CAN FRONTIER DEVELOPMENT AFFORD THIS PROJECT??
By its own admission, this is the largest project Frontier Development has ever undertaken. That’s why they brought in Chicago developer The Prime Group as part of a joint venture – Frontier simply cannot do it alone. But Curt Hurst and Frontier Development are clearly the face of this project – he is the one trying to sell the city on this idea. But let’s look at some facts:
It is a virtual certainty that we are headed into a recession (in today’s news – Forecast for US Recession Within Year Hits 100% in Blow to Biden (msn.com).
The International Monetary Fund predicts a very tough economy in 2023 (IMF Warns Rate Increases Could Spur A Global Recession - The New York Times (nytimes.com)).
Frontier submitted its proposal in March 2022 and shortly thereafter supplied a very brief financial pro forma and budget.
Also in March 2022, the Fed raised interests rates for the first time since 2018, and has raised interest rates four times since that date.
In March, Frontier claimed it would obtain $105 million in institutional debt and $25 million in sponsor equity.
How has Frontier’s forecast, financial pro forma and budget changed? Every business, big and small, has changed its forecast for end-of-year 2022 and its budget for 2023 based on the current economy. WHAT ABOUT THIS PROJECT? WHY IS OUR CITY BETTING ON FRONTIER, AN UNPROVEN DEVELOPER FOR A PROJECT OF THIS SCALE, AND THEREBY PUTTING THE FUTURE AND FINANCIAL WELL BEING OF OUR CITY AT SIGNIFICANT RISK? Finally, remember that Frontier is demanding FREE LAND (which is clearly worth millions), $20 MILLION IN TIF FUNDING, and a FREE PARKING GARAGE from the city for this project. Why?? “The City financing is required to pay eligible costs that are creating a gap in the Developer’s ability to earn a reasonable rate of return.” THAT QUOTE IS TAKEN STRAIGHT FROM FRONTIER’S PROPOSAL. WHAT “REASONABLE RATE OF RETURN” FOR FRONTIER IS THE CITY PAYING FOR??? HOW WILL THE LOOMING RECESSION, HIGHER INTEREST RATES, HIGHER CONSTRUCTION COSTS, UNPREDICTABLE CONSTRUCTION CONDITIONS, AND COMMUNITY OPPOSITION AFFECT “THE DEVELOPER’S ABILITY TO EARN A REASONABLE RATE OF RETURN?” We will know when Frontier comes to the city with a bigger budget, more expense and a demand for MORE TIF FUNDING. CAN STC AFFORD THAT?? DON’T LET THAT HAPPEN!!