SubmittedThis map, provided by the Western Kentucky University Board of Regents, shows the preliminary layout of Block 12. The orange area indicates land already owned by WKU. The green portions are owned by WKU’s Student Life Foundation.

The plan to keep downtown redevelopment dreams alive with a major construction project next to Western Kentucky University’s campus has cleared a series of official hurdles. It’s been approved – though sometimes on sharply divided votes – by all major players in the redevelopment scheme: Western, city and county governments, and the nonprofit corporation formed to oversee the downtown plan.

Now discussion moves on to specifics of the project, planned for a site called “Block 12.” That’s bounded by Center Street, 13th Avenue and Kentucky Street, and is surrounded on three sides by campus or planned university-related housing.

Mary Cohron, president of the downtown corporation, said Western President Gary Ransdell is “very concerned” to refute the popular belief that Western will be the primary beneficiary of the development, to the near-exclusion of the general public.

“This is not something that is going to become a part of Western’s campus,” she said.

But Ransdell’s statements to Western’s board of regents on Friday largely reinforce the impression that this portion of “downtown redevelopment” will function mostly as an adjunct to the university.

“Basically, we’re getting a parking structure that serves this campus for $250,000 a year … that’s a fraction of what a parking garage would cost if we built it ourselves,” he said.

The university plans to lease 250 spaces in the 432-space garage for 20 years, rising to 300 spaces in the following decade. The $250,000 annual lease originally applied to the 871-space garage planned in central downtown, across from the Southern Kentucky Performing Arts Center site, but was willingly shifted with the garage plan to a spot adjacent to campus.

“We’re having access from 6 a.m. to 6 p.m. for 250 spaces,” Ransdell told regents. A clause in the interlocal agreement that defines the project specifies that proposed rates for the remainder of the parking will be set at $2 for up to 2 hours from 7 a.m. to 3 p.m., Monday through Friday, when university classes are in session “as long as the garage is located in Block 12.” Users of the hotel, conference center and prospective retailers could park for free at any time, but the current plan includes 168 surface parking spaces surrounding the hotel, conference center and retail space.

Ransdell also said that evening use of the garage could be managed by the university’s Parking & Transportation Committee, and Western is even more interested in the garage as a convenience for “hundreds” of event guests at nearby Van Meter Auditorium, slated to reopen in December.

Project parts

The garage has long been the most contentious part of the plan. It was originally planned for a spot designated as “Block 6,” next to the Bowling Green Ballpark. But private financiers pulled out with the onset of the economic recession, and that site is being turned into a ground-level parking lot.

Trying to save the downtown garage plan, backers had arranged a complicated loan swap to get access to federal New Market Tax Credits, hoping to fund a smaller garage on the site. Instead, the garage – now reduced to 432 spaces – and its financing plan were shifted to “Block 12.” Placing the garage there was the price named by Louisville hotelier Chester Musselman for building a 100-room SpringHill Suites by Marriott on the same block, an amenity long sought by Ransdell.

The downtown garage was to be completely hidden in a sheath of commercial and residential development. Its new incarnation near campus will be partially enclosed, with the Kentucky Street side being concealed by college student housing built by the Student Life Foundation, the nonprofit corporation that owns and operates Western’s dorms.

The other long side of the garage, facing the hotel, is expected to be covered by commercial and office space. A tentative design shows those as an 8,000-square-foot university bookstore and cafe, 3,000 square feet of private retail space, and an 11,000-square-foot office for WKU Police. The garage would apparently be open on the narrow ends facing campus and 13th Avenue.

Western is “tentatively exploring” leasing space for a campus police station, Ransdell said. The current station, beneath a parking garage on campus, has police “operating in deplorable conditions,” he said.

The hotel is projected to stand five stories tall on the corner of 13th Avenue and Center Street, and be surrounded by its own parking lots. A breezeway would connect to a university alumni center with 6,000 square feet of conference space.

Not part of this project but in close association with it is the future $49 million College of Business building, fronting on the curve of College Heights Boulevard and Kentucky Street. Across Center Street from the hotel would be more fraternity and sorority houses in Western’s long-planned Greek Village; the Sigma Alpha Epsilon house is already built, and Sigma Nu fraternity has just agreed to build on an adjacent site. More houses are expected further down Center Street, on land owned by the Student Life Foundation.

Across Kentucky Street from the garage, land has already been cleared by the Student Life Foundation for about 60 apartments, to be occupied by nontraditional college students. The first phase of one- and two-bedroom apartments, estimated to cost about $6 million, are expected to open in August 2011, according to Student Life Foundation Director Brian Kuster. Another 40 units may be built there later. They’ll probably be three-story brick buildings designed to fit into traditional designs of the area, he said. The nontraditional student housing will be completed before the theme housing begins construction, Kuster said. On a nearby Kentucky Street site, the university may build “theme housing” for students enrolled in specific programs.

Ransdell said that the university plans to build more housing in the area, naming Center and Kentucky streets as the only direction for campus to continue growing.

Status

Western already owns a large portion of the land between campus and 14th Avenue, on the proposed site of the alumni center/conference center and a parking lot. The downtown corporation would buy that land from Western with money generated from tax credits, Ransdell said.

The sale price hasn’t been determined, but it will be sold at market value, he said. Proceeds of that sale will be used to develop the Greek Village so it will be a “net break even,” Ransdell said.

“The idea is to take the money from the area and put it back into the area,” he said.

Of the remaining land needed for the garage and hotel, “pretty much all of it” has been bought with a $3.8 million loan from the WKU Foundation, according to Kevin Brooks, attorney for the downtown corporation.

“We did that this week,” he said. “That’s what that money was for.”

The loan could be repaid with proceeds from the hoped-for next round of New Market Tax Credits, Brooks said. If those don’t come through, the land would simply be deeded to the foundation, he said.

The garage is expected to be finished late next summer, but other portions of the development won’t start on the same schedule, Brooks said. The alumni center/conference center will be built with the proceeds of the next round of New Market Tax Credits, he said.

“I wouldn’t expect it to be going up at exactly the same time because the other parts are nowhere near farther along as far as the (garage plan),” Brooks said. “The garage is already designed.”

Finalizing the hotel deal waited on ratification of the garage plan by the downtown corporation, city and county governments, and Western, Cohron said. All that approval has now been granted, and Brooks said Musselman is expected to make a formal commitment soon.

“I think everybody’s on board and moving as fast as we can, but I don’t want to speak for him,” Brooks said.

Ransdell said the hotel would probably take about six more months to design. It’s not expected to include a restaurant, and he said he’d like to see university-affiliated restaurant and catering groups provide food for hotel guests.

Cost and financing

A project outline presented to city commissioners Aug. 30 includes a breakdown of costs for the garage and associated projects: $11 million to build the hotel, $5.5 million to buy land and build infrastructure, $5 million for the garage itself, $4.5 million for the alumni/conference center, $7.5 million for the Student Life Association housing attached to the garage, and $10 million for “mixed use” development concealing the other side of the garage – a total of $43.5 million.

That money would come from a variety of sources. Ultimately, the plan calls for selling bonds to pay construction costs, with those bonds being repaid out of tax revenue from new jobs, new businesses and higher property values in the 50-block redevelopment area. But to get millions in potential state tax money turned over for bond payments, a threshold of $150 million must be invested in the area within the next 50 months. Promoters of this specific project tout its potential to get about halfway to that goal, but doubters – including Mayor Elaine Walker – argue that even if the $150 million threshold is reached, the type of development planned won’t generate enough new tax revenue to cover the bond payments, even with the addition of state levies.

Currently, however, the bond market is too weak to sell development bonds; so backers are relying on federal New Market Tax Credits to jump-start the process.

“We’re still all hoping the bond market will get better, but until then, New Market Tax Credits would appear to be the avenue,” Brooks said.

The parking garage will be paid for with cash generated by the sale of those tax credits, and that deal should be closed shortly, he said. The student housing on one side of the garage will be paid for by the Student Life Foundation, while the commercial and office space on the other side will be built by the downtown corporation, and that construction cost repaid by lease income from tenants, Brooks said.

Musselman Hotels will get its site for free, but will pay for construction of its own building, he said.

The downtown corporation will own all portions of the development except for the hotel, and lease the space back to its occupants, Cohron said.

Western’s Alumni Association has about $2 million on hand to start building the alumni center/conference center, but it’s possible the downtown corporation could actually build it and set up a lease-to-own agreement with the university, Ransdell said.

The first round of tax credits, totaling $18 million, is in the final stages, Cohron said. But the corporation hopes that federal authorities approve another round of tax credits nationwide, enabling them to get a total of $33 million in credits for this project, she said.

“We’re pretty confident that more will be available,” Cohron said. “If not, we’ll just have to revisit the whole situation.”

Tax credits, however, don’t translate into dollar-for-dollar construction funds, she said.

“Thirty-three million in tax credits doesn’t produce $33 million in cash,” Cohron said. Instead, the credits would be sold to banks for about 39 cents on the dollar. At that rate, the current allocation of $18 million in credits would generate about $7 million cash, and the whole $33 million would produce about $12.9 million cash.

The Kentucky Heritage Council has raised some concern that using New Market Tax Credits, which are federally sponsored, might trigger historic review requirements of the National Historic Preservation Act of 1966. Such a review could require alteration of development plans, even to mandating that some structures deemed historic be preserved and renovated. Brooks, however, said he’s extensively studied the issue and has advised the heritage council that tax credits – since they’re not actual federal cash – should not require historic review.

Brooks said he doesn’t anticipate any more funds will be needed beyond the hoped-for second round of tax credits, which should bring that total to $33 million; the Student Life Foundation’s funding of housing construction; and Musselman’s hotel financing. Altogether, those should cover the projected total cost, he said.