THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Wednesday, May 22, 1996 TAG: 9605220157
SECTION: LOCAL PAGE: B3 EDITION: FINAL
SOURCE: BY ALEX MARSHALL, STAFF WRITER
LENGTH: 71 lines
Hedging its bets with the federal government, the City Council Tuesday quietly authorized the Norfolk Redevelopment and Housing Authority to borrow $33 million from commercial banks or sell bonds to build the Nordstrom anchor in the MacArthur Center mall.
The council added the funding options in case the Department of Housing and Urban Development fails to approve $33 million in loan guarantees that were to be used to build the mall's key anchor.
HUD had given preliminary approval of the guarantees but is now holding them up in a dispute over how many low-income residents will be hired by the Seattle-based retailer.
The NRHA will not have to return to council for authorization if it does not receive the HUD loan guarantees.
The NRHA authorization was included in next year's $488 milllion budget, which the council approved.
The budget does not increase real-estate tax rates, which will remain at $1.40 per $100 of assessed value.
It does raise water and wastewater rates, as well as the stormwater management fee and imposes a new 50-cents-a-month recycling fee.
The result, according to city officials, will be an estimated $2.21 a month average increase in residents' combined public service bills.
The budget improves the retirement plan of public safety employees and gives a 3 percent cost-of-living adjustment to city retirees. It also raises council salaries by $5,000, which is $2,000 less than in the administration's budget proposal. With the new salaries, the mayor will make $25,000 annually and a council member will make $23,000.
The budget also gives more money to libraries and essentially fully funds the school administration's $200.5 million request.
Councilmen Herbert M. Collins and Paul R. Riddick voted against all fee and rate increases, most of which pay for capital improvement in the water system. Councilman W. Randy Wright voted against all but the new recyling fee.
Mayor Paul D. Fraim stressed in an interview Tuesday that the HUD loan guarantees were still the city's choice for building the MacArthur Center Mall.
With HUD in essence co-signing the loans, the city is likely to receive better interest rates. Under the plan, if the mall were to fail, the lenders would be repaid out of community development block grants HUD provides to the city.
But the arrangement has broken down because Nordstrom, the luxury department store, says it does not want to agree to hire 51 percent of its employees from low-income backgrounds, something HUD is demanding. Earlier, the chain said it would make 51 percent of its jobs available for low-income workers.
The Nordstrom store is the centerpiece of the $300 million mall planned for downtown and scheduled to open in 1998. As an incentive to attract Nordstrom, the city agreed to pay for construction of its store. The city is putting roughly $100 million into the mall, half of that to build parking garages.
Should the HUD loan guarantees not materialize, the city would most likely try to borrow the money for the Nordstrom store from private banks, Fraim said.
If the banks balk, then the city would try to sell revenue bonds, pledging lease payments to the city from the store.
These would not be general obligation bonds and so would not legally involve the full faith and credit of the city, city officials have said.
But the city would have to put forward some substantive collateral as a sign of its willingness and ``moral obligation'' to pay, say the budget documents. Scope, Chrysler Hall and the Waterside Convention Center are mentioned as properties the city might put up as security.
These or other properties may also have to be pledged for the HUD loan guarantees as well, say city officials, because HUD is requiring more collateral than originally discussed.
NRHA is scheduled to turn the building site over to private contractors for Taubman Inc., the mall developer, on June 15. by CNB