Though he does not need to have buy-in from the community, per state law, he said the transparency and garnering support will help the new agency succeed.
“What we’re doing is to streamline an economic development toolbox,” Smith said.
HOW IT WORKS
The combined port authority and development finance agency (DFA) for Hamilton would be an entity that would help developers with gaps in financing needed for projects. And a port authority has different economic tools that can be deployed than what a DFA can bring to the table.
According to the Ohio Council of Port Authorities, a port authority can perform “activities that enhance, foster, aid, provide, or promote transportation, economic development, housing, recreation, education, governmental operations, culture or research, citing state law.
Then, a DFA can issue tax-exempt and taxable bonds, provide credit enhancement programs, and offer direct lending, equity investments, or a broad range of access to capital financing mechanisms, according to the Council of Development Finance Agencies.
Using the Beckett Paper redevelopment project as an example, that mixed-use project would benefit from a city port authority. Plans for the 175-year-old former paper plant will transform a facility designated for demolition several years ago into a 250-apartment complex, an $80 million to $90 million project.
The old industrial property has received some early indication and that has minimal brownfield impact and will require some minor remediation. If a developer would come into a project like that, their first question, Smith said, would be “How much money is that going to cost?”
After its environmental issues are stabilized, the developer would have to determine how much is needed for any demolition, the condition of the remaining buildings and the cost to rehabilitate. As they ask those questions, a potential developer will have to determine what kind of debt they’ll take on, such as senior debt and mezzanine loans.
“Once that’s identified,” Smith said, “the question is then how do you keep building that capital stack so you can get a developer to actually say ‘yes?’”
From a port authority perspective, one of the tools that can be used is a revolving loan fund with below-market interest rates. Banks are required by the Federal Community Reinvestment Act to invest in census tracts that are designated blighted, or in the FCRA terms, “eligible,” for low-to-moderate-type incentives.
“We would work directly with the CRA departments of PNC, Huntington, First Financial, Fifth-Third,” Smith said, adding that Hamilton never had the entity to do this in the past. “We’re going to be very aggressive in that area to do this.”
Then, with its DFA capabilities, this new port authority could help with New Market Tax Credits. It first needs to get Community Development Entity (CDE) and Community Development Financial Institution (CDFI) certifications. Those designations will allow the entity to apply to the U.S. Department of Treasury to receive direct allocations of the New Market Tax Credits, which would be part of a project’s capital stack.
“It’s going to take other sources to fill that capital stack,” said Smith, which would also includes state and federal historic tax credits, and Transformational Mixed-Use Development credits.
“An average developer is not going to be knowledgeable on how to get those through the state of Ohio,” Smith said. “That’s going to be a specialty of ours. We will try to build these capital stacks so it makes sense for a developer to come in to do a project like that.”
While a Hamilton port authority will focus on city projects, it will not be alone in the journey, as there are potential projects that could require the county port’s support. However, until the city port is established, it’s uncertain how the two will collaborate, though Smith said, “I’m sure there are things we’ll work on.”
Regardless, he said, the two entities will communicate.
FINANCING THE PORT
Starting a port authority will require capital, and Smith is pulling in community partners to help fund the organization. To date, he said, there are six commitments from outside agencies and businesses, and those funding partners likely will have a seat on the new port authority’s board of directors.
“The goal is to raise capital through banks and foundations and other entities to create revolving loan funds to help pay for the real estate and other related activities, but my sense it’s going to save the city substantial money the first five years in operations versus what we’ve spent in the past five years,” Smith said.
The city has invested, on average, more than $2 million on economic development activities, which does not include the contributions made in support of the Spooky Nook Sports Champion Mill project. With a Port Authority in place, the city’s annual spending for these types of projects would be closer to $500,000 or less. And that
This new entity would potentially spend $700,000 to operate, but most of that would be on the legal side for things like development agreements and real estate contracts. The staffing would be just Smith, who said he’ll be the only employee as the entity starts up.
What an annual budget would actually look like, however, would be difficult to determine until a board of directors is in place as it would approve any budgets.
HAMILTON’S FUTURE
It’s uncertain how a city port authority will shape Hamilton in the future, mainly because there are too many variables. One key variable is the economy. If interest rates keep rising and costs keep rising, developments will slow.
That’s a primary reason for the urgency to create this entity, he said, because “We don’t want it to slow in Hamilton. We truly believe that there is a path forward, even with higher interest rates, even with a challenging macroeconomic environment, to move projects forward.”
There is a hope that in five to 10 years from now, the Shuler-Benninghofen Woolen Mill in Lindenwald is developed, Becket Paper is finished, the Crawford-Hoying project is underway or close to completion, and Spooky Nook has a lot more density.
“It’s going to look different,” Smith said. “The value to adding more residential is no different than what Liberty Center.”
Liberty Center in Liberty Twp. is not just a shopping destination, as are apartments on its west side. A purpose was to have a built-in customer base on site.
“They understood that you have to feed people to the restaurants, to the retail outlets, otherwise they were never going to optimize their success,” Smith said. “Hamilton is no different. We need people that will go to the coffee shops, to the ice cream parlors, to the bars, to the restaurants, and we look to other cities.”
Hamilton frequently looks to four communities for best practices. Ashville, N.C., Greenville, S.C., Chattanooga, Tenn., Naperville, Ill., have very different job and industrial bases, but they have so many common threads. “They have built their communities around placemaking, bringing people into those communities,” Smith said. “That helps bring people in, and people equate to jobs.”
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