Letter: Downtown is worth the investment

Published 12:00 am Sunday, August 25, 2019

The economics are not hard to understand (“Downtown incentive grants get go-ahead”). Downtown is a business district that generates substantial property tax, sales tax and a self-imposed MSD tax. Downtown generates jobs. Downtowns density lowers the cost of providing city services (water, sewer, trash collection, safety). It generates more tax revenue than it spends.

Milking the cow requires periodic feeding of the cow. Buildings that are redeveloped generate more tax revenue than buildings that are in a spiraling decline.

Our community needs affordable housing. And the city spends most of its Community Development Block Grant funds on providing affordable housing and anti-poverty programs.

Our community also needs market-rate housing. And market-rate housing is the only thing that will financially work downtown.

Why? A commercial building is only worth what you can get for it in rent. And a bank will only loan what a building is worth in rent, less 30%. Interest rates are substantially higher on commercial loans.

The cost to redevelop a downtown property is about the same (mechanical, electrical, plumbing, life safety) if you are developing market-rate or low-income housing. The only difference in cost are the finishes (countertops, wallpaper, appliances). And it takes every penny of income, at market rate, to pay the mortgage, taxes, insurance and upkeep to borrow enough money to redevelop a downtown commercial building. Rents at a lower rate would not support the mortgage, taxes, insurance and upkeep.

When you consider the Yadkin Hotel, most of downtown residential is considered affordable housing. The market-rate apartments that are being developed represent the difference between the buildings being developed or the buildings continuing to depreciate and more blight.

The City Council identified this as what it is — an economic development project with an expectation of a return on the investment. Millions of dollars in private investment, jobs and tax revenue will ensue.

— Michael S. Young