The Real Deal

By Rob Holbert Managing Editor

Mobile’s proximity to the disaster area created by Hurricane Katrina has already proven to be a boon, bringing displaced citizens and businesses. Now the downtown area could benefit from some federal disaster relief funding that will allow $40 million in capital improvements.

While the GoZone funding is not free money from Washington, it provides for low-interest loans in areas that qualify. As Mobile was included in the area damaged by Katrina, property owners here qualify, and the Downtown Mobile Alliance is set to try to use that to the city’s advantage.

Downtown Alliance Executive Director Elizabeth Sanders says downtown property owners have put together a list of 17 projects with a value of roughly $40 million they hope to see land GoZone approval. The projects range from creating a small boutique hotel and building a parking deck with retail at the ground level, to rehabbing historic buildings for office space.

The gist of the GoZone funding is to allow lending institutions to forego paying taxes on the interest they charge, thus lowering the cost of loans by a couple of percentage points on average. While this doesn’t make a lot of difference for a small project, it can have tremendous impact for something bigger.

Sanders said when they first looked into the possibility of using GoZone funding, it appeared many projects might be too small to make it worthwhile. But once the Downtown Alliance began working to get several projects under one umbrella, it made sense. But there are still several hoops to be jumped through before the GoZone money is a go.

“From that came a collection of projects worth about $40 million. We’ll put the package together, and the mayor has to sign off on it. Then the bonding authority has to look at it, then the governor’s office,” Sanders said. She expects the package to go to the governor by the end of the month.

But even if the projects are awarded a GoZone designation, the principles involved must still secure their own loans from financial institutions.

“They have to go to their sources of credit,” Sanders said.

Sanders says the group put together by the Downtown Alliance isn’t the only LoDa property being gussied up under the auspices of the GoZone Act. The Lafayette Plaza Hotel is also in the process of seeking GoZone designation for it’s own $10 million facelift. Sanders said there are probably more.

One of the other benefits of the GoZone designation is it allows for accelerated depreciation, up to 50 percent in the first year, and it also allows borrowers to go back and get refunds for up to five years prior.

“This is a significant incentive Congress passed for the Gulf Coast area. You wouldn’t wish to be put in a hurricane area, but this is very good for us,” Sanders said.

She described the current level of activity and interest in downtown as “tremendous,” but said many folks desirous of starting projects downtown are having a hard time getting property.

“The challenge is acquiring property,” Sanders said. “Finding people willing to sell and willing to sell at a reasonable price is tough.”

She said there are some downtown property owners who seem determined to “sit” on old properties, rather than selling them for development.

Rob Holbert is Lagniappe managing editor. Contact him at rholbert@lagniappemobile.com.

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