Over a month ago, I went on KPEL to make the case that the Lafayette Economic Development Authority and the Lafayette Public Trust Financing Authority should use the $30 million they have in combined cash to rebuild the Buchanan Street parking garage — currently set for redevelopment — instead of using public money to build new office space for the Opportunity Machine and CGI, respectively. These projects put each organization in direct conflict with the existing owners of Downtown buildings, not to mention the free market, and are based on the false assumption that real estate speculation funded by government subsidies is the answer to the long-term economic health of Downtown Lafayette. This kind of subsidy is actually harmful and counterproductive.
The Louisiana Immersive Technologies Enterprise building (distinguished by the color-changing “egg” out front), a LEDA-sponsored economic development project, is a 72,000-square-foot office building on UL’s Research Park property that cost some $15 million to build. The project was touted as a landmark in Lafayette’s tech ambitions when it was built in 2006. By the time it was turned over to UL Lafayette in 2017, it had already cost more than $30 million of taxpayer funds to run. It was built on the premise that building office space purposed for “technology” would result in economic development. In the end, LITE forfeited the money-losing building to UL, which now carries the burden of its ongoing costs.
Opportunity Machine presently rents 9,000 square feet of space in the LITE building for $244,578 per year or $27 per square foot (the going market rate in Lafayette is $16 per square foot). But now LEDA is proposing to move Opportunity Machine to the old Karma nightclub space on Jefferson Street. Keep in mind that the taxpayer subsidy to Opportunity Machine is currently $350,000 per year. LEDA has purchased the 22,000-square-foot building for $1 million and proposes to spend a total of $2.5 million more in renovation of the space for Opportunity Machine. That will mean $3.5 million for 22,000 square feet or $160 per square foot, making it among the more expensive buildings in Downtown.
LPTFA, whose mission is to “further and accomplish any public function and purpose of the city” of Lafayette, has also decided to make real estate development its core function. Unlike previous developments for low-income housing, it has now decided to venture into commercial office development. At hand is its proposal to help finance the construction of CGI’s new office building in the old Coburn’s warehouse space Downtown. Based on some very basic estimates of building contractors I have spoken with, the cost of this project will be approximately $13 million to $15 million dollars for 50,000 square feet of office space or $260 to $300 per square foot.
That would make it the most expensive commercial office building in Downtown Lafayette, by far. The proposed rent they will charge CGI is insufficient to pay down the loan amounts to create “value” for their investment. Most importantly, it will be built in an area with no demand for office space. So at the end of the 10-year rental period, the debt will still be twice today’s value of the average commercial office space in Downtown Lafayette.
The rent equivalent of the LPTFA deal with CGI would be $27 to $30 per square foot each year, and the LEDA Opportunity Machine is $24 per square foot. The average rent for office space in Downtown is $14 to $16 per square foot, and Downtown office space is running at a 25% vacancy rate. Building more office space in an already depressed market will only hurt the value of existing space.
Meanwhile, the parish and city governments are literally broke — no money for drainage, no money for roads, no money for any capital repairs, much less improvements. So any hope of Lafayette Consolidated Government rebuilding the Buchanan Street parking garage on its own without new taxes or subsidies to the private sector is not possible. Period.
That’s a problem. Without the parking garage, parish employees for the courthouse, sheriff and other LCG employees have no parking, so the parish government may come to the logical and obvious conclusion it cannot stay Downtown. It is, in fact, a cheaper long-term solution to move into the middle of the parish where it can more easily serve all the municipalities. If the courthouse goes, then the sheriff goes. And if they go, so do the lawyers, accountants, support staff, etc. And then the restaurants, retail. That’s a bleak future.
This is not my wish, but those departures would be the result of bad planning and wasteful spending. We can stop it with a smart fix to this parking garage problem.
Now, in response to LCG’s request for RFPs, I have submitted my own proposal and since have been asked to supply the capital on two of the other three proposals. I will gladly honor these offers — because I’m a capitalist, I’m doing it for profit. I know at the end of the day, it will be your tax dollars that will pay me to do what no investor would otherwise do. My advice to you, fellow taxpayers, is to demand that LEDA and LPTFA redirect their funds to doing something truly meaningful to the economic well-being of Downtown, instead of squandering it on speculative real estate development at a cost well above market value.
To help all this and to get buy-in from the Downtown District property owners, I also suggest that DDA propose this change in the plans of LEDA and LPTFA and push for an increase in the property taxes of the Downtown Development District. If Downtown wants to convince the rest of Lafayette that it needs this public assistance, it should also be willing to push for this and help pay for part of it through their property taxes.
Development is the result of good, sustainable economic policy, not the end goal. It is the measure of that success. If Downtown had a market demand viable for either the renovation of a bar or an abandoned warehouse into a technology office space, the market could and would build it. There is a very good reason no private capital has done what LEDA and LPTFA now propose to do; it doesn’t make economic sense, without taxpayer money. And that’s where it’s all coming from.
More troubling, however, is that neither of these plans have seen public debate or transparency. They are given to us “fait accompli,” as is and predetermined in conclusion. That isn’t good government.
What do we do about it? Well, you should demand that the DDA and the candidates for the upcoming election commit now on this issue. Now. What type of economic policies do they support? This is a good test for a lot of big talk.