University administrators are urging College Park officials to enter a finance agreement in which the city would forgo millions of dollars in tax revenue to help pay for the East Campus development. In exchange, developers would help fund a new city hall.

Representatives of East Campus developer Foulger-Pratt/Argo Investment said the city’s participation in the complicated financing model is essential to the success of the 38-acre, $900 million project, because without the money construction cannot begin on time.

“This project does not work without the city and the county,” FP-Argo bond lawyer Richard Newman said. “And if the project doesn’t progress, there’s zero tax revenue.”

Under the developer’s “tax increment financing” plan, the city would provide an average of $1million a year over 30 years to help pay off $180 million in bonds used to finance the project. In return, the FP-Argo developing company would funnel $6 million of the money it raises through selling bonds to move city hall to a new location, and College Park has the incentive of getting the project built as soon as possible so it can start raking in tax money.

The East Campus development, as currently planned, will bring in an average of $4 million a year over 30 years to the city, whose budget is now only about $13 million a year. The city will also benefit from additional stores that will open in the area, and the university plans to put graduate student housing in the center as well.

Both sides have much at stake in seeing this project progress quickly, but city officials are still not sure whether they will accept FP-Argo’s proposal.

District 3 Councilwoman Stephanie Stullich said she expects the city to use its financial leverage to ensure that its East Campus requirements are met.

“Approval of the [financial model] really is contingent on the whole package being one that we can feel comfortable with,” Stullich said. “No, it’s not a done deal. Yes, we do need resolution on a lot of issues that have been raised.”

Stullich would not speculate on whether the city would block the project from advancing, saying only that she was “hopeful” the two parties could reach agreement. The city will deliberate on the issue in the coming months.

But District 2 Councilman Bob Catlin said he is confident the city and the developer can come to some sort of an agreement.

“In something like this, everything’s negotiable,” he said.

Newman said uncertainty on the city council about the amount of money involved and attempts to “micromanage” and exert financial leverage over East Campus could endanger the project, leading to delays and frightening off potential bond-buyers.

“The tail can’t wag the dog,” Newman said, referring to the city trying to shape the East Campus development. Becoming involved financially with the project should not give the city additional power to request changes to the project, he said.

A major change that several council members proposed at their meeting with FP-Argo last night was a provision that the development include additional locally-owned independent businesses.

“Let’s say the city wanted to say the only retail you can have is tae kwon do,” Newman said. “The bondholders are going to say, ‘oh s—, how much money can they get out of that?'”

But Stullich said there was more to the issue than the money.

“I don’t think for the city this is so much about finances. We’re not looking to make a profit off of this,” she said. Although the city is projected to earn millions of dollars in tax revenue from the project, “it’s a question of making sure the concerns of the community can be addressed. I don’t think that the city is trying to hold the project hostage. I don’t think the city is being unreasonable.”

Newman said that because the bonds are paid off through city and county tax revenue, bondholders do not want to see any restrictions placed on the development plans because it could diminish or slow their own earnings.

The bonds would go on sale when construction begins at East Campus, scheduled for January 2010.

The city will make a final decision in the next few months on how it will be involved in the East Campus financing, after consulting with independent financial experts.

“I’m sure everyone’s interested in getting things moving as soon as possible,” College Park Mayor Stephen Brayman said. “We will have umpteen things to say.”

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