Urban Government Center June 14 2021

Fence surrounding 810 Barret Avenue, one of the buildings at the old Urban Government Center

LOUISVILLE, Ky. (WDRB) – Metro government is parting ways with its chosen developer for the old Urban Government Center site and hopes to start negotiations with the runner-up.

Louisville Forward, the city's economic development arm, made the announcement Wednesday morning after months of talks with Underhill Associates failed to result in an agreement. 

It will now pursue a similar deal with Paristown Preservation Trust, which has until September 7 to agree to move forward and submit a budget. 

The decision is the latest twist in the years-long effort to redevelop the vacant property near Barret Avenue and Breckinridge Street. And it marks the second time that the project's preferred developer has left or been removed since Mayor Greg Fischer's administration announced plans in 2016 to seek new uses there. 

City officials told Underhill Associates in a letter dated Tuesday that they were ending negotiations, a move that came nearly nine months after a Metro selection committee scored the developer's proposal the highest and recommended the two sides start negotiating. 

Then, on Wednesday, Louisville Forward offered Paristown Preservation Trust a chance to enter into talks, according to a letter obtained by WDRB News. 

Steve Smith, managing partner of Paristown Preservation Trust, said in a statement that "we appreciate the opportunity announced today" by Louisville Forward. Smith is the owner of Louisville Stoneware and has led development projects like the nearby Paristown Hall. 

Underhill Associates president Jeff Underhill said in a text message that the city's decision is a "huge mistake and injustice for the community that invested so much time and effort" in the city's proposal process. He declined to say if he's considering legal action, saying "time will tell." 

Rather than simply selling the land, the Fischer administration’s approach sought to get input from neighbors during a city-led round of proposals in 2017 and again in 2020. In turn, that has led to various opinions about how to transform the land once home to government office buildings and the old Kentucky Baptist Hospital.

Supporters of the Paristown Preservation Trust plan welcomed Louisville Forward's decision. Joann Robinson, who has lived in the neighborhood since 1996, said she liked parts of both proposals but preferred the one presented by Smith's group.

She said she is particularly excited about plans for houses on two acres on Vine Street already owned by the trust, and the possibility of a neighborhood park.

"This is one of the best things that could happen to people in this whole area -- for someone to finally get on the ball and do something," she said. 

But Shannon H. Musselman, president of the Paristown Pointe Neighborhood Association, said the area remains a "divided community." 

"We have those that are celebrating today, and we have those that are gravely disappointed in the city's decision," she said. "And overall, that's been a difficult place for our neighborhood to be." 

Musselman is among those who has called for Metro government to split the land into smaller portions and involve several developers. She suggested that approach again on Wednesday, saying that one idea is to let Smith's group redevelop a former police station on the property, which would connect to his other developments nearby -- and let Underhill move forward with plans to rehabilitate the former hospital. 

"It's been such a fight between the two," she said. "And it would be such a beautiful thing to see if they can unite."

Underhill and Paristown Preservation Trust were the only two groups that bid on the work during the city's second round of proposals for the property. They also were among the losing bidders during the initial round, which resulted in the Marian Group as the preferred developer.   

A selection committee of city officials chose Underhill Associates last November to negotiate a development deal with the city, giving its proposal the highest score.

Underhill's vision for the 10-acre tract includes a grocery store, farmer's market space, restaurant and retail tenants, a gym and affordable student and senior housing, along with a community garden.

The panel scored the plan 84.5, compared with 62 for the Paristown Preservation Trust's submission. At the same time, however, the committee had “serious concerns” about a funding gap of $12.1 million in the Underhill proposal.

Louisville Forward began discussions in December, but by late March the amount of public funds needed to complete the budget had grown to $13.7 million, according to city documents. Underhill recommended Metro government use part of its American Rescue Plan Act funds, the coronavirus relief package that Congress approved in March.

But the Fischer administration asked for a different approach in May, telling Underhill in a letter that it wouldn’t agree to using city budget or American Rescue Plan Act funds to close the gap, which represents about 23 percent of the project’s $58.9 million cost.

It gave Underhill a June deadline to submit a new plan, but the developer told Louisville Forward that it would be “shortsighted” to do so.

As the two sides continued to talk, the runner-up developer called on city officials to abandon negotiations with Underhill and consider its proposal. Smith told reporters in early August that Underhill had had enough time to finalize a deal.

In Louisville Forward's letter to Underhill, agency co-chief Jeff O'Brien wrote that the firm had not been able to meet the terms of the city's proposal "without an additional budget subsidy." The letter to Smith said the group can budget for a "traditional incentive" such as tax increment financing or tax moratorium, but it can't include a direct subsidy. "No additional gap should exist," O'Brien wrote. 

Tax increment financing rebates some tax revenues to developers for public infrastructure costs.

Paristown Pointe resident Justin Mog called the city's action "the latest in a long series of fumbles," and said city officials "moved the goal posts" by demanding private funding to fill the budget gap. 

"We feel like the city has pulled the rug from under us yet again and the property will sit idle and decaying for god knows how many more years," Mog said in an email. "It is not just an eye-sore, it is a blight on our community, a ridiculous squandering of tax-payer dollars, and a waste of a huge opportunity for downtown revitalization."

Paristown Preservation Trust has called for a mix of uses there, including office space, apartments, a parking garage and a possible boutique hotel. A feasibility study would determine if the aging hospital building could be incorporated into the project.

The selection committee raised some concerns about aspects of the proposal in its judging last fall. Several members wrote that the community benefits were unclear, for example, while others wanted more detail about reusing existing buildings and $20 million in public infrastructure. 

O'Brien had faced questions about the city's prolonged negotiations with Underhill during a meeting of the Metro Council's Labor and Economic Development Committee in June. The committee's vice chair, Republican Anthony Piagentini, said Wednesday he plans to call agency officials to one of its upcoming meetings. 

"They're going to answer hard questions about this. And depending on their answers, we need to consider as a Metro Council if we need to do a full-blown investigation into what is going on, and whether or not there are systemic problems with how we do this."

This story may be updated.

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