LOUISVILLE, Ky. (WDRB) – The first attempt failed. So did the second.
Now, take three: Metro government has reached an agreement with its third different developer for a sweeping makeover of the abandoned old Urban Government Center property.
The Louisville Forward economic development agency announced Thursday that it finalized terms of a deal with a group that wants to transform the 10-acre site in the Paristown Pointe neighborhood into a mixed-use project with homes, office space, a parking garage and a hotel.
There would be no direct city funds given to the Paristown Preservation Trust, but some taxes generated by new activity would be returned to the developer to close a $15 million funding gap, said Jeff O’Brien, chief of Louisville Forward.
But the agreement signed Tuesday indicates that state or federal funds could be used to complete the project.
The property includes the former Kentucky Baptist Hospital building, along with buildings once used by the Louisville Metro Housing Authority and Metro police. It’s bounded by Barret Avenue, E. Breckinridge Street, Vine Street and Lampton Street.
The Paristown group, led by developer Steve Smith, had proposed studying whether an “adaptive reuse” of the old hospital was possible. O’Brien said in an interview that the building and other structures would instead be razed under the trust’s latest plan, although an old steam plant and smokestack could be salvaged.
But Smith told WDRB News that a decision on the old hospital building won't be made until his team receives a structural engineering report.
"The whole thing cannot be renovated," he said. "But the original 1920s structure is what we're looking at trying to save right now."
The development agreement gives the trust until December 31, 2022 to receive several government approvals, such as a property-wide rezoning. It has until mid-September to walk away from the deal if it determines the property conditions or "unsatisfactory," or it can't get the approvals.
It also requires that in order to qualify for tax increment financing, or TIF, the Paristown group must ensure that at least 10 percent of rental units are leased for less than market rate prices. The Metro Council would have to approve the TIF.
The Paristown trust proposed a mix of uses that includes an office building, a 125-room hotel and parking garage, 250 to 300 apartments and nearly 3.5 acres of green space, according to documents submitted to Metro government.
“Today begins the next chapter for this property, and we are excited that it will be given new life with features that enhance the surrounding community, including mixed-income housing," Mayor Greg Fischer said in a press release.
The development agreement calls for Metro government to sell the city-owned properties at 810 and 850 Barret Avenue, and 1235 E. Breckinridge St., for $1 in exchange for the Paristown group signing a “community benefits agreement” with the area’s neighborhood associations. The city also would help the housing authority sell its former building at 768 Barret Avenue.
The trust would have to cover the environmental cleanup costs for the site, according to Louisville Forward.
“Our team is excited to create a new beginning for this important piece of property in the Paristown Pointe neighborhood and to continue working with the neighbors on community-enhancing elements,” Smith said in the press release.
The proposal is in addition to other projects Smith has been involved with in the area, including the planned development of houses on Vine Street near Breckinridge street. The total cost of that work and the redevelopment of the old Urban Government Center site is $167 million, Smith said.
Louisville Forward began negotiating with Smith’s group in August after it broke off talks with Underhill Associates, the developer a Metro selection committee recommended for the project in late 2020.
Underhill received 84.5 of 110 points during that process. Its proposal – a grocery store, farmer's market space, restaurant and retail space, a gym and affordable student and senior housing -- was judged “more reflective of community desires and feedback, and is more thoughtful in contemplating and addressing potential gentrification and displacement.”
The sticking point was how to fill in a funding gap. Underhill wanted the city to use part of its American Rescue Plan Act funds to cover about 23 percent of the project’s $58.9 million cost, but the Fischer administration refused.
The Paristown Preservation Trust was the only other group to bid on the work.
The selection committee gave that plan 62 points. It concluded that the proposal wasn’t “sufficiently responsive” to the city’s request.
“Across all categories, the scores for this proposal hovered in or around the 50th percentile,” Stephanie Kertis, Louisville Forward’s former assistant director, wrote at the time. “The follow-up interview did not change the impression of the committee.”
Gretchen Millikan, who was then Metro’s Director Advanced Planning and Sustainability Director for Develop Louisville, wrote that the proposal only “[p]artially fits desired attributes.”
"Lacks a clear vision for the area and details about how they will achieve the different aspects to make a ‘sustainable’ and ‘abundant’ neighborhood. Proposal is disjointed, wordy and rather general,” she wrote.
The committee noted in its questions to the developers that reusing the hospital building was “championed by the community throughout the process.” One committee member, Benjamin Moore, wrote that the “lack of commitment to reusing buildings on the site is concerning given the neighborhood feedback.
Asked why Metro government didn't start over with a different approach or issue a new solicitation of interest, or SOI, for the property in light of those concerns, O'Brien said: "I think at the end of the day, the the thought was, 'Well, if we're going to go back out to SOI, we should at least give No. 2, the second-place finisher, a chance to negotiate with us and give them some very strict terms.'"
The first effort to redevelop the land faltered in late 2019 after the Marian Group, the city’s chosen developer, backed out. It claimed Metro didn't secure a series of promised land-use and other approvals.
Smith's group has been involved in all three efforts.
Martina Kunnecke, president of the Neighborhood Planning & Preservation Inc. advocacy group, is critical of how city officials shepherded a public input process from nearby residents, noting that Underhill was a popular choice among many in the area.
"Louisville Forward's handling of this from day one has been awful. It has been biased, and it's been at the public's expense--and if they don't think the public is watching, they are sadly mistaken," she said.
But to Shannon Musselman, president of the Paristown Pointe Neighborhood Association, the latest deal is "exciting" and brings in prominent Louisville developers Hollenbach-Oakley, whose work includes the Blankenbaker Station and Eastpoint Business Center office parks.
"They've got some great projects they've done, and they will make this 10 acres shine," she said.
Metro Council President David James, whose 6th District now includes the old Urban Government Center property, said it's important to see the terms of the Paristown trust's community benefits agreement, which he called "truly the neighborhood's agreement with the developer."
Besides failing to move forward with the two previously chosen developers, Metro government also was involved in a dispute over a city-owned lot on Vine Street that the Paristown trust leased for the Kentucky Center's Paristown Hall.
After the trust and the Kentucky Center threatened to sue, the city agreed to sell the lot for $1, with the trust paying Marian $500,000 to help cover pre-construction work. That move caused Marian to drop plans for nearly two dozen “21st century shotgun homes.”
"Metro could have done much better," James said. "But we're here now, so let's see what happens."
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