The Westwood City Council is lending a hand to Woodside Village project as its developers grapple with an unexpected surge in development costs.
The council last Thursday night voted to expand a tax increment financing deal for the project at Rainbow Boulevard and 47th Place.
City officials agreed in 2012 to give Los Angeles-based Tanner & White Properties’ $22 million in tax subsidies for the two-phase project. Construction is almost complete on the project’s first phase, a mix of 91 apartments and more than 20,000 square feet of commercial space on the north side of Rainbow Boulevard.
Blair Tanner, one of the developers, said the company has leased about 70 percent of the apartments with more than half already occupied. They are also seeing strong demand for the commercial space.
The second phase, to be built on city-owned property on the south side of Rainbow Boulevard, is still in the planning stages. It is expected to include about 244 residential and commercial units and 16,300 square feet of commercial retail space, including space for a potential grocery store.
Developers, however, said construction costs have skyrocketed in the nearly five years since the original development plan was approved and their projected costs for the second phase have jumped about $20 million, or 73 percent, to $47.4 million.
The total budget for the development, which also includes redeveloping the Woodside Health and Tennis Club, is expected to rise from $63 million to $105 million.
To help the developers cover the additional costs, the council voted 5-1 Thursday to increase the public financing limit for the entire development from $22 million to $28 million.
Most of that incentive is tax increment financing, which uses future growth of property and sales tax income on the site to reimburse the developers for some development costs. The city doesn’t have to hand over the additional $6 million in TIF funds until the developers spend the $105 million.
Council members also approved creating a 22-year, 0.9 percent capital improvement district sales tax on the club. That tax is not included in the $28 million public financing cap and would be applied to pay for second-phase improvements.
They also agreed to restart the 20-year time limit before the tax increment financing on the second phase expires and to hand over title to the land for the second phase as soon as the developers secure financing for the second phase and redevelopment of the club. Previously, the city would have waited until work on the club was completed before handing over title.
City officials stressed that if the developers didn’t complete the second phase within four years after gaining title to the land, the city could reclaim it.
William Crandall, the city’s real estate consultant, noted that even with the increased public financing cap, the larger overall project budget means the ratio of public to private investment in Woodside Village is actually shrinking from 35 percent to 26 percent.
More than a dozen residents addressed the council about the new TIF agreement with support and opposition almost evenly split.
Scott Bingham, a resident and chairman of the 47th and Mission Road Development Committee, said he felt Woodside Village has already helped spark redevelopment elsewhere in the city and that the developers should be allowed to finish the project.
“I believe that Woodside Village has played a significant role in the revitalization of 47th Street and that in turn has made Westwood a more attractive place to live,” Bingham said.
Resident Christine Folgmann, on the other hand, said she had recently extensively rebuilt her home and wondered if she should have applied for a TIF of her own.
“It doesn’t seem fair that I’m going to have this huge tax increase (from the new house), and I’m going to have to pay that, and these gentlemen aren’t going to have to pay taxes for 300 additional residences over 20 years,” Folgmann said.
In approving the new agreement, council members said they were confident the additional tax incentives were necessary to ensure the second phase was completed and that the project would ultimately generate far more revenue for the city.
“This is a $100 million investment in this community and long-term tax base diversification,” said Councilman Jason Hannaman. “It’s difficult to comprehend how that’s going to change the city’s financing structure, the services we can offer.”
Councilwoman Margaret Bowen, who was elected the board earlier this year, cast the lone “no” vote.
“If Mr. Tanner has a sound business plan and his project is a resounding success, he should not be asking for more tax breaks,” Bowen said. “I could only support a TIF in a blighted area. If an area is not blighted, I believe that TIF is welfare for developers.”
David Twiddy: email@example.com