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Council considering loan for Morgan development

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Should Rochester taxpayers loan one of the region's biggest developers $1.5 million?

That issue is on the agenda for City Council's November 14 meeting. Mayor Lovely Warren is asking Council to approve the loan to one of the Morgan development companies for apartments it's building at the corner of South Avenue and Court Street.

The building is part of a major project that includes a riverfront public walkway. Morgan's development will have 111 apartments – 11 of them classified as "affordable housing" – underground parking, and commercial space.

Morgan is currently a huge player downtown. It's involved with the Alliance Building, Legacy Tower, the Hyatt and Riverside hotels, the Gannett Building, and Tower 280, plus two projects not yet under way: Parcel 2 at the Midtown site and apartments on the Inner Loop infill between East Avenue and Charlotte Street.

And within the next few months, Warren may ask City Council to approve another Morgan development at Midtown: apartments at the back of the proposed RBTL theater.

It's not unusual for the city to loan money to developers, and $1.5 million is a small portion of the project's $33.6 million cost. But this particular loan has made the news because of an unrelated controversy involving Morgan. In September, the Buffalo News reported that the FBI is investigating Morgan's financing practices related to a development in that city.

Former television reporter Rachel Barnhart, who unsuccessfully challenged Warren in the September Democratic Primary, raised the issue on the blog of the new activist group Rochester for All, which Barnhart helped found. Barnhart urged City Council not to approve the loan.

That's not likely. The mayor needs only five votes, and odds are, she'll get them. And Council members don't seem particularly concerned about the FBI story, saying it doesn't affect Morgan's Rochester projects. But some of them have raised other questions. Among them: When Morgan requested the loan, how affordable the "affordable" units are, and why Council wasn't told about the loan when it approved other legislation associated with the development.

City officials say the loan request came up during discussions with the developer last summer. As part of the loan negotiations, says Warren spokesperson James Smith, Morgan agreed to set aside 10 percent of the apartments for affordable housing – about half for tenants with incomes less than 120 percent of the federal Median Family Income figure, half for those with incomes less than 80 percent of the MFI. In addition, the agreement requires construction contractors to hire minority and women workers.

Morgan will pay 3 percent interest on the loan.

The Morgan loan, Smith says, "is not extraordinary or out of the way in any way."

When they consider loans to a private business, city officials, like banks, look at its track record: previous projects, loan repayment history. In those areas, Morgan is said to get high marks – from banks and from City Hall. (M&T Bank has committed $27 million to the 103 Court Street project.)

Still, developers are profit-making businesses, and many of downtown's recent developments have received public subsidies. Several candidates in this year's campaigns questioned whether that should continue. And some criticized the high rents in many of the new apartments.

On the other hand, projects by Morgan and other developers are helping boost downtown's residential population, which supports businesses and arts and entertainment venues. In addition, Rochester and its school district are heavily dependent on city property taxes, and taxes on new development are helping offset the loss of Kodak and other businesses.

Council members will have to decide whether the Morgan project provides enough benefits to warrant taxpayers' investment.

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