Tax credit issue stalls Jeffersonville project

May 30-- May 30--JEFFERSONVILLE -- A prized piece of real estate on the fast-track to development now faces derailment from pending litigation, jeopardizing a project that seeks to transform a slice of Jeffersonville's downtown core.

The Jeffersonville Urban Enterprise Association (JUEA) at a special meeting Wednesday unanimously approved a resolution to take legal action to stop the sale of property at Market and Spring streets to Alan Muncy's ARC Property Investment LLC, which has plans for a mixed-used development including retail and apartments.

Now the project is in limbo after Wednesday's action, which stems from the Jeffersonville City Council denying Urban Enterprise Zone tax breaks to Muncy that would have resulted in the JUEA receiving income from the project -- a crucial part of a development agreement between Muncy and the JUEA.

On May 20, the city council voted 5-3 to deny the tax credits, which would have resulted in an estimated $450,000 for the JUEA over a 10-year period. The council's vote set in motion a chain of events that culminated in Wednesday's decision by the JUEA board of directors to pursue legal action.

According to the development agreement, the deal -- Muncy purchased the property for $1 with the caveat that the site requires about $200,000 in remediation work -- would be "null and void" should the council deny the tax credits. But how that clause is being interpreted, and the decision by JUEA chairman Dustin White to close on the property last week, is at the heart of the stalemate.

"In this transaction, the terms have changed," said Nathan Pruitt, Jeffersonville's planning director and executive director of the JUEA. "The contract states one thing that did not occur, that is the tax credit, that in turn has a huge financial implication. It means lost revenue."

For that reason Pruitt urged Muncy, through a chain of emails last week discussed at Wednesday's meeting, not to close on the property. But Muncy, who declined comment Wednesday, moved forward with the closing on May 23 -- along with White -- and waived the clause in question, which is under "developer's covenants" in the agreement.

"With respect to the development agreement, we have been under contract with ARC and I, as chairman, according to our bylaws am authorized and it is my duty to sign documents that are in accordance with the contracts that are approved by the JUEA," White said. "... Being bound by the contract, it was time to do the closing, which is what I did."

At Wednesday's special meeting, which White did not attend, board members said in conversations they had with White last week it was unclear that he would be executing a closing with Muncy on the property, especially after the council denied the tax credits.

"Certainly when he called me I had no idea he was about to close or that he was actually asking for any kind of consent or approval," said JUEA board member Kelley Curran. "It just seemed like he was trying to get my opinion about the contract."

The JUEA bylaws state that the chairperson "when authorized by the Association, he/she shall execute in its name all statements, documents, contracts, recommendations, etc."

"There's no requirement to get a resolution to sign the closing," White said. "I felt it was my duty to in good faith execute the contract that had been approved by the board and signed by me."

How Wednesday's meeting came about also was a point of contention. JUEA bylaws state that at the request of three or more board members the chairman is to set a board meeting. White said three or more board members on Friday requested a meeting via email. He replied that on the next business day, which was Tuesday due to the Memorial Day holiday, he would set the meeting for Thursday because 48 hours' notice is required.

"But some board members thought they would just go ahead and have a meeting," White said. "I can't control what people do. So anything they did [Wednesday] isn't valid."

While White said the closing came about because all of the approvals from city planning and historic boards were in place for the project, Curran questioned the timing of it all.

"I don't have any idea why it became so important either to Alan or Dustin to do it that day," she said. "All I can think of is we had another meeting planned for June 5, unless they were just trying to get it done before [the board] could say 'yeah we're not doing that because our agreement is null and void.'"

Now the fate of the $3.5 million investment is up in the air. Another sticking point is that the JUEA at a previous meeting agreed to give Muncy $40,000 toward remediation costs -- something that is on hold due to the pending litigation.

When an entity utilizes an Urban Enterprise Zone tax credit it receives a 50 percent reduction in taxes over 10 years, and the remaining 50 percent is considered a donation to the Urban Enterprise Association, which is how the JUEA would collect an estimated $450,000 on the project.

For White, who said the tax credits tied to the project could be brought up after a new council is seated in January, it's all about honoring the development agreement and JUEA's mission to promote economic development in the Urban Enterprise Zone.

"The association is not a for-profit entity. Our job is to revitalize the area within its boundaries," he said. "We have fostered a $3.5 million investment in downtown Jeffersonville and are providing 22 apartments and three new businesses. That fulfills the mission of the JUEA, not to make a profit."

Jason Thomas is an assistant editor at the News and Tribune. Contact him via email at [email protected] or by phone at 812-206-2127. Follow him on Twitter: @ScoopThomas.

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