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January 15, 2008

The LEO Interview: Mayor Jerry Abramson

If 2007 was the year when big ideas finally got on the make in Louisville — Museum Plaza, a downtown arena, the Bridges Project, the smoking ban, a workable dog ordinance, a ban on trans fats, Liberty Green, and more, more, more downtown development — then 2008 will be the gritty, brutal year when Metro must figure out how to afford it all. The national economy is in the gutter, due mostly to the collapse of the subprime mortgage market and subsequent decline in the housing economy. Manufacturing jobs are an afterthought. Kentucky’s state budget shortfall nears $300 million, and the city may be as much as $10 million shy of last year’s budget projections.And so, Mayor Jerry Abramson starts his 19th year with an empty wallet and a fat to-do list. As is custom, he sat down with LEO last week to give us his thoughts on the state of the city — what was, is and will be for the next 12 months. LEO: Is the redevelopment of downtown progressing like you envisioned?Jerry Abramson: We’ve been planting seeds for about 20 years for the redevelopment of downtown. You know, you plant those seeds, and you fertilize those seeds, and you water those seeds, which we have done as a community for the last 20 years. And then, three or four years ago, shazaam! The blossoms begin to occur, and people begin to want to participate in the beauty of the thing, that thing being a vibrant center city. It’s everything I had hoped it would be and more, because I never thought we’d ever get the arena, I never had a dream of a Rem Koolhaas-Josh Ramos building that would be described by The Wall Street Journal as one of the three most exciting high-rises to be built in the world over the next four years, I never dreamed of the kind of housing expansion and boom that would be occurring downtown — condos, apartments, etc. And certainly I had the dream about the waterfront, as we worked through bringing in a world-class landscape designer, but it’s just great. LEO: Last year around this time you told me you hoped to see more retail downtown, and more entertainment aimed at an older audience than what Fourth Street Live is aimed at. Were you talking about Center City? JA: You bet. This project is called Center City for lack of a better name. There will be a name, OK? It won’t be Center City. That I can assure you. But, for discussion purposes, so we know what we’re talking about — yeah, that’s exactly what we were working on. And the tax increment financing, the TIF we were able to get to the tune of about $190-some-odd million from the state, really puts it in play, the commitment of the group that’s going to take the old Stewart’s building, Hilliard Lyons, and make it into an Embassy Suites, the announcement we’ll have shortly about a world-class restaurant going into the Rodes space in the Starks Building, the opportunity for Louisville Gardens to have a $10 million facelift for small types of concerts and things of that nature, that’s exactly what we were thinking about.LEO: I wanted to ask you about TIFs, because they’ve been helping with these big-ticket projects, and Louisville had not really had TIFs before — JA: Yeah, we did. We did a TIF conceptually for the baseball park. Conceptually, because it wasn’t a legal vehicle (available then) through which the state and the city could participate. But when I framed up, We’re going to build this baseball park, we’re going to build it right here where there is literally nothing around, and then we’re going to take the revenues from what occurs around it to be able to pay off the bonds, that was a TIF — conceptually. Then the first real TIF was the Marriott. That TIF was for that piece of property, and the commitment was made for the jobs and the property tax, the occupation tax for that piece of property, to assist the developers in developing that. And as you remember, the city — the old city — put in about 30 percent of the entire cost, maybe 40 percent, to get a convention-style hotel, a new one, to be built. Then the statute began to change, and TIFs were opened up in a different way under Gov. Fletcher. And those TIFs give us an opportunity, as Louisvillians who constantly complain about not being able to get the taxes we pay to Frankfort back in sufficient numbers to be able to be spent here, to reach out to our friends in Frankfort and say, Here’s a chance for you to commit your sales tax, which is significant, and your corporate income tax, which could be significant, and your state property tax, which is so-so significant, to join with us in developing a project that wouldn’t otherwise happen, starting with the Museum Plaza, the arena, and now for lack of a better term, Center City. It’s a great mechanism. The way the law is written it’s for public structures, so it’s parking lots and sidewalks and public facades and everything that’s public — public gutters, public roads, public streetlights — so it’s public infrastructure where the dollars are committed. LEO: Do you think there’s a lot of public support for this kind of financing? JA: When you sit down and explain it to people, in terms of the leveraging effect. When you explain to people that this concept has been in place — I’ve been going to mayor’s conferences for 19 years, and up until three or four years ago, I used to sit there and salivate over hearing mayors around America — from Boston and New York to Chicago and L.A. and Atlanta and Kansas City and Phoenix and Indianapolis — they were all developing their projects based on TIFs, which ultimately work to the benefit of the local community, and give the local community a set of tools that attracts developers to invest their money, which gives you new, energizing stuff, you know? We didn’t even talk about the TIF in terms of the medical center (a U of L project at the site where the Haymarket used to be), which has the potential of giving the opportunity for research facilities as well as biotech companies, life-science companies. That is a whole other — when I was going through the TIFs that exist — that is tremendous. The reason why so much of this had to happen so quickly was because the projects were teed up, the law had just been changed. In terms of the retail issue, which was your original question, the law changed as of Jan. 1, in terms of how much the state would commit for retail, so we wanted it to commit as much as possible, and the way you did that is you had to have it done before Jan. 1. And with the transition of the Fletcher crowd leaving and the Beshear crowd coming in, we had like a two-week, three-week window of opportunity. And we got it done. LEO: Last year you also said that you hoped, by the end of 2008, to have nearly 4,000 residential units downtown. I’m curious how that’s coming. JA: We have on the drawing boards or under construction an additional 2,000 units. Now, what happens is, for example, if you’d been here two weeks ago I’d have said we’re right on track. But since that time, as an example, Steve Poe’s organization (Poe Company) on the waterfront (RiverPark Place) is now scaling it down as a result not of the demand in this community for downtown housing, which is still strong as ever, but because of the economics that have been created as a result of the subprime mortgage crisis that has thrown Wall Street into turmoil. Same time, we’ve just rolled out another 300-plus units that will be available in a very edgy architecture for Liberty Green. So yeah, we’re right on target. We may not hit — I think we started at about 2,000 existing, and we have been adding to that. But whether the national economy slowdown, and the uncertainty of the national financial markets, create a problem for it to continue as quickly as we had hoped, is really an issue that we’ve got to deal with, and yet it’s beyond our control. LEO: I wanted to ask you about Liberty Green, because I’ve heard a gripe from some developers recently about changing the plan somewhat to sell more of the rental units (than originally planned). It was unclear to me— JA: Then those people didn’t understand. When I did Park DuValle, the HOPE VI project — which for a dollar of public money attracts two to three dollars of private money, there’s your leverage — it was set up to be a third public housing residents, a third market-rate apartments, a third homeownership. That’s exactly what (Liberty Green) is. So the focus of the 300-or-so condos: For example, today we have built 185, give or take, apartments — 181, give or take, are rented. So the thing we hadn’t broken ground on, or laid out our game plan — because in Park DuValle, you’ll see single-family homes as you think of them. You can’t build those types of single-family homes in an area like (Liberty Green). What you can do is provide really exciting architecturally designed condos that go from $100,000 if you buy one floor up to $500,000 if you buy four floors plus the garage. So it is right in line with what we’d originally projected, and meets all the requirements of HOPE VI, which is important to be able to continue to get those kinds of funds. LEO: As far as housing is concerned, one of the big laments about the Bush administration is that they’ve really drained a lot of that HUD (Department of Housing and Urban Development) money. JA: Last year, (Congress) put $99 million into the budget for HOPE VI projects. Liberty Green’s $40 million, so basically you’re talking about two projects. This year, they put $100 million in. (Before, Bush had) zeroed it out. When President Clinton started the project … it was over a billion dollars. Because of the leverage. Because if you can put a dollar and get two, three, four dollars of private money leveraged because of that dollar, you’ve got a deal. And the success of mixed-income neighborhoods has proven to be far better than warehousing poor people in old barracks, basically.LEO: No question. And I know the city is looking at trying to replicate Park DuValle and, potentially, Liberty Green with the remaining barracks-style (public housing complexes). JA: Yes, I would like to replicate it. Keep in mind that some areas do not lend themselves to a HOPE VI project. For example, Park Hill is in the middle of an industrial area. It’s off Hill Street. It doesn’t make any sense to rebuild a Park DuValle or a Liberty Green at that location. So it would make no sense to do a HOPE VI — that’s going to have to be a complete relocation. LEO: The city set aside $350,000 this year to help bail people who got bad loans out of foreclosure. Earlier this afternoon, I was at a press conference by the Metropolitan Housing Coalition, where they released a new foreclosure study that shows that it’s reaching epidemic levels. The problem of foreclosure is infiltrating all these different neighborhoods that aren’t traditionally susceptible to such a thing. Do you think that Metro will have to find another way to deal with that in the coming year? JA: You know, I went up to Detroit and met with the leadership of organizations from Citywide to Wells-Fargo, from the Mortgage Bankers National Association where about eight of us, eight of the mayors reviewed the options, began to talk with them about the workout opportunities. Subsequent to that, the secretary of the treasury moved with his approach. Prior to me going to Detroit, I had a meeting with all our bankers, with the Kentucky Housing Corporation, and our local mortgage banking folks, and our National Association of Realtors based here in Louisville, the Louisville chapter, focusing on what we can do, and we’ll be ready within the next several weeks to roll out a program of response, both in terms of how to use the dollars you’re talking about, as well as an overall commitment from banks and other institutions. The real issue here is that 50 percent, in my judgment, of those who have their homes foreclosed on, never communicate with their lender. That’s a fact. And we’re going to create a program that will give folks an opportunity — I mean, after you receive the 13th letter from your lender saying you’ve got problems, and you’re afraid to contact them back because you think they’re going to take your home, and the last thing the lender wants is your home. So we’re going to work through an approach that will be more user-friendly for individuals who are going through difficulties. The only positive thing about this horrendous foreclosure issue throughout the country — this is what we’re saying as mayors — is that we have been beating the drums about the issue of foreclosure before Congress, in terms of the changes in the law that need to occur in terms of predatory lending, etc., for years and they’ve never listened. And they’ve never listened for the same reason they’ve never listened on other issues we’ve talked about, because when we talk about those issues, they have normally been pigeonholed into an area of poor people. In this situation, we’ve got a foreclosure in Lake Forest, we’ve got foreclosures in Fern Creek, we’ve got foreclosures in Pleasure Ridge Park, in Okolona, in Beechmont, in Crescent Hill. And all of a sudden, now there’s a desire to do something. So our hope at the U.S. Conference of Mayors, at the national level, is to engage Congress, Fannie Mae, Freddie Mac and others, to really get a grip on this. The culprit in what we’re going through today in America, in my judgment, is Wall Street. They created these exotic products that were put together and sold worldwide. In this community, if you look at the list of — and we did a review of the last year — which bank has the most loans that have had foreclosures occur, it’s Wells-Fargo. Except there is no Wells-Fargo bank here. Deutsche Bank was one of the top five. There is no Deutsche Bank here. There’s a Chinese bank that’s a part of a British conglomerate — they were in the top 10. They’re not here. So the question is, how do you connect? How do you get folks to respond? LEO: What is the reality of the city’s economic base now? I’m thinking of the manufacturing and white-collar jobs that used to be prominent here. What is filling those roles today? JA: The conscious decision this community made, after the early ’80s recession where we lost 30,000-plus jobs because manufacturing tanked, we made a conscious decision as a community to diversify our economy, and we’ve done just that. When I was a child in this community, we had 40 percent of our folks working in manufacturing. We’re around 11 percent right now, and probably ought to stay somewhere between 10 and 15, just to have a good balance. Logistics has come online since we made the tough decision to expand the airport, and ultimately with UPS growing, so do the companies that use UPS for overnight deliveries. Biotech companies, like Genentech, show up in Louisville. Amgen shows up in Louisville. Financial back-office operations continue to grow in Louisville. The answer to your question is, we have made the excruciating turn from a heavily manufacturing to a service-oriented community, and healthcare is growing based on the demographics of America, and we’re seeing that right here — whether it’s Kindred, whether it’s Humana, whether it’s the hospitals themselves. The new VA hospital we’re hopeful of attracting, etc. So right now, I’d say to you, it’s a very diverse economy, it’s an economy that will not feel excruciating pain from the swings of the national economy — we won’t get the big highs, but we won’t have to fight through the big lows. LEO: So, say I’m a 26-year-old guy who’s sick of Nashville and is looking to move here. I’m college-educated, say even I’ve got a master’s, and I want to come to Louisville. Where am I going to work? JA: Well, as I said, healthcare is an expanding field, so whether it’s Humana, whether it’s Kindred, whether it’s the hospital fields, whether it’s biotech companies, depending on how much risk you are willing to take. There are a lot of young people who are taking that research out of the universities’ laboratories and developing business plans to be able to create new businesses. Twenty-three to 24 of I’m aware of myself that we’re working with through MetaCyte and the groups with the university. Financial opportunities, if you’re looking for venture capital, you’ve got companies here that are venture capitalists that you could seek to become a part of their organizations. If you’re interested in fast foods and what that means in a management, business-technology way — I was in Chicago last year and took Yum! Brands with us, they’re always looking to hire, KFC, took SHPS with us, took Mercer-Meidinger looking for 200-plus folks looking to grow that business, took Brown-Forman looking for people. Technology people, finance people, people with backgrounds in marketing — SHPS was looking for 10 or 12 — those are the kinds of companies that I think would be attractive, depending on whether you’re a company guy or gal, or whether you’re an entrepreneur. LEO: I wanted to ask you about West End economic development. We’ve got obviously the major project at the old Philip Morris site (at 18th and Broadway). As we said before, a lot of the development is happening downtown. Do you see that affecting West Louisville in a positive way? JA: We certainly hope so. You see the growth as we go down Market and Main, if you go west, as you begin to think in terms of the Shippingport Center area, we’ve got plans in place and opportunities once we expand River Road all the way through, so that it doesn’t make the turn up 8th Street. An anchor, obviously, is 18th and Broadway. When I went to the International Shopping Center Convention, I went and spoke with several big-box stores and carried lots of statistics to show that 18th and Broadway location would be an exceptionally exciting opportunity. We have been working with local folks who get it, like Kroger’s, which opened the new Kroger in Portland, which has been tremendously successful. So there are companies that understand. The newest one, the most unique one, is Pro-Liquitech (809 S. 8th St.), that makes all the tastes. That is just a fascinating group. They bought that old building and completely renovated and refurbished it — we use that as an example for others to follow and see the opportunities, where the infrastructure’s there, the roads and sidewalks and streetscapes are there. I saw on Broadway the old cinema theaters are now coming alive and ready to announce, they’ll be ready shortly to announce the retailers that will be going in there. Yeah, there is a momentum that’s going on in West Louisville, but can there be more? Yeah, there can be more. And by the way, there can be more in Pleasure Ridge Park, and there can be more in Valley Station, there can be more in Okolona and Fairdale. I’m working with Okolona right now in terms of the expansion of the property next to Jefferson Mall. We’re working with Pleasure Ridge Park for additional family restaurants. We’re working with Pleasure Ridge Park and Shively on the closing of the Bacon’s/Dillard’s and we hope to get a Kohl’s to be able to support retail in that area. There’s a direct correlation between the success and the vibrancy of the center of the community, and you hope not only West Louisville, but it continues to ripple across the community. LEO: Everybody’s concerned about the state budget and the shortfalls there. What are your concerns, and what actions might you be able to take? JA: Revenues are down in the state. Revenues are down in the city compared to what we projected. Structural imbalance exists in the budget in the state. Structural imbalance means one-time money was used to balance the budget. We have never done that, and we will never do that, as long as I’m mayor, so that we don’t have any structural problems, but we have six, eight, nine, 10 million dollars less in revenues if this trend continues, than we have budgeted. And so we’ve got to come up with a game plan to keep this budget balanced while continuing to deliver services. The state plays a role in that we get funding from the state for lots of things, and the question is, how much less will we get from them? We’ve got to put that in with how much less in revenues are we receiving from our tax base, and then I’ve got to make that work. We are concerned, of course. When you talk about funding of the university, you know, great universities help make great cities. When you talk about potential funding cuts for public schools, that plays a role in the quality of life in this community. We’re very concerned in terms of what the state does with the very difficult financial situation it’s presently in. LEO: How do you persuade lawmakers to deal fairly with Louisville? JA: You first start at the governor’s office, and it’s always good to have a governor who’s a friend. He understands clearly and said it over and over again, that this community is the economic engine of this commonwealth. And so, as he makes these very, very difficult decisions to prepare his budget for the end of January, we’ll talk with him about the issues that really make a difference in our ability to continue to generate revenues for the state of Kentucky’s tax base. Then, after the budget is presented, we have the opportunity to visit with our legislators — the state Senate and state House — and to interact with them on the same issues that are important to the community. LEO: There was a little bit of an uproar recently about the increasing costs of both the arena and Museum Plaza. There were complaints that taxpayers were being told one thing and sold another. Can you explain what happened? JA: Certainly in the arena, if you look back in your notes you’ll find that, four or five months ago, before this financial crisis in this country, rates were so good that it looked like we were going to have a savings of about $115, $116 million of the total cost, which was really great. Then the financial crisis, and with this uncertainty on Wall Street, all of a sudden not only is that $116 million lost in savings, but it’s now going to be even more expensive. If we had floated the bonds six months ago, when we were still having some difficulties here locally, they would have gotten to take advantage of those savings. Now, with the market, we’re going to wait as long as we can — first quarter, maybe beginning of the second quarter — in hopes that the market will settle down. But the dollars are there to be able to handle the cost.Museum Plaza, we have negotiated with those developers, once they got the many, many millions of dollars committed from the state through the TIF, we have been working with them — the original approach was about $75 million, is what they wanted from us in infrastructure, roads and sidewalks and streets, stuff like that, plazas, all that public access area — we drew the line at $45 million … to be paid back by the taxes that are generated in terms of property tax and occupational tax. LEO: What happens to the Bridges Project if push comes to shove and the money is not there?JA: Push will not come to shove with there not being the money there. The money will be there to do these bridges, or they won’t be done. It’s that simple. We’ll either be able to do the two bridges and the reconstruct of Spaghetti Junction with a very clear financial plan, or, if the funds aren’t there, then give it a decade, maybe two, and we’ll be the bottleneck of the southeastern part of the United States. And the UPSes won’t be able to get their stuff in and out, and the Fords will have great difficulty getting their engines to be put into their vehicles, and the mayor of Bowling Green was saying she was quite concerned about the Corvette plant getting its materials from up north, and the Magnum plant and the folks I’ve talked to in Shelby County, and Bullitt County, and Oldham County and — it is a major, major issue that needs to be resolved, and without the funding it won’t be, and therefore, we have to create — and we feel confident we will — the mechanisms that will give us an opportunity to build the two bridges, reconstruct Spaghetti Junction, which now averages two accidents every working day. But without the funding it won’t go forward, and we’ve got to do it — there’s no ands, ifs or buts. LEO: Are you frustrated, then, that there’s still so much disagreement? You look at something like the council forming this ad hoc committee to study 8664, and you said to me last year and say to people all the time that we’ve made our decision, we’re moving forward. Are you frustrated? JA: My frustration is that the federal government has walked away from infrastructure in this country. I would submit to you that the federal government has two areas of responsibility: One is defense of this country, and two is the vibrancy of the economy. And the vibrancy of the economy is directly linked to being able to move goods, services and people from one end of the country to the other. Now, the state of Indiana decides they’re going to build roads because they’re going to sell their road to the Germans or the Australians, and the city of Chicago decides they don’t have any infrastructure and there’s no federal money so they do the skyway to the Germans or to a pension plan in Australia, and everybody now, each state, is trying to create a mechanism to be able to keep its own infrastructure up to speed. And yet, we are an interlinked 50-state union that has got to have the ability to move goods north and south, east and west. LEO: Do you think it’s wise to privately finance major infrastructure? JA: No. I am not in favor, if we had a toll road, of selling it to a pension company based in Australia for 99 years. I am in favor, however, if there is no federal money — and the senior senator from Kentucky has told me, eyeball to eyeball sitting in his office in Washington, there is no money. This country’s energy policy has created a situation where the interstate trust fund zeroes out in 2009, meaning there’s only money there to maintain what we have. And why is that? Because the only way we fund transportation in this country is through the gas tax. Our energy policy says drive fewer miles, buy more hybrids, use less gas. There’s a problem there. We’re going to have to change the whole paradigm of how we fund infrastructure in this country. But ultimately, when my senior senator, the leader of the Republican Party, stands up and says there is no federal money, you’re on your own, you’ve got to create something. That’s why these 29, 30 states are coming up with these approaches that we’ll own the bridge, we’ll finance the bridge, and instead of getting an 18-percent return on investment or whatever the foreigners need to be able to make it a good deal, we’ll get a significantly lower return that will be used not only to maintain the infrastructure we’re funding, but also give us funding opportunities for other roads and transportation projects within this region, 25, 28 counties, of Indiana and Kentucky. LEO: You and a heck of a lot of other people took a hit on the vote on the library tax, but everybody’s talking about how we like the idea of expanding the libraries. What do you see happening? JA: What happened in that election, you had a snake-oil salesman stand up and say you can get something for nothing. Let me tell you, if given the opportunity to get something for nothing, as compared to having to pay for something, people will vote for something for nothing every time. So here we are. Just to be able to cover the expenses of the police and the library and the fire department and EMS and the housing department and the parks, just to cover those, we’re $8-10 million short.And so the snake-oil salesman is now saying the money’s there. It’ll be interesting to see whether that individual is able, on the council, to find the money. It’s one thing to build a building; it’s another to operate it. What we’re trying to do, realistically — and we’re always trying deal with the reality of what exists rather than the whims and fantasies that some would present — and the reality is the funds aren’t there. But at the same time, I’ve asked the Library Commission and the Library Foundation to go back to the drawing board to refocus on their master plan, and to give me some options that we can look at over the next five years that would give us expanded service, especially in areas that don’t have the access to service. Contact the writer at sgeorge@leoweekly.com