There is an issue with the Stiteler development that has gone unreported. I suspect that’s because, like so many economic issues, it hasn’t been understood. It surely hasn’t been understood by the City Council.

I will now perform the death-defying feat of trying to explain it. Before I do, let me remind you that a great deal of development and improvement has gone on downtown fueled by purely private investment. I.E: with little or no public support.

Mr. Private Developer, henceforth PD, sees a downtown property he thinks is ripe for re-development. He buys it, and does all the preparatory and clean-up work to start building his lofts, or studios, or restaurant space–whatever his plan is. Let’s say that he invests a million bucks in all that, in buying the property and in development preparation. Now PD goes to the bank. He needs a two million dollar loan for his project.

Mr Banker, henceforth MB, takes a look at the projections, PD’s pro-formas and so forth.

MB: See here, PD, you have a cost basis of a million dollars in this project and now you want a two million dollar loan. That means you’ll be into the project for a total of three million bucks. In order for it to cash flow you’ll have to charge rent at so-and-so many dollars a square foot.

MB: Now here’s my problem. There’s another developer in the neighborhood who has been given his land by the City. His cost basis is zero, zip, nada. He’s come to me for a loan, too. Like you he wants 2 million. In order to cash flow he could charge fewer dollars per square foot than you. But even if he charges what you plan to charge, he is a better risk because he’ll be into the project for only two million.

He’s a better risk and I have limited resources so if I make your loan at all it will have to be for a higher interest rate.

Hence it is at least arguable that giving away City property makes it harder for private developers, not easier. In the attempt to spur development the City Council has placed all other development at a disadvantage.

The Data Port checked in with City Council offices to see what the levels of e-mail traffic were prior to last night’s vote.

A spokesman at Regina Romero’s Ward One office estimated that the office received approximately 140 e-mails in support of the Rialto Theater.

Rodney Glassman’s Ward 2 office: 100, mostly Rialto related.

Shirley Scott, Ward 4:  ”Mayor and Council comment line was bombarded” according to a spokesperson. In addition the office estimates that they received about 50, concerned about the future of the Rialto Theater.

Steve Leal’s Ward 5 spokesman, Barbara Jordan, estimated that they received about 300 e-mails to “save the Rialto.”

Nina Trasoff, Ward 6 : The Data Port spoke with Trasoff, who estimated that e-mail traffic related to last night’s vote was between 150 and 200. Trasoff sent The Data Port a copy of the e-mail she sent to people who had e-mailed her. The Data Port will discuss that in a later post.

Karen Uhlich’s Ward Three office will be getting back to us.

It’s apparent that most of the concern about the Stiteler plan centered around the Rialto Theater. There are other issues, of course, mostly about the overall financial wisdom of the deal. Those are the subject of a future post.

By a 7-0 vote the City Council last night voted to delay a decision on the Stiteler  development deal

Perhaps it finally occurred to them that giving Stiteler four million bucks worth of land as a reward for developing his own property didn’t make as much sense as they once thought.