Green Building Law Blog

Like the Destiny USA project in Syracuse (which is mired in a controversy over whether the tax exempt green bonds issued for the project should keep their tax exempt status despite the project's failure to incorporate any green features--more about that project is available here), the Georgetown Redevelopment Project in Redding, Connecticut was also selected as a demonstration project to qualify for green tax-exempt bonds under the America Jobs Creation Act of 2004.

According to my research, at least $14.5 million in tax exempt bonds were issued for the Georgetown project. For you bond junkies, the details of the bond offer was:

Georgetown Special Taxing District
Nov 16, 2006 $14,450,000
General Obligation Bonds, Series 2006A (book entry)
Dated Nov 22, 2006.
Due Oct 1, 2036.
First coupon Apr 1, 2007.
Callable Oct 1, 2016 at par.
Purchased through negotiation by Banc of America Securities LLC, as
follows:
Due Amount Cpn Reoffered Ins
10/1/36 $14,450,000 5.125% 5.125%
L.O.: Shipman & Goodwin, Hartford, CT.
F.A.: Lamont Financial Services Corp, Wayne, NJ. 
 

Like the Destiny USA project, the Georgetown project stalled, and is having difficulty meeting its bond obligations.

According to the Weston Forum, the deal to sell the site to a developer fell through in mid-2010:

With the advent of the country’s financial crisis in 2008, capitalizing the project became an issue. That, combined with the delay in state approvals, stalled the project, but the intersection work has since been funded and put out to bid.
 

 As of  July 9, 2010, according to Bond Buyer (subscription required) the Georgetown Special Taxing District in Connecticut received a forbearance on $1.5 million of tax anticipation notes after failing to pay them on time.

The district was unable to pay the notes on June 30 because it had not collected property taxes from a stalled mixed-use development. The project and district are located on a 51-acre tract in the town of Redding in affluent Fairfield County.

The forbearance gave the district two months to figure out what to do without defaulting on bond payments. The failure to make the payment by June 30 constitutes a technical default, according to disclosure documents.  It is not clear whether the bonds were paid, but if they were not, another set of green bonds has gone into default. 

Although the two projects are currently in the same boat financially, they are not equivalent projects.  Unlike the Destiny USA project, which was a large mall extension which was going to be fitted out with green features, the Georgetown Redevelopment Project was actually a thoughtful green project.  It was envisioned as a transit oriented, mixed use redevelopment of a 55 acre, contaminated wire mill site.  The master plan includes residential (including 40 units of affordable housing), commercial and light industrial uses, as well as a YMCA, performing arts center and public open space oriented around a transit station.  A powerpoint of the master plan and description of the project is available here.

The project would have encouraged transit use, created a mixed use community, redeveloped contaminated property and (theoretically) integrated green building and renewable energy features. This is exactly the sort of project which should be encouraged and supported.  

The fact that the Georgetown project has not come to fruition is a bad outcome for the Georgetown project in specific, and green bonded projects in general.  First, this is a good project.  Doing transit oriented, mixed use development is positive for communities and the environment.  So, the fact that it had difficulty meeting its financial obligations and may not come to fruition is disappointing.

On a more global level, projects like Georgetown and Destiny USA make bonds for green projects look risky, which may make financial institutions shy away from issuing and underwriting the bonds.  This will make getting financing for green projects harder than it already is.  Second, it makes the public sector more reluctant to support green projects if they fear that they will not be able to meet their financial obligations. 

To end this on a brighter note, it appears that public entities are continuing with the site and transit work on the Georgetown project continue to progress, even though a private developer is not currently doing the mixed-use component.