The city of Annapolis has finalized a long-awaited financial agreement with developers and a state economic agency to fund the reconstruction of Noah Hillman Garage and the redevelopment of City Dock.
City officials announced in a news release Thursday they had signed an agreement with the development group Annapolis Mobility and Resilience Partners, or AMRP, with backing from the Maryland Economic Development Corp. to pay for what is expected to be the largest municipal project in city history with an estimated cost of $70 million.
The transaction was completed about four months after the demolition of the downtown garage began and nearly two years after the city announced plans to enter into a private-public partnership to build a new garage and later redevelop the downtown waterfront area.
Under the agreement, the financing for the $28.3 million Hillman garage and much of the City Dock project — estimated at $41.62 million — will be partially paid through the issuance of bonds. The bond sale was completed Thursday when $47.3 million in Series A, tax-exempt bonds were sold to investment groups T. Rowe Price, Nuveen, Franklin Funds, MacKay Shields, and JP Morgan Investment for their Maryland investment fund portfolios, according to the city release.
Maryland Economic Development Corp., or MEDCO, handled the bond sale and will will collect parking and other revenues, and make payments on the debt and other expenses like garage operations, maintenance and construction contracts, the city said. Any remaining funds will be paid to the city, which Public Works Director David Jarrell estimated will be about $1 million per year.
MEDCO was established in 1984 by the Maryland General Assembly to help finance local projects that retain existing businesses in the state and attract new ones. One of the ways it does this is by borrowing money and issuing bonds.
The bonds will be paid back over 30 years from the parking revenue generated by the garage and surrounding on-street parking. The city will now receive a one-time payment of $25.35 million as part of the deal, said Jarrell, who recently returned to the job after two years as city manager.
That money, known as a concession payment, will be used to pay down more than half of the City Dock redevelopment.
In 2020, the city tapped AMRP, a group of 10 companies — some with Annapolis and Baltimore ties — to undertake the multiphase project. Since late February, AMRP has been working to secure financing. Meanwhile, Baltimore-based Whiting-Turner Contracting Co. began overseeing the demolition of the nearly 50-year-old Hillman garage in May. The new parking structure is slated to have 165 more parking spaces, modern amenities like EV charging stations and solar panels and take 14 to 16 months to build.
The Morning Sun
Construction of the replacement garage is on schedule and slated to open in June 2023, the city announced.
The city plans to use the $25.3 million concession payment to seed the City Dock project, slated to get underway in late 2023. Additional bond offerings and state and federal grants will pay the remaining costs. Some of that money is already accounted for thanks to a $10 million commitment from the state of Maryland, $3.2 million in American Rescue Plan funding, and just over $1 million in federal funding.
Cost estimates for that phase have risen from $35 million to about $42 million in recent months because of construction cost inflation and increased material and equipment costs and labor shortages, Jarrell said.
The scope of the project, which includes a raised park on the current site of the Dock Street parking lot, flood barriers, and stormwater pumps to combat rising sea levels, has not changed, he said. Completion of the project is expected in 2025.
The Annapolis City Council endorsed the private-public partnership in February after briefly debating whether the city should issue its own general obligation bonds, a move some council members thought might be better for the city in the long run and avoid giving up control of the garage for decades.
In that scenario, the city would have retained full control of the new garage and with it the millions of dollars in parking revenue it generates annually. However, by issuing bonds to pay for the project, the city would have also taken on approximately $65 million in debt, according to estimates from Coldwell Banker Richard Ellis, a commercial real estate and investment firm hired to advise the city on the Hillman deal. Because MEDCO issued the bonds, the city does not have liability for them, Jarrell said.
“A lot of work went into this complex agreement and I’d like to acknowledge their expertise and patience,” Mayor Gavin Buckley said in a news release. “I can see the garage rebuild from my office and I know that downtown businesses and residents will be thrilled when we get to the other side of the construction. It’s going to be amazing for parking, for our environment, and for convenience. Each day we move a little closer to our goals.”