FOR IMMEDIATE RELEASE: March 3, 2011
SCHUMER URGES HUD SEC TO APPROVE LOAN APPLICATION THAT IS NEEDED TO BRING PAETEC HEADQUARTERS TO ROCHESTER—MOVE WOULD MEAN 1,000 JOBS, ECONOMIC BOOST TO CITY
Under Agreement Rochester Must Secure HUD Loan Within 180 Days of Signing; With Clock Ticking Schumer Presses HUD Chief to Sign Approval Quickly or Project Could Stall
Paetec in Rochester Would Bring Up to 1,000 Jobs, Boost Downtown Redevelopment Efforts
Schumer: Prompt OK from HUD is Key to Making Paetec Downtown a Reality
Today, U.S. Senator Charles E. Schumer announced that he has written to the U.S. Department of Housing and Urban Development (HUD) Secretary Shaun Donovan urging him to quickly approve a Section 108 Loan Application that would bring Paetec Inc.’s headquarters to downtown Rochester. This would mean a potential 1,000 jobs for residents and a revitalizing force in Downtown Rochester. The $16.5 million Federal HUD loan is essential to bring Paetac to Rochester and under the agreement if the loan is not approved within 180 days of the December 28, 2010 signing the project would fall apart.
“Bringing Paetac to downtown Rochester will mean 1,000 good paying jobs and an economic shot in the arm to the region, and we can’t afford to lose this opportunity,” Schumer said. “The Department of Housing and Urban Development should act now. With the clock ticking on this pivotal project, I strongly urge HUD to approve the loan so that this job-creating project can move forward as soon as possible.”
This past August Rochester City Council authorized Mayor Robert Duffy to seek HUD approval in order for the City to extend the $16.5 million loan to Paetec. By January the regional HUD office in Buffalo determined the City's plan to loan the $16.5 million was sound and forwarded the agreement to HUD headquarters in Washington, DC for final review and approval. However, the matter is still awaiting final HUD action.
Section 108 loans are a commonly-used and effective tool employed by cities to revitalize distressed areas and leverage private sector investment. Specifically, cities like Rochester may borrow against future federal Community Development Block Grant funding in order to make low-interest loans to incentivize local redevelopment projects. Typically Section 108 loan interest rates are 50% less than commercial market rate loans. The City of Rochester has structured payback guarantee provisions in its proposed $16.5 million loan to Paetec to help ensure taxpayer interests are protected and the loan is repaid.
Successfully securing this Section 108 Federal HUD Loan approval is a key provision of the agreement signed by the City of Rochester and Paetec Communications on December 28, 2010 to bring the company's $55 million world headquarters to downtown Rochester. The agreement specifies that within 180 days of the agreement signing the City must secure HUD approval to make the $16.5 million low-interest Section 108 loan to Paetec or the December 28th agreement will be breached and the project jeopardized. As of today, there are now only 115 days left. Without this $16.5 million in funding Paetec will not be able to build their new headquarters in downtown Rochester.
The $16.5 million loan represents nearly 30% of the financing for the overall $55 million Paetec Headquarters project. Paetec has committed to financing its new headquarters using $5 million of its own equity and securing $34 million in loans including the $16.5 million Section 108 loan. Additional tax credit investment is being sought in partnership with the City of Rochester.
The Paetec development is a key part of the City's overall economic rebuilding strategy. It is part and parcel of the revitalization of the nearly nine acre former Midtown Plaza site in the center of downtown. The financial and physical deterioration of the former Midtown Plaza over the past two decades precipitated a decline that encompassed the entire downtown region and discouraged new investment. To reverse this trend, Senator Schumer has made the redevelopment of the Midtown Plaza site his top economic priority in the Greater Rochester region.
Last year Schumer secured $1.4 million in federal funding for the Midtown Plaza Revitalization Project that will be used to build new infrastructure and access roads to make the 9-acre site shovel-ready for new private development. Once completed, the site will accommodate about one million square feet of office, residential, hotel and retail space and will create approximately 2,000 new jobs for downtown Rochester, including 1,000 Paetec workers.
Unless the City secures HUD approval for the Section 108 loan within the next 115 days Paetec will not be on track to open its new world headquarters in 2013. Paetec had committed to move its current 900 employees into the new headquarter building and create up to 100 new jobs over the next few years.
A copy of Schumer’s letter to Secretary Donovan appears below:
March 3, 2011
Honorable Shaun Donovan
Secretary, United States Department of Housing and Urban Development
451 Seventh Street, SW
Washington, DC 20410
Dear Secretary Donovan:
I write to urge you to support the City of Rochester’s application for a Section 108 loan application. This application is a key provision to an agreement signed by the City of Rochester and Paetec Communications last December 28th that would help the company move its headquarters to downtown Rochester. The agreement specifies that the Section 108 loan must be secured within 180 days of the agreement’s December 28th signing or the project could stall. As you may know, the Paetec development project is a key part of the City's overall economic rebuilding strategy and would revitalize the nearly nine acre former Midtown Plaza site in the center of downtown Rochester. The financial and physical deterioration of the former Midtown Plaza over the past two decades precipitated a decline that encompassed the entire downtown region and discouraged new investment. Paetec had committed to move its current 900 employees into the new headquarter building and create up to 100 new jobs over the next few years. However, the City must secure HUD’s approval for the Section 108 loan within the next 115 days or Paetec will not be on track to open its new world headquarters in 2013. Paetec has committed to financing its new headquarters using $5 million of its own equity and securing $34 million in loans including this $16.5 million Section 108 loan application.
The complexities of this downtown development are such that we need to off-set financial obstacles with any and every tool in our arsenal. Federal incentives, such as the low-interest Section 108 loan, will enable Rochester to level the playing field and attract new private investors like Paetec. This loan is the catalyst to create hundreds of new jobs and usher in more than $200 million in new downtown investment. The clock is ticking and everyday that goes by that this loan approval remains pending threatens to end the Paetec Midtown Plaza site redevelopment and undermines Rochester’s ability to revitalize the heart of the city. I encourage HUD to act quickly to grant final approval of the $16.5 million loan. Thank you for consideration of this request. If you have any additional questions, feel free to contact Megan Richardson or Chris Zeltmann of my office at (202) 224-6542 at your convenience.
Charles E. Schumer
United States Senate