HomeMy WebLinkAbout07-14-2014 Council Economic Development CommitteeAGENDA
City Council Economic Development Committee
Monday, July 14, 2014
8:00 a.m.
Emma Harvat Hall
City Hall
1. Call to Order
2. Consider approval of minutes from the February 10, 2014 Economic
Development Committee meeting
3. Consider approval of minutes from April 1, 2014 Economic
Development Committee meeting
4. Consider approval of financial assistance for The Chauncey
5. Consider request for financial support for Entrepreneurial
Development Center, Cedar Rapids
6. Update from Iowa City Area Development Group
7. Staff updates
8. Committee time
9. Other business
10. Adjournment
EDC February 10, 2014 1
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MINUTES
CITY COUNCIL ECONOMIC DEVELOPMENT COMMITTEE
FEBRUARY 10, 2014
CITY MANAGER'S CONFERENCE ROOM, CITY HALL, 8:00 A.M.
Members Present: Susan Mims. Michelle Payne, Matt Hayek
Staff Present: Wendy Ford, Tracy Hightshoe, Jeff Davidson, Tom Markus, Steve
Long, Eleanor Dilkes
Others Present: Taki Mullins (Butter); Adam McLaughlin (Midwest One Bank); Bob
Long (MetaCommunications); Dan Cilek (Meta Communications);
Aly Brown (Press -Citizen); Andy Brodie (Film Scene); Bill
Thomasson (Film Scene); Laura Bergus (Film Scene); Mark Nolte
(ICAD); Nancy Quellhorst (Chamber)
RECOMMENDATIONS TO COUNCIL:
Payne moved to recommend the request for financial assistance from Film Scene
per staff recommendation. Hayek seconded the motion.
Motion carried 3-0.
Hayek moved to recommend the request for an Economic Development grant to
assist Meta Communications in their expansion and relocation Der staff
recommendation. Payne seconded the motion.
Motion carried 3-0.
Payne moved to recommend the request for a CDBG Economic Development Loan
to Butter, a new breakfast and lunch restaurant, per staff recommendation. Hayek
seconded the motion.
Motion carried 3-0.
CALL MEETING TO ORDER:
The meeting was called to order by Chairperson Mims at 8:01 A.M.
WELCOME AND INTRODUCTIONS:
Chairperson Mims welcomed everyone and asked that those present introduce
themselves for the minutes.
CONSIDER APPROVAL OF MINUTES:
The first action was to review the minutes of the September 3, 2013, Economic
Development Committee meeting. There was no discussion.
Payne moved to approve minutes from the September 3, 2013, meeting as
submitted.
Hayek seconded the motion.
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Motion carried 3-0.
CONSIDER REQUEST FOR FINANCIAL ASSISTANCE FROM FILM SCENE
Ford gave the background on this request. As noted in the packet information, two
separate studies have indicated a strong desire for movie theaters in the downtown
district. Two years ago, Andy Brodie and Andrew Sherburne approached the Planning
Department with plans to start an art house cinema that would fill this void. Staff worked
with Brodie and Sherburne to find the right space for this vision. After two years, the two
began to work with Marc Moen on the possibility of creating some space in the old Vito's
location for an initial venue. By this time, they had formed their board of directors,
incorporated as a non-profit and begun to raise funds.
Ford noted that Film Scene has been doing well, exceeding some early expectations,
but they still require financial assistance. As with many non-profit arts organizations,
they count on two sources of income — contributed funds (donations) and earned
revenues (ticket sales and concessions). Film Scene's projections are conservative in
terms of fundraising and tickets sales, and there will be a deficit for the first three years
of operation. Ford noted that Film Scene has requested three years of funding to get
them through until they can operate without a deficit. They have requested a declining
amount of $35,000 in FY15; $25,000 in FY 16 and $15,000 in FY17. This total of
$75,000 would reduce Film Scene's projected deficit of $179,000 at the end of the three-
year period, and also require a combination of additional fundraising and for them to
obtain an operating line -of -credit from their bank.
Ford noted that movie -going is an activity that helps to fill an entertainment void
downtown. She recalled for Members the rehab improvements made to the building,
and the assistance the developer received, specifically for replacing the roof, the HVAC
system, and adding an elevator in view of the future potential for the building as a non -
alcohol entertainment, retail and office venue in the ped mall. She noted the developer,
in turn, is helping Film Scene by providing a below -market rent rate for them. Ford also
referenced two the Council's strategic planning priority goals of having a vibrant urban
core and engaging in strategic economic development activities, and said that
supporting this request is aligned with City Council's Strategic Planning Priorities.
Andy Brody then addressed the Members. He said that they have been pleased with the
success of Film Scene so far. Film Scene has been open full-time for almost three
months now, and they have been averaging more than 40 people per show, and as of
this morning, have sold 5,770 tickets since opening full-time. He added that they now
anticipate 25,000 admissions in their first year of being open full-time, about 7,000 more
than their original projections.
Brody noted that they have a predominantly non -student membership program where
members pay an annual fee and receive $5.00 admission to all regular programming.
Normally tickets are $8.50 each, with a $7.50 price for a matinee, $6.50 for seniors 60+,
and $6.50 for University of Iowa students. They also hope to extend this discount to
Kirkwood College students in the future. Brody noted that about 700 to 800 of the
admissions were U of I students. The IndieGoGo (a web -based crowd sourcing)
Campaign netted around 225 members and a fundraising total of $91,000. So far more
than 900 individuals have made contributions to Film Scene through either the social
EDC February 10, 2014 3
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media campaign or through the Founder's Circle campaign and Film Scene has over
350 annual paying members currently.
Brody then responded to Members' questions about the jobs at Film Scene. There are
currently two full-time and one part-time employee, in addition to six part-time box office
staff and four part-time projectionists. Box office and concession staff starts at $7.50 an
hour plus tips, and shift managers make $8.00 while projectionists make $10.00 hour.
The head projectionist's pay is at $12.50 per hour, with the salary for the executive
director is $35,000; $30,000 for the operations director; and $15,000 for the part-time
marketing director. Payne asked if the possible minimum wage increase will have much
effect on Film Scene, and Brody stated that they have not looked at those numbers yet.
Hayek noted that the Board of Directors for Film Scene is packed with talent, adding that
this really gives him confidence for their success. He asked about fundraising for the
near future and how Film Scene plans to deal with this going forward. Brody responded,
noting they plan to increase membership in their $1,000 Founder's Circle level. Mims
then asked what impacts are expected if the College/Gilbert Street project moves
forward with Marc Moen. Brody noted that they did do a Letter of Intent to be included in
the project when it was first being discussed, and added that they hope to have the
College/Gilbert project as an expansion of Film Scene, not a replacement. As far as he
knows, the developer intends to keep the theater at the College/Gilbert Street location.
Brody also spoke to how he hopes to host a film festival one day, and that in concert
with the Englert and the eventual Chauncey project, they would be well on their way to
being able to host a substantial film festival.
Payne asked for an explanation of the difference between Scene 1 and Film Scene.
Brody explained that Scene 1 is more akin to a nickname and refers only to the space at
118 E. College. It is as much a marketing tool as anything. With no further discussion,
Chairperson Mims asked for a motion.
Payne moved to recommend the request for financial assistance from Film Scene
per staff recommendation.
Hayek seconded the motion.
Motion carried 3-0.
Steve Long spoke to the Members regarding this grant request, noting that Meta
Communications is a software development company based in Iowa City. They have
thousands of customers all over the world, and have been housed in Iowa City since
1991. They also have offices in Chicago and St. Petersburg, Russia. Long stated that
Meta has outgrown their current space on South Gilbert Street and has been looking for
something in the downtown area. Due to several factors, namely the cost of staying
downtown, Meta began to look elsewhere. Long stated that they began to work with
Meta to help them stay in Iowa City as this is where they truly wanted to stay as they
expand their operations. One of the issues was the cost of parking for their employees.
Long stated that they came up with a way to assist by providing parking permits over a
three-year period and a declining number of permits over subsequent years, if their
goals to add 20 more employees were met. Another need is high-speed internet,
something currently missing in this area. Long noted that the City is working with South
Slope to provide the fiber optic line needed for this high-speed capability.
EDC February 10, 2014 4
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Long continued, explaining the costs for the Meta Communications' expansion. They
are currently looking at purchasing three floors. The actual purchase will be made by a
separate entity who will then lease back to Meta Communications. Looking ahead, Meta
plans to have 53 employees by the end of three years. Hayek asked about the total cost
to the City for this request, and Long explained. Over a 10-year period, there would .bea.
$222,720 value for the parking permits, plus the requested $58,000 of the total $300,000
build out costs. Long stated that staff is recommending approval of the funding request.
Payne stated that she thinks it sounds like an exciting project and she looks forward to
having this downtown. Markus added that it shows the company's commitment to
downtown, as well. Bob Long from Meta added that they want to stay in Iowa City, that
having the University has been helpful for them as a feeder program and keeps the
talent coming. Hayek added that this is exactly the kind of creative class office
environment they are wanting downtown and that he supports it fully. Payne asked for
further clarification on the parking contract and how that will work. Staff explained.
Hayek moved to recommend the request for an Economic Development grant to
assist Meta Communications in their expansion and relocation per staff
recommendation.
Payne seconded the motion.
Motion carried 3-0.
Tracy Hightshoe introduced the next item and applicant, Taki Mullins and his lender, who
were both present. She gave a brief description of the proposed restaurant, noting they
hope to open by June. It will be a breakfast and lunch restaurant. Startup costs are
estimated at $125,000. Midwest One has offered a financing commitment for $50,000
with the condition that the applicant could secure a $25,000 CDBG economic
development loan and put up $15,000 in cash. The landlord is willing to put in a $25,000
building allowance for some of upgrades. Hightshoe noted that the owner has consulted
with the Small Business Development Center process and has worked out the initial staff
concerns. The restaurant will create about 18 positions — three full-time staff at $10 -
$12 per hour and two full-time cooks. The rest of the jobs will be part-time. Staff is
recommending a $25,000 loan over seven years at 0% interest. Mims asked the owner
what brought him to Iowa City. He responded that he has always wanted to open a
gourmet -type breakfast and lunch restaurant. Markus asked what security there would
be for this loan, and Hightshoe noted that it is secured by a bank UCC lien.
Hayek asked if Hightshoe could give some history on how they have handled such
requests in the past for restaurants. Hightshoe noted that $20,000 to $35,000 has been
loaned in the past, typically capping out at $35,000. When interest rates were higher
they would charge more for such loans, but now with rates so low, they have been doing
0 to 1%. Hightshoe explained how businesses such as this go through the Small
Business Development Center's evaluation before they can be considered for such
requests. Mims agreed that this will be a great addition to the Riverfront Crossings area.
Hayek added that this is one of the riskier types of loans we do, but that is inherent in
economic development. Markus asked that Hightshoe to give some background on how
many defaults they have had on such loans. She said none since 2006, and that one
EDC February 10, 2014 5
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party is still paying them back, even though they defaulted. Markus added that they
have had very good luck with restaurants using this grant program.
Payne moved to recommend the request for a CDBG Economic Development Loan
to Butter, a new breakfast and lunch restaurant, per staff recommendation.
Hayek seconded the motion.
Motion carried 3-0.
Markus gave an update on his efforts to get an agreement between Iowa City, Coralville,
and North Liberty on how we communicate and cooperate regarding economic
development activities. He noted this is going to take a bit longer to do than he had
originally hoped. Hayek asked what other cities in the state have such agreements.
Markus noted the Quad Cities do and much of the language used in the initial draft is
from that, in particular, the part about businesses moving from one jurisdiction to
another. Another issue we have emulated is 'Recruitment by Proxy," when a city gives a
developer an incentive, and the developer goes out and does the recruitment and
disbursement of the incentive. Markus noted that Mason City, Cedar Rapids and
Hiawatha have such agreements. As for the name of this agreement, Markus stated that
they softened this a bit as it was originally called an "Anti -Piracy Agreement." Mims
stated that she hopes they continue to move forward with this, and she noted the
Connect Five agreement. She also thanked staff for the work they have done with
companies to find accommodations in Iowa City to keep them here. Hayek stated that he
agrees this is a good document, and one that is fair to all jurisdictions, but he agrees that
they face challenges in getting the other jurisdictions to buy into it. Markus used JECC
as an example, noting that this was one of those issues that faced an uphill battle, and
yet now it is being touted as an exceptional model. Markus stated that Mark Nolte has
been included in the conversation, which helps to give some perspective to the bigger
picture.
COMMITTEE TIME:
Mims stated that she would like to have a discussion on the I -JAG program. There has
been a request for support of this program, and Mims stated that the question then
becomes — do we, as a City, support this work, and if so, where do the funds come from.
She believes they need to have a discussion regarding where these funds will ultimately
come from.
STAFF TIME:
Report on Tourism Improvement Districts — Ford stated in November, the CVB
invited city managers to a statewide DMO Association meeting to listen to a keynote
speaker who spoke about tourism improvement districts, or TIDs. Ford further
explained noting that it is a district formed by petition by those within the district to
assess additional funds for marketing tourism in their communities. She said that the
speaker was an attorney who has been part of an advisory group helping other
states enact laws that would allow such activity in their states. Ford said currently
EDC February 10, 2014 6
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five or six other states have been using such districts for increasing their tourism
promotion.
EntreFest 2014 Conference & Sponsorship — Ford talked about EntreFest, a
conference that is going to be hosted in downtown Iowa City, May 14, 15, and 16,
with a hoped for attendance of 500 people who are entrepreneurs, intra-preneurs or
economic development people for three days of learning, meeting and mingling. She
noted that the City Manager's office approved a $2,500 sponsorship for this event.
The Creative Corridor with Amanda Styron and her group are the event organizers.
Real Estate Broker for Industrial Park — Ford noted that they are currently in
negotiations with a real estate broker who will be listing the industrial park on 420th
Street. Staff feels confident this broker will be able to bring some new businesses to
the industrial park. Hayek brought up how they need to be very conscious of buffers
in this area as things develop in the industrial park, the new school is built, and more
residential areas are developed as well. Davidson explained how the Southeast
District Plan covers this with a required greenway that will serve as this type of
buffer. The area will be a public green space that can allow for the transition from
industrial to residential. He added that if Council were interested they could go over
this plan at a work session.
CDBG Economic Development loans — repayment update — Hightshoe noted that
currently they have 16 businesses in various stages of repayment. Over the past
year $55,000 has been repaid, and these funds are reinvested in the CDBG account.
Discerning Eye just paid off their loan, and Alphie's Beauty Supply will probably pay
off their loan next month.
ESRI Market Data Information Sheets — Hightshoe noted that back in October of
2012, ESRI offered municipalities the ability to run 33 reports before deciding if they
wanted to order the service. She added that the service is quite expensive so staff
did not recommend it. However, staff did run 33 reports and they coordinated with
the National Development Council about what businesses, especially site selection
or developers, they would want to see in an area before they invest. Ten areas were
done throughout Iowa City, according to Hightshoe. She further explained what the
reports show — such as in a given area, what are the consumers like, how do they
spend their money. She noted how accurate the reports appear to be. Hightshoe
continued, explaining each page of the report and highlighting sections of particular
interest to the Members. She noted that the information will be on the City website
and the Economic Development web page for the public to look at.
Davidson then noted the Court/Linn site — staff is preparing the RFP and hopes to
get this out in March. Since the last discussion on this project, staff has updated the
parking demand figures for downtown in Riverfront Crossings, and now believe that
with the partnership with Midwest One Bank and the LLC that will be doing the
housing project on the Harrison Street site, that there is currently not a need for
another public parking facility. Demand numbers are down slightly, according to
Davidson, and permit waiting lists are shorter. Regarding the Midwest One Bank
project, Davidson shared that the rehab of the historic building and the construction
of the new building are both proceeding. Once the new office tower is completed,
the joint venture part of the Harrison Street project will begin.
Davidson stated that the University hopes to have an RFP out in March on bringing
the Art Museum downtown. They are interested in the downtown and Riverfront
Crossings areas.
Davidson shared that the two new buildings in Towncrest are occupied and open
now. There is one small retail space still available. The Williams Street streetscape
EDC February 10, 2014 7
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project should wrap up in the spring, according to Davidson. The Hospice is
proceeding with their fagade improvement program, as well. Davidson stated that
these improvements have had the desired effect — other businesses are now
interested in the Towncrest area and are looking into relocating there.
• Regarding the Chauncey project at Gilbert and College, Davidson noted that Marc
Moen has continued discussions with them on that project as he completes his Park
at 201 project.
• The project that was discussed for the Mumm's site on Riverside Drive was pulled by
the developer, according to Davidson. Staff has been in touch with the developer
who states that they are just making some slight changes and plan to come back
with plans shortly. This is for a mixed -use building with retail on the ground level and
40 residential units above it.
• The Packing and Provisions Buildings, formerly known as Vito's won an award from
the Thousand Friends of Iowa under `best practices for historic rehab buildings.'
• Davidson then noted the project at 700 S. Dubuque coordinated by the 404
Development Group is waiting for a State grant program to reopen, hopefully around
April 1. The State has indicated that they stand a good chance of accessing these
funds.
• Davidson added that the 404 Development Group is also working with New Pioneer
Co -Op on property east of the Rec Center. There will be more information on this
soon.
Hayek noted that when they were in Washington, D.C. last week they spoke about the
possibility of grant funding for their Transit building, due to the nature of that site and the
need for relocation of it. Davidson noted that they have been in touch with some of the
national franchise businesses, but that due to timing issues with relocation, have not
accelerated the redevelopment process. Mims added that what they heard in D.C. last
week didn't sound good as far as what kind of funding might be available for such a
project. Markus stated that they have also started conversations with other transit
facilities in the area to see if they are interested in working together.
Steve Long added that the NCAA swim meet has chosen Iowa City as its host city next
March. There is a committee consisting of staff, the UI Athletic Department, the CVB,
and the Downtown District to make sure they feel welcome. There will be several
thousand visitors from around the country.
OTHER BUSINESS:
None.
ADJOURNMENT:
Payne moved to adjourn the meeting at 9:20 A.M.
Hayek seconded the motion.
Motion carried 3.0.
EDC February 10, 2014 8
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Council Economic Development Committee
ATTENDANCE RECORD
2013 - 2014
TERM
00NAME
EXPwoW
i
W
A
Michelle
01/02/14
X
X
X
X
Payne
Matt
01/02/14
X
X
X
X
Hayek
Susan
01/02/14
X
X
X
X
Mims
Key:
X = Present
O = Absent
O/E = Absent/Excused
EDC April 1, 2014
MINUTES
DRAFT
CITY COUNCIL ECONOMIC
DEVELOPMENT COMMITTEE
APRIL 1, 2014
CITY MANAGER'S
CONFERENCE ROOM, CITY HALL, 8:00 A.M.
Members Present:
Susan Mims, Michelle Payne, Matt Hayek
Staff Present:
Wendy Ford, Tracy Hightshoe, Jeff Davidson, Tom Markus,
Eleanor Dikes
Others Present:
Andre Perry, Mission Creek;
RECOMMENDATIONS TO COUNCIL:
Payne moved to recommend the request for financial assistance from the Mission
Creek Festival per staff recommendation. Hayek seconded the motion.
Motion carried 3-0.
Payne made the motion to recommend approval of the updates to the Economic
Development Policies as discussed. Hayek seconded the motion.
Motion carried 3-0.
Hayek made the motion to deny the request for assistance from HAG.
Payne seconded the motion.
Motion carried 3-0.
CALL MEETING TO ORDER:
The meeting was called to order by Chairperson Mims at 8:01 A.M
CONSIDER APPROVAL OF MINUTES:
Minutes of the February 10, 2014, Economic Development Committee meeting were
reviewed. Payne noted that on page 3, in the paragraph where it states: "Payne asked
for an explanation of the difference between Scene One and Film Scene...", and she
questioned the way this is worded. Ford stated that she would work on this wording and
will resubmit the minutes for the Committee's approval.
CONSIDER REQUEST FOR ASSISTANCE FOR MISSION CREEK FESTIVAL:
Ford introduced the item, noting that Mission Creek will be embarking on their ninth
annual festival this year. She briefly spoke to Members about the history of the festival
and how well it has been accepted. This year there will be an expansion of youth
activities and also the addition of a high-tech component with a lecture and a mini -tech
conference at the Englert Theatre. The request is for $5,000, and Ford noted that there
are funds in the Economic Development fund that could cover it. She invited Andre
Perry to speak to Members about the festival. He thanked the Members for their help
over the years, and began to explain what they can expect with the upcoming festival.
He added that this year is the biggest expansion of programming they have had, with the
high-tech component and working with local entrepreneurs and tech folks to bring that
EDC April 1, 2014
side of creativity to the festival. There will also be a full-fledged film component and
youth activities, according to Perry.
Perry noted that about 30% of their funds continue to be contributed income, while about
70% is earned income through ticket sales. Payne asked Ford about the Economic
Development fund and if this will be replenished July 1 with the new fiscal year. Ford
noted that it would be. Mims stated that she believes this event to be successful and
that it attracts people from around the region and beyond. Hayek agreed, stating that he
believes this is an excellent event for the City to invest in. He suggested that it be
included in long-term economic development funding.
Payne moved to recommend the request for financial assistance from the Mission
Creek Festival per staff recommendation.
Hayek seconded the motion.
Motion carried 3-0.
CONSIDER UPDATE TO IOWA CITY ECONOMIC DEVELOPMENT POLICIES:
Davidson noted that these policies are continually reviewed and refined in accordance
with the Council's perspective on these issues. He stated that the City Manager wanted
to make sure that these policies reflect the Council's strategic plan objectives.
Therefore, after the Council's meeting in January where they reviewed their strategic
plan, staff has refined economic development policies to reflect the Council's objectives.
By doing this, Davidson stated it gives staff and developers a better guide to work with
when looking at projects.
Davidson continued, noting that staff just wanted to quickly step through these to see if
the Committee agrees with the policies being proposed. Mims brought up the cover
letter on staff's packet info, noting that it shows February 10 in the third paragraph. She
questioned if this shouldn't be April 1st, today's date. Ford noted that this issue was
previously scheduled to be discussed at the last meeting, but that there were a couple of
issues left to work out, so it was deferred. Markus and Davidson noted that other
communities handle their requests for financial participation in a less formalized way.
Iowa City uses a gap analysis to help determine funding requests. This can coverTiF
assistance, parking funds, land sale and acquisition, etc.
Davidson discussed the policies. Payne asked about the focus on the developer's
return. She stated that when she read this, she thinks it appears to convey our interest
in the developer making a profit. She finds this wording lacking clarity. It was suggested
to use 'scrutiny' in its place. Davidson continued the review, noting that use of TIF
rebates shall be considered highly preferable to cash up front. Dilkes proposed that in
the last sentence, "...upfront financing... additional security is required," to eliminate the
word 'additional' and move this sentence down to the paragraph at the bottom of the
page. Then on the second page, where the bullets are, it should note "all or some," not
"all" in the objectives. Davidson added that the final three bullets at the bottom of the
page are to provide additional clarification and information about the City's processes.
Payne noted that on the last page, top paragraph, the last few words say '... as
determined by the City Council.' She questioned this, stating that it is more what the
EDC April 1, 2014
staff has determined and the Council has approved. Davidson noted that they can clean
this up. Then the last bullet, under `comprehensive planning,' Payne questioned if this
shouldn't say 'strategic plan.' Davidson suggested they add "strategic plan" to this, in
addition to the comprehensive. Hayek added that also in this section, if we shouldn't
consider the order of these bullet items. Markus suggested adding wording that states
they are not in order of priority.
Davidson continued to discuss the policies of the City, noting that when they are up
against other states and areas for business competition, they need to be flexible in their
approach. He reiterated how these various projects and initiatives are taken from the
strategic planning document. Members continued to discuss ways to incent
development and ways to remain flexible while still accomplishing the overall goals and
objectives. Davidson noted that if the Economic Development Committee approves
these changes to the policy, it can then go before the full Council for approval.
Members continued to ask questions of staff concerning how they approach their work
with developers and how much the City can and cannot control. Mims spoke to the
perception that the public has with development and how much involvement the City
has, and she questioned ways to get the information and processes more accessible
and into the public realm. Dilkes suggested publishing more detailed analysis, showing
why such decisions have been made.
Payne made the motion to recommend approval of the updates to the Economic
Development Policies as discussed.
Hayek seconded the motion.
Motion carried 3-0.
CONSIDER REQUEST FOR ASSISTANCE FOR I -JAG:
Mims stated that she is the one who asked to put this item on the agenda. She believes
they should remove this request at this time, until I -JAG gets their fundraising formalized
and other entities become a part of it. Currently other municipalities are not taking part
in this assistance. She added that they have growing private support. She asked if City
High still has the one class, and Ford noted that they have two classes now, with the
hope to start a third at West High. Hayek asked if they applied for assistance from
United Way, and Ford stated that they did not. Members continued to discuss this
situation, with staff noting what funding stream would be best for continued support.
Ford stated that they should respond to I -JAG, and she reiterated that they should go
through the Johnson County United Way joint funding application process, which will
begin again in the fall.
Hayek made the motion to deny the request for assistance from I -JAG.
Payne seconded the motion.
Motion carried 3-0.
REVIEW ECONOMIC DEVELOPMENT FUND BALANCES:
Ford stated that this report focuses on three funds — Aid to Agencies, Community
Development, and Economic Development. She noted how each fund is different and
EDC April 1, 2014
has unique purposes. Ford and Markus then responded to Members' questions about
various line items. There was consensus this report was helpful.
Davidson then stated that he wanted to have Hightshoe report on the Building Change
program. She noted that they currently have a balance of $47,000 in the CDBG
Economic Development Fund for small business loans, and then they will have an
additional $100,000 coming in July 1". The plan is to put $25,000 towards small
business loans, in conjunction with the $75,000 for minority or those that might not be
CDBG eligible, and then they can put up to $93,000 into the Building Change program.
Hightshoe shared that a lender recently approached her about being in a partnership
where the City would manage money that the bank provides as low -interest loans to
expand the Building Change program. This money could only be used for fagade
improvements in the downtown urban renewal area, and could be used for sustainability,
energy efficiency, and upper -floor renovations. Hightshoe stated that two other banks
have also shown an interest in this program. Mims asked if Hightshoe had sought the
credit union's interest on this program, in addition to local banks. Hightshoe stated that
she had not done this yet, but would.
COMMITTEE TIME:
Payne asked if staff had an update on the Chauncey project. Davidson noted
negotiations are going well, and the gap analysis is moving along. Dilkes has started the
preliminary work on the development agreement. Davidson noted the various aspects of
this project — FilmScene, a bowling alley, restaurant, office space, and a variety of
residential units.
Hayek asked if what he has heard is true about some possible partnership with the Co -
Op behind the Rec Center. Davidson stated that they are in the middle discussions with
a developer, and a gap analysis is underway and there will be more to come.
Hayek commented that the Sheraton's lighted sign is missing multiple letters, and he
questioned how they could address this since it is a private property. Davidson stated
that staff could contact the hotel.
Hayek also stated that he has seen some recent press regarding some start-ups out of
Iowa City that have received some pretty hefty loans from the State. He said we should
keep our eyes on these businesses as they have some influential people on their
boards, signaling keen interest. We want to be sure to keep these businesses in town.
Payne asked if we had secured a broker for the industrial park. Davidson said yes.
Hayek said he wants to ensure, as the park developed out, that there is a good buffer
between the industrial and residential neighborhood to the north. Davidson stated that is
the plan. Davidson and Markus continued to talk about this industrial area, further
explaining how the rail system is meant to work.
Payne asked if the University has put out their RFP for the Art Museum. Davidson
stated that they are getting ready to do so, and that there is a "pre-RFP release" meeting
on April 10 that staff is planning to attend. Davidson stated that he met with the
business manager of the University and that learned there were just a few sites of
interest to them and that the University does have interest from the owners of these
sites.
EDC April 1, 2014
OTHER BUSINESS:
Davidson noted that residents of the Peninsula area may be present at the Council's
meeting regarding getting a flood -proof access to their area so they will not have to
contend with another possible evacuation in the future. He added that they have been in
contact with the property owner, Mr. Cole, and have been trying to develop a plan for the
development of his property. Markus noted that the cost of putting in such a road must
be weighed with possible development in the area, and discussions continue. Davidson
continued with his updates, noting that the park planning is underway in Riverfront
Crossings. They have the flood mitigation grants that they need and are moving forward
with the planning. Streetscape planning will be starting soon for Riverside Drive,
according to Davidson, so they can be ready as development begins to take place there.
In April, the Planning Department hopes to get to the RFP out for the Court -Linn
property. Midwest One has started back up on their construction. Dilkes has been
working hard on the Harrison ramp and townhouses project that will be next to the
Midwest One Bank building. Davidson noted that they have been in constant contact
with City Carton. Sycamore Mall has also been in touch with the City quite a bit as they
work on filling their vacancies. The .Jefferson Hotel project is still active. The Van Patten
property that burned down is seeing some movement. A new project may be the
Unitarian Church and possible redevelopment of their property. Markus noted the City
may be interested in partnering in some way, with the need for more office space.
Davidson noted that Towncrest rehab continues to move along well with continued
interest in the area.
ADJOURNMENT:
Payne moved to adjourn the meeting at 9:18 A.M.
Hayek seconded the motion.
Motion carried 3-0.
EDC April 1, 2014
Council Economic Development Committee
ATTENDANCE RECORD
2013 - 2014
TERM
o
'`
0
0
0
0
NAME
EXP.
w
o
o
3
o
2
w
o
W
W
w
A
A
Michelle
01/02/14
X
X
X
X
X
Payne
Matt
01/02/14
X
X
X
X
X
Hayek
Susan
01/02/14
X
X
X
X
X
Mims
Key:
X = Present
O = Absent
O/E = Absent/Excused
r
r��CITY OF IOWA CITY
%Z-ft MEMORANDUM
Date: July 10, 2014
10: City Council Economic Development Committee
From: Jeff Davidson, Economic Development Administrator
Re: Agenda item #4: Consider approval of financial assistance for The Chauncey
Introduction
In January 2013 the City Council selected The Chauncey as the preferred development proposal
following a competitive process of evaluating 10 candidate proposals for the quarter block parcel of City -
owned property at the intersection of College and Gilbert Streets. This is the current location of the
Wilson Building, the former U-Smash-Em-I-Fix-Em Building, and a parcel owned by MidAmerican Energy
which contains an active electrical substation. Since the selection of the preferred developer, City staff
has been negotiating the various scope and parameters of the project. This has culminated in a request
for financial assistance that is summarized in the following materials.
Project Proposal
The proposed project consists of a mixed use building with the following uses and square footages:
Levels 1 and 2
Movie theatre; bowling alley; cafe; building lobby; gallery space
24,853 sq. ft.
Levels 3 and 4
Class A office space
34,850 sq. ft.
Levels 5-7
Hotel and associated facilities
23,100 sq. ft.
Level 8
14 studio apartments for lease
7,700 sq. ft.
Levels 9-15
52-58 studio, one and two bdrm condos for lease and for sale
56,175 sq. ft.
You will note that the size of the project, shown in the attached renderings provided by the developer, has
been reduced from the originally proposed 20 story building to a 15 story building. This was negotiated
with the developer in response to concerns about the scale of a 20 story building as well as issues
associated with the 2 mile airport overlay zone. There is one fewer office floor; the remainder of the
eliminated floors are residential. In other respects the mix of uses in the building are as originally
proposed.
The existing zoning of the City owned property is P, Public, and CB-5 for the MidAmerican property. In
order for the project to proceed, the property will need to be rezoned to CB-10, Central Business District.
An application for rezoning would be taken through the normal public process. Under CB-10 zoning the
developer is required to put a retail or office use on the first floor. Levels 1 and 2 are proposed as retail
floors. Levels 3 and 4 will be constructed as Class A office space, but could also be used as retail if a
suitable tenant is found. The hotel component on Levels 5, 6 and 7 will have 35 rooms with a lobby on
the first floor. In addition to property tax, the hotel will produce hotel -motel tax. The Hotel Vetro, a
similarly sized hotel, produces around $150,000 annually in hotel -motel taxes. The 14 studio apartments
on Level 8 could be converted to hotel rooms.
The required parking for the 66-72 residential units will be provided in a 52 space subterranean parking
facility underneath the building. Parking for the remaining uses in the building which are not required to
have parking on -site will be provided by any unused on -site spaces, and in the 450 space Chauncey
Swan Ramp next door.
July 10, 2014
Page 2
Attached are two companion documents which you will want to use in your evaluation of the proposal.
This first is the developer's formal application for financial assistance on the project. In addition to the
project renderings, this document provides more detail on the configuration of each building level, and the
developer's justification for moving ahead with the project. The developer will be present at your 7/14
meeting to answer any questions about the materials he has provided.
The second document is the final report evaluating the financing of the project from our financial
consultant the National Development Council (NDC). NDS has concluded there is a financial gap of
$14,187,250. This includes the developer's request for TIF-supported financial assistance in the amount
of $12,097,250, which would be provided up front during the construction period. The balance of the gap
financing is from funds paid by the developer for acquisition of City property and subterranean rights
under Chauncey Swan Park. The annual TIF increment generated by the project would be used to repay
the City's bonded indebtedness. Tom Jackson will be present to answer any questions about his report.
The estimated construction cost of the project is $49 million. The property is currently in tax-exempt
status. The estimated taxable valuation at completion of the project would be in excess of $24 million,
which includes the 90% commercial property tax rollback, and the 56.03% residential rollback. This
results in an estimated TIF increment in excess of $762,000 in year one for the purpose of servicing the
debt on the issuance of TIF revenue or general obligation bonds. We have conservatively escalated this
amount by 2% every other year in making the projections for the TIF financing of the project. The
developer will agree to a minimum assessment agreement, which will guarantee the property taxes
required to retire the City's indebtedness within the prescribed timeframe.
Economic Development Policies
In April 2014 the City Council reevaluated and ultimately readopted its economic development policies to
more closely align with the adopted City Council Strategic Plan. Inherent in these policies is to attract
new residential, commercial and industrial development in order to grow the property tax base, and retain
and expand existing businesses. The Strategic Plan also supports organizations that create
environments to incubate, foster and grow new businesses.
The adopted Economic Development Policies state that the City will consider the use of financial
incentives, specifically including TIF, in order to implement the goals and strategies of the Strategic Plan.
Projects requesting City financial assistance will be required to go through the financial gap analysis
process, which The Chauncey proposal has been subjected to and is summarized in the attached NDC
report. That process is intended to scrutinize project costs, developer equity and Return on Investment,
and maximization of project debt. The intention is to fill the financial gap of a project that achieves
community objectives without undue enrichment to the developer. The dollar amount and time duration of
the financial incentive shall be the smallest amount necessary to achieve the maximum amount of benefit
as determined by the City.
The financial gap analysis provides the basis for preparation of the development agreement between the
City and the developer. This agreement will lay out the terms, conditions, understandings, expected
results and performance measures required for the project to receive financial assistance.
In order to receive financial assistance from the City, developers are expected to meet all or some of the
following minimum standards for their projects. All are addressed to some degree by The Chauncey.
• High quality architectural and site design. The Chauncey is designed by local architects
Rohrbach Associates PC. The adjacent public park will be redesigned and enhanced as part of
the project.
• Energy efficiency and sustainability features beyond what is required through adopted
building codes. The Chauncey is being built to LEED Silver standards. This includes special
evaluation of mechanical and electrical systems efficiency, and a geothermal heating and cooling
system which will be installed under Chauncey Swan Park.
July 10, 2014
Page 3
• If a residential project, the provision of affordable housing. The developer has agreed to the
sale of 5 units within the Chauncey to the Iowa City Public Housing Program which will be used to
provide housing for income -eligible persons.
• Creation and retention of high quality jobs. There will be significant employment associated
with The Chauncey. The 36,850 sq. ft. of Class A office space is anticipated to include an
architectural office and tech -related businesses. The commercial aspects of the building will
include management positions that are likely to meet or exceed County median wage and benefit
levels.
• Developer equity equal or greater to public financing requested. As summarized in the NDC
report, developer equity and public financing are both proposed at approximately $14.2 million,
which together represent 58% of the total project cost. Bank debt and affordable unit presales
make up the balance of the estimated $49 million total construction cost.
• The redevelopment of underutilized or blighted properties. The properties which make up
the development site meet the state code definition of a blighted property.
• Projects achieving public purposes as detailed in the Comprehensive Plan, Urban Renewal
Area planning documents, and/or the City Council adopted Strategic Plan. The Iowa City
Comprehensive Plan was amended in 2013 and this development parcel was changed from
Municipal Campus to Commercial. The Urban Renewal Area Plan cites as specific goals to
remediate blight, create a vibrant mixed use pedestrian -oriented neighborhood, create residential
living spaces for young professionals and other members of the creative class, and create office
space. The City Council Strategic Plan calls out the following specific priorities: economic
development activities, healthy neighborhoods, and a strong urban core.
Chauncey Swan Park
Directly north of the project site is Chauncey Swan Park. This location was a surface parking lot until the
late 1980's when the Chauncey Swan Parking Ramp was constructed and the area was converted to a
small urban park. The developer acknowledges that the adjacency of the park to the project site is a
significant enhancement to the project, and has indicated his intentions to enhance the park property
upon completing construction of the building.
During construction of The Chauncey a portion of the park will be used as a construction lay down area,
similar to how Black Hawk Park on the ped mall was used for construction lay down for the Park at 201
project. Care will be taken to reserve adequate space adjacent to the parking ramp for Farmer's Market
activities, and to limit disruptive construction activities during Farmer's Market hours of operation. At
some point during construction a geothermal well field will be installed underneath Chauncey Swan Park.
The developer will purchase the subterranean property rights underneath the park for installation of the
geothermal system.
The developer will undertake a park planning process with the Director of Parks and Recreation and the
Parks and Recreation Commission to determine how the park will be reconstructed following construction
of The Chauncey. The developer's application contains the following statement: "The opportunity to build
adjacent to what will be a beautiful park presents a rare and very special opportunity to create something
spectacular. The scope of the project includes upgrading Chauncey Swan Park to create a more inviting
and comfortable public space, enhancing its function for the Farmer's Market and creating a space
conducive to outdoor movie screenings."
The developer has indicated he is committed to spending up to $600,000 for reconstruction of the park.
Summary
Marc Moen, the preferred developer selected by the City Council for redevelopment of the quarter block
property at the corner of College and Gilbert Streets, has negotiated the financial assistance package that
July 10, 2014
Page 4
is detailed in this memo. If approved, the project development agreement will be prepared with the
following gap financing package: $12.1 million from TIF, and $2.1 million from the sale of property and
subterranean rights. The total estimated construction cost is $49 million.
This will allow construction of The Chauncey, a 15 story mixed use building including movie theatres, a
bowling alley, lobby/gallery space, Class A office space, a 35 room hotel, and 8 floors of condominiums
and apartments. If you approve moving forward, staff will commence legislative activities including the
development agreement, rezoning, and alley vacation. Staff will also commence Chauncey Swan Park
planning activities with the Parks and Recreation Commission. The developer has pledged funding of up
to $500,000 for Chauncey Swan Park enhancements.
Bring any questions to the July 14 EDC meeting.
THE CHAUNCEY, LLC.
221 E. COLLEGE STREET
SUITE 300
IOWA Carr, IOWA 52240
mart*moenarouo.com
NnNE:
319.430.3010
July 10, 2014
City Council Economic Development Committee
c/o Jeff Davidson, Economic Development Administrator
410 E. Washington Street
Iowa City, IA 52240
RE: Proposed Development - NE CORNER COLLEGE ST/GILBERT ST
Dear Jeff,
I have enclosed information regarding The Chauncey project for
submission to the City Council Economic Development Committee.
We are committed to spending a minimum of $49,000,000 on this project.
I would be pleased to answer any questions from you or the committee.
Thank you for your consideration.
rAi^o MILE;
319.358.6778
THE CHAUNCEY
7
NE CORNER COLLEGE ST/GILBERT ST
SITE: College St/Gilbert St NE Corner Site abutting the north side of E. College Street
and East side of South Gilbert Street. The area is currently owned by the City of
Iowa City and NlidAmericar. Energy and is outlined in red on the diagram below.
The proposed site also includes the 20' wide alley from South Gilbert Street to the
Chauncey Swan Parking Facility directly north of the sites outlined in red.
Rk 1.6..: S:V. Ctly GISIPCD Me{vt_IlrEan plannMpl]012002U_bhn Wkon RetlrunopmenMlap t.n•xd
PROJECT:
15 Story Mixed Use Development
Uses & Net Square Footage approximations
>Level 1 and 2 (Movie theaters; bowling center; Caf6; Residential & Hotel Lobby;
public gathering and gallery areas):—24,853 Sq Ft
;�,Leveis 3 and 4 (class A office or similar facilities):—34,850 Sq Ft
Level 5 -7 (approx. 35 hotel rooms, conference room, fitness room, roof terrace):—23,100 Sq Ft
B Level 8 (approx. 14 studio condos for lease - potential for conversion to hotel rooms): —7,700 Sq Ft
8 Level 9-15 (approx. 52 - 58 studio, one and two bedroom condos for lease and for sale): —56,175 Sq Ft
Preliminary Plans:
UNDERGROUND PARKING:
LEVEL 1: (Commercial Level)
•2 screen movie theater
*First level of bowling center (6 of 12 lanes)
*Cafe (opens onto Chauncey Park and also provides food service to Bowling Center and Theaters)
-Lobby area serving office, hotel and residential levels
• Public space (including gallery areas for two and three dimensional works of art)
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LEVELS 9 through 14: (Residential Levels)
*studios, one and two bedroom condos for lease and for sale (approx. as - 54 units)
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LEVEL 15: (Residential Level)
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PROJECT DESCRIPTION:
Or. September 28, 2012, The Chauncey was proposed in response to the City of
Iowa City s "Request for Proposal for Private Developer for the College St / Gilbert
St Northeast Corner Site". The full proposal can be viewed online at:
htW://www.icgov.org/site/CMSv2/file/collegeGilbert/theChauncgypdf
On January 8, 2013 the Iowa City Council selected the Chauncey as the preferred
proposal.
The Chauncey is designed as an arts and entertainment destination including uses
that are absent in downtown Iowa City including a two -screen movie theater with
approximately 250 seats and a 12-lane bowling center. FilmScene will operate the
theater in conjunction with University of Iowa's Bijou Theater. This model has been
tested at 118 E. College (a 63 seat venue) which has enjoyed overwhelming success
and community support with sales nearing 20,000 tickets in the short time it has
been open.
Bowling has been widely requested from a diverse group of people and has been
cited in market studies as a missing component in downtown Iowa City. The
Chauncey, L.L.C. commissioned a bowling center market survey for downtown Iowa
City, which supported of a boutique 12-lane Bowling Center.
Chauncey will provide approximately 34,850 net square feet of class A office space.
CIass A office space has been lacking in downtown Iowa City. Marketek, Inc. was
retained by the City of Iowa City to conduct a downtown market study. One of the
conclusions reached by Marketek is that a passive approach to downtown office
development would likely result in downtown Iowa City realizing only a fraction of
its potential in attracting office users. The space that has been developed in recent
years at Plaza Towers, Packing & Provision Building and Park@201 has met with
success and has attracted a significant number of well paying jobs to downtown
Iowa City. Those users have all confirmed Marketeles conclusion that it is important
to have space available within a relatively short time frame in order to attract users.
Office users are an important component to establishing a critical mass of people
living and working in downtown Iowa City. Those users support the services and
retail businesses already existing downtown and encourage more retail and service
businesses to locate downtown and more permanent residents to live downtown.
The hotel component on levels 5, 6 and 7 has 35 spacious quality rooms,
representing smart growth in the hospitality supply rather than flooding the market
with rooms, which could potentially undermine existing hotels. The goal is to
enhance the existing hospitality industry downtown as was accomplished with
hotelVetro. Excellence in architecture, distinctive interiors and quality construction
are important in maintaining the integrity of our unique downtown environment.
The density of The Chauncey also represents smart growth. The project includes 66
to 72 residential units, in addition to the 35 hotel rooms. 14 of the residential units
are on level 9 and can be converted to hotel use. Dense development in the
downtown area lessens sprawl and the burden on neighborhoods bordering the
downtown.
The construction of The Chauncey will be orchestrated to assure that the Farmer s
Market stays in operation during the construction period.
The project will also utilize geothermal wells, built under Chauncey Swan Park, and
The Weidt Group will consult on the efficiency of the mechanical electrical systems
with the goal of achieving the most sustainable building feasible. Although
certification is not required, the building will be built to at least Silver Leed
standards.
Summary of benefits to Iowa City:
Increased Property Tax Base:
The development site currently generates no property taxes. The net taxable value
(after rollbacks) is estimated in excess of $24M the first year of full assessment,
which will increase over time.
With little or no infrastructure costs to the City, and no added emergency personnel
or physical plant, the City will gain a significant tax base from a property that
currently provides no property taxes to the City.
Beautification of a blighted area:
The construction site is a blighted area that has long needed attention. The
opportunity to build adjacent to what will be a beautiful park presents a rare and
very special opportunity to create something spectacular. The scope of the project
includes upgrading Chauncey Swan Park to create a more inviting and comfortable
public space, enhancing it's function for the Farmer's Market and creating a space
conducive to outdoor moving screenings. Approval of the specific park
improvements will be obtained from the Parks and Recreation Director prior to
construction. We are committed to spending up to $500,000 in construction costs
for such improvements.
Added Commercial uses:
The Chauncey includes a two -screen movie theater with approximately 250 seats
and a 12-lane bowling center. These will increase traffic downtown and they
respond to the needs identified in market studies commissioned by the City and the
University.
Added hotel rooms:
The Chauncey will add an additional 35 quality downtown hotel rooms with the
potential to ramp that up to 49 rooms depending on demand. This will have a
positive ripple effect on the downtown economy with guests eating and shopping
downtown and will also produce hotel -motel tax revenue.
Additional class A office space:
It is important that we retain and attract the best and brightest, and quality office
space is an important component of this.
Having this diversity of people invested in downtown is important to the continued
vitality and growth of our downtown.
Permanent downtown residents:
Permanent residents become invested in our downtown and they quickly become
part of the fabric of our downtown. When done well, there is a real feeling of
community in mixed -use buildings. A considerable amount of dynamic open public
space in The Chauncey assures a sense of place that is welcoming to the public.
Downtown residential units for permanent residents provide a strong and very
stable property tax base.
Vibrant downtown:
Through the hard work and vision of many individuals, groups, organizations, the
University of Iowa and the Iowa City Council, we have an enviable downtown that
keeps improving. Plaza Towers has become downtown hub, where everyone is
welcome, and which is enjoyed by hundreds of people everyday. The Chauncey,
focused on arts and entertainment, will continue the process of moving downtown
forward.
NECESSARY FINANCIAL ASSISTANCE:
The cost of The Chauncey project is, at a minimum, $49,000,000. The National
Development Council, as consultant to the City of Iowa City, has had full access to all
numbers associated with this project. GAP financing in the amount of $14,187,250
is required. TIF Financing is requested in the amount of $12,200,000 with the
balance of the GAP financing coming from proceeds from the City's sale of the site
and subterranean rights. The independent gap analysis of this project concludes
that these funds are necessary and warranted for this project.
MEMORANDUM Oil
Date: June 27, 2014
To: Jeff Davidson, Economic Development Administrator, City of Iowa City
From: Tom Jackson, Director, National Development Council
CC: Wendy Ford, Economic Development Coordinator, City of Iowa City
RE: Chauncey Mixed -Use Project, Northeast Corner of South Gilbert and East College Streets
At your request, the National Development Council (NDC) has reviewed materials submitted by
the development team led by Marc Moen (hereinafter, "the Developer') in support of a request
for City gap financing for the development of a project site at the northeast corner of South
Gilbert and East College streets. NDC has requested updated project cost, operating revenue
and expense and sales projections during meetings, phone conversations and through email
correspondence with the Developer since its proposed project, the Chauncey, was selected by
the City in January 2013 following a competitive Request for Proposals (RFP) process.
The RFP was directed to private developers and development teams interested in the
development of an urban, downtown -density building (the "Project") at the northeast corner of
East College and South Gilbert streets, one block east of the Downtown Iowa City Pedestrian
Mall. The City's goal was to convey the property to the development team which best met the
City's goals for an urban, downtown -density development, which will be walkable to downtown
Iowa City and the University of Iowa campus. The Project was envisioned as a privately -owned
urban building containing commercial, hotel, office and/or residential uses.
Financial projections have been reviewed for several scenarios for the Project, including a
twenty -floor option, but the Developer has refined these plans to focus on the development of
a fifteen (15) floor mixed -use building that includes:
• space for film theaters, bowling alleys, and cafe on floors 1 and 2;
• 35,000 square feet of office space on floors 3 and 4;
• a 38 room hotel on floors 5 through 7; and,
• 66 residential condominiums, ranging in size from 550 to 2,600 square feet, on floors 8
through 15, or which 52 will be available for rental or sale and 14 on floor 8 will be held
as rentals or for expansion of the hotel given adequate demand.
Since its selection as the preferred developer for the Project in early 2013, the Developer has
supported its assumptions and projections on the Chauncey's development costs, operating
revenues and expenses and sales revenues with increasing detail as information has become
available and in response to requests by the City and NDC. The developer has provided the
Chauncey Mixed -Use Development
June 27,2014
Page 2
following documentation to support their request for gap financing and NDC's analysis of the
request:
• a development budget based on:
o conceptual designs by Rohrhach Associates PC, Architect, Iowa City; and,
o construction cost estimates provided by McComas-Lacina Construction, Iowa
City;
• the Developer's operating revenue and expense pro forma (revised pursuant to the
completion of a market analysis);
• a "Market Analysis" prepared by Keith J. Westercamp, MAI, of Appraisal Associates
Company of Cedar Rapids, dated May 13, 2014; and,
• a "Bowling Center Survey," prepared for the project by William Kratzenberg of Bowling
Services, Inc., Atlanta, Georgia, dated September 7, 2012
Documents that have not yet been available for review include:
a term sheet for commercial financing identifying a maximum loan amount, rate and
term. Pending the Developer's selection of a senior lender, NDC has used underwriting
criteria observed in other Iowa City transactions that anticipate favorable availability of
private debt financing and that limit gap financing needs; and,
an appraisal for the Chauncey identifying the project's as -complete fair market value.
Most of the required elements of an appraisal were included in the market analysis
identified above. The Developer has represented that lenders it has consulted for
financing have also indicated that they will accept an appraisal of value by the market
analyst's author, Appraisal Association Company.
NDC's analysis of the projected financials for the project suggest that City gap financing in the
amount of $14,187,250 is required to bring the Chauncey's sources in line with projected uses,
as follows:
Total Project Costs $49,142,748
Permanent Financing Sources
Projected Bank Loan $19,733,784 40.16%
Affordable Unit Presales $ 1,000,000 2.03%
City Gap Funding —TIF $12,097,250 24.62%
City Gap Funding— Non-TIF $ 2,090,000 4.25%
Required from Developer $14,221,714 28.94%
Total Permanent Sources $49,142,748 100.00%
The estimates and projections the Developer has provided, as modified and confirmed by the
independent market analysis, support a recommendation for gap financing for the project
through a combination of Tax Increment Financing (TIF) and the use of the sales proceeds from
City -owned property and subterranean rights associated with the Chauncey for the following
reasons:
Chauncey Mixed -Use Development
June 27,2014
Page 3
1) The market analysis prepared for the Chauncey suggests residential rents in the range of
$1.70 to $2.00 per square foot, with smaller units commanding the higher rates. NDC's
analysis, in concert with Developer projections, keeps to the higher end of this range,
assigning rents of $1.85 to $2.00 per square foot. Residential vacancy rates were projected
at 3%, below the 5% recommended by the market analysis.
2) The market analysis suggested rents of $17.00 per square foot for the office component,
whereas the Developer had projected $18.00 given the Chauncey's amenities. NDC's
analysis used $17.50 as well as a below -market 5%vacancy rate for office space at
stabilization. Signed leases and/or letters of intent for the office space were not available
for review at the time of NDC's analysis.
3) The Developer projected fully net lease rates for the Chauncey's cafe, film theater and
bowling alley components of $20, $10 and $10 per square foot, respectively. The market
analysis supported this conclusion and they were used in NDC's analysis. The low, $10 per
square foot, market rates for the film theater and bowling alley support a value of
approximately $138 per square foot that is well below those for other project components
as follows:
a. $300 per square foot for for -sale residential (117% higher)
b. $250 per square foot for office space (81% higher)
c. $275 per square foot for the cafe (99% higher)
The lower revenue and market values associated with the theater and bowling alley uses
also reduce the Project's capacity for debt and equity attraction and contribute significantly
to the financing gap. For comparison purposes, the gap would be reduced by just over $1.9
million if both uses commanded the project $17.50 per square foot office rents. At the
same time, the City's RFP process and the market analysis both recognized the
attractiveness of the Chauncey's unique commercial uses to residential and commercial
tenants, as well as to the overall Downtown Iowa City market. Signed leases and/or letters
of intent for the three uses were not available for review at the time of NDC's analysis.
4) The three floors of hotel space will be designed to allow for their transition to and from use
as residential condominiums and were modeled consistent with the upper eight floors of
residential units at $2.00 per square foot on a full -net lease basis, not including food,
vending, telephone and internet revenue. A lease/management agreement with a hotel
operator was not available for review at the time of NDC's analysis.
5) The City and Developer have agreed in principal to purchase five (5) residential units at
project completion for a total of $1,000,000. Given the current design, two 550 square foot
studio units, two 825 square foot one bedroom units, and one 1,100 one bedroom unit
would be included in this purchase for a total of $1 million. The final size of the units will be
refined through the design process with the final area totaling approximately 4,000 square
feet the price per unit at approximately $250 per square foot, 16.7% below the market
study's recommended sale price of $300 per square foot. In NDC's analysis, the sale of
these five residential units at the time of project completion are the only sales
contemplated. The Developer intends to sell additional units and the market analysis
suggests that sales, including presales, of 25% to 30% of the residential units would be
reasonable during the first three years of operations. The gap analysis is more favorable to
Chauncey Mixed -Use Development
June 27, 2014
Page 4
the City, however, to treat all of the units outside the City's affordable housing purchase as
rental and to include the long-term (25 year) after-tax cash flow and appreciation in the
estimates of the project's debt and equity capacity. For example, projecting the sale of a
mix of eight (8) of the smaller units, in addition to the City's five (5) units (13 total or 25% of
the 52 units being made available for sale) would increase the gap by $351, 818 given NDC's
debt and equity criteria and assuming that the early sales were at or close to $250 per
square foot.
6) The estimated bank debt attracted to the deal, $19,733,784, has been maximized given the
projected operating proforma and underwriting criteria (1.2 debt coverage ratio, 80% loan
to value) that are very favorable to the project. The maximum projected loan amount is
also influenced by the capitalization rate, which was identified by the market analysis as
being in the 7.0% range. NDC's analysis set the cap rate at 7.50% given the mix of
residential, office, restaurant, and, in the case of the bowling and film theater venues, new
and untested uses. The final capitalization rate will be set by as -complete appraisal.
7) The recommended equity contribution of $14,221,714 was determined based on a 7.5%
internal rate of return given the projected after-tax cash flow and net sales proceeds of the
project if held as a rental property for 25-years. The Developer intends to offer units in the
project for sale as demand is evidenced in the market, but, per the discussion in item 5,
above, NDC's underwriting has focused on the value of the project as a rental property
given the uncertainty of the condo sales schedule and the lower up -front gap financing
required given this assumption.
8) The Developer has not identified or requested a developer fee in its proposed uses and NDC
has not included one in its analysis. As to other proposed uses, the project has only
progressed through the conceptual design phase. As final designs progress and as a pre -bid
estimate is developed, the budget for this project should be reviewed to reaffirm the
recommended level of gap financing.
9) Also, with construction on the Chauncey not projected to be completed until 2016, market
changes that may strengthen or weaken projected rental and for -sale condominium
revenues should be reviewed for both the residential and commercial units.
Conclusion: the project as presented demonstrates a need for gap financing in the amount of
$14,187,250, of which $12,097,250 would be generated through Tax Increment Financing and
the balance of $2,090,000 would be generated in the project's account by payments from the
Developer for the acquisition of City -owned property and for subterranean rights for
geothermal lines beneath City property.
If the terms of the selected senior debt and updated project costs are substantially different
from what the Developer has projected, NDC will review this evaluation as requested by the
City.
r
CITY OF IOWA CITY
MEMORANDUM
To: Economic Development Committee
From: Wendy Ford, Economic Development Coordinator
Date: July 10, 2014
Re: Funding request from EDC, Inc.
Introduction
EDC, Inc. has approached the City of Iowa City for funding. They have requested $25,000 to
finish out calendar year 2014 and a commitment of $50,000 per year for five years through
2019. The City has not previously funded the organization.
Background
EDC, Inc. is a business accelerator with a mission to provide economic growth through the
creation and expansion of high impact Iowa businesses. They are located in Cedar Rapids and
have operated there since 2003. Businesses must meet certain eligibility requirements to be
considered for assistance. EDC Inc. may assist companies in many ways, from service in an
advisory capacity to being a link to various sources of capital.
EDC first approached the City of Iowa City in late 2007 with a request for $15,000. The City
Council Economic Development Committee decided to defer, for six months, pending a request
for more detail on the organization. While a request for more information was made, the next
correspondence from EDC came in July of 2009 with a request for $20,000 annually for five
years. At that time, staff recommendation was to deny the request because funds had not been
budgeted, because the Iowa City Area Development Group (ICAD) had provided some funding
and was awaiting performance reports and because the EDC's connection to the south end of
the corridor was still unclear. Further, the City had recently and substantially increased its
funding commitment to ICAD.
Discussion of Solution
The same concerns resonate with staff today. While EDC's unique strength is in linking
financing opportunities to select business types, we feel that City resources are better spent on
local organizations with similar missions, especially as funds sources are more limited. ICAD
fills many entrepreneurial needs locally, and serves a wide variety of businesses while fostering
a fertile landscape for start-up companies in its operation of the CoLab.
Recommendation
Staff acknowledges the need for access to capital and business acumen, and that EDC, Inc.,
helps a select set of businesses to those ends. However, as with any request for financial
assistance, we must have a clear understanding of the return on investment for Iowa City and
are not able to recommend funding at this time.
!i edc
Accelerating Iowa Business
March 24, 2014
Tom Markus
City of Iowa City
410E Washington Street
Iowa City, Iowa 52240
Dear Tom,
The Entrepreneurial Development Center (EDC) is focused on the growth and development of high -
impact, interstate -commerce businesses headquartered in the Iowa City area. These firms are driving
the diversification of the Iowa City economy in the direction of information -technology, bio-science and
advanced manufacturing.
EDC engages with established companies like Breads from Anna (which EDC helped Anna Sobaski
create ten years ago) as well as next generation companies like Emmyon, CardioStrong and Radiation
Protocols. Firms engaged in interstate commerce generate wealth by bringing money into our
community from outside the region. These locally headquartered firms also utilize local financial
institutions and professional service providers, thereby creating a "multiplier effect" as revenues trickle
through the economy more than one time.
EDC regularly invests between 30% and 70% of its resources within Iowa City / Johnson County and
yet secures less than 5% of its funding support from the same region. EDC has offices in the [CAD
CoLab facility and has established a solid Iowa City presence. EDC is partnered with ICAD as well as
the University of Iowa in the support of entrepreneurs and the growth and diversification of the Iowa
City economy.
EDC's annual operating budget is just under $1 million and we are very much in need of additional
funding for the second half of calendar year 2014 as well as for years 2015 - 2019.
We respectfully request that The City of Iowa City consider the following:
• Support of $25,000 for the balance of calendar year 2014
• A pledge of $50,000 / year for years 2015 — 2019 (approved on an annual basis)
A copy of our 2013 Stakeholder Report is included for your review.
Thank you for your careful consideration of our request. The investment by the City of Iowa City is
important to our success, and your support is truly appreciated.
Respectfully sub�mitte�d -�
rtis Nelson
President & CEO
p: 319.369.4955 ° f: 319.832.1481
230 Second St SE, Suite 212 • Cedar Rapids, IA 52401
316 E. Court Street • Iowa City, IA 52240