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HomeMy WebLinkAbout2015-12-29 Resolution�' t ICITY OF IOWA CITY ..nl X01 �"q7 114 MEMORANDUM To: City Council --�, From: Tom Markus, City M ager Date: December 22, 2015 Regarding: Approval of the Plan and Specifications for the Harrison Street Parking Facility Project On June 16, 2015, after several years of planning and negotiations with assistance from bond counsel, Council authorized the execution of the lease -purchase agreement between the City, A&M Development II, LLC, and Capital One Public Funding, LLC for the Harrison Street Parking Facility Project. This project is not a public improvement project pursuant to Iowa Code Section 364.4. Iowa Code Chapter 364 is the "powers and duties of cities" code. Pursuant to Iowa Code section 364.4 (titled "Property and services outside of city — lease -purchase — insurance") , a contract for construction by a private party of property to be lease -purchased by a city is not a contract for a public improvement, except that a hearing must be held on the plans and specifications, which must then be approved by the Council. The preliminary plans and specifications were attached agreement approved on the June 16, 2015 resolution. The agreement contemplates that the City would approve the final plans and specifications, as required by state law. It states that the City shall approve the final plans if a) they conform to the terms of the lease, b) conform to all applicable federal, state and local laws, c) are adequate for the city's contemplated use as a parking facility, d) the developer hasn't defaulted on the lease agreement, and e) the improvement project costs do not exceed $16,000,000. Council has not yet approved the final plans and specifications. This oversight came to our attention on Friday, December 18, 2015. The developer is in process of completing site plan review and has made an application for a foundation permit. Realizing this error was the City's oversight and no fault of the developer, Staff sought to correct this oversight as expeditiously as possible so as to not cause any unnecessary delay. The developer has already held its pre -construction meeting, where a December 28, 2015 commencement date was discussed and planned for. Approving the plans and specifications on the 29th is as quickly as the City could proceed, given notice publication requirements. That this occurred toward the end of the current Council's tenure is of mere coincidence. Enclosed with this memo are the previous memos to City Council and Economic Development Committee regarding the lease -purchase agreement for your information. The conditions for approval of the final plans summarized above have been satisfied, therefore Staff recommends approval of this resolution. CC: Rockne Cole, Pauline Taylor, John Thomas, Eleanor Dilkes, Geoff Fruin, Marian Karr 'COPl �` N CITY OF IOWA CITY M E M 0 RAN D U To: City Council Economic Development Committee From: Jeff Davidson, Economic Development Administrator Date: December 1, 2014 Re: Consider a request for financial assistance from A&M Development 11, LLC for the Sabin Townhome project Mike Hahn, representing A&M Development II, LLC, is proposing a project consisting of 28 townhouses on Dubuque Street and Harrison Street in Riverfront Crossings. The townhouses are part of a larger master planned project consisting of the 6 story MidwestOne Bank office building currently under construction at the corner of Clinton and Dubuque (One Place at Riverfront Crossings), and a 610 space City of Iowa City parking facility. The townhouses will provide the east and south fagade of the parking facility. The 28 townhouses will be constructed as part of a condominium regime that includes the City parking facility. To enable the parking facility component to be built by the Developer as part of a single project the Iowa Code allows the City to enter into a lease/purchase agreement with the Developer. Staff anticipates this Agreement will be on the Council agenda in December/January along with the Development Agreement for TIF assistance if approved by EDC. The parking facility will be tax exempt. The residential townhouse units will be individually leased or owned. One Place at RFC will have a physical skywalk connection to the parking facility but is a separate property not included in the townhouse/parking facility condo regime. The townhouse/parking project will be constructed on the site of the former Sabin Elementary School, which is currently owned by the University of Iowa. There is an existing contractual arrangement between MidwestOne Bank and the University of Iowa which requires the University to demolish the Sabin Building when One Place at RFC is completed. A mitigation plan approved by the State Historic Preservation Office stipulates building artifacts which will be salvaged from the structure prior to demo. Following demolition, the property will be transferred to A&M Development 11 and the townhouse/parking facility project will commence. A&M plans to begin construction on August 15, 2015, complete the parking facility by August 1, 2016 and complete the townhouse units by Fall of 2016. The estimated cost of constructing the 28 townhouses is $6,986,549. The developer is requesting Tax Increment Financing rebates of $976,277 to fill a financial gap on the project. The City's financial analyst at the National Development Council has substantiated the financial gap on the project, summarized in the attached report. The developer's formal request for financial assistance is also attached. Background The townhouse project consists of 28 two bedroom townhomes of 1,135 SF (14 upper units) or 1,428 SF (14 lower units). Three units will be sold to the Iowa City Housing Fellowship for their affordable rental housing portfolio, and marketed to households meeting county median income COOPY guidelines. The 3 units are likely to be rented to households not exceeding 80% of county median income, which in Johnson County is $57,250 for a family of 3. The stacked two story townhouse model will introduce a new housing product to Riverfront Crossings. All of the units will have direct access via a backdoor to the City parking facility, and the City will make covered parking available to each unit at the market rate monthly fee. Each townhouse will have a street level entrance; there are no common hallways. Each unit will have outdoor space on every level in the form of a balcony or garden terrace. The National Development Council has reviewed the revenue and expense parameters of the proposed project and substantiated a $976,277 financial gap. The project financial parameters scrutinized in gap analysis are summarized in the attached NDC report. Bank financing of $3.3 million and developer equity of $2.1 million will provide nearly 80% of the project's financing, with TIF projected at 12% of the total. TIF rebates preferred The 2014 City of Iowa City Economic Development Policy states that for development projects seeking financial assistance, rebates, as opposed to cash up front, shall be highly preferable. The Sabin property has been in public ownership and has not generated any property tax revenue for at least 97 years. An annual TIF increment of $85,926 has been calculated for the townhomes project, which assumes the maximum allowable rollback for all of the units. The developer has agreed to an 11.4 year TIF rebate structure that will fund the $976,277 gap identified on the project. After this point the full property taxes will accrue to the taxing entities. The City Council Adopted Strategic Plan The Sabin Townhomes project aligns with three of the City Council's stated goals of being more inclusive and sustainable by building healthy neighborhoods, creating a strong urban core and fostering economic development. Healthy Neighborhoods The proposed townhouses are part of the Riverfront Crossings Central Crossings Subdistrict. This subdistrict is intended to introduce higher density housing options that will link the downtown and south downtown areas with the lower density portions of Riverfront Crossings including the Park District. Retail uses that support the residences in the area will be incorporated into mixed use buildings. Ralston Creek will be opened up and provide open space and a linkage to the riverfront park. Walkability will be promoted to a high degree. Creating a Strong Urban Core The project site is adjacent to downtown and walkable to east side employment and entertainment destinations. It is within a mile of the west side employment center with many transit options available. The 3 affordable housing units will help ensure residential options within the urban core for moderate income households. Economic Development Activities C(Opuy The project will create annual property tax generation estimated at $122,000 in year one. This compares favorably to the existing property tax generation of zero. Economic Development Policy The 2014 Economic Development Policies state: It shall be the policy of the City of Iowa City to use the City Council Strategic Plan as the basis for its economic development activities. Inherent in the plan is to attract new development including residential, commercial and industrial uses to grow the tax base. The 2014 Economic Development Policies establish minimum standards required of developers to be eligible for public financing. Developers must achieve at least some of the standards. The elements of this project meeting those standards include: • The project must have high quality architectural and site design. The proposed project is designed by Neumann Monson Architects of Iowa City. It is an innovative design which fully integrates the adjacent parking facility with no common hallway elements. • Projects must be energy efficient and offer sustainability features above and beyond the required building code. The townhomes will include high efficiency heating and cooling units for each condo unit, as well as low flow plumbing fixtures. The exterior cladding is a recycled by product of the rice milling industry. The adjacent parking structure will include photovoltaic units that will defray a portion of the electrical load of the facility. • If residential, projects must either provide a certain number of units for low/mod income persons or contribute to a fund for that purpose. The project will sell 3 of the units to the Iowa City Housing Fellowship to be made available to families at 80% of median income or below. • Redevelop an underutilized or blighted property. The property currently contains an old elementary school building, the majority of which is vacant. A contractual obligation not related to this project will result in the site being made vacant. • Developer equity must meet or exceed the financial request from the City. Developer equity is $2.2 million, over twice the financial request of the City. Developer equity and bank financing represents nearly 80% of total project costs. • Achieve public purposes as detailed in the Comprehensive Plan, Urban Renewal Area Plan, and City Council Strategic Plan. The project is consistent with the Riverfront Crossings Master Plan and Form Based Code, the City -University Urban Renewal Area Plan, and the City Council Strategic Plan. Summary ABM Development II LLC has requested City financial assistance in the amount of $976,277 to build a 28 unit townhouse structure which will be integrated into a 610 space City parking facility. It is part of a larger master planned development which includes the One Place at Riverfront Crossings office building. The total estimated construction expense of the entire development exceeds $30 million. The proposed project is consistent with the Riverfront Crossings Master Plan. The financial gap of $976,277 has been substantiated by the National Development Council and would be structured into a TIF rebate scheduled for 11.4 years. This represents 12% of the estimated project cost. At the end of the rebate period the full annual property tax amount estimated at $137,000 will accrue to the taxing entities. The property currently generates zero in property tax revenue. The proposed TIF expense is approximately the same as the estimated $1 million expense to construct a facade on the parking facility if the townhouse project was not providing the parking ramp fagade. Recommendation Staff recommends approval of the City's financial participation in the form of TIF rebates, not to exceed $976,277. CITY OF IOWA CITY MEMORANDUM Date: December 19, 2014 To: Tom Markus, City Manager From: Dennis Bockenstedt, Finance Director RE: Harrison Street Parking Garage - Lease/Purchase Agreement Financing Introduction This memorandum is the Finance Department recommendation for the selection of a financial institution to provide financing for the lease/purchase of a new multi-level parking facility in the Riverfront Crossings area along Harrison Street. History/Background The City has been in negotiations with A & M Development for a lease/purchase agreement for the construction of a parking facility that will be adjacent to the new Midwest One office building and a proposed 28 unit townhouse development and will be on Harrison Street between Clinton and Dubuque Streets. The Finance Department was tasked with finding a financial institution that would accept assignment of the lease and the City's promise to pay from the developer in exchange for funding the construction cost of the facility. Discussion of Solution On November 18, 2014, the Finance Department in conjunction with the City's financial advisor, Public Financial Management, the City's bond counsel, Ahlers & Cooney, PC, and the City Attorney's Office issued a Request For Proposals (RFP) to ten separate banks, underwriters, and financial institutions/brokers. The proposals were due to be submitted to the City Finance Department by loam on December 9, 2014. In response to the RFP, the City received five proposals from institutions (JP Morgan, Capital One Public Funding, Midwest One Bank, D.A. Davidson & Company, and Piper Jaffray & Company.) Proposals were reviewed by the City Attorney, the City Finance Department, Ahlers & Cooney, P.C., and Public Financial Management. After reviewing the proposals for overall compliance with the RFP and estimated cost of financing, the proposal being recommended for acceptance was that submitted by Capital One Public Funding (COPF). Financial Impact The financial impact to the City is the issuance of a tax exempt lease with a principal balance of an estimated $15,305,000 (the estimated cost of the parking structure plus issuance costs.) The projected completion of the parking garage construction and subsequent issuance of the lease is August 1, 2016. Lease payments would begin in Fiscal Year 2017. The COPF proposal is for a 20 -year, fixed-rate lease/purchase. The rate will be determined upon the acceptance by the City of the parking garage improvements based upon a formula using the 10 -year LIBOR swap rate. The formula rate as of the date of the proposal was 3.96%. The financing requires no underwriting discounts or protective debt reserves, and COPF is responsible for their own legal and issuance costs. The City will pledge the net revenues from the City's Parking System along with the developer's interest in the Harrison Street parking facility as a guarantee for the financing. This will not be a general obligation of the City and will not be repaid or guaranteed with property taxes. CITY OF IOWA CITY c:%",MEMORANDUM Date: June 10, 2015 To: Tom Markus, City Manager From: Dennis Bockenstedt, Finance Director RE: Harrison Street Parking Garage - Lease/Purchass Agreement Financing Introduction In 2013, a new development along Harrison Street between Dubuque and Clinton Streets in the Riverfront Crossing District was announced. The development was to include the new Midwest One office building, a 28 unit townhouse development, and a 600+ space City parking facility. Historv/Backaround Since that announcement, the Midwest One office building has been under construction and is nearing completion. The City has been in negotiations with A & M Development II for a lease/purchase agreement regarding the construction of the 600+ space parking facility, and a development agreement has been approved for the proposed 28 unit townhouse development. The City has also been working to finalize the other agreements that are necessary to complete the transfer and assignment of the leaseipurchase agreement to a third -party financier. On November 18, 2014, the Finance Department in conjunction with the City's financial advisor, Public Financial Management, the City's bond counsel, Ahlers & Cooney, PC, and the City Attorney's Office issued a Request For Proposals (RFP) to ten separate banks, underwriters, and financial institutions/brokers. The proposals were due to be submitted to the City Finance Department by 10am on December 9, 2014. In response to the RFP, the City received five proposals from institutions (JP Morgan, Capital One Public Funding, Midwest One Bank, D.A. Davidson & Company, and Piper Jaffray & Company.) Proposals were reviewed by the City Attorney, the City Finance Department, Ahlers & Cooney, P.C., and Public Financial Management. After reviewing the proposals for overall compliance with the RFP and estimated cost of financing, the proposal selected was that submitted by Capital One Public Funding, LLC (COPF). On January 20, 2015, the City Council adopted a resolution to institute the proceedings to take additional action for the authorization of a municipal parking system lease/purchase for an amount not to exceed $16 million. Discussion of Solution The City has completed its negotiations with A & M Development II for the Master Lease Purchase Agreement and other related agreements. These documents outline the conditions and terms for the construction of the 600+ space parking facility, the conditions for the City to accept the constructed parking facility, the financial terms of the lease/purchase, and the terms of assignment of the lease to COPF. Copies of these agreements are available in the City Clerk's office. Financial Impact The financial impact to the City is the issuance of a tax exempt lease with a principal balance of an estimated $15,300,000 (the estimated cost of the parking structure plus issuance costs.) The projected completion of the parking facility construction and subsequent issuance of the lease is March 1, 2017. The lease payments would begin in August 2017. The COPF proposal is for a 20 -year, fixed-rate lease/purchase. The rate will be determined upon the acceptance by the City of the parking garage improvements based upon a formula using the 10 -year LIBOR swap rate. The formula rate as of the date of the proposal was 3.96%. June 10, 2015 Page 2 The COPF proposal is for a 20 -year, fixed-rate lease/purchase. The rate will be determined upon the acceptance by the City of the parking garage improvements based upon a formula using the 10 -year LIBOR swap rate. The formula rate as of the date of the proposal was 3.96%. The financing requires no underwriting discounts or protective debt reserves, and COPF is responsible for their own legal and issuance costs. The City will pledge the net revenues from the City's Parking System along with the developer's interest in the Harrison Street parking facility as a guarantee for the financing. This will not be a general obligation of the City and will not be repaid or guaranteed with property taxes. The City's estimated interest costs over the 20 -year lease/purchase are $6,993,898 given the current calculated interest rate and assuming that the lease remains outstanding for the entire 20 years. The lease may be called by the City at $2,000,000 per year starting in year two and is fully callable starting in year eight. Recommendation it is staff recommendation to approve the resolution directing execution of the Master Lease Purchase Agreement and other related agreements between the City, A S M Development Il, LLC, and Capital One Public Funding, LLC for the construction and subsequent lease/purchase by the City of a 600+ space parking facility on Harrison Street between Clinton and Dubuque Streets for an amount not to exceed $16 million. claftww con Construction December 23, 2015 Chris O'Brien City of Iowa City At this time we are requesting that the review and acceptance of the plans and specs for the Harrison Street Parking Ramp be expedited as quickly as possible. The project schedule is very tight and with the weather being favorable we are making good progress, delaying the approval will cause us to reschedule the Augur Cast contractor who has been scheduled far in advance and having to reschedule could cause considerable delays. Sincerely, k�,� Mike Hahn AM Properties II 1310 Highland Court Iowa City, Iowa 52240 Telephone: (319) 338-1125 FAX: (319) 338-5964 � � l .-M a. 1310 Highland Court Iowa City, Iowa 52240 Telephone: (319) 338-1125 FAX: (319) 338-5964 Prepared by: Eleanor M. Dilkes, City Attorney, 410 E. Washington St., Iowa City, IA 52240 (319) 356-5030 RESOLUTION NO. 15-399 RESOLUTION APPROVING PLANS, SPECIFICATIONS, FORM OF CONTRACT, AND ESTIMATE OF COST FOR THE CONSTRUCTION OF THE HARRISON STREET PARKING FACILITY PROJECT. WHEREAS, notice of public hearing on the plans, specifications, form of contract and estimate of cost for the above-named project was published as required by law, and the hearing thereon held. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF IOWA CITY, IOWA THAT: The plans, specifications, form of contract and estimate of cost for the above-named project are hereby approved. The City Manager, or designee, is hereby authorized to approve change orders as may become necessary during the construction and administration of this Project. Passed and approved this 29th day of December , 20 15 MAYOR Approved by fl ATTEST: J a�A4 CITY LERK City Attorney's Office Resolution Ido. 15-399 )Page 2 It was moved by Payne and seconded by Resolution be adopted, and upon roll call there were: AYES: NAYS: x x x x x x x Dickens ABSENT: the Botchway Dickens Dobyns Hayek Mims Payne Throgmorton