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04 TIF Agreement Res 2007-405 _ _ _ __ _ __~~_ r""II.__ __1______ ___.1. .. ,,________-1.._ .. Economic Development Memorandum ~ Date: May 23, 2007 TO: Steven E. Sheiffer, City Manager FROM: Doug Venable, Director of Economic Development (fI SUBJECT: Action on a Resolution Approving a TIF Development Agreement with D & S. Ventures, Inc, and Authorizing an $82,500 TIF Development Loan and an $82,500 CDBG Second Floor Access Loan for the Construction of an Elevator at 10 North Parker Dr. in TIF No. 23 (File Resolution 2007 - 405) I. Summary The City Council created TIF No. 23 in 2002 to stimulate the redevelopment of a 4- block area on the east side of the downtown along E. Milwaukee St. D & S Ventures, Inc., owned by David Schultz, purchased the property at 10 N. Parker Dr. (formerly known as the Allan Building) from the City for redevelopment and re-use. In 2005, the City Council approved a $100,000 TIF Development Loan to construct a handicapped ramp and elevated sidewalk along the front of the building along the N. Parker Dr. fal{ade. Mr. Schultz is now requesting assistance in order to complete a $220,000 interior renovation to add an elevator to the second and third floors along with the construction of an elevator lobby on each floor. The City Administration has negotiated a financing package that includes $55,000 in owner equity, an $82,500 TIF Development Loan, and an $82,500 CDBG Second Floor Access Loan. The TIF Development Loan would be made over 10 years at 4% interest rate. The CDBG Loan would be made over 17 years, with an interest rate of 0% and deferred principle payments for the first 10 years, and an interest rate of 5% for the final 7 years. The CDA met on May 16, 2007 and recommended that the Council approve the $82,500 CDBG Second Floor Access Loan for the installation of an elevator in this historic building. The Administration recommends that the Council adopt Resolution 2007 -405, which approves the TIF Development Agreement with D & S Ventures, Inc. authorizes an $82,500 TIF Development Loan and an $82,500 CDBG Loan according to the terms set forth in the Agreement. II. Project Description D & S Ventures, owned by David Schultz, purchased the former Allan building at 10 N. Parker Dr. from the City. Mr. Schultz has replaced all of the windows, removed interior partitions, and painted interior rooms, and installed a handicapped ramp outside the building as part of on overall building renovation. Interior spaces are ready for new tenants, but the upper floors of the building remain inaccessible for handicapped individuals. ~ Economic Development Department + Box 5005 + Janesville, WI 53547-5005 + 755-3180 - - - - _..~.....__. ......J.....,,~ n~~..... ') D & S Ventures Project Page 2 Mr. Schultz is proposing to replace the freight elevator that provides access to the second and third floors with a new passenger elevator and related elevator lobby. He hopes that the installation of an elevator will allow him to attract a long term tenant(s) for the second and third floors of the building. III. Proposed TIF Development Agreement The City Administration has negotiated a TIF Development Agreement with D & S Ventures, Inc. to provide financing assistance for the construction of the elevator and related elevator lobbies. Under the terms of the TIF Agreement, the City will loan D & S Ventures a total of $165,000 in two separate $82,500 loans. The first $82,500 loan will be made using TIF monies. The loan will have a term of 10-years at an interest rate of 4%. This results in an annual debt service payment (principle and interest) of $10,025. The loan will be secured with a mortgage against the property and by a personal guarantee made by David S. Schultz, the owner of D & S Ventures, Inc. The planned elevator will not initially add substantial value to the building. New property value will be added over time as the renovated building is leased and the owner generates increased net operating income. Given the difficulty in projecting future property values, it is also difficult to project future TIF property tax increments that may be generated. Therefore, the terms of the loan provide that once the 2005 TI F Development loan is repaid in 2015, the City will compare the property taxes paid for the prior year to the $6,355 in property taxes paid on the building when the TIF district was created, and will forgive a portion of the annual debt service equal to the amount that the actual property tax bill exceeds $6,355. As an example, if the actual property tax bill in the year 2016 is $8,355, then under the terms of the TIF loan, the City would forgive $2,000 of the annual debt service payment ($8,355 - $6,355 = $2,000), and D & S Ventures will owe the City $8,025 ($10,025- $2,000 = $8,025) in debt service for that year. The proposed TIF Agreement also provides for a second $82,500 CDBG Second Floor Access Loan. The City set aside $132,000 in CDBG funds in 2003, to make loans to property owners to address handicapped accessibility issues for the upper floors of historic downtown buildings. The D & S Venture project will be the first time these CDBG funds have been used. The terms of the CDBG Loan include a term of 17 years with an interest rate of 0% and deferral of principle payments for the first 10 years while the TIF loan is being repaid. For the last 7 years, the interest rate will be 5% with an annual debt service payment (principle and interest) of $13,992. The use of federal CDBG monies for this construction project will require D & S Ventures to pay the prevailing wage rates for all construction activities and to abide by the provisions of the Davis Bacon Act. The Community Development Authority met on May 16, 2007 and recommended that the Council approve the proposed $82,500 CDBG Second Floor Accessibility loan. D & S Ventures Project - ~ D & S Ventures Project Page 3 IV. Recommendation The City created TIF No. 23 to stimulate the redevelopment of land along E. Milwaukee Sl. in downtown Janesville. The older, historic structures often require major capital investments to provide for handicapped access and to upgrade the building interiors for modern tenant requirements. Without assistance to property owners to accomplish these renovations, the buildings cannot attract tenants, and the buildings continue to deteriorate. The Administration recommends that the Council adopt Resolution 2007 - 405 which would approve the TIF Development Agreement with D & S Ventures, Inc.; authorize the Administration to make an $82,500 TIF Development Loan; and authorize an $82,500 CDBG Second Floor Accessibility Loan to facilitate the construction of an elevator at 10 N. Parker Dr.. D'7'~ Douglas Ve Ie I " " '" >/A '" " /AV/ //~ PARKER DR ~c} ~\)..(p ~.;j <;:. / Lc_ c=J 10 N. Parker Drive _ Leased Premises - Relocated Curb Handicap Ramp n NORlH Date:3-23"'{)5 Scale: 1 "=40' Map Coordinate: M-15 LOCATION MAP IEJI a.z CITY OF JANESVILLE I JIIIf' PLANNING DEPARTMENT 10 N. PARKER DR. .J,Devekopn'ent',C;.APD\?I"ml"9~~\"'-15_~O"I"9-f"0I"I:Jng-Cnan9" RESOLUTION No. 2007 - 405 A Resolution Approving a TIF Development Agreement with D & S Ventures, Inc.; Approving an $82,500 TIF Development Loan and an $82,500 CDBG Second Floor Accessibility Loan to D & S Ventures to Install an Elevator at 10 N. Parker Dr. in TIF No. 23 WHEREAS, the Common Council of the City of Janesville created Tax Incremental Finance (TIF) District No. 23 on September 9, 2002 in order to stimulate the redevelopment of properties along E. Milwaukee SI. and North Parker Drive in downtown Janesville; and WHEREAS, D & S Ventures, Inc. has proposed the renovation of the property at 10 N. Parker Drive to install an elevator to provide handicapped accessibility to the second and third floors of the property ("Project"), and WHEREAS, D & S Ventures, Inc. has requested redevelopment assistance to complete this Project consistent with the objectives and proposed expenditures set forth in the Project Plan for TIF District No. 23 and consistent with the objectives of the Community Development Block Grant Second Floor Accessibility program; and, WHEREAS, the City and D & S Ventures, Inc. have negotiated a TIF Development Agreement and related Promissory Note ("Agreement/Note"), true and correct photocopies of which are attached hereto and incorporated herein by reference as if fully set forth verbatim, and which Agreement sets forth the terms and conditions of City redevelopment assistance including: 1. The making of an $82,500 TIF Development Loan from the City to D & S Ventures, Inc. 2. The making of an $82,500 CDBG Second Floor Accessibility Loan to D & S Ventures, Inc.; and WHEREAS, the Community Development Authority, at their May 16, 2007 meeting, reviewed the proposed $82,500 CDBG Loan and that the Common Council of the City of Janesville approve the making of this loan to D & S Ventures, Inc.; and WHEREAS, the Common Council of the City of Janesville do hereby find that the proposed TIF Development Agreement, the proposed $82,500 TIF Development Loan, and separate $82,500 CDBG Loan to install an elevator at 10 North Parker Drive are each in the best interest and to the benefit of the citizens, the renovation and development of the City's downtown, of benefit to the community and the City's health, safety, welfare and good order; and WHEREAS, various Wisconsin's laws including, but not limited to, Wis. Stats. SS 62.11 (5), 62.22(1),66.0101,66.1103 and 66.1105 jointly and severally empower the Common Council and the City to enter into these transactions as part of this TI F development project. NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of Janesville that: 1. Each of the above recitals and findings is reiterated and incorporated herein by reference as if fully set forth verbatim; and 2. The attached Agreement/Note by and between the City and D & S is hereby authorized and approved; the City Administration may enter into said Agreements and Notes on behalf of the City, including the $82,500 TIF Development Loan and a separate $82,500 CDBG Loan to D & S Ventures, Inc., according to the terms and conditions as set forth in the TIF Development Agreement; and BE IT FURTHER RESOLVED, that the City Manager, on behalf of the City of Janesville, is hereby authorized to negotiate, draft, modify, review, enter into and amend the Agreement(s), Note(s), TIF Development Loan, CDBG Loan, Loan Document(s) and any and all other related documents, papers and agreements; to take whatever other actions; and to otherwise make whatever other agreements, changes, modifications and amendments on behalf of the City the City Manager may, from time to time, deem necessary and/or desirable to effectuate the intent of this Resolution. ADOPTED: Motion bv: Second bv: Council member Aye Nay Pass Absent Brunner DeGarmo Loaschinq Steeber Truman Wellnitz Williams APPROVED: Steven E. Sheiffer, City Manager ATTEST: Jean Ann Wulf, City Clerk-Treasurer APPROVED AS TO FORM: UJ~9--€ y ;f City Attorney /i Proposed by: City Manager Prepared by: Economic Development Director and City Attorney Resolutions/D & S Elevator TIF 23 Loan CDBG Resolution and Council TIF Elevator CC.doc Summary of TIF Development Agreement By and Between D & S Ventures, Inc. and City of Janesville I. Parties A) City of Janesville B) D & S Ventures, (Developer/Promissor) C) David S. Schultz, Guarantor II. Description of the Property III. Purpose of Agreement IV. The Agreement A) The City shall: 1) Loan D & S Ventures $82,500 in TIF Monies to help pay costs of elevator installation 2) Recommend approval of $82,500 CDBG loan to help pay costs of elevator installation. B) D & S Ventures shall: 1) Provide City with financial documentation on project for review and approval by City Manager. 2) Obtain approval of building plans and exterior plans by Site Plan Review Coordinator and Janesville Historic Commission. 3) Complete installation of elevator and obtain occupancy permit. 4) Invest at least $55,000 in owner equity toward total $220,000 renovation project. 5) Timely repay $82,500 TIF development loan and $82,500 CDBG loan according to terms of loan agreements. C) D & S Ventures will be subject to property taxes. D) D & S Ventures project contingencies: 1) All required plan approvals and permits. 2) Project financing upon terms acceptable to D & S. E) City's obligation to make loans is contingent upon waiver or satisfaction of D & S Ventures contingencies. F) D & S Ventures can repay TIF loan or CDBG Loan at any time without penalty. TIF Development Agreement D & S Ventures, Inc. Exhibit TIF Development Loan Conditions 1. Loan Amount: $ 82,500 2. Loan Term: 10 years 3. Interest Rate: 4.0% 4. Annual Debt Service: $ 10,025 5) Debt Service Forgiveness: There will be no debt service forgiveness until the 2005 Handicapped Ramp Tl F Loan is paid in full (2015). After 2015, if property tax bill exceeds $6,355, then annual $10,025 debt service can be reduced by the amount tax bill exceeds $6,355. 6) Loan Closing: Loan to close upon completion of construction, payment of bills, and issuance of Occupancy Permit. 7) Timing of Debt Service Payments: Debt service payments to be made annually on the anniversary of loan closing. 8) Sale of 10 N. Parker Dr.: If D & S Ventures sells 10 N. Parker Dr before loan is repaid, then loan becomes due and payable immediately. 9) Personal Guarantee: David Schultz shall personally guarantee performance of D & S Ventures. TIF Development Agreement D & S Ventures, Inc. Exhibit CDBG loan Conditions 1. Loan Amount: $ 82,500 2. Loan Term: 17 years 3. Interest Rate: 0.0% no principal first 10 years then 5.0% for last 7 years 4. Annual Debt Service: $ -0- for first 10 years $13,992 for last 7 years 5) Loan Closing: Loan to close upon completion of construction, payment of bills, and issuance of Occupancy Permit. 6) Timing of Debt Service Payments: Debt service payments to be made annually on the anniversary of loan closing. 7) Sale of 10 N. Parker Dr.: If D & S Ventures sells 10 N. Parker Dr before loan is repaid, then loan becomes due and payable immediately. 8) CDBG Provisions: 9) Personal Guarantee: David Schuitz shall personally guarantee performance of D & S Ventures.