#2 Authorize a TIF development agreement for Home Health United project (File Res. #2010-753)
Economic Development Department Memorandum
November 15, 2010
TO: City Council
FROM: Vic Grassman, Economic Development Director
SUBJECT: Action on a Proposed Resolution Authorizing a TIF Development
Agreement with Wright Road Property Group LLC and 3700 Racine Street
LLC for the Home Health United, Inc. Project (File Res. 2010-753)
Executive Summary
SARA Investment Real Estate (SARA), D/B/A Wright Road Property Group LLC and
3700 Racine Street LLC, is in the process of completing construction plans for a new
building to serve Home Health United, a home health care equipment supplier. The new
building is to be located at the southeast corner of Racine St. and Wright Rd. In order to
develop the site, there is need for extension of watermain and sanitary sewer along with
roadway improvements along Wright Rd. to provide appropriate turn and deceleration
lanes for the development driveway.
The watermain for the new building will be constructed along the south side of Racine
St. extending easterly from Wright Rd. It is important to note that when considering the
design for the water main extension, staff noted that the water distribution network along
Racine St would be significantly benefited by continuing the SARA extension to the
existing watermain at Racine St and Wuthering Hills Dr. Extending this watermain would
provide construction cost efficiencies, and provide improved redundancy and reliability,
not only for the SARA building, but also for the St. Mary’s/Dean campus to the west as
well as the industrial park to the north of Racine St. from the interstate to Highway 14.
City Manager’s Recommendation:
The City Manager recommends approval.
Economic Development Director’s Recommendation
Staff recommends that SARA Investments be granted a ten year payback period for the
extension of watermain and sanitary sewer along with road improvements instead of the
normal five year period. This is based on the following:
SARA Investment is allowing the City to extend the water distribution network not
only for their present project as noted above but for the entire length of their, yet
undeveloped, land holdings bordering Racine St. from Wright Rd. to Wuthering
Hills Dr. This would also allow the City to have a redundant water system to
support St. Mary’s/Dean Care and the industrial park to the north of Racine St.
Funds from TIF 32 will be used to pay for this project. Under city policy, the use
of TIF funding allows for a ten year payback period.
SARA Investments has/is the primary developer in Janesville and has
investments in a variety of projects located throughout the city. Our typical term
for the use of TIF funds in these projects has been ten years. This request is
consistent with our other financial contracts with SARA and would continue to
support our partnership with SARA in a fair manner.
Background
The following is a summary of the public infrastructure costs for SARA:
Improvement Cost
Sanitary Sewer $47,182
Watermain $68,135
Roadway Improvements $194,580
Total $309,897
Note: The watermain improvement cost above includes not only the 193ft adjacent and
directly attributable to the Home Health United Development but also the 863ft of
remaining SARA property to the east thereof for which there are no current
developments projects under consideration.
TIF Status
TIF 32 has a current increment of approximately $28,000.This does not reflect the new
increments that would be added from such projects as Blaine Farm and Fleet, St.
Mary’s /Dean Care or the SARA project. In addition, because of the benefits of these
improvements provided to the industrial park to the north of Racine St. a contribution
from TIF 14 could be appropriate as well. TIF 14 currently has a positive balance of as
of 2010 of approximately $1.0 million
cc: Eric Levitt
Jacob Winzenz
Carl Weber
Resolution No. 2010-753
A Resolution Approving a TIF 32 Development & Loan Agreement and Promissory Note
For $258,148 With
Wright Road Property Group LLC and 3700 Racine Street LLC
(Collectively, though more than one, the “Promissors”)
Home Health United, Inc. Project
nd
WHEREAS, the Common Council of the City of Janesville, on the 22 day of September, 2008,
created Tax Incremental Finance District No. 32 for 21 years and adopted the initial Project Plan
in accord with Wisconsin’s Tax Increment Financing Laws, Wis. Stats. Sec. 66.1105 and other
applicable statutes, as from time to time amended or renumbered in order to stimulate the
development and redevelopment of certain mixed use commercial and industrially zoned
properties; retain and increase employment at that location; construct, renovate and expand
commercial and/or industrial facilities; develop the public infrastructure serving those properties
and TIF 32, and otherwise provide for and facilitate the overall economic health, welfare, vitality,
and good of the community; and
WHEREAS, the Project Plan for TIF District 32 includes industrial and manufacturing
development and redevelopment, improvements, facility construction, expansion, and
renovation, job retention and creation, and related financing, incentives, payments, loans, and
actions that effectuate and/or facilitate these public purposes and goals; and
WHEREAS, Wright Road Property Group LLC (“Wright”) and 3700 Racine Street LLC (“3700”)
are two separate Wisconsin limited liability companies affiliated with Sara Investment Real
Estate LLC (“Sara”) which is a local major developer that desires to, promises to, and shall,
through Wright, lease to Home Health United, Inc. (“HHU”), its prospective tenant, a new
commercial structure in TIF 32 that Wright shall cause to be constructed. HHU will transfer its
existing operations to such new commercial structure in TIF 32 and shall thus maintain not less
than twenty (20) existing jobs in the City of Janesville; and
WHEREAS, Wright and 3700 shall jointly and severally promise to and shall repay to the City of
Janesville (“CITY”) the $258,148 in principal and 6% annual interest on the unpaid balance in
the annual amounts, and otherwise perform in accord with, the a certain TIF Development &
Loan Agreement and Promissory Note, the terms, conditions, promises, and provisions of which
are reiterated and incorporated herein by reference as if fully set forth verbatim; and
WHEREAS, there are currently sufficient positive fund balances in the TIF District 32
improvement and overall project accounts, and these expenditures fall within the allowable time
and scope for said Development and Loan Agreement and Promissory Note expenditures with
additional general fund financing for economic development, loans and purposes; and
WHEREAS, no Plan Commission review or recommendation was necessary for this particular
Development Agreement since it does not involve the purchase or conveyance of real property
by the CITY; and
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WHEREAS, the Common Council hereby find that the City Administration has negotiated the
TIF Development & Loan Agreement and Promissory Notes with Wright and 3700 upon terms,
conditions, promises, obligations, provisions, and purposes, consistent with the best interest of
and benefit to the City, all applicable laws, and Common Council industrial and economic
development policies, goals, objectives, and directives; and
WHEREAS, the district is zoned B3 mixed use commercial and light industrial and
manufacturing; and
WHEREAS, Sections 66.1105 and 66.1101 of the Wisconsin Statutes authorize cities to utilize
tax increment financing to promote industry and implement economic development projects; and
WHEREAS, Sections 62.11(5), 62.32, 66.0101, and other provisions of the Wisconsin Statutes
authorize various land transactions, business, and activities of the Common Council for the
public good; and
WHEREAS, the Common Council has authorized the use of Tax Increment Financing Districts
for industrial site development and TIF Development agreements when the Council adopted
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amended Council Policy Statement No. 61 (Economic Development Policy) on the 13 day of
June, 1994; and
NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of Janesville that:
1. Each and every of the above recitals are reiterated and incorporated herein by reference
as if fully set forth verbatim; and
2. The above described Wright and 3700 TIF 32 Development & Loan Agreement and
Promissory Notes are also reiterated and incorporated herein by reference as if fully set forth
verbatim; and
3. The Wright and 3700 TIF 32 Development & Loan Agreement and Promissory Notes, and
all expenditures, terms, conditions, promises, obligations, performance, conditions, and
provisions set forth therein are hereby found to be in the best interest of, and for the benefit of,
the City, and, therefore, are hereby both authorized and approved; and
4. The City Manager and/or his designee(s) is/are hereby authorized to execute, enter into,
and effectuate the Wright and 3700 TIF 32 Development & Loan Agreement and Promissory
Note with Wright and 3700 on behalf of the City of Janesville; and
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BE IT FURTHER RESOLVED, that the City Manager and/or his designee(s), on behalf of the
City of Janesville, is/are hereby authorized to administratively negotiate, draft, execute, review,
enter in, modify, amend, record, file, and otherwise effectuate the above agreements and
promissory note, and/or to make and enter into any and all other agreements, contracts,
documents, papers, and forms, and/or to take whatever other actions that the City Manager
and/or his designee(s) may, from time to time and at any time, determine necessary and/or
desirable to effectuate the above transactions, agreements, above intent, and/or purposes of
this Resolution.
ADOPTED:
Motion by:
Second by:
APPROVED:
Councilmember Aye Nay Pass Absent
Brunner
McDonald
Eric J. Levitt, City Manager
Perrotto
Rashkin
ATTEST:
Steeber
Truman
Voskuil
Jean Ann Wulf, City Clerk-Treasurer
APPROVED AS TO FORM:
Wald Klimczyk, City Attorney
Proposed by: Economic Development Director Vic
Grassman
Prepared by: City Attorney Wald Klimczyk
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TIF Development Loan Agreement and Promissory Note
By and Between
City of Janesville (“Lender” or “City”)
And
Wright Road Property Group LLC and 3700 Racine Street LLC
(Collectively, though more than one, the “Promissors”)
PurposeCITYPromissors
: The TIF Development Loan from the to is being made under the
provisions of Wisconsin’s TIF Law (ss 66.1105), as a necessary project element and cost
according to the terms, provisions, and promises set forth in this TIF Development Agreement
and Promissory Note for this Development Project Located in Janesville TIF District No. 32 (the
“AGREEMENT”) by and between the City the Promissors, the terms, conditions and provisions
of which are incorporated herein by reference as if fully set forth verbatim.
Loan Amount
: Two hundred fifty eight thousand one hundred forty-eight and 00/100 Dollars
($258,148.00)
Loan Purpose
: To finance the cost of public infrastructure improvements and related expenses
to (i) support the creation of the new business location for Home Health United, Janesville, WI
on land owned by Wright Road Property Group LLC and (ii) to support the future development
of land owned by 3700 Racine Street LLC.
Loan Term
: 10 years
Interest Rate
: 6.00%
Annual Debt Service
: $35,074.04 (this amount includes the annual installment principal and
interest payment). The annual debt service of these assessment costs shall be placed on the
property tax bill for the land owned by the Promissors with the first installment due in January
Promissors
2012. agree to and shall pay all annual debt service (as described and calculated
CITY
above) due to the within thirty (30) days of its receipt of the annual debt service payment
CITY
invoice from the . The Promissors shall be jointly and severally liable for all payments
due and owing under this Agreement but may, among themselves, separately agree upon the
allocation of such payments.
Description of Development
: This TIF Development Loan Agreement and Promissory Note,
made and entered into for the good and valuable consideration set forth herein and otherwise,
sufficiency of which is hereby acknowledged, is intended to describe the various points of
agreement regarding the proposed development of certain lands by the Promissors as follows:
A. Wright Road Property Group LLC owns that certain real property located at the southeast
corner of the intersection of Racine Street and South Wright Road, in the City of Janesville,
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Rock County, Wisconsin (the “WRPC Parcel”), which WRPC Parcel is described as follows:
Lot 1 of a Certified Survey Map recorded in Vol. 34 of Certified Survey Maps on Pages
15, 16, 17, 18 and 19 as Document No. 1901114 being a Certified Survey Map of Lot 1
of Certified Survey Map Document No. 1848111 as recorded in Vol. 32 on Pages 308
through 311 of Certified Survey Maps being situated in part of the NW 1/4 of the NW 1/4
of Section 4, T.2N., R.13E., City of Janesville, County of Rock, State of Wisconsin.
B. 3700 Racine Street LLC owns that certain real property located at the east of and adjacent to
the WRPC Parcel, in the City of Janesville, Rock County, Wisconsin (the “3700 Parcel”), which
3700 Parcel is described as follows:
Lot 2 of a Certified Survey Map recorded in Vol. 34 of Certified Survey Maps on Pages
15, 16, 17, 18 and 19 as Document No. 1901114 being a Certified Survey Map of Lot 1
of Certified Survey Map Document No. 1848111 as recorded in Vol. 32 on Pages 308
through 311 of Certified Survey Maps being situated in part of the NW 1/4 of the NW 1/4
of Section 4, T.2N., R.13E., City of Janesville, County of Rock, State of Wisconsin.
C. Wright Road Property Group LLC intends to construct a single story building on the WRPC
Parcel which it will lease to Home Health United (the “WRPC Development”). Upon the date of
execution of this Agreement 3700 Racine Street LLC does not have specific plans to develop the
3700 Parcel. The improvements contemplated by this Agreement will benefit the future
development of the 3700 Parcel.
POINTS OF AGREEMENT AND UNDERSTANDING
The Promissors have provided a final Certified Survey Map dated August 12, 2010 for the site.
This will be used by the City as the basis for design of all public improvements to support the
WRPC Development.
City agrees to prepare construction documents, administer the contract for, and manage the
construction of all public utility and traffic improvements to support the WRPC Development.
The Promissors agree to pay their prorated share of the costs for all utility improvements
associated with the WRPC Development based on the actual contract cost plus 20% for
Engineering and Administrative services, in addition to any direct costs for materials provided by
the City and the City of Janesville Water and Wastewater Utilities. The total cost is currently
estimated to be One hundred fifteen thousand three hundred eighteen and 00/100 Dollars
($115,318.00) for the water and sewer utility components. The Promissors also agree to pay any
additional costs that may arise from unforeseen conditions that increase the City’s cost for
completion of the construction of improvements to support the WRPC Development.
The Promissors agree to pay the costs for all traffic improvement associated with the WRPC
Development based on the actual contract cost plus 20% for Engineering and Administrative
services, in addition to any direct costs for materials provided by the City of Janesville. The total
cost is currently estimated to be One hundred forty two thousand eight hundred thirty and 00/100
Dollars ($142,830.00) for the traffic component. The Promissors also agree to pay any
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additional costs which may arise from unforeseen conditions that increase the City’s cost for
completion of construction of improvements to support the WRPC Development.
The City agrees to allow the Promissors to pay these costs as part of a ten (10) year installment
payment plan with annual simple interest at the rate of six percent (6%) on the unpaid balance.
The assessment costs shall be placed upon the Promissors’ real property tax bill with the first
installment due and payable in January 2012.
The Promissors agree to be responsible for a pro-rated share of the costs associated with
additional required traffic improvements including a round-about on Wright Road at the entrance
to the WRPC Development should those improvements become necessary as a result of the
WRPC Development and/or the future development of the 3700 Parcel generating excess traffic.
Costs associated with those improvements shall be separate and additional to those set forth
above.
The CITY and Promissors do hereby agree to carry out the provisions defined by this TIF
Development Loan Agreement and Promissory Note.
Sale of Janesville property
If, for any reason, Wright Road Property Group LLC elects to
and/or does sell, alienate, hypothecate, or in any manner convey (but not including any mortgage
loan) the WRPC Parcel, then the entire unpaid principal and interest balance of the TIF
Development Loan and Promissory Note and all accrued and unpaid interest thereon shall
immediately become due and payable in full to the City. The due on sale clause shall not apply
to the granting of the construction mortgage on the WRPC Parcel or the refinancing thereof.
Purpose of Agreement
: This Agreement is for a site located in City of Janesville TIF District
No. 32 and will be used by the Promissorsfor the expansions and development described herein.
The WRPC Development will provide, foster, and encourage additional employment; expand the
tax base; enhance the health, welfare, and benefit of the City; and add significantly to the
aesthetic nature and character of this portion of the City of Janesville. Wright Road Property
Group LLC has entered into a 10-year lease with Home Health United to occupy 100% of the
WRPC Development. Home Health United will transfer its existing operations to the WRPC
Development and shall retain approximately twenty (20) existing jobs in the City of Janesville.
To these legitimate ends and purposes the Promissors are hereby entering into this Agreement
CITY
with the in order to expand and rehabilitate the WRPC Parcel. The planned WRPC
CITY
Development is consistent with such overall and particular plans and will produce
revenues to the City through increased equalized value of real and personal property, tax
increments, tax payments, and/or tax equivalence payments sufficient and required under this
CITY
Agreement to repay certain TIF expenditures and related costs and expenses within
proposed TIF District No. 14. Said arrangement is to the benefit of the Promissors as the terms
of this Agreement and related business factors evince.
CITY
By approving and entering into this Agreement, the governing body of the finds the
Agreement and project each in the best interest of the city and of benefit to the community.
The further purpose of this Agreement is to facilitate the renovation and improvement of the
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WRPC Development on the WRPC Parcel, which shall more than adequately meet and greatly
CITY
facilitate the intent and goals of the and its land use and development plans for proposed
CITY
TIF District No. 32. The Promissors acknowledge that the is only able to finance the cost
and expense of the contemplated transactions through the TIF District 32 Project Plan pursuant
CITY
to applicable Wisconsin laws and statutes which enable the to receive and utilize specially
designated and directed future real and personal property tax revenues from the WRPC Parcel
and 3700 Parcel as generated by the WRPC Development (and any future development of the
3700 Parcel) thereon which increase the overall equalized value of TIF District No. 32.
CITY
Further, by law, the must use such increased incremental tax revenues generated by such
development project(s) located within TIF District No. 32 to repay its TIF District development,
related costs and expenses. But for the Promissors’ promises and agreements herein and
CITYCITY
representations herein and otherwise, the would not enter into this Agreement. The
relies and relied upon such representations, promises and agreements of the Promissors for all of
CITY’s
the purposes arising from and/or pertaining to this Agreement and the WRPC
Development.
In consideration of the Promissors’ covenant to complete the WRPC Development on the WRPC
CITY
Parcel, promises, Promissory Note to the , and performance by the Promissorsof each and
Agreement
every of their joint and several other obligations set forth in this the City enters into
this Loan.
A.As to the performance of this Agreement and each obligation herein, in the event that
CITY
the is delayed for any reason in performing any of its promises as set forth in
this Agreement performance by the Promissors shall not be delayed.
CITY
B.The agrees to execute and deliver such other documents as counsel for the
PROMISSORS
may reasonably request to consummate the transaction contemplated
herein.
C.This Agreement constitutes the entire Agreement between the parties and no
modification shall be binding unless amended and agreed to in writing and signed by
the affected parties.
PROMISSORS
D.The , by signing below acknowledges having read, fully
understanding, and having personally received a copy of this Agreement.
CITY
E.This Agreement is not binding upon the until such time as the Common
Council for the City of Janesville lawfully approves this Agreement and authorizes
CITY
and empowers the City Manager and such others of the necessary to execute
CITY
this Agreement on behalf of the . Execution of this Agreement by the City
CITY’s
Manager or others on the behalf is evidence of such authorization.
F.This Agreement shall remain in full force and effect until such time as each and every
PROMISSORS
of the obligations of the has been fully satisfied and discharged,
whichever shall occur last.
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G.All rights and remedies in this Agreement for each party are cumulative and in
addition to any and all others in law and equity.
H.Any notice which is required in connection with this Agreement shall be mailed,
certified mail with return receipt requested, or delivered by nationally recognized
CITY
overnight carrier, or hand delivered, if to the :
CITY
If to the : Eric J. Levitt, City Manager
Municipal Building
18 North Jackson Street
Janesville, WI 53545
Promissors
If to the : Wright Road Property Group LLC
And/or 3700 Racine Street LLC
c/o Sara Investment Real Estate LLC
6250 Nesbitt Road, Suite 500
Madison, WI 53719
Person or place of notice may be changed from time to time by any party notifying the other in
writing duly served of the change.
I.3700 Racine Street LLC and Wright Road Property Group LLC are jointly and
severally parties to this Agreement and Promissory Note, and are jointly and severally
responsible and liable to the City for payment of the annual repayment installments
set forth herein, both hereby acknowledging the good and valuable consideration set
forth herein and benefit to each separately arising and deriving from this Agreement
and Note.
J.This is a guarantee of payment and performance and not of collection. The
obligation(s) of 3700 Racine Street LLC, and Wright Road Property Group LLC
under this Agreement shall be absolute and unconditional, and shall remain in full
force and effect until the defaulted, breached, and/or failed payment(s) and/or
performance occurs(s) to the satisfaction of the Lender, City, and 3700 Racine Street
LLC and Wright Road Property Group LLC, jointly and severally promise payment,
which payments and/or performance shall not be affected, modified or impaired upon
the happening from time to time of any event, including without limitation any of the
following, whether or not with notice to, or the consent of 3700 Racine Street LLC
and Wright Road Property Group LLC:
a.The compromise, settlement, release or termination of any or all of the
performances, payments, promises, obligations, provisions and/or covenants
of the Promissory Note, or any of its successors or assigns, under the
Agreement;
b.The failure to give notice to any party of the occurrence of an event of breach,
default and/or failure under the terms and provisions of the Promissory Note
or the Agreement;
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c.The waiver by the City of any of the performances, payments, promises,
obligations, provisions and/or covenants of the Promissors or any of its
successors or assigns, under the Agreement;
d.The City’s grant of any extension of the time for payment or any principal of
or interest on ay payment(s) and/or other performance(s) under the Agreement
as amended, or any other guarantee of the payment(s) and./or of the time for
performance of any other performances, payments, promises, obligations,
provisions and/or covenants of the Promissors, or any of its successors or
assigns, under the Agreement, as amended or any extension modification or
renewal of any thereof, if any;
e.The modification or amendment (whether material or otherwise) of any of the
performances, payments, promises, obligations, provisions and/or covenants
of the Promissors, or any of its successors or assigns, set forth in the
Agreement, as amended, if any, or this Agreement;
f.The taking or the omission of any of the actions referred to in the Agreement,
as amended, if any, or this Agreement;
g.Any failure, omission, delay or lack of diligence on the part of the City to
enforce, assert or exercise any right, power or remedy conferred on the Seller
in this Agreement as amended, or any other act or acts on the part of the City,
from time to time;
h.To the extent permitted by law, the release or discharge of 3700 Racine Street
LLC and/or Wright Road Property Group LLC from the performance or
observance of any performance, payment, promise, obligation, provision
and/or covenant of the Promissors, or any of its successors or assigns, under
the Agreement, as amended, if any, by operation of law or otherwise;
i.The default or failure of any party fully to perform any of its promises and/or
obligations set forth in this Agreement.
K.No set-off, counterclaim, reduction, or diminution of any obligate or any defense of
any kind or nature which any party has or may have against the City shall be available
hereunder to any party against the City.
Agreed to this _____ day of ____________________, 2010.
Wright Road Property Group LLC
____________________________________________
By (print): Eric M. Schwartz
Title: Manager
3700 Racine Street LLC
____________________________________________
By (print): Eric M. Schwartz
Title: Managing Member of Racine Street Property Investors LLC, the sole member of
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3700 Racine Street LLC
Agreed to this _____ day of ____________________, 2010.
CITY OF JANESVILLE
____________________________________________
By (print): Eric. J. Levitt
Title: City Manager
____________________________________________
By (print): Jean Ann Wulf
Title: City Clerk-Treasurer
Developers Agreement SARA Investments No 2 2010 (6).doc
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