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HomeMy WebLinkAbout2006-06-21 Business and Economic Development Committee Minutes 1 , **REYISED AGENDA** BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE June 21, 2006 fMinutes � Councilor Attendance: Greene, D'Errico, Hawes, Farrington, Palmer, Gratwick Staff Attendance: Barrett, McKay, Bolduc, Hupp � Others: Russell, Ames, Harriman 1. Amendment to Lease Agreement with Kataddin Precision Components, LLC to December 31, I 2006 Bolduc explained that this is an extension of an existing agreement for storage space at 110 Hildreth Street. A motion was made and seconded stafYs recommendation to amend the lease ' agreement. 2. Amendment to Lease Agreement with Penquis CAP to June 30, 2007 � Due to serving on the Board of Penquis CAP, Councilor Palmer asked if he should excuse himself from this discussion. A motion was made and seconded to excuse Palmer's participation. Gratwick agreed to fill in for Palmer for this item. Bolduc said this is a continuing � of an existing agreement. Penquis leases a building off Fillmore Street in the BIA complex for their daycare center. A majority of its clients are low and moderate income. Earlier in the year, the Council initiated a lease with Penquis through June 30, 2006 when the City assumed control with the exchange of the UMS property. Penquis would like to extend the lease for � another year which will allow the City time to evaluate the building regarding maintenance issues. Strategies wiil be developed for a budget to correct the issue. Bolduc talked about a provision whereby Penquis' lease would pay for the improvements. Responding to Gratwick, � Bolduc said the $500 monthly rent is consistent with the rate paid to the UMS in the immediate past. Bolduc anticipates an increase in the rate would pay for the suggested upcoming improvements. A motion was made and seconded to approve staff's recommendation. McKay � said the building is basically in good condition but deferred maintenance issues need attention at this time. After the evaluation of maintenance needs is completed and a cost structure in place, Penquis has indicated its desire to negotiate a lease agreement whereby the City would � receive reimbursement over time for the improvements. A motion was made and seconded to approve stafPs recommendation for an amendment to the lease. � 3. Update on Tentative Developer Status of Liz and Paul Leonard for Development of a Daycare Facility at 107 Maine Avenue McKay said the Council has previously approved tentative developer status through the end of � June for the Leonard's. In order to determine the land area to be conveyed to the Leonard's the City needs to update its survey which was done. There are three access points to the site. The Leonard's need access of all three. The City needs to make certain that adequate access is I available for Building 26 and Auburn Hall. Ring is working on a plan that will satisfy the needs for all parties involved. It will require cross easement, conveyances to the Leonard while the City retains an easement for access. The City needs to retain adequate frontage on Maine � Avenue to meet the zoning requirements for Auburn Hall. On the upcoming Council agenda, staff recommended Council approval of an item which would extend the Leonard's tentative developer status through July 30, 2006. A motion was made and seconded to approve staff � recommendation. i 1 4. Status of Option Agreement with Larry Springer for Front Street Development � McKay said the Council has previously approved a development agreement with Larry Springer for the 24,000 sq. ft. multi-purpose building on Front Street. Mr. Springer was required to have approved development plans and begin construction by end of June. In order to complete the � conveyance, the City needed to revise its survey and discovered that the City operates on a certain survey base that is different from what most use. The two surveys needed to be reconciled to determine the IoYs location. The site actua�ly sits back away from Front Street and didn't have frontage. The right of way of Front Street needs to be widened up to the � development site to provide frontage. This updated information was provided to Springer two weeks ago which didn't give him adequate time to finalize his plans. McKay provided details of the proposed building in relation to the floodplain level. Barrett spoke of the Corps of Engineer's ,, updated floodplain mapping on the Penobscot River. It was done in the past 2-3 years. A motion was made and seconded to approve stafYs recommendation. 5. Bangor Internationai Airport Domestic Air Service Presentation by Mike Boyd , Hupp indicated that BIA is in the process of updating its marketing plan and are looking at several components including the potential for air cargo development, for international air , charter, corporate international traffic. A plan for domestic air service was not included in the proposal as Mike Boyd, consultant, already provides this service for BIA. Boyd presented a power point presentation. � 6. Request of Penview Associates, LLC for extensio� of Develapment Agreement Deadiines � The item was originally planned to take this item out of sequence making it Item 4.5. The Penview principle, Brian Ames, due to an Augusta commitment, was late in arriving at the meeting. The request was made to place this item later on in the agenda. , Heitmann indicated that in late April a Council Order was approved amending some of the deadlines in the Penview Associates agreement with the City. The new deadlines stipulated a � closing date in June 30, 2006, evidence of financing by]une 15. The City received information from Back Bay Capital and a summary of terms from Bank of America on June 15"'. It was not a binding letter of commitment but did show progress with the financing. Both companies had � indicated that the June 30`" deadline would not be met. An appraisal is required by Bank of America which is expeded to be complete by June 10"'. After approval of the loan, Bank of America estimates 45-60 days to close. Penview is now requesting an extension of these dates. � Russell introduced Ames of Penview and Harriman of Back Bay Financing. Ames has been working on pursuing the capital, finalized construction drewings for the project, has received a � term sheet from Bank of America in May and was expecting a commitment letter by June 15. It did not happen. Russell said the extension request is to August 30`". Regarding the title for the property, Russell said the City doesn't have an opinion or title policy. The City has agreed � to do an abstrect but unfortunately it was past the heirs in the change of title which caused delays. Title work is in process. The abstracters estimate 2-3 weeks to trace the property's past ownership. Ames has recently expended $2,500 for an appraisal required by Bank of , America. Hawes said she understands the current issues as outlined by Russell. She referred back to the � last Council meeting at which time a rundown of the number of extensions that have provided to Penview since September of 2003. In light of the extensions, the last set of deadlines has not been met and she sensed that the Council felt that it was time to say enough. Speaking for , � � herself, she felt the Council cannot agree to further extensions at this point. Hawes stated that � she is not in favor of another e�ension. Palmer asked Ames and Harriman to address the Committee. Harriman said that Ames had contacted him to put together a financing project for Beivedere on the Riverpark. He � appreciates the extension given and can understand the challenges Ames has run through. Harriman believes the project has good partners and a good management team. Bank of � America is one of the country's largest banks. He spoke of the impact of the project on Bangor's economy. Bank of America has indicated that it will prepare a conditional commitment letter but did not have enough time to prepare it to meet the deadline. Responding to Palmer, Harriman spoke about his company. Back Bay Capital was created as a subsidiary of HC � Lending. It is a commercial finance consultant. Farrington agreed with Hawes. His stated that his confidence level is dwindling. He wouid like ' to see the project continue but is not comfortable with continuing as an exclusive in this develop. It is City properry and doesn't want the City's back to the wall. Farrington would like to see an arrangement whereby the project can continue but if other interested parties offer I another development proposal. He expressed appreciation to Ames for his upfront professionalism. � Putting projects into perspective, Ames talked of the watenvorks project. Work has just started, iYs about half the siz� dollar wise of the Penview Project, and the process began two or three years prior to the Penview project. Belverdere is the largest private project undertaken in � Bangor. Ames agreed that all are frustrated with the delays but he is doing the best that he can do. Responding to Farrington's concerns, Ames feels the Bank of America would not want to put further effort into the project unless they have a secure purchase option on the properly. AHe feels it needs to be an exclusive arrangement. Responding to Palmer regarding the exclusivity, Heitmann said a development agreement � provides the developer the exclusive right for the property. The development agreement can be terminated along the way if certain deadlines are not met and in this case the ]une 15"' deadline of legally binding commitment as passed. The other deadline was the closing on June ' 30w. Heitmann said that as of June 15 and then again as of luly 1, there is no development with Penview Associates. There is no one that has first option on the parcel. The rights in the Ciry then revert to the same rights that it had before—it can do what it wants. Last year a � similar conversation occurred because the development agreement had expired July 1�of last year. The City continued to work with Penview and in October of 2005 entered into a new development agreement, which was the second agreement. Though not aware of any other , interested party, Heitmann said the City needs to be open if one did occur. By taking no action, the Committee is indicating no further support for an extension. By taking action to extend, it would need full Council approval. The Council can either grant an extension of the date or not. � If the decision is not to grant, Penview is free to continue to proceed. The City has the flexibility to act if something comes along for another development. Responding again to Palmer, Heitmann said the June 15 deadline was not met so there is no development ' agreement in place at this time. The developer status has expired. Palmer asked Ames to explain the vision for the project at the corner of Raiiroad and Summer � Streets. Palmer asked Heitmann if there is any financial arrangement to continue this for 60 days. Is it � possible to insist that Penview pay for the privilege of an additional 60 days? Heitmann said it � could be part of an amended development agreement; i.e. requirement of an option fee. The � original agreement was for $500/month for an option fee. , Hawes said there is essentially no development agreement because of the passed deadline of June 15`�. Heitmann said that in his opinion and it is a breach of the agreement. Hawes asked � how something can be extended if it doesn't exist. Heitmann said if there is an inclination to extend the dates it wouid be better to authorize the approval of a new agreement which would have the same affect as extending the dates. Hawes said her main issue is that the deadline � was not met. She doesn't agree with requiring Penview to expend further money to work on a project because they did not meet a deadline. Lacking a new agreement doesn't stop Ames from continuing to work on the project. � Responding to Greene, Heitmann said that clearly the agreement states certain work to be completed by certain dates. The June 15"' deadline was a legally binding commitment. No one ' seems to disagree that the date was not met. There is no longer an agreement in place as of June 16"'. If a third party expressed interest were to object to the Council's extension of an agreement that doesn't exist, it could create an issue. If the Council is inclined to extend and � rewrite the dates, simply rewrite the agreement with difFerent dates. Russell suggested a reaffirmation of the existing agreement rather than writing a new agreement. Heitmann said it is the same difference. Hawes said the discussion is going around and coming back to the same issue. Either the � Committee will agree to suggest an extension of the dates or not. At the last Council meeting, she felt the Council set a very clear message that the City has extended and extended, , understanding Ames' position, but there comes a time that if the City gives one more extension and Ames returns, the Council would not be amiable to another extension. No one has personal animosity towards the project or development, however, how many times can it be ' discussed with the same message: this is the last time, and then pull it back and provide another deadline. The message at the last Council meeting was not to offer an eactension. Russell said if it is not extended the deal will be dead. The bank will not expend any time or , effort on the possibility that the City will resurrect the deal. It's Ames' money being expended, not the City, so the additional 60 days does not place the City in a position to be out of money. , There is no other interested party. It is not realistic to think that Ames will continue working on the project without the Council's extension approval. Heitmann said evidence of financing, certification of a construction contract and evidence of all permits, licenses and governmental , approvals necessary prior to closing have not been completed by Penview. These four were specified in the agreement. One of the problems on both sides is there are other players out of the City's and Ames' control that are being relied on; i.e. Bank of America, appraisal, etc. � Heitmann said he would hesitate to advise the Council to vote in favor of extended time if the reason was out of concern that Bank of America would not proceed. Greene clarified the only thing the Committee can do at this point is to make a recommendation � to full Council on June 26`h. He said the Council might look at it differently if a letter were provided by a lending institution. Heitmann said he expected the Council to feel more secure in , their decision-making with more facts and less speculation. Palmer expressed concern with the extension. He shares Hawes'view. For three years there � has been feeling that the project would become a reality but the process hasn't moved ahead much at this time. In the meantime, the City could perhaps be missing other opportunities. The Council has been lenient and helpful on this project. ,, , IHeitmann observed that if Ames is able to produce financing immediately, the Council would be , willing to work with him regardless of passed deadlines. The real key is the June 30`" date. The financing is key to the project moving fonvard. There are iwo major components to it: the appraisal and the other investor, who is not legally committed at this point. If these two � components were in place, the Council could be fairiy confident that the project would be able to move forward. Heitmann suggested that if a new agreement is put in place, as opposed to an extension, the City can do that at the July 10`" Council meeting. By the end of the month, � the City would know about the appraisai and the investor's step to be legally bound to the project. � Farrington reinforced that the Council made its desires known at the last Council meeting regarding the project. He has a probiem with the delay and he is not comfortable with continuing. ' Palmer agreed with Heitmann's suggestion to wait and not make an opinion at the moment but to wait until July 10"' for the full Council's determination. He doesn't think an extension would be seen as favorable among the Council. � Heitmann said that if the appraisal comes in as promised by June 30 and if the investor concludes discussion by that same date there is a July 5 BED Committee meeting. There could � be an update at that time. Greene asked if any Committee member was prepared to make a motion to either extend or ' rewrite the development agreement for Penview Associates. No motion was made. Greene concluded there was no recommendation from the Committee to the City Council. � 7. Executive Session — Lease Negotiations — Farm Road — 1 M.R.S.A. §405(6)(C) (Confidential Memorandum provided separately) 1 A motion was made and seconded to go into executive session. 8. Committee Action on Above Item Following the executive session the Committee voted to not ' approve the proposed lease. ' � � , , � �