HomeMy WebLinkAbout2004-06-30 Business and Economic Development Committee Minutes �
BUSINESS AND ECONOMIC DEVELOPMENT COMMITTEE ,
June 30, 2004
Minutes �
Councilor Attendance: Palmer, Farrington, D'Errico, Allen
Staff Attendance: McKay, Bolduc, Martzial, Weber �
Others: Joe Cloutier, Suzanne Roy, Dan McCormic (Realty
Resources), )ohn Karnes
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The Business and Economic Development Committee met at 4:00 at Union Place �
for a brief tour of the site, a vacant apartment building at 253 Union Street, and
the Dave's Video premises. One of the proposals is for significant expansion of
the Dave's Video business. After the tour, the Committee reconvened in the City �
Council Chambers at approximately 5:22 pm.
CONSENT AGENDA I
A motion was made and seconded to approve passage of the Consent Agenda �
items.
1. Community Development Rehabilitation Loan Subordination Request— 289 i
Elm Street
2. Lease of Space in 39 Florida Avenue to]enkins' Professional Cleaning �
3. 2003 Homeless Continuum of Care Application
AGENDA �
1. Community Development Loan Request- Freese Assisted Living — Freese �
Building Associates Limited Partnership/ Realty Resources
McKay indicated the next three items deal with properties managed by �
Realty Resources. The City has been working with Realty Resources for
approximately 2 years to address operating cost problems associated with this ,
project. The first project was the rear of the Freese Building with 34 units of
elderly housing in 1998. The second project was the top three floors of the front '
of the building with 32 assisted living housing units in 2000. Realty constructed
an atrium on the Broad Street side of the building. Both housing projects have
experienced cash flow problems due largely to the restrictions imposed by MSHA
for the assisted living units. The requirements for the elderly housing tenants �
are categorized at certain levels with a specified number of tenants with a certain
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� income level below 50%, a certain number below 40%, etc. With the assisted
living tenants, a higher than expected operating cost existed because of the
� atrium and electricai, heating costs, etc. The largest problem in the financing of
the assisted care facility has been a remaining balance on the first mortgage,
which is contributing to the cash flow problem. Staff asked Reaity to do an
� energy efficiency survey of the project to identify areas of cost savings. Realty
. has completed ali of the recommended energy efFcient projects. Staff and
Realty have come to the conclusion that a solution for good operation of the
� project would be to find a way to pay off the first mortgage with an outstanding
balance of $452,000. Mr. Cloutier has offered to pay off 1/3 ($152,000) of the
remaining balance. MSHA has agreed to provide $150,000 in financing in the
� form of a zero percent, no repayment loan. Cloutier has asked the City of
Bangor to finance an additional $150,000. The City's original loan was at 8%
� interest. McKay suggested that the City's mortgage be refinanced at 5.5%
interest with a repayment term of 30 years and that the City loan an additional
$150,000 at 4.5% to help pay off the first mortgage. The City and MSHA would
, share the first mortgage position on the property. It requires Committee and
Council approval. Cloutier thanked the City and staff for its commitment to
assisted housing as well as downtown revitalization. Cloutier indicated he has
� put $170,000 into the project. Cloutier feels that McKay's recommendation
would make the project financially sound and viable for the future. MSHA has
committed vouchers to the project that will follow the refinancing. MSHA has
� committed 20 to project based units of permanent Section 8, working with the
Bangor Housing Authority. Farrington asked if the project will become viable or
will the developer be coming back to the City in future years. He also asked
� about the structuring of the current mortgages. McKay said the first mortgage of
$452,000 is held by CST. The remaining mortgage is the City's, where the City
� loaned $212,000, and that is being repayed through the taxes paid by the
project. The current balance on the City loan is $197,000. Regarding the
$452,000, the developer, MSHA, and the City will each assume 1/3. The City's
� one-third will come from CDBG funding at 3%. Cloutier said that the project
doesn't charge the highest rent, but the individuals living there simply cannot
afFord to pay more. Cloutier believes the recommendation proposed by staff will
� be the final solution for the project. In response to D'Errico, Roy said it is not at
100 occupancy at this time. Martzial said that after working with Realty
Resources for a little over a year and in reviewing the situation very closely, he is
� confident at this point that restructuring is the solution. A motion was made and
seconded to approve staff's recommendation.
� 2. Community Development Loan Request - Freese/Main Street Housing
Associates / Realty Resources
McKay said the Freese Building second request is for the rear of the
�, building. The City made a loan at 6% interest and Realty Resources has
requested that the interest be reduced to 3%. Staff s recommendation is to
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approve the request. A motion was made and seconded to approve staff ,
recommendation. Farrington did not dispute the motion; however, he did
indicate it could be an instructive lesson for future worthwhile projects. It does �
ultimately come to the taxpayer. Cloutier said the Freese project is the most
complicated project he has ever been involved in. He cited energy issues in old
buildings. A motion was made and seconded to approve staff's recommendation �
to reduce the loan interest rate from 6% to 3%.
3. Essex Street Affordable Housing Proposal �
At the City Council's direction, the City issued a request for proposals for
redevelopment of the former Naval Reserve Center on Essex Street. One �
proposal was received from Realty Resources to develop a 31-unit affordable
housing project. The City granted Realty tentative developer status. Realty �
submitted an application and has been approved by MSHA for tax credits. The
majority of the project financing will be from tax credits, a MSHA loan in the
amount of $600,000, another MSHA loan in the amount of $600,000, a CDBG '
loan is proposed, City tax increment financing, and $170,000 from the developer.
If the Committee wishes to proceed with the proposal, it needs to recommend to
the City Council an extension of the tentative developer status to allow staff and �
Realty Resources to negotiate a developer agreement for Council consideration
and approval. Martzial reviewed a map outlining the area and the project. Allen
asked about the entrance to the project being in close proximity to the traffic �
light at Stillwater/Essex and creating traffic jams. The project has not gone
before the Planning Board to date and a traffic study will be required at that
point. McKay indicating the zoning is Government and Institutional so it will �
require a zone change to High Density Residential to allow for the housing
development. It is a 3-acre site, which was part of the RFP process. The City
owns approximately 2 acres adjoining the site toward the Mary Snow School, �
which may or may not be developable. Palmer indicated the 2 acres in question
was the city dump many years ago. Allen asked about an entrance from Essex �
Street and an exit out onto Broadway or vice versa. Someone asked if it could
connect to Pine Street. Weber said the RFP indicated there would only be Essex
Street access. It also indicated there would not be access onto Milford Street or �
Broadway. Weber said the traffic study would be addressed at the Planning
Board level as part of the development process. In response to Allen, Weber
said that grading and filling would be addressed as part of the development i
process. Farrington talked about the traffic flow, the number of parking spaces
for the 32 units, the offering price and the zone change. He feels it is better to �
proceed at this point where all issues involved will be discussed in detail. Palmer
asked Farrington if that was in the form of a motion. It was and the motion was
seconded to extend the tentative developer status to Realty Resources for a 90-
day period. During that time, McKay said the City stafF and Realty would �
negotiate a development agreement for Council approval. The 90-day developer
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� status shouid take Realty through to the ciosing period. McKay said that in the
past the City has been willing to extend the option agreement up to a year, as
� long as progress as been made. Farrington said he would want the four areas of
concern that he raised answered during the review process. Palmer said the
motion should indicate that Realty Resources will be the exclusive group the City
� will deal with for a 90 day period and, if there needs to be more time, the
Council might be willing to extend that time. D'Errico talked about the value of
the property indicating there have been several swaps made and asked if McKay
' could clarify it. McKay said the Airport owned 27 acres of land on the other side
of the runway that the military wanted to combine their training facilities. The
, City deeded them 27 acres and, in exchange, the City received the Armory on
� Main Street, which then belonged to the Airport. The City decided that it wanted
the Armory for Parks and Recreation. The City exchanged the Essex Street
� property for the Main Street Armory and also paid the Airport additional funds to
make the exchange equal in value. The City had ownership of the Essex Street
land and the military owned the building, which they left to the City. The City
� then demolished the building due to asbestos related problems. Realty initially
proposed an acquisition price of $400,000. Allen asked that a Broadway egress
be considered.
� 4. Union Place Development Proposals
� Prior to its meeting, the Committee toured the Union Place Development
area where the City acquired 5 various properties including a 4-unit apartment
building. McKay said the City issued an RFP for redevelopment for residential
� development proposals including the redevelopment or replacement of the
existing apartment building. Owners of adjacent properties were allowed to
� submit proposals. Proposals were received from John Karnes for 8 new dwelling
units and rehabilitation of the existing building, and a proposal from Dave
Lawler, owner of Dave's Video, who would like to replace his existing building
� with a new 5,000 sq. ft. retail building and also have a residential development.
Karnes and Lawler were also involved in the Committee's tour. Palmer asked if it
were possible to split the development in order to accommodate both
� developers. Depending on the Council's wishes for the Lawler proposal, it would
possibly leave areas for residential property. Before voting, Palmer expressed
concern that only four committee members were in attendance. Allen talked
� about splitting the property and asked about the zoning for the property when it
was under consideration for development by RiteAid. Palmer said RiteAid would
have taken the entire corner, including the video store and the apartment
� buildings. McKay said that after much deliberation the Council did approve a
contract zone change for the RiteAid project. To accommodate Mr. Lawler's
� proposal, McKay said there would be some necessary zone changes. Barrett said
there was neighborhood opposition to the zone change during the RiteAid
process. D'Errico asked about the City's obligation to use the site for housing
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due to CDBG funding used to purchase the property. Marizial said it was �
purchased by CDBG funds at approximately $660,000 (acquisition, demolition,
relocation). He said the initial plan to HUD stated that the plan was to redevelop �
the site as residential properly. The City is not tied to low to moderate income
housing. His understanding is that the City has no legal ties but it would be nice
to stay with the original plan for residential housing. D'Errico asked about one of �
the developers who did not use proper procedure in responding to the RFP.
Martzial said that Lawler's proposal was lacking some of the RFP requirements.
The Purchasing Department made the decision to accept it. The Karnes' �
proposai was compliant with the RFP request. Allen asked what impact the ,
residential development could have on the commercial development as it
currently stands. Weber said that the Karnes'proposal would not allow for �
commercial space. McKay said the if the Lawler proposal is accepted as
proposed with a 5,000 sq. ft. building it would leave an area to redevelop or �
replace the 4-unit apartment buiiding. It is uncertain, based on the information
provided by John Hamer today, if a second unit or a larger building could be
buiit. Mr. Karnes' 12-unit proposal would be reduced to no more than 8 units �
and perhaps only to rehabilitation of the existing building. Palmer asked Karnes
if he has an interest in doing a lesser project, a joint partnership, or splitting the
properly. Karnes said he did informally speal�with Lawler. Lawler indicated he �
just wanted a new store and that Karnes could do the apartments. Karnes said
the question is how many apartments would be allowed after the store is
changed. Weber talked about zoning issues. If the residential property and �
commercial properly could find the right zone (urban service district) and then it
became a planned group development, there could be shared parking. Weber �
said the City does not like to see residential and commercial shared parking.
Weber said she would be more than happy to work with Lawler and Karnes, if
that is the direction of the Council. Palmer asked about residential units over �
commercial space. Weber said it wouid be a challenge from the zoning
perspective. Urban service district would allow that use. URD2, the current
zoning, would not aliow it. �
Palmer suggested a two-week period for Karnes and Lawler to meet
regarding a joint project. Karnes expressed interest but didn't feel it would work �
with the zoning issues invoived. He also expressed a concern with time frames
and rising interest rates. Karnes said he isn't certain what the Lawler proposal is.
Karnes submitted his proposal on February 18, 2004. At prior meetings, Lawler �
was asked to submit a proposal because he did not originaily submit one. He did
not submit one and he expressed that he has no intention to do so due to costs
involved. Karnes has expended the funds on the chance of getting the project. �
Karnes said he feels the Committee should be making a decision at this meeting
on whether to accept his proposal. Karnes feels that Lawler has not followed the �
RFP system. In Lawler's absence at the Committee meeting, Palmer suggested
that this discussion should not take place. In defense of Lawler, Palmer said he
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� has done a remarkable job at the corner. Barrett said the first thing to be done
is to see if the parcels can be split, then Planning needs to provide a map
� regarding zoning. Palmer totally disagreed indicating that the two parties need
to be brought together to talk. Barrett disagreed with Palmer indicating the
issue is whether two separate projects would be feasible on the property.
� Barrett said staff has repeatedly attempted to talk with Lawler, who has
indicated he has no interest in speaking with City staff. As a result, the City isn't
in a position where it can even comment on the plan that he has proposed.
� Allen talked about bringing both parties together for development of the corner.
D'Errico said he cannot dodge the issue of an RFP process where one developer
� follows the rules and guidelines and the other does not. If policies and
procedures had been followed, the City would not be at this point. Palmer said
he didn't want to talk about Lawler without him being present. Farrmgton was
� not available to take the 4:00 pm tour of the property in question. He
expressed concern with the length of time that has passed with discussions on
the development. From the start, he has favored residential development on the
� site. Farrington said the current commercial development has grandfathered
status and is not one that necessarily fits into the residential area. He is
concerned about the lack of planning on the commercial proposal and is of the
� opinion that the City should proceed with the residential development proposal.
Although hesitant to make the motion due to the fact of not being at the tour,
Farrington said he has heard nothing during the committee's discussions to
� change his opinion of going with Mr. Karnes' proposal. Palmer asked Farrington
if he would have an opportunity in the next two weeks to view the properly.
Farrington said yes, with City staff's assistance.
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Farrington asked Karnes what impact a two-week delay would pose on
� him. Karnes said he would like to see the process move forward with a
resolution, and he felt a vote of the committee is in order. He put forth a good,
complete proposal, met with City staff regarding guidelines, and he would like to
have an answer. Interest rates have gone up so his numbers have changed.
� Barrett said he was not suggesting that staff would not attempt to get both
parties together, but the threshold question is what does commercial use do to
� the rest of property and can there still be residential development? Allen said
that the development already completed in that area is commercial. She would
like to see further communication between the proposers as both have very valid
� projects. Palmer again stressed with only 4 committee members present that
both developers could lose at this committee meeting. From a planning
standpoint, Weber said that further progress can be gained with the two�
Aadditional weeks. She will provide information on how much retail and residential
can be accommodated with a mixture of Mr. Lawler's lot and the City property.
� Karnes asked Weber if she could provide an answer at this meeting. Weber said
she did not have the materials in front of her.
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D'Errico asked about any legal obligation to stay with the standards of the �
RFP process. Barrett said the normal wording in an RFP is that the City reserves
the right to accept or reject any and all proposals. Palmer said that, if no motion �
was forthcoming, he would ask for a two-week delay. He asked that after the
consent agenda of the next committee meeting that this be the first item on that
agenda. He asked that members of the committee be subpoenaed so that all are �
in attendance. D'Errico said he feel a mockery has been made of the RFP
procedure. Allen said that past history woufd show quite a bit of debate on the
RFP procedures as they stand. Palmer thanked staff for their efforts and Mr. �
Karnes for his patience. Farrington asked for clarification as to whether this
issue wiil be brought to a head in two weeks. Palmer is hoping it will. He said �
the other option is to vote today and it could get deadlocked and then go to full
Council. D'Errico said he was prepared to make a motion to accept the Karnes'
proposal. Palmer took a vote, it was a deadlock so the motion failed. This item
was then referred to a workshop of the full Council. �
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