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HomeMy WebLinkAbout2008-12-03 Business and Economic Development Committee Minutes � � BUSINESS AND ECONOMIC DEVELOPMENT COMMITrEE � December 3, 2008 . , Minutes �, Counulors: Hawes, Bronson, D'Errico, Gratwick, Stone, Nealley, Palmer Staff:� Barrett, McKay, Ring Others: lulia Witcox, VOA � i. Staff Update — Bangor WaterFront Master Plan � Hawes noted that this item was being taken out of sequence as representatives for tfie Volunteers of America wouid be late arriving. � Ring prepared the latest architectural rendering of the watertront master pian. The City is now looking downriver through the entire former railroad site. A few changes from the previous plan are additional parking areas on both sides of the railroad tracks, a water park with play structures, open space, an amphitheater, an arboretum/butterfly park, picnic stations, and a more recent change to � � incorporation of aaess for smaller vessels, canoes, and kayaics. In conjunction with those primary elements, there is a series of walkways and pathways. The - type of work to be undertaken in the next phase in 2009-2010 would include � improvements to stay away from the shoreland because of likely necessity for access and some disturbance with the coal tar remediation project. in the short term there will be some parking improvements, extending public utilities, grading �� as well as at least a new path through the site. � Another change is a stight shif�of the amphitheater which would bring it about 120 ft up river or toward Front Street. The seating capacity will remain the same but it oocupies a I'ittle less footprint. Immediately adjacent there would be several rows of benched area to be used for seating. He pointed out there wiil be a slope area as well that would accommodate approximately 1,000. � There is some funding in place and the �ty is still waiting to hear the results of �- its last grant application. The C'ity is at the point where it needs to obtain a site location or development act (SLODA) permit from the DEP. He noted a public � informational meeting will be held on Dec. 4 from 5:30-7 pm in the Chambers which is a DEP SLODA requirement process. � Nea{ley talked about Maine weather and the impracticability of an ampli�theater without a shell. Responding to Nealley, Ring said a shell has been discussed. One of tfie things that the City s�ll sees as very probably is a shell structure to � provide a stage covering and to accommodate lighfing/sour� equipment. He referred to a treliis type structure as well as a lighted watkway. � . � � . 1� D'Errico asked if the parking lot has been expanded on the north side since the previous plan reviewed. Ring said no. The parking area capacity is about 90. � - Gratwick talked about a community garden. He referred to the Victory Garden in Boston, which is a hub of activity. He asked about lar� available on the north ,� side for development of a community garden. Ring said that it is not specifically included on the rendering but he does know there is interest and there has been � discussion of locations of community gardens. Tracy Willette, Parks and Recreation Director, has been looking into it. � Bronson said he would like to see the riverfront developed in some way so that � tl1e dry area and water area are accessibte. He agreed with the small boat � access. He said he would like to see the project move forward as rapidly as � possible. . McKay noted that Pam Shadley, Design Consultant and Wright-Pierce would be ,� at tomorrow's public informa�ona! meeting. 2. Volunteers of America Affordable Housing Development District � Application . McKay noted that the Committee has previously met with VOA representafives �; regarding their proposed tiousing development 315 Harlow Street across from the Post Office. It is the former site of Capital Ambulance, Bangor Photo and a� � small restaurant. At this point, the buiidings have been demolished and further soil testing needs to take place. It is a 2.3 acre site for a 51,000 sq. ft. two and four story building, 55 units of affordable senior housing, 36 of the un'�ts will be funded through a HUD Sec.tion 202 program, and the remainder being funded through the low income housing tax credit program. The funding for.the development costs is in place. '� As part of the project, VOA needs to develop an operating budget which is funded by the rental income from the project, which is controlled by the federal � government. From that income they need to pay operating and maintenanoe costs. What is not provided for in their operating budget is sufficient funding to pay properly taxes on the new development. Under state law, everybody pays . �_ property taxes. There is a state law that provides municipalities bo form a tax increment financing district whereby the City can return all or a portion of the new tax revenue from the new development back to support to the � development. McKay said that the project was previously assessed for $595,000 that provided the City with slightly more than $11,000 in real esbte taxes � annuaily. When completed, the proposed assessment is in excess of$SM, and the tax revenue would be $96,OOU at the current tax rate. � �. �' � VOA is proposing that the City adopt a TIF District which in the state statutes is � cailed affordable housing development district whereby VOA would pay the futl taxes but the City would retum to VOA the new taxes achieved by the new development. In the frst year at today's tax rate and the projected value of �, $5,043,000 would equate to $84,730/annually. In their operating budget, the net taxes paid by VOA would be $11,339 based on the assessment of last March 31�. VOA is asking that the difference in taxes paid on the new development be � retumed to them and they would apply them to funding part of their operataon and maintenance expenses. .� Julia Wilcox, �ce President of Business Development for the VOA, corrected McKay in that the remainder of the $96,000 minus the $11,000 would continue � to be in an escrow account to be able to pay that one time biU each year. McKay said that the City can adopt an Affordabte Housing Development District �� under state statutes. It would involve the 315 Harlow Street site which is zon�d Multi-Family and Service District The s'ite plan has been reviewed and approved by the Planning Board. The buiiding plans have been submitted to the Code � Enforcement Office and are being reviewed. The City can designate the AHD District and it needs to be submitted to the Director of the Maine State Housing � Authority for their approval. They have 30 days to review/approve. Once approved, it becomes an official Affordable Housing Development District. Along � with designating the Dish�ict, the Council would be asked to approve a � developmenf program whereby the new tax increment received from the project wauld be retumed to the developer. Wilcox provided and discussed in detail proformas to the Committee with information on a 15 year cash flow and VOA's operating budget. Rents for the one bedroom units are set at $550/month including all utilfies. There is a $49 � utility allowance that is deducted from the $550. The low income housing tax program is a 15 year program where VOA provides housing at 57% of the median income. � � Stone said he is not in favor of the tax credit conce t he asked about the P . construc�on contingency, the developer fees, and the opportuniry for cash � reserves at the end of the project's life to be returned to the City. He also asked what the VOA would do if the City declined participation. � Wilcox said this is the first housing project in Maine that has combined a HUD 202 project and a low income housing tax cred+t. HUD is going to make VOA run � the buiiding fvr 40 years as a low income senior housing facility. VOA has been in the housing business for over 100 years. The only monies that are able to accumulate are repiacement reserves; i.e. roof.reptacement, apptiances, etc. If � � � � � there is money lefit over in tlie annual operating budget, HUD requires the � � money to be placed in a residual receipts aaount for the project: The money has to stay with the project. Even though energy costs have increased over time � as well as other operating costs, the VOA has never has an increased budget. There is no avenue to raise rents. HUD 202 is affordable senior housing that HUD subsidizes, tenants pay only 30% of their adjusted income, and HUD pays ,� VOA the difFerence. A HUD 202 is budget based. The tax credit side rent caps the amount that HUD will pay for the contract rent. � As stated, this is the first of its kind project in Maine. Vermont has done 3-4 of these types of projects. it works but the operating budget is the downfall. if � VOA ended up with a cash flow, the investor and the company purchasing the tax credits wouid terminate their participation. Wilcox stressed that VOA's revenue cannot change. There is no other way to bring in additional rents. � Regarding the construction contingency, Wilcox said the contingency is well spent at this point. The site has been challenging in many areas including � environmental. The contingency account is at 8%�which is 3% higher than . . normat. The developer's return will be the tax credit; Wilcox said responding to Stone. She talked about construchon guarantees. � McKay said in the earlier proformas that he had seen debt service on one of the sources of financing. Wilcox said originally MSHA was trying to pu11 some of the � funding awarded. At that tlme it was 90 cents on the dollar and now it is 72. cents. Because MSHA took some of the funding away and made VQA defer � some of their developer's fee. VOA was able to prove that it would hurt the project and that an equity investor doesn��want the sponsor and manager to take on the liability. � Wilcox spoke about developer fees.� VOA has been working on the project for two years, is looking at a 20 month construction period, and will b�ng ciose to � $9M into Bangor's economy. It is costing more to demolish the s�te. If ifiere are cost overruns in construction, VOA will be held on the line. Wiicox said if the project were just a HUD 202 complex the project would t�tax- � exempt under state law. But because a limited liability partnership is required � for this project to bring in all of the funding, it then becomes non-profit. Nealley expressed concerns similar to Stone. He asked if Bangor residents have � first opportunities for the un'�ts. Wiicox said they are not advertised. People find � out about it is here in Bangor. After her last meeting with the Council, the phone calls began to come in. A list of Bangor residents has been started. Responding � to Nealley, Wiicox said that HUD will own 60% of the project and they want any leftover dollars at year's end to go into a residual account. On the investor side, � �. � � MSHA and the investor regulate that if af�er all the models are approved and consdvction commences, any monies after that have to stay with the building. � Neailey noted that if the City is going to participate it has to do so upfront whether or not the project fails. Bringing the asset to Bangor will be a lesser burden on the City because ali utilifies will be paid and the tenants will be taken �;� care of and not requiring general assistance, lNllcox said. Bronson stated his opinion that on one hand it can be demonstrated that this is a � good project, and there is a need for the project. He is very uncomfortable with investments in the community that cannot pay their part of the expense of operating. Additionally, in this case because he thinks that the group of � residents will be the group of residen#s who need more services not fewer service.s. He agreed with Stone in finding some sort of a balance regarding the taxes. � D'Errico asked about the $9M impact on Bangor. Wilcox said the VOA has paid � taxes on the site for the past 24 months, has purcha�ed the building and� . demolished it, a local contractor is being used and using local subs for 20 ; months. Wilcox said there is a service coordinator in the budget to help tenants. � VOA has a new nationa! senior service strategy program. _ � Gratwick thinks this is an important development for Bangor. He hopes the City will not be`pulling the pfug'at this point in the project. He asked what happens � 16 years from now if the project cannot pay for the project due to rising costs. Wilcox said the developer budget has 6 months of reserves and, if it needs to be � used, VOA would be responsible to replenish it. Responding to Gratwick, Wilcox said that VOA takes 50% of everything taken in on a developer fee and puts it � into a reserve. VOA's national office will be taking a very small piece of the project and they have tfie reserves. VOA is the 10"' largest non-profit organization in the nation. Responding to Gratwick, at the end of 16 years, VOA � would retum to the City to negotiate a PILOT(payment in lieu of taxes). " Stone asked Barrett what he envisions wiil happen to the Curve Street area � developmerrt. Barrett said it is one of the things the City hopes to see further area development resulfing from the VOA project. It wili remove a building on a very difficult site that is very difficult to redevelop. He didnt feel there was � another viable opportunity for ifie redevelopment of the site. There is a . tremendous demand for this type of housing.� He noted that the City has provided TIF's in the past�—the Waterworks, the Freese's building, the Shaws � proj�ct on Main Street. McKay said that funds spent on Curve Street included HUD grants for Curve and Market Streets and another street off Market. Barrett � talked about the Union Place project where the City put $1.5M to clean up a parcel of .63 acres. The City often gets into these situations in helping projects trying to invest in community improvements that exceed market reality. � � � S�one asked 1Nilcox to convince him that the Ci should rtia te and su rt � tY Pa Pa PPo the project. Responding to Gratwick, McKay said the property was assessed as of last March at $595,200 which included $428,600 for the bultding and the r remainder for the land. In response to Gratwidc, Wilcox said that this type of housing eliminates the need for individuals to make a choice between food and 1� heat Bamett said that in terms of the Ctty this will be a low service demanding � group. The primary service woutd most likely be ambulance and emergency medical services. � Nealley said that he didn't think that anyone around the table is questioning the mer�ts of the project. � Responding to Nealiey, McKay said this will require a public hearing which is _ scheduled for the upcoming Monday Councii mee�ng. The Council is required ta � consider public comments at that tlme. Foilow�ng the public hearing, Counal wiil be asked to vote on an Order designating tMe district and approving the development program and as proposed would retum 100% of the new tax � revenue back to YOA. Foliowing that a Credit Enhancement Agreement would be needed between the City and VOA in the form of a formal document of the terms , and conditions whereby the City would provide the returr� o�the new taxes in �. retum for them developing their project and making sure it remains affordable to Iow income individuals. Barrett said that technicatiy the Council doesn� have to vote on the item on Monday but the public hearing is required to be held on , � Monday. Wilcox asked if it would be appropriate for VOA's equity investor to attend � . Monday's Counul meeting. She cannot continue on with the project until this piec:e of the pr�oject is settled. Stone didn�feel it would be worth the expense. � A motion was made and seconded to recommend approval to proceed with the project and to�continue the item fio the upcoming Monday night Council meeting. � Palmer asked for the voting members of the Committee. Hawes stated there � were five in attendance. Gratwidc asked if there is any wiggle room available. Wilcox said looking at the � . cash flows there is not a lot of wiggle room. Wilcox thanked the Committee. � . � �- �