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TO: Mayor Richard C. Irvin
FROM: David Dibo, Director of Economic Development
DATE: February 8, 2019
SUBJECT:
A Resolution authorizing the execution of a Redevelopment Agreement with UEP Keystone, LLC to facilitate the redevelopment of certain real property located at 30 S Stolp Ave. in the City of Aurora, commonly known as the "Keystone Building."
PURPOSE:
To promote the continued revitalization of the downtown, the Economic Development Division recommends the approval of the Redevelopment Agreement between the City of Aurora and Urban for the development of the Keystone Building at 30 S. Stolp. Urban plans to redevelop the property with market rate apartments and re-energized retail on the ground floor.
BACKGROUND:
Housing, specifically market rate housing is intrinsic to the cycle that not only creates activity and excitement but brings the need for services that in turn supports businesses that attract more residents and more spending. Property values rise that further incents developers to take risks on projects that previously were deemed unfeasible. An iconic building that is underutilized will be re-adapted and re-purposed, a first example of the ripple impact of the redevelopment of the former Waubonsee College. Sales taxes will increase in the retail business and overall assessments will rise. Impacts to School District 131 should be minimal given the likely market for the residential units; yet a portion of the incremental real estate taxes will go to the district. The redevelopment of the Keystone Building is consistent with the goals of the City’s downtown Master Plan approved November 2017.
DISCUSSION:
The Keystone Building, is not yet on the National Register for Historic Places and needs to undergo the thorough process to get it qualified and then implemented consistent with this designation. The building, will no doubt qualify, yet will need extensive renovations to change uses while maintaining the historic character of the building.
Another way of characterizing the “gap” is a “but for” evaluation that indicates that the project would not move ahead but for the granting of these incentives. The city made the strategic decision to work on a number of simultaneous downtown projects to facilitate comparisons amongst them. Fundamental real estate principals were used to analyze projected the costs and revenues and the “resultant “gap”.
The Keystone building is one of the few buildings other than the Art Center and Paramount that is within the boundaries of the newly created TIF #9, (Stolp Island TIF) whose boundaries have been defined and has been recommended by the Tax Increment Finance Joint Review Board. It is now undergoing the steps needed to become final including a public hearing, Council approval and various State sign offs.
There are 4 levels to the economic incentives described in the RDA:
1. A City grant of $1,425,000
2. A Finish Line Grant of $75,000
3. A short term bridge loan for the City $ 1,706,866.55
4. A pay as you go TIF split 80% (Urban) and 20% (City)
Below is a description, discussion of each incentive:
1. The City grant (called a “Forgivable Loan” by the developer) is a straight out grant the City will fill most of the gap that results from the “negative spread” between the cost of the building and its economic value.
2. The Finish line grant is essentially a forgivable loan as well albeit with conditions. A simple way to look at #1 and #2 is that the City is causing the developer to receive a total of $1,500,000 in funds to do the project.
3. The bridge loan is an interest bearing short term loan that is collateralized by the monetization of the historic tax credits; while not legally described as such it is essentially a short term investment by the City. The City intends to finance this loan through a short term line of credit with a local banking institution and this line of credit will need to be approved by the City Council at a later date, concurrent with the adoption of the new TIF for the development.
4. Incremental TIF dollars will grow as taxes increase; the developer will get 80% of these, offsetting the majority of their incremental real estate tax liability and 20% will go to School District 131.
The incentive package is critical for the success of this agreement/project. Based on a 23 year analysis of cash flows from the project, the developer will be receiving very little return on investment in the first 10 years based on rents and the commercial debt needed for the project. In years 11-13, the developer begins to receive a return on their investment through the TIF. This structure shows the level of partnership involved in this agreement.
The develop will rent spaces in the Stolp garage on an as needed basis at rates charged by the City to all users; if spaces are unavailable, alternatives will be offered in other City owned parking lots.
The total project value will be approximately $11 million.
IMPACT STATEMENT:
The project aligns with the recommendations set forth in the Downtown Master Plan (O17-080), which calls for the redevelopment of existing properties. In the Downtown Experience Chapter, the plan specifies that the City of Aurora: “Identify and activate vacant spaces.” In the Downtown Economy Chapter, the plan specifies that the City of Aurora “Support the downtown core by enhancing livability,” and “Maximize the rehabilitation of the existing downtown residential spaces through engagement, resources, and support.
RECOMMENDATIONS:
Staff recommends the approval of the redevelopment agreement attached as Exhibit A.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution authorizing the execution of a Redevelopment Agreement with UEP Keystone, LLC to facilitate the redevelopment of certain real property located at 30 S Stolp Ave. in the City of Aurora, commonly known as the "Keystone Building."
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, UEP Keystone, LLC (the "Developer") has proposed to redevelop real property located at 30 Stolp Ave. in the City of Aurora (the "Keystone Building") by renovating the existing 4-story building the Property for approximately six (6) retail tenants with spaces ranging from 850-1,800 square feet (as currently formatted), and thirty (30) residential units on floors two (2) to (4) (generally, the “Project”);
WHEREAS, the Project would not be economically viable but for the assistance and participation of the City; and
WHEREAS, the City and the Developer have negotiated a Redevelopment Agreement to facilitate the Project; and
WHEREAS, said Redevelopment Agreement is attached to this resolution as Exhibit A and incorporated into this resolution as if fully set forth herein;
WHEREAS, the Project is predicated and contingent upon the removal and extraction of certain properties from TIF District No. 1, as more fully set forth in the Redevelopment Agreement;
WHEREAS, approval of the Redevelopment Agreement is in the best interest of the City City and the health, safety, morals and welfare of its residents and taxpayers and will be in furtherance of the Redevelopment Plan, thereby providing for economic development, enhancing the tax base of the City and other taxing districts and adding to the welfare and prosperity of the City and its inhabitants; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that the Redevelopment Agreement attached to this Resolution as Exhibit A shall be and hereby is approved; and further
BE IT RESOLVED, that the Mayor is authorized to execute a Redevelopment Agreement that substantially and materially conforms to the provisions of the Redevelopment Agreement set forth in Exhibit A on behalf of the City; and further
BE IT RESOLVED, that the several City Officers and employees designated in the Redevelopment Agreement shall be and hereby are authorized to perform the function and duties set forth in the Redevelopment Agreement; and further
BE IT RESOLVED, that the Mayor is authorized to execute such additional documents or agreements between the City and the Developer which are related to and subordinate to the Redevelopment Agreement so long as (1) such additional documents or agreements are consistent with and do not conflict with the provisions of the Redevelopment Agreement authorized by this Resolution (2) are necessary to carry into effect the purposes of the Redevelopment Agreement, and (3) do not impose any additional liabilities upon the City.