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TO: Mayor Richard C. Irvin
FROM: Rick Guzman, Manager of Neighborhood Redevelopment
DATE: November 3, 2017
SUBJECT:
To approve a Development Agreement between The City of Aurora and The Aurora Revitalization Owner LLC (formed by The Development Partner, The Community Builders) for the Redevelopment of residential units 2 - 20 S. Stolp Avenue; 5 E. Galena Blvd. and 104 E. Downer Place.
PURPOSE:
Attached is a Development Agreement that covers the development of the residential portions of the buildings at 2 - 20 S. Stolp; 5 E. Galena Blvd.; and 104 E. Downer Place. This agreement is strictly between the City of Aurora and “The Aurora Revitalization Owner” formed through the City’s development partner, The Community Builders (TCB), a nationally renowned, non-profit developer that has expertise in utilizing Historic Tax Credits and other tax credit financing to redevelop vacant buildings into vibrant, mixed-use centers for artist residences, retail and community center-type spaces.
BACKGROUND:
On December 13, 2016, the City Council passed Resolution R16-385 (attached), which approved a Development Agreement with the same entity, “The Aurora Revitalization Owner,” to provide an equivalent amount ($600,000.00) of federally provided HOME funds subject to nearly identical repayment and other terms and conditions set forth in this new Development Agreement (Exhibit 1). Accordingly, such HOME funds have already been set aside and reserved by the Neighborhood Redevelopment Division of the City of Aurora for this very purpose.
Subsequent to the passage of R16-385, HUD staff instructed the City not to execute an agreement that formally committed the HOME funds until after January 28, 2018 at which point the 15-year “period of affordability” attached to the current project and current ownership at of the property at 104 E. Downer Place (commonly known as “Coulter Court”) shall expire. HUD cited Federal Regulation 24 CFR 92.214(a)(6) as effectively prohibiting HOME funds from being formally committed to a project that was previously assisted with HOME funds. However the term “project” is defined in the same federal regulation as a “site or sites together with any building… or buildings located on the site that are under common ownership, management, and financing and are to be assisted with HOME funds as a single undertaking under this part.” Since the "project" previously assisted with HOME funds involved entirely different ownership, management and financing, the City had anticipated that HOME funds could be used for the new project without difficulty. Unfortunately, HUD has not yet been willing to change its interpretation of the regulation.
The Developer is scheduled to close on all of its remaining financing for the properties at 2-20 S. Stolp; 5 E. Galena Blvd. and 104 E. Downer Place on December 1, 2017 (a date that cannot be pushed back any further), but in order to do so, it must demonstrate that all other funding sources-including the $600,000 that will eventually come from HOME funds-have been committed. Since HUD has instructed the City to wait until after Jan. 28, 2018 to commit the HOME funds, it must now provide a separate agreement evidencing the City’s funding Commitment of $600,000.
The attached Development Agreement (Exhibit 1) contains provisions that both acknowledge that HOME funds are contemplated to eventually fill the $600,000 funding commitment and provide that the City is not be required to disburse any other funding until March 1, 2018. Meanwhile, City staff is already preparing all steps necessary to execute the HOME funding Development Agreement after January 28, 2018, but before March 1, 2018 so that it will become completely unnecessary for the City to disburse any funding other than the $600,000.00 in HOME funds that were originally contemplated for this project and already approved by City Council.
DISCUSSION:
The attached Development Agreement does not change the funding commitments to the Aurora Arts Center project and is consistent with the funding limits contained in City Council Resolutions R16-385 and R17-133, which contained a summary of the City’s total funding commitments limiting it to a total of $5.93 million dollars of which all but $650,000 (or just 10.9%) comes from federal pass-through dollars and/or revenue sources created by the project itself.
IMPACT STATEMENT:
This action will have a positive impact on the City, its residents and the downtown since without it, the redevelopment of the properties involved in the Aurora Arts Center would not be able to move forward. The funding sources proposed are typical sources for projects such as this. Repurposing these historically significant buildings in the downtown; creating jobs and driving additional foot-traffic will have a spin off effect on other development nearby.
RECOMMENDATIONS:
It is recommended that the attached Development Agreement be approved.
cc: Alderman O’Connor, Chairman
Alderman Mesiacos
Alderman Bugg
Alderman Mervine, Alternate
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution Authorizing the Execution of a Development Agreement with Aurora Revitalization Owner LLC for the Properties Located at 5 E. Galena Boulevard; 2-20 South Stolp Avenue; and 104 E. Downer Place - Aurora Arts Centre Residential Project.
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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, the Mayor and City Council of the City of Aurora, Kane, Kendall, Will, and DuPage Counties, Illinois ("Mayor and City Council"), constituting the corporate authorities thereof, have considered a development agreement (the “Development Agreement”), a substantially complete draft of which is attached hereto and made a part hereof as Exhibit 1, between the City of Aurora and Aurora Revitalization Owner LLC (“Developer”), relative to the residential portions of the Aurora Arts Centre Project, which concerns property located at 5 East Galena Boulevard; 2-20 South Stolp Avenue; and 104 E. Downer Place, Aurora, Illinois (together, the “Property”); and
WHEREAS, the Development Agreement contemplates a bridge loan by the City to the Developer of up to Six Hundred Thousand and No/100 Dollars ($600,000.00); and
WHEREAS, the Development Agreement contains a clause that acknowledges that “the City anticipates using HOME Funds (“HOME Funds”) to assist the Project in the future, and, if and when such HOME Funds become available, the City anticipates loaning such HOME Funds to the Developer so it can repay the loan of City Funds described herein;” and
WHEREAS, the Development Agreement further provides that “the City will not be required to disburse City Funds hereunder until March 1, 2018;” and
WHEREAS, the City of Aurora previously received an “Authority to Use Grant Funds” from the U.S. Department of Housing and Urban Development (HUD) to provide Six Hundred Thousand and No/100 Dollars ($600,000.00) in federally provided HOME funds (hereafter “HOME funds”), to be used in furtherance of the rehabilitation and development of the residential portions of the Aurora Arts Centre project, but has been instructed by HUD that such funds may not be formally committed to the project prior to January 28, 2018 at which point the current “period of affordability” in place at the property at 104 East Downer Place will expire; and
WHEREAS, Mayor and City Council have previously approved the allocation of the HOME funds subject to the repayment and other terms and conditions as set forth in the Development Agreement authorized by City Council Resolution R16 - 385 passed on December 13, 2016, and such HOME funds have already been set aside and reserved by the Neighborhood Redevelopment Division of the City of Aurora for this very purpose; and
WHEREAS, the City therefore intends to provide the HOME funds in accordance with both City Council’s authorization and HUD’s approval so that such HOME funds shall be provided after January 28, 2018 but prior to March 1, 2018 which would negate the obligation for the City to provide the “bridge” loan of Six Hundred Thousand and No/100 Dollars ($600,000.00) that is contemplated in Development Agreement attached hereto as Exhibit 1; and
WHEREAS, the attached Development Agreement (Exhibit 1) is nevertheless needed so that the City’s funding commitment of Six Hundred Thousand and No/100 Dollars ($600,000.00) can be evidenced at the financial closing of the Aurora Arts Center Residential Project scheduled for December 1, 2017, while still complying with the instructions from HUD not to formally commit the HOME funds until after January 28, 2018;
WHEREAS, the Mayor and City Council have determined that it is in the best interests of the residents of the City of Aurora that the Development Agreement be entered into by the City of Aurora, and further, that but for the provision for incentives as provided therein, the property would not otherwise be developed as provided therein.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows:
Section 1: The Recitals hereto set forth above are hereby made a part and are operative provisions of this Resolution as fully as if completely repeated at length herein.
Section 2: The Mayor and City Council hereby find that it is in the best interests of the City of Aurora and its residents that the aforesaid Development Agreement with Aurora Revitalization Owner LLC be entered into by the City of Aurora, with said Development Agreement to be substantially in the form attached hereto and made a part hereof as EXHIBIT 1. Any additional edits, revisions or amendments to the Development Agreement subsequent to this approval are subject to the approval of the Mayor in consultation with counsel, so long as the contemplated uses of the funds loaned to Developer in furtherance of the residential portions of the Aurora Arts Centre Project remains the same, and the amount of funds provided does not exceed Six Hundred Thousand and No/100 Dollars ($600,000.00).
Section 3: The Mayor and City Clerk of the City of Aurora, are hereby authorized to execute for and on behalf of said City of Aurora, the aforesaid Development Agreement and all other documents contemplated thereunder necessary to facilitate the Development Agreement and loan of Funds to Developer of up to Six Hundred Thousand and No/100 ($600,000) for the uses specified.
Section 4: This Resolution shall take effect from and after its adoption and approval as required by law.