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TO: Mayor Robert J. O’Connor
FROM: Rick Guzman, Assistant Chief of Staff
DATE: November 29, 2016
SUBJECT:
To approve a Development Agreement with The Aurora Metropolitan Exposition, Auditorium and Office Building Authority (a.k.a., The Aurora Civic Center Authority or ACCA) and The Aurora Arts Center Developer LLC (formed by The Community Builders) for the Redevelopment of the non-residential, commercial portions of the buildings Located at 5 East Galena Boulevard and 2 - 20 S. Stolp Avenue
PURPOSE:
Attached is a Development Agreement that reflects the same terms approved by City Council on June 28, 2016 in a Memorandum of Understanding between The City of Aurora and 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. Based on the Structure of the Partnerships involved, the Aurora Civic Center Authority (ACCA) is also a party to the Development Agreement that solidifies the previously agreed upon terms.
This Development Agreement - combined with a “companion” Development Agreement for the residential portion of the project (also up for consideration) - contemplates a full, historic renovation of the former Waubonsee Community College Campus buildings located at 5 E. Galena and 2 - 20 S. Stolp and the Former Coulter Opera House located at 32 S. Broadway for the following new, long-term uses:
1. Restaurant: a first-class, restaurant space in 5,000 sq. ft. of the building facing Galena;
2. School for Performing Arts & Paramount Space: an approx. 35,000 sq. ft. condo consisting
of 4 dedicated apartments, rehearsal space and a 30,000 sq. ft. school for performing arts
(built to ACCA Specifications & including some FF&E);
3. Artist’s Lofts: an additional 36 artist’s loft, affordable units with strong artist preferences and
work requirements (income limits of $30,410 for single or $34,760 for couple at the point of
tenancy, but incomes are permitted to rise without a cap and the affordability requirement
simply acts as “rent control”)
4. Coulter Court Repairs & Recapitalization: significant capital upgrades of 38 existing housing
units at “Coulter Court,” at 32 S. Broadway (owned by Joseph Corp.), eliminating need for
the City to continue to invest hundreds of thousands of dollars. Fifty percent (50%) of the
units will also be set aside for local people qualified for the State Referral Network disability
housing and all units will be supported through a partnership with A.I.D. which will provide
support services
.
BACKGROUND:
There are two separate, but “companion” development agreements because there will need to be separate ownership partnerships established for (a) the residential portions of the buildings at 32 S. Broadway and 2 - 20 S. Stolp; and (b) the commercial portions of the buildings located at 5 E. Galena Blvd. and 2 - 20 S. Stolp. This is necessary because separate tax credit investors will need to be part of the ultimately separate partnerships created to hold the properties and ensure compliance with the different Tax Credit requirements.
To put this proposal in perspective, this project uses many of the same funding sources as the soon to be completed VeriGreen/EverGreen St. Charles Hospital senior residence project.
Similarities: The project’s residential units are almost entirely funded by affordable housing Tax Credits (LIHTC) so the City only has to invest $600,000 of federal pass-through dollars in the residential portion; and the project is eligible for Federal Historic Tax Credits helping to reduce overall costs.
Differences: This project contains substantial storefront and other space that is not appropriate for residential use and therefore half of the building is not eligible for the most beneficial tax credits. Additionally, however, this project is anticipated to create 80 - 100 new jobs for artists through the School and those working in the new restaurant-as well as to attract an additional 150,000 - 200,000 annual visitors to the downtown.
DISCUSSION:
This $35M project is being supported largely through 3 types of tax credits (Federal Historic, Affordable Housing and “New Markets”) as well as through a mix of Developer & City funding sources:
Developer Funding:
• $4 million (approx.) in New Market Tax Credits (NMTC) for commercial buildout (TCB has
their own allocation of NMTC and is securing additional credits as well);
• $1.0 million from a “program income” from a federal NSP2 grant;
• $500,000 - $1,000,000 (approx.) of developer equity;
• $500,000 “program income” from the operation of the residential portion of the building (paid
into the project @ $50k x 10 years-city must bridge this).
Total of $6 - $6.5 million from developer + an additional $20 million in tax credits.
City Funding:
• $700,000 CDBG (Federal pass through)
• $500,000 TIF grant
• $3.0 million Sec. 108 bridge loan paid back by sources created through development:
o $1 million from the Developer ($500,000 program income over 10 years from the residential units + $500,000 from TIF increment created by the project-essentially a “pay as you go” TIF process);
o $1.0 million from ACCA via a combination of savings in years 1-7 and a percentage of net proceeds from the performing arts school in years 8-15;
o $1.0 million from future lease proceeds for the 5,000 sq. ft. restaurant space (over approx. 15 years).
• $600,000 HOME (Federal pass through and incorporated into a separate, companion Development Agreement).
The City is therefore facilitating a total of $3.7 million in federal pass-through dollars ($700,000 CDBG pass-through grant + a $3 million loan that will be paid back and is ultimately guaranteed by future federal funding allocations). The only locally collected City funds are the half-million dollars ($500,000) from TIF #1, which are being used in the very way that they were intended to be used, which is to help facilitate a large-scale development that both creates jobs, activity and increased building valuation within the District, as well as to increase the ultimate amount of property taxes paid within District in the long-term by moving a building back onto the tax rolls that has been off the tax rolls for several decades.
Together with the Companion Development agreement, which authorizes the allocation of $600,000 of Federal HOME money, the total City contribution includes $4.3 million of federal pass-through and/or federally guaranteed loan proceeds and $500,000 of TIF proceeds. Moreover, $3 million of the $4.3 million of federal resources would be paid back by sources created by the development itself.
DISCUSSION:
IMPACT STATEMENT:
This action will have a positive impact on the City, its residents and the downtown. 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 Mervine
Alderman Bohman
Alderman Mesiacos, Alternate
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution Authorizing the execution of a Development Agreement between the City of Aurora, The Aurora Metropolitan Exposition, Auditorium and Office Building Authority and Aurora Arts Center Developer LLC for the Property Located at 5 East Galena Boulevard and 2-20 South Stolp Avenue - Aurora Arts Centre Commercial 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 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 and function pertaining to its government and affairs for the protection of the public health, safety, morals and welfare; and
WHEREAS, the Corporate Authorities of the City of Aurora, Kane, Kendall, Will and DuPage Counties, Illinois have considered a development agreement (the “Development Agreement”), a true and accurate copy of which is attached hereto and made a part hereof as EXHIBIT 1, between the City of Aurora (“City”), the Aurora Metropolitan Exposition, Auditorium and Office Building Authority (“ACCA”) and Aurora Arts Center Developer LLC (the “Developer”), relative to the commercial portions of the Aurora Arts Centre Project, which concerns property located at 5 East Galena Boulevard and 2-20 South Stolp Avenue, Aurora, Illinois (together, the “Property”); and
WHEREAS, the Development Agreement contemplates the provision by the City of up to Three Million Seven Hundred Thousand and No/100 ($3,700,000.00) of federal pass-through and/or federally guaranteed loan proceeds, and up to an additional Five Hundred Thousand and No/100 ($500,000) of local funds in an aggregate amount of City-provided funds to the Parties of not to exceed Four Million Two Hundred Thousand and No/100 Dollars ($4,200,000.00) (collectively, the “City Facilitated Fund”), to be used in furtherance of the rehabilitation and development of the commercial portions of the Aurora Arts Centre Project, all subject to the terms and conditions as set forth in the Development Agreement and various sub-agreements relative to the City Facilitated Funds to be entered into prior to disbursement of any particular portion of the City Facilitated Funds; and
WHEREAS, the City Facilitated Funds are more specifically contemplated to be comprised of up to Seven Hundred Thousand and No/100 Dollars ($700,000.00) in federal pass-through Community Development Block Grant funds, up to Three Million and No/100 Dollars ($3,000,000.00) in federal Section 108 Loan Funds that will be paid back and are ultimately guaranteed by future federal funding allocations, and up to Five Hundred Thousand and No/100 Dollars ($500,000.00) in Tax Increment Financing funds; and
WHEREAS, it is understood that the City continues to seek additional funding sources and that the sources and amounts set forth above may be revised prior to disbursement, but in no event shall the amount of City Facilitated Funds exceed Four Million Two Hundred Thousand and No/100 Dollars ($4,200,000) without further City Council approval; and
WHEREAS, the Corporate Authorities of the City of Aurora, Kane, Kendall, Will and DuPage Counties, Illinois 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 of the City Facilitated Funds 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 Preambles hereto are hereby made a part of, and operative provisions of, this Resolution as fully as if completely repeated at length herein.
Section 2: The Mayor and City Council of the City of Aurora hereby find that it is in the best interests of the City of Aurora and its residents that the aforesaid Development Agreement with ACCA and the Developer, and the various sub-agreements contemplated thereunder, 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 City Attorney and the Mayor, and so long as the contemplated uses of the City Facilitated Funds in furtherance of the commercial portions of the Aurora Arts Centre Project remains the same, and the amount of City Facilitated Funds does not exceed Four Million Two Hundred Thousand and No/100 Dollars ($4,200,000.00).
Section 3: The Mayor and City Clerk of the City of Aurora, Kane, Kendall, Will and DuPage Counties, Illinois, are hereby authorized to execute for and on behalf of said City of Aurora, the aforesaid Development Agreement, the sub-agreements contemplated thereunder, and all other documents necessary to facilitate the Development Agreement and provision of the City Facilitated Funds for the uses specified in the Agreement.
Section 4: This Resolution shall take effect from and after its adoption and approval as required by law.