cover
TO: Mayor Richard C. Irvin
FROM: David Dibo, Director of Economic Development
DATE: January 18, 2021
SUBJECT:
A Resolution approving a redevelopment agreement with Windfall Group LLC for the development of rental apartments and owner-occupied townhomes along the west side of the Fox River at 309 N River St.
PURPOSE:
This resolution and redevelopment agreement will facilitate the development of the first phase of the property located on the west side of the Fox River adjacent to the new pedestrian bridge and Wilder Park. This development will continue the growth of residential units and retail/restaurants within the downtown in accordance with the downtown housing study.
BACKGROUND:
The city has had a long-term goal of the development of properties along the east and west bank of the Fox River north of the downtown as evidenced by the creation of Tax Increment Finance (TIF) districts #5 and #6 in 2007. These TIFs have had mixed performance over the past 14 years, however with the completion of the pedestrian bridge the city has received interest in residential development projects on both sides of the river adjacent to the bridge. In order to continue the successful redevelopment of the downtown into a destination for entertainment, dining and living, the City continues the strategic addition of each of these uses. Residential development will support recently added restaurants, River Edge Park, the Paramount and the new Copley theater.
The west side of the river has a 9-acre site, owned by the City, that will be subdivided into three parcels that are north of the Casino/Pinney St. The first development being considered is the far north portion of the properties and will involve the construction of 160 market rate residential units and potential retail/restaurant uses on the first floor on approximately 3 acres.
Adding this development to the recently approved DAC development for approximately 250 units and previously approved developments at Keystone, Terminal, 80 S. River St, and the Hobbs Building brings the total new market rate units constructed or planned up to roughly half of the number of units included in the original housing study and as such puts the City on course to add these units over a five year period.
DISCUSSION:
The City has received a proposal from Windfall Group LLC (Windfall) for the above described development. Eddie and Judy Ni, have been great partners with the City in the development of the former Yorkshire Plaza into the Pacifica Square development, a vibrant and growing retail and residential development at the corner of New York and Route 59. Windfall is experienced in other real estate uses including residential. Windfall acts as the General Partner with a series of limited partners. They are currently building about 280 units in Jamaica (Queens) New York. Windfall had built over 5,000 residential units outside of Shanghai (China) and are working to build another 3,000 units in various markets throughout the United States, including 450 units in Champaign, Illinois. Windfall has provided a Pro Forma that outlines the costs and funding for the development as shown in Attachment A. As noted in this attachment the developer plans to finance this project through $7.5 million in developer and Opportunity Zone (also developer) equity. This will be combined with debt financing from the developer in the amount of $38.0 million. Finally, the City will provide up front financing of $8.2 million in the form of $1.6 million in donated land and $6.6 million in cash. This $6.6 million is planned to be financed through two sources. The first and primary source will be the property tax increment created by the development and the second source is recommended to be current Gaming Tax funds. Ideally, as discussed below most of the City's incentive will come back to City in real estate taxes.
This incentive includes $500,000 in upfront soft costs that will be matched dollar for dollar by Windfall. All expenses incurred for soft costs will be deducted from the $6.6 million in funding to be provided for construction purposes as outlined in the redevelopment agreement. In the event the project does not proceed to completion, the City maintains ownership of all plans and intellectual property included in these soft costs (similar to the language in the DAC redevelopment agreement.
The amount of Gaming Tax Funds required will vary based on whether the City chooses to issue Revenue bonds or General Obligation Bonds. City staff has met with District 129 to discuss the creation of a Micro TIF for Phase I as it is 3 acres in size and therefore is large enough to be in a separate TIF. As a part of this discussion both City and District staff agreed to recommend a 20-year TIF that will run with the debt service needed for the $6.6 million up front funding. A copy of the funding analysis is attached and shows that the following key points:
1) A minimum of 20% of the tax increment is designated to be redistributed to all taxing bodies, which is the same requirement in the current TIF #5.
2) If a General Obligation Bond is used, the City will still need to contribute an estimated $500,000 in other funds. In this scenario, it is also projected that the redistribution amount could increase to 30% in 2036, but this is contingent upon having a one year reserve balance for debt service.
3)If a Revenue Bond is used the City will need to contribute just under $3.0 million in other funds and no increase from the 20% redistribution will occur due to higher interest rates.
Given the above, this development will provide an immediate benefit to these taxing bodies of approximately $100,000 each year, which is greater than the amount currently received from the entire TIF #5 at $74,400 as noted in the 2022 approved budget.
Regardless of the financing mechanism used, this development represents a continued commitment to reducing incentive amounts. The upfront cost of $6.6 million represents 12.3% of the total development costs. The addition of the land at an agreed upon value of $1.6 million brings this ratio to 15.2%.
As has been the case in recent development projects, this incentive will also be in the form of a forgivable loan. This format provides a federal tax benefit to the developer while also ensuring compliance with the redevelopment agreement. Failure to comply with all aspects of the redevelopment agreement will result in the outstanding balance of the forgivable loan being converted to a repayable loan. The City will rely of the developer's personal guarantee and/or liens or reversion rights subject to the terms of the first lien.
IMPACT STATEMENT:
Adoption of this resolution and redevelopment agreement will provide for the continued development of the Downtown and provide for greater support for all downtown business and entertainment businesses.
RECOMMENDATIONS:
That this Resolution and Redevelopment Agreement be approved.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution Authorizing the Execution of a Redevelopment Agreement with Windfall Group LLC
body
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, Illinois (the “City”) 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, pursuant to the Tax Increment Allocation Redevelopment Act of the State of Illinois, 65 ILCS 5/11-74.4-1, et seq., as from time to time amended (the “TIF Act”), the Mayor and Aldermen of the City (collectively, the “Corporate Authorities”) are empowered to undertake the redevelopment of a designated area within its municipal limits in which existing conditions permit such area to be classified as a “conservation area or blighted area,” as such terms are defined in the TIF Act; and
WHEREAS, the City is pursuing various economic development strategies to encourage development within and around the City’s riverfront area (the “Riverfront Area”); and
WHEREAS, Windfall, LLC (the “Developer”) has proposed a development for 309 N. River St., currently owned by the City of Aurora, Illinois (the “Property”); and
WHEREAS, the Property is currently an unimproved lot utilized as a parking lot; and
WHEREAS, Developer proposes to redevelop the Property, by constructing a multi-story building consisting of 160 market rate apartment units with a mix of studios and one (1), two (2) and three (3) bedroom apartments with a parking structure and retail/restaurant space (generally, the “Project”); and
WHEREAS, the proposal of the Developer is to undertake the following in connection with the Project: (i) undertake and pay for the costs of all plans and specifications, professional fees and apply for all required plan review approvals and permits; and (ii) commence, undertake and complete the Project in compliance with the approved plans and permits and city codes and other applicable legal requirements; and
WHEREAS, the Developer submitted a preliminary project plan, including preliminary construction drawings, a proforma contractor estimate of the construction costs (completed by a union or prevailing wage contractor), a proforma project budget and general description of the scope of the Project (collectively, the “Preliminary Project Plan”) to the City to provide the City with details of the Project; and
WHEREAS, the Preliminary Project Plan is consistent with the mutual goals of the Developer and the City; and
WHEREAS, upon substantial completion, the Project shall represent a total capital investment on the part of the Developer of approximately $53,800,000.00 as set forth in the Preliminary Project Plan; and
WHEREAS, the Project is located within TIF District No. 5; and
WHEREAS, the City intends to provide incentives to the Developer which may necessitate a non-substanital amendment to TIF District No. 5, creating a new TIF district that will include the Property; and
WHEREAS, the City is authorized under the TIF Act to create redevelopment plans and redevelopment project areas and to enter into redevelopment agreements and to reimburse developers who incur redevelopment project costs authorized by a redevelopment agreement and which are further designated by law as eligible costs as defined by the TIF Act; and
WHEREAS, in order to induce the Developer to complete the Project, the City Council has determined that it is in the best interests of the City and the health, safety, morals and welfare of the residents of the City, pursuant to the terms of that certain redevelopment agreement attached hereto and incorporated herein as Exhibit A (the “Agreement”), to establish a new redevelopment plan and a new redevelopment project area that will include the Property, and to reimburse the Developer for certain eligible Redevelopment Project Costs (as defined in the Agreement); and
WHEREAS, the City Council has also determined that it is in the best of the City to provide the Developer with a forgivable loan in the amount of $6,200,000.00 and the donation of the Property for an estimated value of $1,600,000 in accordance with the terms set forth in the Agreement; and
WHEREAS, in light of the foregoing, the City Council desires to execute an agreement that substantially and materially conforms to the provisions of the Agreement set forth in Exhibit A:
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that the 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 an agreement that substantially and materially conforms to the provisions of the Agreement set forth in Exhibit A on behalf of the City; and further
BE IT RESOLVED, that the Mayor, Chief Financial Officer, Director of Economic Development, and each of their respective designees shall be and hereby are authorized to perform the City’s duties set forth therein described.