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TO: Mayor Richard C. Irvin
FROM: David Dibo, Economic Development Director
DATE: October 22, 2021
SUBJECT:
Approval of a Second Amendment to the Redevelopment Agreement with Craft Urban/Bernie Laskowski.
PURPOSE:
As was highlighted to the City Council on September 14, 2021 certain development agreements may need to be amended to take into account the changes in costs/economic conditions resulting from the COVID 19 Pandemic. This Second Amendment proposes changes in costs associated with the pandemic and other construction cost issues and also outlines funding associated with this new request.
BACKGROUND:
There have been three Council actions that are material to this amendment. The first is resolution R19-421 on December 30, 2019 provided for the City’s purchase of the adjacent vacant lot (I W Downer Place) and a commitment to fund up to $600,000 in a renovation/construction loan subject to terms to be spelled out in a subsequent RDA, the second with resolution R20-077 on April 1, 2020 that formalized mutual understandings and commitments between Mr. Laskowski and the City, and the third resolution approved on March 23, 2021 was R21-066 which changed the development of the second floor from apartments to banquet facilities.
As noted in the last amendment, the new configuration provided for a greater revenue generation overall and was viewed favorably as the downtown is in need of dining spaces for larger groups (apartment needs are being met through other developments). The costs and funding of the current agreement are included in the attached copy of R21-066 and are also provided below in a side by side evaluation of the new needs of the development due to cost changes.
DISCUSSION:
The development of the restaurant/banquet facility is still an integral part of revitalizing the downtown. As the local and regional economies adjust to the post COVID 19 world, it is clear that costs have gone up in nearly all sectors of the economy. With respect to this development, construction, capital (for equipment) and operating costs have increased due to the scarcity of labor (construction and future operations) and equipment (longer lead times and higher prices for restaurant, HVAC, and other equipment types).
Attachment B shows a revised sources and uses summary of the development that compares the previous data to the current request and provides options for funding these increased costs. As noted in this attachment construction costs have increased from $765,000 to $1,342,000. Due to the increased costs as outlined in this document, an additional $575,000 in construction funding is required. The developer has agreed to increase funding for construction by $200,000, and since the above cost increases are associated with the COVID 19 pandemic, the City proposes the use of $350,000 in American Rescue Plan Act (ARPA) funding. ARPA funding may be used to support businesses that have been specifically impacted by the COVID 19 pandemic. That said, the definition of "impacted" is still a work in progress across the entire country as local government recipients of ARPA work towards the utilization of these funds over the next three years. In the event that direct usage of ARPA under an economic development category is not approved (approvals are done retroactively during the City's submission of funding/usage information), the City would potentially have the option of using ARPA funds that have been received by the City under the "revenue loss" category. Once the City has declared revenue losses due to COVID, like the CARES funding received in 2020, these funds can be used for General Corporate purposes as directed by the local governing board.
Another major cost increase involves the costs for furniture, fixtures, and equipment and for working capital. As noted in attachment B, the FFE/working capital is increasing from an estimated $200,000 to $425,000. Combining this with the above increase for construction brings the developer equity up to $725,000.
Attachment C is a detailed breakdown of the costs provided by the General Contractor chosen by Craft Urban. The original and amended agreement provided a cost estimate from Craft Urban and staff used both documents to assess the specific areas of cost increases.
It is important to note that the original $600,000 in funding is still being provided as a non-forgivable loan that will be paid back by Craft Urban. Craft Urban has requested that the City extend this note repayment period from 10 years to 15 years and that no principal payment will be due for the first two years of the loan. Given the increases in operating costs that will prevail over the next few years, this request is reasonable. The City will still receive interest on this note as outlined in the redevelopment agreement.
IMPACT STATEMENT:
Approval of this amendment will enable this redevelopment, primed to start just as the pandemic took hold, to move forward. This development is another key location that will support the entire downtown as an entertainment and dining destination.
RECOMMENDATIONS:
Staff recommends the approval of the resolution Authorizing the Execution of a Second Amendment to the Redevelopment Agreement Previously Entered into Between the City of Aurora and Bernie Laskowski/Craft Urban.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
title
A Resolution Authorizing the Execution of a Second Amendment to the Redevelopment Agreement between the City of Aurora and Bernie Laskowski/Craft Urban.
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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 desires to increase the number of quality restaurant establishments in its downtown area; and
WHEREAS, Bernie Laskowski is a successful chef and restaurant owner and founder of the Craft Urban restaurant located in Geneva, Illinois and is planning a sister restaurant in the City of Aurora; and
WHEREAS, the City of Aurora desires to lend Bernie Laskowski, or a designated entity managed and operated by Bernie Laskowski, up to Six Hundred Thousand and No/100 U.S. Dollars ($600,000.00) from existing lines of credit for the purpose of redeveloping 41 S. Stolp Avenue and the adjacent lot as a Craft Urban restaurant and/or reimburse certain expenses related to the closing of the contemplated transaction; and
WHEREAS, the impact of the COVID 19 pandemic has caused hardships on all businesses in Aurora through increased costs for construction, labor, and equipment; and
WHEREAS, Bernie Laskowski/Craft Urban still desires to move forward with the development described in this Redevelopment Agreement despite the adverse conditions created by the COVID 19 pandemic and is willing to increase their funding of this project by $100,000 to help meet these increasing costs; and
WHEREAS, the increased costs associated with this project are deemed to be eligible for funding through the American Rescue Plan Act (ARPA) in the amount of $350,000.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: that the Second Amendment attached to this resolution as Attachment A shall be and hereby is approved; and further
BE IT RESOLVED, that the Mayor is authorized to execute an amendment to the Agreement that substantially and materially conforms to the provisions of the Second Amendment 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, the Chief Development Services Officer, and each of their respective designees shall be and hereby are authorized to perform the City’s duties set forth therein described