ECONOMIC DEVELOPMENT MEMORANDUM

Transcription

1 ECONOMIC DEVELOPMENT MEMORANDUM February 27, 2017 TO: City Council FROM: Gale Price, Economic Development Director SUBJECT: Consideration and action on a TIF Development Agreement with TJF Development Inc. for property located within TIF No. 37 and addressed as 2700 Pontiac Place. (File Resolution No ) Relates to Strategic Plan Strategic Goal - Economy In early 2016, the City Council adopted modifications to existing policies and created the Council Policy No. 61B, which expanded the use of Tax Increment Financing (TIF) to newer commercial redevelopment sites. The modification to the policy was proposed understanding that the use of TIF may be necessary to encourage the redevelopment of the former Menards site at 2700 Pontiac Place. TIF is one of the City s most important tools to help promote redevelopment of previously developed commercial areas within the Community. File Resolution No authorizes a TIF Development Agreement for redevelopment of the former Menards located at 2700 Pontiac Place. Executive Summary The City of Janesville has been in discussions with TJF Development Inc., for the redevelopment of the former Menards retail store located at 2700 Pontiac Place since the summer of The City and TJF Development Inc. have reached an agreement for which the developer will purchase, rehabilitate, and redevelop the 78,000 sq. ft. facility into a series of mid-box, national retail stores by the end of TJF Development Inc. has secured leases for a majority of the facility and will hold the south acreage of the site for future hotel development that would be completed by another party. The City as proposed would participate in this project with a pay-as-you-go approach. The payas-you-go approach is not proposed due to a concern for the developer, but since the City has no history with utilizing TIF in regional type of retail redevelopment, staff believes that it is appropriate for the pay-as-you-go approach to be utilized. This will require the development to perform from a value standpoint as outlined in the developer pro forma, which will determine the actual incentive payment for the project on an annual basis. This approach limits the risk for the City if the development were to not succeed. 1

2 City Recommendation The City recommends that the City Council adopt File Resolution No approving the TIF Development Agreement between the City of Janesville and TJF Development Inc. for property located within TIF 37 and located at 2700 Pontiac Place. Suggested Motion I move to approve File Resolution No authorizing the City Manager to enter into TIF Development Agreement with TJF Development Inc. for property located in TIF No. 37 and located at 2700 Pontiac Place. Background TJF Development Inc. has proposed the purchase, rehabilitation, and reconstruction of the former Menards retail building located at 2700 Pontiac Place into a new multi-tenant, mid-box retail facility of 78,000 square feet, with the former lumber yard area to the south to be held for future hotel uses. The building will require removal and reconstruction of three of the four facades and a complete new reimaging of the building to define multiple tenant spaces. The redevelopment will also require additional plumbing and electrical throughout the building to accommodate the multiple tenant spaces. The site is located at 2700 Pontiac Place and includes 15.1 acres of property, all of which are currently vacant at this time. The redevelopment of the building is currently projected to include four tenant spaces and in the former lumber yard area the property will be held for the development of potentially two new hotels. The current assessed value of the property is $3,063,700 and with the redevelopment of the retail structure is anticipated to increase $6,096,300 for a total value after completion of $9,160,000. With the increase in the value of the property, the tax increment created by the redevelopment (and to be paid by the developer) is projected to be in the first year at $154, and will increase gradually over the course of the agreement. Because this redevelopment is the first implementation of the new Council Policy No. 61B and because it is a pay-as-you-go approach, there is a distinct difference in the structure of the agreement. The value of the project is not established as a guarantee but a projection due to the pay-as-you-go approach. In most agreements, the value of the project is established as a guarantee because the City has provided land and/or a development incentive up front, but since the project is a pay-as-you-go, the value is established as a projected property value which will create $154, of new increment in the first year and will gradually increase over the course of the agreement. That increase in increment will be returned to the developer as the incentive for the redevelopment. The developer will secure a loan for his gap for which he will pay with the incentive (increment returned) to them for the increase in the value of the property. The maximum incentive that the developer can receive is $2,865, which is the principal and interest on the loan he will receive for covering the gap for the project. In addition, the payment is limited to 14 years, which means that for any year that the building does not perform the developer will receive a reduced payment and will not be able to catch up in future years. TIF Development Agreement specifics: 78,000 sq. ft. reconstructed/rehabilitated facility 15.1 acres that the developer will purchase from Menards $9,160,000 projected property value $154, in projected new increment from the project 2

3 $2,865, maximum incentive for the project assuming full performance. The ultimate incentive will be decreased in the event the property does not perform in any year during the agreement for which a payment is to be made 14 years for payment of the incentive Options Adopt File Resolution No authorizing the City Manager to enter into TIF Development Agreement with TJF Development Inc. for property located in TIF No. 37 and located at 2700 Pontiac Place. Amend the conditions of the TIF Development Agreement with TJF Development Inc. before approval. Defeat File Resolution No , thus not authorizing the TIF Development Agreement with TJF Development Inc. Analysis The former Menards property is the highest profile potential project envisioned when the Council Policy No. 61B was modified in The former Menards site has continued to dilapidate since relocation of the store and the proposed redevelopment would repurpose the property into a series of mid-box retails stores that will bring new retailers to the community. The proposed redevelopment shifts the risk for the redevelopment of the property to TJF Development who would redevelop and reutilize the site. The assistance to complete this project is being provided through a pay-as-you-go approach which also limits the exposure for the City. The City believes that this creates a win-win for the developer and the City as proposed and will significantly improve a highly visible, entryway property for the City. Conclusions The redevelopment and reuse of the dilapidating, former Menards store will provide an improved entrance to the City with rehabilitating this property. In addition it will provide additional new retail uses for the community and last it continues to demonstrate the rebirth and growth of Janesville during the post-general Motors economy. These are all positives for the City and for the project. Restated City Recommendation The City recommends that the City Council adopt File Resolution No approving the TIF Development Agreement between the City of Janesville and TJF Development Inc. for property located within TIF 37 and located at 2700 Pontiac Place. cc: Mark Freitag, City Manager Maxwell Gagin, Assistant to the City Manager 3

4 Resolution No A Resolution Approving a TIF Development Agreement with TJF Development Inc., for the rehabilitation and redevelopment of the former Menards store located at 2700 Pontiac Place, located within City of Janesville Tax Incremental Financing District No. 37 WHEREAS, Sections and of Wisconsin Statutes authorize cities to utilize tax increment financing to promote industry, rehabilitate existing properties and implement economic development projects; and WHEREAS, the Janesville Common Council have authorized the use of Tax Incremental Financing Districts (TIDS) for commercial site development and TIF development agreements to facilitate the redevelopment of existing commercial structures, and overall economic benefit of the City of Janesville (CoJ) when they adopted Council Policy Statement No. 61 (Economic Development Policy) in 1994 and further modified as Council Policy Statement No. 61B (Commercial Economic Development Policy); and, WHEREAS, the Common Council of the CoJ created Tax Incremental Financing District No. 37 to stimulate commercial redevelopment of the former Menards property; and WHEREAS, TJF Development Inc., and the CoJ have negotiated a certain TIF Development Agreement which, in major part, calls for the CoJ to provide a pay-as-yougo development incentive not to exceed Two Million Eight Hundred Sixty Five Thousand Seven Hundred Seventy Four and 73/100 ($2,865,774.73) to be used for purchase of and redevelopment of the site; and WHEREAS, the Common Council of the CoJ hereby find that the approval of this particular negotiated TIF Development Agreement with TJF Development Inc., and to be in the best interest and of benefit to the CoJ, its citizens, residents, taxpayers, and the overall community; NOW, THEREFORE, BE IT RESOLVED, by the Common Council of the City of Janesville that the Administration s negotiated TIF Development Agreement with TJF Development Inc., and the TIF development incentives described above are hereby approved and authorized, according to the terms and conditions set forth in the specific TIF Development Agreement, and BE IT FURTHER RESOLVED, that the City Manager, on behalf of the City of Janesville, and those he authorizes on his behalf is/are hereby authorized to negotiate, draft, modify, amend, review, enter into, and file all such other documents, papers, and agreements, take whatever other actions, and to make and enter into whatever other changes and amendments to the TIF Development Agreement, and such other documents and agreements, which the City Manager may, from time to time, deem necessary and/or desirable to effectuate the intent of this Resolution.

5 Resolution No Page 2 ADOPTED: APPROVED: Mark A. Freitag, City Manager ATTEST: David T. Godek, City Clerk-Treasurer Motion by: Second by: Councilmember Aye Nay Pass Absent Deupree Gruber Jorgensen Liebert Marklein Tidwell Williams APPROVED AS TO FORM: Wald Klimczyk, City Attorney Proposed by: Economic Development Office Prepared by: Economic Development Office and City Attorney