PROPOSED I-435 & ANTIOCH MIXED-USE REDEVELOPMENT PROJECT

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1 City Hall 8500 Santa Fe Drive Overland Park, Kansas November 26, 2014 Mayor Carl Gerlach Council President John Skubal Members of the City Council PROPOSED I-435 & ANTIOCH MIXED-USE REDEVELOPMENT PROJECT Mayor and Members of the City Council: The Overland Park Development Company I, LLC, a Kansas limited liability company (the Developer ), has proposed the use of several incentive tools including Kansas sales tax and revenue bonds ( STAR Bonds ), tax increment financing ( TIF ), community improvement district financing ( CID ) and economic development revenue bonds ( EDRBs ) for the redevelopment of Brookridge Golf and Fitness ( Brookridge ) located at I-435 & Antioch. As proposed, this redevelopment would create a mixed-use, urban-style center consisting of office, retail, entertainment, hospitality, residential, and public park components (the Project ). Because of the statutory procedures and time required for consideration of STAR Bonds and TIF projects, the Developer has requested that the City Council consider the TIF and STAR Bonds requests first. Hearings to consider creating a STAR Bond project district (the STAR Bond Project District ) and a TIF redevelopment district (the TIF District ) (collectively the Districts ) for the Project are scheduled for Monday, December 15, The purpose of the December 1, 2014 Committee of the Whole meeting is to provide an opportunity for the City Council to receive additional information about the proposed Districts and ask questions about the Project prior to the December 15, 2014 public hearings. The following information and exhibits are provided to assist the Governing Body in its consideration. THE PROJECT On October 20, 2014 the Developer presented an overview of the Project to the Committee of the Whole. As proposed, the Project would include the redevelopment of Brookridge in multiple phases generally depicted on the maps attached as Exhibit A and as depicted in the following table: Years Office s.f. Performance Hotel Retail s.f. Residential Units Venue Seats Rooms ,431,440 3, , ,745 35,001 1, ,637,391 35, TOTAL 3,861,576 3, ,252 2,

2 The total estimated cost of the Project at full build out is approximately $2.4 billion. This includes a cash investment (with general fund revenue) by the City of $27 million between 2015 and A high-level summary of the total private and other public sources of funding for the Project is depicted on the following table: Private State City CID STAR TIF TOTAL Land Acq. - 3,848,000 3,084,495-9,361,749 9,361,749 25,655,993 Infrastructur - 32,132,958 23,915,505-30,011,713 30,011, ,071,889 Retail 9,310, ,705, ,015,556 Office 820,901, ,493, ,394,906 Residential 573,357, ,357,282 Hotels 78,959, ,959,123 Perf.Venue ,075, ,075,231 Golf Course 13,126, ,726, ,852,380 Parking ,582, ,939, ,522,707 Fees & Exp 180,451, , , ,960,455 Financing 103,502, ,760,798 38,138, ,401,963 TOTAL 1,779,608,249 35,980,958 27,000, ,000, ,971, ,706,495 2,389,267,485 Exhibit B includes a detailed cost estimate providing the schedule for and sources of funding. Exhibit C provides information submitted by the Developer about the Project following the form of the TIF information requested by the City from all TIF applicants. (Please note that the cost estimate projects a ten-year build out based on the Developer s best-case scenario for development of the Project. Other information submitted by the Developer is based on a fifteen-year build out. It is expected that timing will be adjusted to reflect the zoning process and negotiations related to specific elements of the Project.) STAR BOND PROJECT DISTRICT K.S.A ,160 et seq., as amended (the STAR Bond Act ) provides the opportunity to finance eligible development costs (generally land acquisition and infrastructure costs, including structured parking) with bonds payable from both City and State sales taxes generated within the development. The development must meet eligibility criteria outlined in the STAR Bond Act and requires creation of a STAR Bond project district and City and State approval of a STAR bond project plan or plans. A STAR Bond project must be located within a defined STAR bond project district and meet the requirements of an eligible area as defined in the STAR Bond Act. As defined, an eligible area means a historic theater, major tourism area, major motorsports complex, auto race track facility, river walk canal facility, major multi-sport athletic complex, or a major commercial entertainment and tourism area as determined by the secretary. The Developer has submitted the Project for STAR Bond consideration as a major commercial entertainment and tourism area.

3 A STAR Bond district may only be created after a public hearing. Attached in Exhibit D is Resolution No. 4102, adopted on November 3, 2014, providing for a notice of public hearing to consider establishment of a STAR Bond District for the Project. This resolution outlines the boundaries of the proposed STAR Bond District and a plan for the district, which contemplates three (3) project areas. In addition to the public hearing the STAR Bond Act requires that a proposed STAR Bond District be designated as an eligible area by the Kansas Secretary of Commerce (the Secretary ) before a district can be created. While the statute does not identify a specific set of criteria that must be met, it provides the authority for the Secretary to establish rules and regulations to assist in defining what would constitute a major commercial entertainment and tourism area. There is specific criteria for what constitutes a major commercial entertainment and tourism area outlined in the Kansas Administrative Regulations. Attached in Exhibit E is a copy of the letter submitted by the City requesting eligible area designation from the Secretary (pursuant to the Governing Body s October 20, 2014 direction). Also attached in Exhibit E is a letter from the Secretary advising that he has determined that the proposed STAR Bond Project District is a major commercial entertainment and tourism area and an eligible area in accordance with the STAR Bond Act. Following the December 15, 2014 public hearing, the Governing Body can consider an ordinance making findings and creating the STAR Bond District or continue the public hearing. The STAR Bond Act also states that if no ordinance or resolution is passed by the city or county within 30 days from the conclusion of the public hearing, then the STAR bond project district shall not be established. Once the STAR Bond Project District for the Project is created, the Johnson County Board of Commissioners (the County ) and the Board of Education of the Shawnee Mission School District (the School District ) are notified and have thirty (30) days to consider the STAR Bond Project District. If either the County or School District determines that the proposed STAR Bond Project District will have an adverse effect on it, they have what amounts to a veto right and can adopt a resolution exercising this right and provide it to the City. Upon receipt of such a resolution the STAR Bond Project District must be dissolved by an ordinance of the City. Assuming that neither the County nor School District veto the STAR Bond Project District, the City can proceed with the Developer to consider a STAR Bond project plan ( STAR Bond Project Plan ). The letter from the Secretary requires submission of a STAR Bond Project Plan on or before February 3, 2015 (ninety days from the November 5, 2014 letter from the Secretary). TIF DISTRICT K.S.A et seq., as amended (the TIF Act ) provides the opportunity to finance redevelopment costs (generally land acquisition and infrastructure costs, including structured parking) with bonds or on a pay-as-you-go basis. Payments are made from all or a portion of the incremental increase in taxes generated as a result of the redevelopment project.

4 A TIF project must be located within a defined redevelopment district that meets at least one of the eligible areas defined in the TIF Act. As defined, an eligible area can be a blighted area, conservation area, enterprise zone, intermodal transportation area, major tourism area or a major commercial entertainment and tourism area or bioscience development area. The Developer has requested creation of a TIF District based on eligibility of the Project as a major commercial entertainment and tourism area. A TIF district may only be created after a public hearing. Attached in Exhibit F is Resolution No. 4101, adopted on November 3, 2014, providing for a notice of public hearing to consider establishment of a TIF District for the Project. This resolution outlines the boundaries of the proposed TIF District and a plan which contemplates twenty-four (24) project areas. The TIF Act includes specific criteria for creation of a redevelopment district for the defined eligible areas except for major commercial entertainment and tourism area. Unlike the STAR Bond Act, the TIF Act does not reference any action or designation by the Secretary in relation to establishment of a TIF District based on eligibility as a major commercial entertainment and tourism area. Additionally, there are no criteria in the Kansas Administrative Regulations that offer guidance to a local municipality in considering a finding of eligibility as a major commercial entertainment and tourism area. In the absence of any specific direction in the TIF Act or otherwise, the staff worked with its bond counsel, Kutak Rock, LLP and its special counsel, Stinson Leonard Street, LLP to identify specific, locally-focused criteria that could be considered by the Governing Body in consideration of whether to create a TIF District for the Project. The Governing Body has previously approved three TIF projects: Cherokee South, Market Lofts, and Valley View. Each of these TIF districts was created using the criteria set forth in the TIF Act for eligibility as a conservation area. The evaluation of a conservation area includes a detailed review of historical information and an evaluation of current conditions. The evaluation of "major commercial entertainment and tourism area" is, by contrast, a forward-looking, speculative exercise, requiring the Governing Body to evaluate whether or not the development of a prospective project would result in a major commercial entertainment and tourism area (and what that would mean for the City). Attached in Exhibit G is the Major Commercial Entertainment and Tourism Area Study (the Study ) prepared by the Developer based on the information requested to aid the Governing Body in its evaluation of whether to create the TIF District based on eligibility as a major commercial entertainment and tourism area. This includes information similar to that required in the Kansas Administrative Regulations for STAR Bond purposes as well as additional information which is more specific to the City. The eligibility criteria for consideration of the Project as a major commercial entertainment and tourism area is based on a prospective view of the possibilities and the Developer s plan for the Project. Accordingly, the decision as to whether to create the requested TIF District should be based on the Governing Body s evaluation of the information provided, including information presented as part of the public hearing, and a determination that the assumptions and plans for the proposed TIF District Plan are reasonably supported by the information submitted. Additional information may also be requested by the Governing Body.

5 In addition to evaluation of whether to create the TIF District based on the eligibility criteria, the Governing Body may also consider whether to create the TIF District with the requested twenty-four (24) project areas and/or whether to impose a time limit on the number of years the TIF District would remain in effect. The Study indicates (on page 6, Section V (c) 1.) that the Developer will agree that no TIF redevelopment project plan will be approved more than twenty (20) years after creation of the TIF redevelopment district. This provides the opportunity for one or more of the 24 project areas to be submitted in 2034, and last until Following the December 15, 2014 public hearing, the Governing Body can consider an ordinance making findings and creating the TIF District or continue the hearing. Once a TIF District for the Project is created, and like the requirements of the STAR Bond Act, the County and School District are notified and have thirty (30) days to consider the TIF District. If either the County or School District determines that the proposed TIF District will have an adverse effect on it, they must adopt a resolution stating the same and provide it to the City. Upon receipt of such a resolution the TIF District must be dissolved by an ordinance of the City. Assuming neither the County nor School District veto the TIF District, the City can proceed with the Developer to consider a TIF Project plan or plans. NEXT STEPS If the Governing Body votes to create each of the Districts, those actions would complete only the first step of many in the process of approving STAR Bond and TIF incentives. The next statutorily required step for each of the Districts is preparation and consideration of project plans. In addition, for TIF projects it has been the policy and practice of the Governing Body to have an economic and gap analysis conducted as part of the feasibility analysis when developing a TIF project plan. In addition, STAR Bond and TIF incentives are not the only incentives the Developer has identified for the Project. The Developer also intends to request CID incentives and EDRB financing. Consideration of these tools is subject to additional procedures and hearings as required by the City s policies and by state statute. The Developer submitted zoning plans for the Project on Monday, November 25, The rezoning will be subject to the City s normal planning process including consideration by the Planning staff, Site Plan Review Committee and Planning Commission. As has been the policy and practice of the Governing Body, no incentives, project plans or agreements would be presented for approval prior to completion of the rezoning process. Please feel free to contact me with questions. Respectfully Submitted KRISTY STALLINGS DEPUTY CITY MANAGER

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