Fiscal Note
The proposed resolution amends the Economic Development Division's (EDD) 2025 Adopted Capital Budget to increase expenses in TID 46 by $5,295,000 for an affordable housing project at 5546 Element Way. The expenses will be incurred in two ways:
1) A $930,000 TIF-guaranteed loan to EC Residential LLC or its assigns. The loan represents 55% of the present value of all incremental taxes anticipated from the Project over the amended TID’s 10-year remaining life. The TIF Loan would be repaid through incremental taxes generated by the Project. It is anticipated that the incremental taxes generated by the Project will be sufficient to repay the loan within approximately 6 years; however, the Developer is required to guaranty a minimum payment if sufficient future tax increment is not available.The increment guarantee is secured by a subordinated mortgage on the Property.
2) A $4,365,000 grant to the Community Development Authority (CDA) for the purpose of providing an incentive to the Developer to maintain housing affordable beyond the mandatory 15-year affordability period. The CDA incentive includes an option for the CDA to purchase the Project after the affordability period expires utilizing this grant.
This funding is also contingent upon the amendment of the Project Plan of TID 46 in 2025.
Title
Authorizing the Mayor and City Clerk to execute a development agreement and authorizing: 1) a budget amendment to the EDD 2025 Capital Budget (TID 46) to fund a $930,000 Tax Incremental Finance Loan to EC Residential LLC, or its assigns to construct approximately 197 units of affordable housing and 151 underground parking stalls located at 5546 Element Way in the University Research Park in Tax Incremental District (TID) 46,; and 2) a budget amendment to the EDD 2025 Capital Budget (TID 46) granting $4,365,000 of tax increments from TID 46 to the Community Development Authority for the purpose of preserving affordability in the Project (District 19).
Body
WHEREAS, the City of Madison is in the process of amending TID 46 during 2025; and
WHEREAS, the intent and purpose of the Project Plan, among other things, is to encourage development of a wide range of housing options and attract and retain business and employment in the City of Madison; and
WHEREAS, EC Residential LLC, or its assigns, (“Developer”) has proposed to construct 197 affordable housing units and 151 underground parking stalls on the Property at a total estimated development cost of approximately $63,254,000 (“Project”) located at 5546 Element Way, within the University Research Park property in the City of Madison and within the amended boundary of TID 46 (“Property”), subject to an amendment to the Project Plan to TID 46; and
WHEREAS, City staff has conducted an analysis (See Attached Report) of the Project and has determined a financing gap to be approximately $5,295,000 such that, but for TIF assistance, the Project could not occur; and
WHEREAS, due to the advanced age of TID 46, the Project can only support $930,000 of the gap as TIF Loan assistance; and
WHEREAS, $930,000 of TIF assistance to the Project represents approximately 55% of the present value of the estimated tax incremental revenues generated by the Project in conformance to TIF Policy that no more than 55% be made available to a project (“55% Gateway”) without prior authorization by the Finance Committee; and
WHEREAS, Developer plans to sell the Project at the end of the 15-year affordability period; and
WHEREAS, it is in the interest of the City of Madison to preserve longer-term affordability on a site that abuts the Bus Rapid Transit (BRT) line; and
WHEREAS, on November 26, 2024, the Board of Commissioners for the Community Development Authority of the City of Madison (CDA) will meet to consider a proposal to purchase a future ownership interest in the Project in Year 16, authorizing a pre-purchase payment of $4,365,000 to be secured via a development agreement between the CDA and Developer; and
WHEREAS, the City shall transfer $4,365,000 of tax increment from TID 46 to the CDA, in the form of a grant, for the purpose of purchasing such future ownership interest in the Project, toward the public purpose of preserving affordable housing; and
WHEREAS, in addition to any other powers conferred by law, the City may exercise any power necessary and convenient to carry out the purpose of the TIF law, including the power to cause project plans to be prepared or amended, to approve such plans, and to implement the provisions that effectuate the purpose of such plans; and
NOW, THEREFORE, BE IT RESOLVED that the City hereby finds and determines that the Project is consistent with the public purposes of Tax Increment Finance Law and the plans and objectives set forth in City of Madison TIF Policy, the City’s $930,000 loan to Developer demonstrates the potential to encourage development of a wide range of housing options in TID 46, thereby accomplishing the public purpose objectives set forth in the Project Plan, TIF Law and City TIF Policy more likely.
BE IT FURTHER RESOLVED that the City hereby finds and determines that the Project is consistent with its goals and objectives concerning the creation and preservation of affordable housing and therefore authorizes a transfer of $4,365,000 of TID 46 tax increment to the CDA toward purchasing a future ownership interest in the Project.
BE IT FURTHER RESOLVED that the TIF Loan and CDA grant funding shall be on substantially the same terms as the Term Sheet attached as Exhibit A.
BE IT STILL FURTHER RESOLVED that the grant to the CDA and TIF Loan to the Developer is hereby approved and that the Mayor and City Clerk are hereby authorized to execute a development agreement, and other documents as may be necessary to effectuate the transaction, all of which are subject to the approval of the City Attorney.
BE IT STILL FURTHER RESOLVED that the 2025 EDD Capital Budget (TID 46) is amended to authorize $930,000 of TIF Loan funding to the Project.
BE IT FINALLY RESOLVED that the 2025 EDD Capital Budget (TID 46) is amended to authorize $4,365,000 of grant funding to the CDA.