Fiscal Note
To date, the developer has sold a total of 42 units to owner occupants. Under the current agreement, the developer must sell an additional 29 units to owner occupants by June 15, 2009 or be required to repay $3,274,000 of the original TIF loan. If the developer is unable or unwilling to repay $3,274,000 at that time, the City would pursue remedies available under the development agreement in an attempt to enforce compliance with this provision of the current development contract. Those remedies could include suing the developer (309 W. Washington, LLC), suing the personal guarantor (Randy Alexander) or commencing a foreclosure action. If the developer is unable to achieve the second sales threshold on May 15, 2010, the remaining $1,000,000 of the original TIF loan would become due, with similar potential remedies available to the City.
This proposed resolution would modify and postpone for 2 1/2 years the dates by which 309 W. Washington, LLC, the developer of Capitol West, must demonstrate compliance with the unit sales thresholds contained in the current development agreement and avoid repayment of the original $4,274,000 TIF loan or a portion thereof. Under the terms of the modified agreement, the developer would be given a "credit" of $1,449,000 in recognition of the 42 units already sold. If an additional 29 units are sold by December 31, 2011, and additional $1,825,000 credit would be awarded. If fewer than 29 additional units are sold by that time, a payment of somewhere between $859,000 and $1,825,000 would be due from the developer to the City, with no opportunity for later recovery. Then, for additional units sold to owner occupants after December 31, 2011 but before December 31, 2013, the developer would receive an additional credit of $34,500 per unit up to a total of $1,000,000, the total remaining amount which could be due to the City if no additional units are sold during that period.
The 2009 budget does not anticipate any revenue from the return of prior year TIF loans. Thus, the adoption of this resolution would have no immediate budgetary impact.
Title
Authorizing the Mayor and City Clerk to execute an amendment to the Tax Incremental Financing Development Agreement between the City and 309 W. Washington, LLC, and amending Enactment No. RES-07-00419.
Body
On November 21, 2006, the Common Council adopted Enactment No. RES-06-00986 (the "2006 Resolution") that authorized the execution of a development agreement to fund a tax incremental finance loan in the principal amount of $4,274,000 to 309 W. Washington, LLC ("Developer"). Under the terms of the 2006 Resolution, $3,274,000 of the TIF loan was to become a grant if Developer sold seventy-one (71) residential condominium units to owner-occupants by July 15, 2008, and the remaining $1,000,000 of the TIF loan was to become a grant if Developer sold an additional fifty-three (53) residential condominium units to owner-occupants by March 15, 2009. The Development Agreement provides that if Developer does not sell the required number of units by the two specified dates, Developer is to repay the City the amounts of $3,274,000 and $1,000,000, respectively.
On April 17, 2007, the Common Council adopted Enactment No. RES-07-00419, File No. 05934 (the "2007 Resolution"), which extended the two sales dates set forth in the 2006 Resolution by eleven and fourteen months to June 15, 2009 and May 15, 2010. Developer has requested that the City extend the two owner-occupant sales dates due to the economic downturn and the resulting reduction in real estate sales. To date, Developer has sold 42 units to owner-occupants, including all 16 inclusionary zoning units. Staff met with Developer and negotiated a restructuring of the loan terms to extend the owner-occupancy sales dates to December 31, 2011 and December 31, 2013, and to provide Developer with a credit of $34,500 for each unit sold to an owner-occupant, resulting in a credit against its loan equal to $1,449,000, leaving a balance due of $2,825,000.
NOW, THEREFORE, BE IT RESOLVED that:
1. Enactment No. RES-07-00419 is amended to extend the sales dates by which Developer must sell residential units to owner-occupants to December 31, 2011 and December 31, 2013, and to credit Developer $34,500 for each unit sold to an owner-occupant. If Developer fails to sell an additional twenty-nine (29) units to owner-occupants on or before December 31, 2011, Developer shall repay the City $1,825,000 on December 31, 2011, minus any amount credited for unit sales. If Developer fails to sell an additional fifty-three (53) units to owner-occupants on or before December 31, 2013, Developer shall repay the City $1,000,000 on December 31, 2013, minus any credit for unit sales. Developer shall agree to not seek further amendments or modifications to its loan repayment terms. Developer shall also agree to not sue the City regarding the terms of the loan.
2. The Mayor and City Clerk are hereby authorized to execute an amendment to the Development Agreement between the City and Developer to incorporate the terms as described herein.
All other terms and conditions of Enactment No. RES-07-00419 shall remain the same.