Fiscal Note
The proposed resolution amends the 2025 Adopted Operating Budget for the Economic Development Division to reflect $1,356,300 in loan revenues received from the Wisconsin Department of Natural Resources (WDNR) and an equal appropriation in expenditures for payment to the developer. The proposed resolution further approves the Ready for Reuse loan agreements between the City of Madison and WDNR and between the City of Madison and Conway at Huxley, LLC; between the City of Madison and Roth Street I Limited Partnership; and, between the City of Madison and Roth Street II Limited Partnership. WDNR's loan conditions require that the City provide a general obligation promissory note that pledges the full faith and credit of the City to repay the $1,356,300 loan in the event that the loan is not repaid by the developer.
The Ready for Reuse loan from WDNR is a 10-year, 0% interest loan. The developer will repay $585,000 of the loan to the City in the first 10 years, and the City will apply those payments to the repayment of the loan to WDNR. In the final year, the City will make a balloon payment for the balance of the loan to WDNR after the Developer's year 10 payment. The developer will then repay the City for the $771,300 balloon payment over the following 10 years with interest. The schedule outlined in the attached Repayment Schedule assumes a 4.6% interest rate on the remaining balance based on current City investment earnings rates plus 50 basis points. The interest rate will be adjusted as needed each year based on the City’s future annual rate of investment earnings. Repayments are scheduled such that the total payment (principal + interest) is the same in each of the 10 years.
The promissory note will require that the City designate a portion of General Fund reserves equal to the remaining principal on the loan until it is repaid. The unassigned General Fund balance as of December 31, 2024, is $110.6 million. The initial designation of $1,356,300 represents 1.2% of the unassigned balance. As the loan principal is repaid by the developer, the amount set aside in the General Fund balance will be reduced. The amendment to the 2025 adopted budget to receive the DNR loan and pay the proceeds to the developer does not change net general fund expenditures for purposes of qualifying for the state Expenditure Restraint Incentive Program (ERIP).
Title
Approving the Ready for Reuse Loan Agreements between the City of Madison and Wisconsin Department of Natural Resources (WDNR), between the City of Madison and Conway at Huxley, LLC, and between the City of Madison and Roth Street I Limited Partnership, and Roth Street II Limited Partnership for the purpose of assisting in the remediation of contaminated soil at Huxley Yards (in and around 905 Huxley St, 1003 Huxley St, and 1846 Commercial Ave), and amending the 2025 Economic Development Division Operating Budget to accept and loan the funds. (District 12)
Body
WHEREAS, the Wisconsin Department of Natural Resources (WDNR) administers the Ready for Reuse Program under which it offers zero interest loans to local governments to help clean up environmental contamination at eligible brownfield sites; and,
WHEREAS, RES-24-00582 authorized the City to apply to WDNR for $1,027,300 Ready for Reuse Loan for the purpose of assisting in the remediation of contaminated soil around the View, Victoria, and Conway at the Huxley Yards property. on behalf of Lincoln Ave Capital Management, LLC acting through its affiliates Roth Street I Limited Partnership, and Roth Street II Limited Partnership, and Conway at Huxley, LLC (collectively, the “Developer”); and,
WHEREAS, RES-25-00142 authorized the City to apply to WDNR for an additional $329,000 Ready for Reuse Loan for the purpose of assisting in the remediation of contaminated soil around at Huxley Yards on behalf of Lincoln Ave Capital Management, LLC acting through its affiliates Roth Street I Limited Partnership, and Roth Street II Limited Partnership, and Conway at Huxley, LLC; and,
WHEREAS, the City’s applications were approved and the WDNR has agreed to loan the City up to $1,356,300 (the “Loan”); for a period of ten years maturing in 2035 at a rate of zero (0) percent and which is detailed in the following three attached agreements with the WDNR:
• Huxley Yards - The View ($466,900)
• Huxley Yards - The Victoria ($162,400)
• Huxley Yards - The Conway ($727,000)
WHEREAS, during this initial ten-year period, the City is a pass-through for the loan funds, whereby, the WDNR loans funds to the City who in turn loans them to the Developer. The Developer repays a small amount of principal to the City who in turn repays the WDNR. For all three loans, the total repayment by the Developer for the first ten years is $585,000; and,
WHEREAS, in year ten, the Developer would normally be responsible for repaying the remaining principal, established to be $876,300; and,
WHEREAS, the City has agreed to refinance the remaining balances by paying off the total amounts to the WDNR and enter into loan agreements with the Developer for the remaining balances, totaling $771,300 after the Developer’s payments in year 10 (the “Refinanced Loans”); and,
WHEREAS, the City will make equal yearly payments to the WDNR amortizing the loan over the initial ten year period; and,
WHEREAS, the payment terms of the Refinanced Loans between the City and Developer are proposed to be a 10-year term with interest at the City’s borrowing rate plus 50 basis points, with payment further secured by a guaranty, as detailed in the attached agreements; and,
WHEREAS, in year 10, the City will identify a funding source for the Refinanced Loans, which may include general fund balance, general obligation borrowing, or funds from a tax increment district.
NOW THEREFORE BE IT RESOLVED that the Common Council hereby authorizes the City to accept a Ready for Reuse Brownfields Cleanup Loan in an amount not to exceed $1,356,300 for the purpose of assisting in the remediation of contaminated soil at Huxley Yards, and to execute the following three loan agreements [Huxley Yards - The View (466,900), Huxley Yards - The Victoria ($162,400), and Huxley Yards - The Conway ($727,000)] with the WDNR on substantially the same terms as the attached DNR loan agreements; and,
BE IT FURTHER RESOLVED that the Common Council authorizes the City to provide a general promissory note to the DNR in a form approved by the City Attorney (the “Note”) that pledges the full faith and credit of the City to repay the $1,356,300 loan from the WDNR in the event that the loan is not repaid by the developer. The promissory note will require that the City designate a portion of the general fund reserves equal to the remaining principal on the loan until it is repaid. City irrevocably pledges its full faith and credit to the punctual payment of the principal on the Note. The Note shall be a direct and general obligation of the City, and the City shall be obligated to levy, if needed, ad valorem taxes upon all the taxable property in the City for the payment of the Note; and,
BE IT FURTHER RESOLVED that the Common Council hereby authorizes the loan agreements attached in in the aggregate amount of $1,356,300 to Developer, and authorizes the Mayor and Clerk to execute the following loan agreements with Developer on substantially the same terms as the attached Developer loan agreements and notes; and,
BE IT FURTHER RESOLVED that the Economic Development Division Operating Budget is amended by $1,356,300 for the purpose of accepting and loaning these funds; and,
BE IT FINALLY RESOLVED that the Mayor and City Clerk are hereby authorized to execute and record any documents related to this transaction in a form to be approved by the City Attorney.