Fiscal Note
On December 29, 2004, the City purchased the former Super Saver site on Verona Road for $3,500,000. The purchase was funded with $1,500,000 of available TIF increment and $2,000,000 of general obligation borrowing budgeted for 2005.
This resolution authorizes the sale of this same parcel of property to Gorman and Co. for $1,560,000. Terms of this sale would include an initial payment to the City of $560,000, with the remaining $1,000,000 to be paid back over the next 16.5 years, with interest of 6%, if the resulting development achieves sufficient operating cash flow during that period. The obligation to repay the City will be solely that of Avalon Madison Village LLC, an entity created to construct and manage this development.
The land cost write-down of roughly $2,000,000 represents a contribution to the developer. Based on the remaining life of this TIF district, the increased taxable value of the development property is predicted to generate additional tax increment with a present value of approximately $800,000. Thus, when viewed in the context of the current TIF policy, the contribution to the developer represents about 250% of the increment generated by the project.
This resolution also authorizes the expenditure of $300,000 of the sale proceeds for a matching contribution toward the construction of a daycare center on this site. There are no additional expenditures authorized or budgeted in this TIF district. In the absence of future expenditures, sufficient increment is projected to be generated within the district to repay all costs of this land write-down. (approved by D. Brasser)
Title
AMENDED SUBSTITUTE - Accepting an Offer to Purchase from Gorman & Company, Inc. for the purchase of a City-owned property located at 4629 Verona Road (the former Super Saver site) for the development of a rental housing project.
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On September 19, 2000, the City of Madison adopted Resolution Number 57568, ID Number 27996, creating Tax Incremental District (TID) #29 for the Allied-Dunn's Marsh Neighborhood and approving a Project Plan for said district, which plan provides for the following goals: (a) maintain a balance between the needs of its residents for housing, employment, transportation, goods and services, schools, parks and other urban amenities; (b) ensure the integrity of developing residential neighborhoods on the periphery of the City by requiring adjoining development to be part of compact planned residential neighborhoods within approved urban service areas providing the full range of adequate public facilities and public services; (c) provide adequate and accessible park, recreation and open space facilities for the enjoyment and use of all segments of the City's population; (d) maintain economically viable neighborhood commercial districts as a source of local employment, a focus of neighborhood activity, and a centralized convenience shopping and service center for residents of the surrounding area; and (e) in residential neighborhoods, preserve the existing housing stock in sound, well-maintained condition.
In 2002, the City contracted with consultants to provide an analysis of the market conditions affecting the Allied Drive commercial area. The purpose of the analysis was to help the City better understand the market dynamics that caused vacancy rates in excess of 50% and to better understand the potential market effects of the proposed reconstruction of the Verona Road / West Beltline interchange on the long-term vitality of the Madison Plaza Shopping Center.
The result of the Allied Drive Commercial Area Redevelopment Study indicated that the layout and scale of the existing Madison Plaza Shopping Center was not supportable as a neighborhood retail center; that there was 50,000-60,000 square feet of leasable space in the shopping center that the market could not support; and that the opening of a Cub Foods store just west of the Madison Plaza Shopping Center across Verona Road made any future use as a grocery store very unlikely.
Given the increasingly distressed nature of that portion of the Madison Plaza site containing the former Super Saver grocery store and the desire by the City to remove the blighting influence of the property, staff worked on redevelopment options that provide a location for new development (e.g., new housing and other services) that might benefit the greater Allied area.
The City contacted Bradley Operating Limited Partnership, the owner of the Madison Plaza Shopping Center, to ascertain its willingness to sell the former Super Saver site located at 4629 Verona Road. After negotiating a purchase price and conducting due diligence concerning financing and environmental conditions, the City received an Offer to Sell from Bradley Operating Limited Partnership for the former Super Saver site. The Common Council accepted the Offer to Sell on December 14, 2004 (Second Substitute Resolution No. 62099, ID No. 37231) and closing occurred on December 29, 2004.
On November 9, 2004, the Council adopted Resolution 62018, I.D. No. 37064, which authorized the Mayor to issue a Request for Qualifications (RFQ) from developers and owners who are interested in working with the City and the neighborhood in making physical improvements in the Allied area that can address City redevelopment objectives. A total of nine (9) proposals were received.
One of the responses to the RFQ was Gorman & Company, Inc. ("Gorman") which proposed a Section 42 tax credit housing project at the site of the former Super Saver Store at 4629 Verona Road.
A staff team comprised of the Mayor's Office, Alders. Golden and Konkel, staff from the Department of Planning and Development reviewed the Gorman proposal against the language in the RFQ and directed staff to continue to negotiate the terms of a sale with Gorman, with the understanding that Allied residents have expressed a need to provide units for residents that may have poor credit or criminal records and to help provide jobs at a living wage to help meet the Allied Neighborhood goal of employing Allied residents. A Resolution would be forwarded to the Council accepting Gorman's proposal and have the terms of sale adopted by the Council in time to for Gorman to submit a Section 42 application to WHEDA by the February 4, 2005 deadline.
NOW, THEREFORE BE IT RESOLVED that the City of Madison hereby accepts an Offer to Purchase (the "Offer") from Gorman & Company, Inc. (the "Buyer") for the purchase of approximately 6.791 acres of City owned property located at 4629 Verona Road (the "Property") (legally described below and depicted on Exhibit A) for the development of a rental housing development on the following terms and conditions:
1. The total purchase price shall be One Million Five Hundred Sixty Thousand Dollars ($1,560,000).The Buyer shall pay Five Hundred Sixty Thousand Dollars ($560,000) in cash at closing and shall execute a note in the amount of One Million Dollars ($1,000,000) to the City. The note shall carry an annual interest rate of 6% with a balloon payment due approximately 16.5 years after closing. Payments of the note shall made annually out of annual cash flows generated by the rental housing development with a percentage of the cash flow being paid to the City and the remaining percentage of the cash flow being paid to the Buyer until it recoups its deferred developer fees as shown below:
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Deferred fee=$1 - $200K: |
75% cash flow to City |
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Deferred fee=$200K - $400K: |
50% cash flow to City |
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Deferred fee=$400K - $600K: |
25% cash flow to City |
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Deferred fee=over $600K: |
0% cash flow to City |
After the deferred developer fees are paid in full, 100% of cash flow would go to City until loan is paid in full. The loan shall be payable in full upon sale or other transfer of the Property by the Buyer.
2. The note will be secured by a second mortgage to be recorded against the property, together with an unrecorded intercreditor agreement with first mortgage lender giving the first mortgage lender the right to direct creditors' rights, actions, and priority of payments.
3. The City shall provide to the Buyer at the City's expense at least ten (10) business days prior to closing a commitment from a title insurance company licensed in Wisconsin to issue title insurance in the amount of the total purchase price upon the recording of proper documents.
4. The Buyer shall be expressly permitted to assign all of its right, title and interest under this Offer to a limited liability company, which it will organize under the name Avalon Madison Village LLC. Upon such assignment and written notice to Seller, Buyer shall be expressly released from all liability and responsibility under the Offer and all obligations hereunder shall thereafter be the obligation of Avalon Madison Village LLC.
5. The loan will be non-recourse with no credit enhancers or personal guarantees.
6. The Buyer and City shall enter into a Development Agreement that will require the Buyer to develop within a specified time period a mixed-income rental housing development on the Property that will provide at a minimum, the levels of affordability as noted in Attachment B. at least 69% of the units affordable at 60% of the Area Median Income (AMI) or less. meet the minimum set-aside requirements of the Federal Housing Credit program. The Buyer will be further required to dedicate to the City or its assigns a site on the Property at no charge for the construction and operation of a daycare facility. The City shall agree to the location of the site for said daycare facility on the Property. The Buyer shall dedicate land for public street, water and sanitary and storm sewer improvements (the "Public Improvements") across the Property at a location agreed to by the City. The City shall construct the Public Improvements and shall defer any special assessments owed by the Buyer resulting from the construction of the Public Improvements consistent with City ordinances.
7. The Buyer intends to apply to the Wisconsin Housing and Economic Development Authority ("WHEDA") for approval of Section 42 Housing Tax Credits. The Buyer's obligations to purchase the Property are contingent upon the Buyer receiving approval from WHEDA for the dollar amount of Section 42 Tax Credits applied for on of before May 15, 2005 or the Offer shall be automatically null and void.
8. The City has given the Buyer a full opportunity to inspect the Property. The Buyer shall accept the Property in "AS IS" condition, without any warranties, express or implied.
9. The City shall execute and deliver to the Buyer at closing a Quitclaim Deed conveying to the Buyer fee simple title to the Property, free and clear from all liens and encumbrances, excepting municipal and zoning ordinances, recorded easements, recorded building and use restrictions and covenants, taxes levied in the year of closing and all subsequent years, and exceptions to title previously approved by the Buyer.
10. The Offer shall have such other normal and customary provisions including additional Buyer due diligence.
11. Closing shall occur on or before July 15, 2005 or at another date upon agreement of the parties.
BE IT FURTHER RESOLVED that the Common Council hereby finds and determines that this sale is consistent with the public purposes, plans and objectives set forth in the TIF 29 Project Plan and the City's write-down of the purchase price for the Property is an eligible project cost pursuant to TIF law.
BE IT FURTHER RESOLVED that the City finds it necessary and appropriate to make an exception to TIF Policy for this project by providing 250% of the present value of the project's increment as a write-down to the Buyer in order to assist a development project which will provide a day care center and affordable rental housing units, a portion of which will be made available at less than 40% Area Median Income, in an economically challenged and geographically isolated neighborhood.
BE IT FURTHER RESOLVED that the City shall use $300,000 of the $560,000 paid by the Buyer in cash to be used as matching funds to be paid toward the construction of the childcare center for which land was dedicated.
BE IT STILL FURTHER RESOLVED that the City and the Buyer agree to continue discussions with Allied residents but is not obligated to agree to regarding the provision of units for residents who may have a poor credit rating or criminal background, and to provide employment opportunities to Allied residents, contributing to the development of the daycare building, funding and an endowment for the Allied area, developing a plan to give current Allied residents a priority for new, affordable housing and providing seminars on cultural sensitivity and job fairs and that the City will commit to exhaust all measures to work with the Buyer and the neighborhood association to accomplish discussion and possible implementation of these elements in a memorandum of understanding. to explore bringing together additional partners to address these issues. The Buyer agrees to make a good faith effort to develop a written memorandum of understanding with the neighborhood association on these issues and report back to the Common Council and the Allied area task force on or before the closing date of July 15, 2005. The Buyer shall target 20% EBE contractors and develop an employment recruitment plan to recruit neighborhood residents.
BE IT STILL FURTHER RESOLVED that the Mayor and Common Council will appoint a task force to review the proposal and develop a master plan and options for the Allied neighborhood. The makeup of the task force will include a significant neighborhood association representation and other key stakeholders and will be forwarded to the Common Council within 30 days of the adoption of this resolution.
BE IT STILL FURTHER RESOLVED that the Mayor and City Clerk are hereby authorized to execute, deliver, accept, and record the Offer, the Development Agreement, and the deed, and to take such other actions as shall be necessary or desirable to accomplish the purposes of this resolution. The city shall commit up to $10,000 in funds from the Allied and Emerging Neighborhood Fund to finance the work of the taskforce. Commitment of funds shall be subject to approval of a work plan by the Mayor.
BE IT STILL FURTHER RESOLVED that the Buyer dedicates sufficient land on the Property for a daycare facility for approximately 80-85 children ranging in age from infant to four years of age with approximately 50% of the openings targeted to the Allied Neighborhood.
Legal Description
Lot Two (2), Certified Survey Map No. 7363, recorded in the Office of the Register of Deeds for Dane County, Wisconsin, on February 11, 1994, in Volume 37 of Certified Survey Maps, Pages 315 through 320, as Document No. 2575027, in the City of Madison, Dane County, Wisconsin.