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HomeMy WebLinkAboutMN-SPCC-2020-03-11COMMON COUNCIL PROCEEDINGS CITY OF ITHACA, NEW YORK Special Meeting 5:30 p.m. March 11, 2020 PRESENT: Mayor Myrick Alderpersons (9): Brock, McGonigal, Nguyen, Murtagh, Fleming, Kerslick, Smith, Lewis, Mohlenhoff OTHERS PRESENT: Chief of Staff – Cogan City Attorney - Lavine City Controller - Thayer Deputy Director of Economic Development – Knipe Community Development Director – Bohn Director of Planning & Development - Cornish Deputy Director of Planning & Development – Nicholas Director of Engineering - Logue EXCUSED: Alderperson Gearhart SPECIAL ORDER OF BUSINESS: 2.1 COMMITMENT TO TERMS BETWEEN THE CITY OF ITHACA AND TOMPKINS COUNTY AND THE CITY OF ITHACA AND THE DIA IN SUPPORT OF THE CITY’S FINANCIAL GUARANTEE FOR THE COMMUNITY CONFERENCE CENTER PROJECT By Alderperson Murtagh: Seconded by Alderperson Smith WHEREAS, on February 5, 2020, Common Council adopted a resolution regarding “commitment to pursue a City of Ithaca hotel occupancy tax and commitment to provide a shared financial guarantee with Tompkins County”, and WHEREAS, on February 4, 2020, the Tompkins County Legislature adopted a resolution expressing its “willingness to enter into an agreement with the City of Ithaca to support a portion of the City’s financial guarantee for the annual project lease payments throughout the life of the lease”, with this support “contingent on the City of Ithaca passing a companion resolution in support of the project and outlining their role as a project guarantor and on the drafting and County approval of a fiscal agreement between the County, City, and DIA where the fiscal allotments are agreed upon by all parties”, and WHEREAS, following adoption of these resolutions, staff representatives from the City, County and DIA engaged in negotiations regarding the terms of the County’s and the DIA’s commitments to the project in support of the City’s financial guarantee, and WHEREAS, the City of Ithaca recognizes the importance of the tourism and hospitality economy to Tompkins County as a major economic sector, which in 2018 generated $227 million in economic activity, over $16.7 million in local taxes, supported $746 per household in property tax savings, and supported over 2,600 in direct local jobs; and WHEREAS, two market demand and feasibility studies conducted in 2017 and 2019 demonstrated the market demand for a new conference center in Ithaca and projected the appropriate size and capacity of the center; and WHEREAS, a successful Community Conference Center project will be an asset for the City of Ithaca and Tompkins County, resulting in significant increased room tax and sales tax revenues; the addition of new direct and indirect jobs; significant economic impact beyond center operations through the purchase of supplies and services; an estimated 22,000 new room nights county-wide as well as annual visitation of over 63,000 after center operations are stabilized in year five; and March 11, 2020 2 WHEREAS, recognizing the economic development value to the City, County and Southern Tier Region, the State of New York has awarded the Tompkins County Chamber of Commerce Foundation, Inc. a $5.0 million grant through Southern Tier Regional Economic Development Council to establish base equity in support of the Community Conference Center project, and WHEREAS, the Vecino Group will construct the Green Street Garage Project, including the Community Conference Center; take on private debt for such construction; comply with the Ithaca Green Building Code, including use of heat pumps for space heating and hot water; commit to soliciting local labor; commit to paying prevailing wages during construction and reporting on such wages; commit to paying its employees living wages; and enter into a 30-year lease agreement with an entity to be created to operate the conference center portion of the project, and WHEREAS, the City of Ithaca will: 1. Execute a lease guarantee with the Vecino Group, and 2. Establish a hotel room occupancy tax to support the Conference Center or, if such a hotel room occupancy tax is unsuccessful in being authorized, establish a City tourism improvement district (TID) to generate the required revenues from the lodging industry for the Conference Center, and 3. Utilize the revenues from either a hotel room occupancy tax or TID as the first source of funding for this project. These revenues will support the debt payments and operations of the Conference Center, as well as capitalize (and replenish as necessary and as possible) several reserve funds that would serve to protect the City in its role as guarantor for the conference center lease, including: a. Primary Operating Reserve, initially capitalized at $500,000 - to fill the anticipated deficits during years when the annual operating loss is projected to exceed revenues for direct conference center operations b. Capital Replacement Reserve, initially capitalized at $500,000 - to ensure replacement, repair, and replenishment as needed of all furnishing, fixtures, equipment, and capital needs of the conference center c. Rental Reserve - to mitigate any cash flow concerns and ensure two months of lease payments are available to the operating entity at all times d. Final Operating Reserve, projected to be initially capitalized at $1,250,000 through pre-opening collections of the City hotel room occupancy tax, and 4. Dedicate net City hotel room occupancy tax revenues to the conference center operating entity to promote, operate, and maintain the conference center, including net annual rent obligations of approximately $1.5 million per year, and WHEREAS, the Downtown Ithaca Alliance will: 1. Contribute a minimum of $50,000 per year, starting in 2024 and continuing for 10 years, into a Secondary Operating Reserve that will be capped at $500,000, and WHEREAS, the County will: 1. Contribute 4% of County hotel room occupancy tax revenues annually to the City to support the Community Conference Center beginning in 2021 and lasting through 2050 or until the space is no longer being used as a conference center (with first year payment projected to be $120,000, the average annual payment estimated to be $153,000, and the estimated 30 year total contribution to be over $4.5 million) , and WHEREAS, four hotels in Downtown Ithaca – Ithaca Downtown Marriot, Hilton Canopy, Hilton Garden Inn, and Hotel Ithaca – have agreed to: 1. Collectively contribute $50,000 per year during 2021 and 2022 (for a total of $100,000) towards construction costs of the project, and 2. In 2023 collectively capitalize a Tertiary Operating Reserve fund with another $100,000 to be held by the Tompkins County Chamber of Commerce Foundation, Inc. and to be in position behind the Secondary Operating Reserve Fund and ahead of the Final Operating Reserve Fund, and if used to be replenished to maintain a minimum annual balance of $100,000 each year through year ten. March 11, 2020 3 3. Collectively contribute a minimum of $50,000 per year for sponsorship in support of conference center operations beginning in 2023 and continuing for the first ten years of the project, to match the amounts in the project pro-forma, and WHEREAS, the intention is to use and replenish reserves in the following sequence: A) Rental Reserve: This will serve as the operational fund balance to assist with cash flow needs of day to day operations. The goal would be to maintain the fund balance at $300,000, equal to two months of lease payments, to the extent possible. In order to gauge whether the Community Conference Center is experiencing unusual cash-flow issues, the Conference Center Oversight Board will regularly review established performance metrics and budget for the project. B) Capital Replacement Reserve: As the facility, equipment and furnishings need to be repaired, replaced or updated beyond what the operating entity has budgeted for improvements, the Capital Replacement Reserve will be utilized. It is anticipated that the City hotel occupancy tax would replenish or enhance this reserve at $25,000 in year one, growing to an annual contribution of $50,000 per year starting in year three. If there are additional operating surpluses or excess hotel room occupancy tax revenues, after the Primary and Final Operating Reserves have been fully capitalized/replenished, this fund will receive additional contributions. C) Primary Operating Reserve: In the event of an annual deficit for the project, the Primary Operating Reserve would be utilized first. It is anticipated that this reserve will in fact be utilized, especially in the early years as the conference center gets established, and therefore this reserve would be the first one to be replenished with any operating surpluses or excess City lodging stream of income after the Rental Reserve. The goal would be to maintain the fund balance at $500,000 to the extent possible. In order to gauge whether the conference center is performing as anticipated, an Oversight Board will regularly review established performance metrics and budget for the project. D) Secondary Operating Reserve: In the event the Primary Operating Reserve is depleted, the next reserve to be utilized is the Secondary Operating Reserve, which is to be capitalized through $50,000 annual payments by the DIA beginning in 2024 and capped at $500,000. The initial pull from this reserve would be $50,000, at which point the Tertiary Operating Reserve would kick in for up to $100,000 per year. From there, any remaining balance in the Secondary Operating Reserve would be utilized before turning to the Final Operating Reserve. It is expected that the Secondary Operating Reserve would be next in line for replenishment with any operating surpluses. E) Tertiary Operating Reserve: In the event that the Secondary Operating Reserve fund is utilized at the rate of more than $50,000 in any given year, the next reserve to be utilized is the Tertiary Operating Reserve. This fund is to be capitalized at a minimum of $100,000 through contributions from the four main downtown hotels. If utilized, this reserve fund will be recapitalized by the four main downtown hotels at a minimum of $100,000. If this reserve is utilized, it will trigger the engagement of outside experts to advise the Oversight Board on conference center operations and recommendations to the Board for steps to take to improve project performance. F) Final Operating Reserve: In the event the Primary, Secondary, and Tertiary Operating Reserves are depleted, the final reserve to be utilized is the Final Operating Reserve. If this reserve is tapped into, it will trigger an extensive evaluation of the operation and revenues and may require discussions with the Oversight Board regarding significant restructuring of the project, or with the developer regarding possible re-purposing of the facility. It is expected that this reserve be last in line for replenishment with any operating surpluses or excess City lodging stream of income. This reserve fund is to be capitalized with pre-opening City hotel room tax revenues ($1.25 million) and the intention would be to place the County contributions to the City in this Reserve. WHEREAS, City commitment to the Community Conference Center project is contingent on Tompkins County and the Downtown Ithaca Alliance each passing companion resolutions in support of the project and outlining their roles to at least as significant a degree as described above, now therefore be it: March 11, 2020 4 RESOLVED, That the City of Ithaca will: 1. Execute a lease guarantee with the Vecino Group, and 2. Establish a hotel room occupancy tax to support the Conference Center or, if such a hotel room occupancy tax is unsuccessful in being authorized, establish a City tourism improvement district (TID) to generate the required revenues from the lodging industry for the Conference Center, and 3. Utilize the revenues from either a hotel room occupancy tax or TID as the first source of funding for this project. These revenues will support the debt payments and operations of the Conference Center, as well as capitalize (and replenish as necessary and as possible) several reserve funds that would serve to protect the City in its role as guarantor for the conference center lease, including: a. Primary Operating Reserve initially capitalized at $500,000 - to provide assurance to operator during years when the annual operating loss exceeds revenues for direct conference center operations b. Capital Replacement Reserve, initially capitalized at $500,000 - to ensure replacement, repair, and replenishment as needed of all furnishing, fixtures, equipment, and capital needs of the conference center c. Rental Reserve - to mitigate any cash flow concerns and ensure two months of lease payments are available to the operating entity at all times d. Final Operating Reserve, projected to be initially capitalized at $1,250,000 through pre-opening collections of the city hotel room occupancy tax, and 4. Dedicate net hotel room occupancy tax revenues collected to the operating entity to promote, operate, and maintain the conference center, including net annual rent obligations of approximately $1.5 million per year; now, therefore, be it RESOLVED, That subject to the commitment of all parties to financial terms as outlined in this resolution, the Mayor is authorized to sign a binding MOU with Vecino committing to execute a lease guarantee for the conference center, and RESOLVED, That the Mayor is authorized to sign a Memorandum of Agreement with Tompkins County and the DIA that reflects the conditions outlined in this resolution, contingent upon review by the City Attorney and understanding that any material changes in the conditions outlined in this resolution will require review and approval by Common Council. Chief of Staff Cogan, Deputy Director of Economic Development Knipe, and Community Development Director Bohn gave a brief overview of the proposed conference center project and the financial and risk management structures. A question and answer period followed with Council members asking questions about worse-case scenarios, including a pending global pandemic, the need to diversify the City’s economy beyond student related events, and the long-term financial commitment from the local hotels. Alderperson Kerslick inquired about a cap on the City’s financial liability. Chief of Staff Cogan explained that there is no cap on the City’s financial commitment; however, the City would have seats on a fiscal oversight board and as the reserve funds begin to be used, adjustments would be made to operations to mitigate those losses. Chamber of Commerce Executive Director Jennifer Tavares noted that the contribution amounts listed for the hotels is the minimum contribution. They may agree to contribute more or to adjust the contribution schedule. She further noted that additional industry partners outside of the City may be interested in contributing as they will also benefit from the Conference Center activity. Alderperson Lewis asked about the formation of the fiscal oversight board. Chief of Staff Cogan responded that the details are still being determined, but the original thought is that the chief financial officers, chief elected officers, and potentially someone appointed by Common Council, or their designees, would form the Fiscal Oversight Board. There have also been discussions about the potential formation of an Operating Board with the Downtown Ithaca Alliance and hotel / hospitality experts serving on it. March 11, 2020 5 Alderperson Brock voiced skepticism that the reserve funds will be able to be funded at the level included in pro-forma in the next two years due to the potential onset of a global pandemic. Alderperson Murtagh asked whether the County room tax includes Air B&Bs. Deputy Director of Economic Development Knipe stated that the pending legislation would be written so that Air B&Bs would be subject to the new City hotel room occupancy tax. Further discussion followed with City Attorney Lavine explaining the differences between the occupancy tax and the Tourism Improvement District/Special Benefit Assessment District funding models. Alderperson McGonigal questioned why the four downtown hotels are only committing to a ten-year financial contribution on a 30-year lease, as they would benefit the most from the Conference Center project. Ms. Taveres stated that the ten-year term was to allow the project to achieve stabilization, which is projected at year five, and to ensure that there was a substantial enough term to get through that evaluation period. She noted that the hotels would likely re-evaluate at the end of the term and make decisions on whether to continue funding at that time. She further explained the full financial contributions that the hotels are making that include upfront funding from business operations, minimum annual contributions for 10-years, and the reserve fund contributions. Further discussion occurred regarding the use of the proposed new City room occupancy tax being directed solely to the Conference Center project vs. other important projects such as an inter-city bus depot. Alderperson Murtagh asked about affordable rents for community events. Chief of Staff Cogan responded that the intent is to make this a community asset and efforts will be made to set affordable rates for local events such as banquets, weddings, etc. Further discussion followed on the financing schedule, how this project contributes to the City’s commitment to the Green New Deal, how this project will support the local economy and hospitality industry, and the Green Street Garage construction timeline. Amending Resolution: RESOLVED, That the 10th Whereas Clause be amended to read as follows: “WHEREAS, the Downtown Ithaca Alliance will: 1. Contribute a minimum of $50,000 per year, starting in 2024 and continuing for 10 years, into a Secondary Operating Reserve that will be capped at $500,000; and in the event that this reserve is utilized and the balance drops below $500,000, the annual payments of $50,000 will resume until the balance again reaches $500,000, and” This motion was considered a Friendly Amendment. Amending Resolution: By Alderperson McGonigal: Seconded by Alderperson Murtagh RESOLVED, That the 12th Whereas Clause be amended as follows: WHEREAS, four hotels in Downtown Ithaca – Ithaca Downtown Marriot, Hilton Canopy, Hilton Garden Inn, and Hotel Ithaca – have agreed to: 1. Collectively contribute $50,000 per year during 2021 and 2022 (for a total of $100,000) towards construction costs of the project, and 2. In 2023 collectively capitalize a Tertiary Operating Reserve fund with another $150,000 to be held by the Tompkins County Chamber of Commerce Foundation, Inc. and to be in position behind the Secondary Operating Reserve Fund and ahead of the Final Operating Reserve Fund, and if used to be replenished to maintain a minimum annual balance of $150,000 each year through year ten. 3. Collectively contribute a minimum of $50,000 per year for sponsorship in support of conference center operations beginning in 2023 and continuing for the first ten years of the project, to match the amounts in the project pro-forma, and Discussion followed on the floor regarding the level and duration of funding the hotels would be willing to commit to, and the length of the City’s risk assessment period. March 11, 2020 6 A vote on the Amending Resolution resulted as follows: Carried Unanimously (9-0) Main Motion as Amended A vote on the Main Motion as Amended resulted as follows: Ayes (7) McGonigal, Nguyen, Murtagh, Kerslick, Smith, Mohlenhoff, Lewis Nays (2) Brock, Fleming Carried (7-2) 2.2 Break in Access – Route 13 Deputy Director of Planning & Development Nicholas and Director of Engineering Logue presented a proposal to construct an intersection on Route 13 at Fifth Street related to the Carpenter Circle development. This new intersection, also known as a “Break in Access (BIA)” is an integral part of the City’s vision for Route 13 to become an urban boulevard and is designed to knit together the Northside and Fall Creek neighborhoods and the emerging waterfront district. They explained that Common Council has two main roles in the proposed Break in Access and the project in general. First, although permission for a BIA is granted by NYSDOT, it must be requested directly by the City rather than the project sponsor. This is because a BIA, though it can help a single project, must also have community-wide benefits that are of value to the greater public. Secondly, Common Council is an Involved Agency under SEQR for the environmental review of the project due to the BIA (as well as the PUD and negotiations regarding the community garden lease and land transfer). Deputy Director Nicholas described the community-wide benefits the BIA and Carpenter Park Development would have including the implementation of the Comprehensive and Waterfront Plans, the addition of 150 jobs to the local economy, a downtown medical facility, 208 housing units in direct proximity to grocery stores and recreational facilities, the retention of 2 acres of community gardens, and alternative transportation options including bus access to the area. Director of Engineering Logue described the BIA approval process that the New York State Department of Transportation will follow. He reviewed the potential vehicular traffic impacts the BIA would have including a 15% increase in vehicular trips related to the new development and related traffic delays. He reviewed the potential impacts of 3 major models: 1.) No Break in Access at Fifth Street and all of the traffic had to come in from Third Street. 2.) An intersection at Fifth Street to enter and exit the development but would not connect to the far side on Fifth Street (3-way intersection). 3.) An intersection at Fifth Street that went all the way through to the other side of Fifth Street creating a 4-way intersection. Director of Engineering Logue further discussed the challenges of finding balance between making the intersection bicycle and pedestrian friendly and managing increased vehicular traffic and mitigating delays. Alderperson Lewis asked if the proposed new intersection would also fall under the purview of NYSEG. She noted that there have been issues with the Dey and Meadow Street intersection and coordination between NYS DoT and NYSEG has been challenging. Director of Engineering Logue responded that NYSEG would have to provide power to the traffic signals; however, he didn’t believe that it was as big of an issue as the other intersection. Discussion followed regarding the current traffic congestion and back-ups on Route 13 and the impact that increased trips may have on the surrounding neighborhoods. Alderperson Nguyen noted that most of the residents in the area are adamantly opposed to the Break in Access at Fifth Street. March 11, 2020 7 A question-and-answer period followed regarding the benefits and challenges of the 3-way intersection vs. a 4-way intersection with Council members expressing their preferences. This topic will be discussed further at the April Planning & Economic Development Committee meeting and the May Common Council meeting. ADJOURNMENT: On a motion the meeting adjourned at 8:00 p.m. ______________________________ _______________________________ Julie Conley Holcomb, CMC Svante L. Myrick City Clerk Mayor