HomeMy WebLinkAboutMN-IURA-2010-07-22Ithaca
Urban
Renewal
Agency
Approved 12/17/2010
108 East Green Street
Ithaca, New York 14850
(607) 274-6559 59
(607) 274-6558 (fax) (607) 274-6558 (fax)
MINUTES MINUTES
ITHACA URBAN RENEWAL AGENCY ITHACA URBAN RENEWAL AGENCY
8:30 AM, July 22, 2010 8:30 AM, July 22, 2010
Present: Susan Cummings, Tracy Farrell, Carolyn Peterson Present: Susan Cummings, Tracy Farrell, Carolyn Peterson
Excused: Doug Dylla Excused: Doug Dylla
Others: J.R. Clairborne, Common Council Liaison (9:05 A.M.) Others: J.R. Clairborne, Common Council Liaison (9:05 A.M.)
Staff: Nels Bohn, JoAnn Cornish, Alice Vargo Staff: Nels Bohn, JoAnn Cornish, Alice Vargo
Guest: Avi H. Smith of Unity Inn LLC, Sunit “Lex” Chutintaranond, of Plantation Building LLC, Murray
Gould, Philly DeSarno
Guest: Avi H. Smith of Unity Inn LLC, Sunit “Lex” Chutintaranond, of Plantation Building LLC, Murray
Gould, Philly DeSarno
I. Call to Order I. Call to Order
The meeting was called to order by Chairperson Peterson at 8:35 a.m. The meeting was called to order by Chairperson Peterson at 8:35 a.m.
II. Additions to or deletions from the agenda II. Additions to or deletions from the agenda
Cummings requested an update on R‐3aa zoning changes before Common Council‐ added under VII B.,
Also an update on Drug Seized Asset money
Cummings requested an update on R‐3aa zoning changes before Common Council‐ added under VII B.,
Also an update on Drug Seized Asset money
III. Public comment - None III. Public comment - None
IV. Approval of meeting minutes of June 24, 2010 IV. Approval of meeting minutes of June 24, 2010
Motion to accept the minutes with corrections by Cummings; seconded by Peterson Motion to accept the minutes with corrections by Cummings; seconded by Peterson
Carried Unanimously 3‐0 Carried Unanimously 3‐0
V. Economic Development Committee V. Economic Development Committee
A. Request by Unity Inn LLC for loan assistance to start‐up and operate the Argos Inn, an 11‐room
Inn with bar/lounge at 408 E. State/MLK Street, CD‐RLF
A. Request by Unity Inn LLC for loan assistance to start‐up and operate the Argos Inn, an 11‐room
Inn with bar/lounge at 408 E. State/MLK Street, CD‐RLF
Bohn reviewed the project and noted that the Economic Development Committee was
enthusiastically supported the project, but did not support IURA loan approval at this time as
primary financing is still undetermined. When a primary lender has committed financing for the
project, the IURA will be in position to structure collateral for the IURA gap financing and issue a
possible loan commitment.
Bohn reviewed the project and noted that the Economic Development Committee was
enthusiastically supported the project, but did not support IURA loan approval at this time as
primary financing is still undetermined. When a primary lender has committed financing for the
project, the IURA will be in position to structure collateral for the IURA gap financing and issue a
possible loan commitment.
Smith further described the project and provided an update on financing. He stated this will be an
11‐room B&B, with a bar/lounge that will be open to the public. Smith intends the bar/lounge to
become a social gathering place for the community. He proposes to complete an historic
rehabilitation of the building that will be eligible for historic rehabilitation tax credits. He noted
that he is residing in the apartment on the third floor at the project site.
Smith further described the project and provided an update on financing. He stated this will be an
11‐room B&B, with a bar/lounge that will be open to the public. Smith intends the bar/lounge to
become a social gathering place for the community. He proposes to complete an historic
rehabilitation of the building that will be eligible for historic rehabilitation tax credits. He noted
that he is residing in the apartment on the third floor at the project site.
Cummings stated that she felt that this is an important project, deserving support. Agency
members agreed that the project would enhance the downtown.
Cummings stated that she felt that this is an important project, deserving support. Agency
members agreed that the project would enhance the downtown.
Moved by Cummings, seconded by Farrell: Moved by Cummings, seconded by Farrell:
CD‐RLF – Loan Assistance to Unity Inn LLC for Start‐up & Operation of Argos Inn CD‐RLF – Loan Assistance to Unity Inn LLC for Start‐up & Operation of Argos Inn
IURA Minutes
7/22/10
Page 2 of 12
Whereas, on June 11, 2010, Unity Inn LLC applied for $100,000 of loan assistance for a $1.645
million project to acquire and renovate the historic McCormick‐Cowdry house located at 408 E.
State/MLK Street to an 11‐room inn with a public bar/lounge to be known as the Argos Inn, and
Whereas, Avi H. Smith (Smith) is the sole member of Unity Inn LLC, and
Whereas, the McCormick‐Cowdry house is a contributing property to the national and
local East Hill historic district and renovation plans are being developed to meet Secretary of
Interior standards for historic rehabilitation to be eligible for historic tax credits, and
Whereby, all exterior modifications to the property must be approved by the Ithaca Landmarks
Preservation Commission (ILPC), and
Whereas, the primary objectives of the Community Development Revolving Loan Program (CD‐RLF)
is provision of direct financing for economic development activities to create employment
opportunities, facilitate the expansion of business activity within the City of Ithaca and expansion of
the City’s commercial and industrial tax base, and
Whereas, CD‐RLF financing policy establishes maximum loan amount of $40,000 for a retail
business and $75,000 for a non‐retail business except where the IURA determines that the project
will result in an extraordinary degree of public benefit, and
Whereas, the project is projected to create eight (8) full‐time equivalent (FTE) employment
positions, of which at least 51% will be filled by low‐ and moderate‐income persons, thereby
meeting the CDBG public benefit test to generate at least one FTE job for every $35,000 of
assistance, and
Whereas, all new full‐time positions are projected to receive at least $12.11/hour thereby providing
local living wages to all full‐time employees, and
Whereas, Unity House LLC has acquired the project property for $350,000 and invested $70,000 in
structural upgrades and interior demolition to date, and
Whereas, the proposed uses of project funds are:
$ 350,000 property acquisition
$1,003,000 renovations
$ 131,000 furnishings, fixtures & equipment
$ 35,000 professional fees
$ 16,000 bar inventory
$ 62,000 working capital
$1,597,000 Total, and
Whereas, the proposed sources of project funds are:
$1,077,000 bank
$420,000 equity
IURA Minutes
7/22/10
Page 3 of 12
$100,000 IURA
$1,597,000 Total, and
Whereas, the project is in the process of qualifying for historic tax credits that could attract over
$200,000 of additional equity to the project, and
Whereas, Smith is seeking primary financing through the Small Business Administration (SBA) 504
program whereby a private sector lender loans up to 50% of the project cost secured by a senior
lien, an SBA504 lender loans up to 30% of the project cost secured by
a junior lien (& backed by a 100% SBA guarantee) and the borrower provides the remaining 20% of
project cost, and
Whereas, underwriting on primary lender financing has not been completed yet, and
Whereas, a funding gap of at least $100,000 in project financing is projected, and
Whereas, the project implements IURA policy to strengthen the vitality of the downtown,
encourage in‐fill development over sprawl development, promote renovation of historic structures
and create jobs paying living wages, and
Whereas, at their July 13, 2010 meeting, the IURA Economic Development Committee reviewed the
loan application, a credit analysis report prepared by Robert Deemer, Jr. of H. Sicherman & Co., and
considered applicable provisions of the IURA Economic Development Policy Guidelines and
Operating Plan, and recommended the following; now, therefore, be it
RESOLVED, that the IURA hereby finds that it is premature to issue a binding loan commitment for
this project at this time as primary lender financing terms and collateral have not yet been
solidified, however, should primary financing be secured to undertake the project this is an
appropriate project for an IURA gap financing loan subject to final underwriting, and be it further
RESOLVED, that a letter of strong interest for a possible loan, including possible loan terms, be
issued for the project for a potential gap financing loan from the Community Development
Revolving Loan Fund, subject to the following terms:
Borrower: Unity House LLC, a NYS limited liability company
formed in 2009
Possible Loan
Amount:
Up to $100,000
Project: Start up and operation of Argos Inn, an 11‐room
inn and bar/lounge located at 408 E. State/MLK
Street, Ithaca, NY
Total Project
Cost:
$1,597,000
IURA Minutes
7/22/10
Page 4 of 12
Projected Use of
IURA Funds:
Non‐construction project costs such as FF&E,
inventory, professional fees and/or working capital
Term: To be determined
Interest Rate: 4% annually, reset to 3% upon submission of
satisfactory job reports documenting that job
creation
goals have been achieved for two consecutive
quarters
and borrower is in compliance with all other terms
of the loan agreement.
Repayment: To be determined
Collateral: Satisfactory collateral sufficient to secure the loan
– subject to negotiation.
Guarantor(s): 1. Personal guarantees of Avi H. Smith, individually.
2. Possible additional guarantors subject to
negotiation on collateral.
Conditions: 1. Creation of at least eight (8) full‐time equivalent
employment positions of which at least 51% must
be held by low‐ and moderate‐income persons.
2. Payment of living wages to all full‐time employees.
3. Satisfactory review of 2009 income tax returns.
4. Satisfactory progress to secure a liquor license
5. Site plan and ILPC project approval.
6. Annual submission of balance sheet and profit and
loss statements for Unity House LLC.
And be it further
RESOLVED, that the IURA hereby waives the maximum $75,000 loan amount from the CD‐RLF for
this application in recognition of exceptional public benefits resulting from the project, including:
renovation of a historic building in the local East Hill historic district;
Establishment of business that will pay a living wage to all full‐time employees;
Strengthening the vitality of the downtown and reducing the need for visitors to travel by
automobile;
Match fund leveraging exceeding 10:1, and be it further
IURA Minutes
7/22/10
Page 5 of 12
RESOLVED, that the Director of Community Development for the IURA is authorized to issue a letter
of interest and term sheet, including clarification that the letter does not constitute a binding loan
commitment, in accordance with this resolution.
Carried Unanimously 3‐0
B. Request from Lex Chutintaranond of Plantation Building LLC for short‐term loan assistance in
anticipation of receipt of Restore NY grant funds for the Downtown Commons Upper Story
Housing project, at 130‐132 E. State/MLK Street, ‘Gateway’ proceeds
Bohn summarized the project request noting that delays in accessing Restore NY grant funds from
the Empire State Development Corp. has created a need for a bridge loan. Bohn reported that the
developer began work on the building in good faith and that Restore NY grant funds would be
available in October, but due to the State budget delay, the funds will not be available until
December or January. Asbestos abatement has been completed, but the building is not weather
tight and funding has been exhausted to pay the contractor until Restore NY grant funds become
available.
Bohn reported that the Economic Development Committee reviewed this loan application closely
and recommended approval of a short‐term loan secured by two mortgages on real estate and
financial guarantees. The loan funds will be repaid from Restore NY grant funds awarded to the
City for the Downtown Commons Upper Story Housing Project that earmarked $900,000 for the
Plantation Building project.
Murray Gould, financial consultant on the project for the developer, addressed the Agency
regarding historic tax credits and pending New York State legislation.
Following discussion, Cummings moved, seconded by Farrell, the following:
Gateway Proceeds – Short‐Term Loan Assistance to Plantation Building
1. Whereas, on June 25, 2010, Sunit “Lex” Chutintaranond, managing member of Plantation
Building LLC, requested a short‐term bridge loan of $512,000 until Restore NY grant funds can
be accessed from the Empire State Development Corporation (ESD) for the comprehensive
rehabilitation project of the Plantation Building located at 130‐132 E. State/MLK Street, and
2. Whereas, the amount of loan assistance requested is equal to approximately three months of
project construction expenditures, and
3. Whereas, Lex Chutintaranond and Flaminia Cervesi are each 50% owners in ItalThai LLC, the
owner of the Plantation Building, and Lex Chutintaranond is the sole owner of Plantation
Building LLC, the operating company that will undertake the redevelopment project and
syndicate historic tax credits, and
4. Whereas, the City of Ithaca was awarded $900,000 in Restore NY grant funds to assist in the
$2.47 million redevelopment of the vacant Plantation Building to create a 4,000 SF restaurant,
IURA Minutes
7/22/10
Page 6 of 12
1,200 SF of commercial office space, six market‐rate, one‐bedroom apartments and two
affordable one‐bedroom apartments, and
5. Whereas, the City authorized the Ithaca Urban Renewal Agency (IURA) to administer and
implement the Restore NY grant, and
6. Whereas, Restore NY grant funds can be accessed via a Grant Disbursement Agreement (GDA)
per the following process:
A. Submit proof of project readiness to ESD, including proof of completion of
environmental review, state historic preservation office review and site plan review; a
final project budget, including an independent construction estimate; and
documentation that all project funding is committed, including bank financing
B. ESD Board approval
C. Public Authorities Control Board (PACB) approval
D. Completion of ESD public hearing
E. Issuance of a GDA, and
7. Whereas, during the three month impasse to adopt the 2010‐2011 New York State budget, no
GDAs for Restore NY projects were approved by the PACB, and
8. Whereas, with adoption of a significant portion of the NYS 2010‐2011 budget in early July, the
PACB has resumed approval of new GDAs for Restore NY projects, and
9. Whereas, the Plantation Building Restore NY project is scheduled for ESD Board review in
September 2010, which is expected to result in issuance of a GDA in October 2010, and
10. Whereas, proposed use of project funds are:
$435,000 acquisition of building
$159,000 demolition, site preparation & environmental remediation
$1,444,000 construction
$164,000 architecture/engineering
$178,000 developer fees
$33,000 construction interest & insurance
$57,000 soft costs, reserves & leasing costs
$2,470,000 Total, and
11. Whereas, the proposed sources of project funds are:
$900,000 Restore NY grant
$391,000 loan #1 M&T Bank – building acquisition
$359,000 loan #2 M&T Bank ‐ project
$80,000 loan #3 IURA – affordable housing
$156,000 equity – managing member
$367,000 equity – Federal rehabilitation (historic preservation) tax credits
$217,000 equity – NYS rehabilitation (historic preservation) tax credits
$2,470,000 Total, and
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7/22/10
Page 7 of 12
12. Whereas, Plantation Building LLC has executed a construction contract with a guaranteed
maximum price that is on budget , and
13. Whereas, the interior demolition, site preparation and asbestos removal has been completed,
leaving the structure in fragile condition and developer equity exhausted, and
14. Whereas, bank construction financing is contingent upon final approval of the Restore NY
grant, and
15. Whereas, it is imperative that the construction project advance in a timely manner to install the
HVAC system and make the building weather tight to prevent the existing “wet” sprinkler
system from freezing in cold weather, and to avoid increased project costs, and
16. Whereas, shutting down the project to wait for access to Restore NY funds in late October
imperils project feasibility and substantially increases project costs, and
17. Whereas, all project funding sources are committed except for equity to be generated from
sale of rehabilitation tax credits, and
18. Whereas, rehabilitation tax credits are made available at both the Federal and State level to
encourage rehabilitation of historic properties by each providing tax credits equal to 20%
of the cost basis of the project that can be sold to an investor through syndication to generate
equity for the project, and
19. Whereas, the New York State budget process and related legislation has delayed access to
Restore NY funds and destabilized the market for purchase of rehabilitation tax credits, and
20. Whereas, NYS law, unlike many states, requires the purchaser of the Federal rehabilitation tax
credit to also be the purchaser of any NYS rehabilitation tax credit, thereby effectively limiting
the market to sell tax credits for this project to entities with NYS tax liabilities, and
21. Whereas, a technical error in the 2009 NYS rehabilitation tax credit law inadvertently
prohibited banks and insurance companies from purchasing tax credits, and
22. Whereas, nationwide, banks and insurance companies are the top buyers of tax credits, and
23. Whereas, the NYS Senate and Assembly have passed legislation correcting this technical error,
but the bill has not been signed into law by the Governor even though the Governor’s office
supported the initial legislation, and
24. Whereas, as part of the 2010‐2011 budget process the NYS Assembly, in support of an initiative
by the Governor, passed legislation to defer 50% of a wide variety of tax credits, including
rehabilitation tax credits, for 3 years and also capped the total amount of tax credits received
by any single purchaser to $2 million per year, and
IURA Minutes
7/22/10
Page 8 of 12
25. Whereas, the NYS Senate has not passed companion legislation to defer and cap tax credits,
and
26. Whereas, the legislative status of NYS rehabilitation tax credits is still unresolved, resulting in a
poor financial climate to sell NYS tax credits, which are projected to generate $217,000 in
equity for the project in a stable market that includes banks and insurance companies who can
utilize such credits in the current tax year, and
27. Whereas, the project’s development consultant, Port City Preservation LLC, strongly
recommends against the sale of tax credits to investors in the current unstable market and
indicates that sale of the tax credits can be completed within 60 days of initiation, and
28. Whereas, tax credits must be sold by the date the project is put into use (certificate of
occupancy), which is projected for March 2011, and
29. Whereas, use of CDBG funds for the requested loan is problematic because use of CDBG funds
for construction activities requires compliance with the Davis‐Bacon Act which would require
re‐bidding the construction project, and
30. Whereas, the IURA holds “Gateway” proceeds on behalf of the City of Ithaca, which were
derived from the sale of City‐owned real estate to Eddygate Park Associates in 1986 to facilitate
the Eddygate Park Apartment mixed‐income 64‐unit rental housing project in Collegetown for
which sales proceeds were realized in 2002, and
31. Whereas, in 2002 “Gateway” proceeds were loaned to Gateway Plaza Associates, LLC to
facilitate the Gateway Plaza project located at 401 E. State/MLK Street with repayments
earmarked by the City of Ithaca Common Council for affordable housing activities, and
32. Whereas, the Gateway loan was fully repaid in 2007, and
33. Whereas, the balance of “Gateway” proceeds is approximately $595,600 as of June 30, 2010, of
which $100,000 has been earmarked as a contribution to the Housing Fund, and
34. Whereas, the Plantation Building project includes affordable housing, and
35. Whereas, use of “Gateway” proceeds requires approval from the City of Ithaca Common
Council, and
36. WHEREAS, on July 13, 2010, the IURA Economic Development Committee reviewed this matter
and recommended the following action subject to City of Ithaca Common Council approval;
now, therefore, be it
1. RESOLVED, that the IURA hereby approves, subject to approval by the City of Ithaca Common
Council, a loan to Plantation Building LLC in accordance with the loan application and the
following terms:
IURA Minutes
7/22/10
Page 9 of 12
Borrower:
Plantation Building LLC, a NYS Limited Liability
Company formed in 2009
Loan Amount: Up to $490,000, not to exceed 100% of collateral
value
Project: Bridge loan for redevelopment of the Plantation
Building at 130‐132 E. State/MLK Street, Ithaca, NY
Source of Loan
Funds:
“Gateway” proceeds
Projected Use of
Funds:
Construction phase project expenses
Term: Up to 8 months
Interest Rate: 3.5%
Repayment: The loan shall be repaid from Restore NY grant
funds disbursed by the Empire State Development
Corporation to the City of Ithaca.
Monthly interest‐only payments shall be accrued.
Repayment of the loan balance plus accrued
interest is due upon receipt by the City of Ithaca of
Restore NY grant funds or maturity of the loan,
whichever is earlier.
Collateral: 2nd mortgage on the property and building owned
by
ItalThai LLC located at 622 Cascadilla Street,
Ithaca, NY (ZaZa’s Cucina restaurant building),
behind only a 1st mortgage held by M&T Bank with
a balance of $440,000.
2nd mortgage on property and building owned by
Sunit Chutintaranond and Flaminia Cervesi located
at 20 Rosina Drive, Ithaca, NY (residence), behind
mortgages held by M&T Bank with a balance of
$428,000.
Guarantor(s): Sunit Chutintaranond and Flaminia Cervesi, each
individually.
IURA Minutes
7/22/10
Page 10 of 12
Corporate guarantee of ItalThai LLC
Corporate guarantee of Za Za’s Cucina, Inc.
2. RESOLVED, that the IURA hereby recommends City of Ithaca Common Council approval of the
use of Gateway proceeds to fund this bridge loan, and be it further
3. RESOLVED, that upon approval by the City of Ithaca Common Council, the Director of
Community Development for the IURA is authorized to issue a loan commitment in accordance
with this resolution, and be it further
4. RESOLVED, that IURA Chair, upon the advice of the Executive Director and IURA Attorney, is
hereby authorized to execute all necessary and appropriate documents to implement this
resolution, including, but not limited to, executing loan agreement documents.
Carried Unanimously 3‐0
C. Committee Chairperson Report – no report
VI. Neighborhood Investment Committee
A. Clarification to Resolution #1398 ‐ Funding for the Ithaca Free Clinic Relocation (2010 #18)
Farrell reviewed the benefits of reclassifying the project as a public service activity rather than a
public facility activity under the Community Development Block Grant program.
Farrell moved, seconded by Cummings the following:
Clarification to Resolution # 1398—
Funding for the Ithaca Free Clinic Relocation (2010 #18)
Whereas, the Ithaca Urban Renewal Agency authorized $20,465.60 for the relocation of the Ithaca
Free Clinic to 521 West Seneca Street as a public facility activity in the 2010 Action Plan, and
Whereas, this funding was stipulated as being provided for the renovation of this site to meet the
needs of the Free Clinic operations, and
Whereas, renovations are programmed to be underway in anticipation of a September 2010
occupancy, but 2010 CDBG funds are not projected to become available until after renovations are
complete, and
Whereas, it has been determined by staff, in conjunction with Free Clinic staff, that the funds would
be more useful if distributed as a public service project, paying for rent and/or other administrative
expenses, so that money currently available to the Ithaca Health Alliance can be used for the
renovations, and
Whereas, this change in use of the funds will result in the desired outcome of successfully
relocating the Free Clinic to an appropriate downtown location and the guarantee of operations at
this site for the next 5 years, and
IURA Minutes
7/22/10
Page 11 of 12
Whereas, this allocation as a public service activity in the 2010 Action Plan conforms to the 15%
CDBG spending cap for public services ($145,461/$1,015,297= 14.3%), and
Whereas, the original allocation for the Free Clinic included $476.60 in delivery funds, this, along
with the $20,000 awarded to the Ithaca Free clinic, representing the balance of unallocated CDBG
funds for 2010, and
Whereas, there will be no need of delivery funds for a public service activity, but there is an
outstanding need for the GIAC Rehabilitation project; now, therefore, be it
Resolved, that the IURA hereby approves a modification to Resolution 1398 to allow operating
expenses to be eligible use of CDBG funds allocated to the Ithaca Health Alliance as a public service
activity to leverage the relocation of the Ithaca Free Clinic to 521 West Seneca Street, and be it
further
Resolved, that all other requirements of Resolution #1398 remain in force, and be it further
Resolved, that the remaining $476.60 in CDBG funds originally allocated for project delivery be
reallocated to 2010 # 9 GIAC Rehab Year 3.
Carried Unanimously 3‐0
B. Committee Chairperson report ‐ none
VII. Governance Committee
A. Review of IURA Financials for June, 2010
Cummings summarized the monthly financials. Bohn noted that the CDBG expenditure ratio is
well below 1.5 required by HUD and that all leases and loans are current except for Diane’s
Downtown Automotive, which remains one month behind.
B. Committee Chairperson report
Cummings requested an update on progress with completing the City’s 2008 financial audit. Bohn
replied that according to the City Controller, the City’s auditor has completed their in‐house work
and expect to complete their audit in August. Cummings noted that the 2008 audit was due
September 30, 2009 and is many months delinquent.
VIII. New/Old Business
A. IURA Chairperson Report ‐ none
B. Staff Report
Bohn noted that the Finger Lakes Wine Center is scheduled to begin construction work next week
and open in Spring 2011.
IURA Minutes
7/22/10
Page 12 of 12
C. The next meeting date: August 26, 2010 – Bohn noted that he will be on vacation during the
scheduled IURA August meeting and that Dylla has indicated he is unable to attend the meeting as
scheduled. Members agreed to cancel the meeting unless a time‐sensitive agenda item comes up.
IX. Motion to Adjourn
Peterson moved, seconded by Farrell to adjourn the meeting. Carried Unanimously. The meeting
was adjourned at 10:43 a.m.
End
Minutes prepared by A. Vargo, edited by N. Bohn
j:\community development\admin files\minutes\iura\2010\7july\7-22 iura minutes nb edit.doc