HomeMy WebLinkAboutMN-IURAED-2011-10-11Approved 12/13/11
108 E. Green Street
Ithaca
Urban
Renewal
Agency
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 PM, Tuesday, October 11, 2011
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Doug Dylla, Leslie Ackerman, Martha Armstrong, Jennifer Tegan, Ayana Richardson
Staff: Nels Bohn, Charles Pyott
Guest: Lex Chutintaranond
I. Call to Order
Chairperson Dylla called the meeting to order at 3:35 P.M.
II. Agenda Additions/Deletions – None
III. Public Comments (3‐minute maximum per person) – None
IV. Review of Meeting Minutes
Richardson moved, seconded by Ackerman, to approve the minutes of the August 9,
2011 meeting. Carried Unanimously.
V. Community Lending
A. Restore NY III Grant – Request from ItalThai, LLC for Modification of $900,000 City
Loan to Forgivable Loan After 7 Years
Applicant Lex Chutintaranond outlined the basic details of his request and indicated he
had originally expected the project to cost $2.4 million; however, the cost escalated to
$3.0 million.
Dylla expressed his own understanding of the request: the original $900,000 grant was
subsequently converted to a 30‐year, 0% interest loan with no payments due until the
end of the term, for the purpose of maximizing the Federal and state historic tax credits
available to project investors. Given the project’s unanticipated $500,000 cost overrun,
however, the applicant is now requesting conversion of the $900,000 loan back into a 7‐
year forgivable loan.
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October 11, 2011
Page 2 of 12
Bohn corroborated Dylla’s understanding of the request. He added that, since the
$900,000 was a City loan and not an IURA loan, the applicant is merely asking the IURA
for its recommendation to the Common Council.
Bohn indicated that to convert the $900,000 loan back into a grant, the applicant is
requesting the IURA support a request to the City to enter into a memorandum of
understanding to commit to convert the 30‐year repayable loan to a forgivable loan
after the historic tax credit regulatory period has expired. He indicated that the request
may raise concerns as a potential gift, but that conceptually it is returning the funding
assistance to its original designation as grant.
Bohn noted the Mia loan will generate a wide variety of public benefits such as job
creation, including living wage jobs; housing, including affordable housing; and property
and sales tax generation which could be measured at year #7 in consideration of the
conversion request.
Dylla asked the applicant if he anticipated this would be the last request for any
modification of the project’s terms, to which the applicant responded, yes.
Chutintaranond indicated the way the project unfolded simply resulted in some
unanticipated outcomes, including a significant cost overrun.
Bohn added that the original $900,000 funding amount awarded the project through the
Restore NY grant program was actually lower than initially requested because the
funding agency suggested the project could raise equity through historic tax credits.
Armstrong inquired into the impact of the loan modification on IURA’s own funds, to
which Bohn replied there would not be any, since City funds would be used and the loan
would be executed by the Mayor. The original Restore NY grant was disbursed to the
City.
Richardson noted that, since the $900,000 funding was originally a grant to begin with,
she sees absolutely no problem with converting it back to a grant.
Chutintaranond remarked that in the end he will have spent about $500,000 more of his
personal funds on the project, which he had not anticipated. Armstrong remarked this
kind of project takes a phenomenal amount of work and she lauded the applicant for all
the money and effort he has invested.
Ackerman expressed surprise the building is only appraised at $1 million. Bohn replied
that the appraiser examined a variety of factors in making that determination, such as
comparable sales, current and anticipated income, but based his appraisal primarily
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October 11, 2011
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using the income approach to value. However, since the appraisal was performed
before the project was completed, much of the basis for the appraisal was hypothetical.
Bohn remarked that the building’s appraised value could appraise out at about $1.3 ‐
$1.5 million were it re‐appraised today, still well below the project cost.
Armstrong moved, seconded by Richardson:
Resolution of Recommendation to the City of Ithaca; Restore NY III – Funding
Assistance from City of Ithaca to Italthai, LLC Redevelopment of Plantation Building –
130‐132 E. MLK, Jr./E. State Street
WHEREAS, The City of Ithaca received a grant award of $1.15 million from the Empire
State Development Corporation through the Restore NY program to complete upper
story redevelopment of the Plantation Building and the Petrune building (located at
126‐128 and 130‐132 E. MLK Street).
WHEREAS, $900,000 of assistance was earmarked to ItalThai, LLC (managing member
Sunit “Lex” Chutintaranond) in the form of a grant to assist a $2.5 million
redevelopment of the Plantation building at 130‐132 E. MLK Street.
WHEREAS, Initially, a City/ItalThai LLC grant agreement was developed and executed on
January 10, 2011 to provide for payment of $900,000 to ItalThai upon completion of the
project. See Exhibit A.
WHEREAS, a critical component of the financing plan for the $2.5 million project was to
leverage federal and state historic tax credits generated by the project into investor
equity of over $550,000. Specialized tax credit legal counsel, Cannon, Heyman & Weiss,
informed ItalThai, LLC that grant funding reduces the tax basis of the project thereby
reducing the amount of tax credits available. Injecting Restore NY III financial assistance
in the form of a loan does not reduce the tax basis. As ItalThai LLC required at least
$550,000 from syndication of historic tax credits, ItalThai requested that Restore NY
Grant funding from the City be provided in the form of a loan rather than a grant. The
initial grant agreement was superseded by a $900,000 loan agreement at 0% with no
payments due to the end of the 30‐year term. See Exhibit B.
WHEREAS, it is anticipated that ItalThai LLC will seek forgiveness of this loan, which had
initially been a grant, after the 5‐year historic tax credit compliance period has been
completed in recognition that the City agreed to provide Restore NY III funds in the form
of a grant to the developer and the numerous public benefits provided by the project,
including but not limited to increased sales tax, increased property tax, 18 FTE new jobs,
8 upper story housing units of which 2 are affordable units, redevelopment of a vacant
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October 11, 2011
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downtown building and installation of fire sprinklers to protect the building and arrest
the spread of fire from adjoining buildings.
WHEREAS, additionally, the project ultimately cost $3,000,000, a $500,000 cost overrun,
a cost that the developer ItalThai, LLC (managing member Sunit “Lex” Chutintaranond)
was forced to personally absorb.
WHEREAS, the project is not financially viable if the developer would have to repay the
$900,000.00 grant that has been converted to a loan, nor will any additional financing
be available to developer within the 30 year loan period if said $900,000.00 loan
remains in place as a lien against the project.
Now therefore, it is hereby,
RESOLVED, that the IURA recommends that the City of Ithaca provide a memorandum of
understanding agreement to the developer, that the $900,000.00 loan shall convert to a
grant 7 years from the date of the Memorandum of Understanding, conditioned upon
the developer Italthai, LLC and Sunit “Lex” Chutintaranond, having met all conditions
under the Restore NY III funding program and all conditions under federal and state
historic tax credits.
Carried Unanimously 5‐0
B. Community Development Revolving Loan Fund – Request from Wildfire
Restaurant, Inc. for Loan Modification to Establish Employment Goal at 16 FTE Jobs
(CD‐RLF #26)
Bohn indicated the applicant believes it has reached a plateau of 16 FTE employees that
the restaurant will not exceed in the foreseeable future. The original loan called for 24
FTEs, as projected by the borrower, which Wildfire remains obligated to report on. At
this point, Bohn noted, the applicant contends that reporting on 24 FTEs represents an
unnecessary administrative burden to the borrower and the IURA as the restaurant is
already open for lunch and dinner 6 days a week with frequent late evening
performances in the upstairs lounge. As a result, the applicant is now requesting a
modification of the loan agreement to require 16 FTEs. This reduction would have an
added benefit of triggering a lower interest rate, from 4% to 3%.
Bohn indicated the applicant’s financial outlook is not particularly good, at this point.
The restaurant opened in an economic recession and is burdened with a considerable
number of minimum fixed costs, even when the number of customers being served is
low (although the Wildfire lounge is generally performing better than the restaurant).
Bohn remarked the applicant has been making a good faith effort to create the
projected jobs, but the sales levels do not support additional hiring. He added that the
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October 11, 2011
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applicant is current on loan payments and has submitted all required reporting. Bohn
recommends approving the request.
Richardson asked if the loan would have been approved at 16 FTEs. Bohn indicated that
is a good question. Traditionally, he remarked, CDBG loans require a minimum of 1 FTE
job per $35,000 of funding. Bohn noted that 16 FTEs still represent a significant number
of jobs (especially considering that the Lost Dog Café was going to close), which would
still fulfill the CDBG public benefit requirement. There are other benefits associated
with the loan, as well, such as the improvements to the building and sales tax
generation.
Ackerman asked if the committee should be seriously concerned with Wildfire’s viability
at this time, to which Bohn replied he does not believe default is very likely, but actual
revenues are far below original projections. The applicant will be exploring further
options for improvement, such as closing for renovations, identifying another operator
or a partner, etc.
Ackerman asked if the committee should be exploring reducing the FTE requirement
even further, to which Bohn replied that would not be necessary as Wildfire has
demonstrated job creation of 16 FTE jobs. The proposed loan modification only needs
to be a one‐time action, since it would simply serve to affirm the applicant has met the
loan’s FTE goal.
Richardson indicated from the current discussion it sounds as though the loan would
likely have been approved at 16 FTEs, to which Bohn agreed.
Armstrong moved, seconded by Ackerman:
Wildfire Restaurant, Inc. Loan Modification to Revise Job Creation Goal (CD‐RLF #26)
Whereas, on September 18, 2009, the IURA issued a $95,000 loan to Wildfire
Restaurant, Inc. to undertake a $673,000 project to acquire the Lost Dog Café business
and the building located at 106‐112 S. Cayuga Street, Ithaca, NY to open up the Wildfire
restaurant, and
Whereas, based on the borrower’s loan application, the job creation goal for the project
was established at 24 full‐time equivalent jobs to satisfy the CDBG public benefit test,
and
Whereas, the restaurant and upstairs lounge opened on schedule and the name of the
restaurant was subsequently changed to Delilah’s on Cayuga, and
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October 11, 2011
Page 6 of 12
Whereas, borrowers are required to submit quarterly job reporting until the
employment goal has been satisfied for two consecutive quarters, and
Whereas, on October 6, 2011, the borrower requested a reset of the employment goal
from 24 FTE jobs to 16 FTE in recognition of the downturn of the national and local
economy, and
Whereas, job reporting results show the project has leveled out at 16 FTE jobs, and
Whereas, financial reporting show the business has not met original revenue
projections, and
Whereas, the borrower is current on loan repayments, has satisfied local match
requirement of $568,000, and is in compliance with all terms of the loan agreement,
and
Whereas, the national economy has been in a deep recession since the restaurant
opened in October 2009, and
Whereas, at 16 FTE jobs, the project exceeds the minimum CDBG public benefit test to
create at least 3 FTE jobs, and
Whereas, the IURA staff recommends modifying the job creation goal as requested, and
Whereas, at their October 11, 2011 meeting, the IURA Economic Development
Committee reviewed this matter and recommended the following, now, therefore be it,
RESOLVED, that the IURA hereby approves a modification to the loan agreement with
Wildfire Restaurant, Inc. to reset the job creation goal to 16 FTE jobs, and be it further,
RESOLVED, that the Director of Community Development for the IURA is authorized to
issue a loan modification commitment in accordance with this resolution, and be it
further
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 a loan modification
agreement.
Carried Unanimously 5‐0
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October 11, 2011
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C. Status Reports on Loans & Restore NY Projects
Neighborhood Pride
Bohn updated the committee on the status of the Neighborhood Pride loan application.
According to applicant John Petito, the loan has been downsized by Square 1 Bank to
$1.595 million (from $1.745 million), which Petito is confident should still be enough to
successfully undertake the project. Regarding the issue of how the operation would be
safeguarded in the event of Tony and Irene Petito’s deaths, Petito indicated he still
needs to talk with his attorney. Petito also indicated he would need some more time to
answer the question of whether the $475,000 designated for staffing would be
sufficient to meet payroll in the break‐even scenario ($3.5 million in sales).
The Blind Elk
Bohn noted the Blind Elk loan application is essentially in stasis at the current time. The
applicants expect to return to the committee in November or December. The
applicants are currently looking for more investment and lower fixed costs. Bohn added
the targeted lease space is also being explored by another party.
Finger Lakes Wine Center
Bohn reported the Finger Lakes Wine Center is experiencing difficulty meeting its sales
goals, although it is doing reasonably well with the meeting space rental portion of the
business. The applicant is currently working on improving its prospects.
Dylla remarked he believes much of the problem may be related to the applicant’s
marketing strategy.
Bohn agreed with that assessment and added the Wine Center may need to better
define itself in the marketplace. He indicated that a Downtown Ithaca Alliance task
force will be working with the Wine Center on some possible solutions.
VI. Cherry Street Industrial Park
A. Request from J. Gould for Approval to Sublease Property Located at 245‐247
Cherry Street (Tax Map #96.‐2‐1.21)
Bohn noted that J. Gould is seeking approval to sublease the property at 245‐247 Cherry
Street. He indicated it is a typical lease agreement that includes an option to purchase.
Bohn noted the property has been vacant for two years, but J. Gould has now identified
an interested prospective tenant, which the IURA would need to approve. The space
would be used as offices for the Laborers International Union of North America, Local
785, and would include a learning center. Bohn indicated the proposed draft resolution
should include a condition calling for the applicant to become and remain current on all
its lease obligations. Bohn remarked it would be good to get the building back into
active use.
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October 11, 2011
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Richardson moved, seconded by Tegan:
Cherry Street Industrial Park – Approve J. Gould Sublease at 245‐247 Cherry Street
Whereas, the Ithaca Urban Renewal Agency (IURA) previously entered into a 20‐year
Lease/Purchase agreement with Jonathan Gould for lease of 245‐247 Cherry Street to
construct a building and operate Perfect Screen Printers at 245‐247 Cherry Street in the
Cherry Street Industrial Park, and
Whereas, in 1997 the IURA executed a modification to the lease to extend the term of
the lease to 22 years, and
Whereas, leases between the IURA and EMF include the following language: “Lessee
shall not assign or sublet this lease or any interest therein, to any party without approval
of the IURA; such approval will not be unreasonably withheld”, and
Whereas, in 2009 the Perfect Screen Printer business relocated to a larger building
outside of the Cherry Street Industrial Park, and
Whereas, the lessee seeks IURA approval to sublease the premises to Laborers
International Union of North America Local 785, and
Whereas, the Economic Development Committee discussed the matter at their October
11, 2011 meeting and recommend the following, now, therefore be it
RESOLVED, that the IURA hereby approves a sublease from Jonathan Gould to Laborers
International Union of North America Local 785 for property located at 245‐247 Cherry
Street Industrial Park (Tax Map #96.‐2‐1.21), subject to submission of a copy of the
executed sublease and becoming current on all lease obligations.
Carried Unanimously 5‐0
B. Possible Disposition of City‐Owned Land (Tax Map #100.‐2‐1.2)
Bohn noted that given this year’s City budget is particularly lean, the City is currently
evaluating which of its properties could be sold and placed back on the tax rolls. One of
the properties it is looking at is adjacent to the Cherry Street Industrial Park, between
the flood control channel and the train tracks, and has been assessed at $825,000. He
suggested the IURA could assist the City by disposing of the parcel through an RFP
process to ensure long‐term economic development public benefits result from the sale.
Bohn outlined the following three questions that would need to be posed:
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October 11, 2011
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(1) Is the property appropriate for commercial/industrial use?
(2) If the IURA moves forward with the purchase, would it make sense to sell it as a
single parcel?
(3) Is there value to have the IURA manage the sale versus the City selling the land
through auction or a commercial real estate broker?
Bohn indicated that an area of wetlands lies at the rear of the property, so only about 5
acres of the property would be immediately usable. (Nothing could be done with the
wetlands portion of the site without prior approval from the Army Corps of Engineers.)
The IURA may also want to consider adding a road extension to the property, keeping in
mind this would cost ~$200,000.
Dylla asked if any feasibility studies could be performed to identify the best options.
Bohn replied that this could certainly be done, although it may be premature to
consider a feasibility study, until the Common Council indicates interest in sale of the
parcel.
Bohn went on to note the property used to be the site of the old inlet that flowed
through it. The site is part of an old riverbed, which was subsequently filled in, and, as a
result, it is now pre‐loaded for light construction (any larger and heavier buildings would
require special foundations). Bohn went on to note that the site is not environmentally
contaminated. A geotechnical analysis was performed, which determined that the
land’s geotechnical profile is very similar to other sites around the city.
Bohn noted that the first step would be to obtain a determination from the Board of
Public Works that the site is not needed for public works. Then the Common Council
needs to determine if the property is appropriate for sale. The third step is to
determine the appropriate method of disposition, IURA or by the City. If the City selects
disposition through the IURA, then the City should identify any goals for IURA
disposition.
Ackerman remarked that any restrictions the IURA imposes on the property may end up
hamstringing the City’s effort to reap the proceeds from the sale. Dylla agreed. The
IURA would probably need to keep the transaction as unrestricted as possible.
Regarding a possible road extension, Ackerman noted there is no way to determine in
advance what kinds of uses might elicit the most interest. It may not make sense to
construct a road extension too early in the process.
Bohn indicated that, while the City is interested in the immediate potential proceeds of
a land sale, it is also interested in the longer‐term prospect of collecting tax revenues
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October 11, 2011
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and job creation. Ackerman noted, in that case, selling the property without any
restrictions at all may not be the most sensible approach, from a long‐term perspective.
Dylla asked if the IURA has the means to purchase the property, up‐front, before it has
worked on identifying a use, a buyer, and other details. Bohn replied, no, that is
probably not realistic, given the property’s cost. He added that traditionally the IURA
rebates the proceeds of land sales back to the City.
Dylla asked if the IURA could perhaps purchase the property at a discount, spend some
time identifying the use and the buyer, sell it, and then divide the proceeds of the sale
with the City. Bohn indicated that could be the subject of further discussion with the
Mayor. An optimal solution may be found that benefits both parties.
Dylla asked if it would be satisfactory for the committee to simply express its interest in
exploring the issue further, without providing any further details or committing to
anything at this time. Bohn replied, yes, a simple expression of interest should suffice,
at this early point in the process.
VII. Economic Development Planning
A. NYS Southern Tier Regional Economic Development Council
Bohn reported on the activity of the NYS Southern Tier Regional Economic Development
Council. He noted that all Regional Economic Development Council project proposals
would be submitted directly to the state, as part of the new consolidated funding
application process. Of the $1 billion in total available funding, $200 million in entirely
new funding would be made available on a competitive basis, with the remaining $800
million representing existing grant programs previously established by a variety of state
agencies. Four regions would receive up to $40 million each, in both capital funding and
tax credits, while the remaining regions would share the final $40 million. Bohn noted
that $70 million of the $200 million in new grant funding will be awarded in the form of
tax credits. He indicated there is not as much funding available this year as there is
likely to be next year. Bohn explained that 80% of a grant application’s score would be
determined by the reviewing agency’s scoring requirements, while the remaining 20%
determined by Regional Council scoring.
B. City Comprehensive Plan – Identification of Issues/Recommendations
Bohn indicated the City Comprehensive Plan (“Comp. Plan”) planning process was
launched a few weeks ago and that Phase I of the project will focus on crafting an
overall vision and accompanying “umbrella document.” Phase II will focus on producing
more detailed neighborhood plans and thematic plans. The consultant team specifically
solicited input from the IURA and its committees and the IURA Board will be discussing
the Comp. Plan over the coming month. Bohn encouraged EDC members to think of
comprehensive planning issues they might want the Comp. Plan Committee to address.
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October 11, 2011
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Any issues that EDC members come up with should be communicated to the IURA
Board.
Dylla asked if the Comprehensive Plan is a legally required document, to which Bohn
replied, no. Armstrong pointed out that the Comprehensive Plan forms the legal basis
to defend zoning regulations. Bohn added that the principal task will be to generate a
document that is detailed enough to function in a meaningful way, but lacks the level of
detail which would likely slow the process down and make adoption difficult. Bohn
noted the draft plan should be completed by June 2012 (with an approximate
anticipated time horizon of 20 years).
Ackerman asked if the Comp. Plan could be characterized as a set of guidelines, or more
of a binding constitution, to which Bohn replied that remains to be seen, but usually it
functions as guidelines.
Bohn went on to note that one of the issues to be examined will be the work of the
Board of Zoning Appeals (BZA) and the Planning Board, and the relationship between
the two. Bohn explained that the BZA reviews considerably more zoning appeals than it
used to, which has sometimes complicated and impeded the process and contributed
towards a substantial increase in zoning variances granting and uncertainty by
applicants and residents what type of development is allowed.
Armstrong indicated the Comp. Plan should seek to rationalize the various disparate
portions of the City Code. She also recommended the Comp. Plan Committee scrutinize
every part of the project approval process from beginning to end. Armstrong noted
there may be considerable room for improvement in how the Planning Board and BZA
actually function and coordinate their actions. Armstrong added there seem to be too
many obstacles to approval for development projects, which has likely contributed to
lost investment in the city. Armstrong believes certain aspects of the process can be
virtually unmanageable and she knows there is a certain amount of dissatisfaction on
the part of developers.
Dylla remarked it would be interesting and helpful to discuss economic development
concerns with the Comp. Plan Committee.
VIII. Other New/Old Business
A. Review of 2012 Action Plan Application and Evaluation criteria
Bohn indicated the Job Training Program Application form has been revised. He asked
committee members to review the new form and e‐mail their comments and questions
to him, with the goal of trying to finalize it by the end of October. Bohn noted the
purpose of the revisions is to try to collect more information relating to project
outcomes and program design issues. Bohn added that the EDC evaluation matrix
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October 11, 2011
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would also be provided to applicants in the belief it will help applicants to have access to
the scoring information.
B. Staff Report
(not presented due to lack of time)
C. Review of Loan and Lease Payment Reports
(not reviewed due to lack of time)
IX. Next Meeting Date: November 8, 2011
X. Adjournment
The meeting was adjourned by consensus at 4:55 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.