HomeMy WebLinkAboutMN-IURAED-2013-04-09Approved: 5/14/13
Ithaca
Urban
Renewal
Agency
108 E. Green Street
Ithaca, New York 14850
(607) 274-6559
(607) 274-6558 (fax)
MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 PM, Tuesday, April 9, 2013
Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY
Present: Doug Dylla, Leslie Ackerman, Jennifer Tegan
Excused: Heather Filiberto
Vacancy: 1
Staff: Nels Bohn, Charles Pyott
Guests: Lex Chutintaranond, ItalThai, LLC
I. Call to Order
Chairperson Dylla called the meeting to order at 3:37 P.M.
II. Agenda Additions/Deletions ― Nels announced he would have no update on the Cherry
Street Industrial Park RFP at this time, so that particular agenda item (“VII. Authorization to
Issue Request for Proposals for Development of 5‐Acre Parcel in Cherry Street Industrial
Park”) should be postponed to the next meeting.
III. Public Comments (3‐minute maximum per person) ― None.
IV. Review of Meeting Minutes: March 14, 2013
Tegan moved, seconded by Ackerman, to approve the March 14, 2013 minutes, with no
modifications. Carried Unanimously 3‐0
V. Community Lending
A. Request from ItalThai, LLC Seeking IURA Support for Assignment of Loan of
Restore NY Grant Funds for Plantation Building, from City to IURA
Nels recapitulated the salient details of the request, as discussed at the last meeting:
• request was made as a result of a significant cost overrun (including unanticipated
costs associated with requirements to syndicate historic rehabilitation tax credits)
IURA EDC Minutes
April 9, 2013
Page 2 of 9
• original Restore NY grant was converted to loan, to maximize tax credit equity
necessary to close project funding gap
• owner’s debt amounts to well over building’s value, so he cannot approach bank for
further financing ― at this point in the project, owner had expected the building
would have been an asset
• to manage his current financing, owner is asking that the loan from the City be
conveyed to the IURA and subordinated to future loans (and eventually designated
by the IURA as a grant or a deferred loan).
Bohn remarked the resolution being considered represents a recommendation to the
IURA that it formally ask Common Council to assign to the IURA the City’s loan to
ItalThai LLC.
At the last EDC meeting, Bohn noted, committee members requested more information
from the applicant on the cost overruns, as well as the problems with the 30‐year loan.
He noted that the correspondence in the package addresses these issues. Bohn also
generated a spreadsheet, itemizing all project finances.
Chutintaranond complained that the loan has prohibited him from being able to deal
further with the bank, both on a short‐term basis and also on a longer‐term basis for the
purpose of undertaking other projects, because the amount of debt secured by the
Plantation building exceeds its appraised value. Chutintaranond’s most immediate need
is to make sure he can weather the upcoming construction associated with the
Commons Redesign Project and refinancing to reduce interest costs would assist him.
Although he appreciates that the Downtown Ithaca Alliance (DIA) is taking several steps
to mitigate the negative construction impact, it will nonetheless be a burden for him.
Ackerman asked Bohn if there were a reason the loan could not be converted back to a
grant, right now. Bohn replied that the 5‐year regulatory period for the historic tax
credits is still current. In order to protect the IURA’s interests, legal council with tax
credit expertise would be required to validate that approach. Furthermore, Bohn noted,
the State has a ‘clawback’ option, although it declines every year by 20%. Realistically, it
would be approximately 3½ years before the loan could be converted back to a grant.
Dylla asked about the long‐term plan for the project. Chutintaranond responded that
there are other loans that should be refinanced. He explained that much of the problem
associated with having so many loans is that there are so many bank payments to
support, which encumbers the overall enterprise.
IURA EDC Minutes
April 9, 2013
Page 3 of 9
Bohn remarked it would be reasonable to anticipate that some Common Council
members may be concerned about giving away a perceived City asset to the IURA; so it
is important to stress there is precedent for this kind of transaction (the draft resolution
contains some language addressing this issue). He noted that all other recipients of
Restore NY assistance received grants, not loans.
Ackerman moved, seconded by Tegan:
Restore NY3, Downtown Commons Upper Story Housing – Recommendation to
Assign Loan of Restore NY Funds to ItalThai, LLC from City of Ithaca to IURA
WHEREAS, in 2009 the City of Ithaca (City) 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/E. State Street), located within the
urban renewal project boundary area.
WHEREAS, $900,000 of assistance was earmarked to ItalThai, LLC (managing member
Sunit “Lex” Chutintaranond) in the form of a grant to fill a financial gap in a proposed
$2.5 million redevelopment of the Plantation building at 130‐132 E. MLK Street, and
WHEREAS, the City authorized the Ithaca Urban Renewal Agency (IURA) to administer
and implement the Restore NY3 grant, and
WHEREAS, a City/ItalThai, LLC Restore NY pass through grant agreement was
developed to provide for payment of a $900,000 grant to ItalThai, LLC upon
completion of the project, which agreement was executed by the City on January 10,
2011, and
WHEREAS, in 2011 specialized tax credit legal counsel, Cannon, Heyman & Weiss,
informed ItalThai, LLC that injecting Restore NY3 funding from the City into the
project as a grant would reduce the eligible tax basis of the project thereby
decreasing the amount of tax credits available to investors and resulting in a financial
gap for the project, and
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, and
WHEREAS, injecting Restore NY3 financial assistance into the project in the form of a
loan does not reduce the eligible tax basis, and
IURA EDC Minutes
April 9, 2013
Page 4 of 9
WHEREAS, as the project financing relied on attracting at least $550,000 in equity
through historic tax credits, ItalThai, LLC did not execute the Restore NY pass through
grant agreement and requested that Restore NY funding from the City be provided in
the form of a $900,000 loan at 0% interest with no payments due until the end of a
30‐year loan term as a means to maximize equity attracted through historic tax
credits, and
WHEREAS, on April 25, 2011 the City and ItalThai, LLC executed an agreement to loan
$900,000 in grant funds awarded to the City of Ithaca to ItalThai, LLC, which loan is
secured by a mortgage on the project property, and
WHEREAS, at that time, ItalThai, LLC indicated they intended to seek City approval in
the future to forgive this loan upon satisfactory completion of the project in
recognition of the project’s public benefits and that the City had originally agreed to
provide Restore NY3 funds in the form of a grant to the developer, and
WHEREAS, the mixed‐use project has been successfully completed with a new ground
floor restaurant, 16 FTE new jobs created, 1,100 SF of office space, and 8 new
housing units created of which two are occupied by low‐and moderate‐income
households at affordable rents, and
WHEREAS, both the Restore NY and federal and state historic tax credit programs
have minimum 5‐year compliance periods and the Restore NY program includes a
“clawback” provision requiring repayment of grant funds to NYS in the event the
project property is sold in the first 5 years, and
WHEREAS, total project debt on the Plantation Building is approximately $1.7 million
as of 2013, which exceeds the appraised value of the finished project, thereby
impeding ItalThai’s borrowing capacity to refinance and consolidate existing debt or
take out new line‐of‐credit or term debt, and
WHEREAS, the Restore NY loan, as currently structured, creates a significant obstacle
to the ItalThai, LLC financing repairs and building improvements during the 30‐year
term of the Restore NY3 loan, and
WHEREAS, the IURA developed the Restore NY3 funding application, administered
the Restore NY3 funds, loaned additional funds to the project to close financing gaps,
regularly monitors the project and manages a loan portfolio of approximately $4
million, and
IURA EDC Minutes
April 9, 2013
Page 5 of 9
WHEREAS, the IURA is better positioned than the City to administer the Restore NY3
loan and analyze future requests to modify collateral requirements and forgive the
loan to financially stabilize the project and facilitate future reinvestment in the
property while ensuring not more than a reasonable financial return on the owner’s
equity investment, and
WHEREAS, any assignment of the loan would transfer liability for compliance with
regulatory requirements, including the “clawback” provisions of the Restore NY3
program to the IURA, and
WHEREAS, Section 503‐a of GML authorizes assignment of the Restore NY3 loan from
the City to the IURA, and
WHEREAS, at their April 9, 2013 meeting the IURA Economic Development
Committee reviewed this matter and recommends the following; now, therefore, be
it
RESOLVED, that the IURA recommends that the City of Ithaca assign to the IURA the
$900,000 Restore NY3 loan to ItalThai, LLC, for the Plantation Building project located
at 130‐132 E. MLK Jr./E. State Street, and be it further
RESOLVED, that the IURA Chairperson, subject to review by IURA legal counsel, is
authorized to execute any agreement to accept assignment of the loan, and be it
further
RESOLVED, that ItalThai, LLC be responsible to pay any and all costs to implement an
assignment of the loan.
Carried Unanimously 3‐0
C. Review of March 2013 Lease & Loan Report
Bohn noted there has been an increase, over the past month, in the number of loans in
arrears:
Downtown Diane’s Automotive
Bohn noted he contacted the owner and scheduled a meeting with her. This is
probably the most troubling loan delinquency, since IURA staff has worked
extensively with the owner already.
IURA EDC Minutes
April 9, 2013
Page 6 of 9
Argos Inn
Bohn noted he met with the owner in early March 2013. Since then, half a payment
has been made, but the owner remains 2 payments behind. He noted that the
project was subject to numerous cost overruns, but the anticipated tax credit equity
would make up for those. The Inn does need to close on the tax credit transaction
soon though, since it cannot open for business until it does (or it would forfeit the
tax credits).
State Theatre
Bohn noted he has reached out to the theatre and is expecting a response shortly.
The theatre owes for February and March 2013. It currently has a particularly busy
schedule of shows/events (which is good). The Theatre operation is subject to
periodic mismatches between revenues and expenses due to the seasonal and
performance schedule that drives revenues. The Theatre tends to fall behind on
payments, and then become current following completion of several shows.
Bandwagon Brew Pub
Bandwagon is one month behind; it is semi‐regularly 30‐days delinquent, but ends up
paying with late fees.
Finger Lakes Wine Center
The Wine Center will most likely not be making any more payments.
Bohn announced that both e2e Materials and Lot 10 have now paid in full. The “Ithaca
Community Recovery” UDAG loan was also completely paid (515 E. Seneca Street).
Bohn recommended that the committee move into Executive Session, if it would like to
discuss the Finger Lakes Wine Center.
― EXECUTIVE SESSION ―
Tegan moved, seconded by Ackerman, to open the Executive Session at 4:01 P.M. to
discuss the financial and credit history of a particular corporation.
Carried Unanimously 3‐0
No action was taken during the Executive Session.
― Executive Session concluded at 4:08 P.M. ―
IURA EDC Minutes
April 9, 2013
Page 7 of 9
D. Loan Pipeline (& Associated Updates)
The Piggery
Bohn announced that the Piggery decided it does not need to construct the
slaughterhouse operations it had been considering, as slaughter services are now
available in the region. Its current plan is to convert their existing site to a USDA meat
production facility (with a butcher shop, but no longer a restaurant) ― about a
$900,000 project. IURA staff has been working with it to identify possible loan packages
(in concert with TCAD); and it appears the Piggery will proceed with applying for funding
assistance from TCAD and other lenders. The project looks promising.
Emmy’s Organics
Emmy’s is exploring relocating to 629 W. Buffalo Street (the former Providence Hobbies
location) and may seek $75,000 in IURA loan assistance.
Blue Stone Grill
Bohn announced the Blue Stone Grill continues to recover from its fire and is working
with a New York State Small Business Administration (SBA) advisor to develop a
business/recovery plan. IURA staff has also been working with the restaurant for
several months.
Harold’s Square
Bohn announced the developer acquired site control of four downtown buildings from
Trader K’s up to the Maté Factor for a mixed‐used 137‐foot tall, 11‐story building
project, including one story of ground‐floor retail, three stories of upper‐story office,
and six stories of residential. One issue of potential concern is whether the developer
will succeed in procuring enough office space tenants. The project it would certainly
have significant positive downtown impact.
Dylla asked if the developer plans to approach the IURA for funding assistance. Bohn
replied, it has not been mentioned yet, though individual business tenants may seek
financing assistance.
Ithaca Marriott Hotel,
Bohn noted that IURA staff is working with the Marriott Hotel, which is currently
negotiating with the City for parking space. The City is currently proposing leasing the
developer 90 spaces, which could be used by either hotel users or hourly users. Bohn
observed that, once all the current downtown development projects have been
completed, the Green Street Garage will be approaching capacity.
IURA EDC Minutes
April 9, 2013
Page 8 of 9
VI. HUD Entitlement Program
A. Review of IURA Proposed 2013 Action Plan
Bohn reported that all 4 economic development projects reviewed by the committee
received funding:
• Economic Development Revolving Loan Fund ($126,000)
• Greater Ithaca Activities Center (GIAC) — Hotel Employment Training Program (fully‐
funded)
• Historic Ithaca — Work Preserve & WP2 (fully‐funded)
• Downtown Ithaca Alliance — Downtown Construction Loan Program, to be funded
from existing Community Development – Revolving Loan Fund (RLF) pool
Bohn added that the Beechtree Care Center’s Lighting Upgrade project is proposed as a
combination grant/loan ($55,000 loan, repaid to the CD‐RLF).
Bohn observed that the IURA agreed to fund 20 of the 24 applications received.
B. Status Report on 2012 Economic Development Activities
Development of 5‐Acre Parcel in Cherry Street Industrial Park
According to the terms of the proposed purchase and sale agreement between the IURA
and the City, the IURA agrees to take possession of the property after the site has been
vacated by campers and cleared of temporary structures for 90 days. The City has
worked with campers and local homeless housing support groups, and the camper
voluntarily relocated off the site on March 18, 2013. DPW has since removed the
structures on the premises. The IURA is now in position to close on the property in
early summer so the IURA can now issue an RFP for acquisition and development of the
site.
VII. City Strategic & Comprehensive Planning
A. Review of Common Council‐Adopted 2013 Strategic Themes
Bohn reported that Common Council worked hard to create the 2013 Strategic Themes
and plans on working them into the budget process. He reviewed the document and
pointed out that there are several areas that relate directly to the IURA..
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April 9, 2013
Page 9 of 9
B. Review of Comprehensive Plan’s Preliminary Economic Vitality Goals
Bohn announced that the City’s Comprehensive Plan Committee has been in the process
of establishing its Chapter Groups and Chapter sub‐headings for the Comprehensive
Plan. He encouraged EDC members to communicate their comments or concerns with
the draft Economic Vitality Goals to the Comprehensive Plan Committee as soon as
possible, especially if they notice anything in document that appears missing.
To have a robust Downtown Area, Dylla observed, it needs to contain entrepreneurial
niches (e.g., restaurants, bookstores, crafts, etc.) that distinguish it from the ‘big box’
stores and their own commercial districts.
Ackerman observed that the singular ongoing concern she would like to focus on, in the
Downtown Area and other commercial districts, is the vacancy issue. The city should
not be seeing ⅓ or more of these locations vacant and/or turning over every 6‐12
months. The City should come up with an effective strategy to work with local landlords
to address this. Ackerman stressed that commercial space needs to be affordable to
support local business formation and expansion. It is not just housing that needs to be
affordable.
In terms of entrepreneurial development, Ackerman remarked, more work needs to be
done to ensure entrepreneurial start‐ups are intensively coached in the initial few
critical months of their business lifecycles.
Tegan observed that some people may be surprised to learn that there are a fair
number of software developers downtown. Perhaps specific attention should be given
to the less‐ or non‐visible businesses and “business‐to‐business” businesses in the
Downtown Area (e.g., what their needs are, how to attract more of them, etc.) Dylla
agreed, adding that home‐based businesses could be another focus area.
C. Other Business
Proposed Downtown Zoning Amendments
Bohn indicated the current Proposed Downtown Zoning Amendments are designed to
increase the development potential in downtown areas that are served by frequent
transit.
VIII. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, May 14, 2013)
The meeting was adjourned by consensus at 4:51 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.