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HomeMy WebLinkAboutMN-IURAED-2013-12-17Approved: X/X/13 108 E. Green Street Ithaca, New York 14850 (607) 274-6559 (607) 274-6558 (fax) DRAFT MINUTES ITHACA URBAN RENEWAL AGENCY Economic Development Committee (EDC) 3:30 PM, Tuesday, December 17, 2013 Common Council Chambers, 3rd Floor, City Hall, Ithaca, NY Present: Doug Dylla, Chris Proulx, Leslie Ackerman, Jennifer Tegan Excused: Heather Harrick, Heather Filiberto Staff: Nels Bohn, Charles Pyott Guests: Gary Ferguson, Downtown Ithaca Alliance (DIA), Executive Director Jeff Rimland, Rothschild Building, Owner Christopher Keller, KingPins of Ithaca, LLC, Chief Operating Officer/Majority Owner I. Call to Order Chairperson Dylla called the meeting to order at 3:38 P.M. II. Agenda Additions/Deletions ― None. III. Public Comments (3-minute maximum per person) ― None. IV. Review of Meeting Minutes: None V. Community Lending A. Request for KingPins of Ithaca, LLC for Loan Assistance from Priority Business Loan Fund to Establish 21‐Lane Family Bowling & Entertainment Center with Restaurant at 215 E. M.L.K., Jr./E. State Street (Upper Floor) Bohn explained the $150,000 loan request is for an entertainment venue, costing $1.6M for the core project, with an additional $1.1M invested by the landlord to upgrade the building (e.g., elevator and stairs) to make it more accessible from the Commons. The landlord has been trying to ‘reactivate’ the 28,000-SF space, which has been inactive for 5 years. Bohn noted the applicant launched a similar project on Long Island. A considerable amount of the base costing, financing, and operations planning for the proposed project was based on that facility. Ithaca Urban Renewal Agency IURA EDC Minutes December 17, 2013 Page 2 of 13 Bohn noted the IURA underwriter’s report includes management analysis and financial projections. In many ways, the applicant is trying to create a ‘third place’ in the community, between home and work, generally targeted towards a younger population. The business would create 20+ jobs, paying a range of wages (some living wage and some less), although all full-time positions would pay living wages. Bohn explained the request is contingent on $500,000 in State financing. 40% equity would be built into the project (including $350,000 from the bowling equipment vendor). Bohn indicated that both IURA staff and its consultant recommend approval, with some conditions. The debt-to-service ratio would be high and it will be very important for the project to adhere to its repayment schedule. The collateral would include personal guarantees from both principals, as well as the landlord, with the IURA in second lien position. One condition of the loan would require evidence of the equity invested in the project, as well as proof of lease and Building Permit. The applicant’s business and marketing plan generally seem sound. The critical issue would be the project’s overall feasibility and the underlying demand for it. Keller explained he has been in the bowling business for 30 years and owns two bowling alleys: a more traditional one and All-Star Lanes (where most of the application figures were derived from since it more closely models the proposed project). The proposed bowling alley would focus more of its programming on open play, families, students, than bowling leagues Dylla asked about the project’s marketing strategy. Keller replied it would comprise both general grassroots marketing and marketing for specific business-generating programs (e.g., small-group packages), including radio and television advertising. Dylla asked what kinds of foods it would feature. Keller replied, similar to standard pub-style food, but slightly more upscale, though reasonably priced. Proulx asked if the business would serve alcohol. Keller replied, yes. Proulx asked how the noise situation would be handled. Keller replied the site would have a soundproof sub- foundation and a soundproofed rear. He stressed there has never been a noise problem with his other projects. Proulx asked about the competition with the other two local bowling alleys. Keller replied those are oriented towards different markets (e.g., one of them is primarily league-based and more traditional). Ackerman asked how the revenue projections translate into actual customer volume. Keller replied the projections are based on revenue per lane; they are very conservative numbers. A single customer bowls two games on average. Keller would need to perform some minor calculations to translate the revenue projections into customer volume. Rimland added that the Riverhead location averages $30/person/visit, from which one could extrapolate the customer volume. IURA EDC Minutes December 17, 2013 Page 3 of 13 Bohn noted the market study examined the population of likely bowlers with a certain level of income. It determined the project would need 2,700 people per lane/per year and that Ithaca has a sufficient population to support that. Tegan observed that Ithaca once had both a lasertag facility and a miniature golf course, neither of which succeeded. She expressed skepticism the proposed project would succeed. Keller replied that bowling has been around a long time and generally has lasting universal appeal. Lasertag and miniature golf probably do not fall into quite the same entertainment category. He emphasized that a well-run bowling center can make considerable money. Tegan asked about the lasers and the big screens. Keller replied they would be drop-down screens which play video to accompany the music. The project could also feature a country music night, as well as glow-in-the-dark bowling for certain special events, parties, etc., both of which would draw customers on slower nights. Tegan asked if the applicant had connected with local entertainment representatives. Rimland replied he contacted Dan Smalls, who expressed considerable interest. Proulx observed it would be a mixture of entertainment activities and asked how flexibly the applicant could adjust the mix, if a particular mix did not succeed. Rimland replied the applicant is working on variety of flexible features. Keller added the project would be very flexible and the site configuration could be changed reasonably easily. Rimland noted that, while bowling would be the major draw, other features, like catering, parties, and other activities, would represent a large piece of the income and create enough volume to support the business. Tegan asked if the restaurant would feature local, organic, and/or natural foods. Rimland replied, yes. (That is already being done for approx. 80% of the menu at the Riverhead site.) Ackerman observed that day-to-day operating income would finance the project, but there is no cashflow contingency, so there would no leeway if revenues slipped. Earning even as much as 90% of projected revenue would appear to place the business in a significant negative cashflow situation. Rimland replied he would be the landlord, so if the business happened to need a line-of-credit, that could be done internally. He added the Riverhead bowling alley has never had to borrow. Dylla asked if the second-story location would make any difference to the project’s prospects for success. Rimland replied, no. There are numerous examples of viable businesses around the country on upper floors. IURA EDC Minutes December 17, 2013 Page 4 of 13 Ferguson noted the second-story location could actually be an asset. It is a better upper- story use than a first-floor use. It is also a highly-visible second-story location and the elevator directly from/onto Commons would provide a very interesting and attractive entry point. Proulx asked about the impact of the off-site/long-distance management of the facility and what measures the applicant would take to ensure effective management. Keller replied the general manager would be local, with other local people involved. Proulx asked if the applicant would hire locally. Keller replied they would focus on finding someone with industry experience, but would require that person to live locally. Bohn asked for an update regarding the State’s financing role. Rimland replied they would need to re-apply. Ferguson explained they were originally asked to submit the application to the State’s Community Revitalization Fund for downtown revitalization projects; however, the State subsequently decided it should be restructured as building loan, rather than a business loan. Rimland indicated he would restructure the proposal accordingly, which should not be an onerous process. Rimland’s own loan application would go towards the $1M of building improvements and the State loan would be used for the build- out. Rimland would then simply loan the money he receives from the State to the business. The State should be reviewing the application in January 2014. The prospects for approval seem good. The details just need to be worked out Bohn noted that the total financing amount would remain the same. The new proposal would simply shift the loan portion to the landlord. If EDC chooses to proceed, it could approve the resolution with a few added conditions. The State will likely base its analysis on the IURA loan, so the Committee should keep that in mind. He added the reconfiguration of the financing could possibly enhance the application, from the IURA’s perspective, since the loan applicant would be different. Tegan expressed continued reservations that the project does not seem very ‘Ithaca’ and would not be viable here, in the long-term. Dylla and Ackerman both agreed. Proulx observed there are a few gaps in Ithaca’s entertainment portfolio, which it is possible the project would fill, although he is not certain the targeted demographic is large enough. He likes the downtown location and the fact it would provide an alternative entertainment option for people on The Commons. Ferguson added that the DIA believes the project would be a tourism draw. He is confident the Marriott hotel next door to the project will eventually move forward. With all the other downtown hotels, the project would provide an additional entertainment option for all of those guests. IURA EDC Minutes December 17, 2013 Page 5 of 13 Proulx noted he would be far more concerned with the project’s prospects, if the applicant had no experience in the industry. Tegan asked if the project had been broadly publicized in the community. Rimland replied, no. Ackerman remarked she is unimpressed with the $8.00-$9.00/hour wage range. While IURA has not historically insisted that all jobs be living wage jobs, she would like to see what could be done to increase that. Moved by Proulx, seconded by Tegan: Loan Assistance from Priority Business Loan Fund to Establish 21‐Lane Family Bowling & Entertainment Center with Restaurant at 215 E. M.L.K., Jr./E. State Street WHEREAS, on November 4, 2013, KingPins of Ithaca, LLC (KingPins) applied for a $150,000 IURA loan for a $1.65 million project to convert 28,000 square feet of vacant upper-floor space at the Rothschild Building (215 E. State/E. MLK Jr. Street) into a new 21-lane family bowling, entertainment center with restaurant, and WHEREAS, the primary objective of the Ithaca Density District Priority Business Loan Fund (PB-LF) is to induce the creation, start-up and expansion of specific priority business enterprises in the greater downtown that have been defined by the community as highly desirable or substantially increases foot traffic thereby strengthening downtown vitality, and WHEREAS, at their November 12, 2013 meeting, the IURA Economic Development Committee determined that the proposed family entertainment bowling center project proposed by KingPins qualifies as an eligible business use for the PB-LF, and WHEREAS, Christopher Keller is the Chief Operating Officer and majority owner of KingPins of Ithaca, LLC, and WHEREAS, the project is modeled after All Star Lanes, a 28-lane bowling and entertainment center in Riverhead, New York that opened in 2012, and WHEREAS, the project is designed to create an entertainment venue catering to a wide variety of people, including college students and families, by offering bowling, billiard tables, ping-pong tables, video arcade games, party rooms, a full-service bar and restaurant, and IURA EDC Minutes December 17, 2013 Page 6 of 13 WHEREAS, the principal owner of the Rothschild building, and landlord to Kingpins, is Jeffrey Rimland who is also the principal investor in the All Star Lanes business on Long Island, and WHEREAS, the proposed uses of project funds are: $500,000 bowling equipment, including installation $300,000 kitchen equipment $250,000 furniture $200,000 audio/video system $120,000 pre-opening expenses $95,000 working capital $75,000 IT system $75,000 contingency $35,000 food and beverage inventory $1,650,000 Total, and WHEREAS, the proposed sources of project funds are: $650,000 equity $500,000 Jeffrey RImland $350,000 Qubica AMF vendor loan $150,000 IURA $1,650,000 Total, and WHEREAS, PB-LF financing policy establishes maximum loan amount of $150,000 for a business project provided the project creates at least one FTE job for every $35,000 of loan assistance, and WHEREAS, the project is projected to create at least twenty-one (21) full-time equivalent (FTE) employment positions, of which at least 51% will be filled by low- and moderate-income persons, and WHEREAS, the project is projected to create one FTE job per $7,150 of IURA loan assistance, and WHEREAS, the IURA particularly seeks to assist projects that generate living wage jobs ($12.62/hour plus health benefits or $13.94 w/o health benefits), fill vacancies, and assist minority and women-owned businesses (M/WBEs), and WHEREAS, KingPins projects that six (6) FTE positions (all full-time positions plus part-time bowling mechanics) will earn at least a living wage of $13.94/hour and seven (7) FTE service positions will earn tip income, and IURA EDC Minutes December 17, 2013 Page 7 of 13 WHEREAS, the second-floor lease space for the project has been vacant since 2010, and WHEREAS, the proposed project will locate in an existing building and IURA funding will not be used for any construction activities, therefore the project is a categorically excluded activity pursuant to 24 CRF 58.35(b)(4) of the National Environmental Protection Act (NEPA) and the loan constitutes a Type II action under the City of Ithaca Environmental Quality Review Ordinance, and is not subject to further environmental review, and WHEREAS, at their December 17, 2013 meeting, the IURA Economic Development Committee reviewed the loan application, a credit analysis prepared by H. Sicherman & Co., Inc. and applicable provisions of the IURA Economic Development Policy Guidelines and Operating Plan, and recommend the following; now, therefore, be it RESOLVED, that the IURA hereby approves a loan from the Ithaca Density District Priority Business Loan Fund (PB-LF) in accordance with the loan application, and supplemental submissions, subject to the following terms: Borrowers: KingPins of Ithaca, LLC, a New York State limited liability company established in 2013 Loan Amount: Up to $150,000 Project: Start-up of a a new 21-lane family bowling, entertainment center with restaurant at 215 E. State/E. MLK Jr. Street, Ithaca, NY. Total Project Cost: $1,650,000 Projected Use of IURA Funds: Equipment acquisition, including but not limited to audio/visual equipment. IURA funds may not be used for construction activities. Term: 87 months (7 years, 3 months) Interest Rate: 3.5% annually, reset to 2.5% upon submission of satisfactory job reports documenting that the job creation goal has been achieved for two consecutive quarters and borrower is in compliance with all other terms of the loan agreement. Repayment: Interest-only payments for 3 months, then level monthly principal and interest payments due to fully amortize the loan IURA EDC Minutes December 17, 2013 Page 8 of 13 over the remaining 84 month term (approximately $2,016/month). Collateral: 1. First security lien on all business assets (except as noted below) of KingPins including account, inventory, furniture, fixtures and equipment now owned or hereafter acquired. Bowling vendor, Qubica AMF, will hold a first security interest in the bowling equipment it is providing and financing. 2. Second security lien on bowling equipment financed by Qubica AMF. Personal Guarantor(s): 1. Personal guarantees of: (a) Christopher Keller, (b) Christopher Smith and (c) Jeffrey Rimland, joint and several. Job Creation Requirement: Creation of at least 21 (twenty-one) FTE employment positions of which at least 51% must be held by low- and moderate- income persons. Conditions: 1. Submission of proof of financing/equity commitment from Jeffrey RImland, or an affiliated entity, in the amount of at least $500,000 at terms satisfactory to the IURA. 2. Submission of evidence of availability of Mr. Keller’s equity commitment prior to loan closing. 3. Review and approval of the executed lease agreement between Ithaca Properties, LLC and KingPins of Ithaca LLC prior to disbursement of loan funds. 4. Submission of a building permit for the project prior to disbursement of loan funds. Reporting: 1. Annual submission of accountant-prepared federal and New York State tax returns. 2. IURA job reporting, including reporting on wage levels of jobs created. 3. Documentation of project match funding, including proof of equity investment. And be it further, RESOLVED, that the Director of Community Development for the IURA is authorized to issue a loan commitment letter in accordance with this resolution, and be it further IURA EDC Minutes December 17, 2013 Page 9 of 13 RESOLVED, that the IURA Chairperson, upon the advise of IURA legal counsel, is hereby authorized to execute all necessary and appropriate documents to implement this resolution. Carried Unanimously 4‐0 B. Update on Various IURA‐Assisted Economic Development Projects Bohn reported the Argos Inn resolved its major default issues: its insurance lapse on the collateral for the loan, its delinquency on taxes for the collateral property, and the lack of job reporting. It only needs to begin repaying the loan, which is tied to its closing on its historical tax credit and requires a final documentation of its costs. Bohn spoke to the Argos Inn accountant, who appears to be within a week of completing that process. Overall, the Argos Inn has been making positive steps. Bohn noted that the eLab Downtown Retail Support Program was required to submit its quarterly report by Thanksgiving and another report by January 2014, which it has done. It submitted its billing vouchers, including a fairly long summary of activities. It indicated it would be finished by January 2014 and would submit a more detailed schedule of benchmarks. Bohn noted it has now met its minimum requirements. Bohn reported there is no change in the status of the Neighborhood Pride grocery store. C. Review of November 2013 Lease & Loan Repayments Bohn reported that leases are current, as well as loans, except for the Argos Inn, as well as the Finger Lakes Wine Center, which still needs to be closed out. The State Theatre is behind two months, which Bohn is investigating. Bohn reported that the Ithaca Coffee Company opened its coffee-roasting facility on Hancock Street and expanded its operations on Triphammer Road, which seems to be working for them. It has asked to issue a joint press release or story with the IURA about how the IURA’s loan assistance helped it grow and provided a good opportunity for the city. D. Loan Pipeline Bohn reported that a potential loan applicant may be requesting gap financing for a small retail busines near The Commons. It is still negotiating site control and working with local banks. It would probably be a $50,000 loan application. Proulx asked what the available funds balance is for these kinds of projects. Bohn responded the IURA received $130,000 in loan repayments and began 2014 with around $400,000 available. It also received some lump-sum payoffs, making for a total of $500,000 available. IURA EDC Minutes December 17, 2013 Page 10 of 13 Dylla noted the Committee would receive a report on available funding resources next month. Bohn announced that the State awards funds on an annual basis through its Regional Economic Development Council, in a competitive process, and this year the Southern Tier was identified as a high-performer, which should translate into some form of grant for the local area. The winners would be eligible for $25M. The list of Southern Tier projects was long: • CORNELL UNIVERSITY START-UP INCUBATOR in the downtown area for transferring technology from the campus to the community • HOTSPOT PROJECT (3-YR) FOR ENTREPRENEURIAL ACTIVITY, sponsored by Binghamton University and and Corning Community College • Tompkins Cortland Community College was awarded $2.3M for ITS FARM-TO-BISTRO PROJECT, to be located under the Cayuga Street Garage. Tegan informed the Committee that another donor provided a commitment for an additional $2M to the farm-to-bistro project, which is great news. VI. Property Disposition A. Cherry Street Industrial Park Expansion – Authorize Execution of Listing Agreement to Market & Sell 6‐Acre Parcel Located at End of Cherry Street (Tax Parcel #100.‐2‐1.21) Bohn reported that he had a productive meeting with commercial broker, Steve Lipinski. Lipinski wanted to understand the IURA’s goals for the 6-acre parcel. Lipinski indicated that the best way to market the property will be word-of-mouth throughout the local business community, along with radio advertisements. Bohn noted the whole process is anticipated to take 12 months, given the multi-layered nature of the approval process. Lipinski proposed listing the property just under the assessed value. He also asked for an 8% commission, with a minimum $25,000. The commission would include any co- brokering costs. Bohn noted he believes Lipinski understands the whole review process, including the fact that the City and/or IURA could reject a proposal(s), even if is within the target price range. Bohn indicated one consideration had been whether 8% is a fair fee, since it seemed a little high, although it does include any co-brokerage fee(s). At this point, Bohn will ask IURA legal counsel to review the proposed agreement; but he would like the Committee’s conceptual agreement on the sale terms. IURA EDC Minutes December 17, 2013 Page 11 of 13 Moved by Ackerman, seconded by Tegan: Disposition of 6‐Acre Parcel at Southerly End of Cherry Street (Tax Parcel #100.‐2‐ 1.21) ― Authorize Listing Agreement with Stephen Lipinski Associates, LLC WHEREAS, on June 5, 2013, the City of Ithaca conveyed a 6-acre parcel at the southerly end of Cherry Street to the Ithaca Urban Renewal Agency (IURA) to market and negotiate a proposed sale of the property for economic development purposes, and WHEREAS, pursuant to terms of the purchase agreement with the City, the IURA agrees to solicit competitive proposals for purchase and development of the property in compliance with the following guidelines: - Sales price: seek fair market value - Use: economic development - Tax Status: taxable, and WHEREAS, the parcel is located within the Urban Renewal Project Boundary area, and WHEREAS, pursuant to §507 of the General Municipal Law, the City is authorized to dispose of real property through the IURA to a qualified and eligible sponsor (a/k/a preferred developer) at a negotiated sales price for a specific end use, following publication of a notice disclosing the terms of the proposed sale and a public hearing and approval by the Common Council of the proposed sale, and WHEREAS, issuance of a Request for Expression of Interest (RFEI) in summer 2013 and pro-active marketing to nearby business owners did not result in any responses to the RFEI, and WHEREAS, the Economic Development Committee (EDC) recommends listing the property for sale with a commercial real estate broker with the understanding that purchase proposals will still be evaluated for post-acquisition community and economic development benefits and that any purchase agreement is subject to IURA approval and Common Council endorsement, and WHEREAS, proposals to market and list the property for sale were received from the following commercial real estate brokers: • Lama Company • Pyramid Real Estate • Stephen Lipinski Associates, LLC, and IURA EDC Minutes December 17, 2013 Page 12 of 13 WHEREAS, at their November 12, 2013 meeting the EDC evaluated proposals and rated Stephen Lipinski Associates LLC as their top choice based on recent transaction history, approach to marketing the property and knowledge of the local business community, and WHEREAS, at their December 17, 2013 meeting the EDC reviewed a draft Exclusive Authorization to Sell Listing Agreement from Stephen Lipinski Associates LLC and recommends the following, now; therefore, be it RESOLVED, that the IURA hereby authorizes the IURA Chairperson, subject to review by IURA legal counsel, to execute an Exclusive Authorization to Sell Listing Agreement with Stephen Lipinski Associates LLC for marketing and sale of a 6-acre parcel located at the southerly end of Cherry Street (tax parcel #100.-2-1.21) subject to satisfactory resolution of the following issue: 1. Clarification that a fee is not triggered if a purchase proposal is not approved by the IURA and endorsed by the Common Council, and be it further RESOLVED, that should mutually agreeable terms not be reached with Stephen Lipinski Associates, LLC, then the EDC is authorized to negotiate contract terms with the next highest rated commercial real estate broker to list the property. Carried Unanimously 4‐0 VII. Other Business Proulx brought up the issue of the living wage and asked what the general discussion has been in the past about the IURA’s requirements for a living wage for its loans. Bohn replied a living wage has certainly been a goal. The IURA routinely asks its applicants questions about the issue, but it is also cognizant the size of its loans is generally not large enough to influence most applicants’ wage structure. IURA loan terms are not significantly better than banks’ to compel an applicant to pay living wages; however, general verbal discussions with applicants have been productive, to some extent. The IURA could probably make more of an impact through minor requirements. Bohn added that one complication associated with the issue is that tip income, such a large proportion of many IURA-funded projects, is hard to identify. Bohn suggested the IURA could conceivably reduce its interest rate, in exchange for a binding agreement to pay a living wage. IURA EDC Minutes December 17, 2013 Page 13 of 13 VIII. Staff Report None. IX. Adjournment (Next Meeting Date: 3:30 PM, Tuesday, January 14, 2014) The meeting was adjourned by consensus at 5:01 P.M. — END — Minutes prepared by C. Pyott, edited by N. Bohn. j:\community development\admin files\minutes\edc\2013\edc minutes 12-17-13 - unfinished draft.doc