HomeMy WebLinkAboutMN-IURAED-2018-04-17Approved: 6/14/18
108 E. Green St.
Ithaca, NY 14850
(607) 274-6565
MEETING MINUTES
ITHACA URBAN RENEWAL AGENCY
Economic Development Committee (EDC)
3:30 PM, Tuesday, April 17, 2018
Common Council Chambers, City Hall, Ithaca, NY
Present: Chris Proulx, Chair; Doug Dylla, Vice‐Chair; Leslie Ackerman
Excused: Heather Harrick; Charles Hamilton
Vacancies: 1
Staff: Nels Bohn; Anisa Mendizabal; Charles Pyott
Guests: Terri Miller, Madeline’s
Scott Miller, Madeline’s
I. Call to Order
Chair Proulx called the meeting to order at 3:31 P.M.
II. Agenda Additions/Deletions
Bohn noted the Neighborhood Investment Committee (NIC) recently completed its 2018 Action
Plan recommendations, which the Committee could discuss, time permitting.
III. Review of Meeting Minutes: March 27, 2018 (Special Meeting)
Dylla moved, seconded by Ackerman, to approve the March 27, 2018 minutes, with one minor
modification.
Carried Unanimously 3‐0.
IV. New Business
A. Restore NY4 ― Request from PPM Homes, LLC to Modify Proposed Seneca/Corn St. Buildings
Rehabilitation Project
Bohn explained the project was originally awarded $500,000, which included both the former
Wylie Dry Cleaning and Ithaca Glass buildings; however, a subsequent investigation of the sub‐
surface conditions of the Ithaca Glass building revealed the building footers are undersized and
insufficient to support an overbuild so the project would require reconstructing much of the
foundation and building. As a result, the applicant proposes concentrating solely on that site,
including demolition and reconstruction, which would house 10 living units. Should the modified
project proposal be approved today, it would require approval of Common Council and New York
State that the revised project would have scored high enough to receive funding.
Ithaca
Urban
Renewal
Agency
IURA EDC Meeting Minutes
April 17, 2018
Page 2 of 9
Dylla asked if New York State would likely be amenable to the revised project. Bohn replied it has
been amenable to similar projects in the past and the amount of private investment ($4 million)
remains the same. It also increases the number of living units to ten, although it no longer
redevelops two buildings. He added there is also some suspected sub‐surface contamination at
the Wylie Dry Cleaning site, which may have created a future delay in that portion of the original
project.
Dylla moved, seconded by Ackerman:
Approve ModificaƟon to Restore NY4 Project ― Seneca/Corn Street Buildings RehabilitaƟon
WHEREAS, PPM Homes, LLC requests to modify their Restore NY4 project to address feasibility
issues, and
WHEREAS, on February 9, 2017, the Empire State Development awarded a $500,000 Restore
NY4 grant to the City of Ithaca for the Seneca/Corn Street Buildings Rehabilitation project
sponsored by PPM Homes, LLC, and
WHEREAS, the funded project included rehabilitation of the existing buildings located at 109 N.
Corn Street and rehabilitation and vertical addition to the building located at 413‐415 W.
Seneca Street, and
WHEREAS, subsurface and structural investigation at 413‐415 W. Seneca Street revealed the
need for expensive structural modifications that rendered the original project economically
infeasible, and
WHEREAS, PPM requests approval for a modified Restore NY4 project for reconstruction at
413‐415 W. Seneca and exclusion of the 105 N. Corn Street building from the Restore NY4
project, and
WHEREAS, the modified project proposes to demolish the existing building at 413‐415 W.
Seneca Street and reconstruct an 11,500 sq. ft., three story building with 15% commercial
space and ten residential rental units, and
WHEREAS, two ground floor commercial spaces of the live/work units will front on W. Seneca
Street, and
WHEREAS the following table compares the proposed modified project to the original project:
RESTORE NY4 SCORING
CRITERIA Original Project Modified Project
Commercial Investment $4,094,000 $4,001,000
Revitalize Urban Center Rehabilitate 2 vacant Reconstruct 1 vacant building
IURA EDC Meeting Minutes
April 17, 2018
Page 3 of 9
buildings
Improve Local Housing 6 units (12 beds) 10 units (16 beds)
Leverage PACE financing YES YES
Leverage NYSERDA YES YES
WHEREAS, the modified project achieves similar public benefits and Restore NY4 scoring
criteria, and the sponsor confirms project readiness for the modified project, and
WHEREAS, a modification to the RestoreNY4 project requires approval by the Common Council
and Empire State Development, and
WHEREAS, the IURA administers the RestoreNY4 award on behalf of the City, and
WHEREAS, the IURA Economic Development Committee has compared the proposed modified
Restore NY4 proposal against the original proposal for RestoreNY4 scoring and community
benefits, now, therefore, be it
RESOLVED, that the IURA hereby recommends Common Council approval of the modified
Restore NY4 proposal submitted by PPM Homes, LLC for 413‐415 W. Seneca Street for
submission to Empire State Development.
Carried Unanimously 3‐0
V. Community Loans
A. Priority Business Loan Fund ― Request from Delante, LLC for Loan Modification Including
Release of Security Lien & Partial Loan Pay‐Off
Bohn explained that the applicant is asking to modify the existing loan to include a partial pay‐off
and a continuation of the remainder of loan to be paid on the same schedule, with a planned
change of ownership for the restaurant.
Terri Miller reported she has been negotiating with the landlord about the assignment of the
lease. She has accepted the business asset purchase offer from a new restaurant owner, which
would go towards paying off a portion of the debt.
Dylla asked the applicant to elaborate on what she meant when she mentioned the restaurant’s
business model is no longer viable. Terri Miller replied that those downtown restaurants that are
doing well are generally casual dining establishments, which have lower price‐points. The fine
dining model, on the other hand, has been slowly deteriorating and it is not enough to sustain
Madeline’s day‐to‐day business. The new owners have considerable experience with a more
casual dining format.
IURA EDC Meeting Minutes
April 17, 2018
Page 4 of 9
Scott Miller added the new owners would invest a lot of money into the property. They are well‐
funded and are long‐term community members. They would arguably be better tenants than
Madeline’s ― Madeline’s simply does not have the capital to invest further in the restaurant.
Ackerman moved, seconded by Dylla:
Loan Assistance to Delante Inc. dba Madeline’s Restaurant (PB‐LF #7)
WHEREAS, on April 4, 2018, Delante, Inc. (Madeline’s) requested approval for a loan
modification, and
WHEREAS, the owners have determined that Madeline’s business model is no longer viable
and seek to sell business assets of Delante, Inc. to a new restaurateur who will assume the
lease and open a different restaurant, and
WHEREAS, on November 30, 2015, the IURA issued a loan of $150,000 to Delante Inc.
(Madeline’s) for a $470,000 project to refinance existing debt, acquire new fixtures and
equipment, and renovate the Madeline’s restaurant located at 215 E. State/MLK Jr. Street,
and
WHEREAS, the IURA loan is secured by a 2nd lien on business assets, a 2nd mortgage lien on
property located at 106‐112 S. Cayuga Street and personal financial guarantees of the
owners, and
WHEREAS, Madeline’s satisfied its obligation to create 3 full‐time equivalent employment
positions, and is current on loan repayments, with an outstanding principle balance of
$120,342.80 as of March 31, 2018, and,
WHEREAS, an Asset Sales Agreement was executed on March 1, 2018, subject to IURA
consent, at a sales price of $420,000, and
WHEREAS, the net proceeds from the asset sale is insufficient to fully pay all existing and
projected financial obligations, the borrower proposes the following use of proceeds:
$248,000 payoff bank SBA loan
61,000 partial payoff of IURA loan
$50,000 payoff of revolving credit used to fund Madeline’s
$17,000 accounts payable due to vendors
$4,000 legal and closing fees
$40,000 set aside toward $84,000 capital gains tax due 4/19
$420,000 Total, and
WHEREAS, the borrower proposes to continue to make monthly loan repayments of
$1,954.31 to the IURA until the loan is repaid in full, and
IURA EDC Meeting Minutes
April 17, 2018
Page 5 of 9
WHEREAS, following the asset sale, the approximately remaining $60,000 balance of the
IURA loan would be secured by a 2nd mortgage lien on 106‐112 S. Cayuga Street behind
Tompkins Trust Company and personal financial guarantees of the owners, and
WHEREAS, the current collateral value of the 2nd mortgage is estimated by staff to be
sufficient to secure the remaining IURA loan balance, and
WHEREAS, the personal financial guarantees provide supplemental loan security, and
WHEREAS, the orderly transition to a new restaurant at 215 E. State/MLK Jr. will maintain
street level vitality downtown, and
WHEREAS, the IURA Economic Development Committee reviewed this matter at their April
17, 2018 meeting and recommend the following; now, therefore, be it
RESOLVED, that the IURA hereby approves the loan modification as requested and consents
to the asset sale (and release of the UCC‐1 security filing on business assets of Delante Inc.)
that will pay down the IURA loan by at least $61,000 and continue current monthly loan
payments until the IURA loan is repaid in full; and be it further
RESOLVED, that the IURA Chairperson, upon the advice of IURA legal counsel, is hereby
authorized to execute all necessary and appropriate documents to implement this resolution.
Carried Unanimously 3‐0
B. Restore NY3 ― Request from Italthai, LLC to Recharacterize Restore NY Loan as Grant &
Discharge Mortgage Lien on 130‐132 E. M.L.K., Jr./State St.
Bohn explained the original grant was converted into a loan at the applicant’s request, which the
applicant would now like to convert back into a grant. The project has been completed and the 5‐
year regulatory period for the historic tax credits has expired, so now would be an appropriate
time to consider such a request. The overall project has been successful from a community‐wide
perspective, although it did not perform financially quite as well as the applicant hoped due to
extensive cost overruns in the building rehabilitation and delays in securing historic tax credit
approval. The IURA received a legal opinion establishing there is nothing inappropriate to approve
this request. IURA legal counsel has reviewed the legal opinion letter and is satisfied with its
analysis.
Dylla asked if there were any precedents for this action. Bohn replied he is not aware of any and
the legal opinion did not cite any. The legal opinion simply analyzed the legal code. However,
every other Restore NY project has been treated as a grant, so there is ample precedent for
providing Restore NY assistance in the form of a grant.
IURA EDC Meeting Minutes
April 17, 2018
Page 6 of 9
Ackerman moved, seconded by Dylla:
Restore NY3 ― Recharacterize Restore NY3 Loan to Italthai, LLC as Grant
WHEREAS, on January 31, 2018, Italthai, LLC requested that the $900,000 Restore NY3 loan
to Italthai, LLC be forgiven and re‐characterized back to its original grant status, and
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).
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 $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 NY III 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 partially 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 NY 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 at least $550,000, and
WHEREAS, injecting Restore NY3 financial assistance into the project in the form of a loan
instead of a grant does not reduce the eligible tax basis, and
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, and
IURA EDC Meeting Minutes
April 17, 2018
Page 7 of 9
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 on January 13, 2013 the Italthai, LLC loan was assigned from the City to the IURA,
and
WHEREAS, it has now been over seven years since the mixed‐use project has now been
successfully completed with a new ground floor restaurant, 16 FTE new jobs created, 8 new
housing units created of which two are occupied by low‐and moderate‐income households
at affordable rents, and
WHEREAS, the project has upgraded safety for the Commons through installation of fire
sprinklers and an upgraded water supply in the building and converted a vacant
underutilized building into a vital storefront with upper story housing, and
WHEREAS, the project ultimately cost $3 million, with a $500,000 cost overrun that was
absorbed by the project sponsor, and
WHEREAS, the original project financing was underwritten with Restore NY funds provided
as grant funding, which resulted in a projected 5% cash‐on‐cash return before cost overruns,
indicating that the developer will not receive a windfall profit if the loan of Restore NY loan is
forgiven, and
WHEREAS, both the Restore NY and federal and state historic tax credit programs have
minimum 5‐year compliance periods that expired in 2016, and
WHEREAS, every other recipient of Restore NY‐assisted projects in the City of Ithaca have
received Restore NY assistance in the form of a grant, and
WHEREAS, Italthai LLC has submitted a legal opinion letter concluding that discharge of the
mortgage and re‐characterization of the loan as a grant would not create any liability to the
IURA regarding applicable historic tax credit provisions, and
WHEREAS, at their April 17, 2018 meeting, the IURA Economic Development Committee
reviewed this matter and recommends the following; now, therefore, be it
RESOLVED, that the IURA hereby grants the request from Italthai, LLC to re‐characterize the
Restore NY3 loan as a grant thereby forgiving the $900,000 Restore NY3 loan and discharge
the mortgage securing the loan, and be it further
RESOLVED, that discharge of the mortgage is subject to payment of Italthai, LLC of all IURA
legal fees in this matter, and be it further
IURA EDC Meeting Minutes
April 17, 2018
Page 8 of 9
RESOLVED, that the IURA Chairperson, subject to review by IURA legal counsel, is authorized
to execute any and all documents to implement this resolution.
Carried Unanimously 3‐0
VI. Old/Other Business
A. NYS Small CiƟes CDBG ― Policy Change to CDBG Program Income Guidelines
Bohn reported the IURA recently received a letter from New York State:
“This letter is to announce a change in policy regarding retention of Community
Development Block Grant (CDBG) program income by current and past recipients of the
CDBG Program administered by New York State since the start of Program Year 2000. CDBG
program income includes any proceeds generated by the use of CDBG funds, regardless of
whether the grant that generated the program income is open or closed, and must be used
in compliance with CDBG rules. Under CDBG program income rules at 24 CFR 570.489(e),
the State can choose to allow recipients to retain and reuse the program income subject to
all CDBG requirements, or to require it to be returned to the State and reallocated under
the State's Method of Distribution.
In the past, the Housing Trust Fund Corporation (HTFC), the funding mechanism for the
Office of Community Renewal, allowed Recipients to retain and reuse the program income
for additional CDBG activities, including after grant closeout, subject to annual reporting.
Under 570.489(e)(3)(ii)(A), the State may require recipients to return program income if it
determines that recipients are unable to utilize funds in full compliance with program
requirements or the funds are "unlikely to be applied to continue the activity within the
reasonably near future." Compliance questions related to the accumulation, reuse and
reporting of program income by local recipients has resulted in audit findings that the State
is required to address. Due to these audit findings, HTFC will require all past and present
local recipients of the State's CDBG Program (since the year 2000) to return any
uncommitted program income in their possession on March 31, 2019 or received after that
date.”
Bohn explained the City of Ithaca participated in the NY Small Cities CDBG program in 2000, 2001,
and 2003. It funded numerous programs over that time, only one of which produced Program
Income ― a $665,000 loan to the Hilton Garden Hotel, which has been steadily repaid and has
accumulated $520,000 in unused funds for the IURA. The IURA will either need to spend that
money by the March 31, 2019 deadline, or return it to the State. Furthermore, the IURA would
need to return any further Program Income from the loan that it receives after that date. As a
result, the IURA will need to consider what the best eligible use of the funds would be (public
facilities, affordable housing, or economic development). The IURA would also need to submit the
proposed use of funds to Common Council for approval.
IURA EDC Meeting Minutes
April 17, 2018
Page 9 of 9
Proulx suggested making a large contribution to the Community Housing Trust Fund. Bohn replied
that may be possible, as long as the IURA identifies a specific CDBG‐eligible project where
contingencies and environmental review will be completed by the March 2019.
B. 2018 AcƟon Plan ― Neighborhood Investment Committee (NIC) Recommendations
Proulx noted that NIC did not recommend funding the Re‐Entry Hub Ground Works program,
which was consistent with EDC’s recommendation. It also partially funded the Hospitality
Employment Training Program (HETP) program, which was similar to what EDC recommended. The
only difference is that EDC was going to fully fund the Food Entrepreneurship Program (FEP).
Dylla remarked he would personally like to see more funding for FEP than NIC suggested.
C. IURA Loan & Lease Payments Report: March 2018
Bohn reported all leases and loans are current. The grants summary shows two red “No’s.” Both
the GIAC Wading Pool and Spencer Road Sidewalks projects are moving forward, but they
represent large funding amounts, which need to be expended by June 1, 2018, to comply with
HUD spend‐down requirements.
D. Staff Report
Bohn reported that Liquid State Brewing met its job‐creation goal of 2.5 FTEs, having created 3
full‐time positions, so they will be released from further job‐reporting requirements.
Bohn noted the State Theatre will be submitting a loan application to fund the merger of its ticket
office into the rest of the theatre space to create a larger concession area.
Bohn also met with potential loan applicant, D.P. Dough, which wants to upgrade its facility and
move towards the front of Press Bay Court.
VII. Adjournment
The meeting was adjourned by consensus at 5:00 P.M.
— END —
Minutes prepared by C. Pyott, edited by N. Bohn.