ACTION REQUESTED:
Title
Communication from the City Manager and Corporation Counsel with a Request to APPROVE the THIRD AMENDMENT to the Revised REDEVELOPMENT AGREEMENT and PARKING DECK LEASE with OSF HEALTHCARE SYSTEM and 124 ADAMS PROPERTY HOLDINGS, LLC.
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BACKGROUND:
On August 27, 2019, the City of Peoria approved a Revised Redevelopment Agreement with OSF Healthcare Systems (OSF). OSF and Caterpillar formed 124 SW Adams, LLC to redevelop the Block and Kuhl department store building, originally built in 1905 into the OSF Ministry Headquarters. The cost of the Project was approximately $127 million. The OSF Ministry Headquarters consists of collaborative administrative office space housing medical professionals, financial and legal professionals, as well as C-suite officers, among others. In total, it is anticipated that approximately 700 OSF employees will occupy and utilize the former Block and Kuhl Building to provide support services for OSF Healthcare professionals and outpatient centers throughout the Midwest.
The Project also includes site amenities that benefit not only the OSF Mission Partners but the Downtown public. The former Caterpillar Merchandise Center has been renovated into a Great Harvest Bread Company with a public facing coffee shop. The former A&P grocery store at the corner of Washington and Fulton will be renovated into a public facing steakhouse called Saffron Social. Redevelopment of the former Block and Kuhl Building has created more than 300 construction jobs. It is anticipated that OSF Mission Partners will provide an impact of over $2 million per year to Downtown Peoria through increased economic activity.
Construction of the Project began in 2019. OSF began moving employees into the building in January 2022 and it is anticipated that all construction will be completed on the Project by December 31, 2022.
The Redevelopment Agreement anticipated approximately $127 million worth of investment by OSF Healthcare. As part of that Agreement, $1 million was anticipated to be spent on public improvements around the block. When construction began, the City determined that the corner of Adams and Fulton needed to be modified to accommodate the conversion to two-way traffic. Further, due to the staging of construction, it was advantageous for OSF to finance the planned reconstruction of the Southwest-bound lanes of Washington Street from Main to Fulton as part of their construction activities. The Washington Street improvements are currently planned for 2024.
On July 27, 2021, Council approved a First Amendment to the Redevelopment Agreement that determined these additional public improvements were to be part of the Project designed and/or constructed by OSF. It was determined that the cost (up to $1.25 million) would be reimbursed by the City and those funds would come directly from the Central Business District TIF.
On August 23, 2021, Council approved a Second Amendment to the Redevelopment Agreement acknowledging that increased construction costs had pushed public improvements from (up to) $1.25 million to (up to) $1.5 million. The increased costs were determined to be TIF eligible and the funds came from the Central Business District TIF.
Extensive life-safety renovations have been completed to bring the building into compliance with all fire safety codes. Recently, it was determined that an additional $750,000 was needed to complete the fire suppression upgrades. The purchase and installation of this equipment is a TIF eligible expense. The parties have determined that to the extent there are any funds remaining from the previously allocated funds for public improvements, the fire suppression system will also be considered a public improvement.
The attached Third Amendment deems the fire suppression cost TIF eligible. The Amendment does not increase any amounts previously authorized for the project.
FINANCIAL IMPACT: No impact to already approved project budget.
NEIGHBORHOOD CONCERNS: The OSF Redevelopment is a significant improvement to the Central Business District.
IMPACT IF APPROVED: OSF will make the additional improvements.
IMPACT IF DENIED: OSF and the City will have to locate a different revenue stream to pay for public improvements.
ALTERNATIVES: N/A
EEO CERTIFICATION NUMBER: N/A
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2017 - 2032 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Financially Sound City
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Grow employers and jobs.
DEPARTMENT: City Manager's Office