ACTION REQUESTED:
Title
Communication from the City Manager with a Request for the Following:
A. ADOPT an ORDINANCE Approving the LEWIS HOUSE LLC REDEVELOPMENT AGREEMENT (1st District); and
B. ADOPT an ORDINANCE Amending the City of Peoria 2016/2017 BIENNIAL BUDGET Relating to the Use of South Village Growth Cell TIF Funds to be Transferred to the East Village Growth Cell TIF Fund for the Lewis House LLC Development Agreement.
Body
BACKGROUND: Conn Hospitality Group of Springfield, IL (doing business as Lewis House, LLC) has plans to invest approximately $3.2 million to renovate 321 NE Madison into an “Obed & Isaac’s,” a combination microbrewery, restaurant and tavern. This will be the second “Obed & Issac’s” location in Illinois; their first location is a very popular and successful business in downtown Springfield.
The property was built as 2nd Presbyterian Church but has more recently been referred to as the “Cornerstone Building.” Its most recent use was as a banquet facility. The building is a contributing structure in the Northside National Historic District. The project includes the complete renovation of the church sanctuary into a 200-seat restaurant and tavern; construction of a 15-barrel brewhouse behind the building; and construction of an outdoor dining area and bocce ball courts. The budget for the renovation alone is nearly $1.6 million. In addition to the capital investment, Conn Hospitality expects to employ at least 80 full time equivalents and have an annual payroll in excess of $2 million.
The project is financed through a mix of sources, including a conventional bank loan of $2.7 million and $300,000 in private equity. City staff have review the project financials and there is still a gap of about $200,000. To close this gap, the City has worked with Conn Hospitality to provide an advance of $200,000 against future property tax increment rebate. The attached Redevelopment Agreement outlines a process by which the City would advance the developer $200,000 in TIF funds. The loan would be repaid, at 4% interest, through the incremental property tax generated by the project. Staff estimates that the investment will generate in excess of $60,000 in new property taxes. Each year, 50% of the increment will be applied to the loan. With no calculation of property value inflation or an increase in the property tax rate, staff projects the loan would be repaid within 8 years. The agreement further limits the ability of property values to be protested below a level that would generate sufficient revenue to repay the advance. The loan proceeds are not made available until all financing for the project is secured. Furthermore, half of the loan proceeds are withheld until the entire project is complete.
Once completely repaid, the developer will be entitled to a rebate of 50% of increment. This rebate is used to reimburse Conn Hospitality for the eligible costs of renovating the property.
FINANCIAL IMPACT: The City will loan the project $200,000 from East Village Growth Cell TIF. The loan is repaid at 4% interest through the capture of 50% of incremental property taxes. Since the East Village Growth Cell does not have a fund balance of $200,000, the attached ordinance approves a transfer of $200,000 from the South Village TIF Fund. As the loan is repaid at interest, those funds will be transferred back to the South Village TIF. The 50% balance of funds not applied to the loan or rebated to the developers will be retained in the East Village Growth Cell TIF.
The new business is expected to generate significant sales tax and restaurant tax for the City of Peoria.
NEIGHBORHOOD CONCERNS: Redevelopment of buildings in downtown is a widely held community goal.
IMPACT IF APPROVED: The Redevelopment Agreement will be approved and the project will proceed.
IMPACT IF DENIED: The Redevelopment Agreement will not be approved and the project may be reduced in scale or delayed.
ALTERNATIVES: Council could direct staff to adjust the terms of the Redevelopment Agreement.
EEO CERTIFICATION NUMBER: Not applicable.
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Vibrant Downtown: Riverfront/ Central Business District/ Warehouse District
2. Grow Peoria: Businesses, Jobs and Population.
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Reinvest in neighborhoods.
2. Grow employers and jobs.
DEPARTMENT: City Manager's Office