ACTION REQUESTED:
Title
Communication from the City Manager with a Request for the Following:
A. ADOPT an ORDINANCE Approving the EPIC PEORIA LLC and MIDWEST CLIMBING AND FITNESS LLC REDEVELOPMENT AGREEMENT.
B. ADOPT an ORDINANCE Amending the City of Peoria 2016/2017 BIENNIAL BUDGET Relating to the Use of the Warehouse District TIF Fund Balance. (Council District 1)
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BACKGROUND: EPIC Peoria LLC (property owner) and Midwest Climbing and Fitness LLC (business operator) are, collectively, a group of local investors who are seeking to convert a portion property at 927 SW Washington into an indoor climbing gymnasium. They intend to subdivide and purchase the northeastern half a property owned by Haggerty Industrial Supply. The southwestern portion was recently renovated by Haggerty and serves as their showroom and retail operation. The group will renovate and expand the current 13,000 square foot building with a tower addition in the rear that will bring the total square footage to approximately 19,000 square feet. The business will focus on indoor rock climbing and bouldering, but will also include traditional fitness equipment, fitness classes and a small retail area. Indoor climbing gyms is a growing business model and have become very popular. The closest operation to Peoria is in Bloomington, IL. The investment group and City staff have been working on this project for over a year and a half. The developer has investigated a number of sites in Peoria and elsewhere in the region and have determined this location in the Warehouse District best meets their needs. They have worked diligently to arrange financing.
The total project cost is approximately $3.8 million. It is financed through a mix of sources, including a conventional bank loan, owner equity, private investment dollars and equity generated from historic tax credits. City staff have reviewed the project financials and there is still a gap of $360,000. To address this gap, City staff studied the property tax increment that would be generated by a completed development. The developer provided their bank-ordered property appraisal, and in consultation with the Peoria Township Assessor, we have conservatively estimated that the project will pay $63,726 in property taxes. Of that amount, $59,754 will be increment deposited in the Warehouse District TIF Fund.
Historically, the City has been willing to rebate a developer 50% of the incremental property taxes generated by an investment. As was done with Winkler Lofts and Obed & Isaac’s, staff is suggesting provision of an “advance” of this rebate in the form of an upfront loan of $360,000. The loan is repaid by withholding the 50% rebate over the remaining 12 years of the TIF. Once the loan is repaid, the developer is not entitled to any further incentive. 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 as evidenced by a Certificate of Occupancy.
FINANCIAL IMPACT: The City will loan the project $360,000 from Warehouse District TIF fund balance. The loan is repaid over the next 12 years by withholding the 50% rebate of incremental property taxes that would normally be available for developers. Increases in property values and the property tax rate over the next 12 years helps ensure the loan will be repaid. However, two additional securities are in place. First, the agreement bars the developer from protesting the property’s valuation below the level necessary to meet the loan obligation. Second, should any loan balance remain at the end of the Warehouse District TIF, the balance will need to be repaid. The agreement is binding on all successors.
In addition to the incentive outlined above, the development will create a new business in Peoria that will be a regional draw. They intend to employ 10 or more full time employees and will generate sales taxes and amusement taxes.
NEIGHBORHOOD CONCERNS: Redevelopment of buildings in the Warehouse District 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, delayed or cancelled.
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
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Reinvest in neighborhoods.
DEPARTMENT: City Manager's Office