ACTION REQUESTED:
Title
Communication from the City Manager and Interim Corporation Counsel with a Request for the Following:
A. ADOPT an ORDINANCE Amending the City of Peoria 2022 REVISED ANNUAL BUDGET Relating to the Use of the Central Business TIF Fund Balance to Reimburse OSF HEALTHCARE SYSTEM and 124 ADAMS PROPERTY HOLDINGS, LLC up to $1,500,000.00 for Public Improvements to the Corners of FULTON STREET, ADAMS STREET, and WASHINGTON STREET; and,
B. APPROVE the SECOND 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.
Due to increased construction costs, the aforementioned work now has an estimated cost of $1.5 million. The attached Second Amendment to the Redevelopment Agreement would treat these additional costs as TIF eligible expenses. These funds would also come from the Central Business District TIF.
The balance of the block is owned by OSF Healthcare and would still be part of future negotiations between the City and OSF regarding a mixed use development on the balance of the block to be completed within the next 3-5 years.
FINANCIAL IMPACT: The estimated investment by OSF in the building is approximately $127 million. The City will see the portion of Washington Street adjacent to the OSF Project improved 2 years ahead of schedule. The Downtown TIF has sufficient funds to repay OSF an additional $250,000 for the planned improvements.
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: Washington Street improvement will have to wait until 2024.
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