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HomeMy WebLinkAboutLBRA MINUTES 2013-01-30MINUTES OF THE SIXTH MEETING OF THE CITY OF LIVONIA BROWNFIELD REDEVELOPMENT AUTHORITY The sixth meeting of the Brownfield Redevelopment Authority of Livonia was called to order at 5:02 p.m. on Wednesday, January 30, 2013, by Chairman Jack Engebretson. MEMBERS PRESENT MEMBERS ABSENT: Jack Engebretson, Chairman Lynda Scheel, Vice Chairman Joe Taylor, Treasurer Ashley Krueger, Secretary Paul Condon Ken Harb Enrico Soave Jim Cambridge Bill Fried OTHERS PRESENT: Jack Kirksey, Mayor Mark Taormina, Planning & Economic Development Director Michael Slater, Director of Finance Michael Fisher, Assistant City Attorney Karl Zarbo, Livonia Phoenix, L.L.C. Margie Watson, Program Supervisor, Planning Department ROLL WAS CALLED. A quorum was present. APPROVAL OF MINUTES it was: On a motion by Harb, seconded by Scheel, and unanimously adopted, #01-13 RESOLVED, that the Minutes of the Fifth Meeting of the City of Livonia Brownfield Redevelopment Authority held April 11, 2012, are hereby approved as submitted. Mr. Engebretson, Chairman, declared the motion is carried and the foregoing resolution adopted. PROPOSED AMENDMENT TO THE BROWNFIELD PLAN AND REIMBURSEMENT AGREEMENT FOR LIVONIA MARKETPLACE Engebretson: The next thing on the agenda is a request from Livonia Phoenix, L.L.C. to amend the Brownfield Development Plan and Reimbursement Agreement for the redevelopment of the Livonia Marketplace that was approved by this Board and the City Brownfield Redevelopment Authority January 30, 2013 Page 2 Council back in 2009. The proposal will be presented, as understand it, by the developer. Well, let's have Mark Taormina present it. Taormina: Thank you. Each of you should have a copy of the staff's analysis. I'll just try to go over it briefly and touch on some of the important aspects. As you know, Livonia Phoenix has operated under a Reimbursement Agreement and Brownfield Plan that was approved by the City Council in 2009. Under this agreement, the developer is entitled to be reimbursed for eligible activities from the collection of taxes above the initial base taxable value of $6.6 million. The reimbursement agreement spelled out the terms of the payback that was to commence in 2011. It actually could have occurred earlier but, in this particular instance - because the project was not fully completed - it started in December, 2011. It was designed to go a maximum of 13 years, or shorter, if all of the eligible costs were reimbursed prior to that. We've gone over this in the past, but the amount of reimbursement equals the captured taxes above a certain base value that we set as part of that original Brownfield Plan of about $5.6 million. Everything above that was captured as part of the Tax Increment Finance Plan. In addition, Livonia Phoenix was also approved under Wayne County's TURBO Program, which is a little different program. The duration of that is six years. It commenced immediately with the project in 2009. Their property taxes were to be reduced by 100% in the first year (2009), and 50% for the next 5 years (2010 - 2014). Under the original projections, Livonia Phoenix expected to recoup all of their eligible costs from captured taxes. In addition, they expected to receive the TURBO benefit. What was not fully understood at the time the original Reimbursement Agreement was adopted was the interaction between the TURBO Program and the Brownfield Plan during the first few years when both of these incentive programs run concurrently. The Developer mistakenly believed that the taxable value of the real property used in calculating the TURBO disbursement was then reapplied and used in determining the amount of tax capture available for reimbursement under the Brownfield Plan. This, however, would result in the taxable value of a significant portion of the real property being used twice: once for calculating the reimbursement under the TURBO Program, and then a second time for calculating the reimbursement under the Brownfield Plan. To appropriately determine the incremental value for Brownfield Redevelopment Authority January 30, 2013 Page 3 capture under the Brownfield Plan, it is first necessary to exclude TURBO from the valuation since this money is returned to the Developer. When you calculate it that way, the total amount of the payback to the Developer changes. When they looked at it and projected this through the life of the plan for 13 years, they realized that they would not realize the same amount, and they would come up short. So that's when they approached us with a plan to modify the agreement to try to capture more of those costs. They're now in the fourth year of the TURBO program. Essentially, what they want to do is delay the first couple of years of the TIF payback. Instead of commencing in December, 2011, they want to delay the commencement until 2014, and instead of going a full 13 years potentially, to cut it back to 12 years. What we've done in the chart in your packet is encapsulate some of the salient aspects of the differences between the current reimbursement agreement and what is proposed. You can see that the duration goes from 13 to 12 years. It would begin in 2014 as opposed to 2011 and end in 2025 instead of 2024. Most importantly, we show what the difference is in the projected payback to the Developer. You can see there is about a $446,000.00 difference between the two. Again, this is set out over the life of the plan. We also tried to show you what the difference would be in the City portion, which constitutes roughly 25% of the taxes, and that equates to a difference of about $110,000, which we summarized in the first paragraph on the second page. Going back to our last action on this project which was in April of last year, we did approve the first payment to the Developer in the amount of roughly $15,700.00. They asked us not to make that payment pending an outcome to their request to modify the Reimbursement Agreement and the Brownfield Plan. That's really where we're at now. Your recommendation to the City Council, should you adopt a resolution, would require a public hearing on this matter. The rest of your packet includes a letter from the Developer and their request, as well as the actual language of how the documents would be offered. The last part of that packet is the actual chart. It spells out clearly the terms of the payback. Some of the language also relates to the timing of the payback and how it would coincide with the collection of winter and summer taxes. The Mayor and Mike Slater did have a couple meetings ahead of this to layout this plan that hopefully will receive your authorization. Brownfield Redevelopment Authority January 30, 2013 Page 4 Engebretson It's always good to hear from both Mike Slater and Mike Fisher. Are there any questions for the Planning Director? Mayor, do you want to start here? Kirksey: I don't on this matter but I do want to chat briefly with this group about a very quick non -business item. I certainly think that Mark has done a nice job summarizing the request before you. Fisher: The one thing I would say is this agreement was negotiated very intensely over a long period of time and sort of word for word and sentence for sentence. The one thing that wasn't part of our original plan was using the three year time limit to try to reduce the amount of payout to the Developer. The reason for the three year time limit before reimbursement would kick in was because there was some concern that they would level the property and it would be dirt and it would remain dirt until somebody came in to put in some corn. So we wanted to make sure that this project actually got built. That's why we had the three year limit. So the change that they've asked as they in good faith built it, isn't counter to what we were doing when we negotiated this originally. That's my only point. Engebretson: Thank you. Mr. Slater do you want to add onto that and perhaps address the impact that this may have on the City? Slater: I think Mike Fisher and Mark Taormina have done an excellent job in summarizing it. I can talk through the minutia of the numbers but I'd prefer not to do that unless there are questions. The summary of the impact of the numbers was on the staff recommendation on the bottom of page 1. Again, I guess the one caveat is that there are a lot of assumptions that go into what we project here. Obviously, the extent that property values change or tax rates change or there are tax appeals, there is going to be some impact on the personal property tax laws. All those things are going to affect these estimates, but based upon our current projections, under the current plan, they are going to get about $4.6 million back; under the proposed change, it can be $5.134 million. The only thing I'd add, which isn't anywhere in here, is that what we're proposing to you tonight is not what they originally asked this to be changed to. We have negotiated kind of a middle ground between what's in place now, where they wanted to go, and what we're proposing to you tonight. Engebretson: Are there any questions or comments of support. Mayor? Brownfield Redevelopment Authority January 30, 2013 Page 5 Mayor: This is a totally different subject, but Mayor Engebretson and have been on a committee to try to launch a funding mechanism and to redesign Nehasil Park and also for a monument. You should have received an invitation to a February 13 event at Laurel Manor at which time we will present the renderings of the dramatic changes to the park as well as a proposed monument to look at. It will be the official launch of a fundraiser for that effort. I brought more invitations here tonight. Please take them and give them to a neighbor. Engebretson: I want to encourage all of you to participate in this upcoming event. It's quite a traumatic memorial to fallen public safety officers. That is a result of the families encouraging us to make it a public service memorial and not just focus on Officer Nehasil. It was very gracious of them. So that's where we are. We'll come and talk to you later, Karl. Zarbo: I bet you will. Kirksey: You can come on the 13th. Don't bring your wallet, but don't lose your wallet. My apologizes to everyone but I try to do this at every meeting. Engebretson: Mr. Zarbo, the floor is yours. Zarbo: I want to thank the Authority for the time and the work they've put into this and, very important, the staff. What you're seeing tonight has been going on behind the scene for nine months. The work that Mark and Mike have put in has been phenomenal. What we are really trying to do, and I think I have five pages of stuff that I was going to read. Let me tell you what it is. I took excerpts out of the original agreement and tried to just take some of those terms and repeat it. I'm not going to sit here and do that with you guys because I think we all understand. What we're basically trying to do is take what we believe was an agreement made in 2008, take a look at the reality of what has happened from 2008 to 2012, and simply take the concept of those dollars and slide it. As Mike said, we originally looked at when this would be up and running and when you start the meter. So not only would we recapture but just one of the things I would remind you is that your Authority also captures and has funds from the project. So the longer this is alive and the more money moves through this, the more Brownfield Redevelopment Authority January 30, 2013 Page 6 comes into the Authority. And that really is what is a remarkably complicated document. That's really all we're trying to do. We're not asking for any more money. We're asking for the ability to actually recover the amount that was agreed to, and the only way there's even a remote possibility of that is by sliding the terms. What I would remind you is that what was agreed to in all of these documents, we really have done. There was a check of about $15,000 but we haven't asked for it, and in fact, we have turned down any money. So everything that you see out there has obviously been done and paid for. What we're really asking is under the set of circumstances that changed dramatically, we sat in rooms and tried to crank through an understanding of where we would be in 2024 to the reality of what happened when we knocked that thing down and rebuilt it. We're just respectfully requesting that you would look at that slide in time to allow us to attempt to recapture the money that was agreed to originally. It just would be a change in the length of the term to collect it. With that, I'd be happy to attempt to answer any questions that you might have. Condon: Actually just one question to Mike and Mike and Mark. Is there a down side here for the City, either perceived or actual? Fisher: It probably does result in more money eventually going to the Developer that otherwise would be coming to the City. Although, as I say, it's pretty close to the intent that we had when we originally negotiated this. As I say, the deadline for when the reimbursement kicked in was strictly an incentive to get them moving on the construction, not an attempt to reduce the amount of money they were going to capture overall. Condon: So does that mean the $6.6 million maximum goes up to $6.8? Taormina: No. Slater: It's just a projection. They are projecting that their total ultimate expenses will be less than $6.6 million. Condon: Okay. So there's really not a real negative effect to us as a City or a group that would not stand up to some scrutiny by someone? Fisher: I don't think so. Brownfield Redevelopment Authority January 30, 2013 Page 7 Slater: I will tell you that there was an honest misunderstanding of the interaction between TURBO and the Brownfield from all parties, from their side and our side. As Karl said, it is really, really complex when you put these numbers together. We tried to make it fairly simple but behind the summary, there are a lot of numbers. It was an honest misunderstanding by all parties. I think this kind of gets us back to where we thought we would be in the first place. Condo: Okay. Thank you. Scheel: The first payment is scheduled to start in July, 2014, for the amount that we're holding that we were supposed to pay them. Are we still withholding payment? Zarbo: What we thought would make this simpler, and again above board, so we would welcome scrutiny, is we would finish the TURBO so that kind of comingling, the concept just goes away. We really wouldn't look to start the Brownfield until the TURBO was completed. At least all of geniuses in the room think that takes away all of that confusion about is it a deduct, is it an addition, and that's really why we picked those dates. It's in conjunction with the 50% for five years that is the TURBO concept. Did I answer that? Taormina: I may be throwing this over to Mike but I believe that the money, to the extent that it's being paid, will have to be returned to the taxing jurisdictions. So the $15,000 would not be deposited in any kind of fund. The capture for the purposes of reimbursement wouldn't commence until 2014. So everything that is collected up until then goes, as it normally would, to the various taxing jurisdictions with the exception of the TURBO rebate. Slater: We collect for all the taxing entities as you know. When the tax dollars come in, it goes into a tax fund. It's an in and out. Money goes in there and then it gets sent out to whoever it's owed to - the City, the schools, county, what have you. Right now, that money is sitting in a tax fund. It's just a matter of whether this gets approved, then the money will go back to the taxing jurisdiction. If it doesn't get approved, it would go back to the original agreement, which means that the money would go to the Developer. We're going to hold that until this gets through Council one way or the other. Normally, at this point in Brownfield Redevelopment Authority January 30, 2013 Page 8 time, we would have come to you for approval of the next distribution on the summer 2012 taxes. We know what that is under the original agreement. We haven't brought that to you because there's an alternate agreement here which would result in the distribution starting in 2014. Harb: In terms of the impact to the City, the total is going to be about $111,000. We're going to collect $111,000 less over the next 12 years or so. Slater: Yes. Harb: So let's talk about December, 2025. We're basically not collecting taxes until the Developer is able to get reimbursed for an amount of money up to $6 million or so. What is the potential tax impact in today's dollars at that time? Slater: The projected tax impact is actually on the very last page of your package. The last year, which would be 2025, under "Distribution of Captured Taxes," the Developer would be at $406,000 of real property taxes and $79,000 of personal property taxes. To the revolving fund to the Administration, it would be $111,000. So that's what the impact is projected to be in the last year. Harb: So the Livonia Marketplace is going to collect for the City of Livonia in 2026 around $500,000 in property taxes? Slater: No, it will be more than that because it's just the captured portion. This is the amount in excess of the $5.6 or $5.8 million, whatever the base value was. It would be this plus whatever the taxes would be on the base value of $5.6, which we're getting all along. Harb: So by delaying payment for a year and a half, we're missing the potential ... Slater: We're delaying by two and half years, but we shortening the number of years too. Again, it is some more dollars to the Developer because we have fewer years of interaction with TURBO and the tax capture, but they originally asked for this whole thing to be moved and to keep it at 13 years. Brownfield Redevelopment Authority January 30, 2013 Page 9 (W Harb: Finally, when we have other Brownfield Developments, are we going to do the same concept - do the TURBO first and then wait until after the TURBO is over? Taormina: No. TURBO is no longer a program being offered by Wayne County. They are respecting all the agreements that are out there that are still active, but there is no plan to reactive the TURBO program. Slater: I would say for future ones, I think every one of these things needs to be looked at on their merits. This was obviously a very troubled site, a large site. It had been problematic for a lot of years. What you get at this location may not fit in another situation. Harb: Thank you. Taylor: Let me put it in a simpler way. If a citizen came up to me and asked, how much money are we collecting from Seven Mile and Middlebelt, what would I tell him? Slater: Today? Because it's not done yet. Summer taxes were $316,000 and last winter's taxes were $108,000. So $424,000. Taylor: That's now. Twenty five years from now, will that be a lot different? Slater: It could be more because TURBO has taken half of the real on this, plus there's hopefully inflation in the building values. And the dollars 25 years from now are not the same value as the dollars are today. In real terms, I can't tell. If property values go up more than inflation, it will be worth more. If it goes up less, then it will be less. Taylor: Schools get so much and Wayne County get so much. Slater: Right. Condon: What was it before the development? Was $5 million the property value? What were the taxes back then roughly would you guess? The reason I'm asking, just like what Joe's thinking, is that if someone comes up to ask you, it would be nice to be able to say well taxes were this. We're now getting $424,000 so there's been Brownfield Redevelopment Authority January 30, 2013 Page 10 an obvious improvement of the property and improvement in revenue to the City or taxing agencies. Taylor: It would be hard to explain this. Condon: Do you know what I'm saying? Taormina: Remember that the agreement was established in a way that prevents us from going backwards. So by establishing that base value, that was the intention of it. It was everything that was going to be accrued above and beyond what the value of the property was in 2009. The exception to that is the years of TURBO. Condon: No increment, no return. Slater: The alternative was an empty field. Kirksey: In addition to the failing mall, it had a lot of negative implications. Zarbo: We were initially in front of the City and the Planning Commission, and to some degree the Council, and I think it was difficult for everybody to believe what we said initially. We were going to knock this down and we're going to redevelop. And then said, what tenants do you have? We had none, zero. But it had to come down. The only thing I guess just for conversation, the Mayor from day one really had positioned and we hoped like hell that this would reposition that northeast corridor in Livonia. And just so you folks are aware, just a matter of a few weeks ago we bought the vacant Farmer Jack's across the street. So we're pretty bullish on not only what we've accomplished but what we, going beyond Lorimax, have accomplished to try to get this area rejuvenated. Taylor: Do you have a tenant? Zarbo: We're working on three strategies. We don't see it as an issue. One really would be someone taking the whole site. We'd do the entitlement and sell. One would be a tenant taking the entire site, we probably would own the dirt and do the entitlement. The third would be we're working at a concept of bringing it up to multi -tenant. We're excited about owning it and making it part of an offensive strategy as opposed to someone Brownfield Redevelopment Authority January 30, 2013 Page 11 who could do something directly opposed to what we're doing across the street. Taylor: What about the restaurant across the street and how much vacancy do you have? Zarbo: It is being salvaged as we speak. As soon as we can get settled with the water department, it should start to come down within 10 days. We are very early with market, looking at a two tenant operation for a brand new building to come out of the ground. Petco is set to open next week Monday. We're early on, but immediately north of Petco we have the ability to build another 10,000 square feet onto that building. We think we'll have signed documents within 90 days for that. We hope to start construction on that yet this year too. From a vacancy standpoint, it is the building with the Verizon unit that really has the only vacancy, and we struggled with that building. I'd love to tell you we know why. If we knew why, we'd fix it, but we've had a little bit of difficulty with that building. The rest of the property is doing well. Taylor: Thank you. Krueger: Is the agreement we're looking at tonight, is that what is going to be signed if it's approved? Zarbo We wrote that as a suggestion to your team. We're sure that the Mike's and Mike's will word it till they're comfortable. That was language that we wrote even to try to make it a little easier and everyone could attempt to read what we're trying to accomplish. So we took a stab at writing it. Krueger: Okay. Thank you. Soave: In summation of our purpose here, we're not renegotiating the original terms of the reimbursement agreement. I think it reflects the actual intent of the parties prior to signing the original one that came before us in 2008. Zarbo: And it's the reason we presented it as an amendment because we hoped and thought that captured it without having to go back and reinvent it. Brownfield Redevelopment Authority January 30, 2013 Page 12 Condon: I would have to think too that this might even be subject to more revisions down the road as we see the effect of the personal property tax thing. Zarbo: There are some unknowns in this still, but as we're sitting here today, we'd like to lock it down and move on. Slater: Our intent would not be to revisit this again. Tax law changes are part of doing business, and to the extent that the Developer is negatively impacted by it, I don't think we're going to propose to visit it again. Zarbo: We're willing to take that on the chin. If you look back again at 2007 and 2008, and you talk about increments, we thought this thing would take off like it was, and it just hasn't. So the other reason, there just isn't any increment in it again. But we've spent the money. You have your more than 310,000 square foot, we believe, first class shopping center there and we're going to continue to pick away at it. Engebretson: I think there has been a wonderful outcome of cooperation between the Developer, the City, and all the tenants. I do want to say though, that I believe that it's an over -simplification to say that all were doing is sliding dates. We have had the opportunity to prepare for this meeting with meetings with the Developer, the Mayor and the staff. I think those meetings were productive. The matter before us is reasonable and very much in order to consider for approval. It's a very complex issue. We're very fortunate to have people like the folks at the end of the table here that can take the time to really understand the complex issue, and we're also fortunate to have a Developer represented by someone who does his homework and has been a trusted and valued partner through the years. Some of the differentials are not going to be known for some time because we don't know about personal property tax and inflation and the economy has a lot of unknowns, but to the extent possible, assumptions have been made to reflect the best thinking of what's going on today on both sides. I think we've ended up at a good place. The discussion has been exhaustive. I think we're at a point where a motion would be appropriate to consider at this point and time relative to the proposed amendment as to whether or not to support that proposal. . Brownfield Redevelopment Authority January 30, 2013 Page 13 Ms. Scheel: I would make a motion to accept the recommendation from the Administration. On a motion by Scheel, seconded by Taylor, and unanimously adopted, it was: #02-13 RESOLVED, that the City of Livonia Brownfield Redevelopment Authority does accept the recommendation from the Administration and does hereby approve the request by Livonia Phoenix, L.L.C. to amend the Brownfield Plan and Reimbursement Agreement for Livonia Marketplace as submitted, subject to approval by City Council and approval as to form by the City's Law Department. Mr. Engebretson, Chairman, declared the motion is carried and the foregoing resolution adopted. It will go to the City Council for a public hearing and their final determination. I would like to take this opportunity to thank Mark Taormina, Mike Fisher and Mike Slater for all of the great work that they've done. On a motion by Taylor, seconded by Condon, and unanimously adopted, the Sixth Meeting held by the City of Livonia Brownfield Redevelopment Authority on January 30, 2013, was adjourned at 5:45 p.m. As V. Kru er, Secretary