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
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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