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HomeMy WebLinkAboutR-1998-107 Great Western Building ProjectRESOLUTION NO. R-98-10 7 A RESOLUTION authorizing and directing the City Manager and the City Clerk to execute and submit an application, including all understandings and assurances contained therein, to the U.S. Department of Housing and Urban Development (HUD) for an Economic Development Initiative (EDI) grant of $1,000,000 for the renovation of the Great Western Building and adjacent plaza area located. in Yakima, Washington. WHEREAS, economic development is a priority of the City of Yakima, and the City intends to approach economic development on a comprehensive basis involving public, private and community-based efforts to achieve new investment and redevelopment in the City; and WHEREAS, under Section 108 of the Housing and Community Development Act of 1974, federal guarantees are available for loans obtained for the purpose of funding economic development activities that will create new permanent full-time jobs for low and moderate income residents; and WHEREAS, JEM Properties, a local limited liability corporation, desires to renovate the Great Western Building and develop the adjacent plaza area for retail sales; and WHEREAS, the renovation of the Great Western Building and the development of the r adjacent plaza area for retail sales will enhance downtown economic vitality,. create a number of new permanent full-time jobs for low and moderate income residents, and is in the public interest; and WHEREAS, the Office of Neighborhood Development Services (ONDS) of the City of Yakima recommends that the City apply for a $1,000,000 EDI grant to help fund the renovation of the Great Western Building and the development of the adjacent plaza area; and WHEREAS, an EDI grant can only be used in conjunction with a Section 108 loan, and in applying for the EDI grant the City would have to commit that if the grant is approved, the City will apply for a Section 108 loan within 60 days of notification of the grant award; and WHEREAS, as consideration for the City applying for an EDI grant and Section 108 loan, JEM Properties agrees to the following conditions: • To repay any and all Section 108 loan funds received for said renovation project, and (lk)res/edi grant -great „estern buil/pm • To create one (1) new permanent full-time job for every $35,000 of HUD funds received for said renovation project, and • To take all reasonable and necessary steps to ensure that fifty one percent (51%) of said new jobs will be filled from low and moderate income residents of the City's Community Empowerment Zone, and • To comply with all applicable state and federal laws and regulations. WHEREAS, based on the foregoing, the City Council has determined that it is in the best interest of the City to authorize said EDI grant application and corresponding Section 108 loan application, now, therefore, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF YAKIMA: The City Manager and the City Clerk are hereby authorized and directed to execute and submit an application, including all understandings and assurances contained therein, to the U.S. Department of Housing and Urban Development (HUD) for an Economic Development Initiative (EDI) grant of $1,000,000 for the renovation of the Great Western Building and adjacent plaza area located in Yakima, Washington. The City Manager is also hereby designated as the official City representative to act in connection with the grant and loan applications, and is authorized to take such additional actions as may be necessary and prudent to complete the grant and loan application process. 5, ADOPTED BY THE C1'1 Y COUNCIL this 84 day of uLy , 1998. ATTEST: City Clerk (Ik)resiedi grant -great western buil/pm Puccinel_i, Mayor MEMORANDUM July 9, 1998 To: Honorable Mayor, John Puccinelli Members of City Council Economic Development Committee From: Micheal A. Morales, Grants Writer Re: Economic Development Initiative Grant/Section 108 Loan Application As discussed at our previous meeting, a notice was published inviting proposals from developers for consideration of an application to the U. S. Department of Housing and Urban Development's Economic Development Initiative (EDI) competition. This competition provides a window of opportunity to combine grant dollars with a Section 108 loan project. The grant may only be utilized in conjunction with a Section 108 Loan. Attached is a brief overview of the Section 108 loan program, as discussed at our previous meeting. In response to the notice, three inquiries were received. Of the three inquiries, the proposal from JEM Development (see attached) was the only project that could possibly meet the July 30 deadline for the City. The proposed project v ould redevelop the Great Western Building into a hotel and retail center for the downtown, while preserving the historic integrity of the building. Based on the financial capacity of the developer, the potential for the proposed project to impact and benefit the Downtown retail area and surrounding CDBG target area, and the potential of creating up to 70 new jobs with a majori': benefiting low and moderate income families, staff recommends City Council authorize the submission of an application for this project. If recommended by the committee, the process for the proposed EDI applicu�:�:. would consist of the following steps: 1. July 21: A resolution by City Council authorizing the submittal of the grant application and notice of intent to apply for the Section 108 loan upon successful award. 2. July 30: Application for EDI grant. Application would include a notice of intent to apply for a Section 108 loan within 60 days of a successful award. 3. October: If application is successful, a full application for a Section 108 loan for the project would be developed within 60 days of the grant award. If the grant is not awarded, neither the City nor the developer is obligated to apply for the Section 108 loan. 4. Public hearings on the Section 108 loan application and the City's 1998 Consolidated Plan (to include the Section 108 loan) would be required as part of the process. 5. Provided the underwriting criteria established by HUD is agreeable to both the developer and the City, the loan package must be formally approved by City Council. Neither the City nor the developer is obligated to accept the loan package, however, a rejection of the loan package will forfeit the grant award 6. If accepted, the City will reserve a portion of it's future years CDBG allocations as security for the loan. This competitive round represents only the second opportunity that HUD has provided to utilize an economic development grant with a Section 108 loan. While a Section 108 loan can be applied for at any time, the EDI grant component may not be available for at least another two years. Cc: Glenn Rice, Assistant City Manager William Cook, Manager, Office of Neighborhood Development SECTION 108 LOAN PROGRAM The Section 108 Loan Program is a public financing tool for economic development and housing projects funded by the U.S. Department of Housing and Urban Development (HUD). The Section 108 Program consists of a 100% federal guarantee against the sale of local notes issued by a public agency (City of Yakima). The public agency must pledge its future Community Development Block Grant (CDBG) entitlements to HUD as a contingent funding source if the assisted project is unable to pay the 108 debt. HUD also requires additional security and a reasonable project cash flow in addition to CDBG pledge. SECTION 108 ELIGIBLE ACTIVITIES Acquisition of Real Property Rehabilitation of Real Property Publicly Owned Related Relocation Activities Related Clearance, Demolition, and Removal Related Site Preparation Payment of Financing Costs Housing Rehabilitation Economic Development Activities Construction of New Housing Debt Service Reserve Public Facilities FISCAL CONSIDERATIONS Terms: Terms can range from three months to 20 years. Interest Rates: The interest rate to the grantee is based on one of two rates: 1. For interim borrowing, The LIBOR, or London Prime Rate, plus 25 to 50 basis points. 2. For a permanent note sale, Treasury Notes are used to estimate the cost of interest., plus 35 to 50 basis points. Cash Flow: generally, a 15% to 20% buffer or more cash flow in excess of debt service requirements is favorably reviewed. In financial terms, the net operating income must generate cash flow 1.15 to 1.2 greater than the debt service requirement. Security and Collateral: HUD wants collateral equivalent to approximately 120% of the loan amount. Security acceptable to HUD include: Real Property - 80% of appraised market value. Machinery and Equipment - 80% to 90% of cost/value. Receivables - 80% of the average in the last 3 years accounts Inventory - 50% of the last 3 years ending inventory. Leases - Assignment of leases and rent. JOB CREATION AND RETENTION Job creation and retention are two of several public benefits that result from a successful 108 program. To ensure these public benefits, a job creation ration of 1 job to every $35,000 of Section 108 loan funds is required. Jobs created are also targeted to low and moderate income residents. PROCESS AND TIMING Development of Application by City: 30 to 45 days minimum Review by HUD Field Office: 15 to 30 days Review and Approval by HUD Headquarters: 30 to 90 days Execution of funding approval document: Varies by locality Contract, agreement and note sent to locality: 30 days after funding approval document Execution of agreements and note: Varies by locality Proceeds disbursed by interim lender: 10 days after return of agreements and request, •h: 6.61 July 7, 1998 Mike Morales City of Yakima fAnartment of Community & Economical Development 129 North 2nd Street Yakima, Washington 98901 Dear Mike, As you know, I have recently purchased the Great Western Building I am very much interested in redeveloping this building to enhance the downtown area and at the same time retain the image and the historical heritage of the Great Western Building Due to it's close proximity to the Yakima Convention Center I have decided the most favorable way to benefit the needs of the downtown area would be to redevelop the building into a hotel The hotel would accommodate approximately 50 to 60 rooms, a restaurant, retail business on the main floor and meeting rooms on the top floor where the Masonic Temple is now located. In researching this project I have spoken to Kathy Coffey, Manager, of the Yakima Convention Center Bureau and she has strongly supported the need for additional hotel space in the downtown area due to the increase of conventions in the Yakima area and the lack of hotel rooms near the Center. She also injected that women would most likely feel much safer in the mall area environment. Before making my decision to convert the Great Western into a hotel I traveled to beth the Seattle area, as well as, Canada and have found the attraction to downtown area hotels to be greatly beneficial to the cities. Not only do they attract tourist but they also at the same time encourage and motivate other property owners to improve their locations. The hotel, restaurant and retail business' combined would create approximately 70 new jobs in the downtown area. This would include hotel administrative staff, maids, janitors, waiters/waitresses, cooks, cashiers and clerks. Many of these positions are entry level positions that would open up new jobs for those just beginning to enter into the work force in the local area. I have contacted an architect who is in the process of preparing designs and determining feasibility for this project. At this time, I have no financing for this redevelopment plan, therefore, I am requesting a $2,500,000 00 grant/loan from the City of Yakima. YAKIMA MALL SHOPPING CENTER CORPORATION 402 E. Yakima Ave., Suite 1400, Yakima, Washington 98901 Phone (509) 248-4040 • FAX (509) 457-8361 PAGE TWO Mike Morales July 7 ono In addition, to the aforementioned project, we are also considering an additional $2,500,000 project which would coincide with the hotel. This project is for a plaza next to the Great Western Building which would add an additional 30,000 square feet. There is no doubt that the City of Yakima would greatly benefit from the redevelopment of the Great Western building into a hotel, as well as, beautify and enhance our downtown area. Thank you for your consideration of this project and please feel free to call if you are in need of any additional information. Sincere o v e io l /� Joseph R. Morrier President/CEO JRM/pjn Current Zoning and Utilities CURRENT ZONING SR Suburban Residential R-1 Single -Family Residential ■ R-2 Two -Family Residential . R-3 Multi -Family Residential B-1 Professional Business ■ B-2 Local Business ■ HB Historical Business ■ SCC Small Convenience Center ■ LCC Large Convenience Center ■ CBD Central Business District CBDS CBD Support M-1 Light Industrial ■ M-2 Heavy Industrial N Water Line N Sewer Lines Future Land Use FUTURE LAND USE Future Zoning FUTURE ZONING SR Suburban Residential R-1 Single -Family Residential II R-2 Two -Family Residential . R-3 Multi -Family Residential B-1 Professional Business ■ B-2 Local Business ■ HB Historical Business ▪ SCC Small Convenience Center ▪ LCC Large Convenience Center ▪ CBD Central Business District CBDS CBD Support M-1 Light Industrial . M-2 Heavy Industrial Digital Orthophoto Mosaic of Digital Orthophotography flown 03/12/94 Low Density Residential Medium Density Residential High Density Residential Professional Office Neighborhood Commercial Large Convenience Center Arterial Commercial CBD Core Commercial Industrial Urban Reserve CITY OF YAKIMA DEPARTMENT OF COMMUNITY AND ECONOMIC DO/ELOPEMENT 129 North Second Street Yakima, Washington 98901 Phone:(509)675-6113 Fax 15091575-6105 All maps shown at 1' = 100ft One page Atlas: greatwest Created: July 16,1998 BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. For Meeting Of: July 21, 1998 ITEM TITLE: Approve Application for a $1 Million Dollar Economic Development Initiative Grant for the Great Western Building Project. SUBMITTED BY: William Cook, Neighborhood Development Services Manager CONTACT PERSON/PHONE: William Cook, Neighborhood Development Services Manager (575-6101) SUMMARY EXPLANATION: The Office of Neighborhood Development Services is requesting the approval to submit an application to the U. S. Department of Housing and Urban Development (HUD) for a $1 million dollar Economic Development Initiative (EDI) Grant for the Great Western Building project. This grant may only be used in conjunction with a U. S. Department of Housing and Urban Development (HUD) Section 108 Loan. In applying for this Grant, the City agrees that if successful, the City will apply for a Section 108 Loan within 60 days of notice of grant approval. Future Council action will be required to approve the terms and conditions of any Section 108 Loan received for the project. Section 108 Loans provide communities with a source of financing for economic development projects involving job creation. The $1 million dollar Economic Development Initiative Grant will be used in conjunction with a $1.5 million Section 108 loan to leverage $2.5 million in private investment for the project development. (Continued on next page) Resolution X Ordinance_ Contract _ Other (Specify) Funding Source ,' APPROVAL FOR SUBMITTAL: City Manager STAFF RECOMMENDATION: Approve Application BOARD RECOMMENDATION: The Council Economic Development Committee at their meeting of July 10, 1998 recommended approval of the submittal of the Economic Development Initiative Grant application and Notice of Intent to apply for Section 108 Loan funds for this project. COUNCIL ACTION: The project will fund the renovation of the Great Western Building and adjacent mall plaza area into a hotel and retail center. The project will be developed by JEM Properties, a local limited liability corporation with private financing provided by Key Bank. The historic hotel will occupy the second through seventh floors, while retail activities will be present on the ground level. Additional retail space will be provided by enclosing the plaza area adjacent to the Great Western Building. Nearly 20,000 square feet of new retail space will result from this project. The hotel will add approximately 41 new guest rooms to the benefit of the Downtown Business Core area and the community's tourism economy. Surrounding Community Development Block Grant (CDBG) Target Area residents of low and moderate income will also benefit from the creation of new permanent jobs. The Section 108 Loan and Economic Development Initiative (EDI) Grant programs require creation of one new permanent job for each $35,000 of federal financing provided. Application for this competitive grant process must be received by the U. S. Department of Housing and Urban Development in Washington, D. C. by July 30, 1998.