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HomeMy WebLinkAbout31-26 Ordinance Authorizing Payments in Lieu of Taxes for Western Avenue I, LLC South Bend City Hall Phone 311 inside City limits 215 S.Dr.Martin Luther King Jr.Blvd. - Z Email 311@southbendin.gov Suite 500 0.3TH��, Website Southbendin.gov South Bend,IN 46601 James Mueller,Mayor '� = S• • Filed in Clerk's Office PEACE %le ` 'a Jun 3, 2026 r<z'" 1865 Bianca [irado City Clerk, South Bend, IN City of South Bend Department of Community Investment June 2 2026 Council Member Canneth Lee President Chairperson South Bend Common Council Community Investment Committee South Bend City Hall, 3rd Floor South Bend Common Council South Bend, Indiana 46601 South Bend City Hall, 3rd Floor South Bend, Indiana 46601 RE: Bill No. 31-26: An Ordinance of the Common Council of the City of South Bend, JJ Indiana, Authorizing Payments in lieu of Taxes for Western Avenue I, LLC 1, Dear President Lee and Chairperson, Please find attached Bill No. 31-26 for first reading, which has been filed for the Common Council's consideration pursuant to Indiana Code 36-1-8-14.3(e). 1 Indiana Code 36-1-8-14.3 et seq. authorizes the City to enter into a payment in lieu of taxes (PILOT)agreement with a property owner of a qualifying affordable housing development. Such an agreement sets the amount and schedule of each payment, which the City must deposit into an affordable housing fund and is used to directly support the development, preservation, or accessibility of affordable housing within the community. Bill No. 31-26 provides the necessary authorization for a PILOT for Western Ave Transformation District, a new affordable housing development located on W. Western Ave.,just west of S. Taylor Street and to be owned by Western Avenue I, LLC. Western Ave Transformation District is a planned 156-unit mixed income housing development by developer The Michaels Organization, a New Jersey-based company specializing in multi- family developments. The project was awarded low-income housing tax credits by the Indiana Housing and Community Development Authority. 110 of the units for the new project will be reserved for households earning at or below 60 percent of the area median income. City of South Bend Community Investment Bill No. 31-26 would also authorize and approve the form of the PILOT Agreement with Western Avenue I, LLC, and would authorize its execution and delivery by the Mayor on behalf of the City. A form of Agreement is enclosed with this Bill for filing, and the final agreed-upon version will be submitted as a Substitute Bill prior to the date for public hearing. The Council's adoption of Bill No. 31-26, the execution of the PILOT Agreement, and the continued support of the established affordable housing fund are actions necessary to ensure the success of the Western Ave Transformation District development and address the need of affordable housing in South Bend. Sincerely, Joseph Molnar �'' Deputy Director of Community Investment Filed in Clerk's Office Jun 3, 2026 BILL NO. 3 1-26 Bianca Tirado City Clerk, South Bend, IN ORDINANCE NO. AN ORDINANCE OF THE COMMON COUNCIL OF THE CITY OF SOUTH BEND, INDIANA, AUTHORIZING PAYMENTS IN LIEU OF TAXES FOR WESTERN AVENUE I,LLC STATEMENT OF PURPOSE AND INTENT The City of South Bend, Indiana(the"City")is a duly organized municipal corporation and political subdivision under the laws of the State of Indiana, and the Common Council of the City is the legislative body of the City(the "Common Council"). Western Avenue I,LLC,an Indiana limited liability company(the"Owner")has confirmed to the City that the Owner will develop, own, and operate an affordable rental apartment facility on the+/- 8.81 acre site located at 628 West Western Avenue, South Bend, Indiana and identified as Parcel Number 71-08-11-426-001.000-026 in the St. Joseph County Assessor's records which real estate is legally described on Exhibit A attached hereto (the "Property"), and known as the Western Avenue Transformation District(the"Project"). The Project will be developed, constructed, and operated for the purpose of providing housing to income eligible persons under the federal low-income housing tax credit program in 26 U.S.C. §42 and will be subject to an extended use agreement under 26 U.S.C. §42 (the"Extended Use Agreement")as administered by the Indiana Housing and Community Development Authority ("IHCDA") for a period of at least fifteen (15) years. Pursuant to the Extended Use Agreement,the Project will have 110 units available for rent to residents whose incomes average 60% or less of the applicable area median income and 46 unrestricted units. Additionally, pursuant to the Extended Use Agreement, the affordable units within the Project will be limited to charging rents as determined in accordance with the IHCDA Extended Use Agreement and, from-time to time, by the United States Department of Housing and Urban Development(the"Restricted Rents"). The Owner qualifies as a "property owner" under I.C. 36-1-8-14.3(d) and the Owner has agreed to make certain payments in lieu of taxes (each payment, a"PILOT", and collectively, the "PILOTs"),and the City and Owner desire to document that agreement in a written agreement(the "PILOT Agreement"). The City is authorized to enter into the PILOT Agreement pursuant to I.C. 36-1-8-14.3 et seq.,and pursuant to I.C.36-1-8-14.3(e),subject to the approval of a property owner,the governing body of a political subdivision may adopt an ordinance to require the property owner to pay PILOTs at times set forth in the ordinance with respect to property that is subject to an exemption under I.C. 6-1.1-10-16.7. Pursuant to I.C. 6-1.1-10-16.7, for assessment dates after December 31,2021,all or part of a property is exempt from property taxation if the owner of the property has entered into an agreement to make payments in lieu of taxes under I.C. 36-1-8-14.3. The PILOTs must be calculated so that the PILOTs are in an amount that is: (1) agreed upon by the property owner and the governing body of the political subdivision; (2) a percentage of the property taxes that would have been levied by the governing body for the political subdivision upon the property if the property were not subject to an exemption from property taxation; and(3) not more than the amount of property taxes that would have been levied by the governing body for the political subdivision upon the property if the property were not subject to an exemption from property taxation. The form of the PILOT Agreement is attached to this Ordinance as Exhibit B. NOW, THEREFORE, BE IT ORDAINED BY THE COMMON COUNCIL OF THE CITY OF SOUTH BEND, INDIANA, AS FOLLOWS: SECTION I. Recitals. The above recitals are incorporated herein by reference as though set forth fully herein below. SECTION II. Approval of PILOTs. As more specifically provided in accordance with the form of PILOT Agreement, the Common Council hereby approves PILOTs for the Property in annual sums as follows: Year 1 $ 21,000 Year 2 $ 21,630 Year 3 $ 22,279 Year 4 $ 22,947 Year 5 $ 23,635 Year 6 $ 24,344 Year 7 $ 25,074 Year 8 $ 25,826 Year 9 $ 26,601 Year 10 $ 27,399 Year 11 $ 28,221 Year 12 $ 29,068 Year 13 $ 29,940 Year 14 $ 30,838 Year 15 $ 31,763 SECTION III. Authorization and Approval of Form of PILOT Agreement. The Common Council hereby authorizes and approves the form of the PILOT Agreement and authorizes its execution and delivery by the Mayor on behalf of the City substantially in the form attached hereto and incorporated herein by reference as Exhibit B, all for the purposes contemplated herein. SECTION IV. Recording of Executed Ordinance. The City Clerk is directed to provide an executed copy of this Ordinance, as approved, and a copy of the executed PILOT Agreement to the Owner for the Owner to record with the St. Joseph County Recorder's Office and for the Owner to file the recorded Ordinance and PILOT Agreement with the City Clerk's Office, the St. Joseph County Assessor's Office, the St. Joseph County Auditor's Office, and the St. Joseph County Treasurer's Office. SECTION V. Further Authorizations. The Common Council hereby requests, authorizes, and directs the Mayor,Common Council President, Controller and the City Clerk, and all official officers, members, employees, and agents of the City, and each of them, for and on behalf of the City,to negotiate,prepare,execute, and deliver any and all other instruments, letters, certificates, agreements, and documents as are determined to be necessary or appropriate to consummate the transactions contemplated by this Ordinance, and such determination shall be conclusively evidenced by the execution thereof. The instruments,letters,certificates,agreements, and documents necessary or appropriate to consummate the transactions contemplated by this Ordinance shall, upon execution, as contemplated herein, constitute the valid and binding obligations or representations and warranties of the City, the full performance and satisfaction of which by the City is hereby authorized and directed. SECTION VI. Effectiveness. This Ordinance shall be in full force and effect from and after its adoption and the procedures required by law.This Ordinance remains in full force and effect until repealed or modified by the Common Council, subject to the approval of the Owner. [Signature Page Follows] Duly passed and adopted on this day of , 2026 by the Common Council of the City of South Bend, Indiana. Canneth J. Lee, Council President South Bend Common Council Attest: Bianca L. Tirado,City Clerk Office of the City Clerk Presented by me, the undersigned Clerk of the City of South Bend, to the Mayor of the City of South Bend, Indiana on the day of ,2026, at o'clock .m. Bianca L. Tirado, City Clerk Office of the City Clerk Approved and signed by me on the day of , 2026,at o'clock Ill. James Mueller,Mayor City of South Bend, Indiana EXHIBIT A Property Glass House Survey Of Lots 56 57 58 And Lots 5 To 10 Touhey And Hagerty(Note: Legal description subject to change based on title and survey confirmation.) EXHIBIT B Form of PILOT Agreement (See Attached) Parcel Identification No.: 71-08-11-426-001.000-026 PILOT AGREEMENT THIS PILOT AGREEMENT (this "PILOT Agreement") is entered into to be effective as of this day of , 2026, (the "Effective Date"), by and among the CITY OF SOUTH BEND, INDIANA, a municipal corporation and political subdivision of the State of Indiana (the "City"), and Western Avenue I, LLC, an Indiana limited liability company (the "Owner," with each of the City and the Owner sometimes being individually referred to as a "Party"and collectively as the"Parties"). RECITALS WHEREAS, the City is a duly organized municipal corporation and political subdivision under the laws of the State of Indiana, and the Common Council of the City is the legislative body of the City(the"Common Council"); [WHEREAS, the managing member of the Owner is Western Avenue I - Michaels, LLC, an Indiana limited liability company(the"Managing Member");] WHEREAS, the Owner has confirmed to the City that the Owner will develop, own, and operate an affordable rental apartment facility on the+/-8.81 acre site located at 628 West Western Avenue, South Bend, Indiana and identified as Parcel Number 71-08-11-426-001.000-026 in the St.Joseph County Assessor's records which real estate is legally described on Exhibit A attached to and made a part of this PILOT Agreement(the"Property"), and known as the Western Avenue Transformation District(the"Project"); WHEREAS, the Project will provide 110 affordable housing units for low-income residents whose incomes 60% or less of the applicable area median income and 46 unrestricted units; WHEREAS, the Project will be financed utilizing federal low-income housing tax credits under the federal low-income housing tax credit program described in 26 U.S.C. § 42; WHEREAS, the Project will be subject to an extended use agreement which is described in 26 U.S.C. § 42 (the "Extended Use Agreement") as administered by the Indiana Housing and Community Development Authority (the"IHCDA") for a period of at least fifteen (15)years; 1 WHEREAS, pursuant to 26 U.S.C. § 42 and the Extended Use Agreement, the 110 affordable units within the Project will be available for rent to residents whose incomes will be at 60%or less of the applicable area median income (the"Restricted Residents"); WHEREAS, pursuant to 26 U.S.C. § 42 and the Extended Use Agreement, the affordable units within the Project will be limited to charging rents as determined, from time-to-time by the United States Department of Housing and Urban Development(the"Restricted Rents"); WHEREAS, since the Project will constitute property described in 26 U.S.C. § 42, the Project will be subject to the Extended Use Agreement, and the Parties have entered into this PILOT Agreement, the Owner qualifies as a "property owner" under Indiana Code § 36-1-8- 14.3(d); WHEREAS, the Owner has agreed to make certain payments-in-lieu-of-taxes as set forth in this PILOT Agreement; WHEREAS,the City is authorized to enter into this PILOT Agreement pursuant to Indiana Code § 36-1-8-14.3 et seq.; and WHEREAS, in order to provide for the successful development, financing and operation of the Project, the Owner and the City are entering into this PILOT Agreement, which the City represents has been ratified by the Common Council. NOW,THEREFORE, in consideration of the foregoing premises, mutual covenants, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows: AGREEMENT Section 1. Owner Compliance. Section 1.1 (a) Owner acknowledges that in order to qualify for property tax exemption for the Property under Indiana Code §6-1.1-10-16.7,the Project must be in compliance with the requirements of§ 6-1.1-10-16.7. (b) Owner further acknowledges that: (i) the mere execution of this PILOT Agreement does not confer any property tax exemption on the Property under Indiana Code § 6-1.1-10-16.7; (ii) in order to obtain any such property tax exemption or partial exemption under Indiana Code § 6-1.1-10-16.7, the Owner must timely file its property tax exemption application, including renewal applications, if any are required, with the St. Joseph County Assessor requesting an exemption pursuant to Indiana Code § 6-1.1-10-16.7 from Owner's obligation to pay all or any portion of its real and personal property taxes on the Property; and 2 (iii) the Owner must meet its burden of proof under Indiana law pursuant to the normal application and determination process applicable to Indiana Code § 6-1.1-10-16.7 to qualify for and receive such exemption. Section 2. Payment In Lieu of Taxes. Section 2.1. (a) The Owner has agreed to make payments in lieu of taxes as described herein in consideration of the cooperation and support of the City for successful development, financing and operation of the Project, which includes, but is not limited to, the public promotion and support for the Project.The annual amount payable by the Owner to the City hereunder (the "Annual in Lieu of Amount") shall be in the annual sums as follows: Year 1 $ 21,000 Year 2 $ 21,630 Year 3 $ 22,279 Year 4 $ 22,947 Year 5 $ 23,635 Year 6 $ 24,344 Year 7 $ 25,074 Year 8 $ 25,826 Year 9 $ 26,601 Year 10 $ 27,399 Year 11 $ 28,221 Year 12 $ 29,068 Year 13 $ 29,940 Year 14 $ 30,838 Year 15 $ 31,763 (b) The Annual in Lieu of Amount has been negotiated between the City and the Owner in accordance with Indiana Code § 36-1-8-14.3(f), and by specifically taking into account the applicable provisions of Indiana Code § 6-1.1-4-40, Indiana Code§6-1.1-4-41, and Indiana Code § 6-1.1-10-16. (c) The Owner will pay all property taxes due on the Property until such time as the Owner complies with the requirements to secure the property tax exemption for the Property described in Section 1.1(b). Section 2.2. The Annual in Lieu Amount payable by Owner with respect to the Property shall be imposed as property taxes and payable in two equal installments due and payable on or before May 10 and November 10 of each successive calendar year, with the initial installment of the payment becoming due and payable on May 10 of the year following the Project's final 3 building receiving its Certificate of Occupancy (the "C of 0") from the City (each payment, a "PILOT", and collectively, the "PILOTs"). Upon receipt by the Owner of an Annual In Lieu Amount bill from the Controller of the City, the Owner shall remit its semi-annual PILOT to the City at the Office of the Controller on or before each installment due date. Subject to Section 2.4, the aggregate annual amount of each year's semi-annual PILOT shall not exceed the Annual in Lieu of Amount. Section 2.3. The obligation of the Owner to pay the Annual In Lieu of Amounts shall be subordinate to the obligations of the Owner with respect to the Owner's obligation to make debt service payments on any financing which may now or in the future be secured by a mortgage on the Property. The City agrees to execute whatever documents any lender to the Owner now or in the future may require which are commercially reasonable in order to confirm the foregoing subordination. Section 2.4. The City shall have the right to enforce the payment of all PILOTs when due, including all penalties, costs, and expenses imposed under Indiana Code §6-1.1-22-1, et. seq., and Indiana Code§6-1.1-37-1,et seq. or any statute which amends or replaces them for delinquent PILOTs, in the same manner as the City enforces the obligations of non-exempt taxpayers. Section 2.5. The lenders and investors of the Owner shall have the right, but not the obligation,to cure defaults hereunder. Such cure shall be accepted as if provided by the Owner. Section 3 Term. Section 3.1. Except as otherwise provided in Section 4, the PILOT Agreement and applicable PILOTs required hereunder shall continue for a period of fifteen (15) years beginning with the initial year that a PILOT is made by the Owner to the City (the "Initial Term"). The Initial Term may be extended by a mutual, written agreement of the Parties. Section 4. Termination. Section 4.1. City or Owner may terminate this PILOT Agreement at any time upon a material breach of this PILOT Agreement or failure to perform any term of this PILOT Agreement by the other, unless such material breach or failure is cured within thirty (30) days after written notice is given to the party in material breach;provided,however,that if any such claimed material breach or failure is of a nature that it cannot be cured within thirty (30) days, a non-breaching party shall not have the right to terminate this PILOT Agreement as long as the party in material breach is diligently pursuing appropriate action to cure the material breach or failure within a total of forty-five (45) days if such action was commenced within thirty (30) days after the giving of notice of the material breach or failure. Section 4.2. Neither City nor Owner shall have any further obligations hereunder except for those obligations accruing prior to the date of termination and those post-termination obligations enumerated in this PILOT Agreement. 4 Section 5. General Provisions. Section 5.1. Conditions Precedent to Agreement. Notwithstanding any other provision herein, this Agreement shall be conditioned upon: (a) the Owner having legal title to the Property; and (b) the Owner executing and recording the Extended Use Agreement providing for a term of at least fifteen(15)years. Section 5.2. Captions; Incorporation and Exhibit. The captions and headings of various Sections and Exhibits referenced herein are for convenience only and are not to be considered as defining or limiting in any way the scope or intent of the provisions hereof. Notwithstanding the foregoing, each of the Recitals and the Exhibits referenced herein are incorporated and expressly made a part hereof Section 5.3. Entire Agreement. This PILOT Agreement constitutes the entire agreement of the Parties with respect to the subject matter contained herein, and all prior discussions, negotiations,and document drafts are merged herein. Section 5.4. Notices. Any notice, demand, request, or other communication which any Party hereto may be required or may desire to give hereunder shall be in writing, addressed as follows and shall be deemed to have been properly given if hand delivered (effective upon delivery), if sent by reputable overnight courier, charges prepaid (effective the business day following delivery to such courier): If to Owner: Western Avenue I, LLC c/o The Michaels Development Company 2 Cooper Street, 14th Floor Camden, NJ 08102 Attn: Mark Morgan With a copy to: Applegate&Thorne-Thomsen, P.C. 425 South Financial Place, Suite 1900 Chicago, Illinois 60605 Attnl Bennett P. Applegate, Jr. With a copy to: [TO BE CONFIRMED] If to City: City of South Bend, Indiana South Bend City Hall 215 S. Dr. Martin Luther King Jr. Blvd., Suite 500 South Bend, Indiana 46601 Attn: Executive Director, South Bend Department of Community Investment 5 With a copy to: South Bend Legal Department 215 S. Dr. Martin Luther King Jr. Blvd., Suite 600 South Bend, Indiana 46601 Attn: Corporation Counsel Email: legaldept@southbendin.gov or at such other address as the Party to be served with notice may have furnished in writing to the Party seeking or desiring to serve notice as a place for the service of notice. Notices given in any other manner shall be deemed effective only upon receipt. Section 5.5. Modification, Amendment, or Waiver. No modification, waiver, amendment, discharge, or change of this PILOT Agreement shall be valid unless the same is in writing and signed by all Parties. Section 5.6. Governing Law. This PILOT Agreement shall be governed by and construed under the laws of the State of Indiana. Suit, if any,shall be brought in St.Joseph County, Indiana. Section 5.7. Execution in Counterparts. This PILOT Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts,each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Section 5.8. Severability. If any provision of this PILOT Agreement is determined by a court having jurisdiction to be illegal, invalid, or unenforceable under any present or future law, the remainder of this PILOT Agreement will not be affected thereby. It is the intention of the parties that if any provision is so held to be illegal, invalid, or unenforceable, there will be added in lieu thereof a provision as similar in terms to such provision as is possible that is legal, valid, and enforceable. Section 5.9. No Joint Venture. Nothing contained in this PILOT Agreement will be construed to constitute Owner as a joint venturer with City or to constitute a partnership between Owner and City. Section 5.10. Construction. The Parties acknowledge that each Party and each Party's counsel have reviewed and revised this PILOT Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party will not be employed in the interpretation of this PILOT Agreement or any amendments or schedules hereto. Section 5.11. Authorization. The persons executing and delivering this PILOT Agreement on behalf of the Parties hereto represent and warrant to the other Party that such person is duly authorized to act for and on behalf of said Party and execute and deliver this PILOT Agreement in such capacity as is indicated below. 6 Section 5.12. Assignment/Successor. This PILOT Agreement shall be binding upon the City and Owner, and all successors, grantees, or assignees of Owner with respect to the Property (or any portion thereof) which would otherwise be entitled to claim an exemption for real and personal property taxes imposed on the Property. Section 5.13. Recording. The Owner will cause, at Owner's expense, this PILOT Agreement, the Ordinance of the Common Council approving this PILOT Agreement (the "Ordinance") and any other instruments of further assurance to be promptly recorded, filed, and registered as provided in the Ordinance, and at all times to be recorded, filed, and registered, in such manner and in such places as may be required by law to preserve and protect fully the rights of the City hereunder as to all of the mortgaged property. In the event the owner does not record and file the PILOT Agreement and the Ordinance, as provided in the Ordinance,within thirty(30) days of the later of(i) adoption of the Ordinance by the Common Council and (ii) execution of this PILOT Agreement by all parties thereto, the City will cause, at Owner's expense,this PILOT Agreement and the Ordinance to be recorded and filed as provided in the Ordinance, the expense of which will be reimbursed by the Owner to the City. Section 5.14 Incorporation of Recitals.The recitals contained in this PILOT Agreement are incorporated into the operative provisions of this PILOT Agreement as if separately restated and are true and correct. * * * * * [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 7 IN WITNESS WHEREOF, the undersigned Parties have caused the execution of this PILOT Agreement by their duly authorized representatives as of the day, month, and year first above written, but to be effective as of the Effective Date. CITY OF SOUTH BEND, INDIANA James Mueller, Mayor STATE OF INDIANA ) ) SS: COUNTY OF ST. JOSEPH ) Before me, a Notary Public, in and for said County and State, personally appeared James Mueller, in his capacity as the Mayor, acting for and behalf of the City of South Bend, Indiana, and who,having been duly sworn, stated that any and all representations and warranties contained therein are true and correct in all material respects. Witness my hand and Notarial Seal this day of , 202 . Notary Public Printed Name My Commission Expires: My County of Residence: [EXECUTIONS CONTINUED ON FOLLOWING PAGE] OWNER: Western Avenue I, LLC, An Indiana limited liability company By: Western Avenue I—Michaels, LLC An Indiana limited liability company, Its manager and a member By: Greg Olson, Regional Vice President STATE OF INDIANA ) ) SS: COUNTY OF ) Before me, a Notary Public, in and for said County and State, personally appeared in his capacity as the who acknowledged the execution of the foregoing instrument as such acting for and on behalf of said and who, having been duly sworn, stated that any and all representations and warranties contained therein are true and correct in all material respects. Witness my hand and Notarial Seal this day of , 202 . Notary Public Printed Name My Commission Expires: My County of Residence: 9 Prepared by and return after recording to: Jenna K. Throw, City Attorney, City of South Bend, 215 S. Dr. Martin Luther King Jr. Blvd., Suite 600, South Bend, IN 46601 I affirm under penalties for perjury,that I have taken reasonable care to redact each Social Security Number in this document, unless required by law. Jenna K.Throw 10 EXHIBIT A The Land referred to herein below is situated in the County of St. Joseph, State of Indiana, and is described as follows: Glass House Survey Of Lots 56 57 58 And Lots 5 To 10 Touhey And Hagerty 11