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HomeMy WebLinkAbout2008-02-06 Redevelopment Authority Minutes• SOUTH BEND REDEVELOPIVIENT AUTHORITY REGULAR MEETING February 6, 2008 1:30 p.m. Presiding: Jose Alvarez 1308 County-City Building 227 West Jefferson Boulevard South Bend, IN 46601 The February 6, 2008 Regular Meeting of the Redevelopment Authority was called to order at 1:30 p.m. by its President, Jose Alvarez. There was a quorum present. 1. ROLL CALL Members Present: Mr. Jose Alvarez, President Ms. Carolyn V. Pfotenhauer, Vice President Mr. Ray Thomas, Secretary Redevelopment Staff: Mr. Don Inks, Director of Economic Development Mrs. Jenny Hullinger, Recording Secretary Others Present: Mayor Stephen Leucke Marguerite Taylor Ashley Ottesen, Kite Realty Chris Maloy, Kite Realty • Rich Hill, Legal Council, Baker & Daniels, LLP Nancy Sulock, South Bend Tribune 2. APPROVAL OF MINUTES a. Approval of the minutes of January 16, 2008 Upon a motion by Carolyn Pfotenhauer, seconded by Ray Thomas, and unanimously carried, the Authority approved the Minutes of the Regular Meeting of January 16, 2008. 3. NEW BUSINESS a. Redevelopment Authority Approval requested for a Development Agreement by and among the South Bend Redevelopment Commission, The South Bend Redevelopment Authority, the City of South Bend and Kite Realty Group, L.P. Mr. Inks gave the high points of the Development Agreement. He said there may be some minor changes, but the major ones have been covered. Since the University of Notre Dame .and Kite are still finalizing the documentation of their agreement for the sale and lease of land for the Eddy Street Commons site, Kite cannot acquire or lease property from the University and then cannot convey that property to the Redevelopment Authority so that we can build our public improvements: the garage and the street improvements. Because of this, the bonds • The South Bend Redevelopment Authority February 6, 2008 Meeting Minutes will be issued with a call provision where the funds will sit idle in an account. If the University of Notre Dame and Kite are not able to complete their agreement, then we will have the ability to pay off the bonds. Kite is agreeing to indemnify for any costs related to that transaction, such as the issuance costs, any interest or other costs incurred with paying off the bonds. On the funding amount, the City is agreeing to supply $35M for the development of the Eddy Street Commons site. Also, $1.7M will be reserved for the Triangle development; the total amount of the City's investment will be $36.7M. The $35M will be funded from the proceeds of bonds, which are expected to net $30M, and from cash resources from Major Moves and sewer capital, which would be $SM. It is important to understand that when we issue these bonds, if we have a debt service reserve requirement we may not achieve a full $30M in net bond proceeds. The City's obligation is to supply whatever amount comes out of that transaction, so if it is less than $30M we will only supply that plus the $SM cash. The City's obligation is to supply whatever bond proceeds come out of that transaction and not more. If we receive more that $30M from the bonds, then the City will reduce its cash commitment so that the total is•no more than $35M. The term of the agreement: this agreement will be effective until either the total private investment of $169,300 has been invested into the project or the assessed value reaches $157M. The term is achieved when the first of these is met. There are reporting obligations for the developer. As contracts are let, as work proceeds, there are regular updates during construction. After the project is complete there is a five year reporting period. We will then be able to see what the economic impact of the project really is. There are development delay fees in the event that certain aspects of the project fall behind schedule. There is a mechanism in place so that we will receive a delay fee, the maximum amount to be collected under this is $1 M. The developer is also agreeing to supply the City with a letter of intent for the hotel development so that before the bonds are sold we will have a letter of intent outlining that transaction. The Redevelopment Authority has an obligation to complete the financing of the public infrastructure projects and finish the acquisition right-of--way for Napoleon Boulevard. The City will be contracting through the Board of Public Works with Kite Realty Construction as a Construction Manager for the project. The first parking garage lease has already been entered into with the Redevelopment Commission. The second parking garage lease would run from the Redevelopment Commission to the developer, and be accomplished under the 2 H:\WPDATAW UTHORTY\020608.MIN.DOC • The South Bend Redevelopment Authority February 6, 2008 Meeting Minutes City's normal bid procedures. The lease will be for twenty five years, and the successful bidder will be responsible for all operations and maintenance, including capital maintenance of the garage for the twenty five .years. At the end of that term the garage will be conveyed to the Developer. In the default provisions, if the commitments are met as outlined then there will be certain delay fees and this agreement details what is considered a delay. Mr. Hill said one important point, is that the parking garage will be turned over to the developer for its use and operation. The garage will generate taxes, which are very important to the structure of the financing. Mr. Alvarez asked if the use of local contractors was abest-effort basis since there are no numbers or percentages given. Mr. Inks said there is language in the agreement that states that the Developer will meet with business agents. On the reporting side, we will get reports on all the contracts being issued so we can see how many local contractors are participating in the project. Mr. Alvarez asked how Kite would let the local community know about the opportunities to participate in the project. Ashley Ottesen, from Kite Realty Group, said they have already met with local contractors. She was not sure how it had been advertised, but she will get back with us about that. She said they have already had apre-bid meeting with the local contractors letting them know what will go out to bid. Mr. Inks said it was reported in the Tribune Business Weekly last week that Michiana Area Industry Advancement Fund met with Kite about the Eddy Street Commons project. Mr. Alvarez said he would feel more comfortable if an amount or a percent of local contractors would be used. He knows that since this is such a large project that it can be difficult to find large enough local contractors to handle the work, but they could be sub-contractors. Mr. Alvarez said he is very adamant that local contractors be involved in the project. Ms. Ottesen said they will continue to meet with any groups we would like Kite to meet with. Ms. Pfotenhauer asked for a definition of a "quality residential" and a "quality hotel" to Kite. Mr. Malloy, of Kite, said the elevations of the project show a lot of brick rather than vinyl. Ms. Ottesen said they are using materials that will look good over time. Ms. Pfotenhauer asked if "quality" would be used in relationship to who was going to operate the hotel, as well, and Ms. Ottesen said Ms. Pfotenhauer was correct. Mr. Greg Hakenen, from Notre Dame University, said that this project is very important to the University from a very long term perspective, meaning 50 to 150 years. From the very beginning the University established the principle that the development must be a quality development. The developer is not being required to build to the standards that the University builds to, which is 100 year buildings, but they are above what a typical spec developer 3 H:\W PDATAW UTHORTY\020608. MIN. DOC The South Bend Redevelopment Authority February 6, 2008 Meeting Minutes would do in this market. Part of the University's agreement with Kite is that the University has approval rights on the construction of the project. Quality is hard to define but there is more oversight of this project than normal. Mr. Inks said his recommendation would be to approve the Development Agreement, subject to final legal review because there are still a few items that need to be adjusted, like dates and the call provisions as far as minor date changes. So, approval subject to final legal review. without any material changes would be the recommendation. Upon a motion by Ms. Pfotenhauer, seconded by Mr. Alvarez, the Authority unanimously approved the Development Agreement subject to final legal review without any material changes. b. Redevelopment Authority Approval requested for Resolution No. 163 Authorizing the Issuance of the South Bend Redevelopment Authority Lease Rental Revenue Bonds of 2008 (Eddy Street Commons Project) and Regarding other related matters Mr. Rich Hill said this is the bond resolution, which will authorize the issuance of the bonds, and approve the Agency Agreement and the Trust Agreement. The Agency Agreement allows the Board of Public Works to go through the bidding process and enter into the construction management agreement with Kite. The Trust indenture controls the process of the funds. Resolution No. 163 explains what the bonds will be used for, and that the Authority intends to lease the parking garage to the Commission, and references the Trust Agreement and the Development Agreement. The resolution identified U.S.A. Bank as the Trustee and it references the Agency Agreement. It identifies the Authority's intent to prepare a Preliminary Official Statement, which is occurring right now. Section two sets a maximum interest rate of 8%. Section three is the call provision and it creates a special call period of up to six months in which, after the sale of the bonds, if the property does not come from Notre Dame to Kite to the Authority as required by the Lease Purchase structure then the bond proceeds would be held unspent and would be utilized to redeem the bonds. Kite would indemnify the city for any costs involved in that transaction. Section four appoints the Trustee. Section five references the Trust Agreement and the public provisions of the Trust Agreement. Section six authorizes the Secretary-Treasurer to place a copy of the Trust Agreement in the Minutes of the Authority. Section seven references the authorization to enter into a bond purchase agreement with City Securities. City Securities has been working with the City and Kite on the structuring of the financing. Section eight authorizes the President and Secretary of the Authority to approve the Official Statement when it is complete. Section nine covers the timing 4 H:\W PDATAW UTHORTY\020608. MIN. DOC The South Bend Redevelopment Authority February 6, 2008 Meeting Minutes of issuing of the bonds. Section ten references the trust Agreement, which has been already approved. Section eleven references the Agency Agreement. Section twelve authorizes the President, Vice-President and Secretary to execute any of the documents that are required on the financing, which is effectively the closing documents. We anticipate selling the bonds this month or the beginning of March. Section fourteen indicates the provision of this resolution and the trust agreement should constitute a contract between the Authority and the holders of the bonds. Mr. Alvarez asked about the interest rate as mentioned in the Development Agreement. Mr. Hill said the City is representing to Kite in the Development Agreement that $30M worth of proceeds will be provided from the bond issue in addition to the other funds that are being made available in terms of sewer capital and Major Moves. If in fact the interest rate is higher than anticipated in the structuring the amount could be lower. If the interest rate is more favorable there could be more proceeds available. We will not know the interest rate until we sell the bonds. Upon a motion by Mr. Thomas, seconded by Ms. Pfotenhauer, the Authority unanimously approved Resolution No. 163 Authorizing the Issuance of the South Bend Redevelopment Authority Lease Rental Revenue Bonds of 2008 (Eddy Street Commons Project) and Regarding other related matters. c. Redevelopment Authority Approval requested for the Trust Agreement between the South Bend Redevelopment Authority and U.S. Bank National Association, Indianapolis, Indiana, Trustee Mr. Hill said this is a typical agreement that the Authority uses when issuing bonds for redevelopment improvements. It does appoint the Board of Public Works to go through the process of bidding out the project. The Board of Public Works complies with all of the public bidding and public notice requirements. There will be an agreement with Kite to serve as the construction manager. The Form of Trust Indenture essentially controls the rent payments that will be received from the Redevelopment Commission to the Authority. The rent payments will essentially be the tax increment that will be generated from the project to pay the principle interest. The bond proceeds will also be held under the Trust Indenture until the call period is over. Upon a motion by Ms. Pfotenhauer, seconded by Mr. Thomas, the Authority unanimously approved the Trust Agreement as presented. • d. Redevelopment Authority Approval requested for the Agency Agreement with the H:\ W PDATAW UTHORTY\020608. MIN. DOC 5 s The South Bend Redevelopment Authority February 6, 2008 Meeting Minutes City of South Bend Mr. Hill said the Agency Agreement sets up the Board of Public Works as the overseer like any other City project. The Board of Public Works is experienced in this process so it is in the best interest of all parties involved. Upon a motion by Mr. Alvarez, seconded by Ms. Pfotenhauer, the Authority unanimously approved the Agency Agreement as presented. Mayor Stephen Luecke thanked the Authority for their diligent work and their thoughtful review of the documents. He said he was deeply grateful for their service. He expressed excitement about the project, the great partnership that has been going on for many years with neighborhood planning efforts, a great consortium with the University and our institutional partners like the NNRO, and the neighborhood representation. This project will be an historic investment in the City of South Bend. The project will bring not only regional, but national attention. This will bring additional investment in the City. .Marguerite Taylor, a resident of the proposed area, said the neighborhood has been a ground floor participant of the project. They are not as concerned about national attention as they are about their neighborhood. They thanked the Authority for approving the project. Mr. Alvarez said he was excited about the project and thought it was great for South Bend. Mr. Alvarez is very glad that new housing is going into the area that has needed improvement. Ms. Pfotenhauer said to know what the area was like in the 1980s and to see where it is going now is very exciting. 4. NEXT MEETING DATE: February 20, 2008 5. ADJOURNMENT There being no further business to come before the Redevelopment Authority the meeting was adjourned at 2:10 p.m. Jose Alvarez, President H:\W PDATAW UTHORTY\020608.MIN.DOC 6 G~ onald I s, Director