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HomeMy WebLinkAbout11-98 Resolution No. 11-98 RESOLUTION AUTHORIZING EXECUTION OF A FEES AND COSTS REIMBURSEMENT AGREEMENT WITH OTTER CREEK, LLC REGARDING THE PROPOSED BUSINESS DISTRICT AT THE OTTER CREEK RETAIL CENTER BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that Sean R. Stegall, City Manager, and Jennifer Quinton, Acting City Clerk, be and are hereby authorized and directed to execute a Fees and Costs Reimbursement Agreement on behalf of the City of Elgin with Otter Creek, LLC for reimbursement of fees and costs incurred by the city regarding the proposed Business District at the Otter Creek Retail Center, a copy of which is attached hereto and made a part hereof by reference. s/ David J. Kaptain David J. Kaptain, Mayor Presented: June 8, 2011 Adopted: June 8, 2011 Omnibus Vote: Yeas: 7 Nays: 0 Attest: s/Jennifer Quinton Jennifer Quinton, Acting City Clerk ELGIN THE CITY IN THE SUBURBS" DATE: June 16, 2011 TO: Rick Kozal, Assistant City Manager FROM: Jennifer Quinton, Acting City Clerk SUBJECT: Resolution No. 11-98, Adopted at the June 8, 2011, Council Meeting Enclosed you will find the agreement listed below. Please distribute this agreement to the other party and keep a copy for your records if you wish. If you have any questions please feel free to contact our office 847-931-5660 and we will do our best to assist you. Thank you. • Resolution 11-98 Adopted Authorizing Execution of a Fees and Costs Reimbursement Agreement with Otter Creek, LLC Regarding the Proposed Business District at the Otter Creek Retail Center . FEES AND COSTS REIMBURSEMENT AGREEMENT THIS AGREEMENT is made and entered into this 8th day of June, 2011 , by and between the City of Elgin an Illinois municipal corporation (hereinafter referred to as the "City") and Otter Creek, LLC, an Illinois limited liability company (hereinafter referred to as the "Developer"); and WHEREAS, the Developer has requested that the City take the following action (the "Municipal Action"), to wit, enact or adopt legislation that will cause certain property owned by the Developer commonly known as the "Otter Creek Retail Center" on the west side of South Randall Road between U.S. Highway 20 and South Street in the City of Elgin, Illinois (the "Subject Property") as a Business District (hereinafter a "Business District") as defined under the Illinois Business District Development and Redevelopment Act (65 ILCS 5/11-74-3.1 et seq.); and WHEREAS, in analyzing and (at the sole discretion of the City) implementing the requested Municipal Action, the City expects to incur fees and costs including, without limitation, fees and costs payable to Kane, McKenna and Associates, Inc. in connection with such consultant's (i) preparation and presentation of a feasibility analysis of the proposed Business District and (ii) consulting with the City in connection with the redevelopment agreement with the Developer (collectively the "Fees and Costs"); and WHEREAS, the City is unwilling to embark on its consideration of the requested Municipal Action unless the Developer agrees to reimburse the City for the Fees and Costs as herein provided; NOW, THEREFORE, the undersigned Developer does hereby covenant and agree as follows: 1. The Developer shall promptly reimburse the City for such Fees and Costs as the City may from time to time incur; provided, however, that unless and until this Agreement is hereafter amended so as to increase such limit, the Developer shall not be required to reimburse the City more than an aggregate of Twenty Thousand Dollars ($20,000) of such Fees and Costs (the "Aggregate Reimbursement Limitation"). 2. Subject to the Aggregate Reimbursement Limitation, the Developer's covenant as contained in paragraph 1 above shall apply to all such Fees and Costs incurred by the City prior to such date (if ever) as the Developer shall have notified the City in writing that the Developer has elected to withdraw its request for the Municipal Action. 3. To secure its obligations to the City hereunder, the Developer shall deposit with the City the sum of Fifteen Thousand Dollars ($15,000) (the "Escrow Deposit"). The City shall have the right to withdraw from the Escrow Deposit such Fees and Costs as may from time to time be due and owing by the Developer to the City, and shall account for all such withdrawals to the Developer. The amount of such Escrow Deposit shall not limit the Developer's obligation to the City hereunder. Further, any balance of the Escrow Deposit remaining after the payment to the City of all Fees and Costs due and owning by the Developer shall be promptly refunded by the City to the Developer. • 4. This agreement shall not be construed so as to create a partnership, joint venture, employment or other agency relationship between the parties hereto. IN WITNESS WHEREOF, the parties have entered into and execute this agreement as of the 8th day of June, 2011. DEVELOPER: CITY: OTTER CREEK, LLC CITY OF ELGIN By: B City Manager Name: S(r>1--fc'S to'(S Title: kligliAtfr,f4P-6- OVARd—A/612 Attest: Acting Cit erk 2 .„,11„ Ilfh ELGIN THE CITY IN THE SUBURBS' AGENDA ITEM: MEETING DATE: May 25, 2011 ITEM: Feasibility Study for Establishing a Business District at Otter Creek Retail Center (No Cost to the City) OBJECTIVE: Conducting a feasibility study to determine the viability of creating a Business District at the Ot- ter Creek retail center. RECOMMENDATION: Authorize a feasibility for creating a Business District at the Otter Creek retail center. BACKGROUND Otter Creek, LLC (developer) owns the Otter Creek retail center located on the west side of south Randall Road between U.S. Highway 20 and South Street. The developer is asking the city to establish a "Business District" for its retail development to help it finance (1) the repaving of the retail center's parking lot, and (2) the relocating of a stormwater detention area in an outlot with frontage on Randall Road to an interior lot within the retail center. The developer purchased the Otter Creek retail center in 2007 and began reconfiguring the two, vacant "big box" tenant spaces formerly occupied by the Omni grocery store and the Han- dy Andy home and building improvement store. The facades on those two, vacant spaces along with those of all the other properties in the retail center were also extensively rehabilitated during the two years following the purchase in addition to other tenant space improvements and incentives. The developer states that it has invested approximately $4.2 million in the retail center since purchasing the property. (Although the Target store is located within the commonly recognized boundaries of the Otter Creek retail center, that retail operation and the property on which it is located are separately owned by entities not affiliated with developer. Target will not be included within the proposed Business District.) In March 2009, developer entered into a sales tax sharing agreement with the city to assist in securing the Burlington Coat Factory as a tenant. Under the agreement, the city agreed to re- bate up to $495,500 in sales tax generated by the Burlington Coat Factory over a five-year pe- riod. Last year, the city made its first sales tax rebate payment to developer in the amount of $87,499.02. . . . . ' The Illinois Business District Development and Redevelopment Act (65 |L[S 5/11-74-3.1 et seq.) (Act) allows municipalities to establish a Business District and, if it is determined that the prop- erty within the Business District is blighted and certain conditions and procedures are met, enables a municipality to impose a Business District tax within the Business District and to use the funds generated to pay for Business District improvements. The Act is intended to streng- then the tax base of Business treng-thgnthet8xbaSemfBusine5s Districts, to assure opportunities for district development or re- development and to attract sound and stable commercial growth in the district. Municipalities can elect, by ordinance, to impose increased sales taxes in 0.25 percent incre- ments up to 1.0 percent within the district. Sales taxes can then be used within the Business District for any costs allowable under the Act. Typical costs include land assembly, streetscape improvements, public infrastructure improvements, site preparation and stormwater deten- tion. The city currently imposes a sales tax of one percent /1V6\ on tangible personal property sold in the city. (The combined total sales tax from all governmental entities on personal prop- erty purchased in Kane County is 7.75 percent and 9.75 percent in Cook County.) A Business District remains in place for up to 23 years following designation. During that time, all retail sales taxes are collected by the Illinois Department of Revenue and paid to the State Treasurer, who disperses a check to the municipality. Any revenues generated within the dis- trict are placed in the Business District Tax Allocation Fund. Formation of a Business District does not require the consent of the property owners within the district and the sales tax that is levied is paid by those who purchase goods and services in the Business District. To form a Business District and levy a sales tax in the district, the Act requires that a municipality prepare a plan, hold public hearings and make a blight finding. An amend- ment to the Act adopted nlend'rnenttotheActadopted last year eliminated the requirement that the proposed Business Dis- trict area's present condition and use is blighted, allowing a municipality to determine that the property will become blighted in the future without additional investment. OPERATIONAL ANALYSIS The developer asked the city to consider establishing a Business District at the Otter Creek retail center in late 2009. At that time, staff did not believe the developer would be able to demon- strate the retail shopping center was in a blighted condition within the meaning of the Act and declined to pursue the matter further. After the 2010 amendment to the Act allowing for a find- ing of "future" blighting conditions became law, the developer asked that the city reconsider the creating a Business District for its retail center. The developer is seeking to use the funds that would be generated from the sales tax increase in a Business District to finance an estimated $3.2 million in infrastructure improvements and tenant incentives. An estimated $500,000 would be used to relocate the stormwater detention area from an outlot fronting Randall Road; $300,000 for repaving the parking lot; $1.6 million to incent a 'big box" retailer; $420,000 to incent a restaurant; and $400,000 for other tenant in- ., . centives and facility improvements. The developer estimates that a sales tax surcharge of .75 to 1.0 percent will be required to generate sufficient revenue to fund these proposed improve- ments. Staff interviewed two consultants specializing in conducting feasibility studies used to deter- mine the viability of establishing a Business District. Robert Rychlicki of Kane, McKenna and As- sociates, Inc. was selected by the staff not only for the significant depth of experience he has in \s'smciates, |nc. vvasse|ectedbythestaffnmtmnlyforthesignificantdepthofexperiencehehasin analyzing and creating Business Districts, but also for the exceptional work he is providing to the city in consulting for the Bluff City Quarry TIF District. Mr. Rychlicki's cost for services is also lower than the competing consultant the staff interviewed. There is no cost to the city for undertaking the feasibility study; all costs for Mr. Rychlicki's work will be borne by the developer. The feasibility study will include: • Examination of Business District qualification factors and presentation or rationale for basis under which the Business District is to be justified under State law. • A statement of redevelopment goals and objectives. • A statement of eligible redevelopment activities. • Presentation of estimated costs for the redevelopment projects contemplated for im- plementation under the plan. • A detailed discussion of impediments to the successful redevelopment of the project area and measures the city could undertake to eliminate such barriers so to promote economic revitalization of the prject area. Should the viability of establishing a Business District be substantiated, staff will then seek city council approval to proceed with the legislative establishment of the Business District. At that point, the proposed increase to the sales tax in the Business District will be considered by the city council as well as the terms of the proposed development agreement between the city and developer governing the sharing of that increased sales tax revenue. If the city council approves the creation of a Business District, Mr. Rychlicki will then, at the de- veloper's expense: • Assist the city and the developer in participating in meetings with all interested and af- fected parties and overlapping taxing jurisdictions and develop the procedures for such gatherings as required by state law. . . . . • Assist the city in participating in required community meetings or public hearings, as well as helping to insure preparation and execution of property notification as required for all meetings. • Work with the city's corporation counsel to meet all the requirements of appropriate laws to insure proper establishment of the Business District. • Assist the city's corporation counsel in preparing appropriate ordinances required for adoption of the redevelopment plan and p 'ect. • Assist city in establishing and maintaining complete documentation files to assure prop- er support of eligibility findings in order to support legal standing for establishment of the Business District. • Assist the city in reviewing any economic development proposals submitted to the city by potential developers or the owners of property located in the Business District. Two agreements are attached for reference. The first agreement is between the city and Kane, McKenna and Associates, Inc. for the professional services that firm will be providing to the city for the Business District's feasibility study and for the legislative creation of the Business District should the city council provide such approval at a future date. The second agreement is be- tween the city and the developer and requires the developer to pay the professional service fees the city incurs from Kane, McKenna's work on the business district. That agreement re- quires the developer to deposit the sum of$15,000 with the city to draw down upon when ser- vices are rendered by Kane, McKenna. INTERESTED PERSONS CONTACTED Otter Creek, LLC, the retail center's owner, has been contacted regarding the proposed busi- ness district as has the Elgin Area Chamber of Commerce. Both parties are in agreement with conducting a feasibility study to determine the viability of establishing a business district at the Otter Creek shopping center. FINANCIAL ANALYSIS There is no cost to the city for undertaking the feasibility study to determine the viability of creating a Business District at the Otter Creek retail center. The developer will be paying all costs for the city consultant's work analyzing the feasibility of creating a Business District, and all costs relating to the establishment of the Business District should the city council ultimately approve its creation. Should the feasibility study make a favorable determination for creating Business District at the Otter Creel retail center, the city council will be provided with a detailed financial analysis of ` the proposed development agreement between the city and the developer governing the shar- ing of the additional tax revenue expected to be generated from the Business District. BUDGET IMPACT FUND(S) ACCOUNT(S) PROJECT#(S) AMOUNT AMOUNT BUDGETED AVAILABLE N/A N/A N/A N/A LEGAL IMPACT None. ALTERNATIVES The city council may choose not to authorize a feasibility study to determine the viability of creating a business district at the Otter Creek retail center. This option will require the develop- er to seek other financing sources for the retail center's maintenance and redevelopment. NEXT STEPS 1. Execute the respective agreement with Kane, McKenna and Associates, Inc. and Otter Creek, LLC. 2. Report back to city council with determination on viability of establishing a Business Dis- trict in the Otter Creek retail center. Originators: Richard G. Kozal,Assistant City Manager Final Review: Colleen Lavery, Chief Financial Officer William A. Cogley, Corporation Counsel/Chief Development Officer Approved: Sean R. Stegall, City Manager S ATTACHMENTS A. Professional Services Agreement with Kane, McKenna and Associates, Inc. B. Fees and Costs Reimbursement Agreement with Otter Creek, LLC 6