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DOWNTOWN INFRASTRUCTURE INFILL INCENTIVE PROGRAM REIMBURSEMENT AGREEMENT WITH OPEN WINDOW PROJECT, LLC
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Authorizing a Downtown Infrastructure Infill Incentive Reimbursement Agreement with Open Window Project, LLC for $1.8 million; and
2. Authorizing the City Manager to execute future reimbursements up to an additional $2 million if appropriations are made to the downtown incentive program in subsequent fiscal years; and
3. Authorizing the City Manager to take necessary and appropriate actions to carry out the purpose and intent of the resolution.
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Summary
The City Council identified economic development and downtown revitalization as key goals for the City of Stockton. To further those goals, the Council adopted the Downtown Infrastructure Infill Incentive Program in July 2015 to encourage infill development in Downtown Stockton and to help defray the cost of public infrastructure. Open Window Project, LLC is ready to begin construction of its Open Window Project (Project), consisting of market-rate housing and retail/commercial space, and has requested funding under the Downtown Infrastructure Infill Incentive Program. Staff is recommending that a Reimbursement Agreement for $1.8 million, in accordance with the program guidelines, be executed with Open Window Project, LLC for Phase I of the Project, which will include 150 market-rate housing units, 62 affordable-housing units, and 92,400 s.f. of commercial space. Staff further recommends that the City Manager be authorized to approve future reimbursements, up to an additional $2 million (for a total of $3.8 million), should future funding be allocated through the annual budget to the Downtown Infrastructure Infill Incentive Program. The program criteria of a minimum of 35 market-rate housing units and/or 30,000 s.f. of new or renovated commercial space meets the program guidelines without the inclusion of the proposed affordable units.
DISCUSSION
Background
The City Council adopted two critical plans, the Urban Land Institute (ULI) Report (February 2012) and Economic Development Strategic Plan (February 2015) to guide the City in revitalizing Downtown Stockton and targeted neighborhoods, increasing employment opportunities, and attracting private investment throughout the community.
In an effort to encourage infill, mixed-use development in Downtown Stockton and to defray the cost of public infrastructure, the City Council approved the Downtown Infrastructure Infill Incentive Program in July 2015 (Attachment A - Resolution No. 2015-07-07-1502). The Program provides up to $900,000 annually, on a reimbursement basis, for public offsite infrastructure improvements associated with eligible Downtown infill projects. Eligible projects must consist of a minimum of 35 market-rate housing units and/or a minimum of 30,000 s.f. of new, or newly renovated, retail or commercial space. The applicant must also make a capital investment of at least $500,000 and eligible public infrastructure improvements must equal $100,000 or more. The Program was approved for a ten-year period and will sunset in July 2025 unless extended by the City Council.
In February 2016, the City Council approved a Master Development Plan (MDP) and Development Agreement with Open Window Project, LLC for its Open Window Project, which encompasses approximately 15 square blocks within the Downtown Stockton core. The Open Window Project MDP is a mixed-use development that consists of approximately 1,000 residential units, 90,000 s.f. of commercial space, and 110,000 s.f. of industrial/art studio space.
Present Situation
Open Window Project, LLC is prepared to begin Phase I of the Project and has submitted a request to participate in the City’s Downtown Infrastructure Infill Incentive Program. Open Window Project, LLC has undertaken predevelopment activities, including design and engineering, towards the implementation of Phase I, which encompasses three blocks bound by Miner Avenue to the north, Sutter Street to the west, Channel Street to the south, and Stanislaus Street to the east (Attachment B - Project Description).
Phase I is comprised of 200 residential units, of which a minimum of 150 units will be market-rate. This total includes a diversity of housing options, including townhomes, lofts, apartments and live/work spaces in both new construction and adaptive reuse of existing structures. Phase I also includes approximately 92,400 s.f. of new commercial space and approximately 200 onsite parking spaces.
In addition, Phase I includes a 25,000 s.f. City Center Walk that features a park-like greenbelt that weaves through both new construction and historic buildings while incorporating art, outdoor amenities and access to retail/commercial spaces.
Open Window Project, LLC has requested a Reimbursement Agreement in accordance with the Downtown Infrastructure Infill Incentive Program guidelines in the amount of $3.8 million for eligible public improvements associated with Phase I of the Open Window Project. Eligible improvements include, street improvements, storm drain, sanitary sewer and water supply projects required for the development of the project. The first $1.8 million has been budgeted this fiscal year from fully funding the first two years of the downtown incentive program, however, the remaining balance of $2 million will be dependent upon City Council appropriations in subsequent fiscal years. Should Council appropriate funds and subject to City Manager approval, a maximum of $900,000 may be reimbursed to Open Window Project, LLC in fiscal years 2017-18 and 2018-19; the remaining $200,000 would be reimbursed in fiscal year 2019-20. The City shall only be obligated to reimburse the $1.8 million currently appropriated. The proposed resolution would also authorize the City Manager to approve up to $2 million more (for a total of $3.8 million) but only if future appropriations are made by the City Council in future fiscal year(s) budget(s).
Open Window Project, LLC must meet the following conditions before the City will make a reimbursement payment:
1. Provide City with documentation that substantiates the cost of the public improvements and that such costs have been paid by Open Window Project, LLC.
2. Obtain all City permits and approvals required to commence construction of Phase I of the project.
Once the above conditions have been met, the City will reimburse Open Window Project, LLC in the following manner and contingent upon available funding:
1. The first payment of 10% (i.e. $380,000) shall be due upon City’s issuance of building permits for the public infrastructure improvements.
2. The second payment of 10% (i.e. $380,000) shall be due upon City’s issuance of building permits for Phase I of the Project.
3. The third payment of 20% (i.e. $760,000) shall be due once construction of a minimum of 150 new market-rate housing units and/or 90,000 s.f. of new/newly renovated commercial space is 50% complete.
4. The fourth payment of 30% (i.e. $1,140,000) shall be due upon City’s issuance of the first temporary Certificate of Occupancy for Phase I of the Project.
5. The City may make final payment of 30% (i.e. $1,140,000) within sixty (60) days after recordation of the Notice of Completion of the Improvements and upon the City’s acceptance of Improvements, providing there are no liens in place pertaining to the Improvements.
The Reimbursement Agreement and public infrastructure improvements are attached as Exhibit I to the resolution.
FINANCIAL SUMMARY
Sufficient funds are available in the FY 2016-17 Economic Development account number 010-1760-510 to reimburse up to $1.8 million. The remaining balance of
$2 million may be reimbursed in equal installments of $900,000 in fiscal years 2017-18 and 2018-19, with the remaining balance of $200,000 reimbursed in fiscal year 2019-20, and will be contingent upon City Council appropriation during the normal annual budget approval process each fiscal year and City Manager authorization. Future funds are not part of the Long Range Financial Plan.
Attachment A - Resolution No. 2015-07-07-1502
Attachment B - Project Description