Title
Downtown Hampton Inn/Lot 9 Redevelopment (B)
Explanation
On September 19, 2005, the CRA authorized Staff to prepare a Request for Proposals to solicit developers interested in building a hotel or a hotel with other uses on Lot 9 in Downtown. A sole response by Windsor Aughtry was subsequently selected for this project. At the time when Windsor Aughtry's initial proposal was first considered, the CRA approved of the general nature of the project and of the incentive request. However, the CRA requested that Windsor Aughtry fine-tune project and the incentive request and resubmit once these particulars had been worked out. Windsor Aughtry subsequently revised and adjusted certain details of the development, including the construction staging plan, number of stories, and the structure of the incentive request. Additionally, the developer succeeded in separately negotiating a parking agreement with the privately-owned parking garage located adjacent to Lot 9. On July 16, 2007, the CRA heard presentations from Staff and from Windsor Aughtry regarding the developer's revised Hampton Inn application. At that meeting, the CRA approved the project concept as presented and approved TIF reimbursement to fund the approximately $802,000 in eligible costs that comprise the "but for" financing gap identified for the project. The approved funding plan consisted of a 13-year payment period in which there would be 90% TIF reimbursement for the first five years and 60% reimbursement for the final eight years (or ending earlier if the "gap" amount was reached more quickly than anticipated.) Since that meeting, a development agreement for this project has not been signed.
In September 2007, the Florida Supreme Court issued an opinion in the case of Strand v. Escambia County, which profoundly impacts the tools and mechanisms used by CRAs statewide (including the Gainesville CRA) to fund redevelopment. Strand questions the constitutionality of multi-year obligations of the tax increment. The Court has since announced its intention to revisit its initial interpretation of the issue. However, at this time, due to Strand, the CRA cannot enter into a development agreement (contractual obligation) with Windsor Aughtry to provide the back-end, multi-year TIF-reimbursement package that was approved on July 16, 2007.
Since multi-year financing is currently not an option, CRA staff has been working to determine if and how an upfront payment could be made to cover the "but for" gap for this project. With help from City staff, CRA staff has developed the following plan (approved by the CRA on November 19, 2007): The CRA will reassign $127,000 currently allocated in the Downtown budget for E. University Avenue Lighting to the Lot 9/Hampton Inn project. Additionally, the CRA requests that the City permit the CRA to defer two annual payments owed to the City for the Downtown parking garage, and one annual payment owed for the Commerce project. If this is passed, the interlocal agreements for these projects would need to be amended extending the CRA's payment obligation timeline for the projects by two and one years, respectively. City staff in the Budget & Finance Department would also re-amortize the loans based on these changes. As the final component to this upfront payment structure, the CRA also requests that the City Commission transfer without consideration the proceeds from the sale of Lot 9, valued at approximately $342,000, to the CRA. The CRA, in turn, would use the proceeds of that sale to fund eligible infrastructure improvements necessary at the site. Following the aforementioned requests/recommendations from the CRA will cover approximately $764,000 in up-front incentives, which is quite close to the identified funding gap of $802,000.
Fiscal Note
The funding gap identified for this project by CRA Staff and a third-party consultant is approximately $802,000. The proposed reallocation of funds within the Downtown district will result is $127,000 transferred from the Streetscape Account (#610-790-W202-5520) for E. University Lighting to a new account created for the Lot 9 redevelopment project. The CRA requests the City Commission allow the CRA to postpone two annual payments to the City for the Downtown parking garage, an annual payment of approximately $112,172, which will be used towards Lot 9 redevelopment. The CRA also requests to postpone one annual payment to the City for the Commerce project, resulting in $70,304 that will be used towards Lot 9 redevelopment. Additionally, the CRA requests the City Commission transfer without consideration the proceeds from the sale of Lot 9 to the CRA. This lot is valued at approximately $342,000. The CRA will then use those proceeds to fund infrastructure improvements at the site. The total value of the above recommended actions is approximately $764,000.
Recommendation
CRA to City Commission: 1) Allow the CRA to defer two annual debt service payments to the City related to the Downtown parking garage, and authorize the amendment of the interlocal agreement governing this debt service to accommodate the postponement by extending the payment period an additional two years; 2) Allow the CRA to defer one annual debt service payment to the City related to the Commerce project, and authorize the amendment of the interlocal agreement governing this debt service to accommodate the postponement by extending the payment period an additional one year; 3) Request that the City Commission transfer without consideration the proceeds from the sale of Lot 9 to the CRA for the purpose of redevelopment; and 4) Authorize the City Manager to execute any and all necessary documents.