Title
The Palms Transformational Projects Program Incentive Request (B)
Explanation
The CRA has received an application for Transformational Incentives for a project entitled The Palms on Southwest 2nd Avenue from Southwest 2nd Ave, L.L.C. based out of Gainesville, Florida.
The proposed project is located on the northeast corner of Southwest 2nd Avenue and Southwest 3rd Street. The project includes one four-story building. The project is an upscale multi-family condominium residential project with 48 two bedroom/two bath units. Parking will not be provided onsite; instead the developers may obtain parking spaces, if available, from the Southwest Downtown Parking Garage, located on the building's northern border. The developer will be purchasing offsite stormwater retention from the City of Gainesville.
The Transformational Incentive Program allows for projects that receive 25 points to request 80% of the increment generated by the project for 15 years. The program was amended to allow those projects that receive 50+ points to request 90% of the increment. In this application the developer has requested 80% of the increment generated by the project for 15 years. The incentive would be capped at the "but for" gap claimed by the applicant at the Net Present Value of $1,158,640. The remaining increment would be allocated to the Downtown Redevelopment Area in the projected amount of $479,150 over fifteen years. After fifteen years the full increment generated by the project would be allocated to the Downtown Redevelopment Area Trust Fund until the end of the redevelopment area's life.
Staff retained PMG Associates to complete an independent fiscal evaluation of the application including verification that a gap does exist and a review of the points claimed by the applicant. PMG Associates, Inc. found that the gap of $1,158,640 does exist, but that the project does not meet the requirements for an 80% incentive as it does not meet the 26 points as proposed. The developer has claimed 26 points under the Downtown points system for the Incentive Program. Staff and PMG Associates disagree with this assessment, and PMG instead has recommended the applicant reaches a total of 24 points, which qualifies the applicant for the 60% incentive. Staff agrees that the applicant qualifies for the 60% incentive but with a points total of 21 with no allocation for merit points. A copy of the report by PMG Associates, Inc. has been provided in the backup along with the application from Southwest 2nd Ave, L.L.C.
PMG's report states that they believe that there may not be spin-off from this project, but that the development will "enhance activity at the existing establishments." PMG also has found that the City will generate revenue from a variety of sources related to The Palm projects, totaling a minimum of $28,640 annually for utility taxes, stormwater fees, etc.
PMG bases the cause of the gap on sale prices that are below average for the area, but states that the current market does not support estimates for higher price points than those listed in the application. PMG also has determined that the higher project costs per unit influence the gap.
The Downtown Redevelopment Advisory Board reviewed this application at their November 8, 2006 meeting and unanimously recommended approval of the incentive request, but recommended 60% of the increment generated by the project for 15 years. The Downtown Redevelopment Advisory Board also recommended that the developer fully outline and explain all merit points claimed on their application for the possible consideration of 80% of the increment generated by the project for 15 years by the CRA. The Downtown Redevelopment Advisory Board further requested clarification on the consultant's report. Staff has requested the consultant provide more information in the report and the CRA has received an extended report.
Staff recommends that The Palms application for incentives under the Transformational Incentive Program be approved with the following terms: The "but for" gap for the project be determined to be $1,158,640 and the payments be capped at the net present value of that amount calculated as of the incentives application date. The project be provided 60% of the actual increment generated annually until the cap is met or 15 years. No change be permitted to the building materials without approval of the CRA; if the materials change the CRA could reopen the incentive agreement. No change of ownership (other than sale of the residential units) is permitted without approval of the CRA. The CRA reserves the right to bond the increment at a point in the future and pay the developer the net present value of gap early. This could save the CRA considerable money since the CRA borrowing rate would likely be less than the developers. The development agreement allows that if those items the CRA has provided incentives for fall into disrepair the CRA can use annual increment payments to make repairs as needed.
Staff and the developer will make a presentation to the CRA on the application and project. A representative from PMG Associates will also be available to respond to questions regarding their evaluation.
Fiscal Note
Projects that receive less than 25 points under the Transformational Incentive Program are eligible for up to 60% of increment generated by the project for 15 years. Any incentives paid under this program are paid from the tax increment generated by the project so there is no immediate impact on the annual budget for the Downtown Community Redevelopment Area. The cost of the analysis by PMG Associates is $9,500. Currently no funds are available in the Professional Services account for the cost of the analysis and staff recommends transferring $9,500 from the Downtown Residential Projects account.
Recommendation
Downtown Redevelopment Advisory Board to the CRA: 1) Recommend approval of the Transformational Incentive Program Application for The Palms on Southwest 2nd Avenue as described above and the 60% of the increment for 15 years; 2) allow the developer an opportunity to demonstrate to the CRA that they are entitled to receive merit points and 3) receive clarification on the consultant's report.
Executive Director to the CRA:
Approve The Palms Transformational Incentives Program application with terms as follows: 1) the "but for" gap for the project be determined to be $1,158,640 and the payments be capped at the net present value of that amount calculated from the developer's incentives application date; 2) that the project be provided 60% of the actual increment generated annually until the cap is met or over 15 years; 3) construction begin within two years from the date of the CRA approval; 4) no change be permitted to the building materials without approval of the CRA; 5) no change in form of ownership (other than sale of the residential units) is permitted without approval of the CRA; 6) the CRA reserves the right to bond the increment at a point in the future and pay the developer the net present value of the gap early; 7) that the development agreement allow that if those items the CRA has provided incentives for fall into disrepair the CRA can use annual increment payments to make repairs as needed; 8) authorize the Executive Director and the CRA attorney to prepare and execute any and all documents necessary and 9) approve the transfer of funds from the Downtown Residential Projects account to fund the analysis by PMG Associates.