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HomeMy WebLinkAboutRDA FIN'CL ASSISTANCE 10-04-93RDA NO. 5 10-4-93 OATE: OCTOBER 4, 1993 Inter-Com TO' WILLIAM A. HUSTON, EXECUTIVE DIRECTOR FROM: COMMUNITY DEVELOPMENT DEPARTMENT S[JBJECT: AGENCY FIN/%NCIAL ASSISTANCE: 100 WEST MAIN STREET (THOMPSON) RECOMMENDATION It is recommended the Redevelopment Agency authorize the Assistant City Manager to negotiate and return to the Agency with an Owner Participation Agreement to provide a deferred loan of $27,120 to assist the property owners of 100 West Main Street to renovate and rehabilitate the existing building pursuant to Agency approved Design Review 93-012. FINANCIAL IMPACT The Town Center Financing Plan, approved by the Redevelopment Agency on March 4, 1991, identified $200,000 in tax increment funds from the Town Center Project Area as being available for commercial rehabilitation projects by Fiscal Year 1993-94. When the Owner Participation Agreement is returned to the Agency for approval, the Agency will be required to appropriate $27,120 from the projected 1993-94 Town Center Capital Account for this assistance. BACKGROUND In June, 1991, the City received the summary report on The Old Town Charette. The Charette participants included numerous local residents and business owners, planning and architectural professionals as well as city representatives. Its purpose was to identify strengths and weaknesses within the Old Town area. The subject building, located at 100 West Main Street (the southwest corner of Main Street and E1 Camino Real) and referred to in the Charette as "The Roach Building", was defined as an "onion" by the participants. "Onions" were those features of the Old Town which the workshop participants identified as undesirable or in need of improvement. The Charette participants developed a "vision" of Old Town which, among other characteristics, envisioned a village atmosphere, which utilizes E1 Camino Real as the central corridor and creates and enhances a pedestrian environment in a manner which capitalizes on the unique character of Tustin. Subsequent to the Charette, the Redevelopment Agency sponsored a Regional/Urban Design Assistance Team (R/UDAT) of the American Institute of Architects to analyze the findings of the Charette, as well as the Old Town area as a whole, and to make specific Redevelopment Agency Report Agency Financial Assistance 100 West Main Street (Thompson) October 4, 1993 Page 2 recommendations concerning improvements needed to maintain the viability and historic nature of Old Town. The R/UDAT, in answering the question "What can Old Town Be?" provided four answers: le TUSTIN'S HEART: A common center that portrays the image of what the City and its values are. · AN ECONOMICALLY VIABLE PLACE: An area with its own economic niche in the community, not trying to compete with other business areas. · A PLACE FOR ITS RESIDENTS: An area which recognizes the importance and integrity of the residential neighborhoods and provides businesses that serve the Old Town residents. · A PLACE FOR NEW BUSINESSES AND RESIDENTS: An area that expands its viability and dynamism by attracting new residential, commercial and office development. Concerning the subject property, the R/UDAT stated: "The Roach Building site and the adjacent office court should be redeveloped according to the following objectives: · Improve the architectural character of the Main Street/E1 Camino Real intersection. · Enhance the identity of Old Town's retail core." Jeff and Cherie Thompson have recently purchased the "Roach" building and have been working with the Community Development Department to meet the concerns of the Charette and the objectives of the R/UDAT. They are proposing extensive exterior renovation to make the building compatible with the Cultural Resources District and to bring back to Old Town some of the architectural features which existed in the past. They also are proposing to make structural and tenant changes in the building to attract retail users to the first floor storefronts. The elevations of the building will be redesigned, with modern adaptations, to be reminiscent of the old brick First National Bank of Tustin, which previously existed across the street from this Redevelopment &genc¥ Report &gency Financial Assistance 100 West Main Street (Thompson) October 4, 1993 Page 3 building, at the northwest corner of E1 Camino Real and Main Street. Included in the renovation will the construction of a focal point two-story corner turret, similar to the one which was featured on the bank building¥~renovating the windows and doors as well as covering the exterior walls of the building along E1 Camino Real and Main Street with a brick veneer. A number of other improvements are proposed to make the building compatible with the historic elements of Old Town. On June 21, 1993, the Redevelopment Agency approved Design Review 93-012 for the renovation of the subject building, as shown in the attached renderings (Exhibit 1). The Agency also waived the lease fee for five parking spaces owned by the Agency in the Steven's Square parking structure. The property owners have also been working with the City Staff as part of the City's federally funded Commercial Rehabilitation Program. Under this program, property owners in the Old Town area can receive a $10,000 grant to offset design and engineering costs for rehabilitation and seismic retrofitting work as well as another $10,000 grant to offset construction costs. Both of these grants are financed through the Community Development Block Grant (CDBG) Program. The Community Development Department Staff have already approved the property owner's application and have allocated $10,000 from CDBG funds for the design and engineering assistance, as well as an additional $10,000 to offset construction costs for rehabilitation activities. DISCUSSION In addition to assistance from the federally funded Commercial Rehabilitation Program, the property owners have requested additional Redevelopment Agency assistance in off-setting costs associated with the rehabilitation of the property. The estimated total cost for renovating the building will be approximately $87,486, based on information provided by the property owners' architect. The cost breakdown is attached as Exhibit 2. The property owners are substantiating their request partially based on future anticipated City and Agency revenue that will be derived from the project over time and also on the benefits of the project to the Old Town. The property owners intend to replace the tenants on the first floor of the building with retail users, as recommended by the R/UDAT, and to place non-retail users on the second floor. This is expected to increase sales tax revenues to Redevelopment Agency Report Agency Financial Assistance 100 West Main Street (Thompson) October 4, 1993 Page 4 the City of Tustin by approximately $11,663 over a ten year time frame. (See Exhibit 3) The renovation of the build-ing is also substantial enough to anticipate an increase in tax increment received by the Redevelopment Agency over a ten year period by approximately $5,475. (See Exhibit 4). This, along with the sales tax, would provide a total income stream to the City and the Agency over ten years of $17,138. (See Exhibit 5). Furthermore, one of the primary goals of The Town Center Redevelopment Plan is to preserve and enhance the historic nature of the Old Town area, and to ensure the area's financial viability. In considering whether Redevelopment Agency assistance might be provided, the Staff would recommend the Agency be guided by the following principles: ® The Agency assistance should be provided for costs for renovations which either preserve an historically significant building in Old Town or which makes an otherwise non-historical building substantially compatible with the character of Old Town. · Agency assistance should be limited to the level which can 'not reasonably be expected to be financed by the private sector through conventional lending practices. Under conventional lending practices, the owner could reasonably be expected to obtain financing for 65% of the proposed improvements. · Agency assistance should recognize the risk factor involved in making substantial improvements in the Old Town Area, but at the same time, not allow for public subsidy of immediate profits made on the public investment. In addressing the first principle, above, the total project cost anticipated by the property owners will contribute significantly towards making the existing building compatible with the character of Old Town. Under the second principle, staff believes that any proposed Agency assistance should be limited to $27,120 or approximately 35% of the expected improvement costs. And, in considering the third principle, staff believes that any Agency assistance to the property owner should be in the form of a deferred loan without payments, of which 10% of the loan is forgiven for each year the property owners hold title to the Redevelopment Agency Report Agency Financial Assistance 100 West Main Street (Thompson) October 4, 1993 Page 5 property. forgiven. At the end of ten years, the entire loan would be To determine the level of assistance, the Staff reduced the total estimated project costs of approximately $87,486 by the $10,000 rebate that will be provided to the property owner through the Commercial Rehabilitation Program grant for construction. The staff then determined the amount of the remaining cost (65%) which could be financed by conventional methods, if the property owner wished to utilize conventional financing. This resulted in a projected Agency assistance level of $27,120. Total Construction Cost CDBG Construction Grant Non-funded Construction Cost $87,486.00 10,000.00 77,486.00 Percentage Privately Financed Total Financed Conventionally 65.00% $50,366.00 TOTAL AGENCY DEFERRED LOAN $27,120.00 As noted above, the loan will be forgiven at 10% per year ($2,712) as long as the property owner continues to own the property. In the event the property owner sells the property before the ten year loan term, the non-forgiven balance would be due and payable. With this financial assistance package the property owner will be eligible to receive $47,120 in combined funding from the City and the Redevelopment Agency for construction of the proposed improvement. In summary, this funding is from the following sources: CDBG Design and Engineering Grant $10,000.00 CDBG Construction Grant 10,000.00 'RDA Financial Assistance 27,120.00 TOTAL CITY/AGENCY PROJECT ASSISTANCE $47,120.00 CONCLUSION Based on the above principles and analysis, the staff believes there are significant compelling reasons to provide Agency assistance to the subject property owners for the following reasons: . The subject property has been identified by the community through the Old Town Charette as hindering the overall Redevelopment Agency Report Agency Financial Assistance 100 West Main Street (Thompson) October 4, 1993 Page 6 atmosphere of Old Town. · The R/UDAT singled out this building for redevelopment in a manner which weuld strengthen the architectural character of Old Town. · The intersection of Main Street and E1 Camino Real is the primary focal point of Old Town. · The City and the Redevelopment Agency will realize additional tax revenues over ten years totalling approximately $17,138. · The proposed level of assistance reflects the market forces which currently exist for this type of improvement project. · The proposed structure of the Agency assistance (as a deferred loan to the property owner) limits any undue profit being realized by the property owner through the use of tax increment funds. The staff, therefore recommends approval of the proposed financial ass~ nce program· ~, ha~ ~ Zim~, er~' ~levelopm~ogram Manager r z imme r \ c ct hemp. mem J~ EXHIBIT 2 PROJECTED REHABILITATION COSTS 100 WEST MAIN STREET Demolition New Metal Tower and Metal Detailing New Cornice Line "~ New Brick Veneer New Wood Sills New Plaster Lintels New Plaster Base New Window Assemblies New Downspouts New Light Fixtures and Tower Lighting Building Directory Display Case Structures Painting SUBTOTAL 15% Contingency TOTAL PROJECT COSTS $ 3,500.00 12,500.00 4,620.00 31,917.00 288.00 1,500.00 2,868.00 3,000.00 207.00 3,000.00 575.00 2,100.00 10,000.00 $76,075.00 11,411.00 $87,486.00 EXHIBIT PROJECTED CITY SALES TAX INCOME FROM THE REHABILITATION OF 100 WEST MAIN STREET ASSUMPTIONS CURRENT SALES TAX TO CITY 48.00 Retail Floor Space--~ after Renovation Projected Base Year Annual Sales per Square Foot TOTAL PROJECTED BASE YEAR ANNUAL SALES 1,019.00 square feet $1oo.oo $101,900.00 Percent Sales Tax To City BASE YEAR INCOME TO CITY 1.00% $1,019.00 ANNUAL PERCENTAGE INCREASE 4.00% ANALYSIS YEAR ANNUAL SALES CURRENT SALES TAX SALES TAX TO CITY TO CITY NET SALE TAX TO CITY Year l(Base) 101,900.00 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 105,980.00 110,215.00 114,624.00 119,209.00 123,977.00 128,936.00 134,093.00 139,457.00 145,035.00 TOTAL NET SALES TAX TO CITY 1,019.00 48.00 1,060.00 50.00 1,102.00 52.00 1,146.00 54.00 1,192.00 56.00 1,240.00 58.00 1,289..00 60.00 1,341.00 62.00 1,395.00 64.00 1,450.00 67.00 $ 971.00 1,010.00 1,050.00 1,092.00 1,136.00 1,182.00 1,229.00 1,279.00 1,331.00 1,383.00 $11,663.00 EXHIBIT 4 PROJECTED TAX INCREMENT INCOME FROM THE REHABILITATION OF 100 WEST NAIN STREET ASSUMPTIONS ADDED ASSESSED VALUATION 52,000.00 PERCENT OF ASSESSED'~ALUE TO AGENCY 1.00% ANNUAL PERCENTAGE INCREASE 2.00% ANALYSIS YEAR ASSESSED VALUE Year 1 50,000.00 Year 2 51,000.00 Year 3 52,020.00 Year 4 53,060.00 Year 5 54,122.00 Year 6 55,204.00 Year 7 56,308.00 Year 8 57,434.00 Year 9 58,583.00 Year 10 59,755.00 TOTAL TAX INCREMENT TAX INCREMENT 500.00 510.00 520.00 531.00 541.00 552.00 563.00 574.00 586.00 598.00 5,475.00 EXHIBIT 5 TOTAL PROJECTED INCOME TO CITY AND REDEVELOPMENT AGENCY FROM THE REHABILITATION OF 100 WEST MAIN STREET Total Sales Tax Income Total Tax Increment-~ TOTAL INCOME TO CITY AND REDEVELOPMENT AGENCY $11,663.00 5,475.00 $17,138.00 rz immer \ cct homp. mem