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At present the agreement says that
Lincoln is going to give the developer $510,000 to do the project.
The developer is asking that those funds be paid in advance of the
developer's expenditure of those funds.
One unresolved issue at the moment is
that the proposed method of attaining those funds will not meet the
requested timetable of the project. The suggested alternative bond,
according to the bonding company, would not be available for sale
until January in the best-case scenario, Bates said. Contractors are
already getting permits to begin work in December as scheduled.
Bates highlighted important provisions
within the agreement with the developer.
The developer asks for:
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Control of the development in its
entirety. They do what they wish to do within the confines of
the general redevelopment plans.
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Commitment that the first occupants
of the property will be Goody's and Dollar Tree.
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Retaining the right to change
tenants.
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Retaining the right to sell the
property.
The developer commits to:
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Be responsible to repay the debt
service if for any reason Goody's or Dollar Tree close during
the 10-year term.
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Limit the use of the funds received
from the city to making the improvements on the property.
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Be obligated to make those changes
to the property.
The city commits to:
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Obtain the money.
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Give the developer the money.
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Pay the debt service on the money.
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Pay down the debt using 100 percent
of the newly generated retail sales tax revenues.
Grice clarified that the developer is
submitting an agreement that gives them control of the development
in terms of what work is done in developing, leasing and possible
sale of the property. What's most important is that the developer is
obligating itself to limit the expenditures exclusively to the
improvements on the property. "It is not an open check to spend
where-you-may," Grice said, "It has to go on this project."
The "Plan," as submitted by the
developer, is requesting $510,000, plus the cost of a traffic signal
device if one is approved by IDOT, as well as the cost of finance,
cost of interest on the city's portion and an estimated $25,000
marketing fee or some kind of fee related to the debt obligation,
depending on where the financing comes from.
The $25,000 fee may be less if done
through a third party other than the one considered for alternative
bonds. Some other borrowing source may even advance the financing
quicker, as is needed at this time.
A Lincolnite, Philip Dehner from A.G.
Edwards, came forward and said, "I think this is a good move. These
are good companies."
Dehner also said that the investment
company he works for would probably be willing to help settle some
of the financing issues with the project.
The request that the developer is
making from the city is less than half of the investment that it
will be making. The developer will cover all extra costs. One
additional cost that is already known will be incurred by working
through the winter. The outside of the building will need to be
plastic-sheeted while stucco is applied, in order for it to dry
properly and prevent cracking.
Speaking as the developer, David
Christie said he knows that he will be investing more than his 50
percent of the estimated costs, but he is willing to do that and get
it done well. This will benefit him and the city.
Permits have already been taken out for
construction on the property. Christie said he has entered into
agreements with the stores and committed to begin work by Nov. 20.
Beginning work by that date will allow him to turn the property over
to the stores for a Feb. 1, 2004, opening.
The dates are driven by Goody's
commitment on Wall Street that they would be opening 10 stores, and
one of those stores is in Lincoln. "They have to work that far in
advance," Christie said.
The aldermen and city managers
presented a number of specific questions to the developer and his
representatives.
Building and safety officer Les Last
asked how rehabilitation costs were estimated and if the figures in
the proposal are hard numbers.
It was explained that costs have been
averaged and may go up or down. For example, the Dollar Tree is estimated
at a cost of $90,000 for 15,000 square feet.
[to top of second column in this
article] |
Alex Glenn, a broker for Christie Inc.,
said that they generally estimate costs on prior experiences. "We do
a number of these projects; we know what it costs," he said.
He also said that they know what
ceiling tile and other building supplies cost. "We're very
comfortable that these numbers are going to be every bit of that."
Renovation costs on the interior of the
Goody's store are on the high side at $475,000. Goody's will occupy
24,797 square feet. But, this is a high-profile business with nicer
than usual fixtures, Christie said.
Alderman Verl Prather asked if the
projected Dollar Tree store is what is referred to as a "racetrack."
A racetrack is a store where the aisles
are wide and in a circular fashion.
A representative responded, yes, a
racetrack store has higher sales projections. They can carry more
merchandise. This will be one of the bigger Dollar Tree stores in
the country.
Alderman Buzz Busby said that he has
some background in retail as a factory rep, and he feels that the
projections of sales based on square footage are on the high side.
That figure normally runs between $50 and $100. The Dollar Tree
projections are listed between $150 and $160 per square foot. Busby
asked if they know the average figures for the stores being
proposed.
A. Glenn said that the figures
presented are actually lower than the nationwide average of these
stores. "We used a pretty conservative approach," he said.
The "Plan" projects that the 1.5
percent sales tax revenue will be sufficient to pay off the debt in
a 10-year period even with 0.5 percent of the 1.5 percent being used
only for infrastructure.
Several amortization tables were
provided for the aldermen to review.
The "Plan" includes an estimate
suggesting the city will gain a small but additional revenue through
the real property tax, which is at 1.128 percent. That increased
assessed evaluation is about 30 percent over what is there now,
Grice said.
However, Last pointed out that the
property sits in an enterprise zone and will not bring in the $1,500
property tax that was estimated in the "Plan."
Details of the "clawback" are still
being worked out by the lawyers. The clawback is basically that in
the event one of the stores closes before the loan is paid off, the
individual store would be responsible to pay off their portion.
The developer is asking for some
flexibility on this. The developer would like a six-month deferment
from the city, which is what they have in their agreements with the
stores, allowing opportunity to re-lease the premises. The six
months would allow some breathing time, and it would be far better
for everyone to get a new tenant in there to pick up that revenue
stream again.
Glenn Shelton said that he has received
some calls about the project. In light of job layoffs and tight on
finances for the city, he questioned if the developer would consider
financing the project and then the city pay the developer with the
sales taxes that the businesses bring in.
The developer responded: "That's called
a pay-as-you-go TIFF. I think I'm making a large enough investment
in this property. I am investing over half the investment. I'm
taking less rent than I'm currently getting [Goody's lease is
$20,000 per year less than Staples unexpired lease, which is still
being paid], but it's not helping anybody.
"So I think I'm doing my part to make
this thing work," Christie added. "And you will not be disappointed.
We think it adds a lot of credibility to your community."
A. Glenn pointed out that this is a
great opportunity to jump-start the economy here, with other
businesses sure to follow and the jobs that will be made available,
all at no risk to the city, since they are guaranteeing payback
should the businesses go awry.
Other like questions about sales
figures and business stability were asked and answered by the
developer and representatives.
The developer and representatives
summarized saying that the stores have done their homework about
opening here in Lincoln. "The stores feel good about the market," A.
Glenn said. "We feel very comfortable with them [the sales
projections], but if you'd like us to provide more information, we
can get that," he added.
Christie summarized his belief in the
stores and his commitment to Lincoln, saying: "I'm here tonight
because I believe in Goody's. I wouldn't be signing a lease with
them and making a huge investment and guaranteeing I'm going to pay
this money back if I didn't believe in their operation."
[Jan
Youngquist] |
