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LRB-FISCAL
REVIEW SECTION ANALYSIS - REVISED
MAY 21,
2004 AGENDA ITEM 1, FILE 031366
ZONING & NEIGHBORHOOD DEVELOPMENT COMMITTEE EMMA
J. STAMPS
File #031366
is a resolution relative to the redevelopment of the
Traser Yards site at North 6th and West Canal Streets
as well as properties adjacent thereto. (DCD)
Background
1. The
Department of Public-Works and Department of City
Development are collaborating to complete development
along Canal Street in the Menomonee Valley.
2. The
Menomonee Valley Plan adopted by the Common Council
in 1998 assumes the transfer of DPW facilities out
of the Menomonee Valley. Currently, the DPW Traser
Yards and Central Garage are located along Canal Street
at 6th and 21st Streets in the Menomonee Valley.
3. In recent
years, various Council Committees have debated the
economic and development feasibility of relocating
these city facilities. To date, no plan for moving
the Central Garage has been presented to the Common
Council. However, on May 12, 2004, the Public Improvements
Committee recommended adoption of File #040025, resolution
relocating the DPW Traser Yards to a newly constructed
facility to be co-located with Water Works distribution
facilities on the old Tower Automotive plant near
North 35th Street and West Keefe Avenue in the 7th
Aldermanic District.
4. File
#031366 proposes the redevelopment of the 6th and
Canal Traser Yards site via acceptance of the Harley-Davidson
Motor Corporation’s (HD or “the developer”)
offer to purchase approximately 20 acres of city-owned
property at 6th and Canal Streets.
5. No closing
date has been determined, at the time of this writing.
6. An analysis
of risks and benefits to the City, incorporating feedback
and assessments by the Comptroller’s Office
and other documents contained in the file indicate
the following:
Benefits
-
Partnership with a respected, successful local business
-
Potential catalytic project to spur further development
and redevelopment in the east and west ends of the
Menomonee Valley
-
Minimizes City risk for Phase I developments (museum,
café, etc.) through a $7 million letter-of-credit
Potential to create and retain construction, retail,
and commercial jobs
-
Potential to increase future tax base in the Menomonee
Valley after tax increments obligations are satisfied
-
Expanded property tax base by placing current exempt
property on the tax roll
-
HD’s $7 million letter-of-credit applies only
to Phase I developments, i.e. the guarantee does
not extend to Phases II (archives and shop) and
III (office/commercial)
-
City must market undeveloped land if all phases
are not completed
-
No firm limits to the financial risks were determined
at the time of this writing
-
Possibly several non-financial and/or financial
risks that are to be determined
-
City recovery of demolition costs can be paid by
TID increments only after all principal and interest
debt
7. The
Term Sheet which accompanies this resolution, provides
for significant city assistance, including:
-
Prior
to February 15, 2006, City must provide evidence
that it has acquired free-and-clear control of all
parcels in the project site
-
City
shall create a $7 million developer financed Tax
Incremental District for the HD Project areas
-
City
shall lease the Traser Yards from HD at $1 per year,
ending February 28, 2006. At the end of the lease
term, HD can either:
(1) extend the city lease up to 1 year at a base
rent of
$10,000 per month or $120,000 per year,
(2)
“put” the site back to the city at a
repurchase price of $150,000 per acre if only 7.1
acres of the total 10.2 is developed, and/or
(3)
sue the city for actual damages to HD for the city’s
failure to vacate the Traser Yards (This Committee
may benefit from a City Attorney opinion whether
statutes limit the city’s risk for actual
damage payouts.)
8. If approved,
the HD Project will enjoy the benefits of a new $7,000,000
Tax Incremental District to assist in funding extraordinary
site development costs. The “extraordinary site
development costs” are not defined in the term
sheet and could potentially result in cost overruns
which, according to the term sheet dated 5/12/2004,
may have to be recovered in future amendments to the
TID. In return, the City can expect HD to:
Development of a 3-Phase Project over a 7-Year Period:
(1) Phase
I development of a 110,000 sq. ft. Harley Davidson
Museum, café, retail space, banquet and restaurant
facilities, and related office and technical support
facilities at an estimated TID cost of $5.3 million.
(2) Phase
II development of a 20,000 sq. ft. expansion of Harley-Davidson
Museum at an estimated TID cost of $0.3 million.
(3) Phase
III development of a 100,000 sq. ft. office and/or
commercial building(s) at an estimated TID cost of
$1.4 million
HD Assumes
Ownership of Streets, Riverwalk, and Walkways
-
Except
South 6th Street, West Canal Street located west
of South 6th Street
-
HD
may, based upon future determination, grant public
access to HD owned areas, including riverwalks
Employment/Job
Creation and Transfers:
-
Phase
1 – estimated 500 on-site construction jobs,
70 full time museum jobs, 15 part-time museum jobs,
40-70 restaurant jobs
-
Phase
2 – estimated 10 jobs at archives, restoration
shop and exhibits
-
Phase
3 – estimated 280 – 400 employees transfer
from crowded Juneau Avenue facility to a new Menomonee
Valley technical training and office building
-
EBE compliance requirement for not less than 18%
of the combined site improvement and construction
costs; HD is also to use its best efforts to hire
up to 21% of total Project hours from a pool of
unemployed workers in the block grant areas
-
Note:
according to s. 309-41-2-a, if city contracts were
involved in the construction of the HD facilities,
contracts would require that 25% of the worker hours
would be performed by unemployed residents of the
CDBG area
HD
Assumes Extraordinary Responsibilities for:
-
Paying
up to $50,000 of costs to vacate the former 6th
and W. Canal Streets rights-of-way (The language
implies that the City is responsible for cost overruns.)
-
Determining
whether to reconfigure the Project into two phases
instead of three, so that Phase I measures 110,000
sq. ft. and the remaining phase(s) measure an aggregate
120,000 sq. ft.
9. According to DCD, the HD Project estimated
development cost, including the purchase price,
totals approximately $95,000,000 (Phase 1 -
$60 million, Phase 2 - $15 million, and Phase
3 - $20 million).
10.
This project is contingent upon satisfactory review
of city departments, HD, the Common Council and the
mayor.
The
most recent fiscal note, dated January 28, 2004, does
not specify total expenditure and total revenue amounts,
due in part to the uncertainty of future costs related
to this project including, (1) creation of the proposed
Tax Incremental District, (2) the final decision of
whether to finance the HD project as developer financed
or general obligation borrowing, as recommended in the
Comptroller’s letter dated May 17, 2004, (3) total
demolition costs, (4) final costs for vacating the former
6th and W. Canal Streets right-of-way, and (5) costs
of contract breach by either party.
In the
event that Phases I, II, and II of the Project are
not substantially completed within the periods outlined
in the Master Term Sheet, then the Common Council
may adopt a resolution terminating any further payments
on any incomplete phase development.
Under (c)
of the Traser Yards Lease section of the Term Sheet,
if the City has not vacated the Traser Yards by January
15, 2006, HD can sue the City for HD’s actual
damages as a result. Statutory limits for actual damage
payout data were not part of this file, at the time
of this writing.
This
matter, File 031366, refers to developable Traser Yards
land measurements as 7.1 acres, while the file pertaining
to relocating the Traser Yards, File 040025, reports
the land measures 10.2 acres. Details related to the
3.1-acre variance and its significance to the City’s
repurchase option are forthcoming from city departments.
In addition,
the Comptroller’s letter dated May 19, 2004,
indicates that anticipated tax increments may be able
to pay off the estimated $5.3 million of city contributions
for the museum Phase I but, it should not be assumed
that the increments will justify the $14 million expenditure
to the move the Traser Yards to 35th and W. Nash Streets.
Those new facilities are expected to cost $24 million,
and will be funded by property tax levy borrowing
and user fee supported enterprise Water Works funding.
Moreover,
if HD corporate strategy changes and no longer considers
this Project a “corporate growth” opportunity,
it may curtail its development plans; TID payments
will be eliminated for those phases, requiring future
Common Council action. Hence, HD curtailing development
plans, after being granted 7-year exclusive development
rights, exposes the City is to a risk of the land
being underdeveloped, according to the Comptroller.
cc: Barry
Zalben James Scherer Jeannie Laskowski Prepared by:
Emma J Stamps x 8666
W. Martin Morics Michael Daun Patricia Algiers LRB-Fiscal
Review Section James Purko Joseph Czarnezki David
Schroeder February 2, 2004
Revised May 17, 2004
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