The Common Council met 02/16/2022. One of the items that was separated out for an individual vote was the “request to amend the Development Agreement with Bela Development LLC located at 513 W. College Avenue in Tax Increment Financing District No. 12 to provide the Developer until January 1, 2023 to meet the minimum $1,700,000 assessed value requirement.”
This item had been discussed briefly at the Community and Economic Development Committee meeting on 02/09/2022 and had been recommended by the committee for approval.
Alderperson Chad Doran (District 15) requested that it be separated out from the rest of the agenda items and said that he wanted to give Community and Economic Development Director Karen Harkess an opportunity to speak to the Common Council as a group regarding the terms of the development agreement and the size and scope of the project.
Director Harkness told the Common Council that Alderperson Doran had asked her about this development agreement. He had wondered if anything similar to this issue had happened before. In her memory, it had not.
She went on to explain that the city typically had not done development agreements for amounts as small as $1.7 million. They usually try to keep them around $3 million. Some of the reasons for that were because it takes the same amount of staff time no matter the amount and with anything less than $3 million there isn’t a very big swing. With an increment of $1.7 million, if the value comes in at $1.14, that is a really big difference.
She said that she, the Finance Director, the Attorney’s Office, and the mayor discussed this, and they felt that the way to address this was not to amend what the city’s expectation was for the assessed value that was being created. They did however recognize that the last two years have been very difficult. Covid has impacted a lot of things, among which were the ability to sign leases and get tenants into newly created spaces.
She finished by saying that the developer was committed to getting some additional leases signed for the building, and staff felt comfortable giving them an additional 12 months to meet the required value of $1.7 million.
Alderperson Doran thanked her for clarifying that and mentioned that he hadn’t separated the item because he didn’t think they should approve the amendment to the agreement but rather just as a reminder to the Council about the process that goes into these development agreements and about things to think about in the future.
Alderperson Kristine Alfheim (District 11) wanted to clarify for the record that the city was not out any money if they approved this item.
Director Harkness confirmed she was correct. The city was not out any money by extending the agreement. It was a PayGo TIF which meant they had to pay their taxes before they would be reimbursed for the increment they created. “So there is no risk on the city at all.”
Alderperson Sheri Hartzheim (District 13) said that it had been mentioned that the developer was trying to get more tenants. Was that the only way they could increase the assessed value or where there other ways also?
Director Harkness said the other thing they could do was to continue to rehab parts of the building. However, the challenge with that was that the assessed value did not increase by as much as the cost of renovations. For example, the developer had spent a $250,000 to replace the elevator, but that didn’t translate into a quarter of a million dollars in additional assessed value. The most effective way to increase the assessed value was to get more tenants in the building.
The Council had no further questions on the item and approved it 14-0.
View full meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=917288&GUID=027ACB1D-AF8C-4480-B87D-52B8D0EF1B95
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