City Council

Minutes of Work Session of Redevelopment Agency of Ogden City, Utah, April 7, 2015 Page Minutes of the Work Session of the Ogden City Redevelopment Agency held on Tuesday, April 7, 2015 at 8:00 p.m., in the Council Work Room on the third floor of the Municipal Building, 2549 Washington Boulevard, Ogden City, Weber County, Utah. Present: Chair Richard A. Hyer Vice Chair Marcia L. White Board members Bart E. Blair Neil K. Garner Caitlin K. Gochnour Doug Stephens Amy L. Wicks Board Administrator Bill Cook Board Deputy Administrator Janene Eller-Smith Board Policy Analyst Glenn Symes Communications Manager Amy Sue Mabey Also present: Acting Chief Administrative Officer Jay Lowder Public Services Deputy Director Justin Anderson Community and Economic Development Deputy Manager Brandon Cooper Engineer Taylor Nielsen Chief Deputy Recorder Lee Ann Peterson The purpose of the Work Session was to discuss a Participation and Reimbursement Agreement with Russo Investments VW, LLC (Hyundai Dealership) and Board business. Participation and Reimbursement Agreement with Russo Investments VW, LLC (Hyundai Dealership) Board Deputy Administrator Eller-Smith stated the Administration has negotiated a Participation and Reimbursement Agreement with Russo Investments VW, LLC, owner of the Hyundai dealership. The agreement allows the dealership to receive a portion of the tax increment generated by the upgrades to their facilities. She explained the South Wall Economic Development Project Area was created by Board resolution in 2012 to help the dealerships in the area. Community and Economic Development Deputy Manager Cooper provided a brief history of negotiations that have taken place relative to redevelopment of the property that is subject to the proposed agreement. He noted in November 2014, the Redevelopment Agency (RDA) staff began successful negotiations with Johnny Russo of Russo Investments VW, LLC concerning the redevelopment of approximately 2.84 acres of privately owned real property located at 33 15 Wall Avenue. This location is currently being operated as a Hyundai dealership by Mr. Russo, but is too small and out of compliance with corporate standards. Mr. Russo is under an obligation from Hyundai to bring the dealership into compliance. Mr. Russo's options in doing so are: 1) relocating the dealership to a location outside of the city with sufficient acreage and access; or 2) demolish and reconstruct a new dealership at the existing location. Mr. Russo's preference is the latter, but the costs to do so are exorbitant due to existing site soil conditions, cost of demolition, and a drainage issue caused by adjacent properties. Therefore, Mr. Russo is requesting RDA assistance via a tax increment incentive over the remaining tax increment period (which expires in 2022), allowing him to bridge the cost overruns and thus remain in business in Ogden City. This incentive is estimated to be approximately $224,000, but is paid out only as a percentage of tax increment that is actually collected and apportioned only to the nonretail service part of the Facility (approximately 75% of the total value). Mr. Cooper then summarized the terms of the Participation and Reimbursement Agreement as follows: Developer: Russo Investment VW. LLC Developer currently owns the 2.84 acre dealership located at 33 15 Wall Ave. All of the existing buildings on the parcel are scheduled to be demolished and reconstructed as part of the project. Parcels: APN #05-125-0005, 05-125-0006 Lot Size: Approximately 2.84 acres (123,710 square feet) Proposed Project: Hyundai Dealership Proposed Incentives: At least 75% of the expected increase in value of the property as a result of the project is attributable to the development of facilities that serve the service and support operations of the franchised dealership. Accordingly, the certain incentives from the RDA are limited to payment from the RDA to the developer of 100% of  the tax increment generated by 75% of the project available throughout the entire tax increment period, which extends to December 31, 2022. Benefits:  Cleaning up and improving older and underperforming buildings  Creating an attractive retail corridor within Ogden  Anchoring this section of Wall Avenue with new and renovated automobile dealerships  Strengthening Ogden's employment and tax bases  Creating an environment where other dealerships may desire to relocate to Ogden  Protecting Ogden's existing tax base (providing a competitive business environment that would prevent dealerships from being lured to other communities) Risk: Developer default prior to construction completion. However, if developer does default, no incentive will be given. Incentive is post-performance. Financial Summary: Estimated tax increment revenue generated by the project would be $224,000. Actual incentive given to developer over tax increment period would vary based on actual increment received by RDA. Funds would be sourced from the South Wall EDA project fund. Mr. Cooper concluded by recommending the Board approve the proposed Participation and Reimbursement Agreement. Board member Gochnour thanked Mr. Cooper for making proof of payment of prior year property taxes a requirement of the agreement. Mr. Cooper stated one other item of importance is that the incentive to be provided to the other party to the agreement is a percentage of the property tax revenue rather than a dollar amount, which incentivizes Mr. Russo to better improve the property to realize a higher property value. He then noted that some work has been done on the project to date, but Mr. Russo was hesitant to demolish the existing building until he understood whether the RDA would authorize the proposed agreement. Ms. Eller-Smith commented the issue will be scheduled for consideration on an upcoming RDA agenda. The meeting adjourned at 8:08 p.m. ________________________________________ LEE ANN PETERSON, MMC CHIEF DEPUTY CITY RECORDER ________________________________________ RICHARD A. HYER, CHAIR APPROVED: June 2, 2015