City Council

Minutes of Work Session of Redevelopment Agency of Ogden City, Utah, May 5, 2015 Page Minutes of the Work Session of the Ogden City Redevelopment Agency held on Tuesday, May 5, 2015 at 9:33 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 (participated via teleconference) 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 Also present: Chief Administrative Officer Mark Johnson Community and Economic Development Deputy Manager Brandon Cooper Deputy City Recorder Julia LaSeure The purpose of the work session was to review and discuss a Participation and Incentive Agreement with Project Engineering, Consultants, LTD (East Washington Urban Renewal Area). Participation and Incentive Agreement with Project Engineering, Consultants, LTD Board Deputy Administrator Eller-Smith reported Community and Economic Development Deputy Manager Cooper will review a proposed Participation and Incentive Agreement with Project Engineering Consultants, LTD (PEC). PEC will be leasing and completing renovations on an upper floor of the building located at 2326 Washington Boulevard, owned by P.C. Thomas Investment Company, LC. The first floor of the building is currently occupied by Recreation Outlet. To date, all Participation and Incentive Agreements approved by the Board have had a nexus between the tax increment generated by the project and the incentives pledged to the developer. Under the proposed agreement with PEC, the Agency is pledging general revenues received from the Project Area that were not generated by the proposed project. Participation and Incentive Agreements have all been with property developers/owners up to this point. If approved, this would be the first agreement with a lessee. Mr. Cooper provided a historical overview of the creation and evolution of the East Washington Urban Renewal Area, noting there have only been two major projects in the Project Area since its creation in 2010. Two of the major criteria included in the plan for the area were to revitalize buildings along Washington Boulevard and increase tax base in downtown Ogden. In 2014 the Redevelopment Agency (RDA) received interest from PEC to expand its operations to Ogden and to lease approximately 3,000 square feet of previously unoccupied space within the Project Area. PEC desires to construct tenant improvements within the existing building and operate as a professional engineering office. The firm is requesting certain incentives from the RDA in order to cover relocation costs and funding gap; the incentive would be applied to their first year’s rent. He noted staff is supportive of the agreement because the firm will bring high paying jobs to the downtown, which will increase the daytime population to support other local businesses and restaurants. He summarized the negotiations that took place between Agency staff, the building owner, and PEC, noting PEC has requested a $30,000 incentive up-front. He reiterated Ms. Eller-Smith’s comments that this is not typical as incentives are usually paid upon receipt of tax increment. Board member Wicks indicated she would prefer to see incentives used for something that the City would retain in the event the company receiving the incentive does not remain in Ogden for a long period of time. Mr. Cooper noted the tenant improvements would remain in the building in the event that the tenant vacates in the future. He noted the lease term will not be less than three years. Vice Chair White asked if the building owner has received an incentive. Mr. Cooper answered no with the exception of the Agency negotiating a lease agreement on their behalf. He added that another company has been drawn to the building as a result of the PEC transaction. A firm named Tookios is relocating to Ogden from one of the Iomega buildings in Roy. The company is a software development firm that is connected to some of the other redevelopment that has recently occurred in Ogden, such as the location of the Weber State facility on Washington Boulevard. The result is that the building owner will experience a build out of 6,500 square feet for both firms.  Board member Wicks asked how many jobs PEC will bring to the downtown area. Mr. Cooper replied at the end of the three year lease term they hope to have twelve staff members at their Ogden location. Board member Garner asked if there is sufficient parking to accommodate the two new businesses that will be located in the building. Mr. Cooper responded that the owners of the building have provided parking to other entities in the area, but as the number of people working in their building increases they will have the opportunity to reserve parking for their own tenants. Board member Wicks stated that she is concerned about any negative impacts on other tenants in the area. Vice Chair White asked how Agency staff arrived at a $30,000 incentive. Mr. Cooper explained that these incentives are always based upon the investment associated with the project. In working with the property owner and PEC, the determination was made that the tenant improvements equate to a $150,000 investment and over the period of the lease those improvements will generate $11,000 to $13,000 per year, which will pay back the $30,000 incentive over the three year lease term. Chair Hyer stated it seems unusual to provide the incentive to PEC at the beginning of the project. Mr. Cooper clarified the situation is not unlike loan programs offered by the Agency and PEC has agreed to a reversionary clause in the agreement that would require them to pay back the incentive they received on a prorated basis depending upon the number of years or months of the lease term that have lapsed. Board Executive Director Cook asked why Agency staff has not steered PEC in the direction of a loan rather than an incentive agreement. Mr. Cooper stated a loan is much more complicated. Board member Gochnour suggested that the lease term be longer than five years due to the fact that the Agency would be giving PEC $30,000 at the onset of their lease. Vice Chair White agreed. Mr. Cooper stated there are extension provisions in the lease. Board member Gochnour clarified she feels the initial lease term should be five years. Mr. Cooper stated that Agency staff could continue negotiations and determine whether PEC would be willing to amend the agreement to require at least one lease term extension. He reiterated PEC will generate sufficient tax increment over the first three years of the lease term to cover the incentive amount. General discussion regarding the project and tenant improvements within the building ensued, after which Board member Gochnour asked exactly where the incentive funding is coming from. Mr. Cooper replied it is available in the Project Area budget; the Area has generated revenue based simply upon property value appreciation. He concluded it is his recommendation that the Board approve the agreement upon inclusion of the reversionary clause and provide the incentive up front in the project. Vice Chair White asked what criteria must be met in order for PEC to actually receive the $30,000 incentive. Mr. Cooper indicated that the incentive will not be provided until build out and tenant improvements are complete. Chair Hyer asked whether the Tookios project will fail if PEC does not move to the location being discussed. Mr. Cooper indicated the two are closely connected, but location of one of the businesses in the subject property is not contingent on the other business moving. Board member Gochnour stated she feels strongly that it is reasonable to require that PEC enter into a five year lease in order to receive the incentive. She indicated she worries that approving a three year lease will set a precedent. Mr. Cooper disagreed and explained that no precedent will be set because each lease and incentive agreement is negotiated on a case-by-case basis. He added that PEC requested the incentive and if funding had not been available in the Project Area budget their request would have been denied and they would have been steered in the direction of an incentive agreement whereby they would receive the incentive on the back-end of the agreement. Several Board members expressed their concern that advertisement of this agreement could either anger other businesses that have not had access to similar resources or could cause new businesses to request the same concessions. Ms. Eller-Smith pointed out that it is important to remember that PEC’s improvements to the building will be worth $11,000 to $13,000 per year. That will be the case whether they remain in the building or not. Mr. Cooper agreed and stated that the taxes are based upon the condition of the building and the City will benefit by receiving increased tax revenue. Ms. Eller-Smith indicated that final consideration of the agreement is tentatively scheduled for next week. She stated she will work with Mr. Cooper to amend the agreement to include the reversionary clause before it is forwarded to the Board for review. The meeting adjourned at 9:57 p.m. /s/ Julia M. LaSeure JULIA M. LASEURE, MMC DEPUTY CITY RECORDER /s/ Richard A. Hyer RICHARD A. HYER, CHAIR APPROVED: July 28, 2015