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Home My WebLink About11-323JULY 13, 2011 11 -323 RESOLUTION (CARRIED 5 -1 -1P LOST LAID OVER WITHDRAWN ) PURPOSE: OBLIGATE FUNDS AND AUTHORIZE ESCROW AGREEMENT FOR CURRENT ALLOWABLE PROJECT COSTS FOR TIF #7 SOUTHWEST INDUSTRIAL PARK INITIATED BY: CITY ADMINISTRATION WHEREAS, pursuant to Section 66.1105 of the Wisconsin Statutes, Tax Incremental Finance District (TIF) #7 Southwest Industrial Park was created on July 20, 1989 to expand the boundaries of the Southwest Industrial Park; and WHEREAS, allowed expenditures under the existing Project Plan include land acquisition, infrastructure development, signage, landscaping and other site preparation costs; and WHEREAS, the expenditure period for TIF #7 ends July 20, 2011; and WHEREAS, the City has identified the allowable Project Costs set forth on Exhibit A attached hereto, which Project Costs will not be due and payable until after July 20, 2011; and WHEREAS, the City deems it to be necessary and in its best interest to authorize the execution of an agreement providing for escrowing sufficient funds to pay current allowable project costs as they become due; and WHEREAS, the City intends to apply money in the escrow fund for the current allowable Project Costs as specifically identified on Exhibit A, attached hereto; and NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Oshkosh that funds in the amount of eight hundred seventy -four thousand two hundred dollars ($874,200) are hereby obligated for the purpose of paying the current allowable project costs as identified on the Attached Exhibit A. BE IT FURTHER RESOLVED that the proper City officials are hereby authorized and directed to enter into an appropriate escrow agreement on or before July 20, 2011, for the payment of current allowable project costs as identified on Exhibit A, attached hereto, for TIF #7 Southwest Industrial Park. JULY 13, 2011 11 -323 RESOLUTION CONT'D BE IT FURTHER RESOLVED that the proper City officials are authorized to execute the escrow agreement and any and all other documents necessary for purposes of same. BE IT FURTHER RESOLVED that the proper City officials are authorized and directed to transfer $874,200 from Acct. No. 527 - 1040 - 1702 -00000 TIF #7 Southwest Industrial Park Fund to the escrow agent for disbursement in accordance with the escrow agreement. EXHIBIT A The following are estimated costs related to the purchase, site preparation and environmental remediation necessary for the property: Purchase Price $625,000 Phase I $ 4,500 Phase II limited soil borings $ 6,000 Demolition Over- site $12,000 Asbestos Inspection $ 4,500 Subtotal Estimated Engineer Costs $ 27,000 Contractor Estimated Costs Cleanup of Petroleum impact soil from UST $ 50,000 Demolition $100,000 Asbestos Abatement $ 5,000 Crushing Pavement and Concrete $ 35,000 Subtotal Estimated Contractor Costs $190,000 Estimated total cost $217,000 Contingency 10% $ 21,700 Estimated Total $238,700 Cost of Escrow $ 1,500 Cost of Legal Services $ 4,000 Closing Costs 5,000 Total $ 874,200 TO: Honorable Mayor and Members of the Common Council FROM: Allen Davis, Community Development Director DATE: July 12, 2011 SUBJECT: REVISED Property Acquisition — Universal Business Park expansion New Resolution -- Obligate funds and Authorize Escrow Agreement for Current Allowable Project Costs for TIF #7 Southwest Industrial Park BACKGROUND The City had hoped to purchase the two parcels to the west of the Universal Business Park. The Roadway Express property adjoining the Park is under contract, contingent on City Council approval. The property further to the west, the Pfeilstifter property, will not be purchased because the owner is not motivated to sell in this short time frame. The plan would be to demolish the Roadway Express trucking terminal and sell the land for future Business Park users or a corporate headquarters. As part of our Due Diligence, the Phase 1 environmental review has been completed and a complete estimate of total costs can now be made. These costs may impact the potential net return on the land investment, but still provide a significant economic impact in terms of future tax base and jobs. ANALYSIS The specifics of the Roadway Express property transaction are as follows: • The Roadway property totals 8.5 acres. • The proposed purchase price is $625,000, under full market value of $663,400. • The following are the high -end estimates for all the anticipated site costs: Phase I environmental $ 4,500 Phase II limited soil borings $ 6,000 Demolition Over -sight $ 12,000 Asbestos Inspection $ 4,500 Subtotal Estimated Engineer Costs $ 27,000 Contractor Estimated Costs Cleanup of Petroleum impact soil from UST $ 50,000 Demolition $100,000 Asbestos Abatement $ 5,000 Crushing Pavement and Concrete $ 35,000 Subtotal Estimated Contractor Costs $190,000 Estimated total cost $217,000 Contingency 10% $ 21,700 Remediation and Demolition Estimated Total $238,700 Cost of Escrow $1,500 Cost of Legal Services $4,000 Closing Costs $5,000 Total Estimated Demo /Site Costs $249,200 • The remediation costs could be eliminated depending on the re- development of the site. If excavation is avoided in the UST on the north of the building, the estimated savings would be about $50,000 to $70,000. • If the City can interest a contractor to use the site as a temporary concrete crushing site like Jeld Wen or the Miles Kimball Warehouse, the estimated savings for crushing pavement and concrete would be about $35,000. • Tax Increment Finance (TIF) District 4 7 has sufficient funds in it to fund the proposed acquisition and site preparation. • TIF expenses must be escrowed by July 20, 2011. • The projected sales price of $2.50 /sq.ft. could yield $925,000. • OAEDC's 16% commission would total $148,000. Sales $925,000 Land - 625,000 Demo /Site - 249,200 Commission . - 148,000 Est. Net Gain/ ($97,200) (Loss) on purchase $60,000 — assumes no remediation /asbestos costs $35,000 — assumes no cost for concrete removal Alt. Net Gain/ (Loss) on purchase ($2,200) • City's share of TIF "holding costs" of 3% for the land would equal to about $10,000 /year. (interest on the TIF fund balance) • The property taxes not paid on the property due to City ownership would be $15,500 /year. The projected results for the property development are: • Development of about 40,000 sq.ft. of office space. • Added tax base of about $6,000,000 at $150 /sq.ft. • Added property tax revenue of about $13 8,000 /year. • One employee per 500 sq.ft. equal to 80 employees. • Income of $35,000 per employee equal to $2,800,000 annually. Because the expenditure period for TIF #7 ends on July 20, 2011, in order to use TIF funds to pay for the acquisition, remediation and site development costs, the City must create an escrow account prior to July 20 and transfer sufficient funds into the account to cover any anticipated costs. If the City does not create the escrow account and transfer the funds prior to July 20 then the City will lose the opportunity to use TIF #7 funds for these project costs. If the escrow account is created, and some or all of the funds from that account are not ultimately spent on the items identified in the Resolution and Escrow Agreement, those remaining funds would be returned to TIF 47. The Escrow Account is a method for the City to pay for specific, identified, and planned project costs which have been obligated before July 20 but could not be disbursed until after the July 20 expenditure deadline date. City staff has worked with the City's financial advisors, auditors and legal counsel to ensure that this process has been completed in accordance with state statutes, all TIF and other rules and requirements. FISCAL IMPACT The Tax Increment Finance District #7 account has sufficient funds for the purchase and escrowed funds. There is no impact on the City budget or levy. When Tax Increment Finance District #7 is closed in 2016, additional property value will be put on the tax roll. RECOMMENDATION The City Council approves the proposed acquisition of the Roadway Express property Approved, City Manager