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HomeMy WebLinkAbout12. 16-52FEBRUARY 9, 2016 16-52 RESOLUTION (CARRIED__7-0_____ LOST _______ LAID OVER _______ WITHDRAWN _______) PURPOSE: APPROVE AGREEMENTS WITH CUMBERLAND COURT MASTER DEVELOPMENT, LLC, AND THE HOUSING AUTHORITY OF THE CITY OF OSHKOSH FOR PAYMENT IN LIEU OF TAXES (PILOT) FOR CUMBERLAND COURT APARTMENTS LOCATED AT 1000 – 1080 AND 1130-1240 CUMBERLAND TRAIL INITIATED BY: CITY ADMINISTRATION WHEREAS, the Oshkosh Housing Authority owns Cumberland Court Apartments located at 1000-1080 and 1130-1240 Cumberland Trail; and WHEREAS, Wisconsin statutes allow municipalities to enter into payment in lieu of taxes (PILOT) agreements with Housing Authorities to pay for services, improvements, or facilities furnished to properties owned by Housing Authorities; and WHEREAS, currently there is not a PILOT agreement in effect for the Cumberland Court Apartments; and WHEREAS, the Housing Authority is planning a two phase renovation of this property and has asked the City to enter into PILOT agreements for the two phases of the project; and WHEREAS, the PILOT agreement will allow the Housing Authority to make a payment to the City for the services, improvements, and facilities that the City provides to the property. NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Oshkosh that the proper City officials are hereby authorized and directed to enter into payment in lieu of taxes (PILOT) agreements with Cumberland Court Master Development, LLC and the Oshkosh Housing Authority for Cumberland Court Apartments located at 1000-1080 and 1130-1240 Cumberland Trail in the City of Oshkosh. CITY HALL 215 Church Avenue P. 0 Box 1130 Oshkosh,54902-1130 City of Oshkosh O.f HKOIH TO: Honorable Mayor and Members of the Common Council FROM: Lynn A. Lorenson, City Attorney DATE: February 4, 2016 RE: Approve Agreements with Cumberland Court Master Development, LLC and The Housing Authority of the City of Oshkosh for Payment in Lieu of Taxes (PILOT) for Cumberland Court Apartments located at 1000-1080 and 1130-1240 Cumberland Trail BACKGROUND The Oshkosh Housing Authority purchased Cumberland Court Apartments in 1992. Wisconsin statutes recognize that housing authority properties are essential for public and governmental purposes and so grant those properties tax exempt status. The statutes also allow municipalities to fix a sum to be paid annually in lieu of taxes for the services, improvements or facilities furnished to the property by the city in which they are located. The payment in lieu of taxes may not exceed the amount that would be levied as the annual tax of the city on the property. Because this property was owned by a Housing Authority, it became tax exempt upon the purchase. This particular property also was not subject to a payment in lieu of taxes (PILOT) agreement. The Housing Authority is planning a renovation of this property and in connection with this renovation have approached the City to enter into PILOT agreements for this property. They are dividing the property into two phases for the renovation and are requesting a PILOT agreement covering each phase of the project. ANALYSIS Wisconsin statutes allow municipalities to enter into PILOT agreements with Housing Authorities to pay for services, improvements or facilities furnished to those properties. Other properties held by the Housing Authority have existing PILOT agreements and the proposed PILOT agreement in this case is consistent with the state statutes and those other existing PILOT agreements. 1 The agreement will allow the City to recoup some of the costs it expends for services to these properties. In addition, because this property was tax exempt and not subject to a PILOT, tenants have not been allowed to claim Homestead Credits on their taxes. With the adoption of the PILOT agreement the Housing Authority tenants will now be able to claim those credits on their taxes. FISCAL IMPACT The PILOT agreement will allow the Housing Authority to make a payment to the City for the services, improvements and facilities that the City provides to the property. The amount to be paid annually is equal to 10% of the difference between the amount collected as rent for the residential units and the sum of the electrical, water, sewer and fuel bills for the property. Currently there is no PILOT in effect for this property, so acceptance of this agreement will allow the City to recoup costs which are not currently reimbursed. RECOMMENDATION Staff recommends approval of the agreement. Respectfully Submitted, Approved: inn . Lorens• Mark A. Rohloff City Attorney City Manager 2 PILOT AGREEMENT This PILOT Agreement ("Agreement") is entered into effective March 1, 2016, by and among the City of Oshkosh, Wisconsin (the "City"), Cumberland Court Master Development, LLC, a Wisconsin limited liability company ("Master LLC"), which owns 100% of the membership interests of Cumberland Redevelopment, Phase 1, LLC, a Wisconsin limited liability company (the "Company"), and The Housing Authority of the City of Oshkosh, Wisconsin a/k/a Housing Authority of the City of Oshkosh, Wisconsin a/k/a Oshkosh Housing Authority, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin (the "Housing Authority"). RECITALS WHEREAS, the Housing Authority has owned and operated 32 units of a Project Based Section 8 affordable rental housing project located in the City at 1000-1080 Cumberland Trail, Oshkosh, Wisconsin 54904 (referred to herein as the "Property") and WHEREAS, in order to raise debt and equity capital for the substantial rehabilitation and construction of the Property, the Housing Authority anticipates transferring federal income tax ownership of a portion of the Property, through the Master LLC, to the Company in 2016 by selling the Property consisting of a 32-unit affordable rental housing project more particularly described in the attached Exhibit A (the"Project"); and WHEREAS, the Housing Authority is the sole managing member of the Master LLC and the property manager of the Project, and, as such, exercises exclusive control and authority over the operation of the Project; and WHEREAS, the Housing Authority has loaned substantial sums to the Master LLC and/or the Company in connection with the acquisition and rehabilitation/construction of the Project, and has a right of first refusal to acquire the Project for a nominal sum following expiration of the fifteen(I5)-year low-income housing tax period(the "Compliance Period"); and WHEREAS,the Master LLC and the Company are obligated to operate the Project as affordable housing in compliance with HUD and Internal Revenue Code restrictions and requirements, and the Housing Authority is solely responsible for ensuring that such restrictions and requirements are satisfied by the Company throughout the Compliance Period; and WHEREAS, the Company will not generate material positive cash flow in excess of its fixed expenses, fees and debt obligations; and WHEREAS, the parties have determined, based upon the foregoing RECITALS, that the Project constitute property of the Housing Authority that is exempt from taxation under Section 70.11(18) of the Wisconsin Statutes and which may be subject to a payment in lieu of taxes ("PILOT") imposed by the City, as provided in Section 66.1201(22) of the Wisconsin Statues; NOW, THEREFORE, acknowledging the receipt of sufficient consideration, the parties agree as follows: 1. Term of PILOT Agreement. The Company shall make a PILOT to the City with respect to the Project for each calendar year beginning in 2016 and ending in the final calendar year of the Project's Compliance Period, now estimated to be calendar year 2031. As required by Section 66.1201(22) of the Wisconsin Statutes, such PILOT shall not exceed the amount that would be levied as the annual tax of the City upon the Project. 2. Computation of PILOT. The PILOT for each calendar year shall be ten percent (10%) of the difference between O one hundred percent (100%) of the tenant's portion of the collected rents for all of the residential rental units in the Project for such calendar year; and one hundred percent (100%) of the electricity, water, sewer and fuel bills incurred by the Company with respect to the Project for such calendar year. The amounts under clauses (a) and (b) above shall be based upon the financial statements of the Company for the prior calendar year. 3. Payment of PILOT. The Company shall make the PILOT within the time periods applicable to properties that are not exempt from property taxation, as provided in Section 74.11 of the Wisconsin Statutes. 4. Obligation of Company and Housing Authority. The Housing Authority shall cause the Company to rehabilitate and operate the Project as affordable rental housing throughout the Compliance Period in accordance with the income, rent and other restrictions and limitations imposed by HUD and the Internal Revenue Code. 5. Obligations of City. The City shall furnish or cause to be furnished to the Company and/or Project tenants such services or facilities as are furnished to other property owners and residents of the City on the same basis as such City services are ordinarily provided. The City shall also, to the extent permitted by applicable law, apply or modify existing City codes and ordinances to permit the Housing Authority and the Company to operate the Project as described above throughout the Compliance Period. 6. Miscellaneous. This Agreement cannot be unilaterally amended, modified or terminated by any party hereto. Each party hereby represents to and for the benefit of the other party that the person executing this Agreement on the signature page on behalf of such parry has been duly authorized to execute this Agreement, and that this Agreement has been duly authorized and approved by such parry. The benefits of this Agreement shall not be assigned by the Company or the Housing Authority without City's consent. This Agreement represents the entire agreement of the parties with respect to the subject matter hereof. This Agreement shall be governed by the laws of the State of Wisconsin. This Agreement may be signed by facsimile or in counterparts. [SIGNATURE PAGE FOLLOWS] 2 IN WITNESS WHEREOF, the parties hereto duly execute this PILOT Agreement effective as of the date first set forth above. CITY OF OSHKOSH By: Name: Mark Rohloff Its: City Manager By: Name: Pamela Ubrig Its: City Clerk By: Name: Lynn Lorenson Its: City Attorney THE HOUSING AUTHORITY OF THE CITY OF OSHKOSH,WISCONSIN A/K/A HOUSING AUTHORITY OF THE CITY OF OSHKOSH A/K/A OSHKOSH HOUSING AUTHORITY, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin By: Sylvia Carey-Butler Its: Chairperson By: Susan van Houwelingen Its: Executive Director CUMBERLAND COURT MASTER DEVELOPMENT, LLC, on behalf of Cumberland Redevelopment, Phase 1, LLC a Wisconsin limited liability company By: The Housing Authority of the City of Oshkosh, Wisconsin, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin Its: Managing Member By: Sylvia Carey-Butler Its: Chairperson By: Susan van Houwelingen Its: Executive Director Signature page to Cumberland Redevelopment, Phase 1 PILOT Agreement EXHIBIT A PROJECT 32 apartment units located at 1000-1014, 1030, 1044-1058 and 1080 Cumberland Trail, Oshkosh, Wisconsin 54904 more particularly described as: All or a portion of Lots 167, 168, 169, 170, 171 and 172 and that part of Cumberland Court (now vacated) lying Northeasterly of the Northeasterly line of Cumberland Trail all in FIRST ADDITION TO WESTHAVEN, in the Thirteenth Ward, City of Oshkosh, Winnebago County, Wisconsin, excepting therefrom the North 29.62 feet of said Lots 169 and 170. Part of Tax Key No. 913-1368 A-1 PILOT AGREEMENT This PILOT Agreement ("Agreement") is entered into effective March 1, 2016, by and among the City of Oshkosh, Wisconsin (the "City"), Cumberland Court Master Development, LLC, a Wisconsin limited liability company ("Master LLC"), which owns 100% of the membership interests of Cumberland Redevelopment, Phase 2, LLC, a Wisconsin limited liability company (the "Company"), and The Housing Authority of the City of Oshkosh, Wisconsin a/k/a Housing Authority of the City of Oshkosh, Wisconsin a/k/a Oshkosh Housing Authority, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin (the "Housing Authority"). RECITALS WHEREAS, the Housing Authority has owned and operated 40 units of a Project Based Section 8 affordable rental housing project located in the City at 1130-1240 Cumberland Trail, Oshkosh, Wisconsin 54904 (referred to herein as the "Property") and WHEREAS, in order to raise debt and equity capital for the substantial rehabilitation and construction of the Property, the Housing Authority anticipates transferring federal income tax ownership of a portion of the Property, through the Master LLC, to the Company in 2016 by selling the Property consisting of a 40-unit affordable rental housing project more particularly described in the attached Exhibit A (the"Project"); and WHEREAS, the Housing Authority is the sole managing member of the Master LLC and the property manager of the Project, and, as such, exercises exclusive control and authority over the operation of the Project; and WHEREAS, the Housing Authority has loaned substantial sums to the Master LLC and/or the Company in connection with the acquisition and rehabilitation/construction of the Project, and has a right of first refusal to acquire the Project for a nominal sum following expiration of the fifteen(15)-year low-income housing tax period(the "Compliance Period"); and WHEREAS,the Master LLC and the Company are obligated to operate the Project as affordable housing in compliance with HUD and Internal Revenue Code restrictions and requirements, and the Housing Authority is solely responsible for ensuring that such restrictions and requirements are satisfied by the Company throughout the Compliance Period; and WHEREAS, the Company will not generate material positive cash flow in excess of its fixed expenses, fees and debt obligations; and WHEREAS, the parties have determined, based upon the foregoing RECITALS, that the Project constitute property of the Housing Authority that is exempt from taxation under Section 70.11(18) of the Wisconsin Statutes and which may be subject to a payment in lieu of taxes ("PILOT") imposed by the City, as provided in Section 66.1201(22) of the Wisconsin Statues; NOW, THEREFORE, acknowledging the receipt of sufficient consideration, the parties agree as follows: 1. Term of PILOT Agreement. The Company shall make a PILOT to the City with respect to the Project for each calendar year beginning in 2016 and ending in the final calendar year of the Project's Compliance Period, now estimated to be calendar year 2031. As required by Section 66.1201(22) of the Wisconsin Statutes, such PILOT shall not exceed the amount that would be levied as the annual tax of the City upon the Project. 2. Computation of PILOT. The PILOT for each calendar year shall be ten percent (10%) of the difference between O one hundred percent (100%) of the tenant's portion of the collected rents for all of the residential rental units in the Project for such calendar year; and one hundred percent (100%) of the electricity, water, sewer and fuel bills incurred by the Company with respect to the Project for such calendar year. The amounts under clauses (a) and (b) above shall be based upon the financial statements of the Company for the prior calendar year. 3. Payment of PILOT. The Company shall make the PILOT within the time periods applicable to properties that are not exempt from property taxation, as provided in Section 74.11 of the Wisconsin Statutes. 4. Obligation of Company and Housing Authority. The Housing Authority shall cause the Company to rehabilitate and operate the Project as affordable rental housing throughout the Compliance Period in accordance with the income, rent and other restrictions and limitations imposed by HUD and the Internal Revenue Code. 5. Obligations of City. The City shall furnish or cause to be furnished to the Company and/or Project tenants such services or facilities as are furnished to other property owners and residents of the City on the same basis as such City services are ordinarily provided. The City shall also, to the extent permitted by applicable law, apply or modify existing City codes and ordinances to permit the Housing Authority and the Company to operate the Project as described above throughout the Compliance Period. 6. Miscellaneous. This Agreement cannot be unilaterally amended, modified or terminated by any party hereto. Each party hereby represents to and for the benefit of the other party that the person executing this Agreement on the signature page on behalf of such parry has been duly authorized to execute this Agreement, and that this Agreement has been duly authorized and approved by such parry. The benefits of this Agreement shall not be assigned by the Company or the Housing Authority without City's consent. This Agreement represents the entire agreement of the parties with respect to the subject matter hereof. This Agreement shall be governed by the laws of the State of Wisconsin. This Agreement may be signed by facsimile or in counterparts. [SIGNATURE PAGE FOLLOWS] 2 IN WITNESS WHEREOF, the parties hereto duly execute this PILOT Agreement effective as of the date first set forth above. CITY OF OSHKOSH By: Name: Mark Rohloff Its: City Manager By: Name: Pamela Ubrig Its: City Clerk By: Name: Lynn Lorenson Its: City Attorney THE HOUSING AUTHORITY OF THE CITY OF OSHKOSH,WISCONSIN A/K/A HOUSING AUTHORITY OF THE CITY OF OSHKOSH A/K/A OSHKOSH HOUSING AUTHORITY, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin By: Sylvia Carey-Butler Its: Chairperson By: Susan van Houwelingen Its: Executive Director CUMBERLAND COURT MASTER DEVELOPMENT, LLC, on behalf of Cumberland Redevelopment, Phase 2, LLC a Wisconsin limited liability company By: The Housing Authority of the City of Oshkosh, Wisconsin, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin Its: Managing Member By: Sylvia Carey-Butler Its: Chairperson By: Susan van Houwelingen Its: Executive Director Signature page to Cumberland Redevelopment, Phase 2 PILOT Agreement EXHIBIT A PROJECT 40 apartment units located at 1130-1144, 1170, 1200, 1220, and 1240 Cumberland Trail, Oshkosh, Wisconsin 54904 more particularly described as: All or a portion of Lots 160, 161, 162, 163, 164, 165, 166, 167, 168 and that part of Cumberland Court (now vacated) lying Northeasterly of the Northeasterly line of Cumberland Trail all in FIRST ADDITION TO WESTHAVEN, in the Thirteenth Ward, City of Oshkosh, Winnebago County, Wisconsin, excepting therefrom the North 29.62 feet of said Lots 169 and 170. Tax Key No. 913-1368 A-1