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Home My WebLink About08. 17-276 JUNE 13, 2017 17-276 RESOLUTION (CARRIED 7-0 LOST LAID OVER WITHDRAWN ) PURPOSE: APPROVE PAYMENT IN LIEU OF TAXES (PILOT) AGREEMENT WITH OSHKOSH HOUSING AUTHORITY AND WAITE RUG HOUSING,LLC FOR PROPERTY LOCATED AT 300 EAST CUSTER AVENUE INITIATED BY: LEGAL DEPARTMENT WHEREAS, the Oshkosh Housing Authority owns property located at 300 East Custer Avenue; 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, the Housing Authority is renovating this property and has asked the City to enter into a PILOT agreement for this 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 a payment in lieu of taxes (PILOT) agreement with Waite Rug Housing, LLC and the Oshkosh Housing Authority for property located 300 East Custer Avenue in the City of Oshkosh. TO: Mayor and Members of the Common Council FROM: Lynn A. Lorenson, City Attorney DATE: June 7, 2017 RE: Resolution to Approve Payment in Lieu of Taxes (PILOT) Agreement with Oshkosh Housing Authority and Waite Rug Housing, LLC for Property Located at 300 East Custer Avenue BACKGROUND The Oshkosh Housing Authority purchased property located at 300 East Custer Avenue and is renovating the property to operate 56 units of subsidized housing. In order to raise capital for the renovation of the property the Housing Authority will transfer federal income tax ownership of a portion of the property to Waite Rug Housing, LLC, a separate legal entity. The Housing Authority will be the sole managing member of the LLC and will remain the property manager for the project. 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. 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. 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. City Hall, 215 Church Avenue P.O. Box 1130 Oshkosh, WI 54903-1130 920.236.5000 http://www.ci.oshkosh.wi.us The agreement will allow the City to recoup some of the costs it expends for services to this property. 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 from tenant paid portion of rent for the residential units and the sum of the electrical, water, sewer and fuel bills for the property. RECOMMENDATION Staff recommends approval of the agreement. Respectfully Submitted, Lynn . Lorenson City Attorney Approved: Mark A. Rohloff City Manager City Hall, 215 Church Avenue P.O. Box 1130 Oshkosh, WI 54903-1130 920.236.5000 http://www.ci.oshkosh.wi.us PILOT AGREEMENT This PILOT Agreement ("Agreement") is entered into effective June 1, 2017, by and among the City of Oshkosh, Wisconsin (the "City"), Waite Rug Housing, LLC, a Wisconsin limited liability company (the "Company") and The Housing Authority of the City of Oshkosh, Wisconsin a/k/a The Housing Authority of the City of Oshkosh, 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 approval from the Department of Housing and Urban Development to own and operate 56 units of subsidized housing to be located at 300 East Custer Avenue, Oshkosh, Wisconsin 54901 (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 to the Company in 2017 by leasing that part of the Property consisting of a 56 unit subsidized housing rental portfolio more particularly described in the attached Exhibit A (the "Project"); and WHEREAS, the Housing Authority is the sole managing member of the Company 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 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 Company is 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 constitutes 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 2017 and ending in the final calendar year of the Project's Compliance Period, now estimated to be calendar year 2033. 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 Ua) 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 (b) 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 party has been duly authorized to execute this Agreement, and that this Agreement has been duly authorized and approved by such party. 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] F) 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 R. Ubrig Its: City Clerk By: Name: Lynn Lorenson Its: City Attorney THE HOUSING AUTHORITY OF THE CITY OF OSHKOSH, WISCONSIN A/K/A THE HOUSING AUTHORITY OF THE CITY OF OSHKOSH, a public body, corporate and politic, organized and existing under the laws of the State of Wisconsin By: Name: Its: Chairperson By: Name: Susan van Houwelingen Its: Executive Director WAITE RUG HOUSING, 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: Name: Sylvia Carey -Butler Its: Chairperson By: Name: Susan van Houwelingen Its: Executive Director Signature page to Waite Rug Housing, LLC PILOT Agreement EXHIBIT A PROJECT 56 apartment units located at 300 East Custer Avenue, Wisconsin 54901 more particularly described as: Part of: Block One (1) (being bounded on the East by the West line of Mount Vernon Street, on the South by the North line of Custer Avenue and on the West by the Easterly right of way line of the Soo Line Railroad Company); and Lots One (1), Two (2), Three (3), Four (4), Five (5), Six (6), Seven (7), Eight (8), Nine (9), Ten (10), Eleven (11), Twelve (12), Thirteen (13) and Fourteen (14) of Block Two (2), all in Pleasant Home Land Co's First Addition, in the Fifteenth Ward, City of Oshkosh, Winnebago County, Wisconsin and that portion of vacated Mount Vernon Street. and Lots One (1), Two (2), Three (3), Four (4), Five (5), Six (6), Seven (7), Eight (8), Nine (9), Ten (10), Eleven (11) and Twelve (12) of Block Three (3) in Pleasant Home Land Co's First Addition, in the Fifteenth Ward, City of Oshkosh, Winnebago County, Wisconsin, together with that portion of vacated Eastman Street, lying North of Custer Avenue and South of Nevada Avenue between Blocks Two (2) and Three (3) of subject premises and that portion of vacated Mount Vernon Street. All of Tax ID No. 1505830100 and part of Tax ID 1505840100 To be described as: Lot Two (2), Certified Survey Map No. recorded in the Office of the Register of Deeds for Winnebago County, Wisconsin on , 2017, in Volume of Certified Survey Maps, Page , as Document No. , located in the City of Oshkosh, Winnebago County, Wisconsin. Together with easements established by a Declaration of Easements dated as of , 2017 and recorded , 2017 as Document No. , in the Winnebago County Register of Deeds Office, Wisconsin. A-1