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HomeMy WebLinkAboutmemo - 1The Honorable Mayor and Members Of the City Commission Joe Arriola City Manger RECOMMENDATION April 27, 2004 Resolution regarding Interlocai Agreement between the City of Miami, Miami -Dade County and Midtown Miami Community Development District, and a "Finding of Necessity Study" for the creation of a Community Redevelopment District. It is respectfully recommended that the City Commission adopt the attached resolution (the "Resolution") authorizing the City Manager to execute an Interlocai Agreement (the "ILA") in substantially the attached form by and between the City of Miami (the "City"), Miami -Dade County (the "County") and Midtown Miami Community Development District (the "CDD") (collectively, the "Parties"). The creation of the CDD was adopted by the City Commission on November 13, 2003, through Resolution R-03-1135. The ILA sets forth the understanding between the Parties with respect to the financial contributions to be made by the City and the County to the CDD. The CDD will be issuing bonds to fund the costs of public infrastructure improvements. The resolution further authorizes the City Manager to prepare a "Finding of Necessity Study" pursuant to Chapter 163, Florida Statutes, for the creation of a Community Redevelopment District (the "CRD"). BACKGROUND The CDD intends to develop a 56-acre site, formerly known as the Buena Vista Rail Yards, (the "Property"), located in the Wynwood/Buena Vista neighborhood. The Property is the largest undeveloped site in the City of Miami, and is in close proximity to Little Haiti, Overtown, Allapattah, the Design District and the Biscayne Boulevard corridor. It was identified as the centerpiece for redevelopment in the FEC Corridor Strategic Redevelopment Plan (the "FEC Plan") which was adopted by the City Commission in November of 2002. The proposed development will include three often -utilized components of economic development -residential, office and commercial development. It will be constructed in six incremental phases and is expected to include a 600,000 square foot retail shopping center, upwards of 400 apartments, several restaurants and bars, two public plazas, 2,900 SUBMITTED INTO THE PUBLIC RECORD FOR TFM 5f5flf1 .!E'•WCy structured and on -grade parking spaces, an office tower, a hotel and spa and eight condominium towers totaling 3,000 units and integrated with an additional 148,000 square feet of retail space (the "Development"). The aggregate construction cost of the Development is estimated to be $1.2 billion. Approximately $500 million in construction costs will be invested during the first two phases of the Development. Phase one, scheduled to be completed in 2006, will generate $303 million in construction costs, while phase two, scheduled to be completed in 2007, will result in an additional $197 million investment. The Development will be constructed by two nationally recognized developers, Biscayne Development, LLC ("Biscayne") and Developers Diversified Realty Corporation ("DDR") (collectively, Biscayne and DDR shall be referred to as the "Developers"). Biscayne will be responsible for developing the condominium towers, the office tower and the hotel and spa, and DDR will be responsible for developing the retail shopping center and the apartments. FINANCING PLAN The Property has no street, sidewalk, water, sewer, electric, green space or any other infrastructure in place. It is generally the role of government to provide public infrastructure in urban areas. The unique concept to be outlined below will describe a funding mechanism for providing the public infrastructure that is paid for exclusively out of revenue streams created by the Development. Total infrastructure costs for the Development are estimated to be $106 million. The CDD has requested from the City and the County project -generated financing assistance for infrastructure costs in an amount up to $76.0 million. Approximately $51 million will fund hard costs for 2,900 on -grade and structured parking spaces (the "Parking") and a public plaza (the "Midtown Plaza), plus $25 million for debt service, reserves and other costs associated with the bond issuance. In order to facilitate the requested project -generated financing assistance, the Developers formed the CDD. The CDD will issue thirty-year bonds having a principal amount of $76 million through a public financing (the "Bonds") to fund the Parking and Midtown Plaza components of the infrastructure. The Bonds will be repaid by the CDD through economic incentive payments ("EIP") and/or tax increment payments generated by the Development, and, if needed, special assessments to be levied against the owners of the Property (the "Special Assessments"). As noted above, the CDD will be the issuer of the Bonds, and therefore is solely responsible for the payment of the debt service on the Bonds. The Bonds will be issued in the name of the CDD and will not be issued based upon the credit or reputation of the City. A default on the Bonds would not have an impact on the City's credit standing in the markets. The City would also not be responsible for the debt service on the Bonds even in the event of a default by the CDD. All other infrastructure, excluding the Parking and the Midtown Plaza , will consist of roadways, water and sewer improvements, drainage and irrigation, streetscape, landscape and public plazas ("Other Infrastructure"). Other Infrastructure is estimated to cost $30 million and will be paid for by the owners of the Property through Special Assessments or will be satisfied by other loans and public grants (from entities other than the City). Potential grant funding sources for Other Infrastructure may include public grants, such as a $2 million EDA grant and a $2.5m FDOT grant, an $800 thousand loan from the South Florida Regional Planning Council, and a $400 thousand (BEDI) loan from Miami -Dade County. A Section 108 Loan Guarantee was recently approved by the Board of County Commissioners (the "108 Loan"), and may finance up to $20.6 million of Other Infrastructure. The 108 Loan will be secured and paid only through Special Assessments against the owners of the Property. In the event the 108 Loan is not used by the CDD, the CDD will issue other debt to fund Other Infrastructure and will also pay that debt only through Special Assessments. The 108 Loan will have no effect on the City's capacity to issue Section 108 Loan Guarantees for other projects in the City. There are no City general fund dollars involved or at risk. There are no City repayment guarantees. There are no Homeland Defense and Neighborhood Improvement Bond funds being utilized. There will be no bonds issued in the future that would have to be guaranteed by the City's general revenues or any other City revenue stream. The Bonds will be backed only by revenues derived from new Development construction and Special Assessments. STRUCTURE OF BONDS The Bonds will be issued by the CDD in an aggregate principal amount of up to $76 million. The amount of Bonds to be issued includes $25 million of interest capitalized during the construction period (three years) of the Parking and the Midtown Plaza, bond issuance costs and interest reserves. The CDD will pledge the EIP, tax increment payments and Special Assessments for the repayment of the Bonds. Special Assessments will be required in the event that the phasing of the Development does not occur at the pace currently planned and/or if the EIP and or tax increment payments are not sufficient to meet annual debt service on the Bonds. EIP and/or tax increment payments have been structured so there will be no impact on the City's general fund should construction not proceed as scheduled or in the event of default. Because EIP and/or tax increment payments are directly related to the completion of Development components, the failure of the CDD to deliver completed components on schedule may result in a Special Assessment on the owners of the Property in order for the CDD to cover its debt service on the Bonds. INTERLOCAL AGREEMENT The Resolution requests your approval for the City to enter into the ILA with the County and the CDD. The ILA sets forth the obligations of the CDD to provide financing for the Development and the conditions under which the City and County shall make EIP to the CDD, including the method by which the amounts shall be calculated and sources used to fund City and County payments under the ILA. The City and County shall make EIP to the CDD annually based on completed Development components (see Schedule I of the ILA). The City's Share of EIP is approximately 60% (the "City's Share") and the County's Share is approximately 40% (the "County Share"). The actual amount due in any year shall be determined in accordance with Schedule I of the ILA which will be updated upon the actual sale of the Bonds so that EIP will not exceed the CDD's annual debt service. Moreover, the ILA further limits the total amount of the City's Share of EIP and/or tax increment payments to $101 million through maturity, 2037. In the event that the City's Share and the County's Share of EIP payments to the CDD for completed components are insufficient to cover the CDD's annual debt service obligation on the Bonds, then the CDD will be responsible for the deficiency through the levying of Special Assessments. The ILA also requires that the City and the County take all actions necessary to establish a CRD, the boundaries of which would be limited to the Property. Upon the creation of the CRD, EIP would be reduced to the extent of tax increment generated by the Development. However, in no event would the sum of EIP and tax increment payments exceed amounts that would have been paid by the City and the County had the CRD never been created. FISCAL IMPACT ANALYSIS The City estimates that, if the Development is constructed as currently planned and tax values increase at 3% per year, the City will receive incremental tax revenues of at least $316 million, net of all EIP and/or tax increment payments paid during the life of the Bonds. The entire $316 million will go to the City's general fund. The estimates have been computed conservatively, using only construction costs, rather than the projected taxable values of Development components upon completion. Even assuming a worst case scenario, if only phases 1 and 2 are built, with an approximate $500 million of construction costs, the City's estimated tax revenues for the 2008-2037 period of $198 million would cover the City's portion of EIP and/or tax increment payments by a 2 to 1 ratio. The maximum debt service on the Bonds in any one year is $6 million. Thus, the maximum amount of the City's Share in any one year would be $3.6 million. These computations do not take into consideration the incremental tax base resulting from the impact of a redevelopment project of this size on the surrounding neighborhood or other revenues such as personal property taxes, sales taxes, fire fees, occupational licenses and other City fees. For example, impact fees directly related to the Development are estimated to be in excess of $3.4 million, and the residential component of the Development will generate an estimated $12 million for the City of Miami's Affordable Housing Trust Fund. Finally, recurring fees and taxes, i.e. fire fees, personal property taxes, licenses, solid waste charges, are estimated to contribute an additional $1 million per year to the City's general fund, and parking meter revenues are estimated to be $250,000 per year. OTHER BENEFITS Job Creation and Community Empowerment During the Development's seven-year construction period, it is anticipated that over 700 full-time jobs will be created. In addition, upon completion of the Development, it is anticipated that over 2,500 permanent full-time jobs will be created from entry level to senior positions. The City wants to ensure that employment opportunities are maximized for City residents, especially low to moderate income residents. Therefore, as a condition precedent to executing the ILA, the City will require the Developers and the CDD to enter into a first source and minority hiring agreement (the "First Source Agreement"). The First Source Agreement will require, among other things, the following commitments on the part of the Developers and the CDD: 1. To use commercially reasonable efforts, incompliance with all applicable laws, to give first preference in employment to City residents; 2. To use all commercially reasonable efforts to ensure that employees of contractors and subcontractors are at least 51 % low to moderate income residents; 3. To use commercially reasonable efforts to include in retail lease agreements a commitment by retailers that commercially reasonable efforts will be made to employ City residents and provide the City with quarterly reports of their efforts; 4. Hold job fairs, at least annually, with adequate notice to City residents; 5. Collaborate with community based organizations and other groups to ensure that appropriate training programs are developed and offered to City residents; and, 6. Provide quarterly reports to the City of Miami for its review of the results of all of the aforementioned efforts. The Developers have already taken significant steps toward fulfilling these employment commitments. To date, 85% of labor -related contracts, totaling nearly $18 million, have gone to Local minority contractors. They have also hired 30 people from the Wynwood community to fill newly created positions. These newly created positions include medical benefits and accrual of vacation days. The Developers have also collaborated with organizations such as the Puerto Rican Chamber of Commerce and South Florida Workforce as part of their community outreach for job development. Resumes and applications obtained through the Developer's community outreach efforts will be provided to tenants of the retail and office Development components. Affordable Housing Commitment Biscayne has committed to an affordable housing program which will designate a total of eighty (80) units, ten (10) units in each of the eight (8) condominium towers, as affordable units. Biscayne will contribute $5,000 towards the closing costs for each of these units. Biscayne has an arrangement with HSBC Bank USA to make available 97% financing for all prospective buyers of units (including the eighty (80) affordable units) at the Development. The financing program includes liberal underwriting guidelines, and allows prospective purchasers to qualify regardless of credit history; so long as the prospective purchaser is not in bankruptcy and is current on all personal credit obligations at the time of application. Biscayne will also provide a $1 million revolving line of credit to the Rafael Hernandez Housing and Economic Development Corporation or other similar non-profit housing agency as may be mutually agreed to by the City and the County. The line of credit will be made available during the construction period of the Development (estimated to be seven (7) years), and may be used only for the rehabilitation and/or construction of affordable housing units in Wynwood and surrounding neighborhoods. CONCLUSION The Development implements the recommendations of the Commission -adopted FEC Plan by delivering a project that is integrated into the surrounding community. We believe the Development is the cornerstone for economic revitalization of the Wynwood community, as well as surrounding City neighborhoods. The City's investment in portions of the infrastructure will yield significant returns to the City, and create thousands of jobs for City residents.