AGENDA 12-06-2016

RESOLUTION NO. R2016-50 A RESOLUTION AUTHORIZING A LETTER OF INTENT TO HISTORIC GOETZ TOWER, LLC REGARDING THE LEASE OF SPACE AT GOETZ TOWER, AND DECLARING AN EMERGENCY. WHEREAS, the redevelopment of Goetz Tower is an integral part of the renovation of downtown Middletown; and

WHEREAS, the City has supported Historic Goetz Tower, LLC, the owner of Goetz Tower, in obtaining historic tax credits and has entered into a community reinvestment area agreement for property tax abatement; and

WHEREAS, the property owner and the City have discussed a tentative agreement for the City to lease office space at Goetz Tower; and WHEREAS, the lender for the redevelopment project has requested a letter of intent to lease as a guarantee of tenants following construction;

NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Middletown, Butler/Warren Counties, Ohio that: Section 1 City Council hereby authorizes the City Manager to send a letter of intent to lease to Historic Goetz Tower, LLC outlining the City’s intent to lease space at Goetz Tower in a form substantially similar to Exhibit “A”, attached hereto. Section 2 It is hereby determined that the subject matter of this legislation is not a general and permanent nature, does not provide for a public improvement and does not assess a tax or payment. Section 3 This resolution is hereby declared to be an emergency measure for the immediate preservation of the public peace, health, safety, and general welfare, to wit: to assure Historic Goetz Tower, LLC and their lender of the City’s intent to lease space at Goetz Tower so that construction can begin in 2016, and shall take effect and be in force from and after its adoption. _____________________________ Lawrence P. Mulligan, Jr., Mayor Adopted: _____________ Attest:_____________________________ Clerk of City Council H:/Law/leg/2016 Leg/r Goetz Tower

 

 

Letter of Intent.doc EXHIBIT “A”

November 21, 2016

Mr. Steve Coon

Mr. Dave Jursik

Mr. Joe Parsons

Historic Developers, LLC PO Box 259 Louisville, OH 44641

 

Gentlemen:

 In support of the Historic Goetz Tower redevelopment, the City of Middletown will agree to lease the first floor of the building for a period of 5 years. This space will be occupied by one or more City Departments and will be used as commercial office space. The rate will be negotiated upon completion of the project, based on a fair market value. The lease will begin when the construction is completed on the building. The City of Middletown has invested significant resources in this project and will continue to support it and other redevelopment efforts in our community. We look forward to working with you and seeing this project come to fruition.

Sincerely,

Douglas Adkins

City Manager

What a City, I can explain each part of your response. I’m not sure we’re going to always agree, but at least you’ll understand our thinking in the actions taken. Also, I'm not terribly adept at bolding type, etc., here so I've taken your statements, and then added my explanation below each comment. Please excuse any formatting errors.

What a City:
So, Adkins not only doesn't think that giving a private investor taxpayer money to develop this property is enough, and, no doubt, helping with the rehab, but now he is wanting to lease the first floor to house city departments for 5 years, using more taxpayer money in doing so?

First of all, are there now that many employees and departments in this city government that the city building can no longer house these city employees? No reason was given as to why this new cost to the city is being incurred in the post. Are you moving people there because you are out of room in the city building or because you want to help out your buddies in occupancy?

Adkins:
A valid question. Yes, we are out of room. Through the recession, we laid off people each year to balance the budget. 20 years ago we had 700 employees. We ended up by 2012 with 362 total employees and one person departments throughout the building. Marty was planning AND zoning with no clerical support. Now we have a City Planner and a City Zoning Official. The building inspection department was down to the Chief Building Official and his admin. Due to the resurgence in building throughout the city, we’ve had to add two building inspectors to keep up with the volume. In 2017, we add a person in the Health Dept to allow us to open the Health Department through lunch again and on Fridays. We are adding an Animal Control officer back into the budget in 2017. We are restoring resident services as quickly as the tax revenues allow.

When the school district moved into the 4th floor at Donham Plaza, we squeezed into three floors with the reduced departments. We are now completely out of room and have a couple people in hallways to make things work. With the 2017 additions above, we need additional space. The school district pays the City $65,100 a year in rent for the fourth floor. Some of those funds will be put back on the street in rent for the Goetz Tower lease. I solve my overcrowding problem with school district rent and support a new project in the city.   The end result, hopefully, is that the Goetz Tower building receives a $3 million renovation and is filled with 16 new apartment dwellers, all paying income taxes, and after the CRA property tax abatement period, the owner pays the updated value in property taxes moving forward every year, to be used for things like paving roads. OR we could leave the building abandoned and deteriorating and not paying property taxes or producing income taxes.   Both are valid policy choices. I believe the best choice is to invest in Middletown.   And I try to invest in things that produce ongoing revenues into the future for ongoing infrastructure maintenance repairs.

What a City:
Secondly, why does the city practice of real estate transactions continually use taxpayer money to purchase property when it should be the private sector developers taking the risk with their own money and determining who the tenants should be. Why is the city helping a private entity in filling their building, especially after the city set up this situation in the first place? Seems as if, from start to finish, the city has taken all the risk while the private party involved has stood back and watched the city do it's thing.

Adkins:
Another good question. The answer will take a little bit of writing. Hopefully this format doesn’t have a character limit on responses.
I believe that cities often have to be the catalyst to start the process. Banks don’t loan money on new ideas. They like to see other people be successful before they take a risk. With downtown, there are no comparables to match up against so banks typically will not lend for an unproven product.

Some people (many on this forum) have not been happy with the City’s investment in the downtown buildings. I would point out that the city’s investment brought Cincinnati State to downtown. Their building, which we purchased for about $250,000, sold for several million dollars, raising property values downtown. Their professors and staff pay income taxes to support your roads and services. Their students drink coffee at Triple Moon and support other downtown businesses.   The city investment in Cincinnati State and Pendleton Arts Center has led to now 35 operating businesses downtown. 8 additional businesses are on the books to open the first half of 2017. All of those businesses pay income taxes and are operating in buildings that were empty and deteriorating. Now those buildings are renovated and will be producing property tax income for the city. Other than façade grants, the city has not had to invest in most of these buildings or in the businesses that now operate in them. The catalyst that we started, spurred others to invest their private money in downtown buildings and businesses.

Goetz Tower is the residential equivalent of the Thatcher building purchases. To add to the stability and success of downtown, you will need people living downtown with disposable income. You need people who will need to get their hair cut, fill their cars with gas, get groceries, etc.   The Goetz Tower apartments are upper scale luxury apartments. Granite Countertops, etc., all the trimmings. Because there is no product like this in the area, banks are reluctant to loan for the whole amount. We will be filling in the gap in financing. Why would we do this?

Because it’s been successfully done all over the country. Once there is a successful project, banks will look at the Goetz Tower success and be more willing to bankroll the second project. The third project will be easier than the second and so on. Look at downtown Hamilton and Over the Rhine in Cincinnati for two local examples of this type of success, but it’s been done all over the country. It is a proven concept and there is no reason to believe it will not be successful here as well.

What a City:
But the people don't want you to do business like this Adkins. We don't want you to use our taxpayer money for this purpose. We want you to fix the dam roads with our money. It is a safe bet that more people want their streets paved than the downtown developed. Refocus the funds to encompass more of the people's needs.

Adkins:
The 2017 budget has over $12 million in capital projects including completion of the Oxford State Road widening, the Yankee Road extension, $1.75 million in local paving, a new roof and chiller for the city building, and a new roof for the community center.   I tried to balance long overdue deferred maintenance on city assets with infrastructure improvements. There are always going to be questions about whether we picked the best balance and/or streets to pave, etc.   

2017 Local Paving includes:
OPWC Funded Paving Project   Estimated Cost = $1.45M plus assessments for sidewalk, curb and gutter

Central Avenue between Breiel Boulevard and Marshall Road
S. Main St. between 11th Avenue and 18th Avenue
Kensington Street between Central Avenue and Grand Avenue
Wicklow Drive between Limerick Lane and Cambridge Drive
Limerick Lane (all)
Poppy Drive (all)
S. Heinkel Road between Poppy Drive and Central Avenue

City Crew Paving
Estimated Cost = $300K (Auto & Gas Tax Budget) plus assessments for sidewalk, curb and gutter

Philadelphia Ave. (all)
Carolina St. between Roosevelt and Burbank
Shelley St. (all)
El Camino Dr. (all)
Ocala Dr. (all)
Catalina Dr. (all)

What a City:
Why hasn't the city put as much interest and money into other areas of town as they have the downtown? You are perfectly willing to let the private sector develop the Towne Mall area on their own. Do the same with the dam downtown and stay out of the real estate business.

Adkins:
The city is working actively on the East End with the AK Steel project which stubbed roads and utilities into the East End. Now we are updating the East End plan to better recruit new business to the highway and are working internally and with Warren County and Duke on an infrastructure plan that would allow future development of the 600 acres by the highway. It’s in progress, you just can’t see the work being done yet.

The Oxford State widening and extension of Yankee Road were made to increase the attractiveness of the MADE industrial area. We’ve had several good prospects in to look at the area, but the difficulty in bringing raw materials in and finished goods out of the area made new development difficult. We’re in the process of removing those barriers and should see further development in our industrial areas in future years.

We are updating the Airport plan and have purchased an access point off of Hook Drive that will allow development of another 10-15 acres of aviation related business on the west side of the airport.

We are constantly working with the Mall owners on further developing the mall. Most of our work there is relationship building and working with the owners to attract new tenants to the area. Again, a lot of economic development work is done that doesn’t show up to the public until Buffalo Wild Wings opens up a new restaurant (with 100 new jobs paying income tax).

We are working all over the city and the benefits are starting to pay off. 2016 will have the largest income revenue in the past 15 years. I’ve said this so many times… It took 30 years to get this way, you can’t fix it on Thursday. It’s going to be a slow grind for years, trying to do the right thing every day, to slowly put the city back in a financial position to maintain and sustain its infrastructure on an ongoing basis. I not only have to pay for normal upkeep, we have to work to pay for 20+ years of deferred infrastructure repairs. Not an easy task.

City Building Staffing:

You state you were a 700 20 years ago before the recession. Now at 362 in 2012. Your list of new hires to beef up the one man departments and re-staff still shouldn't necessitate the need to expand to the new building. The city owns the old Seniors Center next door and in close proximity to the city building. Why pay rent to a private entity when you can house the overflow in a building you own?(and no doubt, once again, paid for using taxpayer money while claiming you want to get out of the real estate business by the way) Doesn't make sense to pay someone for lease space Mr. Adkins. Even with the school district occupying the fourth floor, the few you have hired still should fit in the city building, right? How large are their work areas?

Ok, Mr. Adkins, a poor choice of an example as to the success of Cincy State. C'mon, let's talk truth here. CS has NOT come anywhere close to projections when announced as to enrollment nor impact downtown. It is not the "foot traffic catalyst" that was once talked about. It has yet to hit a thousand students which would be 20% of the original projected enrollment number of 5000 in 5 years (later reduced to 3000 in 5 years and later amended to much less than that by the way). Student spending impact in the downtown is magnified as to importance because there is very little spending coming from the actual citizens of this city. The only other spending comes from 5% of this community who like art and frequent the overpriced fru fru restaurants located in your downtown. Most in town eat at the fast food places, not in your downtown. Ya just can't tell me that the downtown spending has any meaningful impact at all on the over revenue collected by the city regardless of the source. How many students are actually downtown for classes to purchase from these businesses and how many take on-line computer classes and never come to Middletown? Furthermore, you just told us that the city bought them the building for 250 grand using taxpayer money once again and the city set CS up for business like they do everyone else downtown.........but not in other areas of town by the way. Other areas of town are left to fend for themselves and, if developed at all, use private sector money the way it is suppose to be done.

Mr. Adkins: "Banks don’t loan money on new ideas"

Why not? Sure they do. If the investor has a sound, logical business plan and can sell the idea to the bank with a reasonable guarantee of investment return, anticipated customer base/income level retention and business longevity.

Mr. Adkins:   "The catalyst that we started, spurred others to invest their private money in downtown buildings and businesses."

It is NOT the city's responsibility to stimulate growth by leading the way on purchasing property for development. The city doesn't take the financial risk. The city provides a solid platform for private investors to take on the financial aspect of business creation. It is the city's responsibility to OFFER THE ATTRACTIONS that would stimulate the private sector developers to take an interest in the city. Currently, IMO, you are doing the developers job and taking all the risk with our money and not focused on making the city more desirable....IE-BASICS....low crime and basic safety issues addressed, proper sewer and water facilities, reduced heroin/drug usage, BETTER ROADS, general blight removal in key areas of town, not just the perceived "ghetto" areas and attracting educated people to town who will fill the workforces for employers instead of low income-handout people and finally, working on that tarnished city image surrounding communities have of this once great city by eliminating the "ghetto/low class" tag that is around the city's neck right now.

Adkins:
"The 2017 budget has over $12 million in capital projects including completion of the Oxford State Road widening, the Yankee Road extension, $1.75 million in local paving, a new roof and chiller for the city building, and a new roof for the community center.   I tried to balance long overdue deferred maintenance on city assets with infrastructure improvements. There are always going to be questions about whether we picked the best balance and/or streets to pave, etc."

It's a start but long overdue.......like decades overdue. Former leaders should have started the ball rolling on these types of expenditures decades ago. Again, you are not to blame for those who came before you. A sad epitaph to the poor leadership we have had since the 60's. No vision, no focus on the important things the city needed. Just typical governmental wasteful spending on pet projects that were of no interest to those living here.

Adkins: "We are working all over the city and the benefits are starting to pay off. 2016 will have the largest income revenue in the past 15 years. I’ve said this so many times… It took 30 years to get this way, you can’t fix it on Thursday. It’s going to be a slow grind for years, trying to do the right thing every day, to slowly put the city back in a financial position to maintain and sustain its infrastructure on an ongoing basis. I not only have to pay for normal upkeep, we have to work to pay for 20+ years of deferred infrastructure repairs. Not an easy task"

That's alright. Take your time and do it right. We long time residents have been waiting since the 60's for someone in the city building to wake up and start rebuilding the city once again after taking it to the gutter the last 4 decades.

High end apartments in a high end location?.....You're kidding right?

Was forced to vacate a very successful business in the downtown to make room for the mall(late 60s-early 70s)
Re-located to a new center on S university
City offered a small loan @ 2% below prime interest rate(double digits back then)
Paid back in full as per terms
No incentives or debt forgiveness
Created a showplace that hired hundreds(a thousand?) for four decades
Business was featured In trade magazines nationally
Paid property taxes, payroll taxes, income taxes, permits, licenses galore

Very proud of that entity and its success
Served a now forgotten area of our community well, and shared the success throughout the area by contributing to organizations, schools and churches filled with families that made our company work.

I doubt that you can find many to dispute any of this, and will testify to our long-term community involvement
I am proud of our legacy and continued I nvolvenent in this community, even after putting our businesses to rest, while keeping all of them functional privately iwwnwd bin-city subsidized and in good hands.
No vacant buildings or corporate welfare

sorry for the typos from my phone

AND:

OK middielover and those feeding you info---obviously admin-connected...
I have had a good guess as to your identity for a while, and since you want to take this to a personal level,

What is your stake in the business world?
Do you operate any businesses and where?
Have you taken any taxpayer-funded incentives,grants and/or property/income/payroll tax waivers from city admin(and for what locations?)?
How many do you employ and for how long?

Tell us about it!

Fair enough?

swohio75 wrote: The city was supposed to have it's new video recording system in place so that the Dec. 6 meeting would be available online.  Yet, I don't see it on their YouTube page.

They probably can't afford the new system now.  They probably wasted the money on this lease instead.

I'll add one more fact that makes it hard to operate. Between the loss of the inheritance tax and the reduction in state support from the local government fund, the city now operates with $1.8 million a year less than it was receiving in 2010. For us, like you, in many cases it has been one step forward (record 2016 tax revenues) and one step back (loss of state funding). It's one more reason I believe we need to take our time and slowly build a Middletown that doesn't rely on the state or the feds to be successful. It's a hard transition and a slow one.

Too bad the meeting was unable to be recorded.

Doug with regard to the city’s lease agreement, I would hope the city:

• Pays no more than $10 a square foot for rent.  This seems to be the going rate in the downtown area
• Has an option to sublease the space if market conditions warrant. I would hate to see street-level retail space along Central not be available because the city has a five year lease. 
•  Considers the space for Econ Development, Communications/PR to help increase visibility

The notes in the staff report were not completely clear.  Does the city’s lease agreement start when their space on the first floor is completed or when the building’s construction is completed.  The following was vague: “The lease will begin when the construction is completed on the building.”

Thanx for the informative and detailed reply, Mr.A. How it should be. This forum may well be the easiest and best way to pass info and open discussion.