While the City is choosing to negotiate with Rule Enterprises, there are some pretty big conditions on final approval as well as choosing Gorman Companies as the back up plan.
Will the great Grocery-Store-on-Park-Street-dilemma be coming to a conclusion – or are we continuing along with another Judge-Doyle-Square-type-saga? The city purchased the property in 2012 and tore down the building so we couldn’t use it as a day resource center for people experiencing homelessness. The city also cut a deal with Porchlight and to put their affordable housing out in the swamp on Nakoosa Trail instead of this “prime” location and cut a deal with Goodwill. Even tho the city voted to use the property for homeless services. Porchlight could have purchased the property for little or nothing under the BRAC regulations. Lots has happened between 2012 and now and still no development on the site. Are we any closer?
MINIMUM REQUIREMENTS
After a failed Request for Proposal (RFP) the city put out another RFP in May with the following minimum requirements:
- Preserve food access by constructing a grocery store that will serve the multiple neighborhoods in the vicinity of the Property or nearby;
- Complete the eastern portion of a street connection (“Connector Street”) from Park Street to Fish Hatchery Road through or adjacent to the Property, and;
- Meet the recommendations of the Wingra BUILD Plan and Comprehensive Plan, as well as requirements of the Zoning Ordinance and Urban Design District #7.
PROPOSALS
The city received 4 proposals. Here’s a “draft” staff summary of the proposals. The staff report written on November 13th says the following:
- Gorman / Maurer proposes to build a 24,000 square foot grocery store on the first floor and 93 apartment units on floors 2-5 above it. The apartment units would be financed using 9% WHEDA (Wisconsin Housing and Economic Development Authority) Low Income Housing Tax Credits (LIHTC). Units would be targeted to residents making between 30% and 60% of Area Median Income (AMI), along with 15% market rate units. The preliminary plan for the WHEDA financed units would include the following unit types: (1 BDR – 38, 2 BDR – 37, 3 BDR – 18). In addition, there would be seven (7) townhome style units fronting on South Park St. The project would include 85 surface parking stalls and approximately 90 underground parking stalls. Gorman is requesting $1.85 million of Affordable Housing Funds (“AHF”) from the City of Madison. Gorman is proposing to purchase the Property for $1, which, as noted above, the City must consider as a request for $1,078,000 of TIF assistance. The total requested assistance from Gorman for the project is $2,928,000.
- Key Project elements
- 24,000 SF grocery store
- 93-unit apr. development
- 79 affordable units ranging from 30-60% AMI
- Key Financial Elements
- Total project cost of $22.8M
- Assessed value of $12M
- $1.85M of City AHF
- $1 purchase price
- Total assistance requested $2.928M
- City staff summary assessment – Gorman has proposed a project that delivers a grocery, with an identified grocery partner (Maurer’s Market), while also developing housing at a modest level of density (93 units), but at a higher level of affordability that the 9% WHEDA LIHTC financing can provide. The Gorman proposal contains surface parking and a request for $2.928M of total City financial assistance, including a land write down of $1.078M and $1.85M City AHF.
- Key Project elements
- Rule Enterprises proposes to construct a two phase development on the Property. The first phase would consist of a grocery store of approximately 30,000 square feet and 150 units of rental housing that would be financed using 4% federal tax credits and 4% State tax credits both of which are administered by WHEDA. Some units would be targeted to residents with incomes between 30% and 60% of AMI. The remaining units would be targeted to residents with incomes between 60 and 80% AMI. The preliminary plan for the WHEDA financed units would include the following unit types: 1 BDR – 75 units, 2 BDR – 50 units, 3 BDR – 25 units. Phase I would include the construction of a 345 stall parking structure that would serve the grocery, the Phase I residential units, and the residential units in Phase II. Phase II would consist of 80 units of apartment housing that would be financed using 9% WHEDA tax credits, and would sit atop the structured parking. Rule is requesting $2 million of AHF from the City of Madison, for Phase I, with an additional request possible for Phase II. Rule is proposing to purchase the Property for $1.5 million.
- Key Project Elements
- 30,000 SF grocery store
- Phase I – 150-unit apt development and 345 structures parking stalls, 80 affordable units ranging from 30-60% AMI
- Phase II – 80 unit apt development using 9% WHEDA LIHTC funds, 85% affordable units ranging from 30-60% AMI
- Key Financial Elements
- Total project cost of $41.3M
- Assessed value of $19.7M
- $2M of City AHF
- $1.5M purchase price
- Total assistance requested: $2M
- City staff summary assessment – Rule proposes to develop a project that delivers a grocery, however they have yet to identify a grocery partner, while also delivering a very dense project (230 units). Phase I provides 150 residential units at a lower level of subsidy (a 4% WHEDA LIHTC project), with Phase II potentially providing an additional 80 units at a higher level of subsidy (a 9% WHEDA LIHTC project), all over structured parking. It should be noted that Rule’s proposal to build a 4% WHEDA LIHTC project that includes a grocery and structured parking would represent a new product mix that to date, has not been built in the City. While other tax credit projects have been built with structured parking, they have traditionally required extensive TIF assistance. Rule proposes to pay the City $1.5M for the Property, while requesting $2M of City AHF.
- Key Project Elements
- Welton Enterprises proposes to redevelop both the Property, and the adjacent Pick N Save grocery store (located at 1312 South Park St). This analysis only considers the proposal to redevelop the Property, as the City does not control the site at 1312 South Park St, which is also owned by Welton. In Phase I, Welton proposes to construct a four story building with a 20,0888 square foot grocery store, 92 units of market rate apartments, 90 stalls of underground parking, and 89 stalls of surface parking. The preliminary plan for the market rate housing would include the following unit mix: Efficiency – 20 units, 1 BDR – 47 units, 2 BDR – 25 units. Phase II would include approximately 94 units of affordable and market rate housing. Welton is proposing to purchase the Property for $1, which, as noted above, the City must consider a request for $1,078,000 of TIF assistance. Welton is also requesting an additional $2 million in direct TIF assistance. The total TIF request from Welton, including the land write down and direct TIF assistance is $3,078 million.
- Key Project Elements
- 20,088 SF grocery store
- 92 units of market rate apts
- 89 stalls of surface parking and 90 stalls of underground parking
- Key Financial Elements
- Total project cost of $24.5M
- Assessed value of $17.1M
- $2M of direct TIF assistance
- $1 purchase price (equates to an additional $1.079M of TIF)
- Total assistance requested: $3.078M
- City staff summary assessment – Welton proposes to develop a project that delivers a grocery, however they have yet to identify a grocery partner, while also delivering housing at a modest level of density with no requirements for affordability in their proposal for the Property (92 market rate units). The Welton proposal contains surface parking and a request for $3.078M of total City financial assistance, including a land write down of $1.078M and an additional $2M of direct TIF assistance. The Welton proposal is unique as Welton is the owner of the adjacent Pick N Save site, allowing better coordination for development.
- Key Project Elements
- Baehr Inc / Valeo / McShane / Habitat for Humanity / Capitol Centre Market (Valeo) proposes to construct a 30,000 square foot grocery and three level, 450 stall parking structure, with a four story 227 unit (649 bed) student housing apartment structure on top of it for a total of seven (7) stories of building. In addition, the project would include 17 townhomes that would be built and owner occupied by families through Dane County Habitat for Humanity. The preliminary plan for the student housing units would include the following unit mix: 1 BDR – 26 units, 2 BDR – 75 units, 3 BDR – 31 units, 4 BDR – 95 units. In addition, there would be 17 units constructed for Habitat for Humanity families that would be 3 BDR / 2.5 bath townhome style structures. Valeo is proposing to purchase the Property for $1.08 million.
-
- Key Project Elements
- 30,000 SF grocery
- 227-unit apt development (649 bedrooms)
- 17 Habitat for Humanity owner-occupied row house
- 450 structured parking stalls
- Key Financial Elements
- Total Project Cost of $87.7M
- Assessed value of $70.8M
- $1,080,000 purchase price
- Total assistance requested: No taxes during construction and City construction of Cedar St. extension.
- City staff summary assessment – Valeo proposes to develop a grocery, with an identified grocery partner (Capitol Centre Market), while developing a very dense project (227 student units, 17 Habitat for Humanity units), but with only the Habitat units being set aside to specifically address affordable housing. The Valeo proposal contains structured parking, a purchase price of $1.080M, and requires no City financial assistance.
- Key Project Elements
More on the city’s assessment can be found here.
CONDITIONS OF APPROVAL OF RULE ENTERPRISES
The resolution spells out the following conditions of approval with a deadline of January 16, 2020:
City of Madison grants exclusive rights to the Developer to negotiate for the Property, provided that the conditions below are met:
- The Developer provides a Letter of Intent (“LOI”) to the City of Madison between the Developer and a grocer that identifies a lease rate, square footage, lease term, and any tenant improvements for a grocer to occupy the Project as a tenant, prior to January 16, 2020;
- That the Developer submit an application for, and receive financing, from the Wisconsin Housing and Economic Development Authority (“WHEDA”) for 4% federal and state tax credits to finance the Project, and that this application shall be submitted to WHEDA no later than January 16, 2020;
- That prior to 4:00 PM on January 16, 2020, the Developer sign a term sheet with the City of Madison that contains the terms and conditions for the sale of the Property from the City to the Developer;
- That the Developer come to terms with the City regarding the design and layout of the extension of Cedar Street through the Property, as described in the RFP, through the Property;
- That no later than January 16, 2020, the Developer come to terms with the City regarding any funding provided to the Project from the City’s Affordable Housing Initiative (“AHI”) Fund. A separate funding resolution incorporating agreed upon terms will be put forth for future action by the Common Council.
Back Up Plan
- To the extent a final development agreement cannot be completed with the Developer by the deadlines set forth in this resolution, City Staff shall return to the Finance Committee, at which time the Finance Committee is hereby authorized to terminate negotiations with Developer and to commence negotiations with Gorman Companies, and under what terms those negotiations shall take place.
COUNCIL REQUEST/CONCERN
The Bay Creek Neighborhood Association has the following request of the council.
BACKGROUND
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- The Truman-Olson RFP lists two primary requirements: a full-service supermarket and a connector street (location determined by the city).
- The RFP criteria for selecting who will develop the Truman Olson site includes: the experience of the developer/supermarket team as well as the financial viability of proposal.
CONCERN
Recommended developer has minimal development experience, no experience working with groceries and no attached grocer at this stage.
REQUEST
Common Council authorizes City staff to receive additional information from the top 2 developers to be included as an addendum to staff’s report prior to the Finance Committee meeting on November 24, 2019. Including, but not limited to:
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- Whether it is possible for Gorman (the City’s “Plan B”) to submit a WHEDA 9% LIHTC financing request by the December 6, 2019 deadline. Gorman has indicated a willingness to lower its TIF request in order to meet WHEDA’s financing requirements. Significance of this is that should Rule fail to secure grocer by January 16, 2020, Gorman can still be on track to avoid a grocery gap. Staff has identified this as a possibility in their report on page 09: “While the request for 71% of the TIF generated by the project exceeds the City’s adopted TIF policy, City Staff believes that is could be possible to find the approximately $322,000 of either project savings or developer equity.”
- Clarity on Rule Enterprise’s development history. Staff report states Rule has 3 successful affordable housing projects completed. Rule’s website suggests only one completed 60-unit affordable housing project to date. WHEDA confirms that Rule’s second approved project has not yet begun.
- Progress report on Rule’s search for a grocer.
TO BE CLEAR:
- This post is informational, I have no preferred project but obviously like the idea of more affordable housing, bringing new developers to town and supporting a black developer.
- I think it is a heavy lift for Rule Enterprises, or anyone, to meet all the city requirements in less than 2 months over the holidays. Feels like a set up for failure. There isn’t much time to get things done.
- I’m not sure this is a done deal. It seems odd the city is already calling out their fall-back position of Gorman.
