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HomeMy WebLinkAbout2015 Resolution No. 057' RESOLUTION NO . .6!J_ SERIES OF 2015 A RESOLUTION APPROVING A REDEVELOPMENT ASSISTANCE AGREEMENT WITH KRF II, LLC FOR THE RITE AID PHARMACY LOCATED AT 707 EAST JEFFERSON AVENUE, ENGLEWOOD, COLORADO. WHEREAS, the City wishes to provide certain business assistance in connection with the Rite Aid Pharmacy Development for a 14,600 square foot store located at 707 East Jefferson Avenue; and WHEREAS, KRF II, LLC plans to lease this space for 20 years, with options to continue the lease for 50 years; and WHEREAS, KRF II, LLC plans for the project to generate new sales and use tax revenue, and create new jobs in the City; and WHEREAS, pursuant to the provisions of Section 31-15-903, C.R.S., the City has the authority to negotiate for incentive payments or credits with taxpayers who establish new business facilities or who expand existing business facilities; and WHEREAS, the City Council finds the execution of this Agreement will serve to provide benefit and advance the public interest and welfare of the City. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ENGLEWOOD, COLORADO, THAT: Section 1. The proposed Redevelopment Assistance Agreement between the City of Englewood and KRF II, LLC (dba KENTRO Group), for the Rite Aid Pharmacy at 707 East Jefferson Avenue, Englewood, CO is hereby approved, a copy of which is attached hereto as Exhibit A. Section 2. The Mayor is hereby authorized to execute the Agreement on behalf of the City Council of the City of Englewood. ADOPTED AND APPROVED this 1st day of June, 2015. REDEVEWPMENT ASSISTANCE AGREEMENT FORKRF II, LLC (dba KENTRO GROUP), FOR THE RITE AID PHARMACY AT 707 EAST JEFFERSON A VENUE, IN TBE CITY OF ENGLEWOOD. nns AGREEMENT(" Agreement") is made and entered into as of the.,....... __ ,__ day of _____ ,......., ___ __,J 201S, between the CITY OF ENGLEWOOD, a Colorado home rule municipal corporation (the "City"), and. ICRF JI, LLC, a Colorado Corporation. WHEREAS, the City wishes to provide certain business assistance in connection with the Rite Aid Phlll11J8cy Development for a 14,600 square foot store at 707 East Jefferson Avenue in Englewood, Colorado (the project); and WHEREAS, KRF U, LLC plans to lease this space for 20 years, with options to continue the lease for SO years; and WHEREAS, KRF n. LLC plans for the project to generate new sales and use tax revenue, and create new jobs in the City; and · WHEREAS, City Council finds the execution of this Agreement will serve to provide benefit and advance the public interest and welfare of the City. NOW, THEREFORE, in consideration of the mutual promises set forth below, the City and, KRF U, LLC, a Colorado corporation, agree as follows: I. Use Tax Rebates; The City shall rebate to KRF n. LLC SO~ of the Building Use Tax collected in an amount not to exceed $30,625, from the imposition of the City's 3.5% Use Tax attributable to the construction of this project. Rebates shall not exceed the lesser of $30,625 or 500/o of the Building Use Tax due on the project 2. Sales Tax Rebatesi The City shall rebate to KRF965, Ile SO% of Sales Tax actually colJected, in an amount not to exceed $105,000, from the imposition of the City's 3.5% General Sales Tax on retail sales occurrin1 at the Project ("Sales Tues''). The rebate period shall commence upon the issuance of the Certificate of Occupancy for Rite Aid Pharmacy. The total Sales Tax rebate shall not exceed $105,000 nor shall Sales Taxes be rebated for lon;er than three (3) years. 3, Payment of Funds: The Building Use Tax rebate shall be paid by the City in a single payment and shall be made after receipt of payment of building us~ in an amount subject to rebi,te. Payment will be issued within 60 days of the issuance of th e Certificate of Occupancy for Rite Aid Pharmacy. 4. 1 % Franchjse Fee: The City agrees to utilize its credit from Xcel Energy for relocation and/or undergrounding of Xcel overhead utility distribution lines located on the property, estimated $60,000. The Xcel agreement provides only for utility lines owned by Xcel. KRF U. LLC, is responsible for the cost of relocation of all other lines. KRF U. LLC will coordinate the Xcel undergroundina through the City's Public Works Department., I! X H I ~ a I ' T A • • 5. Below is a summary of those impediments and the use of proceeds from the economic development incentive: 1. Underground/relocation of current overhead utility lines 2. Relocation and demolition of existing sewer line 3. Construction of underground detention/water quality 4. Potential relocation of city ditch (depending on the development plan of northern parcel) 6. Use of Funds, Funds rebated pursuant to this Agreement shall be used by KRF D, LLC solely for obligations ·and/or improvements related to the project. 7. Entire Agreement. This instrument shall constitute the entire agreement between the City and KENTRO GROUP and supersedes any prior agreements between the parties and their agents or representatives, all of which arc merged into and revoked by this Agreement with respect to its subject matter. Contact information is-as follows: KRFll,LLC c/o .K.ENTR.O GROUP 1509 York Street. Suite 201 Denver, CO 80206 8. Termination. This Agreement shall terminate and become void and of no force or effect upon the City i( by July, 20 i 7 KRF n, LLC has not completed the pl'Qject (as evidenced by the issuance of a certificate of occupancy); or should fail to comply with any City code. Thru finite extensions of (30 to 60 days) this agreement can be extended by the City Manager or dcsianee subject to aareemcnt of the parties . 9, Subordination. The City's obligation pursuant to this Asrcrmcnt are subordinate to the City's obligations for the repayment of any cummt or future bonded indebtedness and are contingent upon the existence of a swplus in sales and use tax revenues in excess of the sales and use tax revenues necessary to meet such existing or iuturc bond indebtedness. The City shall meet its• obligations under this Agreement only after the City bas satisfied all 9thcr obligations with respect to the use of sales tax revenues for bond repayment purposes. For the pmposcs of this Agreement, the terms "bonded indebtedness.'' "bonds," and similar terms descn"bing the possible fonns of indebtedness include all forms of indebtedness that may be incurred by the City, including, but not limited to, general obligation bonds, fCVenuc bonds, revenue anticipation notes, tax increment notes, tax increment bonds, and all other forms of contractual indebtedness of whatsoever nature that is in any way secured or collatcralized by sales and use tax revenues of the City. 10. Annual Appropriation. Nothing in this AarcCJncnt shall be deemed or construed as creating a· multiple fiscal year obligation on the part of the City within the meaning of Colorado Constitution Article X, Section 20, or any other constitutional or statutory provision, and the City's obligations hereunder arc expressly conditional upon annual appropriation by the City Council, in its sole discretion. KRF D, LLC understands and agrees that any decision of City Council to not appropriate funds for payment shall be without penalty or recourse to the City and, further, shall not affect, impair, or invalidate any of the remaining terms or provisions of this Agreement. " I 1. OovemiDI Law: Venue. This Agreement shall be governed and construed in accordance with the laws of the State of Colorado. This Agreement shall be subject to, and construed in strict accordance with the City of Englewood City Charter and the City of Englewood Municipal Code. In the event of a dispute concerning any provision of this Agreement, the parties agree that prior to commencing any litigation. they shall first enpgc in a good faith the services of a mutually acceptable, qualified. and experienced mediator or panel of mediators for the pwpose of resolving such dispute. In the event such dispute is not fully resolved by mediation or otherwise within 60 days after a request for mediation by either party, then either party may commence legal proceedings regarding the dispute. The venue for any lawsuit concerning this agreement shall be in the District Court for Arapahoe County, Colorado. 12. Legat Challenge; Escrow. The City shall have no obligation to make any rebate payment hereunder during the pendeocy of any lepl challenge to this Agreement. The parties covenant that neither will initiate any legal challenge to the validity or enforceability of this Agreement against any challenge by any third party. Any funds appropriated for payment under this Agreement shall be escrowed in a separate City account in the event there is a legal challenge to this Agreement. · 13. Assignment. This Apecmcnt is personal to KR.FD, LLC. KRF II, LLC may not ll!Sign any of the obliptions, benefits or provisions of the Ap-ecmcnt in whole or in any part without the expressed written authorization of the City Council. Any pwportcd asaipmeot. transfer, pledge, or encumbrance made without such prior written authorization shall be void. 14. No Jojnt Venture. Nothing in this Aareement is intended or shall be construed to create a joint venture between the City and KRF n, LLC, a Colorado corporation and the City ·shall never be liable or responsible for any debt or obligation of KRF D, LLC, a Colorado corporation. KRFll,LLC A COLORADO CORPORATION (dba Kentro Group) By:~ ~aiafas,ci AITEST: CITY OF ENGLEWOOD By. __________ _ Randy P. Penn, Mayor ATTEST: Loucrishia A. Ellis, City Clerk • • COUNCIL COMMUNICATION DATE: AGENDA ITEM: SUBJECT: June 1, 2015 11 cl Kentro Group Redevelopment Assistance Agreement INITIATED BY: STAFF SOURCE: Community Development Darren Hollingsworth, Economic Development Manager COUNCIL GOAL AND PREVIOUS COUNCIL ACTION City Council discussed the proposed Redevelopment Assistance Agreement at the April 20, 2015 Executive Session with consensus to bring the Agreement forward for consideration at an upcoming City Council meeting. Stated goals in Englewood's Comprehensive Plan are community revitalization and increased commercial opportunities. RECOMMENDED ACTION Staff recommends that Council approve a Resolution authorizing the City of Englewood to enter into an agreement with the developers for the former Baily's Fitness property, KRF II, LLC., d.b .a. Kentro Group. The proposed use of funds will support site improvements necessary to support the development of a Rite Aid Pharmacy at 707 East Jefferson Avenue. BACKGROUND, ANALYSIS, AND ALTERNATIVES IDENTIFIED The Kentro Group is under contract to purchase the property, which for over 15 years has been vacant. The site is being used for the next 12 to 18 months as a construction staging for the Swedish Medical Center expansion, after which Kentro plans to move forward with development of a Rite Aid Pharmacy. The property is approximately 1.17 acres with the Rite Aid Pharmacy building being 14,600 square feet. Project Overview Kentro is seeking an economic development inc entive from the City of Englewood to enhance their ability to secure Rite Aid as a tenant. Kentro has identified several development impediments of the site. Below is a summary of those impediments and the proposed use of proceeds from the economic development incentive: 1. Underground/relocation of current overhead utility lines 2. Relocation and demo lition of existing sewer line. 3. Construction of underground detention/water quality 4. Potential relocation of city ditch (depending on the development plan of northern parcel) These extraordinary development costs of approximately $450,000 are likely a major factor that the site has • gone undeveloped for over 1 5 years. Rite Aid representatives have reached an agreement to move forward with a lease at 707 East Jefferson Avenue. Kentro indicated that the incentive incentives will reduce their development costs, making the site more attractive and financially viable for Rite Aid Pharmacy to move forward with a lease. FINANCIAL IMPACT Based on the agreement all sales taxes generated after year three (3) would accrue to the City and are expected to reach $70,000 per year. The Financial Assistance Agreement involves a maximum City incentive payment of $135,625 to reimburse the Kentro Group site improvement costs necessary to make the property 707 East Jefferson Avenue development ready. The terms of the agreement are as follows: 1) Rebate 50% of actual Building Use Tax collected, not to exceed $30,625. 2) Rebate 50% o f actual sales tax collected, not to exceed $105,000 or 3 years, whichever occurs first. 3) Use of funds to underground power lines, possible relocation of city ditch, construct underground detention and water quality, and demolition of existing sewer line. 4} Rebate shall not exceed the actual cost of improvements. The City's contribution of the 1% Franchise Fee for the undergrounding of electrical lines will not directly impact revenues to the City and is thereby considered an indirect cost. However, the use of these funds is limited to undergrounding of Xcel lines and will have no negative impact on the City's General Fund. Pursuant to CRS 31-15-903 notice was provided to Arapahoe County regarding this proposed incentive agreement. The proposed Redevelopment Assistance Agreement with Kentro is consistent with the City's Economic Development Incentive Policy. Attached is a copy of the City's Economic Development Incentive Policy. UST OF ATTACHMENTS Economic Development Incentive Policy Resolution ... City of Englewood Economic Development Incentive Policy Goal Statement The City of Englewood is supportive of business attraction and development-related projects and is committed to supporting new opportunities to diversify the local economy. Englewood strives to provide for the fiscal health of the community by creating mechanisms to assist targeted businesses, priority development sites, and projects that enhance the quality of life and fiscal condition of the community, Intent/Purpose □ Create a tool to assist economic development efforts 0 Foster diversification of economic base, including expansion of retail sales tax base □ Assist in attracting desired businesses and development to City □ Assist in redevelopment or reuse of priority redevelopment sites Eligible Uses of Incentive Funding D Improvements to public infrastructure that benefit a larger area or the public at large, including but not limited to: street improvements, traffic signalization, sidewalks or trails, water and sanitary sewer lines, storm sewer lines, drainage improvements, water quality improvements, or electrical or natural gas lines. □ Costs incurred in eliminating features that detract from the surrounding neighborhood or render a site difficult to redevelop, such as undergrounding electrical lines, removal of environmental contamination, removal or relocation of utility substations or other facilities, or demolition or renovation of structures that are obsolete or in poor condition. 0 Costs incurred in providing public spaces, landscaping, or elements of streetscape beyond that required by ordinances of the City. Economic Development Criteria -Eligible Projects D Retail developments or expansion of existing retail uses that will generate additional sales tax shall be a priority of the City. D Office or manufacturing uses creating or adding jobs. 0 Underrepresented or desirable retail establishments. ( e.g. table-service restaurants, electronics and clothing stores ) 0 Residential projects that demonstrate benefit to the community, development on underutilized sites, or within proximity of light rail station or other transit amenity. D Any project deemed by City Council to be unique, advantageous, or desirable additions to the community D A determination of whether the project would proceed if the incentive is not provided. D Incentives are not intended to unduly enrich an individual developer or business or to create an unfair advantage. D A statement from the business or developer to verify the need for the incentive in terms of 'why this investment is necessary to foster the development or business activity.' Cost Benefit Analysis n Staff will provide a cost benefit analysis for any incentive agreement. The three components of a cost benefit analysis are: o Identify direct benefits: The true measure of project value includes all property taxes, sales and use taxes, impact fees, licenses and permit fees. o Calculate impact of the project. Direct costs are matched against direct revenues. If costs exceed revenues, the desirability of the project needs further analysis. If the direct revenue exceeds costs the analysis can help identify the break-even point by determining the number of years it will take for the project to payback the incentives and other public costs. o Identify direct public costs: In addition to the costs of incentives, all other direct costs associated with the project are totaled to include infrastructure costs, utility, increased fire , police and any other public expenses associated with the project. D The break-even point or payback period of the proposed incentive will be estimated. 0 Impact of the project on existing Englewood businesses will be analyzed. INCENTIVE TYPES Coordinated Development Approach The City of Englewood is committed to providing exceptional customer service and ensuring that its applicants experience a quality development process. All projects are eligible for a formal in-person Development Review Team (DRn meeting, in which the responsible City departments provide comments, suggestions, and recommendations prior to formal permit submittal to ensure an efficient and effective process. Sales Tax Reimbursements The City may consider a share-back or partial re imbursement of the inc remental City coll ected portion of retail sales tax generated from the project. All proceeds of a sales tax reimbursement must be utilized for purposes outlined under "Eligible uses of incentive funding ." Sales tax rebates shall not exceed 50% over the term of the agreement (with a maximum rebate to be determined by cost/benefit analysis) of the actual incremental increase in sales tax revenue generated by the use or site. Building Use Tax Reimbursements The City may consider a reimbursement of construction and equipment use tax generated by the development of a project. All proceeds of the use tax reimbursement must be utilized for purposes outlined under "Eligible uses of incentive funding." Building use tax rebates shall not exceed 50% (with a maximum rebate to be determined by cost/benefit analysis) of the actual use tax collected. Furniture Fixtures and Equipment Use Tax Reimbursements The City may consider partial or full reimbursement of the use taxes paid for furniture fixtures and equipment generated by a project. All proceeds of the use tax reimbursement must be utilized for purposes outlined under "Eligible uses of incentive funding." Rebates ofup to 100% (with a maximum rebate to be determined by cost/benefit analysis) may be given for furniture, fixtures and equipment use tax. Tax Increment Financing The City may consider utilizing Tax Increment Financing (TIF) through the Englewood Urban Renewal Authority (EURA) only after an urban renewal area has been established. The City will only consider utilizing TIF for projects that are unique, significant in magnitude, and have considerable regional benefit. City Property Tax The City may consider partial or full reimbursement of the City's portion of property tax collections for a finite period of time. Reduction in Fees The City may consider offsetting all or a portion of the development fees for commercial or residential projects that meet the goals and objectives of the Comprehensive Plan and Sub-Area Plans (if applicable), and provide a unique and quality project in terms of product type, tenant mix, and overall physical environment. Rebates ofup to 100% (with a maximum rebate to be determined by cost/benefit analysis) may be given for building permit fees and development application fees, not to include plan review fees or other contractual fees. The City of Englewood is supportive of economic development and redevelopment related projects. City Council will consider financial incentives to support economic development and redevelopment activities on a case-by-case basis. The incentives outlined in this policy are provided at the sole discretion of City Council and are not to be considered an entitlement for any eligible or otherwise qualified project.