The $7 million renovation slated for the Wilson Building is receiving unanimous support from Clinton City Council members after they reviewed the development deal being offered to the Cedar Rapids investment group considering the building for market-rate housing.
City of Clinton officials won’t offer cash up front to Frantz-Hobart, which is considering the Wilson Building for 28 market- rate apartments, but the first details of the development deal between the two shows the city will offer a number of incentives to secure the downtown housing.
Frantz-Hobart uses federal and state historic tax credits to complete their projects, but also relies on local incentives. The company is securing the former itself and working on the latter with the city in order to purchase the building by March 1.
Frantz-Hobart partner Jim Hobart, Clinton Area Chamber of Commerce President and CEO Nathan Sondgeroth and Interim City Administrator Jessica Kinser detailed the project and the local incentives during the Clinton City Council’s Committee of the Whole meeting Tuesday night with the end goal being a vote from council members on a letter committing to the project.
“The local incentives really are the last piece of this puzzle that will give Frantz-Hobart the confidence they need to actually purchase and acquire the building under their option period,” Sondgeroth said.
Under the proposed development deal, the city would not be responsible for any cash up front for the project as it is not something that is feasible. The city will, however, provide a 95 percent tax increment finance rebate for the building, not to exceed $1.26 million over a decade. Frantz-Hobart would need to prove they have paid taxes in order for the taxes to be rebated. This rebate would leave the city with $19,000 in property taxes annually.
Rather than an up-front cash incentive, the city will provide a “backstop” cash incentive to be used only if the development was not rented at 100 percent. The proposal presented Tuesday involved the city being responsible for up to six units for 10 years at $800 per month per unit. The maximum risk for the city in providing the backstop would be $576,000.
“This is something that is risk. Usually governments are risk adverse, but this is something looking at the financial obligation and the annual commitment it was minor in comparison to the benefit that can be seen from this project,” Kinser said.
The item would be budgeted annually in order to be prepared for the potential cost and the $19,000 in property taxes could be allotted to the backstop.
Council members unanimously agreed to forward the letter of commitment to the project to their next regularly scheduled council meeting. If the letter of commitment receives final approval from the council, it would kick start city staff to complete a bundle of other behind-the-scenes work, Kinser explained.
“If this moves forward to the next council meeting basically with the resolution directing the mayor to sign this letter of commitment, signing the letter of commitment is not just making things happen. There are still a number of steps, timely steps, that would need to occur,” Kinser said.
The city would need to amend the central business district urban renewal plan to include the project and other potential improvements. That change would entail a public hearing, consultation with the school and county, review by the planning commission, and final recommendation from the council. They also would amend the current TIF ordinance so it is reduced to just Hy-Vee parcels. A new TIF district would then be created that would include only the Wilson Building. Only after these steps would a development agreement be finalized.