A pair of local property owners has found the coronavirus pandemic has put a major dent in commercial real estate. As such, they asked the city to make changes with their development agreement.
However, the Waterloo City Council decided Thursday to take no action on the request from Craig Ellsworth and Jay Lang, the current owners of the Waterloo Technology Center at 575 W. Madison St., the former home of Perry Printing.
Mayor Jeni Quimby said the city is not insensitive to the situation the owners are in but has concern that this would set a precedence for other properties the city has a guaranty with.
“We’ve got a lot invested with this as well,” she said. “Unfortunately, my recommendation would be the same as (Clerk/Treasurer Mo Hansen).”
Ellsworth and Lang requested the minimum payment requirement as part of the developer’s agreement with the city be temporarily removed for two years.
They also requested a municipal guaranty included in the original developer’s agreement be extended by an additional four years. The original guaranty was for seven years and will conclude in January 2021.
“August of each year is the time that our credit line is rolled over into the next year. Our bank has made it clear that under the present income and loss conditions of 575 W. Madison St, this year’s renewal will be difficult. In any case, the Guarantee remains essential to support that financing,” the owners wrote in an email to the city.
Ellsworth, who attended the meeting remotely, said if the owners are unable to obtain the guaranty, the chances of being able to obtain financing “will go to zero. We’re trying to buy time to get out of this market we’re in now.”
Clerk/Treasurer Mo Hansen noted the city assessor has reduced the value of the property by a bit more than 30% for 2021 so in that year, the tax bill will be less than the guaranteed tax incremental finance (TIF) revenue of $42,229. Historically the property value has been $1.7 million; the new value is $1.1 million.
“The reason for the developer revenue guaranty is to cover debt the city took out in the first quarter of 2014 to finance a $100,000 cash incentive to the developer that was part of an issuance of debt that was $900,000 with $800,000 for this project,” Hansen said. “That wraps up in 2023.”
Hansen said there is a value to lenders by having the city back a loan guaranty.
“On the front end, it’s a non-monetary item,” he said. “On the back end, in an adverse lending situation, it puts the city in a position where it obligates a tax revenue specific to tax incremental district 2 revenue to cover that in a circumstance where the city would have to step in and act to guarantee a lending that’s gone south; that would be a reason to extend it.
“And a reason to let it expire … is simply because in December of 2013 when we went down this path the city stepped up to sell a $1.7 million property for basically $1,” Hansen said. “We incentivized it with $100,000 in cash and we gave a municipal loan guaranty covering up to $400,000 in project debt. A reason to not further engage the city in the process is the city has been an enduring partner for these last seven years and we’ve done our duty. … We have to make a decision as a public entity to how long we want to engage in assisting with our major office property in our community.”
Ellsworth said the owners did not anticipate having to come before the city requesting a change in the developer’s agreement.
“This whole thing with the COVID issues and the impact it’s had on the commercial real estate market has made this necessary,” he said. “We’ve continued to aggressively market it for lease or sale and we’ve lowered the price. … We’re really running into some challenges here.”
Budget timeline updated
The council approved an update to the municipal code §53-4, revising the budget deliberating sequence.
Council President Tim Thomas said the finance committee had been meeting with Mayor Jeni Quimby to set timelines for the city’s budgeting process. The ordinance sets the dates for the process.
“Basically, the preliminary budget is to go out on the first Thursday in July,” said Thomas, noting this is the budget framework to the department heads. “And by July 31 have their budget (submittals) completed and filed with the city clerk.”
He said shortly after the deadline, the city will begin working on the next year’s budget.City to sell utility revenue bonds
The council passed a resolution to sell $4,365,000 combined utility revenue bonds.
David Ferris, a municipal advisor with Ehlers who attended remotely, said the bonds would provide financing for the electric utility substation and southwest and east loop. The city’s electric, water and sewer user fees will pay for the debt service for the project.
According to the bond pre-sale document from Ehlers, the bonds are being issued for 20 years. Principal on the bonds will be due on Nov. 1 from 2022 to 2040; interest will be payable every six months beginning May 1, 2021.
The board also:
• Learned the roundhouse at Firemen’s Park is being renovated. The project is funded by a donation of the Friends of the Park group from money it raised through the Charlie Berens comedy shows. The building renovations are expected to be completed by the July 30 Concerts in the Park event.
• Were informed multiple events for Firemen’s Park were canceled, which has impacted the parks budget.• Approved an operator’s license for Juanita Albrecht.