BOARD OF DIRECTORS MEETING
County of Chautauqua Industrial Development Agency
CCIDA
200 Harrison Street, Jamestown, NY
October 30, 2012
10:00 a.m.
Michael Metzger Chairman
David Bryant Member
Fred Croscut Member
Greg DeCinque Member
Doreen Sixbey Member
Kim Peterson Member
Also in attendance:
William Daly Administrative Director/CEO
Rich Dixon CCIDA Chief Financial Officer
Greg Peterson Counsel
Jonathan Taber Counsel
Carol Rasmussen CCIDA Staff
Lawrie Taylor CCIDA Staff
Kristine Morabito CCIDA Staff
Susan Casel CCIDA Staff
William Salter Consultant
Jim Wells Millennia HousingManagement, LTD,
Absent Board Member(s): Dennis Rak
Michael Metzger
I will now call the County of Chautauqua Industrial Development Agency (CCIDA) Board of Director’s meeting to order. Today is October 12, 2012 (10:01 a.m.) This meeting is being held at CCIDA, 200 Harrison Street, Jamestown, NY.
I will now have roll call.
Kim Peterson– Here, Fred Croscut – Here, David Bryant – Here, Greg DeCinque – Here, Doreen Sixbey – Here, and Mike Metzger – Here. We have a quorum and will begin the meeting.
Michael Metzger
Everyone has had a chance to review the minutes from September 18, 2012. Are there any questions; if not, may I have a motion to accept the minutes as presented?
Doreen Sixbey
I so move.
Kim Peterson
I second.
Michael Metzger
All in favor indicate by saying Aye.
Board Members
Aye
Michael Metzger
The minutes are passed.
Before we get started, I would like to recognize a member of our Board. Gregory DeCinque received the “Man of the Year Award” from Chautauqua County Chamber of Commerce.
Congratulations were given by all.
I would like to move that we start with Resolutions F & G since Mr. Bill Salter is here specifically for them.
Motion approved by the Board
Kim, Resolution 10-30-12-06, please.
Kim Peterson
Resolution 10-30-12-06
Whereas, the County of Chautauqua Industrial Development Agency has been presented with a CRLF Loan request in the amount of $75,000.00 from Jamestown MVP LLC, to assist in the purchase of equipment. Loan terms are 7-years at 4% interest.
Greg DeCinque
Second.
Carol Rasmussen
An overview was given regarding the loan.
There was general discussion among the Board.
Michael Metzger
If there is no further discussion, I will take a roll call vote.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey – Aye, and Michael Metzger – Aye.
The resolution is passed.
Doreen, the next Resolution.
Doreen
Resolution Number 10-30-12-07.
WHEREAS, CCIDA has received a request from JAMESTOWN MVP LLC d/b/a MVP PLASTICS to authorize the Subordination and Execution of an Intercreditor Agreement with LOEB TERM SOLUTIONS, LLC regarding the following items:
Purchase Money Security Agreement; Term Note; and Mortgage
Fred Croscut
Second.
Michael Metzger
If there is no further discussion, I will take a roll call vote.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey – Aye, and Michael Metzger – Aye.
The resolution is passed.
Thank you Bill for coming. Now I would like to go on to Resolution D since Jim Wells is here for that one.
Fred, the next Resolution.
Fred Croscut
Resolution 10-30-12-04
Resolution taking preliminary action toward the acquisition and straight leasing of a certain project for Covenant Manor Apartments, LLC and authorizing the execution and delivery of a preliminary agreement with the applicant with respect to such transaction.
David Bryant
Second.
Michael Metzger
Introduced Jim Wells.
Jim Wells
I’m Jim Wells, from Cleveland, OH, Millennia Housing Development, as a Senior Project Manager. We are an affordable housing developer. We operate in 7 states – from Iowa, Missouri, over to Ohio, Michigan, down to Kentucky.
We’re looking at acquiring Covenant Manor Apartments; it was built in 1920’s as a hotel. In the 70’s it was converted to affordable, elderly housing. There is a Section 8 contract on the community; and has a runoff lease of 20 more years so the tenants are going to stay there. The Section 8 contract means that the individuals who live there pay 33% or 25% of their income. So it subsidizes their income and gives them a safe, decent place for them to call home.
Unfortunately, the property is aging, and needs capital improvement. In 2004, the debt was restructured. The NYS Dept. of Housing and Urban Development came in and reduced the rents – it’s called “Market to Market”. In reducing the rents, they re-subordinated the existing first mortgage into a second mortgage. They gave them money to do capital improvements. It honestly was not enough. The property is in need of new mechanical systems, a new roof, and it just needs upgrades that an 80-90 year old building does. Our proposal is to come in – acquire the building and rehabilitate it. The rehabilitation will be in excess of $3 million of hard construction costs. We were looking at doing this about 7-8 months ago, when we went through our initial due diligence. We realized that a problem has come up with the existing management. The company and owner have been great. They are a wonderful non-profit in the area, but the vacancy has been a little bit higher than what we need it to be. Additionally, the operating expenses have been a little bit higher than what we need them to be. In turn, we can’t get the first loan to come in to support the rehabilitation.
Again, the rehabilitation will be in excess of $3 million. That will be funded through tax exempt bonds, which we will apply to you guys for, and will hopefully sell in to Red Stone Bank out of New York. We’ve already talked to them. They were going to purchase them except the net operating income was too low because of the high expenses – high vacancies. What accompanies a tax exempt bond is low income housing tax credits. We have already talked with Great Lakes Financial Group out of Lansing, MI, who is committed to buy those tax credits when we get them. We will get them assuming that you guys grant us the tax exempt bonds. A couple of years when we come in to apply, the tax credits come in per Section 482 of the Internal Revenue Code. They’re guaranteed to come with the property. What that basically means is the Federal Government is giving the property in the Jamestown area resources in tax credits. We will sell them off to Great Lakes Financial Group out of Lansing. Great Lakes Financial Group is actually going to sell them to a bank. First Niagara is going to be the ultimate purchaser of these bonds. That’s a couple years out, but what that will do is bring in the equity needed, and then with the new first mortgage through the tax exempt bond issuance to provide the $3 million of rehabilitation we plan on doing in the community. The general contractor will be American Preservation Builders. They have committed to using almost wholly local subcontractors. So it will benefit the local community as a whole. That’s the grand plan. We have the scope of work and we’re very excited about it. We did run in to a hitch with this whole vacancy and net operating issue. Basically it’s too low. So we need to acquire it using a bridge loan, hold the property, reduce the operating expenses, and also reduce the vacancy. We have commissioned 2 or 3 formal market studies, and have also done our own market studies with a couple of individuals from our company. We are extremely confident that we can occupancy to 100%, vacancy to 0. We’re also very confident that we can reduce the operating expenses to the extent that, through the bridge loan we’re working on, we are reducing our management fee to the portion that the management company that comes in who’s an affiliate of ours will reduce the fees just to keep the property operating above water and continue to make mortgage payments. While all of this is occurring, we realize that the real estate taxes are set for a dramatic increase. That ultimately submarines the property. We have accounted for an increase in the property taxes; however, just being honest with you, it wasn’t to the level to what the property taxes would increase or could increase through the normal course of property taxes in this area. So what we’ve applied for is a PILOT. Our proposal does increase the payments. Currently it is a Church based organization so they are paying very limited taxes. They are actually only paying taxes on the retail space. We want to increase that. We want to provide you with additional revenue. We’re hoping you can work with us to keep the real estate taxes less than what they would be. We’ll keep you informed as to what’s going on with the property. We can come here tell you about it – our plans to redevelop it – where we’re at with occupancy – where we at with operating expenses. That’s it in a nutshell.
Any questions?
Question: How many units?
Answer: There are 88 units and retail space on the first floor. We will renovate that space, too. We have an in-house real estate broker who has started to reach out to local companies to see if we can bring them downtown to the first floor of the building. I don’t have an update on who those tenants are but we will rehabilitate that space.
Question: So, there’s going to be no effect on the existing tenants – is that correct?
Answer: Yes, there is not allowed to be any effect. The HUD Section 8 contract has a regulatory agreement that is attached to it. It basically says that those tenants cannot be displaced. Even if they all hit the lottery and are over the income limit, we still cannot remove them. That is still their home and we’re just trying to enhance that for them.
Question: To reiterate – even though you’re a applying for a PILOT agreement, relative to the taxes that are being paid on that property currently, that it will be an increase.
Answer: Yes, Rich and I spoke about this.
Rich Dixon
The first floor of the Covenant Manor houses the Chautauqua Sports Hall of Fame and some other businesses. That was assessed at $380,000 and Covenant Manor was able to get that reduced to $135,000, and that’s the taxable portion.
There is also a small parking lot next to the Furniture Mart that Covenant Manor owns which is a taxable parcel at $1,600 yr.
The other two parcels are tax exempt. So the majority of the building is tax exempt and a little parcel behind it is tax exempt.
This project would not involve taking the parcels that are currently on the tax roll off. So the County, City, everybody’s talking they need more taxable property. This property will become taxable and we will do a PILOT so we will gain more revenue from that for all taxing jurisdictions.
As Jim says, this is a long-term project. Our PILOT only goes out so many years. I look at this as a great win win for the community. They are going to invest $3 million into it. It’s going to be taxable and some day will be paying its full share. It is a very exciting project.
Bill Daly
If it were to stay under its current ownership, they only pay taxes on the retail space and one small parcel. Who would be another purchaser of this kind of thing? Would it be a tax exempt organization?
Jim Wells
It could be or another organization similar to ours. I do know that this property has been for sale three times. We actually looked at acquiring it about 3 years ago. At that time, the numbers didn’t pencil out. The owner of our company wants to become involved in WNY and this is our first step into coming in.
Question: Why does he want to come to WNY?
Answer: We’re trying to expand eastward. We have over 110 affordable apartment communities and it’s all west. We are based out of Cleveland, OH. As we’re trying to grow the organization, we’re looking at western PA, western NY, and down to West Virginia to try and grow towards the Atlantic as well.
Question: You have 88 units that fall under Section 8. As you rehab, will those new units also have to be Section 8 housing?
Answer: The Section 8 housing cannot go away for a period of at least 10 years. It applies to the whole building. Depending on what happens in Washington depends on what happens with the Section 8 contract. We don’t see those going away especially for what we’ve been hearing out of Washington. What we’ve been hearing is that the Section 8 program will be staying around. Especially for elderly individuals because they are the ones that really need affordable housing. Covenant Manor is a perfect example of elderly individuals who need safety and an affordable place to call home.
Rich Dixon
I know there have been local not-for-profits that looked at this and passed. I think it’s great that we have for-profit entity interested in getting this back on the tax roll.
Jim Wells
Going back to the question as to who else would purchase it. Because this property does have a Section 8 contract, we have to go through the Buffalo HUD Field office. That application we submitted in late May and are just now receiving our approvals from HUD headquarters. So to the extent of available purchasers out there, would have to have experience with HUD.
Question: Do you currently have HUD financing on the building?
Answer: Right now it’s a first mortgage through a commercial institution. It is insured by the Federal Government – it’s a 221 D3 is a section of the Federal Housing Act that allows the financing that is currently on the property.
Question: I know sometimes HUD loans have to be out there for a period of time. Are you in that time period where it can be terminated?
Answer: Yes. We just received word that the 9807’s, which are the prepayment requests, have gone to headquarters. They are reviewing them and we should be getting them back soon.
Question: What’s your timing on the bond financing?
Answer: We are set to close at the end of this year. Our bridge lender will hold us out there for about three years at the max. So it has to be within three years. From my experience, it will take a year.
Question: So the application today is just a tax lease PILOT?
Answer: Yes.
Michael Metzger
If there is no further discussion, I will take a roll call vote.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey – Aye, and Michael Metzger – Aye.
The resolution is passed.
Greg, the next Resolution.
Greg DeCinque
Resolution 10-30-12-01
Whereas, the County of Chautauqua Industrial Development Agency has been presented with a Working Capital CRLF Loan request in the amount of $65,000.00 from EMC FinTech. Loan terms are 7-years at 4% interest.
Kim Peterson
Second.
Carol Rasmussen
After discussion the Resolution was amended to include conditional approval by Staff of updated financials.
Michael Metzger
If there is no further discussion, I will take a roll call vote to approve as amended.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey – Aye, and Michael Metzger – Aye.
The resolution is passed. David, the next Resolution.
David Bryant
Resolution 10-30-12-02
Resolution amending the County of Chautauqua Industrial Development Agency’s Uniform Tax Exemption Policy.
Note: UTEP Policy was handed out to the Board – see attached.
Doreen Sixbey
Second.
Bill Daly
We found it necessary to modify our UTEP Policy. It caused a little bit of a stir. The last two times that we modified it there has only been one taxing entity that has even commented, and that has been the City of Jamestown – asking us to get rid of UTEP and all tax incentives. This time they sent out their response so it is a matter of record.
Jon Taber
Perhaps we should get the process we went through so it will be a matter of record.
In order to modify the UTEP with the proposed amendments, we followed the same process that we followed the last time that we went through this a couple of years ago. At that time we added reuse projects and tourism destination projects.
The IDA State Statute is very scant on detail on what’s required when you modify your UTEP. All is says in the statute is that when the IDA adopts its UTEP that it is required to get input from all affected taxing jurisdictions. We interpreted that very conservatively to say that if it applies that we are going to adopt the UTEP, and also apply when you are going to amend it. We followed the process to amend it the same as when we adopted it. It also, doesn’t say what steps (specifically) what steps are required to achieve or gain the input of the affected tax jurisdictions. We tried to be very conservative in our approach there as well. What we’ve done is send a letter to every single taxing jurisdiction in Chautauqua County (64) – the County, towns, villages, cities, and all of the school districts. What we’ve done is the same thing that we did the last time. In the letter to the tax jurisdictions, we enclosed a copy of the proposed changes. We requested that they provide us with a written response if they had any comments related to the changes. We also identified that there would be a public hearing – time and place – so they could respond in person as opposed to writing a letter. We also posted the notice in two papers – The Post Journal and The Dunkirk Observer – related to the public hearing, asking the general public. Carol and I attended the public hearing, after sending out the letters, and after providing the public notice in the paper. Nobody attended. In response to the 64 letters that we sent out, we received only one letter, and that was from the City of Jamestown. We do have a series of comments from the City of Jamestown, and the Board should consider it in connection with making the decision on whether to approve the changes. As with financial assistance that the IDA provides, we are not required to obtain any approval from any taxing jurisdiction. We went well beyond what is required.
Bill Daly
What happened was the City of Jamestown decided to take their response and email blasted it to the IDA, myself, Rich, Carol, and all the County Legislators, their Assessors, City Council, other City officials, their treasurer, their corporate counsel, and also Sam Hoyt (ESD).
Legislator George Borrello, from Silver Creek, responded to Mr. Centi. I have copies of Mr. Teresi’s letter the emails (handed out & attached) of the give and take between the two.
A memo (attached) of Bill’s response was handed out to the Board.
When we did our UTEP back in 2010, the only ones that came out against it, aggressively, was the City of Jamestown.
The reason we made the modification is (You all remember Section 487, of Real Property Tax Laws, exempted wind, solar, methane digesters from property taxes.) What happened is the big commercial wind projects would come in and they declared they were exempt. So taxing entities, to make sure they received some kind of tax, exempted out of it. This happened all over NY State. So by meaning to exempt small wind, small solar, and small methane digesters, it gave a free pass to the big ones. When we exempt out, we caught the small guys in the exemption. So the CCIDA found a way to give an exemption to the small guys.
My response is very direct. The truth is, in the City of Jamestown, these projects are tax exempt. Nobody thought to check. The City of Jamestown and the School System did not exempt out of 487. They would be County taxable. The BPU has also come in with a letter, which we will respond to.
Rich Dixon
I would like to add. Under the advice of George Cregg, we had gone to the County, advising them to adopt out of the 487. So that the large wind developers came to develop the wind projects you could negotiate a pilot with them and get their fair share.
When Bill went to the County Legislature with some information from George to do that, the Legislature approved it. But, the Legislators said to the IDA that they didn’t want the small wind and small farmer to get hurt by this. Bill agreed that the IDA would do a no cost PILOT for the people who installed personal wind projects. As we did the first couple, we discovered that it was no cost to them, but it was a cost to the IDA. This amendment helps us stream-line that to put some administrative features in so we can do them –quickly- but will not take a lot of our resources. So this was done at the request of the Legislator.
Michael Metzger
If there is no further discussion, I will take a roll call vote.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey –Aye, and Michael Metzger – Aye.
The resolution is passed.
Greg DeCinque
How much does it pay to get in to this kind of paper exchange? Obviously responding to the point he’s made is absolutely essential.
Bill Daly
The same group has moved down to the BPU. All of a sudden, we get a letter from the BPU. People want to know all about this now.
At some point you have to give a response in writing incase you get another response. The response has to be – we really think you’re wrong and here is why. We met and decided if there will be a response and what the response will be. We decided that you can’t have the same criticism repeatedly without at least putting some bases of fact out there.
The concept out there for IDAs is – your industrial only; only if you’re creating new jobs; and only if you sell your product overseas. About 18% of our workers are employed in advanced manufacturing of some sort. The truth is, we actually benefit from the SKFs, Cummins, Truck-lites, where they sell 100s and 100s of millions out of the County. We’re very blessed that way; but, it’s everything else that we need to help to get people to develop.
Retention is critical, too. Retention is gigantic. So many companies will say – I’m going to put on a 15,000 sf addition and only hiring 2 people, but it means I’m going to be here for 15 years with my 45 employees. That’s music to our ears, because if you’re making the capital investment, and you’re staying here in our county, we’re thrilled. Or it could be, we’re expanding; adding two new machines; no new employees. We spending $800,000 on the building and we’re spending $1.2 million on these two machines – we won’t be adding new employees, but we’ll be here for 15 years.
Michael Metzger
If there’s nothing more.
Doreen, the next Resolution C.
Doreen Sixbey
Resolution 10-30-12-03
Whereas, CCIDA has received an offer to enter into a contract with Phoenix Metal Fabricating, Inc. to sell property owned by CCIDA, vacant land on Harrison Street, City of Jamestown.
Fred Croscut
Second.
Rich Dixon
There are three parcels next to Phoenix Metal. They were very interested in one of the parcels for parking and/or expansion. It was sold at the assessed value.
Michael Metzger
If there is no further discussion, I will take a roll call vote.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey –Aye, and Michael Metzger – Aye.
The resolution is passed. Kim, the next Resolution.
David Bryant
Resolution 10-30-12-05
Whereas, the CCIDA has been presented the completed budget report for 2013, and be it resolved that the Chairman, being authorized by the Board of Directors, sign any and all other documents necessary in order to effectuate the budget.
Greg DeCinque
Second.
Rich Dixon
Reviewed the proposed 2013 budget. We have put together what we think our year will look like. It’s a very conservative budget.
Michael Metzger
If there is no further discussion, I will take a roll call vote.
Kim Peterson– Aye, Fred Croscut – Aye, David Bryant – Aye, Greg DeCinque – Aye, Doreen Sixbey –Aye, and Michael Metzger – Aye.
The resolution is passed.
I regretfully would like to read a letter of resignation – letter was read. We want to commend Mike Piazza on his almost 20-year tenure with the Board. He was a tremendous advocate of the CCIDA as he was of the County. We are better to have served him and better to have known him. We have a plaque that will be hung on the Board room wall along with his picture to honor him. At some point, we’d love to have him come in to see it.
Rich, the Treasurer’s Report.
Rich Dixon
An overview of the Balance Sheet was given.
Michael Metzger
If there are no questions, may I have a motion to accept the Treasurer’s Report?
Kim Peterson
I so move.
Doreen Sixbey
Second.
Michael Metzger
All in favor.
Ayes all around.
The Treasurer’s Report is accepted.
I would now like to move for a motion to conduct an executive session to discuss the financial and credit history of certain companies and the potential acquisition and lease of real property by the Agency.
Greg DeCinque
I so move.
Kim Peterson
I second.
Michael Metzger
All those in favor.
Board
Ayes all around.
We are now in Executive Session.
Executive Session begins at 11:26 a.m.
Executive Session ends at 11:44 a.m.
We are now back in Regular Session.
Michael Metzger
Is there any Old Business to come before the Board?
Bill Daly
How many of you heard the announcement by President Porter, Counselor Nephew, and County Executive Greg Edwards relating to the potential for a very large retail project in Silver Creek right at exit 58. It’s a very unique concept. We’ve been working with them, Mark Geise has been involved, and we worked with their planners, the County Executive. This is a spectacular opportunity. They are looking to keep it on the tax rolls. This could be a tremendous retail boom.
Kristine Morabito
An MMM Real Estate project update was given. The development is moving forward.
Michael Metzger
If there is nothing else, may I have a motion to adjourn?
David Bryant
So moved
Greg DeCinque
Second
Michael Metzger
All in favor indicate by saying Aye.
Board Members
Aye
Michael Metzger
This meeting is adjourned. Meeting adjourned at 11:52 a.m.
