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HomeMy WebLinkAbout02-24-2025 - Special Study Session AgendaSPECIAL STUDY SESSION AGENDA CITY COUNCIL MEETING CITY OF WHEAT RIDGE, COLORADO Monday, February 24, 2025 Meeting will start at the conclusion of the regular City Council meeting which starts at 6:30 p.m. This meeting will be conducted as a virtual meeting, and in person, at: 7500 West 29th Avenue, Municipal Building, Council Chambers. City Council members and City staff members will be physically present at the Municipal building for this meeting. The public may participate in these ways: 1. Attend the meeting in person at City Hall. Use the appropriate roster to sign up to speak upon arrival. 2. Provide comment in advance at www.wheatridgespeaks.org (comment by noon on February 24, 2025) 3. Virtually attend and participate in the meeting through a device or phone: Click here to pre-register and provide public comment by Zoom (You must preregister before 6:00 p.m. on February 24, 2025) 4. View the meeting live or later at www.wheatridgespeaks.org, Channel 8, or YouTube Live at https://www.ci.wheatridge.co.us/view Individuals with disabilities are encouraged to participate in all public meetings sponsored by the City of Wheat Ridge. The City will upon request, provide auxiliary aids and services leading to effective communication for people with disabilities, including qualified sign language interpreters, assistive listening devices, documents in Braille, and other ways of making communications accessible to people who have speech, hearing, or vision impairments. To request auxiliary aid, service for effective communication, or document in a different format, please use this form or contact ADA Coordinator, (Kelly McLaughlin at ada@ci.wheatridge.co.us or 303-235-2885) as soon as possible, preferably 7 days before the activity or event. Public Comment on Agenda Items 1. Fruitdale School Lofts Item 1 Memorandum TO: Mayor and City Council FROM: Patrick Goff, City Manager Lauren Mikulak, Community Development Director DATE: February 24, 2025 SUBJECT: Fruitdale School Lofts ISSUE: On November 28, 2016, City Council approved an Amended and Restated Development Agreement with the Wheat Ridge Housing Authority (WRHA) and Fruitdale School Partners LLC (FSP), for the redevelopment of Fruitdale School into a sixteen-unit residential development with five of those units restricted as affordable. The investment from the City and the WRHA into this project assisted in the preservation and rehabilitation of a National Registered historic property and the creation of affordable rental units for Wheat Ridge residents. FSP is in active negotiations to sell this property to Foothills Regional Housing. A sale of this property will impact the terms and conditions of the Agreement the City and WRHA entered into with FSP. PRIOR ACTION: The timeline for the redevelopment of Fruitdale School goes as far back as 2007 with significant action undertaken by the WRHA. Key actions taken by City Council are summarized below. A complete timeline is included as Attachment 2. October 5, 2015 – City Council reviewed a mixed-use development proposal from Hartman Ely Investments (HEI) for the redevelopment of Fruitdale School January 11, 2016 – City Council reviewed a residential only development proposal from HEI and considers a public-private partnership February 8, 2016 – City Council approved Resolution No. 15-2016 supporting the redevelopment of Fruitdale School, authorizing financial participation in the amount of a $1.925 million loan and a $470,000 grant February 22, 2016 – City Council approved Resolution No. 17-2106 approving the development agreement for the project and authorizing a loan up to $2.115 million and a $470,000 grant Study Session Memo – Fruitdale School Lofts February 24, 2025 Page 2 May 9, 2016 – City Council approved an application from the WRHA for a zone change on the property from A-1, C-1 and R-3 to Mixed-Use Neighborhood November 7, 2016 – City Council received an update on the project at study session including new terms for the City’s $2.115 million loan which would extend the payback period November 28, 2016 – City Council approved an Amended and Restated Development Agreement with WRHA and FSP FINANCIAL IMPACT: As part of the Amended and Restated Development Agreement, the City and WRHA committed to the following financial obligations: City loan - $2,115,000 (20-year term; interest accrues in 2018) City loan - $470,000 (35-year term; interest accrues in 2027) WRHA loan - $170,000 (35-year term; interest accrues in 2037) WRHA loan - $400,000 (35-year term; interest accrues in 2017) Fruitdale School Partners made one payment in the amount of $1.5 million to the City in 2018 towards the $2.115 million loan leaving an outstanding total balance of $1.085 million owed to the City and $570,000 owed to the WRHA. The repayment of the remaining loans is contingent on FSP earning a 20% cash-on-cash return which has not occurred to date. BACKGROUND: The WRHA purchased the historic Fruitdale School from the Jefferson County School District in April 2011 for $112,000. WRHA gave thorough consideration of various options to redevelop or reuse the property on their own, in their capacity as a housing authority. It was very challenging to identify a viable reuse for the Fruitdale School property in large part because of the dilapidated state of the historic building and the infeasible financial costs of redevelopment. Ultimately, they determined it was not financially feasible or prudent for the WRHA to independently pursue a reuse project, so in early 2014, they began actively seeking a private developer partner. In February 2015, the Authority entered an exclusive negotiation period with Hartman Ely Investments (HEI), an established local development firm with extensive experience in redeveloping and repurposing historic properties. After negotiating for a year on project scope and public/private finance options, City Council and WRHA approved financial commitments in the form of a Development Agreement. Those commitments included $570,000 in long-term loans from WRHA and $2,585,000 in long-term loans from the City. In addition, the project leveraged a variety of other public and private Study Session Memo – Fruitdale School Lofts February 24, 2025 Page 3 funding sources, including state and federal historic and solar tax credits through local investors, federal HOME funding for affordable housing through Jefferson County, solar power production payments through Xcel Energy, HEI equity and a Freddie Mac loan. This sixteen-unit residential project includes five units which are deed restricted at an area median income of 80% or lower. The project also incorporates numerous sustainability components, including a solar power array, providing more than 80% of the projects’ energy needs, a free electric vehicle charging station, and small fruit orchards and other low-water-use edible landscaping. FRH is in active negotiations with FSP (HEI) to purchase the Fruitdale School Lofts. The FRH Board is supportive of the purchase under the following terms: Foothills Regional Housing 1. Assume the remainder of the $1.494 million Freddie Mac loan 2. Contribute $100,000 cash to the purchase price 3. Pay $515,000 to cover deferred development and asset management fees 4. Increase the affordability of the existing units by adding project-based vouchers over time. Wheat Ridge Housing Authority 1. Forgive $570,000 in loans City of Wheat Ridge 1. Contribute $1.5 million of NOAH funds to the purchase price 2. Receive $1,085,000 in repayment of the City loan to the General Fund RECOMMENDATIONS: Staff recommends approval of this purchase and sale agreement between FRH and FSP. A sale to FRH would preserve and increase the affordable units from five to sixteen and preserve an historic asset in Wheat Ridge in partnership with FRH as a trusted community partner. City Council Options: 1. Do nothing. The property would either remain as-is under its current ownership and the repayment of City and WRHA loans would be unlikely, or the property would be sold on the private market. In that case, rents would likely be increased to market rates potentially displacing households and losing the 11 naturally occurring affordable units. 2. Recommend that the WRHA forgive the $570,000 in long-term loans and the City contribute $1.5 million of NOAH funding to the project. The City’s $2.0 million in NOAH funding was awarded by Congress to preserve affordable housing units in Wheat Ridge. Study Session Memo – Fruitdale School Lofts February 24, 2025 Page 4 3. Recommend that the WRHA forgive the $570,000 in long-term loans and the City contribute the full $2.0 million of NOAH funding to the project. There is some uncertainty concerning the status of the $2.0 million in NOAH funding and if the Federal government will honor this budget appropriation. It may be prudent for the City to allocate the entirety of these funds for this project before the funding is rescinded. Contributing the full $2.0 million to this project would allow FRH to free up additional funding in their budget for other projects such as IVES II. ATTACHMENTS: 1. Amended and Restated Development Agreement, dated November 29, 2016 2. Fruitdale School Timeline of Project Milestones 1 Fruitdale School – Timeline of Project Milestones • Fall 2007 – Fruitdale is decommissioned as a school in 2007 when the new Norma Anderson Preschool opens on the adjacent property. The east addition of Fruitdale is demolished to accommodate the preschool. Utilities to Fruitdale are disconnected and transferred to the new preschool, and the historic building becomes vacant. • Spring 2008 – Jeffco Schools issues an RFP to solicit proposals for the possible sale of the building. WRHA decides to submit a proposal for renovation of the school into residential units. • April 2008 – WRHA retains Entasis Group to complete a cost estimate for a possible residential reuse of Fruitdale. WRHA pays Entasis $22,000 to develop conceptual plans and work specifications. Entasis completes a proposal to renovate the building into residential lofts; the cost for renovation is estimated at nearly $1.7 million for an average cost of $188,000 per unit for nine units. • Fall 2008 – After exploring financing options, WRHA decides a residential reuse of Fruitdale is not feasible because of the financing requirements associated with multifamily development. The WRHA notifies Jeffco Schools that the project is no longer considered feasible and the proposal is withdrawn. • Summer 2010 – The Fruitdale building has remained vacant for three years, and Jeffco Schools contacts Wheat Ridge to see if the City or Housing Authority would like to reconsider purchasing the property before demolition plans are finalized. • July 2010 – WRHA decides to commission a more detailed market analysis to assess the viability of converting the Fruitdale School into residential units. • October 2010 – A market analysis is completed by The Genesis Group for a fee of $4,000. The analysis considers for-sale and for-lease residential units. The results of the analysis again indicate that a residential reuse is not financially viable, particularly given the current economic and multifamily housing conditions. The Housing Authority decides again not to pursue acquisition of Fruitdale. • November 2010 – WRHA sends a letter to Jeffco Schools indicating they are not interested in purchasing the building. • February 2011 – The school district prepares the building for demolition. The Mayor, with support from Colorado Preservation Inc. (CPI) staff, approaches Jeffco Schools about the possibility of WRHA purchasing the building to save it from demolition. • April 2011 – After several months of negotiation, the Housing Authority ultimately purchases Fruitdale School for $112,000—the same price which Jeffco Schools had already paid for environmental remediation in preparation for demolition. A portion of the new preschool’s playground remains on the land deeded to WRHA. • Fall 2011 – The interior of the school has deteriorated because of a lack of climate control and a leaking roof during the four years of sitting vacant. WRHA decides to install a new roof, and the building is weatherized for a cost of $110,000. 2 • Spring 2012 – Based on an application submitted by CPI, a $15,000 non-matching grant is received from the State Historic Fund (SHF) for completion of a Historic Structure Assessment (HSA). Slaterpaull Architects is hired to prepare the HSA. • December 2012 – The HSA is completed and identifies $2.2 million in deficiencies; these would need to be addressed simply to make the building habitable, without any major interior changes to the building configuration or tenant finish work. • Spring 2013 – WRHA applies for and receives a second SHF grant in the amount of $43,000. This includes a required 25% match of $11,000 from WRHA, and allows for the preparation of construction documents as identified in the HSA. • March 2013 – After applying for historical landmark designation, Fruitdale School is approved to be included on the National Register of Historic Places and the Colorado State Register of Historic Properties. • December 2013 – WRHA retains Butler Burgher Group to complete a valuation and market analysis that explores possible reuse options (condos, apartments, office, retail, industrial, etc.) and quantifies the feasibility of each. The market study assumes that deferred maintenance ($2.2 million) has already been addressed and considers the renovation costs and stabilized values for each type of land use. The market study concludes that no specific land use is considered a “highest and best use,” and any potential reuse would likely have a funding gap of $1.5 to $1.75 million dollars. If redevelopment is desired, the study recommends a partnership with the City. Alternatively, it recommends demolition as the most objective, financially feasible option, although this too would be at a loss given the land value is less than the combined costs of demolition and the Authority’s investment to date. • March 2014 – WRHA publishes a Request for Interest (RFI) to solicit reuse proposals from the development community. • July 2014 – Three proposals are received in response to the RFI, and the Housing Authority selects a proposal from Mountain Phoenix Charter School for an expansion of their charter school into Fruitdale. A purchase and sale agreement is executed in October. • January 2015 – After several months of due diligence, the charter school terminates the purchase and sale agreement. • February 2015 – The Housing Authority offers another RFI respondent, Hartman Ely Investments (HEI), an opportunity to present their redevelopment proposal. • April 2015 – HEI presents a preliminary reuse proposal to WRHA and is granted an exclusive four-month period to conduct due diligence. At this time the redevelopment included potential agricultural and commercial uses. • September 22, 2015 – HEI presents an updated $6 million redevelopment proposal to WRHA. The Authority approves a motion directing staff to negotiate a purchase and sale agreement with HEI. They also direct staff to complete pre-development tasks including a land swap with the school district, necessary land use entitlements, and removal of the reverter clause. 3 • October 5, 2015 – City Council reviews a mixed use development proposal for Fruitdale and discussed the project’s funding gap. • November 6, 2015 – The PSA between WRHA and Fruitdale School Partners (FSP) is recorded. • November 24, 2015 – WRHA passes motions authorizing their financial participation in the amount of a $170,000 grant and a $400,000 loan and directs staff to negotiate and execute a development agreement. • January 11, 2016 – City Council discusses a revised residential-only development proposal for Fruitdale, the updated project pro forma, and a possible public private partnership. • January 12, 2016 – WRHA holds a special meeting to complete a comprehensive review of the residential redevelopment proposal and ratifies their direction to execute a development agreement for a 100% residential project. • February 8, 2016 – City Council approves Resolution 15-2016 supporting the redevelopment of Fruitdale School, authorizing financial participation in the amount of a $1.925 million loan and $470,000 grant, and approving the term sheet for the project. • February 22, 2016 – City Council approves Resolution 17-2016 approving the development agreement for the project and authorizing a loan up to $2.115 million and a grant of $470,000 • March 16, 2016 – The Development Agreement between FSP, WRHA, and the City is recorded. • March 17, 2016 – WRHA and Jeffco Schools execute and record a land swap agreement. • April 1, 2016 – An application is submitted to the State Historic Fund for a potential $175,000 grant. • April 7, 2016 – Planning Commission approves WRHA’s application for a subdivision on the property. • April 22, 2015 – The order for default judgment and quieting the title is recorded, removing the school-related reverter clause. • May 6, 2016 – Jefferson County Community Development provide a letter of support, committing $680,000 in HOME funds for the project. • May 9, 2016 – City Council approves WRHA’s application for a zone change on the property from A-1, C-1, and R-3 to Mixed Use-Neighborhood. • June 8, 2016 – WRHA and Jeffco Schools execute bargain and sale deeds competing the land swap which enlarges the Fruitdale property to the north and returns the preschool playground to the school district. • June 9, 2016 – The approved subdivision plat is recorded. • June 20, 2016 – The National Park Service and History Colorado (state historic preservation office) approve the redevelopment proposal making the project eligible for 4 approximately $925,000 in federal historic preservation tax credits and $1,000,000 in state tax credits. • July 2016 – HEI selects The Abo Group, a Lakewood-based architectural firm, to begin final construction drawings. Soon after, HEI selected Palace Construction as the contractor for the project. • August 4, 2016 – Staff is notified that the project is not awarded an SHF grant. • August 16, 2016 – WRHA and HEI host a community meeting and publish a project update in the Connections newsletter. • August 2016 – HEI secures a written commitment from a St. Louis based bank to purchase the State historic preservation tax credits (over half of the total tax credit amount) at a better syndication rate than projected in the project’s pro forma (90% vs 85%). • September 2016 – HEI received a LOI from a Denver real estate group (Pinnacle Real Estate Group) to purchase 50% of the federal historic preservation tax credits (HPTC) at an 80% discount rate. • September 19, 2016 – HEI submits a site plan application for review. • September 30, 2016 – Xcel approves the project’s ground-mounted solar array for the Solar*Rewards program and associated tax credits and extends the completion deadline to April 2017. • October 3, 2016 – An application is resubmitted to the State Historic Fund after consultation with their staff for a potential $200,000 grant. Awards will be announced in February 2017. • October 25, 2016 – HEI submits a building permit application for review. • October 25, 2016 – Housing Authority receives an update on the status of the project, including completed tasks and project costs and financing. The Board expressed support for staff to negotiate final refinements to the Development Agreement that was originally approved in early 2016. • November 7, 2016 – At a study session, City Council receives an update on the status of the project, including completed tasks, projects costs, tax implications, and new terms for the City’s $2.115 loan which could extend the payback period. • November 2016 – Staff works with the City Attorney’s office and a third-party financial advisor (Economic and Planning Systems) to improve the final terms of the public private partnership. • November 28, 2016 – City Council approved the Amended and Restated Development Agreement. • November 29, 2016 – WRHA approved the Amended and Restated Development Agreement.