Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
CC:	Diane Stoddard and Cynthia Wagner, Assistant City Managers
FROM:	Britt Crum-Cano, Economic Development Coordinator
DATE:	April 15, 2014
RE:	Proposal for purchase & rehabilitation of 1106 Rhode Island Street

Located at the southeast corner of 11^th Street and Rhode Island Street, the 1106 Rhode Island Street property is 0.268 acres in size with three structures identified as contributing to the North Rhode Island Street Historic Residential District, National Register of Historic Places: the house, garage, and large barn. The City recently acquired the property (purchase price of $114,500) at 1106 Rhode Island Street, which had been subject to long-standing code violations leading to condemnation.

The City has a desire to see the historic property rehabilitated to productive use. After the City’s ownership of the property was finalized, the City distributed an RFP on March 28, 2014 seeking proposals from firms and individuals interested in purchasing the property and rehabilitating the existing house, large barn and garage located on the property. In response to that RFP, the City received one proposal, submitted by Hernly Associates, Inc.

Proposal Overview:

The Hernly Associates submission proposes retaining the buildings on site that are considered “Contributing” to the North Rhode Island Street Historic Residential District and adding new space that enhances the usefulness of the property. The redevelopment plan includes the following:

Proposed Uses
House	S.F.
Finished Area:	1,547 (1,162 rehab + 385 new)
Basement (existing unfinished):	315
Garage:	228
Apartment	S.F.
New Finished Area: (1 bedroom, 1 bath)	718
Garage:	228
Professional Office in Warehouse/Garage		S.F.
Rehab Areas:		2,170
Existing Open Space		S.F.
Existing open area of NWC of lot		To remain open space

Preliminary site plan and concept drawings were provided by the developer and are included within the proposal.

Project Costs:

Total project costs are estimated at $896,600 and include:

Demolition of sheds and outhouse
Repair house foundation, siding, roof, windows
Paint house & warehouse
House additions, including garage and apartment above
Rehabilitation of warehouse and garage for office use
Repair warehouse and garage roof, siding, windows
Replacement of electrical, water and sewer
Landscaping
New parking area and concrete driveways

Proposed Purchase Price:

As per the developer, the property would be worth more if the building were demolished and removed rather than left in place. “The ‘improvements’ (i.e. the buildings) on the property have been allowed to languish for so long, they actual subtract from the value of the property rather than add to the property.” Based on the property as-is, the developer is proposing a purchase price of $90,000.

Value of 1106 Rhode Island as vacant land (Keller appraisal)	$105,000
Cost to demolish all structures (bid from subcontractor)	$9,500
Cost to disconnect all utilities (estimate)	$500
Cost to obtain demolition approval through City processes (estimate)	$5,000
Value of 1106 RI with buildings in place as-is	$90,000

Proposed Assistance:

According to the developer, residential and office market rental rates alone will not support the cost of redevelopment. For the redeveloped property to maintain a positive cash flow, additional financial support is required, including State and Federal Preservation Tax Credits, State and Local Preservation Grants, a City Development Grant (rebating fees and permit costs), and the establishment of a Neighborhood Redevelopment Area (NRA).

Economic Development Support: The developer is proposing use of a NRA to help the project make positive cash flow during the first 10 years. Kansas Law enables cities to establish neighborhood revitalization areas in order to encourage redevelopment under the Neighborhood Revitalization Act (NRA). The establishment of a revitalization area enables a property owner to receive a rebate on a portion of the incremental increase of property taxes associated with an improvement project within the area.

Development Grant: A development grant estimated at $26,100 is proposed to cover City related fees and permit expenses. Most items covered through this request are suggested as fee rebates.

Development Grant: Proposed Rebate of Project Fees
Replat submittal/review fee rebate	$200
Rezoning submittal/review fee rebate	$200
Site Plan submittal/review fee rebate	$200
BZA submittal/review fee rebate	$200
Demolition Permit for out buildings and rear porch on house rebate	$50
Building Permit fee rebate	$3,950
Dumpster during construction rebate	$3,450
Water service connections house/apartment and office--rebate from utility funds for installation of new water service lines	$7,350
Sanitary sewer service connections house/apartment and office--rebate from East Lawrence sanitary sewer system upgrade program	$10,500
Total Estimated Financial Assistance from City	$26,100

Timeline:

The developer anticipates a 15-18 month timeframe to accommodate property purchase, rezoning, demolition, approvals and construction. Future action items specified within the proposal include:

Action Items

Execute purchase agreement

Submit rezoning application

Submit concept plans for preliminary review to Kansas Historical Society (KSHS) & National Park Service (NPS)

Organize development group as LLC

Final approval of rezoning

Preliminary approval of design concept by KSHS and NPS

Purchase the property

Submit site plan for review & approvals

Submit design plans for HRC review

Submit BZA application for setback variances

Submit demolition application

Prepare construction drawings

Obtain contractor bids

Submit application for Historic Preservation Tax Credits

Submit application for preservation grant

Negotiate NRA tax rebate agreement

Negotiate City development grant

Rehabilitate existing building, construct new additions, and complete site improvements

Staff Recommendation:

A selection committee of City staff and Historic Resources Commission (HRC) representatives reviewed the proposal on April 4, 2014. The committee recommends analysis of economic development support requested and review and recommendation by the Public Incentives Review Committee (PIRC).

Requested Actions:

Receive proposal for purchase and rehabilitation of 1106 Rhode Island Street property. Refer to staff for analysis of requested economic development support and PIRC for review and recommendation.