2024-63 Ordinance Authorizing a TIF Redevelopment Agreement between the City of Decatur and Merchant Street South, LLC

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May 2, 2024 TO: Mayor Julie Moore Wolfe & Decatur City Council Members FROM: Scot Wrighton, City Manager RE: TIF Redevelopment Agreement Action on this proposed redevelopment agreement assumes that the City Council will approve ordinances on May 6 creating the Central Tax Increment Financing(TIF) district. If the Central TIF is not fully enacted,then this item should be tabled. The owners of the office/retail building at the northwest corner of Water and Main Streets (where Flora Gems is located) and the Giggles Building on Merchant Street request that the city approve a redevelopment agreement enabling the owner to use TIF to upgrade the exterior of the office/retail building at East Main and Water Streets, renovate the upper floors of the same building into modern office spaces, and renovate the upper floors of the Giggles Building into 2 apartments. These improvements advance the objectives of the TIF district by increasing the number of residential units in the central business district and (hopefully) increasing the occupancy of currently vacant commercial spaces downtown. This is exactly how the TIF district should be used to improve commercial properties; and this instrument is similar to agreements recently approved by the City Council in the Eastgate Commons TIF district, on Mt. Zion Road. While some TIF redevelopment agreements allow incremental tax revenues generated elsewhere in the TIF district to be used in a different part of the TIF district,this redevelopment agreement only allocates 80% of the new tax increment from just these two buildings, and only up to 80%of the project's total costs. In other words, as tax increments are received,the owner will receive rebates equal to 80%of the actual increment, or 80%of the actual project cost, whichever is less. If actual increments are less than projected,the owner will receive only 80% of the increment actually received. The owner will not recover his entire rehabilitation costs—but the redevelopment agreement is not intended to produce such an outcome. Rehab costs for both buildings are estimated to be approximately$1.52 million, and incremental tax revenues are estimated to be approximately $1.45 million (of which he could receive a little over$1.1 million, depending on the growth of equalized assessed valuations in these properties and the downtown generally). The attached redevelopment agreement does not include all final revisions by the attorneys; so, we will likely submit an updated version to the council on Friday. But it will be substantially like the attached version.