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Council reviews 500 North Grand draft development agreement

By Kelly Terpstra, kterpstra@charlescitypress.com

Shawn Foutch’s redevelopment project for the 500 North Grand building in Charles City seems to be moving along smoothly.

Delays and transfers were two key topics discussed at a Charles City Council planning session on Monday regarding a drafted development agreement with Foutch to create market rate apartments in the 1930s portion of the structure.

Foutch purchased the old middle school building for $1 from the Charles City School District last month. Foutch owns JMAE LLC., a construction company that specializes in historic rehabs and property management.

In order to move forward with his design plan to erect at least 35 apartments on the site and to acquire financing, he needs the consent of the council to award him a 10-year, 100 percent tax abatement on the increased value of the property, that would save him more than $589,000.

The property is estimated to be assessed at over $3 million once the development is completed, and the total amount of property taxes estimated to be due on that over 10 years would be almost $660,000.

Foutch will continue to pay the property taxes on the current assessed value of the property, $262,450, which will be a little over $5,000 per year.

For the three years before construction begins, plus the 10 years of the abatement, Foutch will pay a total of about $70,000 in property taxes, meaning that $589,380 of the estimated $659,721 would be abated.

“It’s important that the public understand that you’re going to be paying the taxes on the current value going forward, where before we’ve never gotten taxes,” said Mayor Dean Andrews. The school district pays no property taxes on school facilities.

“The abatement becomes more a 91 percent abatement than a 100 percent abatement because you are paying those base taxes starting from the beginning all through that time,” Andrews said.

There were also developer’s covenants included in the agreement that Foutch would need to purchase the building and complete his company’s work by Dec. 31, 2022.

The city is still working on the draft and fine-tuning language in the agreement that deals with potential transfer of the property and whether Foutch would be able to sell the property to a prospective owner in the 14-year timeline mapped out by the city.

“Communities usually don’t want me to assign it or transfer it or give it away without having something to say. If I were you, I would not want to let Shawn give it to the next guy unless the next guy agrees to abide by this agreement,” said Foutch. “You having the right to decide whether or not it’s transferred is totally reasonable.”

Foutch said he doesn’t foresee selling the property in the next 15 years.

There was also plenty of discussion about a possible penalty being enacted should the project not be completed by the end of 2022. There had been talk at prior council meetings of a possible fine or penalty to take back or forfeit one year of the tax abatement if the project was six months past due. City Administrator Steve Diers said that type of restriction seemed excessive.

“We can’t do anything like that on that scale. That would be quite a penalty,” said Diers.

Andrews said the council fully understands the difference between a project getting stalled for minor impediments or delays that are out of the developer’s control and major breakdowns that could bring the project to a grinding halt.

“If it gets to that time and things are progressing along but it’s going to be two more months, I don’t think anybody is going to care. But if things have been sitting in the same stage for six months and you say, ‘well it’s going to be another year,’ then that’s a whole different story,” said Andrews.

Foutch said if the project’s completion date ran past due and there was a substantial penalty along the lines of forfeiting one year of tax abatement, his bankers would automatically not give him credit for the last year of abatement.

“I would take the hit immediately,” said Foutch.

Foutch said he felt the council understood where he was coming from in regard to the agreed upon timeline of completion and the reasons that would create a delay – should there be any at all.

“Now if I’m not going to make it because all of my plans were garbage and nothing is working and I’ve failed everywhere, then, you know, shoot away,” said Foutch. “What is language that gives you the firm commitment that you need? We need to work together and try and find something that gets you what you need without being unreasonably punitive.”

Foutch felt he could build close to 40 apartments and estimated 38 apartments could be a workable number the last time he looked over the design plans. The city changed its off-street parking requirements from 2.2 stalls necessary for every apartment unit to 1.5 to accommodate the redevelopment project.

Foutch also said the kitchen and auditorium in the building would more than likely be available for use at minimal cost. He said he didn’t view that section of the building as a profit center and would rather have the space getting used than not.

Foutch recently designed and built 72 apartments in the Phillips Middle School in Fort Dodge, which used to be the town’s old high school. The $12 million project took two years to finish and Foutch said his company put 85,000 work hours into the reconstruction. He said the Fort Dodge building is about twice the size of the North Grand structure.

Foutch said he started leasing those apartments this past March and a third of the units have tenants in them.

Also at the meeting, City Engineer John Fallis filled in the council on two big projects that would deal with drainage issues in the area of South Johnson and Oliver streets, as well as working up a design plan to repair the Main Street Bridge.

Fallis said a proposal from Fehr Graham Engineering for a fee to not exceed $15,000 would be the best plan of action to come up with a solution to slow down and fix the water issues. The study would emphasize storm water modeling and detention evaluation.

“Basically, we have detention there now. It’s just not appropriately placed,” said Fallis. “We need to move it to a better location.”
V&K Engineering was low bid at just under $9,000, but that company’s proposal would build a new and larger storm sewer to alleviate heavy water flow during minor and major storms.

“The philosophy of the city is we want to be good stewards of the storm water. We just don’t want to send it downstream,” said Fallis.

When asked a ballpark figure on what the total cost of the drainage project would run, Diers said anywhere from $250,000 to $300,000.

Calhoun Burns and Associates has assessed the Main Street Bridge in the firm’s evaluation report.

The firm found no major deficiencies in the bridge and said the bridge was in “fair” condition, but the report also stated that repairs should be considered. Repair to the fascia walls, stabilizing the roadway and sidewalk would be some of the work done. Injecting fill to lift the pavements and reestablishing drainage to the intakes were also other aspects of the project.

The fee for engineering services is $22,500 and the estimated cost of the bridge repair work is $325,000.

“It’s an asset and we need to maintain it,” Fallis said.

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