Urban Renewal Authority - Regular Meeting

The town of your economic development department. I'm joined here today with Andy Arnold, our third party consorts consultant with Pioneer Development Company virtually. Andy, I think you're there. As well as Lulu Claire Jack. Awesome. Thanks, Andy. As well as Lulu Claire, one of the business owners with Spinalo LLC. We're here today to review a resolution approving a reimbursement agreement with Spinalo LLC. So I'm just gonna jump into the presentation, give you a quick overview of what we're talking about today. Great.

We're gonna go over the it's really simple, the request, the the potential gap, as well as the recommendation. So the request is very simple. The owners of of Spinallu would like to improve the existing restaurant in 656 Cattell Street. It's around the corner of Cattell And Cheesman, and they are requesting additional funding in order to do so. If you've looked at that building, it needs significant work.

So we are hoping that the URA can assist them in this project. Here's a just kind of a quick aerial of of the lot and kind of what's Spinalo has envisioned for for the for the property. I I should mention I I meant to add the logos before this this presentation was uploaded. Spinalu is a very obscure name, but they they own a couple of restaurants in in Denver you might be familiar with. It's it's Dio Mio and Redeemer Pizza.

In Rhino, they're also have a a third concept opening up in in Wash Park as well. They're very interested in the community. They they they identified this site as having great potential and really fell in love with the community over the past few years. This has been a lay labor of love. We've worked on this for since I've been here, which has been over a year and a half, and I think they've been looking at Erie for a long time.

So there there's a lot of work to be done on that building. Stuff like replacing the roof, upgrading utilities, making it ADA compliant, making the code the building code compliant, as well as just overall beautification of that building is it's a it's a heavy lift, especially for an ownership group that is not they're not a big developer. They're small business owners that really wanna buy into the town and and create something really cool in our downtown. And so whenever we get a request like this, we have a third party consultant. This in this case, it's Andy Ardleman and Pioneer Development Co.

We run a kind of a gap funding analysis to evaluate the market, evaluate this specific parcel as well as the business to see what that true financial gap is to make this project financially feasible. And so you should have seen that that analysis in in your packet, and he does a great job of of breaking it down and explaining it. And he will answer any of the tough questions you guys have today. So this this analysis has kind of estimated the the the the tax increment that would be required in order to make this project feasible. These are the key indicators that Andy looks at when he's running this analysis, and he's identified that number to be around $375,000 today in order to fill that financial gap for this project.

And so today's dollars are not necessarily tomorrow's dollars. And the way that TIFF works is you typically structure in a way where you are reimbursed over span of time. In this case, it's ten years. And so what we have have discovered is that in order to make this project feasible, we would like to pledge 100% of the sales tax generated by this project over the next ten years back into the project. That over time as gross sales tax increment is is around 506 it is $566,000.

And so you can see that broken up up in this table. It's roughly $70,000 per year reimbursed back to the business to help pay off their their debt in order to make this project feasible. And that's kinda that's the recommendation recommendation we have tonight is to approve resolution 25 dash zero zero one, fully executing a reimbursement agreement with Spinalo LLC, validating that $375,000 number in in in in a funding gap, as well as in order to fill that gap of reimbursing $566,000 in gross increment over the next ten years, that being the cap, or expiring 12/31/2034, whichever first occurs. And like I mentioned earlier, if we were to reimburse 100% of the sales tax, you know, over that ten years, averages out about 70,000 per year going back into the project. So that kinda answer that quickly, but I wanna open up the questions and discussion.

I think that's more important.

Alright. And there was a procedural discussion between miss Stamp before. I think we could do discussion, and then we'll see if there's a motion, and then we'll see if there's any any further. Just looking at our town attorney just to make sure.

We just had a very different discussion. So because that's how he's always done it. Understood how you've always done it, but parliamentary rules, I

I yeah.

They they do require a motion and a second and then discussion. I don't wanna be overly picky about it. We've never interrupted it before. Okay. As long as we have a place for discussion and a motion and a second and a vote, doesn't really matter which order we do it in.

Yeah. And I think for this, we can definitely do the motion second. I I worry about things that are controversial, and nobody wants to make the motion to even get to the point of discussion.

Right.

But we'll cross that bridge when we get there.

We'll cross that another time, but I agree with you.

Alright. So Thank you. So first, I'll ask is if there's a motion to approve resolution twenty five zero twenty five, a resolution of the board of commission commissioners of the town of Erie, urban renewal authority approving a reimbursement agreement with Spend Elu, LLC. I'll make the motion. Alright. So commissioner Bell is motion. Second. Alright. We've got a second by commissioner Hoback. Any nope. Discussion now? Questions for Jack? Commissioner Orr.

Got it. Thank you for the presentation. I do have some concerns about the assumptions in this report and would be curious to hear from the applicant or Andy or someone who could speak to those.

Are there particular assumptions as far as which assumptions are you

The sales per square foot, traffic counts, a number Andy,

are you able to answer those or Lulu, I know you're not the numbers gal.

It might be most efficient to start with the applicant.

Okay. Are you able to answer those questions?

I can

try my best. Oh, yes.

If if you can come to the podium just so people remote can hear you. And just your name and address for the record.

Lulu Claire. My address. I

think we need that. Correct?

You do not need a nut. Know.

You don't. This is my

first time doing this, you guys.

This is my first time, at least this right now.

Great. We're in this area.

We'll work we'll work through this together.

First

off, big fan of both Deal Meo and Redeemer Pizza. I've waited in line at both and will continue to do so. The seasonal changes at Redeemer are always a fan favorite. The report mentions you're projecting sales per square foot of nearly $800 a square foot. Can you share what your sales are at your current establishments and how you came to that 800 number for Erie?

I can share that I can share numbers that I think would make that make more sense, which is that at Redeemer, for instance, we do 67% in takeout of our accumulative sales. You know, we're on track to do about 2.5 at Redeemer specifically. So we believe pretty confidently that we can capitalize not only on the space in the building, but that there is a large market here for take out as well.

And how many residents are within a mile of Redeemer versus a mile of this location?

I don't have that number on me. However, there's also a lot of pizza restaurants within the mile of Redeemer. So there's a lot of options. I mean, we service 80205, which, I mean, excuse me, not being prepared. I think that it's hard to compare. It's a little apples to oranges because the the competition there is much greater than it is in the spot that we're looking at. So there's more options to choose from as far as Redeemer goes in in particular. And the same goes for Diomeo. We've proven to be able to carve ourselves out in that market even though it is really congested, we believe here. I can just speak to my own experience. I've been spending the last ten years up

in

Erie taking care of my late mother and constantly looking for places to eat. And I've fallen in love with this community. It's a place that I want to move my family to. My sisters both live here, and we're constantly looking, where can we bring all of the kids? Where can we order takeout, where can we go in with the family and not feel like we're stepping on toes. Numbers wise, maybe I can bring that information population, but we can kind of work through the other questions and maybe I can get to a better answer.

Sure. There were a lot of different cost numbers in the report. Can you help clarify what your actual budget is and if you have contractors who provided estimates and are lined up to proceed with this work?

We do have contractors lined up and plans drawn as you saw. Our current or the current number that we're working with is 1.6. That is inclusive of our operating costs, which I understand that this board doesn't take into account. I believe it was and you can probably correct me, Jack, I think it was 1.2 without the operating costs.

Yeah, think it's 1.2, 1.2.

A large majority of that is just getting the building to be compliant. Most of the work that we're doing there is is making it ADA compliant, which it is not even close to being. And then making a three season patio so that we can service people indoors and outdoors all year long.

So those operating costs, is that startup and staff? What's included

in that?

Startup, staff, marketing, and so on.

That's it for the moment. Thank you. Mhmm.

Alright. Other questions?

Jack, did you want me to answer the sales per square foot or provide more? Yeah.

If you could, Andy, I think that'd be very helpful.

Yeah. Counselor, that was a great question. It is one of the things that we highlighted in the report that is on the higher end of the sales per square foot number. Believe it or not, that sales per square foot number is actually reduced because of the addition of the patio. There's an additional 900 square feet on top of the 1,500 square feet that we're considering the entirety of the restaurant, and that's what brings the projected sales down to $800 a square foot.

I will say that in my experience, I've worked with a number of retailers throughout the state. And I'd say in the Carbon Valley, a high performing restaurant can get as high as 600 to $700 a square foot. I think that the applicant's explanation makes sense in light of the pizza delivery business. If this was purely a sit down restaurant, I think we'd be reaching at $800 a square foot. But I think that given that 30% to 40% of their sales are projected to come from deliveries, it's reasonable. It's a reasonable assumption. I will say it's optimistic, but that is a risk that is ultimately on the applicant because these are the sales that they hope to generate with their own business.

So I have a question on the risk to the applicant. The URA funds us from future tax revenue. If the money is used, build the restaurant and the sales don't materialize, help me understand what happens. I mean, the URA is in the hole, but we're back in the URA or the town is back in the URA in essence. Right?

Yeah. So, Julian, correct me if I'm wrong. This is would be since it's structured as a 100% sales tax reimbursement agreement, it's 100% performance based. So if they don't reach the sales that they project, we I don't don't believe we are on the hook, Julian. Correct.

So not on the hook. So we've already put the money into helping bill no. No. It's so this is to reimburse you over time for the money you've put in, but you put the money in upfront. That is a huge clarification.

Yes. So if we were to pay them cash today, it'd be $375,000 But since we're breaking it up over ten years, that's why it's stretched out to $566,000

Yep.

Got

it. All right. Commissioner Bell. Thank you. So

it says in here discounted back at a current ten year commercial mortgage rate for average retail use. Do do you know what I mean, I I don't know what commercial mortgage rates are running right now. Give me a sec.

It's 6.7% that

we Oh, okay. Was on the okay. So that's just kinda right. Thank you. Okay. And then, I guess, has have we in the URA, have there been other agreements where we've had a 100% increment rates of okay. So this is

I'll I'll just say, commissioners, there's with these projects, there's never a one size fits all. So every agreement and every formula is different based off the needs of that project. If you recall, the agreement that the board approved at last month's meeting for Lucille's for a similar expansion project was 100 percent of the property tax and 50% of the sales tax. This one, to reach the number and the gap, it's just provided for 100% sales tax.

Got you. Okay. Yep. Thank you.

Mhmm. Alright. Other questions, comments, concerns? Hold on. I've got to get the pronunciation of your last name right. Commissioner Shaika?

Sheikh. Sheikh.

Yes. Sheikh. Alright, Sheikh.

Thank you. So has the applicant already been working with the town planning department as far as making sure everything every part of their design abides by, like, town code and all of that?

Yes. They've they've had a pre app, and and as soon as they secure the property, they will go through the building department. We've tried to work very closely with Lulu and their team to make sure that this is they understand what this building is and how they can get to opening their doors. Okay. Thank you. Thank you.

Alright. Well, this is exciting from my perspective because when I was up here twenty years ago, I used to go to that restaurant from time to time, sometimes before meetings down here, and it's been empty for twenty years or fifteen years. And, yeah. So if we can make something good of it, and, there's another great place to eat, that's exciting. With that, oh, I'm sorry. Let me go to, commissioner, Pessar Amelli.

Yeah. So if everything is met, like, will you start business and when will you when are you expecting to make money?

It it greatly depends on what we find under the hood. But our hope is within this year, the goal would be August. We're hoping that we would close at the March and and hit the ground running.

So when we say under the hood, like, do you expect

It's we can only do so much inspection superficially. Okay. You know, the building owner has been really great to work with. We've I've been working with Jack and the building owner over the last probably close to sixteen months at this point. So I feel like everything's pretty transparent but just with old buildings you never really know what you're gonna get into but you know we're hoping to move as quickly as possible.

Wonderful. And Commissioner Orr.

On that point on the building condition that Jack also described earlier, it looks like the town has an assessed value just over half of this contract price, which is also similar to the assessed market value of similar small format retail properties. Can you give us some color on how you arrived at that purchase price for this asset that needs quite a bit of work by the sounds of it?

In this day and age, it's a lot less about appraisal value and it's a lot more about what the seller wants to sell it

for.

It's worth it to us because we believe so much in this community. Everywhere else that we've been looking, we've been in talks with other developers that are willing to offer us leases that are around 40 to 45 a square foot. And as small self funded business owners, it just doesn't have the longevity as we see in buying a building in a town that's blossoming like Erie and being able to take the chance on making a statement here rather than leasing from one of the new builds on County Line.

I I would just say that I do have concern about that purchase price. Completely understand that, you know, it may be worth that for the right use, but as the study supports, it needs, you know, considerable subsidy even with pretty sizable revenue assumptions. So I would have, you know, I would struggle to approve this when the recuperation of these funds that you are is going to outlay are based on those assumptions and given the property's condition and location outside of Main Street without a dedicated parking facility to support the number of trips to support these sales figures.

You know, come up here and I do the parades with my nieces and nephews and we walk right by that building. You know, I've spent a lot of time here and quite honestly, I disagree. I think that the value might be high, but everything that we've looked at in in other areas and in Denver specifically is much, much greater and you're getting about the same same value as far as a building goes. The structure of the building is intact. It certainly needs to be updated.

As you mentioned, it hasn't been touched in twenty years. But, you know, both as you know, at Redeemer and Dio are both old buildings that we feel pretty proud of what we've been able to turn them into without spending a lot on fixtures. For us, it's getting the equipment, making it look nice, and creating a space that people want to come and bring their families. And we believe that this building can be that. And we'd like to be there for much longer than ten years. So I think when we're looking at it that way the value does make a lot of sense to us.

Chairman Moore may I just address one additional comment Again, just to reiterate, this is a reimbursement agreement. So the commission will not be out any expenditures unless they generate sales tax and and that's gonna be after they've expended all the funds to rehabilitate the building. So they are really putting themselves at risk and URA is not really incurring any risk in this venture.

Yeah. I think that that's exactly the way I'm looking at this. And I love the innovation. You know, looking at something and saying we can make something for this community. I think your words were something about a vibrant community. Right? There's energy down here. Mhmm. We need entrepreneurs that are willing to take that risk to make it happen. Any other questions before I call the the vote? Commissioner O'Connor. Just some background information. How excuse me. Your other two restaurants are do you own those buildings?

We do not. Okay. We are on leases on all three of them. We are currently, you know, hoping to buy the building that Diomio is in. We have a great relationship with that building owner. But we had let him know that our focus can't tell if you guys

can actually hear me on line. Yeah, we can. Yeah.

Okay. But our focus has been on this project before we put any more energy into Denver. I think that there's just a lot that the city of Denver needs to get going in order to really embrace small businesses that are trying to rehabilitate old buildings. You know, and I think, like you said, if we're doing well, hopefully that means the city is happy, right? If we're doing well, it's because your community has welcomed us and excited about what we're offering.

For your three restaurants, did

you have to go through and refurbish the buildings Oh, in a similar manner?

Yep. Okay.

So you're familiar with

Definitely. Okay. We're in the process of it right now at the Wash Park location.

Okay.

Yeah.

And how long have you been in business?

We opened Diomeo eight years ago. We started that project ten years ago.

Thank you. All right. Looking for any other comments. Jack,

I'm sorry, guys. This is Andy. I had my hand up for a while, but I don't know if you can actually see me. I did want to just make a quick comment. And this goes back to one of the commissioner's comments about the cost of the building and the requirement of subsidies to make this feasible. Julian and I and Jack, this is our third gap analysis just this year on basically commercial retail businesses in Erie. And there's starting to see I'm starting to see a pattern that I wanted to share with the board very quickly that I think is important in terms of addressing this, I would say, a systemic issue. There are so many people moving into Erie. It's a great place to live. You all know that.

And there's a lot of development pressure. But what has happened is that this development pressure and essentially the cost of land and cost of buildings that has climbed, what we haven't seen is, at least in these general databases, an increase in your rents on a commercial retail basis. A lot of your restaurants and commercial businesses are owner operated. And so sometimes those rents aren't reported because they're not charging a rent, right, to a tenant. And so I want to bring this up because because I think not only does this URA Board have the power to create these reimbursement agreements and create great businesses within your town, but you're also, in a sense, proving the market because I think ultimately, you'd like to get to a place where these businesses, there's such desirability that is proven out in the market, you don't have to necessarily come up with a reimbursement agreement in the future.

And so not only are you catalyzing these developments, but you need to catalyze, for lack of a better term, data to justify the investment from a banking standpoint, underwriting standpoint, equity standpoint. And until we have more restaurants in Erie that are proving out these rates, we're going to see a continued gap between the value of your land and your buildings and what the market proves out.

All right. Do we need to do a roll call vote on this one? Right. No. Because it's reimbursement. There's nothing coming out of the funds.

Never has to do a roll call

vote. Oh.

It's up to you if you want. You you can should say Sure.

I know.

Chair as a chair, you may always call for a roll call.

Right. I'm just trying to get that nuance of

It's not required.

Alright. I'm just gonna call the vote. All in favor, aye. Aye. All opposed, say no. Alright. Motion carries. It's approved. Congratulations. Thank Alright. Alright. Thank you. With that, we will adjourn. Do I need a motion to adjourn?

No. Well,

I will adjourn the URA, my first URA meeting. Thank you all. And we will go into session at this point.