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Purchase of 1126 White Street from DCSDTHE CTTY OF DUB ~ E Masterpiece on the Mississippi MEMORANDUM May 29, 2007 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Purchase of Building at 1126 White Street Housing and Community Development Department Director David Harris recommends City Council approval to purchase the building at 1126 White Street from the Dubuque Community School District, for $50,000. This building will be converted to townhouse units to promote increased owner-occupancy in the neighborhood. The School District originally purchased this historic, vacant, nine-unit apartment building with the intent of demolishing it for parking for the new Prescott School, in 2005. After further consideration and discussion with City staff, it was agreed that other parking alternatives would be pursued. Subsequently, the City developed a re-use scenario for the building, to complement the Washington Neighborhood revitalization effort now under way. This concept would convert the building to townhouse units, to promote increased owner-occupancy in the neighborhood. These would be priced at market rates and marketed to `young professionals' working downtown. In particular, we would seek to interest Prescott staff in purchasing these townhouses. Personnel at DB&T and the Crescent Community Health Center would also be recruited, among others. The objective is additional owner-occupants and mixed-income households in an area that is currently predominantly lower-income and renter families. The City hired AI Lundh to develop schematic drawings, showing a converted building with either three or five townhouse units, ranging in size from 1000 to almost 2000 square feet, each with two bedrooms and two baths. Cost estimates were obtained, indicating prices for completed homes in a range from $85,000 to $145,000, depending on number of units. The Council additionally authorized purchase and demolition of a derelict building located adjacent at 141 East 11th Street, offering the possibility of additional off-street parking for this project. A request-for-proposals was authorized by the Council, released in April, seeking bids from developer/contractors willing to purchase the building and accomplish the conversion to townhouses. Proposals are due June 8. To assist with costs of construction financing, an application was submitted to the Iowa Finance Authority's OurHome Rehabilitation Program. The City would receive a $500,000 loan, at 3%, to in turn be loaned to the developer to subsidize costs during construction and marketing of the units. Additional City financial participation would include a contribution of $100,000 toward development costs, from the Targeted Homeownership Grants CIP. The recently- approved lending guidelines for the Washington: Revitalize! initiative also include a package of forgivable, due-on-sale and low-interest, 20-year loans -totaling $30,000 per unit -that will be made available to the developer and then passed through to the purchasers of the individual units. As these are all General Funds, no income limits will apply to buyers. The building is also within the Washington Neighborhood Urban Revitalization Area, recently expanded to include the boundaries of the neighborhood association. The City Assessor has informed the City that the assessment of the building will be based on the sale price, resulting in a 10-year abatement of taxes on the improvements and a base value of only $50,000. These combined financing and real estate tax incentives will substantially impact the `affordability' of the town homes, by reducing monthly payments and cost to the buyers. In fact, although no buyer income limits will be required, the smaller units are projected to be within affordability guidelines for households earning 80% of area median income. The conversion of this building to town homes will accomplish a number of objectives to complement our Washington Neighborhood revitalization efforts. It will promote owner occupancy and a mix of household incomes. If successful, it will demonstrate the market for sensitive re-use of historic but under-utilized and/or functionally obsolete rental housing. It may achieve a `green' objective of promoting `walk-to-work' residences in the downtown. And it will enhance the area adjacent to the new Prescott School. Additionally, the project promotes a partnership with the School District, by incorporating use of the HEART Program as a training opportunity for students. HEART student workers will perform carpentry labor at the site, under professional supervision, while earning academic credit. I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, City Attorney Cindy Steinhauser, Assistant City Manager David Harris, Housing and Community Development Department Director THE CITY OF DuB E Masterpiece on the Mississippi 25 May 07 MEMORANDUM To: Michael Tan Milligen, City Manager j l From: David Hams, Housing and Community Development Department Re: Purchase of building at 1126 White Stree# Introduction The purpose of this memorandum is to request the City Council to approve the attached offer to purchase 1126 White Street from the Dubuque Community School District. Background The School District originally purchased this historic, vacant, nine-unit apartment building with the intent of demolishing it for parking for the new Prescott School, in 2005. After further consideration and discussion with City staff, it was agreed that other parking alternatives would be pursued. Subsequently, we have developed a re-use scenario for the building, to complement the Washington Neighborhood revitalization effort now under way. This concept would convert the building to townhouse units, to promote increased owner-occupancy in the neighbofiood. These would be priced at market rates and marketed to `young professionals' working downtown. In particular, we would seek to interest Prescott staff in purchasing these townhouses. Personnel at DB&T and the Crescent Community Health Center would also be recruited, among others. The objective is additional owner- occupants and mixed-income households in an area that is currently predominantly lower-income and renter families. Discussion We hired AI Lundh to develop schematic drawings, showing a converted building with either three or five townhouse units, ranging in size from 1000 to almost 2000 square feet, each with two bedrooms and two baths. Cost estimates were obtained, indicating prices for completed homes in a range from $85 000 to $145 000, depending on number of units. The Council additionally authorized purchase and demolition of a derelict building located adjacent at 141 East 11th Street, offering the possibility of additional off- street parking for this project. A request-for-proposals was authorized by the Council, released in April, seeking bids from developer/contractors willing to purchase the building and accomplish the conversion to townhouses. We have shown the property to a number of firms; proposals are due 8 June. To assist with costs of construction financing, an application was submitted to the Iowa Finance Authority's OurHome Rehabilitation Program. The City would receive a $500 000 loan, at 3%, to in turn be loaned to the developer to subsidize costs during construction and marketing of the units. As the units would be sold, funds would be repaid to the City and then to IFA. The Finance Authority is expected to approve this loan at its June meeting. City Council authorization will be required to approve this obligation. Additional City financial participation would include a contribution of $100 000 toward development costs, from the Targeted Homeownership Grants CIP (no.101-1595); this program is capitalized by City General Funds. The recently- approved lending guidelines for the Washington: Revitalize! initiative also include a package of forgivable, due-on-sale and low-interest, 20-year loans -totaling $30 000 per unit -that will be made available to the developer and then passed through to the purchasers of the individual units. As these are all General Funds, no income limits will apply to buyers. The building is also within the Washington Neighborhood Urban Revitalization Area, recently expanded to include the boundaries of the neighborhood association. The City Assessor has informed us that the assessment of the building will be based on the sale price, resulting in a 10-year abatement of taxes on the improvements and a base value of only $50 000. These combined financing and real estate tax incentives will substantially impact the `affordability' of the townhomes, by reducing monthly payments and cost to the buyers. In fact, although no buyer income limits will be required, the smaller units are projected to be within affordability guidelines for households earning 80% of area median income. We have met with the School District's Support Services Committee on two occasions and have reached an agreement on the sale price of $50 000. This will be recommended for approval by action of the School Board at its 11 June meeting. Recommendation The conversion of this building to town homes will accomplish a number of objectives to complement our Washington Neighborhood revitalization efforts. It will promote owner occupancy and a mix of household incomes. If successful, it will demonstrate the market for sensitive re-use of historic but under-utilized and/or functionally obsolete rental housing. It may achieve a `green' objective of promoting `walk-to-work' residences in the downtown. And it will enhance the area adjacent to the new Prescott School. Additionally, the project promotes a partnership with the School District, by incorporating use of the HEART Program as a training opportunity for students. HEART student workers will perform carpentry labor at the site, under professional supervision, while earning academic credit. Action Step The action requested of the City Council is to approve the attached offer to purchase the building at 112fi White Street, from the Dubuque Community School District, for $50 000. cc: Barry Lindahl, City Attorney Law Offices Of FUERSTE, CAREW, COYLE, JUERGENS &SUDMEIER, P.C. 200 SECURITY BUILDING 151 WEST 8TH STREET DuBUQoE, IOWA 52001-6832 ALLAN J. CAREW MICHAEL J. COYLE STEPHEN J.JUERGENS ROBERT L. SUDMEIER* DOUGLAS M. HENRY MARK J. WILLGING MICHAEL J.SHUBATTt A. THEODORE HUINKER DANITA L. GRANT JOHN F. HODGES*t WILLIAM N. TOOMEY June 13, 2007 ALL ATTORNEYS LICENSED IN IOWA •AG,SO LICENSED [N WISCONSIN tALSO LICENSED M ILLINOIS Mr. Barry A. Lindahl 300 Main Street Harbor View Place Ste. 330 Dubuque, IA 52001 Dear Barry: Accepted Offer enclosed. AJC/jar Enclosure Very truly yours, FUERSTE, ~ JUERGENS BY: P.C. WILLIAM C.FUERSTE (RETIRED) TELEPHONE: (563) 556-4011 TELECOPIER: (563)556-7134 E-MAII.: MAII~FCCJS.COM WRrIER'$ DII2ECT E-MAn. ADDRESS ACAREW [t.FCCJS.COM OFFER TO BUY REAL ESTATE AND ACCEPTANCE TO: Dubuque Community School District (Seller) 1. REAL ESTATE DESCRIPTION. The City of Dubuque, Iowa (Buyer) offers to buy real estate in Dubuque County, Iowa, described as follows (1126 White Street, Dubuque, Iowa): The South Middle 1!5 of Out Lot 480 in the City of Dubuque, Iowa, according to the United States Commissioners' Map thereof with any easements and appurtenant servient estates, but subject to the following: a. any zoning and other ordinances; b. any covenants of record; c. any easements of record for public utilities, roads and highways designated the Real Estate. 2. PRICE. The purchase price shall be $ 50,000.00, payable at City Hall, Dubuque, Iowa, as follows: $50,000 at closing. 3. REAL ESTATE TAXES. Seller shall pay any unpaid real estate taxes payable in prior years and taxes for the current fiscal year prorated to the date of possession. Buyer shall pay all subsequent real estate taxes. 4. SPECIAL ASSESSMENTS. Seller shall pay all special assessments that are a lien as of the date of possession. 5. RISK OF LOSS AND INSURANCE. Seller shall maintain $ 50,000 of fire, windstorm and extended coverage insurance on the Real Estate until possession is given to Buyer and shall promptly secure endorsements to the appropriate insurance policies naming Buyer as an additional insured. Risk of loss from such insured hazards shall be on Buyer after Seller has performed under this paragraph and notified Buyer of such performance. 6. CARE AND MAINTENANCE. The Real Estate shall be preserved in its present condition and delivered intact at the time possession is delivered to Buyer. However, if there is loss or destruction of all or any part of the Real Estate from causes covered by the insurance maintained by Seller, Buyer agrees to accept such damaged or destroyed Real Estate together with such insurance proceeds in lieu of the Real Estate in its present condition and Seller shall not be required to repair or replace same. 7. POSSESSION. If Buyer timely performs all obligations, possession of the Real Estate shall be delivered to Buyer on June 29, 2007, with any adjustments of rent, insurance, and interest to be made as of the date of transfer of possession. 8. FIXTURES. All property that integrally belongs to or is part of the Real Estate, whether attached or detached, such as light fixtures, shades, rods, blinds, awnings, windows, storm doors, screens, plumbing fixtures, water heaters, water softeners, automatic heating equipment, air conditioning equipment, wall to wall carpeting, built-in items and electrical service cable, outside television towers and antenna, fencing, gates and landscaping shall be considered a part of Real Estate and included in the sale except: 9. USE OF PURCHASE PRICE. At time of settlement, funds of the purchase price may be used to pay taxes and other liens and to acquire outstanding interests, if any, of others. 10. 'ABSTRACT AND TITLE. Seller, at its expense, shall promptly obtain an abstract of title to the Real Estate continued through the date of acceptance of this offer, and deliver it to Buyer for examination. It shall show merchantable title in Seller in conformity with this agreement, Iowa law and Title Standards of the Iowa State Bar Association. The abstract shall become the property of the Buyer when the purchase price is paid in full. Seller shall pay the costs of any additional abstracting and title work due to any .act or omission of Seller, including transfers by or the death of Seller or Seller's assignees. 11. DEED. Upon payment of the purchase price, Seller shall convey the Real Estate to Buyer by Special Warranty Deed, free and clear of all liens, restrictions, and encumbrances except as provided in 1 a. through 1 .d. Any general warranties of title shall extend only to the time of acceptance of this offer, with special warranties as to acts of Seller continuing up to time of delivery of the deed. 12. TIME IS OF THE ESSENCE. Time is of the essence in this contract. 13. REMEDIES OF THE PARTIES a. If Buyer fails to timely perform this contract, Seller may forfeit it as provided in the Iowa Code, and all payments made shall be forfeited or, at Seller's option, upon thirty days written notice of intention to accelerate the payment of the entire balance because of such failure (during which thirty days such failure is not corrected) Seller may declare the entire balance immediately due and payable. Thereafter this contract may be foreclosed in equity and the Court may appoint a receiver. b. If Seller fails to timely perform this contract, Buyer has the right to have all payments made returned to it. c. Buyer and Seller also are entitled to utilize any and all other remedies or actions at law or in equity available to them and shall be entitled to obtain judgment for costs and attorney fees as permitted by law. 14. CONTRACT BINDING ON SUCCESSORS IN INTEREST. This contract shall apply to and bind the successors in interest of the parties. 15. CONSTRUCTION. Words and phrases shall be construed as in the singular or plural number, and as masculine, feminine or neuter gender, according to the context. 16. TIME FOR ACCEPTANCE. If this offer is not accepted by Seller on or before June 12, 2007, it shall become void and all payments shall be repaid to the Buyer. 17. AS IS CONDITION. Buyer is purchasing the Real Estate in its as is condition. Dated: ~ UJ ~ CITY OF DUBUQUE, IOWA By Michael C. Van Milligen, City Manager THIS OFFER IS ACCEPTED Dated: ~~1! , ~ ~a oZ (~~ DUBUQUE COMMUNITY SCHOOL DISTRICT By Doug as H t nhPresident of the Board Joni ucas, Secretary of the Board