CITY COUNCIL AGENDA ITEM
ACTION REQUESTED:
title
Adopt the resolution authorizing a covenant incentive agreement between the City of Naperville and Little Friends for the preservation of the Kroehler Mansion
body
DEPARTMENT: Legal Department
SUBMITTED BY: Michael DiSanto, City Attorney
BOARD/COMMISSION REVIEW:
Not required.
BACKGROUND:
At the November 19, 2019 Council meeting, after approving a Certificate of Appropriateness (COA) authorizing the demolition of the Kroehler Mansion on the current Little Friends property, Council directed staff to continue dialogue with Little Friends for possible incentives that could lead to the preservation of the Mansion.
At the December 3, 2019 Council meeting, Council adopted a resolution that proposed to Little Friends an incentive opportunity of up to $562,000 in exchange for the preservation of the Kroehler Mansion. The maximum incentive amount was based on estimated anticipated property tax revenues to be generated by a residential development on the property over 20 years. The resolution anticipated that the actual amount of the incentive would be the difference between the highest offer Little Friends received for its property with the mansion preserved versus the highest offer without the mansion.
On May 1, 2020, Little Friends submitted documentation (attached) to pursue the incentive opportunity including an overview of the history of bids it received for its property. Based on those bids, Little Friends initially requested the full incentive of $562,000, however based on the offers described in the letter, City staff opined that $450,000 is the highest justifiable incentive amount, as that represented the difference between the highest current offers of $4.95 million (without the Mansion) and $4.5 million (with the Mansion preserved).
At the May 19, 2020, Council meeting Council provided input to the potential developer, Ram West Capital, concerning its conceptual plan for the property, which included retaining the Mansion. At that time, Little Friends expressed to Council its request for a $562,000 incentive, but a consensus of Council opined that they would not consider an incentive greater than $450,000 based on the bids Little Friends received.
In July 2020, Little Friends informed staff that its Board agreed to accept an incentive of $450,000 and asked that the matter be scheduled for Council consideration prior to Little Friends’ August 24, 2020 closing on its new property in Warrenville.
DISCUSSION:
Staff has prepared a covenant incentive agreement between the City of Naperville and Little Friends for City Council’s consideration. The incentive agreement includes the following major terms:
• Little Friends will forfeit the COA authorizing demolition of the Kroehler Mansion (note: demolition of the Krejci Academy, Gymnasium, and Administration Building will continue to be permitted).
• Little Friends will record a covenant against the Subject Properties which requires that the Kroehler Mansion must remain protected and preserved and shall not be demolished nor relocated to any location not on the Subject Properties.
o Per this covenant, the Owner must submit a Preservation Plan for review and approval by the City prior to the demolition of any existing buildings attached to the Kroehler Mansion.
o Per this covenant, the Owner must first obtain a certificate of appropriateness before relocating the Kroehler Mansion on the Subject Properties and any future changes or alterations to the Kroehler Mansion, other than demolition, which is prohibited, shall remain subject to the requirements set forth in the Naperville Municipal Code for obtaining a certificate of appropriateness.
o Per this covenant, unless specifically permitted through a certificate of appropriateness, any demolition of all or part of the Kroehler Mansion or any relocation of the Mansion shall require the Owner to reimburse to the City the full $450,000 incentive. The City may record a lien against the property until this amount is paid.
o The Covenant shall initially be recorded against the entire Property, but after the Property is subdivided and the Kroehler Mansion is located on a single lot, the Covenant shall be amended by the authority of the City Manager to apply solely to that lot.
o Following recordation, the covenant may only be amended with approval by the City of Naperville.
• Following recordation of the incentive agreement and the covenant, the City shall remit to Little Friends $450,000.
• The incentive agreement includes certain termination clauses by which the City would not be obligated to pay the $450,000 incentive.
Little Friends Option
Note, Council approval of this agreement does not automatically cause Little Friends to forfeit the COA that allows for demolition of the mansion. Upon Council approval of this agreement, Little Friends will have until September 1, 2021 to decide whether to record the covenant. Upon recordation, the COA will be forfeit and the City will owe Little Friends the $450,000 incentive. However, Little Friends may change its mind and demolish the mansion and opt-out of the $450,000 incentive any time prior to its recordation of the covenant.
FISCAL IMPACT:
The $450,000 incentive will be funded through funds generated by the Citywide Food & Beverage Tax. The Citywide food and beverage tax is a 1% tax levied upon the retail purchase of alcoholic liquor, food or beverages at any "retail food facility" within the City. The Municipal Code requires that those revenues be distributed as follows: 75%, up to a maximum of approximately $1,900,000 a year, be contributed to the Special Events and Cultural Amenities (SECA) Grant Program; at least 25% be split equally and contributed to the City’s public safety pension funds; any remaining revenue available shall be first used as additional funding for the City's Social Service Grant Program up to a maximum of $500,000; and any remaining revenue above that level will be used to reduce the City's long-term debt obligations. This expenditure also requires an amendment to the City’s 2020 budget as this expenditure was not approved as part of the original 2020 budget.