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RESOLUTION AUTHORIZING TERMINATION AGREEMENT WITH NEW BURNHAM, LLC AND TRANSFER OF UP TO $1,164,240 TO THE DULUTH ECONOMIC DEVELOPMENT AUTHORITY FOR ASSISTANCE TO AFFORDABLE HOUSING PROJECTS.
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CITY PROPOSAL:
RESOLVED, that the proper city officials are hereby authorized to enter into an agreement substantially in the form of attached Exhibit A between the City, New Burnham, LLC and the Duluth Economic Development Authority ("DEDA"), terminating City Contract No. 24268; and
RESOLVED FURTHER, that upon the execution by the City, New Burnham, LLC and DEDA of said termination agreement, and the execution by DEDA and New Burnham, LLC of an agreement in substantially the form of attached Exhibit B, the proper city officials are hereby authorized to transfer to DEDA the sum of $380,000, payable from Fund 110-700-1450-5447(General, Transfers and Other Functions, Transfers and Accruals, Payment to Other Government Agencies), to fund DEDA's obligations under Exhibit B to provide additional assistance to support additional units of affordable housing in the New Burnham Project; and
FURTHER RESOLVED, that upon the execution by DEDA and Merge LLC d/b/a Merge Urban Development Group, LLC of an agreement in substantially the form of attached Exhibit C, the proper city officials are hereby authorized to transfer to DEDA the sum of $784,240, payable from Fund 110-700-1450-5447(General, Transfers and Other Functions, Transfers and Accruals, Payment to Other Government Agencies), to fund DEDA's obligations under Exhibit C to provide additional assistance to support increased affordability for the units in the Merge Projects.
Statement of Purpose
STATEMENT OF PURPOSE: The purpose of this resolution is to terminate the existing Agreement between the City, DEDA and New Burnham, LLC. Additionally, it allows those funds and those allocated to Merge, LLC to be transferred to DEDA to support affordable housing.
The New Burnham and Urbane Duluth projects are both being developed with tax increment assistance from DEDA. New Burnham, LLC is the Developer completing the New Burnham Apartments, which is the conversion and renovation of the former St. Louis County Jail into no less than 31 apartment units, not less than 10% if which must be held for persons having an income at or below 60% of the area median income as stipulated by their existing Development Agreement for tax increment with DEDA. Merge, LLC is the Developer completing the Urbane Duluth project, which is the development on the former Seaway Hotel site which consists of not less than 40 apartment units, all of which must be available to persons having incomes at or below 80% of area median income as stipulated by their existing Development Agreement for tax increment with DEDA.
To enhance affordability of units in existing housing development projects, the City planned to use a portion of its share of American Rescue Plan Act (“ARPA”) to fund such assistance. Council committed $380,000 of ARPA funding via resolution 21-1005R for New Burnham, LLC to fund an additional 10 units which would be made available to persons with an income at or below 70% of the area median income. A commitment of $784,240 of ARPA funding was approved via Council resolution 22-0018R for Merge, LLC to further subsidize the 40 units from 80% to 70% area median income. The modified revenue loss calculation included in the updated ARPA guidance expanded the City’s capacity and flexibility to fund projects out of the general fund. The ARPA guidance allows for the City to fund provisions for governmental services included in the annual budget, thereby freeing up budgeted resources to subsidize the New Burnham and Merge housing projects. This resolution changes the funding source for the two projects and eliminates the more cumbersome provisions from the original New Burnham agreement. The Development Agreements attached as Exhibit B and C will replace the former ARPA funding agreements with each entity for increased housing affordability in their project.