State officials are looking for a more robust commitment from the community before signing off on a low-interest loan to help finance the Ellicott Station project in Batavia; developer Sam Savarino told members of the GCEDC board at their Thursday meeting.
As a result, the GCEDC board will consider an expanded PILOT for the project to match the 30-year loan from Homes and Community Renewal and also take into account the increased cost of the project, from $17.6 million to $21.75 million, as well as the expanded size from 73,100 square feet to 99,111 square feet, and the increase in apartment units from 51 to 55.
The loan is the last piece of the financing puzzle for the project, which has already been delayed by a year because of the complex financing, that includes a $3.5 million investment from Savarino, tax incentives by GCEDC of at least $1.5 million, state grants, and more than $10 million in private investment through a program called the New Market Tax Credits, which allows investors to purchase federal tax credits to help finance projects in distressed urban areas.
As the cost of the project has gone up, so has the cost of financing and transaction costs, which could top $2.5 million.
This is the first project to combine New Market Tax Credits and HCR financing, according to Savarino Companies CFO Milissa Acquard.
The incentives already approved include $897,293 in sales tax savings, $128,232 mortgage tax savings and GCEDC will consider increasing the and $537,398 in property tax savings for the project.
Half of the PILOT payments will be returned to the developer through the “Batavia Pathway to Prosperity” (BP2) program with half going to the relevant taxing jurisdictions (typically, half of the PILOT in a BP2 project area goes into a pool to provide future assistance to to other projects).
Savarino said he thinks their proposal with HCR has gotten past a concern about the planned rental rates for the apartments.
HCR wants to ensure the apartments will be occupied and setting rents plus utilities at 90 percent of the city's median income seemed high to HCR officials, even though that formula is typically acceptable under HCR regulations. Officials asked Savarino to consider setting rents based on 80 or 85 percent of the median income.
Changing the rental rate creates a domino effect for the rest of the financial package, Savarino said, that makes the project much harder to pull off.
Savarino and Acquard said they both think they've reached an agreement with HRC on rents and the financing package but that includes an expanded PILOT approved by the GCEDC board.
"One of the issues that have kept coming up, in some cases with the New Market investors, but also with HCR, is the local buy-in," Savarino said. "It's been deemed not to have enough investment from the community for the benefit the community is getting. We've effectively checked that box by discussing a possible change to the PILOT."
A public hearing will be scheduled on a revised PILOT once the details are worked out.