To: Honorable Mayor and Members of Town Council
Through: David L. Corliss, Town Manager
From: Kevin Tilson, Director of Castle Rock Downtown Alliance
Title
Ordinance Approving the 221 Wilcox Street Redevelopment and Financing Agreement Between the Town of Castle Rock, the Castle Rock Downtown Development Authority, and Riverwalk II, LLC (Second Reading - Approved on First Reading on June 7, 2022 by a vote 4-3)
Body
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Executive Summary
Executive Summary
Confluence Companies has proposed a project in Downtown Castle Rock at the SW corner of Third Street and Wilcox Street at 221 Wilcox Street. The DDA Board met on February 4, 2021, to discuss the proposed project at 221 Wilcox Street, and the board was in unanimous agreement that the proposed project fit the Plan of Development, would have a positive impact on Downtown and was worthy of further analysis. The board directed staff to work with the project and bring back a recommendation to the DDA Board.
Staff was directed to work with project, the Town, the County Assessor and a third-party entity to review the details of the proposed project and pro forma. The review by the independent, third party (included with this memo) identifies a gap on the feasibility of this project. DDA Staff, in partnership with Town Staff, and the development team at Confluence Companies has outlined deal terms for the use of tax increment financing (TIF) to facilitate a mixed-use project at the proverbial “main and main” location in Downtown Castle. Staff is requesting that the DDA Board review the proposed terms for a redevelopment agreement and take action on it.
Theses highlighted deal points are discussed in more detail later in this memo:
• Share back 50% of the property and sales tax generated by the project each year until the not to exceed amount ($3,500,000) is reached or until 12/1/2038.
• Project to Include:
o 5 story mixed use project
o 28 residential apartments (31,984 SF) on levels 3-5.
o Office Space: ~11,257 SF
o Retail Space: ~8,353 SF
o Parking Spaces Onsite: 28 subsurface parking spaces
o Parking Spaces Offsite: 27 parking spaces
• Project must include infrastructure necessary for at least 1 restaurant tenant (grease interceptor and hood).
• Project must provide appropriate access to pedestrian walkways on Wilcox and Third Street during construction.
• Project must receive approval from the Design Review Board before 9/30/22.
• Project must receive a building permit before 12/31/22.
• Project must receive a Certificate of Occupancy by 6/1/25, with optional 6-month extension.
• Façade materials to be presented to DDA Board for approval before installation.
Discussion
Background
The function of the Downtown Development Authority is to revitalize, redevelop and energize Downtown Castle Rock through strategic public investment that facilitates and provides the infrastructure and environment that allows the goals of the Plan of Development to be realized.
The Town’s Community Survey has repeatedly identified “Downtown” as a top priority for the community. The Alliance’s Downtown survey in 2015 overwhelmingly expresses the desire of Castle Rock residents to see investment and vibrancy in Downtown, as does the feedback gathered at community meetings and community events. In addition, the DDA Plan of Development and the mutually agreed upon priorities from Town Council and the DDA for Downtown, identify projects such as this one as a top priority for Downtown.
The project proposes to accomplish multiple goals of the Plan of Development, by providing the infrastructure/buildings in Downtown which allow the private sector to bring specific uses to Downtown. The desired uses are outlined in the Plan of Development, and were discussed with Town Council and the DDA Board in the work session held in August of 2014. These uses are listed below:
• Restaurant and retail: Retail studies have shown that one of the best ways to redevelop a targeted area is to attract restaurants. People spend their disposable income where there are dining options.
• Office: A strong weekday and daytime population is required to support small businesses during the work week.
• Residential: A vibrant downtown environment must stay active and full of people in the evenings and on the weekends when the downtown workforce is off of work. Residential density is a key and needed component to create a vibrant environment in Downtown Castle Rock.
The proposed project at 221 Wilcox Street proposes to positively impact each of these desired uses at a prime location in Downtown Castle Rock, at the corner of Third Street and Wilcox Street, adjacent to the Wilcox Square. This important location warrants special consideration by the Town and DDA. This proejct provides an opportunity for the community to influence specific aspects of the development of this corner. Specifically, this proposed project and Redevelopment Agreement would require the investment at this site to include infrastructure for first floor dining and retail, a daytime population of office users and population of residents.
In the last 10 years or more, the Castle Rock community has taken a number of steps to put in place tools, code, regulation, public boards, etc., that are aimed at facilitating a more active and vibrant Downtown. This includes many public meetings with residents, business owners, property owners, Chamber members, EDC members, Alliance members, and Town Council members, to:
• Create the Downtown Advisory Commission
• Pass ballot measures where business owners voted to tax themselves to create the DDA
• Create the Plan of Development (DDA Document)
• Create the Downtown Master Plan (Town Document)
• Update the Downtown Overlay District to encourage a more vibrant downtown
• Update the signage code in Downtown to allow signage that fits in a historic downtown
This documents among many things encourage investment in the community that will positively contribute to the Downtown economy, and it is believe that this project fits those goals.
The DDA and Town Council have established the following priorities for Downtown:
1. Development in the core.
2. Development that increases density (offices bringing people into downtown daily or residences with people living in downtown).
3. Development that includes restaurants (driving traffic downtown) or retail (increasing Sales Tax TIF).
4. Development outside of the core that has other positive impact or that generates TIF which can be used to invest in projects that accomplish goals 1-3.
The proposed project accomplishes the top 3 priorities and generates TIF, which can potentially be used to assist the project and be used to further additional investment in Downtown. In addition, this project is an ideal complimentary project to the investments that have already occurred in Downtown and on an important corner in Downtown.
Proposed Project
Confluence Companies is proposing mixed-use development with 28 residential units, roughly 8,300 SF of retail (plans to include 1 restaurant), roughly 12,000 SF of second story commercial office, and 28 onsite parking spaces and 27 offsite parking spaces at the adjacent property on the Riverwalk North property.
The renderings of the proposed project are included with this memo. These renderings will also be included as an exhibit in the proposed Redevelopment Agreement. As part of the negotiations on this project, the developer has generated multiple iterations of exterior design renderings. Each iteration has been done to accommodate requests from staff to improve the architecture on the project. Things like stepping back the top floor of the project, adding architectural details similar to other buildings in Downtown Castle Rock and activating the first floor of the building with a retail/restaurant tenant were all accommodated by the current rendering.
Pro Forma and Gap Analysis
Town and DDA staff utilized the service of Jesse Silverstein with Development Research Partners and Andy Arnold of SEH, to conduct an independent, unbiased, third party review of the pro forma. This analysis also included a check on developer assumptions and projections. These reviewers came recommended to Castle Rock from the staff of several DDAs, URAs and Economic Development Organizations in the state and have performed prior analysis for Castle Rock. This analysis found an identified a gap on this project.
Jesse Silverstein and Andy Arnold provided their written opinion of this project based on their review of the project pro forma and check on developer assumptions. They identified an upfront gap on this project of $5,500,000 - $6,500,000. This analysis is attached to this memo as Attachment B. While the not to exceed amount on this project is set at $3,500,000, a conservative estimate for this project’s total increment is roughly $2,500,000 - $3,000,000.
Agreement Structure
The terms of the proposed agreement are outlined below. If approved, an agreement would be drafted consistent with the same intent.
Terms:
• Project to Include:
o 28 residential apartments (31,984 SF) on levels 3-5.
o Office Space: ~11,257 SF
o Retail Space: ~8,353 SF
o Parking Spaces Onsite: 28 subsurface parking spaces
o Parking Spaces Offsite: 27 parking spaces
• Town/DDA to share back 50% of the Property and Sales Tax Increment generated by the project.
o Each year until the not to exceed amount ($3,500,000) is reached or until 12/1/2038.
Requirements:
• Project must include infrastructure necessary for at least 1 restaurant tenant (grease interceptor and hood).
• Project must provide appropriate access to pedestrian walkways on Wilcox and Third Street during construction.
• Project must receive approval from the Design Review Board before 9/30/22.
• Project must receive a building permit before 12/31/22.
• Project must receive a Certificate of Occupancy by 6/1/25, with optional 6 month extension.
• Façade materials to be presented to DDA Board for approval before installation.
An increment payment will only be made to the developer if increment is generated by the project and the district as a whole, and after existing debt obligations are fulfilled.
Source of Funds
The proposed Redevelopment Agreement is recommended to be written so that the private sector pays for the private sector. The proposal would be structured to be performance based, where the Town would share back a portion of sales and property taxes only after they are first collected by the County or the Town, from the owner of the project. This type of structure greatly reduces the risk to the Town and DDA on the project, since the project would only receive a share back once they have built a successful project that pays greater property and sales tax than the property did prior to the project.
The added benefit to the Town and DDA is that increment generated by this project that is not shared back with the project (50% of the increment as proposed), will go to the Downtown Special Fund and can be used accomplish other great things in Downtown.
Property Entitlements/Development Fees
The developer would be responsible for preparing various applications and proposals for Town consideration. The Town will be responsible for reviewing and processing these applications/requests on a timely basis for Town Council consideration following required public processes.
The Town will receive various permit fees, development impact fees and utility system development fees, which will cover the costs of development review services and capital infrastructure demand created by the project.
Staff Recommendation
Organizations supporting the proposed project include:
Castle Rock Economic Partnership:
Town of Castle Rock
Castle Rock EDC
Castle Rock Chamber of Commerce
Downtown Merchants Association
Downtown Development Authority
Staff recommends that the Downtown Development Authority and Town Council approve this proposed deal structure, and approve a Redevelopment Agreement consistent with the details provided above, with Confluence Companies, as it would increase the vitality and redevelopment of Downtown Castle Rock and positively impact the Town’s major economic development objectives.
On May 26, 2022 the Downtown Development Authority approved the deal structure presented above and recommend this project to Town Council for approval.
Attachments
Ordinance
Agreement
Renderings of the project
Pro Forma Analysis from Development Research Partners and SHE
Exhibits 1-5