SIOUX CITY -- Sioux City Council members delayed a vote on a consulting services agreement related to the redevelopment of the Badgerow Building Monday, citing a lack of information about Chicago-based Hunden Strategic Partners' experience with projects that involve historic tax credits.
The council unanimously voted to defer the matter until its next meeting on Dec. 9.
City staff are proposing that the city enter into a contract with Hunden Strategic Partners (HSP) to assist with the process of selecting a developer for the project. The contract would not exceed the price of $60,000 plus expenses and be funded through the Combined Central Sioux City -- CBD tax-increment financing, or TIF.
"It's a little bit higher than what I had thought it was going to be," Mayor Bob Scott said of the cost of the agreement. "If we truly have the five to a dozen people interested in this project, then I wonder why we need this."
According to documents filed with the city, interest in the historic building from "a variety of developers" continues to grow. The council approved a resolution in October for the city to purchase the 12-story structure for $750,000 from Cedar Rapids Bank and Trust Company so that it can be used for the continued redevelopment of downtown.
Earlier this month, the council unanimously approved a resolution adopting an amendment to the Combined Central Sioux City -- CBD Urban Renewal Area Plan in connection with the project, which will receive no more than $1 million in TIF funds.
Given the magnitude of the project, City Economic Development Director Marty Dougherty said the city needs to "cast a wider net" to attract developers who have experience with large historic buildings.
"It's a fairly complex project, as you know, given the nature of the historic tax credits that are involved. In fact, there's a master lease that will continue on with the building; and whoever comes in to do development is going to have to work within the parameters of that lease," he said. "Honestly, we need somebody that knows what they're doing with historic tax credits."
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Scott asked Dougherty to name specific projects that HSP consulted on that involved historic tax credits. Dougherty said he didn't have that information with him.
"They have worked extensively with private developers across the country both in the convention center world and also in other types of commercial development, office development," Dougherty said.
Councilwoman Rhonda Capron said she was under the impression that the city already has five to six developers that are "very interested" in the project and are "good choices."
"Why do we need to have someone go out and look for more?" said Capron, who also asked if the council would still get to select the developer if HSP is involved in the process.
Dougherty said the city needs to market the building and look for "every potential developer that's there" in order to do the roughly $20 million project "right." According to city documents, environmental and structural engineering reports, as well as various general inspections, have "generally found no significant issues" with the Badgerow, which was built in 1933 and listed on the National Register of Historic Places.
Councilman Pete Groetken asked Dougherty to clarify if there are any issues with the building that would cost the city more money.
"I don't think so. We did find a couple leaks like you're going to have in a building that's been sitting empty. We notified the property manager and the bank and they agreed to take care of those. They're minor things," Dougherty said.
Cedar Rapids Bank and Trust purchased the Badgerow for $1 million at a November 2018 auction after it submitted the only bid. The bank had foreclosed on the building the previous year after the owner, California-based Mako One and its managing partner, Bruce DeBolt, defaulted on a bond that was secured to pay to renovate and redevelop it.
Under terms of the proposed purchase agreement, the bank would retain the historic tax credits previously claimed by Mako One, but the new developer would be eligible to apply for additional state and federal historic tax credits.
"In economic development terms, a project like this doesn't go to the highest bidder. It goes to, ultimately, whoever the council thinks will do the best job, given their level of experience and what they propose," said Dougherty, who told the council that the building will likely be restored as a mix of housing and commercial uses or perhaps an office.