Order – Tax Increment Exemption Agreement – Watson Redevelopment Limited Partnership, LLC – Motion Approved


INTRODUCED BY: MAYOR THOMAS P. KOCH
CITY OF QUINCY IN COUNCIL
ORDER NO. 2017-004
ORDERED: January 9, 2017

HOUSING DEVELOPMENT INCENTIVE PROGRAM
TAX INCREMENT EXEMPTION AGREEMENT
between
THE CITY OF QUINCY
and
WATSON REDEVELOPMENT LIMITED PARTNERSHIP, LLC

This AGREEMENT is made this day of , 20 by and between the City of Quincy, (“Municipality”) and Watson Redevelopment Limited Partnership, a limited liability company with an address at c/o WinnCompanies Six Faneuil Hall Marketplace Boston, Massachusetts 02109, that partnership hereinafter referred to as the “Sponsor.”

Section 1— Agreement

The Municipality and the Sponsor, for good and valuable consideration and in consideration of the covenants and agreements herein contained, hereby make this agreement regarding a tax increment exemption pursuant to the Housing Development (HD) Incentive Program, M.G.L. c. 40V and the regulations promulgated thereunder at 760 CMR 66.00 (HD TIE), with respect to the Property as herein defined.

Section 2 — Definitions

Each reference in this Agreement to the following terms shall be deemed to have the following meanings:

Partnership: As used herein shall be the Watson Redevelopment Limited Partnership and its successors and assigns.

Act: M.G.L. c. 40V as may be amended from time to time.

Completion: Certificates of occupancy have been issued for the entire Project.

DHCD: Massachusetts Department of Housing and Community Development.

Event of Default: An “Event of Default” as defined in Section 5 below.

Final Certification: Determination by DHCD that the Sponsor has completed the substantial rehabilitation of the Property, consistent with the Rehabilitation Plans, including the creation of MRRUs, as set forth in the Act and the Regulations.

Fiscal Year: An annual period of July 1 through June 30.

HDIP AMI: Housing Development Incentive Program Area Median Income as defined at 760 CMR 66.04(2)(f)(1) and set forth in Exhibit 3.

HD Project: A Certified Housing Development Project as defined in the Act and the Regulations.

HD Zone: The Housing Development Zone adopted by the Quincy City Council on December 5, 2016 and approved by DHCD as evidenced by a Certificate of Approval dated , 20 and recorded with the Norfolk County Registry of Deeds.

MRRU: Market Rate Residential Unit(s) as defined at Section 3.B.1.

Property: 94-102 East Howard Street and 116 East Howard Street as shown in Exhibit 1, “Map of Property” and further described in Exhibit 2, “Legal Description of Property”.

Regulations: 760 CMR 66.00.

Rehabilitation Plans: The material submitted for Conditional Certification pursuant to 760 CMR 66.05(3)(a) and approved by DHCD.

Sponsor: Watson Redevelopment Limited Partnership, a limited liability company, with an address at c/o WinnCompanies, 6 Faneuil Hall Marketplace, Boston, Massachusetts, 02109, its successors and assigns.

Section 3 — Sponsor’s Covenants

A. Substantial Rehabilitation of the Property. Sponsor will undertake the substantial rehabilitation of the Property in accordance with the work and schedule set forth in the Rehabilitation Plans.

B. Market Rate Residential Units.

1) There shall be a total of 140 residential rental units created in the Project of which 112 shall be MRRUs comprised of six (6) Studio, sixty-eight (68) 1 Bedroom, and thirty-eight (38) 2 Bedroom units. The monthly rent for such units shall be priced to target households at not less than 110% of HDIP AMI, as set forth in Exhibit 3, “Market Rate Residential Units — Pricing Plan”.

2) Sponsor shall use good faith efforts to maintain the units as MRRUs for a minimum of 30 years.

C. Marketing. Sponsor shall cause the MRRU to be marketed in a manner that is consistent with the strategies, implementation plan and affirmative fair housing efforts set out in the Rehabilitation Plans.

D. HD Project Certification. Sponsor shall take all actions reasonably necessary to obtain Final Certification of the Property as an HD Project including but not limited to submitting applications to DHCD for Conditional Certification and Final Certification consistent with the requirements of the Act and the Regulations.

Section 4 — Tax Increment Exemption

Municipality agrees to grant Sponsor an exemption to the real property taxes due on the Property pursuant to M.G.L. Chapter 40, Section 59 according to the following terms.

A. Base Value.
$2,263,200 (FY17).

B. MRRU Percentage.
80 Percent. The MRRU Percentage shall be confirmed as required in paragraph F, below.

C. Exemption Percentage.
Commencing on the Effective Date which shall be Fiscal Year 1:

YEAR FISCAL
YEAR
EXEMPTION
PERCENTAGE
1 2020 (7/1/2019 — 6/30/20) 80%
2 2021 (7/1/2020 — 6/30/21) 80%
3 2022 (7/1/2021 — 6/30/22) 80%
4 2023 (7/1/2022 — 6/30/23) 80%
5 2024 (7/1/2023 — 6/30/24) 80%
6 2025 (7/1/2024 — 6/30/25) 67%
7 2026 (7/1/2025 — 6/30/26) 67%
8 2027 (7/1/2026 — 6/30/27) 67%
9 2028 (7/1/2027 — 6/30/28) 59%
10 2029 (7/1/2028 — 6/30/29) 57%

D. The Increment. As defined at 760 CMR 66.06(1)(b)(1).

E. Calculation. For each Fiscal Year during the term of this Agreement, the HD TIE shall be determined by applying the Exemption Percentage to the property tax on the Increment.

F. Confirmation or Amendment of Calculation. Upon Completion, and prior to applying for Final Certification of the Project, the Sponsor and Municipality shall file a “Tax Increment Exemption — Confirmation of Calculation” in the form attached as Exhibit 4 (“TIE Confirmation”). To the extent that the dates or figures in the TIE Confirmation differ from those set forth in this Agreement, the contents of the TIE Confirmation shall control and shall be deemed to have amended this Agreement.

Section 5 — Default

A. Event of Default. An “Event of Default” shall arise under this Agreement upon the occurrence of any one or more of the following events:

1) Breach of Covenant Prior to Final Certification. Subject to the limitations set forth in the Regulations at section 66.05(4)(b), Sponsor defaults in the observance or performance of any material covenant, condition or agreement to be observed or performed by Sponsor pursuant to the terms of this Agreement, and the continuance of such default for thirty (30) days after written notice thereof from the Municipality; provided, however, that if the curing of such default cannot be accomplished with due diligence within said period of thirty (30) days, then Sponsor shall have such additional reasonable period of time, not to exceed thirty (30) days, to cure such default provided the Sponsor shall have commenced to cure such default within the initial thirty (30) day period, such cure shall have been diligently prosecuted by the Sponsor thereafter to completion.

2) Breach of Covenant Subsequent to Final Certification. Subject to the limitations set forth in the Regulations at section 66.05(5), and as determined by DHCD, Sponsor’s conduct is materially at variance with the representations made in its Rehabilitation Plans; such variance is found to frustrate the public purposes that Final Certification was intended to advance, and the continuance of such default for thirty (30) days after written notice thereof from the Municipality; provided, however, that if the curing of such default cannot be accomplished with due diligence within said period of thirty (30) days, then Sponsor shall have such additional reasonable period of time, not to exceed thirty (30) days, to cure such default provided the Sponsor shall have commenced to cure such default within the initial thirty (30) day period, such cure shall have been diligently prosecuted by the Sponsor thereafter to completion.

3) Misrepresentation. Any representation made herein or in any report, certificate, financial statement or other instrument furnished in connection with this Agreement shall prove to be false in any material respect.

B. Rights on Default.

1) Prior to Final Certification. Upon the occurrence of an Event of Default prior to Final Certification, then this Agreement shall become null and void.

2) Subsequent to Final Certification. Upon the occurrence of an Event of Default subsequent to Final Certification, then:

a. Revocation of Certification. Pursuant to the terms of the Act, the Municipality, may, at its sole discretion, request that DHCD revoke the Final Certification of the Project, such revocation to take effect on the first day of the fiscal year in which DHCD determines that a material variance commenced.

b. Termination of Agreement. Upon revocation of certification, this Agreement shall become null and void as of the effective date of such revocation.

c. Recoupment of Economic Benefit. Upon revocation of certification, the Municipality may bring a cause of action against Sponsor for the value of any economic benefit received by Sponsor prior to or subsequent to such revocation.

3) Other Remedies. The Municipality’s rights upon the occurrence of an Event of Default are in addition to those granted to DHCD and the Massachusetts Commissioner of Revenue under the terms of the Act.

Section 6 — Miscellaneous

A. Effective Date. The effective date of the HD TIE shall be July 1st of the first Fiscal Year following DHCD’s Final Certification of the HD Project upon full stabilization pursuant to the requirements of the Act and the Regulations, which date is anticipated to be December, 2018. The Effective Date shall be confirmed as required in paragraph F, below. Taxes prior to stabilization shall be based on as-is market assessment of the undeveloped property as of December 2016.

B. Term of Agreement. This Agreement shall expire upon the Municipality’s acceptance of the annual report, as required below, for the final Fiscal Year for which the Municipality is granting the TIE.

C. Reporting. Sponsor shall submit reports to the Municipality not later than thirty (30) days after June 30 of each Fiscal Year for the term of this Agreement. Each report shall contain the following information:

1) Until Completion, the status of construction in relation to the schedule contained in the Rehabilitation Plan;

2) Until Completion, the status of marketing in relation to the Rehabilitation Plans; and

3) For each MRRU, the number of bedrooms in the unit, whether it was leased as of the end of the most recent fiscal year and the monthly rent charged.

D. Assignment. The Sponsor shall not assign any interest in this Agreement, and shall not transfer any interest in the same, without the prior written consent of the Municipality, which approval shall not be unreasonably withheld. The foregoing notwithstanding, the rights and obligations of this Agreement shall inure to the benefit of any entity succeeding to the interests of the Sponsor by merger.

E. Notices. Any notice, request, instruction or other document to be given hereunder to either party by the other shall be in writing and delivered personally or sent by recognized overnight courier, receipt confirmed or sent by certified or registered mail, postage prepaid, as follows, and shall be conclusively deemed to have been received and be effective on the day on which personally delivered or, if sent by certified or registered mail, three (3) days after the day on which mailed or, if sent by overnight courier, on the day after delivered to such courier.

1) Municipality:
City of Quincy
34 Coddington Street, 3rd Floor
Quincy, Massachusetts 02169
ATTN: Planning Director

2) Sponsor:
Watson Redevelopment Limited Partnership
c/o WinnCompanies
Six Faneuil Hall Marketplace
Boston, Massachusetts 02109
ATTN: Resident Agent

3) Copy to DHCD: All such notices shall be copied to DHCD at:
Department of Housing & Community
Development 100 Cambridge Street, Suite 300
Boston, MA 02124
ATTN: Associate Director, Housing Development

4) Change of Address. Either party may change the address to which notices are to be sent to it by giving written notice of such change of address to the other party in the manner herein provided for giving notice.

F. Modifications. No modification or waiver of any provision of this Agreement, nor consent to any departure by the Sponsor therefrom shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No failure or delay on the part of Municipality in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

IN WITNESS WHEREOF, the Sponsor has caused this Agreement to be duly executed in its name and behalf and its seal affixed by its duly authorized representative, and the Municipality has caused this Agreement to be executed in its name and behalf and its seal duly affixed by its Mayor as of the day and year first above written.

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MUNICIPALITY SPONSOR
_________________________ _________________________
By: Mayor Thomas P. Koch By: Watson Redevelopment GP LLC

EXHIBIT 2

DESCRIPTION OF PROPERTY

94-102 East Howard Street:

Registered Land:

That land situated in Quincy, in the County of Norfolk and the Commonwealth of Massachusetts, described as follows:

Lot 8 (excepting the fee in East Howard Street) on Land Court Plan No. 18298E filed with Certificate of Title No. 173326, Book 867.

Recorded Land:

That land situated in Quincy, in the County of Norfolk and the Commonwealth of Massachusetts, shown as “Lot 1” on a plan of land entitled, “Plan of Land East Howard Street Quincy, Massachusetts,” prepared by Merrill Associates, Inc., dated January 27, 2006, recorded with the Norfolk County Registry of Deeds as Plan No. 76 of 2006 in Plan Book 553.

116 East Howard Street:

Certain parcels of land with any buildings located thereon located at East Howard Street, Quincy, Norfolk County, Massachusetts, and shown as Lots 9 and 10 (excluding fee in East Howard Street) on a plan entitled “Plan of Land in Quincy,” prepared by Merrill Associates, Inc. dated January 27, 2006 and filed as Land Court Plan 18298G. (Note: Lots 9 and 10 on L.C.P. 18298G result from a subdivision of Lot 7 on L.C.P. 18298F.)

EXHIBIT 3

MARKET RATE RESIDENTIAL UNITS — PRICING PLAN

HDIP AMI: $64,577, as may be amended from time to time consistent with changes in the Pricing Area.

Pricing Area: The HDIP Pricing Area is the municipal boundaries of the City of Quincy.

Proposed Initial Monthly Rent:
Studio: $1,245
1 Bedroom: $1,333
2 Bedroom: $1,600

Proposed rents assume landlord pays all utilities. To the extent residents pay their utilities, rents in the pricing plan will be adjusted downward based on standard utility allowances.

EXHIBIT 4

TAX INCREMENT EXEMPTION — CONFIRMATION OF CALCULATION

In connection with the Tax Increment Exemption Agreement dated______________________, 20____ by and between the City of Quincy, and the Watson Redevelopment Limited Partnership, a limited liability company with an address at c/o WinnCompanies, Six Faneuil Hall Marketplace, Boston, Massachusetts, 02109, with respect to the property at 94-102 East Howard Street and 116 East Howard Street, Quincy, Massachusetts, 02169 (the “Agreement”), the parties hereby confirm the following elements of the Agreement. Unless otherwise stated, capitalized terms have the meaning set forth in the Agreement.

1. The effective date of the Agreement is: _____________________

2. The MRRU is:_____________________

3. The assessed value of the of the residential portion of the Property upon Completion is: _____________________

To the extent that the dates or figures in this “Tax Increment Exemption — Confirmation of Calculation” differ from those set forth in the Agreement, the contents of this document shall control and shall be deemed to have amended the Agreement.

MUNICIPALITY SPONSOR
_________________________ _________________________
By: Mayor Thomas P. Koch By: Watson Redevelopment GP LLC

Dated: __________________

EXHIBIT 5

DEVELOPMENT SCHEDULE

Closing: February 2017

Construction Period: 16 months

Projected pre-leasing commencement: April 2018

Projected certificate of occupancy date/initial occupancy: june/july 2018

Projected stabilization @ 95%: December 2018

EXHIBIT 6

SOURCES AND USES BUDGET

Estimated Project Sources:
$2,450,175 Low Income Housing Tax Credit Equity
$30,768,616 Permanent Debt
$7,000,000 MassHousing Workforce Housing Debt
$1,800,000 DHCD HDIP Equity
$1,006,923 Developer Equity/Deferred Developer Fees
$2.900,000 Other Soft State and Local Subsidy
$45,925,714 Total Sources of Funds
Estimated Project Uses
$5,090,000 Acquisition
$32,604,735 Direct Construction
$5,806,380 Soft Costs
$2,284,599 Developer Fee and Overhead
$140,000 Capitalized Reserves
$45,925,714 Total Uses of Funds

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