City Council to consider $1.25 million taxpayer guaranteed loan for Old Town Elk Grove development
At their first meeting of 2021 on Wednesday, January 13, the Elk Grove City Council will consider providing a taxpayer guarantee for a devel...
https://www.elkgrovenews.net/2021/01/city-council-to-consider-taxpayer.html
At their first meeting of 2021 on Wednesday, January 13, the Elk Grove City Council will consider providing a taxpayer guarantee for a development project already underway in Old Town Elk Grove.
The proposal, which comes from the city's economic development director Darrell Doan would require the city to deposit $1.25 million to guarantee a loan for the developer of property in Old Town. That property, which includes old brick structures at 9676 Railroad Street, on the east side of the Union Pacific railroad track just south of Elk Grove Boulevard, was purchased by the city in 2017 for $420,000.
The city then sold the property at a loss for $401,950 and provided financing for the purchaser and developer, Sacramento-based Eco Green LLC, which is affiliated with Sacramento-based D&S Development. After the first financing of the project at 4.25-percent, the city refinanced at 2.75.
According to Doan's report, the development has started to improve the brick structures that include 90 market-rate apartments, so-called "destination restaurants," and retail. The report says the development costs are $60 million.
Along with selling the property at a loss of $18,050 of taxpayers' money, the city has deferred $82,386 in development impact fees and provided sewer impact fee credits valued at $62,555.
The project is another attempt by Elk Grove to revive the moribund Old Town special planning area. Residents and shoppers have eschewed Old Town in favor of other dining and shopping centers in the new portions of the city, primarily near Highway 99 and to the west.
Despite the economic uncertainty brought on by the COVID-10 pandemic, in his report, Doan claims the developers have identified several prospects for the restaurant space. However, Doan qualified his rosy assessment by saying these prospects "are unable to commit to a lease at this time due to the current economic environment."
Because the developers were unable to secure a restaurant lease, they could not obtain "conventional commercial construction financing," as noted in the report. Under threat, the developer told the city without the financing, they "would have to abandon or significantly delay Phase I of the project."
If approved by the city council, to subsidize the developer, Elk Grove will deposit $1.25 million in the Elk Grove branch of F&M Bank to guarantee the loan to Eco Green. The developer will have a five-year interest-only payback with a ballon payback.
Doan noted if the Eco Green defaults, "the city would take possession of the property, the value of which is estimated to exceed the value of the City's security deposit and existing mortgage."
Along with this retail development, the city is planning a high-end retail center at the District56 civic center. Initially dubbed Project Elevate, the city has put those plans on hold amidst the ongoing COVID-19 pandemic, and when it resumes it could negatively affect prospects for the Old Town project.
Wednesday night's meeting can be viewed online and starts at 6 p.m.
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