Commission Votes to Purchase Velin Building - Refuses to Waive Insurance Payment

IRONWOOD, MI - Tuesday, December 28, 2010 - Before the Ironwood City Commission last night were two key issues to consider involving the Ironwood Theatre. The first issue was to consider a request from the Ironwood Theatre, Inc. to waive payment for the Building Insurance Policy Premium.

The building is owned by the City of Ironwood. It is leased by the Ironwood Theatre, Inc. and they are responsible for maintenance and upkeep of the property. One of their responsibilities is to maintain building insurance. Actually, the City of Ironwood pays the insurance, and in the past Ironwood Theatre, Inc. has reimbursed the City. Back in 2008, the Theatre Board approached the City Commission and requested that the City waive the insurance payment because the Theatre was struggling due to the sluggish economy. This year, again, the Board is requesting the City waive the premiums.

The annual cost for the insurance on the building is approximately $3,029. According to Erickson, the Theatre Board has cut back as many expenses as they possibly could due to the poor economy.

Mayor Burchell reminded the Commission that the previous Commission insisted that matching funds from neighboring communities be paid before the City would waive any premium payments.

Ironwood Theatre Board Member Tom Brown told the Commission that other communities were approached but only one community was willing to help. Wakefield Township contributed $200, but the money was to be used for youth programs only.

Rick Semo asked where the money would come from if the Commission were to support the idea.

Financial Director Julie Frederickson told the Commission that the budget would need to be amended if the Commission were to waive the payment. She noted that the Depot Museum also pays their insurance premiums to the City.

No immediate action was taken.

The second issue before the Commission was then presented by Mayor Burchell. He told the Commission that the Theatre Board was previously working to purchase the Theatre concourse with grant money that was applied for by the City. During the course of negotiations to purchase a portion of the building, the owner offered the City a special price on the whole building. The owner offered the Theatre the entire building for half the original asking price.

Burchell told the Commission that several generous patrons of the Theatre have pledged to provide the additional funds needed to purchase the building. According to Burchell, enough donations have been received to purchase the building without use of any City funds. The $50,000 grant that was applied for to rennovate the concourse would be used as part of the payment on the building.  The owner is now asking the Theatre for $90,000. The remaining $40,000 has already been pledged to purche the building outright.

In order for the Theatre Board to follow through with their plans to purchase the building, the Commission would need to approve the purchase.

According to Burchell, one of the donors needed to have the deal finalized before the year's end for tax purposes. Therefore a decision had to be made at last night's meeting.

City Manager Scott Erickson explained that Community Development Director Merritt Bussiere had prepared a "Redevelopment Scenario" that showed the benefits of purchasing the building and also showed some of the specs of the building.

Bussiere told the Commission that the City could be taking somewhat of a risk considering the building's boiler was over forty years old. However, he explained that the owner of the building was going to put the building back on the market for $200,000 if the City didn't purchase the building. He suggested that the risk of having the building sit empty for another five or more years might be greater than any potential boiler problems.

 

CREATING AN UPWARD SPIRAL IN DOWNTOWN IRONWOOD


A REDEVELOPMENT SCENARIO



For all of Downtown Ironwood’s challenges over time, we’ve recently seen signs of hope. In the wake of Downtown Blueprint adoption in mid-2009:


  • More than 21 new businesses have opened their doors in the Downtown District. While not all of these ventures survive in today’s tough economy, the result is a net gain of 14 new businesses and 28 new jobs. Clearly people are seeing opportunities to grow in our city;

  • In November 2010, with progress made or completion accomplished on half of all Blueprint implementation projects, the Downtown Ironwood Development Authority set project priorities and adopted a 2011 DIDA Work Plan strong on partnerships with the city, the Ironwood Area Chamber of Commerce, and other resource groups; and

  • In 2011, $700,000 million in grants and local match funds will drive streetscaping, signage, park development, and other improvements giving the District a fresh new look. An additional $800,000 in improvement grants is actively being sought.


We’re moving forward. But there are still empty buildings and storefronts. Marginal business enterprises. Quiet evenings.


What the Downtown needs is a spark, a catalyst to stimulate an upward spiral. The “Focus Block” of the District is Aurora Street between Suffolk and Lowell. Redeveloping a key property close to the Historic Ironwood Theatre – the District’s cultural hub – with strong private and public investment has the potential to make that Focus Block an economic and jobs hub for our Downtown.


The Historic Velin Building


Nothing worth doing comes easy, but with the right mix of partners and support, the Velin Building could provide the spark we are all looking for. This brief summary provides a bit of background and some of the basic steps required to move the project forward.


Located immediately adjacent to the Ironwood Theatre – both buildings are on the National Historic Register – the Velin facility was built in 1922. Structurally and cosmetically in excellent shape, the building offers over 12,500 square feet of useable space. On the ground, space for retail, bar, restaurant or other business options ranges from 1,600 sq feet up to the full ground floor area of 7,200 sq feet. The second floor has mostly been used for professional offices over the years providing 8 office spaces that range in size from 250 to 2,000 sq feet. This space could be renovated.


This outstanding property has been underutilized. In recent years, higher rental rates and speculation have driven occupancy rates down from 80 percent to just 23 percent today.


What’s the Plan? Basic Steps for Redeveloping the Velin Building


Step 1: Purchase the Theatre Concourse and the Velin Building – A $50,000 grant has been secured to purchase the Concourse, plus $20,000 more for renovations. As discussions on this smaller project evolved, the current owner cut his selling price in half and, in a special offer to the Theatre and the City, said an additional $50,000 would buy the whole facility. After negotiations, the total purchase price has now dropped to $90,000. Private benefactors, seeing the opportunity for the Theatre and Downtown revitalization, have stepped up to close the gap. The owner’s offer expires on December 31, 2010.


Step #2: For as brief a time as possible, The City of Ironwood owns, operates and maintains the Velin Building while working with partners to obtain private investment, grant funds, and complete key renovations. This interim role by the city is one of facilitator and coordinator of the redevelopment process and, as a local government, serving as a target for public grants.


  • Operations & Maintenance: Fixed recurring costs for the building – gas, electric, insurance and maintenance – run a little over $1,000 a month, or about $12,000 a year. Current monthly rental income is $1,420, or about $17,000 a year. The exact Operations and Maintenance plan needs to be established, but some positive cash flow is present.

  • Retail, Office, Other Space Rentals: An analysis of current Downtown rental rates for various uses will help the City determine and provide reasonable rates for the spaces available. Additional income will ensure that fixed recurring costs are amply covered, and may contribute to some renovation costs.

  • Important Renovations to be addressed during Redevelopment Process:

    • Boiler & Heating System – cost estimates range from $50,000 to $80,000

    • Elevators – cost estimates range from $125,000 to $150,000

    • Bathrooms with Access for the Handicapped

    • Other renovations needed to support business project development

  • Potential Grant Funds

    • All grant programs require that the city work with private investors who put dollars into a redeveloped Velin Building and create permanent jobs

    • Grant opportunities being looked at by City staff include Michigan Economic Development Authority programs such as Special Downtown Projects, Brownfield Redevelopment Incentives, Obsolete Property Rehabilitation Exemption, MI Economic Growth Authority’s Business Tax Credit, and Urban Revitalization 3.0, and the USDA’s Rural Business Enterprise Grant.


Step #3: Reinvestment and Redevelopment, a Public/Private Partnership:


  • Private capital will make this project happen. City ownership keeps redevelopment costs low and creates a unique target for substantial public funding when matched with private investment

  • Various business projects have been discussed for the Velin Building. The City would not select projects. Local stakeholders – to be determined – would analyze economic impact, integration with Ironwood Theatre development, and community benefit of proposed redevelopment projects.

  • Investment, business success, job creation and Downtown revitalization are the shared outcomes that all partners seek. A spark is needed to ignite Downtown Ironwood; this could be the project.

Mayor Burchell explained that there may be money available through the Blueprint Plan to make some improvements to the structure. He also pointed out that the building currently has a positive cash flow. He told the Commission that ground floor restrooms would greatly improve the Theatre since many of the elderly patrons had difficulty climbing the stairs to the basement or second floor restrooms.

Commissioner Lamb made a motion to purchase the entire Velin Building instead of attempting to purchase only the concourse portion of the building contingent on pledge funding. Commissioner Corcoran supported the motion.

Commissioner Semo asked how much more money was needed to purchase the building. Mayor Burchell said there were enough verbal pledges as of this morning to purchase the building.

Semo asked Bussiere how the purchase would affect Community Development. Bussiere told the Commission that the purchase was a good opportunity for the City. It is on the focus block of the Downtown, and the Blueprint Plan looks very favorably on developing that block. He said the Theatre is already an asset to the City, but by adding a potential business on the ground floor next to the Theatre would be very beneficial to the Downtown District. He said having City ownership allows for many financial opportunities and new businesses will help to spark the Downtown District.

Semo asked if there were any risks that could potentially cost the taxpayers. Bussiere told the Commission that several of the donors have offered rennovation monies in addition to donations to purchase the building. He said those funds could help to make improvements that would greatly lessen any risk of serious repairs or expenses in the future.

Semo asked if any CDBG money could be used. Erickson explained that $20,000 has already been earmarked, but more could be requested in the future.

The Commission voted unanimously to purchase the Velin Building.

The Commission then went back to discussing the insurance issue. After a brief discussion, Commissioner Semo made a motion to waive the insurance premium for one year only. Mayor Burchell seconded Semo's motion.

Commissioner Corcoran asked if the Depot Museum paid their own insurance. Julie Frederickson explained that they have a similar situation. They pay $392 per year on their insurance. By a vote of 2 to 2, the motion failed. Commissioners Corcoran and Lamb voted NO. Commissioner Semo and Mayor Burchell voted YES.