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Mazch 27, 2007 VIII-B-4 TO: The Honorable Mayor and Council FROM: John Grossman, HRA Director RE: Recommendation on Redevelopment Agreement with Sherman Associates SUMMARY: The Council Planning Committee met with Loren Brueggemann of Sherman Associates on March 26 to discuss the existing market and fmancial feasibility of the condominium and townhouse proposals for Block 1. The committee recommended that staff clarify public and private costs under the terms of the agreement, and prepare language terminating the agreement for consideration by the City Council and HRA. BACKGROUND: The City and the HRA have pursued redevelopment of the downtown to attract and support new development that: • Is market feasible • Is fmancially feasible • Meets the community's redevelopment goals In 2004 the City and HRA selected Sherman and Associates for downtown redevelopment. A site and building plan and TIF district were approved. The City and HRA executed a development agreement with Sherman Associates in July 2005. It documents the 29-unit condominium project, and later phases on Blocks 1, 3 and 29. In September 2006, Sherman determined that the condos were not market feasible and proposed an alternate development of 23 town homes. On February 28, 2007 Sherman concluded that they could not build the town homes at the unit prices recommended by the market report, although time and a market upswing could change that. In comparison to the condominium, the town homes would contribute significantly less revenue to fund community goals such as park improvements or visitor destinations. The development agreement states that if there has not been a closing on development property by March 31, 2007, the agreement can be terminated by one party giving written notice to the other. Unless specific action is taken to terminate the agreement, it remains in effect. Mr. Brueggeman, Vice President of Sherman Associates, has indicated that if the existing agreement is terminated they would like to discuss some form of agreement to preserve their development rights. COMMITTEE RECOMMENDATION: 1) That staffclarify public and private costs under the terms of the agreement, and prepare language to terminate the agreement for consideration by the City Council and HRA in May. 2) That Council and HRA take time to review downtown redevelopment issues and goals, and not consider new proposals during this time.