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Muskegon City Commission
Commission Meeting Date: July 28, 2020 Title: West Urban Properties Agreement
Submitted By: Frank Peterson Department: City Manager
Brief Summary: In June, the City Commission accepted a Letter of Intent from West Urban Properties and
authorized the city manager and city attorney to finalize a development agreement. The proposed
development agreement is attached and recommended for approval.
Detailed Summary: We are proposing the framework of a Pilot program that we would use to initially
partner with West Urban Properties to construct 100 units on vacant city lots. As part of the program,
either the City or West Urban Properties may choose to stop home construction prior to the completion of
the 100 homes. The program is expected to be applicable to many different builders/developers and many
different housing types and densities. As the City tries to revers 40+ years of neighborhood disinvestment,
it is important that we acknowledge the areas that make us less-attractive for development than urban
areas. Some of those items are more in our control than others. This program focuses strictly on
developer return on investment -with the goal of the city acting as a partner to help ensure that a major
investment in rental housing neither fails to cashflow nor causes unreasonable increases in local rents.
Many times, affordability and profitability contradict one another - this Pilot Program is designed to help
attain both.
Amount Requested:$ Amount Budgeted: $
Fund(s) or Account(s): N/A Fund(s) or Account(s) : N/A
Recommended Motion: To authorize the City Manager to sign the Development Agreement.
Check if the following Departments need to approve the item first:
Police Dept. D Fire Dept. 0 IT Dept.
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For City Clerk Use Only:
Commission Action:
PILOT DEVELOPMENT AGREEMENT
THIS PILOT DEVELOPMENT AGREEMENT (the "Agreement11 ) is made on the 1st day of
November, 2020, by and between the CITY OF MUSKEGON, a Michigan municipal corporation,
whose address ls 933 Terrace Street, Muskegon, Michigan 49440 (the "City11 ) and West Urban
Properties, LLC, a Michigan limited liability company, whose address is 3265 Walker Avenue,
Suite D, Grand Rapids, Michigan, 49544 (the "Developer").
RECITALS
A. Pursuant to P.A. 381 of 1996, as amended, ("Act 381"), the Muskegon Brownfield
Authority adopted a brownfield plan (the "Brownfield Plan") to add numerous vacant properties,
as specified on attached Exhibit A (the "Property").
B. The Property is Included in the City's Scattered Site Brownfield Project, as
amended by the Muskegon Brownfield Redevelopment Authority on July 14, 2020.
C. The Developer intends to redevelop the Property into a 100-unit scattered site
residential rental neighborhood where no less than 40% of the units are allocated to tenants with
income levels between 70% and 120% of the Area Median Income (AMI), as defined by the
Michigan State Housing Development Authority (the "Project").
NOW, THEREFORE, the parties agree as follows:
1. Project Completion.
a. Developer agrees to purchase the Property described in attached Exhibit A.
I. The Developer will be responsible for all survey work associated with lot line
adjustments, except that City shall be responsible for all costs, including costs associated
with any necessary survey to create tax parcels.
ii. City will waive or pay for all water and sewer connection fees. Developer shall
be responsible for all other fees, specifically including mechanical, plumbing, electrical,
and any other construction and building permit fees.
b. Operating Incentive. In exchange for the Developer's commitment to allocate 40%
of the units to be rented by individuals with income levels between 70% and 120% of Area
Median Income, as defined by the Michigan State Housing Development Authority, the City
agrees to provide an operating incentive to ensure such affordability as provided in Paragraph 3.
2. Rental Rates.
The Developer shall be responsible for verifying tenant income to ensure his/her
qualifications for any income-restricted units. An income-qualified tenant's rent shall be set to
follow the RENT LIMITS established annually by the Michigan State Housing Development
Authority (MSHDA) for a Muskegon County family earning between 70% and 120% of AMI and
renting a 1-3-bedroom home. The Developer is not obligated to rent any units below the 70%
RENT LIMIT, regardless of the tenant's verified income level. Exhibit C of this Agreement
demonstrates the initial rent limits as established by MSHDA in April 2020.
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3. Shared Rental Benefit.
a. As an incentive to assist moderate income renters, the Developer may from time
to time rent units at a rental rate below $1,300 per month. In the event the developer rents a
unit to an income-qualified resident for less than $1,300 per month, the City will reimburse the
Developer as follows:
i. If the rental rate ls between $1,050 and $1,300, City will reimburse the
Developer the difference between the rental rate and $1,300; and
ii. If the rental rate is below $1,050, the City will pay $250 to Developer plus 50%
of the difference between the rental rate and $1,050.
As an incentive to attract market rate renters, the Developer may from time to time rent
units at a rental rate above $1,300 per month. In the event the developer rents a unit to a tenant
for more than $1,550 per month, the Developer will remit to the city 50% of the difference
between the actual rental rate and $1,550 per month.
b. City shall establish the "West Urban Properties Rental Subsidy Fund". The City
shall deposit $250,000 from the City of Muskegon Economic Development Revolving Loan Fund,
which was created in part by a gift from Sappi Paper Company when the company ceased
operations for economic development. All monies owed to the Developer by City pursuant to
Paragraph 3(a) shall be paid from the West Urban Properties Rental Subsidy Fund and all monies
owed by the Developer to the City pursuant to Paragraph 3(a) shall be credited to the West Urban
Properties Rental Subsidy Fund. On a quarterly basis, Developer shall provide documentation, to
City's satisfaction, as to the amount City owes Developer and/or Developer owes City pursuant
to Paragraph 3(a). Upon termination of this Pilot Development Agreement, all monies left In the
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West Urban Properties Rental Subsidy Fund shall revert to the City of Muskegon Economic
Development Revolving Loan Fund for economic development, and any amounts owed to the
Developer shall be waived. City shall have no obligation to reimburse Developer for any reason
from any other City fund.
4. Vacancy Assistance.
During the first 30 days after completion of a home with a certificate of occupancy, the
Developer shall be responsible for any vacancy losses. After the 30-day holding period and during
the first 12 months of the completion of a home with a certificate of occupancy, the City will
reimburse the Developer $1,300 per month while the unit is owned by Developer and vacant.
Any monies owed by City shall be taken from the Fund established in Paragraph 3(b) and from
no other source of City monies. Any unit that remains vacant for more than three months must
be listed on the MLS at a price not more than 110% of cost to construct, which will be accepted
by Developer. Failure to list the property for sale at not more than 110% of the cost to construct
shall render the City's obligation to provide vacancy assistance invalid. If the provisions of this
Paragraph are not exercised by Developer, then City shall have the right to terminate this
Agreement as to any building not under construction at the time the City provided notice of its
intent to terminate this Agreement pursuant to this Paragraph. Both parties agree that a building
wlll be considered under construction only after the foundation and/or building slab is in place.
5. Renter Opportunity to Purchase.
With a 60-day written notice from any Tenant to the Landlord. Tenant shall have the
option to purchase their occupied Leased Premises at the current appraised value plus any
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subsidy paid from the West Urban Properties Rental Subsidy Fund for that unit, unless that value
is less than the original cost to build the residential dwelling.
6. Property Taxes.
In the event that the State Equalized Values (SEV) assigned to properties by the City
Assessor at the completion of a phase results in an initial annual property tax bill in excess of
$2,325 per unit, parties agree to amend Section 3(a) of this Pilot Agreement to offset the
Increased property tax burden. Annually, beginning January 1, 2022, the $2,325 maximum per
unit average shall increase or decrease with the Consumers Price Index regularly used by the
Muskegon City Assessor.
7. Term of Agreement.
a. The Developer's and City's obligations under this Agreement for any individual parcel
shall terminate 20 years from the issuance of the original certificate of occupancy or upon a sale
ofthe parcel that results in an uncapping of the Property's Taxable Value, but never after January
1, 2045 (the "Term").
b. This 100-unit Pilot shall be completed in 4 phases of 25 home increments. The
Developer and City agree to meet upon the completion of each phase to discuss the
performance of the prior phase before proceeding onto the next phase. At that time, if either
party is dissatisfied with the performance of the phase, the upcoming phase may be postponed
for up to 12 months by providing written notice.
c. If Developer is not constructing units on the Property for a 12-month period, as
evidenced by the failure to pull permits and complete construction in a timely manner, the Pilot
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Development Agreement shall terminate, after Notice as required by Paragraph 8, as to Parcels
where Developer is not pursuing construction.
d. Should any court of competent jurisdiction find any portion of the Pilot Development
Agreement void and/or prohibits City from funding any obligation provided in this Pilot
Development Agreement, either City or Developer may terminate this Pilot Development
Agreement with no consequences from the other party.
8. Notices.
All notices, payments, demands or requests required or permitted to be given pursuant
to this Agreement shall be in writing and shall be deemed to have been properly given or served
effective on the second (2nd) business day after being deposited in the United States mail,
postpaid and registered or certified with return receipt requested; or when sent by private
courier service for same-day delivery or one day after being sent by private courier service for
next-day delivery. Notices shall also be sent via e-mail and to the respective addresses set forth
below:
To Seller: THE CITY OF MUSKEGON
Attn: City Manager
933 Terrace St.
Muskegon, Ml 49440
With copy to: Parmenter Law
P.O. Box 786
Muskegon, Ml 49443-0786
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To Purchaser: WEST URBAN PROPERTIES, LLC
Attn: Dave Dusendang
3265 Walker Avenue, Suite D,
Grand Rapids, Michigan, 49544
9. Assignment.
Developer and City shall have the right to assign all of its rights and delegate all of its
obligations under this Agreement to either an existing or a newly created entity, provided
however, that no assignment shall operate as a release of that party without the written consent
of the other, where consent may be withheld in such other party's sole discretion.
10. Arbitration.
Any and all disputes, controversies, or claims arising out of, or in connection with or
relating to this Agreement, or any breach or alleged breach thereof, shall, on the request of either
party, be submitted to and settled by arbitration in the State of Michigan pursuant to the rules,
then in effect, of the American Arbitration Association (or at any other place or under any other
form of arbitration mutually acceptable to the parties involved). This Agreement to arbitrate shall
be specifically enforceable under the prevailing arbitration law. Notice of the demand for
arbitration shall be filed, in writing, within a reasonable time after the claim, dispute, or other
matter in question that arose where the party asserting the claim should have been reasonably
aware of it, but in no event later than the applicable Michigan statute of limitations. Cost of
arbitration shall be shared equally by the parties, provided that each party shall pay for and bear
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the cost of his or her own experts, evidence, and attorney fees. Judgment on the award rendered
by the arbitrator may be entered in any court having jurisdiction to do so.
11. Entire Agreement.
This Agreement supersedes all agreements previously made between the parties relating
to the subject matter. There are no other understandings or agreements between them.
12. Non-Waiver.
No delay or failure by any party to exercise any right under this Agreement, and no partial
or single exercise of that right, constitutes a waiver of that or any other right, unless otherwise
expressly provided herein.
13. Headings.
Headings in this Agreement are for convenience only and shall not be used to interpret
or construe its provisions.
14. Governing Law.
This Agreement shall be construed in accordance with and governed by the laws of the
State of Michigan.
15. Counterparts.
This Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same instrument.
16. Binding Effect.
The provisions of this Agreement shall be binding upon and inure to the benefit of all the
parties and their respective heirs, legal representatives, successors and assigns.
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The parties have executed this Agreement on the date set forth above.
CITY OF M"EGON ,.
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WEST URBAN PROPERTIES, LLC
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EXHIBIT A
TO DEVELOPMENT AGREEMENT
DESCRIPTION OF ALL PARCELS SUBJECT TO THIS AGREEMENT
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1246 5th St
1252 5th St
1245 5th St
12615th St
1342 6th St
1349 6th St (2 lots}
1352 6th St (2 lots}
14116th St
1387 7th St (2 lots}
395 Houston Ave (2 lots)
275 Mason Ave (2 lots}
346 Mason Ave (2 lots)
352 Mason Ave
219 Merrill Ave
271 Merrill Ave (2 lots)
388 Merrill Aye (2 lots}
235 Monroe Ave
239 Monroe Ave
240 Monroe Ave
250 Monroe Ave
254 Monroe Ave
398 Monroe Ave
1392 Park St
382 W Muskegon Ave
487 W Muskegon Ave
420 Washington Ave (2 lots)
459 Washington Ave (3 lots}
1782 5 th St (2 lots)
318 W Larch Ave (2 lots)
324 W Larch Ave
1686 7 th St (2 lots)
1660 7th (2 lots)
408 W Dale Ave
340 W Forest Ave
1639 5th St
1605 Sanford St (2 lots)
487 W Southern Ave (2 lots)
305 W Grand Ave
1535 6th St
1542 7thSt
355 W Grand Ave
337 W Grand Ave
1458 6th St
1464 6th St
0 Washington Ave
242 Strong Ave
1360 7th St
1366 7th St
1262 6th St
579 W Muskegon Ave
0 W Muskegon Ave
617 W Muskegon Ave
1047 Ambrosia St {7 lots)
1075 Ambrosia St(6 lots)
1155 Ambrosia St(6 lots}
1205 Ambrosia St{6 lots)
1386 Ransom St
1530 Hoyt St
292 Mason Ave
254 W Southern Ave
1670 Park St
1772 5th St
1227 Fleming Ave
553 Jackson Ave (3 lots)
579 Jackson Ave
601 Jackson Ave
621 Jackson Ave
558 Jackson Ave (2 lots)
608 Jackson Ave
445 Marquette Ave
527 Herrick St
530 Herrick St
270 Meeking St
329 Leonard Ave
366 Bennett St.
1251 8th Street
EXHIBIT B
TO DEVELOPMENT AGREEMENT
PARCEL PURCHASE AGREEMENT
This PARCEL PURCHASE AGREEMENT (this "Agreement") is made on the 1st day of
November, 2020, by and between WEST URBAN PROPERTIES, LLC, a Michigan limited liability
company of 3265 Walker Avenue, Suite D, Grand Rapids, Michigan, 49544 ("Purchaser") and THE
CITY OF MUSl
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