Members of Gloversville’s Local Planning Committee for the $10 million Downtown Revitalization Initiative grant on Wednesday conducted its most in-depth public discussion so far on the details and merits of all of the different economic development projects the committee is likely to submit to New York state in June for final approval for funding from the grant.
Some of the major projects discussed included: the Glove City Lofts artists housing apartment building project (seeking $1.3 million in DRI funding, 6% of total project cost), two projects sponsored by Matt Capano (seeking a combined $1.6 million in DRI funding) and the Schine Memorial Hall Arts Initiative (seeking $345,906 in DRI funding, 85% of total project cost).
The $21.2 million Glove City Lofts project was the first DRI applicant discussed. The project is sponsored by Kearney Development which is seeking to build 75 loft-style affordable housing units at 52 Church St. for mixed income tenants, including some units dedicated specifically to income eligible artists and a 2,000-square-foot art gallery run by the Glove Cities Arts Alliance.
“They are requesting $1.3 million for a $21.2 million project, so their DRI-ask is only 6%, which is the lowest percentage of all of the projects, so it has a high degree of leverage,” said the committee’s consultant, Michael Ndolo, the director of Economic Development for MRB Group. “At Open House No. 2 this project was pretty much universally liked by the public with only one (negative response).”
Mayor Vince DeSantis, a committee co-chair, said the Glove City Lofts project should be “moved forward” into the final list of projects to be submitted to the state “because it’s so transformative, and because it meets several of the criteria, helping more people live downtown, and it has the potential to catalyze other development,” DeSantis said.
LPC member Christine Pesses asked how much the Glove City Lofts project is seeking in “low-income housing tax credits.”
“And if they don’t get (the tax credits the company is seeking to help finance the project) does that sink their project?” Pesses asked.
Kearney Development has already applied for the federal housing tax credits from the state agency that distributes them, Ndolo said. If Kearney doesn’t get the tax credits, he said, there will be a second round of distribution later this year, giving Kearney a second crack at the tax credits.
“If they never get an allocation (of the tax credits) they would be hard pressed to proceed, because that’s a substantial amount of assistance both at the federal and the state level,” Ndolo said.
Matt Capano, the owner of several businesses in Gloversville including the restaurant “New York Lunch” and the Gloversville True Value Hardware store, both on Bleecker Street, is the only developer with two projects seeking grant money.
These are the descriptions of Capano’s projects:
• Restaurant at Former City Hall — Capano Enterprises Inc. requested $250,000 of DRI funding to offset 33% of a $750,000 renovation and expansion project to open a restaurant and bakery in the now vacant space at the old City Hall, former home of Salvatore’s Italian Restaurant. The project also includes the relocation of Capano’s existing restaurant New York Lunch at 21 Bleecker St., a move that would make way for expanding the Capano’s Gloversville True Value Hardware next door.
• Mixed-Use Renovation of the Carriage House — Capano Enterprises requested $1.3 million in DRI funding to pay for 40% of the $3.4 million cost to redevelop the historic Carriage House building at 39 N. Main St. The project calls for creating a “full-service microbrewery” and restaurant with outdoor seating, an event/exhibit room in the basement. The second and third floors will be converted into seven studio apartments, and improvements will be made to the historic building facades.
Ndolo and Gloversville’s main DRI consultant Lisa Nagle, of Elan Planning, both said Capano’s projects earned high approval ratings at the open house where members of the public were asked to rank the different projects being considered for the grant money.
Several committee members, however, had tough questions about two projects with only one developer.
“Is it possible that they can move forward with both projects?” Pesses asked. “I mean that’s a lot to swallow in one fell swoop.”
Pesses said the restaurant at the former city hall looks like a feasible project not requiring much investment, but she is doubtful of the amount needed for the mixed-use renovation of the Carriage House.
“Are they really ready both with the finances and everything else to carry forward with both projects?” she asked.
Ndolo said the former city hall is relatively small and reminded the members of the LPC that the purpose of the DRI grant is to help economic development projects that might not otherwise happen get the private sector financing they need.
“There’s certainly nothing precluding the same developer from receiving two LPC awards, through a process like this. That happens on a regular basis,” Ndolo said, referencing his knowledge of DRI grants in other communities. “I have not seen any issue that would lead me to believe we have a capacity either financial or operational with respect to this developer. I can’t guarantee it, but it doesn’t appear to be.”
Committee member Geoff Peck — Gloversville Planning Board president, vice president of population health for Nathan Littauer Hospital, chairman of the FMCC Board of Trustees and president of the Eccentric Club — did not comment earlier in the meeting when the committee eliminated from DRI funding consideration a proposal to replace the Eccentric Club roof and to build a third-floor event space, because of his position as the club’s leader.
Peck asked Ndolo how much financial vetting had been done for Capano’s company.
“Other than a theory that a bank would finance it or private equity or whatever, how deep have you gotten into a balance sheet, tax returns, things like that to show true financial readiness, not just about this one, but any of these projects?” Peck asked.
Ndolo said the planning committee is not doing “a full underwriting process” with respect to vetting the applicants.
“We’re not going down to existing personal financial statements, establishing collateral and stuff like that,” he said. “What we rely on is mostly the history of the developer. The existing bank relationships that they have. What they have done, and their community reputation in terms of what projects have succeeded, and not that they’ve been attached to.”
Ndolo said when a DRI applicant lacks existing bank relationships and a good community reputation that’s when a committee asks for more documentation. Capano is bringing in “a $400,000 cash equity position” with his proposals and Ndolo’s analysis indicated Capano’s financing for both projects was sound.
Peck questioned the viability of applicants’ projects. In the case of the Capano Mixed-Use Renovation of the Carriage House the total project cost is $3.4 million and the DRI funding request will only pay for $1.3 million, he said.
“That leaves a $2 million gap on a building with — I’m guessing the assessed value of that building is probably $150,000 to $175,000 — so I’m wondering where do you get the other $2 million from?” Peck said. “If you’re Geoff Peck and you go to the bank and you want to do renovations and you ask for $2 million, and the collateral that you’re using for this project is this $175,000 building, that doesn’t fly. So, I’m wondering, not specifically on this one, but with a lot of these projects the construction costs far outweigh the building value — they’re upside down. So, how do you look at the potential to draw in potential revenue to pay for these millions of dollars in some cases?”
The $10 million DRI grant program exists to help development projects leverage money from the grant into obtaining financing that might otherwise not be available, Ndolo pointed out.
“The fact is, that’s why you have DRI, these projects wouldn’t stand on their own, and the per square foot cost of ‘re-use’ tends to be prohibitive,” Ndolo said.
DeSantis and 1st Ward Councilwoman Marcia Weiss focused their comments on how the restaurant at former City Hall and Mixed-Use Renovation of the Carriage House projects address needs of the city’s downtown and the goals of the DRI process.
“The fact that it’s right next door to the Glove Theatre makes it very catalytic, and the use of the public space around it checks a lot of boxes. It should move forward,” DeSantis said.
Weiss said the bottom line is Gloversville needs to expand its offerings of restaurants downtown.
“The Glove Theatre really needs restaurants, because that’s the one thing that is lacking when you go to the Glove Theatre there’s really no place to go after, or before to have a meal,” she said.
Pesses said one good thing about the two restaurant – related project ideas is that neither is for a pizza
The committee advanced both Capano projects to the next step.
PECK PROBES SCHINE PROJECT PROPOSAL
Next the committee discussed the Schine Memorial Hall Arts Initiative project, which is seeking $345,000 in DRI funding, 85% of a $406,948 project to renovate the third floor of 30 N. Main St. for the relocation of the Storto Glove Museum from Schoharie County and to create a new “coworking space for artists.”
DeSantis and Pesses recused themselves from the discussion about the project because both are investors with an ownership stake in the Schine building.
Committee member David Halloran, the superintendent of the Gloversville Enlarged School District, said he likes the concept of the Schine Memorial Hall Arts Initiative project.
“It will attract people to downtown who may not have any association with the city at all,” he said.
Peck said he likes the concept of the Schine project, but questioned how much of the project would be paid for with DRI funding.
“I have a question about the 85% funding eligibility for a privately held enterprise,” he said.
Nagle said that the applicant for the Schine project is actually the non-profit entity called the “Memorial Hall Cultural & Arts Center”, which makes the project eligible for such a high-percentage of DRI funding.
“The sponsor for this project is a non-profit, which has yet to be formed, but all of their paperwork is in,” she said.
Peck questioned why the investors of the Schine building, which own it via a for-profit LLC, are permitted to create a non-profit entity to be their applicant for the DRI funding.
“It seems like a bit of an ‘end-run’ (around the rules),” he said.
If the project is funded, the non-profit Memorial Hall Cultural & Arts Center that would rent space “at a low rate” to the Storto Glove Museum, Nagle said.
“It seems like a non-profit is being set up for the sole reason of being able to draw down the higher percentage of funding for a project,” Peck said. “You see what I mean? If the non-profit is being set up to raise the ask for the DRI to 85%, from 20 or 30% (levels acceptable for a for-profit entity), do you see what I’m saying?”
Nagle said she did see what Peck was saying, but she said the non-profit, when its formation is finalized, has an acceptable purpose with respect to the workings of the project as proposed.
“I get that piece of it, but where does that qualify the owners of the building to draw down 85% of the cost?” Peck asked.
“But it would not be the owners, it would be the non-profit,” Nagle said.
“Who are the same entity as the owners of the building,” Peck said.
The ownership structure of the non-profit Memorial Hall Cultural & Arts Center may need to be clarified so “that it includes ownership other than the owners of the building,” said Committee co-chair Wally Hart, the division director of community and business developing for Lexington ARC.
“It still seems conflicted at the very least,” Peck said, adding, “I like the project.”
Earlier in the meeting the possibility that the Eccentric Club’s foundation might form a non-profit that could be involved in its DRI application was discussed, but ultimately did not persuade LPC members to support the private club’s DRI project application.
Peck said the non-profit structure coupled with the LLC ownership of the Schine building could create the perception of a conflict with respect to the 85% DRI funding request, but ultimately he supports the project as moving forward to the next step to be included in Gloversville’s Strategic Investment Plan.
The consensus of the committee said the Schine project should move forward for now, but additional answers about the non-profit corporation will need to be answered before the process ends.
The LPC’s next public meeting is scheduled for June 5.