When Eastern Iowa Community Colleges announced plans in August 2014 to construct an urban campus in downtown Davenport, Restoration St. Louis was identified as the developer and hopes were that classrooms could open as early as this fall.
The campus is pegged for the 3rd Street block between Brady and Main streets, north of the City Square redevelopment under way by Restoration St. Louis, using two former financial buildings on either corner, with a connector building in between.
Almost two years later, the $28 million project is still very much alive but has been delayed.
And it is no longer a given that Restoration St. Louis, owned by Amrit and Amy Gill, the forces behind the renovation of the Hotel Blackhawk, the Forrest Block and the Renwick Building, in addition to City Square, will be the developer.
Although information on the colleges' website states that the company "will be the full service developer for the project," a letter of intent between the two has expired, and a contract with a developer won't be executed until later this year, Eastern Iowa Chancellor Don Doucette said.
In the months since the project's announcement, the nine-member Eastern Iowa board of trustees and Doucette concluded that financing for the project would be more favorable if the college district — not Restoration St. Louis — owned the former First Federal Savings and Loan, sometimes known as the Social Security building because the agency was housed there for many years, and First Midwest Bank.
Ownership would provide "a better way to finance the overall package," Robert Gallagher Sr., board president, said in an interview. "You don't pay extra expenses with owning the building."
The decision reached by a unanimous vote of the trustees in December required a six-month period of due diligence.
Those reports, dealing with proposed financing, the feasibility of that financing and the how the project would be structured legally, were presented to the board last week in a 2½-hour working session. All were all on the positive side.
The Urban Campus timeline at present is to close on financing by Aug. 31 and to begin construction in September with opening of classrooms a year later, Doucette said.
Although the district really wants the 2017 opening, it may consider a delay if that would mean more favorable financing, Doucette said.
Reports come in positive
The financing package was presented to the trustees by Sam Estep, a former senior vice president of development for Restoration St. Louis who worked on the project for that company.
He left to start his own firm and was hired by the district as an independent, third-party consultant to do the project's financial due diligence. Restoration St. Louis wasn't asked because, being party to the sales/purchase contract, it is not a third party, Doucette said.
Dick Davidson of the Davenport law firm of Lane & Waterman and Terry Kilburg, a certified public accountant with his own consulting firm and former chief financial officer for Von Maur, delivered assessments of the legal and financial feasibility of the project, respectively.
Several times during the discussion, Davidson said the Urban Campus project would operate under the same model as was used for the recent restoration of the Adler Theatre, Davenport.
"It's the exact same model as the Adler," he said.
With the Adler, the city of Davenport turned the theater over to a nonprofit group that then created various subsidiaries, including a for-profit entity, that processed the historic and New Market tax credits used in financing. When finished, the theater was sold back to the city and the various subsidiaries were folded.
With the Urban Campus, the buildings would be conferred to a nonprofit foundation that would create various subsidiaries, including a for-profit limited liability company, to process the credits. A for-profit is required because tax credits are awarded only to entities that pay taxes. When the tax credits expire, the campus would be sold back to the college (for the amount of the remaining debt) and the subsidiaries would be "unwound," Davidson said.
The only risk would be if the college did not finish the project or failed to operate the campus for at least seven years, Davidson said.
Financing: Banks are in
The project anticipates receiving $2.5 million in federal historic tax credits and $3.3 million of state historic tax credits, Estep said. Combined, this accounts for 45 percent of the project's qualified reimbursable expenses, or the "hard" costs of construction, not the "soft costs" of developer, legal or architect fees, he said.
The construction cost estimates, which came in under budget, were from Estes Construction, Davenport, Estep said.
The project qualifies for state historic credits because the First Federal building has been designated a local landmark by the city of Davenport.
"No matter what, we will get state credits," Estep said, although he added that approval may not come until after Jan. 1.
The project would qualify for federal credits if First Federal was listed on the National Register of Historic Places, and a nomination seeking that status has been filed. Estep said he is confident of approval.
Also requested will be $4 million in New Market tax credits, available under a federal program to help economically distressed communities attract private investment capital by providing investors with a federal tax credit. Investments are to breathe new life into neglected, under-served communities.
Again, Estep is confident. The Urban Campus project meets all the aims of the program, including jobs and education, and the area is in a "severely distressed Census tract," which is another factor considered in scoring projects for approval, he said.
"Our project is what this program is all about," he told the trustees.
Overall, the only question is the timing of the New Market credits, a factor that could move a decision on the project back to October or November, Doucette said. That would mean the district "likely would not be able to move into the new campus until spring 2018," he said.
Securing a permanent loan of $6.5 million should be no problem, Estep said. The project already has commitments from four banks, including three in Iowa, competing to be the lender. The loan would be secured by the college's 20-year lease of the buildings. The lease will range from $650,000 to $1.3 million, depending on the lender that is chosen, Doucette said. The debt service would be paid from cost savings in the new efficiencies and from the lease, estimated at $250,000 annually, from its second floor center in the Ground Transportation Center.
The $8.2 million is the total investment of the college and foundation, including buildings.
Finally, the district already has raised $3.5 million of a $5 million capital campaign, securing commitments from the Harold R. Bechtel Charitable, John Deere, Roy J. Carver, Hubbell Waterman, Alcoa and Bob and Blenda Ontiveros trusts/foundations and the Scott County Regional Authority and the Riverboat Development Authority, now called the Regional Development Authority.
At one point, the colleges considered issuing general obligation bonds as a source of financing, but that is no longer the case.
Do the numbers work?
Kilburg, hired to crunch the numbers, began his presentation by saying, "I think this is a good project."
He examined the financial feasibility of the Urban Campus separate from any future project regarding the Kahl Building, now home to Eastern Iowa downtown classrooms, and found it doable.
When the Urban Campus project was first announced two years ago, renovation of the Kahl into 80 apartments and refurbishment of the Capitol Theatre was described as Phase II of an overall project.
Restoration St. Louis was described as the would-be developer and revenue from the apartments was going to be used to meet the majority of the annual debt service.
But now, it appears that rents are not necessary.
"You could do the Urban Campus and decide not to do the Kahl and the Urban Campus would be fine," Kilburg said. "You could sell the Kahl."
His main concern about the Urban Campus is that the college needs a tax increment financing district for the campus from the city of Davenport. If a district is not created, the district's for-profit subsidiary set up to receive tax credits would be liable for taxes on the $20 million in improvements.
"The taxes could potentially be $900,000, a high-risk obligation because it (the project) is being done not by the college (tax-exempt) but by a for-profit entity," Kilburg said. "You have to get this exemption from the city of Davenport."
Davidson commented, "I can't imagine in my wildest dreams that we wouldn't get a TIF from the city."
The developer question
Board members are scheduled to consider a purchase agreement for $3.2 million on June 20. The money would come from reserves in the colleges' capital improvement budget, Doucette said.
The price represents the amount Restoration St. Louis invested in the properties — $2,559,415 for purchase and $670,505 for development work, including architectural services, legal services, facilities repairs, environmental mitigation, financing and carrying costs for the properties, he said.
The "impetus for the district to purchase the two bank buildings was to improve the financial feasibility of the project and to solve a structural problem in the use of funds — (it) was never about changing developers, as we were never dissatisfied with the relationship, nor had EICC and RSL (Restoration St. Louis) ever entered into a development contract," Doucette wrote in an email.
The Times could not reach Amy Gill for comment last week, although she said in a March 30 email that she didn't think "much had changed" about the Urban Campus project.
"RSL and EICC have been partners in the development of the SCC Urban Campus since its conceptualization, when RSL proposed the project to solve an EICC need," she wrote. "We think this is a huge project for Davenport and support it whole-heartedly."