The Beloit City Council voted to turn a no-interest loan toward the Fairbank Flats project into a grant Monday night during a special meeting, but not before some councilors raised concerns.
Construction on the Flats began this week and is expected to be completed by the summer. The project is going to cost about $3.1 million. The council’s unanimous vote turns the $150,000 loan into a grant that will not have to be paid back.
“They are just starting this week to put up the construction fence and do some clean up around the site. So construction is really taking off right about now and based on the size of the project they are estimating it to be between seven to eight months project,” said Maggie Baum, spokeswoman for Gorman and Company.
Beloit City Manager Larry Arft told the councilors city officials have been working with the company for the two to three weeks to prepare for closing on the property on Wednesday.
A request to convert the loan into a grant came from Gorman and Company because the not-for-profit group they are working with had issues about dealing with a loan in 15 years.
Arft explained the money has been appropriated already. It was called a loan because that was what the company asked for, he added. City Attorney Tom Casper later explained the conditions of the loan, pointing out that it was going to be a no interest loan for 17 years. It was also a no recourse loan, which means the city couldn’t sue for the money, he added.
Council Vice President James Van De Bogart raised concerns over the number of parties involved in the project. Who would the tenants or any others go to with concerns? he asked.
Arft said there would be a group, hired by Gorman and Company, to manage the property. There is also talk of having an on-site manager.
He added there are many players because of the financial assistance the company is getting on the project.
“The tax credits are making this project possible,” Arft said. “There is no way in the Western world a project like this could go forward without tax credits.”
The project will receive about $1.94 million in tax credits, over a 10-year period, from the Wisconsin Housing and Economic Development Authority. Another $625,285 will come in the form of equity historic tax credits.
Council President Terrence Monahan said the financing of the Fairbanks Flats is not standard or conventional. There was five years of nothing on this project because the financing needed to be worked out.
“This is the only way we can get it done,” he said.
“We don’t know what’s going to happen in 15 years. It’s the only game in town to get the Flats redone,” Arft added.
Councilor Kevin Leavy wondered what would happen if Gorman and Company backed out of the project or if in a few years the project failed.
Casper assured him the company had dedicated a lot of time to the project and wouldn’t easily back out.
“I think we’ve passed that point, to be honest with you,” Arft said. “I think we’ve passed the stop and go point.”
There was concern in the last few weeks because there was no activity on the site, but this week’s start is a good sign, he added.
“Right now they’ve mobilized. They’ve been working,” Arft said.
The project is new to the country. It has been tested in the Cleveland area in Ohio and proven to be successful, he added.
“This is strictly a test case for us. There is no way I can sit here and tell you it’s going to be this way, this way and this way. There are a lot of variables,” Arft said.
He said the construction portion of this is essentially worked out. The next part of the project the city will need to be concerned about is getting the right tenants for the Flats. Tenants who are interested and committed to the project, he explained.