Title
An Ordinance approving a Chapter 100 Plan for the Montage Project; authorizing the City of Lee’s Summit, Missouri to issue two series of taxable industrial development revenue bonds in an aggregate principal amount not to exceed $63,400,000 for such project; and authorizing certain documents and actions in connection therewith.
(Note: First read by Council on January 21, 2025. Passed by unanimous vote.)
Body
Issue/Request:
This is an ordinance following the public hearing for the approval of a Chapter 100 Plan for the Montage Project and authorizing the issuance by the City of its taxable industrial development revenue bonds in the aggregate principal amount of not to exceed $63,400,000 to finance costs of the project to be constructed by TriStar Properties (the “Developer”), as the Developer of the Project. The Bonds will be issued pursuant to the provisions of Sections 100.010 to 100.200 of the Revised Statutes of Missouri, as amended, and Article VI, Section 27(b) of the Missouri Constitution, as amended (collectively, the “Act”).
Key Issues:
Developer is requesting that the City approve incentives through a Chapter 100 Plan to provide sales and use tax exemption on construction materials and a fixed schedule of payments in lieu of taxes (PILOTs) for 10 years for the residential portion of the project.
Background:
At the May 14--, 2024 Council meetings, the City Council heard a conceptual presentation about the incentive request presented by Developer for the entire Lee’s Summit Crossing Project. A majority of the City Council expressed an interest in considering the incentive request presented by the developer team. The City Council did not vote or render any type of final or binding decision as part of the conceptual presentation.
On May 14, 2024, the City Council held a third conceptual presentation and then opened a public hearing on the prior version of the Chapter 100 Plan that is now before the City Council, which was being advanced by Tristar Properties, LLC, as the applicant. According to the Action Letter for that May 14th Council meeting, the Council discussed included the following topics at the conceptual presentation:
• Regional CID
• Churches
• Purchase of property for field house / tax not general fund
• Offsite CID - benefits
• Reimbursement Plan
• Good project
• Multifamily
• Public benefit to infrastructure
• Business opt out of CID
• Offset cost to the City
• CIP Projects
• Improved look to City
• Fieldhouse
• Costs
• Buildings
• Timing of development
The Action Letter for the May 14, 2024 meeting reflects that the Council reached a general consensus to move forward with this project.
A public hearing was held on the previous iteration of the Tristar project on July 23, 2024. Following that Chapter 100 hearing on July 23rd, a motion was made by Councilmember Prier, seconded by Councilmember Lopez, that Bill No. 24-131 be advanced to second reading. The motion failed by a 4-5 vote.
Developer is bringing the same project back, with an agenda item prior to this public hearing as an opportunity for the developer team to provide an update to the City Council on the entire project.
Montage at Lee’s Summit Investors, LLC is a special purpose entity formed to construct and operate the Project, which is owned by Larson Capital Management (“Larson”). Larson is a St. Louis-based national financial services firm with approximately $6 billion in assets under management. Larson is utilizing TriStar Properties to construct and deliver the Project. TriStar Properties is based in St. Louis, Missouri, and has over 25 years of experience in development of institutional-quality projects. TriStar Properties has developed over 15 million square feet of space and over $1.1 billion in total project value.
The Project to be financed by the Bonds consists of a townhome and villa community of approximately 226 units to be located on approximately 54.39 acres of land situated to the northeast of the intersection of highways 291 and 150 in the City (the “Project Site,” as shown in the map below). The Project is anticipated to be completed in two phases. Phase 1 is anticipated to consist of 68 townhomes and 84 courtyard villas constructed with brick and stone facades, architectural shingles and vinyl siding. Amenities will include a clubhouse with a fitness center, a swimming pool and a dog park.
Phase 1 will also include the completion of certain public improvements, including the construction of and mass grading allocable to public streets, sidewalks, storm sewers, water supply, sanitary sewer, electric supply and communications infrastructure (the “Public Improvements”). Phase 2 is anticipated to consist of 8 townhomes and 66 courtyard villas utilizing similar construction materials to Phase 1. Phase 2 will share use of the Public Improvements and amenities constructed during the completion of Phase 1.
The Chapter 100 Plan has been requested to provide sales and use tax exemption on construction materials and fixed payments in lieu of taxes (PILOTs) starting at $2,776 per unit pursuant to Chapter 100 of the Revised Statutes of Missouri.
Impact/Analysis:
The Project is expected to cost approximately $63,400,000. The investment is anticipated to be made from 2024 through 2028 as shown in the Cost-Benefit Analysis. Under Article X, Section 6 of the Missouri Constitution and Section 137.100 of the Revised Statutes of Missouri, all property of any political subdivision is exempt from taxation. Under this Plan, the City intends to issue the Bonds in 2024.
The sources of funds to be expended for the Project will be the proceeds of the Bonds in a principal amount not to exceed $63,400,000 to be issued by the City and purchased by the Company and, if needed, other available funds of the Company. The Bonds will be payable solely from the revenues derived by the City from the lease or other disposition of the Project. The Bonds will not be an indebtedness or general obligation, debt or liability of the City or the State of Missouri.
The Companies will make payments in lieu of taxes (“PILOTS”) for each component of the Project as follows:
(1) prior to construction, the amount calculated to equal the taxes that would have been due on the unimproved land were it in private ownership,
(2) during construction, an amount calculated from a starting point of $2,776 dollars per door, with an inflation adjustment of 3.0% in each odd year starting with 2025, for units under construction, pro-rated by percentage of completion, and
(3) from and after completion, for a period of 10 years, a fixed PILOT calculated from a starting point of $2,776 dollars per door, with an inflation adjustment of 3.0% in each odd year starting with 2025.
The total PILOT payments are estimated in the Cost-Benefit Analysis. The projected impact to the City for the real property tax exemption is summarized in the presentation materials that are included in the meeting packet.
Under the lease agreement, the benefitted company typically:
(1) will unconditionally agree to make payments sufficient to pay the principal of and interest on the bonds as they become due;
(2) will agree, at its own expense, to maintain the project, to pay all un-abated taxes and assessments with respect to the project, and to maintain adequate insurance;
(3) has the right, at its own expense, to make certain additions, modifications or improvements to the project;
(4) may assign its interests under the lease agreement or sublease the project while remaining responsible for payments under the lease agreement;
(5) will covenant to maintain its corporate existence during the term of the bond issue; and
(6) will agree to indemnify the municipality for any liability the municipality might incur as a result of its participation in the transaction.
Timeline:
If this Plan is approved by the City Council, the City intends to issue Bonds for Phase 1 of the Project in 2025 and anticipates issuing Bonds for Phase 2 of the Project during or after 2025.
Presenters
Curt Petersen, Polsinelli PC, for Developer
David Bushek, Chief Counsel of Economic Development and Planning