AGENDA #9

MEMORANDUM

TO: Mayor and Town Council

FROM: W. Calvin Horton, Town Manager

SUBJECT: Request from EmPOWERment, Inc.

DATE: September 9, 2002

Adoption of Resolution 11 would authorize amendment of the Town’s Performance Agreement with EmPOWERment, Inc. to use up to 35% of the leasable space in the Midway Business Center for non-profit organizations, including EmPOWERment’s offices. Under the current terms, EmPOWERment is authorized to rent up to 10% of the office space in the facility to non-profit organizations.

Adoption of Resolution 12 would not allow EmPOWERment to increase the amount of office space in the Midway Business Center used by non-profit organizations, but would modify the calculation for the amount of space in the Midway Business Center authorized for use by non-profit organizations to include EmPOWERment’s offices.

BACKGROUND

On March 2, 1998, the Council budgeted $150,000 of Community Development funds to EmPOWERment, Inc. to acquire a property on Graham Street in the Midway Business District. On June 29, 1998, the Town entered into a Performance Agreement with EmPOWERment, Inc. to demolish an existing building and construct a new building. The new building is 5,984 square feet. The stated purpose of the incubator is to provide affordable rental space to small businesses, and for businesses to create jobs for lower and moderate income individuals.

On November 23, 1999, the Council authorized an amendment to the Town’s June 29, 1998 Performance Agreement with EmPOWERment and budgeted an additional $60,120 of Community Development funds for the Midway Business Center to fill a funding gap. The funds have been used for professional services related to the construction of the incubator such as architectural, engineering and legal services, and option payments.

On August 28, 2000, the Council authorized a resolution allowing EmPOWERment to rent up to 10% of office space in the Midway Business Center to non-profit organizations (please see Attachment 1). This calculation was based on the total square footage of the building (including common areas and hallways), not the leasable square footage.

THE REQUEST

In the attached letter dated August 8, 2002, EmPOWERment, Inc. requested an exemption from the current limit of space leased to non-profits (please see Attachment 2). EmPOWERment would like to rent a 121 square foot office in the Midway Business Center to Affordable Rentals Inc. According to EmPOWERment, Affordable Rentals, Inc. will rely heavily on EmPOWERment’s expertise in rental property acquisition, rehabilitation and management.

DISCUSSION

We recommend changing the method of calculating the percentage of space available to non-profit organizations. We suggest using the total leasable space in the facility rather than the entire total square footage of the building. We also recommend including EmPOWERment’s offices in the percentage calculation.

There is approximately 3,757 square feet of leasable space in the total 5,984 square foot Midway Business Center. EmPOWERment currently rents 504 square feet of the leasable office space to a non-profit organization. The proposed request would increase this figure to 625 square feet. In addition, EmPOWERment occupies 684 square feet (two offices, 18% of leasable office space) for a total of 1,309 leasable square feet (35%) used by non-profit organizations.

Currently six offices are occupied by for-profit businesses, three offices are occupied by non-profit businesses, and six offices are vacant. If the Council approves this request, four out of the fifteen offices would be occupied by non-profit organizations, including EmPOWERment. If the Council chooses not to approve this request, 31% of the leasable space would be used by non-profit organizations (including EmPOWERment’s offices and the existing non-profit).

Federal Community Development regulations would permit space to be rented to non-profit, for-profit business or organization as long as 51% of the jobs created by the businesses located in the Midway Business Center benefit lower and moderate-income individuals (individuals earning less than 80% of the area median income by household size). To date, fourteen (61%) of the full time jobs in the Midway Business Center are held by lower and moderate income individuals; therefore, this requirement has been satisfied. If this request were approved, EmPOWERment would continue to be required to annually certify that they meet the requirements in the Agreement.

As stated in our August 28, 2000 memorandum to the Mayor and Council, we note the following advantages for consideration of this request:

The non-profit’s office would be in a convenient location easily accessible by its clients and at an affordable rent.
The non-profit would have access to shared facilities provided by the incubator (i.e. conference room, office equipment).
The non-profit will benefit from the services that the Midway Business Center will provide (i.e. assistance with developing a business and marketing plan).
Federal regulations permit space in the incubator to be rented to non-profit organizations as long as 51% of the jobs created are for low and moderate-income individuals.

We have identified the following disadvantages:

1. The incubator was proposed and approved by the Council to create and assist small businesses for the purpose of promoting economic development for low and moderate-income persons.

2. Many other non-profit organizations are in need of space in the community and could benefit from locating in the Midway Business Center. Without occupancy restrictions, the original goal of providing affordable rental space to small for-profit businesses may not be accomplished if non-profit organizations are permitted to occupy the building.

We recommend that the Council authorize amendment of the Town’s Performance Agreement with EmPOWERment to use up to 35% (1,309 square feet) of the leasable office space for non-profit organizations, including its own offices. Increasing the previously established limit would allow EmPOWERment to rent office space to Affordable Rentals, Inc., and reserve the majority of space in the facility for for-profit small businesses as originally intended.

RECOMMENDATION

That the Council adopt the attached Resolution R-11 to authorize amendment of the Town’s Performance Agreement with EmPOWERment to use up to 35% of the leasable space in the Midway Business Center for non-profit organizations, including its own offices.

The Council could also reasonably conclude that the present allocation is appropriate and adopt Resolution R-12 to not allow EmPOWERment to increase the amount of office space in the Midway Business Center used by non-profit organizations, but modify the calculation for the amount of space in the Midway Business Center authorized for use by non-profit organizations to include EmPOWERment’s offices.

ATTACHMENTS

1. August 28, 2000 memorandum to the Mayor and Council (p. 6).

2. August 8, 2002 letter from EmPOWERment (p. 11).

A RESOLUTION AUTHORIZING AMENDMENT OF THE TOWN’S PERFORMANCE AGREEMENT WITH EMPOWERMENT, INC. TO USE UP TO 35% OF THE LEASABLE OFFICE SPACE IN THE MIDWAY BUSINESS CENTER FOR NON-PROFIT ORGANIZATIONS (2002-09-09/R-11)

WHEREAS, the Town executed a Performance Agreement with EmPOWERment, Inc. for use of Community Development funds to develop the Midway Business Center on North Graham Street as a small business incubator; and

WHEREAS, on August 28, 2000, the Council authorized EmPOWERment, Inc. to rent up to 10% of office space in the Midway Business Center to non-profit organizations; and

WHEREAS, EmPOWERment, Inc. has requested that the Council increase the amount of office space rented to non-profit organizations;

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes amendment of the Town’s Performance Agreement with EmPOWERment, Inc. to eliminate the square footage cap in the Midway Business Center for non-profit organizations, including EmPOWERment’s offices.

BE IT FURTHER RESOLVED EmPOWERment, Inc. will continue to annually certify that 51% of the jobs created by the businesses located in the Midway Business Center must benefit lower and moderate-income individuals (individuals earning less than 80% of the area median income by household size).

BE IT FURTHER RESOLVED that the Council authorizes the Manager to amend the Town’s Performance Agreement with EmPOWERment, Inc. to include these terms.

This the 9^{t h} day of September, 2002.

Amended 9-11-02.

A RESOLUTION TO MODIFY THE CALCULATION FOR THE AMOUNT OF OFFICE SPACE IN THE MIDWAY BUSINESS CENTER AUTHORIZED FOR USE BY NON-PROFIT ORGANIZATIONS TO INCLUDE EMPOWERMENT’S OFFICES (2002-09-09/R-12)

WHEREAS, on August 28, 2000, the Council authorized EmPOWERment, Inc. to rent up to 10% of office space in the Midway Business Center to non-profit organizations; and

WHEREAS, EmPOWERment, Inc. has requested that the Council increase the amount of office space rented to non-profit organizations;

NOW, THEREFORE, IT BE RESOLVED by the Council of the Town of Chapel Hill that the Council modifies the calculation for the amount of space in the Midway Business Center authorized for use by non-profit organizations to include EmPOWERment’s offices.

BE IT FURTHER RESOLVED that EmPOWERment may use up to 31% of the leasable office space in the Midway Business Center for non-profit organizations, including EmPOWERment’s offices.

BE IT FURTHER RESOLVED that the Council authorizes the Manager to amend the Town’s Performance Agreement with EmPOWERment, Inc. to include these terms.

This the 9^th day of September, 2002.