The resurrection of the nine-building arcade complex would have the same kind of dramatic and far-reaching impact as the opening of Fifth Third Field in 2000 and the Schuster performing arts center three years later, which are among the main reasons why downtown welcomes about 7.2 million visitors annually, said Dayton officials and local economic development leaders.
“Much like Schuster, RiverScape and baseball, the arcade seeks to be catalytic because there is 1 million square feet of vacant space around it that already is in conversation with developers who are waiting to see what happens with the arcade,” said Dayton City Manager Shelley Dickstein.
She later said, “The city hasn’t invested in a project like this, to this level, in 15 years.”
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Most of the funding for the project has been secured, and if this plan does not succeed, it’s extremely unlikely there would be another opportunity like this again to bring the long-vacant complex back to life, officials said.
City officials said the arcade project would be another major downtown destination and would increase the tax base and be a magnet for new investment in that part of downtown.
A two-story interior section of the Third Street Dayton Arcade. The city of Dayton Friday pulled a request for $1 million in Montgomery County ED/GE funding to redevelop the arcade — but another funding request is expected in the spring. TY GREENLEES / STAFF
But officials also said the arcade’s innovation hub will have a programming presence in all corners of the city to ensure the entire community benefits from the project.
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The Dayton City Commission today will authorize the loan of up to $10 million to the Dayton Arcade LLC to help provide one of the last major pieces of funding for the first phase of the project, officials said.
The loan is part of a development agreement approved by commissioners with development team partners Cross Street Partners, Model Group and McCormack Baron Salazar.
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The city’s loan only will be “activated” if the development partners close on the project’s financing, which is expected to take place in August.
The loan will be interest-only for seven years. The city will internally borrow its own funds and repay that over seven years with economic development funds. At the end of seven years, the borrower will need to repay, refinance or reach another agreement about the loan.
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The funding means the city will have a “participatory” piece of the revenue generated by the arcade moving forward, said Diane Shannon, Dayton’s director of procurement, management and budget.
The interest on the loan will be the same return as the city would have earned had it left the funds invested, Shannon said.
Vinyl posters depicting a sleeping giant are covering the north entrance of the Dayton Arcade. CORNELIUS FROLIK/STAFF
“This keeps us active in the game for a seven-year period, and then we’ll have a day of reckoning,” she said.
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The development agreement approved today provides an early release of up to $2 million in funds to pay for demolition work inside the arcade to help obtain accurate construction bids. Internal demolition is expected to begin in early June, with bids being solicited the f0llowing month.
The loan is a big commitment for the city, but it was already invested in the project.
In 2015, the city of Dayton contributed about $450,000 for repairs and other work on the arcade to keep it dry and stable and prevent further deterioration. The city also agreed to contribute about $1 million to the project help pay for architectural, engineering and other professional services.
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The city also committed $2.5 million of its federal HOME dollars to help create new apartments inside the arcade.
The $1 million the city committed to professional services will be returned by the developer when the city brings the $10 million to the closing, officials said.
Aerial view of the Dayton Arcade rotunda. Six months after being denied state historic tax credits, the developers of the Dayton Arcade officially earned $5 million in incentives on Wednesday, June 28, 2017. TY GREENLEES / STAFF
The Dayton Arcade is a civic piece of real estate that has been expected to perform as a conventional piece of real estate, which is not financially feasible, said John Gower, urban design director at CityWide.
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“You have to bring all these other financing sources to the table, because you would never be able to debt finance this thing,” Gower said.
The arcade partners have been awarded tens of millions of dollars in low-income housing tax credits, new market tax credits, state and federal historic tax credits and other incentives.
Foremost, the arcade is going to create jobs and promote entrepreneurship, Gower said, but it also will provide affordable housing for young creative types and professionals and high-demand urban amenities, including restaurants and other retail.