Ithaca Urban Renewal Agency approves 2024 audit, reaffirms investment rules and reviews waterfront projects

The Ithaca Urban Renewal Agency (IURA) unanimously approved a resolution accepting the agency's 2024 financial audit and reaffirmed its investment guidelines at a regularly scheduled meeting, while staff and board members reviewed major property holdings and warned of a looming operating shortfall as federal grant revenue lags inflation.

The agency voted to approve the audit prepared by the accounting firm Incero (resolution in the meeting packet) and then adopted a separate resolution reaffirming the IURA's investment guidelines. Both motions passed without dissent. Nels, IURA staff, told the board the audit was "what we categorize as a clean financial audit. There's no findings. There's no recommendations. There's no deficiencies identified." Board members then discussed the agency's real estate holdings and near-term funding options.

The vote to accept the financial report covers the agency's fiscal period 01/01/2024 through 12/31/2024 and authorizes submission of the audit report as required under state reporting rules. The investment guidelines resolution restated the agency's practice of holding funds at FDIC-insured institutions and using collateral agreements for deposits above the FDIC insurance limit.

Why it matters: IURA staff emphasized the agency's solid short-term fund balance but warned that grant revenues have not kept pace with inflation, creating an operating gap once one-time federal ARP administrative funding is expended. The board also used the session to update its approach to several key downtown and waterfront properties, including Cherry Street and Inlet Island, which could generate revenue or require remediation before development.

Key details from the meeting

Audit and finances Nels summarized the audit and the agency's fiscal position, saying the agency has "about $1,800,000" in fund balance but that much of that is restricted to specific programs. He noted the audit uses a modified-accrual basis and that about $80,000 in accrued vacation is not included in the reported numbers. Nels told the board that the agency's core operating budget to maintain roughly 3.6 full-time equivalent positions and basic operations runs closer to $440,000 a year, and that the city-level CDBG and HOME allocations used by the agency have not been adjusted for recent inflation.

Nels outlined three paths the agency can take to address the projected operating shortfall after ARP funds are spent: sell property, reach agreements with the city for payment of services, or increase loan activity to generate additional interest income. He also identified a discretionary cash reserve of roughly $450,000 and a smaller Cherry Street Industrial Park Fund of about $100,000.

Program spending and federal requirements The board discussed U.S. Department of Housing and Urban Development (HUD) requirements for timely disbursement of Community Development Block Grant (CDBG) funds. Nels warned the agency may not meet HUD's timeliness test this year because several projects are slow to draw down funds; examples cited included homeowner rehabilitation work that has struggled to find contractors willing to bid, and a large sidewalk contract that is under way but unlikely to be fully completed and paid by HUD's reporting deadline.

Nels also reported that the agency manages a one-time HOME-ARP allocation (approximately $1.9 million) that provides short-term administrative resources; staff expect those funds will be spent down, and that after 2027 some grant streams could be at risk pending federal decisions. Nels said HOME/CDBG administrative set-asides are limited (he cited 20% for CDBG planning/admin and 15% for HOME administration) which constrains local operating revenues.

Real estate holdings and current projects Board discussion turned to IURA-owned or controlled parcels the agency considers its most valuable holdings: Inland Island, the Cherry Street waterfront (a roughly six-acre parcel subdivided into four lots in the agency's inventory), and the Hugo Garage parcel. Nels presented an assessed total value of holdings in the agency's inventory of about $5.8 million, while noting assessment values do not equal market appraisal.

- Cherry Street: The board discussed the area's waterfront zoning and the fact that some Cherry Street subareas currently do not permit residential use. The agency's economic development committee has recommended issuing a request for expressions of interest (RFEI) to solicit development ideas for the six-acre parcel at the end of Cherry Street; that RFEI was described as likely to be considered further at the agency's next meeting.

- Inland Island: The agency reported two key impediments to marketing Inland Island to developers: (1) a state-owned parcel used by the Coast Guard Auxiliary that needs to be transferred to the city (staff said a term sheet is in place) and (2) a roughly half-acre area with historic petroleum contamination from prior canal operations that needs investigation and possible remediation. Staff recommended a preliminary environmental study to estimate cleanup costs so the agency can determine whether to require a developer to take on remediation or to do the cleanup itself before marketing.

- Sale and dispositions in progress: The agency noted a pending sale process for a former fire station property (309 College Ave.) that received a high sealed bid in the board's recent solicitation; staff said the high bid was $5,500,000 and the sale is proposed to close this summer. The city has also secured an option to purchase a separate site (the "Bullet Drum" site) for about $1,300,000 as a potential future public safety facility.

Urban renewal projects and leases The board reviewed two urban-renewal-related actions in the pipeline: - Drop-In Center / Downtown Ithaca Childcare Center: The agency described a proposed 10-year lease extension and a 10-year option tied to the city and the IURA; staff said the extension will be considered at the Common Council and the lease contains no purchase option. - INHS (Ithaca Neighborhood Housing Services) and 205 West State Street: The IURA described a proposed acquisition of a small downtown parking lot (12 to 13 spaces) to be sold to INHS to support a proposed 56-unit senior affordable housing project. Staff identified the fair-market value being used in negotiations for the parking lot at $370,000. Any final closing is contingent on INHS securing construction financing; the council will consider the transaction at an upcoming meeting.

Other program updates Nels updated the board on several grant-funded projects and subrecipients: the OAR collaborative street outreach contract has been delayed while the agency waits for required documentation (a board resolution accepting the award, an agreed beneficiary count and other materials); a prior INHS Inland Island project was reassigned when the original developer withdrew; and St. John's sober-living program has opened but has not yet reported the full number of beneficiaries it committed to the agency.

Board members' concerns Board members and attendees raised several recurring themes: the tension between keeping industrial zoning and supporting mixed-use or residential redevelopment on waterfront parcels; the soil and foundational constraints at parts of Cherry Street that increase development costs; and the challenge that some developers either could not meet timelines (as with an earlier Emery's proposal) or faced higher costs because of soil conditions.

Actions and votes at the meeting - Resolution approving the IURA financial report for the period 01/01/2024 through 12/31/2024 prepared by Incero (motion moved by George; second recorded; passed unanimously). - Resolution reaffirming IURA investment guidelines (moved and seconded; passed unanimously). - Resolution approving submission of required Public Authorities Law reports to the New York State Authorities Budget Office (moved and seconded; passed unanimously).

What happens next Staff recommended conducting a targeted environmental assessment for Inland Island and completing the state conveyance for the Coast Guard Auxiliary parcel before reissuing marketing materials or an RFP for Inland Island. The economic development committee will advance the RFEI for the end-of-Cherry-Street parcel for board consideration. The city will take final action where required (for example, the INHS parking-lot transaction will appear before the Common Council). The agency will continue to track timeliness of CDBG/HOME spending and will consider the three revenue strategies (land sale, service agreements with the city, or additional lending) to close the forecasted operating gap once one-time ARP administrative funds are exhausted.

Ending: The IURA concluded the meeting after agreeing to move forward on follow-up steps for waterfront parcels and to continue monitoring grant spend-down and program compliance; board members said staff would return with proposals and cost estimates for environmental work and property conveyance steps.