Middletown approves $43 million O&W redevelopment plan; council OKs RECAP lease and improvement agreement

The Middletown Common Council voted unanimously to advance the long-stalled O&W rehabilitation project, approving bid awards for the $43 million redevelopment and simultaneously authorizing a lease and improvement agreement with the Regional Economic Community Action Program (RECAP).

The project will restore the historic O&W building and turn much of the space over to RECAP for Head Start and child-care services, Mayor said during discussion. "This is truly a game changer for our city," the Mayor said, calling the project a way to "preserve a beautiful piece of Middletown's history" while delivering services to families in the city's lowest-income census tract.

Council members and staff described the project as a diversified financing structure that blends grants, tax-credit equity, municipal borrowing and RECAP investment. The council was presented with a financing summary showing a total project cost of $43 million; about $10 million attributed to RECAP-related interior improvements; roughly $13 million from various grants and tax-credit equity; a $3.6 million city fund-balance appropriation; and a $6.6 million planned city bond issuance. To provide early-stage funding while grant reimbursements arrive, the city will issue roughly $19.9 million in bond anticipation notes.

The council heard additional details on repayment and revenue: $6.6 million of the bond anticipation notes will be rolled into city bonds, an estimated $3.9 million would be reimbursed by grants at project closeout, and the remaining balance is expected to be covered by RECAP lease payments and other project rental income over a 15-year lease term. RECAP's initial $10 million investment is treated as a reimbursable contribution and the tenant plans to reduce its upfront obligation through a capital campaign and structured lease payments. The lease payment schedule presented starts at $22 per square foot in year one and increases 2% annually, as required by tax-credit investors.

The council also heard that historic-preservation requirements contributed to higher costs: the state and federal preservation standards require specific restoration work, including rebuilding the north tower with matching brick, a change the Mayor estimated adds about $3 million to the project. The scope also includes acquisition and development of a nearby parking lot to provide about 70 spaces.

Council members asked several operational questions. Alderman Johnson asked how the $10 million in RECAP-related costs were delineated; staff responded that engineers working with RECAP separated tenant improvements (interior build-out) from core building systems (the city will supply HVAC units and other core infrastructure). When asked about a start date, staff said contract preparation typically takes about 30 days and additional items — contractor bonds, builder's risk insurance and final insurance — remain before work can begin.

Alderman McCliner congratulated the Mayor and described the project as a long-standing priority referenced in the city's master plan and regional DRI discussions. The Mayor said Recap has signed the lease, and outstanding items include securing contractor insurance and other final approvals.

Votes at a glance

- Resolution to change the date of the regular meeting of the Common Council (sponsored by Alderman Johnson): carried, roll call recorded as ayes from Jean Francois, Johnson, Kleiner, Green, Witt and President Rodriguez.

- Resolution authorizing the awarding of bids for the O&W project (sponsored by Alderman Kleiner; second by Alderman Green): carried, roll call recorded as ayes from Jean Francois, Johnson, Kleiner, Green, Witt and President Rodriguez.

- Resolution authorizing a lease agreement with the Regional Economic Community Action Program (RECAP) (sponsored by Alderman Witt; second by Alderman Johnson): carried, roll call recorded as ayes from Jean Francois, Johnson, Kleiner, Green, Witt and President Rodriguez.

- Resolution authorizing an improvement agreement with RECAP (sponsored by Alderman Jean Francois; second by Alderman Johnson): carried, roll call recorded as ayes from Jean Francois, Johnson, Kleiner, Green, Witt and President Rodriguez.

What the council recorded as next steps are routine preconstruction tasks: finalize contracts (estimated 30 days), ensure contractors post bonds, and secure required insurance. The Mayor and staff emphasized the project is fully funded under the presented financing plan and that capital improvements paid by RECAP during the 15-year period will become city property at the end of the lease term.

Background and funding sources cited by staff during the meeting include a Restore New York grant (approximately $1.826 million cited), an Empire State Development (ESD) grant of $2 million, Community Development Block Grant (CDBG) CARES Act funds administered through the state Homes and Community Renewal program (cited at $4.1 million), a Dormitory Authority of the State of New York (DASNY) grant of $2 million for site work, and federal ARPA funds. The Mayor said some tax-credit equity and other grant amounts were counted toward the $13 million in grant/tax-credit financing noted in the presentation.

The council meeting also included a routine procedural resolution to change the regular meeting date; that vote carried before the O&W discussion.

The council's approvals advance contract award and tenant agreements; staff said grant reimbursements, insurance and contractor bonding remain before construction can start.