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HomeMy WebLinkAbout9A, Letter of Support for Arden Village MHFA Tax Credit Application and Extension 'It EN HILLS Request for Council Action 9A Prepared By: Meagan Beekman, City Planner Council Meeting Date: May 14, 2012 Letter of Support for Arden Village MHFA Tax Credit Application and Extension Request Budgeted Amount: Actual Amount: Funding Source: NA NA NA Recommendation: Staff recommends that the City provide a renewed letter of support, which does not include TIF assistance. Staff further recommends approving the amendment to Section 5.0, Subd A.2, of the Development Agreement for Arden Village, LLC to extend the building permit deadline to June 30, 2013. Supporting Documents: 1. Memorandum from Meagan Beekman, dated May 14, 2012 2. May 14, 2012, Letter of Support 3. Arden Village Development Agreement Amendment No. 2 4. March 19, 2012, Meeting Minutes ,!It EN HILLS MEMORANDUM DATE: May 14, 2012 TO: Honorable Mayor and City Councilmembers Patrick Klaers, City Administrator FROM: Meagan Beekman, City Planner L SUBJECT: Letter of Support for Arden Village MHFA Tax Credit Application and Extension Request Requested Action Sand Companies, Inc. (SCI) has requested a letter of support for their application for Minnesota Housing Finance Agency (MHFA) tax credit financing for Arden Village. In addition, SCI is requesting a one year extension on their deadline to pull building permits on the project. Background Land Use Approvals SCI has proposed the development of an affordable rental housing development at 1296 County Road F. The proposed 4-story building consists of 55 housing units with one to three bedrooms, a 55-stall underground parking garage, and a 55-stall surface lot. The development would also include a tot lot playground and picnic area for residents. The proposal required the property to be rezoned from the current 1-1, Limited Industrial District, to R-4, Multiple Dwelling District. In order to rezone the property, a Comprehensive Plan Amendment was also required. Prior to recent City land use approvals, the 2.76-acre property operated under a Conditional Use Permit (CUP) that was approved in 1972 for a 240-foot communications tower. SCI requested a Preliminary and Final Plat to subdivide the property into two parcels, and a Master and Final PUD for the development itself. Because the CUP encompassed the entire property, a CUP Amendment was needed to reflect the proposed legal description for the newly subdivided lot. City of Arden Hills City Council Meeting May 14, 2012 Page 1 of 3 On March 8, 2010, the City Council gave land use approvals for the Arden Village project including Conditional Use Permit Amendment, Rezoning, Comprehensive Plan Amendment, Preliminary and Final Plat, and Master and Final Planned Unit Development. The Council also approved a development agreement. Section 5.0 Subd A.2 of the Development Agreement required Arden Village to obtain a building permit for the development on or before June 30, 2011. Letter of Support Subsequent to the land use approvals, SCI requested a letter of support for tax increment assistance. Although the request for tax increment assistance was relatively small in relation to total projects costs, local financial assistance is very important in leveraging tax credits, grants, and loans from other funding providers. SCI needed a letter of support prior to its application for tax credits from the Minnesota Housing Finance Agency (MHFA). On June 14, 2010, the Council approved a letter of support for Arden Village that included up to $225,000 in TIF assistance. Since the initial approval of the project, Arden Village has moved forward with purchasing the parcel, and has filed the Final Plat to subdivide the property with the County. Arden Village is continuing to working with MHFA on an application for housing tax credits that would allow the project to be constructed. Arden Village did not receive funding in the first MHFA funding cycle, and in May 2011, requested a one year extension on their building permit deadline, as well as a second letter of support for the next MHFA funding request. On May 9, 2011, the City Council approved both requests. The second letter of support also included up to $225,000 in TIF. Minnesota Housing Finance Agency Tax Credit Application Arden Village did not receive funding in 2011, and SCI intends to submit another funding application for this year's MHFA tax credit funding cycle. As part of their application, an updated letter of support is needed. The Council reviewed the Arden Village development, and met with SCI at the March 19, 2012, Council work session (Attachment C). At that meeting the Council indicated ongoing support for the project, but hesitancy over the continued $225,000 in TIF. SCI stated that they were seeking an alternative funding source for the project that may replace the TIF. At this point it appears that SCI has secured funding from the Greater MN Housing Fund, and as a result their letter of support (Attachment A) does not include an offer of TIF from the City. In order to use the Greater MN Housing Fund resources, SCI must begin construction of Arden Village on or before December of 2012, as they would have to obtain a certificate of occupancy by December 30, 2013. As a result of this timeline, a sentence has been added to the letter of City of A rden Hills City Council Meeting May 9, 2011 Page 2 of 3 support that states that the City understands that there is an accelerated completion schedule and that the City will work with the project, within the code guidelines, to achieve a certificate of occupancy by the end of 2013. All other aspects of the letter remain the same as previous years. Extension Request The applicants are requesting a one-year extension on their deadline to submit for building permits in order to give them time to pull together their financing package, which includes the housing tax credits. A one year extension is being requested in the event that Arden Village is not selected for MHFA funding in 2012. The extension would amend the Development Agreement to require that Arden Village obtain a building permit for the development on or before June 30, 2013 (Attachment B). The building permit extension would not change, extend, or alter any other aspect of the approved Development Agreement. Recommendation Staff recommends that the City provide a renewed letter of support, which does not include TIF assistance. Staff further recommends approving the amendment to Section 5.0 Subd A.2 of the Development Agreement for Arden Village, LLC to extend the building permit deadline to June 30, 2013. Requested Action Motion to approve the renewed 2011, letter of support and Arden Village Development Agreement Amendment No. 2 to extend the building permit deadline to June 30, 2013. Attachments: A. May 14, 2012, Letter of Support B. Arden Village Development Agreement Amendment No. 2 C. March 19, 2012, Meeting Minutes City of Arden Hills City Council Meeting May 9, 2011 Page 3 of 3 Attachment May 14, 2012, Letter of Support May 14, 2012, City Council Meeting ARZEN_HILLS May 14, 2012 Minnesota Housing Finance Agency 400 Sibley Street, Suite 300 St. Paul,Minnesota 55101 Attention: Multifamily Underwriting RE: Housing Tax Credit Program& Super RFP. ARDEN VILLAGE—ARDEN HILLS. Dear Multifamily Development: The City of Arden Hills is a community made up of residents, businesses and institutions sharing a common history. One of the primary purposes of a community is to serve as a place of residence for its citizens. Assuming this charge, offering a mix of life cycle housing opportunities becomes a challenge for local governments especially in suburban markets. The City has a strong desire to support affordable and work-force housing and is an active participant in the Livable Communities Program. The City's 2030 Comprehensive Plan sets goals that emphasize the development of a variety of housing types that are suitable for a mix of incomes including work-force housing. Developers and the City must be partners to cooperatively develop housing plans to provide life cycle housing in Arden Hills. To promote and participate in rental housing opportunities, the City has provided incentives for affordable housing developments. As a cost reduction measure to endorse Arden Village, the City has approved the project with a density bonus, flexibility in zoning and fast track permitting and approval. We also understand the project will be on an accelerated completion schedule and we will work with the project, within the code guidelines, to achieve its certificate of occupancy before the end of 2013. The City will also not be collecting the approximate $71,560 park dedication fee and also waiving$2,000 in City SAC/WAC fees. The proposed development is an excellent opportunity for the City of Arden Hills to meet a large portion of its housing goals. This endorsement is based upon the findings that the project will meet locally identified housing needs and that the proposed housing is in short supply in the local housing market. This need is evidenced by the gap between the local supply and demand for the proposed type of housing. The City Council's endorsement is evidenced by this letter of support for the proposed development. We respectively request funding approval for this needed development in the City of Arden Hills. Sincerely, David Grant Honorable Mayor City of Arden Hills + 1245 West Highway 96 * Arden Hills,MN * 55112-5743 Phone 651.792.7800 * Fax 651.634.5137 * www.ei.arden-hills.mn.us Attachment Arden Village Development Agreement Amendment No. 2 May 14, 2012, City Council Meeting CITY OF ARDEN HILLS ARDEN VILLAGE DEVELOPMENT AGREEMENT AMENDMENT NO. 2 PC# 09-021 1.0 Parties. This Amendment No. 2 to the Arden Village Development Agreement if dated the 10' day of May, 2012, and is entered into by and between the City of Arden Hills, a Minnesota statutory city ("City"); and Arden Village, LLC, a Minnesota Limited Liability Corporation ("Arden Village"). 2.0 Recitals. A. The City and Arden Village are parties to the certain Arden Village Development Agreement dated March 8, 2010 ("Agreement"). B. The City approved Amendment No. 1 to the Agreement dated May 9, 2011, amending Section 5.0 Subd A.2 of the Agreement. C. The Parties wish to further Amend Section 5.0 Subd A.2 of the Agreement as hereinafter specified. 3.0 Terms and Conditions of Permit. In consideration of the City's development approvals; in compliance with the City's development regulations and in consideration of the undertakings expressed herein, the parties agree: A. Section 5.0 Subd A.2 is hereby amended in its entirety to read as follows: Arden Village shall obtain building permits on or before June 30, 2013, or the PUD Plan approval shall expire unless extended by the City Council prior to the approval's expiration date. Extension requests shall be submitted in writing to the City staff at least 45 days prior to the expiration date. B. All other provisions of the Agreement shall remain in full force and effect. 1 The parties acknowledge and agree to the terms and conditions of this Amendment No. 2 to the Arden Village Development Agreement: CITY OF ARDEN HILLS A Minnesota statutory city By: David Grant Mayor Attest: Patrick Klaers, City Administrator STATE OF MINNESOTA ) ) ss. COUNTY OF ) On this day of 2012, before me, a notary public within and for said county, personally appeared Stanley Harpstead, to me known to be respectively the Mayor of the City of Arden Hills, and they executed the foregoing instrument and acknowledged that they executed the same by authority of and on behalf of the City of Arden Hills. Notary Public 2 Arden Village, LLC, a Minnesota limited liability corporation By: Printed Name: Title: STATE OF MINNESOTA ) ss. COUNTY OF ) On this day of 2012, before me, a notary public within and for said county, personally appeared to me known to be respectively the of Arden Village, a Minnesota limited liability corporation, and owner of the above described property and they executed the foregoing instrument and acknowledged that they executed the same by authority of and on behalf of said corporation Notary Public THIS INSTRUMENT WAS DRAFTED BY: Meagan Beekman City Planner City of Arden Hills PAPlanning\Planning Cases\2009(laserfiched)\09-021 Arden Village PUD,Plat,Rezoning(APPROVED)\Letters of Support and Extension Requests\2012\Final PUD Permit v6- Amendment No.2.doc 3 Attachment March 19, 2012, meeting minutes May 14, 2012, City Council Meeting March 19, 2012, Council Minutes Arden Village Review and Update City Planner Beekman presented the City Council with information on Arden Village. She explained that Sand Companies was the developer for the project and were seeking a letter of support for their 2012 tax credit application for the Minnesota Housing Finance Agency. The application deadline is late May. In preparation of this application, the developer requested an opportunity to speak with the Council and discuss the project in further detail. City Planner Beekman explained Arden Village is a 55-unit four-story building with workforce rental housing located at 1296 County Road F. The development would also include a tot lot playground and picnic area for residents. At the time of the approval a zoning code amendment was approved changing the site from Industrial to High Density Residential. The City previously approved a letter of support for up to $225,000 of TIF for this development. Staff recommended the Council discuss the project along with the letter of support. John Belisle, Midwest Housing, discussed the Arden Village Development further noting that the project planning began in 2009. He noted this is a high quality project with the goal being to create workforce housing geared towards working families. He noted Sand Companies has been in business for 20 years. The rental rates were discussed in detail, along with income limits. He noted credit and criminal background checks are completed on each renter. Mr. Belisle commented he has completed four applications for this project to the Minnesota Housing Finance Agency. He indicated additional funding sources were being sought to subsidize the reduced rental rates. Arden Village received an earmark for $250,000 in home funds last year from Ramsey County, which will be given again in 2012. Mr. Belisle stated that tax credits for housing projects are granted on an extremely competitive basis. For this reason, he is seeking a City Council letter of support for the 2012 tax credit application for the Minnesota Housing Finance Agency. Councilmember Holden requested further information on the project's financing and how the programs are funded. Mr. Belisle reviewed a chart with the Council. City Administrator Klaers requested City Planner Beekman discuss the City's low to moderate income housing goals as approved by the Metropolitan Council. Mr. Belisle stated he had reviewed the 2030 Comprehensive Plan when this project began. City Planner Beekman stated the Met Council assigns a certain number of housing units to each community for low to moderate income housing units based on demographics and rate of projected growth. The community is then expected to adopt these goals and participate in the Met Council's Home Program. At this time, the City's goal is to add 288 affordable housing units by 2020. Participation in the Met Council's Home Program is required to receive any grants and funding available from the Met Council; however, she noted the program was voluntary. City Planner Beekman explained the need for affordable housing is made visible through this program. She reported Arden Village met the affordable housing standards. Mr. Belisle stated the local participation allows for additional funding opportunities through the Met Council. Further discussion ensued regarding the application process with the Minnesota Housing Finance Agency and tax credits. Councilmember Holmes expressed concern that funds were being requested from the City when the developer was not investing the same amount. The developer was receiving tax credits to cover their expenses while the City would be out $225,000 in TIF money. Mr. Belisle commented that without assistance this project could not move forward. City Planner Beekman indicated developers expect to make money over time through a development. The City was not looking to make a profit on the development but was looking to make an investment in the community. Community Development Director Hutmacher added that the cost of building these units would not allow for them to be geared towards workforce housing. For that reason, tax credits and grants reduce the capital costs of development so that rents are affordable. City Administrator Klaers stated the only risk with the development would be if the units were not rented. Mayor Grant questioned how much of the land costs were recouped through the sale of the antenna tower. Mr. Belisle explained he was asked to keep this information confidential. City Administrator Klaers stated the information may be public and available through Ramsey County. Councilmember Holden was in favor of providing some TIF dollars for the project. She was uncertain if the entire $225,000 was necessary. City Planner Beekman questioned if the application with the Minnesota Housing Finance Agency would be jeopardized if the TIF amount was reduced. Mr. Belisle did not feel this would jeopardize the application, as the City was assisting with reduced Park Dedication Fees and a trail. He noted the City did approve a higher density for the site, which assisted the project. Mayor Grant felt it would be difficult for the City to offer the same amount of TIF year after year as developments and initiatives throughout the community change. He questioned if $100,000 were offered by the City if Sand Companies could make up the difference. Jamie Thelen, Sand Companies, indicated Sand Companies has been investigating other funding sources to assist with the project. Councilmember Holmes asked for the estimated net profit for the first year of operation. Mr. Belisle anticipated the development would make approximately $50,000 in the first year after paying all operating expenses and debt services. He explained the units had to remain affordable for 30 years. City Administrator Klaers questioned if it would be appropriate to have Ehlers review the information and determine an appropriate level of TIF for the proposed development. Community Development Director Hutmacher explained the "But For" analysis from Ehlers could provide the Council with additional information on the proposed development and its overall financing. Mayor Grant asked if staff knew the expense of the "But For" analysis. City Administrator Klaers estimated this to be a $5,000 expense and would be paid for by the developer. City Planner Beekman indicated if the TIF funds were granted, the assistance would be available to the developer for 12 years. After that time, full property taxes would be paid. Mayor Grant stated the City could also take TIF from Cottage Villas and apply it to this project. That would allow the tax revenue from this project to be collected from Day 1. The advantage of using these funds was that it was slated for affordable housing. City Planner Beekman stated this would be an option and the City would see some cost savings by not creating a new TIF district. Mayor Grant questioned if the Council wanted to proceed with the $225,000 in TIF or allocate a lesser amount. He was willing to provide TIF funds to the development but was uncertain if the full amount was necessary. Councilmember Tamble stated he was in favor of the development but was unable to commit to a dollar amount. Councilmember Holden agreed. Councilmember Holmes indicated she too supported the project. Councilmember Werner was not solid on the numbers but was willing to pursue TIF for this development. He questioned if the City had to determine an amount at this time or simply offer support for the project. Mr. Belisle commented that an amount did have to be included in the letter of support for the Minnesota Housing Finance Agency. He offered to walk Councilmembers Werner and Tamble through the facility in White Bear Lake to provide more information on the proposed development.