HomeMy WebLinkAbout7C, Sand Companies Request for a Letter of Support for Housing Tax CreditsEN HILLS
Re uest for Council Action
q
Prepared By: Sue Iverson,
Finance Director/Treasurer
James Lehnhoff,
Community Development Director
Council Meeting Date: May 10, 2010
Sand Companies, Inc request for a letter of support for housing tax credits with the Minnesota
Housing Finance Agency for up to $575,000 in public assistance as proposed in the
May 10, 2010, memorandum.
Budgeted Amount:
N/A
Actual Amour�t:
N/A
Funding Source:
N/A
Recommendation:
Approve Sand Companies, Inc request for a letter of support for housing tax credits with the Minnesota
Housing Finance Agency for up to $575,000 in public assistance as proposed in the May 10, 2010,
memorandum.
Supportinq Documents:
1. May 10, 2010, Memo to the City Council
2. Proposed Letter of Support Request
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%�. EN HILLS
MEMORANDUM
DATE: May 10, 2010
TO: Mayor & City Council
FRUM: Sue Iverson, Finance Director/Treasurer
James Lehnhoff, Community Development Director
SUBJECT: Arden Village Workforce Housing Concept Proposal —
Revised Letter of Support for Housing Tax Credit Application
Action Req uest
Consider a motion to approve the request from Sand Companies, Inc for a letter of support for up
to $575,000 in public assistance for their housing tax credit application with the Minnesota
Housing Finance Agency as proposed in the May 10, 2010, memorandum. �
Background
At the September 14, 2009, meeting, City Council approved a letter of support for Sand
Companies, Inc. (SCI) housing tax credit application to the Minnesota Housing Finance Agency
for the 5 5 unit Arden Village workforce housing proj ect at 1296 County Road F. That letter of
support offered up to $400,000 in public assistance, which could be in the form of Tax Increment
Financing (TIF), waived fees, or a combination of sources. Applications with community
financial support score higher and have a better chance of obtaining the housing tax credits,
which are a key part of making the building affordable.
The Minnesota Housing Finance Agency (MHFA) announced their awards at the end of January
2010; however, the Arden Village proposal was not selected at that time. MHFA encouraged
SCI to resubmit their application for the next funding round. The housing tax credit applications
are due by June 15, 2010.
City of A�den Hills
City Council Meeting for May 10, 2010
IlMetro-inetlardenhillslAdminlCouncillAgendas 8� Packet Information1201015-10-10 RegularlPacket Information1051010 - CCMemo - Arden
Village - Sand Companies.doc
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Revised Letter of Support
In order to submit a new application to MHFA, SCI is requesting a revised letter of support from
the City. The revised letter of support is requesting up to $575,000 in public assistance. The
source of the assistance has not been determined, but potential sources include TIF and the
proposal to sell the communications tower to the City. A letter of support is not an approval
of tax increment financing, the proposal to sell the tower to the City, or any other form of
public assistance. The proj ect must still meet all TIF statutory requirements and undergo a
detailed financial review by the City. However, the letter of support is a good faith commitment
from the City to provide the requested support if the housing tax credits are approved by MHFA
and if the project can demonstrate the need in accordance with the City's Business Subsidy
Policy.
Preliminar_y Public Subsid_y Review
The Financial Planning and Analysis Committee (FPAC) is in the process of reviewing a
preliminary TIF analysis performed by Ehlers and Associates. The preliminary TIF analysis
indicates that the Arden Village property would generate an estimated $252,000 over 26 years or
$184,000 over 15 years. The complete TIF analysis will not take place until SCI is awarded the
tax credits from MHFA, which is when the "but for" test will be completed to determine if and
how much TIF is justified by the project.
FPAC is also reviewing SCI's proposal to sell the communications tower to the City to
determine if it would be prudent for the City to purchase the tower. SCI is currently proposing to
sell the tower to the City for a$1 provided there is a commitment for $575,000 in public
assistance, which could be a combination of TIF and cash from the City. For example, if the
proj ect demonstrates that $184,000 in TIF is justified, then the City would pay the gap of
$391,000 under the current proposal. FPAC is in the process of reviewing the costs and revenue
related to the tower as well as seeking an appraisal. Once FPAC completes their analysis, a
recommendation for a counterproposal will be provided to the City Council.
FPAC met on May 6, 2010 to review the request for a revised letter of support. Representatives
from SCI were present to answer questions and discuss the proj ect and application with the
committee. The Financial Planning and Analysis Committee recommends that the City of Arden
Hills issue a letter of support for up to $575,000 of assistance for the Workforce Housing Project
on County Road F. This $575,000 does appear to be an appropriate amount of gap financing
needed for this $10,400,000 proj ect. It is anticipated that the funding for this support would
come from the following potential sources; Ramsey County, cell tower proceeds or TIF.
The request for support increased for two primary reasons. First, the City's approval of the
proj ect required additional stone on the exterior of the building, and additional arnounts of
City of Arden Hills
City Council Meeting for May 10, 2010
IlMetro-inetlardenhillslAdminlCouncillAgendas � Packet Information1201015-10-10 RegularlPacket Information1051010 - CCMemo - Arden
Village - Sand Companies.doc
Page 2 of 3
fencing around the property. Secondly, the higher request takes into account the proposal to sell
the tower to the City, which results in a loss of revenue to SCI. If the tower is not sold to the
City, the need for public assistance would be reduced. However, the higher number allows the
City to continue exploring the possibility of purchasing the tower but does not obligate the City
to purchase the tower. Additionally, the higher number would increase the number of points
awarded the proj ect through the MHFA application process, making award of tax credits for the
proj ect more likely.
SCI is also applying for a HOME grant from Ramsey County. According to Mary Lou Egan at
Ramsey County Community Development, SCI may receive a small amount of funding, perhaps
$35,000, in 2010 to support their tax credit application to MHFA. Funding from the County
would increase SCI's chances of receiving the tax credits. The project may be eligible for up to
$300,000 in support from the County, but they will not tie up the funds in 2010 for a project that
is not scheduled to start until 201 l. SCI will not know if additional County funds are awarded
until May 2011, but Ms. Egan said the proj ect has a good chance of being selected in 2011
because of its location and housing needs in Arden Hills. Grants received by SCI would be
factored into the public subsidy evaluation and would reduce any requested need from the City
accordingly.
Land Use Apl�rovals
The Arden Village proposal received all necessary land use approvals at the March 8, 2010, City
Council meeting.
Timeline and Letter of Support
The deadline for the housing tax credit application is June 15, 2010. In order to complete the tax
credit application and meet the submittal deadline, SCI would need the letter of support from the
City by June 1, 2010. MHFA will make its determination by October 28, 2010. If the tax credits
are approved, SCI will move forward with the formal application for public assistance with the
c ity.
Assuming the tax credits are awarded and the public assistance request is �nalized, SCI
anticipates starting construction in early 2011 and opening in 2012.
Attachment
Proposed Letter of Support
City ofArden Hills
City Council Meeting for May 10, 2010
I IMetr�o-inetl ardenhills IAdmin I CouncillAgendas � Packet Information 1201015-10-10 RegularlPacket Information 1051010 - CC Memo - Arden
Village - Sand Companies.doc
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May 10, 2010
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
proj ect with a density bonus, flexibility in zoning and fast track permitting and approval. The City will
also not be collecting the approximate $71,560 park dedication fee.
The City of Arden Hills also proposes significant local financial contributions for thls proj ect as part of its
participation and endorsement. If the proj ect is selected for funding, the City Council supports the use tax
increment �nancing (TIF) for the project or other funding means to achieve up to $575,000 in assistance.
As part of the TIF, the project will need to meet all state guidelines for TIF, including the "but for test".
The project also must be reviewed under the City's business subsidy policy.
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 proj ect 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,
Stan Harpstead
Honorable Mayor