HomeMy WebLinkAbout8A, Arden Village Workforce Housing�;.� EN HILLS .
Re uest for Council Action �
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Prepared By: James Lehnhoff,
Community Development Director � Council Meeting Date: June 14, 2010
Arden Village Workforce Housing Proposal —
Updated Letter of Support for the Housing Tax Credit Application
Budgeted Amount: Actual Amount: Funding Source:
Recommendation:
Consider a motion to approve a letter of support for Sand Companies, Inc's housing tax credit application to the
Minnesota Housing Finance Agency for the Arden Village project at 1296 County Road F for an amount not to
exceed $225,000 or $575,000 as proposed in the June 14, 2010, memorandum.
Supporting Documents:
• Memorandum dated June 14, 2010, from James Lehnhoff
• Updated Letter of Support from Sand Companies, Inc.
�;.� EN HILL5
MEMORANDUM
DATE: June 14, 2010
TO: Mayor & City Council
FROM: James Lehnhoff, Community Development Director
SUBJECT: Arden Village Workforce Housing Proposal —
Updated Letter of Support for the Housing Tax Credit Application
Action Req uest
Consider a motion to approve a letter of support for Sand Companies, Inc's housing tax credit
application to the Minnesota Housing Finance Agency for the Arden Village proj ect at 1296
County Road F for an amount not to exceed $225,000 or $575,000 as proposed in the June 14,
2010, memorandum.
Background
At the September 14, 2009, City Council meeting, the Council approved a letter of support for
Sand Companies, Inc.'s (SCI) housing tax credit application to the Minnesota Housing Finance
Agency for the 55 unit Arden Village workforce housing project 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. The letter did not
guarantee $400,000 in support since �nancial reviews had not yet been conducted. Applications
with community financial support score higher and have a better chance of obtaining 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 for tax credits at that time. MHFA
encouraged SCI to resubmit their application for the next funding awards in fall 2010.
The Arden Village proposal received all necessary land use approvals at the March 8, 2010, City
Council meeting. SCI subsequently informed the City that they would submit a new housing tax
credit application to MHFA. The housing tax credit applications are due by June 1 S, 2010. The
applicants do not consider the proj ect to be viable without the housing tax credits
City of Arden Hills
City Council Meeting fo� June 14, 2010
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Page 1 of 4
Letter of Suuport Review
In preparation for a new housing tax credit application to MHFA, SCI submitted an updated
letter of support in May. FPAC reviewed the revised letter at their May 6, 2010, meeting. FPAC
did not recommend a particular course of action but stated that the request for up to $575,000
was an appropriate number for the gap �nancing request.
The $575,000 request was an increase from the $400,000 request made in September 2009,
which is related to SCI's proposal to sell the communications tower to the City. While SCI
would technically donate the tower to the City for $1 and write-off the tower as a donation, the
loss of revenue from the tower increased the funding need for the project. However, the
increased support from the City adds points to SCI's housing tax credit application and increases
their likelihood of being selected. If the City accepted SCI's tower sale proposal, the City could
fund the complete $575,000 request through a combination of TIF, fee waivers, or direct
payment. Under this scenario, the City would also take ownership of the tower.
When the new letter of support was reviewed by FPAC and the City Council, the preliminary
TIF calculations indicated that the project would generate approximately $184,000 over 15 years.
It is important to remember that the TIF calculation was an estimate because a complete analysis
will not be completed until 2011 prior to the start of construction. Based on SCI's $575,000
request, the remaining gap after TIF would be $391,000. The remaining $391,000 could be
funded by a combination of fee waivers or payment from the City.
On May 10, 2010, the City Council reviewed the revised letter of support from SCI for their
housing tax credit application to MHFA. At that time, the Council expressed concern regarding
the increased funding request from $400,000 to $575,000; the discrepancy between the funding
request and estimated TIF generation; and the potential impact of a HOME grant from Ramsey
County. Furthermore, the request for support had become intertwined with the sale of the tower,
which made it dif�cult to fully analyze the request. Due these reasons and since the tower
appraisal was expected by the end of May, the letter of support was tabled. The tower has since
been valued at $500,000.
Updated Preliminary TIF Review
The City's financial consultant has revised the preliminary TIF analysis since the May meeting.
The revised calculation indicates that the project would generate $201,000 over 15 years. Again,
this is a preliminary calculation and the �nal number will not be determined unti12011. The TIF
number currently does not include any adjustments for inflation over the life of the TIF district.
Additionally, SCI is considering opting out of the 4d tax classification, which is a reduced tax
level for workforce housing. Either of these adjustments could increase the amount of TIF
generated by the proj ect. These decisions would be made during the complete TIF review in
2011.
City of Arden Hills
City Council Meeting for June 14, 2010
IlMetro-inet.uslardenhillslPlanninglCommunity DevelopmentlHousinglAffordable HousinglArden Village - Sand Companies106141 D- CC Memo
- Arden Village - Sand Companies.doc
Page 2 of 4
Ramse_y Countv Grant Contribution
As reported at the May 10 Council meeting, Ramsey County awarded Arden Village a$3 5,000
grant to support their housing tax credit application. The proj ect may be eligible for up to
$300,000 in additional grant money in 2011, but the County does not want to tie up 2010 grant
money for a project that is not scheduled to start until 2011. When Ramsey County's support
was discussed at the Council meeting, it was not clearly explained how that grant may impact
SCI's request from the City. It was initially thought that it could reduce SCI's request from the
City. However, it has since been explained that funding from Ramsey County would reduce the
overall support from MHFA resulting in essentially no net gain to SCI. This was confirmed
directly with MHFA.
The primary bene�t of the grant is that the County's initial contribution adds points to the
housing tax credit application and increases the chance that this proj ect is selected for housing
tax credits. Additionally, Ramsey County HR.A's mission is to add workforce housing units in
Ramsey County, which is why they support the project. Nevertheless, the City could still include
"look back" provisions in the development agreements should SCI obtain funding that reduces
their need from the City.
Updated Letter of Support
The deadline for the housing tax credit application is June 15, 2010. The City will need to make
a determination on the letter of support at their June 14 meeting or SCI will not be able to
complete their tax credit application. MHFA will make its determination by October 28, 2010.
If the tax credits are approved, the City would begin the formal TIF review in spring 2011. The
TIF review would be completed before construction starts and likely be certi�ed by June 30,
2011.
While the letter of support does not commit the City to provide the full funding request, the
Council expressed concern about potentially misrepresenting the City's financial support in
SCI's tax credit application to MHFA. Since the communications tower sale has become
entangled in the letter of support, the City's decision on whether or not to pursue purchasing the
tower will inform the wording in the updated letter of support (see attachment).
Based on the updated �nancial data and direction from the May 10 Council meeting, SCI has
prepared two possible public subsidy strategies depending on whether or not the City wants to
pursue ownership of the tower. The City will need to select one of the two options for the letter
of support that is submitted to MHFA for SCI's application. Whichever option is selected, the
City would be offering a good faith commitment to provide the requested amount of support to
the proj ect p�ovided that SCI receives the housing tax credits and the final financial analysis
demonstrates the need for the requested support.
City of Arden Hills
City Council Meeting for June 14, 2010
IlMetro-inet.uslardenhillslPlanninglCommunity DevelopmentlHousinglAffordable HousinglArden Village - Sand Companies1061410 - CC Memo
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Page 3 of 4
Option 1: Not Purchasing the Towe�
If the City does not purchase the communications tower, SCI is requesting up to $225,000 in
assistance. Although the preliminary TIF analysis indicates that $201,000 would be
generated, that is not a�nal number and it could change when the complete TIF review is
completed in 2011. It is feasible that the �nal public subsidy from the City could vary from
$225,000. For example, if the �nal TIF number is $201,000, the City would not be expected
to pay the remaining $24,000. The City's �nancial consultant stated that the preliminary
nature of the TIF number is not out of line with the $225,000 request.
Option 2: Pur�chasin� the Tower
If the City purchases the communications tower, SCI is requesting up to $575,000 in
assistance. This subsidy could be funded through TIF, a waiver of fees, and/or a cash
payment. If the TIF generates $201,000, the City would need to fund the $374,000 gap. The
gap would essentially represent the price of the communications tower. If the City
contributes $575,000 to the project, SCI will secure two additional points on their housing
tax credit application and increase their chances of securing the tax credits.
Selecting option two is not the final commitment to purchase the tower; however, it does
send the City solidly in that direction and the City should be prepared to take ownership of
the tower. The City would still need to negotiate the value and payment terms of the tower.
Once the TIF analysis is completed in 2011, the City would then know the �nal "price" of
the tower. The City would be expected to �11 the gap between the TIF and the final
negotiated public subsidy amount.
At the end of the third paragraph in the letter of support, a new line was added regarding the
City's park dedication fee and SAC/W�C fees (it is underlined for your convenience). It is true
that the City is not collecting the park dedication fee; however, SCI is constructing a nearly
1,700 foot long sidewalk along County Road to connect the property to the trail on Lexington
Avenue. The estimated cost of the sidewalk is more than the park dedication fee, and it has
already been approved as part of the land use approvals.
After discussing the housing tax credit application with SCI, staff is supportive of SCI's request
for a total fee waiver of $2,000 from the City's sewer access charge (SAC) and water access
change (WAC). This is a new request from the previous letter of support. The total SAC/WAC
fee is estimated at $148,000, of which $115,500 is paid to the Metropolitan Council for sewer
access. The $2,000 request is a relatively minimal waiver for gaining another point on the tax
credit application.
Attachment
Proposed Letter of Support
City of Arden Hills
City Council Meeting for June 14, 2010
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Page 4 of 4
(CITY OF ARDEN HILLS LETTERHEAD)
June 14, 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 project with a density bonus, flexibility in zoning and fast track permitting
and approval. The City will also not be collecting the approximate $71,560 �ark dedication fee
and also waiving $2,000 in Citv SAC/WAC fees.
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�ti��i�.y p+�l�c�T.
The proposed development is an excellent opportunity for the City of Arden Hills to meet a laxge
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