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Department Approval ,� �� ��3 � l�'�, Jy REQUEST FOR COUNCIL ACTION Date: 09/28/2009 Item No.: 12.e City Manager Approval Item Description: Approve a Memorandum of Understanding between the City and Aeon Pertaining to T� Increment Financing and Sienna Green Phase II BACKGROUND On July 13, 2009, the City Council approved the creation of T� Increment Financing (TIF) No. 18, which encompasses the Sienna Green (formerly Har Mar Apartments) parcel. Aeon, the owner of Sienna Green, requested the creation of this district to provide a gap financing mechanism for the second phase of its project. As planned, Sienna Green Phase II includes the construction of a new, 50-unit apartment building. These new apartments are intended to provide affordable two-and-three bedroom apartments to complement the existing one-bedroom units Aeon is renovating as part of the first phase of their project. Aeon is preparing an application to the Minnesota Housing Finance Authority (MHFA) for affordable housing t� credits and requested that the City and Aeon work together to draft a development � agreement to set forward the level and extent of increment to be provide to the project in order to bolster � their application. However, it is premature for the City to negotiate and enter into a development � agreement with Aeon as the actual financial gap has yet to be established. In lieu of a development � agreement, staff recommended that a Memorandum of Understanding (MOU) between the City and � Aeon detailing the future steps toward a development agreement would be an appropriate action and � could demonstrate to the agency the City's commitment to this project without obligating the City or � Aeon to specific dollar amounts or project requirements. � Staff has worked with the City's development attorney with Sriggs and Morgan, Jennifer Soulton, to � prepare a draft MOU. To review the MOU, please see Attachment A. Aeon has reviewed the document � and feels that the language within the document provides them with the assurances that the Minnesota , Housing Finance Authority is looking for as part of tax credit application process. This agreement � outlines the project, discusses the TIF district and the City's willingness to allocate increment to this , project with terms and conditions to be set forward in a future development agreement, identifies the , requirements to negotiate a development agreement, establishes fees and expenses and termination and � approval processes. The MOU does not commit the City to allocate any specific dollar amount for the project. The total amount and terms of assistance will be negotiated and approved by the City Council at a later date. POLICY OBJECTIVE , Sy approving the MOU, the City Council is advancing the potential availability of affordable housing as � advocated for through the goals and policies of the preliminarily approved 2030 Comprehensive Plan. In . addition, development of new affordable rental housing will help the City meet its affordable housing goal, which is set by the Metropolitan Council. Page 1 of 2