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03-26-2019 Concurrent CC, HRA, and PC Work Session AgendaSPEC IAL C O N C U R R E N T C IT Y C O U N C IL, H O U SIN G AN D R ED E V E LO PMEN T AU TH O R ITY, AN D P LAN N IN G C O MMIS S IO N W O R K S E S S IO N R IC H F IE L D MU N IC IPAL C E N TE R, B AR TH O LO ME W R O O M MAR C H 26, 2019 5:45 P M C all to order 1.D iscuss proposed development for C ity Garage S outh (301 77th S treet West) site A djournment Auxiliary aids for individuals with disabilities are available upon request. Requests must be made at least 96 hours in advance to the City Clerk at 612-861-9738. CITY OF RICHFIELD, MINNESOTA Office of City Manager March 21, 2019 Council Memorandum No. 17 HRA Memorandum No. 2 The Honorable Mayor Housing and Redevelopment and Authority Commissioners Members of the City Council City of Richfield Subject: Proposed Development for City Garage South Site Council Members and HRA Commissioners: On February 11, 2019, MWF Properti es presented a proposed 55-unit workforce housing development for the City Garage South Site (301 77th Street West). At the work session on March 26, staff will present additional information to policymakers regarding the proposed development. Chris Stokka from MWF Properties will also be in attendance to answer questions. Policymakers are asked to review the information provided in this memo, visit the site beforehand, and prepare any questions you may have. Staff is asking for direction from policymakers on the questions posed at the end of the memo. Summary Staff is bringing the development for your consideration for the following reasons: 1. The property is guided and zoned for multi -family housing. Staff has used this designation as a guide in seeking development for the property. 2. Under the Inclusionary Housing Policy, developments either provide affordable units or make a payment in lieu to the City. The proposed project offers an opportunity to create affordable units in place of the units that are forgone in favor of the in lieu payments. 3. An analysis of our existing housing stock, the City’s affordable housing need allocation, and feedback from the community suggest that there is a need for accessible housing, housing with supportive services, and larger rental units for families. The proposal provides 15 three-bedroom units and four to six units of housing for people with disabilities, accompanied by supportive services. Site Background The property formerly housed the offices for the City garage. Following the construction of the new Public Works facility in 2007, this building was demolished and ownership of the site was transferred to the Housing and Redevelopment Authority (HRA) to develop the site. The I-494 Corridor Master Plan and related zoning amendments were adopted during this same time frame and the property was guided for Medium Density Residential (MDR) based on its location. The I-494 Master Plan as a whole looked to create an urban, pedestrian -friendly, economically sustainable district that would be distinct and unique to Richfield. Sites farther from freeway access were designated for housing, while commercial uses were focused on areas with superior access. On an interim basis, the site is being leased by Richfield -Bloomington Honda for employee parking. The HRA’s lease with Richfield-Bloomington Honda allows for termination of the lease with at least 30 days’ notice. The proposal from MWF is the second housing development that has been proposed for the site. In 2017, Nicolai Apartments proposed 21 units of market-rate housing. The feedback provided by policymakers at that time was that the City/HRA would consider providing tax increment to develop the site , but that the building design needed to be improved. The developer decided not to move forward with the development. The Proposed Development MWF is proposing 55 units, with the following breakdown of unit sizes and rent and income limits: Unit Size Affordability # of Units 1 BR 30% AMI 50% AMI 6 7 2 BR 50% AMI 70% AMI 21 6 3 BR 70% AMI 15 Note: The income for the 3BR units is 70%; however, rents will likely be less than the maximum allowed. The proposed development would include four to six units for people with disabilities. Supportive services of approximately 30 hours per week would be provided for the households occupying those units. The developer plans to apply for housing tax credits to provide equity for the project. The Low Income Housing Tax Credit Program (LIHTC) is a federal resource for housing in which an investor purchases tax credi ts and receives a 10-year reduction in their federal tax liability. The proceeds from the sale of the tax credits is invested in affordable housing that must then remain affordable for 30 years. A limited amount of tax credits are made available per stat e. Points are awarded to projects based on a variety of factors as laid out in the State’s Qualified Allocation Plan (QAP) (e.g., economic integration, access to high performing schools, access to transit). Tax credits are allocated to projects that score the highest, given the amount of funds available. The Program is highly competitive . In Minnesota, typically one in three projects is awarded funding. The site is one of relatively few areas in the City that receive a high number of points under the QAP priorities. These websites provide additional information on the LIHTC Program:  www.taxpolicycenter.org/briefing-book/what-low-income-housing-tax-credit-and- how-does-it-work  www.mnhousing.gov/wcs/Satellite?cid=13589052 54471&pagename=External%2 FPage%2FEXTStandardLayout Policies The following policies provide guidance in making land use decisions for the property: 1. The Comprehensive Plan is the policy document that describes the community’s vision for the future of Richfield. It is a roadmap that staff uses to direct developers to appropriate locations for particular projects. It is the document that is used to determine zoning districts . The zoning of a property is required by State Law to match its Comprehensive Plan de signation. In 2005-2006 the City amended the Comprehensive Plan and zoning designations along I-494. Based on anticipated changes to I-494 access and a desire to both take advantage of the I -494 visibility and to create a more livable corridor, the area was guided for a mix of commercial and higher density housing. This particular property and the surrounding properties were guided for medium-density residential housing (MDR), which allows densities between 8 and 34 units per acre. The City’s Inclusionary Housing Policy offers a density bonus of up to 15% for projects that include affordable units, thereby allowing up to 39 units per acre. The developer is proposing a density of 5 9 units per acre, which will require the property to be re-guided to high density residential (HDR). All other parcels along I-494 that are guided for either multi-family housing or mixed use allow for higher densities – either 35-100 units per acre or 50-150 units per acre – which suggests that re-guiding to HDR would be consistent with the Plan. A Comprehensive Plan amendment typically requires a super majority approval from the Council; however, in the case of an affordable housing development, a simple majority is all that is required. NOTE: The adjacent properties at 301 77 th Street West (LaMettry’s) and 7600 Pillsbury (Havenwood) were formerly guided MDR but were re-guided to Community Commercial and HDR, respectively. . 2. The City’s affordable housing need allocation, as determined by the Metropolitan Council for the 2030 Comprehensive Plan time period, is as follows: At or Below 30% AMI 66 From 31 to 50% AMI 29 From 51 to 80% AMI 26 TOTAL UNITS 121 3. The Housing Visioning policy, adopted in 2013, recommends giving priority to projects that serve a mix of incomes. It is, however, unlikely the City will be able to meet the allocation of 66 units for households earning below 30% AMI through mixed-income housing alone. The proposed development would serve incomes between 30 and 70% of the AMI. 4. The City’s Inclusionary Housing Policy commits the City to “building a community that is welcoming and affordable to a diverse population of individuals and families at all stages of their lives.” It requires new developments receiving financial assistance from the HRA to reserve 20% of all units as affordable to households earning no more than 60 % of the Area Median Income (AMI) or contribute 15% of the tax increment financing (TIF) (or the value of other types of assistance) in lieu of including the units. In the past, in lieu contributions have been used for a variety of programs/projects currently funded by the Housing and Redevelopment Fund: Richfield Rediscovered, commercial acquisitions for redevelopment, apartment purchase assistance (e.g., Seasons Park), and New Home Program. At the time of approval of the Inclusionary Housing Policy, the HRA indicated that the in lieu payments should be used to create affordable housing elsewhere. Zoning Considerations The property is zoned Mixed -Use Neighborhood (MU-N). In this zoning district, apartments are a permitted use. The developer will be required to apply for Site Plan Approval. At such time that the developer formally applies for Site Plan Approval, staff will review the plans for conformance with the Zoning Ordinance and provide guidance to the Planning Commission as to how it meets/does not meet the rules and standards. Neighborhood Input The City’s current Comprehensive Plan was developed wi th significant community input over the course of nearly two years (2017-2018). A stated goal of the Plan is providing a full range of housing choices for all members of our community. A need for more affordable housing, especially housing at/or below 30% of AMI, is called out as a specific need. This site has been designated as a housing site for the past 12 years. The Council is allowed to re -guide property so long as a land use application has not been submitted and the new designation is compatible with th e surrounding designations. An additional public process is required prior to any land use designation change. A site cannot be designated to allow only market rate housing vs. affordable housing. The community may provide feedback to the HRA regarding whether or not it is appropriate to sell the property to the developer for the proposed use and/or whether it would be appropriate to use TIF to repay the City for the cost of the land. Adjacent neighbors include the auto body shop, storage facility, mis cellaneous commercial uses, and Havenwood Senior Living. New Orleans Court Apartments and Townhomes are one block to the east. The developer plans an open house for the neighbors and interested community members to ask questions about the proposal and off er feedback on the proposed design and project features in April. Environmental Considerations Underground storage tanks were removed from the property in 1999 , and clean-up of contaminated soil from the tanks was completed in 2000. A Phase II environmental report was completed in 2007. Sporadic detections of petroleum-related contamination were identified in soil samples, but no significant soil or groundwater contamination patterns or “hot-spot” areas were identified. Questions were raised about the impact of the railroad tracks on the development. The developer has spoken with staff from Minnesota Housing. They have stated that the low traffic volume and speed make the railroad’s impact negligible and do not disqualify the proposed site for consideration for the LIHTC program. A significant amount of both single and multi-family housing is currently located all along the railroad tracks. The long-term plan for the tracks is for it to become a trail. The LaMettry’s auto body shop i s located just to the east of the development. While the building is new and was constructed with an up -to-date ventilation system, additional analysis will be required to determine the potential for negative air quality on the site. Staff is currently working to identify the appropriate manner in which to evaluate any air quality issues related to LaMettry’s. Timing Applications for 2020 tax credits are due to Minnesota Housing on June 3, 2019. The developer must provide evidence of site control and City financial participation with the application so they need a purchase agreement (or development agreement) for the site by this date. Consideration of this request would come before the HRA in April or May. The developer plans to apply for land use approvals during the summer. A final decision on the allocation of tax credits would occur in November. Construction would take place during 2020, and the development would open in 2021. City (HRA) Financial Participation Control of the site and City financial participation is required for the tax credit application. Staff is recommending that the City’s financial participation be provided by the HRA through a land write-down. This method has the benefit of lowering development costs, which improves the project’s score. The HRA would repay itself through tax increment over a period of time. The site is currently in a tax increment district. Sales proceeds will be used to pay down the bond d ebt for the Public Works facility. The estimated appraised value of the property is between $400,000 and $500,000. A write-down of this amount would equal a subsidy of between $7,300 and $9,000/unit. If approved, this subsidy would be far less (on a per -unit basis) than the HRA typically provides as a subsidy. An analysis of need and of the tax increment generated will be conducted before the proposal is brought before the HRA. The estimated end-value of the development is $7.5 million. Questions to Consider The proposal raises the following questions for policymakers to consider: City Council/Planning Commission  Is the site appropriately guided for housing?  If it is, should it remain guided for medium density or should it be re-guided for high density?  If not housing, what designation would be most appropriate? City Council/HRA  Is the proposal consistent with the Inclusionary Housing Policy?  Are the Council and HRA in support of affordable housing that is not in mixed- income developments? If not, how should any in lieu payments be used?  How does the Council/HRA envision providing the City’s allocation of housing affordable at 30% of the AMI? HRA  Does the proposed work force housing warrant a reduced land price? Are the proposed terms, to pay ourselves back with tax increment over time, acceptable to the HRA? Respectfully submitted, Katie Rodriguez City Manager KR:ju Attachments Email: Department Directors Planning Commission ATTACHMENTS Tax Credit Income/Rent Limits Hennepin 4/1/2018 Income limits by household size 1 2 3 4 5 6 7 8 30% 19,830 22,650 25,470 28,290 30,570 32,820 35,100 37,350 35% 23,135 26,425 29,715 33,005 35,665 38,290 40,950 43,575 40% 26,440 30,200 33,960 37,720 40,760 43,760 46,800 49,800 45% 29,745 33,975 38,205 42,435 45,855 49,230 52,650 56,025 50% 33,050 37,750 42,450 47,150 50,950 54,700 58,500 62,250 55% 36,355 41,525 46,695 51,865 56,045 60,170 64,350 68,475 60% 39,660 45,300 50,940 56,580 61,140 65,640 70,200 74,700 70% 46,270 52,850 59,430 66,010 71,330 76,580 81,900 87,150 ---- Maximum Gross Rents By Bedroom Size(Post 1989) ---- 0 1 2 3 4 5 6 30% 495 531 636 735 820 905 990 35% 578 619 742 858 957 1,056 1,155 40% 661 708 849 981 1,094 1,207 1,320 45% 743 796 955 1,103 1,230 1,358 1,485 50% 826 885 1,061 1,226 1,367 1,509 1,650 55% 908 973 1,167 1,348 1,504 1,660 1,815 60% 991 1,062 1,273 1,471 1,641 1,811 1,980 70% 1,157 1,321 1,486 1,650 1,783 1,915 2,048 Februrary 11th, 2019 Outline Development Team Developer - MWF Properties Builder - Eagle Building Company Management Company - Velair Property Management Development Summary Location Job demographics example Project features Site Plan Rendering Q&A Development Team DEVELOPER Builder Property Manager  Established in 1999  1,249 units developed. 342 under construction. 250 units breaking ground in 2019.  Long term owners – Have never sold a property.  Company philosophy: Build and maintain relationships Maintain positive reputation Curb appeal Strong management Community Relations Headquarters in Richfield Repeat business Rochester – 11 properties Forest Lake – 2 properties Vadnais Heights – 2 properties* Shakopee – 2 properties* Waconia – 2 properties* *Approved but not completed Built 14 of MWF’s properties (all since 2012) Headquarters in Richfield “It’s always nice to work with professionals. My hats off to [Eagle Building].” - Building official, City of Eagan Recent Projects 7 Forest Oak Apartments II Forest Lake, MN Opened May 2016 Lafayette Square Davenport, IA Opened February 2017 Recent Projects 8 Red Rock Square Newport, MN Opened August 2017 1st Avenue Flats Rochester, MN Opened April 2017 *Visit www.mwfproperties.com for further details. Recent Projects 108 Place Bloomington MN Construction Start April 2019 Boulevard Mounds View, MN Opening Fall 2019 Thomas Avenue Flats Saint Paul, MN Opening March 2019 Sarazin Flats Shakopee, MN Opening Fall 2019 Interior Photos 10 Interior Photos 11 Interior Photos 12 Interior Photos 13 Manages all of MWF’s properties. Corporate leadership – 84 years of combined experience •Heavy focus on: Curb appeal Applicant screening Community Relations Responsiveness •Headquarters in Richfield Community Relations Richfield Development Summary Four stories over underground parking Mix of 1, 2, and 3 bedroom units. Income limits between 50% and 70% of Area Median Income Income ($56,560 for family of four). Five to six 30% units set aside for residents with disabilities. Universal Design. On site manager, caretaker, maintenance. Resident Occupations (example) Occupations - Interlaken Place - 10/2018 Realtor Delivery Driver Bank Teller Documentation Specialist Retired Retired Property Manager Nursing Home Aide Teacher Assistant LTS Teacher & Retail Assistant DJ County Worker Machinist Store Clerk Sales US Postal Worker Registered Nurse Teacher Retired Splicer Store Clerk Spa Specialist Entertainer House Cleaner Property Caretaker PCA Retired Southdale Pediatric Associates Retired Hair Stylist Waitress Store Clerk Massage Therapist Commoscope Sales Business Development Manager Service Representative Equipment Technician Horse Show Groomer and Stable Management Driver Location MWF and Velair Headquarters Site Location Benefits High Demand: Help replace 698 NOAH units lost in 2017. Access to transit – Local bus line is only 10 feet from property. Adjacent to multiple roadways and freeways. Within walking distance of many “workforce” employers. Within walking distance of a multiple public parks. Two blocks from management headquarters Project Features On site management Community Room Fitness Center Secure Access (fob system) 24 hour surveillance Secure package room Bike Friendly – Hanging Bike Racks, Fix it station Underground Parking – Included in rent Green Features: LED lighting, low flow fixtures, recycling chutes and receptacles throughout building. In unit laundry Preliminary Site Plan Similar project rendering Project Financing Utilize Section 42 tax credits to help fill gap created by lower rents. Annual submission to Minnesota Housing (June 3rd) Highly competitive, 1 of every 3 applications approved. Important Scoring Factors: Transit Economic Integration Schools Cost Containment Local Participation City Participation Necessary to help fill funding gap Necessary to make proposal competitive for funding. Recent examples of local financial support for tax credit housing projects: Shakopee: $296K in fee waivers Bloomington: $527K in land write down Mounds View: $570K in TIF & Land write down Rochester: $600K in TIF City Participation •MWF requesting land write down. •Would help the project by: -Helping fill the financing gap -Make the project more competitive – points for: -Cost containment -City participation •City would get paid back via higher property taxes of completed project (win/win). Preliminary Development Schedule April 2019 - Execute development agreement. June 3rd, 2019 – Apply for financing Nov 2019 – Begin closing process and develop full drawings. April 2020 – Close on financing. Construction commences. Dec 2020 – Construction Completion. Leasing Period begins. April 2021 - Lease-up complete. THANK YOU Questions?