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HomeMy WebLinkAbout9C - Senior Housing Project CITY COUNCIL AGENDA REPORT October 15, 2001 9C Frank Boyles, City Manager AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION APPROVING' IN CONCEPT THE USE OF TAX INCREMENT FINANCING TO FUND A SENIOR HOUSING PROJECT. DISCUSSION: History: The City Council previously approved a 12-acre multi-family final plat known as Creekside Plaza. Creekside Plaza included the construction of two 24- unit buildings and one 54-unit building. The two 24-unit buildings are under construction. ISSUES: Very soon after the City Council approved the PUD, the City was asked for financial assistance. Since then, various parties have contacted the staff inquiring about financial assistance to complete the 54-unit building. Current Circumstances: Recently, Harold Jesh, on behalf of Eagle Creek Development, submitted a preliminary application for financial assistance. Mr. Jesh met with the Mayor and staff representatives to discuss the 54-unit senior rental building. He was provided a copy of all planning approval documents which include the guidelines for the number of assisted senior rental units and the plans for the building. At the meeting, Mr. Jesh asked if the City Council would consider conceptual approval of his funding request. That is the purpose of this agenda item. According to the pre-application, the request being made is to create a Tax Increment Housing District which provides $675,000 (13% of the project cost) in tax increment financing. We explained to Mr. Jesh that the City Council has only supported pay-as-you-go tax increment projects. He has confirmed this understanding. The 54-unit senior housing development will be part of the Creekside PUD. The building will contain 14 one-bedroom and 40 two-bedroom units and will include one underground heated parking stall per unit. Total project cost is $5,264,556. Of this amount, the developer will provide $1,316,139 (25%) in equity in the form of private capital and land (excluding T1F). Construction is expected in fall 2001 with completion in fall 2002. I have reviewed the pre-application and discussed the following issues with Mr. Jesh: 1. Is Tax Increment the only form for fin"ancing required to construct this project? 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 I :\CQUNCI L \AGNRPTS\200 1 \CREEKSI DE TII7i.~AL OPPORTUNITY EMPLOYER Yes. Mr. Jesh has confirmed that $675,000 pay-as-you-go TIF through a housing district is the only form of assistance the project will require. The requested term of the TIF is 20 years. 2. How many units will benefit from assisted rental rates and for what period of time? Mr. Jesh indicates that all 54 rental units benefit from tax increment financing. The one bedroom and two bedroom monthly rents with TIF (assuming 7.13% return on investment "ROI') are $829 and $909 respectively. Without TIF, Mr. Jesh indicates that the rents would be $909 and $989 with the same ROI. In addition, 11 of the units, or 20%, will be reserved for persons making 50% or less of median income of Scott County. 3. What form will the $1,316,139 developer equity take? The developer's equity is land and cash exclusive of TIF. 4. Who is the applicant? Larry Gensmer and John Messenbrink doing business as Eagle Creek Development LLC. 5. Where is the "but-for" analysis? The application shows that without assistance the project generates only 3.71% return on investment. With TIF, the project generates 7.13% which is considered an acceptable return on investment. 6. How is the assistance amount determined? See the response to Question 2 above. ALTERNATIVES: The City Council may take anyone of the following actions: (1) Find the proposed project consistent with City Council policy and approve the resolution as submitted or as amended. (2) Find the project inconsistent with City Council policy and direct amendments to the project to achieve consistency. (3) .Take no action pending the receipt of additional information. RECOMMENDED MOTION: Alternative (1). The proposed project appears to be consistent with the Council's desire to assure that moderate cost senior housing is available in the community. The next step would be to have Ehlers and Associates perform a complete financial analysis, prepare a Tax Increment Plan, notify the County and School District, and ask the City Council to schedule a Tax Increment Financing Public Hearing. 1:\COUNCIL\AGNRPTS\2001\CREEKSIDE TIF.DOC RESOLUTION 01~ I) ~ A RESOLUTION APPROVING IN CONCEPT THE USE OF TAX INCREMENT FINANCING TO FUND A SENIOR CITIZEN HOUSING PROJECT Motion By: Second By: REelT ALS WHEREAS, the City desires to provide senior housing which offers reduced rents for persons meeting federal income guidelines; and WHEREAS, the City has been approached by Mr. Harold Jesh representing Mesrs. Larry Gensmer and John Messenbrink d/b/a Eagle Creek Development LLC with a project to construct 54 rental senior housing units, 20% of which will be available to persons earning 50% or less of the median income (hereinafter "Project"); and WHEREAS, the aforementioned Project is known as CREEKSIDE ESTATES; and WHEREAS, the Developer maintains that the Project is not economically viable without the assistance of public financing; and WHEREAS, to encourage and facilitate the development of financially assisted senior housing, the City is eager to work with ~esponsible developers on qualifying projects; and WHEREAS, where appropriate and permissible the City is prepared to use available tax increment financing tools, as provided by Minnesota statutes to facilitate development of qualifying projects; and WHEREAS, the City and Developer understand that the City's ability to establish a tax increment financing district, the ability to collect tax increments and the operation of the property tax system are controlled by the State Legislature and that the use and/or availability of tax increment financing is subject to changes by the State Legislature during the 2001 legislative session, which changes are beyond the power or purview of the City Council; and WHEREAS, the Developer agrees to bear all risks associated with legislative changes or resulting from statutory requirements which the Developer is unable to meet; and WHEREAS, both the City and Developer understand that both time and costs are associated with the preparation and evaluation of plans and related documents necessary to develop and analyze the proposed Project and determine whether the Project meets the statutory requirements and City criteria for the issuance of tax increment financing; and WHEREAS, both the City and Developer wish to avoid the unnecessary expenditure of time and money on projects that are not of interest to the City. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER _ ____,___'._...~...~_~_"_"_,__,"_~...,_.........__.....______,_.._......__...._....,._~.~~___....__~______"....,.,.,_''''.''".m..,._.,__._.___~__"._.".._.,.._._.,._..~_._,._.___...._.~..__m.~_....,...___..~.~____._____~~.~__--,.--.. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, MINNESOTA that: 1. The Recitals set forth above are incorporated herein as if fully set forth. 2. The Developer is encouraged to submit to the City an application for Tax Increment Financing for the Project referred to as Creekside Estates. Along with the application the Developer will deposit with the City the amount of $12,000 which monies will be used by the City solely to pay for legal, financial and staff costs associated with the analysis, review and facilitation of the Project. 3. The Developer will design the Project to be compatible with the final PUD plan for Creekside Estates. The City Council shall be the final arbiter of whether the Project, as designed, is compatible with the approved PUD plan. The Project shall also be designed to comply with all applicable zoning, subdivision and other land use regulations of the City and other governmental entities having jurisdiction. 4. The Developer will provide the City with a plan for financing the Project which includes a minimum equity contribution by the Developer of 25% of the total Project costs. 5. The Developer must demonstrate to the City that it has the capacity to successfully complete the Project and that the City's financial assistance is necessary for the proposed Project to occur. 6. All determinations regarding the suitability of the site for the proposed Project are the sole responsibility of the Developer to determine for itself. The City makes no representations or warranties that the site under consideration by the Developer is suitable or will sustain the proposed Project. 7. The City will analyze the documents, plans, materials and data supplied by the Developer (the "Application") and determine if the Project qualifies for TIF. 8. If the Project meets all the criteria discussed herein the City will negotiate a tax Increment Financing Agreement with the Developer. The City Council will act reasonably in determining whether the Project meets applicable criteria, including but not limited to financing, TIF statutory requirements and zoning requirements. . ti 10 Notwithstanding Paragraphs 1 through ~ above, nothing in this Resolution is intended to bind the Council to provide the Developer with tax increment financing. This Resolution is intended to (~. demonstrate the City's interest in moving forward with the Developer. 191 The staff and Ehlers and Associates are hereby directed to complete the financial analysis for this ~prepare the Tax Increment Financing Pia notify the County and School District pursuant to statute and request that the City Council schedule a public hearing to consider this Tax Increment Financing request. PASSED AND ADOPTED THIS 15TH DAY F OCTOBER, 2001. YES NO ~ Mader Mader Ericson Ericson Gundlach Gundlach Petersen Petersen Zieska Zieska fill ~ I{) (~Jr ~;an;;OYles. C) Manager R:\RESOLUTI\ADMINRES\creekside tifDOC " o ~ H.AROLD A. ]ESH, L.L.C. . September 28, 2001 Mr. Frank Boyles, City Manager City of Prior Lake 16200 Eagle Creek Avenue SE Prior Lake MN 55372.1787 Dear Mr. Boyles, On behalf of Eagle Creek Development LLC, kindly accept the pre-application for Tax Increment Financing consideration in the development of a 54 unit Senior (55 +) Housing . Complex in Prior Lake. The proposed development will provide to the. City of Prior Lake, housing for seniors, who at this time do not want the continued responsibility of maintaining a single family home. In having this housing 'available, seniors will.be able to live in Prior Lake amongst their friends and relatives in a very comfortable setting. If you have any questions regarding the submittal, please do not ?~sitate to call. .. - ..-. Sincerely, .~~-S~ Harold A. Jesh, LLC HOUSiNG DEVELOPMENT CONSULTANT 1311 2nd Street North, Suite 104 · S':lllk R.:1pids, MN 5(-,379 · (320)202-0590 . F.:1x (320)240-2300 .....--._---~-----_..- CITY OF PRIOR LAKE PRE-APPLICATION FOR FINANCIAL ASSISTANCE Legal name of applicant: Eagle Creek Development LLC Address: 7765 175th Street East, Prior Lake, MN 55372 Telephone number: 952-447-5058 Name of contact person: Larry Gensmer REQUESTED INFORMATION: Addendwn shall be attached hereto addressing in detail the following: 1. Type of financial assistance requested: X Tax Increment Financing Tax Abatement Cash Contribution Low Interest Loan Other: 2. A map showing the exact boundaries of proposed development. 3. Give a general description of the project including estimated cost, size and location ofbuilding(s); business type or use; traffic information including parking, projected vehicle counts and traffic flow; timing of the project; estimated market value following completion. Indicate why and for what purpose the financial assistance is requested. . 4. The existing Comprehensive Guide Plan Land Use designation and zoning of the property. Include a statement as to bow the proposed development will conform to the land use designation and how the property is or will be zoned. 5. A statement identifying how the assistance will be used and why it is necessary to undertake the project. 6. A statement identifying the public benefits of the proposed project including estimated increase in property valuation, new jobs to be created and other community assets. L: \ TIF\ti fpre-app 1 ication .doc 1 16200 Eagle Creek Ave. S_E., Prior Lake, Minnesota 55372-1714 I Ph. (952) 447-4230 I Fax (952) 447-4245 AN EOUAL OPPORTUNITY EMPLOYER 7. A written perspective of the developer's company or corporation, including principals, history and past projects. SIGNATURE: ~~4'#4~ September 28,2001 Applicant's Signature: Date: L:\TIF\tifprc-application.doc 2 ~~~ ~~ 0::;:; ~~""' ~.. ~nn O. 000 ~.. ~<< e:~ ~~~ Z~~ i~ ~~g ;:~~ ~~ ~~ ~ . ~ g ~ ~ '" .. " z " !~~!; !i~ -.. ~~. l~ !I ~..:) -, C/l s. -3 t"l '"0 f;: Z ----;J~ ~1:';=J ~~~~ jlii.O UlCo;l_ :::> ~R ~~ ~~ \ ~~. \ ~I; , j;~ \.." ~i o S o ~ ~ > ~:~g \ll~xa ~~cr~~ .....'1; l"~<t: ~o~:;: ~i~~ ~ z .., A \' ~ o ~~~ ~ ~~! ~p I ~;*I ..~ !~l · "s' ~~; Sl. 5 ~ ~ -' - I, ~ N I '- ~! '4; ~~~ ~. .. 'q.\i ~Q~ ' , a. Q I I I I ~I ~ ii _ "'I 'I i I I I 1 I ~I ~ ;~ ,,<:: ~~ ~" ~.. .0 ~~ !a I-j VI ..-, ;:; .~~ . ~~, ~ .....~ ~ ;~; : r': !" ~~" : ~ ~, > q a ~ ! i ~ ;: .... ; ~~ Ui c:; :<: trl ~ <: ::>- :j c :<: U : ~~ / ~ ~~. / 8 R - 4 ~ '" . Ii f . . ~d~2 I ~ . ~ r-1 ~ > c. ~ ~< .. ~ '" ~ ~ ~ ~ ~ ~ ~ Ir~ ~"VlIIt I;' O:::j~ ;:;~r-\ ~ r-,"")n ;; ~ ~~~ .... % s::: ... ~ sg~ ~ .anZl ..~~ II :~~ ~ :~~ c.aCj ~ ~, _G", OVl~ .. -" "II 2 ' ~ ~~ :1:1 ~~ ! ~~ ~~ .-~ ..0 -~<:: 0)0% ~..o ~~~ ~C'I~ ..~" ,,~z i~~ ~. ~ .. ; ;: ~ a ~ g ~ .. ~ ~ .. <: % :; {~!'~~i~I~;~~~~PMENT ~~!~:rl ~7 Ii i III I!] ~ % O....uu.. ~o~~ ~~,.,M )0 rr-nn : g ~~~~ .... ...z>> S ~~g~ )00 Ut)o~~ ::~s .....-.j~G ~~?5 ~~~ =0:0: ~~Vln 3 GENERAL DESCRIPTION OF PROJECT The proposed 54 unit senior housing project will consist of 14 one bedroom and 40 two bedroom units. The rent rate will include one underground heated parking stall for each unit. The building, located at 16435 Tranquility Court SE in Prior Lake will encompass site coverage of20,798 square feet. The estimated cost of the proposed senior housing project will be $5,264,556.00 with commencement of construction to begin this fall, 2001. The need for Tax Increment Financing is essential in order to provide rents affordable to the senior tenants desiring rental housing. Page 1 of 1 Frank Boyles From: Annette Jesh [ahjesh@home.com] Sent: Monday, October 08,2001 2:52 PM To: Frank Boyles Frank, Here is page 5 and page 7 & 8 as an attachment of the information I am sending you. Harold 5 Several Minnesota Communities are seeking solutions to their growing housing needs. Most are faced with the problem that is currently plaguing some metropolitan communities throughout Minnesota. In some metropolitan communities it is not financially feasible to build Market Rate Assisted Living Housing complexes since rent levels cannot be met to justify development. Many metropolitan communities and larger regional growth centers have experienced substantial growth during the 1990's. In these areas, the primary housing issue is simply how much of each housing type to build. In some metropolitan areas, particularly county seats, even though there has been favorable growth, incomes are often too low to justify a housing development. In order to facilitate housing growth in communities such as Prior Lake, outside economic assistance is vital. One vehicle is Tax Increment Financing, which we are in the process of requesting. Subsequently, we respectfully request the City of Prior Lake consider our application for funding in order to make this development a reality. 10/8/01 6 The proposed development will provide to the City of Prior Lake, housing for seniors, who at this time do not want the continued responsibility of maintaining a single-family home. In having this housing available, seniors will be able to live in Prior Lake amongst their friends and relatives in a very comfortable setting. In addition, by providing this housing to the seniors, single family homes will be freed up for young families wishing to stay in Prior Lake and new families coming to the City. At this time it is difficult to estimate the increase in property valuation or new job creation, however this project will approach five million dollars in new construction. Overall, the City of Prior Lake will benefit in providing this proposed housing for many years to come. 7 · With reference to the cover letter dated September 28,2001, as a Housing Development Consultant, I (Harold A. Jesh), have becomepart of the development team of Eagle Creek Development LLC, on September 13, 2001. I will continue to be part of this process through: · the Certificate of Occupancy, · the Eligible Cost Breakdown justifying Tax Increment Financing provided by the City of Prior Lake, · and lastly, coordination with the Property Management firm in meeting the requirement of the 20/50 Income Test by renters required in a Tax Increment Financing housing district. · Through the establishment of a "Housing District" the proposed project will be a low and moderate income rental project with 20% of the units being rented out to persons at 50% of the median income of Scott County. · Pay-as-you-go The advantage of a pay-as-you-go structure is that the risk is minimized. If the project does not pay real estate taxes, the city does not make Tax Increment Financing payments. In addition, no bonds are issued by the city for this project thus liability does not exist under this process. · "But For" Test The proposed development would not be expected to occur solely through private investments thus the use of Tax Increment Financing is deemed necessary since the development requires improvements which the developers could not economically provide to construct this housing project. Tax increment financing assistance is necessary to assist in making at least 20% of the units affordable for persons with incomes less than 50% of the area medial family income. The assistance will also make the remaining units more affordable for persons of moderate income. · Rent Affordabi1ity In order to provide affordable rents to persons of moderate income, the need for Tax Increment Financing assistance is essential. This need for assistance was shown in the Target Rent Schedule with no Tax Increment Financing assistance 8 being provided. The cash on cash return of 3.71 % does not lend itself to an investment that can succeed. . Eagle Creek Development LLC respectfully requests consideration by the City of Prior Lake, approval of Tax Increment Financing assistance for twenty (20) years.