HomeMy WebLinkAbout9C TIF Ron Clark MultiFamily Housing O� 04,
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4646 Dakota Street SE
Prior Lake,MN 55372
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CITY COUNCIL AGENDA REPORT
MEETING DATE: MAY 11, 2015
AGENDA#: 9C
PREPARED BY: DAN ROGNESS, COMMUNITY & ECONOMIC DEVELOPMENT DIRECTOR
PRESENTED BY: DAN ROGNESS
AGENDA ITEM: CONSIDER APPROVAL OF A RESOLUTION CONSENTING TO THE PRO-
CESS FOR THE CREATION OF A HOUSING TAX INCREMENT FINANCING
DISTRICT IN SUPPORT OF THE PROPOSED RON CLARK MULTIFAMILY
HOUSING PROJECT
DISCUSSION: Introduction
The purpose of this agenda item is to consider providing support of Tax Increment
Financing (TIF)for a proposed 68-unit affordable rental housing development for
families, located south of Pike Lake and north of County Highway 42. Ron Clark
Construction is proposing to construct this workforce housing project, nearly iden-
tical to one they recently completed in Savage north of Arby's. In order to be
competitive to receive Housing Tax Credits (HTC) from Minnesota Housing Fi-
nance Agency (MHFA), a local financial contribution is necessary. The HTC fi-
nancing mechanism is critical to achieve affordable rents or households at/below
60% of the area median income adjusted annually by family size.
History
The site under consideration for a multi-family housing project is approximately
21 acres; however, due to extensive wetlands and a large stormwater ponding
easement, much land area is unbuildable. The property is zoned High Density
Residential (R-3), which would allow the proposed multi-family housing project
by Conditional Use Permit(CUP). The 2030 Comprehensive Plan guides this 86-
acre area as Planned Use, Sub-Area A, Pike Lake West, for 50% Low Density
Residential, 25% High Density Residential, and 25% Commercial.
In 2007, the city approved a Final PUD Plan for this site to include 11 residential
townhomes and 8 town-office units. However, the developer did not move for-
ward with this project. Since then, various other ideas have been reviewed with
City staff, but the wetland and pond easement constraints were difficult to work
around for townhomes. The Ron Clark proposal is the first one to consider a
single 3-story multi-family building that appears to work better on this constrained
site.
Current Circumstances
Ron Clark Construction has submitted applications to the City for two actions re-
lated to the City's subdivision and zoning ordinances: (1) preliminary plat; and
(2) conditional use permit (CUP). Both applications were reviewed by the Plan-
ning Commission during a public hearing on April 20, 2015. The Commission
tabled actions on both applications until May 4 in order for the developer to work
further with City staff to refine the plans into conformance with staff's review com-
ments. The Commission's May 4th meeting concluded with an approval decision
on the CUP and a positive recommendation to the City Council on the preliminary
plat.
Ron Clark's proposed housing project will compete against other multi-family
housing projects for Housing Tax Credits through MHFA; the application deadline
is in early June of 2015. Attachment#3 shows how MHFA allocates more points
for federal, local and/or philanthropic contributions that can include a variety of
sources (grants, tax increment financing, tax abatement, land donation, fee
waiver, etc.).
This project, with a very low base market value for vacant land is a good candi-
date for TIF. A target project assistance level of$575,000-$600,000 would likely
be feasible within a 15-year period based upon preliminary projections. Since
the developer's MHFA application will score best at a local minimum assistance
level of$750,000, Ron Clark has approached the Scott County CDA for a contri-
bution of$150,000 for affordable housing achievement. The CDA's formal deci-
sion will be made by its Board on May 12, 2015.
The MHFA application only requires a local level of support that is further de-
pendent on the formal/future TIF review and approval process. Therefore, the
proposed resolution is one that grants City Council support to move forward with
its public financing that includes a future Housing TIF District. The resolution
clearly states that the City has full discretion to approve such financing subject to
a complete review process based on state statutes and the city's financing poli-
cies, which would include the TIF amount and District term (years).
Conclusion
The need for affordable (workforce) housing for families is supported in two doc-
uments, including a 2011 Scott County Housing Needs Assessment by Maxfield
Research and the Metropolitan Council's allocation of affordable housing need
as part of the Council's Housing Policy Plan (see Attachment#3).
1. County Needs Assessment — shows that Prior Lake has 85 affordable
general occupancy, non-senior, rental units (Bluff Heights = 37 and Kes-
trel Village = 48); the report shows a 10-year demand of 95 such rental
units between 2011-20.
2. Met Council Allocation — shows a 10-year allocation need of 1,166
affordable units between 2011-20; a draft document for Thrive 2040
shows a 10-year allocation need of 1,050 units between 2021-30.
ISSUES: The City Council's resolution of support for TIF related to the proposed Ron Clark
Construction multifamily workforce rental housing project is not a final approval
of TIF; however, it is an endorsement of support to move forward pending
MHFA's award of Housing Tax Credits to this project.
ALTERNATIVES: 1. Motion and a second to approve a resolution consenting to the process
for the creation of a Housing TIF District in support of the proposed Ron
Clark multifamily housing project.
2
2. Motion and a second to deny a resolution consenting to the process for
the creation of a Housing TIF District in support of the proposed Ron Clark
multifamily housing project.
3. Motion and a second tabling action on the resolution and requesting the
developer and/or staff to return with additional information as directed by
the City Council
RECOMMENDED Alternative #1
MOTION:
ATTACHMENTS: 1. Location Map
2. Site Plan and Preliminary Plat
3. MHFA local contribution points; 2011 Housing Needs Assessment for Scott
County; and Met Council 2011-20 allocation need for affordable housing.
4. Estimated TIF Revenue from Ron Clark Project
3
01 131t19#
60 4646 Dakota Street SE
4sEsO Prior Lake,MN 55372
RESOLUTION 15-xx
A RESOLUTION CONSENTING TO THE PROCESS FOR THE CREATION OF A HOUSING TAX
INCREMENT FINANCING DISTRICT IN SUPPORT OF THE PROPOSED RON CLARK MULTIFAMILY
HOUSING PROJECT
Motion By: Second By:
WHEREAS, The City of Prior Lake (the "City") is a municipal corporation and political subdivision duly
organized and existing under the Constitution and laws of the State of Minnesota; and
WHEREAS, Pursuant to the Constitution and laws of the State of Minnesota, particularly Minnesota
Statutes, Sections 469.174—469.1799 et. seq., as amended, the City is authorized to use tax
increment financing to carry out the public purposes described therein and contemplated
thereby; and
WHEREAS, A proposal has been made by R.E.C., Inc. d/b/a Ron Clark Construction and Design (the
"Developer") to construct sixty-eight(68) units of multifamily rental housing at or near the
northwest corner of County Highway 42 and Pike Lake Trail in Prior Lake, and 100% of the
units will be affordable to households with incomes at/below 60%of the area median income
(the"Project"); and
WHEREAS, The Developer has submitted plans and applications for approval by the City for a Conditional
Use Permit and a Preliminary Plat related to the Project;
WHEREAS, The City wishes to support the Project and work with the Developer to secure Tax Increment
Financing ("TIF") assistance from the City by creating a Housing TIF District upon the
Developer's securing an allocation of Housing Tax Credits ("HTC")from the Minnesota
Housing Finance Agency ("MHFA")for the Project; and
WHEREAS, The City cannot create a Housing TIF District in support of the Project until all statutory
requirements have been fully satisfied, including the consideration of comments from the
public and affected governmental jurisdictions following a public hearing(s).
NOW THEREFORE, BE IT HEREBY RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE,
MINNESOTA as follows:
1. The recitals set forth above are incorporated herein.
2. The City Council supports the Project subject to final determination of project eligibility, required
reviews, public input, notices and hearings, and without surrendering its legislative discretion.
3. This City Council, upon MHFA's approval of Housing Tax Credits for the Project, authorizes City staff to
continue to work on Tax Increment Financing for the Project upon receipt of a TIF application and
corresponding fee from the Developer.
PASSED AND ADOPTED THIS 11th DAY OF MAY, 2015.
VOTE Hedberg Keeney McGuire Morton Thompson
Aye 0 ❑ ❑ 0 ❑
Nay ❑ ❑ ❑ 0 0
Absent 0 ❑ ❑ ❑ ❑
Abstain 0 ❑ 0 ❑ ❑
Frank Boyles, City Manager
•
http://splash/teams/am/October4 2010/05 11 2015/Ron Clark Housing TIF Res.docx 2
Attachment #1
Ron Clark Construction Multi-Family Housing Site
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legal document and should not be substituted for a title search,appraisal, survey, or for zoning 3/4/20151 inch = 374 feet
verification.
Attachment #2
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Attachment #3
Developer Minnesota
Selection Priorities DeveHousing
Claimed Awarded
5. Federal/Local/Philanthropic Contributions 2 to 10 Points
Points are awarded for projects that are receiving contributions from the federal government;a local unit of government;an area
employer;and/or a private philanthropic,religious or charitable organization.
Identity of Interest exclusion: Contributions from any part of the ownership entity will be considered general partner cash and
excluded from the calculation unless the contributions are awarded by local units of government or nonprofit charitable
organizations pursuant to a funding competition.
Total federal/local/philanthropic contributions$ divided by Total Development Cost$ equals(rounded to the nearest
tenth)
❑ 20.1%and above–10 points ❑ 5.1-10%–4 points
❑ 15.1–20%–8 points ❑ 2.1–5%–2 points
❑ 10.1-15%–6 points • ❑ 0–2%–O points
Federal/Local/Philanthropic Contributions include:
• Monetary grants/donations
• Tax increment financing-calculate Net Present Value(NPV)by using NPV discounted by Applicable Federal Rate(AFR)
• Tax abatement(calculate NPV by using NPV discounted by AFR)
• Land donation or city write down of the development site
• In-kind work and materials donated at no cost
• Local government donation/waiver of project specific costs,assessments or fees(e.g.SAC/WAC)
• Reservation land not subject to local property taxes
• Reservation land with long-term low cost leases
• Deferred loans with a minimum term that is co-terminus with the HTC Declaration with an interest rate at or below the
AFR
• Grants from nonprofit charitable organizations converted to deferred loans with a minimum term that is co-terminus
with the HTC Declaration with an interest rate at or below the AFR. Award letter from the nonprofit charitable
organization contributor must be provided at the time of application verifying the project specific(restricted)
contribution
• Below Market Interest Rate(BMIR)Loans–calculate NPV based on the difference between the AFR and the BMIR rate
(e.g. RD 515, NHASDA first mortgage).
• Historic Tax Credits
To qualify for points for tax increment financing or tax abatement,there must be satisfactory documentation that the contribution is
committed to the development at the time of application.
At the time of application,written documentation from the contributor justifying the amount and the terms of the contribution
must be provided and be consistent with current market comparable costs. The documentation must be in the form of a project
specific letter of intent,city or council resolution, letter of approval,statement of agreement or eligibility,or memorandum of
understanding. In the case of Historic Tax Credits,at the time of application written documentation of eligibility through evidence of
Historic Register listing or approval of Part 1—Evaluation of Significance.
Within 6 months of the date of selection(Minnesota Housing Board selection date)the applicant must provide Minnesota Housing
with documentation of a firm commitment,authorization or approval of the federal/local/philanthropic contribution(s). The
documentation must state the amount,terms and conditions and be executed or approved at a minimum by the contributor.
Documentation containing words synonymous with"consider"or"may",(as in"may award")regarding the contribution,will not be
considered acceptable. Lack of acceptable documentation will result in the reevaluation and adjustment of the tax credits or RFP
award,up to and including the total recapture of tax credits or RFP funds.
2016 HTC Self-Scoring Worksheet 6 of 22 Rev.05/2014
Ralartinn Prinritiac
SCOTT COUNTY HOUSING STUDY CONCLUSIONS AND RECOMMENDATIONS
Prior Lake -Summary of Demographic and Housing Condition Findings
Key demographic and housing market findings for Prior Lake from the housing study are high-
lighted below. For a comparison, figures for Scott County are shown as well.
Demographic and Housing Characteristics Summary
•
Prior Lake Scott County
General OccupatiOy teiital AntrettgalsRiVMSBAB
Distribution and vacancy rate of rental units by type
Market rate 145/ 4.1% 1,827/ 3.2%
Affordable 85 / 0.0% 449 / 1.8%
Subsidized 46/ 0.0% 349 / 0.9%
Average rent for market rate unit $713 $886
Average square foot for market rate unit 830 972
Average rent per square foot $0.86 $0.91
• .:�..�s....*PgtZVfn:.:..-�: .. .xi.,.-s ..t_x,;;S2RlOr-HOUSIng.::.R....-....E,..a..MzxENIM..,.f*MMI1Mei.silRi
Distribution and vacancy rate of senior housing by type
Affordable/Subsidized Active Adult 39/ 0.0% 307/ 1.3%
Market Rate Active Adult-Rental 54/ 0.0% 368/ 1.4%
Market Rate Active Adult-Ownership 80/ 1.3% 147/ 2.4%
Congregate 139/ 2.2% 218/ 2.8%
Assisted Living 92/ 6.5% 188/ 5.9%
Memory Care 38/ 0.0% 90/ 0.0%
Prior Lake Projected Housing Demand,2010 to 2020
General Occupancy
Demand I
L 2,379
i I
For-Sale Demand Rental Derj}and4
1,999 Wan 1
Single-Family Multifamily iMae'g
1,199 800 M 247`i s 5 $.
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Modest Move-up Executive Modest Move-up
60 300 839 320 480
I Senior Housing
• ' Demand 1
!WW 284
1 i I
Senior Rental logit Ownership'
`a -�
284 rs 5
1 I
Sub/Aff MR Adult Congregate AL MC
84 129 3 51 17
Note: Because households are mobile and are willing to seek out various housing products in adjacent
communities,these demand figures may experience fluctuations.
Community Number of Affordable
Units
Independence 36 •
Inver Grove Heights 872
Jordan 114
Lake Elmo • 465
Lakeville 2,260 N 0 0 j o c
Lauderdale 35 0`D `0 m 9
s
Lexington 8 Q 0 s
Lilydale 28 0 - o ID 0
Lino Lakes 560 0 Q. o-ri N
Little Canada 72 .ti 0 3 A Q
Long Lake 40 tr� a�, 0 Po
-0 o a p
Loretto 3 0 o;. a- n 0
Mahtomedi 27 m 0 o 1 3 c
Maple Grove 1,764 0 s 3 m c
tD fn 9
Maple Plain 19 "3.,:,, o a 0
N
Maplewood 388 3 a m� 2 a 0 i
Marine on St.Croix 0 v a o;v 0. w i
00
Mayer 172 °0 v t 2 y
,.N� "4,
Medicine Lake 0 a o m 0
Medina 506 CD n a a
Mendota 3 A a N 0 �.
0 3 0
Mendota Heights 43 � 0 3 st
FD-
Minneapolis
p
Minneapolis 4,224 0 a 3 ;v
Minnetonka 378 o c a
Minnetonka Beach 0 n�° 0 a y
Minnetrista 209 0 ?5 c 0 9
CD
Mound 68 a-0 -a Igl
Mounds View 65 = 0 a a Z
New Brighton 137 w N 0 0 ro 0@
New Germany 11 o m to y 0.
New Hope 213 m o m o i
Newport 68 a o o
North Oaks 56 0 0 o CD
a
North St.Paul 108 NJ N`N?Q
Norwood Young America 194 ti o e..:,a o
Oak Park Heights 23 w ,0
o4o o m
Oakdale 184 *9 ro ,>rt 1
Orono 310 0.`0 a o
Osseo 26 (D 5:"N ro '''
Plymouth 1,045 m a m o . o
Prior Lake 1,166 ` o g -i
Ramsey 636 a
Richfield 765
Robbinsdale 133
Rogers 373
Rosemount 1,000
Roseville 201
Savage 1,237
Shakopee 2,105
Shoreview 94
Shorewood 53
South St. Paul 104 '
Spring Lake Park 19
Spring Park 31
St.Anthony 312
St. Bonifacius 0
St. Francis 74 I
St. Louis Park 501
St. Paul 2,625
St. Paul Park 438
Stillwater 233
Allocation of Affordable Housing Need(as of December 2013) 2 Metropolitan Council
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Attachment #4
PRELIMINARY FOR DISCUSSION PURPOSES ONLY
City of Prior Lake
Tax Increment Financing District No.1-6 PREL
Projected Tax Increment
Ron Clark Housing Development
Assumed 100.00% 5.00% 0.36% Available Total
TIF Taxes New Base Captured Original Estimated State Net Annual PV of Net
District Value Payable Tax Tax Tax Tax Tax City Auditor Tax Available TIF
Year Year Year Capacityl Capacity Capacity Rate Increment Admin. Deduct. Increment 3.00%
1 2016 2017 12,113 (1,995) 10,118 110.108% 11,140 (557) (40) 10,543 10,285
2 2017 2018 48,692 (1,995) 46,697 110.108% 51,417 (2,562) (185) 48,670 56,371
3 2018 2019 48,936 (1,995) 46,941 110.108% 51,685 (2,575) (186) 48,924 101,337
4 2019 2020 49,180 (1,995) 47,185 110.108% 51,955 (2,588)_ (187) 49,180 145,213
5 2020 2021 49,426 (1,995) 47,431 110.108% 52,226 (2,602) (188) 49,436 188,024
6 2021 2022 49,673 (1,995) 47,678 110.108% 52,498 (2,615) (189) 49,694 229,795
7 2022 2023 49,922 (1,995) 47,927 110.108% 52,771 (2,629) (190) 49,952 270,551
8 2023 2024 50,171 (1,995) 48,176 110.108% 53,046 (2,643) (191) 50,212 310,318
9 2024 2025 50,422 (1,995) 48,427 110.108% 53,322 (2,657) (192) 50,474 349,119
10 2025 2026 50,674 (1,995) 48,679 110.108% 53,600 (2,670) (193) 50,737 389,114
11 2026 2027 50,928 (1,995) 48,933 110.108% 53,879 (2,684) (194) 51,001 428,139
12 2027 2028 51,182 (1,995) 49,187 110.108% 54,159 (2,698) (195) 51,266 466,215
13 2028 2029 51,438 (1,995) 49,443 110.108% 54,441 (2,712) (196) 51,533 503,366
14 2029 2030 51,695 (1,995) 49,700 110.108% 54,724 (2,726) (197) 51,801 539,615
15 2030 2031 51,954 (1,995) 49,959 110.108% 55,009 (2,741) (198) 52,070 574,984
16 2031 2032 52,214 (1,995) 50,219 110.108% 55,295 (2,755) (199) 52,341 609,494
17 2032 2033 52,475 (1,995) 50,480 110.108% 55,582 (2,769) (200) 52,613 643,165
18 2033 2034 52,737 (1,995) 50,742 110.108% 55,871 (2,783) (201) 52,886 676,018
19 2034 2035 53,001 (1,995) 51,006 110.108% 56,162 (2,798) (202) 53,162 708,073
20 2035 2036 53,266 (1,995) 51,271 110.108% 56,453 (2,812) (203) 53,437 739,349
21 2036 2037 53,532 (1,995) 51,537 110.108% 56,747 (2,827) (204) 53,716 769,866
22 2037 2038 53,800 (1,995) 51,805 110.108% 57,041 (2,842) (205) 53,994 799,641
23 2038 2039 54,069 (1,995) 52,074 110.108% 57,337 (2,857) (206) 54,274 828,692
24 2039 2040 54,339 (1,995) 52,344 110.108% 57,635 (2,871) (207) 54,556 857,037
25 2040 2041 54,611 (1,995) 52,616 110.108% 57,934 (2,886) (209) 54,839 884,694
26 2041 2042 54,884 (1,995) 52,889 110.108% 58,235 (2,901) (210) 55,124 911,679
TOTAL= 1,380,164 (68,762) (4,969) 1,306,434
Key Asssumptions
1 Estimated annual increase in valuation: 0.50%
2 Tax rate is based on Pay 2015 tax rates.
3 Base Mrkt Value= $266,000 Includes 1 parcel,PID: 259230020
4 New Mrkt Value= $6,460,000 Based on$95,000 value per unit for 68 units
5 Present value is based on semi-annual payments.
6 Assume classification is Qualified 4d/Low Income Housing,Classification Rate=0.75%
0 NORTHLAND STRATEGIES
Speclol Projects Group
3/26/201S Prepared by Northland Securities,Inc.