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2017-03-14 HRA Agenda PacketPLEASE TURN OFF CELL PHONES & PAGERS IN COUNCIL CHAMBERS. MOUND HOUSING & REDEVELOPMENT AUTHORITY REGULAR MEETING TUESDAY, MARCH 14, 2017 6:00 P.M. MOUND CITY COUNCIL CHAMBERS Page Opening the meeting 2. Action approving agenda, with any amendments 3. Action approving minutes: Feb 28, 2017 regular meeting 4. Stacie Kvilvang and James Lehnhoff from Ehlers requesting action 2-4 approving establishment of a TIF District for Harrison's Bay Senior Living 5. Adjourn • s-TIPff,- •- •- February 28, 2017 The Mound Housing and Redevelopment Authority in and for the City of Mound, Minnesota, met in regular session on Tuesday, February 28, 2017, at 6:55 p.m. in the council chambers of the Centennial Building. Members present: Chair Mark Wegscheid, Jennifer Peterson, Jeff Bergquist, Ray Salazar, and Kelli Gillispie Members absent: none Others present: City Manager and Director of Public Works Eric Hoversten and Director of Finance and Administrative Services Catherine Pausche Public Present: Karen Buffington, Sharon Hutchson, Daniel Hutchson, Barb Dulebohn, Tom Dulebohn, Paul Hamrick, Marianne Hamrick, Kim Buffington -Latour, Lori Falness, Mike Falness, Ashley Nylander, Suzanne Berg, Pat Buffington, Greg Fall, Candice Anderson, Cody Anderson, Allan Anderson, Julianne Amendola, Dan Jensen, Kristine Buffington, Bev Beno, Vanessa Owens, Patrick Owens, Bethany Slicerson, Chau Espenson, Betty Hall, Ted Hall, Sam Jaap, and Jordan Jaap 1. Open meeting Chair Mark Wegscheid called the meeting to order at 6:56 p.m. 2. Approve agenda MOTION by Salazar, seconded by Gillispie, to approve the agenda. All voted in favor. Motion carried. 3. Approve minutes MOTION by Gillispie, seconded by Gillispie, to approve the minutes of the Feb 14, 2017 regular meeting. All voted in favor. Motion carried. 4. Approve claims MOTION by Salazar, seconded by Bergquist, to approve the claims in the amount of $4,395.11. All voted in favor. Motion carried. 5. MOTION by Salazar, seconded by Peterson, to approve the following resolution. All voted in favor. Motion carried. RESOLUTION NO. 17-04H: RESOLUTION AUTHORIZING THE CLOSE OUT OF FUND 680 (HRA - PUBLIC HOUSING), TRANSFER OF THE REMAINING RESERVES TO IKM LIMITED PARTNERSHIP, LLC, AND RECORDING OF REMAINING FINANCIAL ACITIVITY IN FUND 285 (GOVERNMENTAL HRA SPECIAL REVENUE FUND) 6. Adjourn MOTION by Gillispie, seconded by Bergquist, to adjourn at 6:58 p.m. All voted in favor. Motion carried. Attest: Catherine Pausche, Clerk H Chair Mark Wegscheid To: Catherine Pausche, Director of Finance and Administrative Services From: Stacie Kvilvang & James Lehnhoff - Ehlers Date: March 14, 2017 Subject: Trident Development: Harrison Bay Senior Living TIF Review Trident Development is proposing to construct a 72 -unit assisted living/memory care facility (Harrison Bay Senior Living) at 1861 Commerce Boulevard. They are proposing to have 20% of the units be affordable with the breakdown of units noted below: In order to provide units at a more affordable level, they have requested up to twelve (12) years in tax increment financing (TIF) in an amount of approximately $1.44 million. The City requested Ehlers to review their application to determine how much TIF, if any is needed, the term and options to retain affordability of these units longer. TIF District Requirements The HRA would create a Housing TIF District, which has a maximum term of 26 years. This type of District requires the project to provide a minimum level of affordability at one of the following two (2) levels: ® 20% of the units need to affordable to persons with incomes at or below 50% of the Area Median Income (AMI) or • 40% of the units need to be affordable to persons with incomes at or below 60% of AMI As noted in the above table, Trident proposes to provide 15 units (21%) affordable to persons at or below 50% of AMI, which translates to an annual income of $30,050 for an individual or $34,350 for a couple. It should be noted that most developments restrict more than the 20% units required (typically up to 25%), to make sure they always remain in compliance with the affordability requirements. LEADERS IN PUBLIC FINANCE Minnesota Offices also in Wisconsin and Illinois www,ehlers-inc.com phone 651-697-8500 3060 Centre Pointe Drive fax 651-697-8555 Roseville, MN 55113-1122 tall free 800-552-1171 City of Mound Trident Development: Harrison Bay Senior Living TIF Review March 8, 2017 Page 2 Why TIF is Needed The difference in rents charged for the affordable units versus the market rate units and effect on annual revenue is as follows: With 21% of the unit rents at affordable levels, the project's potential rental income decreases by approximately $491,000 annually. The lower revenue reduces the project's ability to obtain and carry debt and attract private equity investors, thereby creating a funding gap. TIF Options The HRA's TIF policy is to provide the least amount of TIF for the shortest period of time. If the HRA chooses to move forward, there are two potential scenarios for structuring the TIF assistance, to meet not only this goal, but to retain affordability longer within the project. Regardless of the selected scenario, the developer would receive the minimal amount of assistance needed to make the project financially feasibility and provide typical market returns. The current estimated TIF assistance is up to $1.084 million, in the form of a pay- as-you-go TIF Note. Scenario 1: 10 Year TIF District with 10 Years Guaranteed Affordability Principal amount of the TIF Note would be $1.084 million paid at 3.5% interest over the 10 -year term. The Developer would receive 90% of the annual TIF generated and the HRA would retain 10% of the TIF for administrative costs and/or use on other affordable housing projects. At the end of 10 -years, the HRA could decertify the TIF District, so starting in year 11, 100% of the taxes from the project would be paid to the various taxing jurisdictions (tax estimates will be provided at the HRA meeting). Scenario 2: 10 Year TIF District with 15 Years Guaranteed Affordability The principal amount of the TIF note and interest rate would remain the same as noted above, but be paid out over 15 years instead. The Developer would receive approximately 60% of the annual TIF generated by the district over the first 10 years, after which time the district could be decertified. The HRA would retain 10% of the TIF generated over the 10 years for administrative costs and/or use on other affordable housing projects and the remaining 30% of TIF would accumulate in the TIF District's fund balance for use in paying on the TIF Note in years 11-15. Essentially, the Developer would recc'— the same amount of TIF assistance but in smaller amounts over a longer periou of time, in order to retain a longer period of affordability. City of Mound Trident Development: Harrison Bay Senior Living TIF Review March 8, 2017 Page 3 We completed a review of the Developer's proforma and will review this in detail, along with the options discussed above, with the HRA at their meeting. It should be noted that the projected assessed value used in the TIF calculations are currently under review by the Hennepin County Assessor's Office (we used an assumption of $150,000/unit based upon similar development within metro area). If modified by the Assessor's Office, the TIF calculations and analysis will change accordingly. Please contact either of us at 651-697-8506 with questions. M!