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Home My WebLink AboutCity Council Packet 10-30-2019 SpecialCity Council 1 of 1 October 30, 2019 CITY OF PLYMOUTH AGENDA Special City Council October 30, 2019, 5:00 PM 1. CALL TO ORDER 2. TOPICS 2.1 Four Seasons Mall redevelopment project update Four Seasons Mall Redevelopment PowerPoint Analysis memo from Ehlers 10-25-19 2.2 Set future Study Sessions November December January 3. ADJOURN 1 Special City Council October 30, 2019 Agenda Number:2.1 To:Dave Callister, City Manager Prepared by:James Barnes, Housing Program Manager Reviewed by:Steve Juetten, Community Development Director Item:Four Seasons Mall redevelopment project update 1. Action Requested: Receive an update on the Four Seasons Mall redevelopment project. 2. Background: Attached is a PowerPoint presentation which provides a high level overview of the Four Seasons Mall Redevelopment project and action items that Council will be considering on November 12 and future meetings. 3. Budget Impact: N/A 4. Attachments: Four Seasons Mall Redevelopment PowerPoint Analysis memo from Ehlers 10-25-19 2 Four Seasons Mall Redevelopment Dominium Development 3 Council Action (Nov 12) •Consider PUD & preliminary plat •Hold public hearing for and approve sale of housing revenue bonds •Approve TIF redevelopment agreement term resolution 4 Council Action (Future Council Meetings) •Execute Bassett Creek Watershed grant documents & maintenance agreements •Approve purchase agreement and related documents for parking ramp and site •Execute DEED Redevelopment Fund grant documents •TIF Redevelopment Agreement •Approve TIF interfund loan agreement for pooled funds (if needed) •Approval of final plat •Public hearing on roadway vacation 5 6 7 8 Housing Overview •1 person household = $35,000 - $49,000 •2 person household = $40,000 - $56,000 •3 person household = $45,000 - $63,000 •4 person household = $50,000 - $70,000 •1 bedroom rents = $915 - $1,315 •2 bedroom rents = $1,095 - $1,576 •3 bedroom rents = $1,261 - $1,816 Two – three story family housing buildings with 163 units One – six story senior housing building with 255 units Affordable to households at 50–70 % of the area median income 9 Commercial Overview •Developed by Launch LLC •Approximately 23,300 sq. ft. of space •Four individual buildings •Possible uses include •Coffee shop •Fast casual sit down restaurant •Sit down restaurant •General retail space 10 Parking Ramp •Three Story 229 stall parking ramp •200 stalls for park & ride customers during weekdays •Available to the commercial visitors and general public during non park and ride hours. •Early cost estimates are between $7.8 - $8.2 million 11 12 Park & Ride Facility Deal Points •City will acquire property from Dominium •City will enter into agreements with Architectural and Engineering firms •Public bidding process •City will hire a Project Manager •City will build ramp •Execute Operations and Maintenance Agreement 13 Housing Revenue Bonds •Council granted preliminary approval on July 23, 2019 •Received 10% allocation for the family buildings •Sale must occur by December 3, 2019 •Application will be submitted in January for remaining 90% and the senior building •Housing Revenue Bonds are pass-through and do not affect the city’s credit rating. 14 TIF Redevelopment Agreement Terms •Pay-As-You-Go TIF Notes over 18 years (75% of annual increment) •Family Note not to exceed $1,904,000 (present value) •Senior Note not to exceed $3,127,000 (present value) •Increment could be collected beyond 18 years if additional eligible uses were identified •Minimum Assessment Agreement will be in place •Affordability maintained for a minimum of 20 years •City receives 25% of increment to assist with public improvements including ramp and roadway improvements ($1,651,000 - present value) 15 DEED Redevelopment Fund Grant Documents •Project awarded $637,450 in DEED Redevelopment Grant funds •Funds may be used for •Demolition •Abatement •Water infiltration pond •Utilities (water, storm sewer, and sanitary sewer) •Developer will execute a sub-grant agreement 16 Bassett Creek Watershed Grant Documents & Maintenance Agreements •$840,000 available grant funds to assist with storm water quality improvements •The goal is to reduce 100 pounds of phosphorus from the north arm of Bassett Creek •Construction of new storm water pond and enhancements to nearby wetlands •Watershed is expected to act on the grant November 14, 2019 17 Council Action (Nov 12) •Consider PUD & preliminary plat •Hold public hearing for and approve sale of bonds •Approve TIF redevelopment agreement term resolution 18 Council Action (Future Council Meetings) •Execute Bassett Creek Watershed grant documents & maintenance agreements •Approve purchase agreement and related documents for parking ramp and site •Execute DEED Redevelopment Fund grant documents •TIF Redevelopment Agreement •Approve TIF interfund loan agreement for pooled funds (if needed) •Approval of final plat •Public hearing on roadway vacation 19 Memo To: Jim Barnes, HRA Manager From: Keith Dahl and Stacie Kvilvang, Ehlers Date: October 24, 2019 Subject: Four Seasons Mall Redevelopment Projects – Analysis of TIF Request The City received two (2) applications for public financial assistance from Dominium (the “Developer”) requesting approximately $8.1 million of Tax Increment Financing (TIF) assistance in the form of two (2) pay-as-you-go (PAYGO) TIF Notes over a 26-year term. The Developer has proposed to construct a 255-unit affordable senior apartment, along with a 163-unit, non-age restricted affordable apartment on the above referenced site (the “Projects”). Construction would begin in the spring of 2020 with an anticipated project costs of approximately $131 million (taxable value of $75.5 million). We have conducted a review of the Projects, specifically the Developer’s budget and pro forma based on industry standards for construction, land acquisition, and project costs; as well as to ensure that all revenues, and expenditures have been appropriately accounted for and considered. A TIF estimate was prepared to determine the potential amount of increment that could be generated from the Projects. Based upon only providing 75% of the TIF (City retains 25% for other redevelopment projects and administrative costs), the Projects would generate a total present value (principal amount) of approximately $6.775 million (this figure is based on the developer’s anticipated financing rate of 4.312%). Based on our review, the Developer’s requested financial assistance is more than what is necessary for the Projects to be “financially feasible”. We’ve concluded that the Projects require only 18 years of assistance totaling approximately $5.027 million ($3.127 million for the sr. apartments and $1.9 million for the non-age restricted apartments). The tables below provide a synopsis of the sources and uses associated with the Projects: Senior SOURCES - SR. APTS Amount Pct. Per Unit First Mortgage 40,935,001 55% 160,529 TIF Mortgage 3,127,000 4% 12,263 Tax Credits 20,984,532 28% 82,292 Deferred Developer Fee (100% of Total Fee) 6,398,982 9% 25,094 Deferred Contractor Fee (91% of Total Fee) 2,827,128 4% 11,087 Local Grants 400,000 1% 1,569 TOTAL SOURCES 74,672,643 100% 292,834 20 USES - SR. Apts Amount Pct. Per Unit Acquisition Costs 2,699,254 4% 10,585 Construction Costs 51,567,746 69% 202,226 Contractor Fee 3,123,832 4% 12,250 Environmental Abatement/Soil Correction 530,000 1% 2,078 Professional Services 2,292,445 3% 8,990 Financing Costs 6,993,238 9% 27,424 Developer Fee 6,398,982 9% 25,094 Cash Accounts/Escrows/Reserves 1,067,146 1% 4,185 TOTAL USES 74,672,643 100% 292,834 Non-Age Restricted SOURCES - NON-AGE RESTRICTED APTS Amount Pct. Per Unit First Mortgage 30,176,000 54% 185,129 TIF Mortgage 1,904,000 3% 11,681 Tax Credits 15,799,202 28% 96,928 Deferred Developer Fee (100% of Total Fee) 4,927,616 9% 30,231 Deferred Contractor Fee (100% of Total Fee) 2,382,686 4% 14,618 Local Grants 1,067,450 2% 6,549 TOTAL SOURCES 56,256,954 100% 345,135 USES - NON-AGE RESTRICTED APTS Amount Pct. Per Unit Acquisition Costs 2,016,669 4% 12,372 Construction Costs 39,280,602 70% 240,985 Contractor Fee 2,387,850 4% 14,649 Environmental Abatement/Soil Correction 560,000 1% 3,436 Professional Services 1,668,545 3% 10,236 Financing Costs 4,725,464 8% 28,991 Developer Fee 4,927,616 9% 30,231 Cash Accounts/Escrows/Reserves 690,208 1% 4,234 TOTAL USES 56,256,954 100% 345,135 Pro Forma Analysis: Overall, the information contained in the development pro formas generally meets the expectations of a rental housing project utilizing 4% low-income housing tax credits (LIHTC) and other sources of public financial assistance. 1. Acquisition Costs – The proposed land acquisition cost of the Projects is approximately $11,000 to $12,000 per unit. This is within the market range of $10,000 to $15,000 per unit for similar development projects of its type. 2. Total Development Costs (the “TDC”) – The TDC is approximately $131 million or $313,000 per unit. Multi-family projects in this market generally range between $225,000 and $275,000 per unit. The Projects are higher than the expected market range, however 21 there are two main reasons influencing this higher value; (i) structural supports and pilings due to poor soils; and (ii) higher than normal water table. These two reasons have increased the construction costs associated with concrete work and pilings throughout the site and ensuring structurally sound foundations. 3. Developer Fee – The proposed developer fee is approximately 9% of the TDC, which is within the typical industry range of 8-10% for LIHTC projects. The Developer is limiting its fee and deferring 100% of it to close the financial gap. Instead of the Developer being compensated upfront for the time and resources spent to develop the Projects, they will be paid out of available cash flow. Currently, it is anticipated to be repaid within 17 years. 4. Contractor Fee – The Developer acts as their own general contractor and have subsequently proposed a contractor fee that is 4.2% of the TDC, which is within the industry range of 3% to 5%, but low for a standard LIHTC project. They are deferring 100% of the fee in the non-age restricted project and 91% in the senior project, which will be paid out of cash flow and is anticipated to be repaid within 17 years (the combined contractor fee and developer fee equate to approximately 13% of the TDC, which typically totals 12-14%). 5. Rents – All of the units will be affordable to households at or below 60% of the area median income (AMI). The proposed gross rents range from $60 - $90 above the 2019 regulatory maximums allowed under the LIHTC program; however, the Developer is projecting the regulatory maximum rents out to 2020 instead of using the 2019 rent limits as found below. The rent and income limits are derived by the United States Department of Housing and Urban Development (HUD) on an annual basis, and the 2020 rent limits will not be released until April of next year. Maximum Gross Monthly Rent Bedroom Size 60% AMI One Bedroom $ 1,125 Two Bedrooom $ 1,350 Three Bedroom $ 1,560 6. Operating Expenses – The operating expenses on a per unit basis for the Projects are approximately $3,000, which at the low end of the typical market range of $3,000 to $4,000 per unit per year. Please note that this per unit expense is before management fees, property taxes, and replacement reserves. 7. Management Fee – The proposed management fee is 2.5% of the effective gross income of the Projects. This is lower than the typical range of 3% to 5%. 8. Reserves – The annual deposit to replacement reserves is $250/unit per year, which is typical for LIHTC projects. 9. Financing – The Developer has maximized the First Mortgages for each of the Projects. The mortgages require debt coverage of 115% to ensure that revenues generated will be adequate to repay them. In review of the Developer’s debt coverage, they have 22 approximately 111% with TIF assistance in year 1 and meet the required debt coverage ratio of 115% in year 3. 10. Low-income Housing Tax Credits (LIHTC) – The Projects anticipate tax credit pricing of $0.965 for every $1.00 of available tax credit, which generates approximately $36.7 million of proceeds for the Projects. Tax credit pricing on many current projects is between $0.85 and $0.95. Based on current conditions, the assumed tax credit equity is exceptional. Recommendation: Based on our review of the Developer’s pro forma and under current market conditions, the proposed developments may not reasonably be expected to occur solely through private investment within the near future. The cost associated with development of the Projects may only be feasible through public financial assistance from the City. We conclude that TIF assistance in the amount of $5.027 million, in two (2) separate PAYGO TIF Notes can be supported for the Projects. Please contact either of us at 651-697-8500 with any questions. 23 Special City Council October 30, 2019 Agenda Number:2.2 To:Dave Callister, City Manager Prepared by:Sandy Engdahl, City Clerk Reviewed by:Laurie Hokkanen, Administrative Services Director Item:Set future Study Sessions 1. Action Requested: Schedule Study Sessions and/or add topics as desired. Calendars are attached to assist with scheduling. 2. Background: Pending Study Session Topics (at least three Council members have approved the following study items on the list): -IOCP Affordable Workforce Housing Tour Other Council requests for Study Session Topics: None at this time. Staff requests for Study Session Topics: None at this time. 3. Budget Impact: N/A 4. Attachments: November December January 24 SUN MON TUE WED THU FRI SAT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 November 2019 3400 Plymouth Boulevard Plymouth, MN 55447 OFFICIAL CITY CALENDAR Phone: 763-509-5080 plymouthmn.gov 5:30 PM SPECIAL COUNCIL MEETING Budget, CIP, Utility Rate Study Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers 7:00 PM PLANNING COMMISSION MEETING Council Chambers THANKSGIVING HOLIDAY 7:00 PM ENVIRONMENTAL QUALITY COMMITTEE MEETING Medicine Lake Room 5:30 PM SPECIAL COUNCIL MEETING Review Board and Commission Applications Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers SUN TUES MON THUR FRI SAT THANKSGIVING HOLIDAY CITY OFFICES CLOSED CITY OFFICES CLOSED VETERANS DAY CITY OFFICES CLOSED 7:00 PM PARK & REC ADVISORY COMMISSION MEETING Plymouth Ice Center 7:00 PM HOUSING AND RE- DEVELOPMENT AUTHORITY MEETING Parkers Lake Room 7:00 PM PLANNING COMMISSION MEETING Council Chambers Plymouth Arts Fair Plymouth Creek Center Plymouth Arts Fair Plymouth Creek Center 25 SUN MON TUE WED THU FRI SAT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 December 2019 3400 Plymouth Boulevard Plymouth, MN 55447 OFFICIAL CITY CALENDAR Phone: 763-509-5080 plymouthmn.gov 7:00 PM PLANNING COMMISSION MEETING Council Chambers 5:30 PM SPECIAL COUNCIL MEETING Dundee Nursery Redevelopment Concept Plan Medicine Lake Room 7:00 PM REGULAR COUNCIL MEETING Council Chambers 7:00 PM HOUSING AND REDEVELOPMENT AUTHORITY MEETING Parkers Lake Room SUN TUES MON WED THUR FRI SAT 7:00 PM ENVIRONMENTAL QUALITY COMMITTEE MEETING Council Chambers 7:00 PM CHARTER COMMISSION MEETING Medicine Lake Room 7:00 PM PLANNING COMMISSION MEETING Council Chambers CHRISTMAS DAY CITY OFFICES CLOSED CHRISTMAS EVE CITY OFFICES CLOSED AT NOON 2:00 PM - 5:00 PM Old Fashioned Christmas Plymouth Creek Park 5:30 PM SPECIAL COUNCIL MEETING Board and Commission Interviews Medicine Lake Room 26 SUN MON TUE WED THU FRI SAT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 MARTIN LUTHER KING JR. BIRTHDAY CITY OFFICES CLOSED 21 22 23 24 25 26 27 28 29 30 31 January 2020 3400 Plymouth Boulevard Plymouth, MN 55447 OFFICIAL CITY CALENDAR 763-509-5080 plymouthmn.gov 7:00 PM PARK & REC ADVISORY COMMISSION MEETING Council Chambers SUN TUES MON WED THUR FRI SAT CHANGES ARE NOTED IN RED 7:00 PM REGULAR COUNCIL MEETING Council Chambers 7:00 PM PLANNING COMMISSION MEETING Council Chambers 7:00 PM ENVIRONMENTAL QUALITY COMMITTEE MEETING Medicine Lake Room 7:00 PM HOUSING AND REDEVELOPMENT AUTHORITY MEETING Parkers Lake Room NEW YEAR’S DAY CITY OFFICES CLOSED 7:00 PM REGULAR COUNCIL MEETING Council Chambers Absentee Voting begins for Presidential Nomination Primary Election 6:00 PM-8:00 PM Skate the Garden Millennium Gardens Pond 6:30 PM-10:00 PM After Hours at the Creek Plymouth Creek Center 27