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HomeMy WebLinkAbout2006-01-30 Minutes, City Commission work MINUTES OF THE WORK SESSION MEETING OF THE CITY COMMISSION BOZEMAN, MONTANA January 30, 2006 ***************************** The Commission of the City of Bozeman met in work session in the Community Room, Gallatin County Courthouse, 311 West Main Street, on Monday, January 30,2006, at 6:00 p.m. Present were Mayor Jeff Krauss, Commissioner Sean Becker, Commissioner Jeff Rupp, Commissioner Steve Kirchhoff, Commissioner Kaaren Jacobson, City Manager Chris Kukulski, Assistant City Manager Ron Brey, Director of Public Service Debbie Arkell, Director of Finance Anna Rosenberry, Planning Director Andy Epple, and City Clerk Robin Sullivan. The meeting was opened with the Pledge of Allegiance and a moment of silence. Sianina of Notice of SDecial Meetina Each of the Commissioners, in turn, signed the Notice of Special Meeting. Public comment No comment was received under this agenda item. Commission education re affordable housina with Community Affordable Housina Advisorv Board (CAHAB) and other interested Darties Distributed just prior to the meeting were an agenda prepared by the CAHAB, a copy of their power point presentation, and two spreadsheets regarding the costs of construction and land as prepared by Dab Dabney. Vern Klingensmith, a Bozeman resident of 27 years and Interfaith Housing board member, raised the question, "affordable to whom". He then provided the response, noting that teachers, police officers, firefighters, ministers, and other public service workers are among those targeted. Mr. Klingensmith noted CAHAB is aware that a partnership between CAHAB and the development community needs to exist in order to best serve the city's needs. Mr. Klingensmith reviewed the history of Bozeman's affordable housing program and finished by noting that CAHAB is prepared to work with the new Commission in order to meet Bozeman's goals. Amanda Cater, CAHAB member, noted that the Bay Area Economics (BAE) Study offered recommendations, some of which have been implemented. The study identified target priority populations, including those being people who are at 80 percent of area median income (AMI); for a family for four that is currently $44,800. She noted that rentals have been established for people who earn less money; and a first time homebuyer program, called the Road to Home, has been implemented. She stated that regulatory process reforms are on-going, and areas needing improvement have been identified. She highlighted those issues as well as the challenges, including the lack of rental units for people earning less than 30 percent of AMI, the need to identify long-term funding sources, and the need to identify land for affordable housing. Tracy Menuez, HRDC and CAHAB, quoted that the area has 42.8 percent home ownership, which is lower than the percentages in Missoula, Great Falls, Havre, Helena, Butte and many other communities in Montana. She forwarded a proposal for workforce housing, noting it addresses the need to provide units that the working class can afford to purchase, based on housing costs, including principle, interest, taxes, insurance and utilities costing no more than 30 percent of their income. She stated that, with today's 01-30-06 work - 2 - salaries, that is $123,000 for a two-bedroom unit for two people or $154,000 for a three-bedroom unit for four people. Associate Planner Jami Morris covered some possible UDO revisions, including maximizing the net buildable area, amending the restricted size lot requirements, reducing development costs, and amending the planned unit development section of the code. Controller Brian LaMeres, Chair of CAHAB, briefly talked about funding for affordable housing, identifying the current balances in the various funding sources at this.time. He indicated that the revolving fund has a current balance of approximately $129,000 with approximately $150,000 trickling back in from previous loans; the balance in the big box monies is approximately $170,000; and one mill has been dedicated to the program in this year's budget at an estimated $58,000. Dab Dabney, developer, presented a housing cost analysis. He characterized himself as the largest developer of affordable rental housing in the community, noting he has built $40 million in projects over the last 10 years. He reviewed the figures in the handout showing housing cost breakdowns. He stated that housing does not become affordable if you remove the impact fees; rather, he sees lot cost as the villain of the affordable housing. He noted that a restricted size lot currently costs $85,000. He then reviewed the square foot costs of a small home and a larger home, cautioning that the smaller the home, the higher the per square foot cost because of the fixed costs. He noted that his figures reflect a 10-percent profit, while profits a few years ago were in the single digits. He stated the constant rise in building material costs is contributing to the rising costs of housing, noting the inflationary costs were 8 percent last year. Mr. Dabney then presented a lot cost analysis. He noted the process to get the approvals, etc, and then to start work might take six months. He suggested that it would take about three years to sell all the lots. He said that banks are very conservative when loaning on land only, and they recover their monies first before the developer realizes any monies from the sale of lots. In the meantime, he cautioned that the developer is assuming the risk that the housing market may slow down and that the land will not generate the anticipated income. He recognized that, if everything goes perfectly, the developer will make good money, but he won't make any for four years. He stressed that there is a lot of risk and time involved, and things seldom come out perfectly. He concluded by identifying the need to find a way to make land more affordable, because that is the one cost that can be controlled. Mr. Klingensmith asked Mr. Dabney about how to manage the land costs. He responded that when you are dealing with maximizing the number of houses, the fewer lot lines, the better. If you take a larger parcel and put more dwellings on it and shrinking the setbacks, you can create a condo type complex. They would be truly single family houses, but would have common interest in the land through a homeowners association. He recognized that the price of lots is market driven and that if an excess of lots were on the market, the prices would decrease or the lots would not sell. Chris Budeski spoke concerning infill lots. He stated that the parkland dedication requirements increase the price of the homes. He stressed that any dedication of land in stream setbacks, parks, and streets, increase the cost of the developable land. He finished by stating that the extra fifteen feet in the new streambank setbacks is a hard cost. Lowell Springer forwarded his proposal to increase density in exchange for open space dedication, noting he has garnered support from the development community for that concept. He noted that planned unit developments require a combination of open space and parkland, and suggested that a density bonus in exchange for a portion of the open space requirement could be granted. He indicated that, under the right circumstances, this could mean reducing the cost of a townhouse or condo by as much as 25 percent, which may make those units affordable to those with incomes at 80 percent of area median income. Mike Jarrett stated he employs people who don't make enough to buy a house in Bozeman. With the labor market in Bozeman, people are trying to chase labor to build a house; and those costs are getting higher and higher. Mr. Dabney responded that the cost of labor is 55 percent ofthe total cost, and that for every dollar that the worker earns, the government gets over 40 cents. Brian Caldwell noted that, at some point in building a society, we decided there is a priority to educate the public and suggested that the same approach be taken on housing. He stated it is important 01-30-06 work - 3 - to involve all components, and that solutions might include paying higher wages, providing community funding for affordable housing, and providing incentives to developers. He stressed that the development community should not be asked to shoulder the entire burden. He noted that in mobile home parks, one owns the residence but leases the land on which it sits by paying lot rent. He stated that in Jackson Hole, Wyoming, a similar approach was taken by a modular home builder. He suggested that the community might assist by subsidizing the land lease, thus providing a guaranteed return to the developer and lessening the risk. He finished by suggesting that density be increased, parkland requirements lessened, and public/private cooperation encouraged. Responding to questions, Planning Director Epple stated that if there was an easy way to solve the affordable housing crisis, we'd be doing it. He said that review of an affordable housing project gets expedited under the City's current policies. He noted that there have been a lot of restricted size lots platted, but no affordable units constructed on them to date. He said that 954 new dwelling units were permitted in 2005, which was a new record. Director Epple noted that people want to live here and are willing to pay a lot. The first time somebody pays $85,000 for a lot, that's the new market rate. He liked Mr. Springer's suggestion and agreed that the developers won't pass the savings along unless they are required to do so. John Barkow, CAHAB, stated that the restricted size units are good, but are currently market driven so the 80-percent of area median income is not being met. Responding to questions from Mr. Barkow, Mr. Dabney stated that one of his West College Street projects contains two-bedroom, one-bath units that cost $115 per square foot to construct. He indicated that $100,000 to $200,000 is the area in which the community needs to concentrate its efforts. Dave Jarrett stated that people want their own stand alone home with land, and that's what they keep striving toward. John Trull noticed that the issue of Section 8 housing has not been discussed and asked if there is any interest in building that type of house. Bob Wade, Recreation and Parks Advisory Board, stated that affordable housing means the people are low income and, as a result, will use the public trails and facilities for their recreation since they can't afford a membership at the Ridge or a Bridger ski pass. He noted that he has lived in condos and townhouses for many years and likes that lifestyle, plus that type of development allows for more units and an area of shared land. He suggested that stand alone homes may not be realistic as affordable housing, and identified row housing as an option that works well in the eastern part of the United States. Vern Klingensmith noted that in CAHAB meetings, they have discussed the fact that the number of units is important in providing affordability, and noted that common walls are much cheaper. He suggested that these attached units can be good starter homes for the lower income people, many of which are public servants, with the potential of growing wealth, and the possibility of being able to buy a stand-alone home later. Planning Director Andy Epple said that single detached housing is the least affordable type; truly affordable housing is attached. In Bozeman, the market has responded since, out of the 954 new units built last year, 73 percent were some form of attached homes. That number has been consistent over the last 5 years. Beth Hanson suggested that restricted size lots may be not be that practical. She wants to see some subdivisions with relaxed rules that allow for building a nice home, at a little lower price point that is still practical. Mayor Krauss suggested the possibility of using government land to develop affordable housing for their employees, including the state, city, county, and MSU. Responding to questions, Caren Robertystated thattheAMI is based on the census, and is updated about every other year. She noted that Bozeman has a much lower AMI, than Gallatin County. Brett Tudsbury, recommended reducing the size of the lot and size of home, since they are so far out of reach. He noted that, as Mr. Dabney pointed out, there is no large profit for the builder and developer. He suggested that townhouse/condominium projects be considered, particularly in today's market. He then 01-30-06 work - 4- stated the restricted size lots are hard to sell, because they cost nearly the same as larger lots and are generally not desirable to buyers. Responding to John Trull, Dab Dabney stated that Section 8 housing money is rapidly drying up and involves so much paperwork that most developers shy away from it. He then noted that a new program has been implemented under which Section 8 funds can be used toward a mortgage payment rather than for rent; however, the qualifying income remains extremely low. He then indicated that HRDC does accept Section 8 tenants in those units that it manages; however, he cautioned it is extremely difficult to develop an entire Section 8 project. Responding to questions, Mike Jarrett said that it costs a certain amount to build a house, even if they are different size houses. He cautioned that, the smaller the house is, the higher the cost per square foot it is because of things like land costs. He noted the result is that people can't buy the 1 ,200 square foot house, because it's still too expensive. Planning Director Epple noted that the size of the restricted size house is set at 1515 square feet plus the garage under the code. Mr. Tudsbury responded that if you are looking at $90 to 100 per square foot, it's $150,000 for the house, $100,000 for the lot, plus the commission and profit, for a total cost of nearly $300,000. Lowell Springer cautioned that to provide restricted size lots on a normal 300-foot long block, one would have a series of 150-foot by 30-foot lots, which do not meet code requirements and which would allow only long, narrow buildings which are not cost efficient to construct to maintain. He stressed that the squarer the building, the better in terms of cost and design. Brian Caldwell noted that the level of subsidy by the community needs to be increased significantly, stating that steps must be taken to ensure the quality of the housing and that a ghetto isn't the answer either. If there is truly a desire for affordable housing, options to be considered include taxes on title transfers, and recording fees as well as other forms of taxation. He also recognized that townhouses and dense condo units are the only way to go. Greg Allen noted that he is working on a large scale condo development; and he has found that if concrete is not used extensive in the floors and the walls, the liability insurance is $3,200 per unit above the cost of other types of liability insurance; the bank won't finance the project, and contractors won't build it. He noted the result is higher soft costs when you get bigger buildings. Eugene Graf suggested that those who are eligible for low- and moderate-income housing participate with sweat equity. He suggested that this could help to lower the costs of the home and result in an owner buy-in that prevents low-income housing developments from becoming ghettos. Mayor Krauss noted that last year, the Commission earmarked one mill for affordable housing, which is the first time that type of commitment has been made. He then identified UDO changes, smaller lots, and less open space as additional ideas for creating affordable housing. He acknowledged that the current provisions for restricted size lots and restricted size units are not providing affordable housing. Commissioner Rupp thanked the community for coming to this discussion, and voiced his agreement with the CAHAB. He stressed the importance of paying attention to those public servants who can't afford to live in this town. He agreed that the cost of land is too high, and stated that whether we use zero lot lines or UDO relaxations, he's ready to do that. He noted that the homebuyer programs are in place, but the housing is not available. He identified other communities that are trying to provide affordable housing and suggested implementing a requirement that if one builds ten units, one must be sold to a public servant. He further noted that one doesn't find condos at the $150,000 price range. He is willing to push the City Commission to task the CAHAB and Planning Board to draft an ordinance that will address these issues. He's not interested in shouldering the burden because the money is not in the City funds, but he wants to do what is working with the other communities. Commissioner Jacobson stated that she thinks that Commissioner Rupp's workforce housing idea is a good idea. She identified a need for inclusionary zoning, and noted that this disperses affordable housing throughout subdivisions. She expressed support for requiring that a certain number of lots be 01-30-06 work -5- affordable for around thirty years. She concluded by reiterating Commissioner Rupp's question, "where does the money come from." Commissioner Kirchhoff noted that when one looks at the results of the national survey, Bozeman came in at the bottom; and he is pleased that Commissioner Rupp is willing to push the issue. He doesn't think we can get out of that hole by knocking off $3,000 here and $5,000 there; rather, it is important to identify a source to subsidize the program or to use land currently in government control. He also doesn't think that anyone thing will correct this situation, and recognized that requirements may need to be imposed. He cautioned that when the government does something like this, there are unintended consequences, but acknowledged that a dramatic step is needed. He stated that implementing requirements may result in the market costs of homes within a development increasing by 10 percent to cover the costs of the affordable units for the workforce, but suggested that may be an appropriate community subsidy. He stressed that City funding options are limited but he feels it is important for those working in the community to be able to live here. Commissioner Becker stated that we are focusing on critical workforce housing, and suggested that the successful components of programs in other cities be carefully considered. For an economy to work, there has to be housing; and he feels that identifying a source of funding to provide workforce housing is important. He cited the quote in yesterday's edition of the Bozeman Dailv Chronicle, noting that the restricted size lots don't work. He noted the issue of modulars was raised tonight, and acknowledged that may be a viable alternative to the continually spiraling construction costs. He stated government is not in the business of building houses; rather, it isin the business of providing infrastructure and services for those houses. He noted, however, that if staff desires to undertake an affordable housing project on city or county land, he's willing to support it. He finished by saying that there is a lot of expertise in this Commission in housing and he is confident that the issue can be addressed. City Manager Kukulski reminded the Commission that the City has limited resources and asked them to identify the target wage or position. He sees that affordability lies in townhouses and condominiums, not in freestanding houses Mayor Krauss noted that he likes the idea of subsidy, suggesting that the City should be looking at lands that it or other governmental entities own or control. He also stated that cookie cutter developments provide a level of affordability that have worked for generations and suggested that the option be considered. He also proposed that the City consider getting into the construction loan business with low- or no-interest loans. He also supports considering the earmarking of an additional mill for affordable housing in the upcoming budget; however, he cautioned that it must be weighed against all other needs in the general fund. He recognized that the costs of providing workforce housing cannot be borne by the development community alone, but that at least some responsibility falls on the governmental entities. He finished by noting the unintended consequences, like development fleeing the city; and recognized that, if there is no development, then there will be no affordable housing. Commissioner Rupp stated some kind of guarantee of affordable housing is essential in exchange for many of the possibilities that have been discussed during this work session. Mayor Krauss talked about restricted cost lots. He noted that the unit size doesn't seem to be making headway, and there is a danger of those unintended consequences. If the developer is making $2 million on land development, then maybe the City ought to be in the development business. Mayor Krauss closed the work session by thanking everyone who has attended and participated in the discussion. Break - 8:15 O.m. to 8:27 o.m. Mayor Krauss declared a break from 8:15 p.m. to 8:27 p.m., in accordance with Commission policy. Discussion - FYI Items The following "For Your Information" items were forwarded to the Commission. 01-30-06 work - 6 - (1 ) Commission meeting schedule for the remainder of the year, including the locations of the meetings. (2) Memo forwarding minutes for the Solid Waste Management District board meeting held on January 18, along with a reminder of the deadline for items to be placed on the February 15 agenda. (3) Letter from Amanda Murdoch, 506 Sanders, a senior at Bozeman High School, expressing concerns about various issues, including the use of methamphetamine and the asbestosis that has resulted from the W.R. Grace vermiculite mine at Libby. (4) Letter from Jerry and Sandie Hammer, 307 East Granite Avenue, expressing concerns about the new middle school site and identifying issues to be addressed in its construction to protect the existing neighborhood. (5) Copy of the newsletter announcing the upcoming meeting of the Cascade Neighborhood Association, which was held on January 25. (6) Notice of upcoming public meetings on school trust lands, to be held in various communities throughout Montana in mid-February. (7) Minutes from the Community Affordable Housing Advisory Board meting held on January 11,2006. (8) Agendas for the County Commission meetings to be held at 9:00 a.m. on Tuesday, January 31, and at 1 :30 p.m. on Wednesday, February 1, at the Courthouse. (9) Agenda for the joint orientation session of the Planning Board and Zoning Commission, scheduled for 7:00 p.m. on Tuesday, January 31, in the Commission Room. (10) Agenda for the Development Review committee meeting to be held at 10:00 a.m. on Wednesday, February 1, at the Professional Building. (11 ) Planning Director Andy Epple reminded the Commissioners of the Planning and Zoning orientation scheduled for 7:00 p.m. tomorrow night at City Hall and encouraged all interested Commissioners to attend since it will provide a good overview of the planning process. Commissioner Becker and Commissioner Kirchhoff indicated their intent to attend. (12) City Manager Kukulski announced that a work session on setting of goals has been set for February 13 and asked the Commissioners to review the 2004 list of goals and the list prepared during the April 2005 work session in preparation for this session. Following discussion, the Commissioners agreed that the work session be scheduled for 6:00 p.m. to 10:00 p.m., with a facilitator to assist in the process. (13) Commissioner Becker drew attention to the letter from Amanda Murdoch that was included in the packet. He brought up the methamphetamine issue and asked if there is anything that can be done to offenders who are under the age of 18. Assistant City Manager Brey responded that those who are under 18 are generally released to their parents unless the crime is so severe that they need to be taken to Billings or another community where juvenile facilities are available. City Manager Kukulski cautioned that cocaine use is making a comeback in Bozeman. (14) Commissioner Rupp stated that he attended the Transportation Coordinating Committee meeting. He also noted that the bylaws do not mandate that the Mayor be a member of the board; and the Commission agreed that Commissioner Rupp would be the member with Mayor Krauss serving as the alternate. He noted that South 19th Avenue from Main Street to beyond Stucky Road is the major project for summer 2007. He also noted that this summer, 1-90 will be under the same construction as it was last 01-30-06 work - 7 - summer. He also mentioned that the Rouse corridor is beginning the design phase, with work scheduled for beyond 2010. Director of Public Service Arkell noted that the Rouse corridor is not funded in the current transportation bill, but may be in the 2009 transportation bill. City Manager Kukulski noted that the congressional delegation has been doing great getting funds from the federal government. He also noted that the current plan is that a traffic signal will be installed if the roundabout at South Willson Avenue and West College Street is determined not feasible. (15) Commissioner Jacobson reported on the City-County Health Board meeting. She noted that the board spent two hours discussing one septic tank variance. (16) Commissioner Kirchhoff reminded the Commission that he will be leaving on February 24 and returning around March 17. He noted that he will be in Mexico, serving as translator for a doctor providing services in the extremely poor village of Tula. He asked the Commissioners for permission to pursue a sister city relationship with that community; a majority of the Commissioners indicated their support. (17) Mayor Krauss submitted the following. (1) Announced that Commissioner Becker and City Manager Kukulski will be attending the MPPA meeting on Wednesday. (2) Noted that on February 1-3, the Local Government Center will be conducting the Mayor's Academy here in Bozeman. He indicated he will also be attending the economic outlook seminar on Wednesday morning, since the Mayor's academy starts in the afternoon. (3) Noted that he went to the fairgrounds to see the $1 million improvement program they've undertaken in building a new outdoor arena and renovating if Building 1. (18) John Trull announced his resignation from the Local Government Study Commission because of moving to Belgrade. The StUdy Commission has been through the charter once. and that document will now be reviewed by the legal department. He indicated that Harold Fryslie has been identified as a possible replacement because he has attended many of the meetings. (19) City Manager Kukulski noted that municipal wastewater treatment facilities are often the first to be evaluated when total maximum daily load (TMDL) levels are exceeded and water pollution results. He stated that, one by one, municipal facilities are being scrutinized and suggested that the Cities band together and work on the issue collectively. He recognized that Bozeman will need to face the issue within the next few years through construction of a new facility. Adiournment - 9:01 O.m. There being no further business to come before the Commission at this time, it was moved by Commissioner Kirchhoff, seconded by Commissioner Jacobson, thatthe meeting be adjourned. The motion carried by the following Aye and No vote: those voting Aye being Commissioner Kirchhoff, Commissioner Jacobson, Commissioner Becker, Commissioner Rupp, and Mayor Krauss; those voting No, none. ~. ATTEST: JE~ ,Mayor ~/~ R L. SULLIVAN City Clerk PREPARED BY: O/7J"= DEVIN M. AR U Deputy City Clerk 01-30-06 work