HomeMy WebLinkAbout9TEN Project Midtown Board PacketPage 1 of 8
Staff Report
To: Midtown Urban Renewal Board
From: David Fine, Urban Renewal Program Manager
Meeting Date: October 3, 2019
Subject: 9TEN Mixed-Use Project
TIF Assistance Program Overview
The Bozeman City Commission created the Midtown TIF Assistance Program in 2017 to
support redevelopment activity and advance the goals of the 2015 Midtown Urban Renewal
Plan. The Midtown TIF Assistance Program supports projects that create significant new taxable
value as well as meeting the five goals of the Midtown Urban Renewal Plan. These goals, as
required by statute, focus on mitigating blighted conditions in the urban renewal area. Each of
these five goals are further refined with particular criteria for a total of sixteen categories that
can receive points. Point awards demonstrate specific compliance with the criteria, but are not
the only factors the board may consider in recommending an incentive award. For example, the
board may also consider new taxable value created by the project, or whether the project would
be feasible without a public incentive. In addition to tax generation, the goals of the Urban
Renewal Plan and the need for assistance, the Board must also make affirmative findings as
required by State Law.
Criteria for TIF Assistance
Overall District Relevance
1. Relevance to the Midtown Urban Renewal Plan: Documentation of the project’s impact in
relation to the goals and objectives of the Midtown Urban Renewal Plan, particularly mixed-
use development. Urban design elements are also considered, including pedestrian
emphasis and quality of design.
The 9TEN project creates significant attainable workforce housing in the walkable and bikable
core of Bozeman. In this way, it supports multimodal transportation and reduces wider
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infrastructure demand. The project includes ground floor commercial space and supports the
District goal of supporting urban density mixed land uses. 9TEN double fronts the corner of
Aspen St. and 8th Ave. and provides visual interest with compatible human scale urban design.
[5 of 5]
Goal Number 1: Promote Economic Development
2. Tax Generation: The project will increase the taxable value within the District. The increase
in taxable value due to new construction & rehabilitation is estimated by the County
Assessor’s office or State Department of Revenue to determine tax increment generation.
Submit documentation of estimated tax projections to receive points for these criteria.
The 9TEN project promotes economic development in the service of blight remediation with two
new 4-story buildings totaling 120,760 square feet that include 3,500 SF of commercial space.
Leland Consulting Group (LCG) created a tax revenue generation model for the Midtown URD.
Using data provided by the property owner, LCG estimates that the property will provide an
estimated annual net tax revenue increase of $242,163 for the District, with the net increase in
the value of the property of $25,968,119. For the assumptions related to these projections,
please see the LGC report. [4 of 4]
3. Elimination of Blight: The project’s direct and indirect impact on the physical and fiscal
deterioration within the Tax Increment Financing District and the community. Submit
information showing current conditions of property.
The project substantially increases the density and taxable value of development on the
property. 9TEN addresses a defective and inadequate street layout, in which Aspen St. ends at a
field and an unpaved alley. The project will add missing sidewalks to Aspen St. and provide
better traffic circulation by building 8th Ave. to a full city standard between Aspen St. and
Juniper St. The alley will be paved. 9TEN alleviates the blighting condition of inappropriate land
coverage with vacant land in the urban core through the addition of urban density workforce
housing. The project addresses the age obsolescence of vitrified clay sewer pipe that runs
underneath adjacent buildings by installing new city standard sewer pipe in the 8th Ave. right of
way. [4 of 4]
4. Employment Generation: Total employment generated by the project assessed in terms of
new permanent and part-time jobs, and construction jobs. Submit documentation of
estimated new jobs to receive points for this criterion.
The project supplies 3,500 SF of commercial space for office or retail jobs. The jobs have not
been specifically identified. Construction of the project will create short-term employment in
the building trades. [1 of 3]
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Goal Number 2: Improve Multi-Modal Transportation
5. Facilitates Public Health and Mobility: Project will construct or improve sidewalks, including
ADA access to buildings. Provide detailed information demonstrating that the current
condition inhibits public health and mobility.
The project adds new storefront block frontage standard sidewalks at the corner of Aspen St.
and 8th Ave. adjacent to Building 2 and transitions to mixed frontage sidewalks adjacent
Building 1 . The new building will be ADA accessible. Pedestrian access and facilities will be
dramatically improved. [1 of 1]
6. Reduces Resource Demand: Project promotes the use of transit, ride sharing, or car sharing.
Provide plans, agreements or other methods to demonstrate reduction of resource demand.
While locating housing and commercial development in Midtown places it in a centrally located
location, this project does not take particularly exceptional or innovative measures to promote
transit use, ride sharing, or car sharing. [0 of 1]
7. Promotes Active Transportation: Project promotes bicycling as an active transportation
option by constructing or improving bike lanes, providing covered bike parking, and/or
participating in a bike share program. Provide plans, agreements or other methods to
demonstrate reduction of resource demand.
Covered bike parking is provided. [1 of 1]
Goal Number 3: Improve, Maintain, and Support Innovation in Infrastructure
8. Infrastructure Improvements: Project promotes innovation in infrastructure and/or reduces
long- term costs of maintenance. Provide plans and descriptions of innovations proposed.
The project meets the standard requirements of the City code for street trees, sidewalks and
water and sewer infrastructure.
[0 of 2]
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Goal Number 4: Promote Unified Human Scale Urban Design
9. Street Frontage: The project improves the street frontage by eliminating parking between
the right-of-way and the building. Provide plans to demonstrate improvement in street
frontage.
The project will bring Aspen St. up to City standards with curb, gutter, sidewalk, and street trees
adjacent to the UHaul property. The project is located on an undeveloped site and cannot
“improve” the street frontage where none currently exists. The project meets the code
requirements adjacent to the site.
[1 of 2]
10. Vehicular Access Points: The project reduces the number of vehicular access points to the
property and improves the pedestrian experience. Provide plans, agreements or other
methods to demonstrate reduction.
The project does not eliminate any vehicular access points. [0 of 2]
11. Street Orientation: The project enhances the North 7th Ave. entryway corridor by having
buildings oriented toward the street and designed to provide interest and activity.
“The proposed project does not front directly onto North 7th Avenue. However, the associated
improvements will improve pedestrian access along Aspen Street, improve the vehicular access
points to properties on Aspen Street, and provide an infill project on a highly visible block on
North 7th Avenue. Existing and future businesses along North 7th will benefit from the residents
and commercial spaces created.” (Applicant)
[1 of 3]
12. Pedestrian Experience: The project enhances the pedestrian experience with elements such
as façade transparency, building articulation, street furniture and/or landscaping. Submit
plans and details that address this criterion.
The project provides enhanced façade transparency with a storefront design fronting Aspen St.
and N. 8th Ave. The project includes street trees and tree grates as well as meeting sidewalk
requirements. The project does improve the pedestrian experience by adding sidewalks and
street trees adjacent to UHaul and the Cat’s Paw. No landscaping plan was submitted with this
application. [2 of 3]
13. Quality of the Development Exceeds Minimum Requirements. The quality of development
and overall aesthetics (architectural, site design, landscaping, etc.) are beyond that which is
minimally required by the UDC. Submit documentation to demonstrate compliance with this
criterion.
Page 5 of 8
Based on preliminary renderings, the project as proposed appears to exceed the minimal
requirements of the UDC for architecture, site design, and landscaping. [2 of 2]
Goal Number 5: Support Compatible Urban Density Mixed Land Uses
14. Increases Housing Units: The project increases housing units within the District. Submit
plans demonstrating an increase in the number of housing units.
The project includes 97 workforce housing units with a mix of studio, 1, 2, and 3 bedroom units.
[4 of 4]
15. Mix of Uses Including Residential: The project has a mix of uses, including residential.
Submit plans detailing the proposed mix of uses within the project.
Building 2 includes 3,500 SF of commercial space on the ground floor along with 45 units of
housing on the upper floors. Building 1 is an entirely residential building.
[3 of 4]
16. Shared Parking: The project shares parking among compatible uses. Provide details
demonstrating compliance with the UDC and as well as total number of parking spaces
reduced because of a shared arrangement.
The application does not demonstrate how the project shares parking between compatible uses
on its own site or with adjacent properties . Future more detailed plans for parking could show a
shared parking arrangement to receive points for this category. [0 of 2]
Total Points (29/44)
Criteria for Approval of Urban Renewal Project, 7-15-4217 MCA
1) a workable and feasible plan exists for making available adequate housing for the
persons who may be displaced by the project;
The project does not displace residents.
2) the urban renewal plan conforms to the comprehensive plan or parts thereof for the
municipality as a whole;
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The Midtown Urban Renewal Plan adopted in 2015 made findings that mixed-use
projects that included commercial and residential uses were in conformance with
the comprehensive plan.
3) the urban renewal plan will afford maximum opportunity, consistent with the sound
needs of the municipality as a whole, for the rehabilitation or redevelopment of the
urban renewal area by private enterprise; and
The project includes a request for tax increment financing assistance that makes the
proposed redevelopment project feasible to be undertaken by private enterprise.
4) a sound and adequate financial program exists for the financing of said project.
The Midtown Urban Renewal District currently has adequate revenue to support the
issuance of tax increment bonds to finance the tax increment finance assistance for
this project.
Staff Recommendation
The City Commission created the Midtown Urban Renewal District in 2006 with the
vision of a walkable pedestrian centric area with compact urban density. The Commission
adopted 2017 Midtown Action Plan reinforced this vision and named five elements for targeted
redevelopment that would help implement the urban renewal plan. These targeted private
investment elements included infill, increased building density, encouraging multimodal
transportation, retail that serves surrounding residents, and providing housing to support
commerce in the area. These goals are represented in the criteria for the Midtown TIF
Assistance Program, whose goal is to promote projects that meet these criteria, drive growth in
taxable value, and create demand for market driven redevelopment. At this phase of Midtown’s
redevelopment lifecycle, few projects containing the target elements are financially feasible, but
for TIF incentives. Incentives may create the potential for higher returns to mitigate higher risk,
which may attract investment that would not occur without these incentives.
Bozeman struggles, given current market dynamics, to facilitate the construction of
workforce housing at attainable prices. Recently approved urban renewal projects with a major
housing component, such as the Ruh Building, Aspen Crossing, and West Peach Condos, require
significant assistance to attain feasibility as market rate projects. 9TEN is a major workforce
housing project with units offered at means tested prices. The project offers 21 units at prices
that could be affordable for residents making 80% of the area median income (AMI). The
Applicant plans to offer the remaining 76 units at prices affordable at 110% AMI. The proposed
affordability is a function of assuming two incentives, New Market Tax Credits (NMTC) and TIF
Assistance. Both incentives are essential to meeting the project’s affordability targets. While the
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Midtown Urban Renewal Board does not make decisions about NMTC allocations, the pricing
model requires the allocation of $10,000,000 in NMTC. A change in this allocation amount may
necessitate changing the pricing of the project.
The Midtown TIF Assistance Program allows the payment of eligible costs of
development to incentivize development that meets the goals of the Midtown Urban Renewal
Plan. The applicant is applying for several eligible cost areas totaling $1,447,000. Staff finds that
the proposed costs for infrastructure and impact fees are eligible for TIF assistance. Staff scored
the application based on the program criteria. Based on our review and the application
materials presented, the project received 29 of 44 available points. The application scored
points toward four of five goals of the Midtown Urban Renewal Plan. The project eliminates
blight and advances the District goal of creating urban density land uses and providing increased
housing stock within the District to drive further development.
The proposed incentive request is consistent with the goals of the Midtown Urban
Renewal Plan. In order to ensure that the level of assistance makes the project feasible, but
does not provide unreasonable returns to the developer, staff hired Economic and Planning
Systems, Inc. (EPS) to provide a third party assessment of the development pro forma. Staff
contracts for this component of the review process to assess the reasonableness of each
applicant’s incentive request. The Applicant is requesting $1,447,000 to mitigate the costs of
public infrastructure and impact fees for the project. EPS estimates that with the use of NMTC,
the funding gap for the project would be $1,495,000. Given that the total projected cost of
infrastructure and impact fees for the project is $1,596,885, Staff recommends that the Board
consider an incentive award of up to $1,495,000 to cover the full project gap.
The return for the Applicant is calculated differently than past projects presented to
Board. The EPS analysis of the proposed return is provided in full:
Developer return for projects funded with NMTCs is generated through a set developer
fee as opposed to a general return on investment, as is the case with conventional real
estate development projects. This fee compensates the developer for the time and
resources spent to develop the project. In other words, the fee provides the incentive
for the developer to develop affordable housing or other types of qualified businesses.
The fee is included in the development budget and is generally released by the tax credit
equity after the construction is completed.
For projects utilizing NMTCs, development fees typically range from 10 to 15 percent,
depending on the project type, risk profile, and location. The developer is proposing a
7.0 percent fee for this project, which is well below that range.
In other words, the Developer Fee of $2.08 million represents a 7% return on the project, which
is well below a normal return for a project of this type and below the returns expected for other
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recently approved Midtown projects. The rate of return to the developer is low, given market
conditions.
Leland Consulting Group (LCG) completed a financial analysis of the project to help staff
evaluate the application for creation of new taxable value. Their report analyzed return on
investment (ROI), estimated payback period for the public assistance and proposed target
metrics for the ratio of private investment to public assistance. LGC bases their analysis on
awarding the applicant’s full assistance request. LCG recommends a ratio of private investment
to public assistance of 10:1 or greater for multi-family projects; the ratio for this project is
greater than 17.32:1.
LCG also created a tax generation model for the Midtown URD. According to their
model, the project would produce net new annual taxes of $242,163, which would allow TIF
assistance to be paid back in 8.32 years (assumes a 5% interest rate on the advanced amount)
for new increment-based payback if assistance is provided at the staff recommended amount.
Recommended Motion
Consider the Motion:
“Having reviewed the findings of the Staff Report, Public Comment, and Board Deliberation and
Discussion, I move to direct staff to negotiate a development agreement with the Applicant for
Midtown TIF Assistance not to exceed $1,495,000 and to draft a Resolution to designating the
9TEN Mixed-Use Project as an Urban Renewal Project.”
BOZEMAN MIDTOWN TIF ASSISTANCE REQUEST
MAY 2019
9TEN mixed use
802-910 North 8th Avenue
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Project Summary
The 9TEN mixed use project site is located west of the North 7th Avenue U -Haul and southwest
of Gallatin Valley Furniture. The project site is vacant and is generally bound by North 8th
Avenue, Aspen and Juniper Streets. This infill project targets a best use scenario for the site by
delivering higher density, smart-growth development with workforce housing near the core of
Midtown. This project will provide much needed housing in a central location and will foster
desirable, walkable urban living, especially as Midtown continues to evolve. Furthermore, this
project will provide tenant amenities not common to most rental apartments in the area. The
project is seeking TIF assistance and consists of two buildings to be constructed in a single
phase. A concept review application for this project was submitted to the City of Bozeman Office
of Community Development on May 7th.
At full build out the site will include two buildings totaling 120,760 sf and off-street parking.
Building 1 is located on the north end of the site and consists entirely of residential units.
Building 2 is located on the south end and consists of a mix of residential units on the upper
floors and ground floor commercial space. The project will also provide open space and tenant
amenities on site. The commercial spaces will front onto North 8th Avenue and Aspen Street,
providing an active and engaging streetscape.
The property abuts existing rights-of-way along Aspen Street, Eighth Avenue and a 20’ wide
alley. However, there are currently no completed streets and limited utility infrastructure at this
location. This project proposes to collaborate with the City of Bozeman to complete the
infrastructure adjacent to this property . Anticipated improvements include new infrastructure at
North 8th Avenue between Aspen and Juniper Streets, and completion/update of infrastructure
along Aspen and Juniper Streets from North 7th to North 8th. . This includes all necessary curb
and gutter, sidewalks, water line extensions and stormwater infrastructure needed at these
locations. Additionally, it is anticipated that the existing sewer line that runs in the alley to the
east will need to be re-routed to some extent. It is anticipated the project would incur the
burden of these costs initially, with eventual reimbursement via TIF Assistance Funds.
With necessary approvals, construction of streets and infrastructure will begin late Winter 2020
with building construction beginning in Summer 2020, and a target completion date in late
Summer 2021.
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PROPERTY INFORMATION
• • • • • •
APPLICANT INFORMATION
• • • • • •
COMPANY PROFILE
• • • • • •
PROJECT INFO & DETAIL
• • • • • •
CRITERIA FOR TIF ASSISTANCE
• • • • • •
PROJECT NARRATIVE
• • • • • •
MAPS, EXHIBITS, PLANS
PART 1
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Property Address: 802-910 North 8th Avenue
Legal Description: Lots 13-18 & south 35 feet of Lot 12, Block 12
of Durston’s 2nd Subdivision
Property Owner 816 N 8th, LLC
& Developer: Geoff Anderson
203.376.0746
geoffreympanderson@gmail.com
Project Intrinsik Architecture, Inc
Representative: Attn: Scott Freimuth
406.582.8988
PROPERTY & APPLICANT INFO
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Geoff Anderson
04-25-2019
SAME
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Business Location:
The project site is currently a vacant, undeveloped lot at 802-910 North 8th Avenue
Year Business Established:
2018 (816 N 8th LLC)
Type of Business
816 N 8th LLC is a development company
Outline Business Plan: (Please note these are the best estimates and projections at
this time).
COMPANY PROFILE
GROSS SALES
Gross Condominium Sales
(min. 20% units sold to individuals 80% AMI)
$24,827,813
Gross Commercial Shell Space Sales $700,000
TOTAL Gross Sale Revenue $25,527,813
TAX REVENUE
Annual Tax Generation $216,986
TIF FUNDING
Eligible TIF Funding Requested $1,596,885
PAYBACK PERIOD
Estimated TIF Payback timeline 7.4 Years
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
SOURCES & USES OF FUNDS
The 9TEN project will use and allocate funds and resources as outlined below.
USE of FUNDS
LAND (fair market value) $ 1,147,600
SOFT COSTS (Planning, Arch, Engineering, Entitlements) 796,422
CONSTRCUTION COSTS $19,910,550
HARD COST CONTINGENCY $1,991,055
IMPACT FESS $ 702,900
PERMIT FEES $ 30,000
MISC (Title, Recording, Insurance) $100,000
FINANCE COSTS (Origination, Lender Legal, Appraisal) $ 225,384
LOAN INTEREST $1,425,973
NMTC (New Market Tax Credits) COSTS $2,000,000
DEVELOPER FEE $2,832,988
TOTAL $31,162,872
SOURCE of FUNDS
GROSS NMTC Equity $6,630,000
SOURCE LENDER PROVIDING NMTC $13,370,000
DIRECT LOAN $11,162,872
TOTAL $31,162,872
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Project Information:
9TEN is a mixed-use development consisting of two buildings: one an exclusively
residential building with 52 units (Bldg 1) and a second mixed-use with commercial
& 45 multi-household residential units on the upper levels (Bldg 2).
Property Manager: North Coast Companies
General Contractor: TBD
Project Intrinsik Architecture, Inc
Manager: Attn: Scott Freimuth
406.582.8988
sfreimuth@intrinsikarchitecture.com
Property Status
The property is currently vacant, undeveloped land.
Type of TIF Assistance Sought
Assistance with Public Infrastructure Costs, Impact Fees
Value of TIF Assistance Sought
$1,447,000
PROJECT INFO & DETAILS
Project Name: 9TEN mixed use
The subject site (1.62 acres) is vacant land on the SW portion of the block between
N Seventh & N Eighth Avenues and Juniper & Aspen Streets. The site is adjacent to
the current U-Haul store and Gallatin Valley Furniture. The site is currently vacant
and lacks adjacent infrastructure. This project seeks to complete the block with
streets and infrastructure in addition to new development.
Site:
Estimated Occupancy:
Summer 2021
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
$31,162,872
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
CRITERIA FOR TIF ASSISTANCE
OVERALL DISTRICT RELEVANCE
1. This project touches on the major goals and objectives identified in
the Midtown Urban Renewal Plan: Specifically, 9TEN will promote
economic development; improve opportunities for multimodal
transportation; promote unified, human scale urban design and
support compatible urban density mixed land uses.
PROMOTE ECONOMIC DEVELOPMENT
2. Tax Generation: The two buildings (120,760 SF) and site
improvements, at full build out, will significantly increase the tax
base for the site. Further, the addition of this development will add
commercial space and increase the property values for adjacent
sites, thus increasing the overall tax generation for the area.
3. Elimination of Blight: Currently the site is vacant, undeveloped land
and the adjacent rights-of-way (ROW) are incomplete. Adjacent lots
and ROW (U-Haul, Cat’s Paw) contain infrastructure that is not up to
current City standards (lack sidewalks, curb and gutter, standard
access points, etc.). The development of this site will complete the
City block generally encompassed by Juniper & Aspen Streets and 7th
& 8th Avenues. Standard sidewalks and boulevard tree plantings will
be installed as required. Drive access points to the adjacent
businesses are anticipated to be improved and brought into
compliance, creating more complete and pedestrian friendly
streetscapes.
4. Employment Generation: The project development itself will create
jobs in the form of design and construction opportunities for local
businesses. Upon final build out, the commercial space, totaling
5/5
4/4
4/4
3/3
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
CRITERIA FOR TIF ASSISTANCE
3,500 sf, will generate office or retail based jobs. Additionally, property
management and maintenance positions will be required for the post-
occupancy operations and upkeep.
IMPROVE MULTI-MODAL TRANSPORTATION
5. Facilitate Public Health & Mobility: Given its location near the Midtown
core, proximity to transit and downtown, this site offer multiple options for
walkability and cyclists alike. The improvements the project will bring to
the block will provide ADA standard accessibility and extend the
streetscape along the east side of 7th avenue and allow visitors and
residents of the site to easily access the North 7th corridor.
6. Reduces Resource Demand: The Blue Line bus stop is only a few blocks
away (less than .15 miles) and allows riders to access the transfer station
downtown in under 10 minutes and then connect to the Orange and Red
lines headed for other destinations in the city. Expanded future bus service
is contemplated in the pending Downtown Bozeman Improvement Plan
that would connect several central hubs and parking facilities. With these
planned densities, ride sharing opportunities are probable.
7. Promotes Active Transportation: It’s close proximity to downtown and area
amenities make it a walkable and bikeable destination. This project site
development will includes ample bicycle parking.
IMPROVE, MAINTAIN and SUPPORT INNOVATION IN INFRASTRUCTURE
8. Infrastructure Improvements: The project proposes to improve sidewalks,
completing the block and installing boulevard trees where required.
1/1
1/1
2/2
1/2
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
CRITERIA FOR TIF ASSISTANCE
PROMOTE UNIFIED HUMAN SCALE URBAN DESIGN
9. Street Frontage: Building 2 will adhere to Storefront Block standards
along 8th and Aspen, promoting pedestrian activity with 12’ wide
sidewalks, weather protection, and expansive storefront glazing. The
overall site configuration highlights the pedestrian oriented street
façade and prioritizes pedestrian access.
10. Reduced Vehicular Access: There are only two main vehicular access
points via the alley at the rear of the site and a central drive to be
created between the two buildings. This moves vehicular access to the
rear of the buildings and away from the Pedestrian circulation on Aspen
Street and Eighth Avenue.
11. Enhances 7th Ave Entry Corridor: The proposed project does not front
directly onto North 7th Avenue. However, the associated improvements
will improve pedestrian access along Aspen Street, improve the
vehicular access points to properties on Aspen Street and provide an
infill project on a highly visible block on North 7th Avenue. Existing and
future businesses along North 7th will benefit from the residents and
commercial spaces created.
12. Enhances Pedestrian Experience: This project will adhere to Storefront
and landscape Block standards along 8th and Aspen, promoting
pedestrian activity with 12’ wide sidewalks, weather protection, and
expansive storefront glazing, and street trees. Furthermore, landscaped
and urban plazas are placed directly adjacent to the sidewalks.
13. Quality of Development: The design intent is to meet or exceed the
Bozeman UDC requirements.
2/2
2/2
2/3
3/3
2/2
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
SUPPORT COMPATIBLE URBAN DESNITY MIXED LAND USES
14. Increases Housing Units: This project proposes 52 units in Building One
and 45 units Building two, for a total of 97 dwelling units of workforce
housing. This will include a mix of Studio, 1, 2 & 3 bedroom units.
15. Mixed Use: Building two includes 3,500 sf of commercial on the ground
floor along with 45 multi-household dwelling units on the subsequent
three floors. The project as a hole places multiple households in the
heart of the Midtown district, walkable to multiple commercial and
retail destinations, and encouraging future development.
16. Shared Parking: The project currently does not have a shared parking
component. It will be providing, at a minimum, the required parking B-
2M zoning requirements; as opposed to providing no or limited parking
as currently allowed in the Midtown District. The applicant may explore
a shared parking agreement with adjacent properties in the future.
4/4
3/4
1/2
TOTAL POINTS: 40/44
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PROJECT NARRATIVE
Intro
This project consists of a 1.62 acre site zoned B-2M located along North 8th Avenue
between Aspen and Juniper Streets. The 816 North 8th Avenue project consists of two
4-story buildings and related site improvements. Building 1 is exclusively residential
and Building 2 provides ground floor commercial and parking, and multi-household
residential. Building 1 totals 58,880 gross sf and includes 52 dwelling units and 2,350 sf
of tenant amenity space. Building 2 totals 61,880 gross sf and includes 45 dwelling
units, 3,500 sf of ground floor commercial, and ground level indoor parking. This
application seeks TIF assistance for Impact fees for both buildings, as well as costs to
build out non-existent street and utility infrastructure adjacent to the property. A
concept review application for this project was submitted to the City of Bozeman
Office of Community Development on May 7, 2019.
Building Design
Upon full build out, the site will include off-street parking, a residential building, and a
building with a mix of residential units and ground floor commercial space, as well as
open space and tenant amenities. The commercial space(s) will front onto North 8th
Avenue, providing an active and engaging storefront for pedestrians. The commercial
space will be built as shell space with the flexibility to accommodate a single large or
several smaller commercial tenants. The upper floors will house the dwelling units,
which at this time are anticipated to be a mix of Studio, 1, 2 & 3 bedroom units.
Preliminarily, this project will include 45 units on the upper 3 levels of Building 2 and
52 units in Building 1. Open space for tenants will be provided by a mix of private
balconies and in-building amenity space. Building 1 will include the fourth floor roof-
top amenity space for tenants. Additionally, Building 1 will house ground level lobbies
with workstations and lounge space, and additional tenant amenity areas. In addition
to the recreational & amenity areas, indoor vehicle parking, bike parking, and storage
for residents will be located on the ground level of Building 2.
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PROJECT NARRATIVE
Anticipated Infrastructure improvements
The public right-of-way abuts the property on all sides, but the streets are not
complete and the utility infrastructure at these locations is minimal. This project
proposes to collaborate with the City of Bozeman to complete the infrastructure
adjacent to this property. Anticipated improvements include paving, curbs, gutter and
public sidewalks of North 8th Avenue between Aspen and Juniper Streets. Additional
improvements along Aspen and Juniper Streets from North 7th to North 8th are
anticipated. This includes the water, sewer, and stormwater infrastructure needed at
these locations. Additionally, it is anticipated that the existing sewer line that runs in
the alley to the east will need to be re-routed to some extent. It is anticipated the
project will incur the burden of these costs with some sort of payback program with
the city and through the TIF assistance program.
Access and Parking
Both Building 1 and 2 will front on North 8th Avenue, where the primary residential
entrance and commercial storefront will be located. A central drive access in between
the two buildings. Surface parking will flank the entire length of the east side of the
property, accessible via the Alley, as well as along the central drive. The Alley will be
accessed by the Aspen street to the south as well as a west entrance to the north of
the property. Additionally, indoor garage parking will be provided on the ground level
of the Building 2.
Schedule
With necessary approvals, construction of streets and infrastructure will begin late
Winter 2020 with building construction beginning in Summer 2020, and a target
completion date in late Summer 2021.
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
MAPS, EXHIBITS, PLANS
9TEN mixed use
Bozeman Midtown TIF Assistance Request
SITE SURVEY
9TEN mixed use
Bozeman Midtown TIF Assistance Request
SITE DIAGRAM & VICINITY
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Aerial Perspective looking East
Aerial Perspective Looking West
PERSPECTIVE IMAGES
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PERSPECTIVE IMAGES
Perspective looking Northeast
Perspective Looking Northwest
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PERSPECTIVE IMAGES
Perspective looking Southwest
Perspective Looking Northwest
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
SITE PLAN CONCEPT
N
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
FLOOR PLANS
BUILDING 1 LEVELS 2,3 FLOOR PLAN
BUILDING 1 LEVEL 1 FLOOR PLAN
N
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
FLOOR PLANS
BUILDING 1 LEVEL 4 FLOOR PLAN
N
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
FLOOR PLANS
BUILDING 1 LEVEL 1 FLOOR PLAN
BUILDING 2 LEVELS 2-4 FLOOR PLAN
N
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PART 2
PROJECT TIMELINE
• • • • • •
PUBLIC BENEFITS
• • • • • •
PROJECT FINANCIAL INFORMATION
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
TIMELINE
SPRING
2019
SUMMER
2019
FALL
2019
WINTER
2019-20
SPRING
2020
SUMMER
2020
FALL
2020
WINTER
2020-21
SPRING
2021
SUMMER
2021
FALL
2021
Concept &
Design
Site Prep & Street Imp.
Building Construction
Occupancy
The anticipated project timeline is as follows:
Concept Rev.
Site Plan
Infrastructure and Bldg. Permits
Design Development
& Construction Document Prep.
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
PUBLIC BENEFIT
Re-occupancy of Vacant Land
This lot has historically been vacant, so this isn’t re-occupancy in the true sense.
However, the addition of this project will complete the block making the area more
vibrant, desirable and walkable. Project infrastructure will contribute to “completing”
Aspen and Juniper Streets. Additionally, Aspen Street is a designated “Storefront”
block frontage, and the streetscape will be reflective of that with wider sidewalks and
an activated streetscape.
Elimination of Blight
Currently the parking lots, sidewalks and curbs in and around the site are not up to
city standards and are unsafe. As part of this project and site development,
infrastructure will contribute to complete and improve conditions on Aspen & Juniper
Streets. Rather than unsightly, vanishing streets to nowhere, the block will be
completed and built to City Engineering Standards. This means pedestrian friendly
routes, sidewalks and boulevard tree plantings. Clearly defined ground level spaces
will surround the new buildings providing office and retails spaces along with a
mixture of multi-household workforce living units.
Creation of New Office/Retail Spaces
Building 2 includes 3,500 sf of ground level commercial space. The use(s) is TBD, but it
will be well suited for office or retail space with a highly visible location in the
Midtown corridor.
Urban Living Options
This project proposes a variety of dwelling types including Studio, 1, 2 & 3-bedroom
units. The design of the building and layout of dwelling units will maximize natural
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
light coupled with surrounding views of the mountains encompassing the valley. This
site is located in the heart of Midtown and residents will enjoy many options to
access local eateries, music venues, services, bus lines, schools and Downtown.
Health and Mobility
Site development will modernize this block and area of the Midtown Corridor. It is
close to the Blue Line and easily accessible for pedestrians, cyclists, bus riders and
drivers alike. The site will include accessible facilities and a green space for passive
recreation and enjoyment. Its proximity to other Midtown Amenities and the urban
sidewalk network make it an easy destination to access. Site improvements will also
create a clean, safe and inviting location within the district.
Increased Tax Revenue
This project development will translate into new property tax revenues that
contribute to future Midtown projects. A breakdown of the anticipated tax
projections are as follows:
Projected Taxes: $ 216,986
Payback to TIF (7.4 years): $1,596,885
New Jobs and Local Sales
The project development itself will create jobs in the form of design and construction
opportunities for local businesses. Upon final build out, the commercial space,
totaling 3,500 sf, will generate office or retail based jobs. Additionally, property
management and maintenance positions will be required for the post-occupancy
operations and upkeep.
PUBLIC BENEFIT
Residential Mixed-Use Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
9TEN mixed use
Bozeman Midtown TIF Assistance Request
Concept Review: 816 North 8th
Residential Urban Infill
9TEN mixed use
Bozeman Midtown TIF Assistance Request
TIF ELIGIBLE EXPENSES
Description Amount
CITY of BOZEMAN: Impact Fees $702,900
Public R.O.W. Infrastructure Upgrades $893,985
TOTAL $1,596,885
183115-MEMO-TIF Review-9TEN-09-11-2019
M EMORANDUM
To: David Fine, City of Bozeman
From: Brian Duffany and Tim Morzel, Economic & Planning
Systems
Subject: Bozeman URA TIF Request Review: 9TEN
Date: September 11, 2019
This memorandum provides a summary of the analysis Economic &
Planning Systems (EPS) has completed on the request for tax increment
financing (TIF) assistance for the 9TEN mixed-use project. EPS has been
contracted by the City of Bozeman to complete an evaluation of
developer requests for TIF and specifically evaluate key project
assumptions, such as construction costs and sales revenues, as well as
overall project feasibility. The purpose of this analysis is to ensure that
the assumptions presented by a developer align with current market
conditions and industry standards.
This memorandum provides an overview of the evaluation criteria, an
overview of the key inputs, and a summary of the key findings.
Approach
As part of the TIF application process, each developer is required to
submit a formal proposal that includes a project overview and key
project assumptions. These materials include a summary of the
development program, construction costs, eligible costs, sales revenues,
and any ongoing revenue and expenditure assumptions. Using this
information as a starting point, EPS has structured a static and time
series pro forma that summarizes this information as well as a number
of other key project metrics such as project return. This analysis aligns
with the approach used to evaluate past projects and provides a
baseline for evaluating this project’s request for TIF. However, unlike
past projects, the developer is proposing to partially fund the
construction of this project through the use of New Market Tax Credits
(NMTC). As a result, this analysis provides a summary of the evaluation
of the project with and without the use of NMTCs.
Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 2
Project Assumptions
This section provides a summary of the development assumptions submitted by the development
team and a comparison to current market conditions or industry standards.
Development Program
Location: Generally bound by North 8th Avenue, Aspen and Juniper Streets
Parcel Area: 1.62 acres (70,567 square feet)
Stories: 4-stories
Total Building Area: 120,760 square feet
Commercial Program: 3,500 square feet of general commercial space
For-Sale Residential Condos: The proposal contemplates 97 for-sale condos for this site. Of
the total units, 21 units (20 percent of total) will be priced at 80 percent of area median income
(AMI) and 76 units (80 percent of total) are anticipated to be priced at 110 percent AMI.
Sale Price: $204,714 for 110% AMI units; $282,979 for 80% AMI units
Project Costs (Summarized in Table 1)
Land Costs
Total: $1,147,600
Cost per Land SF: $16.26 per square foot
Percent of Total Costs: 3.8 percent of total
Comments: Land costs typically range from 10 to 20 percent of total project costs depending on
the development type and local market. At 3.8 percent of total, this project is well below that
that range. In addition, land costs at $16.26 per square foot are also well below typical land
costs for comparable projects in this area.
Hard Costs
Total: $21,901,605
Cost per Square Foot (GBA): $181 per square foot
Comments: Average construction costs in the larger market area have ranged from $125 to
$175 per square foot. At $180 per square foot, this project falls just above that range. Due to a
variety of local and national factors, construction costs continue to escalate and may result in
higher construction costs at actual time of construction.
Soft Costs without NMTC
Total: $3,299,156
% of Hard Costs: 11.1 percent
Comments: Generally, soft costs for comparable projects typically range from 20 to 30 percent
of hard construction costs (vertical construction costs). At 11.1 percent of hard costs this project
falls below that range.
Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 3
Table 1 Project Construction Cost Summary
Description Total per unit per sf % of Total
97 units 120,760 sf
LAND COSTS
Land 1,147,600$ 11,831$ 9.50$ 3.8%
Land Costs 1,147,600$ 11,831$ 9.50$ 3.8%
TOTAL LAND COST 1,147,600$ 11,831$ 9.50$ 3.8%
Vertical Development Costs
Hard Costs 21,901,605$ 225,790$ 181.36$ 73.4%
Construction Cost 19,910,550$ 205,263$ 164.88$ 66.7%
Hard Cost Contingency 1,991,055$ 20,526$ 16.49$ 6.7%
TOTAL VERTICAL CONSTRUCTION COSTS 21,901,605$ 225,790$ 181.36$ 73.4%
Soft Costs
General Soft 1,629,322$ 16,797$ 13.49$ 5.5%
Architecture/Survey/Engineering/Review 796,422$ 8,211$ 6.60$ 2.7%
Impact Fees 702,900$ 7,246$ 5.82$ 2.4%
Permit Fee 30,000$ 309$ 0.25$ 0.1%
Misc (title, recording, Insurance)100,000$ 1,031$ 0.83$ 0.3%
Financing Fees and Costs 5,179,053$ 53,392$ 42.89$ 17.3%
Finance Costs 243,861$ 2,514$ 2.02$ 0.8%
Loan Interest 1,425,973$ 14,701$ 11.81$ 4.8%
NMTC Costs 1,428,092$ 14,723$ 11.83$ 4.8%
Developer Fee 2,081,127$ 21,455$ 17.23$ 7.0%
TOTAL SOFT COSTS 6,808,375$ 70,189$ 56.38$ 22.8%
TOTAL PROJECT COST 29,857,580$ 307,810$ 247.25$ 100.0%
Source: Development Team; Economic & Planning Systems
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Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 4
NMTC Costs (Summarized in Table 2)
Total: $1,428,092
Comments: Due to the legal and financial complexities associated with NMTC, there are
significant additional soft costs for a project that is funded through the use of NMTC. These
include costs for project audit, transaction closing costs, CDE asset management fees, and a
variety of others.
Developer Fee with NMTCs
% of Total: 7.0 percent
Total: $2.08 million
Comments: Developer return for projects funded with NMTCs is generated through a set
developer fee as opposed to a general return on investment, as is the case with conventional real
estate development projects. This fee compensates the developer for the time and resources
spent to develop the project. In other words, the fee provides the incentive for the developer to
develop affordable housing or other types of qualified businesses. The fee is included in the
development budget and is generally released by the tax credit equity after the construction is
completed.
For projects utilizing NMTCs, development fees typically range from 10 to 15 percent, depending
on the project type, risk profile, and location. The developer is proposing a 7.0 percent fee for
this project, which is well below that range.
Table 2 NMTC Soft Cost Detail
Description Quantity Cost Total
NMTC Costs (Costs adjusted for multi-QALICB Model)
CDE Fees 4.00%of total $10,000,000 total 400,000$
CDE Asset Management Fees 3.50%of loan $6,685,000 loan 233,975$
Recapture Guaranty and Compliance Rec'd over 7 years -$
Closing 1.50%of total $10,000,000 total 150,000$
Yrs 1 through and including EOY5 0.75%of total $10,000,000 total 75,000$
Yrs 6/7 and stub admin 0.75%of total $10,000,000 total 75,000$
Exit Services, Success Fee and Wind-up 0.40%of total $10,000,000 total 40,000$
CDE Annual Audit Fees $66,867 total 1.0 unit 66,867$
Loan Servicing Fees 6,500.0 per year 7.5 years reserved 48,750$
Investment Fund Fees 5,500.0 per year 7.0 years reserved 38,500$
Leverage Lender Audit/Tax Returns 5,000.0 per year 8.0 years reserved 40,000$
Miscellaneous 35,000.0 total 1.0 unit 35,000$
Transaction Closing Costs 225,000.0 estimate 1.0 unit 225,000$
TOTAL PROJECT COST 1,428,092$
Source: Development Team; Economic & Planning Systems
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Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 5
For-Sale Revenues (Summarized in Table 3)
Gross Residential Revenue: $25,805,375
Comments: Units priced at 80 percent AMI are currently estimated at an overall average of
$204,714 per unit, which reflects the allowable sales priced documented in the City’s 2018
Affordable Housing Ordinance Administrative Manual. The average value for units priced at
110 percent AMI is estimated at $282,979 per unit. Net residential sales prices are reduced by
5.5 percent in order to account for fees and closing costs.
Commercial Revenue: $700,000
Comments: The 3,500 square feet of commercial space is estimated to sell at $200 per square
feet, which aligns with local commercial market conditions. Net commercial sales prices are also
reduced by 5.5 percent in order to account for fees and closing costs.
Table 3
Program and Revenue Summary
Description Units Square Feet % of Total Per Unit/SF Total
COMMERCIAL
General Commercial N/A 3,500 3%$200 $700,000
Subtotal N/A 3,500 3%$200 $700,000
RESIDENTIAL
Condos - 80% AMI
Studio 4 N/A 4%$172,000 $688,000
1-Bed 6 N/A 6%$198,000 $1,188,000
2-Bed 6 N/A 6%$198,000 $1,188,000
3-Bed 5 N/A 5%$247,000 $1,235,000
Total 21 N/A 22%$204,714 $4,299,000
Condos - 110% AMI
Studio 13 N/A 13%$236,500 $3,074,500
1-Bed 23 N/A 24%$272,250 $6,261,750
2-Bed 21 N/A 22%$272,250 $5,717,250
3-Bed 19 N/A 20%$339,625 $6,452,875
Total 76 N/A 78%$282,979 $21,506,375
Residential Subtotal 97 117,260 97%$266,035 $25,805,375
GROSS REVENUES 97 120,760 100%N/A $26,505,375
NET REVENUE [1]$25,047,579
[1] Fees and commissions are estimated at 5.5 percent of total
Source: Development Team; Economic & Planning Systems
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Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 6
Project Return
The performance of the project with and without additional public investment is evaluated by
using two approaches. The first evaluates the performance of the project without the use of
NMTCs. This approach is used to establish a baseline performance level. The second approach
evaluates the projects needed for additional public funding with NMTCs.
Project Feasibility without NMTCs
The baseline approach (without NMTCs) relies on two methodologies for determining project
performance. The first is an evaluation of the project’s Net Present Value (NPV) and Internal
Rate of Return (IRR). The second approach is based on a static (single point in time) evaluation
of the project’s total value and compares that to total construction costs.
Internal Rate of Return and Net Present Value
The IRR is the percentage rate earned on each dollar invested for each period it is invested. The
IRR is typically used by investors to compare alternative investments based on their potential
rate of return. Mathematically, the IRR is an iterative calculation that determines the discount
rate that results in a net present value (NPV) equal to zero. The NPV is the estimated value of all
future cash flows of an investment discounted to the present. The NPV of a given series of cash
flows is heavily dependent on an investor’s discount rate, which reflects an individual investor’s
opportunity cost of capital. In other words, an investor’s discount rate reflects their expected
rate of return for investments with a comparable level of risk.
For the purpose of this analysis, the discount rate is used as a hurdle rate in determining an
appropriate rate of return for a given project. When determining appropriate discount it is
important to consider the following rates when building up to a project discount rate.
• Inflation rate and the riskless rate of return (U.S. 10-Year Treasury Note rate of return)
• General real estate risk (timing and market cycle risk)
• Product type risk (i.e., multifamily, retail, office, etc.)
• Market risk (geographic specific)
Without public investment the project achieves an internal rate of return of -3.31 percent. The
factors outlined above and the risks associated with this type of project, at this location, and in
this phase of the real estate cycle warrant a discount rate of approximately 8.00 percent. While
this estimate is somewhat subjective, it reflects a variety of current market conditions and risk
factors. In order to achieve an internal rate of return of 8.00 percent the project requires
approximately $4.0 million in public investment, as shown in Table 4.
Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 7
Table 4 Time Series Pro Forma (without NMTC)
Description Factor Escalation Total Year 0 Year 1 Year 2
DEVELOPMENT COSTS
Construction Completion 100%0%0%
Construction Cost -$26,348,361 -$26,348,361 $0 $0
Land $1,147,600 2.0%-$1,147,600 -$1,147,600 $0 $0
Horizontal Development Costs $0 2.0%$0 $0 $0 $0
Vertical Development Costs $21,901,605 2.0%-$21,901,605 -$21,901,605 $0 $0
Soft Costs $3,299,156 2.0%-$3,299,156 -$3,299,156 $0 $0
Total Commercial Costs -$26,348,361 -$26,348,361 $0 $0
REVENUE
Condo/Commercial Sales Schedule 0%50%50%
Condo Sales $25,047,579 $0 $12,523,790 $12,523,790
Gross Condo Revenue $25,805,375 0.0%$25,805,375 $0 $12,902,688 $12,902,688
Gross Commercial Revenue $700,000 0.0%$700,000 $0 $350,000 $350,000
Taxes Condo Sales 0.0%N/A $0 $0 $0 $0
Sales Commissions 5.5%N/A -$1,457,796 $0 -$728,898 -$728,898
PROJECT CASH FLOWS
Net Project Cash Flows -$1,300,781 -$26,348,361 $12,523,790 $12,523,790
Construction Costs -$26,348,361 -$26,348,361 $0 $0
Condo Sales $25,047,579 $0 $12,523,790 $12,523,790
Net Present Value 8.00%-$4,015,128 -$26,348,361 $11,596,102 $10,737,131
Internal Rate of Return -3.31%
Source: Economic & Planning Systems
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Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 8
Static Project Feasibility
Evaluating the project from a static (i.e., single point in time) perspective provides an alternative
approach to evaluate a given project’s feasibility. This method relies on a comparison of the total
project costs to the project’s net revenues. For this project, total value is calculated by netting
the value (after sales commissions) of the revenues generated by condo sales and the
commercial sales against total project costs.
For this project a return on cost hurdle rate of 10.0 percent is used. Netting total condo sale
revenues and commercial sale revenues of $25.05 million against estimated construction costs of
$26.35 million (excludes soft costs relating to NMTCs) results in a return on cost of -4.94
percent. In order to achieve a 10.0 percent return on cost, the project requires roughly $3.9
million in public investment, as shown in Table 5.
Table 5 Static Financial Performance (without NMTC)
Project Feasibility with NMTCs
As previously noted, the developer has determined that this project cannot move forward but-for
the use of NMTCs. As a result, this analysis primarily relies on an evaluation of the performance
of the project with NMTCs.
NMTC Overview
The New Markets Tax Credit (NMTC) Program was enacted by Congress as part of the
Community Renewal Tax Relief Act of 2000. This program permits individual and corporate
taxpayers to receive a credit against federal income taxes for making Qualified Equity
Investments (QEIs) in qualified community development entities (CDEs). While the NMTC
program is typically used to fund the construction of qualified commercial projects, it can also be
used for the construction of for-sale housing. In order to qualify, the developer must provide at
least 20 percent of the total units at or below 80 percent of AMI.
The specific NMTC allocation is determined by the local CDE. Based on information provided by
the developer, this analysis assumes that the minimum project allocation would be $10 million.
This allocation is subject to change pending the CDE’s evaluation of this project’s request for
NMTC. It is also important to note that any increase in project allocation is likely to be associated
with an increase in the number of affordable units included in the development program.
Description Amount
Total Construction Costs $26,348,361
Net Revenues $25,047,579
Return on Cost -4.94%
Return on Cost Hurdle 10.0%
Revenue Target $28,983,197
Gap -$3,935,617
Source: Development Team; Economic & Planning Systems
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Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 9
The $10 million project commitment is divided between an equity investment and the source
lender providing NMTC leverage in the form of a loan. NMTC equity must be invested in a
qualifying use for seven years. During that time the equity investor is able to benefit from a 5
percent annual tax credit in years 1-3 and a 6 percent tax credit in years 4-7, totaling 39 percent
of the allocation amount over the seven year period. Total NMTC equity is estimated at $3.315
million based on a purchase price of $0.85, as shown in Table 6.
NMTC leverage or debt fills the remainder of the $10 million allocation and equates to $6.685
million. This is structured as a low interest loan that is paid down as revenues become available.
The remainder of the project construction costs of $19.8 million ($29.8 million – 10.0 million =
$19.8 million) are funded through interest only conventional debt that is paid off as the project
generates revenue.
Table 6 NMTC Equity Estimate
Project Sources of Funds
Incorporating NMTCs into the overall funding strategy for the project changes the financial
structure from a typical return-based model to a development fee-based model that is more
common in affordable housing development, such as for projects that incorporate Low Income
Housing Tax Credits (LIHTC).
Due to the fact that with NMTCs this project operates as a fee based development project, there
is no need for the project to achieve specific return hurdles. The only challenge is ensuring that
the total use of funds aligns with the available source of funds. As previously noted, total
construction costs are estimated at $29.8 million. The project is anticipated to generate $25.8
million in condo sales and $700,000 in commercial sales revenue. Accounting for fees and
commissions, net sales revenue is estimated at $25.05 million. In addition to these revenues,
Description Amount
USE OF FUNDS $29,857,580
SOURCE OF FUNDS
NMTC Funds
Equity
Total NMTC Allocation $10,000,000
Credit Rate 39%
NMTC Equity Amount $3,900,000
Credit Purchase Price $0.85
Credit Value $3,315,000
NMTC Leverage (Debt)$6,685,000
Conventional Debt $19,857,580
TOTAL $29,857,580
Source: Economic & Planning Systems
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Memorandum September 11, 2019
Bozeman TIF Review: 9TEN Page 10
the project is anticipated to receive $3.315 million in NMTC equity as an additional source of
funds. In total, net sales revenues and NMTC equity are estimated at $28.36 million, resulting in
a total project gap of $1.49 million, as shown in Table 7. This gap is less than half of what was
estimated using a return-based approach.
Table 7 Static Financial Performance (without NMTC)
Project Request
The Developer is requesting $1.447 million in TIF revenues in order to fund project-specific
eligible costs that include City impact fees and eligible right-of-way improvements around the
site. Based on the methodology that incorporates NMTCs as a source of funds, EPS has validated
the developer’s estimated project funding gap of $1.49 million. It is also important to note that
the request for TIF represents roughly 5.0 percent of total project costs. For many projects
requesting TIF the percent of total project cost typically ranges from 10 to 20 percent. This
request is well below that range.
Description Amount
Use of Funds - Development Costs
Land Costs $1,147,600
Construction Cost $19,910,550
Hard Cost Contingency $1,991,055
Architecture/Survey/Engineering/Review $796,422
Impact Fees $702,900
Permit Fee $30,000
Misc (title, recording, Insurance)$100,000
Finance Costs $243,861
Loan Interest $1,425,973
NMTC Costs $1,428,092
Developer Fee $2,081,127
Subtotal - Uses $29,857,580
Source of Funds
Gross Condo Sale Revenue $25,805,375
Gross Commercial Sale Revenue $700,000
Less: Fees and Commissions -$1,457,796
NMTC Equity $3,315,000
Subtotal - Sources $28,362,579
PROJECT FUNDING GAP $1,495,000
Source: Economic & Planning Systems
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9Ten
Tax Increment Analysis
September 27, 2019
Prepared by:
Andy Parks, CPA
Leland Consulting Group/GEL Oregon, Inc.
on behalf of the City of Bozeman Economic Development Department
Summary
Applicant plans to build a mixed use; 97 unit condominum residential building located by North 8th, Aspen and Juniper streets.
Applicant plans to invest approximately $29.858 million and is requesting $1.447 million from the Agency.
* Return on Investment (ROI)
* Estimated payback period, and
The following schedule summarizes analysis findings:
Estimated value of completed project 26,505,375$
Estimated capitalized interest - Included in value
Less: 2018 market value per assessor 537,256
Net estimated increase in value 25,968,119
Allocation of increase to residential 25,805,375
Allocation of increase to commercial 162,744
Estimated net increase in taxable value 351,448
TIF tax rate - estimated - FY 2023 689.04
Estimated incremental taxes (TIF) - annual 242,163
TIF investment 1,447,000
ROI - estimated 16.7%
Estimated payback period (years)8.32 assumes 5.0% interest rate on advanced amount
Private investment to public investment 17.32 Metric:
Greater than 8 to 1 - commercial
Greater than 5 to 1 - family wage jobs
Assumptions
Cost and timing information provided in application - except construction financing which is estimated
Estimated start date Mar-20
Estimated completion Sep-21
Increase in property taxes applicable fiscal year 2023
Construction Interest - estimated NA
Analysis has been performed to determine:
* Private investment to public investment
https://itax.gallatin.mt.gov/detail.aspx?taxid=RGG1786
Greater than 10 to 1 - desired for multi-
family
The property valuation used in the analysis is based on the estimated sales price provided by the applicant. The estimated sales price
is less than the estimated cost to complete the project. Different valuation methods include but are not limited to; income
approach, sales comparisons, construction cost and Capital Asset Pricing Model.
Estimated value is less than the estimated cost to complete
the project