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HomeMy WebLinkAbout12-16-21 Agenda - Northeast Urban Renewal Board (NURB)A.Call meeting to order at 6:30pm Via Webex: https://cityofbozeman.webex.com/cityofbozeman/onstage/g.php? MTID=e64e349693e0cbbfcfb1e5b24364c85f6 Click the Register link, enter the required information, and click submit. Click Join Now to enter the meeting Via Phone: Call-in toll number (US/Canada): 1-650-479-3208 Access code: 2553 324 0150 B.Disclosures C.Changes to the Agenda D.Approval of Minutes D.1 Minutes from November 2, 2021 and August 19, 2021 (Fine) E.Public Comment Please state your name and address in an audible tone of voice for the record. This is the time for individuals to comment on matters falling within the purview of the Committee. There will also be an opportunity in conjunction with each action item for comments pertaining to that item. Please limit your comments to three minutes. F.Action Items F.1 Recommendation to the City Commission TIF Assistance for the Wildlands Mixed Use Project(Fine) G.FYI/Discussion H.Adjournment THE NORTHEAST URBAN RENEWAL BOARD OF BOZEMAN, MONTANA NURB AGENDA Thursday, December 16, 2021 For more information please contact David Fine, dfine@bozeman.net This board generally meets the third Thursday of the month from 6:30 PM to 8:30 PM Committee meetings are open to all members of the public. If you have a disability and require assistance, please contact our ADA coordinator, Mike Gray at 582-3232 (TDD 582-2301). 1 Memorandum REPORT TO:Northeast Urban Renewal Board FROM:David Fine, Economic Development Program Manager SUBJECT:Minutes from November 2, 2021 and August 19, 2021 MEETING DATE:December 16, 2021 AGENDA ITEM TYPE:Citizen Advisory Board/Commission RECOMMENDATION:Approve minutes from November 2, 2021 and August 19, 2021 STRATEGIC PLAN:1.1 Outreach: Continue to strengthen and innovate in how we deliver information to the community and our partners. BACKGROUND:Draft minutes from November 2, 2021 and August 19, 2021 UNRESOLVED ISSUES:n/a ALTERNATIVES:n/a FISCAL EFFECTS:n/a Attachments: NURB 110221 min.doc NURB 081921 min.doc Report compiled on: December 13, 2021 2 NURB Meeting – November 2, 2021 1 Northeast Urban Renewal Board (NURB) Regular Meeting Tuesday, November 2, 2021 The Northeast Urban Renewal Board met in regular meeting at 6:30 p.m. on Tuesday, November 2, 2021, via Webex. Present:Absent: Voting Members: Ethan Barlow Charlie Kees Corwin Dormire Natalie Van Dusen Jeanne Wesley-Wiese (6:50 to 7:30 p.m.) Non-Voting Members: EJ Daws Chris Nixon Robert Pavlic Commissioner Liaison: I-Ho Pomeroy Staff: David Fine, Urban Renewal Program Manager Robin Sullivan, Recording Secretary Guests: Call to Order – Chair Corwin Dormire called the meeting to order at 6:35 p.m. Changes to the Agenda. No changes were made to the agenda. Public Comment – No public comment was received. Discussion/Action Items – Northeast Urban Renewal District Tax Increment Financing (TIF) Assistance Program Criteria for TIF Assistance. David Fine stated the City Commission has requested some consistency in how people apply for tax increment financing monies. He recognized that every district has different goals in its plan and the boards have different interests. Also, the urban renewal law has a pretty specific list of what the urban renewal monies can be used for. David Fine stated the draft program that was included in the packets is patterned after the Midtown program and allows for expenditure of funds for public infrastructure and demolition costs. He indicated that, under state law, impact fees, cash-in-lieu payment of water rights and parkland, and workforce housing are included in the definition of infrastructure. Those components are similar across all of the tax increment financing districts, but the programs differ 3 NURB Meeting – November 2, 2021 2 in how they address the goals of the plan and the criteria for evaluation of applications. David Fine identified some needed revisions to the narrative portion of the program, characterizing them as typographical or grammatical errors. He indicated that references to “Board” will be changed to “City” or “city staff” in light of the impending changes to board structures. He noted that the criteria for evaluating applications are directly related to the goals in the district plan and asked if the criteria listed and the weighting for each is appropriate. Responding to Corwin Dormire, David Fine stated this program and criteria for TIF assistance are not in response to the Cottonwood and Ida project; rather, it is important to have a standardized process for considering requests for funds from the government. He noted that this program also includes a standard application for use of TIF funds. Responding to Natalie Van Dusen, David Fine stated a tax increment financing assistance program with criteria and a standardized application form will be created for all but the Downtown district, which has a different plan and will sunset in twelve years. He indicated that, while the basic plans and application forms are essentially the same, the criteria for evaluating applications will be based on the goals and emphasis of each district. He stated that, once each board has approved the document for its district, it will go to the Commission for approval by resolution. David Fine began review of the criteria, noting that the first three address the insufficient infrastructure in the area. He stated the blight report and district plan identify this issue, which includes 115-year-old clay sewer pipes and streets in need of upgrades. Ethan Barlow stated that the proposed points are 2, 4 and 6 for each criterion and noted that those figures identify the degree of emphasis and importance for each of the items. He suggested that Criterion No. 10 seems to be the most measurable and quantifiable of all of the criteria. He then asked how the City wishes to measure value when it is neither economic or immediately monetary. David Fine acknowledged that weighting is the important part of the assistance program; and he has no problem with adjusting the weighting at the Board’s request. He stated that staff will engage a third party consultant to evaluate applications against the criteria as set by this Board and adopted by the Commission. Ethan Barlow suggested that increasing the points to 6 for return on investment may make sense. He also noted that 6 points for infrastructure improvement may not be appropriate, particularly since those improvements are often a requirement for approval of a project. He observed that, as more infrastructure in the area is improved, future projects may not any requirement or opportunity for infrastructure improvement. He stated that community housing and infrastructure are the most important components of new development but they are not elective. David Fine stated there are opportunities for going above and beyond City requirements, such as enhanced streetscape. Ethan Barlow noted that adding “above and beyond” in the language for evaluating an application introduces subjectivity, but acknowledged it may be worth considering. He stated that, if the City requires certain infrastructure improvements, it seems odd for the project to get 4 NURB Meeting – November 2, 2021 3 credit for doing that work. David Fine noted that, while the Cottonwood and Ida project would have been required to install a significant amount of infrastructure improvements, a small infill project may be required to install no or little improvements. Responding to Corwin Dormire, David Fine stated the evaluation is based on a pass/fail determination, and the point system is an exercise in determining whether it meets the criteria or not. He noted the application should receive at least half of the total points available to be considered for approval. EJ Daws noted that community housing is the other criterion that has 6 points. He noted that is such a central topic in the community right now and voiced concern that it seems like a political statement instead of a monetary statement. He questioned what role tax increment financing monies have in addressing that issue and how to ensure the units remain affordable. Corwin Dormire noted that infrastructure and community housing are the two issues that stymy projects. He suggested that if those are the two areas this Board wishes to support, then a greater weight should be considered for those items. David Fine stated that long-term affordability can be addressed through a development agreement. He noted that agreement could include deed restricted units for sale allowing a small annual percentage increase in value. He then stated that a proforma will be required for a project seeking tax increment financing assistance. He indicated that infrastructure and community housing, or workforce housing, are two of the areas where tax increment monies can be spent. Responding to board member comments, David Fine stated that if the mill levy for community housing passes, it will generate $1 million annually; and that does not provide much affordable housing. Responding to Jeanne Wesley-Wiese, David Fine stated that by increasing the weight for certain criteria, the Board is increasing the emphasis on the policy. He reminded the Board that this is a recommendation to the Commission, which then approves the assistance program. Jeanne Wesley-Wiese stated she struggles with the political aspect, but she also recognizes the need for affordable housing. Ethan Barlow noted that community housing has become a large problem. He also recognized that the costs of installing needed infrastructure improvements can break a project. He suggested that thoughtful landscaping or intermodal transportation seem to have more value when evaluating a project. Responding to EJ Daws, David Fine stated that staff will typically do a staff report and use a threshold of 50 percent of the points available, although it is possible to approve a project that does not meet that threshold if it is determined desirable. He noted that this plan is trying to put sideboards on evaluating proposals and determining how tax increment financing monies are spent. He stated the criteria also nudge the development community toward the type of project desired. 5 NURB Meeting – November 2, 2021 4 Jeanne Wesley-Wiese noted that the criteria add weight to the principles for the district and give a clearer path toward that type of development. She then voiced her support for the plan as submitted. Corwin Dormire noted that growth in the district should reflect its eclectic nature. He identified open space and sustainability as important aspects to consider. Natalie Van Dusen stated she agrees that infrastructure and housing are critical, and the points assigned reflect that importance. Ethan Barlow concurred, noting he is comfortable with the plan as submitted. Jeanne Wesley-Wiese stated this is a good way to get things in the district that are needed for the whole community. David Fine thanked the Board for working through the plan, recognizing that it is subjective but has revealed the importance of community values. It was moved by Ethan Barlow, seconded by Corwin Dormire, that the Board approve the plan and criteria for tax increment financing assistance for the Northeast Urban Renewal District and forward the recommendation to the City Commission. The motion carried on a 4-0 vote. Financial Report on the status of the Northeast Urban Renewal District Fund. David Fine briefly highlighted the financial report, noting that there have not been many expenditures this year. He does anticipate invoices from KLJ and Ken VanDeWalle for the pedestrian bridge in the upcoming month. Set agenda for November 18, 2021 meeting or cancel meeting. David Fine asked if the Board wishes to keep its November 18 meeting. Corwin Dormire asked if there are any agenda items to be addressed; David Fine responded that he anticipates a TIF assistance application and suggested that if it is not received, the meeting could be cancelled. David Fine asked that the Board consider keeping its December and January meetings on the calendar, with one of the upcoming agenda items being a review of the past list of projects and identifying projects to be considered for upcoming budgets and work plans. He cautioned that this Board may no longer exist by the February meeting date. The board members agreed with the proposed meeting schedule for the remainder of the year, acknowledging that the November 18 meeting may be cancelled if the anticipated application is not received. FYI/Discussion.There was no discussion under this agenda item. 6 NURB Meeting – November 2, 2021 5 Adjournment – 7:40 p.m. There being no further business to come before the Board at this time, it was moved by Corwin Dormire, seconded by Ethan Barlow, that the meeting be adjourned. The motion carried on a 3-0 vote. Corwin Dormire, Chair Northeast Urban Renewal Board City of Bozeman 7 NURB Meeting – August 19, 2021 1 Northeast Urban Renewal Board (NURB) Regular Meeting Thursday, August 19, 2021 The Northeast Urban Renewal Board met in regular meeting at 6:30 p.m. on Thursday, August 19, 2021, via Webex. Present:Absent: Voting Members: Ethan Barlow Corwin Dormire Charlie Kees Natalie Van Dusen (arrived at 6:38 pm) Jeanne Wesley-Wiese Non-Voting Members: EJ Daws Chris Nixon Robert Pavlic Commissioner Liaison: I-Ho Pomeroy Staff: David Fine, Urban Renewal Program Manager Robin Sullivan, Recording Secretary Guests: Call to Order – Vice Chair Ethan Barlow called the meeting to order at 6:35 p.m. Changes to the Agenda. No changes were made to the agenda. Public Comment – No public was in attendance at this meeting. Approval of Minutes – May 20, 2021. It was moved by Jeanne Wesley-Wiese, seconded by Charlie Kees, that the minutes of the regular meeting of May 20, 2021 be approved as submitted. The motion carried on a 3-0 vote. Discussion/Action Items – Aspen Street Pedestrian Bridge next steps. David Fine stated the pedestrian bridge has been on this Board’s work plan for several years. The bridge is about 90 percent engineered and, therefore, is a shovel ready project. The Cottonwood and Ida project has been terminated at this time and, as a result, construction of that section of Front Street between East Tamarack Street and North Ida Avenue is also terminated. The result is to move the Aspen 8 NURB Meeting – August 19, 2021 2 Street pedestrian bridge to this fiscal year. The outstanding issues are the exact location of the bridge and finalizing the engineering. He characterized the bridge as structurally sound and crossing the creek in a straight line; however, he suggested this Board may wish to take additional steps to make it a statement piece and an architectural asset to the community. As a result, he has contacted Rob Pertzborn to identify artistic features that could be added to make the bridge an asset. He acknowledged that this step would increase the cost of the bridge. Jeanne Wesley-Wiese stated she is happy that the pedestrian bridge can be funded this fiscal year; and she supports making it a statement. She noted that this has always been the art side of town and she like having a creative side to the project. Ethan Barlow acknowledged the bridge has had quite a history and has been a possibility for a long time. He finds the practical solution underwhelming and supports a more aesthetic approach. David Fine stated the current engineered design is structurally sound with concrete abutments in the proper orientation to the creek. He noted that a pre-engineered bridge can be purchased and placed on those abutments; and that is the current design. He noted that this type of bridge does not preclude cool architectural elements. Natalie Van Dusen stated a bridge with architectural elements would reflect the character and positive nature of the neighborhood. Charlie Kees noted the bridge has been in the queue for years, and he is in favor of it. He lives on East Aspen Street and finds the bridge would open connectivity to the neighborhood across the creek and could make his son’s travel to Hawthorne School easier. He cares about the uniqueness of the northeast neighborhood and wishes to protect it. He then asked about the timeline for the bridge. David Fine stated he does not believe adding architectural elements will add to the timeline for the project. He indicated the final engineering and design should be completed later this fall, with bidding in the first quarter of 2022 and construction next summer. Responding to additional questions from Charlie Kees, David Fine confirmed the sidewalk alignment was recently staked. He noted the sidewalk is located within the street right-of-way, but there is a lot of stuff in the public right-of-way right now. The staking is so the public understands what might be displaced or need to be moved as a part of the project; and that is what holds the most potential to frustrate people. He plans a softer approach for gaining support for moving encroachments, but acknowledged that some difficult decisions may have to be made. It was moved by Jeanne Wesley-Wiese, seconded by Charlie Kees, that the Aspen Street pedestrian bridge be prioritized as a project in the Fiscal Year 2021-2022 budget and work plan. The motion carried on a 4-0 vote. Update on the financial status of the NURB fund and staff updates on status of projects in the FY2020-2021 Work Plan and Budget.Robin Sullivan briefly highlighted the financial report. She then drew attention to the balance in the fund, which is significantly higher than the projected balance forward in the FY 2021-2022 budget. 9 NURB Meeting – August 19, 2021 3 David Fine stated the parking structure that had been attached to the Cottonwood and Ida project is not necessarily dead since parking is needed in the area. He noted there are no specific plans at this time, but it is an issue that will be explored further. David Fine reported that the principal investor in the Cottonwood and Ida project has pulled the plug on the project. He noted the project was to include dedicated affordable units and a mix of attainable and luxury units. The higher costs of construction resulted in the inability to provide attainable units and was still risky with low margins. The development group is socially conscious about its projects and did not feel it could proceed with the project as it was changing. At this time, they are considering options for the site. David Fine noted that less has been spent on boulevard and open space maintenance than in prior years, mainly because the contractor for the Aspen Street mowing stopped doing so, and he did not know it until he was contacted about the lack of maintenance. Since it is difficult to get a new mowing crew late in the season, he has asked the Parks Department to mow the area until the end of the season. David Fine reported the quiet zone feasibility study has been completed and reveals that all three crossings need to be improved. No funding is available to do the North Rouse Avenue crossing, but some developers could potentially be interested in fronting some of the costs of doing so. The Griffin Drive upgrades are currently underway, and the improvements needed for the quiet zone designation, including a raised median and 10-foot-wide asphalt paths on both side of the roadway with bike/pedestrian gates, are being installed as a part of the project. He noted that this district could fund the improvements for the North Wallace Avenue crossing, but he would prefer to get developers to fund the project if possible. Responding to Ethan Barlow, David Fine stated the preferred quiet zone improvements include raised medians, lights, bells and gates. He stated that gates for bike/pedestrian facilities are required for those facilities that are separated from the street. He noted that the improvements can be installed at any time; however, a quiet zone cannot be established until all of the improvements are done. He cautioned that the Montana Department of Transportation controls the North Rouse Avenue crossing and, as a result, will make the decision on whether quiet zone improvements will be made for that crossing. Responding to Ethan Barlow, David Fine stated the Gallatin Valley Land Trust found they did not need the $15,000 they had requested for the Front Street trail because the bids came in under estimate. Review of the urban renewal plan and state statutes pertaining to urban renewal districts. David Fine noted a couple board members were recently appointed. He drew attention to how the district monies can be expended, noting that list is set forth in Section 7-15- 4288 of the Montana Code Annotated. He stated that public infrastructure is the area where most of the tax increment financing monies have been expended to date. He noted that those expenditures are limited by the urban renewal plan; and the plan needs to be updated if a proposed project is not included in the original plan. David Fine briefly highlighted some of the costs that have been covered by the MidTown Urban Renewal District, including demolition costs and transitional housing costs for those who were displaced by removal of a trailer court. 10 NURB Meeting – August 19, 2021 4 Responding to Natalie Van Dusen, David Fine stated the urban renewal plan for this district was attached to the memo in the packet information. . Fiscal Year 2021-2022 Work Plan and Budget – Recommendations regarding future projects in lieu of Front Street Construction (Tamarack to Ida). David Fine stated the motion in the previous discussion on this issue addresses this agenda item. He noted that the amount budgeted for this project may change because it does not include the architectural elements that have been added. David Fine noted the amount budgeted for this project was $170,000 and the amount budgeted for the Front Street project was $190,000. He has notified the Commission that this change in project priorities could happen, and staff can proceed with the direction that this Board has given them. Set agenda for September 16, 2021 meeting or cancel meeting. David Fine stated he would like to have a meeting next month. He noted the property owners of the Wildlands Project have also purchased the Bronken property. Those owners would like to talk to the Board about their project and possibly make a request related to one of those projects. He also wants to provide an update on Commission action regarding board consolidation. FYI/Discussion.David Fine gave a brief update on board consolidation. He noted the City currently has forty advisory boards, each of which has a Commissioner Liaison and staff support. The City Manager has been looking at ways to consolidate and reduce the number of boards. The first phase of the board consolidations has just occurred, shrinking the number of boards to five; and the urban renewal boards are not a part of that phase. He stated those boards will be included in the second phase; and the City Manager’s current proposal is that the Commission take back the decision making authority for those districts. He noted this change will require public action including revising the plans for both the Midtown and Northeast Urban Renewal Districts and the adoption of an ordinance. Responding to Ethan Barlow, David Fine stated the goal is to have the first phase board consolidations completed in November with the new boards being seated in December. The change in urban renewal boards is anticipated in the first quarter of 2022. Adjournment – 7:27 p.m. There being no further business to come before the Board at this time, Ethan Barlow adjourned the meeting. Ethan Barlow, Vice Chair Northeast Urban Renewal Board City of Bozeman 11 Memorandum REPORT TO:Northeast Urban Renewal Board FROM:David Fine, Economic Development Program Manager SUBJECT:Recommendation to the City Commission TIF Assistance for the Wildlands Mixed Use Project MEETING DATE:December 16, 2021 AGENDA ITEM TYPE:Citizen Advisory Board/Commission RECOMMENDATION:I move to recommend that the Bozeman City Commission designate the Wildlands Project as an Urban Renewal Project in the Northeast Urban Renewal District and enter into a development agreement to reimburse up to $583,445 in eligible cost from incremental taxes generated by the project. STRATEGIC PLAN:2.2 Infrastructure Investments: Strategically invest in infrastructure as a mechanism to encourage economic development. BACKGROUND:Please see the linked Staff Report and associated documentation regarding the Wildlands mixed use project. UNRESOLVED ISSUES:None at this time. ALTERNATIVES:At the discretion of the Board. FISCAL EFFECTS:The Applicant is requesting reimbursement of $583,445 in eligible costs from tax increment that is expected to be created by the project. Attachments: Wildlands Mixed Use Development Staff Report.docx OREP TIF APPLICATION X WILDLANDS PEACH LLC pdf standard.pdf 213051-Wildlands TIF Memo 12-07-2021.pdf Report compiled on: December 13, 2021 12 1 Wildlands Mixed Use Development | Staff Report To:Northeast Urban Renewal Board From:David Fine, Economic Development Program Manager for Housing and Development Brit Fontenot, Economic Development Director Meeting Date: December 16, 2021 TIF Assistance Program Overview The Bozeman City Commission created the Midtown Tax Increment Finance (TIF) Assistance Program in 2017 to support redevelopment activity and advance the goals of the 2015 Midtown Urban Renewal Plan. The City Commission provided direction to Staff to create complementary programs for other Urban Renewal Districts in the City. The Northeast Urban Renewal Board voted unanimously to recommend just such a program for the Northeast Urban Renewal District (NURD) at their November 2, 2021 meeting. The Applicant structured their application based on the Board’s recommended program in the absence of a City Commission approved application process. Staff is reviewing this application based on the Board’s recommended criteria and framework in advance of final approval of the program by the City Commission. In Staff’s opinion, this approach is superior to the ad-hoc approach by which requests in this District have been submitted to the Board and to the City Commission for approval. The Northeast TIF Assistance Program supports projects that contribute to the following seven goals of the Northeast Urban Renewal Plan: 1) Ensure the health, safety, and security of the District, 2) Balance Commerce and Livability within the Mixed-Use Framework, 3) Honor the Unique Character and Vitality of the District, 4) Public Open Space is Essential to a Healthy and Appealing Urban Environment, 5) The Costs of Projects and Programs shall be Weighed Against their Benefits to the District, 6) The City shall not Limit its Vision for the District Improvements to Monies Available Solely through the TIF Funding, 7) Projects shall Consider Impacts on Adjacent Neighborhoods. These goals, as required by statute, focus on mitigating blighting conditions in the urban renewal area. Each of these seven goals is further refined with particular criteria for a total of twelve 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, whether the project would be feasible without a public incentive, and the project’s provision of amenities and services that contribute to walkability, quality of life in the district and surrounding neighborhoods, and provision of community housing. Staff Recommendation Staff Recommends providing TIF Assistance to the Project. The Northeast TIF Assistance Program exists to promote projects that meet its criteria, drive growth in taxable value for the long-term benefit of the wider community, and create demand for market driven redevelopment. At this phase in the Northeast URD’s redevelopment lifecycle, few projects containing 13 2 the targeted criterion elements are financially feasible, “but for” TIF incentives. Incentives may create the potential for higher returns to mitigate higher risk, which will likely attract investment that would not occur without these incentives. The project does an excellent job of balancing commerce and livability within the mixed-use framework of the District. It creates well-scaled ground floor commercial spaces for small businesses that can serve the neighborhood and surrounding residents, including providing spaces for the expansion of two neighborhood anchors, Wild Crumb Bakery and Fink’s Delicatessen. Ground floor commercial space in a vertically mixed-use building is difficult to develop under normal market conditions, and recent skyrocketing labor and construction costs are making it difficult to develop commercial space at rents the market will bear. Rents for the commercial space are reasonable or below market and the provision of this kind of space is essential to activating walkable neighborhoods. The project remediates conditions that contribute to blight on the property. The Wildlands development will demolish a “dilapidated abandoned building” and three deteriorating decommissioned fuel tanks. Removing these hazards from the property creates a clear community benefit in the form of addressing blight remediation, a core goal of urban renewal activity. The project advances Bozeman’s Community Housing Action Plan (CHAP) through a legally binding commitment to develop three units of workforce housing in another Outlaw Real Estate Partners controlled site within the NURD. The CHAP classifies units at 120% AMI as “Entry Level Subsidized Housing”. The Wildlands project itself includes 12 units of housing, which with the commitment of 3 units in the adjacent project means that 20% of the proposed new units would be priced at an attainable level. The Board and the City Commission had not created any criteria related to affordability for the Northeast Urban Renewal District at the time this project was conceived and designed. While it is true that the housing units provided in the Wildlands project are priced at very high levels, draft affordability criteria were only provided to the Applicant recently to provide a structure to their application for assistance. As a result, it would not be reasonable to assume that the project would be designed to meet affordability targets the Applicant could not have been aware of as they designed their project. As such, the commitment of attainable units in a future NURD project represents a good-faith effort by the Applicant to serve evolving community priorities. The proposed incentive request of $583,445 is consistent with the goals of the Northeast Urban Renewal Plan. With a project cost of $20.8M this represents a ratio of private to public investment of 35.65:1. This produces an outstanding ROI for the District. 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. EPS concluded their analysis and found that the Applicant did demonstrate a significant financing gap for the project. EPS also flagged three public policy issues for the Board, and ultimately, the City Commission to consider in making a funding determination for this project. EPS’ “Review of Wildlands Project Financial Performance” is attached for review. The Wildlands project creates significant new taxable value. A primary goal of districts which employ a tax increment financing provision is to facilitate new investment and the creation of new taxable value for the long-term benefit of the broader community. The Applicant projects that the project will create $209,754 in net new taxable value each year. For context, we estimated the total value of tax increment 14 3 collections for the NE URD in FY22 at $270,000. A project of this significance would have a major impact on growth of the tax base and on the ability of the District to implement future improvements. The Wildlands project received points on criteria representing 6 out of 7 of the goals of the Northeast Urban Renewal Plan, creates a significant return on investment that can fund future public infrastructure improvements in the District, and includes a commitment to create three entry level subsidized ownership housing units in a future NURD development. Given the satisfaction of these public policy goals, Staff recommends approval of the full funding request. Criteria for TIF Assistance Ensure the Health Safety and Security of the District 1.Infrastructure Improvement:Infrastructure Improvement: The project will repair, replace, or improve outdated or insufficient infrastructure i.The project improves an alley adjacent to the project with curb, gutter, sidewalks and lighting. 2/6 2.Multimodal Transportation:The project incorporates infrastructure that facilitates safe, efficient, and convenient access of the district for all modes of transportation i.The project removes 3 curb cuts on Peach St. which will improve walkability and enhance safety for pedestrians, cyclists and micro mobility users by limiting mid-block vehicular access to the street.1/4 3.Public Utilities:The project will incorporate public utilities in a way so that they are not visually or physically obtrusive i.The project buries and screens public utilities. 2/2 Balance Commerce and Livability within the Mixed-Use Framework 4.Mix of Uses:The project incorporates mixed use development that promotes livability. i.The project mixes uses vertically with a vibrant mix of ground floor commercial uses including bakery, deli and fitness uses, with housing above those uses. 4/4 5.Community Housing:The project includes affordable housing units. For the purposes of this criterion, an affordable housing unit is defined as a unit that requires no more than 33 percent of a household’s income for housing payments based on a designated percentage of area median income (AMI). Eligible rental units shall be affordable at 70% AMI and eligible for sale units shall be affordable at 90% AMI. Condominium units are eligible as for sale units. Additional points may be awarded for projects that provide on-site housing for the proposed workforce. Eligible rental dwellings to be constructed in the proposed residential development shall be provided by long-term contractual obligation to an affordable housing agency, for a period of not less than 20 years, with a written plan assuring ongoing affordability pricing and eligibility monitoring, and annual re-certification. The city's affordability guidelines and subsequent revisions establish affordability and eligibility. To receive 3 points under this criterion, 10% of all units must meet the affordability criteria. To receive 6 points under this criterion, 20% of all units must meet the affordability criteria. 15 4 i.The project includes 12 units of housing on site and 3 units at an adjacent site. The three units, which will be developed as part of another project, will be sold at a price that is affordable to households making 120% of the Area Median Income (AMI), what Bozeman’s Community Housing Action Plan calls “Entry Level Subsidized Housing”. As a result, 20% of the proposed new units would be priced at an attainable level. No units are proposed for affordability at the rates suggested by this criterion. 0/6 Honor the Unique Character and Vitality of the District 6.Character:The physical design, materials, and massing of the project reflects thecommunity’s values of durability, flexibility, and simplicity, and add vitality to the neighborhood. i.Staff concurs with the Applicant’s description of how the project meets the Character criterion 2/2: The physical design, materials, and massing of the project reflects the community’s values of durability, flexibility, and simplicity, and preserves historic assets and character of the Neighborhood. An infill building has the opportunity to add more context and neighborhood language. In designing Wildlands we purposely kept the scale to three stories instead of the allowed four stories to better relate to the existing building where the iconic business of Wild Crumb is located. With a new three story addition, the design had a welcoming space carved out at the first floor adjacent to the existing restaurant and bakery to welcome pedestrians and patrons and to create a vitality to the neighborhood for continued conversation and friendships. For materiality, to create a sense of importance, relation to existing, and a plinth, brick was used on the first floor for the commercial spaces. The brick allows for a historic feel and relevance to adjacent buildings and other more prominent buildings around town and the area. As the materials continue vertical the second and third floors are a low maintenance wood product that silvers without streaks over time to allow the building to age gracefully with a soft palette that blends into the unique neighborhood that is the North East Neighborhood. The overall shape outside of the height creates a frontage to the street to create more activity on the street edge without overpowering the neighbors in scale and proximity. The building is a “z” shape surrounding the existing structure and pulls off the alley side from the other existing buildings on that corner to create separate parking and visual access. This is important for an infill project to allow for “negative” three dimensional space, it adds density, but does it in a way that doesn’t overpower all the existing properties.(p.12) 7.Sustainability:The project’s design and construction practices incorporate environmentally sustainable strategies and elements i.The project incorporates solar panels, low/no maintenance exterior materials, and a high level of insulation to maintain energy efficiency. 2/2 Public Open Space is Essential to a Healthy and Appealing Urban Environment 8.Open Space:The project designates new land for parks and open space i.The project adds street trees along the Peach St. and Wallace Ave. frontages and expands the publically accessible plaza along the Wallace St. frontage. 1/4 16 5 9.Landscaping:The project improves landscaping in existing public spaces i.The project enhances the landscaping along the Peach St. and Wallace Ave. frontages. 2/2 The Costs of Projects and Programs shall be Weighed Against their Benefits of the District 10.Return on Investment:The investment of public funds in the project results in a leverage ratio of at least 10:1 for residential projects; 8:1 for commercial/industrial projects; and/or 5:1 for living wage jobs. i.The Applicant is requesting $583,445 in TIF Assistance on a project with a total cost of $20.8M, a 35.65:1 ratio of private to public investment. This produces an outstanding ROI for the District.4/4 The City shall not Limit its Vision for the District Improvements to Monies Available Solely through the TIF Funding 11.Public-Private Partnerships:This project involves and/or will encourage public-private partnerships that will add value to the District and its investments. i.The Applicant did not provide enough information to award points for this criterion. 0/4 Projects shall Consider Impacts on Adjacent Neighborhoods 12.Complimentary to Adjacent Neighborhoods:The project is complimentary to adjacent neighborhoods, not just the Northeast Urban Renewal District.2/2 i.The project provides neighborhood scale food, fitness and retail spaces that can serve surrounding residents, including maintaining 2 iconic local businesses as tenants. The project received more than half of the available points and received points on criteria meeting 6 of 7 urban renewal plan goals. Total Points: 24/42 17 REAL ES T A T E I NV E STO R S U PD A T E WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT BOZEMAN MIDTOWN TIF ASSISTANCE REQUEST PROPERTY ADDRESS: 600 N. Wallace and 629 E. Peach St., Bozeman, MT 59715 LEGAL DESCRIPTION: NORTHERN PACIFIC ADD, S06, T02 S, R06 E, BLOCK 106, Lot 27 - 32, ACRES 0.489, PLAT C-23-A12 NORTHERN PACIFIC ADD, S06, T02 S, R06 E, BLOCK 106, Lot 24 - 26 SEPTEMBER 2021 | OUTLAW REAL ESTATE PARTNERS PAGE 1 18 P R OJ EC T SU M M AR Y This is a Conceptual Review application for advice and comments on a mixed-use development on a 0.73-acre Site in the northeast portion of the City. This development entails the following actions: 1. Demolition of a circa-1954, 1,852 square feet (sf) warehouse, underground storage tank, above-ground storage tanks and parking lot addressed as 615 E. Peach Street; 2. Lot aggregation through a subdivision exemption process to create one lot “Site”; 3. Renovation of a 4,500 sf, 2-story-plus basement commercial building by converting a. 2nd floor office suite to two 2-bedroom dwelling units; 4. Conversion of the existing basement level to storage and accessory office space for the bakery tenant in the first floor level; 5. New construction of a 3-story addition to the existing 2-story commercial building at 600 N. Wallace Ave consisting of: a. Ground floor restaurant, retail space and entrance and accessory uses and spaces for the upper-level residences; b. Fifty-six at-grade parking for commercial and residential uses of the Site; c. Three on-street parking spaces attributed to on-site dwelling units; d. Second level dwelling units and office space and a common open space plaza; e. Third level residences; and rooftop deck PAGE 2 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 19 P A R T 1 PROPERTY INFORMATION APPLICANT INFORMATION COMPANY PROFILE PROJECT INFO & DETAIL CRITERIA FOR TIF ASSISTANCE PROJECT NARRATIVE MAPS, EXHIBITS, PLANS PAGE 3 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 20 PROPERTY & APPLICANT INFO Property Address: Legal Description: Property Owner & Developer: Project Representative: 600 N. Wallace and 629 E. Peach St., Bozeman, MT 59715 NORTHERN PACIFIC ADD, S06, T02 S, R06 E, BLOCK 106, Lot 27 - 32, ACRES 0.489, PLAT C-23-A12 NORTHERN PACIFIC ADD, S06, T02 S, R06 E, BLOCK 106, Lot 24 - 26 Outlaw Real Estate Partners Eric Ladd 406-570-0639 eric@theoutlawpartners.com 45 Architecture Jeff Lusin 406-577-2345 jlusin@45arch.com PAGE 4 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 21 PAGE 5 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 22 C O M PA N Y P R OF I L E Business Location: 600 N. Wallace Avenue and 615/629 E. Peach Street. The property is legally described as Lots 27 to 32, Block 106 (600 N. Wallace Avenue) and Lots 24 to 26, Block 106 (615/629 E. Peach St.), Northern Pacific Addition, S06, T02 S, R06 E. The lot with the warehouse is listed as 615 E. Peach Street on the City’s Historic Survey report for the property and is listed as 629 on the Assessor’s datum. The Site lies within the North East Historic Mixed Use District (NEHMU) and the Neighborhood Conservation Overlay District (NCOD). Year Business Established: 2019 Type of Business: Outlaw Real Estate Partners is a new development company establishing itself. Outline Business Plan: See following pages for Development revenue, tax generation, source, and use of funds. (Please note these are the best estimates and projections at this time) WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT PAGE 6 23 PRO J E C T I N F O & DE T A I L S Project: Wildlands Mixed Use Site: 600 N. Wallace Avenue and 615/629 E. Peach Street. The property is legally described as Lots 27 to 32, Block 106 (600 N. Wallace Avenue) and Lots 24 to 26, Block 106 (615/629 E. Peach St.), Northern Pacific Addition, S06, T02 S, R06 E. The lot with the warehouse is listed as 615 E. Peach Street on the City’s Historic Survey report for the property and is listed as 629 on the Assessor’s datum. The Site lies within the North East Historic Mixed Use District (NEHMU) and the Neighborhood Conservation Overlay District (NCOD). Project Information: The Wildlands Development is a planned renovation and expansion of the existing building located on the corner of Peach Street and Wallace Ave in Bozeman, Montana. This project, located within the NEHMU and the Conservation overlay, will add new uses to the site and provide the neighborhood with a semi-public covered plaza area while enhancing, respecting, and complimenting the existing building and beloved tenants already present. Property Manager: TBD General Contractor: Langlas Project Manager: 45 Architecture Jeff Lusin 406-577-2345 jlusin@45arch.com Property Status The first floor of the existing building is currently leased to Wild Crumb and Finks Delicatessen. The Second floor is being vacated at the end of the year for the remodeling of the new residences. The other parcel has parking and an abandoned building to be demolished. Type of TIF Assistance Sought Requesting assistance for public infrastructure costs & building demolition. Value of TIF Assistance Sought: $583,445.48 Estimated Occupancy: Spring 2023 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT PAGE 7 24 C R I T E R IA F O R T I F A S S I S TA N C E Northeast District Goals: Ensure the health, safety, and security of the District Infrastructure Improvement: The project will repair, replace, or improve outdated or insufficient infrastructure. The basement level, currently underutilized, will be improved to provide a bakery prep kitchenartisan food processing space, a new fire suppression system will be installed on the main floor for the two current tenants, Wild Crumb Bakery + Finks Delicatessen. The first level of the expansion will house a health & exercise tenant near Wallace Ave and the alleyat the north edge of the site. It will also provide space for two more tenants (office and very small restaurant) on the south side of the property along Peach Street. In both cases, the expansion willseek to establish a storefront block frontage according to Section 38.510.030 of the UDC. Located on the first level will be an at-grade fully enclosed parking garage that supports tenants of the building. The 14 stalls of this garage are within a conditioned space and are designated fortenants only (both residential and business/commercial). Please refer to sheets G-010 and G-011 (included) for a more in-depth analysis of parking on the site. Adjacent to the enclosed parkingstructure at the northeastern corner of the site will be an uncovered public parking lot with 15 stalls. The purpose of this lot is to serve the customers of the ground level new and existing tenantbusinesses. The building design features a pedestrian access “breezeway” through to the Peach St frontage, allowing for a more walkable site while still shielding the open lot from view. Prior to the construction of the expansion, demolition will occur on site to remove some existing abandoned industrial tanks and a dilapidated warehouse building. This area is currently on a different lot, but as part of the project lot aggregation will be pursued to join this property with theone on which the existing Wild Crumb/Fink’s building is located. The tanks are not of historic significance. The warehouse building, originally owned by The Texas Company, has been referred toas “an intrusive element” within the NEHMU. It is deteriorating badly and has lost much of its potential historical integrity due to changes in design and materials. Our intention is to demolish this structureentirely prior to the construction of the new expansion... PAGE 8 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 25 C R I T E R IA F O R T I F A S S I S TA N C E Infrastructure Improvement: cont. The Wildlands Development will be the first development revitalization to this district since Mountains Walking. It Is an important development that brings the benefits of not only smaller commercial spaces for more business for neighbors to utilize, but also more density of housing. Beyond the increase of taxable units on site, Wildlands brings a more walkable sense of place for the neighbors and visitors to congregate and enjoy the landscape in the outdoor living room, whether by foot or by bike. By removing the curb cuts along Peach and Wallace we create a more walkable landscape for people to gather and hang out. Along those lines the additional commercial units along those streets will create a location for sharing customers amongst the other businesses in the area. There is also solar onto the roof and low maintenance materials and a high level of insulation to the building to create a building that will last the test of time. The businesses to benefit from the TIF assistance will be the surrounding businesses within the same block as with the TIF assistance the alleyway and street improvements will create a safer neighborhood and experience. Part of the property is an abandoned building with 3 different curb cuts where vehicles are constantly entering and existing. The additional commercial space on the ground floor with the improved landscaping will create a more inviting atmosphere for the surrounding single- family residences. The alley has no curb and gutter and will be improved through the distance of the property lines of Wildlands with sidewalk, curb and gutter, and increased lighting. There are required improvements to the water, sewer, and stormwater controls. 6/6 Multimodal Transportation: The project incorporates infrastructure that facilitates safe, efficient, and convenient access of the district for all modes of transportation Located on the first level will be an at-grade fully enclosed parking garage that supports tenants of the building. The 14 stalls of this garage are within a conditioned space and are designated for tenants only (both residential and business/commercial). Please refer to sheets G-010 and G-011 (included) for a more in-depth analysis of parking on the site. Adjacent to the enclosed parking structure at the northeastern corner of the site will be an uncovered public parking lot with 15 stalls. The purpose of this lot is to serve the customers of the ground level new and existing tenant businesses. PAGE 9 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 26 C R I T E R IA F O R T I F A S S I S TA N C E Multimodal Transportation: cont. The building design features a pedestrian access “breezeway” through to the Peach St frontage, allowing for a more walkable site while still shielding the open lot from view. Along with the parking, 10 bike parking spots to allow additional means of transportation. The Wildlands Development intends to create a safer and more efficient method of transportation that removes 3 curb cuts at Peach and Wallace to isolate the car transportation towards the alley that in turn allows Peach and Wallace to be more friendly for pedestrian traffic and bike traffic. 4/4 Public Utilities: The project will incorporate public utilities in a way so that they are not visually or physically obtrusive. All utilities are buried to help clean up any overhead connections to the building. This will allow for a better user experience and walking experience for the neighborhood. Ideally this building is part of a continued improvement along Peach to allow for more friendly pedestrian access and build upon the anchor building that it is. The meters of the utilities are also designed behind screens from the public view to again enhance the overall experience of the user and visitor to the building. 2/2 Northeast District Goals: Balance Commerce and Livability within the Mixed-Use Framework Mix of Uses: The project incorporates mixed use development that promotes livability Adjacent to the enclosed parking structure at the northeastern corner of the site will be an uncovered public parking lot with 15 stalls. The purpose of this lot is to serve the customers of the ground level new and existing tenant businesses. The building design features a pedestrian access “breezeway” through to the Peach St frontage, allowing for a more walkable site while still shielding the open lot from view. The second level includes four full 2-bedroom residences, the bedrooms of two 2-story 2-bedroom units, as well as one 3-bedroom unit. All these residences will feature private covered exterior decks. The third level of the new expansion will house two full 2-bedroom residences, the living/kitchen spaces of two 2-story 2-bedroom units, as well as two 3-bedroom units. All these residences will feature private covered exterior decks. PAGE 10 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 27 C R I T E R IA F O R T I F A S S I S TA N C E Public Utilities: cont. The roof of the building is mostly unoccupiable, but it will feature a 732 square foot roof deck accessible by both stairs and elevator. Prior to the construction of the expansion, demolition willoccur on site to remove some existing abandoned industrial tanks and a dilapidated warehouse building. This area is currently on a different lot, but as part of the project lot aggregation will bepursued to join this property with the one on which the existing Wild Crumb/Fink’s building is located. The tanks are not of historic significance. The warehouse building, originally owned by TheTexas Company, has been referred to as “an intrusive element” within the NEHMU. It is deteriorating badly and has lost much of its potential historical integrity due to changes in design and materials.Our intention is to demolish this structure entirely prior to the construction of the new expansion. We will be salvaging the art work on the front exterior to be incorporated into the new building’s artworkas well. The alley has no curb and gutter and will be improved through the distance of the property lines of Wildlands with sidewalk, curb and gutter, and increased lighting. There are required improvementsto the water, sewer, and stormwater controls. The Wildlands Development will be the first development revitalization to this district sinceMountains Walking. It’s an important development that brings the benefits of numerous smaller commercial spaces for more local businesses to utilize , but also more density of housing. 4/4 Community Housing: The project includes affordable housing units In order to enhance the long-term affordability of the Northeast Neighborhood, Outlaw will enter into an agreement with the City of Bozeman stipulating that the Wildlands project at 600 N. WallaceStreet will only receive the full TIF amount requested if the following requirements are met: 1) The new Wildlands residential and commercial units have provided the City of Bozeman with two years of tax revenue, effectively paying back the TIF grant in full 2) Any new development at 707 Peach Street, an Outlaw controlled site, will require a minimum of 3affordable units at 120% AMI 8/8 PAGE 11 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 28 C R I T E R IA F O R T I F A S S I S TA N C E Northeast District Goals: Honor the Unique Character and Vitality of the District Compatibility: The physical design, materials, and massing of the project reflects the community’s values of durability, flexibility, and simplicity, and preserves historic assets and character of theneighborhood An infill building has the opportunity to add more context and neighborhood language. In designing Wildlands we purposely kept the scale to three stories instead of the allowed four stories to betterrelate to the existing building where the iconic business of Wild Crumb is located. With a new three story addition, the design had a welcoming space carved out at the first floor adjacent to theexisting restaurant and bakery to welcome pedestrians and patrons and to create a vitality to the neighborhood for continued conversation and friendships. For materiality, to create a sense of importance, relation to existing, and a plinth, brick was used onthe first floor for the commercial spaces. The brick allows for a historic feel and relevance to adjacent buildings and other more prominent buildings around town and the area. As the materialscontinue vertical the second and third floors are a low maintenance wood product that silvers without streaks over time to allow the building to age gracefully with a soft palette that blends intothe unique neighborhood that is the North East Neighborhood. The overall shape outside of the height creates a frontage to the street to create more activity on the street edge without overpowering the neighbors in scale and proximity. The building is a “z”shape surrounding the existing structure and pulls off the alley side from the other existing buildings on that corner to create separate parking and visual access. This is important for an infill project toallow for “negative” three dimensional space, it adds density, but does it in a way that doesn’t overpower all the existing properties. 2/2 PAGE 12 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 29 C R I T E R IA F O R T I F A S S I S TA N C E Sustainability: The project’s design and construction practices incorporate environmentally sustainable strategies and elements Beyond the increase of taxable units on site, Wildlands brings a more walkable sense of place forthe neighbors and visitors to congregate and enjoy the landscape in the outdoor living room, whether by foot or by bike. By removing the curb cuts along Peach and Wallace we create a morewalkable landscape for people to gather and hang out. Along those lines the additional commercial units along those streets will create a location for sharing customers amongst theother businesses in the area. There are also solar panels to be installed onto the roof using low maintenance materials and a high level of insulation to create a building that will stand the test oftime. The building utilizes exterior materials that are little to no maintenance to ensure the lasting look and permanence to the structure. Selection of materials needed to reference the area and useof the building, while still relating back to the original building on the site. Part of the use of this building long term is also allowing it to evolve and adapt to an ever changing user. With the user inmind, there is power brought to the parking stalls to allow for electric vehicle hook-ups particular to the car manufacturer of the user's choice. 2/2 Northeast District Goals: Public Open Space is Essential to a Healthy and Appealing Urban Environment Open Space: The project designates new land for parks and open space The Wildlands development extends the open space along N Wallace Ave. around the corner toPeach St. This additional open space along these major frontages in this neighborhood improves the streetscape with trees and landscaping with places for people to sit, dogs to play, and kids toenjoy their Wild Crumb treats. The additional expansion of the overall space allows for a protected outdoor area at the street level and adds to the streetscape for longer seasonal use. The newlyadded fire pit and seating in this area extends the improvements on the street side to bring the park space into the boundary of the building. Removing the curb cuts and additional balcony openspace also adds additional three-dimensional open space context to this building as an improvement overall. 4/4 PAGE 13 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 30 C R I T E R IA F O R T I F A S S I S TA N C E Landscaping: The project improves landscaping in existing public spaces By removing the curb cuts along Peach and Wallace we create a more walkable landscape for people to gather and hang out. As previously mentioned in the Open Space section, by continuingthe outdoor open space off N. Wallace Ave. to Peach the landscaping adds additional opportunities for neighborly conversation. Right now, the patrons of Wild Crumb have to cue into adirt area off a parking lot and the planned project will have a hardscape and abundant landscaping for those patrons to easily cue into and enjoy. Additionally the outdoor area outsidethe exit of Finks and Wild Crumb allow the flow of patrons into a core area of the landscape of the development for improved use of streetscape environments. 2/2 Northeast District Goals: The Costs of Projects and Programs shall be Weighed Against their Benefits of the District Return on Investment: The investment of public funds in the project results in a leverage ratio of at least 10:1 for residential projects; 8:1 for commercial projects; and/or 5:1 for family wage jobs The project is expected to generate a conservative $20.1m in new residential and commercial sales value, which will yield $209,754.75 in annual new taxes assuming a 1% mill rate. Based on a TIFrequest of $583,445.48, the payback period is 2.78 years; over a 30 year period, the project has a ratio of 10 to 1 in tax generated versus TIF requested, not to mention the amount of additional spendto local businesses by new residents and commercial tenant employees and wages generated by that spend. This number also does not include the multiple proposed projects that Outlaw RealEstate Partners intend to pursue over the next 5 years in this neighborhood alone. 4/4 PAGE 14 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 31 C R I T E R IA F O R T I F A S S I S TA N C E Northeast District Goals: The City shall not Limit its Vision for the District Improvements to Monies Available Solely through the TIF Funding This project involves and/or will encourage public-private partnerships that will add value to theDistrict and its investments. The developers are investing over $30,000 in public infrastructure upgrades and $20,000 in communications infrastructure, including amenities to the Project and neighborhood such assidewalks, streetscapes, gardens, public gathering spaces, and public art. Moreover, the developers are also the owners and developers of the Bronken’s Beer Distribution site to the east of theWildlands Project and plan to invest over $50m into the site by developing a world-class mixed- use project that will add value to the district and its investments. 4/4 Northeast District Goals: Projects shall Consider Impacts on Adjacent Neighborhoods The project is complementary to adjacent neighborhoods, not just Northeast The Project is located only 5 blocks north of Main Street and the eastern gateway to downtown Bozeman. Residents and visitors will be able to walk or ride bikes within minutes of downtown toenjoy the additional commercial opportunities afforded by the Project. Moreover, the Project is already home to the Wild Crumb bakery who have a long term lease and recently signed a newlease for the basement to develop a commercial kitchen. Wild Crumb and Fink’s deli already attract a large following of people who are drawn to the famous baked goods and deli sandwiches. Thenew Project will enhance signage, outdoor dining options, and visibility of these iconic local businesses. Finally, the Project is within walking distance of the midtown renewal district and within20 minutes of Bridger Bowl Ski Area, two demand drivers that will be greatly enhanced by the Project. 2/2 Total Points 36/44 PAGE 15 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 32 T I F E L I G I B L E EX P E N SE S PAGE 16 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT Value of TIF assistance requested – requests over $50,000 require Part 2 of the application Demolition of Existing Structures: Sidewalks, curbs, gutters, and alley: CILWR: Public/Utility Infrastructure Communications Infrastructure: Fiber Impact Fees: Total TIF Requested: $ 98,000.00 $250,000.00 $ 14,194.80 $ 30,000.00 $ 20,000.00 $ 171,250.68 $583,445.48 33 PRO J E C T N ARRA TI V E The Wildlands Development is a planned renovation and expansion of the existing building located on the corner of Peach Street and Wallace Ave in Bozeman, Montana. This project, located within the NEHMU and the Conservation overlay, will add new uses to the site and provide the neighborhood with a semi- public covered plaza area while enhancing, respecting, and complimenting the existing building and beloved tenants already present. The existing structure to remain consists of 3 levels, each approximately 4,550 square feet. • The basement level, currently underutilized, will be improved to provide a bakery prep kitchen artisan food processing space. This work will be completed under a different permit/contract. Much of the basement (approx. 1,725 sq ft) will remain unchanged. • The main floor currently houses two tenants, Wild Crumb Bakery & Fink’s Delicatessen. The renovation and addition will aim to minimize impact on these two businesses, which will anchor the mixed-use development going forward. However, a new fire sprinkler system will be installed throughout both spaces. • The upper level will be renovated with the use changing from office to residential. The two new residential units will both feature 2 bedrooms. Windows on this level will modified to provide natural light as well as rescuable openings per code. The expansion structure features 3 levels and will connect to the existing building along the entire north and east elevations. This connection will occur at the ground level. It will also occur at the upper level via a bridge spanning the gap between the existing and new portions of the structure. The existing basement level will also be connected via a new egress stair that will replace the existing exterior stair. PAGE 17 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 34 PRO J E C T N ARRA TI V E • The first level of the expansion will house a health & exercise tenant near Wallace Ave and the alley at the north edge of the site. It will also provide space for two more tenants (office and very small restaurant) on the south side of the property along Peach Street. In both cases, the expansion will seek to establish a storefront block frontage according to Section 38.510.030 of the UDC. Also located at the first level will be an entrance lobby and other accessory spaces for the residential units above. • Also located on the first level will be an at-grade fully enclosed parking garage that supports tenants of the building. The 14 stalls of this garage are within a conditioned space and are designated for tenants only (both residential and business/commercial). Please refer to sheets G-010 and G-011 (included) for a more in-depth analysis of parking on the site. • Adjacent to the enclosed parking structure at the northeastern corner of the site will be an uncovered public parking lot with 15 stalls. The purpose of this lot is to serve the customers of the ground level new and existing tenant businesses. The building design features a pedestrian access “breezeway” through to the Peach St frontage, allowing for a more walkable site while still shielding the open lot from view. • The second level includes, four full 2-bedroom residences, the bedrooms of two 2- story 2-bedroom units, as well as one 3-bedroom unit. All these residences will feature private covered exterior decks. • The third level of the new expansion will house two full 2-bedroom residences, the living/kitchen spaces of two 2-story 2-bedroom units, as well as two 3-bedroom units. All these residences will feature private covered exterior decks. PAGE 18 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 35 PRO J E C T N ARRA TI V E • The roof of the building is mostly unoccupiable, but it will feature a 732 square foot roof deck accessible by both stairs and elevator. Prior to the construction of the expansion, demolition will occur on site to remove some existing abandoned industrial tanks and a dilapidated warehouse building. This area is currently on a different lot, but as part of the project lot aggregation will be pursued to join this property with the one on which the existing Wild Crumb/Fink’s building is located. The tanks are not of historic significance. The warehouse building, originally owned by The Texas Company, has been referred to as “an intrusive element” within the NEHMU. It is deteriorating badly and has lost much of its potential historical integrity due to changes in design and materials. Our intention is to demolish this structure entirely prior to the construction of the new expansion. PAGE 19 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 36 M AP S , E XH I B IT S , P L ANS PAGE 20 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 37 S I T E D I A G R A M & V I C I N I T Y PAGE 21 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 38 R E N DE R I N G S PAGE 22 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 39 R E N DE R I N G S PAGE 23 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 40 PE R S P E C T I VE I MA G E S | N ORT H & S O UT H PAGE 24 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 41 PE R S P E C T I VE I MA G E S | E A S T & W E S T PAGE 25 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 42 C O N C E P T UA L S I T E P L A N PAGE 26 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 43 F L O O R PL A N S | L E V E L 1 & 2 PAGE 27 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 44 F L O O R PL A N S | L E V E L 3 & BA SE ME N T PAGE 28 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 45 P A R T 2 PROJECT TIMELINE PUBLIC BENEFITS PROJECT FINANCIAL INFORMATION PAGE 29 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 46 PAGE 30 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 47 PU B L I C B E N E F I T Projects with a high degree of public benefits are typically more likely to receive TIF assistance. The criteria matrix of this application guides the Board and City Commission to understand and evaluate the public benefits for a project. Provide a detailed narrative response to each criterion and include supporting documentation. This section answers the following criteria numbers from the TIF Assistance score sheet: (1,2,3,4,6,7,8,9,10,11,12) The Wildlands Development will be the first development revitalization to this district since Mountains Walking. It’s an important development that brings the benefits of not only smaller commercial spaces for more business for neighbors to utilize, but also more density of housing. Beyond the increase of taxable units on site, Wildlands brings a more walkable sense of place for the neighbors and visitors to congregate and enjoy the landscape in the outdoor living room, whether by foot or by bike. By removing the curb cuts along Peach and Wallace we create a more walkable landscape for people to gather and hang out. Along those lines the additional commercial units along those streets will create move a location for sharing customers amongst the other businesses in the area. There is also solar onto the roof and low maintenance materials and a high level of insulating to the building to create a building that will last the test of time. PAGE 31 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 48 PU B L I C B E N E F I T Re-occupancy of Partially Vacant Land This lot has not historically been vacant, but a good percentage of it has not been utilized to its maximum potential. Since the city is growing so quickly we see it as necessary to utilize as much space as possible in downtown areas. The addition of this project will complete the block making the area more vibrant, desirable and walkable. Project infrastructure will contribute to “completing” E Peach and N Wallace Streets. Additionally, E Peach 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 south east corner of the lot is occupied by a dilapidated abandoned building and the northeast corner is occupied by three decommissioned fuel tanks. This building and the tanks are a hazard to the community, and could potentially encourage undesirable behaviors. As part of this project and site development, the infrastructure will contribute to complete and improve conditions on Peach Street and the alley way running parallel to E Cottonwood St and E Peach St. . Rather than unsightly, abandoned infrastructure and buildings, the block will be completed and built to City Engineering Standards. This means pedestrian friendly routes, sidewalks and nature immersed engagements with the already existing retail areas. Clearly defined ground level spaces will surround the new building providing office and retail spaces along with a mixture of high design loft living units. PAGE 32 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 49 PU B L I C B E N E F I T Re-creation of New Office/Retail Spaces The Wildlands Development Building will allow for a (3) story mixed use commercial/residential building over a parking garage with plans to connect the Wild Crumb building to the Wildlands project with a sky bridge to unlock allowable residential square footage. The ground floor of the building will have (3) units with a total of 3,200 SF commercial spaces for lease or sale and 35 provided parking spaces. These areas will be well suited for office or retail space with a highly visible location in the Northeast corridor. Urban Living Options This project proposes 2nd and 3rd floor residential units that will range from 1,000 SF to 2,300 SF, feature 11’ ft ceilings and private decks/balconies off of the living room or bedroom areas. These areas will be well suited for residential dwelling spaces with a highly visible location in the Northeast corridor. The design of the building and layout of dwelling units will maximize natural light coupled with surrounding views of the mountains encompassing the valley. This site is located in the heart of the Northeast neighborhood 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 Northeast 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 Northeast 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. PAGE 33 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 50 PA R T 2 F O R P R O J E CT S R E Q UE S TI N G O V E R $50 ,00 0 IN A S S I S T A N C E Project Financial Information In order for the Northeast Urban Renewal District Board to adequately review applications seeking TIF assistance, the following information must be submitted with the application. This information will be used to perform a third-party financial analysis to determine the project’s anticipated return on investment (ROI) and reasonableness of developer profit. The goal of the Northeast TIF Assistance program is to make projects financially feasible. Therefore, projects that demonstrate financial need for public funding will be given priority. 1. Sources & Uses of Funds a. Identify the sources of funds used to finance the project. Typical sources include equity, lender financing, mezzanine financing, other anticipated types of public assistance, and any other types or methods of financing. Describe the sources of equity and include a term sheet for lender financing, if available. b. TIF assistance is available as a reimbursement after the project is complete. Thus, the project budget must identify the up-front sources intended to finance the development costs of the project. If determined, specify the specific line items of the project budget that each source will finance. c. Summarize the uses of funds. General categories to be identified include acquisition and related site costs, hard construction costs, and a breakdown of soft costs. PAGE 34 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 51 PA R T 2 F O R P R O J E CT S R E Q UE S TI N G O V E R $50 ,00 0 IN A S S I S T A N C E 2. Development Budget Provide an accurate and detailed development budget for the project that includes a detailed breakdown of significant line item costs consistent with the sample included in the application packet. The budget should be arranged to identify acquisition and site related costs, hard costs, and soft costs. Also, identify all line items that are performed by the developer, owner, or related entities. Budget of TIF Eligible Expenses Identify which of the development budget costs are eligible for reimbursement as allowed by 7-15- 4288, MCA. Financial Commitments Submit commitment letters and/or term sheets from all lenders for proposed debt (such as construction, mezzanine, permanent, and government financing) and all other financial sources of the project (such as grants, and tax credits). Commitment letters must clearly specify the nature and terms of the obligations. PAGE 35 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 52 P R O J E CT E D P R O J E C T M I L E S T O N E S Site Plan Final Review – September 2021 Building Permitting - October 2021 Mobilization/ Demolition/ Groundbreaking – November 2021 Construction Duration – 13 months Provide anticipated dates for site acquisition, project start, completion, estimated date of occupancy, and other project milestones. Multi-phase projects must include details for each phase. The timeline should also identify any critical or time-sensitive dates as well as any time constraints facing the applicant. (Please refer to the following pages) Provide detailed explanation on impact on the timeline if TIF assistance is not granted at the requested amount. a. If TIF Assistance is not granted and final budgets come back higher than expected, the project is at risk of being put on hold. Construction information Size of any existing structure to be demolished or rehabbed; size of any new construction; types of construction materials (structural and finish); delineation of square foot allocation by use a. 6,630 SF of existing building is being remodeled on the interior, with the new expansion of 38,760SF of wood and steel structure clad in "kebony wood" material and a semi-glazed brick, with varied locations of corrugated metal. See Questions #4 for delineation of spaces of the building by use. PAGE 36 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 53 PAGE 30 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 54 S OU R C E S & U S E S O F FU N DS *Outlaw has highlighted in yellow G&A and Marketing Costs which are all line items that are performed by the developer, owner, or related entities Equity for the Wildlands development totals $8.4m which has been sourced from a small group of friends and family investors. PAGE 37 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 55 S OU R C E S & U S E S O F FU N DS PAGE 38 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 56 S O U R C ES & U S E S - PRO J E C T R E V E N U E PAGE 39 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 57 SOU RC E S & U S E S - TER M S S H EET PAGE 40 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 58 PAGE 41 SOU RC E S & U S E S - TER M S S H EET WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 59 PAGE 42 SOU RC E S & U S E S - TER M S S H EET WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 60 D EVE LOP M E NT B U D G E T PAGE 43 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT 61 Increased Tax Revenue This project development will translate into new property tax revenues that contribute to future Northeast Neighborhood projects. A breakdown of the anticipated tax projections are as follows: New Jobs and Local Sales The project development itself will create jobs in the form of retail, food service and office job opportunities for local businesses, the commercial space, totaling 3,200 SF will drive the establishment and re-establishment of new and old businesses alike. Additionally, property management and maintenance positions will be required as part of the whole community development. PU B L I C B E N E F I T PAGE 44 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT Annual new taxes @ 1.0% mil rate: Payback to TIF requested Payback Period $ 209, 754.75 $ 583,445.48 2.5 Years 62 T I F E L I G I B L E EX P E N SE S PAGE 45 WILDLANDS WILD PEACH, LLC MIXED USE DEVELOPMENT Value of TIF assistance requested – requests over $50,000 require Part 2 of the application Demolition of Existing Structures: Sidewalks, curbs, gutters, and alley: CILWR: Public/Utility Infrastructure Communications Infrastructure: Fiber Impact Fees: Total TIF Requested: $ 98,000.00 $250,000.00 $ 14,194.80 $ 30,000.00 $ 20,000.00 $ 171,250.68 $583,445.48 63 213051-Wildlands TIF Memo 12-07-2021.docx M EMORANDUM To: David Fine, City of Bozeman From: Brian Duffany and Colton Harguth Subject: Review of Wildlands Project Financial Performance Date: December 7, 2021 This memorandum provides a summary of the analysis Economic & Planning Systems (EPS) has completed on the proposed Wildlands project. This information is intended to be used by City Staff and the Northeast Urban Renewal District Board in considering the applicant’s request for financial assistance from tax increment financing (TIF). Approach As part of the TIF application process, each project developer is required to submit a formal proposal that includes a project overview and cost and revenue estimates. These materials include a summary of the development program, construction costs, eligible costs for TIF reimbursement, sales revenues, and any ongoing revenue and expenditure assumptions. Using this information as a starting point, EPS has structured a proforma analysis to gauge the project’s financial feasibility. The proforma analysis is a “but for” test: “but for” the incentive award, would the project proceed? The financial performance of the project is however only one consideration the Board may use in awarding TIF. The Board has the discretion to make, reduce, or deny an award based on other public benefit and policy criteria. 64 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 2 Project Description The proposed project is to renovate an existing commercial building in conjunction with developing 12 residential condominiums. The site is improved with 4,500 square foot two story commercial building with a basement occupied by Wild Crumb Bakery and Finks Delicatessen, two long-time Bozeman businesses. The existing building will be renovated, and a third story addition will be added for residential condominiums. The basement will be converted to storage and office space for Wild Crumb. The remainder of the site will be developed with residential condominiums and ground floor mixed use commercial space. Wild Crumb and Finks will stay in the new project. The developer has indicated they would pay below market rent estimated at $18.00 per square foot compared to about $25.00 to $30.00 per square foot market rent for newer commercial space in this area. The residential condominiums are targeting the luxury end of the market with sale prices ranging from $750 to $875 per square foot, or $1.4 to $2.0 million per unit and an average of $1.6 million. These prices are more than double the current median single family home price of approximately $700,000. Appreciation rates have been above 10 percent per year. The developer has already acquired the site and spent considerable money on design and construction documents and is bidding out construction pricing for a possible 2022 start. TIF Request The developer has requested $583,445 in financial assistance to offset the public improvement and redevelopment costs, as shown in Table 1, consistent with the TIF Policy on eligible costs. Table 1. TIF Request by Improvement Type Improvement Type TIF Request Demolition of Existing Structures $98,000 Sidewalks, curbs, gutters, and alley $250,000 CILWR $14,195 Public/Utility Infrastructure $30,000 Communications Infrastructure Fiber $20,000 Impact Fees $171,251 Total TIF Request $583,445 Source: Developer Financial Documents; Economic & Planning Systems 65 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 3 Project Assumptions This section summarizes the development program and key assumptions submitted by the development team. Development Program Location: Northeast corner of Peach & Wallace; 600 N. Wallace and 629 E. Peach St. Parcel Area: 0.73 acres, 31,799 sq. ft. Stories: Three stories (two stories above grade level podium parking) Total Building Area: 52,407 gross building area; 36,272 net saleable and leasable Commercial Program: 12,375 sq. ft. in five commercial spaces (three new, two existing). The commercial space is approximately 34 percent of the net saleable/leasable floor area. For-Sale Residential Condos: 8 one bedroom and 4 two-bedroom units, 12 total Project Costs (Summarized in Table 2) The total cost of the project is estimated at $21.8 million. This includes $3.5 million to acquire the site and existing building. Site Acquisition Total: $3,459,000 Cost per Land SF: $109 per square foot of land; $95 per sale/leasable sq. ft. Cost per Unit: $288,000 per residential unit Percent of Total Costs: 15.9 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. These costs are within that range, however this is a costly site acquisition at over $100 per square foot and $288,000 per residential unit. The high costs are the result of acquiring an existing building with two viable and operating businesses. For the existing 4,500 square foot building, the site purchase equates to $767 per square foot of building area. Hard Costs Total: $15,050,395 Cost per Square Foot (GBA): $287; $415 per sq. ft. per sale/leasable sq. ft. Comments: The residential units are luxury units and will have a high level of finish. Construction costs have also been high during the pandemic. The most recent construction cost estimate provided by the developer on November 17, 2021, increased about 5.0 percent from the original cost estimate. Development costs have been high for all product types during the pandemic due to material supply chain and labor shortages. Soft Costs Total: $3,257,658 Percent of Hard Costs: 15.0 percent Comments: The list of soft costs and their amounts appear reasonable and fall within an expected range of 15 to 25 percent of hard costs. 66 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 4 Table 2. Project Construction Cost Summary Description Total Cost per GSF Cost per RSF % of Total LAND COSTS Land & Building Cost / Acquisition 3,459,000$ 66.00$ 95.36$ 15.9% Purchase Contract $3,400,000 total 1.0 unit 3,400,000$ 64.88$ 93.74$ 15.6% Acquisition Costs $59,000 total 1.0 unit 59,000$ 1.13$ 1.63$ 0.3% TOTAL ACQUISITION COST 3,459,000$ 66.00$ 95.36$ 15.9% Hard Costs Hard Costs 15,050,395$ 287.18$ 414.93$ 69.1% Hard Costs $15,050,395 total 1.0 unit 15,050,395$ 287.18$ 414.93$ 69.1% TOTAL HARD COST 15,050,395$ 287.18$ 414.93$ 69.1% Soft Costs Soft Costs 3,257,658$ 62.16$ 89.81$ 15.0% General Soft Costs $1,293,745 total 1.0 unit 1,293,745$ 24.69$ 35.67$ 5.9% General and Administrative $700,591 total 1.0 unit 700,591$ 13.37$ 19.31$ 3.2% Marketing $100,000 total 1.0 unit 100,000$ 1.91$ 2.76$ 0.5% Contingency $752,519 total 1.0 unit 752,519$ 14.36$ 20.75$ 3.5% Interest Reserve $286,663 total 1.0 unit 286,663$ 5.47$ 7.90$ 1.3% Loan Fees $124,140 total 1.0 unit 124,140$ 2.37$ 3.42$ 0.6% TOTAL SOFT COST 3,257,658$ 62.16$ 89.81$ 15.0% TOTAL CONSTRUCTION COST 18,308,062$ 349.34$ 504.74$ 84.1% TOTAL COST 21,767,053$ 415.35$ 600.11$ 100.0% Source: Developer Financial Documents; Economic & Planning Systems Factor Unit 67 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 5 Project Revenues The development will have two sources of revenue: sale of the residential condominiums and leasing and the sale of the commercial mixed-use space (or value of the income stream). Residential Sales: $19,454,275 (Table 3) Comments: The financial analysis assumes that all 12 units are sold within a year of construction. Estimated pricing in the application ranges from $750 to $875 per square foot. Table 3. Residential Sales Revenues Commercial Revenues: $18.00 to $27.50 per square foot in annual rent resulting in $219,745 in annual net operating income. The value of the space at stabilized occupancy is estimated at $3.23 million using a 6.80 percent capitalization rate, as shown in Table 4. Retail capitalization rates across Denver, Seattle, and the Western U.S. range from 5.25 to 7.50 percent, and average roughly 6.30 percent according to CBRE and Integra Realty Resources. EPS applied an upward adjustment of 50 basis points to reflect the small size of the Bozeman market to bring the total retail capitalization rate to 6.80 percent, as shown in Table 5. Description Total RESIDENTIAL REVENUE Residential Property Sales $19,454,275 Unit 1 $750 psf 1,912 sf $1,434,000 Unit 2 $750 psf 1,619 sf $1,214,250 Unit 3 $800 psf 2,237 sf $1,789,600 Unit 4 $800 psf 1,841 sf $1,472,800 Unit 5 $800 psf 2,001 sf $1,600,800 Unit 6 $800 psf 1,976 sf $1,580,800 Unit 7 $800 psf 1,798 sf $1,438,400 Unit 8 $800 psf 2,319 sf $1,855,200 Unit 9 $850 psf 2,236 sf $1,900,600 Unit 10 $850 psf 1,817 sf $1,544,450 Unit 11 $875 psf 1,830 sf $1,601,250 Unit 12 $875 psf 2,311 sf $2,022,125 Source: Developer Financial Documents; Economic & Planning Systems Factor Unit 68 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 6 Table 4. Commercial space rents and valuation Table 5. Retail Capitalization Rate Estimate Type Total % of Total REVENUE Rentable SF Lease Rate Potential Gross Income 5 units 12,375 unit sf $18.98 yer year 234,833$ 100.0%of PGI Shell A 1 1,708 $27.50 46,970$ 20.0%of PGI Shell B 1 882 $27.50 24,255$ 10.3%of PGI Shell C 1 1,213 $27.50 33,358$ 14.2%of PGI Wild Crumb/Finks 1 4,200 $18.00 75,600$ 32.2%of PGI Basement 1 4,372 $12.50 54,650$ 23.3%of PGI Less: Vacancy 5.0%per year (11,742)$ -5.0%of PGI EFFECTIVE GROSS INCOME (EGI)223,091$ 95.0%of PGI EXPENDITURES Units Factor Operating Expenditures $223,091 EGI 1.50%of EGI (3,346)$ 1.5%of EGI Management $223,091 EGI 1.50%of EGI (3,346)$ 1.5%of EGI TOTAL OPERATING EXPENDITURES (3,346)$ 1.5%of EGI NET OPERATING INCOME 219,745$ 98.5%of EGI COMMERCIAL DISPOSITION REVENUE 6.8%cap rate 3,231,537$ Source: Developer Financial Documents; Economic & Planning Systems Suburban Class B Retail Rate Source: CBRE (Denver)5.25% CBRE (Seattle)5.50% Integra Realty Resources (Denver)7.50% Integra Realty Resources (Seattle)6.75% Integra Realty Resources (West)6.34% Average 6.27% Small Market Adjustment 0.50% EPS Estimate 6.80% Source: CBRE; Integra Realty Resources; Economic & Planning Systems 69 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 7 Cash Flow Analysis Project Return The performance of the project is evaluated with two approaches: on a static basis and with a time series cash flow. In the static analysis, we estimate return on investment (ROI), calculated as net revenues divided by total costs. In the time series evaluation, we examine the Internal Rate of Return (IRR). Static Analysis: Return on Investment Evaluating the project from a static perspective is a simple evaluation of a project’s financial performance. It is appropriate for small projects with a short development timeline. This method compares the total project costs to the project’s net revenues. The total value of the project is calculated by netting the condo sales revenues (after sales commissions) and the value of the commercial space (capitalized NOI) against total project costs. For this project an ROI target of 10.0-15.0 percent is used. As shown in Table 6, the total project revenues and value are $22.7 million compared to costs of $21.8 million yielding a profit of $919,000 or an ROI of 4.22 percent. This falls far below the target of 10 to 15 percent indicating that the project is unlikely to proceed, or if it does will not generate the desired financial returns. The feasibility of this project is sensitive to factors such as costs and appreciation in the residential market. If costs come down by 5.0 percent or if residential sale prices can be increased by 5.0 percent (or 2.5 percent each), the feasibility improves to an estimated ROI of 13.38 percent, which may be sufficient to move forward. However, this sensitivity analysis is speculative. The cost and revenue analysis is based on the best available information and judgement at this time. Table 6. Static financial performance and impact of residential sale price appreciation Description Baseline Metrics 1 percent Escalation 1.5 percent Escalation 2 percent Escalation 5 percent Escalation Revenues $22,685,812 $23,076,843 $23,273,817 $23,471,765 $24,679,875 Residential Sales $19,454,275 $19,845,306 $20,042,280 $20,240,228 $21,448,338 Commercial Value $3,231,537 $3,231,537 $3,231,537 $3,231,537 $3,231,537 Total Costs $21,767,053 $21,767,053 $21,767,053 $21,767,053 $21,767,053 Net Revenue $918,759 $1,309,790 $1,506,764 $1,704,711 $2,912,822 Return on Investment 4.22%6.02%6.92%7.83%13.38% Source: Developer Financial Documents; Economic & Planning Systems 70 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 8 Time Series Cash Flow The IRR is the percentage rate earned on each dollar invested for each period it is invested. The IRR is used by investors to compare alternative investments based on their rates of return. Mathematically, the IRR is the discount rate that results in a net present value (NPV) equal to zero. The IRR is a useful metric because it can be compared to the expected return from other investment opportunities such as stocks or bonds or other real estate projects, or the rate of return an investor/developer needs to justify the risk of a project (the “hurdle rate”). The financing terms of a project can affect the returns to an equity investor, so it is appropriate in some cases to examine the project without debt financing (on an unleveraged basis). For unleveraged investments, we look for an unleveraged IRR in the 10 percent range. This translates to a leveraged IRR in the mid to upper teens percentages. This hurdle is subjective and depends on the investor’s perception of risk in the market and the requirements of their equity investors. EPS selected a hurdle rate of 9.5 percent based on the Weighted Average Cost of Capital (WACC) assuming a typical project financing mix, shown in Table 7. Table 7. Weighted Average Cost of Capital and IRR Hurdle Rate Before any public investment, the project has an estimated IRR of 6.88 percent, as shown in Table 8. At a 9.50 percent hurdle rate or discount rate, the feasibility gap of the project is approximately $640,000 (-$642,356 rounded). If the Board awarded the requested $583,000 it would result in an 8.71 percent IRR and make the project more attractive but still below the 9.5 percent hurdle rate. Sensitivity Testing The time series proforma is also sensitive to some key assumptions. Similar to the static profit analysis, an increase in residential sale prices or reduction in costs moves the IRR upward closer to the 10.0 percent threshold. A five percent increase in sale prices or reduction in costs – or 2.5 percent each – results in an estimated IRR of 13.70 percent as shown in Table 9. In addition, we evaluated the timing of selling the mixed-use portion of the project. The developer indicated a potential holding period of five years or longer. If the space can be leased and sold within 3 years, the IRR increases to 8.50 percent independent of the scenarios on residential price increases or cost reductions. Description Equity Debt Combined Selected Rate Financing 35.00%65.00%100.00% 15.00%5.00%8.50% 17.50%5.00%9.38%9.50% 20.00%5.00%10.25% Source: Economic & Planning Systems 71 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 9 Table 8. Time Series Cash Flow 2021 2022 2023 2024 2025 2026DescriptionFactorEs c.Total Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 DEVELOPMENT COSTS % Construction CostLand & Building Cost / Acquisition 100%100.0%0.0%0.0%0.0%0.0%0.0% Hard Costs 100%0.0%75.0%25.0%0.0%0.0%0.0% Soft Costs 100%0.0%75.0%25.0%0.0%0.0%0.0% Construction Cost -$21,767,053 -$3,459,000 -$13,731,040 -$4,577,013 $0 $0 $0 Land & Building Cost / Acquisition $3,459,000 0.0%-$3,459,000 -$3,459,000 $0 $0 $0 $0 $0 Hard Costs $15,050,395 0.0%-$15,050,395 $0 -$11,287,796 -$3,762,599 $0 $0 $0 Soft Costs $3,257,658 0.0%-$3,257,658 $0 -$2,443,244 -$814,415 $0 $0 $0 Total Costs -$21,767,053 -$3,459,000 -$13,731,040 -$4,577,013 $0 $0 $0 PROJECTED PROPERTY SALES REVENUE Revenue $14,286,450 $0 $0 $19,454,275 $0 $0 $3,481,269 Residential Unit 1 $1,434,000 0.0%$1,434,000 $0 $0 $1,434,000 $0 $0 $0Unit 2 $1,214,250 0.0%$1,214,250 $0 $0 $1,214,250 $0 $0 $0Unit 3 $1,789,600 0.0%$1,789,600 $0 $0 $1,789,600 $0 $0 $0 Unit 4 $1,472,800 0.0%$1,472,800 $0 $0 $1,472,800 $0 $0 $0 Unit 5 $1,600,800 0.0%$1,600,800 $0 $0 $1,600,800 $0 $0 $0 Unit 6 $1,580,800 0.0%$1,580,800 $0 $0 $1,580,800 $0 $0 $0 Unit 7 $1,438,400 0.0%$1,438,400 $0 $0 $1,438,400 $0 $0 $0 Unit 8 $1,855,200 0.0%$1,855,200 $0 $0 $1,855,200 $0 $0 $0 Unit 9 $1,900,600 0.0%$1,900,600 $0 $0 $1,900,600 $0 $0 $0Unit 10 $1,544,450 0.0%$1,544,450 $0 $0 $1,544,450 $0 $0 $0 Unit 11 $1,601,250 0.0%$1,601,250 $0 $0 $1,601,250 $0 $0 $0 Unit 12 $2,022,125 0.0%$2,022,125 $0 $0 $2,022,125 $0 $0 $0 Commercial Shell A $696,308 0.0%$696,308 $0 $0 $0 $0 $0 $696,308 Shell B $341,846 0.0%$341,846 $0 $0 $0 $0 $0 $341,846Shell C $483,888 0.0%$483,888 $0 $0 $0 $0 $0 $483,888Wild Crumb/Finks $1,143,073 0.0%$1,143,073 $0 $0 $0 $0 $0 $1,143,073 Basement $816,153 0.0%$816,153 $0 $0 $0 $0 $0 $816,153 Cost of Sale -$229,355 $0 $0 -$194,543 $0 $0 -$34,813 Residential and Commercial 1.00%-$229,355 $0 $0 -$194,543 $0 $0 -$34,813 Project Net Sale Revenue $22,706,189 $0 $0 $19,259,732 $0 $0 $3,446,457 NET OPERATING INCOME % Leased (Excluding general vacancy)55%55%100%100%100%100% Revenue Potential Gross Income $234,833 1.5%per year $129,158 $131,095 $241,930 $245,559 $249,243 $252,981 Stabilized Vacancy Loss 5.0%$0 $0 -$12,097 -$12,278 -$12,462 -$12,649Effective Gross Income $129,158 $131,095 $229,834 $233,281 $236,781 $240,332 Operating Expenses -$1,937 -$1,966 -$3,448 -$3,499 -$3,552 -$3,605 Management Fee -$1,937 -$1,966 -$3,448 -$3,499 -$3,552 -$3,605 Net Operating Income $127,221 $129,129 $226,386 $229,782 $233,229 $236,727 PROJECT CASH FLOWSNet Project Cash Flows $2,121,609 -$3,331,779 -$13,601,911 $14,909,105 $229,782 $233,229 $3,683,184 Construction Cost -$21,767,053 -$3,459,000 -$13,731,040 -$4,577,013 $0 $0 $0 Project Net Sale Revenue $22,706,189 $0 $0 $19,259,732 $0 $0 $3,446,457 Net Operating Income $1,182,474 $127,221 $129,129 $226,386 $229,782 $233,229 $236,727 Discount Rate Net Present Value (2021)9.50%-$642,356 -$3,331,779 -$12,421,837 $12,434,357 $175,014 $162,228 $2,339,660 Internal Rate of Return 6.88% PROJECT CASH FLOWS WITH PUBLIC SUBSIDYNet Project Cash Flows $2,705,055 -$3,331,779 -$13,485,222 $15,025,794 $346,471 $349,918 $3,799,873 Revenue -$21,767,053 -$3,459,000 -$13,731,040 -$4,577,013 $0 $0 $0 Effective Gross Income $22,706,189 $0 $0 $19,259,732 $0 $0 $3,446,457 Internal Rate of Return $1,182,474 $127,221 $129,129 $226,386 $229,782 $233,229 $236,727 TIF Revenue $583,445 $0 $116,689 $116,689 $116,689 $116,689 $116,689 Net Present Value (2021)9.50%-$194,304 -$3,331,779 -$12,315,271 $12,531,677 $263,891 $243,394 $2,413,784Internal Rate of Return 8.71% Source: Developer Financial Documents; Economic & Planning Systems 72 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 10 Table 9. IRR Sensitivity Testing Sensitivity Analysis | Net Present Value (NPV) Without Subsidy 8%9%10%11%12% Baseline -283,435 -525,426 -756,674 -977,749 -1,189,183 Residential 1% Escalation 48,458 -199,594 -436,740 -663,553 -880,572 Residential 1.5% Escalation 215,643 -35,462 -275,579 -505,283 -725,116 Residential 2% Escalation 383,654 129,480 -113,622 -346,231 -568,892 Residential 5% Escalation 1,409,057 1,136,154 874,832 624,493 384,576 Commercial Sales 2024 106,873 -104,089 -307,279 -503,034 -691,675 Sensitivity Analysis | IRR vs. Hurdle Rate Without Subsidy Calculated IRR 8%9%10%11%12% Baseline 6.88%-1.12%-2.12%-3.12%-4.12%-5.12% Residential 1% Escalation 8.19%0.19%-0.81%-1.81%-2.81%-3.81% Residential 1.5% Escalation 8.86%0.86%-0.14%-1.14%-2.14%-3.14% Residential 2% Escalation 9.53%1.53%0.53%-0.47%-1.47%-2.47% Residential 5% Escalation 13.70%5.70%4.70%3.70%2.70%1.70% Commercial Sales 2024 8.50%0.50%-0.50%-1.50%-2.50%-3.50% Source: Developer Financial Documents; Economic & Planning Systems ScenarioScenarioDiscount Hurdle Rate Hurdle Rate Comparison 73 Memorandum December 7, 2021 Bozeman TIF Review: Wildlands Page 11 Recommendations The purpose of this analysis is to determine if the project has a financing gap and if there are policy reasons or public benefits that justify the awarding of a tax increment financing incentive. It is best practice in EPS’ opinion to consider the financial performance of a project prior to granting any subsidy. If the incentive is making an already profitable project more profitable, than the incentive may not be justified unless there are other public benefits. Conversely, even if a project has a financing gap that should not always be the sole reason for a public investment: there needs to be public benefit. The financial analysis above shows that this project has a financing gap. The analysis shows that the project is not likely to result in a net loss, but the financial returns may not be high enough for a developer to want to proceed. The ROI is estimated at 4.22 percent compared to a target of 10 to 15 percent. The IRR is estimated at 6.88 percent, well below a hurdle rate of 9.5 percent. Despite the financing gap, EPS encourages the City to consider the following public policy issues in making a determination regarding the provision of TIF assistance to this project. 1. The project itself does not provide any affordable or attainable housing. The average price in the development is $1.6 million. EPS does not recommend that the City or Northeast Urban Renewal District invest in a project building units priced more than double the current median price in the City. While the Wildlands project itself does not include any affordable or attainable housing units, the Applicant is committing to three attainable units as part of a future project, making 20% of proposed new units priced at an attainable level. 2. The project design or site limitations may contribute to the feasibility gap. The fact that there is a financing gap on a project with sale prices averaging over $800 per square foot may indicate a larger issue with the design of the project and yield on the site (number of units possible). It is likely that there are not enough residential units to cross subsidize the mixed use space which is not feasible at the costs in this proposal. Ground floor commercial mixed use space is often a “loss leader” in residential mixed use projects but creates an amenity that helps to anchor the project. The market rents in the $25 to $30 range support very roughly, using the “rule of 10s”, costs in the $250 to $300 per square foot range compared to the costs of over $400 per square foot of gross building area. EPS does not recommend that TIF be used to cure a design, site or zoning constraint like this. In EPS’ opinion, TIF is more appropriately used for addressing physical or redevelopment constraints such as a lack of utilities, contamination, demolition, other conditions of blight, or to provide affordable housing. 3. If costs decrease or the residential units can be sold for more, the feasibility of the project will improve. Construction costs are at record highs due to material and labor shortages related to the COVID- 19 pandemic. Lumber prices are roughly double pre-pandemic prices. These costs are affecting all types of development nationally, affecting developers, builders, and end users and home buyers. Some projects are choosing to delay construction until prices come down. If as hoped and expected prices moderate the feasibility of this project will improve. In addition, the developer may be able to increase prices slightly due to the strong appreciation and continued supply constraints in the Bozeman market. 74