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HomeMy WebLinkAbout05-04-22 EVB Agenda & Packet MaterialsA.Call to Order - 6:00 PM Via Webex: https://cityofbozeman.webex.com/cityofbozeman/onstage/g.php? MTID=e7f4fa88d03b0853496dbd092ca70c37f Click the Register link, enter the required information, and click submit. Click Join Now to enter the meeting Via Phone: This is for listening only if you cannot watch the stream or channel 190 • Call-in toll number (US/Canada): 1-650-479-3208 • Access code: 2556 457 8615 Public Comment: If you are interested in commenting in writing on items on the agenda, please send an email to agenda@bozeman.net prior to 4:00pm on the Monday before the meeting. You may also comment by visiting the City's public comment page. You can also comment by joining the WebEx meeting. If you do join the WebEx meeting, we ask you please be patient in helping us work through this online meeting. If you are not able to join the Webex meeting and would like to provide oral comment you may send a request to agenda@bozeman.net with your phone number, the item(s) you wish to comment on, and someone will call you during the meeting to provide an opportunity to comment. You may also send the above information via text to 406-224-3967. As always, the meeting will be streamed through the City's video page (click the Streaming Live in the drop down menu), and available in the City on cable channel 190. B.Disclosures C.Changes to the Agenda D.Approval of Minutes D.1 Approval of Minutes from April 6, 2022 (DiTommaso) E.Public Comments This is the time to comment on any matter falling within the scope of the Economic Vitality Board. There will also be time in conjunction with each agenda item for public comment relating to that item but you may only speak once. Please note, the Board cannot take action on any item which THE ECONOMIC VITALITY BOARD OF BOZEMAN, MONTANA EV AGENDA Wednesday, May 4, 2022 1 does not appear on the agenda. All persons addressing the Board shall speak in a civil and courteous manner and members of the audience shall be respectful of others. Please state your name and place of residence in an audible tone of voice for the record and limit your comments to three minutes. General public comments to the Board can be found in their Laserfiche repository folder. F.Special Presentations F.1 Bozeman Economic & Market Update Presentation(Duffany ) F.2 Seat at the Table Presentation(Andreasen) G.Action Items G.1 Provide recommendation to the City Commission regarding Ordinance 2111, Administrative Departures for Housing Creation and to Define Infill and Missing Middle Housing(Fine) H.FYI/Discussion I.Adjournment J.For more information please contact Brit Fontenot, bfontenot@bozeman.net General information about the Economic Vitality Board is available in our Laserfiche repository. This board generally meets the first Wednesday of the month from 6:00 pm to 8:00 pm. Citizen Advisory Board 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 406-582-3232 (TDD 406- 582-2301). 2 Memorandum REPORT TO:Economic Vitality Board FROM:Jesse DiTommaso, Economic Development Specialist Brit Fontenot, Economic Development Director SUBJECT:Approval of Minutes from April 6, 2022 MEETING DATE:May 4, 2022 AGENDA ITEM TYPE:Citizen Advisory Board/Commission RECOMMENDATION:Approve minutes from April 6, 2022 STRATEGIC PLAN:1.2 Community Engagement: Broaden and deepen engagement of the community in city government, innovating methods for inviting input from the community and stakeholders. BACKGROUND:In accordance with Commission Resolution 5323 and the City of Bozeman's Citizen Advisory Board Manual, all boards must have minutes taken and approved. Prepared minutes will be provided for approval by the board at the next regularly scheduled meeting. Staff will make any corrections identified to the minutes before submitting to the City Clerk's Office. UNRESOLVED ISSUES:None ALTERNATIVES:As recommended by the Board. FISCAL EFFECTS:None. Attachments: 040622 Economic Vitality Board Meeting Minutes.pdf Report compiled on: April 20, 2022 3 Bozeman Economic Vitality Board Meeting Minutes, April 6, 2022 Page 1 of 3 THE ECONOMIC VITALITY BOARD MEETING OF BOZEMAN, MONTANA MINUTES April 6, 2022 Present: Joseph Morrison, Sara Savage, Craig Ogilvie, Danielle Rogers, John Carey, Katharine Osterloth, Christopher Coburn Absent: None A) 00:17:52 Call to Order - 6:00 PM B) 00:19:40 Disclosures • There were no disclosures. C) 00:19:54 Changes to the Agenda • There were no changes to the agenda. D) 00:20:07 Approval of Minutes D.1 00:20:21 Approval of Minutes February 2, 2022 and March 2, 2022 020222 Draft EV Board Minutes.pdf 030222 Draft Economic Vitaility Board Minutes.pdf 00:20:33 Motion Approve minutes as submitted. Sara Savage: Motion Craig Ogilvie: 2nd 00:21:04 Vote on the Motion to free form Approve minutes as submitted. The Motion carried 6 - 0 Approve: Joseph Morrison Sara Savage Craig Ogilvie Danielle Rogers John Carey Katharine Osterloth 4 Bozeman Economic Vitality Board Meeting Minutes, April 6, 2022 Page 2 of 3 Disapprove: None E) 00:22:28 Public Comments • There were no public comments. F) 00:23:07 Action Items F.1 00:23:18 Bozeman Code Audit to Create and Preserve Housing 2022 Commission Memo for Work Session.pdf 2021 AHO Root Policy Memo.pdf Bozeman UDC Affordable Housing Assessment.pdf 00:23:20 Staff Presentation Economic Development Program Manager David Fine presented community housing unified development code incentives for affordability. He asked for board feedback on how the City should offer shallow density bonuses. 00:47:28 Questions of Staff 01:17:30 public comment 01:17:47 Mary Wictor, Public Comment Mary Wictor commented on ADUs, R3 Apartment Buildings Limited zoning designation, and restricted size lots. 01:21:27 Discussion 01:40:16 Motion Recommend shallow incentives into the base code without affordability requirements to the City Commission. Sara Savage: Motion Craig Ogilvie: 2nd 01:41:06 Vote on the Motion to free form Recommend shallow incentives into the base code without affordability requirements to the City Commission.The Motion carried 6 - 0 Approve: Joseph Morrison Sara Savage Craig Ogilvie Danielle Rogers John Carey Katharine Osterloth Disapprove: None 5 Bozeman Economic Vitality Board Meeting Minutes, April 6, 2022 Page 3 of 3 G) 01:41:57 FYI/Discussion G.1 01:42:05 Progress Report on the Economic Development Strategy Update EV Board EDSU Update 04-05-22.pdf 01:42:10 Economic Development Specialist Jesse DiTommaso provided an update on the Economic Development Strategy. 02:09:18 Danielle Rogers provided an update on the adopted CEDAW Resolution. H) 02:14:36 Adjournment For more information please contact Brit Fontenot, bfontenot@bozeman.net General information about the Economic Vitality Board is available in our Laserfiche repository. 6 Memorandum REPORT TO:Economic Vitality Board FROM:Jesse DiTommaso, Economic Development Specialist Brit Fontenot, Economic Development Director SUBJECT:Bozeman Economic & Market Update Presentation MEETING DATE:May 4, 2022 AGENDA ITEM TYPE:Plan/Report/Study RECOMMENDATION:Listen & ask questions regarding the Bozeman Economic & Market Update STRATEGIC PLAN:1.2 Community Engagement: Broaden and deepen engagement of the community in city government, innovating methods for inviting input from the community and stakeholders. BACKGROUND:Economic and Planning Systems, Inc. (EPS) recently completed an Economic and Market Update for the City of Bozeman. This report provides an overview of the City of Bozeman and Gallatin County, Montana economy, key growth trends, commercial real estate trends, and the housing market and housing demand. Brian Duffany, a principle at EPS will provide an overview of the report. Attached is the draft economic and market report from EPS. The final version will be provided to the board upon receipt. UNRESOLVED ISSUES:None. ALTERNATIVES:None. FISCAL EFFECTS:None. Attachments: 213051-Draft Report_12-14-21.pdf Report compiled on: April 29, 2022 7 Draft Report Bozeman Economic and Market Update Prepared for: City of Bozeman, MT Economic Development Department Prepared by: Economic & Planning Systems, Inc. EPS #213051 December 14, 2021 8 Table of Contents 1. City Snapshot and Summary ................................................................................ 1 City Snapshot...................................................................................................... 1 2. Economy ........................................................................................................... 6 Economic Trends ................................................................................................. 6 Wages ............................................................................................................... 9 Economic Drivers ............................................................................................... 10 3. Commercial Real Estate ..................................................................................... 11 Office Market Trends .......................................................................................... 11 Industrial/Flex Market ......................................................................................... 13 Retail Market .................................................................................................... 15 4. Housing ........................................................................................................... 18 Construction ..................................................................................................... 18 Housing Prices ................................................................................................... 19 Apartment Market .............................................................................................. 20 Affordability ...................................................................................................... 22 Housing Demand ............................................................................................... 24 9 List of Tables Table 1. Population and Housing Units, 2010-2020 ......................................................... 2 Table 2. MSU Enrollment, 2001-2020........................................................................... 3 Table 3. Peer City Summary....................................................................................... 5 Table 4. Job and Wage Growth, Top Sectors, Gallatin County ........................................... 9 Table 5. Educational Attainment, Bozeman, 2021 ......................................................... 10 Table 6. Office Summary ......................................................................................... 11 Table 7. Industrial Summary, Gallatin County, 2010-2021 ............................................. 13 Table 8. Retail Summary, Gallatin County, 2010-2021 .................................................. 15 Table 9. Bozeman Building Permit Unit Trends ............................................................. 18 Table 10. Home Price Trends, 2016-2021 ..................................................................... 19 Table 11. Multifamily Summary, Gallatin County ............................................................ 20 Table 12. Recent Multifamily Development Summary, Bozeman ....................................... 21 Table 13. Required Annual Income to Afford Median Home Price, 2016-2021 ...................... 22 Table 14. Bozeman Housing Demand Projection ............................................................ 24 Table 15. Bozeman Housing Demand Projection ............................................................ 25 10 List of Figures Figure 1. Gallatin Valley Region ................................................................................... 2 Figure 2. Private Wage and Salary Employment, Bozeman and Gallatin County, 2020 ............ 6 Figure 3. Employment Growth, Bozeman and Gallatin County, 2015-2020 ........................... 7 Figure 4. Unemployment Rate, 2010-2021 YTD .............................................................. 7 Figure 5. Change in Employment by wage quartile, Gallatin County, 2015-2020 .................... 9 Figure 6. Income Gap to Afford Median Priced Home, Bozeman, 2016 ............................... 23 Figure 7. Income Gap to Afford Median Priced Home, Bozeman, 2021 ............................... 23 11 Economic & Planning Systems, Inc. 213051-Draft Report_12-14-21 1 1. City Snapshot and Summary This report provides an overview of the City of Bozeman and Gallatin County, Montana economy, key growth trends, commercial real estate trends, and the housing market and housing demand. The intended audiences are economic developers, real estate developers and investors, lenders, and policymakers. The purpose is to provide useful information on growth trends by area, economic growth by industry, wages, and housing demand and affordability to help the community track trends, progress, and potential threats. This report is a follow up to the Demographic and Real Estate Market Assessment completed by EPS for the Growth Policy Update in 2018. City Snapshot Bozeman has a 2021 population of approximately 53,000 within Gallatin County (pop. 118,960) with a diverse economy, an educated labor force, and high quality of life not often found in this combination in small cities. Montana State University (MSU) is an anchor in the community and a strong research institution with about 16,000 enrolled students and 4,200 faculty and staff. The area has excellent access to year round outdoor recreation activities and uncrowded spaces. The combination of these factors has supported strong job and wage growth and demand for housing. One of the most pressing issues for the City and greater Bozeman is increasing the housing supply as the average home price is now $779,000 ($700,000 median). Bozeman is one of the fastest growing cities in the U.S. Between 2010 and 2020, the City added nearly 17,000 residents, which translates to a growth rate of nearly 1,700 new residents per year or an annual growth rate of 3.9 percent (Table 1). The City has also added about 700 housing units annually since 2010, which is just under 60 percent of all housing development in Gallatin County. Most of the County’s population is within the Gallatin Valley, which is the area comprised of Manhattan, Belgrade, Bozeman (I-90 Corridor), and Four Corners and Gallatin Gateway (both unincorporated). The most urbanized area of the County is the “Triangle” area that includes Belgrade, Bozeman, and Four Corners (Figure 1). 12 Bozeman Economic and Market Update 2 Table 1. Population and Housing Units, 2010-2020 Figure 1. Gallatin Valley Region Description 2010 2015 2020 Total Ann. #Ann. % Population Bozeman 36,440 40,319 53,293 16,853 1,685 3.9% Belgrade 7,281 7,738 10,460 3,179 318 3.7% Manhattan 1,396 1,191 2,086 690 69 4.1%Other/Uninc.44,541 51,491 53,121 8,580 858 1.8% Gallatin County 89,658 100,739 118,960 29,302 2,930 2.9% Bozeman % of County Pop.41%40%45%58% Housing Units Bozeman 16,761 18,293 23,535 6,774 677 3.5% Belgrade 3,154 3,308 4,339 1,185 119 3.2% Manhattan 574 653 872 298 30 4.3% Other/Uninc.20,841 23,715 24,089 3,248 325 1.5% Gallatin County 41,330 45,969 52,835 11,505 1,151 2.5% Bozeman % of County Units 41%40%45%59% Source: US Census; ESRI; Economic & Planning Systems 2010-2020 13 Economic & Planning Systems, Inc. 3 The Bozeman economy has six key segments that distinguish it from other midsized cities and recreation or resort oriented mountain communities. • Higher Education – Montana State University (MSU) has approximately 16,000 students enrolled and 4,200 faculty and staff. MSU is one of 131 R1 research institutions with “very high research activity” within the Carnegie Classification of Institutions of Higher Education (Indiana University). Table 2. MSU Enrollment, 2001-2020 • Tourism and Recreation – Bozeman is a “gateway community” for world class recreation including the Bridger Bowl and Big Sky ski areas, pristine rivers and streams, and Yellowstone and Glacier National Parks. Thousands of visitors pass through or stay over in Bozeman during their trips to these destinations that draw international visitors. During the busy seasons, one can hear several foreign languages spoken on the streets and in restaurants in Bozeman. • Technology – Bozeman is a hub for technology and research and development companies that have both started in or moved into Montana. Major employers range from companies focusing on software development to photonics R&D and manufacturing. MSU has received numerous grants, including a $20 million grant from the National Science Foundation to accelerate the development of quantum materials and devices. Photonics and optical technology are an important technological cluster, as are technology firms such as Oracle, Workiva, Zoot Enterprises, and numerous startups. • Manufacturing – There are numerous manufacturing firms in Greater Bozeman ranging from outdoor companies (Simms Fishing, Mystery Ranch) to optical technology, materials science, electronics, and aerospace, and even a Gibson Guitar factory. • Retail and Hospitality – Bozeman retailers serve at least a 50-mile radius trade area, making it the premier retail, services, and health care hub in Southwest Montana. Downtown Bozeman is a vibrant main street with independent shops, restaurants, and breweries serving locals and visitors. Enrollment Trends 2001 2010 2015 2020 Total Ann. % Undergraduate 10,538 11,579 13,707 14,240 3,702 1.6% Graduate 1,208 1,986 1,981 2,009 801 2.7% Total 11,746 13,565 15,688 16,249 4,503 1.7% Source: Montana State University; Economic & Planning Systems 2001-2020 14 Bozeman Economic and Market Update 4 BZN Airport Bozeman Yellowstone International Airport (BZN) moves about 700,000 passengers per year through Greater Bozeman. the airport is critical to the region’s economic development by making the city accessible to larger markets and investor capital. BZN also supports the tourism and recreation economy of the region, supporting numerous guide services and Big Sky and Bridger Bowl ski areas. BZN has direct flights to numerous metropolitan areas. Comparison Cities Table 3). Bozeman is a young city with a median age of 27.8. Like Boulder and Fort Collins, Colorado the age is influenced by the presence of a large university. Bozeman is one of the highest income cities in Montana, with an average household income among homeowners of just under $89,000 compared to $73,100 in Billings and $73,400 in Missoula (host of University of Montana). The average household income in communities with a large college or university is often skewed lower by the large student population (often renters). The mix of jobs in each community is similar with retail trade and health care being among the largest sectors in each community. In addition, sectors that experienced the largest growth since 2015 among the peer communities included health care, professional and technical services, and construction. 15 Economic & Planning Systems, Inc. 5 In each community, the number of students as a percentage of population is significant. In Bozeman, students equate to almost 35 percent of the population similar to Boulder and Bend. In Fort Collins, the largest of the comparison cities, the student population equates to about 20 percent of the population. The large student population has an impact on the rental housing supply and the City is interested in additional multifamily and student housing. Table 3. Peer City Summary Description Bozeman, MT Billings, MT Missoula, MT Fort Collins, CO Boulder, CO Bend, OR Demographics Population (2020)53,293 117,116 73,489 169,810 108,250 99,178 Median Age (2019)27.8 37.6 34.6 30.6 28.9 39.8 % Renters (2019)57%37%53%47%52%40% Household Income Owner $88,983 $73,100 $73,396 $95,423 $117,808 $80,785 Renter $39,516 $37,956 $32,640 $41,632 $41,876 $47,962 All Households $55,569 $59,656 $47,426 $65,866 $69,520 $65,662 Employment # of Jobs (2020)29,035 53,519 38,938 94,563 59,744 50,225 Top 3 Sectors #1 Retail Health Care Health Care Health Care Prof. & Tech Svcs.Health Care #2 Health Care Retail Trade Retail Trade Education Education Retail Trade #3 Hotel/Restaurant Accom. & Food Svcs.Accom. & Food Svcs.Accom. & Food Svcs.Manufacturing Accom. & Food Svcs. Top 3 Growth Sectors ('15-'20) #1 Health Care Health Care Construction Health Care Prof. & Tech Svcs.Health Care #2 Prof. & Tech Svcs.Finance & Insurance Prof. & Tech Svcs.Information Manufacturing Construction #3 Construction Transp. & Ware.Health Care Construction Health Care Accom. & Food Svcs. Higher Education Major Colleges/Universities Montana State University Montana State University University of Montana Colorado State University University of Colorado Oregon State University Enrollment (Fall 2020)16,249 4,000 10,015 32,646 34,975 33,359 % of Total Population 30.5%3.4%13.6%19.2%32.3%33.6% Source: U.S. Census; BLS; ESRI; LEHD; Economic & Planning Systems 16 Economic & Planning Systems, Inc. 213051-Draft Report_12-14-21 6 2. Economy Economic Trends The City of Bozeman has a diverse economy driven by key segments that distinguish it from other midsize cities. While retail trade and hotels and restaurant are large sectors, Bozeman and Gallatin County also have significant numbers of jobs in health care, manufacturing, professional and technical services, finance and insurance, and business services (admin./waste mgt. services) (Figure 2). The largest employers in the City, each with over 1,000 employees, include Montana State University and Deaconess Hospital. As of 2020, there were approximately 59,071 private wage and salary jobs in the County and at least 90,000 total jobs including proprietors and government (including MSU). About half of the jobs in the County are within the City of Bozeman. Figure 2. Private Wage and Salary Employment, Bozeman and Gallatin County, 2020 Between 2015 and 2020, Gallatin County added 7,012 private wage and salary jobs (2.8 percent per year), with Bozeman capturing approximately 40 percent of the growth. Employment growth was driven by Construction, Professional and Technical Services, and Health Care (Figure 3). Construction jobs, which are largely cyclical, experienced the third-highest amount of job growth in the County, and were driven by large-scale projects in Big Sky. 5,592 4,220 1,983 5,061 2,772 1,570 1,449 887 754 1,139 511 520 508 514 62 461 8,197 6,920 6,413 5,994 4,829 3,599 2,323 2,260 1,819 1,619 1,463 1,302 1,197 834 701 698 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 Retail Trade Hotel/Restaurant Construction Health Care Prof. & Tech Services Manufacturing Other Admin/Waste Mgmt Wholesale Trade Finance/Insurance Arts/Rec Transport./Warehousing Real Estate Education Ag./Forest/Hunting Information Total Jobs Bozeman Gallatin Source: Bureau of Labor Statistics; Economic& Planning Systems 17 Economic & Planning Systems, Inc. 7 Figure 3. Employment Growth, Bozeman and Gallatin County, 2015-2020 Apart from the spike in unemployment due to COVID-19, Bozeman and Gallatin County have seen a steady decline in the unemployment rate mirroring trends seen across Montana (Figure 4). In September 2021, Bozeman and Gallatin County both had unemployment rates of 1.3 to 1.9 percent, historic lows. Figure 4. Unemployment Rate, 2010-2021 YTD 539 671 715 168 364 112 251 87 35 151 88 -44 92 1,659 934 881 613 562 530 329 317 237 177 172 147 120 -200 0 200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Construction Prof. & Tech Services Health Care Retail Trade Manufacturing Admin/Waste Mgmt Other Real Estate Wholesale Trade Education Finance/Insurance Ag./Forest/Hunting Information Job Growth Bozeman Gallatin Source: Bureau of Labor Statistics; Economic& Planning Systems 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Unemployment Rate Bozeman Gallatin County Montana Source: BLSLAUS; Economic& Planning Systems 18 Bozeman Economic and Market Update 8 MAJOR EMPLOYERS EMPLOYER NAME INDUSTRY/ EMPLOYMENT TYPE NUMBER OF EMPLOYEES Bozeman Deaconess Hospital Health Care 1,000+ Montana State University Education 1,000+ Belgrade School District Education 500-999 Bozeman School District Education 500-999 Gallatin County Government 500-999 Oracle Prof. and Tech Svcs. 500-999 City Of Bozeman Government 250-499 Kenyon Noble Lumber & Hardware Retail Trade 250-499 Town Pump Convenience Stores Retail Trade 250-499 Wal Mart Retail Trade 250-499 Zoot Enterprises Prof. and Tech Svcs. 250-499 Albertson's Retail Trade 100-249 Target Retail Trade 100-249 Bridger Bowl Ski Resort 100-249 Community Food Co-Op Retail Trade 100-249 Costco Retail Trade 100-249 First Security Bank Finance/Insurance 100-249 First Student Education 100-249 Reach Inc. Health Care 100-249 McDonald’s Acc. and Food Svcs. 100-249 Murdoch's Ranch & Home Supply Retail Trade 100-249 Ressler Motor Retail Trade 100-249 Simms Fishing Products Retail Trade 100-249 Town & Country Foods Retail Trade 100-249 Williams Plumbing & Heating Construction 100-249 19 Economic & Planning Systems, Inc. 9 Wages Between 2015 and 2020 Gallatin County had robust wage growth averaging 5.4 percent per year (Table 4). Average wages in professional and technical service jobs grew at 5.6 percent per year, increasing from $67,000 to $87,000 per year. Growth in technology and professional jobs has been a major factor in the evolution of Bozeman and the surrounding area. Table 4. Job and Wage Growth, Top Sectors, Gallatin County An analysis of job growth by wage quartile from 2015 through 2020 shows that 47 percent of new jobs in Gallatin County were in the 50 to 75th percentile of wages, at $52,208 to $66,066 per year (Figure 5). These are good paying jobs at hourly rates of $25 to $32 per hour. In addition, 22 percent of jobs added between 2015 and 2020 were between the 75 and 100th percentile of wages, at $66,066 to $89,804 per year. Large wage drivers include jobs in construction, health care, and professional/technical services. Figure 5. Change in Employment by wage quartile, Gallatin County, 2015-2020 ` Description All Jobs/Sectors 6,568 $38,748 $50,313 5.4% Construction 1,659 $46,904 $59,904 5.0% Prof. & Tech Services 934 $66,664 $87,464 5.6% Health Care 881 $44,876 $56,056 4.5% Retail 613 $29,328 $37,960 5.3% Manufacturing 562 $41,496 $53,508 5.2% Admin/Waste Mgmt.530 $32,396 $39,000 3.8% Source: Bureau of Labor Statistics QCEW; Economic & Planning Systems 2015-2020 Job Growth 2015 Avg. Wage Annual Wage Growth 2020 Avg. Wage 689, 10% 1,024, 16% 3,656, 56% 1,199, 18% 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 0-25% ($0-$39,104)25-50% ($39,104-$52,208)50-75% ($52,208-$66,066)75-100% ($66,066-$89,804) Source: Economic& Planning Systems 20 Bozeman Economic and Market Update 10 Economic Drivers The regional workforce is highly skilled and well educated. Approximately 59.8 percent of Bozeman’s workforce has a bachelor’s degree or higher (Table 5). The presence of MSU and the high concentration of professional and high skill jobs— such as technology and health care—are drivers of the highly educated local workforce. Places with a high quality of life are also able to attract skilled labor. Highly educated skilled workers have more choices and flexibility in where they choose to work and live. Table 5. Educational Attainment, Bozeman, 2021 When compared to select peer cities, Bozeman has the highest percentage of its population that has a bachelor’s degree, and the second highest percentage of its population that has a bachelor’s degree or higher, second only Boulder, Colorado. Description Bozeman Billings Missoula Fort Collins Boulder Bend High School or Less, No Diploma 1.9%4.7%3.2%3.2%2.6%4.0% High School Grad or Equivalent 12.4%28.3%17.9%15.0%5.9%17.0% Some College, No Degree 19.9%21.6%20.1%16.6%10.0%22.9% Associate's Degree 6.0%8.4%8.4%8.2%3.7%10.2% Bachelor's Degree 38.8%26.2%32.0%32.8%36.9%28.0% Grad/Prof. Degree 21.0%10.7%18.4%24.1%40.9%17.8% Total 100.0%100.0%100.0%100.0%100.0%100.0% Bachelor's Degree or Higher 59.8%36.9%50.4%57.0%77.8%45.8% Source: U.S. Census; ESRI Business Analyst; Economic & Planning Systems Percent of Total Population 21 Economic & Planning Systems, Inc. 11 3. Commercial Real Estate This chapter provides an overview of the commercial real estate trends and conditions in Bozeman and Gallatin County. This analysis includes a summary of the total inventory, rental rates, and vacancy rates. Commercial real estate data comes from CoStar which, in Bozeman, does not include a complete inventory but is useful for general trends and information on market conditions. Office Market Trends From 2010 to the fourth quarter of 2021, total office space in Gallatin County grew by 657,484 square feet, or an annual average of 59,771 square feet (Table 6). The City of Bozeman is the office space center in the County, with over 90 percent of office inventory in 2021. In addition, Bozeman captured nearly 88 percent of new office development since 2010. Rental rates in Bozeman increased steadily over the past decade by a total of $9.59 per square foot, and as of the fourth quarter of 2021, reached an average of $20.94 per square foot. Average vacancy rates for office space in Gallatin County and Bozeman have remained under 4.2 percent over the past decade, as a majority of properties in Bozeman have reached stabilization. As of the fourth quarter of 2021, average vacancy in the County averaged 3.8 percent, while vacancy in the City was slightly higher, at 4.2 percent. Table 6. Office Summary Description 2010 2015 2020 2021 Total Ann. #Ann. % Inventory Bozeman 2,490,762 2,561,763 3,046,337 3,067,513 576,751 52,432 1.9% Gallatin County 2,720,990 2,871,924 3,357,298 3,378,474 657,484 59,771 2.0% Pct. Of County 91.5%89.2%90.7%90.8%87.7% Avg. Rent Bozeman $11.35 $15.29 $21.09 $20.94 $9.59 $0.87 5.7% Gallatin County $11.39 $15.00 $21.06 $20.90 $9.51 $0.86 5.7% Avg. Vacancy Bozeman 3.0%3.7%3.6%4.2%1.2%0.1%3.1% Gallatin County 3.0%3.3%3.4%3.8%0.8%0.1%2.2% Source: CoStar; Economic & Planning Systems 2010-2021 22 Bozeman Economic and Market Update 12 Recent office construction in Bozeman has generally been concentrated to the west of the city along Hwy. 191, and to the northeast, along I-90. Notable deliveries since 2018 include the 26,300 square foot AED building (software development) that came online in early 2020 along Hwy. 191. In addition, a 17,305 square foot office building in northeast Bozeman delivered along Hwy. 191 in 2019. The building has strong access to I-90 and is occupied by Payne West Insurance. Other notable projects are detailed below. Industry – Industry is an 87,000 square foot collaborative workspace and incubator building proposed by the developer of Industry in the River North neighborhood in Denver, CO. This is one of the largest proposed office buildings in Bozeman. The project will bolster MSU’s 42-acre Innovation Campus, with goals of providing workplace innovation and creating open collaboration between local and national enterprise in conjunction with MSU. Cannery District – In addition, the Cannery District project is underway with approximately 111,000 square feet of office and retail space available to rent along Oak and Rouse Avenue. The project includes the 52-unit Cannery Flats multifamily project, which delivered in 2020. 23 Economic & Planning Systems, Inc. 13 Industrial/Flex Market From 2010 to the fourth quarter of 2021, industrial space in Gallatin County grew by 437,046 square feet, or an average of 39,731 square feet (Table 7). Over the past decade, Bozeman captured just 37.2 percent of industrial growth in the county, as lower land costs outside the city are attractive to some types of heavier industrial uses. There is still a market in Bozeman however for higher value industrial uses and flex/R&D space, especially for companies that want the Bozeman location and City’s robust municipal infrastructure and amenities. Table 7. Industrial Summary, Gallatin County, 2010-2021 Over the past decade, rents grew by 4.5 percent annually in Gallatin County, while Bozeman experienced modest rental growth of 1.0 percent. As of the fourth quarter of 2021, industrial rents in Bozeman averaged $10.43 per square foot and $11.29 in Gallatin County. Vacancy for both the City and County has generally decreased since 2012 and remained under 4.0 percent since 2015. Description 2010 2015 2020 2021 Total Ann. #Ann. % Inventory Bozeman 1,509,654 1,521,993 1,672,228 1,672,228 162,574 14,779 0.9% Gallatin County 2,589,125 2,603,264 2,975,171 3,026,171 437,046 39,731 1.4% Pct. Of County 58.3%58.5%56.2%55.3%37.2% Avg. Rent Bozeman $9.35 $6.12 $10.64 $10.43 $1.08 $0.10 1.0% Gallatin County $6.96 $5.70 $10.98 $11.29 $4.33 $0.39 4.5% Avg. Vacancy Bozeman 3.6%2.5%0.8%0.6%-3.0%-0.3%-15.0% Gallatin County 3.6%3.7%0.5%1.7%-1.9%-0.2%-6.6% Source: CoStar; Economic & Planning Systems 2010-2021 24 Bozeman Economic and Market Update 14 Notable sites that could drive industrial development include Pole Yard, North Park, and Nelson Meadows, as detailed below: Pole Yard Urban Renewal District – An 87-acre site located between Interstate 90 corridor and Montana Rail Link right-of-way. Portions of the site include a partially delisted Superfund site owned by the Idaho Pole Company. There are environmental restrictions that limit residential development at the property, and any restrictions must be approved by the EPA and Montana Department of Environmental Quality (DEQ). Nevertheless, the site could still foster commercial development activity in the future. North Park Urban Renewal District – A 275- acre area in north Bozeman east of I-90 and west of Frontage Road. The site is currently vacant, but previous plans at the site have included 790,000 square feet of light industrial space and nearly 500,000 square feet of flex space. Nelson Meadows Business Park – A master planned commercial subdivision located in northwest Bozeman at the corner of Nelson Road and Frontage Road. The site is comprised of 27 building lots that vary in size from 0.7 acres to 5.27 acres. The site has direct access to I-90 and is zoned M-1 for Light Manufacturing. As of December 2021, 23 of the 27 lots were under contract or sold. 25 Economic & Planning Systems, Inc. 15 Retail Market The City of Bozeman is the regional trade hub for Gallatin County and a roughly 50 mile radius. The City has over 85 percent of the County’s retail inventory as of the fourth quarter of 2021 (Table 8). In addition, nearly 93 percent of retail space that delivered in Gallatin County since 2010 was in Bozeman. Table 8. Retail Summary, Gallatin County, 2010-2021 Average rents for retail space in the City currently average $22.31 per square foot, slightly higher than rents witnessed in the broader County, which recorded at $22.06 per square foot. Rents in the City and County have both grown steadily since 2010, growing by 3.1 percent and 3.0 percent respectively. Average vacancy for retail space in Bozeman has been notably low since 2010, and averages 2.2 percent as of the fourth quarter of 2021. There are a wide variety of national grocery chains, big box retailers, and smaller local stores. There are eight full service supermarkets (including the Walmart Supercenter, and a Whole Foods currently under construction) in Bozeman plus several smaller specialty food stores and independent grocers such as the Community Food Co-op. Recent deliveries include the 75,000 square foot Winco that delivered in early 2021, and a 50,000 square foot Costco expansion. Bozeman also has several national general merchandise and home improvement anchor retailers including Costco, Target, Home Depot, Lowes, Kohls, and Macy’s. Description 2010 2015 2020 2021 Total Ann. #Ann. % Inventory Bozeman 4,501,345 4,835,713 5,032,178 5,032,178 530,833 48,258 1.0% Gallatin County 5,337,650 5,706,258 5,909,458 5,909,458 571,808 51,983 0.9% Pct. Of County 84.3%84.7%85.2%85.2%92.8% Avg. Rent Bozeman $15.97 $13.65 $21.23 $22.31 $6.34 $0.58 3.1% Gallatin County $15.99 $13.58 $21.00 $22.06 $6.07 $0.55 3.0% Avg. Vacancy Bozeman 1.8%3.3%1.6%2.2%0.4%0.0%1.8% Gallatin County 1.9%2.9%1.5%1.9%0.0%0.0%0.0% Source: CoStar; Economic & Planning Systems 2010-2021 26 Bozeman Economic and Market Update 16 A major retail repositioning project underway is the redevelopment of the Gallatin Valley Mall. Whole Foods will be a new anchor for the redevelopment, plus the existing Macy’s, Barnes & Noble, Regal Cinemas, and JoAnn Fabrics. The redevelopment strategy includes an additional 15,000 square feet of retail space, with a general concept of creating public gathering space, a main street feel, and a broad mix of tenants and entertainment. 27 Economic & Planning Systems, Inc. 17 BOZEMAN RETAIL INVENTORY DESCRIPTION STORE TYPE AVG. SQ.FT. DESCRIPTION STORE TYPE AVG. SQ.FT. Supermarkets and Grocery Stores Shoppers’ Goods Walmart Supercenter 220,000 Costco Wholesale 150,000 WinCo 85,000 Target 120,000 Town & Country Foods (2 stores) 70,000 Kohls 60,000 Safeway 65,000 Macy's 50,000 Albertsons 65,000 Sportsman's Warehouse 50,000 Smith's 50,000 Wholesale Sports 50,000 Rosauers 50,000 Dollar Spree 50,000 Whole Foods (Under Construction) 30,000 Dollar Tree 50,000 Huckleberry's Natural Market 20,000 REI 25,000 Heebs East Main Grocery 10,000 T.J. Maxx 20,000 Community Food Co-op 10,000 Ross 20,000 Other Shopper's Goods Sears Gallatin Valley Furniture 35,000 JCPenney 20,000 Barnes and Noble 20,000 Play it Again Sports 20,000 Office Depot 20,000 Gap Outlet 10,000 Staples 20,000 Joann 10,000 Petco Animal Supplies 20,000 White House Black Market 10,000 PetSmart 20,000 Building Material and Garden Mattress King 10,000 The Home Depot 150,000 Lowe's Home Improvement 150,000 Kenyon Noble Lumber and Hardware 100,000 Murdoch's Ranch & Home Supply 50,000 28 Economic & Planning Systems, Inc. 213051-Draft Report_12-14-21 18 4. Housing This chapter provides an overview of the housing market in Bozeman. It summarizes building permit trends, home prices, the rental market, and key affordability indictors. Construction Between 2014 and 2020, the City of Bozeman issued approximately 5,600 residential building permit units (Table 9) which is an average of 800 per year since 2014. 2020 was the highest year with 945 new construction permits issued. Bozeman has a high percentage of multifamily and condominium construction at 62 percent over this time period. This trend is driven by student demand, young workforce demand, and investor and second homeowner demand. Bozeman is popular among affluent people who visit Big Sky frequently or own a home there and wish to have a jumping off point close to the airport and to experience Bozeman city life. Table 9. Bozeman Building Permit Unit Trends Description 2014 2015 2016 2017 2018 2019 2020 Total Avg.% Single Family 252 263 300 350 229 167 150 1,711 244 30.5% Multifamily /Condo 350 497 356 420 593 546 734 3,496 499 62.4% Townhome 73 22 73 53 37 78 61 397 57 7.1% Total 675 782 729 823 859 791 945 5,604 801 100.0% Source: Economic & Planning Systems 2014-2020 29 Economic & Planning Systems, Inc. 19 Housing Prices Greater Bozeman has seen unprecedented appreciation in home prices. The largest increases occurred between 2020 and 2021 (YTD) with an almost 30 percent increase (Table 10). The median home price in the city is now about $700,000 compared to $359,500 in 2016. This rapid increase is likely not sustainable as it is related to amenity migration away from large metro areas during the COVID-19 pandemic. However, Bozeman has seen steady and rapid appreciation over the past six years averaging 14.4 percent per year on the average sale price. The surrounding communities and entire county have also experienced similar trends with prices essentially doubling over the past six years. The increase in prices has serious implications for affordability and workforce attraction and retention and quality of life. From an investor standpoint it indicates robust demand, tight supply, and opportunities to develop in a strong market. The City is interested in ways to increase the housing supply responsibly in a way that maintains community character. Table 10. Home Price Trends, 2016-2021 Description 2016 2017 2018 2019 2020 2021 Total Ann. %YTD Oct. Median Sales Price Bozeman $359,500 $381,500 $427,500 $460,000 $540,000 $700,000 $340,500 14.3% Belgrade $255,000 $287,250 $320,000 $340,950 $375,000 $520,000 $265,000 15.3% Greater Manhattan $280,000 $307,000 $389,000 $416,000 $564,750 $620,000 $340,000 17.2% Gallatin County $310,000 $331,150 $374,660 $397,500 $439,900 $675,000 $365,000 16.8% Average Sales Price Bozeman $399,912 $425,992 $478,343 $513,704 $590,742 $784,355 $384,443 14.4% Belgrade $283,624 $322,039 $361,505 $390,600 $423,023 $629,816 $346,192 17.3% Greater Manhattan $338,831 $373,322 $426,166 $463,858 $667,156 $777,303 $438,472 18.1% Gallatin County $391,363 $435,596 $493,734 $536,359 $672,724 $972,050 $580,687 20.0% Source: Gallatin Association of Realtors; Economic & Planning Systems 2016-2021 30 Bozeman Economic and Market Update 20 Apartment Market Apartment and other commercial real estate market information comes from the CoStar database, a national real estate data subscription service. CoStar became more active in the Bozeman market about five years ago and has basic market information but may not capture the full inventory. In addition, CoStar focuses on “investment grade” properties and may exclude smaller and lower value assets. CoStar reports about 3,600 apartment units (in apartment buildings; does not include all rented housing units) and inventory growth of about 100 units per year on average (Table 11). The market has had consistently low vacancy since 2010 when the vacancy rate was under 5.0 percent. In 2021 the vacancy rate is reported at 2.1 percent, which indicates that the market is undersupplied with rental housing. More supply is needed to provide more housing to the labor force and to ease pressure on rising rental rates. Table 11. Multifamily Summary, Gallatin County Description 2010 2015 2020 2021 Total Ann. #Ann. % Inventory Bozeman 2,507 2,963 3,620 3,620 1,113 101 3.4% Gallatin County 3,047 3,516 4,189 4,189 1,142 104 2.9% Pct. Of County 82.3%84.3%86.4%86.4%97.5% Avg. Rent (per sq.ft.) Bozeman $1.19 $1.30 $1.55 $1.72 $0.53 $0.05 3.4% Gallatin County $1.18 $1.29 $1.53 $1.70 $0.52 $0.05 3.4% Avg. Rent (monthly) Bozeman $1,079 $1,175 $1,400 $1,557 $478 $43 3.4% Gallatin County $1,060 $1,153 $1,376 $1,526 $466 $42 3.4% Avg. Vacancy Bozeman 4.4%5.9%4.2%2.2%-2.2%-0.2%-6.1% Gallatin County 4.2%5.5%3.8%2.1%-2.1%-0.2%-6.1% Source: CoStar; Economic & Planning Systems 2010-2021 31 Economic & Planning Systems, Inc. 21 Between 2015 and 2020 approximately 650 units were added to the inventory, most of which are in the five new projects listed below (Table 12). Table 12. Recent Multifamily Development Summary, Bozeman Four luxury projects have come online with rents of approximately $2,300 to $2,600 per month which is about $1,000 above the market average indicating that the Bozeman market can support high end product. The Icon Apartments have large units (2 bedroom ranges from 1,000 to 1,200 sq. ft.) with amenities such as a pool and fitness center. The One 11 Lofts and Black Olive properties are mixed use apartments in Downtown Bozeman. Creekside is a more conventional property located in a retail district near North 19th Ave and I-90. Name Address Year Built Units Per Unit Notable Deliveries Icon Apartment Homes 4555 Fallon St 2020 216 $2,341 Creekside Apartments 3266 N 27th Ave 2020 142 $1,744 One 11 Lofts 111 W Lamme St 2020 55 $2,577 Black Olive 110 E Olive St 2019 47 $2,565 Total/Average 460 $2,307 Source: CoStar; Economic & Planning Systems Avg. Effective Rent Icon Apartments One 11 Lofts Black Olive Apartments Creekside Apartments 32 Bozeman Economic and Market Update 22 Affordability The rapid increases in housing prices has priced many people out of the market. In 2016, a household earning about 120 percent of the HUD area median income (AMI) could afford the median priced home. In 2020, a household needed to earn 171 percent of AMI to afford a median priced home and 219 percent of AMI in 2021. The combination of a shortage of inventory, a spike in construction costs, and pandemic related migration have driven up housing prices sharply. Increasing the supply of housing will be important to addressing the shortage of attainable and affordable housing. Table 13. Required Annual Income to Afford Median Home Price, 2016-2021 In 2016 the income levels needed to afford the median priced home were at 80 to 100 percent of AMI (Figure 6). In 2021 there are income gaps at all AMI levels below about 220 percent of AMI. Households earning 150 percent of AMI ($103,880) would still need to earn another $38,000 per year to afford the median priced home (Figure 7). Bozeman Factor 2016 2017 2018 2019 2020 2021 YTD Oct Median Home Price $359,500 $381,500 $427,500 $460,000 $540,000 $700,000 Mortgaged Amount (less: downpayment)5.0% down pmt $341,525 $362,425 $406,125 $437,000 $513,000 $665,000 Mortgage Interest Rate 4.5% int.4.5% int.4.5% int.4.5% int.4.5% int.4.5% int. Loan Term 30-years 30-years 30-years 30-years 30-years 30-years Monthly Costs Mortgage Payment (Monthly)$1,730 $1,836 $2,058 $2,214 $2,599 $3,369 Less: Insurance $1,500 / Year $125 $125 $125 $125 $125 $125 Less: Property Taxes 0.9%$270 $286 $321 $345 $405 $525 Less: Miscellaneous $500 / Year $42 $42 $42 $42 $42 $42 Total Monthly Housing Costs $2,167 $2,289 $2,545 $2,726 $3,171 $4,061 Required Annual Income 30%$86,670 $91,566 $101,803 $109,035 $126,838 $162,445 AMI for Family of 4 117%123%137%147%171%219% [1] rounded to nearest major AMI category Source: US Census; Economic & Planning Systems 33 Economic & Planning Systems, Inc. 23 Figure 6. Income Gap to Afford Median Priced Home, Bozeman, 2016 Figure 7. Income Gap to Afford Median Priced Home, Bozeman, 2021 In housing policy, a household is defined as cost burdened when they are paying more than 30 percent of their income towards rent or mortgage payments. Among renters there is a large amount of cost burdened households – more than half of all renters. About a quarter of Bozeman homeowners are cost burdened and the American Community Survey estimates these households declined slightly from 2010 through 2019. The data mostly reflect people who already own their homes and have not caught up with new buyers in the market at the higher prices noted above. $59,360 $74,200 $89,040 $103,880 $27,310 $12,470 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 80%100%120%150% AMI (2.5-person household) AMI (4-person household)Gap Source: U.S.Census; Economic & Planning Systems $86,670 Income Required to Afford Median Home Price (2016) $71,120 $88,900 $106,680 $124,460$91,325 $73,545 $55,765 $37,985 $0 $20,000 $40,000 $60,000 $80,000 $100,000 $120,000 $140,000 $160,000 $180,000 80%100%120%150% AMI (2.5-person household) AMI (4-person household)Gap Source: U.S.Census; Economic & Planning Systems $162,445 Income Required to Afford Median Home Price (2021) 34 Bozeman Economic and Market Update 24 Housing Demand In this section, a housing demand projection is provided to inform the City as well as real estate interests on the growth potential and need in Bozeman. The projection links job growth to housing demand and estimates that the City needs nearly 900 housing units annually (Table 14) just to keep up with job growth at 2.0 percent per year (compared to 2.8 percent annual growth over the past five years). However, there are other strong market demand drivers that need to be accounted for. The degree of price appreciation seen indicates that there are external factors at work that are constraining the supply of housing. These factors are difficult to account for as they are not apparent in the available housing and economic data. First, because Bozeman is becoming more of a destination for second homeowners and part time residents an additional 10 percent is added to the demand estimate. Second, remote worker in-migration is occurring. There is no data available today that tracks remote workers because their paychecks are associated with the physical off location of their job. We have added another 10 percent to the demand projections. In total, we estimate that the City can support demand for over 1,000 housing units per year (Table 14). A potential housing mix based on past construction and goals of supporting small homes and infill construction is suggested as well (Table 15). Table 14. Bozeman Housing Demand Projection Description Factor 2020 2030 Total Annual Total Jobs - Gallatin County 2.5%94,550 121,030 26,480 2,648 Less: Proprietor Jobs Overcount [1]-10.0%-9,460 -12,100 -2,640 -264 Employed People 1.10 jobs/empl.77,355 99,027 21,673 2,167 Employed Households 1.30 jobs/household 59,500 76,170 16,670 1,667 Normal Vacancy Adjustment 5%3,130 4,010 Housing Units - Gallatin County 62,630 80,180 17,550 1,755 Baseline Demand - Bozeman Bozeman Market Share 50.0%31,320 40,090 8,770 877 Other Market Influences Part Time Residence Adjustment 10%974 In-migration and remote worker adjustment 10%1,083 [1] Counting of partnerships and LLCs in Bureau of Economic Analysis data often results in double counting of employees. Source: Economic & Planning Systems 2020-2030 35 Economic & Planning Systems, Inc. 25 Table 15. Bozeman Housing Demand Projection Description Factors 2020-2025 2026-2030 Total Annual New Unit Demand in Bozeman 1,083/yr.5,414 5,414 10,827 1,083 Bozeman Construction Projection Single-Family (Detached)35.0%1,895 1,895 3,790 379 Townhome/Triplex/Duplex 30.0%1,624 1,624 3,248 325 Multifamily 35.0%1,895 1,895 3,790 379 Total 100.0%5,414 5,414 10,827 1,083 [1] Mobile homes and other miscellaneous housing types are not included Source: Economic & Planning Systems 36 Memorandum REPORT TO:Economic Vitality Board FROM:Jesse DiTommaso, Economic Development Specialist Brit Fontenot, Economic Development Director SUBJECT:Seat at the Table Presentation MEETING DATE:May 4, 2022 AGENDA ITEM TYPE:Plan/Report/Study RECOMMENDATION:Listen and ask questions regarding the Seat at the Table presentation STRATEGIC PLAN:1.1 Outreach: Continue to strengthen and innovate in how we deliver information to the community and our partners. BACKGROUND:Tanya Andreasen from One Valley Community Foundation will present outcomes from the county-wide community engagement initiative called A Seat at the Table, held last fall. A Seat at the Table 2021 focused community conversations and data gathering on housing affordability and attainability for those who work, live, and do business in Gallatin County. The outcomes report along with a resource that gives a snapshot of current housing work and projects are both available at onevalley.org/regionalhousing. Outcomes are meant to communicate lived experiences of participants and their ideas about housing solutions to decision makers and funders. UNRESOLVED ISSUES:None. ALTERNATIVES:None. FISCAL EFFECTS:None. Report compiled on: April 27, 2022 37 Memorandum REPORT TO:Economic Vitality Board FROM:Renata Munfrada, Community Housing Program Coordinator David Fine, Economic Development Manager for Housing and Development Brit Fontenot, Director of Economic Development Department SUBJECT:Provide recommendation to the City Commission regarding Ordinance 2111, Administrative Departures for Housing Creation and to Define Infill and Missing Middle Housing MEETING DATE:May 4, 2022 AGENDA ITEM TYPE:Ordinance RECOMMENDATION:I move to recommend approval of Ordinance 2111 to the Bozeman City Commission. STRATEGIC PLAN:4.5 Housing and Transportation Choices: Vigorously encourage, through a wide variety of actions, the development of sustainable and lasting housing options for underserved individuals and families and improve mobility options that accommodate all travel modes. BACKGROUND:The 2019 City of Bozeman Community Housing Needs Assessment identified a need for between 5,400 and 6,340 housing units over the next five years to address the City's current housing shortfall. Within this shortfall, there is a significant demand for units priced below market rate. While increasing the supply of housing will not, by itself, guarantee that housing becomes more affordable, it is very unlikely affordability can be improved without an increase in housing supply. Increased supply allows Bozeman residents more opportunities to move to different units that better suit their needs in both existing neighborhoods and new development. Departures are an existing tool used to allow alternative compliance with adopted standards. It is difficult to imagine every possible outcome for a standard when applied to specific properties. Departures allow for minor adjustments consistent with the purpose of a standard and integrate within existing review processes to "smooth the edges" while retaining the integrity of the standards. Clarion is suggesting some modest departures to provide flexibility that can allow market rate developments to be completed more affordably, within the spirit of the existing code standards. Examples of departures include marginal flexibility related to setbacks, building height, lot coverage, parking, and private open space requirements. Application of these new departures will primarily be administrative. 38 Departures for housing creation allow City staff to approve development that meets a less restrictive standard than usually applies to building home; including allowing a smaller lot size, fewer parking spaces, home size, and others established in the new wording. The additional flexibility is limited to specific purposes and only applies to the standards and as far as established in the new Departures section. Review of requested Departures is coordinated with whatever review process is relevant to the requested construction. The intent of this amendment is to make it easier to construct homes, especially additional homes within already developed areas and homes of types where there are fewer than desirable to support a broad range of housing options in Bozeman. The intent of this provision is to allow minor departures from existing residential development standards when the review authority determines that the departure will reduce the cost of production of and an increased production of housing while maintaining consistency with the City's adopted growth policy and purposes of Chapter 38 of the Unified Development Code. These departures are especially applicable to infill sites and missing middle housing. The review authority may approve departures from residential standards if the review authority determines that the criteria outlined in Ordinance 2111 have been met. Approval of a departure authorizes development with a different standard that in otherwise required. The Community Housing Program of the Economic Development Department is requesting the Economic Vitality Board consider Ordinance 2111, an ordinance to create departures for housing creation, establishing a new method of departures to authorize additional flexibility in the administration of specified residential standards, amending Bozeman Municipal Code, and make a recommendation to the City Commission. Public Hearings to consider the text amendment to revise Chapter 38 of the Unified Development Code to create departures for housing creation and to define infill and missing middle housing will be held in order for the public to provide comment. On Monday, May 16, 2022 at 6:00 p.m., the Community Development Board, acting in their capacity as the Zoning Commission, will conduct a public hearing. On Tuesday, June 7, 2022 at 6:00 p.m., the City Commission will conduct a public hearing. At the City Commission's public hearing the City Commission may act to approve, modify, or reject the proposal or continue the public hearing to another date. UNRESOLVED ISSUES:None at this time. ALTERNATIVES:As recommended by the Economic Vitality Board. FISCAL EFFECTS:None at this time. Attachments: Ordinance 2111 Departures Draft.pdf 39 Notice of Public Hearing Departures to Unified Development Code.pdf Report compiled on: April 29, 2022 40 Ord 2111 Page 1 of 7 ORDINANCE 2111 (DRAFT) AN ORDINANCE OF THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA TO CREATE 38.320.070, DEPARTURES FOR HOUSING CREATION, ESTABLISHING A NEW METHOD OF DEPARTURES TO AUTHORIZE ADDITIONAL FLEXABILITY IN THE ADMINISTRATION OF SPECIFIED RESIDENTIAL STANDARDS, AMENDING 38.700.100, I DEFINTIONS, AMENDING 38.700.120, M DEFINTIONS, AND PROVIDING AN EFFECTIVE DATE, APPLICATION 22133. WHEREAS, the City of Bozeman (the “City”) has adopted land development and use standards to protect public health, safety and welfare and otherwise execute the purposes of Montana Code Annotated §§ 76-1-102, 76-2-304, 76-3-102, and 76-3-501; and WHEREAS, after proper notice, the Community Development Board in their capacity as Bozeman Zoning Commission held a public hearing on May 16, 2022 to receive and review all written and oral testimony on the proposed amendments; and WHEREAS, the Community Development Board acting in their capacity as the Bozeman Zoning Commission recommended to the Bozeman City Commission that application No. 22133, be approved as proposed; and WHEREAS, after proper notice, the City Commission held its public hearing on June 7, 2022, to receive and review all written and oral testimony on the proposed amendment to the subdivision regulations; and WHEREAS, the City Commission has reviewed and considered the applicable amendment criteria established in Montana Code Annotated § 76-2-304, and found that the proposed amendments are in compliance with the criteria. NOW THEREFORE, BE IT ORDAINED BY THE CITY COMMISSION OF THE CITY OF BOZEMAN, MONTANA: Section 1 Legislative Findings The City Commission hereby makes the following findings in support of adoption of this Ordinance: 41 Ordinance No. 2106, Departures for Housing Creation Page 2 of 7 1. The City has adopted land development and use standards to protect public health, safety and welfare and otherwise execute the purposes of Montana Code Annotated §§ 76-1-102, 76-2- 304, 76-3-102, and 76-3-501. 2. The City adopted a growth policy, the Bozeman Community Plan 2020 (BCP 2020), by Resolution 5133 to establish policies for development of the community which policies include support for infill and redevelopment, increased density of homes, and housing diversity. 3. Zoning and subdivision regulations must be in accordance with the adopted growth policy; and the growth policy encourages development of standards to encourage infill development and incremental increases in residential density in existing developed areas. 4. The City accepted as a basis for housing implementation actions an amended Community Housing Action Plan by Resolution 5143. 5. The City undertook a public process to review and consider possible revisions to the City zoning regulations with the intent to remove potential barriers and to encourage creation of additional housing and especially housing which accomplishes community aspirations identified in the growth policy and the Community Housing Action Plan. 6. The City Commission conducted a work session on March 1, 2022 to receive public comment, consider alternative options, and provide direction to staff during which work session they directed preparation of amendments in the form of those included with this ordinance. 7. A staff report analyzing the required criteria for an amendment to the City’s regulations for zoning review, including the amendment’s accordance with the BCP 2020, and has found that the required criteria of Montana Code Annotated § 76-1-304 are satisfied. 8. The necessary public hearings were advertised as required in state law and municipal code and all persons have had opportunity to review the applicable materials and provide comment. 9. The City Commission considered the application materials, staff analysis and report, recommendation of the Community Development Board acting in their capacity as the municipal Zoning Commission, all submitted public comment, and all other relevant information. 10. The City Commission determines that, as set forth in the staff report and incorporating the staff findings as part of the decision, the required criteria for approval of this ordinance are satisfied. 42 Ordinance No. 2106, Departures for Housing Creation Page 3 of 7 11. The City Commission determines that the ordinance provides a proper balance of interests, rights, and responsibilities of all parties affected by the ordinance. Section 2 That Section 38.320.070, Departures for Housing Creation, of the Bozeman Municipal Code be created to read as follows: 38.320.070, Departures for Housing Creation A. Intent. The intent of this provision is to allow minor departures from existing residential development standards when the review authority determines that the departure will reduce the cost of production of and an increase production of housing while maintaining consistency with the City’s adopted growth policy and purposes of this chapter. These departures are especially applicable to infill sites as defined in 38.700.100 and missing middle housing as defined in 38.700.120. B. Applicability. The review authority may approve departures from residential development standards as identified in Table 38.320.070 if the review authority determines that the criteria in Subsection C below have been met. Approval of a departure authorizes development with a different standard than is otherwise required by this chapter. Table 38.320.070 Ordinance Standard Amount of Departure Permitted from Standard All Types of Residential Dwellings Maximum or minimum building setbacks 10% Reduction from minimum setback requirements, (which may be limited by other standards or may have impacts on construction costs); Does not apply to watercourse or floodplain setbacks Maximum building height 5 feet above the maximum applicable limit in Division 38.320 Maximum lot coverage 10% above the maximum applicable limit in Division 38.320 Parking requirements for single or multi- household dwellings with 2 or more bedrooms 2 parking spaces per dwelling, without regard to number of bedrooms in each dwelling for, not less than one and up to 5 dwellings or 20% of dwellings, in a development whichever is more Parking requirements for multi-household dwellings with one or fewer bedrooms 1 parking space per dwelling for any efficiency or one-bedroom unit for, not less than one and up to 5 dwellings or 20% of dwellings, in a development whichever is more Townhouse or Rowhouse Dwellings Useable open space (38.360.220) Reduction of up to 20% in required dimension, or area, or both of per-unit useable open space 43 Ordinance No. 2106, Departures for Housing Creation Page 4 of 7 Multi-household Residential (5+ units) Useable open space (38.520.060) 20% reduction for any new development within one-quarter mile pedestrian travel distance of an existing park Accessory Dwelling Units (ADU) Lot size ADUs may be permitted on any lot in a district where ADUs are an allowed use that meets the lot size requirement for the principal structure and all other standards in the zone district in which the lot is located (except for lots under 3,000 sq. ft. in area or lots containing attached townhomes), without the requirement for 1,000 square feet of additional lot area Number permitted Up to 1 internal and 1 detached ADU per lot ADU size Minimum size is allowed to be above 600 feet up to a maximum size of 60% of gross floor area of primary dwelling unit; or If the ADU is above a garage: Equal to footprint of main floor of garage; or If the ADU is in an attic or basement: Equal to footprint of main floor of the primary dwelling. C. Criteria. To approve departures, the review authority must determine that criteria 1 and 2; and at least one of criteria 3-5 are met: 1. The departure will result in at least one more home than would otherwise be possible; and 2. The purpose of the standard can still be accomplished if the departure is granted; and 3. The departure will not impose negative impacts on surrounding property; or 4. The departure is applicable to missing middle housing; or 5. The departure is applicable to an infill site. D. Procedure. The request for a departure must be submitted with the initial application for any development. Review times and processes are coordinated with the development application. These departures are not applicable to subdivision reviews. E. Appeals. A decision by the review authority to approve or deny a departure may not be appealed independently, but the decision regarding an application as a whole that includes a departure may be appealed pursuant to Division 38.250. Section 3 That Section 38.700.100, I Definitions, of the Bozeman Municipal Code be amended to include a new definition with the remainder of the section to remain as written: 44 Ordinance No. 2106, Departures for Housing Creation Page 5 of 7 Infill. The development or redevelopment of vacant, abandoned, or underutilized properties within or wholly surrounded by the City, and where water, sewer, streets, and fire protection have already been developed and are provided. Infill is development proposed or located within land that has been subdivided for at least 35 years. Section 4 That Section 38.700.120, M Definitions, of the Bozeman Municipal Code be amended to include a new definition with the remainder of the section to remain as written: Missing middle housing. A residential building containing two, three, or four dwellings in any configuration, as well as townhomes and cottage housing. Section 5 Repealer. All provisions of the ordinances of the City of Bozeman in conflict with the provisions of this ordinance are hereby repealed and all other provisions of the ordinances of the City of Bozeman not in conflict with the provisions of this ordinance shall remain in full force and effect. Section 6 Savings Provision. This ordinance does not affect the rights and duties that matured, penalties that were incurred, or proceedings that were begun before the effective date of this ordinance. All other provisions of the Bozeman Municipal Code not amended by this Ordinance shall remain in full force and effect. Section 7 Severability. That should any sentence, paragraph, subdivision, clause, phrase or section of this ordinance be adjudged or held to be unconstitutional, illegal, or invalid, the same shall not affect the validity of this ordinance as a whole, or any part or provision thereof, other than the part so decided to be invalid, illegal or unconstitutional, and shall not affect the validity of the Bozeman Municipal Code as a whole. Section 8 Codification. 45 Ordinance No. 2106, Departures for Housing Creation Page 6 of 7 This Ordinance shall be codified as appropriate in Section 2 – 4. Section 9 Effective Date. This ordinance shall be in full force and effect thirty (30) days after final adoption. PROVISIONALLY ADOPTED by the City Commission of the City of Bozeman, Montana, on first reading at a regular session held on the _____ day of ________________, 2022. ____________________________________ CYNTHIA L. ANDRUS Mayor ATTEST: ____________________________________ MIKE MAAS City Clerk FINALLY PASSED, ADOPTED AND APPROVED by the City Commission of the City of Bozeman, Montana on second reading at a regular session thereof held on the ___ of ____________________, 2022. The effective date of this ordinance is __________, __, 2022. _________________________________ CYNTHIA L. ANDRUS Mayor ATTEST: _______________________________ MIKE MAAS City Clerk 46 Ordinance No. 2106, Departures for Housing Creation Page 7 of 7 APPROVED AS TO FORM: _________________________________ GREG SULLIVAN City Attorney 47 Notice Of Public Hearings To Consider A Text Amendment To Revise Chapter 38, Unified Development Code, Of The Bozeman Municipal Code To Create Departures For Housing Creation And To Define Infill And Missing Middle Housing On Monday, May 16, 2022 at 6:00 p.m., the Community Development Board acting in their capacity as the Zoning Commission will conduct a public hearing on an amendment to municipal code in the Commission Room at City Hall, 121 N. Rouse Ave. Bozeman MT. Members of the public will also be able to participate remotely via WebEx. Instructions for joining the WebEx meeting will be included on the meeting agenda which is published on the City’s website at least 48 hours prior to the meeting. The agenda is available at https://www.bozeman.net/meetings. On Tuesday, June 7, 2022 at 6:00 p.m., The City Commission will conduct a public hearing on an amendment to the municipal code. in the Commission Room at City Hall, 121 N. Rouse Ave. Bozeman MT. Members of the public will also be able to participate remotely via WebEx. Instructions for joining the WebEx meeting will be included on the meeting agenda which is published on the City’s website at least 48 hours prior to the meeting. The agenda is available at https://www.bozeman.net/meetings. The purpose of the public hearings is to consider the proposed amendments that will: 1. Create a new section 38.320.070, Departures for Housing Creation. 2. Create a new definition for Infill to be included in section 38.700.100, I definitions. 3. Create a new definition for Missing middle housing to be included in section 38.700.120, M definitions. So what? Departures allow the city staff to approve development that meets a less restrictive standard than usually applies to building homes; including allowing a smaller lot size, fewer parking spaces, home size, and others established in the new wording. The additional flexibility is limited to specific purposes and only applies to the standards and as far as established in the new Departures section. Review of requested Departures is coordinated with whatever review process is relevant to the requested construction. The intent of this amendment is to make it easier to construct homes, especially additional homes within already developed areas and homes of types where there are fewer than desirable to support a broad range of housing options in Bozeman. This application is evaluated against the requirements and purposes of zoning set in state law in Title 76 Chapter 2, Section 304, Montana Code Annotated. Approval or contingent approval may be granted if the City Commission determines all applicable criteria are met. How do I participate? The public may comment orally at the public hearings or in writing at or prior to the public hearings regarding compliance of this application with the required criteria. Comments should identify the specific criteria of concern along with facts in support of the comment. During the notice period the City will continue review for compliance with applicable regulations. The complete text of the proposal is available through the Department Community Development, 20 E Olive Street, Bozeman MT 59715; 406-582-2260, and online at https://www.bozeman.net/departments/economic-development/community-housing/bozeman-code- 48 audit-to-create-and-preserve-housing. The proposal may be revised as the public review process proceeds. The City invites the public to comment in writing and to attend the public hearings. Written comments may be directed to Chris Saunders at the City of Bozeman, Department of Community Development, PO Box 1230, Bozeman, MT 59771-1230. Comments may also be emailed to agenda@bozeman.net. Please reference Ordinance 2111 in all correspondence. For those who require accommodations for disabilities, please contact Mike Gray, City of Bozeman ADA Coordinator, 582-3232 (voice), 582-3203 (TDD). Who Decides? At the City Commission’s public hearing the City Commission may act to approve, modify, or reject the proposal or continue the public hearing to another date. The City Commission may revise any of the proposed actions referred in this notice during the public hearing process. 49