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HomeMy WebLinkAboutAuthorize Letter of Support to MT Board of Housing Low Income Tax Credit1 Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Tracy Menuez, HRDC Wendy Thomas, Community Development Director SUBJECT: Summit Housing Group, Inc’s request for a letter of support from the City to the Montana Board of Housing (Low Income Housing Tax Credit Program) for the property located at the northwest corner of Tschache Lane and North 27th Avenue MEETING DATE: September 9, 2013 RECOMMENDATION: Authorize the City Manager to sign a letter supporting the Summit Housing Group’s application to the Montana Board of Housing for low income housing tax credits for the proposed Stoneridge Apartments. BACKGROUND: Summit Housing Group, Inc. has submitted a request for the City’s support of the group’s application to the Montana Board of Housing for low income housing tax credits. Summit Housing Group, Inc. is proposing the construction of a 48 unit affordable apartment complex on a lot within the West Winds Subdivision that is deed restricted for affordable housing. Summit Housing Group completed an informal review for the project with the Development Review Committee (DRC) in January, 2012. Since that time, the conceptual site plan has been modified; however, the project remains very similar to the prior submittal. The project will be required to submit for preliminary and final site plan approvals before it is authorized for construction. To be known as the Stoneridge Apartments, the units will be leased to households earning less than 60% of area median household income. The Community Housing Advisory Board (CAHAB) reviewed this item at their August 14, 2013 meeting and made a unanimous recommendation to support the request for a letter of support. The draft minutes of the meeting are attached for your reference. In addition, CAHAB recommended that the City Commission approve the allocation of affordable housing funds be used to pay the impact fees, estimated to be $27,000, for the units that will serve households with incomes at or below 40% of area median income. The recommendation was based on the Montana Board of Housing approving the tax credit application. The Commission may wish to instruct the City Manager to include this in the support letter. UNRESOLVED ISSUES: None at this time. 19 2 ALTERNATIVES: 1) Authorize the City Manager to sign the attached letter. 2) Do not authorize the City Manager to sign the attached letter. 3) As determined by the Commission. . FISCAL EFFECTS: None. Attachments: Draft letter from the City Manager August 14, 2013 CAHAB recommendation Report compiled on: August 26, 2013 20 September 10, 2013 Mr. Rusty Snow Summit Housing Group, Inc. BHL Development, Inc. 283 W. Front St., Ste. 1 Missoula, MT 59802 RE: Summit Housing Group, Inc.’s LIHTC application to the Montana Board of Housing for the creation of affordable rental housing on the property legally described as on Lot 5, Block 8 of the West Winds Subdivision Phases 2A & 2B Dear Mr. Snow, On behalf of the City of Bozeman, please accept this letter has an expression of the City’s strong support for the Low Income Housing Tax Credit (LIHTC) application Summit Housing Group is submitting to the Montana Board of Housing for the development of an 80 unit affordable housing apartment complex. The development will provide the City with additional affordable rentals, particularly family housing units. The proposed development will provide 32 senior housing units and 48 family units on a parcel that is specifically set aside for the development of affordable housing. The approximate 3.03 acre site currently carries a Land Use Restriction that requires multifamily development for persons making 65% or below the Area Median Income. We wholeheartedly support your efforts to provide new, affordable multifamily housing in this area of Bozeman. The City of Bozeman is experiencing continued growth and affordable housing is in short supply. Your proposed project will help meet the need of small and large families at or below 60% of the median income. With the increased cost of housing in Bozeman, we feel that a project of this type will help address the housing needs of our community. We look forward to the addition of your affordable multifamily project to our community. Sincerely, Chris Kukulski, City Manager 21 City of Bozeman Community Affordable Housing Advisory Board (CAHAB) August 14, 2013 8:00 – 9:00 am City Commission Room, City Hall Attending: Brian LaMeres, Ann Kesting, Kyle Terrio, Mary Martin, Melvin Howe, Chris Mehl, Dave Magistrelli Absent: Kris Keller Staff: Tracy Menuez, Wendy Thomas Public: Rusty Snow, Summit Housing; Jeff Rupp, HRDC The meeting was called to order at 8:05 am by Chair Brian LaMeres. Public Comment: Jeff Rupp, President/CEO of HRDC IX discussed some of the housing initiatives the HRDC is currently pursuing. They are a partner in the Summit housing project that will be presented later in the meeting, and Phase 3 (24 units) of their West Edge condominiums will be underway in the fall. Jeff plans on approaching the City for $160,000 ($10,000 for each of the 16 units in the development that are sold to households earning less than 65% median income as supported by the housing plan) for down-payment assistance for lower-income households purchasing at West Edge. The HRDC is also in negotiations to purchase a trailer park within the City limits, and plans to request a low-interest loan of approximately $200,000 from the City to complete the transaction. The purchase will allow for the preservation of 22 homes. Both projects will leverage significant funds in addition to those from the City. Chris Mehl asked about the timeline for the projects. Jeff replied that the down-payment funds for West Edge will be requested in 2014, while the trailer park is a longer term project. Wendy Thomas asked how the trailer park will be structured. Jeff responded that the HRDC is considering multiple options, including a resident owned cooperative, but, for the short term the priority is to preserve the units. In the long range, the HRDC plans to replace aging structures and infrastructure and address long-term ownership. Action Items 1) Approval of minutes from July 10, 2013 – Motion to approve by Melvin Howe, seconded by Dave Magistrelli. Approved. 2) Request for support for LIHTC application by Summit Housing, Inc. Mary Martin of HRDC declared a conflict of interest as HRDC is a partner in the project. Rusty Snow of Summit Housing, Inc. presented information regarding the proposed Stoneridge Low Income Housing Tax Credit (LIHTC) application (see project handouts attached). The pre- application was submitted to the Montana Board of Housing (MBOH); 14 applications were received in total. Full applications are due to MBOH on October 7, 2013, with awards 22 anticipated in November or December. The process is increasingly competitive, and every point is important. One scoring area is support from local government for the proposed project. The project, on the corner of Tschache Lane and Thomas in the West Winds Subdivision is on approximately 3 acres purchased by Summit. As part of the PUD agreement entered into by the developers of the subdivision, the lot must be used for affordable housing. Summit has entered two applications for this project in the past, which have not been funded, mainly due to the hypercompetitive application process. Summit’s plan is to continue applying until funded. Bozeman has not been the recipient of a large number of credits in recent years, which assists this application, along with the near 0% vacancy rate in the community. This phase of the project will have 48 units, which are comprised of 30 two-bedroom units and 18 three-bedroom units. One on-site manager’s unit is included as well. The rents are structured between 40 and 60% AMI, with 2 bedrooms renting for between $519 and $743 and 3 bedrooms renting for between $583 and $864, depending on rent level (full details are in the application). Five percent of the units are set-aside for disabled households. The site is near services (approximately ½ mile from 19th) and the project will meet the city’s green building guidelines. The project has $7.3 in total financing, with $5.3 million in tax credits, $1.9 million in long-term debt, and $130,000 in deferred development fees, assuming a rate of $.82 on credits. Chris Mehl asked what the deferred developer fee was. Rusty explained that the allowable developer fee on this project was approximately $800,000, however; the developer will need to defer the receipt of that fee to make up the financing gap. The deferred amount of fees can be recovered through cash flow over a five-year period. Typically, the remaining developer fees are pledged as the operating reserve guarantees; essentially leaving the majority of a developer fee escrowed for the first five years of operation. Rusty explained how the tax credit system works. Their application is for $647,500, which, if awarded, will be for 10 years (647,500 x 10 = $6,475,000). Credits are awarded at an estimated $.82 per dollar, for an estimated total of $5,300,000 in credits ($6,475,000 x .82 = $5,309,500). Syndicators are used to bundle and sell the credits, typically to large corporations in need of tax credits. Chris Mehl asked about the project’s assumed 7% vacancy rate. Rusty replied that this is the standard calculation used, typically, Bozeman is much lower, but it is necessary to demonstrate in the pro-forma that the project can survive difficult market conditions, such as were present in the tax credit units in the 2007-2008 years. Rusty added that their market assessment showed a need for 149 additional tax credit units in Bozeman at this time. He also mentioned that the MBOH has demonstrated a desire to award projects with lower costs per unit; the proposed project has the lowest cost/unit of any other that applied. Chris Mehl pointed out that the request is for 1) a letter, and 2) financial support. Rusty replied that the letter is the top priority, the funding is helpful and a show additional support for MBOH. Tracy reviewed the pertinent sections of the housing plan and how they relate to this request. The request by Summit is to reimburse 25% of development fees for the project. The housing plan states that rental units serving households earning 40% AMI and below are eligible for reimbursement, meaning that 6 units would be eligible. Representing 1/8 of the project, with total estimated fees of $216,881, that would mean assistance in the amount of approximately $27,110. Ann stated that this seemed quite straightforward: we have the funds; this project meets the plan and our community needs. Kyle asked about the experience of the market study company, as they cited other Bozeman studies. Wendy responded that the planning department fields 23 numerous requests on market information, and she is not surprised that they would reference multiple projects in the area. Chris asked if the board wanted to recommend the full $27,000, or just a portion. Ann thought for the scope of this project and amount of the request that she would support the whole amount. Chris asked what participation the HRDC would have. Rusty replied that the HRDC will assist with placement and supportive services. Kyle asked if Summit has done other projects in Bozeman, to which Rusty replied that while Summit has been active in Wyoming, they have yet to do a project in Bozeman, and he would be happy to send information on those projects to the group. Tracy asked the group to vote on the two pieces of the request separately for clarity. Ann moved to recommend to the City commission that a letter of support be provided for Summit Housing’s Stoneridge project; Mel seconded the motion. There was no further discussion and the motion passed unanimously with the abstention of Mary Martin. Ann moved to recommend to the City Commission that 100% of the impact fees for the 6 units serving households earning less than 40% of the Area Median Income be reimbursed, contingent upon funding in this round by MBOH and Certificate of Occupancy. Dave seconded the motion. There was no further discussion and the motion passed unanimously with the abstention of Mary Martin. 3) Rental housing survey request for proposals Staff was directed to determine if a RFP was necessary, and, if so, engage the process to complete the work. Mary moved to direct staff to complete the housing survey, Ann seconded the motion, which passed unanimously. FYI/Discussion None Adjourn – Motion to adjourn made by Ann Kesting. Meeting was adjourned at 9:15 am. 24 25