HomeMy WebLinkAbout11.A.2. Request for Fee Waivers to support Workforce Housing Project _411 General Business 11. A. 2.
SHAKOPEE
TO: Mayor and City Council
FROM: Alex Sharpe, Planner
DATE: 11/17/2015
SUBJECT: Request for Fee Waivers to Support Workforce Housing Project (B,D)
Action Sought
The Council is asked to consider a request from MWF Properties for the waiver of
certain City fees to support the financing of a workforce housing project.
Background
NOTE: This item is dependent upon approval of the previous item related to a
rezoning of the property in question. If the Council acts to deny the rezoning, this
item will be pulled from the agenda.
The City has received the attached letter from MWF Properties seeking a local
contribution to the financing of a workforce housing project on the eastern side of
town. The local financial support is needed in order to help MWF obtain state and
federal tax credits necessary to finance the project. Local financial support can be
provided in multiple ways, however, MWF is suggesting that the Council consider
the waiver of SAC fees and a portion of the Park Dedication fees that would be due
on their proposed 66 unit workforce housing project.
City Requested
Fee TOTAL ' Remainder
Per Residential DUE to Waibved e
to be Paid
Unit
Metropolitan 66
Council $2,485' $164,010 $164,010 0
SAC Fees
City SAC
Fees $475 66 11 $31,350 $31,350 0
City Park
Dedication $4,4501 66293 7
$ 00 $140,140 $127,180
� __ ...._Fee
Total -F-166 $489,060 $335,500 $127,180
Some form of local financial participation in affordable housing developments is
common in order to achieve the rental rates needed by those households earning 30
- 60% of the area median income. It is also needed, as is the case with this project,
in order to open the doors to other funding and financing mechanisms which either
require a local participation or favor those projects that have it.
The City of Shakopee's most recent participation in an affordable housing project
came in 2012 when a housing TIF district was established to provide financial
support for the All Saints Senior Living facility. In exchange, the City was
guaranteed that 20% of the units (17 units in a building of 84 total units) would be
affordable to people with incomes no greater than 50% of the median income in
Scott County. This TIF financing provided $1 million in financial assistance for the
development of 17 affordable units.
For the project in question, the City's contribution of$335,000 in fee waivers would
support the construction of 66 units of rental housing affordable to households with
incomes between 30 and 60% of the area median income. Representatives of MWF
Properties will be in attendance at the Council meeting to present their request and
answer questions.
Lastly, it should be noted that If the Council is interested in providing local
financial support for the project, but determines that it does not wish to do so in the
form of fee waivers, it could direct staff to return with alternative means of local
financial support at a future meeting.
Attachments: Letter of Request from MWF Properties
MWF Properties
7645 Lyndale Avenue South
Minneapolis, MN 55423
TEL 612.243.4636
FAX 612.243.4660
MWFPROPERTIES.COM
November 10,2015
Mayor Brad Tabke and City Council Members M IN F
City of Shakopee properties
129 Holmes St. S.
Shakopee,MN 55379
RE: Proposed Development at 1716 Stagecoach Road
Request for City Financial Support
Dear Mayor Tabke and City Council Members:
MWF Properties LLC is requesting financial support from the City of Shakopee in the amount of$335,500 for the project
being proposed.This amount is needed to help secure the tax credits needed for the project.
MWF is proposing to develop a 66-unit affordable rental housing project using Federal Income Tax Credits as the primary
funding mechanism. The allocation of those tax credits is managed by the Minnesota Housing and Finance Agency(MHFA).
The total amount of tax credits available each year is limited and the credits are awarded through an annual competitive
application process. MHFA has developed an extensive set of criteria,each worth a varying number of"points"in the
application.The higher the total point score achieved by an application the greater the likelihood of receiving an award of
credits. In 2015 only the top scoring 33%of applications were awarded credits.
One category in the application is for"federal/local/philanthropic contribution". (See attached page from the scoring
worksheet.)The number of points achieved is a function of the percentage of total development costs funded though such
contributions. Historically projects that do not achieve at least 2 points in this category are not awarded credits. To achieve 2
points requires a contribution that is equal to at least 2.1%of Total Development Cost.
To complicate matters further,a competitive application must also have a total development cost per unit no greater than the
median development cost per unit for all applications submitted that year. That amount is not knowable until after the
applications are submitted in June. An analysis of projects submitted last year indicates that at the 2014 median a contribution
of$335,500 will provide the minimum of 2 points needed in this category for a 66 unit development.
There are many ways in which the local contribution can be accomplished.The most common is through Tax Increment
Financing. But another common approach taken by communities is waiving or reducing fees. After reviewing with staff the
potential options available in Shakopee,the two most likely sources appear to be a waiver of the SAC fee and a reduction of
the City Park Dedication Fee.
The value of the SAC charge is a function of the number of SAC units (determined by Met Council) and the per SAC unit fees
assessed by Met Council and the City. We estimate the combined value of the Met Council and City SAC fees for this project
to be approximately$195,360. The Park Dedication fee for 66 units would be$293,700.Waiving$140,140(48%) of the Park
Dedication fee provides the balance of the local contribution needed to achieve the$335,500 total requested.
In addition to supporting our application for the award of tax credits,the funding provided by the city will offset some of the
extensive site development costs we will be incurring. That will help us maintain the quality of the building we are planning.
There may be other means to achieve the level of local contribution required to secure the 2 points needed for a competitive
application. We are certainly open to discussing those.Thank you for your consideration of our request.
Sincerel
Pe er Worthington
MWF Properties LLC
MWF Properties•7645 Lyndale Avenue South•Minneapolis, MN 55423•TEL 612.243.4636•FAX 612.243.4660
Selection Priorities Developer Minneso Claimed Housing
Awarded
f 1.X 1 1 /rii �J,i1C!7 ft(4tiX441;itir ed} `• a(}1Xl Itl � ,:_r__.__
Points are awarded for projects that are receiving contributions from the federal government;a local unit of government;an area
employer;and/or a private philanthropic,religious or charitable organization.
Identity of Interest exclusion: Contributions from any part of the ownership entity will be considered general partner cash and
excluded from the calculation unless the contributions are awarded by local units of government or nonprofit charitable
organizations pursuant to a funding competition.
Total federal/local/philanthropic contributions$ divided by Total Development Cost$ equals(rounded to the nearest
tenth)
❑ 20.1%and above—10 points ❑ 5.1-10%—4 points
❑ 15.1—20%—8 points ❑ 2.1—5%—2 points
❑
10.1-15%-6 points ❑ 0-2%—O points
Federal/Local/Philanthropic Contributions include:
• Monetary grants/donations
• Tax increment financing-calculate Net Present Value(NPV)by using NPV discounted by Applicable Federal Rate(AFR)
• Tax abatement(calculate NPV by using NPV discounted by AFR)
• Land donation or city write down of the development site
• In-kind work and materials donated at no cost
• Local government donation/waiver of project specific costs,assessments or fees(e.g.SAC/WAC)
• Reservation land not subject to local property taxes
• Reservation land with long-term low cost leases
• Deferred loans with a minimum term that is co-terminus with the HTC Declaration with an interest rate at or below the
AFR
• Grants from nonprofit charitable organizations converted to deferred loans with a minimum term that is co-terminus
with the HTC Declaration with an interest rate at or below the AFR. Award letter from the nonprofit charitable
organization contributor must be provided at the time of application verifying the project specific(restricted)
contribution
• Below Market Interest Rate(BMIR)Loans—calculate NPV based on the difference between the AFR and the BMIR rate
• (e.g. RD 515, NHASDA first mortgage).
• Historic Tax Credits
To qualify for points for tax increment financing or tax abatement,there must be satisfactory documentation that the contribution is
committed to the development at the time of application.
At the time of application,written documentation from the contributor justifying the amount and the terms of the contribution
must be provided and be consistent with current market comparable costs. The documentation must be in the form of a project
specific letter of intent,city or council resolution, letter of approval,statement of agreement or eligibility,or memorandum of
understanding. In the case of Historic Tax Credits, at the time of application written documentation of eligibility through evidence of
Historic Register listing or approval of Part 1—Evaluation of Significance.
Within 6 months of the date of selection (Minnesota Housing Board selection date)the applicant must provide Minnesota Housing
with documentation of a firm commitment, authorization or approval of the federal/local/philanthropic contribution(s). The
documentation must state the amount, terms and conditions and be executed or approved at a minimum by the contributor.
Documentation containing words synonymous with "consider" or"may", (as in "may award")regarding the contribution,will not be
considered acceptable. Lack of acceptable documentation will result in the reevaluation and adjustment of the tax credits or RFP
award,up to and including the total recapture of tax credits or RFP funds.
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