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Home My WebLink About10.A.1. Request for fee waivers to support Workforce Housing Project General Business 10.A. 1. SHAKOPEE TO: Mayor and City Council FROM: Alex Sharpe, Planner DATE: 12/15/2015 SUBJECT: Request for Fee Waivers to Support Workforce Housing Project (B,D) UPDATED ro 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 The City has received the attached letter from MWF Properties seeking a local contribution to the financing of a workforce housing project adjacent to Target on Marchall Road. 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 57 unit workforce housing project. City Requested Fee Residential- TOTAL to be Remainder Per DUE to be Paid Unit Waived Metropolitan 57 Council $2,485 $141,645 $141,645 0 SAC Fees City SAC Fees $475 57 $27,075 $27,075 City Park Dedication $4,450 57 $253,650 $121,280 $132,070 Fee Total 1---57 1-$721.2727,3751 S290,000 $132,070 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$290,3000 in fee waivers would support the construction of 57 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: Resolution 7656 MWF Properties Letter RESOLUTION NO. 7656 A RESOLUTION OF THE CITY OF SHAKOPEE,MINNESOTA, APPROVING A FEE WAIVER REQUEST FOR MWF PROPERTIES TO SUPPORT THE DEVELOPMENT OF A WORKFORCE HOUSING PROJECT WHEREAS, MWF Properties, applicant, and Virginia T Hauer Trust, property owner, have requested waiving fees associated with development on a Multiple Family zoned parcel east of Sarazin Street and north of Downing Avenue. WHEREAS,this parcel is presently zoned Multiple Family(R3);and WHEREAS,the property upon which the request is being made is legally described as: Brittany Village 1V Addition Outlot B; and WHEREAS, the Service Availability Charge fees on this parcel for the proposed development are projected to be$168,720;and WHEREAS,the anticipated Park Dedication fees for 57 units of multiple family housing is $253,650; and WHEREAS,the applicant has requested that the City waive 100%of the City SAC fees and 48%of the City Park dedication fees for a total not to exceed$290,000;and WHEREAS, The City finds that financial support or incentive to housing projects that serve between 30%to 60%of the area median income is in keeping with the City's housing goals; THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SHAKOPEE,MINNESOTA,that fees not to exceed $290,000 shall be waived for MWF Properties for the development of a 57-unit multiple family housing project on the parcel legally described above. Adopted in the session of the City Council of the City of Shakopee, Minnesota, held the day of December, 2015. Mayor of the City of Shakopee AT FEST: Lori Hensen, City Clerk 1 MWF Properties 7645 Lyndale Avenue South Minneapolis, MN 55423 TEL 612.243.4636 FAX 612.243.4660 MWFPROPERTIES.COM November 23, 2015 M Mayor Brad Tabke and City Council Members ■ ■ VV F City of Shakopee properties 129 Holmes St. S. Shakopee,MN 55379 RE: Proposed Development at Sarazin Street 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$290,000 for a project we are proposing on Sarazin St.This amount is needed to help secure the tax credits for the project. MWF is proposing to develop a 57 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$290,000 will provide the minimum of 2 points needed in this category for a 57 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 fee 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$168,720. The Park Dedication fee for 57 units would be$253,650.Waiving$121,280 (48%)of the Park Dedication fee provides the balance of the local contribution needed to achieve the$290,000 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 development costs,which will allow us to enhance the quality of the development. 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. Sincer• eter Worthington MWF Properties LLC MWF Properties•7645 Lyndale Avenue South•Minneapolis,MN 55423•TEL 612.243.4636•FAX 612.243.4660