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HomeMy WebLinkAbout03.A TRELLIS Workshop TO: Honorable Mayor and City Council Jennifer Levitt, City Administrator FROM: Gretchen Larson, Economic Development Director DATE: June 1, 2023 RE: Workshop – Development Project by Trellis Co. Background On April 20, 2022, Trellis Co. presented a preliminary plan for a proposed development at 7601 79th Street South. Trellis is looking to develop a 52-unit affordable senior housing project on the site that will provide units that are 30% and 60% of the area median income (AMI). Housing at these income levels provides an opportunity for deeply affordable senior housing, which currently is very limited in the city. As part of the proposed project financing, Trellis Co. requested a resolution of support from the city to consider assisting in the funding of the project with the use of tax increment financing (TIF). The City’s support of the application process and willingness to consider TIF to fund affordable senior housing, is often seen as a positive in the funding awarding process. The City Council approved the request for TIF assistance at their April 20, 2022, council meeting contingent upon the final TIF analysis that would need to be completed as the project moved forward. As of this report, the team at Trellis Co. has submitted their proposed site plan and other required documents to the planning department for review and presentation at the planning commission meeting on June 26. Also, as a part of the project, Trellis Co. will present a revised site plan, a revised TIF assistance request, and other information on the project for council consideration. Attached to this memorandum is a copy of the memo from the city’s financial consultant team at Ehlers, which indicates a gap in funding of approximately $175,000 which is significantly lower than the initial analysis and TIF request of $450,000. The difference is primarily due to the other sources of funding secured by Trellis Co. via a rent subsidy program known as the Faircloth to Rental Assistance Demonstration program (RAD). The RAD program would restrict rents to deeply affordable and a matrix of the proposed rental rates is included in the memorandum from Ehlers. The team at Ehlers also reported that legislation signed into law in 2023 lowers the st property tax class rate from 0.75% on the 1 $100,000 per unit value and 0.25% per unit value above $100,000 split to a flat 0.25% on the overall per-unit market value. The result of this change: (i) increases the net operating income for the project which can support a higher mortgage amount; and (ii) reduces property taxes and TIF by approximately 50%. Under the new tax rates, this project is estimated to generate $7,712 annually in city property taxes ($27,700 in overall taxes), or $148 per unit per year for city taxes. Honorable Mayor, City Council, and Jennifer Levitt City Council Workshop, Trellis Co. June 7, 2023 Page 2 of 2 Based on the review of the information currently available by the team at Ehlers, they concluded that the development would not reasonably be expected to proceed without $175,000 of assistance. They have suggested that assistance could be in the form of TIF over 16 years or the City Council could consider a one-time lump sum cash grant, in lieu of creating a TIF district. Recommendation Receive report on revised project information from Trellis Co. and provide direction related to the proposed options provided by the City’s Financial Consultants. Attachments Site Plan/Images/Trellis Project Summary Memorandum from Ehlers and TIF Analysis NFNPSBOEVN! UP;!!!Hsfudifo!Mbstpo!†!Fdpopnjd!Efwfmpqnfou!Ejsfdups!! GSPN;!!Tdibof!Svemboh!'!Tubdjf!Lwjmwboh!†!Fimfst! EBUF;!!Nbz!42-!3134!! TVCKFDU;!!Usfmmjt!Efwfmpqnfou!.!Bobmztjt!pg!Gjobodjbm!Sfrvftu! Uif!Djuz!pg!Dpuubhf!Hspwf!sfdfjwfe!b!gjobodjbm!bttjtubodf!sfrvftu!gspn!Usfmmjt!Dp/!)Efwfmpqfs*!up! dpotusvdu!b!63.voju!tfojps!bggpsebcmf!bqbsunfou!dpotjtujoh!pg!tuvejp!boe!2.cfesppn!vojut!xjui! vojut!bggpsebcmf!up!ipvtfipmet!bu!ps!cfmpx!41&!boe!71&!pg!uif!bsfb!nfejbo!jodpnf!)BNJ*/!Uif! Efwfmpqfs!sfrvftufe!%561-111!jo!UJG!bttjtubodf!xjui!b!qspqptfe!dpotusvdujpo!tubsu!jo!3135!boe! ftujnbufe!dptu!pg!efwfmpqnfou!bu!bqqspyjnbufmz!%26/97!njmmjpo-!ps!%416-111!qfs!voju/!! ! Bggpsebcjmjuz! 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Cbtfe!po!pvs!sfwjfx!pg!uif!jogpsnbujpo!dvssfoumz!bwbjmbcmf-!xf‘wf!dpodmvefe!uibu!uif!efwfmpqnfou! xpvme!opu!sfbtpobcmz!cf!fyqfdufe!up!qspdffe!xjuipvu!%286-111!pg!bttjtubodf/!!Uif!bttjtubodf! dpvme!cf!jo!uif!gpsn!pg!UJG!pwfs!27!zfbst!ps!uispvhi!bo!vq.gspou!dbti!hsbou!)jg!bwbjmbcmf*/!!Uif! efwfmpqfs!ibt!bhsffe!up!uijt!bnpvou!pg!bttjtubodf/! Qmfbtf!dpoubdu!Tdibof!Svemboh!ps!Tubdjf!Lwjmwboh!bu!762.7:8.9611!xjui!boz!rvftujpot/! Cottage Grove Senior Developer/Applicant’s Statement Trellis Co. Overview Trellis Co. (formerly known as Community Housing Development Corporation, or CHDC) was founded in 1991 and is based in Minneapolis and has the mission of sustaining and creating equitable affordable housing opportunities that enhance communities over the long-term and create and maintain healthy living. Trellis owns and manages approximately 50 properties containing more than 4,000 units throughout Minnesota. Nearly all of Trellis’s properties are affordable, and many are age- restricted/senior housing as is proposed with Cottage Grove Senior. The Trellis business model relies on strong partnerships. And to that end it has a 30-year track record of success. It has a team-based approach and collaborative culture where it navigates the complex puzzle of affordable housing together with its partners. Trellis benefits from having an in-house management company, Trellis Management, to provide property management services for Trellis properties, as well as other third-party fee management and compliance services. Trellis Management understands the unique circumstances facing many of the residents they serve and works to ensure stable, sustainable housing can be achieved. Trellis Management has a long history of collaboratively working with residents, neighbors, and the communities in which it serves to ensure the housing it provides is an asset to the community. Project Overview th Cottage Grove Senior will be a new construction, senior/55+ project located at 7601 79 Street South on what is currently vacant lot. The project will include 52 units and approximately 43 parking stalls. The th primary vehicular entrance is anticipated to be off 79 Street, with resident building access from the parking lot and potentially Hemingway Avenue. Additionally, the ground floor units facing Hemingway Avenue with large patio access. Project amenities will include on-site management and resident service coordination, on-site laundry (common area laundry room), craft room with programming, storage lockers, on-site parking, and secure mail/package rooms. Unit amenities will include luxury vinyl plank flooring or similar, accessible units, dishwashers, and patios for select units. The location is ideally situated for the planned project given its proximity to:  Gateway North shopping center (grocery, restaurant, services, etc.)  Park Grove Library  Oakwood Park  Located on the DARTS Cottage Grove Bus LOOP The project will provide much-needed deeply affordable, senior housing in the community, with 69% (36 units) of the project units set at 30% of the area median income (AMI) rents and incomes and the remaining units set at 60% AMI. The demand for the proposed housing provided by the project will be high due to a limited availability of senior/55+ housing options in the City of Cottage Grove and the deep affordability that will be offered by the project. These findings are supported by numerous housing studies completed for the area including the “Updated Comprehensive Housing Needs for Washington County” completed by Maxfield Research and Consulting for the Washington County CDA in March 2017. This study found the following:  The vacancy rate for the 1,363 affordable senior properties in the County when they were last surveyed (February 2017) was just 0.6%, “indicating a substantial pent-up demand for these types of units.”  At the time the report was written, Cottage Grove had just 150 units of senior affordable housing, with a vacancy rate of just 0.7%.  The demand for general occupancy affordable was equally strong, with just 0.6% of the affordable units in the County vacant at the time of the survey.  Since the report was prepared, an additional affordable senior property, the Legends of Cottage Grove, opened. While financed under the tax credit program, the unit sizes and rents offered at the Legends are significantly higher than are proposed at the project. As such, the delivery of the Legends does not impact the market for senior housing that will be served by the project. The City of Cottage Grove also identified the need for more affordable housing in their community through their 2040 Comprehensive Plan. The Comprehensive Plan found the following:  According to a Housing Forum hosted by the City in connection with the preparation of the Comprehensive Plan, 79% of respondents felt there was not enough senior housing available.  The Comprehensive Plan has a stated goal of encouraging life-cycle housing in the community, including various types of senior housing. This is particularly true for locations in the City with access to services, amenities and transit as will be the case for the project.  The need to construct senior housing is driven by demographic trends that were identified by the City, with 43% of City residents older than 40 years (as of 2014).  The City shows that there are zero units set aside for people with disabilities in the City, indicating an enormous unmet demand for this housing type in the community, which the project will help to meet. Anticipated Land Use Approvals The project is site is already zoned “Mixed Use,” which allows for the proposed use. Additional anticipated land use approvals include the following:  Variance to allow for reduction in Class I materials from 65% to 50%.  Variance to allow for reduced parking from 104 stalls (plus visitor stalls) to 43.  Additional required approvals as may be identified by staff when a formal land use application is submitted. The reduction in required Class I materials is requested to address high construction costs. The design team has proposed exterior materials and articulation that provide for all high quality, attractive and durable materials. Design elements including different articulations with varying depths on the building elevations, masonry wainscot at the base of the building and varied materials with a cohesive color palette. The building exterior is designed to complement both the existing commercial and residential characteristics of the surrounding neighborhood. The flat roof and metal canopies are typical commercial buildings to the south, while the exterior material palette consisting of cultured stone with various fiber cement lap and panel sidings are consistent with the residential properties to the north of the project site and the new apartment building southwest of the site. Additionally, the large patio units along Hemingway Ave help activate the building at a pedestrian scale and reinforce the building's residential character. The reduction in the required parking ratio is requested to better suit the actual, expected utilization of parking by project residents, staff, and guests. Trellis owns and manages several other senior/disabled properties and has found low parking utilization compared to the general occupancy housing it owns and operates. A sample of similar projects provided the following findings: Property Name/City Number of Units/ Parking Data Population Served Cottage Grove Senior (Project) 52 units / senior 43 stalls. Cottage Grove, MN Franklin Lane Apartments 66 units / senior 59 stalls. Approximately 25 Anoka, MN residents have cars. Woodland Court 80 units / senior 43 stalls. Approximately 30 Park Rapids, MN residents have cars. Evergreen Apartments 62 units / senior 62 stalls. Approximately 34 Hutchinson, MN residents have cars. The project will also benefit from having existing, on-street parking available for guests during peak times such as holidays and from regular route transit service provided by the DARTS Cottage Grove Bus Loop.