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CR 92-162 Handicapped Housing Project ., ,- \, "( Y 0 0' :cQ .. . June 29, 1992 -$-. 0 I>{K/,,~,":' Council Report 92-162 . HANDICAPPED HOUSING PROJECT ProDosedAction. . Staff recommends the adoption of the following motion: Approval of the followinq aqreements as relates to the National Handicap~ed Housing Institute handicapped accessible'housinq proiect at the northwest corner of County Road 3 and 11th Avenue. . - Development agreement - Final tax increment application Approval of this action will allow the applicant to proceed with design and financing activities in conjunction with this project. It is assumed that with approval staff will be able to make minor changes to the above agreements which do not change overall intent. overview In August 1991 the City council adopted a resolution supporting the concept ofa handicapped accessible housing project within the City of Hopkins as proposed by the National Handicapped Housing. Institute. Subsequently in May 1992, the HRA approved a preliminary tax increment application for construction of this project at the southwest corner of county Road 3 and 5th Avenue. eTheproject as proposed would require the acquisition of six residential . structures and one vacant parcel. The applicant has secured purchase option agreements on all of these parcels. As part of the project a portion of the property directly south of Dow Towers would be deeded back to the HRA for expanding public housing parking. In conjunction with this proj,ect, the applicant is proposing the use of tax increment financing. These funds would be used for both site assemblage and site preparation. The HRAis now being asked to consider the following: o The development agreement which identifies the responsibilities of both the developer and the HRA as relates to this project. o The final tax increment application which details the amount of public assistarice requested and the use of those funds. o Purchase agreement primary Issues to Consider o What are the. specifics of the project? o What are the specifics of .the development agreement? . o What are the specifics of'theTIF application? o What is the impact of the action as proposed? o What are the specifics for the purchase agreement of 28 Fifth Ave. So? SUDDorting Information .0 TIF application .... 0 Development agreement . 0 Pur ase agreement 28 Fifth Avenue South o C ept P . & Economic Development Director v ~ CR92-162 . Analysis Page 2 Based on the recommended motion, there. are several issues which need to be considered: 0 What are the specifics of the project? This project will involve construction of a 24 unit handicapped housing project on the corner of 5th Avenue South and Second Street. The project would be for low income, physically handicapped individuals. Funding for the project would be provided by HUD. The project would involve the acquisition of. six residential homes and one vacant parcel. National Handicapped Housing Association has secured purchase options on all of the subject property. 0 What are the specifics .of the development agreement? The development agreement outlines the responsibilities of both the HRA and developer as relates to the project. The fOllowing details the specifics of the agreement: . 0 Developer would purchase all, of subject property, 6 residential properties and 1 vacant parcel. They would agree to deed to the HRA 75 feet (lot and one-half) south of Dow Towers to expand off street parking. Parking improvements in this area would be completed by the HRA at their cost. 0 HRA agrees to reimburse developer up to $566,500 for land write- down, demolition and relocation expenses.. This would be the total purchase price of the subject property minus $36,500 which would be paid by the developer. 0 Developer would provide a Municipal Service Fee to the city of $13,500. This would offset the LGA/HACA loss which would result to the City by creating a new tax increment district. 0 Developer to undertake relocation of owners and tenants. 0 Developer to complete demolition of all properties. 0 Minimum improvements to be constructed by the developer at a cost of not less than $1,049,147. 0 Minimum annual tax increment. to be guaranteed of $19,024.00 annually. 0 Developer shall submit application for conditional use permit '. approval within 60 days from the date of the development agreement. 0 ,Developer shall secure and maintain purchase option agreements until completion of the purchase of subject property. ~ . i ' CR92-162 . Page 3 0 No letter of credit to insure performance is to be provided. Although staff usually requires such an instrument, it is not being required of this developer because of the difficulty for a non-profit to obtain a letter of credit. Also, their previous performance reveals that they are able to satisfactorily complete a project. 0 Completion of the purchase of subject property by no later than January 1, 1994. Closing to take place after submission of evidence satisfactory to the HRA that developer will close on financing. ' . 0 HRA will agree to purchase property directly south of Dow Towers if not acquired by the developer as of March 31, 1992. This site would then be used to expand the parking for Dow Towers, exclusive of whether the handicap housing project proceeded. 0 Completion of project construction within 12 months after commencement of construction. Construction to start within 30 days of purchase of redevelopment property. 0 HRA shall create a new Housing Tax Increment District. 0 HRA shall be entitled to remove and sell house south of Dow . Towers. This must be completed within 14 days of the purchase of the property by the developer or the house would be demolished by the developer. 0 HRA shall have an equity portion in the project. At such time that the project would be sold the HRA would receive 25% of the sale proceeds. However, this payment would not be required if the sale was to another non-profit entity that was proposing to use the building for a similar type of use as presently proposed, or low income housing acceptable to the City. 0 What are the specifics of the TIF application? Total site assemblage cost is estimated to be $527,900. Under the redevelopment agreement the HRA would provide to the.developer $491,400 as a land write-down. Also the HRA would agree to pay all project relocation and demolition which is estimated by staff to be approximately $76,000. In conjunction with the project the developer also agreed to make a developer's payment to the City in the amount of $13,500. This would offset HACA/LTA losses that would occur to the City as a result of creation of a.tax increment district under present statute. . Staff is estimating the following revenue sources for ~his project: 0 NHHI developer fee payment $13,500 0 Public Housing payment for purchase of portion of subject site $20,000 . / .10~ , " CR92-:-162 . Page 4 0 Sale of one dwelling unit (If house $20,000 is unable to be moved it would be demolished and this payment would not available) 0 Tax increment generation (present value) $293,000 Based on the tax increment generated by this project and other sources of income identified, the project will require an additional public subsidy of approximately $234,000. The up front costs associated with financing this project is proposed to be borrowed from the CBD TIF District 1.1. The payment of these funds will be provided both from increment generated within the new tax increment district and Tax Increment District 2.1 (R.L. Johnson site) . The impact of this action will be to reduce available excess TIF cash for undertaking downtown projects by approximately $570,000. However, these funds will be available for CBD projects over approximately a 20 year period as they are repaid to' the CBD. Furthermore it would be possible to use the repayment income stream to finance a land sale. eo What are the specifics for the purchase aqreement of 28 Fifth Avenue South? The purchase agreement for this property owner states that the property will be acquired by the developer at a price of $89,900 by no later than March 31st. They would subsequently transfer title to the HRA. If the developer does not acquire by that date, the HRA will agree to purchase this property based on the purchase agreement. All of the other properties in the project area' have a purchase option with the developer which allows termination if the project does not proceed. However, with 28 Fifth Avenue South the developer and City staff have proposed to execute an agreement with the owner which would require purchase by either the developer or HRA. The reason for this is that the Dow Towers Public Housing Project requires additional off street parking. The subject property is a good location for such parking. As a result staff feels that this property should be acquired exclusive of what happens with the project. . The sources for funding the purchase of this property are as follows: - Tax Increment Funds - Public Housing project funds - Proc~eds from the sale of the house if moved . ----------.-- :'i- ~ t.>.. CR92-162 .0 Page 5 What is the impact of this action as proposed? This is the final action that will be required as relates to both the , development agreement and the tax increment application. Provided the developer meets the requirements of the development agreement the HRA will be obligated, ,to proceed with the project as detailed in that , agreement. . The following additional actions would need to be undertaken in conjunction with this project as detailed in the development agreement: 0 Approval of conditional use permit and other required zoning items 0 Public hearing to establish tax increment district 0 Public hearing on sale ,of property 0 Approval of construction plans Also, as a result of this action the HRA would be required, exclusive of the developer's compliance with the redevelopment agreement, to purchase 28 Fifth Avenue South . Alternatives The City Council has the following alternatives regarding this issue: . 1- Approve the actions recommended by staff. , This will allow the developer and staff to proceed with the necessary steps to undertake construction and completion of this project. 2. Approve with modifications. It is assumed under this action that Council will be requesting modification to either the development agreement or tax increment application. 3. Deny approval. It would be assumed under this action that the HRA no longer wishes to proceed with this project. 4. Continue this item for further information from staff as this project will not be proceeding for some time into the future. . . --- ~- -. - .. - , -,-~-"