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HomeMy WebLinkAbout03/30/1994 Council Minutes144 SPECIAL COUNCIL MEETING CITY OF LINO LAKES COUNCIL MINUTES MARCH 30, 1994 DATE TIME STARTED TIME ENDED MEMBERS PRESENT: MEMBERS ABSENT March 30, 1994 6:00 P.M. 7:15 P.M. Reinert, Neal, Kuether, ;Elliott'. Bergeson Staff members present: City Administrator, Randy Schumacher and Clerk -Treasurer Marilyn Anderson. Mr. Roger Derrick and Mr. Mike Saxton were present representing Cottage Homesteads of America. The purpose of the special meeting was to consider the proposal for senior housing on Elm Street from Cottage Homesteads of America, Inc. Mr. Schumacher gave a brief background on the matter noting that the present proposal was outlined for the City Council at their March 9, 1994 work session. The proposal is for a 90 unit senior housing development on a parcel that is currently under consideration for rezoning back to single family residential. The second reading of the ordinance rezoning the property to single family residential was delayed to allow Cottage Homesteads of America to finalize their proposal for senior housing and their financing plan. A portion of the proposal from Homestead Cottages of America requires that the City collect only the fees that would have been generated by the 27 single family development. The difference in the fees between the 27 single family development and the 90 unit senior housing development would help reduce the amount of rent on several units to make them available to low income seniors. Mr. Schumacher and the City Engineer have put together a presentation showing what the City fees are for the 27 unit single family development and what the fees are for the 90 unit senior housing development. A copy of this presentation was given to the Council Members. The difference is approximately $178,695.00. After considering the actual amount of the building permit fees, the final savings would be approximately $141,695.00. PAGE 1 1 1 1 SPECIAL COUNCIL MEETING MARCH 30, 1994 Mr. Schumacher and Mr. Schneider also considered what impact a 90 unit senior housing proposal would have on the City and school district services as compared to a 27 single family development. They have concluded that the impact to the City is a "wash" and there would be no effect on the school district since senior citizens usually do not have school age children. Seniors use less water because normally there are no more than two (2) persons per unit and often only one (1) person per unit. The do not require fire and police service as often and do not generate the traffic that a single family unit generates. Mr. Schumacher noted that some of the assessments and taxes on the property are delinquent. Mr. Derrick explained that they would be "brought up to date" prior to recording the property in the name of Homestead Cottages and applying for building permits. Council Member Kuether asked what the Tax Increment Finance (TIF) amount would be. Mr. Derrick explained that the TIF would be structured on the "pay as you go" basis. There will be no need for the City to sell bonds to cover the TIF request. Ninety (90) percent of the real estate taxes will be refunded to Homestead Cottages after they are paid to help reduce the rents. Mr. Derrick explained that TIF applies only to the new taxes that will be generated from the improvement and not to the current taxes. Mr. Saxton explained that the TIF is for 15 years and the portion of the TIF to be returned to Homestead Cottages will remain at 90% for the full 15 years. He estimated that $75,000.00 of TIF will be generated each year and it will be applied to the rents. This would mean about $1,215,000.00 of TIF will be realized over 15 years. Mr. Saxton noted that technically the TIF off sets the cost of the project and this manifests itself in reduced rents. Council Member Kuether asked how many units will be rented for $399.00 per month. Mr. Derrick said that three (1) one bedroom units will be; available. There will also be some two (2) bedroom units available at $499.00 per month. The one (1) bedroom units have 728 square feet and the two (2) bedroom units have 878 square feet. Mr. Derrick noted that the rents for these specific units may be adjusted depending upon the final subsidy from the City and the final interest rate charged by the bank. He also explained that there will be 36 units with attached garages and 54 units with detached garages. The detached garages will be clustered in several areas and will be constructed along with the project. Council Member Kuether asked how Homestead Cottages arrived at the proposed rent structure. Mr. Derrick explained that they PAGE 2 14;1 146 SPECIAL COUNCIL MEETING MARCH 30, 1994 started with the current HUD rent maximum and reduced the rents by applying credits from the City and applying TIF credits. This established the proposed rent which is $276.00 below the HUD maximum. He noted that the average senior rent in nearby municipalities is $671.00. Mr. Derrick further explained that a market study was done for this area and meetings were held with prospective renters. It was determined that incomes were lower in Lino Lakes and this area could not support the HUD rent. Mr. Derrick met with Mr. Schumacher and discussed such matters as does the City have a lender they regularly work with who would be willing to provide a mortgage at a lower rate. He then started working with First Banks who needed to reinvest some of their proceeds back into the communities it serves and talked with NSP. The current situation is that NSP is buying the tax credits at below market rate and they will also build the garages as an extra subsidy. Mr. Derrick suggested that the City could further reduce the rents by agreeing to waive all fees and defer them at no interest. This could generate another $20,000.00 per year to subtract from the rents. Mr. Derrick talked to Mayor Reinert about this proposal. Mayor Reinert was not enthused about this proposal and said that the City would have to compare fees from the two (2) development proposals. Mr. Derrick explained that First Banks is impressed because the City is willing to help "write down" the rents by waiving some fees. First Banks feels this will help keep the units rented. Mayor Reinert explained to Council Member Kuether that this information was presented to the City Council at the March 9, 1994 work session. Council Member Kuether noted that the rents had been projected to be at $399.00 with state grants. She asked if the rents will go down further if the City waives some of the fees. Mr. Derrick said no, there will be no state grants. Mr. Derrick explained that he could not guarantee that the rents would remainat the $399.00 per month figure. First Banks is requiring that the 1.2 debt service ratio be protected. Although the interest will be at a fixed rate for 20 years, other banking factors will affect the rent. Council Member Kuether asked how much money is Cottage Homesteads putting into the development. Mr. Saxton explained approximately $979,588.00. Council Member Kuether asked why Cottage Homes is doing a project like this. Mr. Saxton explained that several years ago he realized that his mother had wanted to sell her home because it was becoming difficult for her to maintain. When she started to look for alternative housing, the only thing available was high rise senior housing not located in her community or a PAGE 3 1 1 1 1 1 1 SPECIAL COUNCIL MEETING MARCH 30, 1994 nursing home. This made him realize that senior housing was needed. Council Member Kuether asked Mr. Saxton how he makes money on senior housing projects. Mr. Saxton explained that his firm shares in the cash flow. He also explained the structure of the limited partnership and general partner. He noted that there will be a co -general partner as well. Mr. Saxton explained that he has developed his business concept to serve those who have existing homes and want a carefree life style. Unfortunately, all state funding is now going to family housing rather than senior housing so that alternative financing if needed. Council Member Kuether asked why this money is needed now. Mr. Saxton explained that he would have received a 9% tax credit if the state had not decided that family housing was more important than senior housing. He will now receive a 4.5% state tax credit and he must find a way to make up the difference in financing. Council Member Kuether asked Mr. Schumacher if he knew what a 27 unit single family housing development would generate in taxes. Mr. Schumacher explained that he had not calculated this figure. Mr. Derrick explained that the senior housing project would generate more taxes per year. Mayor Reinert explained that the City Council should consider the entire impact that each proposed development would have on the City and the school district. He noted that although there will be more senior housing units, all indications are that the senior housing development will have a lesser impact on services. Council Member Kuether said that she would have a hard time supporting the proposed senior housing development because the citizens are not aware of the proposal. She felt that the citizens should have some input. Mr. Schumacher explained that the proposal has a long way to go before it is finalized. A development agreement has to be drafted and there are still many financing issues to be completed. He noted that different elements of the proposal are still changing. Council Member Kuether noted that the City Council is making every effort to keep the rents low. However, the low rent units could be rented to someone outside who is not a resident of Lino Lakes. Mr. Derrick explained that every effort will be made to rent to Lino Lakes residents first. PAGE 4 14/ 14 �. SPECIAL COUNCIL MEETING MARCH 30, 1994 Mr. Saxton explained that the current proposal is only asking that the City treat the senior housing proposal like the 27 unit single family proposal. There will be no loss of ad valorem taxes. He said that the City is telling the community that the City will waive some permit fees to keep the rents low. Council Member Kuether asked how the City Charter would affect this proposal. Mr. Schumacher explained that the Charter did not affect the proposal. Council Member Kuether asked if the property was zoned for senior housing. Mr. Schumacher said it is properly zone and will remain properly zoned because there will be restrictions recorded on the deeds. This guarantees that rents will be controlled for 15 years. Council Member Neal said that he had received five (5) telephone calls on this matter today. Only one caller said that she did not want the project and she lives across the street from property. Council Member Elliott said she felt that the City Council has made a lengthy commitment to senior housing and she felt the rents are reasonable because all utilities are included. Mayor Reinert noted that sometimes the City Council does not feel strongly about subsiding projects but the City must look at alternative housing for seniors. Mr. Schumacher explained that the proposal affects only the increase in taxes on the property and without 90% of the increase in property taxes subsiding the project, it would not be built. Mr. Derrick explained that Cottages Homes is committed to subsidizing 20 specific units and that these units will be offered to Lino Lakes residents first. However, the seniors will have to qualify for the units. Mayor Reinert noted that senior housing will affect other neighborhoods because seniors tend to live in older housing that could use updating. These housing units are often sold to first time home buyers because they are affordable. The new owners tend to upgrade the homes. In this matter the community benefits in two (2) ways, the senior is in a carefree unit and the older is updated by the new buyer. Mr. Saxton said that he wanted to further clarify the TIF proposal. The senior project is requesting TIF assistance of 90%. That means that 10% of the TIF is returned to the City. In PAGE 5 1 1 1 1 1 SPECIAL COUNCIL MEETING MARCH 30, 1994 this manner, the senior housing proposal compares favorably with the smaller housing project. Mayor Reinert noted that no community has tried to build a senior housing project using this proposed financing system. He noted that First Bank is required to reinvest in the community and NSP is investing to bolster their image. The City will also benefit from its participation. Mr. Saxton explained that First Bank is saying they will invest if the City is willing to invest. The entire project will promote a positive image for the community, NSP and First Bank. Mayor Reinert said, based on the conversation this evening, what is Cottage Homes requesting from the City. Mr. Derrick said that he would like the City to prepare a resolution using the three (3) points listed in Mr. Saxton's letter of March 28, 1994 with one (1) additional item, (4) authorize the staff to initiate action in support of housing revenue bonds to support the project. Mr. Saxton explained that the City will act as the issuer of the bonds to get the tax credits. The resolution will be used by Cottage Homestead to complete their application at First Bank. Council Member Neal asked when construction would begin. Mr. Saxton explained that it would take about 60 days to complete all the financing requirements and fulfill the recording requirements. Mr. Derrick noted that Cottage Homestead will request an authorization for an early start on the project. Council Member Elliott moved to approve Resolution No. 94 - 23 Acknowledging: 1) the site on Elm Street is zoned for 90 senior cottage rental units plus clubhouse, and that sewer and water is available and can be connected to the site, and all necessary governmental approvals are in place; 2) Tax Increment Financing has been approved and will be implemented according to the Tax Increment Financing plan; 3) the City has given approval to an additional rent subsidy program which will be funded by the City waiving fees as follows: City SAC Unit Charges, $50,260.00, City WAC Unit Charges, $123,275.00, City Park Dedication Fee, $8,160.00; and 4) authorize staff to initiate action in support of housing revenue bonds to support the project. Council Member Neal seconded the motion. Motion carried with Council Member Kuether voting no. Council Member Elliott moved to adjourn at 7:15 P.M. Council Member Neal seconded the motion. Aye. These minutes were considered, corrected and approved at the regular Council meeting held on April 11, 1994. PAGE 6 14 15 u SPECIAL COUNCIL MEETING MARCH 30, 1994 Marilyn G. Anderson, Vernon F. Reinert, Clerk -Treasurer Mayor 1 PAGE 7