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City Council Regular Meeting Minutes April 8, 2008 Page 5 Ms. Kvilvang stated this is correct. 3 Councilmember Roth asked if there is a time restriction on reaching the 60% threshold. 4 5 Ms. Kvilvang replied that HUD defines "presale" as a purchase agreement with a deposit of 6 earnest money. It was her opinion that HUD likely does not define the amount of time required 7 to meet the threshold, and added it is likely the developer will be able to determine relatively 8 quickly whether there is interest in the project. 9 10 Councilmember Roth stated it was his understanding that there are two types of cooperative 11 housing, i.e., limited market and market rate, and asked for clarification on the advantages and 12 disadvantages of both types, as well as what was used to make a decision on the City getting a 13 limited market cooperative. 14 15 Ms. Kvilvang stated this was the choice of the developer and added that a limited equity 16 cooperative is where they are buying a portion of shares in the project and buying into a master 17 mortgage; the advantage of a limited equity is in keeping the project affordable. 18 19 Councilmember Roth stated with a limited market arrangement, a unit's value will only go up a 20 certain amount each year, so over time, it could be viewed as more affordable if the market starts 21 to go up again. 22 23 Ms. Kvilvang stated with a limited equity arrangement, if you are going to sell, there is typically 24 a long waiting list and the unit is still sold through the cooperative. 25 26 Councilmember Roth stated from the list provided for a senior product, two of the three were 27 market rate cooperatives as opposed to limited market. He indicated that in changing the 28 Development Agreement, the City is going to have a lower tax base than if condominiums were 29 in place. He stated over time, with a limited market, that tax base could be somewhat arbitrarily 30 lower than what a market rate cooperative could be, based on the assumption that over time, the 31 value of the property will increase. He asked why the limited market arrangement was decided 32 upon instead of the market rate, and expressed concern that the City may be giving up a higher 33 taxable unit overall. He stated it was his understanding that the City approved this project in 34 order to enhance the community and increase the tax base, and questioned whether the City 35 should give consideration to a market rate arrangement. 36 37 Mayor Faust stated when you do market studies, you look at your target audience, and if you 38 have a market rate versus a limited market arrangement, you end up with higher costs, higher 39 entry fees, and a higher down payment; as a result, from an affordability standpoint, you get 40 more with a limited market arrangement. He added the Development Agreement is not being 41 changed this evening and the resolution only authorizes the commencement of negotiations. 42 43 Darrell Gemar, Pratt Ordway, representing the developer, appeared before the City Council and 44 stated they looked at both limited market and market rate arrangements and with the limited 45 equity, it is more affordable and there is more of a market right now for limited equity 46 arrangements. He stated they are still evaluating both types of arrangements but are leaning