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9.1 HRSR 05-01-2017E lls River` Request for Action To Item Number Housing and Redevelopment Authority 9.1 Agenda Section Meeting Date Prepared by Work Session Aril 3, 2017 Amanda Othoudt, EDD Item Description Reviewed by TIF Policy and Scoring Worksheets Cal Portner, City Administrator Reviewed by Action Requested Review the Tax Increment Financing Policy and scoring worksheet and identify goals as it relates to the city's housing needs. Background /Discussion The Tax Increment Financing policy was approved on February 18, 2014 based on the direction from the two joint workshops held November 4, 2013 and December 2, 2013. In 2014, the HRA and the City Council established a separate Housing TIF policy, formalizing a tool to assist in the development of housing projects that satisfy city goals and require assistance. The Housing TIF policy is a separate policy to the TIF policy employed for economic development, where factors such as job growth and wages are a vital consideration. The HRA approved the Housing TIF Policy and worksheet on April 6, 2015, with the goal of attracting affordable senior housing to Elk River. Staff initiated an EDA Finance Committee review of all financial policies in March of 2016. The TIF policy is the final policy under review. The EDA Finance Committee recently reviewed both the EDA TIF Policy and the HRA TIF Housing Policy. Updates include incorporating all eligible TIF districts into one application. No changes have been made to the goals initially set by the HRA, EDA and City Council. Staff is looking for direction from the HRA and City Council to identify the goals as it relates to the city's housing needs. Financial Impact N/A Attachments • Housing TIF Policy and Application (April 6, 2015) • Updated Housing TIF Worksheet (April 6, 2015) • TIF Policy and Application (February, 2014) • DRAFT 2017 TIF Policy • Maxfield Housing Study (December, 2015) • Springsted Memo dated February 11, 2014 • Joint Workshop Minutes dated Nov 4, 2013 • Joint Workshop Minutes dated Dec 2, 2013 2 P�awEnEO sr Is City E Tax Increment Financing Policy & Application HOUSING Amended: April 2015 Amended: Februarys 2014 Amended: May 2006 Amended: March 2000 Adopted: August 1991 City of Elk River Economic Development Division 13065 Orono Parkway Elk River, tiIN 55330 763.635.1040 Table of Contents I. Policy Purpose 3 11. Objectives of Tax Increment Financing 3 III. Policies for the Use of TIF 4 IV. Project Qualifications 5 V. Subsidy Agreement & Reporting Requirements 6 VI. Application Process for TIF 6 VII. Meeting Schedule 7 VI 11. Sample But -For Analysis 9 IX. Application Review Worksheet: Housing Projects 8 Application I I City- of Elk River Tax Increment Financing Policy* & Application- Housing P 0 N E R E 0 B Y Amended April 8 2015 Page 2 of 14 11AWURd I. POLICY PURPOSE For the purposes of this document, the term "City" shall include the Elk River City Council, Economic Development Authority, and Housing and RedevelopmentAuthority. The purpose of this policy is to establish the City of Elk River's position relating to the use of Tax Increment Financing (TIF) for Housing private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax increment assistance. The fundamental purpose of tax increment financing in Elk River is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through TIF. The City of Elk River is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. It is the intent of the City to provide the minimum amount of TIF, as well as other incentives, at the shortest term required for the project to proceed. The City reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of TIF to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. OBJECTIVES OF TAX INCREMENT FINANCING As a matter of adopted policy, the City will consider using TIF for Housing to assist private development projects to achieve one or more of the following objectives: • To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off' development. • To facilitate the development process and to achieve development on sites which would not be developed without TIF assistance. • To remove blight and /or encourage redevelopment of residential areas in the city that result in high quality redevelopment and private reinvestment. • To offset increased costs of redevelopment (i.e. contaminated site clean up) over and above the costs normally incurred in development. • To create opportunities for affordable housing. • To contribute to the implementation of other public policies, as adopted by the city from time to time, such as the promotion of quality urban or architectural design, energy conservation, and decreasing capital and /or operating costs of local government. • To enhance and diversify the City of Elk River's housing stock. City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E . B T Amended April 8 2015 Page 3 of 14 11`4ATURE III. POLICIES FOR THE USE OF HOUSING TIF When possible, TIF shall be used to finance public improvements associated with the project. The priority for the use of TIF funds is: 1. Public improvements, legal, administrative, and engineering costs. 2. Site preparation, site improvement, land purchase, and demolition. 3. Capitalized interest, bonding costs. b. TIF assistance will be provided to the developer upon receipt of the increment by the City, otherwise referred to as the pay- asyougo method. c. A maximum often percent (10 %) of any tax increment received from the district may be retained by the City to reimburse administrative costs. d. Any developer receiving TIF assistance shall provide a minimum often percent (10 %) owner cash equity investment in the project. TIF will not be used in circumstances where land and /or property price is in excess of fair market value. f. Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. g. TIF will not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. h. TIF shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. i. The developer must provide adequate financial guarantees to ensure completion of the project, including, but not limited to: minimum assessment agreements, letters of credit, personal guaranties, etc. The developer shall adequately demonstrate, to the City's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. k. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the City or its consultants. 1. All TIF proposals shall optimize the private development potential of a site. City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 4 of 14 11`41ATUREJ IV. PROJECT QUALIFICATIONS Housing TIF projects considered by the City of Elk River must meet each of the following requirements: To be eligible for TIF, a project shall result in: i. A minimum increase of $37,500 per year in property taxes, excluding the state portion; and ii. Have a market value of at least $1,250,000 upon completion. b. The project shall meet at least one of the objectives set forth in Section II and satisfy all the provisions set forth in Section III of this document. The developer shall demonstrate that the project is not financially feasible but for the use of TIF. d. The project shall comply with all provisions set forth in the Tax Increment Financing Act, Minnesota Statutes 469.124 to 469.134, inclusive, as amended, and Statutes 469.174 to 469.1794, inclusive, as amended. e. The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. f. The project shall serve at least two of the following public purposes: • Enhancement or diversification of the city's housing stock. Development that will spur additional private investment in the area. Fulfillment of defined city objectives such as those identified in the City's Comprehensive Plan and the City's Housing and Redevelopment Strategic Plan, among others. Removal of blight or the rehabilitation of a high profile or priority site. V. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers /businesses receiving Tax Increment assistance from the City of Elk River may be subject to the provisions and requirements set forth by the City's Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to 116J.995 (the "Minnesota Business Subsidy Law "). VI. APPLICATION PROCESS FOR TIF Applicant submits the completed application along with a $10,000 application deposit, to be refunded for any portions not utilized if the tax increment project does not proceed. The application deposit will be used toward the cost of services provided in the evaluation of financial feasibility, establishment or modification of the TIF district, and preparation of legal documents and agreements. An additional deposit of $10,000 will be required for projects that require meeting statutory eminent domain and /or redevelopment substandard tests. Projects that demand professional services in excess of the initial deposit shall be required to reimburse the City for the additional expenses. City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 5 of 14 11`4ATURE1 2. City staff reviews the application and completes the Housing Worksheets. The Housing Worksheets are primarily designed to score the desirability of the proposed project. Housing projects will be evaluated on a case -by -case basis and as the projects meet the city's desired objectives. 3. Results of the Housing Worksheets are submitted to the appropriate governing authorities (FDA or HRA) for recommendation to the City Council of approval or denial of the request. 4. If preliminary approval is granted, the Tax Increment Financing Plan, along with all necessary notices, resolutions are prepared by City staff and /or consultants. 5. Notices are published and sent to the county and school board. 6. Public hearings) on the proposed request are held. 7. The City Council grants final approval or denial of the request. City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E . . T Amended April 8 2015 Page 6 of 14 11`4ATURE VII. MEETING SCHEDULE 2015 Housing and Redevelopment Authority & City Council Meeting Schedule For Review of Applications related to Housing assistance APPLICATION DEADLINE (Last Monday) EDA Finance Committee (4t" Tuesday) HRA (1St Monday) CITY COUNCIL (1St Monday) Jan 26 Feb 24 April 6 April 6 Feb 23 Mar 24 May 4 May 4 Mar 30 April 28 Jun 1 Jun 1 Apr 27 May 26 July 6 July 6 May 26 Jun 23 Aug 3 Aug 3 Jun 29 Jul 28 Sep 8 Sep 8 Jul 27 Aug 25 Oct 5 Oct 5 Aug 31 Sep 29 Nov 2 Nov 2 Sep 28 Oct 27 Dec 7 Dec 7 Oct 26 Nov 24 Jan 4 (2016) Jan 4 (2016) Nov 30 Dec 22 Feb 1 (2016) Feb 1 (2016) Dec 28 Jan 26 (2016) Mar 7 (2016) Mar 7 (2016) ALL REQUIRED APPLICATION MATERIALS MUST BE SUBMITTED BY THE DEADLINE OR YOUR APPLICATION WILL BE POSTPONED TO THE NEXT MONTH City- of Elk River Tax Increment Financing Policy* & Application- Housing P 0 N E R E 0 B Y Amended April 8 2015 Page 7 of 14 11AWURd VIII. SAMPLE BUT -FOR ANALYSIS City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N 1 8 E 0 B Amended April 8 2015 Page 8 of 14 11*4ATURd WITH NO WITH TAX ABATEMENT TAX ABATEMENT SOURCES AND USES SOURCES AND USES SOURCES SOURCES Mortgage 9,600,000 8,667,000 Equity 2,400,000 2,400,00 Tax Abatement 0 933,000 12,000,000 12,000,000 TOTAL SOURCES USES USES 1,500,000 1,500,000 Land Site Work 300,000 300,000 Soil Correction 468,000 468,000 Demolition 100,000 100,000 Relocation 65,000 65,000 Subtotal Land Costs 2,433,000 2,433,000 Construction 6,750,000 6,750,000 Finish Manufacturing 250,000 250,000 Subtotal Construction Costs 7,000,000 7,000,000 Soft Costs 350,000 350,000 Taxes 35,000 35,000 Finance Fees 850,000 850,000 Project Manager 542,000 542,000 Developer Fee 540,000 540,000 Contingency 250,000 250,000 Subtotal Soft Costs 2,567,000 2,567,000 TOTAL USES 12,000,000 12,000,000 Income Statement Income Statement Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft. Rent -Space 1 100,000 $8.00 800,000 1005000 $8.00 800,000 Rent -Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500 Rent -Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000 Other 0 $0.00 0 0 $0.00 0 1,2375500 1,237,500 Mortgage 20 Term 1,051,646 20 Term 949,439 9.00% Interest 9.00% Interest 9,600,000 Principal 8,667,000 Principal Net Income 1855854 288,061 7.74%1 12.00% Total Return on Equity City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N 1 8 E 0 B Amended April 8 2015 Page 8 of 14 11*4ATURd ,, 2015 Financial Incentive cElk - = Application River Housing Tax Increment Financing I. PROJECT INFORMATION Property Information (pleaseprant) Address: Parcel Number: 75 - The project will be: Housing Other The project will be: If Leased Space Owner Occupied Leased Space Percent Occupied 6 months after Certificate of Occupancy Total Amount of Tax Increment Requested: $ over years. City Portion: County Portion: ISD 728 Portion: Current Real Estate Taxes on Project Site: Annual $ Total $ Annual $ Total $ Annual $ Total $ $ Estimated Real Estate Taxes upon Completion: Phase I $ Phase II $ Construction Start Date Construction Completion Date Percent of project complete on December 31, current year. II. CONTACT INFORMATION Public Information Notice Generally, correspondence to and from Staff is considered public information. Specific data related to a financial assistance request is deemed not public: Financial Information, Financial Statements, Net worth Calculations, Business Plans, Income and Expense projections, Balance Sheets, Customer Lists, Income Tax returns. When public financial assistance is received, only the following remains not public: Business Plans, Income and Expense projections, Customer lists, Income tax returns, design, market, and feasibility studies not paid for with public funds. The city does allow an applicant to submit sensitive financial information directly to the City's financial consultant, for additional security. Property Owner Information (pleaseprint)Name: mail address: Address: E- City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 9 of 14 11`4ATURE1 Street City State Zip Code Phone : Legal Name of Business: Check One: Proprietor Corporation Partnership Federal ID # State ID # Agent Information (print) Same as Property Owner ❑ Different, as below ❑ (Check one) Name: E -mail address: Address: Street City State Zip Code Phone (w): III. SIGNATURE I certify that is defined as a Small Business, For - Profit and is not a religious, (Business name) Political, Casino, Sports Facility, or Pornographic Enterprise. I further certify that all information provided in this application is true and correct to the best of my knowledge. I authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I further agree, if approved, to the loan security and guarantees required by the Subsidy policy. I agree to provide any additional information as may be requested by the city. Agreement to Pay Costs of Review It is the policy of the City of Elk River to require applicants to pay costs incurred by the City in reviewing and acting upon applications, so that these costs are not borne by the taxpayers of the City. These costs include all of the City's out -of- pocket costs for expenses, including the City's costs for review of the application by the City's Financial Consultant and City Attorney, or other consultants, recording fees, and necessary publication costs. The application processing fees cover anticipated costs; costs incurred above the application fee will be invoiced as they are incurred, and payment will be due within thirty (30) days. Application fees are not refundable, though any unused portion is returned at the request of the applicant. If payment is not received as required by this agreement, the City may suspend the application review process and may deny the application for failure to comply with the requirements for processing the application. Payment for costs will be required whether the application is granted or denied. The undersigned has received the City's policy regarding the payment of costs of review, understands that reimbursement to the City of costs incurred in reviewing the application will be required, agrees to reimburse the City as required in the policy and make payment when billed by the City, and agrees that the application may be denied for failure to reimburse the City for costs as provided in the policy. Note: All Major shareholders will be required to sign personal guarantees and a minimum assessment agreement if up front financing of the project is required. APPLICANT SIGNATURE: TITLE: DATE: City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 10 of 14 11`41ATUREJ IV. PUBLIC PURPOSE It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a benefit to the public. Please indicate how this project will serve a public purpose: Job Creation /Retention (Complete table in Section V). New industrial development which will result in additional private investment in the area. _Enhancement and /or diversification of the City of Elk River's economic base. The project contributes to the fulfillment of the City's Economic Development Strategic Plan. Removal of blight. Rehabilitation of a high profile or priority site. Significantly increase the City's tax base. V. SOURCES & USES SOURCES Bank Loan Other Private Funds Owner Cash Equity Fed Grant /Loan State Grant /Loan EDA Micro Loan Tax Abatement ID Bonds TOTAL USES Land Acquisition Site Development NAME Construction Machinery & Equipment Architectural & Engineering Fees Legal Fees Interest During Construction Debt Service Reserve Contingencies TOTAL AMOUNT $ $ $ $ $ $ AMOUNT $ $ $ $ $ VI. ADDITIONAL DOCUMENTATION AND CHECKLIST Please provide one paper and one electronic copy of following: (Incomplete applications will delay the review of an application) A) Application deposit of $10,000, with any unused portion to be refunded if project does not proceed. B) Written Narrative: Please give a brief summary of your business, its products or service, the project and how this subsidy will impact your project. The narrative should include a statement demonstrating how the project meets the public purpose in IV (above). City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 11 of 14 [1'4ATURE1 C) Business Plan. The business plan should include the following: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products /Services 6. Future Plans 7. Market for Business D) Project Proforma' 1. Sources and uses of funds to finance the project, and 2. Operating cash flow assumptions that include: a. Projected revenues, b. Operating expenses, c. Net operating income, and d. Annual debt service and loan payments. E) Financial Statements for previous Two Years and the Current year to date' Profit & Loss Statement Balance Sheet F) Financial Projections for Term of abatement, up to 10 Years' G) Personal Financial Statements of all Major Shareholders, Partners, Guarantors 11) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration I) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project Completion J) Written statement of contact information (Name, Company, Address, Email, Phone, Fax) for project team, including: Attorney, Accountant, Financing Sources (lenders, partners, etc...), Parent Company, Architect 'Sensitive financial documents, while not -public information, maybe submitted directly to the City's financial consultant by signing the attached confidentiality agreement, for additional confidentiality. The attached Confidentiality Agreement may be signed and included with the application. K') Construction Plans and Itemized Project Construction Statement L) Attach the following documentation as Exhibits Exhibit A — Corporation /Partnership Description Exhibit B — List of Shareholders /Partners Exhibit C — But For Analysis Exhibit D — List of Prospective Lessees (if applicable) Exhibit E — Legal Description M) Site and Construction Plans City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 12 of 14 11*4ATUREJ CONFIDENTIALITY AGREEMENT (Sample Agreement) This agreement is made this day of , 20, by and between , a company, hereinafter "Developer," and Springsted Incorporated, a Minnesota corporation, hereinafter " Springsted." WHEREAS, Developer is (description of project), hereinafter the "Project," pursuant to a (form of agreement) with (public entity), hereinafter the "City," dated ; and WHEREAS, Springsted has been hired by the City to investigate certain financial aspects of the Developer and the Project; and WHEREAS, in conjunction with such investigation, Springsted desires to examine the financial information of Developer relative to Developer and the Project; and WHEREAS, Developer is willing to disclose such information only on the condition that such information be kept confidential. NOW, THEREFORE, in consideration of the terms and mutual covenants contained herein, the parties agree as follows: I. Developer agrees to make its financial information, development pro forma and projection, budget information, and such other financial information concerning the Project as Springsted may reasonably request, hereinafter the "Information," available for inspection by Springsted, but solely for the purpose set forth above. 2. Springsted shall accept the Information in strict confidence solely for that purpose and shall make no other use of the information, or disclose it to any other person or party, including the City, without the express written consent of Developer. Notwithstanding the foregoing, Springsted may use the Information in summary form only to report its findings to the City provided that Springsted first presents its proposed report to Developer and obtains Developer's written consent to ensure that no inadvertent disclosures of confidential information or other inaccurate information are contained in such report. 3. Inspection of the Information shall take place in such manner and at such place and time as the parties may agree. The Information shall not be copied, duplicated, abstracted, summarized or recorded, directly or indirectly, by any means whatsoever, without the prior consent of Developer. 4. The Information shall remain the property of Developer, and any Information provided in tangible form shall be returned to Developer upon completion of such inspection. Any copies, duplications, abstracts, summaries or other recordings of the Information made with Developer's consent shall be returned to Developer upon demand. 5. Springsted agrees that any breach of the obligation of confidentiality imposed hereby shall constitute irreparable harm to Developer and shall entitle Developer to equitable relief enjoining any further breaches of this Agreement, together and in conjunction with any and all such other remedies as may be available to Developer at law or in equity. IN WITNESS WHEREOF, the parties have hereunto set their hands the day and year first above written. DEVELOPER 58-A SPRINGSTED INC. LO-A Its Its City of Elk River Tax Increment Financing Policy & Application- Housing P 0 N E A E 0 B T Amended April 8 2015 Page 13 of 14 11`4ATURE1 IX. WORKSHEET- HOUSING PROJECTS TO BE COMPLETED BY CITY STAFF The project must meet the criteria set forth in Section IV of the City's Tax Increment Financing policy to continue. a) Meets minimum thresholds for size, value, and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the but-for analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (f). 1. Ratio of Private to All Public Investment in Project: Points: Greater than 7:1 10 $ Private investment 6:1 8 $ Public Investment 5:1 6 Ratio Private: Public Financing 4:1 4 3:1 2 Less than 3:1 1 2. Project provides housing that is restricted Points: to persons 55 years and older: 10 3. Market Value /Tax Base Generation: Points: Project will result in an estimated market value per unit $135,000 /Unit 5 (land and building) of $125,000 /Unit 4 $115,000 /Unit 3 $105,000 /Unit 2 $ 95,000 /Unit 1 4. Project proposes rehabilitation of existing housing, housing stock, and maximizes utilization of existing infrastructure: Points: 10 5. Project proposes a location near existing jobs, transportation, recreation, retail services, social services, and schools: Points: 3 6. Project includes community/ neighborhood: Points: facility (pool, community center, etc.) Points based on scale of improvement (1 -5) Yes 5 7. Type of Housing Project: Points: 100% Owner Occupied 2 Investment Property 1 8. Likelihood that the project will result in Points: unsubsidized, spin -off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 50 points. 9. Bonus Points The project will not be 100% Pay- asyougo TIF. The project does not require modification to land use plan. The project contributes to the goals of Energy City. • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design & /or materials in construction. Bonus Points: -5 points 2 points 2 points Total Points: Overall project analysis: Rank Points Max eligible High 45 -50 points 100% Moderate 37 -44 points 85% Low 30 -36 points 65% Not Eligible 0 -29 points City E. Tax Increment Financing Policy & Application Amended: February 2014 Amended: May 2006 Amended: March 2000 Adopted: August 1991 City of Elk River Economic Development Division 13065 Orono Parkway Elk River, MN 55330 763.635.1040 Table of Contents I. Policy Purpose 3 II. Objectives of Tax Increment Financing 3 III. City of Elk River Policies for the Use of TIF 4 IV. Project Qualifications 5 V. Subsidy Agreement & Reporting Requirements 6 VI. Application Process for TIF 6 VII. Application for TIF 7 Applicant Information 7 Project Information 8 Public Purpose 8 Sources & Uses 9 Checklist & Additional Information 10 VIII. Sample But -For Analysis I I IX. Application Review Worksheet: Commercial - Industrial Projects 12 X. Application Review Worksheet: Housing Projects 14 City- of Elk River Tax Increment Financing Policy & Application p D W E B E 0 B T Amended February 2014 /� SURE Page 2 of 15 jy I. POLICY PURPOSE For the purposes of this document, the term "City" shall include the Elk River City Coinuil, Economic DevelopmentAutbority, and Housing and RedevelopmentAutbority. The purpose of this policy is to establish the City of Elk River's position relating to the use of Tax Increment Financing (TTF) for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax increment assistance. The fundamental purpose of tax increment financing in Elk River is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through TIF. The City of Elk River is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. It is the intent of the City to provide the minimum amount of TIF, as well as other incentives, at the shortest term required for the project to proceed. The City reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of TIF to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. OBJECTIVES OF TAX INCREMENT FINANCING As a matter of adopted policy, the City will consider using TIF to assist private development projects to achieve one or more of the following objectives: • To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits as defined in the City's Business Subsidy Policy. • To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off' development. • To facilitate the development process and to achieve development on sites which would not be developed without TIF assistance. • To remove blight and /or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. • To offset increased costs of redevelopment (i.e. contaminated site clean up) over and above the costs normally incurred in development. • To create opportunities for affordable housing. • To contribute to the implementation of other public policies, as adopted by the city from time to time, such as the promotion of quality urban or architectural City of Elk River Tax Increment Financing Policy & Application P D W E D E D D Y Amended February 2014 }� /� U®E Page 3 of 15 A V /y {� design, energy conservation, and decreasing capital and /or operating costs of local government. • To enhance and diversify the City of Elk River's economic base. • To significantly increase the City of Elk River's tax base. III. POLICIES FOR THE USE OF TIF When possible, TIF shall be used to finance public improvements associated with the project. The priority for the use of TIF funds is: 1. Public improvements, legal, administrative, and engineering costs. 2. Site preparation, site improvement, land purchase, and demolition. 3. Capitalized interest, bonding costs. b. It is the City's policy to establish the following types of TIF districts: 1. Economic Development Districts • It is desired that the project result in a minimum creation of one full time job per $25,000 of TIF, or • Result in a significant increase in the tax base. 2. Redevelopment Districts • The market value of a redeveloped site shall increase by a minimum of 50% of the current market value. 3. Housing Districts • May be considered on a case -by -case basis. Other types of TIF districts, along with specific criteria, may be considered on a case -by -case basis. TIF assistance will be provided to the developer upon receipt of the increment by the City, otherwise referred to as the pay- asyougo method. Requests for up front financing will be considered on a case -by -case basis. d. A maximum of ten percent (10 %) of any tax increment received from the district may be retained by the City to reimburse administrative costs. e. Any developer receiving TIF assistance shall provide a minimum of ten percent (10 %) owner cash equity investment in the project. f. TIF will not be used in circumstances where land and /or property price is in excess of fair market value. g. Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. h. TIF will not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. City of Elk River Tax Increment Financing Policy & Application P 0 W E D E D D Y Amended February 2014 }� /� U®E Page 4 of 15 A V /y {� TIF shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. j. The developer must provide adequate financial guarantees to ensure completion of the project, including, but not limited to: minimum assessment agreements, letters of credit, personal guaranties, etc. k. The developer shall adequately demonstrate, to the City's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the City or its consultants. m. All TIF proposals shall optimize the private development potential of a site. IV. PROJECT QUALIFICATIONS All TIF projects considered by the City of Elk River must meet each of the following requirements: To be eligible for TIF, a project shall result in: i. The new construction of a minimum of 25,000 square feet; ii. A minimum increase of $37,500 per year in property taxes, excluding the state portion; and iii. Have a market value of at least $1,250,000 upon completion. b. The project shall meet at least one of the objectives set forth in Section II and satisfy all the provisions set forth in Section III of this document. The developer shall demonstrate that the project is not financially feasible but for the use of TIF. d. The project shall comply with all provisions set forth in the Tax Increment Financing Act, Minnesota Statutes 469.124 to 469.134, inclusive, as amended, and Statutes 469.174 to 469.1794, inclusive, as amended. e. The project must be consistent with the City's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. f. The project shall serve at least two of the following public purposes: • Creation of jobs with livable wages and benefits. Significantly increase the City's tax base. Enhancement or diversification of the city's economic base. Industrial development that will spur additional private investment in City of Elk River Tax Increment Financing Policy & Application P 0 W E D E D D Y Amended February 2014 }� /� U®E Page 5 of 15 A V /y {� the area. Fulfillment of defined city objectives such as those identified in the City's Comprehensive Plan and the City's Economic Development Strategic Plan, among others. Removal of blight or the rehabilitation of a high profile or priority site. V. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers /businesses receiving Tax Increment assistance from the City of Elk River shall be subject to the provisions and requirements set forth by the City's Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to 116J.995 (the "Minnesota Business Subsidy Law "). VI. APPLICATION PROCESS FOR TIF Applicant submits the completed application along with a $10,000 application deposit, to be refunded for any portions not utilized if the tax increment project does not proceed. The application deposit will be used toward the cost of services provided in the evaluation of financial feasibility, establishment or modification of the TIF district, and preparation of legal documents and agreements. An additional deposit of $10,000 will be required for projects that require meeting statutory eminent domain and /or redevelopment substandard tests. Projects that demand professional services in excess of the initial deposit shall be required to reimburse the City for the additional expenses. 2. City staff reviews the application and completes the Commercial - Industrial and /or Housing Worksheets. The Application and Commercial - Industrial and /or Housing Worksheets are primarily designed to score the desirability of the proposed project. Industrial, Redevelopment and Housing projects will be evaluated on a case -by -case basis and as the projects meet the city's desired objectives. 3. Results of the Commercial - Industrial and /or Housing Worksheets are submitted to the appropriate governing authorities (EDA or HRA) for recommendation to the City Council of approval or denial of the request. 4. If preliminary approval is granted, the Tax Increment Financing Plan, along with all necessary notices, resolutions are prepared by City staff and /or consultants. 5. Notices are published and sent to the county and school board. 6. Public hearing(s) on the proposed request are held. 7. The City Council grants final approval or denial of the request. City of Elk River Tax Increment Financing Policy & Application p 0 W E D E D D T Amended February 2014 }� /� URE Page 6 of 15 A V /y {� VII. APPLICATION FOR TAX INCREMENT FINANCING A. APPLICANT INFORMATION Name of Corporation /Partnership Address Primary Contact Address Phone Fax Email Brief description of the corporation /partnership's business, including history, principal product or service: Brief description of the proposed project: Attorney Name Address Phone Fax Email Accountant Name Address Fax Contractor Name Address Email Email Engineer Name Address Phone Fax Email Architect Name Address Phone Fax Email City of Elk River Tax Increment Financing Policy & Application p D W E D E D D Y Amended February 2014 }� /� URE Page 7 of 15 A V /y {� B. PROJECT INFORMATION 1. The project will be: Industrial Greenfield: New Construction P0 3 Commercial Redevelopment: New Construction Expansion Rehabilitation Industrial Redevelopment: New Construction Rehabilitation Other The project will be: _Owner Occupied Leased Space Project Address Legal Description & Parcel Identification Number(s) 4. Site Plan and Preliminary Construction Plans Attached: Yes No Amount of Tax Increment Requested for: Land Purchase $ Public Improvement $_ Site Improvement $ Current Real Estate Taxes on Project Site: $ Estimated Real Estate Taxes upon Completion: Phase I $ Phase II $ 7. Construction Start Date: Construction Completion Date: If Phased Project: C. PUBLIC PURPOSE Year Year % Completed % Completed It is the policy of the City of Elk River that the use of Tax Increment Financing should result in a benefit to the public. Please indicate how this project will serve a public purpose. Job Creation /Retention: Number of existing jobs Number of jobs created by project Average hourly wage of jobs created /retained New industrial development, which will result in additional private investment in the area. _Enhancement or diversification of the city's economic base. _The project contributes to the fulfillment of the City's Economic Development Strategic Plan. _Removal of blight or the rehabilitation of a high profile or priority site. _Significantly increase the City's tax base. Other: City of Elk River Tax Increment Financing Policy & Application p D W E D E D D T Amended February 2014 }� /� URE Page 8 of 15 A V /y {� D. SOURCES & USES SOURCES NAME AMOUNT Bank Loan $ Other Private Funds $ Owner Cash Equity. $ Fed Grant /Loan $ State Grant /Loan $ EDA Micro Loan $ Tax Increment $ ID Bonds $ TOTAL $ USES AMOUNT Land Acquisition $ Site Development $ Construction $ Machinery & Equipment $ Architectural & Engineering Fees $ Legal Fees $ Interest During Construction $ Debt Service Reserve $ Contingencies $ TOTAL $ City of Elk River Tax Increment Financing Policy & Application p D W E D E D D Y Amended February 2014 ' /� U®E Page 9 of 15 A V /y {� E. ADDITIONAL DOCUMENTATION AND CHECKLIST Applicants will also be required to provide the following documentation. A) Written business plan, including a description of the business, ownership /management, date established, products and services, and future plans B) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet C) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date D) Two Year Financial Projections E) Personal Financial Statements of all Major Shareholders Profit & Loss Current Tax Return F) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration G) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project H) Application deposit of $10,000, with any unused portion to be refunded if project does not proceed. 1) Construction Plans and Itemized Project Construction Statement J) Attach the followi Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F ng documentation as Exhibits - Corporation /Partnership Description - Description of Project - List of Shareholders /Partners - But -For Analysis - List of Prospective Lessees - Legal Description and PID Number(s) Note: All Major shareholders will be required to sign personal guarantees if up front financing of the project is required. The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the City of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the City after the filing of this application. Applicant Name Date City of Elk River Tax Increment Financing Policy & Application p 0 W E D E D D T Amended February 2014 }� /� URE Page 10 of 15 A V /y {� VIII. SAMPLE BUT -FOR ANALYSIS City of Elk River Tax Increment Financing Policy & Application p D W E 8 E D 8 Y Amended February 2014 IL I Page 11 of 15 irmAWRE WITH NO WITH TAX INCREMENT TAX INCREMENT SOURCES AND USES SOURCES AND USES SOURCES SOURCES 9,600,000 8,667,000 Mortgage Equity 2,400,000 2,400,00 Tax Increment Financing 0 933,000 12,000,000 12,000,000 TOTAL SOURCES USES USES Land 1,500,000 1,500,000 Site Work 300,000 300,000 Soil Correction 468,000 468,000 Demolition 100,000 100,000 Relocation 65,000 65,000 Subtotal Land Costs 2,433,000 2,433,000 Construction 6,750,000 6,750,000 Finish Manufacturing 250,000 250,000 Subtotal Construction Costs 7,000,000 7,000,000 Soft Costs 350,000 350,000 Taxes 35,000 35,000 Finance Fees 850,000 850,000 Project Manager 542,000 542,000 Developer Fee 540,000 540,000 Contingency 250,000 250,000 Subtotal Soft Costs 2,567,000 2,567,000 TOTAL USES 12,000,000 12,000,000 Income Statement Income Statement Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft. Rent -Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000 Rent -Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500 Rent -Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000 Other 0 $0.00 0 0 $0.00 0 1,237,500 1,237,500 Mortgage 20 Term 1,051,646 20 Term 949,439 9.00% Interest 9.00% Interest 9,600,000 Principal 8,667,000 Principal Net Income 185,854 288,061 7.74%1 12.00% Total Return on Equity City of Elk River Tax Increment Financing Policy & Application p D W E 8 E D 8 Y Amended February 2014 IL I Page 11 of 15 irmAWRE IX. TAX INCREMENT FINANCING APPLICATION REVIEW WORKSHEET - COMMERCIALIINDUSTRIAL PROJECTS TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section IV of the City's Tax Increment Financing policy. a) Meets minimum thresholds for size, value, and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the but-for analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (f). 2. Ratio of Private to All Public Investment in Project: $ Private investment $ Public Investment Ratio Private: Public Financing 3. Job Creation in the City of Elk River: Number of new jobs as a result of the project. Number of existing /retained jobs divided by 2. Total 4. Ratio of Public Investment to Job Creation: $ Public Investment Number of new jobs created /retained $ Public Investment per new job 5. Wage Level of new jobs created /retained: Minimum hourly wage of jobs created /retained: 6. Project size: The project will result in the construction of square feet City of Elk River Tax Increment Financing Policy & Application Amended February 2014 Page 12 of 15 Points: 5:1 5 4:1 4 3:1 3 2:1 2 Less than 2:1 1 Points: 40+ 5 30+ 4 20+ 3 10+ 2 Less than 10 1 Points: $15,000 or less 5 $20,000 or less 4 $22,000 or less 3 $25,000 or less 2 Over $25,000 1 Points: Over $21 / hour 5 $18 -21 / hour 4 $14 -17 / hour 3 $10 -13 / hour 2 Under $10 / hour 1 Points: 80,000+ 5 65,000+ 4 50,000+ 3 35,000+ 2 POWERED 0 NAYUREJ 25,000+ 1 7. Market Value /Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial estimated market value (land and building) $80 /sf+ $110 /sf+ 5 of $70 /sf+ $100 /sf+ 4 $60 /sf+ $90 /sf+ 3 $50 /sf+ $80 /sf+ 2 $40 /sf+ $70 /sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied & Investment 4 Investment Property 3 9. Use: Points: Manufacturing 5 Research & Development 4 Commercial Redevelopment 3 Warehouse /Distribution 2 Housing 1 10. Likelihood that the project will result in Points: unsubsidized, spin -off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 45 points. 11. Bonus Points The project will be 100% Pay- asyougo TIF. The project contributes to the goals of Energy City. • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design & /or materials in construction. Bonus Points: Total Points: Overall project analysis: High 45 -38 points Moderate 37 -29 points Low 28 -20 points Not Eligible 19 -0 points 3 points 2 points City of Elk River Tax Increment Financing Policy & Application P 0 W E D E D D Y Amended February 2014 }� /� URE Page 13 of 15 A V /y {� X. TAX INCREMENT FINANCING APPLICATION REVIEW WORKSHEET- HOUSING PROJECTS TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section IV of the City's Tax Increment Financing policy. a) Meets minimum thresholds for size, value, and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the butfor analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (f). 2. Ratio of Private to All Public Investment in Project: Private investment Public Investment Ratio Private: Public Financing 3. Job Creation in the City of Elk River: Number of new jobs as a result of the project. Number of existing /retained jobs divided by 2. Total 4. Wage Level of new jobs created /retained: Minimum hourly wage of jobs created /retained: 5. Market Value /Tax Base Generation: Project will result in an estimated market value per unit (land and building) of 6. Project provides housing that is restricted to persons 55 years and older: City of Elk River Tax Increment Financing Policy & Application Amended February 2014 Page 14 of 15 Points: 5:1 5 4:1 4 3:1 3 2:1 2 Less than 2:1 1 Points: 20+ 5 15+ 4 10+ 3 5+ 2 Less than 5 1 Points: Over $25 /hour 5 $21 -25 /hour 4 $17 -20 /hour 3 $14 -16 /hour 2 Under $14 /hour 1 Points: $135,000 /Unit 5 $125,000 /Unit 4 $115,000 /Unit 3 $105,000 /Unit 2 $ 95,000 /Unit 1 Points: 5 POWERED 0 NAYUREI 7. Project proposes rehabilitation of existing housing, housing stock, and maximizes utilization of existing infrastructure: Points: 4 8. Project proposes a location near existing jobs, transportation, recreation, retail services, social services, and schools: Points: 2 9. Type of Housing Project: Points: 100% Owner Occupied 2 Investment Property 1 10. Likelihood that the project will result in Points: unsubsidized, spin -off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 38 points. 11. Bonus Points The project will be 100% Pay- asyougo TIF. The project contributes to the goals of Energy City. • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design & /or materials in construction. Bonus Points: Total Points: Overall project analysis: High 38 -30 points Moderate 29 -22 points Low 21 -13 points Not Eligible 12 -0 points 3 points 2 points City of Elk River Tax Increment Financing Policy & Application p 0 W E D E D D Y Amended February 2014 }� /� URE Page 15 of 15 A V /y {� City E Tax Increment Financing Policy & Application Amended: March 2017 February 2014 May 2006 March 2000 August 1991 City of Elk River Economic Development Division 13065 Orono Parkway Elk River, MN 55330 763.635.1040 TABLE OF CONTENTS Policy Purpose 3 Objectives of Tax Increment Financing 3 Policies for the Use of TIF 3 Statutory TIF Districts 4 Project Requirements 5 Project Qualifications 6 Subsidy Agreement and Reporting Requirements 7 Public Information Notice 7 Application Process for TIF 8 Signature Page 9 Application 10 Sample But -For Analysis 17 Application Review Worksheet: 18 Non - Housing Projects Application Review Worksheet: 20 Housing Projects City- of Elk River Tax Increment Financing Policy & Application P a w E R E 11 8 T Amended March 2017 NATURE Page 2 of 22 POLICY PURPOSE For the purposes of this document, the term "city" sball include the Elk River City Council, Economic DevelopmentAutbority, and Housing and RedevelopmentAutbority. The purpose of this policy is to establish the city of Elk River's position relating to the use of Tax Increment Financing (TIF) for private development above and beyond the requirements and limitations set forth by State Law. This policy shall be used as a guide in the processing and review of applications requesting tax increment assistance. The fundamental purpose of tax increment financing in Elk River is to encourage desirable development or redevelopment that would not otherwise occur but for the assistance provided through TIF. The city of Elk River is granted the power to utilize TIF by the Minnesota Tax Increment Financing Act, as amended. It is the intent of the city to provide the minimum amount of TIF, at the shortest term required for the project to proceed. The city reserves the right to approve or reject projects on a case by case basis, taking into consideration established policies, project criteria, and demand on city services in relation to the potential benefits from the project. Meeting policy criteria does not guarantee the award of TIF to the project. Approval or denial of one project is not intended to set precedent for approval or denial of another project. II. OBJECTIVES OF TAX INCREMENT FINANCING As a matter of adopted policy, the city will consider using TIF to assist private development projects to achieve one or more of the following objectives: • To retain local jobs and /or increase the number and diversity of jobs that offer stable employment and /or attractive wages and benefits as defined in the city's Business Subsidy Policy. • To encourage additional unsubsidized private development in the area, either directly or indirectly through "spin off' development. • To facilitate the development process and to achieve development on sites which would not be developed without TIF assistance. • To remove blight and /or encourage redevelopment of commercial and industrial areas in the city that result in high quality redevelopment and private reinvestment. • To offset increased costs of redevelopment (e.g. contaminated site cleanup) over and above the costs normally incurred in development. • To create opportunities for affordable housing. • To enhance and diversify the city of Elk River's economic base. • To significantly increase the city of Elk River's tax base. III. POLICIES FOR THE USE OF TIF When possible, TIF shall be used to finance public improvements associated with the project. The priority for the use of TIF funds is: 1. Public improvements, legal, administrative, and engineering costs. 2. Site preparation, site improvement, land purchase, and demolition. 3. Capitalized Interest and Bonding Costs. City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 3 of 22 I IV. STATUTORY TIF DISTRICTS Redevelopment District [Minn. State Statutes 469.174, Subd. 10; 469.176, Subd. 4j] • Buildings, streets, other improvements occupy 70% of the area, and, more than 50% of the main buildings are substandard (substantial renovation or clearance justified; cost of attaining State building code exceeds 15% of the cost of a new structure). • At least 90% of the tax increment revenues must be used to correct the conditions that allow redevelopment district designation. Such costs include: land acquisition, demolition, land clearance, utility installation, roads, sidewalks, and parking facilities. • Maximum term 25 years after receipt of the first increment. Renewal &Renovation District Minn. State Statutes 469.174, Subd. 10a; 469.176, Subd. 4j] • Buildings, street, other improvements occupy 70% of area; and at least 20% of the main buildings are substandard (as defined under Redevelopment District; and, 30% of the other buildings require substantial renovation or clearance to remove conditions such as inadequate street layout, incompatible uses, overcrowding, obsolete buildings, or other identified hazards to community health, safety, and general welfare. These conditions must be reasonably distributed throughout the geographic area of the district. • At least 90% of the tax increment revenues must be used to finance the cost of correcting the conditions (i.e. land acquisition, demolition, land clearance, utility installation, roads, sidewalks, and parking facilities). • Maximum term 15 years after receipt of the first increment. Economic Development District Minn. State Statutes 469.174, Subd. 12, 469.176, Subd. 4c] • A project found to be in the public interest because: It will discourage a business from moving operations to another state or municipality; or, It will result in increased local employment; or, It will preserve and enhance the tax base. At least 85% of the facilities must be used for: • the manufacturing or production of tangible personal property, including processing resulting in the change in condition of the property; • warehousing, storage, and distribution of tangible personal property, excluding retail sales; • research and development related to the activities listed in clause (1) or (2) of the statutes ; • telemarketing if that activity is the exclusive use of the property; City of Elk River Tax Increment Financing Policy & Application P 0 N E 8 E 0 B T Amended March 2017 Page 4 of 22 [IN'ATURE1 • tourism facilities; or • space necessary for and related to the activities listed in clauses (1) to (5) of the statutes. • Maximum term 8 years after receipt of the first increment. Housing District [Minn. State Statutes 469.174, Subd. 11, 469.176, Subd. 4d, 469.1761] A project for low & moderate income housing occupancy. A project does not qualify if more than 20% of the square footage of improvements are for commercial, retail or other non - housing uses. Tax increment revenue must solely finance housing project costs, which may include public infrastructure. For owner - occupied housing, 95% of the units must be initially purchased and occupied by individuals qualifying as low and moderate income under current Federal schedules. For rental housing, 50% of the units must be occupied by persons whose income is 80% or less of area median gross income. Maximum term 25 years after receipt of the first increment. Soils Condition District [Minn. State Statutes 469.174, Subd. 19, 469.176, Subd. 4b] A project where presence of hazardous substances, pollution, or contaminants requires removal or remedial action for use; and, the estimated cost of remediation exceeds the land's fair market value, or, exceeds $2 per square foot. Tax increment may be used only to: o Acquire parcels on which the improvements will occur; • Pay for the cost of removal or remedial action; and • Pay for the administrative expenses of the TIF Authority allocable to the district. Maximum term is 20 years after receipt of the first increment. V. PROJECT REQUIRMENTS In addition to complying with all statutory guidelines, projects requesting TIF should meet the following requirements. However, it should not be presumed that a project meeting this set of criteria will automatically be approved. a. TIF assistance may be provided to the developer upon receipt of the increment by the city, otherwise referred to as the pay- asyougo method. Requests for up front financing will be considered on a case -by -case basis. b. A maximum often percent (10 %) of any tax increment received from the district will be retained by the city to reimburse administrative costs. City of Elk River Tax Increment Financing Policy & Application P 0 N E A E . . T Amended March 2017 Page 5 of 22 11`4ATURE c. Any developer receiving TIF assistance shall provide a minimum of ten percent (10 %) owner cash equity investment in the project. d. TIF will not be used to purchase property where land and /or property price is in excess of fair market value. e. Developer shall be able to demonstrate a market demand for a proposed project. TIF shall not be used to support purely speculative projects. f. TIF will not be utilized in cases where it would create an unfair and significant competitive financial advantage over other projects in the area. g. TIF shall not be used for projects that would place extraordinary demands on city services or for projects that would generate significant environmental impacts. h. The developer must provide adequate financial guarantees to ensure completion of the project, including, but not limited to: minimum assessment agreements, letters of credit, personal guaranties, etc. i. The developer shall adequately demonstrate, to the city's sole satisfaction, an ability to complete the proposed project based on past development experience, general reputation, and credit history, among other factors, including the size and scope of the proposed project. For the purposes of underwriting the proposal, the developer shall provide any requested market, financial, environmental, or other data requested by the city or its consultants. k. All TIF proposals shall optimize the private development potential of a site. VI. PROJECT QUALIFICATIONS All TIF projects considered by the city of Elk River must meet all of the following requirements: To be eligible for TIF, a project shall result in: i. The new construction of a minimum of 25,000 square feet; ii. A minimum increase of $37,500 per year in property taxes, excluding the state portion; and iii. Have a market value of at least $1,250,000 upon completion. b. The project shall meet at least one or more-of the objectives set forth in Section II and satisfy all the provisions set forth in Section III of this document. c. The developer shall demonstrate that the project is not financially feasible but for the use of TIF. d. The project shall comply with all provisions set forth in the Tax Increment Financing Act, Minnesota Statutes 469.124 to 469.134, inclusive, as amended, City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 6 of 22 I and Statutes 469.174 to 469.1794, inclusive, as amended. e. The project must be consistent with the city's Comprehensive Plan, Land Use Plan, and Zoning Ordinances. f. A Non - Housing project shall serve at least two of the following public purposes: • Creation of jobs with livable wages and benefits. • Significantly increase the city's tax base. • Enhancement or diversification of the city's economic base. • Industrial development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Economic Development Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site g. A Housing Project shall serve at least two of the following public purposes: • Enhancement or diversification of the city's housing stock. Development that will spur additional private investment in the area. Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Housing and Redevelopment Strategic Plan, among others. Removal of blight or the rehabilitation of a high profile or priority site. VII. SUBSIDY AGREEMENT & REPORTING REQUIRMENTS All developers /businesses receiving Tax Increment Financing assistance from the city of Elk River shall be subject to the provisions and requirements set forth by the city's Business Subsidy Policy as amended and Minnesota Statutes Sections 116J.993 to 116J.995 (the "Minnesota Business Subsidy Law "), if applicable. VIII. PUBLIC INFORMATION NOTICE Generally, correspondence to and from Staff is considered public information. Specific data related to a financial assistance request is deemed not public: (e.g.) Financial Information, Financial Statements, Net worth Calculations, Business Plans, Income and Expense projections, Balance Sheets, Customer Lists, Income Tax returns. When public financial assistance is received, only the following remains not public: Business Plans, Income and Expense projections, Customer lists, Income tax returns, design, market, and feasibility studies not paid for with public funds. The city allows an applicant to submit sensitive financial information directly to the city's financial consultant, for additional security. City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 7 of 22 11`41ATUREJ IX. APPLICATION PROCESS FOR TIF 1. Meet with appropriate EDA and City Staff to discuss the scope of the project, public participation being requested, and other information as may be necessary. 2. Applicant submits the completed application along with a $10,000 application deposit. The application deposit will be used toward the cost of services provided in the evaluation of financial feasibility, establishment or modification of the TIF district, and preparation of legal documents and agreements. An additional deposit of $10,000 will be required for projects that require meeting statutory eminent domain and /or redevelopment substandard tests. Projects that require professional services in excess of the initial deposit shall reimburse the city for the additional expenses. 3. Staff reviews the application and completes the Commercial - Industrial and /or Housing Worksheets. The Application and Commercial - Industrial and /or Housing Worksheets are primarily designed to score the desirability of the proposed project. 4. The EDA Finance Committee reviews the request Results of the Commercial - Industrial and /or Housing Application and Worksheets are submitted to the EDA Finance Committee for recommendation to the appropriate governing authorities (EDA or HRA) and to the City Council for approval or denial of the request. 6. If preliminary approval is granted, the Tax Increment Financing Plan, along with all necessary notices and, resolutions are prepared by city staff and /or consultants. 7. If Planning Commission action is required, it will be necessary for the applicant to make application to the Commission for Concept Review. 8. A development agreement based upon the terms will be prepared in addition to an economic development plan or redevelopment plan and tax increment financing plan if required. 9. Notices are published and sent to the county and school board. 10. A public hearing may be set, if required by statutes, at which the EDA or HRA will consider a final recommendation related to the formal application. Following the necessary financial analysis and preparation of the detailed plans, the City Council shall take action on the project as required under the Tax Increment Financing statutes 11. The City Council grants final approval or denial of the request. City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 8 of 22 11*4ATUREJ X. SIGNATURE I certify that (legal business name) is defined as a Small Business, For - Profit and is not a religious, Political, Casino, Sports Facility, or Pornographic Enterprise. I further certify that all information provided in this application is true and correct to the best of my knowledge. I authorize the city of Elk River and the Finance Committee to check credit references and verify financial and other information. I further agree, if approved, to the loan security and guarantees required by the Subsidy policy. I agree to provide any additional information as may be requested by the city. Agreement to Pay Costs of Review It is the policy of the city of Elk River to require applicants to pay costs incurred by the city in reviewing and acting upon applications, so that these costs are not borne by the taxpayers of the city. These costs include all of the city's out -of- pocket costs for expenses, including the city's costs for review of the application by the city's Financial Consultant and City Attorney, or other consultants, recording fees, and necessary publication costs. The application deposit covers anticipated costs; costs incurred above the application deposit will be invoiced as incurred, and payment will be due within thirty (30) days. Application deposit is not refundable, though any unused portion is returned to the applicant. If payment is not received as required by this agreement, the city may suspend the application review process and may deny the application for failure to comply with the requirements for processing the application. Payment for costs will be required whether the application is granted or denied. The undersigned has received the city's policy regarding the payment of costs of review, understands that reimbursement to the city of costs incurred in reviewing the application will be required, agrees to reimburse the city as required in the policy and make payment when billed by the city, and agrees that the application may be denied for failure to reimburse the city for costs as provided in the policy. Note: All owners with ownership interests greater than 20% will be required to sign personal guarantees and a minimum assessment agreement if up front financing of the project is required. APPLICANT SIGNA TITLE: DATE: City of Elk River Tax Increment Financing Policy & Application P 0 N . A .. B T Amended March 2017 Page 9 of 22 11`4ATURE City of ELK RIVER ECONOMIC DEVELOPMENT Ells - TAX INCREMENT APPLICATION River` CONTACT INFORMATION Legal Name of Business: Project Site Address: City / State / Zip Contact Person(s) Business Phone Home Phone Check One: Proprietor Federal ID # PROJECT INFORMATION Property Information (please print) Address: Legal Description: Fax Email _Corporation State ID # Number: 75 - Partnership Site Plan and Preliminary Construction Plans Attached: Yes No The project will be: Redevelopment District Renewal & Renovation District Economic Development Housing District Soils Condition District Amount Requested: $ Total Project Cost: $ The project will be: Owner Occupied Leased Space If Leased Space Percent Occupied 6 months after Certificate of Occupancy City- of Elk River Tax Increment Financing Policy & Application p p w I A E D 8 T Amended March 2017 NATURE Page 10 of 22 Total Amount of Tax Increment Requested: $ over years. City Portion: Annual $ Total $ County Portion: Annual $ Total $ ISD 728 Portion: Annual $ Total $ Amount of Tax Increment Requested for: Land Purchase $ Public Improvement $ Site Improvement $ Current Real Estate Taxes on Project Site: $ Estimated Real Estate Taxes upon Completion: Phase I $ Phase II $ Construction Start Date Construction Completion Date. If Phased Project: Year Year % Completed % Completed Percent of project complete on December 31, current year. Brief description of the business entities, business, including history, principal product or service: Brief description of the proposed project: City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 11 of 22 11*4ATUREJ PUBLIC PURPOSE It is the policy of the city of Elk River that the use of Tax Increment Financing should result in a benefit to the public. A Non - Housing project shall serve at least two of the following public purposes: • Creation of jobs with livable wages and benefits. • Significantly increase the city's tax base. • Enhancement or diversification of the city's economic base. • Industrial development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Economic Development Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site A Housing Project shall serve at least two of the following public purposes: • Enhancement or diversification of the city's housing stock. • Development that will spur additional private investment in the area. • Fulfillment of defined city objectives such as those identified in the city's Comprehensive Plan and the city's Housing and Redevelopment Strategic Plan, among others. • Removal of blight or the rehabilitation of a high profile or priority site. Please indicate how this project will serve a public purpose: JOB CREATION /RETENTION Number of existing jobs: Number of jobs created by project: Average hourly wage of jobs created /retained: Job Creation/ Retention job Title Number of jobs Average Hourly Wage Annual Salary Are the Jobs Newly Created or Retained Expected Hiring Date City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 12 of 22 11`4ATURE1 Project Consultant Contacts Attorney Name Addres Phone Fax Email Accountant Name Address Fax Contractor Name Addres Email Phone Fax Email Engineer Name Address Phone Fax Email Architect Name Addres Phone Fax Email City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 13 of 22 11*4ATUREJ SOURCES & USES SOURCES NAME Bank Loan Other Private Fund Owner Cash Equity Fed Grant /Loan State Grant /Loan EDA Micro Loan Tax Increment ID Bonds TOTAL USES Land Acquisition Site Development Construction Machinery & Equipment Architectural & Engineering Fees Legal Fees Interest During Construction Debt Service Reserve Contingencies TOTAL City of Elk River Tax Increment Financing Policy & Application Amended March 2017 Page 14 of 22 AMOUNT AMOUNT P 0 W 1 8 E 0 B T 'IN' A TUR ADDITIONAL DOCUMENTATION AND CHECKLIST Applicant to provide the following documentation: Application deposit of $10,000, application deposit is not refundable, though any unused portion is returned to the applicant. B) Written Narrative: Please give a brief summary of the project and how this subsidy will impact your project. The narrative should include a statement demonstrating how the project meets the public purpose. B) Written business plan, including the following: 1. Description of Business 2. Ownership 3. Management 4. Date Established 5. Products/ Services 6. Future Plans 7. Market for Business C) Financial Statements for Past Two Years Profit & Loss Statement Balance Sheet Tax Returns D) Current Financial Statements Profit & Loss Statement to Date Balance Sheet to Date E) Project ProForma: 1. Operating cash flow assumptions that include: a. Projected revenues, b. Operating expenses, c. Net operating income, and d. Annual debt service and loan payments. 2. Financial Projections for Term of abatement, up to 10 Years F) Personal Financial Statements of all owners with ownership interest greater than 20 %. Profit & Loss Current Tax Return G) Letter of Commitment from Applicant Pledging to Complete During the Proposed Project Duration. H) Letter of Commitment from the Other Sources of Financing, Stating Terms and Conditions of their Participation in Project. City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 15 of 22 11'4ATURE1 I) Site and Construction Plans and Itemized Project Construction Statement J) Attach the followi Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F rig documentation as Exhibits - Corporation /Partnership Description - Description of Project - List of Shareholders /Partners - But -For Analysis - List of Prospective Lessees - Legal Description and PID Number(s) Note: All owners with ownership interest greater than 20% will be required to sign personal guarantees and a minimum assessment agreement if up front financing of the project is required. The undersigned certifies that all information provided in this application is true and correct to the best of the undersigned's knowledge. The undersigned authorizes the city of Elk River to check credit references and verify financial and other information. The undersigned also agrees to provide any additional information as may be requested by the city after the filing of this application. Applicant Name Date City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 16 of 22 11*4ATUREJ SAMPLE BUT -FOR ANALYSIS City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 17 of 22 11'4ATURE1 WITH NO WITH TAX INCREMENT TAX INCREMENT SOURCES AND USES SOURCES AND USES SOURCES SOURCES Mortgage 9,600,000 8,667,000 Equity 2,400,000 2,400,00 Tax Increment Financing 0 933,000 TOTAL SOURCES 12,000,000 12,000,000 USES USES Land 1,500,000 1,500,000 Site Work 300,000 300,000 Soil Correction 468,000 468,000 Demolition 100,000 100,000 Relocation 65,000 65,000 Subtotal Land Costs 2,433,000 2,433,000 Construction 6,750,000 6,750,000 Finish Manufacturing 250,000 250,000 Subtotal Construction Costs 7,000,000 7,000,000 Soft Costs 350,000 350,000 Taxes 35,000 35,000 Finance Fees 850,000 850,000 Project Manager 542,000 542,000 Developer Fee 540,000 540,000 Contingency 250,000 250,000 Subtotal Soft Costs 2,567,000 2,567,000 TOTAL USES 12,000,000 12,000,000 Income Statement Income Statement Sq. Ft. Per Sq. Ft. Sq. Ft. Per Sq. Ft. Rent -Space 1 100,000 $8.00 800,000 100,000 $8.00 800,000 Rent -Space 2 25,000 $8.50 212,500 25,000 $8.50 212,500 Rent -Space 3 25,000 $9.00 225,000 25,000 $9.00 225,000 Other 0 $0.00 0 0 $0.00 0 1,237,500 1,237,500 Mortgage 20 Term 1,051,646 20 Term 949,439 9.00% Interest 9.00% Interest 9,600,000 Principal 8,667,000 Principal Net Income 185,854 288,061 7.74%1 12.00% Total Return on Equity City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 17 of 22 11'4ATURE1 TAX INCREMENT FINANCING APPLICATION REVIEW WORKSHEET FOR NON - HOUSING PROJECTS TO BE COMPLETED BY CITY STAFF 1. The project meets the criteria set forth in Section IV of the city's Tax Increment Financing policy. a) Meets minimum thresholds for size, value, and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the but for analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (f). Meets the appropriate statutory TIF district requirements 2. Ratio of Private to All Public Investment in Project: Private investment Public Investment Ratio Private: Public Financing 3. Job Creation in the city of Elk River: Number of new jobs as a result of the project. Number of existing /retained jobs divided by 2. Total 4. Ratio of Public Investment to Job Creation: $ Public Investment Number of new jobs created /retained $ Public Investment per new job 5. Wage Level of new jobs created /retained: Minimum hourly wage of jobs created /retained: 6. Project size: The project will result in the construction of square feet City of Elk River Tax Increment Financing Policy & Application Amended March 2017 Page 18 of 22 Points: 5:1 5 4:1 4 3:1 3 2:1 2 Less than 2:1 1 Points: 40+ 5 30+ 4 20+ 3 10+ 2 Less than 10 1 Points: $15,000 or less 5 $20,000 or less 4 $22,000 or less 3 $25,000 or less 2 Over $25,000 1 Points: Over $21 / hour 5 $18 -21 / hour 4 $14 -17 / hour 3 $10 -13 / hour 2 Under $10 / hour 1 Points: 80,000+ 5 65,000+ 4 50,000+ 3 35,000+ 2 25,000+ 1 P 0 W 1 8 E 0 B T 1`4ATUR 7. Market Value /Tax Base Generation: Points: The project will result in a per square foot Industrial Commercial estimated market value (land and building) $80 /sf+ $110 /sf+ 5 of $70 /sf+ $100 /sf+ 4 $60 /sf+ $90 /sf+ 3 $50 /sf+ $80 /sf+ 2 $40 /sf+ $70 /sf+ 1 8. Type of Project: Points: 100% Owner Occupied 5 Mix Owner Occupied & Investment 4 Investment Property 3 9. Use: Points: Manufacturing 5 Research & Development 4 Commercial Redevelopment 3 Warehouse /Distribution 2 Housing 1 10. Likelihood that the project will result in Points: unsubsidized, spin -off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 45 points. 11. Bonus Points Bonus Points: The project will be 100% Pay- asyougo TIE 3 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design & /or materials in construction. Total Points: Project Rating: Points: Max Eligibility: Overall project analysis: High 50 -38 points 100% Moderate 37 -29 points 85% Low 28 -20 points 65% Not Eligible 19 -0 points 0% City of Elk River Tax Increment Financing Policy & Application P 0 N E B E 0 B T Amended March 2017 Page 19 of 22 11'4ATURE1 TAX INCREMENT FINANCING APPLICATION REVIEW WORKSHEET - HOUSING PROJECTS TO BE COMPLETED BY CITY STAFF The project must meet the criteria set forth in Section IV of the city's Tax Increment Financing policy to continue. a) Meets minimum thresholds for size, value, and tax revenue. b) Meets at least one of the objectives in Section II and satisfies all of the provisions set forth in Section III. c) Demonstrates need for TIF with the but for analysis. d) Consistent with all city plans and ordinances. e) Serves at least two public purposes as defined in Section IV (g). Meets the appropriate statutory TIF district requirements 1. Ratio of Private to All Public Investment in Project: $ Private investment $ Public Investment Ratio Private: Public Financing 2. Project provides housing that is restricted to persons 55 years and older: 3. Market Value /Tax Base Generation: Project will result in an estimated market value per unit (land and building) of 4. Project proposes rehabilitation of existing housing, housing stock, and maximizes utilization of existing infrastructure: 5. Project proposes a location near existing jobs, transportation, recreation, retail services, social services, and schools: City of Elk River Tax Increment Financing Policy & Application Amended March 2017 Page 20 of 22 Points: Greater than 7:1 10 6:1 8 5:1 6 4:1 4 3:1 2 Less than 3:1 1 Points 10 Points $135,000 /Unit 5 $125,000 /Unit 4 $115,000 /Unit 3 $105,000 /Unit 2 $ 95,000 /Unit 1 Points: 10 Points: 5 P 0 W 1 8 E 0 B T 1`4ATUR 6. Project includes community/ neighborhood: Points: facility (pool, community center, etc.) 5 7. Type of Housing Project: Points: 100% Owner Occupied 3 Investment Property 2 8. Likelihood that the project will result in Points: unsubsidized, spin -off development. High 5 Moderate 3 Low 1 Sub - Total Points: of a possible 55 points. 9. Point Adjustments Bonus Points: The project will be 100% Pay- asyougo TIF. 5 points The project does not require modification to land use plan. 2 points The project contributes to the goals of Energy City. 2 points • Product promotes sensible use of energy, OR • Project utilizes significant energy efficient design & /or materials in construction. Total Points: Project Rating: Points: Max Eligibility: Overall project analysis: High 64 -50 points 100% Moderate 37 -49 points 85% Low 30 -36 points 65% Not Eligible 0 -29 points 0% City of Elk River Tax Increment Financing Policy & Application P 0 N E 8 E 0 B T Amended March 2017 Page 21 of 22 11'4ATURE1 Comprehensive Housing Needs Analysis City of Elk River Maxfield V- Research &Consulting 9 Research & Consulting December 4, 2015 Ms. Amanda Othoudt Economic Development Director City of Elk River 13065 Orono Parkway Elk River, MN 55330 Dear Ms. Othoudt: Attached is the Comprehensive Housing Needs Analysis for the City of Elk River, Minnesota conducted by Maxfield Research and Consulting LLC. The study updates the previous housing study completed in 2012 during the economic downturn and projects housing demand from 2015 through 2025. The updated study provides recommendations on the amount and type of housing that could be built in Elk River to satisfy demand from current and future residents over the next decade. The study identifies a potential demand for over 1,500 new housing units in Elk River over the remainder of the decade and beyond (2015 to 2025, including a variety of housing options). Demand will be spread across all product types; including 787 for -sale units, 442 general - occupancy rental units, and 296 senior units. The existing single - family finished lot supply is dwindling; therefore new platted developed lots will be needed soon to meet future housing demand. Detailed information regarding recommended housing concepts can be found in the Conclusions and Recommendations section at the end of the report. We have enjoyed performing this study for you and are available should you have any questions or need additional information. Sincerely, MAXFIELD RESEARCH AND CONSULTING LLC Ae 440ew Matt Mullins Brian Smith Vice President Research Associate Attachment 612 - 338 -0012 (fax) 612- 904 -7979 7575 Golden Valley Road, Suite 385, Golden Valley, MN 55427 www.maxfieldresearch.com TABLE OF CONTENTS Page EXECUTIVE SUMMARY ......................................................................... ............................... 1 DEMOGRAPHIC ANALYSIS .................................................................... ............................... 6 Introduction..................................................................................... ............................... 6 Elk River Study Area Definition ........................................................ ............................... 6 Population and Household Growth Trends and Projections ........... ............................... 8 Population Age Distribution Trends ................................................. ............................... 9 HouseholdIncome ........................................................................... ............................... 11 Tenure by Age of Householder ........................................................ ............................... 14 HouseholdType ............................................................................... ............................... 15 Tenureby Income ............................................................................ ............................... 18 Net Worth by Age of Householder .................................................. ............................... 20 EMPLOYMENT ANALYSIS ..................................................................... ............................... 22 Employment Growth Trends ............................................................ ............................... 22 Major Employer Interviews .............................................................. ............................... 28 HOUSING CHARACTERISTICS ................................................................ ............................... 31 Introduction..................................................................................... ............................... 31 Residential Construction Trends 2000 to Present ........................... ............................... 31 American Community Survey ........................................................... ............................... 33 Ageof Housing Stock ........................................................................ ............................... 33 Housing Units by Structure and Occupancy or (Housing Stock by Structure Type) ....... 35 Housing Units by Occupancy Status and Tenure ............................. ............................... 37 Owner Occupied Housing Units by Mortgage Status ...................... ............................... 38 Owner - Occupied Housing Units by Value ........................................ ............................... 39 Renter - Occupied Units by Contract Rent ......................................... ............................... 40 RENTAL MARKET ANALYSIS ................................................................. ............................... 41 Introduction..................................................................................... ............................... 41 General Occupancy Rental Projects ................................................. ............................... 41 Pending Rental Developments in Elk River ...................................... ............................... 49 Rental Market Interview Summary .................................................. ............................... 50 SENIOR HOUSING ANALYSIS ................................................................ ............................... 51 SeniorHousing Defined .................................................................... ............................... 51 Senior Housing in Elk River ............................................................... ............................... 52 TABLE OF CONTENTS (continued) APPENDIX - DEFINITIONS ..................................................................... ............................... 113 Page FOR -SALE MARKET ANALYSIS .............................................................. ............................... 59 Introduction...................................................................................... ............................... 59 Overview of For -Sale Housing Market Conditions ........................... ............................... 59 HomeResales by Price ..................................................................... ............................... 64 Home Resales per Square Foot („ PSF) .............................................. ............................... 65 Current Supply of Homes on the Market .......................................... ............................... 67 ElkRiver Lot Supply ........................................................................... ............................... 73 HOUSING DEMAND ANALYSIS ............................................................. ............................... 78 Introduction...................................................................................... ............................... 78 Demographic Profile and Housing Demand ..................................... ............................... 78 Housing Demand Overview .............................................................. ............................... 79 Estimated Demand for For -Sale Housing .......................................... ............................... 83 Estimated Demand for General Occupancy Rental Housing ............ ............................... 84 Estimated Demand for Independent Adult Few Services Senior Housing ...................... 86 Estimated Demand for Affordable Independent Senior Housing ..... ............................... 88 Estimated Demand for Subsidized Senior Housing .......................... ............................... 89 Estimated Demand for Congregate Senior Housing ......................... ............................... 90 Demand Estimate for Assisted Living Housing ................................. ............................... 92 Estimated Demand for Memory Care Housing ................................. ............................... 94 RECOMMENDATIONS AND CONCLUSIONS ......................................... ............................... 97 Introduction /Overall Housing Recommendations ........................... ............................... 97 Recommended Housing Product Types ........................................... ............................... 100 For -Sale Housing .............................................................................. ............................... 100 General Occupancy Rental Housing ................................................. ............................... 105 SeniorHousing ................................................................................. ............................... 107 Challenges and Opportunities Challenges and Opportunities .......................................................... ............................... 110 APPENDIX - DEFINITIONS ..................................................................... ............................... 113 LIST OF TABLES Table Number and Title Page D1. Population and Household Growth Trends and Projections, Elk River, 1990 to 2025. 9 D2. Population Age Distribution, Elk River, 2000, 2010, 2015, and 2020 ........................... 10 D3. Household Income by Age of Householder, Elk River, 2015 & 2020 ............................ 13 D4. Tenure by Age of Householder, Elk River, 2000 and 2010 ............ ............................... 16 D5. Household Type Trends, Elk River, 2000 and 2010 ....................... ............................... 17 D6. Tenure by Household Income, Elk River, 2000 and 2013* ............ ............................... 20 D7. Net Worth by Age of Householder, Elk River, 2015 ...................... ............................... 21 E1. Resident Employment, Sherburne County, 2000 -2015* ............ ............................... 24 E2. Covered Employment Trends, Elk River, 2000, 2005, 2010, and 2014 ........................ 25 E3. Major Employers, City of Elk River, June 2012 .............................. ............................... 32 HC1. Residential Construction, City of Elk River, Annual Building Permits Issued, 2000 to 2015* ............................................................................................. ............................... 32 HC2. Age of Housing Stock, Elk River, 2013* .......................................... ............................... 34 HC3. Housing Stock by Units in Structure, Elk River, 2000 and 2013* ... ............................... 36 HC4. Housing Stock by Occupancy Status and Tenure, Elk River, 2000 to 2020 ................... 37 HC5. Housing Units by Mortgage Status, Elk River, 2013* .................... ............................... 48 HC6. Units by Value, Elk River, 2013* .................................................... ............................... 39 HC7. Units by Contract Rent, Elk River, 2013* ....................................... ............................... 40 RM1.General Occupancy Rental Housing, City of Elk River, October 2015 ......................... 43 RM2.Common Area Features /Amenities, City of Elk River, October 2015 ........................... 46 SH1. Senior Housing Units By Type, City of Elk River, October 2015 ..... ............................... 52 SH2. Senior Housing, City of Elk River, October 2015 ............................ ............................... 53 SH3. Unit Features /Building Amenities /Services, Existing Senior Housing, City of Elk River, October 2015 ................................................................. ............................... 55 FS1. Home Resales, City of Elk River, 2000 to June 2015 ...................... ............................... 60 FS2. Single Family and Multifamily Residential Sales, City of Elk River, 2000 through 2015 62 FS3. Home Resales by Sales Price & Product Type, City of Elk River, 2014 .......................... 64 FS4. Housing Sales Per Square Foot (PSF), Elk River, 2005 to June 2015 ............................. 66 FS5. Homes Currently Listed For -Sale, City of Elk River, August 2015 .. ............................... 68 FS6. Active Listings by Housing Type, Elk River, August 2015 ............... ............................... 69 FS7. Active Listings by Housing Type, Elk River, August 2015 ............... ............................... 70 FS8. Active Listing by Year Built, Elk River, August 2015 ....................... ............................... 72 FS9. Subdivision & Lot Inventory - Detached Housing Units, City of Elk River, 2ndQuarter 2015 ............................................................................ ............................... 74 FS10.Subdivisions & Lot Inventory -Attached Housing Units, City of Elk River, 2ndQuarter 2015 ............................................................................ ............................... 75 LIST OF TABLES (continued) Table Number and Title Page FS11.Vacant Lot for Parcels Platted, Sherburne County, 2000 to Present ........................... 76 HD1. For -Sale Housing Demand, Elk River, 2015 to 2025 ...................... ............................... 77 HD2. Rental Housing Demand, Elk River, 2015 to 2025 ......................... ............................... 78 HD3. Market Rate Adult /Few Services Housing Demand, Elk River, 2015 & 2020 ............... 80 HD4. Affordable Independent Senior Housing Demand, Elk River, 2015 & 2020 ................. 82 HDS. Subsidized Independent Senior Housing Demand, Elk River, 2015 & 2020 ................. 83 HD6. Market Rate Congregate Housing Demand, Elk River, 2015 & 20120 ......................... 84 HD7. Market Rate Assisted Living Demand, Elk River, 2015 & 2020 ...... ............................... 87 HDB. Memory Care Demand, Elk River, 2015 & 2020 ............................ ............................... 90 CR1. Summary of Housing Demand, City of Elk River, November 2015 ............................... 97 CR2. Recommended Housing Development, City of Elk River, 2015 to 2025 ...................... 99 HA4. Elk River Area Housing Affordability — Based on Household Income ........................... 110 EXECUTIVE SUMMARY Purpose and Scope of Study Maxfield Research and Consulting LLC was engaged by the City of Elk River to update the Comprehensive Housing Needs Analysis for the City of Elk River that was completed in 2012. The Housing Needs Analysis provides recommendations on the amount and types of housing that should be developed in order to meet the needs of current and future households who choose to reside in the City. The scope of this study includes: an analysis of the demographic and economic characteristics of the City; a review of the characteristics of the existing housing stock and building permit trends; an analysis of the market condition for a variety of rental and for -sale housing products; and an assessment of the need for housing by product type in the City. Recommendations on the number and types of housing products that should be considered in the City are also supplied. Demographic Analysis The City of Elk River is forecast to add an additional 1,602 people and 742 households between 2010 and 2020. • The population in Elk River is aging and older age cohorts are accounting for a significant percentage of the total population. Over the next five years, the age 55 to 64 cohort will continue to have the highest growth numerically (791 people, or 38%), but significant growth is also forecast in the age 65 to 74 cohort (716 people, or 60 %) and 75+ households (262 people, or 27 %). Older adults and younger seniors (those between the ages of 55 and 74) in these high growth age cohorts are the target market for active adult housing products. • The overall median household income in 2015 in Elk River is estimated at about $78,300. This is substantially higher than the Twin Cities Metro Area at $67,795. • Between 2000 and 2010, homeownership rates increased from 78.3% to 80.2% in the City of Elk River • The County's unemployment rate of 4.2% in 2015 is slightly higher than the State of Minnesota (3.9%) and lower than the Nation (5.5%). Housing Characteristics • In total, Elk River is reported to have approximately 8,810 housing units, of which about 6,650 are owner - occupied, 1,602 are renter - occupied, and 457 are vacant as of 2015. • Owner - occupied housing units account for about 78% of the City's total housing stock. MAXFIELD RESEARCH & CONSULTING, LLC. EXECUTIVE SUMMARY • The City of Elk River issued permits for the construction of 2,704 new residential units from 2000 to 2010. That equates to 246 units annually. However, 91.5% of development occurred from 2000 to 2006. New residential construction declined significantly from 2006 through 2012. Permits have increased since the recession but not near the levels they were in the early 2000s. Approximately 81% of Elk River homeowners have a mortgage. About 24% of homeowners with mortgages also have a second mortgage or home equity loan. Comparatively, about 66% of homeowners in the United States have a mortgage. Rental Housing Market Analysis • In order to assess the current market conditions for rental housing in Elk River, Maxfield Research and Consulting LLC conducted an inventory of subsidized (i.e. housing that is income - restricted to households earning at or below 30% of the Area Median Income), affordable (i.e. housing that is income - restricted between 30% and 80% of the Area Median Income) and market rate (i.e. housing that is not income - restricted) projects located in the City. • In total, Maxfield Research inventoried 931 general occupancy market rate rental units in the City of Elk River spread across 22 multifamily developments (16 units and larger). At the time of the survey, there 49 vacant units (5.3%). Of which 28 vacancies were located in Elk Park Estates that recently underwent a change in management. Excluding Elk Park Estates, the market rate vacancy rate totals 2.3 %. Typically, a healthy rental market maintains a vacancy rate of roughly 5 %, which promotes competitive rates, ensures adequate consumer choice, and allows for unit turnover. • Elk River has a total of 54 subsidized units within two buildings and 244 affordable units across five developments. The buildings feature a variety of unit types that cater to a wide - spectrum of household types. There were four units vacant at the time of the survey for a rate of 1.3 %. A healthy income based rental market typically maintains roughly a 3.0% vacancy rate. • Coachman Ridge (Tax- Credit) recently opened in November of 2015 with 52 units. All of the units were leased prior to opening. • Low vacancy rates in all general occupancy rental products indicate pent -up demand for additional rental housing in Elk River. MAXFIELD RESEARCH & CONSULTING, LLC. EXECUTIVE SUMMARY Senior Housing Market Analysis • There are eight senior housing facilities located in Elk River with a total of 412 units. There were three vacant rental units and one ownership unit for sale at the time of the survey. This equates to a vacancy rate of 1.0 %. This indicates a need for additional senior housing units. • Guardian Angels by the Lake are the only facility that offers senior housing with services. The development contains 60 assisted living units and 30 memory care units. The recent expansion absorbed quickly and the units have remained steadily occupied. For -Sale Housing Market Analysis The average and median resale price of homes in Elk River was approximately $216,840 and $209,975 respectively as of June 2015. The median sales price over the last decade peaked in 2005. From 2005 to 2011, median sales prices have declined by 44 %. Since 2011, the median sale price has recovered increasing by 59% through June 2015. • Home sales have remained relatively steady in Elk River with an average of roughly 400 homes annually in Elk River since 2010. Considering that Elk River has a supply of nearly 6,500 owned homes in 2010, this represents turnover of almost 6% of the owned homes annually. The median list price of homes for sale in Elk River was about $245,960 in June 2015. Based on a median list price of $245,960, a household would need an income of about $63,225 in order to afford to make monthly housing payments of about $1,245 (assuming a 10% down payment, 3.75% 30 -year fixed mortgage). A household with significantly more equity (in an existing home and /or savings) could put more than 10% down and afford a higher priced home. About 67.8% of Elk River households have annual incomes at or above $63,225. As of July 2015, Elk River had a total of nearly 200 vacant lots within 25 subdivisions. All of the subdivisions were platted between 2000 and 2014. Only 3% of Lots were platted after 2010. • The lot supply benchmark for growing communities is a three- to five -year lot supply. This supply of lots is appropriate as it provides adequate consumer choice but minimizes developers' carrying costs. Given the number of existing platted lots and the annual absorption of single - family lots over the past few years, we conclude that Elk River is currently just under a three -year lot supply indicating the need for additional platted lots. MAXFIELD RESEARCH & CONSULTING, LLC. EXECUTIVE SUMMARY Housing Needs Analysis • Based on our calculations, demand exists for the following general occupancy product types between 2015 and 2025: o Market rate rental 265 units o Affordable rental 133 units o Subsidized rental 44 units • For -sale single - family 601 units • For -sale multifamily 186 units • In addition, we find demand for multiple senior housing product types. By 2020, demand for senior housing is forecast for the following: o Active adult ownership 0 units o Active adult market rate rental 77 units o Active adult affordable 42 units o Active adult subsidized 0 units • Congregate 102 units • Assisted living 47 units • Memory care 28 units Recommendations and Conclusions • Based on the finding of our analysis and demand calculations, the chart on the following page provides a summary of the recommended development concepts by product type for the City of Elk River through 2025. Detailed findings are described in the Conclusions and Recommendations section of the report. MAXFIELD RESEARCH & CONSULTING, LLC. 4 EXECUTIVE SUMMARY MAXFIELD RESEARCH & CONSULTING, LLC. RECOMMENDED HOUSING DEVELOPMENT CITY OF ELK RIVER 2015 to 2025 Purchase Price/ No. of Pct. Development Monthly Rent Range' Units of Total Timing Owner - Occupied Homes Single Family2 Entry -level >$225,000 175 200 31% 2016+ Move -up $250,000 - $350,000 320 350 56% 2016+ Executive $350,000+ 75 80 13% 2017+ Total 570 - 630 100% Townhomes /Detached Townhomes/Twinhomes Z Entry -level >$200,000 50 60 31% 2018+ Move -up $200,000+ 110 130 69% 2016+ Total 160 - 190 100% Total Owner - Occupied 730 - 820 General Occupancy Rental Housing Market Rate Rental Housing Apartment -style $950/11311 - $1,450/3BR 180 200 78% 2017+ Townhomes $1,200/2BR - $1,500/3BR 50 60 22% 2016+ Total 230 - 260 100% Affordable Rental Housing Apartment -style Moderate Income3 90 100 73% 2017+ Townhomes Moderate Income3 30 40 27% 2016+ Total 120 - 140 100% Total Renter - Occupied 350 - 400 Senior Housing (i.e. Age Restricted) Active Adult Affordable Rental Moderate Income 40 42 27% 2016+ Active Adult Market Rate Rental4 $900/1BR - $1,200/2BR+ 50 60 36% 2019+ Independent Living (Congregate) $1,750/113R - $1,950/2BR 60 80 45% 2018+ Assisted Living $2,750 /EFF - $4,000/2BR 40 50 29% 2017+ Memory Care $4,000 /EFF - $5,000/2BR 26 28 18% 2017+ Total 144 - 164 100% Total - All Units 1,224 - 1,384 Pricing in 2015 dollars. Pricing can be adjusted to account for inflation. Z Recommendations include the absorption of some existing previously platted lots. 3 Affordablity subject to income guidelines per MHFA. See Table HA -1 for Sherburne County Income limits. 4 Alternative development concept is to combine active adult affordable and market rate active adult into mixed - income senior community Note - Recommended development does not coincide with total demand. Elk River may not be able to accommodate all recommended housing types based on a variety of factors (i.e. development constraints, land availability, etc.) Source: Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. DEMOGRAPHIC ANALYSIS Introduction This section of the report examines factors related to the current and future demand for for - sale and renter - occupied housing in Elk River, Minnesota. It includes an analysis of population and household growth trends and projections, employment data, projected age distribution, household income data and household tenure data for Elk River. A review of these characteristics provides insight into the demand for various types of housing in Elk River over the next decade. Elk River Study Area Definition The draw area for determining current and future housing demand in the City of Elk River is based on traffic pattern orientation, proximity to other communities, interviews with local officials and community stakeholders, natural and manmade geographic barriers, and our knowledge of the draw areas for housing. The Study Area is defined as Elk River proper. [Ignwsy l9 nrrr e.d 97 NF CM Si km 2ntl 95Cr S'[ nl I P[AYIk I'atk 6A9.StME Nvris LoY• Rd W1V E l k River R N aw th Ph 9f et Av•NW 179M its go Sll rtl Are NW -� WV� 95 A.- L 4� 70%S1 NE o- n % IC If A1P"S• @r NW s £ Ramsey 4 i 1 t � E l 1 tYy F ♦iollan r � y t M till ,� MAXFIELD RESEARCH & CONSULTING, LLC. 6 DEMOGRAPHIC ANALYSIS Elk River is the county seat in Sherburne County. Sherburne County is northwest of the Twin Cities Metro Area and included in the Greater Metropolitan Statistical Area. The City of Elk River is about 35 miles northwest of Minneapolis and40 miles southeast of Saint Cloud. The main routes to Elk River are US Highways 169 and 10, along with State Highway 101 Elk River Location in Relation to Sherburne County and the Twin Cities Metro Area Saint Cloud Sherburne County City�Y E l k R`!ver h, MAXFIELD RESEARCH & CONSULTING, LLC. 7 , 1 ".019ftd- I Flow Twin Cities Metro Area iAiaa11eaF)01 S . dd ._... S f Al t -- -.. Fir,,r Fail; rTf x i.'. w a � °' �.• H Q h 5` IJI° I ;�okI71 J. iy °.... S 10r141 � /r MAXFIELD RESEARCH & CONSULTING, LLC. 7 DEMOGRAPHIC ANALYSIS Population and Household Growth Trends and Projections The following graphs show population and household growth trends for the City of Elk River from 1990 to 2025. Table D -1 presents data from 1990 to 2010 from the U.S. Census with projections to 2025 adjusted by Maxfield Research and Consulting LLC based on data from local building permit data, ESRI (a nationally recognized demographics provider), and the Minnesota Department of Administration /Office of Geographic and Demographic Analysis. • According to the U.S. Census Bureau, the City of Elk River contained 22,974 persons and 8,080 households in 2010. Over the last decade, the Elk River's population increased significantly. Through 2010, the population increased by over 6,500 persons (40%), while its household base grew by over 2,400 households (43 %). • Based on our review of growth trend projections for Elk River, current economic trends and building permit history, we project that Elk River will continue to see growth through 2020, but at a much lesser rate than the past two decades due to the Recession and slowdown in the housing market. Between 2010 and 2020, the City of Elk River is projected to add nearly 2,100 persons (9%) and 850 households (10.5 %). Elk River Population Trends ❑ 1990 1990-2020 30,000 ❑ 2000 8,000 ❑ 2000 9,253 i � 25,000 ❑ 2010 8,080 -Z 20,000 ■ 2020 25,632 m K 15,000 ❑ 2025 24,576 22,974 ' 0 4,000 -- 5,664 a 10,000 16,447 5,000 11,143 0 • Based on our review of growth trend projections for Elk River, current economic trends and building permit history, we project that Elk River will continue to see growth through 2020, but at a much lesser rate than the past two decades due to the Recession and slowdown in the housing market. Between 2010 and 2020, the City of Elk River is projected to add nearly 2,100 persons (9%) and 850 households (10.5 %). MAXFIELD RESEARCH & CONSULTING, LLC. 8 Elk River Study Area Household Trends ❑ 1990 1990-2020 10,000 ❑ 2000 8,000 -- 02010 9,253 i ■ 2020 8,080 6,000 -- ❑ 2025 0 4,000 -- 5,664 = 2,000 3 ,732 0 MAXFIELD RESEARCH & CONSULTING, LLC. 8 DEMOGRAPHIC ANALYSIS Household growth trends are a more accurate indicator of housing needs than population growth since a household is, by definition, an occupied housing unit. Mentioned previously, a comparison of historic and projected population and household growth rates shows that household growth is projected to continue to outpace population growth in Elk River, due in large part, to the aging of the baby boom population into their empty- nester years. Population Age Distribution Trends The following graphs show the age distribution of the City of Elk River population in 2000 and 2010, as well as estimates and projections for 2015 and 2020, respectively. Data provided in Table D -2 for the 2000 and 2010 distributions are from the U.S. Census. Maxfield Research and Consulting LLC calculated the 2015 estimate and 2020 projection based off of data obtained from ESRI Inc., and the Minnesota Department of Administration. The following are key trends in Elk River's age distribution: • The majority of age groups in Elk River experienced strong growth in population from 2000 to 2010. The baby boomers ages 55 to 64 experienced the largest rate of growth increasing by 109% (1,143 people) followed by the 45 to 54 age group increased by 80% (1,572 people, the largest numerical growth). Over the current decade, most age groups are projected to continue to grow in all age cohorts albeit a much lower rate than during the last decade. The younger age groups below age 44 are projected to have slight increases as these groups consist mostly of the baby bust generation. MAXFIELD RESEARCH & CONSULTING, LLC. 9 TABLE D -1 POPULATION AND HOUSEHOLD GROWTH TRENDS AND PROJECTIONS ELK RIVER 1990 to 2025 Change U.S. Census Estimated Projected J 1990 to 2000 1 1 2000 to 2010 1 1 2010 to 2020 Population Elk River 11,143 16,447 22,974 23,547 24,576 25,632 5,304 47.6 6,527 39.7 1,602 7.0 Sherburne County 41,945 64,417 88,499 99,975 106,667 111,958 22,472 53.6 24,082 37.4 18,168 20.5 Wright County 68,710 89,986 124,700 143,740 155,175 163,610 21,276 31.0 34,714 38.6 30,475 24.4 Households Elk River 3,732 5,664 8,080 8,353 8,822 9,253 1,932 51.8 2,416 42.7 742 9.2 Sherburne County 13,643 21,581 30,212 34,310 36,874 39,041 7,938 58.2 8,631 40.0 6,662 22.1 Wright County 23,013 31,465 44,473 51,815 56,330 59,850 8,452 36.7 13,008 41.3 11,857 26.7 Sources: U.S. Census; Minnesota Planning; ESRI, Inc; Maxfield Research & Consulting, LLC Population Age Distribution Trends The following graphs show the age distribution of the City of Elk River population in 2000 and 2010, as well as estimates and projections for 2015 and 2020, respectively. Data provided in Table D -2 for the 2000 and 2010 distributions are from the U.S. Census. Maxfield Research and Consulting LLC calculated the 2015 estimate and 2020 projection based off of data obtained from ESRI Inc., and the Minnesota Department of Administration. The following are key trends in Elk River's age distribution: • The majority of age groups in Elk River experienced strong growth in population from 2000 to 2010. The baby boomers ages 55 to 64 experienced the largest rate of growth increasing by 109% (1,143 people) followed by the 45 to 54 age group increased by 80% (1,572 people, the largest numerical growth). Over the current decade, most age groups are projected to continue to grow in all age cohorts albeit a much lower rate than during the last decade. The younger age groups below age 44 are projected to have slight increases as these groups consist mostly of the baby bust generation. MAXFIELD RESEARCH & CONSULTING, LLC. 9 DEMOGRAPHIC ANALYSIS • The 55 to 64 age cohort is projected to increase by nearly 791 people (36%), while the 45 to 54 age group is projected to decline by 436 people ( -12%). These older adults and seniors may be considering downsizing into low- maintenance or independent living housing. Adult Population Age Distribution Elk River POPULATION AGE DISTRIBUTION 2000 to 2020 8,000 _-_-_-_-_-_-_-_- _- _- _- _- _- _- _- _- _- _- _- _- _ -_ -_ -_ I 2000-2020 7,000 -- 2000 ip 2010 --------------- - -- 6,000 -- 2015 ■ 2020 - -- --------- - - - - -- ------------------------ � �� 1 5,000 - -- - ^ -- N c --------------- O No. 5,146 Ln n �o 2020 No. No. 6,444 6,489 w4,000 --------------------- - - - - -- `n ---- - - - - -- -------------------------- a Pct. 70 17 & under 18 -24 I 11395 3,000 -- - - - - -- ----- - - - - -- - - - - -- ---------- ___ - - - - -- 1 O Z 2,000 ----- - - - - -- ----- - - N - - -- - - - - -- - 3,204 3,250 3,522 � 30.2 318 9.9 1,000 - Ln vii o ------ - - - - -- N - 3,297 3,493 467 cl n ni -91 I 45 -54 0 r I 14 3,535 3,429 3,099 1,572 80.1 -436 -12.3 55 -64 1,049 18 -24 25 -44 45 -64 65+ 109.0 791 36.1 Age Cohort • The 55 to 64 age cohort is projected to increase by nearly 791 people (36%), while the 45 to 54 age group is projected to decline by 436 people ( -12%). These older adults and seniors may be considering downsizing into low- maintenance or independent living housing. MAXFIELD RESEARCH & CONSULTING, LLC. 10 TABLE D -2 POPULATION AGE DISTRIBUTION ELK RIVER 2000-2020 Number of Persons Change No. 5,146 No. 6,555 2020 No. No. 6,444 6,489 1 2000-2010 No. Pct. No. 1,409 27.4 -66 Pct. 70 17 & under 18 -24 11395 1,757 2,021 1,865 362 25.9 108 6.2 25 -34 2,461 3,204 3,250 3,522 743 30.2 318 9.9 35 -44 3,117 3,584 3,297 3,493 467 15.0 -91 -2.5 45 -54 1,963 3,535 3,429 3,099 1,572 80.1 -436 -12.3 55 -64 1,049 2,192 2,582 2,983 1,143 109.0 791 36.1 65 -74 663 1,188 1,500 1,904 525 79.2 716 60.3 75+ 653 959 1,024 1,221 306 46.9 262 27.3 Total 16,447 22,974 23,547 24,576 6,527 39.7 1,602 7.0 Sources: U.S. Census Bureau; ESRI, Inc.; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. 10 DEMOGRAPHIC ANALYSIS Household Income The estimated distribution of household incomes in Elk River for 2015 and 2020 is shown in the following graphs. The data in Tables D -3 and D -4 was estimated by ESRI, Inc. The data helps in ascertaining the demand for different housing products based on the size of the market at specific cost levels. The Department of Housing and Urban Development defines affordable housing costs for families as 30% of a household's adjusted gross income. Maxfield Research and Consulting LLC uses a figure of 25% to 30% for younger households and 40% or more for seniors, since seniors generally have lower living expenses and can often sell their homes and use the proceeds toward rent payments. A generally accepted standard for affordable owner - occupied housing is that a typical household can afford to pay 3.0 to 3.5 times their annual income on a single - family home. Thus, a $50,000 income would translate to an affordable single - family home of $150,000 to $175,000. The higher end of this range assumes that the person has adequate funds for down payment and closing costs, but does not have savings or equity in an existing home which would allow them to purchase a higher priced home. The following are key points: • The median household income in Elk River in 2015 was estimated to be about $78,305. Elk River has a higher median income compared to the Twin Cities Metro Area at $67,795 Overall, incomes are expected to increase by about 10% between 2015 and 2020, or about 2.0% annually. This will result in the median income in Elk River increasing from $78,305 in 2015 to about $86,198 in 2020. • Between 2015 and 2020, the number of households will increase in all but two age groups in Elk River. The largest numerical gain will be in the 65 to 74 age group, with a projected increase of 228 households. Non - Senior Households In 2015, roughly 4% of the non - senior households (15 to 64 years of age) in Elk River had incomes under $15,000 (248 households). All of these households would be eligible for subsidized rental housing. Another 4% of Elk River's non - senior households had incomes between $15,000 and $25,000 (271 households). Many of these households would qualify for subsidized housing, but some could also afford "affordable" or older market -rate rentals. If housing costs absorb 30% of income, households with incomes of $15,000 to $25,000 could afford to pay $375 to $625 per month. Average monthly rents for one - bedroom units in Elk River are about $862 (shown in Table R -1 in the Rental Housing Analysis section). MAXFIELD RESEARCH & CONSULTING, LLC. 11 DEMOGRAPHIC ANALYSIS • Median incomes for households in Elk River peak at $96,191 for the 35 to 44 age group in 2015. Households in this age group are entering or are in their peak earning years. The majority of households (87 %) in this age group are homeowners. By 2020, the median income for the 45 to 54 age group is projected to increase to $102,476 a 6.5% increase. • The median resale price of homes in Elk River was $209,975 through June 2015 (see Table FS -1). The income required to afford a home at this price would be about $60,000 to $70,000, based on the standard of 3.0 to 3.5 times the median income (and assuming these households do not have a high level of debt). In 2015, 70% (4,696 households) of Elk River's non - senior households had incomes greater than $60,000. Age of Householder Senior Households • The oldest householders were likely to have lower incomes in 2015. In Elk River, 5% of households ages 65 to 74 had incomes below $15,000, compared to 10% of households age 75 and over. Many of these low- income older senior households rely solely on Social Security benefits. Typically, younger seniors have higher incomes because they are still able to work or are married couples with two pensions or higher Social Security benefits. • Generally, senior households with incomes greater than $30,000 can afford market -rate senior housing. Based on a 40% allocation of income for housing, this translates to monthly rents of at least $1,000. About 475 senior households (75 +) in Elk River (49% of senior households) had incomes above $30,000 in 2015. Seniors will often move from rural areas to cities such as Elk River that provide more medical and other services. MAXFIELD RESEARCH & CONSULTING, LLC. 12 Growth and Income Trends by Age of Householder Elk River 2015 to 2020 2,000 $120,000 1,800 - - -- $96,191 $100,000 1,600 90,27 1,400 00000 - 79;696- - - - -- $80,000 w 6 1,200 $75,720 rn �o E ivi 1,000 °� N m - 9,863 $60,000 c 3 800 - .4 u� v m p 600 - $45 303 - � O 2010 _ - __ _ $40,000 400 O 2015 ri m � z -4-2010 Income �O oo $20,000 c 200 ,n ,n N M LEL N 0 N N I I $0 15 -24 25 -34 35 -44 45 -54 55 -64 65-74 75+ Age of Householder Senior Households • The oldest householders were likely to have lower incomes in 2015. In Elk River, 5% of households ages 65 to 74 had incomes below $15,000, compared to 10% of households age 75 and over. Many of these low- income older senior households rely solely on Social Security benefits. Typically, younger seniors have higher incomes because they are still able to work or are married couples with two pensions or higher Social Security benefits. • Generally, senior households with incomes greater than $30,000 can afford market -rate senior housing. Based on a 40% allocation of income for housing, this translates to monthly rents of at least $1,000. About 475 senior households (75 +) in Elk River (49% of senior households) had incomes above $30,000 in 2015. Seniors will often move from rural areas to cities such as Elk River that provide more medical and other services. MAXFIELD RESEARCH & CONSULTING, LLC. 12 DEMOGRAPHIC ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC. 13 TABLE D -3 HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER ELK RIVER (Number of Households) 2015 and 2020 2015 Less than $15,000 364 25 56 42 47 78 46 70 $15,000 to $24,999 455 25 56 43 62 85 79 105 $25,000 to $34,999 499 38 95 66 62 73 77 88 $35,000 to $49,999 1,043 52 213 140 170 155 126 187 $50,000 to $74,999 1,518 54 291 236 284 254 269 130 $75,000 to $99,999 1,649 31 268 363 455 313 162 57 $100,000 or more 2,826 30 465 807 802 491 175 56 Total 8,353 255 11444 1,697 1,882 1,449 934 693 <$25,000 819 50 112 85 109 163 125 175 $35,000+ 7,035 167 1,237 1,546 1,711 1,213 732 430 Median Income $78,305 $45,303 $75,720 $96,191 $90,274 $79,696 $59,863 $40,056 Twin Cities Med. Incoi $67,795 $34,820 $58,146 $81,972 $88,167 $80,649 $58,179 $37,464 2020 Less than $15,000 325 24 47 33 32 66 47 77 $15,000 to $24,999 337 19 41 29 30 53 72 93 $25,000 to $34,999 397 31 71 44 37 54 72 88 $35,000 to $49,999 898 43 175 103 107 133 129 208 $50,000 to $74,999 1,435 48 267 201 197 239 317 167 $75,000 to $99,999 1,898 34 322 393 428 394 238 90 $100,000 or more 3,532 36 617 971 837 691 287 93 Total 8,822 235 11540 1,773 1,666 1,630 1,162 817 <$25,000 662 43 88 62 62 119 119 170 $35,000+ 7,763 161 1,381 1,667 1,568 1,457 971 559 Median Income $86,198 $50,168 $85,936 $102,476 $100,124 $90,002 $68,761 $44,478 Twin Cities Med. Incoi $78,703 $37,641 $68,180 $92,464 $99,756 $93,254 $69,137 $42,675 Change Less than $15,000 -39 -1 -9 -9 -15 -12 1 7 $15,000 to $24,999 -118 -6 -15 -14 -32 -32 -7 -12 $25,000 to $34,999 -102 -7 -24 -22 -25 -19 -5 0 $35,000 to $49,999 -145 -9 -38 -37 -63 -22 3 21 $50,000 to $74,999 -83 -6 -24 -35 -87 -15 48 37 $75,000 to $99,999 249 3 54 30 -27 81 76 33 $100,000 or more 706 6 152 164 35 200 112 37 Total 469 -20 96 76 -216 181 228 124 <$25,000 -157 -7 -24 -23 -47 -44 -6 -5 $35,000+ 728 -6 144 121 -143 244 239 129 Median Income $7,893 $4,865 $10,216 $6,285 $9,850 $10,306 $8,898 $4,422 Twin Cities Med. Incoi $10,908 $2,821 $10,034 $10,492 $11,589 $12,605 $10,958 $5,211 Sources: ESRI, Inc.; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. 13 DEMOGRAPHIC ANALYSIS • Seniors who are able and willing to pay 80% or more of their income on assisted living housing would need an annual income of $37,500 to afford monthly rents of $2,500, which is about the beginning monthly rent for assisted living in rural areas of Minnesota. In Elk River, there were only an estimated 430 older senior (ages 75 and over) households with incomes greater than $37,500 in 2015. Seniors age 75 and over are the primary market for assisted living housing. Tenure by Age of Householder The following graphs show the number of owner and renter households in Elk River by age group as of 2010. The data in Table D -4 on Page 18 shows the propensity of households to own or rent their housing based on their age. • In 2010, 80% of the households in Elk River owned their housing. This is up from 78% in 2000. Homeownership rates have slightly declined for those ages 25 to 64 in Elk River due to the declining housing market and the poor economic climate. Due to the lack of renter units built over the decade we can assume that many of the single - family homes have been converted to rental properties. • The proportion of renter households decreases as households age and rises again in the senior years when rental housing is a more viable option than homeownership. In 2010, 60% of Elk River's households between the ages of 15 and 24 rented their housing, compared to householders ages 35 to 64 who were overwhelmingly homeowners, with no more than 15% of the householders in each 10 -year age cohort renting their housing. • Although the propensity for households ages 15 to 24 to rent their housing is higher, the 25 to 44 age groups had, by far, the largest number of renters with the 25 to 34 age group having 396 renters and the 35 to 44 age group with 281 renters. These two age groups account for slightly over 40% of all renter households. MAXFIELD RESEARCH & CONSULTING, LLC. 14 Elk River Homeowners by Age of Householder - 2010 84.6% °' 87.3% 83.6% 100% 1,500 72.2% - 80% 1,544 1,696 ° of6c 3 1,000 40.6% 60% 0 1,029 1,079 W w 40% w 0 500 No. of Homeowners 3 tHomeownership Rate 619 20% 0 106 405 E 0% z 0 _ -LR NN 6R Wyk 15�o 25�03R 350 Rs'_oC'R 5b co obN.01R Age of Householder • The proportion of renter households decreases as households age and rises again in the senior years when rental housing is a more viable option than homeownership. In 2010, 60% of Elk River's households between the ages of 15 and 24 rented their housing, compared to householders ages 35 to 64 who were overwhelmingly homeowners, with no more than 15% of the householders in each 10 -year age cohort renting their housing. • Although the propensity for households ages 15 to 24 to rent their housing is higher, the 25 to 44 age groups had, by far, the largest number of renters with the 25 to 34 age group having 396 renters and the 35 to 44 age group with 281 renters. These two age groups account for slightly over 40% of all renter households. MAXFIELD RESEARCH & CONSULTING, LLC. 14 DEMOGRAPHIC ANALYSIS • Between 2000 and 2010, the number of renter households increased in most age cohorts. Over the decade, the number of renters increased at a growth rate 30 %. With a limited number of rental units developed through 2010, it's clear that the number of single - family rental homes has also increased due to the economy and decline in homeownership rate. Household Type The following graph shows the breakdown of the type of households in Elk River in 2000 and 2010. Table D -5 illustrates the data which is useful in assessing housing demand since the household composition often dictates the type of housing needed and preferred. • From 2000 to 2010, Elk River observed the largest numerical increase in the number of families that are married without children (830 households, or 52 %). The increase in households married without children can be attributed to couples waiting longer to have children, and the baby boomers aging into empty nester years. • Persons Living Alone experienced the second highest numerical increase of 608 households (highest growth rate of 62.5 %) in Elk River during the 2000s. This could indicate an aging senior population. As the frailty level of these seniors increases, they typically move out of their homes in pursuit of housing with services. However, the recession has affected many seniors, and their fears of the market can be affecting their decisions to move out of the homes and into age- restricted housing. • Elk River also had significant increases in single - parent households (a gain of 378 households, or 51 %). With only one income, these families are most likely to need affordable or modest housing, both rental and for -sale. MAXFIELD RESEARCH & CONSULTING, LLC. 15 Elk River Renters by Age of Householder - 2010 500 100% 400 ®No. of Renters 80/ 59.4% +Pct. Renters w 300 60% °1 200 ° 157 40% 0 100 20% a z 0 0% 3R 4R 6R I4 �Sk 151,024 1r, to 35 to NSto5� 55 to e5N,0 Age of Householder • Between 2000 and 2010, the number of renter households increased in most age cohorts. Over the decade, the number of renters increased at a growth rate 30 %. With a limited number of rental units developed through 2010, it's clear that the number of single - family rental homes has also increased due to the economy and decline in homeownership rate. Household Type The following graph shows the breakdown of the type of households in Elk River in 2000 and 2010. Table D -5 illustrates the data which is useful in assessing housing demand since the household composition often dictates the type of housing needed and preferred. • From 2000 to 2010, Elk River observed the largest numerical increase in the number of families that are married without children (830 households, or 52 %). The increase in households married without children can be attributed to couples waiting longer to have children, and the baby boomers aging into empty nester years. • Persons Living Alone experienced the second highest numerical increase of 608 households (highest growth rate of 62.5 %) in Elk River during the 2000s. This could indicate an aging senior population. As the frailty level of these seniors increases, they typically move out of their homes in pursuit of housing with services. However, the recession has affected many seniors, and their fears of the market can be affecting their decisions to move out of the homes and into age- restricted housing. • Elk River also had significant increases in single - parent households (a gain of 378 households, or 51 %). With only one income, these families are most likely to need affordable or modest housing, both rental and for -sale. MAXFIELD RESEARCH & CONSULTING, LLC. 15 � � « 2 « Q_ x a � � O 5 0 I'D @ \ 4 j § j / \ 00 / e ( ° 7 % @ 3 0 3 ¥ & { � 2 ~ / r � f \ / z 5 -1 # 3 m r / r / / , } j / & 00 0 -1 -1 ' \ $ $ r e -1 } § / -1 e % % Ln r4 j 0 § \ Ln § 5 a » - $ § o 0 -s- � � � / � o ] R _ . - e w - - . ¥ : $ r4 / / \ m \ m » . m ~ ' Lu ® m LU q e . = E � � j r4 § $ % § % / Ln 0 / / ® } e � / , $ \ % © / \ \ e 2 ( 2 . R ` \ § 00 u g E � § \ Ln Ln � f � o ~ 7 « \ - § § ° 3 x / / 2 \ k k u 2 2 / _ \ _ \ / \/ \/ � 0 I'D J Q z Q V_ x a CO C W 0 r- V J J C7 z H J D z O U 06 x V a W N W D J W LL a 2 � Ln -, co *;IM O m u H 00 ^ o c co • ZI m N O N T O aI - N m LL • C O O O " 00 ZI co N rj Ln N zT CD M IN N Lr, Ln m O m Z I P N r-4 N L, al Ln N Ln Ln W I 'C • LU C Ql rl p O l0 m Y m ,. N � Lr1 ZI J O r = W m O LU N LL C WO Z �� J F(D n O Cil p CQ F ^ O U 06 O O N t • 00 O u- 0 O O a uI N ro 06, � �+ v N cr O O l0 aI a a Z X N Ln -1 N r0 V) O N N C t ON U O i N O N O O Q 0 2 ro oil w N u +�+ O ro 7 H o U vn r- V J J C7 z H J D z O U 06 x V a W N W D J W LL a 2 DEMOGRAPHIC ANALYSIS Roommate households had the second highest rate of growth in Elk River during the 2000s. The number of roommates grew by a 55 %, or 160 households. This, however, was the lowest numerical increase of all groups. This reflects the trend in society of couples living together before marriage and delaying having children until later in life, as well as other non - family households "rooming up" and sharing housing costs during the Great Recession. Tenure by Income The following graph shows the number of renter households in Elk River by income cohort as of 2000 and 2013 (5 -year American Community Survey estimates). The data provided in Table D -6 is useful in that shows the housing options and preferences for households based on affordability. The Department of Housing and Urban Development determines affordable housing as not exceeding 30% of the household's income. It is important to note however, that the higher the income, the lower percentage a household typically allocates to housing. Many lower income households, as well as many young and senior households, spend more than 30% of their income, while middle -aged households in their prime earning years typically allocate 20% to 25% of their income. As income increases, so does the rate of homeownership. The 2013 estimates for Elk River indicates that 89% of those households earning $50,000 or more owned homes compared to 56% for households with incomes between $35,000 and $49,999, 54% with incomes of $25,000 to $34,999, and 50% of households with incomes of $24,999 or less owned their housing. Many of these lower- income homeowners are seniors who live on fixed incomes but have paid off of their mortgage. Although, many of the lower- income households rent their housing, the largest number of renters (397 households or roughly 22% of all renters) have incomes between $35,000 and $49,999 followed closely by those with incomes from $50,000 to $74,999 (374 households or 21% of all renters). Should these households allocate 25% of their income on housing, they could afford monthly rents of roughly $730 to $1,550 per month. The incomes near $35,000 could afford rents offered at most rental developments in Elk River while higher incomes could afford rents that are significantly higher than the rents at most market -rate apartment units in Elk River. Typically, renter households with incomes of $20,000 or less qualify for government - subsidized housing, where rents are often based on sliding scale (30% of income). Based on a 30% allocation of income, these households could afford monthly rents of no more than $500. As of 2013, there were 312 households in Elk River with incomes of $20,000 or less renting their housing. MAXFIELD RESEARCH & CONSULTING, LLC. 18 J Q z Q V_ x a Q C0 C W 0 0 O 0 O Ql 0 0 O O 00 I, 0 0 0 0 0 O O O O O l0 U-) m N 0 O o i--I O t Y OU') l0 N N Y + Ql O v O Z o V} 1 Y TQl n Y n O Ln v v� E O Y o a Ln m t � °E Y 2 V m > M 'n 4, o C N N L O Y ++ iR > ' N 4' Y_ M vl Iy C LM 0 N Q N � 0 Y e � o LM U') r-I O mpr- � Ql U') Y e U') � N � V 0 00 O 00 O 00 O O Ln m m N N rl i--I sployasnOH rn J J z J D N z 0 V 06 2 V a W N W D J W LL a 2 DEMOGRAPHIC ANALYSIS Renter households with incomes of between $20,000 and $35,000 are usually the market for "affordable" rental projects with a shallow subsidy (housing with income restrictions and rents slightly below market rents, such as those financed through Minnesota Housing Finance Agency's Section 42 /Low- Income Housing Tax Credit program). These households can typically afford housing costs of from $500 to $875 per month. As of 2013, there are an estimated 451 renter households in Elk River with incomes between $20,000 and $35,000. It is important to note that seniors are often able and willing, to allocate a larger share of their income on rental housing that meets their needs since they no longer have to save for retirement, their children's education or major purchases (home, car, etc.). This is particularly true in "senior" rental projects where support services and personal care assistance are available. In fact, research has shown that, in assisted living projects, up to 50% of residents not only allocated all of their income but spent -down assets in order to afford monthly housing and service costs. Less than $5,000 $5,000 to $9,999 $10,000 to $14,999 $15,000 to $19,999 $20,000 to $24,999 $25,000 to $34,999 $35,000 to $49,999 $50,000 to $74,999 $75,000 to $99,999 $100,000 to $149,999 $150,000 or more Total TABLE D -6 TENURE BY HOUSEHOLD INCOME ELK RIVER 2000 and 2013* 2000 Own Rent No. Pct. No. Pct. 31 40.3 46 59.7 33 25.6 Pct. 62.3 96 74.4 73 23.3 28 240 76.7 100 45.2 22 121 54.8 159 58.2 58.1 114 41.8 301 53.1 41.9 266 46.9 651 83.1 132 16.9 1,300 88.1 109 175 11.9 1,059 95.6 122 49 4.4 545 98.4 53.7 9 1.6 164 100.0 46.3 0 0.0 r 1,233 21.8 4,431 78.2 1* Data for 2013 is from US Census, American Community Survey (5 -Year Estimate) (Source: US Census Bureau; Maxfield Research & Consulting, LLC. I Net Worth by Age of Householder Table D -7 presents data on the net worth of households by age in Elk River as of 2015. Information in the table is sourced from ESRI with adjustments for the estimated household base as calculated by Maxfield Research & Consulting, LLC. Net worth is defined for an MAXFIELD RESEARCH & CONSULTING, LLC. 20 2013* Own Rent No. 76 Pct. 62.3 No. Pct. 46 37.7 28 56.0 22 44.0 136 58.1 98 41.9 115 49.8 116 50.2 109 47.2 122 52.8 382 53.7 329 46.3 513 56.4 397 43.6 1,326 78.0 374 22.0 1,285 90.0 143 10.0 1,587 93.8 104 6.2 709 97.9 15 1,796 2.1 22.4 6,236 77.6 1* Data for 2013 is from US Census, American Community Survey (5 -Year Estimate) (Source: US Census Bureau; Maxfield Research & Consulting, LLC. I Net Worth by Age of Householder Table D -7 presents data on the net worth of households by age in Elk River as of 2015. Information in the table is sourced from ESRI with adjustments for the estimated household base as calculated by Maxfield Research & Consulting, LLC. Net worth is defined for an MAXFIELD RESEARCH & CONSULTING, LLC. 20 DEMOGRAPHIC ANALYSIS individual, the value of a person's assets, including cash, minus all liabilities. The amount by which the individual's assets exceed their liabilities is considered the net worth of that person. Data in the table is calculated as the total value of a household's wealth less any debts (unsecured or secured by assets). Overall, the median net worth of a household in Elk River is about $215,064 and the average is $632,168. There is a strong correlation between household age and net worth. Households under the age of 25 have substantially less net worth (median of $20,584) compared to households between the ages of 55 and 64 (median of $250,001). Net worth declines as adults age into their senior's years, which is likely due to these households spending down assets to support their living costs following retirement? TABLE D -7 NET WORTH BY AGE OF HOUSEHOLDER ELK RIVER (Number of Households) 2015 Age of Householder Less than $15,000 1,031 101 306 203 145 133 56 87 $15,000 to $34,999 401 53 125 83 54 42 16 26 $35,000 to $49,999 268 25 90 65 35 28 14 11 $50,000 to $99,999 957 40 278 255 157 95 61 71 $100,000 to $149,999 638 14 168 140 122 85 69 41 $150,000 to $249,999 1,034 14 223 256 217 161 86 77 $250,000+ 3,771 1 210 642 1,095 861 602 359 Total 8,100 247 1,401 1,644 1,826 1,405 905 671 Median Net Worth $215,064 $20,584 $75,767 $171,652 $250,001 $250,001 $250,001 $250,001 Average Net Worth $632,168 $45,783 $158,099 $445,138 $735,457 $983,767 $1,151,689 $578,786 Data Note: Net Worth is total household wealth minus debt, secured and unsecured. Net worth includes home equity, equity in pension plans, net equity in vehicles, IRAs and Keogh accounts, business equity, interest - earning assets and mutual fund shares, stocks, etc. Examples of secured debt include home mortgages and vehicle loans; examples of unsecured debt include credit card debt, certain bank loans, and other outstanding bills. Forecasts of net worth are based on the Survey of Consumer Finances, Federal Reserve Board. Detail may not sum to totals due to rounding. Sources: ESRI; Maxfield Research & Consulting, LLC. With significant residual net worth in later life many seniors will have sufficient funds to cover the costs of living in senior housing alternatives. The segment of age 75+ seniors with little or no net worth will rely on public subsidies in order to receive housing and services that meet their needs. • Households often delay purchasing homes and instead choose to rent until they acquire sufficient net worth to cover the costs of a down payment and closing costs associated with home ownership. This will be especially true in the short -term as tightening lending requirements make mortgages with little or no down payments more difficult to obtain. MAXFIELD RESEARCH & CONSULTING, LLC. 21 EMPLOYMENT ANALYSIS Employment Growth Trends Since employment growth generally fuels household growth, employment trends are a reliable indicator of housing demand. Typically, households prefer to live near work for convenience. However, housing is often less expensive in smaller towns, making longer commutes attractive for households concerned about housing affordability. The graphs on the following page depict recent employment growth trends for Sherburne County and are shown in Tables E -1 and E -2. Table E -1 presents resident employment data for Sherburne County from 2000 through September 2015. Resident employment data is calculated as an annual average and reveals the work force and number of employed persons living in the County. It is important to note that not all of these individuals necessarily work in the County. Table E -2 presents covered employment in Elk River from 2000 through 2014. Covered employment data is calculated as an annual average and reveals the number of jobs in the County, which are covered by unemployment insurance. Most farm jobs, self - employed persons, and some other types of jobs are not covered by unemployment insurance and are not included in the table. The data in both tables is from the Minnesota Department of Employment and Economic Development. The following are key trends derived from the employment data: Labor Force /Resident Employment • Between 2000 and 2014, Sherburne County experienced an increase in both its labor force and the number of employed residents. Between 2000 and 2014, the County's labor force increased by 11,855 persons (31%), while the number of employed residents increased by 10,898 persons (30 %). Since 2010, the labor force has increased by only 346 persons (less than a 1% increase) compared to the total employed which increased by 1,646 persons (3.6%). This has resulted in the unemployed person decreasing by 1,300 people (- 31.5%) After the peak year of 2008 however, both the labor force and employed residents declined until 2014 in which the total employed surpassed 2008 with 47,001. The labor force in 2009 was slightly lower than it was in 2008 but has been steadily increasing from 2012. The unemployment rate in Sherburne County was lowest (3.0%) at the beginning of the period in 2000. The unemployment rate fluctuated from 2000 to 2006 but remained relatively steady. Since 2006, the unemployment rate in Sherburne County has increased rapidly to a high of 9.1% (2009) and was higher than both the State and the Nation from 2007 through 2009 (slightly less than national average in 2009). As of September 2015, the unemployment rate has fallen to 4.2 %, below the nation which is at 5.5 %, yet remains slightly higher than the State of Minnesota at 3.2 %. MAXFIELD RESEARCH & CONSULTING, LLC. 22 EMPLOYMENT ANALYSIS • Up until 2006, the unemployment rate in Sherburne County has been on par with that of the State of Minnesota. The rate remained roughly a full percentage point higher from 2006 through 2010. Since 2010, the unemployment rate difference compared to the State of Minnesota has been shrinking and in 2014 was back to earlier figures. Both the County and the State unemployment rates are below the national average. LABOR FORCE AND EMPLOYED RESIDENTS SHERBURNE COUNTY 2000 to 2015* 52,500 49,592 49,759 50,000 --- - - - - -- -------- - - - - -- ----------------- - - - - -- -- 47,500 ---------------------------- - - - - -- --------------------------------------------- - - - - -- - -- a 47,646 c 46 _ _ 531 p45,000 --- - - - - -- _ --------------- - - - - -- - ------------------------- L a42,500 --------- - - - - -- - - - - - -- ----------------------------- - - - - -- ---------------- 0 z 40,000 37,904 —*--Total Labor Force 37,500 -- -- -------------------------------------------------- - - - - -- --6—Total Employed 36,748 35,000 TODD Too" Too" Too" Took Took Todo Tool Too$ Too9 To"3 Toti� TQN, Toti3 TQN11To�� Year MAXFIELD RESEARCH & CONSULTING, LLC. 23 UNEMPLOYMENT RATE SHERBURNE COUNTY 2000 to 2015* 10.0% 9.6% 9.0% - tSherburne 9.1% 8.0% - - - -- ■ Minnesota ---------------------------- -- - - - - -- - - - - - -- --------------------- 41 U.S. 1 7.0% ------------------- - - - - -- --- 7.8% -- -- a+ 6.0% w6.0% -------- - - - - -- - - - - - - ----------------------------- - ------------- - - - - -- -- ----------- T 5.1% O5.0% -- - - - - -- - - - --- 4_6% - --------------------------- - - - - -- ---- - - - - -- E 4.2% w4.0% 4.9% _ ________ ___________ 3.2% �' ° ------------------_ ------- r D / 4.0% 3.9% 3.0% --v - - - - -- - - -- - - -- 30% 2.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Year MAXFIELD RESEARCH & CONSULTING, LLC. 23 EMPLOYMENT ANALYSIS Covered Employment by Industry • Overall, the number of covered jobs in Elk River increased by 44 %, or 3,870 jobs since 2000. Covered jobs have remained relatively stable with few small declines from 2005 through the economic recession. The City of Elk River is currently at its highest point over the period with 12,737 jobs in 2014. • Nearly all of the growth has occurred in the Education and Health Services sector (61 %). Without the substantial growth in this industry, the City would still have experienced a gain in covered employment, however at a much lesser rate over the period. The Education and Health Services sector has overtaken the Trade, Transportation, and Utilities sectors for the largest portion (29 %, or 3,745 jobs) of the jobs in Elk Rlver as of 2014 The Trade, Transportation, and Utilities sector accounted for 22% (2,765 jobs) of covered jobs in the City. MAXFIELD RESEARCH & CONSULTING, LLC. 24 TABLE E -1 RESIDENT EMPLOYMENT (ANNUAL AVERAGE) SHERBURNE COUNTY 2000 to 2015* Total Minnesota U.S. Labor Total Total Unemployment Unemployment Unemployment Year Force Employed Unemployed Rate Rate Rate 2000 37,904 36,748 1,156 3.0% 3.2% 4.0% 2001 39,496 38,001 1,495 3.8% 3.8% 4.7% 2002 41,524 39,552 1,972 4.7% 4.5% 5.8% 2003 43,310 41,090 2,220 5.1% 4.9% 6.0% 2004 45,025 42,780 2,245 5.0% 4.7% 5.6% 2005 46,529 44,513 2,016 4.3% 4.1% 5.1% 2006 48,064 45,991 2,073 4.3% 4.0% 4.6% 2007 48,738 46,299 2,439 5.0% 4.6% 4.6% 2008 49,592 46,531 3,061 6.2% 5.4% 5.8% 2009 49,293 44,821 4,472 9.1% 7.8% 9.3% 2010 48,990 44,867 4,123 8.4% 7.4% 9.6% 2011 48,840 45,355 3,485 7.1% 6.5% 8.9% 2012 48,756 45,754 3,002 6.2% 5.6% 8.1% 2013 48,909 46,309 2,600 5.3% 4.9% 7.4% 2014 49,186 47,001 2,185 4.4% 4.1% 6.2% 2015* 49,759 47,646 2,113 4.2% 3.9% 5.5% Change 2000 -10 11,086 8,119 2,967 5.4% 4.2% 5.6% Change 2011 -14 346 1,646 -1,300 -2.7% -2.4% -2.7% * 2015 data is the average from January through September. Sources: Minnesota Workforce Center; Maxfield Research & Consulting, LLC Covered Employment by Industry • Overall, the number of covered jobs in Elk River increased by 44 %, or 3,870 jobs since 2000. Covered jobs have remained relatively stable with few small declines from 2005 through the economic recession. The City of Elk River is currently at its highest point over the period with 12,737 jobs in 2014. • Nearly all of the growth has occurred in the Education and Health Services sector (61 %). Without the substantial growth in this industry, the City would still have experienced a gain in covered employment, however at a much lesser rate over the period. The Education and Health Services sector has overtaken the Trade, Transportation, and Utilities sectors for the largest portion (29 %, or 3,745 jobs) of the jobs in Elk Rlver as of 2014 The Trade, Transportation, and Utilities sector accounted for 22% (2,765 jobs) of covered jobs in the City. MAXFIELD RESEARCH & CONSULTING, LLC. 24 EMPLOYMENT ANALYSIS • The Education and Health Services industry has more than doubled in jobs over the period, adding 2,378 jobs (174 %). There were nine other sectors that experienced growth which include by numerical growth: the top four were Public Administration which added 305 jobs (53.5%), Trade, Transportation, and Utilities which added 295 jobs (12%), Manufacturing which added 232 jobs (319%), and Other Services which added 131 jobs (34.5 %). • Of the 11 industry sectors in Elk River, two of those experienced a loss in covered jobs over the period (Information Sector and Financial Sector). The Construction industry has regained its employment increasing to 610 jobs in 2014 from 389 in 2010. Covered Employment Trends Elk River 2000 through 2014 13,000 - 12,737 12,000 11,000 10,946 oo� 10,000 10,298 0 Zo 9,000 8,867 8,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Year TABLE E -2 COVERED EMPLOYMENT TRENDS ELK RIVER 2000, 2005, 2010, and 2014 North American Industrial Classification System (NAICS) Change 2000-2014 Employees Average Number of 2000 ' , of 2005 total 2010 2014 Industry 2000 2005 2010 2014 No. Pct. Natural Resources & Mining 64 139 91 91 27 42.2 0.7% 1.3% 0.8% 0.7% Construction 544 754 389 610 66 12.1 6.1% 7.3% 3.6% 4.8% Manufacturing 1,202 1,073 1,243 1,434 232 19.3 13.6% 10.4% 11.4% 11.3% Trade, Transportation, and Utilities 2,470 3,004 2,602 2,765 295 11.9 27.9% 29.2% 23.8% 21.7% Information 108 63 55 63 -45 -41.7 1.2% 0.6% 0.5% 0.5% Financial Services 373 476 394 330 -43 -11.5 4.2% 4.6% 3.6% 2.6% Professional and Business Services 900 735 881 1,333 433 48.1 10.1% 7.1% 8.0% 10.5% Education and Health Services 1,367 1,802 3,031 3,745 2,378 174.0 15.4% 17.5% 27.7% 29.4% Leisure and Hospitality 889 1,102 842 980 91 10.2 10.0% 10.7% 7.7% 7.7% Other Services 380 424 543 511 131 34.5 4.3% 4.1% 5.0% 4.0% Public Administration 570 726 8751 875 305 53.5 6.4% 7.0% 8.0% 6.9% Totals 8,867 10,298 10,9461 12,737 1 3,870 43.6 11 100% 100% 100% 100% Source: Minnesota Workforce Center; Maxfield Research & Consulting, LLC. MAXFIELD RESEARCH & CONSULTING, LLC. 25 N N J Q Z Q F_ z CW C O J a W N Ln °O o O O °o o I N N r4 r4 O SL8 9ZL OLS b Zb 08£ EbS Z178 8 ZOT`L 68 o s o s y0 °Q TWE Z08`T L9E`T J � d s o 188 y y SEL 0J `^ 006 r- N y 9L N ° ELE �N U C Nc � v E9 Ir o N W O T SS O E9 G G . C. m c E 8U 80 W N p w Z09`Z o b00'E v OLb`Z �A £bZ'T a ELO`T ZOZ`T v0 '68E `L m bSL o CG yN T6 0 T J 6E 179 O O O O O O O O O NUJ O L/1 O L/1 O L/1 O Ln m m N N .-i .-i d A sqof paaano:) }o -ON 2 N EMPLOYMENT ANALYSIS Inflow /Outflow The following graph shows the inflow and outflow of workers in Elk River. Outflow reflects the number of workers living in the City but employed outside of the City while inflow measures the number of workers that are employed in the City but live outside. Technically, Elk River can be considered an exporter of workers, as the number of residents coming into the Elk River (inflow) for employment is less than the number of residents leaving the city for work (outflow). Elk River however has a significant number of employees coming into the city for employment (approximately 8,334 workers) and thus the city could also be an importer of jobs as well. The net difference between the net inflow to net outflow of workers was that 976 workers left Elk River than commuted to the city. City of Elk River: Inflow /Outflow i �r j� _ hl::c•.ih.:.n �I L — E6. Ri,er 8;334 9,310 2,082 5 C%eg° •.I Ramsey �M h in _ Z mi MAXFIELD RESEARCH& CONSULTING, LLC. 27 EMPLOYMENT ANALYSIS Major Employer Interviews Maxfield Research and Consulting LLC interviewed representatives of large employers in Elk River in October 2015. The interviews covered topics such as recent trends in job growth, projected job growth, job types, and average hourly wages or annual salaries. Representatives were also asked about housing needs of their employees. Interviews with the area's largest employers not only provide data regarding commercial job growth, but also reveal employer attitudes and perceptions regarding housing demand in any given area. Table E -3 on the following page shows the top employers located in Elk River from 2015, this data was collected by Sherburne County and the City of Elk River Late 2014 and early 2015. Employers continue to say that the Elk River housing market is not a hindrance to their companies and hiring practices. There may be isolated issues with employees, but overall housing is not an issue. Most production, manufacturing, and retail employees are hired from the surrounding area and currently reside within the community or nearby area. Employees typically commute roughly 20 to 30 minutes to Elk River and do not relocate to Elk River. • Although a lack of transitional rental housing continues to exist due to very low vacancy rates, any employee looking to relocate will typically commute while looking for a home to purchase. • None of the companies interviewed had a relocation program in place. A relocation program is not really needed to attract potential employees according to employers. In addition, employees' living choices range from the northwest Twin Cities Metro Area to St. Cloud. Although the majority of manufacturing /processing jobs are filled with area residents, most professional and education jobs are filled by people from throughout Minnesota. The community perception of Elk River is good. People are attracted to the strong school district and level of service and retail that the area provides. Most often, housing is not a deciding factor. • The largest employer in Elk River is the ISD -728, which employs 1,800 people throughout the district. ISD -728 employment has increased employment over the past few years with the growth in student enrollment. Although there was some decline in enrollment early this decade, the district has avoided further cutbacks. Overall, housing has not been an issue and there has not been much relocation of employees to Elk River. • The majority of employers interviewed noted stable in increasing employment over the past three years. When asked about growth in the future, many indicated that they expect to remain stable or experience slow growth over the next few years. Companies are remaining cautious although the market continues to improve. MAXFIELD RESEARCH& CONSULTING, LLC. 28 EMPLOYMENT ANALYSIS TABLE E -3 MAJOR EMPLOYERS CITY OF ELK RIVER 2015 Employer Products /Services Count* ISD #728 Education 1,80C Sherburne County Government 59E Guardian Angels of Elk River, Inc Nursing Care /Housing 37Z Wal -Mart Retail Store 35Z Coborn's Grocery Store 26E Elk River Nursing Home Nursing Care 24C Great River Energy Electric Utility 21C Sportech, Inc Plastics Thermoforming 18E Menards Retail Store 17-- City of Elk River Government 18-- Tescom Corporation Pressure Control Devices 15E Cornerstone Auto Resource Automobile Sales 14i First National Financial Services Financial Institution 14: Avalon Home Care Home Health Care 11C E & O Tool and Plastics, Inc Injection Molding 11C Cretex Companies, Inc. Precast Concrete Products 10S The Bank of Elk River Financial Institution 1M Metal Craft Machine & Engineering Precision Machining 10E Cub Foods Grocery Store 10C Crystal Distribution, Inc Custom Curb Adaptors 10C The Home Depot Retail Store 10C Morrell Companies Professional Trucking Transport 10C Alltool Pinnacle Design & Mfg. Metal Stamping 9S Elk River Ford Automobile Dealership 9z Acromix Machinery Mfg. & Custom Machining 9C Fairibault Foods, Inc Pouch Packaging 8z Plaisted CO. Sand & Gravel 8C Elk River Machine Machine Shop 7C Wolf Material Handling Systems Belt Conveyor Systems 6E Brothers Fire Protection Sprinklers -Fire Protection 6E Select Transcription Inc. Medical Back Office 6� Fairview Clinic Health Care 6C Allina Health Health Care 5E Jim's Market Grocery Store 5� Quality Label , Inc Label Printing 4� Total 6,684 * Employee counts were provided by employers. Employee counts may also inlcudes jobs for that company located outside of Elk River Proper. Sources: Sherburne County; City of Elk River; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH& CONSULTING, LLC. 29 EMPLOYMENT ANALYSIS • Typical wages for those working at large local retail businesses range from $9.00 to $14.00 per hour. These positions are prime candidates for rental housing. These jobs are employed by residents currently living in the surrounding area of Elk River and commute from their current place of residence if hired new. Based on our interviews, professional service jobs typically start from around $35,000 to $40,000 annually. Households with an income of $35,000 could afford monthly housing costs of $875, based on spending on 30% of their gross income on housing. • Considering a household with an annual income of $35,000, and using the industry standard that a household can afford to pay a mortgage that is 30% of their household income for owner - occupied housing (assuming they have limited debt and not including equity), a household with this income could afford a home priced at $87,500 to $105,000. Many households in Elk River have two incomes, however. Using the same affordability standard, a household with two persons each earning $35,000 annually could afford a home priced from $175,000 to $210,000. MAXFIELD RESEARCH& CONSULTING, LLC. 30 HOUSING CHARACTERISTICS Introduction The variety and condition of the housing stock in a community provides the basis for an attractive living environment. Housing functions as a building block for neighborhoods and goods and services. We examined the housing market in Elk River by reviewing data on the age of the existing housing supply; examining residential building trends since 2000; and reviewing housing data from the American Community Survey that relates to Elk River. Residential Construction Trends 2000 to Present Maxfield Research obtained data from the City of Elk River on the number of building permits issued for new housing units in Elk River over the past decade and through September 2015. Table HC -1 displays permits issued for single - family homes, townhomes /twin homes, and multifamily dwellings of three or more units. Multifamily units include both for -sale (condominium, twinhomes, and townhomes) and rental projects. The City of Elk River issued permits for the construction of 2,704 new residential units from 2000 to 2010. That equates to about 246 units annually since 2000. After 2010, Elk River has added only 330 units, or 66 per year. Of the 330 units added, 16 of those units were apartments unit replaced due to fire. Through 2006, the City of Elk River issued 93% of the overall permitted units over the decade. Over that period, residential construction averaged over 354 units per year. However, beginning in 2007, which was the start of the Great Recession, building permits started declining rapidly, and from 2007 to 2010 the City has averaged only 37 units per year. Since 2007, 75% of the units (419) have been single - family homes, 137 units (25 %) in three multi - family apartment buildings and the remaining (19 units) being rowhomes /townhomes. • Since 2012, the City of Elk River has only issued an average of 71 residential permits (single - family) and built an additional 52 unit affordable rental building. The City also added three detached townhomes and replaced 16 apartment units that we destroyed by fire. This indicates an improving housing market although much more conservative than in the previous decade. MAXFIELD RESEARCH & CONSULTING, LLC.. 31 HOUSING CHARACTERISTICS 0 -ft w 250 W 200 N a 150 E 100 w c 50 O 0 U Residential New Construction (Total Units) Elk River 2000-2015* p N M N ■ Single - Family 00 -- -- _ ■Town /Twinhomes - -- N- � Ln ■ Multi- family 3+ Units N � � _._._._._._._ ._._._._._. La-n I pN v --------------------------- 00 _ 00 p l a2j,'nnq .. . . . .l.0 . . . .N - - - -- - -- - --_ M W N Ln- - -- N _m ._._._._.kA._. M . -- eq N a-I _._._._._- _._._._._ '1000 2p�1 2po� 2pa3 2p�V -1100 ?00 2006 200 ) 2p0$ Zp09 2p10 2011 2p�2 2013 2p1Q 2p1s Year ( *2015 Data through October 6) MAXFIELD RESEARCH & CONSULTING, LLC.. 32 TABLE HC -1 RESIDENTIAL CONSTRUCTION CITY OF ELK RIVER ANNUAL BUILDING PERMITS ISSUED 2000 to 2015* Single - Family Permits Issued Townhome/ Multifamily Total Housing Homes Twinhome 3+ Units Units 2000 172 26 86 284 2001 162 18 76 256 2002 194 18 32 244 2003 285 37 228 550 2004 300 12 235 547 2005 195 4 145 344 2006 150 2 98 250 2007 104 0 12 116 2008 25 0 0 25 2009 16 0 4 20 2010 15 0 53 68 2011 11 0 0 11 2012 36 0 0 36 2013 82 0 0 82 2014 68 3 68 139 2015 62 0 0 62 Total '00 to 10 1,618 117 969 2,704 Total 11' to 15 259 3 68 330 * Data through 10/6/15. Sources: City of Elk River; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC.. 32 HOUSING CHARACTERISTICS American Community Survey The American Community Survey ( "ACS ") is an ongoing statistical survey administered by the U.S. Census Bureau that is sent to approximately 3 million addresses annually. The survey gathers data previously contained only in the long form of the decennial census. As a result, the survey is ongoing and provides a more "up -to- date" portrait of demographic, economic, social, and household characteristics every year, not just every ten years. The most recent ACS highlights data collected between 2009 and 2013. Tables HC -2 to HC -7 show key data for Elk River Elk River. Age of Housing Stock The following graph shows the age distribution of the housing stock in 2000 based on data from the U.S. Census Bureau and 2013 from the American Community Survey (5- Year). Table HC -2 includes the number of housing units built in Elk River, prior to 1940 and during each decade since. The following are key points derived from Table HC -2. In total, Elk River is estimated to have nearly 10,000 housing units, of which about 8,415 are owner - occupied and just over 1,300 are renter - occupied. In total, owner - occupied housing units account for about 86.5% of Elk River's total housing stock. The highest number of homes was built during the period from 2000 to 2009. Overall, roughly 27% of the total housing units were built during this period. Less than 10% of Elk River housing stock was built before 1970. Some of these housing units may be dilapidated and in need of replacement or repair. MAXFIELD RESEARCH & CONSULTING, LLC.. 33 AGE OF HOUSING STOCK Elk River 2013* 2,750 2,500 2,250 2,000 1,750 1,500 1,250 ° 1,000 z 750 Ln 500 N 250 N 0 Before 1940s 1950s 1960s 1970s 1980s 1990s 2000s After 1940 Decade Constructed 2010 MAXFIELD RESEARCH & CONSULTING, LLC.. 33 N V_ t; w W V a 2 V z N O 2 m V Z 2 V W W D J W LL X a 2 .; N �* Cl U a ci cl N O 0 � Z 0 cN-I N l0 O M Ol U m m 1O O C, C- N N N O O N N N n n u U d rl c-I N N N N N O a0)-I O W O z W c-I' N m m O . U O Ln eel N d N N N O z O^ m O c-I' N � m l0 N Ln N L " d ci ci a-L O u n U Y i p ONO N J z OH O N N pp N H Z N - Z W iF m Ol _ > u U d l0 l0 l0 O LLI A U J � � aM-I Q O m N ~ LL a-I Z Ln a) N aj W (J y aj O1 l0 Ln OR a ++ i t6 K d N cI M -0 N v O X Ol O lo Z I-i Ln w v N ci M i 7 T to � O N " a ri o ri c � Ln T o E E ° u E z c E ro 0 U u .j 00 01 vC (O U Q fY1 C U a Q v a r, ci co N Q V z O ri m M v u N aj v _ Ln 1.0 N v 0 O N E O p C 4 a m n o t H oo ri of w o m =3 v v � ro Q .Q O =3 =3 N U U m U C? U C? O w ro n ro 3 O v = L^ N m V Z 2 V W W D J W LL X a 2 HOUSING CHARACTERISTICS Housing Units by Structure and Occupancy or (Housing Stock by Structure Type) Table HC -3 shows the housing stock in Elk River by type of structure and tenure as of 2000 and 2013. Data for 2000 is from the U.S. Census and 2013 data is from American Community Survey. • The dominant housing type in Elk River is the single - family detached home, representing about 73% of all housing units as estimated in 2013. • There are only about an estimated 840 total housing units located in buildings of more than 10 units, or about 11% of the housing stock. • According to the data, an estimated 2% of the Elk River's housing stock was vacant as of 2000. As shown in Table HC -4 on Page 37, vacant units increased to 5% in 2010. ACS data for units in structure does not account for vacant units. • It is important to note, however, that the Census' definition of vacant housing units includes: units that have been rented or sold, but not yet occupied, seasonal housing (vacation or second homes), housing for migrant workers, and even boarded -up housing. Thus, the U.S. Census vacancy figures are not always a true indicator of adequate housing available for new households wishing to move into the area. 450 400 350 300 Y U 250 ao 200 �N 3 = 150 100 50 0 Housing Stock By Units In Structure Elk River 2013* 1 detached 1 attached 2 tO 4 ur�ts 5 tO 9 p�ex 10 t° 19 oats 20 t° 49 °rjts 50 } un \ts M °bl \e MAXFIELD RESEARCH & CONSULTING, LLC. 35 HOUSING CHARACTERISTICS TABLE HC -3 HOUSING STOCK BY UNITS IN STRUCTURE ELK RIVER 2000 and 2013* No Pct. No Pct. Owner occupied: 4,431 100.0 6,236 100.0 1, detached 4,043 91.2 5,363 86.0 1, attached 319 7.2 759 12.2 2 to 4 units 40 0.9 0 0.0 5 -to 9 -plex 7 0.2 0 0.0 10 to 19 units 0 0.0 25 0.4 20 to 49 units 0 0.0 0 0.0 50 + units T 0 0.0 72 1.2 Mobile home 22 0.5 17 0.3 Renter occupied: 1,233 100.0 1,687 100.0 1, detached 115 9.3 396 23.5 1, attached 67 5.4 346 20.5 2 to 4 units 57 4.6 75 4.4 5- to 9 -plex 70 5.7 144 8.5 10 to 19 units 298 24.2 144 8.5 20 to 49 units 365 29.6 433 25.7 50 + units 252 20.4 110 6.5 Mobile home 9 0.7 39 2.3 Total occupied: 5,664 100.0 7,923 100.0 1, detached 4,158 73.4 5,759 72.7 1, attached 386 6.8 1,105 13.9 2 to 4 units 97 1.7 75 0.9 5- to 9 -plex 77 1.4 144 1.8 10 to 19 units 298 5.3 169 2.1 20 to 49 units 365 6.4 433 5.5 50 + units 252 4.4 182 2.3 Mobile home 31 0.5 56 0.7 Vacant /Vac. Rate: 118 2.0 -- -- 1, detached 58 1.4 1, attached 46 10.6 2to4units 0 0.0 -- 5- to 9 -plex 3 3.8 -- 10 to 19 units 0 0.0 -- 20 to 49 units 11 2.9 -- 50 + units 0 0.0 -- -- Mobile home 0 0.0 -- -- * Data for 2013 is from US Census, American Community Survey (5 -Year Estimate) Sources: US Census Bureau, Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. 36 HOUSING CHARACTERISTICS Housing Units by Occupancy Status & Tenure Tenure is a key variable that analyzes the propensity for householders to rent or own their housing unit. Tenure is an integral statistic used by numerous governmental agencies and private sector industries to assess neighborhood stability. Table HC -4 shows historic tenure trends for 2000 and with estimates for 2015 and projections for 2020 (ESRI, with adjustment by Maxfield Research). • Even though both owner- and renter - occupied housing units increased substantially over the decade, their percentage of total housing units decreased slightly due to an increased number of vacant units. Owner - occupied units decreased from 77% in 2000 to 76% in 2010 and renter - occupied units from 21% to 19 %. Consequently, the number of vacant occupied units was only 2% in 2000 while increasing to over 5% in 2010. Projections through 2020 indicate a stabilization of owner - occupied housing and vacant units. MAXFIELD RESEARCH & CONSULTING, LLC. 37 TABLE HC -4 HOUSING UNITS BY OCCUPANCY STATUS & TENURE ELK RIVER 2000 to 2020 Elk River Year /Occupancy No. Pct. 2000 Owner Occupied 4,431 76.6 Renter Occupied 1,233 21.3 Vacant 118 2.0 Total 5,782 100.0 2010 Owner Occupied 6,478 75.8 Renter Occupied 1,602 18.8 Vacant 462 5.4 Total 8,542 100.0 2015 Owner Occupied 6,650 77.9 Renter Occupied 1,703 19.9 Vacant 457 5.4 Total 8,810 103.1 2020 Owner Occupied 7,012 75.4 Renter Occupied 1,790 19.2 Vacant 495 5.3 Total 9,297 100.0 Sources: U.S. Census Bureau; ESRI; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. 37 HOUSING CHARACTERISTICS The percentages in Table HC -4 compared to Table D -6 on Page 23 are due to the additional of vacant unit totals. Table D -6 does not account for vacant units and thus percentages are slightly different. Owner - Occupied Housing Units by Mortgage Status Table HC -5 shows mortgage status and average values from the American Community Survey for 2013 (5- Year). Mortgage status provides information on the cost of homeownership when analyzed in conjunction with mortgage payment data. A mortgage refers to all forms of debt where the property is pledged as security for repayment of debt. A first mortgage has priority claim over any other mortgage or if it's the only mortgage. A second (and sometimes third) mortgage is called a "junior mortgage," a home equity line of credit (HELOC) would also fall into this category. Finally, a housing unit without a mortgage is owned free and clear and is debt free. The following key points summarize findings from Table HC -5. Approximately 81% of Elk River homeowners have a mortgage. About 24% of homeowners with mortgages also have a second mortgage and /or home equity loan. Comparatively, about 66% of homeowners in the United States have a mortgage. The average home value of a home with a mortgage from Elk River homeowners is approximately $216,650. By comparison, the same value in the U.S. is about $263,629, or 22% higher than Elk River. TABLE HC -5 HOUSING UNITS BY MORTGAGE STATUS ELK RIVER 2013 (5 -Year Estimate) Mortgage Status No. Pct. Pct. Pct. 1,184 19.0 24.2 30.4 Housing units without a mortgage Housing units with a mortgage /debt 5,052 81.0 75.8 69.6 Second mortgage only 423 6.8 5.6 4.7 Home equity loan only 990 15.9 15.3 12.6 Both second mortgage and equity loan 85 1.4 0.8 0.7 No second mortgage or equity loan 3,554 57.0 54.2 51.6 Total 6,236 100.0 100.0 100.0 Average Value by Mortgage Status Housing units with a mortgage $216,650 $265,537 $231,401 Housing units without a mortgage $256,762 $250,624 $202,693 Sources: U.S. Census Bureau - 2013 ACS; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. 38 HOUSING CHARACTERISTICS Owner - Occupied Housing Units by Value Table HC -6 presents data on housing values summarized by nine price ranges. Housing value refers to the estimated price point the property would sell if the property were for sale. For single - family and townhome properties, value includes both the land and the structure. For condominium units, value refers to only the unit. • Over one -third of the owner - occupied housing stock in Elk River is estimated to be valued between $200,000 and $299,999 (36 %). • The median and average owner - occupied home in Elk River is $206,300 and $224,226, respectively. Twenty -three percent of the Elk River's home values are valued under $150,000. c D a N TABLE HC -6 UNITS BY VALUE ELK RIVER 2013 (5 -Year Estimate) Home Value No. Pct. Pct. Pct. Less than $50,000 91 1.5 3.5 6.1 $50,000 - $99,999 372 6.0 4.4 10.4 $100,000 - $149,999 946 15.2 12.0 16.6 $150,000 - $199,999 1,556 25.0 22.2 21.4 $200,000 - $299,999 2,229 35.7 30.7 25.0 $3000,000 - $499,999 952 15.3 19.4 14.8 Greater than $500,000 90 1.4 7.8 5.7 Total 6,236 100.0 100.0 100.0 Median Home Value $206,300 $221,493 $187,900 Average Home Value $224,266 $261,926 $222,672 Sources: U.S. Census Bureau - 2013 ACS; Maxfield Research & Consulting, LLC Owner - Occupied Units by Value 2,500 -------------------- - - - - -- Elk River - 2013 ACS (5- Year) 2,000 1,500 -------------------------- 1,000 500 0 Less than $50k to $50k $99.9k $100k to $150k to $200kto $250kto $300k+ $149.9k $199.9k $249.9k $299.9k Home Value MAXFIELD RESEARCH & CONSULTING, LLC. 39 HOUSING CHARACTERISTICS Renter - Occupied Units by Contract Rent Contract rent (also known as asking rent) provides information on the monthly housing costs for renters. Contract rent is the monthly rent agreed to regardless of any utilities, furnishings, fees, or services that may be included. Key findings from Table HC -7 follow. • The median and average contract rents in Elk River were $794 and $898, respectively. Based on a 30% allocation of income to housing, a household would need an income of about $31,760 to afford an average monthly rent of $794. • Approximately 34% of Elk River renters have monthly rents ranging from $500 to $749. Another 35% of renters have monthly rents ranging from $750 to $999. Over 48% of renters have monthly rents of $1,000 or greater. • Housing units without payment of rent ( "no cash rent ") make up only 4% of Elk River renters. Typically units may be owned by a relative or friend who lives elsewhere whom allow occupancy without charge. Other sources may include caretakers or ministers who may occupy a residence without charge. TABLE HC -7 HOUSING UNITS BY CONTRACT RENT ELK RIVER 2013 (5 -Year Estimate) Contract Rent No. Pct. No Cash Rent 48 3.6 Cash Rent 1,278 96.4 $0 to $249 64 4.8 6.1 7.9 $250 -$499 144 10.9 7.3 15.1 $500 -$749 446 33.6 24.7 29.0 $750 -$999 463 34.9 30.5 24.6 $1,000+ 631 47.6 31.4 23.4 Total 1,326 100.0 100.0 100.0 Median Contract Rent $794 $835 $734 Average Contract Rent $898 $887 $784 Sources: U.S. Census Bureau - 2013 ACS; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC. 40 RENTAL MARKET ANALYSIS Introduction Maxfield Research and Consulting LLC identified and surveyed larger rental properties of 16 or more units in the Elk River. In addition, interviews were conducted with real estate agents, developers, rental housing management firms, and others in the community familiar with Elk River's rental housing stock. For purposes of our analysis, we have classified rental projects into two groups, general occupancy and senior (age restricted). All senior projects are included in the Senior Rental Analysis section of this report. The general occupancy rental projects are divided into three groups, market rate (those without income restrictions), affordable, (those receiving tax credits in order to keep rents affordable), and subsidized (those with income restrictions based on 30% allocation of income to housing). General- Occupancy Rental Projects Our research of Elk River's general occupancy rental market included a survey of 22 apartment properties (16 units and larger) in October 2015. These projects represent a combined total of 931 units, including 633 market rate units and 298 affordable /subsidized units. At the time of our survey, 45 market rate units and one affordable /subsidized units were vacant, resulting in an overall vacancy rates of 7.1% for market rate units and 1.3% for affordable /subsidized. It is important to note however, that 28 of the 45 market rate vacancies are located within Elk Park Estates which has changed ownership and management. Excluding this property decreases the vacancy rate to 3.0 %. We were unable to gather complete information for the property of Elk Ridge Estates. The overall market rate vacancy rate of 5.3 %, excluding Elk Park Estates drops the vacancy rate to 2.4% which is lower than the industry standard of 5% vacancy for a stabilized rental market, which promotes competitive rates, ensures adequate choice, and allows for unit turnover. The pent -up market indicates a possible need of additional rental housing for all major sectors of the rental market: low- income, moderate - income, and market rate. Table RMA -1 summarizes information on general occupancy projects surveyed. The following are key points from our survey of these developments. Market Rate • Granite Shores, converted to rental in 2012, is the newest market rate general occupancy building built in nearly 20 years. Granite Shores contains a total of 67 units and was originally built as a for -sale condominium in 2006, but struggled to sell units and went into foreclosure. Granite Shores has the highest rents in Elk River, at $1,129 to $1,589 per month for one - bedroom units, $1,299 to $1,539 per month for one - bedroom plus Den units, and $1,429 per month for two - bedroom units. The monthly rents are about 40% to MAXFIELD RESEARCH & CONSULTING, LLC. 41 RENTAL MARKET ANALYSIS 50% higher than the other older market rate properties and had three vacancies at the time of the survey. One - bedroom monthly rents ranged from $675 to $1,589 with rents per square foot from $0.80 to $1.28. Two - bedroom monthly rents ranged from $725 to $1,429 with rents per square foot from $0.69 to $1.38. Evans Meadows has six three - bedroom units that rent for $1,965 per month ($1.31 per square foot). Overall, the average price per square foot for units in Elk River is $0.93. The average price per square foot rents for a efficiency unit is $1.16, $1.05 for a one - bedroom unit, $1.44 for a one - bedroom plus den unit, $0.94 for a two - bedroom unit, and $0.90 for three - bedroom units. The newest units built at Evans Meadows are renting at a price per square foot ranging from $1.31 for three - bedroom units to $1.38 for one - bedroom units. • A common laundry room with coin - operated washers and dryers is available in all market rate properties surveyed. Granite Shores has in -unit laundry and Tara Hills Estates has in- unit hook -up for laundry. All of the properties surveyed have underground, attached, or detached garages either included in the monthly rent or are available for an extra fee ($25 to $50 per month). Affordable /Subsidized • We identified five affordable projects (244 units) which are financed through the Low Income Housing Tax Credit (LIHTC) program, otherwise known as the Section 42 program. The maximum income limit for residency at these projects is at 60% of the area median income. Income limits are represented for both programs in Figures 1 and 2 on page 48. • We also identified two subsidized projects (54 units). Both are Rural Development developments requiring rent of 30% of a resident's adjusted gross income (AGI). • There have been three affordable developments built within the past 10 years. Coachman Ridge is the most recent development which opened in November 2015. Coachman Ridge was fully leased before the occupancy date. The other new affordable developments are Jackson Place (32 units) which was built in 2007 in Downtown Elk River and The Depot at Elk River Station (53 units) built in 2011 near the commuter rail station . The majority of the subsidized and Tax - Credit properties were built 15 or more years ago. • All subsidized units were occupied and there were four vacant units in the affordable properties as of October 2015 for a total vacancy rate of 1.3 %. Typically, subsidized and affordable rental properties should be able to maintain vacancy rates of 3% or less in most housing markets. The low vacancy rates in the market indicate pent -up demand for affordable and subsidized units and also are an indication of the current economic climate in the area. 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N N N -1 O O O M M N IA ++ C 0J N V N > H 0 H 0O rl 0: C M Ln N N rn J `m m m oo ID oo L 0 � O o6 O E Ln a m N ++ (6 N Q \ t oo o G- N Q U N `o > H m oo a) 0J C = ro u N Q u a O m a •N x m o s L O v N N \ i ro u a oo a _j �� c°� Q cc�D W oo a Ln V Z J D N z O u 06 2 u W N W D J W LL a 2 RENTAL MARKET ANALYSIS ranite Shores /ans Meadows ns Park < Crest gewood Manor a Hills Estates Park Estates Ridge Estates moral Apartments Crossings ool Street ver Garden neview ke Orono Estates chman Ridge Depot of Elk River (son Place ee Tree esboro Heights ee Terrace )urn Place Ridge Manor COMMON AREA FEATURES /AMENITIES EXISTING GENERAL OCCUPANCY RENTAL PROJECTS CITY OF ELK RIVER October 2015 w/5 0000000000 CA MY MY MY IU MY MY =Y MY N Y L_JL_JL I JL I JL_jl UG llincluded �I � �I �I � AG Included ���I �I � UG Indluded �I ��I �I � DG Included �I ��I �I � DG Included ���I �I � DG Included �I � �I �I � DG Included �I �I � DG Included Di 0 Di Di 0 DG $so ELI===== ncluded �I � �I �I � UG Included EI Q EI EI Q UG ncluded FA/DG E = E E = DG $45 E =E E = DG ncluded ote: Y= Available, N =Not Available; 1= Included 4= Central Air; W =Wall unit air; S =Some units; DG= Detached Garage; UG= Underground; AG= Attached Garage; O= Offstreet; U =1n -unit; HU= Hook -ups; ISource: Maxfield Research & Consulting, LLC Along with income limits for residents, the projects have maximum rents that are based on a percentage of median income — usually 60% of median income. Rents at the affordable projects range from $695 to $800 for one - bedroom units, from $70 to $900 for two - bedroom units, and from $899 to $1,025 for three - bedroom units. These rents are similar to many of the market rate projects, and there is likely some market overlap. MAXFIELD RESEARCH & CONSULTING, LLC. 46 Utilities and Parking r c 0 E a a a T y � V 7 Y Y L_JL_JL I JL I JL_jl UG llincluded �I � �I �I � AG Included ���I �I � UG Indluded �I ��I �I � DG Included �I ��I �I � DG Included ���I �I � DG Included �I � �I �I � DG Included �I �I � DG Included Di 0 Di Di 0 DG $so ELI===== ncluded �I � �I �I � UG Included EI Q EI EI Q UG ncluded FA/DG E = E E = DG $45 E =E E = DG ncluded ote: Y= Available, N =Not Available; 1= Included 4= Central Air; W =Wall unit air; S =Some units; DG= Detached Garage; UG= Underground; AG= Attached Garage; O= Offstreet; U =1n -unit; HU= Hook -ups; ISource: Maxfield Research & Consulting, LLC Along with income limits for residents, the projects have maximum rents that are based on a percentage of median income — usually 60% of median income. Rents at the affordable projects range from $695 to $800 for one - bedroom units, from $70 to $900 for two - bedroom units, and from $899 to $1,025 for three - bedroom units. These rents are similar to many of the market rate projects, and there is likely some market overlap. MAXFIELD RESEARCH & CONSULTING, LLC. 46 RENTAL MARKET ANALYSIS Elk River General Occupancy Rental Housing Locations lfalls Naak °' Market Rate CI . ,{ G�If rluL, sedge N r+ F k* 2 Granite Shores 14. The Depot at Elk River Station 2. Evans Meadows 15. �:. RidgGwoma 5 ? 4 1pBfh AvC,t,. 6 Dove Tree Apartments sri Raa sn 17. � 5. Bog T-11i '^ t9filhv NW R P. Qa 1`+71h ADZ NWT LP t^ t 6. Elk Park Estates e NW Park y _ Elk Ridge Estates 8. Balmoral Apartments Section 8 9. Elk Crossings /School Street 20. Lanesboro Heights Townhomes 10. River Garden Apartments f'af k Auburn Place tol Pineview Estates 12. Lake Orono Estates w Oak Crest Apartments �d "ZOO AvG NW ix 40 =a� Rv7 nl og � gOtn AveNW fie, T 1 q �"vare � °' c t1kY pw�k � �� P C +l,ca+ip 1.130" 1 6 o.,a K—n F.nk = $a 170 0 ssFW3INW 1B 4 2 ®tl[h us�io € USh ;9.16 L— a. 219 � Fark .Fark JS' 12 to Pa,k 6th $1 NW 5th S1NW Q G F`G ' 'Srh SINW ,Oct& 2 .i 1• Elk- River °h. 10 3rd Ave NW 0,0m5 M11 1 Maim S v lY 2nd`.it NW C 11i1"d AVC _ — � n S 181.1 A— NW u? i i 4 1111:16. i .47P 4 u y 'rryPaM 25 Otsego 96rh S +NF. a✓ v:h 175th Ave fiP'/ 0.14 s'3'a Sr NE Y Y r RT 41.t Se 4k, y 92nd SR NE M j ,��y 11 On 19/� 14 lJ �T ?ny .Sf ly1: n 4 4.6km L 90th St NE 1 1 171 „1 V NW TlstAvY -NW ,p,Ami � sy5l�' x 1 1W Maxfield Research & Consulting, LVC 60 + Units 40 -59 Units 21 -39 Units Less than 20 Units MAXFIELD RESEARCH & CONSULTING, LLC. 47 Key: Market Rate Affordable 1. Granite Shores 14. The Depot at Elk River Station 2. Evans Meadows 15. Jackson Place 3. Lion's Park 16. Dove Tree Apartments 4. Ridgewood Manor 17. Dove Terrace Apartments 5. Tara Hills Estates 18. Elk Ridge Manor 6. Elk Park Estates 19. Coachman Ridge 7. Elk Ridge Estates 8. Balmoral Apartments Section 8 9. Elk Crossings /School Street 20. Lanesboro Heights Townhomes 10. River Garden Apartments 21. Auburn Place 11. Pineview Estates 12. Lake Orono Estates 13. Oak Crest Apartments 60 + Units 40 -59 Units 21 -39 Units Less than 20 Units MAXFIELD RESEARCH & CONSULTING, LLC. 47 RENTAL MARKET ANALYSIS Because the two newer Tax Credit properties were built in the last five years, the properties offer more amenities than the other older affordable and subsidized properties amenities include in -unit washer and dryers, dishwashers, central a/c units, and heated underground garages. Unit and common area amenities are minimal at the older affordable and subsidized projects. All projects feature attached or detached garages renting from $30 to $55 per month. Figure 1 above shows the maximum allowable incomes by household size to qualify for affordable housing and maximum gross rents that can be charged by bedroom size in Sherburne County. Comparing the maximum rents with the market rate rents in Table RMA -1 we can see that all rental buildings except for The Depot at Elk River Station offer rents below 60% of the AMI and most units are below 50% of the AMI. The majority of the properties with rents below 50% of AMI are 20 years and older. The quick absorption occurring at Granite Shores, which offers the highest rents in the market and is the newest rental development, indicates the market is willing and able to afford higher market rents when buildings with updated amenities are offered. Subsidized Housing Assistance Program In addition to subsidized apartments, Elk River also has a "tenant- based" subsidy called Housing Choice Vouchers to help lower income households find affordable housing. The tenant -based subsidy is funded by the Department of Housing and Urban Development's (HUD), and is managed by the St. Cloud Housing and Redevelopment Authority (HRA). Under the Housing Choice Voucher program (formerly Section 8 Certificates and Vouchers) qualified households are issued a voucher that the household can take to an apartment that has rent levels allowable under HUD guidelines. The household then pays 30% of their adjusted gross income for rent and utilities, and the Federal government pays the remainder of the rent to the landlord. MAXFIELD RESEARCH & CONSULTING, LLC. 48 FIGURE 1 2015 MHFA /HUD Income Limits Sherburne County Income Limits by Household Size 1 phh 2 phh 3 phh J 1 4 phh 5phh 6phh 7phh 8phh 30% of median $18,210 $20,790 $23,400 $25,980 $28,080 $30,150 $32,220 $34,320 50% of median $30,350 $34,650 $39,000 $43,300 $46,800 $50,250 $53,700 $57,200 60% of median $36,420 $41,580 $46,800 $51,960 $56,160 $60,300 $64,440 $68,640 Maximum Gross Rents by Bedroom Size 0 BR 11311 21311 11 31311 30% of median $455 $487 $585 $675 50% of median $758 $812 $975 $1,126 60% of median $910 $975 $1,170 $1,351 Sources: MHFA; Maxfield Research & Consulting, LLC Figure 1 above shows the maximum allowable incomes by household size to qualify for affordable housing and maximum gross rents that can be charged by bedroom size in Sherburne County. Comparing the maximum rents with the market rate rents in Table RMA -1 we can see that all rental buildings except for The Depot at Elk River Station offer rents below 60% of the AMI and most units are below 50% of the AMI. The majority of the properties with rents below 50% of AMI are 20 years and older. The quick absorption occurring at Granite Shores, which offers the highest rents in the market and is the newest rental development, indicates the market is willing and able to afford higher market rents when buildings with updated amenities are offered. Subsidized Housing Assistance Program In addition to subsidized apartments, Elk River also has a "tenant- based" subsidy called Housing Choice Vouchers to help lower income households find affordable housing. The tenant -based subsidy is funded by the Department of Housing and Urban Development's (HUD), and is managed by the St. Cloud Housing and Redevelopment Authority (HRA). Under the Housing Choice Voucher program (formerly Section 8 Certificates and Vouchers) qualified households are issued a voucher that the household can take to an apartment that has rent levels allowable under HUD guidelines. The household then pays 30% of their adjusted gross income for rent and utilities, and the Federal government pays the remainder of the rent to the landlord. MAXFIELD RESEARCH & CONSULTING, LLC. 48 RENTAL MARKET ANALYSIS Applicants in Elk River may be eligible for the program if their income is below the current limits shown in Figure 2, which are set by HUD on an annual basis. Currently, the HRA is maxed out on the 873 vouchers they issue. Because the majority of these households have very low incomes, very few could afford rental housing in Elk River without the assistance of the voucher program. Demand for the program is high, as there is at least a five year waiting list and currently stands at over 3,000 households. The funding for the program is very low so the HRA cannot issue any more vouchers and the waiting list is currently closed. The St. Cloud HRA manages their vouchers throughout St. Cloud, Benton, Sherburne, and Wright Counties. The HRA could not provide the amount being used specifically in Elk River. FIGURE 2 Income Limits Sherburne County Housing Choice Voucher Program Finaily Extremely Very Size Low - Income Low - Income 1- Person $18,200 $30,350 2- Persons $20,800 $34,650 3- Persons $23,400 $39,000 4- Persons $26,000 $43,300 5- Persons $28,410 $46,800 6- Persons $32,570 $50,250 7- Persons $36,730 $53,700 8- Persons $40,890 $57,200 Source: St. Cloud HRA Pending Rental Developments in Elk River Maxfield Research and Consulting LLC interviewed City staff in Elk River to determine pending and planned rental developments. As of November 2015, there are no rental developments planned within Elk River. MAXFIELD RESEARCH & CONSULTING, LLC. 49 RENTAL MARKET ANALYSIS Rental Market Interview Summary Interviews with area rental property managers, real estate agents, developers, and other persons familiar with the rental market in Elk River were conducted to solicit their impressions of the rental housing market in the community. The following are some key points from these interviews: • The majority of property managers stated that rental demand has remained strong and vacancy rates remain low. Most of the issues continue to revolve around finding the right qualified tenants. Although they are usually fully occupied, most market rate properties do not maintain a waiting list, and if they do the list is relatively small. Managers state that most vacancies will be filled relatively quickly over a few months. Most of the affordable and subsidized properties maintain lengthy waiting lists due to the strong demand for low - income rental units. The subsidized properties in particular have very long lists with Lanesboro Heights stating a five -year wait. • If an apartment is not available in Elk River, the potential tenant will search in the surrounding communities such as Rogers, Monticello, Albertville, Otsego, and Big Lake. • The majority of managers prefer not to divulge renter profiles and typically stated they had a wide mix of tenants. Most of the managers indicated that the majority of tenants work locally. • Most managers indicated that very few, if any renters utilized the commuter rail for work purposes as most renters work in the local area. • Many of Elk River's rental housing buildings are composed of larger -sized (30 to 60 units) structures targeted at the low- to moderate - income market. The majority of these buildings were built at least 20 year ago and do not feature a variety of contemporary amenities. MAXFIELD RESEARCH & CONSULTING, LLC. 50 SENIOR HOUSING ANALYSIS Senior Housing Defined The term "senior housing" refers to any housing development that is restricted to people age 55 or older. Today, senior housing includes an entire spectrum of housing alternatives, which occasionally overlap, thus making the differences somewhat ambiguous. However, the level of support services offered best distinguishes them. Maxfield Research and Consulting LLC classifies senior housing projects into five categories based on the level of support services offered: Adult /Few Services; where few, if any, support services are provided, and rents tend to be modest as a result; Congregate /Optional- Services; where support services such as meals and light housekeeping are available for an additional fee; Congregate /Service- Intensive; where support services such as meals and light housekeeping are included in the monthly rents; Assisted Living; where two or three daily meals as well as basic support services such as transportation, housekeeping and /or linen changes are included in the fees. Personal care services such as assistance with bathing, grooming and dressing is included in the fees or is available either for an additional fee or included in the rents. Memory Care; where more rigorous and service - intensive personal care is required for people with dementia and Alzheimer's disease. Typically, support services and meal plans are similar to those found at assisted living facilities, but the heightened levels of personalized care demand more staffing and higher rental fees. These five senior housing products tend to share several characteristics. First, they usually offer individual living apartments with living areas, bathrooms, and kitchens or kitchenettes. Second, they generally have an emergency response system with pull -cords or pendants to promote security. Third, they often have a community room and other common space to encourage socialization. Finally, they are age- restricted and offer conveniences desired by seniors, although assisted living projects sometimes serve non - elderly people with special health considerations. The five senior housing products offered today form a continuum of care (see Figure 2 on the following page), from a low level to a fairly intensive one; often the service offerings at one type overlap with those at another. In general, however, adult /few services projects tend to attract younger, more independent seniors, while assisted living and memory care projects tend to attract older, frailer seniors. MAXFIELD RESEARCH & CONSULTING, LLC. 51 SENIOR HOUSING ANALYSIS CONTINUUM OF HOUSING AND SERVICES FOR SENIORS Fully Independent Lifestyle EJSenior Housing Product Type Source: Maxfield Research & Consulting, LLC Senior Housing in Elk River Fully or Highly Dependent on Care As of October 2015, Maxfield Research identified nine senior housing developments in Elk River. These projects contain a total of 412 units. Three of the projects are subsidized, while the remaining six are market rate. Guardian Angels owns and manages seven of the nine properties. Table SH -1 provides information on the total units by product type and Table SH -2 shows detailed information on each development including year built, number of units, unit mix, number of vacant units, rents, and general comments about each project. TABLE SH -1 SENIOR HOUSING UNITS BYTYPE CITY OF ELK RIVER October 2015 Active Adult/Few Services Ownership MR Rental AFF /Sub. Rental Assisted Living Memory Care 124 83 115* 60 30 * All units are subsidized. There are no designated affordable senior units in Elk River. Source: Maxfield Research & Consulting, LLC Market Rate Senior Projects • We identified five existing adult /few service senior project in Elk River with a total of 207 units. Two of the developments are ownership (124 units) and the other three are rental (83 units) buildings. Pullman Place is the newest market rate development built in 2005 and is a cooperative ownership product with 65 units. The remaining products are 10 years and older. MAXFIELD RESEARCH & CONSULTING, LLC. 52 Townhome or Congregate Apartments w/ Optional Single - Family Home Assisted Living Nursing Facilities Apartment Services Age- Restricted Independent Single - Family, Congregate Apartments w/ Memory Care Townhomes, Apartments, Condominiums, (Alzheimer's and Cooperatives Intensive Services Dementia Units) Fully Independent Lifestyle EJSenior Housing Product Type Source: Maxfield Research & Consulting, LLC Senior Housing in Elk River Fully or Highly Dependent on Care As of October 2015, Maxfield Research identified nine senior housing developments in Elk River. These projects contain a total of 412 units. Three of the projects are subsidized, while the remaining six are market rate. Guardian Angels owns and manages seven of the nine properties. Table SH -1 provides information on the total units by product type and Table SH -2 shows detailed information on each development including year built, number of units, unit mix, number of vacant units, rents, and general comments about each project. TABLE SH -1 SENIOR HOUSING UNITS BYTYPE CITY OF ELK RIVER October 2015 Active Adult/Few Services Ownership MR Rental AFF /Sub. Rental Assisted Living Memory Care 124 83 115* 60 30 * All units are subsidized. There are no designated affordable senior units in Elk River. Source: Maxfield Research & Consulting, LLC Market Rate Senior Projects • We identified five existing adult /few service senior project in Elk River with a total of 207 units. Two of the developments are ownership (124 units) and the other three are rental (83 units) buildings. Pullman Place is the newest market rate development built in 2005 and is a cooperative ownership product with 65 units. The remaining products are 10 years and older. 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Park o kj 2 y rviri it _ a 9 N N yea �,ryx (Oak Knall t a,u.,a RKN Park a !Jroran is a8 >3rh a bl St N W Z. Llena z 3 Parka _ a Park a ¢ _ _ q e Q' 1C, _ . - _ Elk � m fiver 7 She Coruanty c Mara 5I ral rgr01jnd5 4. �5� k MainBt $aVanna Park z Ml:ai —ppi Rd NW Rr� a 4rp✓ 0lsego85th St HE �5flr y. +Nf I km 9i sts'4 w 1 mr Maxfield Research & Consulting LLC Key: Adult /Few- Services Ownership 1. Pullman Place 2. Elk Run Village Adult /Few- Services Rental Market Rate 3. Elk Terrace 4. Evans Park 5. Riverview Apartments Subsidized 5. Riverview Apartments 6. Angel Ridge 7. Guardian Oaks Assisted Living 8. Guardian Angels by the Lake Memory Care 8. Guardian Angels by the Lake 5.0 z 5s NE m ° a i Hlahland -, East Palk. h93r�yq LR IOW Ronal V ll'? P",. Birch Mead❑ Par,. "bHA j °4 ir..11 Eroc4. Parma Park 181st A— NW Hill -•i•Ja --'ily Park A i 10 p m 'SGM -SINE dl �I llst Ave -NW j 0 + Units -59 Units -39 Units han 20 Units gum MAXFIELD RESEARCH & CONSULTING, LLC 56 SENIOR HOUSING ANALYSIS Pullman Place is a limited equity cooperative. Cooperative products involve purchasing a unit (or share) and then paying monthly fees which includes all utilities, of property and commons areas, and future building maintenance. Pullman Place sold out fairly quickly when it opened at the height of the real estate market. However current residents who purchased during the peak have lost value in their units. All unit types currently sell fairly quickly compared to 2012 and a few years before. • Elk Run Village is a for sale age- restricted townhome development for active adults. There are a total of 52 homes along with a clubhouse. All of the units are one - level, two- bedrooms with attached garages. Monthly rent for the rental buildings ranges $517 for efficiency units at Riverview Apartments to $1,109 for a two - bedroom unit at Evans Park. Unit sizes range from 320 square feet for an efficiency to 826 for a two - bedroom unit. Both of the market rate buildings are about 30 years and older. Subsidized Senior Housing Projects • There are a total of 138 units in two subsidized senior projects. As of October 2015, all of the subsidized units were occupied indicating pent -up demand for subsidized senior rental units. Overall, the unit sizes at the subsidized senior projects are considerably smaller than many of the previously mentioned general- occupancy rental projects. One - bedrooms range from 540 to 688 square feet and two - bedrooms range from 734 to 800 square feet. • Typically subsidized senior housing offers limited to no amenities. However Guardian Angels has developed Angel Ridge and Guardian Oaks with common area amenities such as a grocery store, gift shop, beauty salon, dining room, community room, extra storage space, and coffee shop. Personal care services are also available at an extra cost along with scheduled activities. Subsidized senior housing offers affordable rents to qualified lower income seniors and handicapped /disabled persons. Typically, rents are tied to residents' incomes and based on 30 percent of adjusted gross income (AGI), or a rent that is below the fair market rent. For those households meeting the age and income qualifications, subsidized senior housing is usually the most affordable rental option available. Senior Housing with Services • There is one facility in Elk River that offers assisted living and memory care services. Guardian Angels by the Lake is a 90 unit development opened in 1998 and recently MAXFIELD RESEARCH & CONSULTING, LLC 57 SENIOR HOUSING ANALYSIS expanded in 2012. A new 30 unit memory care wing was added in 2012 and the former 13 unit memory care wing in the original building, have been converted to assisted living. • Personal care services are provided a -la -carte for both assisted living and memory care. The base fee included weekly housekeeping and linens. Assisted living included two meals per day and memory care includes three meals per day. MAXFIELD RESEARCH & CONSULTING, LLC 58 FOR -SALE MARKET ANALYSIS Introduction Maxfield Research and Consulting LLC analyzed the for -sale housing market in Elk River by analyzing data on single - family and multifamily home sales and active listings; identifying pending for -sale developments; and conducting interviews with local real estate professionals, developers and planning officials. Overview of For -Sale Housing Market Conditions Table FS -1 presents home resale data on single - family and multifamily housing in Elk River from 2000 through June 2015. The data was obtained from the Regional Multiple Listing Services of Minnesota and shows annual number of sales, median and average pricing, average days of market, cumulative days on market, and percentage of sales that are lender- mediated (i.e. short -sale or foreclosure). It should be noted that lender- mediated sales were not categorized until July 2008 and the cumulative days on market were not calculated until 2006. Table FS -2 breaks down resale activity from Table FS -1 into single - family and multifamily resales. The following are key points observed from our analysis of this data. Like across the Twin Cities Metro Area and the nation, pricing peaked in 2005 & 2006 at the height of the real estate boom. The average and median sales price plateaued at roughly $254,000 and $234,900 respectively. For comparison, the Twin Cities Metro Area median sales priced peaked at $230,000 in 2006. Between 2000 and 2005, the median sales price increased annually from $159,000 to $234,900, a gain of 48 %. However, from 2005 to 2010 the median sales price declined to $160,000 ( -32%). Since 2010, home resale prices have increased significantly rising to $209,975 (31 %). Sales prices increased between 2009 and 2010, mostly a result of the first -time homebuyer tax credit that was available in the second half of 2009 through September 2010. The tax credit also spurred transaction activity, resulting in nearly 400 sales in 2009 (17% over 2008 sales). However, the sales price was at its lowest in 2009 at $132,000. Since 2011; the median sales prices has rising annually and is at $209,975 ( +59%). • The average number of resales has averaged about 405 sales annually during the last decade. So far through June 2015, the number of sales has averaged 391. The years of 2013 and 2014 showed substantial improvement in sales from early this decade. • The number of lender- mediated properties accounted for over one -half of all home transactions between 2008 and 2012; peaking in 2010 and 2011 at 70 %. Since 2012, the number has come down substantially and was at about 12% through the first half of 2015. 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L = >. � O1 0 O 0 0 O O 0 O 0 O 0 O 0 O 0 O 0 O 0 c-I O O c-I O c-I c-I c-I O O O p m i5 Q m i5 Q c0 in 0J aj i N N N N N N N N N N N N N N N 0 > E a i m C � f0 C O 3 3 U- _j O H I In to iE 1 O ry N z J D N z O V 06 2 V W N W 0 J W LL a 2 Lit r-I O N O O O O N G1 G1 G1 N i O LL i G1 Y_ W Ln J Q z Q H W Y CQ C W J Q N O LL salesab °O °O °O °O °O °O °O O O O O O O V? O O O O O O O O O O O O n n n M N N rl -q V)- V)- V} V} V} V} a:)iad saIeS tip �O tiM ,y0 tiIV �O by �O ,y0 o^ m o�O O� Off` OM �O O� Oti �O 00 �O V J J z J D (A z 0 u 06 2 V Q W (A W D J W LL a 2 FOR -SALE MARKET ANALYSIS TABLE FS -2 SINGLE- FAMILY AND MULTIFAMILY RESIDENTIAL SALES CITY OF ELK RIVER 2000 through 2015 (1st Half) Pct. Change 00'- 14' 11.0% 32.3% 28.4% Median Average 2000 Number Selling % Selling % Year of Sales Price Chg. Price Chg. 2002 77 Single - Family 4.0% $167,803 2000 318 $162,400 $162,200 $175,779 -- 2001 288 $174,700 7.6% $191,433 8.9% 2002 358 $199,925 14.4% $219,401 14.6% 2003 360 $222,000 11.0% $244,366 11.4% 2004 470 $239,250 7.8% $256,351 4.9% 2005 411 $251,900 5.3% $272,383 6.3% 2006 325 $251,500 -0.2% $273,785 0.5% 2007 252 $249,230 -0.9% $260,260 -4.9% 2008 262 $205,950 -17.4% $220,158 -15.4% 2009 308 $172,950 -16.0% $183,223 -16.8% 2010 235 $181,000 4.7% $193,931 5.8% 2011 273 $160,000 -11.6% $166,955 -13.9% 2012 293 $175,000 9.4% $181,439 8.7% 2013 350 $189,450 8.3% $202,385 11.5% 2014 353 $214,900 13.4% $225,623 11.5% 2015^ 208 $227,250 5.7% $234,692 4.0% Pct. Change 00'- 14' 11.0% 32.3% 28.4% Pct. Change 00'- 14' 222.9% -5.3% 3.7% ^2015: Sales from January to June * Multifamily includes twinhomes, townhomes, and condominiums (cooperatives are typically not listed in the MLS) Source: Regional Multiple Listing Service of MN; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 62 Multifamily* 2000 35 $142,580 -- $145,163 -- 2001 36 $146,400 2.7% $154,227 6.2% 2002 77 $152,197 4.0% $167,803 8.8% 2003 106 $162,200 6.6% $172,222 2.6% 2004 141 $167,123 3.0% $179,253 4.1% 2005 108 $172,775 3.4% $184,227 2.8% 2006 114 $167,025 -3.3% $176,956 -3.9% 2007 108 $164,995 -1.2% $169,623 -4.1% 2008 78 $132,500 -19.7% $137,021 -19.2% 2009 89 $100,000 -24.5% $107,015 -21.9% 2010 78 $107,442 7.4% $110,555 3.3% 2011 109 $90,000 -16.2% $92,842 -16.0% 2012 97 $105,000 16.7% $106,746 15.0% 2013 95 $117,500 11.9% $119,313 11.8% 2014 113 $135,000 14.9% $150,570 26.2% 2015^ 64 $146,500 8.5% $158,818 5.5% Pct. Change 00'- 14' 222.9% -5.3% 3.7% ^2015: Sales from January to June * Multifamily includes twinhomes, townhomes, and condominiums (cooperatives are typically not listed in the MLS) Source: Regional Multiple Listing Service of MN; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 62 Lit r-I O N 0 O O O N i Y_ W N G1 fC G1 N N J Q z Q H W Y CQ C W J Q N O LL O O O Ln r, N IA- ro w 7 E N b.0 C N 0 N O O Ln N Ln N LnO O Ol N N O O O O O O O O O O O O O O O O O O l N O n l N O n N N N r-I r-I r-I r-I IA- IA- i/)- IA- IA- i/)- IA- i/)- amen uiepaW Ln O N r-I O N m r-I O N N -1 O N r-I r-I O N O O N Ql O O N 00 O O N n O O N O O N Ln O O N R* O O N m O O N N O O N r-I O O N O O O N f6 N m W V J J C7 z H J D Ln z 0 V 06 2 V W Ln W D J W LL a 2 FOR -SALE MARKET ANALYSIS • Single- family housing types accounted for about 90% of all sales since 2000. Multifamily resales were highest in 2007 when they accounted for 30% of total sales. Since 2008, multifamily home sales have remained relatively stable accounting for roughly 24% of total sales • During the real estate boom, multifamily housing priced closely to single - family housing and sold for about 12% to 25% less than a single - family home. However, during the later -half of the last decade and early part of this decade multifamily pricing decreased substantially and was priced about 44% lower in 2011. The gap between the housing types is slowly closing with multifamily homes priced currently 35% lower than single - family homes. Home Resales by Price Table FS -3 shows the distribution of sales within nine price ranges from resales in 2014. The graph on the following page visually displays the sales data. • Homes priced from $150,000 to $249,999 accounted for 58% of total single - family home resales in 2014. Conversely, homes priced under $100,000 and over $400,000 accounted for less than 5% of resales. • Multifamily homes priced from $100,000 to $150,000 accounted for 59% of resales in 2014. Another 21% priced from $150,000 to $199,999 and 16% from $200,000 to $249,999. There were no multifamily homes sold over the price of $250,000. MAXFIELD RESEARCH & CONSULTING, LLC 64 TABLE FS -3 HOME RESALES BY SALES PRICE & PRODUCT TYPE CITY OF ELK RIVER Single-family 2014 Multifamily Combined Price Range Under $100,000 No. 7 Pct. No. 2.0% 4 Pct. No. 3.5% 11 Pct. 2.4% $100,000 to $149,999 39 11.0% 67 59.3% 106 22.7% $150,000 to $199,999 104 29.5% 24 21.2% 128 27.5% $200,000 to $249,999 101 28.6% 18 15.9% 119 25.5% $250,000 to $299,999 44 12.5% 0 0.0% 44 9.4% $300,000 to $349,999 37 10.5% 0 0.0% 37 7.9% $350,000 to $399,999 12 3.4% 0 0.0% 12 2.6% $400,000 to 499,999 8 2.3% 0 0.0% 8 1.7% $500,000+ 1 0.3% 0 0.0% 1 0.2% Total 353 100.0% 113 100.0% 466 100.0% Sources: Regional Multiple Listing Service of Minnesota, Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 64 FOR -SALE MARKET ANALYSIS • Overall, 75% for all home resales in 2014 were priced from $100,000 to $249,999. Less than 3% of home are sold for less than $100,000 and only 4.5% sold for more than $350,000. • Based on the median price of $210,000 in Elk River as of the first half of 2015, a household's monthly payment (assuming 10% down and principal /interest, insurance, taxes, and 4% mortgage interest rate) would be about $1,350. The income required to afford a home at this price would be about $54,000 based on purchasing a home utilizing 30% of their adjusted gross income (and assuming they do not have a high level of debt or existing equity). In 2015, 74% (4,964 households) of Elk River's non - senior households had incomes greater than $54,000, meaning that three - quarters of non - senior households in Elk River can afford a median - priced home in the city. 90.0% 80.0% 70.0% 60.0 50.0% 0 40.0% 4 U a 30.0% 20.0% 10.0 0.0 Resales by Price Point & Type: 2014 80.5% ■ SF ■ MF 140.5-1 41.1% ° 2.0% • ° 2.3% 0.3% <$100k $100k -$200k $200k -$300k $300k -$400k $400k -$500k $500k+ Sales Price Home Resales per Square Foot ( "PSF ") Table FS -4 on the following page shows the distribution of sales from 2005 to June 2015. Data is provided the existing homes and new construction in Elk River. The graph on the following page visually displays the sales data. • The median and average price per square foot has declined significantly since 2005. The median price per square foot was $122 in 2005 declining to its lowest point in 2011 at $69 per square foot ( -43%). Since 2011 the price per square foot has steadily increase to $96 per square foot (39 %) as of June 2015. MAXFIELD RESEARCH & CONSULTING, LLC 65 FOR -SALE MARKET ANALYSIS • Before the housing bust and the Great Recession, the price per square foot for existing home was about 10% to 20% less than new home construction. In 2007, the price per square foot between the two was exactly the same. Since 2007, price per square foot for new home construction has been considerably higher. The highest difference occurring in 2012 when the new home construction was 71% higher. New home construction is currently 50% higher as of June 2015. $140 $120 $100 $80 LL N a $60 $40 $20 $0 TABLE FS -4 HOUSING SALES PER SQUARE FOOT (PSF) ELK RIVER 2005 to June 2015 2005 $122 $131 $116 $140 2006 $117 $126 $114 $127 2007 $113 $121 $113 $113 2008 $92 $98 $90 $118 2009 $79 $82 $76 $103 2010 $82 $85 $79 $107 2011 $69 $72 $68 $111 2012 $76 $80 $76 $130 2013 $86 $92 $84 $130 2014 $94 $98 $91 $136 2015* $96 $102 $93 $140 * Through June 2015 Source: Regional Multiple Listing Service of MN, Maxfield Research & Consulting, LLC Elk River Sales per Square Foot (PSF) N N N N N N N N N N N O O O O O O O O O O O O O O O O N F" F" F" F" F" U'7 01 -�I 00 l0 O N N W Ln Year -441pr- -qw- MAXFIELD RESEARCH & CONSULTING, LLC 66 FOR -SALE MARKET ANALYSIS • For comparison, the median PSF cost for housing in the Twin Cities is $113 PSF for an existing home and $152 PSF for new construction. Existing construction is about 18% less than the Twin Cities median; however new construction is only about 8% less PSF than the Twin Cities median. Current Supply of Homes on the Market To more closely examine the current market for available owner - occupied housing in Elk River, we reviewed the current supply of homes on the market (listed for sale). Tables FS -5 through FS -8 homes shows currently listed for sale in Elk River. The data was provided by the Regional Multiple Listing Services of Minnesota and is based on active listings in August 2015. MLS listings generally account for the vast majority of all residential sale listings in a given area. Table FS -5 shows the number of listings by property type (i.e. single - family, town home /twinhome, or condominium) while Table FS -6 shows listings by home style. The following points are key findings from our assessment of the active single - family and multifamily homes listed in Elk River. • About 150 homes were listed for sale in Elk River as of August 2015. Single- family homes accounted for 73% of all active listings. The remaining listings are townhomes (27 %). There were no condominiums listed. The median list price in Elk River was $245,960 for single - family homes and $215,725 for multifamily homes). The median sale price is generally a more accurate indicator of housing values in a community than the average sale price. Average sale prices can be easily skewed by a few very high - priced or low- priced home sales in any given year, whereas the median sale price better represents the pricing of a majority of homes in a given market. • Based on a median list price of $245,960, a household would need an income of about $63,225 in order to afford to make monthly housing payments of about $1,581 (assuming a 10% down payment, 4.00% 30 -year fixed mortgage). A household with significantly more equity (in an existing home and /or savings) could put more than 10% down and afford a higher priced home. About 67.8% of Elk River's non - senior households have annual incomes at or above $63,225. • About 21% of listings in Elk River are priced under $175,000 and none of those listings are priced under $100,000. Homes priced from $200,000 to $299,999 account for 45% of those listed in August 2015. Higher priced homes ($300,300 to $399,999) consist of 21% of the listings and those $400,000 constitute 7 %. MAXFIELD RESEARCH & CONSULTING, LLC 67 FOR -SALE MARKET ANALYSIS • The majority of multifamily listings (44 %) are priced between $200,000 and $249,999 and between $125,000 and $174,999 (44 %). For single - family listings, 16.5% are priced between $150,000 and $199,999, 43% are priced between $200,000 and $299,999, and 28% are between $300,000 and $399,999. TABLE FS -5 HOMES CURRENTLY LISTED FOR -SALE CITY OF ELK RIVER August 2015 Price Range No. Pct. No. Pct. < $99,999 0 0.0% 0 0.0% $100,000 to $149,999 5 4.6% 9 22.0% $150,000 to $174,999 8 7.3% 10 24.4% $175,000 to $199,999 10 9.2% 0 0.0% $200,000 to $249,999 20 18.3% 18 43.9% $250,000 to $299,999 27 24.8% 3 7.3% $300,000 to $349,999 19 17.4% 1 2.4% $350,000 to $399,999 12 11.0% 0 0.0% $400,000 and Over 8 7.3% 0 0.0% 109 100% 41 100% Minimum $114,900 $104,900 Maximum $625,900 $328,350 Median $279,900 $215,725 Average $285,456 $197,080 1 Includes townhomes (attached & detached), twinhomes, and condominiums Sources: Regional Multiple Listing Service of MN Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 68 FOR -SALE MARKET ANALYSIS 35 30 25 20 c 15 0 10 5 0 Elk River Active Listings - August 2015 Under$100k $100kto $150k to $200kto $250kto $300kto $400k+ $149.9k $199.9k $249.9k $299.9k $399.9k List Price TABLE FS -6 ACTIVE LISTINGS BY HOUSING TYPE ELK RIVER August 2015 Property Single- family 109 72.7% Townhome /Twinhome 41 27.3% Condominium 0 0.0% Total 150 100.0% Sources: Regional Multiple Listing Service of MN; Maxfield Research & Consulting, LLC • The majority of active single - family listings are among one -story and two -story housing types with 33% and 32 %, respectively. The remaining types are distributed fairly evenly. • Detached townhomes comprise the majority of current townhome listings (49 %). Side -by- side townhomes are the next largest type townhome listing at 39 %). There are only a few twin home and quad townhomes listed. MAXFIELD RESEARCH & CONSULTING, LLC 69 FOR -SALE MARKET ANALYSIS MAXFIELD RESEARCH & CONSULTING, LLC 70 TABLE FS -7 ACTIVE LISTINGS BY HOUSING TYPE ELK RIVER August 2015 Property .• Avg. Age of Home Single - Family One story 36 33.0% $283,275 2,467 $115 1986 1.5 -story 3 2.8% $176,500 1,651 $107 1944 2 -story 35 32.1% $314,979 2,795 $113 2001 Modifed 2 -story 10 9.2% $358,470 3,310 $108 1999 Split entry /Bi -level 10 9.2% $213,082 1,832 $116 1995 3 -level split 5 4.6% $231,900 2,201 $105 1990 4 or more split -level 10 9.2% $248,800 2,442 $102 1991 Total 109 100.0% $285,456 2,554 $112 1992 Townhomes /Twinhomes Detached Townhomes 20 48.8% $244,098 1,605 $152 2015 Twin Homes 4 9.8% $152,631 1,313 $116 1996 Side -by -side 16 39.0% $151,119 1,526 $99 2003 Quad 1 2.4% $169,900 1,850 $92 2006 Total 41 100.0% $197,080 1,552 $127 2008 Condominiums /Cooperatives Condominium 100.0% Total 0 100.0% $0 $0 0 Total 150 $261,300 2,280 $115 1997 Source: Regional Multiple Listing Service of MN; Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 70 FOR -SALE MARKET ANALYSIS Average List Price by Type $350,000 $140 ■ Avg. List Price ■ PSF ■ $12 $300,000 115 112 ■ $116 $120 ■ $107 ■ 103 $250,000 $100 w U $200,000 $80 J LL N bb a Q $150,000 $60 $100,000 $40 $50,000 $20 $0 $0 1 story 1.5 -story 2 story+ Split entry 3 -level split+ Townhomes Housing Type Townhomes 3 -level split+ w Split entry CL T 2 story+ 1.5 -story 1 story Listings by Housing Type - Elk River 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Pct. MAXFIELD RESEARCH & CONSULTING, LLC 71 10.0% 6.7% 2.0% 4.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Pct. MAXFIELD RESEARCH & CONSULTING, LLC 71 FOR -SALE MARKET ANALYSIS 60 50 40 30 20 10 0 Listings by Decade Built: Elk River 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s MAXFIELD RESEARCH & CONSULTING, LLC 72 TABLE FS -8 ACTIVE LISTINGS BY YEAR BUILT ELK RIVER August 2015 Elm 1900 to 1909 1 0.7% $124,900 1910 to 1919 1 0.7% $169,900 1920 to 1929 1 0.7% $139,100 1930 to 1939 2 1.3% $142,400 1940 to 1949 0 0.0% n/a 1950 to 1959 2 1.3% $165,000 1960 to 1969 1 0.7% $249,900 1970 to 1979 13 8.7% $227,815 1980 to 1989 17 11.3% $274,012 1990 to 1999 26 17.3% $253,008 2000 to 2009 51 34.0% $279,088 2010+ 35 23.3% $270,425 Subtotal 150 100.0% Source: Regional Multiple Listing Service of MN, Maxfield Research & Consulting LLC Listings by Decade Built: Elk River 1900s 1910s 1920s 1930s 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s MAXFIELD RESEARCH & CONSULTING, LLC 72 FOR -SALE MARKET ANALYSIS Elk River Lot Supply Tables FS -9, FS -10, and FS -11 show an inventory of lots within platted subdivisions in Elk River. The table includes information on the year the subdivision was platted, the total number of lots platted, number of lots developed, lots available, and type of lot. The data in Tables FS -9 and FS -10 was provided by Metrostudy (a nationally recognized firm providing data for the residential housing market). The data in Table FS -11 was provided by Sherburne County. The following terms are used in the lot inventory tables: Annual Starts and Closings: The sum of activity for the most recent four quarters. Closing: Defined as when a "move in" has occurred and the home is occupied. Future Lots Inventory: Future lots are recorded after a preliminary plat or site plan has been submitted for consideration by the city. Lot Front: Range of all lot sizes within the subdivision; based on the lot front foot width Occupied: A buyer has taken possession of the home that was previously under construction or a model home. Price: Range of all base home price offered within the subdivision Starts: The housing slab or foundation has been poured. Total Lots: A summation of all lots platted in a subdivision, including those closed, under construction, and vacant. Vacant Developed lot (VDL): The subdivision is considered developed after subdivision streets are paved and vehicles can physically drive in front of the lot. The following are key points from Tables FS -9 and FS -10: • As of 2nd Quarter 2015, Elk River had a total of 200 vacant lots within 26 subdivisions. However, 188 of the vacant lots were single - family lots while 11 vacant lots were attached lots. • The majority of the subdivisions (20) were platted between 2000 and 2006. Roughly 54% of the lots were platted between 2004 and 2006, the peak years of the real estate boom. There have been three subdivisions platted recently in over the past two years. 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Consequently, nearly all the demand for new construction today is for single - family lots as townhome product suffered more so during the recession and has not recovered to the same degree as single - family product. • Although the current single - family vacant lot is waning as few new subdivisions have been platted since the recession; there are enough lots in the short -term to meet lot demand. In addition, there are 369 lots classified as future lots that will likely make the transition from future lots to finished lots to meet forthcoming demand. • The median lot size for new single - family construction is about 0.40 acres for single - family product type and 0.10 acres for attached housing products. Although there are few attached lots identified in Table FS -10; they are actively marketing twinhomes and detached townhomes in the West Oaks subdivision. Kliever Lake Fields is also actively marketing detached townhomes. MAXFIELD RESEARCH & CONSULTING, LLC 76 TABLE FS -11 VACANT LOT FOR PARCELS PLATTED SHERBURNE COUNTY 2000 to Present Elk River 253 117 Baldwin Township 248 193 Becker 69 37 Becker Township 221 130 Big Lake 118 43 Big Lake Township 70 43 Blue Hill Township 152 142 Clear Lake 40 25 Clear Lake Township 36 29 Haven Township 7 6 Livonia Township 244 162 Orrock Township 244 178 St. Cloud 26 12 Palmer Township 12 13 Princeton 10 11 Santiago Township 12 4 Zimmerman 94 53 Subtotal 1,856 1,198 Source: Sherburne County, Maxfield Research & Consulting, LLC • Only 5% of the available lots are within thee subdivisions that have townhome lots platted. Consequently, nearly all the demand for new construction today is for single - family lots as townhome product suffered more so during the recession and has not recovered to the same degree as single - family product. • Although the current single - family vacant lot is waning as few new subdivisions have been platted since the recession; there are enough lots in the short -term to meet lot demand. In addition, there are 369 lots classified as future lots that will likely make the transition from future lots to finished lots to meet forthcoming demand. • The median lot size for new single - family construction is about 0.40 acres for single - family product type and 0.10 acres for attached housing products. Although there are few attached lots identified in Table FS -10; they are actively marketing twinhomes and detached townhomes in the West Oaks subdivision. Kliever Lake Fields is also actively marketing detached townhomes. MAXFIELD RESEARCH & CONSULTING, LLC 76 FOR -SALE HOUSING ANALYSIS The average price of new construction in Elk River is approximately $250,000, or $136 per square foot for single - family housing. Comparatively, new construction detached townhomes and twinhomes are priced similar to single - family housing and averaging prices around $236,000 ($152 PSF). • According to recent data provided by Sherburne County, vacant platted lots have decreased significantly since 2012. Elk River experienced a decline from 253 lots in 2012 down to 117 lots in 2015. This equates to just over half of the platted lots in Elk River being absorbed since 2012. Pending For -Sale Developments According to the City of Elk River, there are no pending for -sale housing developments in the planning process at this time. MAXFIELD RESEARCH & CONSULTING, LLC 77 HOUSING DEMAND ANALYSIS Introduction Previous sections of this study analyzed the existing housing supply and the growth and demographic characteristics of the population and household base in Elk River. This section of the report presents our estimates of housing demand in Elk River from 2015 through 2025. Demographic Profile and Housing Demand The demographic profile of a community affects housing demand and the types of housing that are needed. The housing life -cycle stages are: 1. Entry -level householders • Often prefer to rent basic, inexpensive apartments • Usually singles or couples in their early 20's without children • Will often "double -up" with roommates in apartment setting 2. First -time homebuyers and move -up renters • Often prefer to purchase modestly - priced single - family homes or rent more upscale apartments • Usually married or cohabiting couples, in their mid -20's or 30's, some with children, but most are without children 3. Move -up homebuyers • Typically prefer to purchase newer, larger, and therefore more expensive single - family homes • Typically families with children where householders are in their late 30's to 40's 4. Empty- nesters (persons whose children have grown and left home) and never - nesters (persons who never have children) • Prefer owning but will consider renting their housing • Some will move to alternative lower- maintenance housing products • Generally couples in their 50's or 60's 5. Younger independent seniors • Prefer owning but will consider renting their housing • Will often move (at least part of the year) to retirement havens in the Sunbelt and desire to reduce their responsibilities for upkeep and maintenance • Generally in their late 60's or 70's MAXFIELD RESEARCH & CONSULTING, LLC 78 HOUSING DEMAND ANALYSIS 6. Older seniors • May need to move out of their single - family home due to physical and /or health constraints or a desire to reduce their responsibilities for upkeep and maintenance • Generally single females (widows) in their mid -70's or older Demand for housing can come from several sources including: household growth, changes in housing preferences, and replacement need. Household growth necessitates building new housing unless there is enough desirable vacant housing available to absorb the increase in households. Demand is also affected by shifting demographic factors such as the aging of the population, which dictates the type of housing preferred. New housing to meet replacement need is required, even in the absence of household growth, when existing units no longer meet the needs of the population and when renovation is not feasible because the structure is physically or functionally obsolete. Rural areas tend to have higher proportions of younger households that own their housing than in the larger growth centers or metropolitan areas such as the Twin Cities Metro Area. In addition, senior households tend to move to alternative housing at an older age. These conditions are a result of housing market dynamics, which typically provide more affordable single - family housing for young households and a scarcity of senior housing alternatives for older households. The graphic on the following page provides greater detail of various housing types supported within each housing life cycle. Information on square footage, average bedrooms /bathrooms, and lot size is provided on the subsequent graphic. Housing Demand Overview The previous sections of this assessment focused on demographic and economic factors driving demand for housing in the Elk River. In this section, we utilize findings from the economic and demographic analysis to calculate demand for new general occupancy housing units in Elk River. Housing markets are driven by a range of supply and demand factors that vary by location and submarket. The following points outline several of the key variables driving housing demand. Demographics Demographics are major influences that drive housing demand. Household growth and formations are critical (natural growth, immigration, etc.), as well as household types, size, age of householders, incomes, etc. MAXFIELD RESEARCH & CONSULTING, LLC 79 N J Q z Q 0 z CQ C W 0 z N D O 2 Ln W o�S Ln Ln Ln Ln 0 0 z Q W z M O 2 0o N U_ 2 � a M Q Ln N O 2 W U J � � J M I� to 00 Ln O r-I t0 4 . 7 C O U 0o t r L N Ca N cu r-I N N x X f0 N N M M � � Ln Ln l0 l0 I, r, 000 + �1 N -1 N mM M � � On Ln l0 l0 Ol n 00 i 7 O N I. HOUSING DEMAND ANALYSIS TYPICAL HOUSING TYPE CHARACTERISTICS Entry -level single - family First -time buyers: Families, 1,200 to 2,200 sq. ft. 80'+ wide lot couples w /no children, some 2 -4 BR 1 2 BA 2.5 -3.0 DU /Acre singles Move -up single - family Step -up buyers: Families, 2,000 sq. ft.+ 80'+ wide lot couples w /no children 3 -4 BR 1 2 -3 BA 2.5 -3.0 DU /Acre Executive single - family Step -up buyers: Families, 2,500 sq. ft.+ 100'+ wide lot couples w /no children 3 -4 BR 1 2 -3 BA 1.5 -2.0 DU /Acre Small -lot single - family First -time & move -down buyers: 1,700 to 2,500 sq. ft. 40' to 60' wide lot Families, couples w /no children, 3 -4 BR 1 2 -3 BA 5.0 -8.0 DU /Acre empty nesters, retirees Entry -level townhomes First -time buyers: Singles, 1,200 to 1,600 sq. ft. 6.0 -12.0 DU /Acre couples w /no children 2 -3 BR 11.5BA+ Move -up townhomes First -time & step -up buyers: 1,400 to 2,000 sq. ft. 6.0 -8.0. DU /Acre Singles, couples, some families, 2 -3 BR 1 2BA+ empty- nesters Executive townhomes /twinhomes Step -up buyers: Empty- nesters, 2,000+ sq. ft. 4.0 -6.0 DU /Acre retirees 3 BR+ 2BA+ Detached Townhome Step -up buyers: Empty- nesters, 2,000+ sq. ft. 4.0 -6.0 DU /Acre retirees, some families 3 BR+ 2BA+ Condominums First -time & step -up buyers: 800 to 1,700 sq. ft. Low -rise: 18.0 -24.0 DU /Acre Singles, couples, empty- nesters, 1 -2 BR 1 1 -2 BA Mid -rise: 25.0+ DU /Acre retirees Hi -rise: 75.0+ DU /Acre Apartment -style rental housing Singles, couples, single - parents, 675 to 1,250 sq. ft. Low -rise: 18.0 -24.0 DU /Acre some families, seniors 1 -3 BR 1 1 -2 BA Mid -rise: 25.0+ DU /Acre Hi -rise: 75.0+ DU /Acre Townhome -style rental housing Single- parents, families 900 to 1,700 sq. ft. 8.0 -12.0 DU /Acre w /children, empty nesters 2 -4 BR 1 2BA Student rental housing College students, mostly 550 to 1,400 sq. ft. Low -rise: 18.0 -24.0 DU /Acre undergraduates 1 -4BR 1 -2 BA Mid -rise: 25.0+ DU /Acre Hi -rise: 50.0+ DU /Acre Senior housing Retirees, Seniors 550 to 1,500 sq. ft. Varies considerably based on Suites - 2BR 1 1 -2 BA senior product type Dwelling units(DU) per acre expressed in net acreage (minus right -of -way) Source: Maxfield Research & Consulting, LLC Economv & Job Growth The economy and housing market are intertwined; the health of the housing market affects the broader economy and vice versa. Housing market growth depends on job growth (or the prospect of); jobs generate income growth which results in the formation of more households and can stimulate household turnover. Historically low unemployment rates have driven both existing home purchases and new -home purchases. Lack of job growth leads to slow or diminishing household growth, which in -turn relates to reduced housing demand. Additionally, low income growth results in fewer move -up buyers which results in diminished housing turnover across all income brackets. MAXFIELD RESEARCH & CONSULTING, LLC 81 HOUSING DEMAND ANALYSIS Consumer Choice /Preferences A variety of factors contribute to consumer choice and preferences. Many times a change in family status is the primary factor for a change in housing type (i.e. growing families, empty - nest families, etc.). However, housing demand is also generated from the turnover of existing households who decide to move for a range of reasons. Some households may want to move - up, downsize, change their tenure status (i.e. owner to renter or vice versa), or simply move to a new location. Supply (Existing Housing Stock) The stock of existing housing plays a crucial component in the demand for new housing. There are a variety of unique household types and styles, not all of which are desirable to today's consumers. The age of the housing stock is an important component for housing demand, as communities with aging housing stocks have higher demand for remodeling services, replacement new construction, or new home construction as the current inventory does not provide the supply that consumers seek. Pent -up demand may also exist if supply is unavailable as householders postpone a move until new housing product becomes available. Housing Finance Household income is the fundamental measure that dictates what a householder can afford to pay for housing costs. According to the U.S. Department of Housing and Urban Development (HUD), the definition of affordability is for a household to pay no more than 30% of its annual income on housing (including utilities). Families who pay more than 30% of their income for housing (either rent or mortgage) are considered cost burdened and may have difficulty affording necessities such as food, clothing, transportation and medical care. The ability of buyers to obtain mortgage financing has been increasingly challenging since the Great Recession as lenders have overcorrected from the subprime mortgage crisis. As a result, many borrowers have remained on the sidelines as lenders have enforced tight lending requirements, thereby increasing the demand for rental housing. Mobility It is important to note that demand is somewhat fluid between other northeast Iowa communities and will be impacted by development activity in nearby areas, including other communities outside Sherburne County. MAXFIELD RESEARCH & CONSULTING, LLC 82 HOUSING DEMAND ANALYSIS Estimated Demand for For -Sale Housing Table HD -1 presents our demand calculations for general occupancy for -sale housing in Elk River between 2015 and 2025. The 65 and older cohort is typically not a target market for new general occupancy for -sale housing, therefore, we limit demand from household growth to only those households under the age of 65. According to our projections, the Elk River is expected to increase by estimated 704 households under the age of 65 between 2015 and 2025. Of this projected household growth, we estimate that 82% have a propensity to own, thus projected demand from household growth total 577 households. TABLE HD -1 FOR -SALE HOUSING DEMAND ELK RIVER 2015 to 2025 Demand from Projected Household Growth Projected HH growth under age 65 in the Market Area 2015 to 2025' 704 (times) % propensity to own x 82.0% (equals) Projected demand from new HH growth = 577 Demand from Existing Owner Households Number of owner households (age 64 and younger) in Market Area (2015 )3 5,745 (times) Estimated percent of owner turnover x 55% (equals) Total existing households projected to turnover = 3,160 (times) Estimated percent desiring new housing x 8.3% 261 (equals) Total demand from HH growth and existing HHs 2015 to 2025 = 838 (times) Demand from outside Elk River Market Area 15% (equals) Total demand potential for ownership housing, 2015 to 2025 986 (times) Percent desiring for -sale single - family vs. multifamily5 x 80% 20% (equals) Total demand potential for new single - family & multifamily for -sale housing = 789 197 (minus) Units marketing or approved platted lots (undeveloped and developed lots)6 188 11 (equals) Excess demand for new general occupancy for -sale housing = 601 186 ' Estimated household growth based on data from Table D -1 as adjusted by Maxfield Research & Consulting, LLC Z Pct. of owner households under the age of 65 (U.S. Census - 2010, ESRI, Maxfield Research Inc.). Adjusted by Maxfield Research to account for shift in 3 Estimate based on 2010 owner households and new owner household growth 2010 to 2015 (under age 65) 4 Based on on turnover from 2010 American Community Survey for households moving over 10 -year period. 5 Based on preference for housing type and land availability 6Approved platted lot data does not account for the scattered lot supply which includes individual lots and lots in older non - marketing subdivisions. Multi- family demand includes demand for townhomes, twinhomes, and condominium units. Source: Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 83 HOUSING DEMAND ANALYSIS Demand is also forecast to emerge from existing Market Area householders through turnover. An estimated 5,745 owner - occupied households under age 65 are located in the Elk River in 2015. Based on mobility data from the Census Bureau, an estimated 55% of owner households will turnover in a ten -year period, resulting in 3,160 existing households projected to turnover. Finally, we estimate 8.3% of the existing owner households will seek new for -sale housing, resulting in demand for nearly 261 for -sale units through 2025. Combining the demand from new household growth and from household turnover equals a total demand for 838 for -sale housing units from 2015 to 2025 Next, we estimate that 15% of the total demand for new for -sale units in the Elk River will come from people currently living outside of the Market Area. A small portion of this market will be former residents of the area, such as "snow- birds" heading south for the winters. Adding demand from outside the Elk River to the existing demand potential, results in a total estimated demand for 986 for -sale housing units by 2025. Based on land available, building trends, and demographic shifts (increasing older adult population), we project 80% of the for -sale owners will prefer traditional single - family product types while the remaining 20% will prefer a maintenance -free multi - family product (i.e. twin homes, townhomes, or condominiums). We then subtract the current identified platted lots that are under construction or approved. After subtracting the current lot supply in subdivisions (188 total single - family lots) we find total demand through 2025 resulting in 601 single - family lots and 186 multifamily lots. Estimated Demand for General- Occupancy Rental Housing Table HD -2 presents our calculation of general occupancy rental housing demand for Elk River. This analysis identifies potential demand for rental housing that is generated from both new households and turnover households. The 65 and older cohort is typically not a target market for new general occupancy rental housing, therefore, we limit demand from household growth to only those households under the age of 65. According to our projections, the Elk River is expected to increase by 704 households under the age of 65 between 2015 and 2025. Demand is also forecast to emerge from existing Market Area householders through turnover. An estimated 1,450 renter - occupied households under age 65 are located in the Elk River in 2015. Based on mobility data from the Census Bureau, we estimate renter household by age group for turnover in a ten -year period, resulting in existing households projected to turnover. Finally, we estimate the percentage of the existing renter households that will desire new rental housing, resulting in demand for 244 rental units through 2025. MAXFIELD RESEARCH & CONSULTING, LLC 84 N J Q Z Q Z Q W 0 z N D O x ER •• z J D Z O V 06 2 V W N W 0 J W LL a 2 N o 0) 7 o Ol o n l0 7 cy 00 V1 V1 n m N m N 0 N QN 0 Ln w N bA Q lD o V 7 0 7 o Ol M V N oq M O O N Ln tO Ln Ln W O Y N y v1 G) O W N O W N Ln 7T i v MO Q lD o W O o m o m n s a 7 M NLr) I, O lD 60 N m m to N a oo 7 O c G) O - 2 N w M O N Q M cm O cm ° N 7 N �- V Z cy � v m p m 2 m coo M v M oo O Y N O � i N N I v to Q O QN C o N N t 14 Ln 0 t o N � q� Ln N M T C N Ln c-I O� a O a cn O U uj y 2 Z N ar W VI 0 C J Y N O E Q W e� = E ~ N U J � C X 11 X I I X 11 � O U Z W N v - a a C E L Q C O m Y N o E ° E O to dq != 6 E w p O O N 0 N •� O u U al C ' in N o s y N c O s s '6 p o O O �N i N N t ON c O 7 O 0 fa Y LO H in r L n O = N N u o - 7 Y O = C Y O v v� MO !`I N m0 U T L -6c O v i N }, N C C .O dq N vOi W N C Y Q �• Y U p_ r1 F- N N O 3 -° 'O Q •7 U bA U "6 c U U o bA O N c O D_ 2 N ut ma O 0 0 oA C Y O s 1 -O U 0 E 16 O E ° -a O E d 2 �' ° Y s '^ O o c -0 aj N Ln as+ m t0 v U U in O O O = -0 N s Y m y y m m C O vOi N E° 3= l7 m > N bA o bA a, .'^. aj '� c 3 �_ o s° Y= a, E v c cc ° ° 3 o 3 E o ° ° ° bn t Y m r- u s= a a2S O X O Q WCC O 0 O C0C ° = � OJ ut 7 0 "O -6 Y f0 — C �0 C (U (0 f0 s y= C N pp C aJ C 00 O bA O O =C C ut j O M c m O U C O "C3 E (u O O o aJ V 0 c W O y o o LL E 0 O -p C £ 0 J C_ .. U 5 CC aj _ O '0 O Y in 'X O £ 0 C 0 O C -6 GJ 'O C � E C Nl -6 lL +0+ w O LL C U O N E O N £ c a] a] 'O w N m N N O c U O_ li 2 a" o ;� ;� O E H m m v c `X N H C 'O , v -O w w y F C o_ Q Q Q Q m c U ut c a ut 7 O H Vf ; "C3 N O N 7 N N O N C N N N v i O E_ O• £ 7 7 E_ CY E_ O• f0 +' 7 O• in N E_ 7 O• 7 O• co co co io d O O o_ ar O Z °; v � v v= v E v m m m an v°i c ER •• z J D Z O V 06 2 V W N W 0 J W LL a 2 HOUSING DEMAND ANALYSIS Combining demand from household growth plus turnover results in total demand in Elk River for 375 rental units over the next 10 years. Next, we estimate that 15% of the total demand for new for -sale units in the Elk River will come from people currently living outside of Elk River for a total of 442 rental units. We then estimate the number of rental units each product type could capture in Elk River. This capture rate is estimated based on the current products and product pricing within in Elk River along with household incomes for current renters. We find that there is demand for 44 subsidized housing units, 133 affordable rental units, and 265 market rate units. From the total demand for general occupancy units, we subtract any development under construction or proposed at market equilibrium (95% occupancy) to find the remaining excess demand in Elk River. At the time of this study there was no one planned rental developments and thus, excess demand remains for 44 subsidized units, 133 affordable units, and 265 market rate units. Estimated Demand for Independent Adult /Few Service Senior Housing Table HD -3 presents our demand calculations for market rate independent senior housing in Elk River in 2015 and 2020. In order to determine demand for independent senior housing, the potential market is reduced to those households that are both age and income qualified. The age - qualified market is defined as seniors age 55 and older, although independent living projects will primarily attract seniors age 65 and older. We calculate that the minimum income needed to afford monthly rents is $35,000, since seniors with this income could afford a monthly rent of $1,165 based on spending 40% of their income, which is much higher than the rents of $635 to $734 for two - bedroom units at Elk Terrace and slightly higher than rent of $1,109 at Evans Park for two - bedroom apartments. It is important to note that the existing developments are both over 20 years old and a new senior development would garner the higher rents. In addition, we add households with incomes between $25,000 and $34,999 who would be able to supplement their incomes with the proceeds from a home sale. We estimate the number of age /income - qualified senior households in Elk River in 2015 to be 2,558 households. Adjusting to include appropriate long -term capture rates for each age cohort (0.5% of households age 55 to 64, about 5.0% of households age 65 to 74, and 15.0% of households age 75 and over) results in a market rate demand potential for 119 independent senior rental units in 2015. Some additional demand will come from outside Elk River. We estimate that 25% of the long- term demand for independent senior housing will be generated by seniors currently residing MAXFIELD RESEARCH & CONSULTING, LLC 86 HOUSING DEMAND ANALYSIS outside Elk River. This demand will consist primarily of parents of adult children living in Elk River, individuals who live just outside of Elk River and have an orientation to the area, as well as former residents who desire to return. Together, the demand from Elk River seniors and demand from seniors who would relocate to Elk River results in a total long -term demand for 159 active adult units in 2015. Independent demand in Elk River is split into housing that offers ownership housing and rental housing. Based on the current product available in Elk River, we project that 40% of Elk River's demand will be for adult ownership housing (63 units) and 60% will be for rental housing (95 units). TABLE HD -3 MARKET RATE ADULT /FEW SERVICES HOUSING DEMAND ELK RIVER 2015 & 2020 # of Households w/ Incomes of >$35,0001 # of Households w/ Incomes of $24,999 to $34,9991 + (times) Homeownership Rate x (equals) Total Potential Market Base = (times) Potential Capture Rate (equals) Demand Potential Potential Demand from Market Area Residents (plus Demand from Outside Market Area (25 %)2 (equals) Total Demand Potential (times) % by Product Type (equals) Demand Potential by Product Type (minus) Existing and Pending MR Active Adult Units3 (equals) Excess Demand for MR Active Adult Units Age of Householder 55 -64 65 -74 75+ 1,213 732 430 73 77 88 87% 84% 63% 1,277 796 485 x 0.5% 5.0% 15.0% = 6 40 73 = 119 15.0% + 40 129 = 159 Owner- 62 Renter - Occupied 248 Occupied x 40% x 60% = 63 = 95 Age of Householder 55 -64 1,412 + 72 K 87% 65 -74 928 79 84% 75+ 789 113 63% = 1,475 994 860 x 0.5% 5.0% 15.0% = 7 50 129 = 186 + 62 = 248 Owner- Renter - Occupied Occupied x 40% x 60% = 99 = 149 - 111 - 72 11- 111 - 72 0 = 23 0 = 77 12020 calculations define income - qualified households as all households with incomes greater than $40,000 and homeowner households with incomes between $30,000 and $39,999. Z Based on project manager interviews and historical trends. We estimate that roughly 40% of demand will come from outside the markt area. 3 Existing and pending are deducted at market equilibrium (95% occupancy). ISource: Maxfield Research & Consulting, LLC Next, we subtract existing competitive market rate units (minus a vacancy factor of 5% to allow for sufficient consumer choice and turnover) from the owner and rental demand. Subtracting the existing competitive market rate units results in total demand potential for zero adult owner - occupied units and 23 adult rental units in 2015. MAXFIELD RESEARCH & CONSULTING, LLC 87 HOUSING DEMAND ANALYSIS Adjusting for inflation, we have estimated that households with incomes of $40,000 or more and homeowners with incomes of $230,000 to $39,999 would income qualify for market rate independent senior housing in 2020. Considering the growth in the older adult base, the income distribution of the older adult population in 2020, the methodology projected that there will be no demand for adult owner - occupied units and increase to 77 adult rental units in the City of Elk River by 2020. Estimated Demand for Affordable Independent Senior Housing Table HD -4 presents our demand calculations for affordable senior housing for households with incomes qualifying at or below 50% and 80% of AMI in Elk River in 2015 and 2020. In order to arrive at the potential age and income - qualified base for low- income and affordable housing, we include all senior (65 +) households that qualify for the income guidelines for one - and two - person households in 2015 at or below 50% and 80% of AMI ($30,350 and $52,650). Adjusting to include appropriate long -term capture rates for each age cohort (1.5% of households age 55 to 64, about 10.0% of households age 65 to 74, and 20.0% of households age 75 and over) results in a market rate demand potential for 23 independent senior rental units in 2015. MAXFIELD RESEARCH & CONSULTING, LLC 88 TABLE HD -4 AFFORDABLE INDEPENDENT SENIOR HOUSING DEMAND ELK RIVER 2015 & 2020 Age "65-74 der Age of Householder 55 -64 75+ 55 -64 65 -74 75+ # of Households w/ Incomes of $28,000 to $52,650 233 208 262 197 213 288 (times ) Percent Renter Households x 13% 16% 37% x 13% 16% 37% (equals) Total Potential Market Base = 30 33 97 26 34 107 (times) Potential Capture Rate x 1.5% 10.0% 20.0% x 1.5% 10.0% 20.0% (equals) Demand Potential = 0 3 19 = 0 3 21 = 23 = 25 Total Market Rate Demand Potential (plus) Demand from Outside Market Area (40 %) + 15 + 17 (equals) Total Demand Potential = 39 = 42 (minus) Existing and Pending Aff. Independent Units' - 0 - 0 (equals) Total Demand Potential in Market Area = 39 = 42 ' Includes existing and pending units at 95% occupancy, or market equilibrium. No additional units are planned through 2020. Source: Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 88 HOUSING DEMAND ANALYSIS We then estimate that seniors currently residing outside of Elk River would generate 40% of the demand for affordable senior housing. This demand includes seniors who reside outside of Elk River that would move to the city, as well as those who would relocate from other places of residence (i.e. rural areas, other areas of the state and out -of- state). Together, demand from Elk River seniors and demand from seniors who would locate to Elk River total an estimated 39 affordable units in 2015. There are no affordable senior rental properties in Elk River and thus, the total potential demand remains at 39 units in 2015. Following the same methodology, we project that excess demand capturable in Elk River is calculated to increase slightly to 42 affordable independent senior housing units by 2020. Estimated Demand for Subsidized Senior Housing Table HD -6 presents our demand calculations for subsidized senior housing in Elk River in 2015 and 2020. The 2015 income qualifications for extremely -low income housing in Sherburne County are $18,200 for a one - person household and $20,800 for a two - person household. Seniors with incomes meeting these guidelines are designated as having low incomes and are in need of subsidized housing; households with incomes above these guidelines but below those necessary to obtain market rate housing would be candidates for affordable housing. Seniors living at a Section 202 building pay their rent according to their monthly income (30% of monthly income). Households with incomes slightly above 50% of MFI are primarily a target for affordable housing, with rents usually set at 50% to 80% of MFI, and would not qualify for deeply- subsidized housing. It should be noted that many senior households in low and very low income categories own their homes and therefore have untapped equity which, upon the sales of their homes, can be used toward market rate housing. Maxfield Research & Consulting LLC calculated demand for subsidized senior housing as displayed in Table HD -5. We assume that all households over the age of 65 with incomes of $20,800 or less in Elk River are income - qualified and would be candidates for subsidized senior housing. In 2015, we find a total of an estimated 223 households over the age of 65 in Elk River meeting these age- and income - qualifications. We estimate that approximately 30% of the total age /income - qualified market would both need and desire subsidized senior housing. The remaining households would either remain in their homes until in need of housing with services or obtain affordable /market rate housing with assistance from family members or through the sale of a home or other assets. Applying a 30% capture rate, results in an estimated potential demand for 67 subsidized senior housing units in Elk River in 2015 and 66 units in 2020. MAXFIELD RESEARCH & CONSULTING, LLC 89 HOUSING DEMAND ANALYSIS TABLE HD -5 SUBSIDIZED INDEPENDENT SENIOR HOUSING DEMAND ELK RIVER 2015 & 2020 Age 65+ Households w /Incomes < $20,000 (times) Percent of Income Qualified Seniors Needing /Desiring Subsidized Senior Housing (equals) Demand Potenital from Market Area residents (plus) Demand From Ouside the Market Area (40 %) (equals) Total Demand Potential for Subsidized Senior Housing in Market Area (minus) Existing & Pending Subsidized Senior Units in Market Area* (equals) Total Market Area Subsidized Senior Housing Demand Potential * Competitive subsidized units, minus a 7% vacancy rate. Source: Maxfield Research & Consulting, LLC 2015 2020 223 220 x 30% 30% = 67 66 + 45 44 112 110 118 118 = 0 0 We anticipate that at least 40% of the demand for subsidized senior housing in Elk River will come from seniors currently residing in surrounding communities who would move to the Elk River to be near their family or for other reasons. Including demand from outside of Elk River increases total demand potential to 112 units in 2015 and 110 units in 2020. From this potential demand, we subtract the existing number of competitive housing units in Elk River. Currently, there are only two identified subsidized senior buildings in the Market Area with a total of 122 units and are both fully occupied with waiting lists. Subtracting these units, minus a 3% vacancy factor, results in sufficient subsidized units in Elk River in both 2015 and 2020. The existing subsidized housing units are sufficiently serving the Elk River market through 2020. Estimated Demand for Congregate Senior Housing Table HD -6 presents our demand calculations for congregate housing in Elk River in 2015 and 2020. The potential age- and income - qualified base for congregate senior housing includes all senior (65 +) households with incomes of $35,000 as well as homeowner households with incomes between $25,000 and $35,000 who would qualify with the proceeds from the sales of their homes. The proportion of eligible homeowners is based on the homeownership rates of areas seniors, as identified in the demographics section of this study. The number of age, income, and asset - qualified households in Elk River is estimated to be 1,282 households in 2015. Adjusting to include appropriate capture rates for each age cohort (1.5% of households age 65 to 74 and 11.0% of households age 75 and older) results in a local demand potential for 65 congregate units in 2015. MAXFIELD RESEARCH & CONSULTING, LLC 90 HOUSING DEMAND ANALYSIS TABLE HD -6 MARKET RATE CONGREGATE HOUSING DEMAND ELK RIVER 2015 & 2020 of Households w/ Incomes of >$35,000' # of Households w/ Incomes of $25,000 to $34,999' (times) Homeownership Rate (equals) Potential Market (equals) Total Potential Market Base (times) Potential Capture Rate (equals) Demand Potential Potential Demand from Market Area Residents (plus) Demand from Outside Market Area (25 %) (equals) Total Demand Potential (minus) Existing and Pending Congregate Units3 (equals) Excess Demand for Congregate Units Age of Age of Householder Householder 65 -74 75+ 65 -74 75+ 732 430 928 489 + 77 88 + 79 113 x 84% 63% x 84% 63% = 65 55 = 66 71 = 797 485 = 994 560 x 1.5% 11.0% x 1.5% 11.0% = 12 + 53 = 15 + 62 = 77 = 65 + 22 + 26 = 87 = 102 = 87 I I = 102 ' 2020 calculations define income - qualified households as all households with incomes greater than $40,000 and homeowner households with incomes between $30,000 and $49,999. 2 The potential capture rate is derived from data from the Summary Health Statistics for the U.S. Population: National Health Interview Survey, 2007 by the U.S. Department of Health and Human Services. The capture rate used is the percentage of seniors needing assistance with IADLs, but not ADLs (seniors needing assistance with ADLs typcially need assistance with multiple IADLs and are primary candidates for assisted living.). ' Existing and pending are deducted at market equilibrium (95% )ccupancy). Source: Maxfield Research & Consulting, LLC We estimate that seniors currently residing outside of Elk River will generate 25% of the demand for congregate senior housing. This demand will consist primarily of parents of adult children living in Elk River, individuals who live just outside Elk River and have an orientation to the area, and former residents who desire to return upon retirement. Together, the demand from Elk River seniors and demand from seniors who are willing to locate to Elk River totals 87 units of congregate senior housing in 2015. Since there are no existing congregate units in Elk River, we do not reduce the demand potential by any competitive units. As a result, demand is calculated for 87 congregate units in Elk River in 2015. Adjusting for inflation, we estimate that households with incomes of $35,000 or more and senior homeowners with incomes between $25,000 and $35,000 would qualify for congregate housing in 2017. Following the same methodology, demand is calculated to increase to 102 units through 2020. MAXFIELD RESEARCH & CONSULTING, LLC 91 HOUSING DEMAND ANALYSIS Demand Estimate for Assisted Living Housing Table HD -7 presents our demand calculations for assisted living senior housing in Elk River in 2015 and 2020. This analysis focuses on the potential private pay /market rate demand for assisted living units. The availability of more intensive support services such as meals, housekeeping and personal care at assisted living facilities usually attracts older, frailer seniors. According to the 2009 Overview of Assisted Living (which is a collaborative research project by the American Association of Homes and Services for the Aging, the American Seniors Housing Association, National Center for Assisted Living, and National Investment Center for the Seniors Housing and Care Industry), the average age of residents in freestanding assisted living facilities was 87 years in 2008. Hence, the age - qualified market for assisted living is defined as seniors ages 75 and over, as we estimate that of the half of demand from seniors under age 87, almost all would be from seniors over age 75. In 2010, there were 1,024 seniors age 75 and older in the PMA. Demand for assisted living housing is need - driven, which reduces the qualified market to only the portion of seniors who need assistance. According to a study completed by the U. S. Census Bureau (2008 panels of the Survey of Income and Program Participation (SIPP) files), 30% of seniors needed assistance with everyday activities (from 25.5% of 75- to- 79- year -olds, to 33.6% of 80- to- 84- year -olds and 51.6% of 85+ year olds). Applying these percentages to the senior population yields a potential assisted living market of 370 seniors in the PIMA. Due to the supportive nature of assisted living housing, most daily essentials are included in monthly rental fees, which allow seniors to spend a higher proportion of their incomes on housing with basic services. Therefore, the second step in determining the potential demand for assisted living housing in the PMA is to identify the income - qualified market based on a senior's ability to pay the monthly rent. We consider seniors in households with incomes of $40,000 or greater to be income - qualified for assisted living senior housing in the PMA. Households with incomes of $40,000 could afford monthly assisted living fees of $3,000 by allocating 90% of their income toward the fees. According to the 2009 Overview of Assisted Living, the average arrival income of assisted living residents in 2008 was $27,260, while the average annual assisted living fee was $37,281 ($3,107 /month). This data highlights that seniors are spending down assets to live in assisted living and avoid institutional care. Thus, in addition to households with incomes of $40,000 or greater, there is a substantial base of senior households with lower incomes who income - qualify based on assets —their homes, in particular. Sixty -three percent of the age 75+ households in the PMA are homeowners, and the 2015 year - to -date median resale price of homes in the PMA was $209,975. Seniors selling their homes for the median resale price would generate about $197,367 in proceeds after selling costs. With an average monthly fee of $3,000, these proceeds would last just over five years in an assisted living facility, which is longer than the average length of stay in an assisted living facility (27 MAXFIELD RESEARCH & CONSULTING, LLC 92 HOUSING DEMAND ANALYSIS months according to the 2009 Overview of Assisted Living). For each age group in Table HD -7, we estimate the income - qualified percentage to be all seniors in households with incomes above $40,000 (who could afford monthly rents of $3,000+ per month) plus 40% of the estimated seniors in homeowner households with incomes below $40,000 (who will spend down assets, including home - equity, in order to live in assisted living housing). This results in a total potential market of 211 units from the PMA in 2010. Age gro 75-79 80-84 85+ Total Percent Income- Qualified 2 TABLE HD -7 MARKET RATE ASSISTED LIVING DEMAND ELK RIVER 2015 & 2020 1,024 Total potential market (times) Percent living alone (equals) Age /income - qualified singles needing assistance (plus) Proportion of demand from couples (12 %)3 (equals) Total age /income - qualified market needing assistance (times) Potential penetration rate (equals) Potential demand from PMA residents (plus) Proportion from outside the PMA (40 %) (equals) Total potential assisted living demand (minus) Existing market rate assisted living unitss (equals) Total excess market rate assisted living demand 370 57% 211 x 51% = 108 + 15 = 122 x 40% = 49 + 33 = 82 47 W Percent Number Needing Needing Assistance' Assistance' 520 25.5% Percent Number 114 Needing Needing People Assistance' Assistance' 394 25.5% 100 307 33.6% 103 323 51.6% 167 1,024 Total potential market (times) Percent living alone (equals) Age /income - qualified singles needing assistance (plus) Proportion of demand from couples (12 %)3 (equals) Total age /income - qualified market needing assistance (times) Potential penetration rate (equals) Potential demand from PMA residents (plus) Proportion from outside the PMA (40 %) (equals) Total potential assisted living demand (minus) Existing market rate assisted living unitss (equals) Total excess market rate assisted living demand 370 57% 211 x 51% = 108 + 15 = 122 x 40% = 49 + 33 = 82 47 W Percent Number Needing Needing Assistance' Assistance' 520 25.5% 133 338 33.6% 114 363 51.6% 187 1,221 433 56% 243 51% 124 17 141 40% 56 38 94 47 47 ' The percentage of seniors unable to perform or having difficulting with ADLs, based on the 2008 Survey of Income and Program Participation (SIPP) files, conducted by the U.S. Census Bureau. z Includes households with incomes of $40,000 or more (who could afford monthly rents of $3,000+ per month) plus 40% of the estimated owner households with incomes below $40,000 (who will spend down assets, including home - equity, in order to live in assisted living housing). 3 The 2009 Overview of Assisted Living (a collaborative project of AAHSA, ASHA, ALFA, NCAL & NIC) found that 12% of assisted living residents are couples. ° We estimate that 60% of the qualified market needing assistance with ADLs could either remain in their homes or reside at less advanced senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. s Existing and pending units at 93% occupancy. We exclde 15% of units to be Home and Community Based Waiver recipients. Source: Maxfield Research & Consulting, LLC Because the vast majority of assisted living residents are single (88% according to the 2009 Overview of Assisted Living), our demand methodology multiplies the total potential market by the percentage of seniors age 75+ in the PMA living alone. Based on 2010 Census data, 51% of age 75+ households in the PMA lived alone. Applying this percentage results in a total base of 211 age /income - qualified singles. The 2009 Overview of Assisted Living found that 12% of MAXFIELD RESEARCH & CONSULTING, LLC 93 HOUSING DEMAND ANALYSIS residents in assisted living were couples. There are a total of 108 age /income - qualified seniors needing assistance in the PMA including both couples and singles. We estimate that roughly 60% of the qualified market needing significant assistance with ADLs would either remain in their homes or less service - intensive senior housing with the assistance of a family member or home health care, or would need greater care provided in a skilled care facility. The remaining 40% could be served by assisted living housing. Applying this potential market penetration rate of 40% results in demand for 49 assisted living units in 2010. We estimate that a portion of demand for assisted living units in the PMA (40 %) will come from outside the PMA. Applying this figure results in total potential demand for 82 market rate assisted living units in the PMA. Next, existing assisted living units are subtracted from overall demand. We have adjusted the competitive number of units based on an estimated 15% of units that are occupied by lower - income seniors using the Elderly Waiver program, to pay for their services in an assisted living environment. Overall, we subtract 47 competitive units (after accounting for a 7% vacancy rate) from the demand potential, resulting in 35 units of excess demand for assisted living housing in the PMA. By 2020, total excess demand for market rate assisted living units in Elk River is projected to increase to 47 units. Estimated Demand for Memory Care Housing Table HD -8 presents our demand calculations for market rate memory care senior housing in Elk River in 2015 and 20120. Demand is calculated by starting with the estimated Elk River senior (age 65 +) population in 2015 and multiplying by the incidence rate of Alzheimer's /dementia among this population's age cohorts. According to the Alzheimer's Association (Alzheimer's Disease Facts and Figures, 2007), 2% of seniors ages 65 to 74, 19% of seniors ages 75 to 84, and 42% of seniors ages 85+ are inflicted with Alzheimer's Disease. This yields a potential market of 299 seniors in Elk River. Because of the staff - intensive nature of dementia care, typical monthly fees for this type of housing are at least $4,000 and range upwards of $5,000 when including service packages. Based on our review of senior household incomes in Elk River, homeownership rates and home sale data, we estimate that 30% of seniors in Elk River would have incomes and /or assets to sufficiently cover the costs of memory care housing. This figure takes into account married couple households where one spouse may have memory care needs and allows for a sufficient income for the other spouse to live independently. Multiplying the number of seniors with MAXFIELD RESEARCH & CONSULTING, LLC 94 HOUSING DEMAND ANALYSIS Alzheimer's /dementia (299 seniors) by the income - qualified percentage results in a total of 111 age /income - qualified seniors in the Elk River in 2015. TABLE HD -8 MEMORY CARE DEMAND ELK RIVER 2015 & 2020 65 to 74 Population 1,500 1,904 (times) Dementia Incidence Rate' x 2% x 2% (equals) Estimated Age 65 to 74 Pop. with Dementia = 30 = 38 75 to 84 Population 701 858 (times) Dementia Incidence Rate' x 19% x 19% (equals) Estimated Age 75 to 84 Pop. with Dementia = 133 = 163 85+ Population 323 363 (times) Dementia Incidence Rate' x 42% x 42% (equals) Estimated Age 85+ Pop. with Dementia = 136 = = x 152 354 38% (equals) Total Senior Population with Dementia = 299 (times) Percent Income /Asset- Qualified 2 x 37% (equals) Total Income - Qualified Market Base = 111 = 134 (times) Percent Needing Specialized Memory Care Assistance x 25% x 25% (equals) Total Need for Dementia Care = 28 = 34 (plus) Demand from Outside Market Area (40 %) + 18 + 22 Total Demand Potential = 46 56 (minus) Existing and Pending Memory Care Units3 28 28 (equals) Excess Demand for Memory Care Units = 18 = 28 ' Alzheimer's Association: Alzheimer's Disease Facts & Figures (2009) Z Income - qualified households consider 3/4 of those with incomes greater than $60,000 plus 15% of homeowners with incomes below this threshold. 3 Existing memory care units less units occupied by public pay residents and a 7% vacancy rate. Source: Maxfield Research & Consulting, LLC According to data from the National Institute of Aging, about 25% of all individuals with memory care impairments comprise the market for memory care housing units. This figure considers that seniors in the early stages of dementia will be able to live independently with the care of a spouse or other family member, while those in the later stages of dementia will require intensive medical care that would only be available in skilled care facilities. Applying this figure to the estimated population with memory impairments yields a potential market of about 28 seniors in Elk River. MAXFIELD RESEARCH & CONSULTING, LLC 95 HOUSING DEMAND ANALYSIS We estimate that 40% of the overall demand for memory care housing in the Elk River would come from outside of Elk River. Demand from both inside and outside of Elk River totals 46 memory care units in 2015. We reduce the demand potential by the 30 competitive units (less a 93% occupancy rate). Subtracting these competitive units decreases the excess memory care demand to 18 units. Demand is calculated for 18 memory care units in the City of Elk River in 2015. Following the same methodology, demand is calculated to increase to 28 memory care units through 2020. MAXFIELD RESEARCH & CONSULTING, LLC 96 RECOMMENDATIONS AND CONCLUSIONS Introduction /Overall Housing Recommendations This section summarizes demand calculated for specific housing products in Elk River and recommends development concepts to meet the housing needs forecast for the City. All recommendations are based on findings of the Comprehensive Housing Needs Assessment. The following table and charts illustrate calculated demand by product type. It is important to recognize that housing demand is highly contingent on projected household growth; household growth could be higher should increased job growth ensue and the overall economy continues to improve. TABLE CR -1 SUMMARY OF HOUSING DEMAND CITY OF ELK RIVER Novemeber 2015 of Use Rental Units - Market Rate 265 Rental Units - Affordable 133 Rental Units - Subsidized 44 For -Sale Units - Single- family 601 For -Sale Units - Multifamily 186 Total General Occupancy Supportable 1,229 Age- Restricted (Senior) Market Rate Adult Few Services (Active Adult) 23 77 Ownership 0 0 Rental 23 77 Congregate 87 102 Assisted Living 35 47 Memory Care 18 28 Total Market Rate Senior Supportable 163 254 Affordable /Subsidized Active Adult - Subsidized 0 0 Active Adult - Affordable 39 42 Total Affordable Senior Supportable 39 42 I Source: Maxfield Research & Consulting, LLC I MAXFIELD RESEARCH & CONSULTING, LLC 97 RECOMMENDATIONS AND CONCLUSIONS For -Sale Units - Multifamily For -Sale Units - Single- family Rental Units - Subsidized Rental Units - Affordable Rental Units - Market Rate Adult - Owner Adult - Rental Congregate Assisted Living Memory Care Affordable Subsidized General- Occupancy Demand by Type 2015 to 2025 Senior Housing Demand by Type 2015 & 2020 .0 MAXFIELD RESEARCH & CONSULTING, LLC 98 RECOMMENDATIONS AND CONCLUSIONS Based on the finding of our analysis and demand calculations, Table CR -2 provides a summary of the recommended development concepts by product type for the City of Elk River. It is important to note that these proposed concepts are intended to act as a development guide to most effectively meet the housing needs of existing and future households in Elk River. The recommended development types do not directly coincide with total demand as illustrated in Table CR -1. MAXFIELD RESEARCH & CONSULTING, LLC 99 TABLE CR -2 RECOMMENDED HOUSING DEVELOPMENT CITY OF ELK RIVER 2015 to 2025 Purchase Price/ No. of Pct. Development Monthly Rent Range' Units of Total Timing Owner - Occupied Homes Single Family Entry -level >$225,000 175 200 31% 2016+ Move -up $250,000 - $350,000 320 350 56% 2016+ Executive $350,000+ 75 80 13% 2017+ Total 570 - 630 100% Townhomes /Detached Townhomes/Twinhomes z Entry -level >$200,000 50 60 31% 2018+ Move -up $200,000+ 110 130 69% 2016+ Total 160 - 190 100% Total Owner - Occupied 730 - 820 General Occupancy Rental Housing Market Rate Rental Housing Apartment -style $950/1BR - $1,450/3BR 180 200 78% 2017+ Townhomes $1,200/2BR - $1,500/3BR 50 60 22% 2016+ Total 230 - 260 100% Affordable Rental Housing Apartment -style Moderate Income3 90 100 73% 2017+ Townhomes Moderate Income3 30 40 27% 2016+ Total 120 - 140 100% Total Renter - Occupied 350 - 400 Senior Housing (i.e. Age Restricted) Active Adult Affordable Rental Moderate Income 40 42 27% 2016+ Active Adult Market Rate Rental4 $900/1BR - $1,200/2BR+ 50 60 36% 2019+ Independent Living (Congregate) $1,750/1BR - $1,950/2BR 60 80 45% 2018+ Assisted Living $2,750 /EFF - $4,000/2BR 40 50 29% 2017+ Memory Care $4,000 /EFF - $5,000/2BR 26 28 18% 2017+ Total 144 - 164 100% Total - All Units 1,224 - 1,384 Pricing in 2015 dollars. Pricing can be adjusted to account for inflation. Z Recommendations include the absorption of some existing previously platted lots. 3 Affordablity subject to income guidelines per MHFA. See Table HA -1 for Sherburne County Income limits. 4 Alternative development concept is to combine active adult affordable and market rate active adult into mixed - income senior community Note - Recommended development does not coincide with total demand. Elk River may not be able to accommodate all recommended housing types based on a variety of factors (i.e. development constraints, land availability, etc.) Source: Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 99 RECOMMENDATIONS AND CONCLUSIONS Recommended Housing Product Types For -Sale Housing Single- Family Housing Table HD -1 identified demand for about 790 single - family housing units in Elk River through 2025. However, after accounting for the existing 188 vacant single - family newer lots in Elk River (see Table FS -9); demand is reduced to about 600 new lots in Elk River through 2025. Based on historic construction activity over the past three years, there has been an average of about 70 new single - family units per year in Elk River; down substantially from the early part of last decade when about 220 units on average were added between 2000 and 2005. The lot supply benchmark for growing communities is a three- to five -year lot supply, which ensures adequate consumer choice without excessively prolonging developer- carrying costs. Given the number of existing platted lots in Elk River and the number of homes constructed annually, the current lot supply is able to meet demand only for about two to three years. Although Table FS -9 identified 369 future lots; many of these subdivisions may still be speculative based on preliminary plat information prior to the housing bust of last decade. Therefore, new lots will need to be platted or moved from future lots to vacant developed lots to meet future demand. Due to the age and price of the existing housing stock in Elk River, most of the existing older housing stock appeals to entry -level buyers. Entry -level existing homes, which we generally classify as homes priced under $150,000 will be mainly satisfied by existing single - family homes as residents of existing homes move into newer housing products built in the Elk River Area, such as move -up single - family homes, twinhomes, rental housing and senior housing. A move - up buyer or step -up buyer is typically one who is selling one house and purchasing another one, usually a larger and more expensive home. Usually the move is desired because of a lifestyle change, such as a new job or a growing family. Based on our interviews with Elk River Realtors, move -up homes are generally priced from $250,000 to $350,000. Executive -level homes are loosely defined as those homes priced above $350,000. Most of these homes would be build - to -suit new construction in one of the city's newer subdivisions or are on larger acreages located on the fringe of Elk River. The average base price of all new construction actively marketing in Elk River is approximately $250,000, or about $135 to $140 PSF for single - family housing stock. Although there would be substantial demand for a new single - family housing product priced under $200,000, financially it will be extremely difficult to develop even with public assistance due to infrastructure costs and rising labor and material costs. Based on land and building costs, it is very difficult to build new single - family homes for less than $225,000. Because there only 188 vacant lots, new lots will be needed in the next few years to meet buyer demand. Many of the existing lots in Elk River are flat and target the first -time and move -up MAXFIELD RESEARCH & CONSULTING, LLC 100 RECOMMENDATIONS AND CONCLUSIONS buyers; we also recommend additional "choice lots" that cater to executive buyers and have the topography for walk -out lots and more vegetation on the property. We also recommend considering smaller lots that will increase density while bringing down new subdivision infrastructure costs. For -Sale Multifamily Housing A growing number of households desire alternative housing types such as townhouses, detached townhomes, and twinhomes. Typically, the target market for for -sale multifamily housing is empty- nesters and retirees seeking to downsize from their single - family homes. In addition, professionals, particularly singles and couples without children, also will seek townhomes if they prefer not to have the maintenance responsibilities of a single - family home. In some housing markets, younger households also find purchasing multifamily units to be generally more affordable than purchasing new single - family homes. Over the past fifteen years, multifamily resales have averaged about 20% of all resales in Elk River; however the median sales price has been about 33% lower than single - family housing. Currently, the West Oaks subdivision is marketing a variety of twinhomes and detached townhomes in Elk River. Based on the changing demographics and the need for alternative housing types, demand was calculated for 186 new multifamily for -sale units in Elk River through 2025. Since 2007, there have been only three new town home /twinhome units constructed in Elk River as this sector experienced severe downturn during the recession. However, given the aging of the population and the high growth rate in the 55+ population (especially 65 -74 age cohorts), Elk River would benefit from a more diversified housing stock. These attached units could be developed as twin homes, detached townhomes or villas, townhomes /row homes, or any combination. Because the main target market is empty- nesters and young seniors, the majority of townhomes should be one - level, or at least have a master suite on the main level if a unit is two - stories. The following provides greater detail into townhome and twinhome style housing. • Twinhomes— By definition, a twin home is basically two units with a shared wall with each owner owning half of the lot the home is on. Some one -level living units are designed in three -, four -, or even six -unit buildings in a variety of configurations. The swell of support for twinhome and one -level living units is generated by the aging baby boomer generation, which is increasing the numbers of older adults and seniors who desire low- maintenance housing alternatives to their single - family homes but are not ready to move to service- enhanced rental housing (i.e. downsizing or right sizing). Traditionally most twin home developments have been designed with the garage being the prominent feature of the home; however, today's newer twin homes have much more MAXFIELD RESEARCH & CONSULTING, LLC 101 RECOMMENDATIONS AND CONCLUSIONS architectural detail. Many higher -end twin home developments feature designs where one garage faces the street and the other to the side yard. This design helps reduce the prominence of the garage domination with two separate entrances. Housing products designed to meet the needs of these aging Elk River residents, many of whom desire to stay in their current community if housing is available to meet their needs, will be needed into the foreseeable future. Twinhomes are also a preferred for -sale product by builders in today's market as units can be developed as demand warrants. Because twinhomes bring higher density and economies of scale to the construction process, the price point can be lower than stand- alone single - family housing. As previously mentioned, there are a number of new twin homes under construction in the West Oaks subdivision; however twin homes will continue to be in demand as many older adults and seniors will move to this housing product with substantial equity in their existing single - family home and will be willing to purchase a maintenance -free home that is priced similar to their existing single - family home. Move -up twin homes has especially been popular in the Twin Cities Metro Area over the past few yea rs. Twinhome Examples Standard Twinhome — garage on end Executive Twinhome with alternate garages Executive -style Twinhome — front facing garage MAXFIELD RESEARCH & CONSULTING, LLC 102 RECOMMENDATIONS AND CONCLUSIONS Detached Townhomes /Villas — An alternative to the twinhome is the one -level villa product and /or rambler. This product also appeals mainly to baby boomers and empty nesters seeking a product similar to a single - family living on a smaller scale while receiving the benefits of maintenance -free living. Many of these units are designed with a walk -out or lookout lower level if the topography warrants. We recommend lot widths ranging from 45 to 55 feet with main -level living areas between 1,600 and 1,800 square feet. The main level living area usually features a master bedroom, great room, dining room, kitchen, and laundry room while offering a "flex room" that could be another bedroom, office, media room, or exercise room. However, owners should also be able to purchase the home with the option to finish the lower level (i.e. additional bedrooms, game room, storage, den /study, etc.) and some owners may want a slab -on -grade product for affordability reasons. Finally, builders could also provide the option to build a two -story detached product that could be mixed with the villa product. Pricing for a detached townhome /villa will vary based on a slab -on -grade home versus a home with a basement. Base pricing should start at $250,000 and will fluctuate based on custom finishes, upgrades, etc. Detached Townhome /Villa Examples Cottage -style (alley - loaded garage) Villa — Garage in front 2 -story tuck -under MAXFIELD RESEARCH & CONSULTING, LLC 103 RECOMMENDATIONS AND CONCLUSIONS Side -by -Side and Back -to -Back Townhomes — This housing product is designed with three or four or more separate living units in one building and can be built in a variety of configurations. With the relative affordability of these units and multi -level living, side -by- side and back -to -back townhomes have the greatest appeal among entry -level households without children, young families and singles and /or roommates across the age span. However, two -story townhomes would also be attractive to middle- market, move -up, and empty- nester buyers. Many of these buyers want to downsize from a single - family home into maintenance -free housing, many of which will have equity from the sale of their single - family home. Side -by -side townhomes have been slow to recover from the recession. Many of the townhome developments completed last decade in Elk River had many lender- mediated sales and were attractive for real estate investors. Recently there have been a few new townhome developments move forward in the Twin Cities; however they have been located in high demand communities where the single - family market has priced many buyers out of the market. New construction townhomes in Elk River are still premature; but this sector should begin to turn should land costs escalate and buyers are priced out of many new single - family subdivisions. Townhome Examples 3 -Plex (one -level living w /basement) Row -house style Back -to -back style (6 -Plex) MAXFIELD RESEARCH & CONSULTING, LLC 104 RECOMMENDATIONS AND CONCLUSIONS General Occupancy Rental Housing Our competitive inventory identified that the vacancy rates for all types of general occupancy rental product is below market equilibrium indicating pent -up demand for rental housing. The few newer products that have entered the market in the past few years have all performed well. Coachman Apartments which began marketing in 2015 has absorbed all units before occupancy date. Due to the age and positioning of the remaining existing rental supply (pre - 1990 construction), a significant portion of units are priced at or below guidelines for affordable housing, which indirectly satisfies demand from households that income - qualify for financially assisted housing. However, the growing renter base is seeking newer rental properties with additional and updated amenities that are not offered in older developments. Although ownership housing in older homes in Elk River is generally affordable for first -time home buyers, some are choosing to rent due to fears of past housing market performance. Maxfield Research and Consulting LLC calculated demand for 265 market rate and 133 affordable rental housing units in Elk River through 2025. New general- occupancy rental housing can be developed immediately and will continue to be in demand throughout this decade. • Market Rate Rental —The existing market rate rental supply in Elk River has a mix of ages and household types represented. A new rental project will also have a diverse resident profile, including young to mid -age professionals as well as singles and couples across the age span. Because there is demand for 265 units; new market rate product will likely be developed across multiple buildings and developments. We recommend new middle- market to upper - middle market rental project(s) with roughly that will continue to attract a diverse resident profile; including young to mid -age professionals as well as singles and couples across all ages. To appeal to wide target market, we suggest a market rate apartment project with a unit mix consisting of one - bedroom units, one - bedroom plus den units, two - bedroom units, and a few two - bedroom plus den or three - bedroom units. Monthly rents (in 2015 dollars) should range from $950 for a one - bedroom unit to $1,450 for a three - bedroom unit. Average rents in Elk River are roughly $1.04 per square foot, thus we recommend that monthly rents at a new development should charge on average $1.15 per square foot to be financially feasible. Monthly rents can be trended up by 2.0% annually prior to occupancy to account for inflation depending on overall market conditions. New market rate rental units should be designed with contemporary amenities that include open floor plans, higher ceilings, in -unit washer and dryer, full appliance package, central air - conditioning, and garage parking. MAXFIELD RESEARCH & CONSULTING, LLC 105 RECOMMENDATIONS AND CONCLUSIONS Market Rate General Occupancy Rental Townhomes— In addition to the recommended traditional multi -story apartment projects, we find demand exists for larger townhome units for families - including those who are new to the community and want to rent until they find a home for purchase. An additional 50 to 60 rental townhome units could be supported in Elk River over this decade. We recommend a project with rents starting at approximately $1,200 for two - bedroom units to $1,500 for three - bedroom units. Units should feature contemporary amenities (i.e. in -unit washer /dryer, high ceilings, etc.) and an attached two car garage. Affordable General Occupancy Multifamily Housing— There have been three affordable developments built since 2007 in Elk River. These developments have been extremely successful and have maintained nearly 100% occupancy since opening. Unlike the market rate supply, existing affordable properties are typically dominated by families with children who find it more difficult to afford ownership property and market rate rents. The success of the moderate income affordable Coachman Ridge (53 units) rental project by Duffy Development near the transit station continues to support the excess demand shown for affordable housing. These projects would have income - restrictions established by HUD and would likely target households with incomes between 50% to 80% of area median income; however some could be workforce units with affordability up to 120% AMI. We find that demand exists for about 100 affordable units through 2025. Affordable housing attracts households that cannot afford market rate housing units but do not income - qualify for deep subsidy housing. Affordable projects attract a broad group of people based of tenants based on the unit type. One - bedroom units target singles and couples, whereas two and three - bedroom units target families. Some retired seniors would also be attracted to an affordable concept. We recommend an affordable concept that would target residents at 50% to 60% AMI. A workforce housing project targeting households from 80% to 120% AMI could also be pursued in Elk River. Affordable General Occupancy Rental Townhomes— Rental townhomes affordable to moderate - income households would also be in high demand throughout Elk River. There is currently only one income based townhome development in the City (Lanesboro Heights — Section 8) that is full with a long waiting list. Affordable rental townhomes have been found to very popular throughout many communities. These projects would have income - restrictions established by HUD and would likely target households with incomes between 50% to 80% of area median income; however some could be workforce units with affordability up to 120% AMI. We recommend a project with two- and three - bedroom units and a project of 30 to 40 units. Units should feature central air conditioning, full appliance package, in -unit washer /dryer, an attached one /two car garage. Such developments are popular with families that cannot afford housing options in the for -sale market or market rate rentals. MAXFIELD RESEARCH & CONSULTING, LLC 106 RECOMMENDATIONS AND CONCLUSIONS Senior Housing As illustrated in Table CR -1, demand exists for almost all types of senior housing product types in Elk River. Over the course of five years, there is demand for about 300 new senior units through 2020. The unmet of additional senior housing is recommended in order to provide housing opportunity to these aging residents in their stages of later life. The development of additional senior housing serves a two -fold purpose in meeting the housing needs in Elk River: older adult and senior residents are able to relocate to new age- restricted housing in Elk River, and existing homes and rental units that were occupied by seniors become available to other new households. Hence, development of additional senior housing does not mean the housing needs of younger households are neglected; it simply means that a greater percentage of housing need is satisfied by housing unit turnover. The types of housing products needed to accommodate the aging population base are discussed individually in the following section. Active Adult Rental — Demand was projected for about 75 market rate active adult rental units in Elk River through 2020. However, most of this demand will be closer to 2020. Currently, there are three market rate active adult rental projects in the City. The newest was built in 1992, while the other two are over 30 years old. There may be seniors who currently residing in general- occupancy housing that would consider a newer active adult product. Development of this product could be in separate stand -alone facilities or in a mixed - income project. We believe a mixed - income building would be an ideal development concept to create the most dynamic, inclusive community for active seniors and to temper stigmas and potential neighborhood opposition of affordable housing development. We recommend a new project of about 50 to 60 units later this decade. The project modest rents with base monthly rents starting at $900 per month for one - bedroom units and from $1,200 or more for two - bedroom units. The project should offer transportation, activities, and optional services for housekeeping, etc. le and Subsidized Senior Few Services Rental — Elk River demand for affordable /subsidized senior housing is approximately 40 units in 2020. All of the demand was for affordable senior housing as the existing subsidized housing units is meeting the current demand. Although this product would be well received by seniors in and near the Elk River area; it will be difficult to develop given the economies of scale needed and financing challenges. Affordable senior housing will likely be a low- income tax credit project through the Minnesota Housing Finance Agency (MHFA). MHFA recently started to consider affordable senior housing projects under the tax credit program and is slowly starting to expand financing for this product type. • Independent Living/Congregate —There are no designated congregate units (meals and limited support service) in Elk River, however, Guardian Angels provides meals and services at Evans Park at an extra charge. Demand was calculated for just over 100 congregate units MAXFIELD RESEARCH & CONSULTING, LLC 107 RECOMMENDATIONS AND CONCLUSIONS over the next five years. Based on this demand, we recommend 60 to 80 congregate units with a mix of one - bedroom, one - bedroom plus den, and two - bedroom units. Monthly rents should range from $1,750 for one - bedroom units to $1,950 for two - bedroom units. The monthly fees should include all utilities (except telephone and basic cable /satellite television) and the following services: • I'm OK program; • Daily noon meal; • Regularly scheduled van transportation; • Social, health, wellness and educational programs; • 24 -hour emergency call system; and • Complimentary use of laundry facilities. In addition, meals and other support and personal care services will be available to congregate residents on a fee - for - service basis, such as laundry, housekeeping, etc. When their care needs increase, residents also have the option of receiving assisted living packages in their existing units. New independent housing could be developed adjacent to an existing senior campus or in a stand -alone development. Assisted Living and Memory Care Senior Housing — Based on our analysis, we project demand to support an additional 47 assisted living units and 28 memory care units in Elk River through 2020. Although we find demand, we recommend new units later this decade. Guardian Angels is the primary senior housing provider and they could add new product to one of their existing facilities. We recommend assisted living units include a mix of studio, and one - bedroom, and a few two - bedroom units with base monthly rents ranging from $2,750 to $4,000. Memory care unit mix should be mostly studios and one - bedroom units with a few two - bedroom units for couples with base monthly rents ranging from $3,800 to $5,500. Memory care units should be located in a secured, self- contained wing located on the first floor of a building and should feature its own dining and common area amenities including a secured outdoor patio and wandering area. The base monthly fees should include all utilities (except telephone and basic cable /satellite television) and the following services: • Three meals per day; • Weekly housekeeping and linen service; • Two loads of laundry per week; • Weekly health and wellness clinics; • Meal assistance; • Regularly scheduled transportation; MAXFIELD RESEARCH & CONSULTING, LLC 108 RECOMMENDATIONS AND CONCLUSIONS • Professional activity programs and scheduled outings; • Nursing care management; • I'm OK program; • 24 -hour on site staffing; • Personal alert pendant with emergency response; and • Nurse visit every other month. Additional personal care packages should also be available for an extra monthly charge above the required base care package. A care needs assessment is recommended to be conducted to determine the appropriate level of services for prospective residents. MAXFIELD RESEARCH & CONSULTING, LLC 109 CHALLENGES AND OPPORTUNITIES Challenges and Opportunities Table CR -2 identified and recommended housing types that would satisfy the housing needs in Elk River over the next ten years. The following were identified as the greatest challenges and opportunities for developing the recommended housing types (in no particular order - alphabetically). Affordability. Based on current home prices, about 75% of Elk River householders could afford to purchase an entry -level home given today's pricing (see table on the following page). Likewise, most householders (85 %) can also afford the average market rate rent at a one - bedroom rental project in Elk River. Because of this condition, some householders who would not consider purchasing may do so earlier since the cost to own an entry -level home is on -par with rental housing costs. The following chart compares the costs of homeownership to rentals given today's housing costs based on a 30% allocation of income to housing. We do note, however, that not all householders will have the credit scores and down payment that would qualify them to purchase for -sale housing. MAXFIELD RESEARCH & CONSULTING, LLC 110 TABLE HA -4 ELK RIVER MARKET AREA HOUSING AFFORDABILITY - BASED ON HOUSEHOLD INCOME For -Sale (Assumes 10% down payment and good credit) Entry -Level Move -Up Executive Entry -Level Move -Up Executive Price of House $175,000 $250,000 $300,000 $150,000 $225,000 $300,000 Pct. Down Payment 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Total Down Payment Amt. $17,500 $25,000 $30,000 $15,000 $22,500 $30,000 Estimated Closing Costs (rolled into mortgage) $5,250 $7,500 $9,000 $4,500 $6,750 $9,000 Cost of Loan $162,750 $232,500 $279,000 $139,500 $209,250 $279,000 Interest Rate 4.000% 4.000% 4.000% 4.000% 4.000% 4.000% Number of Pmts. 360 360 360 360 360 360 Monthly Payment (P & I) -$777 - $1,110 - $1,332 -$666 -$999 - $1,332 (plus) Prop. Tax -$219 -$313 -$375 -$188 -$281 -$375 (plus) HO Insurance /Assoc. Fee for TH -$58 -$83 -$100 -$100 -$100 -$100 (plus) PMI /MIP (less than 20 %) -$71 -$101 -$121 -$60 -$91 -$121 Subtotal monthly costs - $1,125 - $1,607 - $1,928 - $1,014 - $1,471 - $1,928 Housing Costs as % of Income 30% 30% 30% 30% 30% 30% Minimum Income Required $44,984 $64,263 $77,116 $40,558 $58,837 $77,116 Pct. of ALL Elk River HHDS who can affordl 75.9% 60.8% 52.0% 79.8% 65.9% 52.0% No. of Elk River HHDS who can affordl 6,092 4,886 4,176 6,413 5,295 4,176 Pct. of Elk River owner HHDs who can affordl 81.4% 65.9% 55.8% 84.0% 71.9% 55.8% No. of Elk River owner HHDs who can affordl 5,076 4,111 3,478 5,240 4,483 3,478 No. of Elk River owner HHDS who cannot affordl 1,160 2,125 2,758 996 1,753 2,758 Rental (Market Rate) 11311 21311 31311 11311 21311 3BR Monthly Rent $850 $950 $1,300 $950 $1,200 $1,350 Annual Rent $10,200 $11,400 $15,600 $11,400 $14,400 $16,200 Housing Costs as % of Income 30% 30% 30% 30% 30% 30% Minimum Income Required $34,000 $38,000 $52,000 $38,000 $48,000 $54,000 Pct. of ALL Elk River HHDS who can affordl 84.8% 80.5% 70.3% 80.5% 73.4% 68.8% No. of Elk River HHDS who can affordl 6,812 6,464 5,645 6,464 5,892 5,528 Pct. of Elk River renter HHDs who can affordl 59.3% 50.9% 74.4% 50.9% 38.3% 32.1% No. of Elk River renter HHDs who can affordl 1,066 914 1,336 914 688 576 No. of Elk River renter HHDS who cannot affordl 730 882 460 882 1,108 1,220 ' Based on 2015 household income for ALL households z Based on 2013 ACS household income by tenure (i.e. owner and renter incomes. Owner incomes = $85,739 vs. renter incomes = $41,109) Source: Maxfield Research & Consulting, LLC MAXFIELD RESEARCH & CONSULTING, LLC 110 CHALLENGES AND OPPORTUNITIES Lender - mediated Properties. As illustrated in Table FS -1, lender- mediated properties have declined substantially since the housing downturn and Great Recession of last decade. Lender mediated properties (i.e. foreclosures and short sales) accounted for over 70% of transactions between 2009 and 2011 before declining annually since and comprising about 12% of transactions thus far in 2015. The continued decline in lender- mediated properties will enhance the overall real estate market and pricing will continue to gain from all the losses of last decade. The median sales price is still down about 10% from the height of the real estate market; hence some homeowners are still upside down on their mortgage. As more and more homeowners regain lost equity, the real estate market will experience strong velocity as many owners desire trade -up housing. Lot Supply. Tables FS -9 and FS -10 inventoried active subdivisions with available lots. Based on our research there are under than 200 finished vacant single - family lots, not included scattered lots throughout the city. Based on this lot supply and the recent construction activity over the past few years, the current finished lot inventory is very low and is less than three years. Therefore, future lots will be needed to be converted to finished lots to meet this demand. Because of the time frame to deliver lots (i.e. permitting process, infrastructure, etc.) new platted lots should begin in 2016 to ensure the lot supply will be ample to support new construction throughout this decade. • Mortgage Rates. Mortgage rates play a crucial part in housing affordability. Lower mortgage rates result in a lower monthly mortgage payment and buyers receiving more home for their dollar. Rising interest rates often require homebuyers to raise their down payment in order to maintain the same housing costs. Mortgage rates have remained at historic lows over the past several years coming out of the Great Recession. However, the Federal Reserve has indicated they may begin raising the Federal Funds Rate this December 2015 and into 2016 that would result in an increase in interest rates. The anticipation of the rate hike has increased buyer activity in 2015 as buyers are locking today's interest rates hoping to avoid rate increases. The anticipated increases are projected to be small; although affordability will be affected most economists do not anticipate a major change in the short -term. Low mortgage rates have been critical for the housing recovery; especially in a market like Elk River that was affected by significant lender- mediated properties. A significant increase in rates ( +1% or more; over 5% in the short term) would greatly affect the housing market and would slow projected housing demand. The following chart illustrates historical mortgage rate averages as compiled by Freddie Mac. The Freddie Mac Market Survey (PMMS) has been tracking mortgage rates since 1971 and is the most relied upon benchmark for evaluating mortgage interest market conditions. The Freddie Mac survey is based on 30 -year mortgages with a loan -to -value of 80 %. MAXFIELD RESEARCH & CONSULTING, LLC 111 CHALLENGES AND OPPORTUNITIES 18.00% 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Historic 30 -year Mortgage Rates 1972 to 2015 (YTD) N � lD 00 O N � lD 00 O N � LD 00 O N 'zT LD 00 O N 'zT Il n n n 00 00 00 00 00 m m m m m O O O O O -1 -1 -1 Ql Ql Ql Ql Ql Ql Ql Ql Ql Ql Ql Ql m m O O O O O O O O c-I c-I c-I c-I c-I c-I c-I c-I c-I c-I c-I c-I c-I -1 N N N N N N N N MAXFIELD RESEARCH & CONSULTING, LLC 112 APPENDIX - DEFINITIONS Definitions Absorption Period —The period of time necessary for newly constructed or renovated properties to achieve the stabilized level of occupancy. The absorption period begins when the first certificate of occupancy is issued and ends when the last unit to reach the stabilized level of occupancy has signed a lease. Absorption Rate —The average number of units rented each month during the absorption period. Active adult (or independent living without services available) — Active Adult properties are similar to a general- occupancy apartment building, in that they offer virtually no services but have age- restrictions (typically 55 or 62 or older). Organized activities and occasionally a transportation program are usually all that are available at these properties. Because of the lack of services, active adult properties typically do not command the rent premiums of more service - enriched senior housing. Adjusted Gross Income "AGI" — Income from taxable sources (including wages, interest, capital gains, income from retirement accounts, etc.) adjusted to account for specific deductions (i.e. contributions to retirement accounts, unreimbursed business and medical expenses, alimony, etc.). Affordable housing— Housing that is income - restricted to households earning at or below 80% AMI, though individual properties can have income - restrictions set at 40 %, 50 %, 60% or 80% AMI. Rent is not based on income but instead is a contract amount that is affordable to households within the specific income restriction segment. It is essentially housing affordable to low or very low- income tenants. Amenity Tangible or intangible benefits offered to a tenant in the form of common area amenities or in -unit amenities. Typical in -unit amenities include dishwashers, washer /dryers, walk -in showers and closets and upgraded kitchen finishes. Typical common area amenities include detached or attached garage parking, community room, fitness center and an outdoor patio or grill /picnic area. Area Median Income "AMI" — AMI is the midpoint in the income distribution within a specific geographic area. By definition, 50% of households earn less than the median income and 50% earn more. The U.S. Department of Housing and Urban Development (HUD) calculates AMI annually and adjustments are made for family size. Assisted Living— Assisted Living properties come in a variety of forms, but the target market for most is generally the same: very frail seniors, typically age 80 or older (but can be much younger, depending on their particular health situation), who are in need of extensive support services and personal care assistance. Absent an assisted living option, these seniors would otherwise need to move to a nursing facility. At a minimum, assisted living properties include MAXFIELD RESEARCH & CONSULTING, LLC 113 APPENDIX - DEFINITIONS two meals per day and weekly housekeeping in the monthly fee, with the availability of a third meal and personal care (either included in the monthly fee or for an additional cost). Assisted living properties also have either staff on duty 24 hours per day or at least 24 -hour emergency response. Building Permit — Building permits track housing starts and the number of housing units authorized to be built by the local governing authority. Most jurisdictions require building permits for new construction, major renovations, as well as other building improvements. Building permits ensure that all the work meets applicable building and safety rules and is typically required to be completed by a licensed professional. Once the building is complete and meets the inspector's satisfaction, the jurisdiction will issue a "CO" or "Certificate of Occupancy." Building permits are a key barometer for the health of the housing market and are often a leading indicator in the rest of the economy as it has a major impact on consumer spending. Capture Rate —The percentage of age, size, and income - qualified renter households in a given area or "Market Area" that the property must capture to fill the units. The capture rate is calculated by dividing the total number of units at the property by the total number of age, size and income - qualified renter households in the designated area. Comparable Property — A property that is representative of the rental housing choices of the designated area or "Market Area" that is similar in construction, size, amenities, location and /or age. Concession — Discount or incentives given to a prospective tenant to induce signature of a lease. Concessions typically are in the form of reduced rent or free rent for a specific lease term, or free amenities, which are normally charged separately, such as parking. Congregate (or independent living with services available) — Congregate properties offer support services such as meals and /or housekeeping, either on an optional basis or a limited amount included in the rents. These properties typically dedicate a larger share of the overall building area to common areas, in part, because the units are smaller than in adult housing and in part to encourage socialization among residents. Congregate properties attract a slightly older target market than adult housing, typically seniors age 75 or older. Rents are also above those of the active adult buildings, even excluding the services. Contract Rent —The actual monthly rent payable by the tenant, including any rent subsidy paid on behalf of the tenant, to the owner, inclusive of all terms of the lease. Demand — The total number of households that would potentially move into a proposed new or renovated housing project. These households must be of appropriate age, income, tenure and size for a specific proposed development. Components vary and can include, but are not limited to: turnover, people living in substandard conditions, rent over - burdened households, income - qualified households and age of householder. Demand is project specific. MAXFIELD RESEARCH & CONSULTING, LLC 114 APPENDIX - DEFINITIONS Density — Number of units in a given area. Density is typically measured in dwelling units (DU) per acre — the larger the number of units permitted per acre the higher the density; the fewer units permitted results in lower density. Density is often presented in a gross and net format: • Gross Density — The number of dwelling units per acre based on the gross site acreage. Gross Density = Total residential units /total development area • Net Density - The number of dwelling units per acre located on the site, but excludes public right -of -ways (ROW) such as streets, alleys, easements, open spaces, etc. Net Density = Total residential units /total residential land area (excluding ROWS) Detached housing — a freestanding dwelling unit, most often single - family homes, situated on its own lot. Effective Rents — Contract rent less applicable concessions. Elderly or Senior Housing — Housing where all the units in the property are restricted for occupancy by persons age 62 years or better, or at least 80% of the units in each building are restricted for occupancy by households where at least one household member is 55 years of age or better and the housing is designed with amenities, facilities and services to meet the needs of senior citizens. Extremely low- income — person or household with incomes below 30% of Area Median Income, adjusted for respective household size. Fair Market Rent — Estimates established by HUD of the Gross Rents needed to obtain modest rental units in acceptable conditions in a specific geographic area. The amount of rental income a given property would command if it were open for leasing at any given moment and /or the amount derived based on market conditions that is needed to pay gross monthly rent at modest rental housing in a given area. This figure is used as a basis for determining the payment standard amount used to calculate the maximum monthly subsidy for families on at financially assisted housing. Fair Market Rent — Sherburne County 2015 Fair Market Rent EFF 1BR I 1 21311 J 1 31311 41311 Fair Market Rent $641 $796 $996 $1,403 $1,656 Floor Area Ratio (FAR) Ratio of the floor area of a building to area of the lot on which the building is located. MAXFIELD RESEARCH & CONSULTING, LLC 115 APPENDIX - DEFINITIONS Foreclosure — A legal process in which a lender or financial institute attempts to recover the balance of a loan from a borrower who has stopped making payments to the lender by using the sale of the house as collateral for the loan. Gross Rent —The monthly housing cost to a tenant which equals the Contract Rent provided for in the lease, plus the estimated cost of all utilities paid by tenants. Maximum Gross Rents for Sherburne County in 2015 are as follows: Gross Rent Sherburne County — 2015 Household — All persons who occupy a housing unit, including occupants of a single - family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements. Household Trends — Changes in the number of households for any particular areas over a measurable period of time, which is a function of hew households formations, changes in average household size, and met migration. Housing Choice Voucher Program — The federal government's major program for assisting very low- income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. A family that is issued a housing voucher is responsible for finding a suitable housing unit of the family's choice where the owner agrees to rent under the program. Housing choice vouchers are administered locally by public housing agencies. They receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program. A housing subsidy is paid to the landlord directly by the public housing agency on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Housing unit — House, apartment, mobile home, or group of rooms used as a separate living quarters by a single household. MAXFIELD RESEARCH & CONSULTING, LLC 116 Maximum Gross Rent EFF 1BR 2BR 3BR 4BR 30% of Median $455 $519 $585 $649 $702 50% of Median $758 $866 $975 $1,082 $1,170 60% of Median $910 $1,039 $1,170 $1,299 $1,404 80% of Median $1,214 $1,386 $1,560 $1,732 $1,827 100% of Median $1,517 $1,732 $1,950 $2,165 $2,340 120% of Median $1,821 $2,079 $2,340 $2,598 $2,808 Household — All persons who occupy a housing unit, including occupants of a single - family, one person living alone, two or more families living together, or any other group of related or unrelated persons who share living arrangements. Household Trends — Changes in the number of households for any particular areas over a measurable period of time, which is a function of hew households formations, changes in average household size, and met migration. Housing Choice Voucher Program — The federal government's major program for assisting very low- income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. A family that is issued a housing voucher is responsible for finding a suitable housing unit of the family's choice where the owner agrees to rent under the program. Housing choice vouchers are administered locally by public housing agencies. They receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program. A housing subsidy is paid to the landlord directly by the public housing agency on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program. Housing unit — House, apartment, mobile home, or group of rooms used as a separate living quarters by a single household. MAXFIELD RESEARCH & CONSULTING, LLC 116 APPENDIX - DEFINITIONS HUD Project -Based Section 8 - A federal government program that provides rental housing for very low- income families, the elderly, and the disabled in privately owned and managed rental units. The owner reserves some or all of the units in a building in return for a Federal government guarantee to make up the difference between the tenant's contribution and the rent. A tenant who leaves a subsidized project will lose access to the project -based subsidy. HUD Section 202 Program - Federal program that provides direct capital assistance and operating or rental assistance to finance housing designed for occupancy by elder household who have incomes not exceeding 50% of Area Median Income. HUD Section 811 Program - Federal program that provides direct capital assistance and operating or rental assistance to finance housing designed for occupancy of persons with disabilities who have incomes not exceeding 50% Area Median Income. HUD Section 236 Program - Federal program that provides interest reduction payments for loans which finance housing targeted to households with income not exceeding 80% Area Median Income who pay rent equal to the greater or market rate or 30% of their adjusted income. Income limits - Maximum households income by a designed geographic area, adjusted for household size and expressed as a percentage of the Area Median Income, for the purpose of establishing an upper limit for eligibility for a specific housing program. MAXIMUM RENT BASED ON HOUSEHOLD SIZE AND AREA MEDIAN INCOME HENDRICKS COUNTY -2015 Maximum Rent Based on Household Size 0' of Income) Min. max. Min. max. Min. max. Min. max. Min. max. Min. Max. Studio 1 1 $366 - $366 $610 - $610 $732 - $732 $976 - $976 $1,220 - $1,220 $1,464 - $1,464 1BR 1 2 $366 - $419 $610 - $698 $732 - $837 $976 - $1,116 $1,220 - $1,395 $1,464 - $1,674 2BR 2 4 $419 - $523 $698 - $871 $837 - $1,046 $1,116 - $1,394 $1,395 - $1,743 $1,674 - $2,091 3BR 3 6 $470 - $607 $784 - $1,011 $941 - $1,214 $1,254 - $1,618 $1,568 - $2,023 $1,881 - $2,427 4BR 4 8 $523 - $690 $871 - $1,150 $1,046 - $1,380 $1,394 - $1,840 $1,743 - $2,300 $2,091 - $2,760 ' One - bedroom plus den and two - bedroom plus den units are classified as 1BR and 2BR units, respectively. To be classified as a bedroom, a den must have a window and closet. Note: 4- person Hendricks County AMI is $69,700 (2015) Sources: HUD, Novogradac, Maxfield Research Inc. Inflow /Outflow -The Inflow /Outflow Analysis generates results showing the count and characteristics of worker flows in to, out of, and within the defined geographic area. Low - Income - Person or household with gross household incomes below 80% of Area Median Income, adjusted for household size. Low - Income Housing Tax Credit - A program aimed to generate equity for investment in affordable rental housing authorized pursuant to Section 42 of the Internal Revenue Code. The program requires that a certain percentage of units built be restricted for occupancy to MAXFIELD RESEARCH & CONSULTING, LLC 117 APPENDIX - DEFINITIONS households earning 60% or less of Area Median Income, and rents on these units be restricted accordingly. Market analysis —The study of real estate market conditions for a specific type of property, geographic area or proposed (re)development. Market rent —The rent that an apartment, without rent or income restrictions or rent subsidies, would command in a given area or "Market Area" considering its location, features and amenities. Market study— A comprehensive study of a specific proposal including a review of the housing market in a defined market or geography. Project specific market studies are often used by developers, property managers or government entities to determine the appropriateness of a proposed development, whereas market specific market studies are used to determine what house needs, if any, existing within a specific geography. Market rate rental housing — Housing that does not have any income - restrictions. Some properties will have income guidelines, which are minimum annual incomes required in order to reside at the property. Memory Care — Memory Care properties, designed specifically for persons suffering from Alzheimer's disease or other dementias, is one of the newest trends in senior housing. Properties consist mostly of suite -style or studio units or occasionally one - bedroom apartment - style units, and large amounts of communal areas for activities and programming. In addition, staff typically undergoes specialized training in the care of this population. Because of the greater amount of individualized personal care required by residents, staffing ratios are much higher than traditional assisted living and thus, the costs of care are also higher. Unlike conventional assisted living, however, which deals almost exclusively with widows or widowers, a higher proportion of persons afflicted with Alzheimer's disease are in two - person households. That means the decision to move a spouse into a memory care facility involves the caregiver's concern of incurring the costs of health care at a special facility while continuing to maintain their home. Migration —The movement of households and /or people into or out of an area. Mixed - income property— An apartment property contained either both income - restricted and unrestricted units or units restricted at two or more income limits. Mobility —The ease at which people move from one location to another. Moderate Income — Person or household with gross household income between 80% and 120% of the Area Median Income, adjusted for household size. Multifamily— Properties and structures that contain more than two housing units. MAXFIELD RESEARCH & CONSULTING, LLC 118 APPENDIX - DEFINITIONS Naturally Occurring Affordable Housing — Although affordable housing is typically associated with an income - restricted property, there are other housing units in communities that indirectly provide affordable housing. Housing units that were not developed or designated with income guidelines (i.e. assisted) yet are more affordable than other units in a community are considered "naturally- occurring" or "unsubsidized affordable" units. This rental supply is available through the private market, versus assisted housing programs through various governmental agencies. Property values on these units are lower based on a combination of factors, such as: age of structure /housing stock, location, condition, size, functionally obsolete, school district, etc. Net Income — Income earned after payroll withholdings such as state and federal income taxes, social security, as well as retirement savings and health insurance. Net Worth —The difference between assets and liabilities, or the total value of assets after the debt is subtracted. Pent -up demand — A market in which there is a scarcity of supply and as such, vacancy rates are very low or non - existent. Population —All people living in a geographic area. Population Density — The population of an area divided by the number of square miles of land area. Population Trends — Changes in population levels for a particular geographic area over a specific period of time — a function of the level of births, deaths, and in /out migration. Project -Based rent assistance — Rental assistance from any source that is allocated to the property or a specific number of units in the property and is available to each income eligible tenant of the property or an assisted unit. Redevelopment —The redesign, rehabilitation or expansion of existing properties. Rent burden — gross rent divided by adjusted monthly household income. Restricted rent — The rent charged under the restriction of a specific housing program or subsidy. Saturation —The point at which there is no longer demand to support additional market rate, affordable /subsidized, rental, for -sale, or senior housing units. Saturation usually refers to a particular segment of a specific market. Senior Housing —The term "senior housing" refers to any housing development that is restricted to people age 55 or older. Today, senior housing includes an entire spectrum of MAXFIELD RESEARCH & CONSULTING, LLC 119 APPENDIX - DEFINITIONS housing alternatives. Maxfield Research Inc. classifies senior housing into four categories based on the level of support services. The four categories are: Active Adult, Congregate, Assisted Living and Memory Care. Short Sale — A sale of real estate in which the net proceeds from selling the property do not cover the sellers' mortgage obligations. The difference is forgiven by the lender, or other arrangements are made with the lender to settle the remainder of the debt. Single- family home — A dwelling unit, either attached or detached, designed for use by one household and with direct street access. It does not share heating facilities or other essential electrical, mechanical or building facilities with another dwelling. Stabilized level of occupancy — The underwritten or actual number of occupied units that a property is expected to maintain after the initial lease -up period. Subsidized housing — Housing that is income - restricted to households earning at or below 30% AMI. Rent is generally based on income, with the household contributing 30% of their adjusted gross income toward rent. Also referred to as extremely low income housing. Subsidy — Monthly income received by a tenant or by an owner on behalf of a tenant to pay the difference between the apartment's contract /market rate rent and the amount paid by the tenant toward rent. Substandard conditions — Housing conditions that are conventionally considered unacceptable and can be defined in terms of lacking plumbing facilities, one or more major mechanical or electrical system malfunctions, or overcrowded conditions. Target population —The market segment or segments of the given population a development would appeal or cater to. Tenant — One who rents real property from another individual or rental company. Tenant -paid utilities —The cost of utilities, excluding cable, telephone, or internet necessary for the habitation of a dwelling unit, which are paid by said tenant. Tenure —The distinction between owner - occupied and renter - occupied housing units. Turnover — A measure of movement of residents into and out of a geographic location. Turnover period —An estimate of the number of housing units in a geographic location as a percentage of the total house units that will likely change occupants in any one year. Unrestricted units — Units that are not subject to any income or rent restrictions. MAXFIELD RESEARCH & CONSULTING, LLC 120 APPENDIX - DEFINITIONS Vacancy period —The amount of time an apartment remains vacant and is available on the market for rent. Workforce housing — Housing that is income - restricted to households earning between 80% and 120% AM]. Also referred to as moderate - income housing. Zoning — Classification and regulation of land use by local governments according to use categories (zones); often also includes density designations and limitations MAXFIELD RESEARCH & CONSULTING, LLC 121 Springsted MEMORANDUM TO: Members of the EDA Brian Beeman, Economic Development Director FROM: Mikaela Huot, Vice President/Consultant DATE: February 11, 2014 Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul. MN 55101 -2887 Tel: 651 - 223 -3000 Fax: 651 - 223 -3002 www.springsted.com SUBJECT: Tax Increment Financing, Tax Abatement and Business Subsidy Policy Updates The Elk River City Council and Housing and Redevelopment Authority (HRA) held joint meetings on Monday, November 4, 2013 and December 2, 2013 to discuss the City's existing tax increment financing (TIF) policy that was initially created in 1991 and later amended in 2000 and 2006. The policy contains the purpose, objectives of tax increment financing, policies for use of tax increment financing, project qualifications, application for TIF, and application review worksheet. The policy lists many City objectives regarding the use of tax increment financing, including creation of affordable housing; however the application review worksheet does not align with the scoring and review of potential housing projects. As a result of the joint meetings, staff and Springsted were asked to update the current policy to include the review of affordable housing projects. A general review and update of the existing TIF policy in conjunction with development of the housing review worksheet has also occurred and was reviewed and approved by the HRA at its February 3, 2014 meeting. It was also advised that updates be made to the existing business subsidy and tax abatement policies to ensure compliance with current statutory requirements and consistency. The purpose of this memo is to provide a brief summary of the recommended changes and potential areas of discussion for the updates. . Tax Increment Financing (TIF) Policy Updates 1. Inclusion of housing projects under Section III (b) (3) 2. Edit under Section III Q) 3. Addition of Section V Subsidy Agreement & Reporting Requirements 4. Edits to Section VI. Application Process for TIF (1) to be consistent with City's fee schedule 5. Edits to Section VI. Application Process for TIF (2) inclusion of housing projects 6. Edits to Section VII. Section E to be consistent with City's fee schedule 7. Minor edits to Section IX 8. Addition of Section X — Housing Review Worksheet Tax Abatement Policy Updates 1. Edits under Section VI. to update statutory reference 2. Edits to Section VII. A to be consistent with City's fee schedule 3. Edits to Section VII I E to be consistent with City's fee schedule Business Subsidy Policy Updates 1. Edits to Section I to update statutory reference 2. Edits to Section 11 to clarify definition of business subsidy 3. Edits to Section V(A.) to clarify intent 4. Edits to Section V(E.) to update minimum wage requirement a. Subject to discussion — some alternates to consider i. At least state or federal minimum wage, whichever is greater, exclusive of benefits ii. Wage of higher or $_ /hr or _% federal minimum wage, exclusive of benefits iii. % of most recent median wage figure for County iv. % of federal poverty level V. % of minimum wage 5. Removal of Section VI. (included under Section 11) 6. Edits to Section VII to be consistent with statutory requirement 7. Edits to Section VII I for clarification Thank you for the opportunity to be of assistance to the City of Elk River. We look forward to discussing in greater detail at the February 18, 2014 scheduled meeting. I can be reached at 651 - 223 -3036 or mhuot(cDspringsted.com with any questions or comments. City of Elk *4�0�ftk%� Joint Special Meeting of the Elk River City Council WVer and Housing and Redevelopment Authority Held at Elk River City Hall Monday, November 4, 2013 Members Present: Mayor Dietz, Councilmembers Westgaard, Wilson, Burandt, and Motin HRA Commissioners Chuba, Knester, and Toth Members Absent: None Staff Present: City Administrator Calvin Portner, Community Operations and Development Deputy Director Manager Jeremy Barnhart, Director of Economic Development Brian Beeman, Finance Director Tim Simon, Community Operations and Development Director Suzanne Fischer, and City Clerk Tina Allard Call Meeting to Order Pursuant to due call and notice thereof, the meeting of the Elk River City Council was called to order at 5:50 p.m. by Mayor Dietz. 2. Pledge of Allegiance The Pledge of Allegiance was recited. 3. Discuss Tax Increment Financing Housing Policy Mr. Beeman presented the staff report. He introduced Springsted Consultant Mikaela Hout. Ms. Hout discussed the following: • Role of an HRA /EDA. • Mission /objectives for tax increment financing. • Importance of establishing criteria /policies based on what the market will support. • Public purpose benefits. • City's policy for use of Tax Increment Financing • City's project qualifications. • What drives the need for public financing assistance. • What role the community wants to play to encourage development • Development efforts a city makes may affect the city's financial reputation. Ms. Hout reviewed a survey that was sent our earlier to Council and Housing and Redevelopment Authority members. Joint Special City Council & HRA Minutes Page 2 November 4, 2013 Councilmember Wilson questioned the minimum numbers and when they were established. Ms. Hout noted the policy was amended in May 2006 but adopted in 1991 and stated staff could check on how reasonable the numbers are for current tax increment financing projects. Mayor Dietz questioned Council and HRA on whether and how TIF should be used for housing. Ms. Hout stated they should consider if it is their objective that TIF be used for housing. If so, then the policy should have some language to allow the city to explore options. If no, then this change should be made clear in policy. She further stated the city could limit the types of housing they would like to consider, such as making it available only for senior housing. Commissioner Toth questioned the criteria for the scoring sheet and had concerns with it being too flexible and setting precedence when allowing exceptions. Ms. Hout stated the policy acts as general guidelines for the city and would be flexible and dependent upon community need. Mayor Dietz suggested the policy be flexible enough so each project can stand on its own. Councilmember Westgaard stated he is not opposed to keeping housing as a consideration in TIF districts but he is not sure if the city should narrow down to development versus a redevelopment scenario. He'd like to allow for TIF for housing but put it as a lower priority over other types of applications. He'd like to stay more on the conservative side from the risk component. Commissioner Kuester stated the commission hasn't covered much with housing and believes the current project is an opportunity to go to market when there is a need in the community for senior housing. She stated the Mayfield Study backs up the need for senior housing. Commissioner Toth commented he likes the set up the city has with the MN Central Housing Partnership. He agreed on the need for some housing work done in the city. He stated TIF may be an avenue worth exploring but it needs to be done carefully with a new evaluation criteria and looking to the long -term benefits for the community. Commissioner Chuba stated he feels it is important for the city to have life cycle housing with a range of affordable housing for the young and elderly. He stated the TIF financing should be flexible, but issues need to be worked out, such as how much TIF to allow, how long it should be good for, and how much increase in value is expected. NATUREI Joint Special City Council & HRA Minutes November 4, 2013 Page 3 Councilmember Motin stated he would not like to see TIF for housing purposes but if the city votes to have it, then the developer would need to meet some other need such as being in an area that also needs redevelopment or close to where it will help a commercial area. He stated the Maxfield Study was done from the viewpoint of, if you build it, they will come, rather than based on a community need. He also noted there are other funding options available for developers. Councilmember Burandt concurred with Commissioner Chuba regarding life cycle housing and felt the need for having different types of availability for all income levels. She felt there is a need to be flexible with the TIF policy and that TIF for housing should be included. She stated there will be more seniors in the near future and the city needs to plan for them coming back to their community. Councilmember Wilson stated housing has not been addressed over the years by the HRA. He stated he would like to address the city policy and limit TIF to senior housing. He stated there is a gap between what Guardian Angels offers, which is low income housing, versus affordable housing. Roger Derrick stated people are already here and they need help now. Commissioner Toth stated he has no issue with using TIF but the city needs well maintained criteria. Ms. Hout stated they would look at the changes that are needed to the existing policy and prepare a new scoring worksheet based on the discussion tonight. 4. Adjournment There being no further business, Mayor Dietz adjourned the meeting at 6:55 p.m. John J. Dietz, Mayor Tina Allard, City Clerk PV0WIIHEO6V INAMU � p Elk River Members Present: Members Absent: Joint Special Meeting of the Elk River City Council and Housing and Redevelopment Authority Held at Elk River City Hall Monday, December 2, 2013 Mayor Dietz, Councilmembers Wilson, Motin, and Westgaard (6:27 p.m.) HRA Commissioners Chuba, Kuester, and Toth Councilmembers Burandt and Commissioner Kuester Staff Present: City Administrator Calvin Portner, Community Operations and Development Deputy Director Manager Jeremy Barnhart, Director of Economic Development Brian Beeman, and Senior Administrative Assistant /Recording Secretary Jennifer Johnson I. Call Meeting to Order Pursuant to due call and notice thereof, the meeting of the Elk River City Council was called to order at 5:46 p.m. by Mayor Dietz. 2.1 Discuss Housing Survey and Develop Housing Tax Increment Financing Scoring Worksheet Mr. Beeman presented the staff report. He introduced Springsted Consultant Mikaela Huot, who reviewed the draft application scoring worksheet with the Council and commission members. The following areas of the worksheet were discussed and adjustments suggested: Under question 1 of the application worksheet, "The policy meets the criteria set forth in Section IV of the city's Tax Increment Financing policy," Ms. Huot reviewed the TIF policy sections asked if the overall policy should be adjusted. She noted the policy as currently worded remained in compliance with state statute. There were no comments regarding question 1. Under question 2, "Ratio of Private to All Public Investment in Project," Councilmember Motin suggested no points be awarded if the ratio was less than 2:1. Discussion ensued regarding whether or not to assign 0 points versus 1 point if some aspects of a project don't meet specific thresholds. Ms. Huot stated some projects may have areas that still qualify it as a worthy, viable project, but may have areas that don't meet all thresholds even by assigning 0 points. It was decided to consider each project in a case -by -case basis. Under question 3, "Job Creation in the City of Elk River," Commissioner Chuba noted his concerns with the number of jobs retained being viewed as significantly less valuable than the new creation of jobs. He felt it more a penalty not attempt to retain businesses who may wish to relocate. Councilmember Motin felt it important to remain consistent between both industrial and housing project types. Ms. Huot agreed and noted other cities differ across the board, depending upon whether or not retainage of current jobs is more important than creating new jobs. It was decided to lower the number of existing /retained jobs divided by a lower number instead of 10. Joint Special City Council & HRA Minutes December 2, 2013 Page 2 Under question 4, "Wage level of new jobs created /retained," Councilmember Motin had concerns with requiring a certain minimum number of jobs and felt an emphasis was placed on higher paying jobs. Commissioner Toth asked if these jobs were considered temporary, part time, or full time positions. Ms. Huot gave an example of a healthcare wage in an assisted living or memory care setting would produce a full time, higher wage job than a manufacturing type of job. She noted these figures come from the existing policy, which was based upon old figures and should be adjusted to a more current salary market. She stated the positions created would be on permanent, full time - equivalent positions. Under question 5, "Market Value /Tax Base Generation," Ms. Hout stated the focus should be on per unit value, not cost to construct. Councilmember Motin stated he felt the range from $95,000 /unit to $135,000 was too narrow and suggested a higher price per unit would also increase the quality of the unit. Commissioner Chuba noted values increase and decrease based upon the economy, and if these values were set in stone, it would be difficult to have gotten these figures about 4 years ago but felt a $40,000 variation isn't too far out of line in this area. Councilmember Wilson asked if the building's other amenities were factored into the unit cost. Ms. Huot stated it would depend upon how the assessor applied the value of the unit along with any amenities the building offered such as a community room. She also noted the project intention would also drive the per -price unit, such as if the project were an income -based property. Question 6, "Project provides housing that is restricted to persons 55 years and older" and question 7, "Project provides that at least 30% of the total units are three- bedroom or more" were discussed together. Ms. Huot asked the members to consider the focus of TIF and if it be towards senior housing projects or a multi -unit housing projects. Councilmember Wilson referenced the senior housing flowchart included in the staff report and asked if using the term "55 years" was proper and should be reworded to "senior housing." Ms. Huot recommended eliminating question 7 if the desire was to focus housing needs on senior housing. She then recommended changing the points for question 6 to 5 points instead of 3 points if the project provided housing that is restricted to seniors. Commissioner Toth expressed concerns with discrimination if only awarding points to senior housing. Ms. Huot stated the project could still generate enough points to qualify for financing even if the project wasn't specific for senior housing. Question 8, "Project proposes rehabilitation of existing housing, housing stock, and maximizes utilization of existing infrastructure" and question 9, "Project proposes a location near existing jobs, transportation, recreation, retail services, social services, and schools" were discussed together, and targeted areas of redevelopment. Commissioners Toth and Chuba asked who determines the criteria of the meaning of the word "near" in question 9. Ms. Huot states this was based upon comments received of the importance to position housing in areas of the city where the use a sidewalk or transportation services were already available. Commissioner Wilson felt this zeroes in on certain areas of the city that would qualify for that type of a development but felt society had decent means of transportation available to them. Mayor Dietz suggested changing the number of points in question 9 to 2 points instead of 4. Question 10 "Type of project" was discussed and the question was discussed if it matters if the property is owner - occupied or rental. It was determined to leave the points as is. Question 11 "Use" was discussed; the consensus was to eliminate question 11. NATUREI Joint Special City Council & HRA Minutes December 2, 2013 Page 3 Councilmember Westgaard suggested removing question 11 and suggested incorporating into question 10 or 11 more areas of use, such as mixed use or owner - occupied housing. Question 12 "Likelihood that the project will result in unsubsidized, spin -off development" was discussed. Question 13 "Bonus points" was discussed. Both questions were consistent with current policy. Ms. Huot summarized that based upon the comments this evening, the total points would adjust moderately from 45 to 38. After discussion, Mayor Dietz asked what the next steps would be. Ms. Huot stated she will make the final adjustments to the application worksheet that were discussed, make any final adjustments to the policy, and bring back to both the HRA and EDA for final review and approval. Once that is completed, the Council will have the final say in reviewing and approving the final policy and worksheet. There was some question as to the need for both HRA and EDA to review the final application and policy revisions. It was the consensus of both the Council and Authority to have the HRA and EDA review before bringing back to Council for final approval. 3. Adjournment There being no further business, Mayor Dietz adjourned the meeting at 6:40 p.m. Minutes prepared by Jennifer Johnson. John J. Dietz, Mayor Tina Allard, City Clerk PV0WIIHEO6V INAMU � p