5.3. SR 09-14-2009Item # 5.3.
MEMORANDUM
TO: Mayor & City Council
FROM: Catherine Mehelich, Director of Economic Development
DATE: September 14, 2009
SUBJECT: Concept Review -Elk River Station Apartments
Issue
The City Council is asked to review and provide direction to staff on the requests for city
support and waiver of fees for the proposed Elk River Station Apartments application for
Housing Tax Credits. At its September 21 meeting the Council will be asked to approve a
Resolution of City Support and submit a support letter from the Mayor for the developer's
application to MN Housing Finance Agency.
Project Description
Duffy Development Company is proposing to construct a 53-unit apartment building as
described in the attached narrative and preliminary site plans on Outlot D, Elk River Station.
The development is being marketed toward working families with 100% of the units being
rented at 60% of Area Median Income (AMI = $83,900) adjusted by household size. The
developer is experienced in constructing and managing similar development throughout the
metro area, which required similar requests for city assistance (see attached developer
background).
Planning Applications
The Planning Commission and City Council will review this project at their meetings on
September 15 and 21. These meetings will include public hearings for a Conditional Use
Permit (to amend the PUD, which requires a 60 unit apartment building) and also a site plan
(the PUD agreement requires public hearings and Council approval for all new
construction.
Based on the staff review thus far,. it appears that the building and site design is largely
consistent with the previously approved project, although there are some changes, which will
be highlighted for the Public, Planning Commission, and City Council review.
Concept Review -Elk River Station Apartments
City Council 9.14.09
Page 2 of 2
Request for City Support
Duffy Development is seeking support from the city for the benefit of its Section 42 Tax
Credit application which is to be submitted to the MN Housing Finance Agency (MHFA).
The Housing Tax Credit Program provides a 10-year reduction in income tax liability to
owners and investors in eligible affordable rental housing units produced as a result of new
construction.
The application for tax credits is reviewed based on a scoring system in a variety of
categories as established by MHFA and are included in the attached list of requests proposed
by the developer. The developer is able to achieve points in most of the categories by way
of flexibility in zoning code requirements currently allowed under the PUD or by ordinance.
MHFA also scores based on financial support provided by the city in the minimum form of
waivers, reductions or deferrals of fees. The estimated local government fees for the
proposed project are $500,000 (includes SAC/WAC, park dedication and building permit).
The developer is requesting the following forms of financial support from the city:
• A 5% reduction of local government fees in the amount of $25,000
• A 1-year deferral of SAC/WAC fees (equal to a project savings of $7,732)
At its September 8, 2009, meeting the Elk River Municipal Utilities Commission approved
the developer's request for aone-year deferral of WAC fees, contingent on City Council
approval of the remainder of the incentives to the developer. Like the city, ERMU indicated
concern about the precedent this sets.
While various independently issued market studies support the need for additional affordable
housing in Elk River, the city has not identified its role in supporting such developments
(e.g. financial assistance, additional conditions of the developer/development, etc). The city
has not typically provided financial assistance toward affordable housing developments,
except for the Jackson Place apartments which was primarily for the purpose of
redevelopment goals and the incentives were achieved through tax increment financing.
Attachments
• Elk River Station Apartments -Preliminary site plans
• Duffy Development Company -Background
• Elk River Station Clarification of City Support
S:\EDA\HRA\HOUSING\9 14 09 ER Station Apts.doc
ELK RIVER STATION APARTMENTS
PROJECT DESCRIPTION
The Elk River Station Apartments is proposed to be a four story structure
with underground parking in a similar architectural style as the surrounding
buildings. It's located in a new, growing part of the city, with a pristine
wetland along the north boundary and access to commuter rail to the south.
The site is very well located between retail and industrial job sources.
The building itself would be wood frame with an underground concrete
parking garage. It will be built with 100% maintenance free materials
consisting of brick and vinyl siding. There will be well lit surface parking
with one stall per unit plus 1/4 stall shown as proof of parking in a lawn area.
The site will be well landscaped as shown on the drawings. Amenities would
include aparry/gathering room, exercise room and site office. The
developer would like to add a tot lot along the north side of the building,
facing the wetland.
The market for this site is clearly working families. The site is well located
for access to the job market both within the city and commuting to the
Minneapolis market. We are setting our rents to attract the 60% of median
income families. That would be a minimum income earner of $20,000/yr
and up to a maximum of $50,340, adjusted for family size. Rents would be
in the range of $640 for a one bedroom, $750 for a two bedroom unit and
$850 for a three bedroom apartment. Heated garage parking would be
included in the rent.
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ELK RIVER STATION
CLARIFICATION OF CITY SUPPORT
1. Waiver of local government development fees
With 53 units, the City of Elk River is asked to reduce their total fees
of about $500,000 by 5% ($25,000).
2. Reduction of infrastructure costs
The city is allowing a reduction in the number of parking stalls that
their code requires. This will allow more grass areas that would have
been impervious surface for a savings of 2,650 sf at $3/sf totaling
$7,950.
3. Density bonus
The City of Elk River zoning code allows for only 38 units buildable
acre. Through the PUD process, we are allowing 53 units. Adding 15
units at $15,000/unit equals $225,000.
4. Flexibility in zoning code requirements
The project has been rezoned from single family to multi-family
through our PUD process. This would allow 38 rather than 8 units to
be built on the site. Adding 30 units at $15,000/unit equals a
$450,000 savings in land costs.
5. WAC/SAC reductions
The City of Elk River assesses the development a $172,950 SAC fee
and Elk River Municipal Utilities assesses the development a $84,800
WAC fee at the time of building permit. By deferring both fees for
one year a 3% interest, we realize a project savings of $7,732.
6. Fast-tract permitting
The City of Elk River is assisting the development by fast-tracking the
approval process. All plans and studies would normally have had to
be in by Aug 10th to be heard at our Sept. 21 st council meeting.
We've accepted plans, reports and studies in late Aug. and waived
others to get the required action before the state deadline.
Duffy Development: Real Estate Development and Construction Management
Page 1 of 1
Welcome!
Established in 1986, Duffy Development Company is a
developer and long-term holder of commercial and multifamily
residential properties operating in the three-state region of
Iowa, Wisconsin and Minnesota.
"The mission of Duffy Development Company is to create
and maintain q~tiality rental communities for responsible
family enjoyment; local mvmicipal pride and solid
corporate investment and growth. "
The Duffy Development Company commitment to its residents
and communities is evident as we continue to be the
managing general partner in all of the properties we've
developed. Long term ownership has aided greatly in
establishing accurate and reliable construction, operating and
reserve budgets. Our history and strong experience in
development and construction have lead to construction
budgets that have never had a construction cost overrun and
operating budgets that continually exceed expected cash
flows.
Thank. you for taking the time to visit our web site. You may
browse our current portfolio of rental communities and follow
along as our new communities evolve Pram the ground up.
This site is currently under construction, please contact us if
you have any questions. Thank you for your patience.
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O Copyright Duffy Development Company 204. Ali rights reserved.
9/10/2009
http://www.duffydevelopment.com/
Duffy Development: Rental Properties
Page 1 of 2
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