City Council Regular Meeting


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  Consent Calendar   4.A.       
Meeting Date: 05/13/2019  

Agenda Item:
Resolutions of support for affordable Housing Tax Credit applications - Joseph Development, Gateway West, and Colonial Square.
Recommendation/Action(s):
Adoption of the attached resolutions.  
Summary:
The City of Mankato received notice of three Low-Income Housing Tax Credit applications that will be submitted to Minnesota Housing in June. Affordable housing development and renovation often requires funding provided by the Low-Income Housing Tax Credit Program. Each state Housing Finance Agency is awarded an allocation of tax credits from the US Treasury Department for the development and rehabilitation of affordable housing.
 
Minnesota Housing determines who will receive the tax credits through a competitive process laid out in the Qualified Allocation Plan. This very competitive process scores applications on a statewide basis providing points for local government support, project based vouchers (PBV), and evidence of local need as expressed in local planning processes. Award of the tax credits require that rents be affordable for 15 years with rent structures and reporting coordinated through Minnesota Housing. The provision of PBV to leverage additional affordable housing is a goal in the 2081-2022 Public Housing Authority Five Year and Annual Plans, and providing leverage funding using CDBG funds is a goal in the 2018 and 2019 CDBG Action Plans.

Project Based Vouchers are Housing Choice Vouchers that are dedicated to a particular rental project. The EDA will contract with the owner of the development to provide not more than 25 percent of the building with PBV rental assistance for a set time period, usually 15 years for a tax credit project. PBV assistance guarantees that the development will serve very low-income residents while providing a cash flow (housing assistance payment) to the project. History has shown that whenever a new tax credit building is constructed, voucher holders want to live there. Community Partners Research, in conducting housing analysis, have reported there are no vacancies in the affordable tax credit developments in Mankato. Lloyd Management reports that they have waiting lists for Cherry Ridge and Sibley Parkway Apartments, Common Bond also maintains a wait list for Dublin Crossing and Rosa Place expects to be fully leased with the building opening mid-June. 

To provide project based vouchers the EDA received permission from HUD to issue a Request for Proposal. With HUD approval, the EDA can project base up to 20% (86 vouchers) of the voucher allocation or budget authority. At this time 26 vouchers are project based by the EDA with six additional to be leased beginning in June of this year. By project basing vouchers, the EDA is assured that voucher holders will have the opportunity to reside in desirable, newly renovated or constructed housing that is energy efficient.

Three proposals were received requesting support. Two are new development projects – Gateway West Apartments and Rosa Place II. One is a rehabilitation project of an existing building – Colonial Square Apartments. Below is a summary of each project.   

Southwest Minnesota Housing Partnership – Gateway West Apartments
This is a new construction, 80 unit, affordable housing project at 141 Sibley Parkway in Mankato. This project will include 20 one bedroom units, 40 two bedroom units, and 20 three bedroom units with income and rent structured as follows:
  • 30 units will be set aside as supportive housing units. Of these, eight will be reserved for High Priority Homeless through the regional Coordinated Entry System. There will be a mix of bedroom sizes for all 30 of these supportive housing units.
    • 30 units will be set aside as supportive housing units. Of these, eight will be reserved for High Priority Homeless through the regional Coordinated Entry System. There will be a mix of bedroom sizes for all 30 of these supportive housing units.
      • Rents for the GRH/Housing Support assisted units made up of the eight High Priority Homeless referrals broken down as two-1BR with rent at $722, four-2BR with rent at $722, and two-3BR with rent at $722.
      • Rents will be restricted at 30% of LIHC for 15 Project Based Housing Choice Vouchers broken down as five-1BR with rent at $694, five-2BR with rent at $935, and five-3 BR with rent at $1321. 
    • Rents will be restricted to 60% of LIHC broken down as 11-1BR with rent at $694, 27-2BR with rent at $775, and 11-3BRs with rent at $895.
    • Rents will be restricted to 80% of LIHC broken down as two–1BR with rent at $730, four-2BR with rent at $880, and two-3BR with rent at $1015.
    • Monthly utility costs are estimated at between $35 and $43.
Gateway Apartments is requesting $100,000 in funds under the Community Development Block Grant program, an allocation of fifteen (15) project-based vouchers and establishment of a tax increment financing district. TIF would be used to reimburse the city for costs incurred related to the demolition and environmental assessment and to reimburse the developer for costs associated with the substandard conditions of the site, including the need to undertake environmental remediation, specialized foundations, and infrastructure improvements. A new TIF analysis is being completed to account for the fact that the project now includes 80 units and a 10,000 square foot childcare center. TIF would be provided on a pay-as-you-go basis and will be further reviewed and discussed under the terms of the development agreement. 
 
Joseph Development, LLC – Rosa Place II
This is a new construction, 51 unit, affordable housing project at the corner of Timberwolf Drive and Heron Drive in Mankato. This is a second phase for the project and will be built adjacent to Rosa Place I. Rosa Place II will include a mix of 12–1BR units with rents at $668-687, 22–2BR units with rents at $799-968, and 15-3BR units with rents at $1,111. Eight-1BR units will be assisted under the GRH/ Housing Support program through Blue Earth County. 100% of units would be affordable to households with income at or below 60% of the area median income.
 
Tapestry Companies, LLC – Colonial Square Apartments
This is a rehabilitation project to preserve 77 units of affordable housing at 300 Ramsey Street in Mankato. Colonial Square is a Section 8 property made up of 54–1BR units with rents at $655 and $678 and 23–2BR units with rents at $806 serving the needs of low income, disabled households at or below 50% of area median income. Tenant rents are subsidized based on 30% of adjust gross income. This project is at risk of converting to market rate rental housing without a successful tax credit application and financial support from additional resources. Colonial Square Apartments is requesting $100,000 in funds under the Community Development Block Grant program, with $25,000 from the 2019 allocation and $75,000 from the 2020 program year, should sufficient funding be allocated to the City in 2020. 

The requested action is adoption of the three resolutions in support of each project. The Southwest MN resolution formalizes the support for the project, approves $100,000 in Community Development Block Grant funding, an allocation of project-based vouchers and indicates that the city will work with Southwest Minnesota Housing Partnership to establish a tax increment financing district if the project were awarded tax credits. The Colonial Square resolution formalizes support for the project and approves $25,000 in CDBG funding for 2019. The Rosa II resolutions formalize support for the project. 

With concern about negative impact on the chance to be awarded tax credits with multiple projects being supported, staff has received feedback from Minnesota Housing indicating projects are scored based on a long list of factors and criteria and only a certain number of points are based on local government support. If there is any competition, it is on a statewide level, not a local level.
 
Attachments
Resolution - Rosa Place II
Resolution - Gateway Apartments
Resolution - Colonial Square
Rosa Place II Project Summary
Gateway Apartments Project Summary
Colonial Square Apartments Project Summary


    

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