M E M O R A N D U M. Front Street Urban Renewal District, 503 East Front Street TIF Request

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1 M E M O R A N D U M TO: FROM: MRA Board Annette Marchesseault, RLA, Project Manager/Redevelopment Specialist DATE: September 1, 2016 SUBJECT: Front Street Urban Renewal District, 503 East Front Street TIF Request Overview Property located at 503 East Front Street has been donated to the North Missoula Community Development Corporation (NMCDC) to facilitate the creation of affordable housing. The property currently contains an unoccupied apartment house with ten units. The original part of the existing building was one of the earliest log cabins in Missoula. Several additions were built on in an ad hoc manner over time. In January 2015 the City of Missoula Building Division found the existing building unsafe to occupy due to a number of electrical, mechanical, plumbing and structural deficiencies and red tagged the structure. Hazardous materials also were identified in the existing building during an EPA funded Phase II analysis. Project Description NMCDC is proposing to deconstruct the existing apartment house and replace it with seven affordable townhouses, with incorporated garages that will be accessed from an interior courtyard space. The buildings will be wood framed buildings with hardie plank siding, similar in appearance to NMCDC s Clark Fork Commons townhouses. The project also includes curb/gutter and sidewalk replacement in the public right of way. All utilities needed for the development already are in place. The townhomes, to be known collectively as Lee Gordon Place, will be part of a community land trust. Homebuyers will own the buildings, but NMCDC will maintain ownership of the land. NMCDC has petitioned for tax exempt status for the land trust. Each homeowner will enter into a 75 year renewable ground lease. The lease will include a resale formula (approved by HUD) that restricts the amount of equity a homeowner is allowed to take from the home when they sell, ensuring that the homes will stay affordable to low to moderate income households with no additional subsidy. 140 West Pine Street Missoula MT phone fax mra@ci.missoula.mt.us

2 Following is a description of the seven units: a) One (942 sf) will be two bedroom, single story, fully handicapped accessible. Estimated sale price: $130,000 b) Four (approximately 1,100 sf) will be two bedroom, three story, with 1.5 bathrooms. Estimated sale price: $135,000 c) Two (approximately 1,433 sf) will be four bedroom, three story, with 1.75 bathrooms. Estimated sale price: $150,000 The total sale price for all homes is estimated at $970,000. Request for Tax Increment Assistance The applicant is requesting $79,720 under the Tax Increment Financing Program for building deconstruction and for improvements within the public right of way. Following is the breakdown of estimated costs: Deconstruction $ 49,520 Foundation Removal $ 12,000 Curb/gutter, sidewalk $ 18,200 TOTAL TIF REQUEST $ 79,720 Front Street TIF application projects are evaluated pursuant to the following criteria: GEOGRAPHIC LOCATION The project is located in the Front Street Urban Renewal District on Front Street in the Heart of Missoula neighborhood. ECONOMIC DEVELOPMENT POTENTIAL Tax Generation The 2015 tax on the property was $4, Based on the established market value, FY 2016 local mil levy assessments, and current methods of determining property taxes for townhouses, taxes could increase to approximately $15,224, which is a 240% increase. This excludes land value, assuming a tax exempt land trust. Economic Stimulus The project is being funded from several sources, including donated land, local and federal grants (HOME, Brownfields, CDBG and MRA), and a construction loan from a local lending institution. The total project cost is estimated at $2,305,551. Construction costs are estimated at $1,546,705. The ratio of MRA funding to overall project cost is approximately 1:30. The ratio to construction costs is approximately 1:19. These ratios are well within the range considered acceptable in MRA funded projects. 140 West Pine Street Missoula MT phone fax mra@ci.missoula.mt.us 2

3 Employment Generation The project will not create permanent jobs. Construction jobs will be generated during the construction period. NMCDC staff will manage home sales as it has with other similar projects, working with Portico Real Estate for marketing and buy/sell agreements. Elimination of Blight This project is a nice example of smart urban redevelopment. It is being developed on a previously disturbed site that already is served by all necessary utilities, and will replace a decrepit and uninhabitable structure that has been vacant for more than 18 months with seven new owner occupied townhouses. It is located on Mountain Line s Bus Route 1, and is within convenient walking distance of retail shops, restaurants, parks, trails, and cultural centers. The architectural style and scale of the proposed buildings shown in the conceptual elevations appears to fit well into the neighborhood. Locating the garage access from an interior courtyard space keeps the front facades of the building inviting at the street face. The second and third stories of the front buildings will bridge the driveway, reinforcing the street edge along the face of the property. The land trust and restrictive resale formula will ensure much needed housing in the urban core for households earning less than 80 percent of the area s median income. SPECIAL OPPORTUNITIES OR EFFECTS Improvement of Public Services All public services necessary for this type of development already are in place. The project will improve curb/gutter, sidewalk and landscaping in the public right of way. Special or Unique Opportunities Given the historic significance of the existing building, the applicant has contracted with a graduate student team from the University of Montana to document the history of the building during the deconstruction process. Members of the team are trained in archaeological survey techniques specific to urban archaeology and have a strong foundation in local Missoula history and archival research. Urban Renewal Goals This project aids MRA in furthering several of its goals in the Front Street URD by replacing a blighted, unsafe building with new, attractive, affordable housing. The project is compatible with the City s plans to convert Front Street from a one way to a twoway street. Impact Assessment This project will have a positive impact on the affordable housing market. It also will replace an unsafe and uninhabitable building. The existing building contains asbestos in vinyl flooring, duct wrapping material and insulating materials, and it also is likely that lead based paint is present throughout the interior and exterior of the structure, including in topsoil. The applicant has received a $125,000 City of 140 West Pine Street Missoula MT phone fax mra@ci.missoula.mt.us 3

4 Missoula Brownfields Grant to remove these hazardous materials during the deconstruction/demolition phase. Temporary dust and noise will occur during demolition and construction, and there may be some temporary disruption of traffic on Front Street during construction. LOGISTICAL CONSIDERATIONS Financial Assistance The project is being financed with donated land, several grants and a construction loan from a local bank. Project Feasibility The costs and financing plan submitted to Staff seem reasonable. Nearly 25% of the total project cost is attributed to soft costs such as developer fees, consultant fees, legal and real estate fees, and grant administration, etc. Due to the nature of the financing, this amount is considerably higher than standard private projects. However, those costs are generally equivalent to grant funds already received and do not appear to impact the ability of the developer to complete the project. The remainder of construction financing is in place through a local lending institution. Developer Ability to Perform The applicant has successfully completed three similar projects in Missoula: Clark Fork Commons, Burns Street Commons and Whittier Court. Timely Completion The developer is expecting to have hazardous material removal and deconstruction done by the end of September 2016, and final construction complete in October Staff feels this is ambitious but doable. Payment of Taxes All taxes are current. ADDITIONAL DISCUSSION: While the applicant has not included landscaping in the public rightof way in the TIF funding request, this would be an acceptable use of TIF funds. The width of the boulevard is very generous at this location on Front Street, and there is a gap at this site where street trees are missing. There appears to be space for two large stature street trees. The estimated cost for establishing lawn, providing two street trees, and installing irrigation in the boulevard is approximately $1,500. Staff recommends including this in the TIF request. There are currently $663,795 in uncommitted funds in the Front Street URD. RECOMMENDATION: Staff believes this project addresses Front Street URD redevelopment goals in terms of design and form. Therefore, Staff recommends the MRA Board approve TIF assistance in an amount of $81,220 for building deconstruction, curb/gutter and sidewalk replacement and landscape improvements in the public right of way. Payments will be made 140 West Pine Street Missoula MT phone fax mra@ci.missoula.mt.us 4

5 on a reimbursement basis based on copies of contractor and vendor invoices showing the actual work completed and materials used. Conditions: Final building design to be fundamentally the same as the conceptual design provided with this TIF application. Detailed site plan and final building design documents, including elevations indicating materials and colors, to be submitted to MRA Staff for review prior to distribution of TIF funds. Site design to include large stature street trees. Deconstruction documentation to be submitted to MRA prior to reimbursement. 140 West Pine Street Missoula MT phone fax mra@ci.missoula.mt.us 5

6 503 East Front Street, Existing Conditions NMCDC s proposed new townhouse development at 503 East Front Street would be similar in appearance to Clark Fork Commons, shown above.

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