UGB IMPLEMENTATION: TEAM CONCLUSIONS ON FIRST STEPS Bend City Council Work Session 3/21/2018 Staff team, consulting team
COUNCIL GOALS, OBJECTIVES, ACTIONS Goal 1: Implement the approved plan Return on Investment Study: Urban Renewal, Housing Tax Exemption Programs Report provides details, analysis, background, initial conclusions Informs where to do first Area Plan (in UGB expansion) Informs where to consider new Urban Renewal District Informs where housing tax exemption programs are appropriate Approach to ROI Study directly driven by other council objectives Work session format for learning and discussion
OVERVIEW OF APPROACH 1. Assess areas most ready for development now, with long-term potential Land use characteristics and revenues o Informs what gets built Infrastructure capacity and costs o Informs readiness of areas Input from public entities, city departments o Informs partnerships, synergies 2. Conclusions regarding readiness in short-term
OVERVIEW OF APPROACH: CONTINUED 3. Implementation Actions apply to areas that are ready Area Plan Urban Renewal Districts Housing and development incentives testing o Multiple Unit Tax Exemption o Vertical Housing Development Zones o SDC Financing 4. Form initial conclusions blending incentives with areas ready in shortterm
APPROACH: AREAS OF ANALYSIS North Area: o Northern Triangle o OB Riley Northeast Edge The Elbow Core: o Century Drive o Bend Central District o KorPine o East Downtown o Inner Highway 20/Greenwood
2028 LAND USE UGB expansion areas build out, Core conservative Housing o Highest number of units: Northeast Edge, Core Areas o Mix: Elbow and Core most mixed, more affordable housing types North and Northeast Edge mostly Single-family Detached Employment o Highest number of jobs: The Elbow, Core Areas o Mix: The Elbow, Core, North Areas
UGB expansion areas mostly stable 2040 LAND USE Core area redevelopment - double jobs/residents by 2040 (from 5-12K) Example: Expansion Example: Core
SDCS: TRANSPORTATION AND SEWER, 2028 AND 2040 Assumptions derived from the Envision Tomorrow model based on the Bend CDD Master SDC Calculator 2016-2017, July 1st 2016 update
PROPERTY TAXES: 2028 AND 2040 Total property tax estimates. City s share is 20.8%, with an assumed collection rate of 95%
Transportation Sewer INFRASTRUCTURE CAPACITY AND COST ANALYSIS o Consistent with adopted Transportation Systems Plan o Integrated Land-Use Transportation Plan, Bend Central District Multi-modal Mixed Use Area, Central Westside Plan o Transportation plan update could change findings o Based on update to upcoming sewer plan could change findings Class 5 estimates Need more detail in future work (Area Plan) to assign costs to property Future decisions could impact costs, project timing, priorities
PAST, CURRENT INVESTMENTS SERVE THE FUTURE Approximately a quarter billion $ in investments
NORTH AREA Transportation - $71M near term transportation Sewer $18-22M CIP project Sewer - $29M cost prior to development Sewer - $11M cost with development Complex and more time for service
NORTHEAST Transportation - $50M near-term Sewer - $18-22M CIP project Sewer - $29M cost prior to development Sewer - $14M with development Not as complex, need time for sewer service
THE ELBOW Transportation - $70M near term Sewer immediate capacity in interceptor Sewer - $7M local improvement and 10 year projects Sewer mostly ready, less complex and time to serve
CORE AREAS Transportation - $27M near-term Sewer $2M CIP project Sewer no major additional needs until 10 years Least complex and time consuming infrastructure projects for service
SEWER CONVEYANCE SYSTEM IMPROVEMENTS Sewer Public Facility Plan (PFP) update underway Major system improvements for entire UGB All areas will be served
CONTEXT FOR RATE STRUCTURE 2018-2022 Sewer Capital Improvement Projects Lift Stations (Retrofits, Decommissioning, Drake) 2017 Sewer Rate Plan did not include Septic to Sewer project costs. WRF Improvements Plant Interceptor Rehab North Interceptor Phase I Collection Line Improvements (Olney Parallel, Amethyst/Mahogany, Condition Assessments) Planning Documents (WRF Facilities, PFP, CSMP) Collection System Enhancements Short Term: flexibility within a 6% rate increase for City contribution of 50% towards current Septic to Sewer project area. Long Term: rate increases are less certain. Septic to Sewer
PUBLIC SERVICES Interviews and meetings with park, school, and library district, police and fire departments, Oregon Department of Transportation (ODOT), private utility providers, and irrigation districts UGB expansion areas: o The Elbow has the highest concentration of synergies and benefits Core areas: o Potential benefit for the Deschutes Public Library o Development supports Climate Action Resolution goals
DISCUSSION OF EVALUATION SUMMARY MATRIX Evaluation Summary Matrix summarizes details in report See hard copy for discussion Summarizes details in report Q/A with Council and team Break (10 minutes)
IMPLEMENTATION AND HOUSING INCENTIVES Overview of remaining presentation: Recent development activity, interest Development economics and role of incentives Area Planning Urban Renewal (UR) Pre-feasibility Study findings Housing development incentives testing Team conclusions based on work to date Outline next steps
DEVELOPMENT ACTIVITY: CORE AREA
DEVELOPMENT ACTIVITY: REAL CORE AREA PROPOSALS
DEVELOPMENT ECONOMICS Public Policy Highest and Best Use Land Development Can Occur Market Feasibility Rent and Construction Cost Fixed Capital Capital is mobile
Project Operating Pro Forma DEVELOPMENT ECONOMICS: ROLE OF INCENTIVES Revenues Apartment Rent Retail Parking Costs and Expenses Debt Service Operations Property Tax Vacancy Reserves Returns Net Cash Flow
AREA PLAN OVERVIEW: WILSONVILLE
AREA PLAN OVERVIEW: CONTINUED
UR PRE-FEASIBILITY OVERVIEW: TAX INCREMENT FINANCING
1. Urban Renewal Pre-feasibility Study: UR PRE-FEASIBILITY OVERVIEW: KEY FINDINGS To fund new projects, creating new URAs is more beneficial than expanding existing URAs. TIF can be part of the solution, but is not a silver bullet Cash flow limits funding in early years Careful design of incentives (especially tax abatements) can minimize short-term revenue loss
UR PRE-FEASIBILITY OVERVIEW: CONSIDERATIONS 1. Bend Central District (and adjoining small opportunity areas): Could support redevelopment objectives: streetscape improvements, bike and pedestrian improvements Storefront improvements Potentially affordable housing 2. KorPine: Could be combined with Central District Could support infill + connectivity needs
HOUSING DEVELOPMENT INCENTIVES TESTING 1. Purpose: Test the financial impact of several development incentives on prototypical building types within several submarkets of Bend Impact of layering these incentives Magnitude of the benefit 2. Vertical Housing Tax Exemptions (VHTE) and Multiunit Property Tax Exemptions (MUPTE): reduces operating costs through limited duration and partial property tax exemptions 3. SDC Financing: converts large, upfront costs to ongoing operating cost, defers first payment to after project cash flow stabilization (12 months)
INCENTIVES: 5-OVER-1 PROTOTYPE HIGHEST RENT CENTRAL SUBMARKETS 5-Over-1 Typology Internal, structured and/or tuck-under parking The Tax Trade-Off 24 new workforce units for a 10 year abatement of $1.7 million That s only $77,000 / unit less than half what a unit costs to build Target No Incentives + SDC Financing (current*) + SDC Financing (improved*) + Vertical Housing (4 floors = 80% exemption) + 25% affordable @ 80% AMI Average Res. Rent $1.98 / sq ft $1.88 / sq ft Cash-on-Cash 10% 7.2% 8.7% 9.3% 12.1% 10.3% Levered IRR (IRR on Cash Before Tax Flows) 20% 14.6% 16.4% 17.3% 20.6% 18.6% 5-over-1 Example: Hoyt 20, GreenLight Development, Portland
INCENTIVES: 3-OVER-1 PROTOTYPE MODERATE RENT INNER SUBMARKETS 3-over-1 Typology rear surface and tuck under parking Needs urban parking ratios to be successful because relies on mostly rear surface and tuck under parking. Target No Incentives + SDC Financing (current*) + SDC Financing (improved*) + Vertical Housing (3 floors = 60% exemption) + 25% affordable @ 80% AMI Average Res. Rent $1.84 / sq ft $1.68 Cash-on-Cash 10% 7.9% 9.7% 10.7% 12.5% 10.4% Levered IRR (IRR on Cash Before Tax Flows) 20% 15.6% 17.7% 19.0% 20.8% 18.5% * Current: 10 yrs @ 7% without Park SDC; Improved: 10 yrs @ 7% including Park SDC and 1 year deferral with interest 3-over-1 Example: Jack Menashe, N Williams, Portland OR
HOUSING AND DEVELOPMENT INCENTIVES TESTING: KEY FINDINGS Current rents make vertical development a challenge without incentives Incentives can make desired development types pencil but multiple, layered tools are required (no silver bullet) VHTE/ MUPTE enable income restricted housing at no direct cost to city VHTE has narrower applicability than MUPTE only on mixed-use buildings fronting main streets Flexibility of MUPTE could be good fit for more suburban, horizontal mixed-use areas (not in URAs) SDC financing has significant benefit but needs full taxing district participation
BLENDED CONCLUSIONS 1. Area readiness (city and partner infrastructure) today: The Elbow and Core areas 2. Implementation: Area Plan for the Elbow Urban Renewal for some, but not all of the Core area: o Consider Bend Central/KorPine + adjoining smaller areas 3. Incentives (following direct talks with taxing districts): 1. Targeted use of VHTE, MUPTE for some of Core areas 2. MUPTE could work in expansion areas as well
NEXT STEPS 1. Council discussion, feedback, level of agreement before formal direction 2. Consider focus on big rocks of Area Plan/New Urban Renewal first 3. Direct staff to begin allows for adjustments and refinements Targeted use of VHTE, MUPTE for some of Core areas MUPTE could work in expansion areas as well