Agenda Packet 10-17-18 Work Session

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October 17, 2018, Work Session – Item 2 on the job site during construction of the project, and d) after construction, provide a report of the home city or zip code of all the construction labor workers. • Moderate-Income Housing Contribution. Obie Companies will contribute to moderate-income housing in the community by paying a moderate-income housing fee equal to 10 percent of the total exemption benefit for the 10-year benefit. Obie Companies intends to pay this fee upfront with a 5 percent discount (estimated total fee of approximately $400,000). This fee is intended to help support moderate-income housing projects in the community. • Project Design and Compatibility. The project design is designed to contribute to its downtown Eugene context. The development is designed for the human scale, will add a needed mix of uses, promote active transportation modes, support a more vibrant pedestrian realm, and increase safety through additional activity and “eyes on the street.” • Historic and Existing Housing Sensitivity. The project site does not have existing housing. The site is adjacent to three buildings that meet the MUPTE definition of “historic locale.” None of the three properties are part of the project and are unaffected by it. • Project Need. PNW Economics, an independent real estate consultant firm, provided a review of the financial information and pro-forma, including assumptions regarding rents, vacancy rates, operating costs, lender underwriting criteria, interest rates, and reasonable rate of return. (See Attachment E for the analysis.) The consultant tested the financial assumptions used in the analysis and concluded that the project would not be viable without the availability of the exemption, using the reasonable assumptions outlined and that MUPTE is critical to the success of the project from a financial feasibility perspective. The Review Panel noted that Project Need involves many variables that are hard to predict. The Review Panel concluded that project need was demonstrated in the application. The majority of the panel members agreed that a 10-year exemption was warranted. Two panel members agreed that only a three-year exemption was warranted and submitted a minority report that is included in Attachment C. Tax Impact Gordon Lofts will generate property tax revenue on the land. The estimated property tax paid will be approximately $6,500 in year 1. During the exemption period, the total taxes to be paid on the land would be approximately $75,000 and the total estimated forgone revenue would be approximately $4.3 million. After ten years, the entire development will be taxable, estimated at $490,000 in year eleven. Need for Tax Exemptions to Encourage New Ground Floor Commercial The applicant requested an exemption on the proposed new commercial space located on the ground floor. The commercial ground floor improves the quality of the streetscape, by creating a higher likelihood of achieving vibrant street-level activity than an all-residential alternative. It improves the quality of the apartments, by raising them away from direct interaction with the sidewalk. It also creates a more interesting building, giving more people ways of interacting with it. There are risks associated with tenanting ground floor commercial at lease rates that can support the cost of constructing the space. Additionally, mixing uses within one building typically adds construction costs and timing issues related to building code requirements. Allowing the