Item 6: MUPTE for "The Danville" at 740 East 13th Avenue - p 1-15

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After reviewing this MUPTE application against the public benefit scoring criteria in the Standards and Guidelines, staff determined that the proposed development earned 150 points. Points were awarded through the following benefits: Density – Exceeding the minimum: 50 points earned for units over the minimum density (there is no minimum at this location). The criteria allows 10 points for each unit in excess of minimum, with 50 maximum points. Green Building- LEED: 100 points are earned for a LEED-certified building. It is projected to be LEED Gold or Platinum. The proposed development also will also provide 30 parking spaces in excess of what is currently required. Since the property is not located in the Residential Parking Program area no points are awarded for providing parking. The applicant initially intended to provide four low-income housing units as part of the development. Recently, the applicant determined that due to the current lending environment and the additional expenses associated with a LEED building, he could not guarantee rents affordable to tenants at 60% of median income. The applicant also has expressed an interest in converting some or all of the housing to ownership in the future and is designing the building accordingly. However, the timing is not satisfactory to award points for this purpose. Impact and Need Tax Exemptions to Encourage Housing: The City and other local taxing districts forgo revenue when property is exempted from taxes. This project proposes new construction on a property that has been historically owned by tax-exempt institutions. It was owned by the Lane Memorial Blood Bank and then Sacred Heart Hospital. Therefore, no taxes have been collected at this site for an extended period. This project will immediately generate property taxes on the land and on the ground floor commercial space. After ten years the entire development will be taxable, generating an estimated $92,000 on the housing portion in year 11. The submitted application indicates that the MUPTE is vital to the development and if it is denied the property will be sold for another purpose. Financial Analysis Both staff and the members of the City’s Loan Advisory Committee have reviewed the financial analysis for this proposal and have determined that the MUPTE request is necessary for this project to proceed as planned. The Pro-Forma for Midtown Terrace (below) shows two key reasons that the project would not be built without MUPTE. First, the debt coverage ratio (Net Operating Income (NOI) divided by debt service) is 1.15, below the amount needed to qualify for conventional financing. (The common bank preference is for 1.25 or higher.) Second, the perceived risk is high demonstrated by the Cash on Cash return (Cash Z:\CMO\2010 Council Agendas\M100208\S1002086.doc