Item 4: MUPTE for Student Housing Project

Home Browse Search

financial analysis.) The MUPTE tax exemption lowers annual operating costs by approximately $846,000, which produces higher net operating income and results in a projected nine percent Cash on Cash rate of return. Staff and the Loan Advisory Committee reviewed the pro-forma, including assumptions regarding lease rates, operating costs, capitalization rate, lender underwriting criteria, interest rate assumption, and market expected rate of return. The Committee confirmed the financial assumptions used in the analysis and unanimously concluded that the tax exemption is needed to generate a return on investment sufficient to attract the required equity investment. Tax Impact th Olive & 13 Student Housing will generate property tax revenue on the land. Staff estimates the property tax paid will be $100,000 in year 1. After ten years, the entire development will be taxable, generating an estimated $1.2 million in year 11. If the project does not move forward, tax revenue will be minimal on the chronically underdeveloped site. (See Attachment G for the estimated allocation of tax payment for this project.) Need for Tax Exemptions to Encourage Ground Floor Commercial Capstone proposes the potential inclusion of up to 5,000 square feet of ground floor commercial space. The ground floor commercial use is considered to provide public benefit as commercial/retail uses in this area will support downtown vitality, and the opportunity for project residents and others in the area to easily walk to the proposed commercial/retail services. 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 related to building code requirements. Allowing the MUPTE to include the ground floor commercial/retail space will improve the financial feasibility of incorporating the space into the project and stimulate a desired form of mixed-use development. Right-of-Way & Alley Vacation As part of the redevelopment of the site, the applicant proposes to realign and improve the public bicycle and pedestrian connection through the site, between Olive and Willamette Streets. The new public path will be within a 20-foot-wide right-of-way that the applicant proposes to dedicate just south of the thth existing West 12 Avenue right-of-way. The applicant proposes to vacate the existing West 12 Avenue right-of-way to facilitate redevelopment of the site and realignment of the bicycle and pedestrian connection. The new right-of-way as proposed would not be open to vehicular use. The MUPTE resolution contains the necessary requirement to ensure that the proposed realignment of the public bicycle and pedestrian connection maintains the public interest. The applicant agreed to provide these improvements. All improvements will be subject to a more detailed review for design elements during the Privately-Engineered Public Improvement (PEPI) permit process, in which the applicant pays for all associated engineering, construction, and inspection costs related to construction of improvements for public areas. The design will be subject to the City Engineer’s approval. As part of the PEPI permit process, the improvement cost will need to be bonded prior to issuance of the complete structure building permit for the housing north of the right-of-way to be vacated. (The AIS for the public hearing on the vacation contains more detail.) Public Comments A display advertisement was published in The Register Guard on February 5, 2012, soliciting comments for 30 days. The comment period ended on March 6, 2012, however, staff continued to collect all ` S:\CMO\2012 Council Agendas\M120423\S1204234.doc