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HomeMy WebLinkAboutItem 4: Supplemental Funding for WestTown on 8th ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Action: Supplemental Funding for WestTown on 8th Meeting Date: October 9, 2006 Agenda Item Number: 4 Department: Planning and Development Staff Contact: Stephanie Jennings www.eugene-or.gov Contact Telephone Number: 682-5529 ISSUE STATEMENT The City Council is asked by the Housing Policy Board, staff, and the Metropolitan Affordable Housing Corporation to approve the use of local funding for a short-term loan to Metropolitan Affordable th Housing Corporation (Metro) that will allow the development of the WestTown on 8 affordable th housing project to proceed. WestTown on 8 will contain 102 affordable housing units affordable to low-income households and nine market-rate, live-work units. BACKGROUND th In 2004, the City issued a Request for Proposals for the Housing Landbank site located at 265 West 8 Avenue. Metro’s development proposal was recommended by the Housing Policy Board and approved by the City Council on March 7, 2005. At that time, the City Council awarded the following subsidies for the project: the Landbank Site (valued at $570,000 and purchased with federal CDBG funds); a $1,025,000 federal HOME grant; and $210,000 in Eugene systems development charge waivers. On th August 8, 2005, the City Council approved a 20-year tax exemption for WestTown on 8 under the Low-Income Housing Tax Exemption Program. th As originally conceived and presented to the City Council, WestTown on 8 was to include 86 units of affordable housing, eight live-work units and one commercial space. In May 2005, the City Council received a staff memo summarizing proposed changes to the project including: 1) an increase in the size of the building to 102 affordable housing units and nine market-rate live-work units; and 2) a change in the financing structure from 9% Low Income Housing Tax Credits to use of 4% Low Income Housing Tax Credits and State bond financing. Since that time, Metro has completed development of the design and construction specifications and issued construction bids through its General Contractor, Gale Roberts Company, in August. The resulting bids were much higher than estimated, resulting in a significant gap between the project budget and actual costs. Metro has utilized a variety of cost savings and financing measures that have closed the gap to approximately $750,000. It is currently negotiating a loan for $300,000 with a local bank, leaving a $450,000 gap. Metro has asked the City to consider providing a loan to cover the remainder. Metro has asked the City to make a decision about possible support by October 15. Without gap financing in place by this date, Metro asserts the project will face additional delays and costs for several reasons. First, construction costs are expected to continue to increase at a rate of at least 1% per month. th Second, Metro must have all necessary financing in place by October 15 in order for the State bond sale to proceed in December. If Metro has to delay the bond sale until 2007, the interest rate lock on a L:\CMO\2006 Council Agendas\M061009\S0610094.doc significant portion of the financing for WestTown will expire and potentially expose the project to a higher and more costly interest rate. City staff has reviewed available resources and determined that it is possible to make up to a $450,000 loan to WestTown using the following City funds: The housing capital project fund, which accumulates resources in order to purchase additional ? landbank sites. $235,000 would come from this fund. The low-income housing fund, which has received payments over time generated through the ? Multiple Unit Property Tax Exemption (MUPTE) program. $135,000 would come from this fund. The downtown projects loan fund, which is a loan pool for use within the downtown area. This ? loan fund is separate from the Downtown Urban Renewal District loan program. $80,000 would come from this fund. This proposal has been reviewed by a committee of the Housing Policy Board that was empowered to make a recommendation on behalf of the entire board. City staff and the Housing Policy Board th recommend a $450,000 short-term loan to Metro for use in the WestTown on 8 project. The loan would be structured with a three-year term and a three percent interest rate. This action will allow Metro to proceed with the project in its current form and to break ground in early 2007 and also allow the City to recover funds in a relatively short time period. Loan repayment to the City will come from Metro’s revenues from several projects. An analysis of Metro’s balance sheet and cash flows verifies Metro’s capacity to repay the loan and still leave an appropriate cushion for its operations. Metro also plans to explore other funding mechanisms and grants that would allow early repayment of the loan. RELATED CITY POLICIES Numerous City goals and policies encourage low-income housing development as well as residential development within the downtown. The Eugene Downtown Plan specifically calls for “multi-unit housing in the downtown core and on the edges of downtown for a variety of income levels and ownership opportunities.” The City Council has established a Housing Dispersal Policy which seeks to maximize housing choice for low-income families and integrate housing throughout the City of Eugene. WestTown will be located in appropriate Census Tracts according the Housing Dispersal Policy. While WestTown exceeds the recommended limit of 60 units, it is highly unlikely that more than 60 units will be occupied by families with children, based on the occupancy mix of other downtown affordable housing developments. COUNCIL OPTIONS The council has two main options: 1.Approve loan funding as proposed. 2.Decline to approve funding. CITY MANAGER’S RECOMMENDATION The City Manager recommends Option #1: Approve use of City funds for a loan to Metropolitan th Affordable Housing Corporation for the WestTown on 8 project as proposed. L:\CMO\2006 Council Agendas\M061009\S0610094.doc SUGGESTED MOTION Move to direct the City Manager to approve the use of City funds for a loan to Metropolitan Affordable th Housing Corporation for the WestTown on 8 project, as proposed, and to include the necessary budget transactions on Supplemental Budget #1 in December. ATTACHMENTS None. FOR MORE INFORMATION Staff Contact: Stephanie Jennings, Housing Finance Analyst Telephone: 682-5529 Staff E-Mail: Stephanie.a.jennings@ci.eugene.or.us L:\CMO\2006 Council Agendas\M061009\S0610094.doc