HomeMy WebLinkAboutResolution No. 5057COUNCIL RESOLUTION NO. 5057
A RESOLUTION APPROVING A MULTIPLE -UNIT
PROPERTY TAX EXEMPTION FOR RESIDENTIAL
PROPERTY LOCATED IN THE VICINITY OF OLIVE
STREET AND 13TH AVENUE, EUGENE, OREGON.
(Applicant: Capstone Collegiate Communities, Inc.)
PASSED: 6:2
REJECTED:
OPPOSED: Brown, Taylor
ABSENT:
CONSIDERED: May 9, 2012
I N OLTO go 9 MON 0
1 1 - 00 "Emmkil N 11 0 WHIM I I 1 9
The City Council of the City of Eugene finds that:
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The proposed 20-foot wide right-of-way will be dedicated and the following
public improvements will be constructed:
(1) A 10-foot wide two-way bicycle facility that is clear of
obstructions and separated from pedestrians, within the new 20-
E. The project is located within the boundaries of the downtown area as described in
subsection (2) of Section 2.945 of the Eugene Code, 1971.
F. The project could not financially be built *'but for" the tax exemption.
G. The applicant solicited comments from city-recognized the affected neighborhood
association.
if. The requirerneuts in the Standards and Guidelines for Multiple -Unit Housing
Property Tax Exemptions adopted by Adi Order Nos. 53-09-01-F and 53-11-05
related to proximity to historic resources have been satisfied.
I. The applicant has complied with the provisions of the Standards and Guidelines
as described in the Report and Recommendation attached as Exhibit A to this Resolution which
was prepared by the Executive Director of the Planning and Development Department ("the
Executive Director") as designee of the City Manager.
I The project will be completed on or before January 1, 2022, and the owner has
agreed to include in the construction one or more public benefits.
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K. The proposed project will be in conformance with all local plans and planning
regulations, including special or district-wide plans developed and adopted pursuant to ORS
chapters 195, 196, 197, 215 and 227, that are applicable at the time the application is approved.
M. Granting the application is in the public interest. In making this determination,
the City Council has considered the number of points awarded tote project based on the public
benefit scoring system contained in the Standards and Guidelines.
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1. Project Description:
1.1 Phase I of the project shall consist of development of approximately 230
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2. On-site management is required. On-site management functions shall include:
Is. No later than 18 months after receiving a Certificate of Occupancy for each phase,
the applicant must demonstrate award of Earth Advantage Silver Certification by
submitting to the City's Planaing and Development Department Eartli Advantage
certification documentation.
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7. The project shall be in conforniance with all local plans and planning regulations,
including special or district-wide plans developed and adopted pursuant to ORS
Chapters 195, 196, 197, 215 and 227.
Section 3. The City Manager, or the Manager's designee, is requested to forward a
copy of this Resolution to the applicants within ten days, and to cause a copy of this Resolution
to be filed with the�
. One County Assessor on or before April 1, 2013.
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Section 4 . This Resolution shall become effective immediately upon its adoption.
The foregoing Resolution adopted and effective the 9` day of May, 2012.
City R corder
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Report & Recommendation of the Planning & Development Department
Olive & 13` Student Housing Application for
Multiple -Unit Property Tax Exemption
The Executive Director of the Planning & Development Department of the City of Eugene Finds that:
1. Capstone Collegiate Communities (Capstone) intends to purchase the real property located between
Olive and Willamette from just north of 12th to 13th Avenues and between Charnelton and Olive from
12th to 13th Avenues, Eugene, Oregon (Assessor's Map17- 03- 31 -42; Tax Lots 700, 800, 900, 1000,
1100, 1200, 1600, 1700, 1800, 1900, 2000, 2100, 2200, 2300, and 2400). Capstone submitted an
application pursuant to the City's Multiple -Unit Property Tax Exemption Program (Sections 2.945 and
2.947 of the Eugene Code, 1971), with respect to residential units to be constructed on the property.
2. As the City Manager's designee, I have reviewed the application and find that:
2.1 The project will be constructed in two phases. Phase 1 will include approximately 232 units
with a total of approximately 790 bedrooms, 600 structured parking spaces and 48 surface
parking spaces. Phase 2 will include approximately 142 units with a total of approximately
514 bedrooms and 430 structured parking spaces. The overall number of units will be
between 350 and 375. The project may also include approximately 5,000 square feet of
0 ground floor commercial space.
The project will include a new bicycle /pedestrian path that connects with the existing path
along 12"' Avenue. Additional details on the path are in Section 2.6.2.
Onsite management will be required during the MUPTE period even if the project is sold and
Capstone is not retained as manager. Onsite management functions will include but are not
limited to:
2.1.1 Maintaining leasing, property /resident management office onsite that is staffed by
full -time and part-time mangers during normal working hours;
2.1.2 Having one or more employees residing onsite;
2.1.3 Having onsite courtesy managers making nightly property inspections; and
2.1.4 Providing information to residents about the sensitivities of neighboring properties,
including Olive Plaza, as part of the lease documents.
2.2 Construction is expected to be complete on or before January 1, 2022.
2.3 The project is located in the downtown area described in subsection (2) of Section 2.945 of
the Eugene Code, 1971.
2.4 The applicant submitted all materials, documents and fees required by the City as set forth in
Section 2.945 of the Eugene Code, 1971, and the Standards and Guidelines for Multiple -Unit
Housing Property Tax Exemptions adopted by Administrative Order No. 53- 09 -01 -F and 53-
11-05.
2.5 The applicant has responded to the public benefit criteria as follows:
2.5.1 Public Benefits
o Density The project will be built in the C -3 zone and has no minimum or
maximum for residential units. Since the minimum density is zero, the applicant
was awarded 50 points, the maximum allowed.
• Green Building Features At a minimum, Capstone plans to qualify for Earth
Advantage Silver, with LEED Silver Certification as the goal.
• Mixed Income The project will not include housing dedicated to controlled
income.
• Homeownership No units are designated for home ownership.
• Accessibility A minimum of six units will be ADA accessible.
• Historic Sensitivity The project is adjacent to the Florence Apartments, a
primary ranked historical structure at 1272 Willamette Street, and in the vicinity
of the Kennell Ellis Building which is*a City of Eugene Historic Landmark at 1280
Willamette Street. The project does not physically alter either of these structures
and will be setback from these existing buildings by an alley and a proposed
driveway access.
• Location The project is located in the Downtown Plan Area.
• Parking The project is not located in a Residential Parking Program zone.
2.5.2 Longevity of Public Benefits All of the public benefits listed above will extend
beyond the period of the tax exemption.
2.5.3 Points Awarded The applicant has been awarded 210 public benefit points. (The
building documents are not far enough along at this time to complete either the
Earth Advantage or LEED worksheets; as a result, no points were awarded in the
Green Building Features category. The applicant did not seek public benefit points
for historic sensitivity.)
2.6 Other Benefits Provided by the Project. Based on the comments heard at council work
sessions and the public engagement opportunities, a number of issues or possible concerns
emerged. Below are the relevant issues and Capstone's responses, which provide additional
benefits.
2.6.1 Management and Coordination with EPD In addition to providing on -site
management for the project, including live -in managers and courtesy officers,
Capstone has agreed to coordinate closely with Eugene Police Department (EPD) to
promote pro- social, courteous, and safe behavior on the part of the residents. This
coordination will include:
2.6.1.1 Meeting with EPD Crime Prevention Unit regarding successful strategies
utilized in other parts of our community, including Crime Prevention Through
Environmental Design and crime victim awareness strategies, and to discuss
opportunities for support from Crime Prevention Unit and any enforcement
actions taken.
2.6.1.2 Working with EPD to align renter code of conduct with social host
regulations.
2.6.1.3 Working with EPD to develop a protocol for responding to nearby residents
and surrounding property owner complaints on a timely basis.
2.6.2 Bike Path Capstone has agreed to create and dedicate a bicycle /pedestrian path
connecting with the existing route along 12th Avenue. This facility is designed
specifically to promote connectivity, create a straighter alignment, and improve the
crossing at Willamette and Olive Streets to ensure safe and convenient movement for
pedestrians and bicycles. The bike path will include a 10 -foot wide two -way bicycle
facility that is clear of obstructions and separated from pedestrians, within the new
20 -foot right -of -way; a bicycle crossing island at the intersection of West 12th
Avenue and Olive Street that prohibits left turns for automobiles; and a replacement
crosswalk within Willamette Street that aligns the proposed bicycle connection
through the site with the existing bicycle way east of Willamette Street. In addition,
Capstone has agreed to provide signage to improve enforcement of the prohibition of
bikes and skateboards on the sidewalk near Olive Plaza.
2.6.3 Neighborhood Impact Capstone has agreed to:
2.6.3.1 Work closely with Olive Plaza. Capstone is in the process of negotiating a
letter committing them to an agreed upon level of mitigation and assistance
for during and after construction.
2.6.3.2 Work with Look Me In The Eye, a disability advocacy organization, to identify
opportunities to employ their clients as part of the housing development.
2.6.3.3 Work to provide additional parking at market rates for general public use or
for Olive Plaza, if the surface and structured parking is not fully utilized by the
project.
2.6.4 Support for "Alt" Modes Capstone has agreed to:
2.6.4.1 Include more bike parking and secured storage than required by code, in
addition to a shared public car facility (such as "WeCar") and one electric
vehicle charging station. Capstone will promote these alternative modes to
the residents of the development. Capstone will present the additional bike
parking for City of Eugene staff review.
2.6.4.2 Construct a new bus stop on Willamette Street located south of the 12
Avenue crossing at Willamette Street. The sheltered bus stop location will be
integrated with the new student buildings. This stop is anticipated to
minimize the impact upon the downtown station which has been a concern
of Olive Plaza residents. The design of the stop will be coordinated with LTD
and City of Eugene staff._
2.6.5 Design and Construction Capstone has agreed to:
2.6.5.1 Improve the existing sidewalks surrounding the project to provide for a more
inviting pedestrian environment. Capstone will expand the circulation space,
and will work with City of Eugene staff to see if expansion of the existing
right -of way is desired in this location.
2.6.5.2 Create a sidewalk design that incorporates strategic tree and root pruning to
enable retaining as many trees within Olive Street and 13 Avenue. rights -of-
way as possible. The trees within the right -of -way are in the process of
review with the City arborist with specific pruning and care instructions to be
established to minimize the impact to the trees. In the case an existing tree
is required to be removed then it will be replaced with a like species.
2.6.5.3 Consistent with Capstone policy, encourage the use of local contractors,
suppliers, and workers for the project as much as possible.
2.7 The financial information Capstone submitted in their application is based on projections
prior to finalizing financing, construction, and tenanting. This analysis is based on the
conservative approach that the project is built at one time. (Phasing would increase the cost
of the project due to mobilization, lost economies of scale, and increased design and other
soft costs; and reduce the return on investment.)
The financial assumptions included in Capstone's MUPTE application pro -forma have been
analyzed and adjusted as necessary to more accurately reflect the expected financial
performance of the project. Of particular note, the projected tax savings in Capstone's pro -
forma were overstated by their assumption that the full construction value of the project
would be used for tax assessment purposes. The changed property ratio used in assessing
real property would result in a lower taxable value and lower tax savings than projected in
their pro- forma. The result of this adjustment is an increased projected return on investment
in the "without MUPTE" scenario. Capstone's originally submitted pro -forma forecasted a
3.2% return on investment without MUPTE. With the more accurate tax savings figure, the
projected return on investment without MUPTE has been adjusted to 6 %. There are no
adjustments made that result in a lowering of the projected return.
The applicant demonstrated that the project as proposed could not be built but for the
benefit of the tax exemption. The financing for the project will be required to meet a specific
Loan -to -Value underwriting- criteria which is expected to be 70 %. The Loan -to -Value
assumption appears to be consistent with today's tighter real estate lending standards. For
this large scale project, Capstone will need to provide 30% ($27 million) of the project's
financing in the form of equity. Unlike typical MUPTE projects financed with local equity, the
proposed scale of the Capstone development will require institutional sources of equity to be
attracted to the project. Additionally, the proposed project will require the investor to
assume some risk from the major redevelopment costs associated with the site and from the
rate of absorption of the large number of proposed units brought into the local student
housing market.
Capstone has indicated that their primary equity investor (Kayne Anderson Real Estate
Advisors) will require a minimum rate of return of 9% in the first year. Without the MUPTE
savings, the project is projected to generate a 6% rate of return, which is insufficient to
attract the required equity investment. The MUPTE tax exemption lowers annual operating
costs by approximately $846,000, which produces higher net operating income and results in
a projected 9% 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.
2.8 Presentations concerning the Olive & 13 Student Housing project were given to the
Downtown Neighborhood Association on January 25 and March 26. The Association
submitted a letter indicating support for the project with stated reservations and
recommendations.
3. A display ad soliciting recommendations or comments from the public regarding this project was
published in the Register -Guard on February 5, 2012. The 30 -day period for comment expired on
March 6, 2012 at 5pm. Staff received 29 written comments within that period. Additional comments
were submitted to staff or directly to City Council after the official comment period. All comments
received as of April 13 were provided to City Council with the materials for the April 23 Public Hearing.
Therefore, based upon the above findings, the proposed project is in conformance with all applicable local
plans and provisions of the Eugene Code, 1971, planning regulations, the Metropolitan Area General Plan,
and the criteria set forth in the City's adopted Standards and Guidelines, and I recommend that the
application be approved.
Dated this 2-0 day of April, 2012.
Sarah J. Medary
Executive Director, AIC
Planning & Development Depart ent