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HomeMy WebLinkAboutItem A: Core Campus - Application for MUPTE for 505 East BroadwayEUGENE CITY COUNCIL AGENDA ITEM SUMMARY Eugene Action: Core Campus - Application for Multiple -Unit Property Tax Exemption for Residential Property Located at 505 East Broadway (The Hub in Eugene) Meeting Date: June 17, 2013 Agenda Item: A Department: Planning and Development Staff Contact: Amanda Nobel www.eugene - or.gov Contact Telephone Number: 541 - 682 -5535 ISSUE STATEMENT The City Council is asked to take action on the request for a Multiple -Unit Property Tax Exemption ( MUPTE) by Core Campus for The Hub in Eugene project located at 505 East Broadway. BACKGROUND In January, the City of Eugene received a MUPTE application from Core Campus for a proposed student housing development (The Hub in Eugene) on East Broadway and Ferry Street. Council held work sessions on May 29 and June 10 to review and discuss the Core Campus proposal and written public comment. Information Requested at the June 10 Work Session At the June 10 work session, councilors made the following requests for information: Housing market information (Attachment A) If /then scenarios (Attachment B) Brownfield information: The property owners and prior user have ongoing and complicated negotiations. The site continues to be an open file with Department of Environmental Quality (DEQ). Some minimal remediation has already occurred including removal of the underground tanks. The cost of additional remediation may be somewhat limited but is as yet undetermined; the prior user bears responsibility for remediation costs. In its current state, ground floor residential is not allowed. The Report and Recommendation of the Planning and Development Department is in Attachment C and includes the list of program defined public benefits and other benefits from the project. The resolutions for approval and denial are in Attachment D and E. Based on council discussion on the Core Campus proposal and potential revisions to the program in general, the approval resolution includes the public benefits as conditions: A. Payment in Lieu of Affordable Housing. A requirement of guaranteed payments to the City in excess of the land property tax due in years six through ten, totaling $1,030,000, which the City could choose to apply to affordable housing. Continuation of the MUPTE would be conditioned on each of the guaranteed payments being paid. The project would S:ACMO \2013 Council Agendas \Ml306l7 \Sl3O6l7A.doc immediately stop receiving the MUPTE if Core Campus failed to make a guaranteed payment. For example, should Core Campus fail to make the proposed $30,000 year six payment, Core Campus would not receive the tax exemption that year and would instead pay property taxes on the improved value to the site (estimated tax of $520,600). Not paying property taxes would trigger default with the lender, which is a strong guarantee in itself that Core Campus would make the payments. Additionally, the guaranteed payments would survive should the property change hands; the new owner would be required to either make the payments to keep the MUPTE benefit active or, alternatively, begin paying full property taxes. A guarantee beyond the guaranteed payment language in the MUPTE resolution may not be necessary. B. A requirement to achieve LEED Silver certification; C. The provision of at least four ADA accessible units; D. Bike and Pedestrian Safety; and E. Local hiring plan with stated goals. Project Overview The Hub in Eugene would be a 12- story, $44 million project: 197 apartments with on -site parking, nearby parking, and commercial retail space. The project will have 501 bedrooms; 4,430 square feet of retail space; 34 on -site parking spaces; and 88 surface parking spaces in a nearby lot. The building would be designed to achieve LEED certification and would include a green roof among other features. The development will have onsite staff and security: six to eight full -time jobs and six part -time jobs. The proposed construction schedule would be 14 -16 months long and provide an average of 120 -150 construction jobs. If the MUPTE is approved, construction would begin in February /March 2014. Project Parking The parking will be fully enclosed as part of the architecture of the building and not readily apparent. A second parking area is proposed to be a surface parking lot within 1 /4 mile at 901 Franklin. (See the June 17 Agenda Item Summary, item B for more information.) MUPTE Program Council is discussing potential revisions to the MUPTE program and enacted a temporary suspension of the program in February 2013. Since the Core Campus application was submitted prior to the suspension, the existing program rules have been applied to this review. As ideas and potential revisions to the MUPTE program have emerged from the City Council's discussions, staff and the developer discussed the possibility of incorporating elements of the potential MUPTE revisions into proposed conditions of approval, such as affordable housing and local hiring. Financial Analysis The applicant demonstrated that the project as proposed could not be built but for the benefit of the tax exemption. Core Campus will need to provide 25% ($11 million) of the project's financing in the form of equity, which is likely to come from an equity investor active in the nationwide market. 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. Core Campus has indicated that its equity investor will require a minimum rate of return of 8.96% in the first year. Without the MUPTE savings, The Hub is projected to generate a 4.7% first year rate of return, which is insufficient to attract the required equity investment. The MUPTE tax exemption would S:ACMO \2013 Council Agendas \Ml306l7 \Sl3O6l7A.doc lower annual operating costs by approximately $450,000, which produces higher net operating income and results in a projected 8.7% first year rate of return. (See Attachment F for the 10 -year pro -forma with MUPTE.) 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 The Hub in Eugene will continue to generate property tax revenue on the land. Staff estimates the property tax paid will be $11,200 in year 1. After 10 years, the entire development will be taxable, estimated at $620,000 in year 11. Core Campus states that the tax exemption is vital to the development and, if it is denied, the 12 -story housing development will not be built. The chronically underdeveloped site is zoned C -2, community commercial for medium density commercial. The surrounding area is a mix of fast food and small format motels. If the Core Campus project does not move forward, the property is likely to develop in a similar manner as the surrounding area, which would produce less value and tax revenue. (Potential tax revenue under different development scenarios is included in Attachment B.) Timing This application was submitted on January 24. By state statute and code, if council has not acted within 180 days from the application date, the application would be deemed approved. RELATED CITY POLICIES Utilization of the MUPTE program to stimulate new multi -unit housing development addresses many goals for Eugene and downtown, including: Eugene Downtown Plan ➢ Stimulate multi -unit housing in the downtown core and on the edges of downtown for a variety of income levels and ownership opportunities. ➢ Downtown development shall support the urban qualities of density, vitality, livability and diversity to create a downtown, urban environment. ➢ Actively pursue public /private development opportunities to achieve the vision for an active, vital, growing downtown. ➢ Use downtown development tools and incentives to encourage development that provides character and density downtown. ➢ Facilitate dense development in the courthouse area and other sites between the core of the downtown and the river. Envision Eugene Pillars ➢ Promote compact urban development and efficient transportation options. • Integrate new development and redevelopment in the downtown, in key transit corridors and in core commercial areas. • Meet the 20 -year multi - family housing need within the existing Urban Growth Boundary. S:ACMO \2013 Council Agendas \Ml306l7 \Sl3O6l7A.doc o Make compact urban development easier in the downtown, on key transit corridors, and in core commercial areas. ➢ Protect, Repair and Enhance Neighborhood Livability. o Implement the Opportunity Siting (OS) goal to facilitate higher density residential development on sites that are compatible with and have the support of nearby residents. Implement a toolbox of incentives that support the achievement of OS outcomes. Regional Prosperity Economic Development Plan ➢ Strategy 5: Identify as a Place to Thrive - Priority Next Step - Urban Vitality As we foster a creative economy, dynamic urban centers are an important asset. Eugene, Springfield and many of the smaller communities in the region recognize the importance of supporting and enhancing vitality in their city centers. Building downtowns as places to live, work and play will support the retention and expansion of the existing business community and be a significant asset to attract new investment. The Cities of Eugene and Springfield will continue to enhance their efforts to promote downtown vitality through development and redevelopment. City Council Goal of Sustainable Development ➢ Increased downtown development COUNCIL OPTIONS The work session is an opportunity to take action on the MUPTE application for the proposed Core Campus project. Council has the following options: A. Adopt the resolution in Attachment D approving the tax exemption, B. Revise the resolution in Attachment D and approve the tax exemption, or C. Adopt the resolution in Attachment E denying the tax exemption. CITY MANAGER'S RECOMMENDATION The City Manager recommends option A. SUGGESTED MOTION Move to adopt a resolution approving a Multiple -Unit Property Tax Exemption for residential property located at 505 East Broadway, Eugene, Oregon (Core Campus /Applicant). ATTACHMENTS A. Housing Market Analysis B. If /Then Scenarios C. Report and Recommendation of the Planning and Development Department D. Approval Resolution E. Denial Resolution F. Pro -forma with MUPTE S:ACMO \2013 Council Agendas \Ml306l7 \Sl3O6l7A.doc FOR MORE INFORMATION Staff Contact: Amanda Nobel Flannery Telephone: 541 - 682 -5536 E -mail: amanda.nobelflannery@ci.eugene.or.us S:ACMO \2013 Council Agendas \Ml306l7 \Sl3O6l7A.doc ATTACHMENT A Housing Market Analysis Key Observations: • Community -wide rental vacancy has historically been low and stable, putting pressure on price • Eugene rental housing costs are unaffordable for a very high percentage of tenants • Demand by large numbers of off - campus students impacts rents and neighborhoods • Large projects on transit corridors give students more opportunities to move and live in housing close to campus, while preserving neighborhood livability • Rentals in the campus area submarket have had nearly zero percent vacancy for many years, which pressures rents to rise; as supply and vacancy rates increase, rent prices may flatten • Student housing supply is still catching up to university enrollment increases of recent years Impact on Overall Vacancy Rates For the past decade, Eugene's vacancy rate has ranged between 3 % -5 %. Local sources estimate the current vacancy rate at 4 %. A good rule of thumb for what is considered a "natural vacancy rate," or the level representing the market's equilibrium, is traditionally placed at 5 %. A low vacancy rate is indicative of upward pressure on prices. However, housing markets with younger populations, or college age populations, may be assumed to have more mobility, greater turnover, and, therefore, higher vacancy rates. Rental properties will typically try to absorb higher vacancy rates and greater turnover volume without lowering their prices. Therefore, metro areas with more mobile populations, like an above - average concentration of students, can be expected to function normally with higher vacancy rates. The low vacancy in Eugene is an indication of market tightness for apartment rentals — especially within the close -to- campus student submarket area where vacancy is known to be lower. Construction of additional bedrooms will likely improve the vacancy rate balance in the student submarket and could contribute to the flattening of rental rates community -wide. Impact on Housing Cost Burden "Housing cost burden" is defined as households paying more than 30% of household income for housing and utilities. In the cities of Eugene and Springfield nearly half (47 %) of all renters have a housing cost burden (2010 Consolidated Plan). Average rents for a Eugene one - bedroom unit are currently around $630, and for a two - bedroom unit around $860. While the Core Campus project's additions of 197 units is unlikely to have a significant impact on overall vacancy, in combination with other student housing construction there could be a short -term impact on student housing vacancy and present a medium -term, general leveling influence for rental housing rates. The Eugene area housing market, like most other urban housing markets, is comprised of numerous submarkets for products of varying quality, locations, and different levels of demand. Rent levels in the campus area range from $650 to $725 per bedroom, with the highest rents ($750 to $800+ per bedroom) in the newest complexes completed for the 2012 -13 school year. Generally, rents for units closest to campus are the highest in the metropolitan area on either per- square -foot or per- bedroom basis. The Core Campus project is targeting segments of the campus area submarket, while designing products they believe will compete against other comparable rentals on the basis of their project's superior amenities. Given the City's concern about the overall affordability of housing and the total number of units within the urban growth boundary, it must be noted that a change to the supply of housing within a submarket also affects the aggregate market because there are overlapping population groups. Large increases to student housing unit supply would broadly impact renters and landlords in the City through a flattening effect on rents and an increase in turnover as renters seek to upgrade their housing. Landlords and property management companies are most likely to respond to the increased competition by offering additional incentives or amenity packages. Vacancy Rates within Student Housing; Projects in Pipeline The large amount of student housing under construction this year and next is still catching up to the large 23% enrollment increases of the past five years. The sizeable and un- forecasted increase has changed the nature of demand in the student housing market: by both bedroom totals and product unit types. Full -time enrollment increased approximately 4,051 since the 2007 -08 school years to a total of 21,917 students. There are an additional 2,674 part -time students. According to local sources, there are an approximate 2,000 bedrooms targeted at students currently in the construction pipeline. However, a developer's analysis of student enrollment need not be precise; like any market analysis, the purpose is to help developers' measure risk, not build to accommodate projected enrollment increases to an exact count. Historically, the campus area experiences virtual zero vacancy — a situation that benefits property owners via higher lease rates. Yet, according to local real estate market experts, this past Fall season a few properties are only just now experiencing higher vacancies for their least desirable unit types and older buildings. If Core Campus and proposed - permitted projects are built, the increased student housing supply at the higher end of amenities will likely result in some turnover and migration into the campus area as leases expire for existing students and new students enter the community. Therefore, the Core Campus project and proposed - permitted projects could alleviate neighborhood livability impacts by further concentrating students on appropriate sites closer to campus. Many students rent in areas far removed from campus (likely due to more affordable prices). They, along with some non - students, will be motivated to rent closer to campus. This migration could have the effect of decreasing housing demand in some of the area's most affordable locations. Therefore, if there were an oversupply of units in the close -to- campus submarket and at the higher end of the product mix, the most likely impacts on the metropolitan housing market would be to somewhat flatten rates generally, to increase rental competition in submarkets of student housing, and potentially to spur landlords to upgrade or invest in their properties to become more competitive. More significant impacts to rental rates are unlikely because projected general population growth is likely to absorb the difference. ' http: / /www.rentiungle.com /average- rent- in- eugene- rent - trends/ "If /Then" Scenarios The following "if /then" scenarios were requested at the June 10 work session: ATTACHMENT B A. If council grants the tax exemption and the Core Campus project is built, then... B. If council denies the tax exemption and the Core Campus project is not built, then... A graphic summary of the financial implications is provided at the end. Scenario A : If council grants the tax exemption and the Core Campus project is built Greater supply of student housing at the higher end of amenities and rents is likely to result in some turnover and migration from outside toward the campus area, thereby potentially increasing the supply of rental housing outside of the campus area. If there were an oversupply of units close -to- campus and at the higher end of the product mix, the most likely impacts on the metropolitan housing market would be a flattening of rental rates generally, increased rental competition in the student housing submarket through incentive packages, and in some limited cases spur landlords to upgrade or invest in their properties to become more competitive. Significant impacts to aggregate rental rates and long -term vacancy are unlikely because projected population growth will likely absorb excess supply over time. (A more detailed analysis is included in Attachment A.) It is assumed that any short -term impacts to the rental housing market would be offset by the long -term community benefits of bringing significant density and activity to the core area of downtown, and achieving the highest value possible on the property which will maximize future property tax revenue. Scenario B : If Council denies the tax exemption and the Core Campus project is not built, then... The outcomes range from continuation as vacant to redevelopment for an alternative use. Alternative use scenarios suggest that the most likely outcome would be development as a commercial use, either fast food or small office. The response of the student housing market in the event the Core Campus project is not built is hard to gauge. It is likely that a similar number of units would be introduced into the market over time. Given general local development trends, these units would likely be provided in smaller, lower density development and disbursed on sites available throughout nearby neighborhoods. Depending on context, such a development pattern could have more negative neighborhood impacts than the Core Campus proposal. Three potential outcomes have been assumed for the site: 1) the property remains vacant, 2) the property is redeveloped for a fast food use, or 3) the property is redeveloped for an office use. Below is a graph of the estimated taxes over a 20 -year period associated with the above scenarios A and B. The estimated Core Campus amounts include the guaranteed additional payments made during years 6 -10. During the first 10 years, the City would receive an estimated $1,158,300 from Core Campus guaranteed payments and land property tax. This is significantly more than the City would receive if the property were alternatively developed into office, into fast food, or left vacant. ■ Fast food would pay approximately $20,000 tax per year, ■ Office would pay approximately $40,000 tax per year, or ■ Vacant would pay approximately $11,000 tax per year The following table represents the estimated additional property tax generated by the Core Campus project when compared to other potential outcomes. Additional Pro er ty Tax: Core versus ... Vacant Fast Food Office 10 yr $ 1,030,000 $ 941,300 $ 699,700 20 yr $ 7,961,500 $ 7,754,000 $ 7,187,000 ATTACHMENT C Report and Recommendation of the Planning & Development Department Core Campus Application for Multiple -Unit Property Tax Exemption The Executive Director of the Planning & Development Department of the City of Eugene Finds that: 1. Core Campus intends to purchase real property located at 505 East Broadway, Eugene, Oregon (Assessor's Map 17- 03- 32 -23; Tax Lots 1800, 1900, and 2300). Core Campus 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 provide 19 studios, 46 1- bedroom units, 44 two- bedrooms, 25 three - bedroom units, 42 four - bedroom units, and 21 five - bedrooms, for a total of 197 residential units. The project may also include approximately 4,430 square feet of ground floor commercial space. 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 • Densi . The project density is approximately 318 units per acre. The project will be built in the C -2 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 Core Campus plans to qualify for LEED Silver certification. • Mixed Income The project will not include housing dedicated to controlled income. • Homeownership No units are designated for home ownership. • Accessibility A minimum of four units will be ADA accessible. • Historic Sensitivity The project is not immediately adjacent or contiguous to a historic structure. Pagel of 4 Resolution EXHIBIT A- Report and Recommendation • Location The project is located in the Downtown Plan Area. • Parking The project is not located in a RPP 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 290 public benefit points. 2.6 Other Benefits Provided by the Project. Based on the comments heard at council work sessions, a number of issues or possible concerns emerged. Below are the relevant issues and Core Campus's responses, which provide additional benefits. 2.6.1 Payment in Lieu of Affordable Housing Core Campus proposes to make payments to the City of $1,030,000 during years six through ten. The payments would be guaranteed and paid regardless of the financial performance of the project. The average cash on cash return for the 10- year period with the MUPTE and the additional payments from Core Campus is estimated at 9.66 %. Continuation of the MUPTE would be conditioned on each of the guaranteed payments in the later years being paid. The project would immediately stop receiving the MUPTE if Core Campus failed to make a guaranteed payment. For example, should Core Campus fail to make the proposed $30k year six payment, Core Campus would not receive the tax exemption that year and would instead pay property taxes on the improved value to the site (estimated tax of $520,600). Not paying property taxes would trigger default with the lender, which is a strong guarantee in itself that Core Campus would make the payments. Additionally, the guaranteed payments would survive should the property change hands; the new owner would be required to either make the payments in order to keep the MUPTE benefit active or, alternatively, begin payment of full property taxes. In years 6 -10 of the tax exempt period, in addition to any other fees, taxes or charges owed to the City, the owner of the property shall make the following payments to the City by July 15 of each year: Year 6 = $30,000 Year 7 = $60,000 Year 8 = $165,000 Year 9 = $300,000 Year 10 = $475,000 Page 2 of 4 Resolution EXHIBIT A- Report and Recommendation If the payment is not made by the due date, the City Manager shall follow the process in Section 2.947 of the Eugene Code, 1971, to initiate proceedings for Council to terminate the exemption. 2.6.2 Local Hiring. Core Campus shall provide a plan with local hiring goals on: A. The percent of the dollar volume of the combined professional services and construction contracts to include local firms (based in Oregon), and B. The percent of on -site construction jobs performed by local residents (residing in Oregon). Exceptions for specialty work not available in the local market will be reviewed on a case by case basis. Core Campus shall also demonstrate a good faith effort to solicit bids for professional services and construction contracts from qualified women and minority business enterprises. 2.6.3 Bicycle and Pedestrian Access and Safety Core Campus has committed to: 2.6.3.1 Design elements to facilitate safety and access, such as a streetscape barrier along East Broadway so residents and visitors are not tempted to cross the street mid - block. 2.6.3.2 Working with the City on options for safe pedestrian crossings. 2.6.3.3 Lighting, signage, and maps for residents and visitors. 2.6.4 Transportation Options Core Campus plans to provide a flex -car and allow bicycle storage within units, in addition to providing limited on- site embedded parking. 2.7 The financial information Core Campus submitted in their application is based on projections prior to finalizing financing, construction, and tenanting. The applicant demonstrated that the project as proposed could not be built but for the benefit of the tax exemption. Underwriting for the permanent financing is based on a maximum 75% loan - to -value and minimum 1.25 debt service coverage ratio. Core Campus will need to provide 25% ($11 million) of the project's financing in the form of equity, which is likely to come from an equity investor active in the nationwide market. Additionally, the proposed project will require the investor to assume some risk from the major redevelopment costs associated with the site and Page 3 of 4 Resolution EXHIBIT A - Report and Recommendation from the rate of absorption of the large number of proposed units brought into the local student housing market. Core Campus has indicated that their equity investor will require a minimum rate of return of 8.96% in the first year. Without the MUPTE savings, The Hub is projected to generate a 4.7% first year rate of return, which is insufficient to attract the required equity investment. The MUPTE tax exemption would lower annual operating costs by approximately $450,000, which produces higher net operating income and results in a projected 8.7% first year 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 Core Campus project were given to the Downtown Neighborhood Association on January 23, 2013. The Association submitted a letter indicating that the Downtown Neighborhood Association Steering Committee unanimously took a position of support for the Core Campus project with specific points on safety for pedestrians and bicyclers. 2.9 The project is, or will be at the time of completion, in conformance with all applicable local plans and provisions of the Eugene Code, 1971, planning regulations, and the Metropolitan Area General Plan. 3 A display ad soliciting recommendations or comments from the public regarding this project was published in the Register -Guard on May 4, 2013. The period for comment expired on June 3, 2013 at 5pm. Twenty -four comments were received within that period. Therefore, based upon the above findings and the criteria set forth in the City's adopted Standards and Guidelines, I recommend that the application be approved. Dated this i ; day of June, 2013. Executive Director Planning & Developmen Department Page 4 of 4 Resolution EXHIBIT A- Report and Recommendation ATTACHMENT D Approval Resolution RESOLUTION NO. A RESOLUTION APPROVING A MULTIPLE -UNIT PROPERTY TAX EXEMPTION FOR RESIDENTIAL PROPERTY LOCATED AT 505 EAST BROADWAY, EUGENE, OREGON (CORE CAMPUS /APPLICANT). The City Council of the City of Eugene finds that: A. Venator Investments LLC (P.O. Box 1202, Clatskanie, Oregon) is the owner of real property located at 505 East Broadway, Eugene, Oregon (Assessor's Map Number 17 -03- 32-23, Tax Lots 1800 and 2300) and John and Gretchen Cetaras Revocable Trust (P.O. Box 68, Rumsey, California) is the owner of real property located at 505 East Broadway, Eugene, Oregon (Assessor's Map Number 17- 03- 32 -23, Tax Lot 1900) ( "the property "). B. CORE Campus (2234 West North Avenue, Chicago, Illinois) has 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 and commercial space to be constructed on the property. C. The project as proposed consists of the development of 19 studio units, 46 one - bedroom units, 44 two - bedroom units, 25 three- bedroom units, 42 four - bedroom units, and 21 five- bedroom units, for a total of 197 residential units. In addition, the project will include approximately 4,430 square feet of commercial space. D. 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. E. The project could not financially be built "but for" the tax exemption. F. The applicant solicited comments from city- recognized affected neighborhood association. G. The requirements in the Standards and Guidelines for Multiple -Unit Housing Property Tax Exemptions adopted by Administrative Order No. 53- 12 -01 -F related to proximity to historic resources have been satisfied. Resolution - Page 1 of 4 H. 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. L 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. J. The proposed project will be at the time of completion, 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. K. The project is not designed for, and will not be used as, transient accommodations. L. Granting the application is in the public interest. In making this determination, the City Council has considered the number of points awarded to the project based on the public benefit scoring system contained in the Standards and Guidelines. M. The Report and Recommendation attached as Exhibit A recommends that the application be approved and the exemption granted. In making that recommendation, the Executive Director found that the applicant submitted all required materials, documents and fees as set forth in Section 2.945 of the Eugene Code, 1971, and the Standards and Guidelines, and the applicant is in compliance with the policies contained therein. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Section 1 . Based upon the above findings which are adopted, and the City Council's review of the Executive Director of the Planning and Development Department's Report and Recommendation which is attached as Exhibit A, the City Council approves the application of CORE Campus for an ad valorem property tax exemption under the City's Multiple -Unit Property Tax Exemption Program for the residential units to be constructed at 505 East Broadway, Eugene, Oregon (Assessor's Map Number 17- 03- 32 -23, Tax Lots 1800, 1900 and 2300), subject to the following conditions: Resolution - Page 2 of 4 1. The project will consist of the development of approximately 200 units with a total of approximately 500 bedrooms, and no more than 5,000 square feet of commercial space. In addition, the project will include at least 4 ADA accessible units. 2. Payment in Lieu of Affordable Housing In years 6 -10 of the tax exempt period, in addition to any other fees, taxes or charges owed to the City, the owner of the property shall make the following payments to the City by July 15 of each year: Year 6 = $30,000 Year 7 = $60,000 Year 8 = $165,000 Year 9 = $300,000 Year 10 = $475,000 If the payment is not made by the due date, the City Manager shall follow the process in Section 2.947 of the Eugene Code, 1971, to initiate proceedings for Council to terminate the exemption. 3. Local hiring Core Campus shall provide a plan with local hiring goals on: a. The percent of the dollar volume of the combined professional services and construction contracts to include local firms (based in Oregon), and b. The percent of on -site construction jobs performed by local residents (residing in Oregon). Exceptions for specialty work not available in the local market will be reviewed on a case by case basis. Core Campus shall also demonstrate a good faith effort to solicit bids for professional services and construction contracts from qualified women and minority business enterprises. 4. Bicycle and Pedestrian Access and Safety Core Campus has committed to: 4.1 Design elements to facilitate safety and access, such as a streetscape barrier along East Broadway so residents and visitors are not tempted to cross the street mid - block. 4.2 Working with the City on options for safe pedestrian crossings. 4.3 Lighting, signage, and maps for residents and visitors. 5. The project shall be completed on or before January 1, 2022. 6. No later than 18 months after receiving a Certificate of Occupancy, the applicant shall submit to the City's Planning and Development Department documentation of Leadership in Energy & Environmental Design (LEED) Silver certification (copy of U.S. Green Building Council Rating Certificate and final LEED review). Resolution - Page 3 of 4 Section 2 . Subject to the conditions in Section 1 of this Resolution, 100% of the residential units and commercial space (up to 5,000 square feet) described in Section 1 are declared exempt from local ad valorem property taxation beginning July 1 of the year following issuance of a Certificate of Occupancy and continuing for a continuous period of ten years unless earlier terminated in accordance with the provisions of Section 2.947 of the Eugene Code, 1971. 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 Lane County Assessor on or before April 1, 2014. Section 4 . This Resolution shall become effective immediately upon its adoption. The foregoing Resolution adopted and effective the day of , 2013. City Recorder Resolution - Page 4 of 4 ATTACHMENT E Denial Resolution RESOLUTION NO. A RESOLUTION DENYING A MULTIPLE -UNIT PROPERTY TAX EXEMPTION FOR RESIDENTIAL PROPERTY LOCATED AT 505 EAST BROADWAY, EUGENE, OREGON (CORE CAMPUS /APPLICANT). The City Council of the City of Eugene finds that: A. Venator Investments LLC (P.O. Box 1202, Clatskanie, Oregon) is the owner of real property located at 505 East Broadway, Eugene, Oregon (Assessor's Map Number 17 -03- 32-23, Tax Lots 1800 and 2300) and John and Gretchen Cetaras Revocable Trust (P.O. Box 68, Rumsey, California) is the owner of real property located at 505 East Broadway, Eugene, Oregon (Assessor's Map Number 17- 03- 32 -23, Tax Lot 1900) ( "the property "). B. CORE Campus (2234 West North Avenue, Chicago, Illinois) has 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 and commercial space to be constructed on the property. C. The project as proposed consists of the development of 19 studio units, 44 one - bedroom units, 44 two - bedroom units, 25 three- bedroom units, 42 four - bedroom units, and 21 five- bedroom units, for a total of 197 residential units. In addition, the project will include 4,430 square feet of commercial space. D. 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. E. The Report and Recommendation of the Executive Director of the Planning and Development Department, as designee of the City Manager, attached as Exhibit A to this Resolution recommends that the application be approved and the exemption granted. In making that recommendation, the Executive Director found that the applicant submitted all required materials, documents and fees as set forth in Section 2.945 of the Eugene Code, 1971, and the Standards and Guidelines, and the applicant is in compliance with the policies contained therein. F. Notwithstanding the recommendation to approve the application, the City Council has determined that granting the application is not in the public interest. Resolution - Page 1 of 2 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Section 1 . Having considered the above findings and the Executive Director's Report and Recommendation attached as Exhibit A to this resolution, the City Council finds that it would not be in the public interest to grant the application of CORE Campus for an ad valorem property tax exemption under the City's Multiple -Unit Property Tax Exemption Program for the residential units to be constructed at 505 East Broadway, Eugene, Oregon. Therefore, the application is denied. Section 2 . The City Manager, or the Manager's designee, is requested to forward a copy of this Resolution to the applicant within ten days. Section 3 . This Resolution shall become effective immediately upon its adoption. The foregoing Resolution adopted and effective the day of , 2013. City Recorder Resolution - Page 2 of 2 ATTACHMENT F Pro-forma with MUPTE Below is the 10-year pro-forma with the MUPTE and the additional payments to the City. The guaranteed payments Core Campus proposes to make to the City total $1,030,000, which is 20% of the MUPTE savings for the 10-year period. The average cash on cash return for the 10-year period is 9.66%. ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................ With MUPTE Year I Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Income 4,649,100 4,695,600 4,742,500 4,790,000 4,837,900 4,886,200 4,935,100 4,984,500 5,034,300 5,084,600 Vacancy 232,500 234,800 237,100 239,500 241,900 244,300 246,700 249,200 251,700 254,200 Effective Gross Rent 4,416,600 4,460,800 4,505,400 4,550,500 4,596,000 4,641,900 4,688,400 4,735,300 4,782,600 4,830,400 Operating Exp 1,413,300 1,427,500 1,441,700 1,456,200 1,470,700 1,485,400 1,500,300 1,515,300 1,530,400 1,545,700 Property Tax (449,000) (462,500) (476,400) (490,700) (505,400) (520,600) (536,200) (552,300) (568,900) (586,000) (saved by MUPTE) Add'I Pymt to City 30,000 60,000 165,000 300,000 475,000 IND 3,452,300 3,495,800 3,540,100 3,585,000 3,630,700 3,647,100 3,664,300 3,607,300 3,521,100 3,395,700 Debt SeNce 2,491,522 2,491,522 2,491,522 2,491,522 2,491,522 2,491,522 2,491,522 2,491,522 2,491,522 2,491,522 CIF 960,778 1,004,278 1,048,578 1,093,478 1,139,178 1,155,578 1,172,778' 1,115,778 1,029,578 904,178 Cash on Cash Return ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 8.7% 9.1% 9.5% 9.9% 10.4% 10.5% 10.7% 10.1% 9.4% 8.2% J The financial analysis on the without MUPTE pro-forma is in the June 10 Agenda Item Summary, Attachment I.