TO: Urban Renewal Agency Board
THROUGH: Steve Powers, Executive Director
FROM: Kristin Retherford, Urban Development Director
SUBJECT:
title
Affordable housing development at 3350 Portland Road, NE.
Ward(s): Ward 5
Board Member(s): Ausec
Neighborhood(s): Northgate, Highland
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ISSUE:
Shall the Agency Board for the proposed 180-unit affordable housing development at 3350 Portland Road, NE:
• Approve an increase to an exception to the North Gateway URA Toolbox Grant Program to increase the maximum grant amount from $749,000 to $849,000;
• Approve the use of $100,000 of currently unallocated FY 16-17 funding for the increase; and
• Authorize the execution of a Development Agreement with the developers, consistent with the terms and conditions identified in the commitment letters?
RECOMMENDATION:
recommendation
• Approve an increase to an exception to the North Gateway URA Toolbox Grant Program to increase the maximum grant amount from $749,000 to $849,000;
• Approve the use of $100,000 of currently unallocated FY 16-17 funding for the increase; and
• Authorize the execution of a Development Agreement with the developers, consistent with the terms and conditions identified in the commitment letters.
body
SUMMARY AND BACKGROUND:
On September 26, 2016, the Agency Board and Council took actions to support a 180-unit housing development at 3350 Portland Road, NE (Attachment 1 - Map). These actions were the Agency Board’s approval of a North Gateway URA Toolbox Grant Program exception, to allow up to $749,000 in FY 16-17 funding to support the housing construction, up to $650,000 in URA funding for related street and sidewalk improvements, and a City Council set aside of $300,000 from the FY 2017-2018 and $100,000 from the FY 2018-2019 U.S. Department of Housing and Urban Development HOME Investment Partnership (HOME) allocations.
The timing of the financing for the development has evolved since Council and the Agency Board first considered support for the development. For the project to proceed at the state level, the developer needs to receive the City’s and Agency’s funding commitment letters within the next few weeks. To meet the schedule, staff recommends that the Agency Board approve an increase to the existing exception for an addition $100,000 in URA funding, together with $300,000 in unallocated in the City’s FY 16-17 HOME funds. These actions will allow the release of the $400,000 HOME funds set aside in FY 17-18 and FY 18-19.
The developer plans to begin construction of the 180-unit affordable housing development at 3350 Portland Road in June 2017. The development will target individuals and families earning 60 percent or less of Salem’s median income (equivalent to $33,900 or less per year). The 14-acre property, currently owned by the Larry and Jeanette Epping Family Foundation, has been vacant for several years and actively marketed for commercial development.
FACTS AND FINDINGS:
Since September, several aspects of the project have evolved:
• Development entities - New development entities have formed to address the funding requirements of HOME and Oregon Community and Housing Services. Mountain West Investment Corporation (Mountain West), will oversee the development, but has formed two new entities that will receive the North Gateway URA and HOME funding and purchase the property. Cornerstone GP, LLC will receive the North Gateway URA grants. Its sole member is Community Resource Trust, which is a non-profit corporation, whose president is Ron Hays. Cornerstone Apartments Limited Partnership will receive the City HOME loan. Cornerstone GP LLC is the general partner in the Cornerstone Apartments Limited Partnership.
• Timing and use of funds - The developer needs to receive funding commitment for all City and Agency sources before June to meet the requirements of other financing sources. The initial HOME funding approval included $300,000 in FY 17-18 HOME funds, and $100,000 in FY 18-19. To provide a funding commitment before June, staff intends to utilize $300,000 in existing FY 16-17 HOME funding for the development. Staff is seeking approval of an additional $100,000 in URA toolbox funds to replace the HOME funds.
• Commitment letters - $650,000 North Gateway URA funding for related street and sidewalk improvements is included in the recommended FY 17-18 North Gateway URA budget. This funding request was presented in the September 26, 2016, staff report to the Agency Board with an indication that staff would return with a request to approve this funding at a future date. The improvements to be funded will serve two undeveloped commercial parcels in addition to the affordable housing development. By executing the commitment letters (Attachment 2 - North Gateway URA Commitment Letters) and development agreement, the URA will be obligated to provide these funds, consistent with the terms and conditions in the commitment letters and the development agreement.
• Development Agreement - Staff recommends that the Agency Board authorize execution of the development agreement with Mountain West, Cornerstone GP, LLC, and the Cornerstone Apartments Limited Partnership, to memorialize the partners, development roles, and conditions of the various funding sources. The development agreement will include the funding commitment letters and their conditions.
Without City and Agency assistance, it is unlikely the development will move forward. The developer is pursuing several financial subsidies because the anticipated monthly rents will not generate the revenue to support the development and operational costs. Some of the subsidies, including Low Income Housing Tax Credits (Tax Credits), require ongoing rent and income restrictions, further limiting sustainable operation of the development. The city’s current multifamily vacancy rates are between 1% and 1.5%, which exacerbates the need for housing, including units that are affordable.
Several recently adopted City and Urban Renewal Area plans and studies identify the need for a broader range of housing options for Salem residents. The adopted Portland Road Corridor Action Plan (Action Plan) recommended the Agency address the need for more affordable housing in the North Gateway URA by providing Toolbox Grant Program funding and/or other incentives to support development. The Action Plan also identified the Epping property, along with several sites along Portland Road, as “opportunity sites” that the Agency should prioritize for possible acquisition and/or development support. The recommended North Gateway URA funding for the development and related frontage improvements are consistent with Section 601.c.1 and 601.c.15 of the URA Plan, authorizing funds for sidewalk installation and related improvements on Portland Road and connecting residential developers to financial incentives.
Exception from Grant Program Policies
The current North Gateway URA Toolbox Grant Program policy states that the maximum grant amount is $300,000. In September 2016 the Agency approved of an initial exception to allow $749,000 grant. Staff recommends an increase to the exception to increase the grant by $100,000.
The current Toolbox Grant Program Policy states that non-profits are not eligible for grant funding. Although Mountain West and the development partners described above are for profit entities, it is likely the development will qualify for a property tax exemption as allowed under state law from certain affordable housing developments.
Annie Gorski
Economic Development Manger
Attachments:
1. Map
2. Draft North Gateway URA commitment letters