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Home My WebLink About2019-1202 Study Session MINCITY Or -ASH LAN D MINUTES CITY COUNCIL STUDY SESSION Monday, December 2, 2019 Council Chambers, 1175 E. Main Street Mayor Stromberg called the Study Session to order at 5:36 p.m. Councilors' Slattery, Graham, Seffinger and Jensen were present. Councilors' Akins and Rosenthal were absent. Public Forum: Huelz Gutcheon — Ashland — Spoke regarding climate change and energy conservation. 1. Vertical Housing Development Zone Planning Manager Maria Harris introduced Scott Fregonese from Fregonese Associates Inc. Harris presented Council with a PowerPoint (see attached). Items discussed were: • Transit Triangle Overlay. • Vertical Housing Development Zone Map. • Vertical Housing Tax Credits and how they work. • VHTC Incentives differ depending on the number of floors. • Developers options. • VHTC Benefits. • Testing Physical Perimeters. • What impacts development performance. • 3 Story Mixed -Use Examples. • 4 Story Mixed -Use Examples. • Comparing the examples. • Testing affordable housing requirements. • Average Rent Assumptions. • Average Median Income Assumptions. • Internal Rate of Return. • Incentives. • Requiring Affordable Housing. • Recommended to not require affordable housing as a condition to use the VHDZ. Council discussed using local developers. Council directed Staff to move forward with this item and bring back to Council in February. 2. Consideration for the Development of a Memorandum of Understanding with ODOT for the Jurisdictional Transfer of a Portion of OR99 Otherwise Known as E Main Street and Lithia Way Public Works Director Paula Brown and Deputy Public Works Director Scott Fleury gave Council a brief Staff report. Brown explained that this consideration would be good for the City and ODOT. Council questioned the cost. Brown explained it would just be Staff time. Brown explained that if Council decides to move forward this item will be brought back at Stage 3 to discuss the pros and cons. City Administrator Kelly Madding spoke that there will be public information and outreach for this project. Council discussed revenue benefits. Council directed Staff to go forward with the MOU. The Study Session was adjourned at 7:00 PM. Respectfully submitted by: City Recorder Melissa Huhtala Attest: Q May Stromberg In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Administrator's office at (541) 488-6002 (TTY phone number 1-800-735- 2900). Notification 72 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to the meeting (28 CFR 35.102-35.104 ADA Title I). Ashland Transit Triangle Vertical Housing Development Zone (VHDZ) Testing Affordable Housing Requirements gsHurvD FREGON ESE How do Vertical Housing Tax Credits Work? • It is a 10 year partial property tax exemption • After 10 years, the full value of the project is placed upon the tax rolls • The exemption applies to the building value only, not the property value • The exemption applies to all taxing jurisdictions that do not opt out when the zone is established • The partial property tax exemption varies with the number of residential floors in a project Vertical Housing Tax Credits Encourage Housing Above Commercial Residential units above E Commercial space below How can I get these incentives for my building? 2 AON& U % Of each full floor of residential above non- residential there Is a 20% propertytax exemption o� Up toso Bulldingswlth 5.Story ortaller Above the ground floor, the property owner gets a 20 percent property tax break for each floor dedicated to residential use, up to 80 percent. Tested Physical Parameters (Zoning) Tested Financial Feasibility (Market) m 4 '" 7 0 1 Story Commercial Example (TT Overlay- C-1 and E-1 Zones) • Generic 150 ft by 150 ft lot = 22,500 sqft • 8,600 sf Retail/office net • 26 Parking Spaces • Percent Improvement Exemption = 0% 1 • Potential Public Revenue (10 Year Property Tax) = o $382,000 150 ft 22,500sgft or.51 Acres What impacts development performance? • Land & Construction cost • Market demand -Zoning standards Cities can influence these - Zoning - Incentives (VHTC) - Streetscapes, parks and amenities 1 Story Commercial Example rr.., sso 000 r«°oo sao.oao sss oao s» o00 su.oao r M,OW sss,oao sso.om Km 3° PROPERTY TAX OVER 10 YEARS •r..,z •r..,re .r..,a .r1115 m•.,s .r..n =r•..e .e...a .m.ao T. Fa-0., Total Tax Exemption over 10 Years= $0 Potential Total 10 Year Property Tax = $382,000 Comparing the 3 Examples .. 1Story 3Story 4Story Commercial Mixed -Use Mixed -Use Potential Total lO Year $382,000 $753,000 I. $903.000 Property Tax -- ,—� Total Tax Exemption over 10 $0 $245,000 $457,000 1 Years Tax Collected after) $0 $508000 .1 $446,000 �Remalmng Exemptlon ovenlO Years ,I , .__ Total Tax Exemption perunit $0 $8,860 `$13,337 1 over 10 Years i 4 Story Mixed -Use Example Internal Rate of Return (IRR) % Internal Rate of Return 10 _ Financially Viable 6w 6UR _ ._ ._.. .. 4.on - .... _. _ ... zo%_—�—�_— o.a% Mar�etflaoo MCMet Pale ate ]PM 20% itlly �lID%RMI) J.T.w ,oaol e[ ARwCeM at RlM, Affrd.blo M1 BQ.'(OMI 80%Mll w/ WRAlld Mlw 6036 PM1 fiRb Mil w/ vxm vxn •%In...1 Rate of RN Testing Requiring Low -Income Housing in the Transit Triangle • Average Median Income Assumptions • We are using $60,000 • In 2017 AMI in Ashland was $50,517 • Average Rent Assumptions • As of April 2019, average rent for an apartment in Ashland is $1300 120% $1,200 Target Rent 60% $650 3 Story Mixed -Use Example Internal Rate of Return (IRR) I AW 0'. Martel Feh MCMel Pate Mp%AMR w/VXiC %Internal Rate of Return ___—Financially Viable Ashland Transit Triangle Vertical Housing Development Zone (VHDZ) Testing Affordable Housing Requirements Ashland Transit Triangle Vertical Housing Development Zone (VHDZ) Testing Affordable Housing Requirements 1 inch = 800 feet CITY 0. 0 400 600 1,600 o F-1 ASHLAND r FREGONESE fa—• A 5 S O C I .A T E S Vertical Housing Tax Credits Encourage Housing Above Commercial Residential units above Commercial space below How do Vertical Housing Tax Credits Work? • It is a 10 year partial property tax exemption • After 10 years, the full value of the project is placed upon the tax rolls • The exemption applies to the building value only, not the property value • The exemption applies to all taxing jurisdictions that do not opt out when the zone is established • The partial property tax exemption varies with the number of residential floors in a project How can I get these incentives for my building? 2 O%Up to Of each full floor of residential above non- residential there is a 20% property tax exemption f () % Buildings With 5 Story or taller Above the ground floor, the property owner gets a 20 percent property tax break for each floor dedicated to residential use, up to 80 percent. VHTC Incentives Differ Depending on the number of floors • VHTC incentives 5 Story or taller buildings to achieve maximum property tax exemption of 80% percent of the building value • 2 Story building - Typicallywill not use VHTC because it would only be a 20% property tax exemption • 3 Story building - 40% property tax exemption • 4 Story building - 60% propertytax exemption • 5 Story building - 80% property tax exemption • 6+ Story building - 80% property tax exemption VHTC Eligibility 1. Project must be entirely located within a vertical housing development zone 2. Project must be a multi -story building used for residential and non-residential uses 3. At least 50 percent of the project's ground floor that fronts the primary public street must be committed to non-residential use Completely Voluntary This is optional. Developers can choose to: 1. Build using existing zoning 2. Build using the TT overlay 3. Take advantage of the vertical housing tax credit program to help make a development project financially feasible VHTC Benefits • Encourage new mixed -use development including more housing • Create long-term community wealth through mixed -use buildings that will be fullytaxed afterthe partial abatement expires • Stimulate more commercial growth in the transit triangle, increasing the value of surrounding properties • Enhance opportunities for a live/work community • Support commercial development by increasing the number of residents in the area • Encourage more walkable neighborhoods by locating goods and services near residents • More housing near transit helps to reduce Green House Gas Emissions Tested Physical Parameters (Zoning) Tested Financial Feasibility (Market) --------------- 10 — 0 S Re 2 Set Lack 0 I-VAROMW Ir" 11— 3 ft - ��}�}�JJJ M Pafkhi What impacts development performance? • Land & Construction cost * Market demand *Zoning standards Cities can influence these - Zoning - Incentives (VHTC) - Streetscapes, parks and amenities I Story Commercial Example (TT Overlay - C-1 and E-1 Zones) • Generic 150 ft by 150 ft lot = 22,500 sqft • 8,600 sf Retail/office net • 26 Parking Spaces • Percent Improvement Exemption = 0% • Potential Public Revenue (10 Year Property Tax) _ $382,000 150 ft 0 22,500 sqft 'O or .51 Acres 1 Story Commercial Example $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 PROPERTY TAX OVER 10 YEARS Year 1 Year 2 Year 3 -Year 4 ■Year 5 ®Year 6 ®Year 7 ■Year 8 ■Year 9 ■Year 10 $42,312 $43,579 $37 605 $38,730 $39,889 $41,083 $33,423 $34,423 $35 452 $36,613 Tax Exemption Total Tax Exemption over 10 Years = $0 Potential Total 10 Year Property Tax = $382,000 3 Story Mixed -Use Example (TT Overlay - C-1 and E-1 Zones) • Generic 15Oft by 150ft lot = 22,500 sqft • Ground floor Retail/Office • 28 Units (650 sqft average) • 28 Parking Spaces • Percent Improvement Exemption = 40% • Total Tax Exemption over 10 Years = $245,200 • Tax Exemption per unit over 10 Years = $8,864 150 ft 0 22,500 sqft LO or .51 Acres 3 Story Mixed -Use Example (40%) 10 YEAR TAX ABATEMENT Tax Remaining ®Tax Exempt $100,000 $90,000 $80,000 � IN Em $70,000 EM 00— $ 0 $ 9 $ 1 $60,000 ®_ $ 6$ 7$ 8 $ 0$ c 4 $24 $ c5 $50,000 $40,000 $30,000 $20,000 $44,311 $45,641 $47,G10 $48,420 $49,873 $523fi9 $5 ,910 $54,#97 $5 1$2 $57817 $10,000 $0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Tax Exemption over 10 Years = $245,200 Potential Total 10 Year Property Tax = $ 753,000 4 Story Mixed -Use Example (TT Overlay - C-1 and E-1 Zones) • Generic 150 ft by 150 ft lot = 22,500 sgft • Ground floor Retail/Office • 34 Units (650 sgft average) • 34 Parking Spaces • Percent Improvement Exemption = 60% • Total Tax Exemption over 10 Years = $457,000 • Tax Exemption per unit over 10 Years = $13,337 150 ft 0 22,500 sqft LO or .51 Acres r, 4 Story Mixed -Use Example (60%) 10 YEAR TAX ABATEMENT Tax Remaining ■Tax Exempt $120,000 $100,000 $80,000 $60,000 $ W 8 $ 4 $ 6 $ 4 $ 1 $ 7 $40,000 $20,000 $38,901 $40,068 $41,270 $42,5-08 $43,783 $45,097 $0:� _ Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Total Tax Exemption over 10 Years = $457,000 Potential Total 10 Year Property Tax = $903,000 Comparing the 3 Examples Potential Total 10 Year $382,000 $753,000 $903,000 Property Tax Total Tax Exemption over 10 $0 $245,000 $457,000 Years Remaining Tax Collected after $0 $508,000 $446,000 Exemption over 10 Years Total Tax Exemption per unit $0 $8,860 $13,337 over 10 Years Testing Requiring Low -Income Housing in the Transit Triangle • Average Median Income Assumptions • We are using $60,000 • In 2017 AMI in Ashland was $50,517 • Average Rent Assumptions • As of April 2019, average rent for an apartment in Ashland is $1300 130% $1,300 120% $1,200 80% $950 60% $650 Target Rent 4 Story Mixed -Use Example Internal Rate of Return (IRR) 12.0% 10.0% 8.0% 6.0% o 4.0% 2.0% 0.0% Market Rate Market Rate (120%AMI) w/ VHTC % Internal Rate of Return 11 20% 20% Affordable at Affordable at 80% AMI 80% AM I w/ VHTC ■ % Internal Rate of Return 3 Story Mixed -Use Example Internal Rate of Return (IRR) 12.0% 10.0% 8.0% 6.0% 0 4.0% 2.0% 0.0% Market Rate Market Rate (120%AMI) w/ VHTC % Internal Rate of Return 11 20% 20% Affordable at Affordable at 80%AMI 80% AM I w/ VHTC ■ % Internal Rate of Return Financially Viable 11 20% 20% Affordable at Affordable at 60%AMI 60% AM I w/ VHTC Financially Viable 11 20% 20% Affordable at Affordable at 60%AMI 60% AM I w/ VHTC Comparing the 2 Examples - Requiring Affordable Housing Total Project Cost VHTC - Total Tax Exemption over 10 Years Additional Subsidy Needed (20% affordable units at 80% AMI) Additional Subsidy Needed as a % of the total Project Cost (20% affordable units at 80% AMI) Additional Subsidy Needed (20% affordable units at 60% AMI) Additional Subsidy Needed as a % of the total Project Cost (20% affordable units at 60% AMI) $5.20 Million $6.23 Million $245,000 $578,000 11.1% $457,000 $834,000 13.4% $1,178,000 $1,117,000 22.7% 21.5% Comparing the 2 Examples - Requiring Affordable Housing VHTC - Total Tax Exemption over 10 Years $245,000 $457,000 Additional Subsidy Needed (20% affordable units at 80% AMI) Total Subsidy Needed VHTC + Affordable Requirement (20% affordable units at 80% AMI) Additional Subsidy Needed (20% affordable units at 60% AMI) Total Subsidy Needed VHTC + Affordable Requirement (20% affordable units at 60% AMI) $578,000 $834,000 $823,000 $1,291,000 $1,178,000 $1,117,000 $1,423,000 $1,574,000 • Requiring affordable housing as part of the VHTZ would create the need for substantial subsidies or alternative methods for filling a sizeable financial ga p. • Placing requirements for affordable housing on an incentive program like VHTC essentially removes the incentive for developers to utilize the program in the first place. Do not require affordable housing as a condition to use the VHDZ Requiring Affordable Promote and utilize the many Housing existing financial incentives already available to encourage affordable housing development Implement a Vertical Housing Program Ashland Transit Triangle Vertical Housing Development Zone (VHDZ) Testing Affordable Housing Requirements 1 inch = 800 feet 0 400 800 1,600 T' v Feet SAS H LAN D ' r IR FREGONESE N S S O C I .4 1 E S