HomeMy WebLinkAbout04.29.24 Special Work Session
AGENDA
Special Work Session
Meeting
5:30 PM - Monday, April 29, 2024
Farmington City Hall, Conf. Room 170
Page
1. CALL TO ORDER
2. APPROVE AGENDA
3. DISCUSSION ITEMS
3.1. Farmington Apartments - Project Update and Financial Assistance
Package Review
No action requested at this time. This item is discussion only.
Agenda Item: Farmington Apartments - Project Update and Financial
Assistance Package Review - Pdf
2 - 17
4. CITY COUNCIL COMMITTEE UPDATE
5. CITY ADMINISTRATOR UPDATE
6. ADJOURN
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SPECIAL WORK SESSION AGENDA MEMO
To: Mayor, Councilmembers and City Administrator
From: Deanna Kuennen, Community Dev Director
Department: Community Development
Subject: Farmington Apartments - Project Update and Financial Assistance Package
Review
Meeting: Special Work Session - Apr 29 2024
INTRODUCTION:
In January 2024, the City Council held a second work session with Vishal Dutt and Yellow Tree
Development to discuss a proposed apartment project and a financial assistance package that
would involve the partial waiver of a special assessment and some level of tax assistance. At that
work session, the City Council provided direction regarding their willingness to provide financial
assistance to support a market-rate, multi-family housing development. Since that time, the
development team has worked with City Staff to address a new road design, planning and zoning
applications have been submitted, and Ehlers, on behalf of the City, has analyzed the financial
assistance need to determine the level of tax assistance warranted for the project.
DISCUSSION:
Project Update:
The development team of Vishal Dutt and Yellow Tree Development have proposed a market-rate
multi-family housing development in Farmington on a 3-acre portion of the property owned by Hy-
Vee as shown here:
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The location and conceptual layout of the project was presented to the City Council for discussion
in late December and again in early January - which resulted in a refined project proposal that
incorporates a new road layout per the request of the City Council, and ultimately increased the
overall unit count. The final proposed project includes:
4-story building with 168 market-rate apartments (mix of unit size)
252 parking spaces (mix of surface and underground parking)
Outdoor amenity space
$40 million + estimated total investment
New road alignment (Dushane Parkway/Spruce Street intersection)
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Financial Assistance Review
As was identified during the work sessions, the project requires some level of assistance in order to
be financially feasible. Based on the refined project design, the development team submitted a
Business Subsidy application, and all required documentation necessary to evaluate the project,
the project assumptions, and expected returns. Jason Aarsvold from Ehlers has analyzed the pro
forma to right-size the finance assistance and determine the appropriate level of assistance
required to move the project forward. Working within the parameters discussed at the January work
session of a maximum of 10 years of abatement of City only taxes (plus the partial waiver of the
Special Assessment) - the tax abatement recommendation includes:
5-years of 100% abatement City taxes
5-years of 75% abatement City taxes
Jason Aarsvold will be in attendance to explain the process involved in reviewing the business
subsidy request and the recommended tax abatement details.
Next Steps
The purpose of this update it to share with the City Council the evolution of the proposed project
and the recommended financial assistance package. The next steps for the project include
scheduling and conducting the tax abatement public hearing (for May), completing the entitlement
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and lot split process, and authorizing the waiver of a portion of the existing special assessment.
Upon successful completion of these steps, the development team plans on starting construction
this summer.
Staff will be available to discuss the entitlement process, new road alignment, and overall project
scope.
BUDGET IMPACT:
Not applicable
ACTION REQUESTED:
No action requested at this time. This item is discussion only.
ATTACHMENTS:
01-02-2024 Meeting Presentation
Page 6 of 17
JANUARY 2, 2024
PROPOSED MF HOUSING DEVELOPMENT –
CONTINUATION OF DISCUSSION
CITY COUNCIL WORK SESSION
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AGENDA
1.Review of Proposed Project
2.Update on Transportation Access & Proposed Solution
3.Financial Incentives Discussion
4.Questions & Answers
5.Next Steps
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REVIEW OF
PROPOSED
PROJECT
•115-unit (+) market-rate
apartment development –
mix of unit sizes
•3-acre site (SE portion of
15-acre Hy-Vee property)
–site is zoned Mixed Use
& MF housing is allowed
with CUP
•Estimated $28 million
investmentPa
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REVISED CONCEPT PLAN:
•Slightly larger parcel
•Possibility for
additional units
•More greenspace and
outdoor amenities
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NEW ROAD ALIGNMENT:
•Eliminates square-about
•Preserves connection to
future Pilot Knob Road
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FUNDING GAP & FINANCIAL INCENTIVES
Reasons for Funding Gap &
Assistance Request
•Increased Construction Costs
•Lower Loan to Cost Percentage
(percentage that can be financed)
•Higher Interest Rate –doubled
since 2022
•Lower Est. Rents vs. Other
Markets
•Est. Debt Coverage Ratio = 1.07
Creates Gap –need 1.25+ to get
financing
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SPECIAL ASSESSMENT
•Existing 15-year special assessment
•Deferred until recently
•Total assessment = $1,987,610
plus interest
•2023 is Year 2 of payments
•Property owner is paying
assessment on entire 15 acres
•Approximate Payoff for 15-acres =
$1,722,595
•Per Acre Cost = $116,549
•Request to Forgive (3 acres) =
Approx. $350,000
•Assessment on remaining 12-acres
continues
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TAX INCENTIVE NEED
•Funding gap –cannot finance unless
increase debt coverage ratio
•Equity –est. $9.86 million
•Tax Abatement –help fill the gap
•Not eligible for Housing TIF –the
project is not considered “affordable”
and does not have income limits.
•Not eligible for Redevelopment TIF –
the project is on greenfield site
•Not eligible for Low Income Housing
Tax Credits –offered by the state to
support affordable housing with
income limits
How Tax Abatement Works
•Similar to TIF –property owner
pays the property taxes and the
taxes are then “rebated” based on
agreement.
•Tax abatement can be up to 20
years if not all taxing jurisdictions
participate.
•Can include existing taxes as well
as taxes generated by the
project/investment.
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Tax Abatement Assumptions
•Ehlers prepared high-level estimate to understand what potentially could be realized in city
taxes based on proposed development.
•Assumptions include:
•Existing taxes will continue to be paid to the city and only new taxes are included in
abatement.
•Only city taxes are included (not school district or Dakota County)
•Project values used are the same as assumption made for the Ebert project.
•Proforma has not been analyzed to vet cost assumptions made by developer.
Tax Abatement Proposal
•Maximum 10 year
•City only taxes -only taxes generated by development not existing taxes paid
•Total Abatement: $1,174,920 which has a Present Value of $822,875
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QUESTION & ANSWERS
NEXT STEPS
Seeking direction from City Council regarding their support for this type of development and
the use of financial tools/incentives to encourage investment.
A positive response will allow the project to move into the next stages which include
detailed engineering, architecture & design and application for tax incentives with in-depth
analysis to determine financial need.
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THANK YOU
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