Lithia Lot - Affordable Housing Project Agreement
|Meeting Date:||December 19, 2006||Primary Staff Contact:||Michael Franell|
|Contributing Departments:||Community Development
|Secondary Staff Contact:||Brandon Goldman|
|Estimate Time:||40 minutes|
The City of Ashland and Kendrick Enterprises have been working on the development proposal for the Lithia Way City owned parking lot since selection of Kendrick Enterprises as the preferred offeror on August 30th 2005. Kendrick Enterprises was selected as the lead proponent out of four proposals received by the City Council in response to an RFP issued in February 2005. City Staff was directed to negotiate with Kendrick Enterprises to address numerous issues raised by the Housing Commission and City Council and return to Council with a more solidified proposal for consideration.
Through the negotiation process a greater understanding of the project finances was obtained through a revised project pro-forma, an opinion of value on the subject property, and an analysis of the potential grant funding available.
Throughout the investigation and negotiation process it became evident that should the project go forward as originally envisioned, a considerable shortfall of funding would have existed. Without an identified source for the shortfall (approx $250,000- $400,000) it appeared that the project as originally designed to provide affordable would not have been financially viable without additional subsidy beyond that which already anticipated through State affordable housing grants (HOME).
In aiming to close this potential funding gap, Kendrick Enterprises and ACCESS Inc. suggested that the project could be modified in a number of ways to assist in closing the financing gap. Their revised proposal included the following changes:
Scope of Project:
Number and Type of Units:
In examining the funding shortfall ACCESS and Kendrick Enterprises proposed the inclusion of some market rate units to assist in closing the financing gap. As the goal was to provide at least 10 affordable units the negotiation team determined that the only way to add additional units, and reduce the development costs of the affordable units, would be to provide small units (less than 500sq.ft.). Staff determined that as units of less than 500 sq. ft. are considered .75 of a unit in Ashland Land Use Ordinance (ALUO), for thirteen studio units would be calculated at a density of 9.75 and therefore conform to the maximum zoning density.
The Housing Commission and City Council had deliberated at length on the issue of unit size and as such this reduction in unit size is a substantive change in the original proposal. The original proposal identified a range of unit sizes including studios, 1-bedroom and 2-bedroom units. As the proposal has changes to be exclusively studios this remains a point for further consideration. The size of the units (being less than 500 sq. ft. each) will not likely be attractive to families with children and will instead predominately serve single individuals and couples. Although this type of housing may be attractive to service sector workers within the downtown it is a shift in the potential demographic served by the proposal.
In the modified proposal, for 10 affordable units and three market rate units, the proceeds from the sale of the market rate units would directly benefit the affordable housing component. The financing gap previously mentioned previously would be effectively closed by the contribution of 100% of the proceeds from the sale of market rate condominiums, and the contribution from Kendrick Enterprises including architectural fees, developer overhead and developer profit. The addition of for-market units into the proposal simultaneously reduces the pro-rata share of the common area and parking for the affordable housing component as a proportional percentage of each would be attributable to the market rate units. A mixed income development also has additional advantages as it would eliminate the potential stigma associated with "low-income" housing development. Both the market and "affordable" units would have identical floor areas there would be no external distinction between them. In order to obtain a maximum sale price for any for-purchase units it would be advisable to locate them on the top floor to add the value of the viewscape to the units. Units offered for sale would be condominiums distinct from the rest of the facility and would not revert to City ownership at any time in the future. Further Kendrick Enterprises has raised the prospect of developing these three units as tourist accommodations to make the units most marketable.
The reduction in size of units was also proposed to reduce the per-unit cost to thereby help close the funding gap and to make the development more competitive for HOME funds. The Housing Commission had originally seen value in providing larger units (one and two bedrooms) but through this investigative process it appears the cost of development of such units, while maintaining the high quality design proposed in the Kendrick Project, would increase the per-unit cost above the maximum typically funded through the State HOME program.
Ultimately the increased density achieved by providing smaller units, from 10 to 13 actual units, raises the question of whether the three additional units would best serve the community as market rate units or subsidized affordable units. Obviously the monetary value of the market rate units is precisely their contribution to the remaining ten affordable units. However, if the City saw a greater community value in retaining these units as affordable the city could essentially cover the cost of their development ($776,651) and additionally provide the $273,349 in anticipated proceeds from their sale (combined $1,050,000).
The potential result of the inclusion of reserved affordable housing parking (4 spaces) and reserved market rate housing spaces (3 spaces) would leave a remainder of 9 spaces within the subsurface parking lot available to the public. The proposed parking level would contain a total of 16 parking spaces including a handicap accessible space. Under the proposal seven would be reserved and not available to the public. The existing parking lot has 13 public spaces and no handicap accessible space, thus if the project goes forward as indicated above, a net four space reduction of on-site "public parking" would result from the dedication of reserved parking as proposed. It is important to note however that the reconfiguration of the entrance onto Lithia Way would allow for one-additional on-street public parking space in addition to those provided on-site within the subsurface structure. Cumulatively there exists 13 public parking spaces today and the proposal would increase the total parking provided to 17 with 7 of those spaces being unavailable to the public at large.
Lastly regarding parking it is important to note that engineering and final architectural plans have not been conducted. One item that relates to this is that the existence of a City Utility Transformer currently in the south east corner of the property may need to be relocated to accommodate the sites development. If this is the case a potential site for relocation would be within the parking level. Again as the details are not provided until a final plan is developed there is the potential that this may reduce available parking by one space.
Lease Duration Affordable Housing:
As the City recognizes the need for affordable housing will likely persist it seems reasonable to extend a lease period to a minimum of 60 years or longer in order to support the provision of affordable housing for that duration while increasing the competitiveness of an application for affordable housing grants. ACCESS Inc. has also indicated that a purchase of air-rights by ACCESS Inc. ($1) would secure permanent affordability and may resolve issues outlined under the Bureau of Labor and Industries section below.
Regarding the commercial component of the development Kendrick Enterprise requested that the City Council consider a 60 year lease in lieu of the 40 year period originally identified in the applicant February 2005 proposal.
The City Council considered the revised proposal at its August 1, 2006, City Council meeting and voted 4 - 1 to move forward with the project based upon the modified proposal with three additional stipulations: 1) that travelers accommodations not be allowed, 2)that they consider full time occupancy as a requirement, and 3) that they consider Councilor Hardesty's suggestion for the commercial area to revert to Access at the end of the term. Legal staff was then directed to develop a draft agreement incorporating in the modified proposal and, to the extent feasible, the three additional stipulations.
Council can approve the draft agreement as proposed.
Council can direct staff to seek to negotiate Council specified modifications to the draft agreement.
Council can reject the proposed agreement and provide staff with direction relating to any further proceedings on this proposed project.
|Staff Recommendation: |
Approve the draft agreement as proposed.
I move the Council authorize the Mayor to execute the Development Agreement For The Development Of The City Of Ashland Lithia Parking Lot Affordable Housing Development as proposed.
Click on the PDF file below to view the following attachments:
• Draft Agreement.
• Revised Draft Agreement [SUBMITTED AT DECEMBER 19, 2006 COUNCIL MEETING]
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