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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/05/2011 - SECOND READING OF ORDINANCE NO. 071, 2011, APPROVIDATE: July 5, 2011 STAFF: Karen Cumbo AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 26 SUBJECT Second Reading of Ordinance No. 071, 2011, Approving the Waiver of City Fees for the CARE Housing Affordable Housing Project in the Provincetowne Subdivision. EXECUTIVE SUMMARY Under Colorado statute and City of Fort Collins ordinances and resolutions dating back to 1988, the projects of housing authorities are exempt from taxes and fees. For many years, the City has waived building permit and development review fees and some capital expansion fees for projects of the Fort Collins Housing Authority (FCHA), as required by the ordinance. For the most part, these have been relatively small projects. FCHA is currently partnering with the non-profit CARE Housing in a large, multi-family affordable housing project in the Provincetowne subdivision, which is under construction. Fee waivers for this project total $557,378 (outlined in detail in “Financial Impacts” below). This Ordinance was adopted on First Reading on June 7, 2011, by a vote of 6-1 (nays: Ohlson). Based upon Council’s comments and questions during First Reading of this ordinance, staff has added more context, chronology, and explanation regarding affordable housing finance and the request for fee waivers for the Provincetowne, Filing III development. While the City has long been committed to affordable housing, and the need for financial support is clearly demonstrated in the increase in the number of applications for local and federal funds, the fiscal impact of this and future fee waivers for projects in which the FCHA is a partner rather than sole owner warrants some thoughtful evaluation of the waiver situation, and possibly some changes to the City Code. Additionally, considering the current and projected fiscal impact on the City for fee waivers for large projects, clarification for the definition of “ownership” as it pertains to the Housing Authority and its development partners will be part of the review. This policy issue will be addressed at an upcoming work session. Pending that policy discussion, the City Manager is recommending that Council consider waiving the fees due for the CARE Housing project. BACKGROUND / DISCUSSION CARE Housing (a non-profit) bought a portion of the Provincetowne project site, located at Autumn Ridge Road and Trilby, from KB Homes to fulfill the affordable housing requirement for the entire residential project. This is an 85-unit, $14.9 million townhome rental housing project intended to serve families earning 30%-50% of the Area Median Income (AMI). [Current Fort Collins/Loveland AMI for a family of four is $76,700. An annual income of $23,000 = 30% AMI, and $38,350 is 50% AMI]. Funding for the project is a combination of grants, Low Income Housing Tax Credits, owner equity, and conventional financing. Provincetowne Funding Sources Amount Low Income Housing Tax Credit Equity $8,724,906 Tax Credit Assistance Program (American Reinvestment and Recovery Act) $1,609,480 HUD Entitlement Funds – CDBG/HOME $1,455,011 City of Fort Collins – Affordable Housing Fund $100,000 Colorado Division of Housing $500,000 Federal Home Loan Bank of Topeka $350,000 Permanent Loan Financing $2,060,000 Deferred Developer Fee $155,855 Development Total $14,955,252 The financing of affordable housing is complex, especially in today’s economic climate. A fifteen year federal tax credit for private investors is a critical component of the financial package, and the private investor (J.P. Morgan Chase, in July 5, 2011 -2- ITEM 26 this case) must be a 99% owner. The Housing Authority is technically only a .001% participant in this project, but is further involved because it guarantees up to $1.4 million of unanticipated costs. Both the tax credit and the fee waiver are critical components of the Provincetowne project, and elimination of either could jeopardize the project. Historically, the City has waived its fees for other, smaller projects in which the FCHA was a minority partner. However, the magnitude of the fees associated with this project has prompted extensive conversations about the ownership issue and the financial impact that the waiver of fees for the project would have on the City. These conversations began during the building permit application process for Provincetowne. Early on, the assumption was that there should be no distinction between a project that is wholly owned or developed by FCHA, and one in which FCHA has only a fractional participation. However, the magnitude of this proposed fee waiver prompted a re- examination of the City’s legal obligation to waive fees for this kind of project. As the legal requirements of state and local law on this subject were further explored, it became apparent that there are two ways to interpret the law on fee waivers for housing authority projects. The difference of opinion as to the proper interpretation of the law led to a new series of negotiations with all of the parties, including consideration of deferral of the fees for some period of time. But because a compromise could not be reached in the negotiations, the decision was made to seek policy direction from City Council. The series of events was essentially as follows. Project Timeline November 2006 CARE Housing purchased the land January 2007 CARE submitted first tax credit application, which was not strong to receive a tax credit award April 2008 CARE began discussions with FCHA about partnership July 2008 FCHA Board of Commissioners approved formal participation intent by resolution August 2008 CARE Housing application for CDBG funds submitted. Fee waivers discussed during pre- application meeting September 2008 CARE Housing and FCHA present application for funding to CDBG Commission. Financing package assumed City waiver of fees January 2009 CARE submitted second tax credit application which included the strength of FCHA as a partner and did include fee waivers April 2009 CARE submitted third tax credit application with additional committed grants and FCHA participation June 2009 Low Income Housing Tax Credit (LIHTC) Reservation awarded by Colorado Housing and Finance Authority (CHFA) November 2010 First building permits requested from the City of Fort Collins. Discussions begin about the proper documentation to show FCHA’s ownership interest and the applicability of the FCHA fee waivers Construction begins. January 2011 FCHA learns of City concerns about the fee waivers. Building permits note deferral of fees pending resolution. February 2011 FCHA corresponds with the City about FCHA ownership, Ordinance No. 065, 1999 and Colorado Revised Statutes and continues to believe, based upon the City’s response, that fee waivers would extend to Provincetown partnership. PDT management and City Manager’s office notified about situation. Interdepartmental staff team (including City Attorney’s and City Manager’s office) undertakes research and development of options. March-May 2011 Negotiations continue, involving City, FCHA, CARE Housing, and legal representatives July 5, 2011 -3- ITEM 26 A significant component of the financing picture for this project is the expectation by FCHA partners and their lenders that the fee exemption which the Fort Collins Housing Authority is eligible for under state law and the City Code passes to the other funding partners. This includes a waiver of taxes and development review and capital expansion fees as provided in Sec. 7.5-17(1) of the Fort Collins Municipal Code. The degree of the FCHA’s ownership of the project has been the subject of considerable discussion, but because of the statutory and municipal code provisions, as well as historic precedent, FCHA and CARE assumed that the waivers would apply in this project. The City has routinely waived fees for FCHA projects in the past. Most of those waivers dealt with small building permit projects, but the waivers also applied to the construction of the Via Lopez project in 1998 and 1999. The FCHA was developer of the low-income homeownership project, which included 22 single family detached homes sold to first- time homebuyers. These fee waivers totaled approximately $107,476. In addition, two acquisition-rehabilitation projects were recently completed by FCHA utilizing LIHTC financing: Village on Elizabeth in 2008, and Village on Stanford in 2010. Both projects received total fee waivers of approximately $4,000. In both cases, FCHA’s subsidiaries are a .01% partner and the equity investors have 99.9% interest in the partnership for the tax credit period of 15 years. At the end of that period, FCHA will be 100% owner. In 1995 and 1996, a 24-unit development on Impala Circle and a 44-unit development at 1403 West Swallow, of which the FCHA was a minimal owner, were built with total estimated fee waivers of $164,808. Several local projects, either partially or wholly composed of affordable units, have sought support from the FCHA. Not all such requests have been approved by the FCHA Board. The FCHA considers a number of criteria in reviewing such requests: financial feasibility, benefit to low-income households, access to support services and other criteria, before agreeing to participate. The funding of affordable housing projects requires strategic packaging of a variety of borrowed resources, application for local and federal funds, and, in most cases, the IRS Low Income Housing Tax Credit program. The LIHTC program requires that equity investors have a 99.9% ownership. It is really the only tool for affordable housing development for the community’s lowest income families. Without it, market rents would be necessary to make the financing work and likely would no longer be considered as an affordable housing project. Affordable Housing Projects and Fees Development and building permit fees for affordable housing projects are currently handled in two ways: 1. If the Housing Authority is involved, all fees and taxes, except for utility fees, are waived as described above, pursuant to both State law and City Code. 2. For affordable housing projects that do not involve the Housing Authority, the following occurs: a. By City Code, development review fees are waived according to the percentage of the project that meets the criteria for and has been designated as affordable. If a project receives a 100% affordable housing designation, 100% of the development review fees are waived; if 10% of the housing units are designated affordable, 10% of the fees are waived. b. By state and federal statutes, sales tax fees are waived for any tax-exempt entities. c. By City Code, plan check, building permit and certain utility fees are collected at the time of building permit issuance. d. By City Code, all other fees are delayed until Certificate of Occupancy issuance, or December 1st of the year the building permit was issued, whichever first occurs. Development review fees cover services rendered. If the fees are waived, and the services are still provided, then the General Fund presumably backfills the gap of expenses incurred. Likewise, Capital Expansion Fees (parkland, fire, street oversizing, police, etc.) cover capital costs associated with new development. If the fees are waived and the capital improvements still provided, then other City, PFA and School District funds presumably backfill the gap. Utility connection fees are not waived. Over $1.5 million of City administered competitive funds, including CDBG and HOME, have already been expended on the Provincetowne project, including payment of water tap fees, electric capacity fees, PFA fees, and building permit July 5, 2011 -4- ITEM 26 fees. Building permits have been issued for all eleven buildings and construction is underway, with the first units expected to be occupied by the end of June 2011. Because of concerns about significant financial and policy impacts on the City, management staff and the City Attorney’s Office have explored several facets of this issue. Staff also worked with the FCHA and CARE Housing on some proposed alternatives to a full waiver of fees for projects involving FCHA partnership. Alternatives discussed include deferring those fees rather than waiving them or limiting the waiver to situations where the FCHA is the majority owner of the project. As noted above, each of these alternatives proved to be unacceptable to one or more of the parties involved. As a result, the City Manager is recommending that the Council waive the fees for the CARE Housing project and then address possible changes in the policy of continuing to waive fees for these kinds of projects at a later time. The most significant issue for Council consideration is the determination of eligibility for fee waivers under current law. If Council determines that the Provincetowne project is not eligible for a fee waiver because of the minority ownership position of the FCHA, and requires payment of the fees, that decision could create a potential default situation. One possible remedy would be that FCHA would step in, thereby creating full ownership, in a sense, and triggering a complex set of legal and financial actions. A more likely scenario would be that FCHA and/or CARE would assemble the funds to pay the fees. To date, the project is on budget and ahead of schedule. The risk related to low income housing tax credit (LIHTC) leasing requirements remains but is minimal. The only real risk at this point would be the additional cost of over $500,000 in fees not waived. CARE Housing has the ability to refinance a property it currently owns and could take out $509,896 in equity. CARE had planned to refinance a property and take out this equity in order to make planned capital improvements which would be deferred indefinitely if this money needs to go into Provincetowne. Attachment 4 is a memo from Julie Brewen, FCHA Director, that gives FCHA’s perspective on the proposed fee waiver, as well as an explanation of how the FCHA determines, on a case-by-case basis, whether to enter into these kinds of partnerships. Other Pending Affordable Housing Projects The Legacy Senior Residences is expected to be under construction this fall, but this project will not be requesting a waiver of fees. The cost of the fees has been built into the financing. Other projects are in the early planning stages, but construction is not anticipated until at least 2013. Other Communities Fort Collins is not the only community faced with this situation. Staff research shows that despite the state law, the waiver of fees is not consistently applied. Some cities waive fees as a matter of policy, and some waive on a case by case basis. Some do not waive fees. A summary of the research is included as Attachment 5. Future Policy and Legal Issues Several questions will be presented to Council at an upcoming work session, and may ultimately result in changes to the City’s policies and ordinances regarding fee waivers. • Does (or should) the waiver of fees for the Housing Authority properly extend to majority partners, or should it be limited to projects wholly owned, developed and operated by the Fort Collins Housing Authority, or projects with some specified ownership interest? • Under what conditions should the City waive fees? • If fees are waived, how are the financial impacts addressed? July 5, 2011 -5- ITEM 26 FINANCIAL / ECONOMIC IMPACTS For the Provincetowne project (eleven multifamily buildings; a total of 85 low income rental units), the potential financial impact of a fee waiver to City funds is $557,378. Approximately $4,762 of the fee revenue lost is Utility development review fees. Building permit and plan check fees total $42,720. The remaining $509,896 is comprised of Capital Expansion fees (Fire, Police, General Government, Parkland, Street Oversizing, and School fees). These figures reflect recent changes in the capital expansion and utility development review fees. Some fees were collected at the inception of this project because of the unresolved issues, and approximately $17,177 will need to be refunded if the fees are waived. The following is a breakdown of the $509,896 Capital Expansion Fees for the Provincetowne/CARE housing townhome buildings. Fire: $ 13,523 Police: $ 9,233 General Government: $ 16,920 Larimer County Roads: $ 15,725 Community Parkland: $118,830 Neighborhood Parkland: $106,590 City Street Oversizing: $148,665 School: $ 80,410 TOTAL CAPITAL EXPANSION FEES WAIVED: $509,896 STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on Second Reading. BOARD / COMMISSION RECOMMENDATION The Affordable Housing Board considered this matter at a meeting on June 16, and unanimously approved a motion to support Ordinance No. 071, 2011, to waive the fees for the Provincetowne project. The Board is sympathetic to Council’s concerns about the financial impacts, but because this project was planned and financed with reasonable expectation of the fee waivers, the Board feels it should be completed as proposed. The Board would like to be included in future discussions of the fee waiver issue. It noted that Policy AHSP-15 in the City’s Affordable Housing Strategic Plan 2010-2014 called for the development of a permanent source of revenue for affordable housing, which could be a source of funds for the fee waiver. Draft meeting minutes can be found in Attachment 6. ATTACHMENTS 1. Copy of First Reading Agenda Item Summary - June 7, 2011 (w/o attachments) 2. Location map for Provincetowne Townhomes 3. Ordinance No. 065, 1999 4. FCHA Director Brewen’s memo 5. Information about other communities 6. Affordable Housing Board minutes , June 16, 2011 7. Powerpoint presentation COPY COPY COPY COPY ATTACHMENT 1 DATE: June 7, 2011 STAFF: Karen Cumbo AGENDA ITEM SUMMARY FORT COLLINS CITY COUNCIL 20 SUBJECT First Reading of Ordinance No. 071, 2011, Approving the Waiver of City Fees for the Care Housing Affordable Housing Project in the Provincetowne Subdivision. EXECUTIVE SUMMARY Under Colorado statute and City of Fort Collins ordinance, the projects of housing authorities are exempt from taxes and fees. For many years, the City has waived fees for projects of the Fort Collins Housing Authority (FCHA), as required by the ordinance. For the most part, these have been relatively small projects. FCHA is currently partnering with the non-profit CARE Housing in a large, multi-family affordable housing project in the Provincetowne subdivision, which is under construction. Fee waivers for this project total $557,378. While the City has long been committed to affordable housing, and the need for financial support is clearly demonstrated in the increase in the number of applications for local and federal funds, the fiscal impact of this and future fee waivers for projects in which the FCHA is a partner rather than sole owner may warrant some thoughtful evaluation of the waiver situation, and possibly some changes to the City’s Code. In addition to considering the current and projected fiscal impact on the City for fee waivers for large projects, clarification is also being sought from City Council on the definition of “ownership” as it pertains to the Housing Authority and its development partners. This issue will be addressed at a future work session. Pending that policy discussion, the City Manager is recommending that Council consider waiving the fees due for the CARE Housing project. BACKGROUND / DISCUSSION CARE Housing (a non-profit) bought a portion of the Provincetowne project site, located at Autumn Ridge Road and Trilby, from KB Homes to fulfill the affordable housing requirement for the entire residential project. The financing of affordable housing is rather complex, especially in today’s economic climate. A fifteen year federal tax credit for private investors is a critical component of the financial package, and the private investor (J.P. Morgan Chase, in this case) must be a 99% owner. The Housing Authority is technically only a .001% participant in this project, but is further involved because it guarantees up to $1.4 million of unanticipated costs. The affordability period for the Project is 40 years. Under certain circumstances, the Housing Authority could take over the project. State law contemplates the type of tax credit financing structure that is being used to finance this Project (where the Housing Authority has only a partial ownership interest), by stating that a project is exempt from taxation if it is owned by “an entity in which an entity wholly owned by an authority has an ownership interest.” It is not clear, however, whether the statutory intent is to also exempt such a project from fees. That is because, as to the exemption from both taxes and fees, the statute states that just “the authority” is exempt. Another component of the financing picture for this project is the expectation by FCHA partners and its lenders that the fee exemption for which the Fort Collins Housing Authority is eligible under state law and the City Code passes to the other funding partners. This includes a waiver of taxes and development review and capital expansion fees as provided in Sec. 7.5-17(1) of the Fort Collins City Code. The degree of the FCHA’s ownership of the project has been the subject of considerable discussion. Does (or should) the waiver of fees for the Housing Authority properly extend to majority partners, or should it be limited to projects wholly owned, developed and operated by the Fort Collins Housing Authority, or projects with some specified ownership interest? A related concern in the extension of the fee waivers to FCHA partners is the criteria for approving projects and partners. Several local projects, either partially or wholly composed of affordable units, have sought support from the FCHA, and not all such requests have been approved by the FCHA board. The FCHA considers financial feasibility, benefit to low-income households, access to support services and other criteria, before agreeing to participate. COPY COPY COPY COPY June 7, 2011 -2- ITEM 20 Affordable Housing Projects and Fees Development and building permit fees for affordable housing projects are currently handled in two ways: 1. If the Housing Authority is involved, all fees and taxes, except for utility fees, are waived as described above, pursuant to both State law and City Code. 2. For affordable housing projects that do not involve the Housing Authority, the following occurs: a. By City Code, development review fees are waived according to the percentage of the project that meets the criteria for and has been designated as affordable. If a project receives a 100% affordable housing designation, 100% of the development review fees are waived; if 10% of the housing units are designated affordable, 10% of the fees are waived. b. Sales taxes are waived for any tax-exempt entities. c. By City Code, plan check, building permit and certain utility fees are collected at the time of building permit issuance. d. By City Code, all other fees are delayed until Certificate of Occupancy issuance, or December 1st of the year the building permit was issued, whichever first occurs. Development review fees cover services rendered; if the fees are waived, and the services are still provided, then the General Fund presumably backfills the gap of expenses incurred. Likewise, impact fees (parkland, fire, street oversizing, police, etc.) cover capital costs associated with new development. If the fees are waived and the capital improvements still provided, then City, Poudre Fire Authority (PFA) and School District funds presumably backfill the gap. Utility connection fees are not waived. The City has routinely waived fees for FCHA projects in the past. Most of those waivers dealt with relatively small projects. The last significant new FCHA construction project was the Via Lopez project in 1998 and 1999. The FCHA was 100% owner of the development, which included 22 single family detached homes; fee waivers totaled approximately $107,476. Over $1.5 million of City administered competitive funds, including CDBG and HOME, have already been expended on the Provincetowne project, including payment of water tap fees, electric capacity fees, PFA fees, and building permit fees. Building permits have been issued for all eleven buildings and construction is underway, with the first units expected to be ready for occupancy by June 11. Because of concerns about significant financial and policy impacts on the City, management staff and the City Attorney’s Office have explored several facets of this issue. Staff also worked with the FCHA and CARE Housing on some proposed alternatives to a full waiver of fees for projects involving FCHA partnerships, including deferring those fees rather than waiving them or limiting the waiver to situations where the FCHA is the majority owner of the project. However, each of the alternatives examined was problematic in this situation, primarily because the projections for the Project were developed, and financing structured, based on the assumption that the fees would be waived as they have been for previous FCHA projects. The City Manager is recommending that the Council waive the fees for the CARE Housing project and then deal with the policy question of continuing to waive fees for these kinds of projects at a later time. That question will be presented to Council at a work session on July 5. Attached is a memo from Julie Brewen, FCHA Director (Attachment 3), that gives FCHA’s perspective on the proposed fee waiver, as well as an explanation of how the FCHA determines, on a case-by-case basis, whether to enter into these kinds of partnerships. FINANCIAL / ECONOMIC IMPACTS For the Provincetowne project (eleven multifamily buildings; a total of 85 low income rental units), the potential financial impact of a fee waiver on City funds is $557,378. COPY COPY COPY COPY June 7, 2011 -3- ITEM 20 Approximately $4,762 of the fee revenue lost is Utility development review fees. Building permit and plan check fees lost total $42,720. The remaining $509,896 is comprised of Capital Expansion fees (Fire, Police, General Government, Parkland, Street Oversizing, and School fees). These figures reflect recent changes in the capital expansion and utility development review fees. Some fees were collected at the inception of this project because of the unresolved issues, and approximately $17,177 will need to be refunded if the fees are waived. ENVIRONMENTAL IMPACTS Staff has identified no adverse environmental impacts as a result of granting this fee waiver. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION These issues will be addressed with the Affordable Housing Board on June 16 so that its input can be considered by Council at the work session on the policy issues on July 5. ATTACHMENTS 1. Location map for Provincetowne Townhomes 2. Ordinance No. 065, 1999 3. FCHA Director Brewen’s memo 4. Powerpoint presentation Attachment 2 NN E. Trilby Rd. S. College Ave. Lemay Rd. Carpenter Rd. ATTACHMENT 3 To: Karen Cumbo, PDT Director From: Julie Brewen, Executive Director Date: May 24, 2011 Re: FCHA Development Partnership Criteria and the Provincetowne Development In 2004, the FCHA Board of Commissioners established formal criteria for considering private developer requests for FCHA participation. FCHA staff and the Board of Commissioners have been extremely sensitive to our relationship with the City of Fort Collins and our responsibilities related to public/private partnerships. In 2006, FCHA and CARE Housing began discussions regarding how FCHA could strengthen the Provincetowne development for low-income families in our community. The discussions were based on FCHA’s Partnership Criteria and the following statutes, ordinance and precedent.  Ordinance No. 65, 1999. City Ordinance specifically exempts all housing authority projects from the payment of enumerated fees based on an explicitly stated important public purpose. City Ordinance also references the consistent statutory exemption found at CRS 29- 4-226.  CRS 29-4-227. Statute provides that the Provincetowne project, in which the FCHA has an ownership interest, is exempt from the payment of taxes or fees to the state or any subdivision thereof. It is our position that a plain reading of this statute exempts the Provincetowne project in which FCHA has an ownership interest. It is also our position that the legislative history of this statutory provision supports full exemption based on conversations with an author of this statute.  CRS 29-20-104.5. Statute specifically authorizes a local government to waive an impact fee or development charge on the development of low or moderate income housing as defined by the local government. City Ordinance No. 65 waives the fee. The City has waived fees for FCHA projects recently and consistently over the past 40 years. The requested fee waiver is supported directly by both Ordinance and statute.  City Practice. The City has waived fees for FCHA projects. It is on this basis that FCHA and CARE structured ownership of the Provincetowne project based on reasonable reliance of City practice. FCHA Partnership Criteria:  Whether a proposed project includes households that earn 30-50% of Area Median Income (AMI) on rental projects, or 80% and below AMI for homeownership projects.  How FCHA resources will increase benefit to low-income households, through increased number of affordable units, lower housing costs, or both, and/or access to support services. ATTACHMENT 4  Market information as determined by FCHA which shows demand for the proposed project.  Long-term affordability, with a preference for projects that achieve permanent affordability.  Opportunity for ownership by the FCHA, and/or FCHA buy-out options after 20-30 year affordability period.  Does the proposal demonstrate development capacity, experience and commitment to the targeted population?  To what extent will FCHA share in the developer fee?  What is the project proximity to employment, transportation, schools, retail, and recreation?  Role of FCHA in the long-term management of the project, including the opportunity to earn a reasonable management fee.  Degree and nature of risk for FCHA.  Degree to which FCHA’s ownership interest is commensurate with the financial benefits it brings to the project.  Projects in which all or a portion of the units are designed to serve special needs population such as the elderly or persons with disabilities may receive special consideration. In addition, we consider whether our involvement strengthens both entities and ultimately makes the project stronger. Each year, FCHA reviews several formal and informal requests for participation in development projects. In 2010/2011, two formal requests were thoroughly vetted and subsequently denied. To date, Provincetowne is the first new construction development partnership that has been formally executed and warranted this level of FCHA participation. Not only does it rank high on our criteria, several factors related to the current economy and the soft market for investor purchase of Low Income Housing Tax Credits have necessitated our increased level of participation and loan guarantees. We are currently working with a developer partner on one other project at this time. We will be the co-developer of Legacy senior apartments which will provide housing for 72 low-income seniors. Again, this project is extremely strong in terms of our criteria above. This particular developer partner has had a great of success with low-income housing tax credit properties in partnership with other housing authorities across our region. In this particular deal, our co- developer partner is taking the majority of the risk, while FCHA and our community will reap all of the benefit. It is likely that due to the current tax credit equity market, this deal will support the voluntary payment of some or all of the development fees. FCHA will become the full owner after the initial 15 year Low Income Housing Tax Credit program investor period. In this case, two strong entities with the same mission and vision will ultimately create an outstanding product and service for our community. There are at least two FCHA projects currently in the due diligence or conceptual phase. One project is a multi-family new construction project that may or may not replace existing public housing. Another project on the drawing board is a “Housing First” apartment property serving single people who have been homeless or near-homeless. Both of these projects will be developed solely by FCHA. At this time, we do not know if either of these project development budgets and financing structures will support the voluntary payment of the development fees, however FCHA will be happy to voluntarily pay some or all of the fees when such projects support doing so. ATTACHMENT 5. Affordable Housing Fee Waiver - Sample Comparison of Other Colorado Jurisdictions City / County Housing Authority Sponsored Projects Other Affordable Housing Projects City & County Broomfield Fees are waived on all remodels. For new construction, the fees are waived on a case by case basis. Longs Peak Energy, Habitat for Humanity, and some others automatically receive waiver of fees per City Council direction. No fees are waived or deferred. Greeley No fees are waived or deferred. (They have not constructed any affordable housing in over 10 years) Offset with HOME fund federal grants for programs like Habitat for Humanity. Fees are not waived or deferred. Larimer County Do not have many of these projects so they would be addressed at the time they were considered. No fees are waived or deferred. Loveland Case by case basis. Developer applicants go before Affordable Housing Commission for a recommendation, and then before City Council and request waivers and/or reductions. City Council has set aside six lots for Habitat for Humanity to build on; all fees are waived. There is a limit to the amount of fees they will backfill. Other non-profits must request fee waivers from City Council; the requests are usually granted. Housing development - builder applies for affordable housing and then fees are waived on houses that are designated as affordable (all fees are waived for these). Council may choose to reduce fees instead of full waiver. Comes before their Affordable Housing Commission first for a recommendation. Then goes to City Council. Working on new revisions to their housing code to add provisions for delayed fee payments in cases where developers get behind on building the percentage of affordable units promised as part of their development. When the developer get behind, the City will start charging them full fees for additional permits until they catch up with the appropriate percentage of affordable units. Once they are back on track, the City will start waiving fees again. This will allow some fee deferments in times when developers are behind in their affordable housing perce Thorton Thornton hasn't dealt with this issue yet, but would recognize the state statute. Requests would be handled on a case by case basis. No fees are waived or deferred unless directed by management. Request are handled on a case by case basis. Westminster Housing Authority treated like any other developer. City is more readily willing to waive these fees on projects sponsored by the Housing Authority. City works with Westminster Housing Authority, Jefferson County and Adams County. No recent big projects with them. Westminster does not have a blanket policy waiving any fees or taxes. Case by case basis - based on financial necessity of waiver. Other factors are considered such as location of project, relationship to the comprehensive use plan, etc. Westminster gives consideration to waiving development and building fees, use tax. The only thing they do not waive is water tap fees (a separate enterprise). City has an open space sales tax that they cannot waive since tied to bonds. Otherwise, all others, including CIEs are subject to negotiation. There is a Development Review Committee made up of staff from the City Manager's Office & Community Development who look at cases and make determination. their recommendation then goes to City Council since they have no authority to waive fees. Waivers are done by ordinance. Lakewood Do waive fees, but do not backfill. They sometimes offset water and sewer fees and repay them with the affordable housing fund. Pueblo Generally do not waive fees. The city manager can waive them, but normally doesn't. Adams County City & County Denver Longmont Longmont waives fees, but does not backfill. Jefferson County County does not waive fees Boulder (City) They used to waive fees but do not any longer. They don't charge an inclusion fee for permanent housing though. County does waive fees, but does not backfill because the fees are nominal. They do waive fees; do not backfill. ATTACHMENT 6 SPECIAL MEETING CITY OF FORT COLLINS AFFORDABLE HOUSING BOARD DRAFT MEETING MINUTES 281 N. College Ave. Conference Rooms A Fort Collins, Colorado June 16, 2011 4:00 – 6:00 PM Chair: Ben Blonder Staff Liaison: Ken Waido, 970-221-6753 City Council Liaison: Lisa Poppaw Board Members Present: Dan Byers, Wayne Thompson, Marie Edwards, Mike Sollenberger, Wendie Robinson Board Members Absent: Ben Blonder Advance Planning Department Staff Present: Ken Waido Council Members Present: None Other Staff Present: Karen Cumbo, Director of Planning, Development, and Transportation; Gail Neben, Note Taker Guests: Julie Brewer, Executive Director, Fort Collins Housing Authority Meeting called order by Dan Byers, Vice Chair, at 4:00 PM. Provincetowne - Potential Waiver of City Impact Fees for the Fort Collins Housing Authority – Provincetowne Project Cumbo: Staff went to City Council last week and will return on July 5. Our concern is the future and how it impacts affordable housing and the City. Staff would like to have input from this board. The Fort Collins Housing Authority in partnership with CARE Housing is developing the Provincetowne project, an 85 unit townhome project. It will be available for occupancy this week. Construction started last November and it is a $14M project. In the planning process both entities assumed that by state law and City ordinance development fees and capital expansion fees would be waived. Council was frustrated because fees had been waived in the past, and they thought they would be waived again.. CDNS staff raised the concern that HA was just a .001% owner in project; and, therefore, questioned why they entitled to full waiver of fees? It became a policy issue because the financial impact of that waiver is $509,000. Impact fees leagally 1 ATTACHMENT 6 have to match the cost of the improvements they fund. There are some legal problems if fees get waived and how the costs get covered and backfilled by the general fund. Staff sees a a financial and legal challenge. There was nevrr any question that the City is committed to supporting affordable housing, but nobody anticipated a $500,000 financial challenge to address it. We have had many conversations about it internally (City Manager's Office, City Attorney), the attorneys for CARE Housing and the attorneys for the Housing Authority and they did not all have the same interpretation of state law. Staff is looking at ways to solve the problem. As discussions have continued, the Housing Authority has told us that this project is an anomaly. Future project will plan for these fees and build them into the financing. We want to separate this project and have fees waived, and then we will go back to City Council with some proposals on how to handle this in the future. There is another project (Legacy Senior Housing Project) that is pending and pushing us to get this resolved quickly. However, they will not be anticipating waiver of fees. They will be building those fees into their pro forma. One question was about the percentage of ownership the Housing Authority has in this project. It was determined that the private investor really needs to have 99% ownership. That level of ownership, though it looks to be a very minor level and was the subject of council discussion, is not indicative of the level of responsibility that the Housing Authority has and control they have. We need to describe the role of the Housing Authority better even though their financial participation is .001%. Board Question: What is state statute? Cumbo: It is not clear. One reference speaks to the percentage of ownership, taxes and fees. Another only makes reference to taxes. But, there is a reference to proportional ownership. Board Question: So, the smaller percentage the less the waiver? I didn't see that by having the tiniest fraction of a percentage of ownership they had a full right to a waiver, which would be the state's position. Brewen: The point of difference between the attorneys is that the beginning of the section of state law talks about projects fully owned by the Housing Authority and the fees and special assistance. Later it talks about partnerships in which the Housing Authority is a partial owner or a subsidiary of the Housing Authority as a partial owner. But in that section it only refers to taxes. That is where the nuance is. Cumbo: One of the things we want to clarify is that there is a level of responsibility and control and meeting the City's goals for affordable housing. We might look at if it is a Housing Authority project (however we define it) there will be a waiver of fees. If it is something less than full ownership or control, we look at some criteria for a waiver of 2 ATTACHMENT 6 fees that meet the goals of the affordable housing for the City of Fort Collins. We should deal with them on a case by case basis. It may be that some projects can manage to finance a project and pay the fees. This one was not possible because it was after the fact and so difficult to put the package together to meet the tax credit. The additional $500,000 was a deal killer. If we plan for project going forward we can work together. Board Question: Is there a proposed ordinance? Cumbo: The ordinance that was approved on first reading last week just deals with this project only. It was attached to your packet. What we need is some additional legal research before we can begin to work thru this. One of the things that is being discussed is the need to backfill these fees for capital expansion which are not general fund backed. The city attorney 's office is working on it and looking at other cities. Julie: The tax credit is the real tool right now. Board Question: What does Loveland do? Cumbo: We will go to Loveland and we need time to pull together all of the information. Fort Collins waived fees for the Via Lopez project in 1988-89, there were not as many units and it was spread over two years with fewer fees so the impact was not as significant. Board Question: Was that a percentage ownership, too? Brewen: That was a home ownership project. Board Question: Is there a precedent in the City of Fort Collins of a percentage of ownership on smaller deals. Brewen: Yes, the last two types of tax credit projects that we did were acquisition rehab so the fees were small adding one new structure here and there and we were that .001% owner. Board Question: It seems that the City of Fort Collins was okay with that on smaller deals. Now that it is a larger impact it rises to the surface. The precedent was set. Cumbo: What we faced last week was Council questioning why we didn't tell them about it before and why did you think this would be okay. Because the code says fees are waived and it has been done before. Brewen: We wrote a memo that we were bringing the fee waivers in our formal application, but it was not talking directly to that issue of back filling. Board Question: So the current issue now is that we are here to discuss Provincetowne, or after Provincetowne? 3 ATTACHMENT 6 Cumbo: I think we will deal with Provincetowne. I am interested in your input on the policy going forward. I am not asking for anything formal today. There is precedent, and if that is the direction we should be going that is helpful. But we want you to be aware of what is happening. The mayor was excited at State of the City Address in January, and asking if, with the passing of 2B, can we put more money into affordable housing, but here is another amount after 2B and how can we fund it? The timing and the feeling of no choice and challenges with funding was the council's concern, but also that there have been a lot of challenges in the last couple of months. We and the council want to do the right thing for Affordable Housing and the Housing Authority. We all probably made assumptions that might not have been accurate, but were made with good intent. Board Question: Affordable Housing is community wide and should be addressed as such. Not borne on the backs of new construction. New construction does not cause poverty. General fund is appropriate for the backfill. I have a concern that if the existing Affordable Housing Fund is approached for the back filling, then the project will be taking money from others community wide. Board Question: I saw the ordinance request from the Provincetowne Project and it sounds like at a later date there will be another work session put together to review them. Will we get a chance as a board to review those things before it goes to work session? Cumbo: Yes. I think we are trying to address the situation for the long term without creating undue burden on anyone, but putting together the kinds of tools we need for projects going forward. There are more in the pipeline in the next 3 or 4 years. Board Question: On the larger projects that have tax credits it would be impossible to be more that fractional ownership. If we can limit the waiver of fees on those projects, will that hinder any bigger projects? Brewen: There are a couple of factors. Economic conditions first. One of the things that happened with Provincetowne was around the time the tax credit reservation was made tax credits went down into the 70 cents on the dollar which created a bigger equity gap. The tax credit market has come back around. FCHA is going to be a partner in Legacy with Cornerstone and the market is back into the 80's. You are correct in terms of the percentage ownership. The key going forward and something we might be a small owner in is, if we have the control or the ability to retain perpetually affordability past the investor period, that is a key piece that either council would make a determination on or would be written into the ordinance. It must be made very clear that the Housing Authority has perpetual control. Board Question: In your deals you are making with the investors, are they required to sell out after the compliance period, so the Housing Authority gets the property at that point? Brewen: If anything happens to CARE, then FCHA would take control. 4 ATTACHMENT 6 Cumbo: People got hung up on this and we need to make the bigger picture more clear. Julie: The chart needs to have a sidebar that says of what control we have. It is in the partnership agreement. It lists us as the developer and gives us the right to take Care out as partner. Board Question: So Royal Bank of Canada is the investor? Brewen: Yes, they working with JP Morgan Chase. Board Question: Are private people in the market now? Brewen: Yes, they are in and out. Cumbo: There is a strong commitment here to affordable houseing, but it has to be balanced with everything else. We can find a way through this project and in the future. We don't want to put anything into the code that is going to have to change with the economy. We want to build enough flexibility into it. Board Question: Is the code written now that it is only housing authorities in state law. Cumbo: Yes. Board Question: Is Legacy project similar to a tax credit? Julie: It is a tax credit deal for seniors. Board Question: How does the key issue affect that? Brewen: I have talked to the developer and told them that we really would prefer not to request fees waivers because the pro forma will support the project costs. The tax credit market is so high right now. Board Question: Are you looking for a motion from us today? Or a decision? Cumbo: No, but your input is helpful. And it is another piece of information we will look at moving forward. We will bring back a draft ordinance or outline when we get there in a couple of months. Board Question: So our decision then is only related to Housing Authorities since that is the only one that will potentially be waiving of fees? Karen: Yes. The Housing Authorities are the only ones covered under state law and the City ordinance. Other projects fees are not addressed. 5 ATTACHMENT 6 Waido: I want to remind the Board that in the Strategic Plan that was adopted by Council last July there is policy statement to develop a more permanent revenue stream for the Affordable Housing Fund. It was not defined how that will be. It is open for discussion. It always comes down to money. There are always peaks and valleys of General Fund allocations. We are looking for a more permanent revenue source dedicated to the fund to be put into the more competitive process. Or a fee waiver for the Housing Authority would have a top priority for the fund. Then anything left over could go toward the competitive process. Board Comment: To confirm for all that we are in favor to continue to waiver of the fees for Provincetowne. Is that correct? Brewen: That would be really helpful. This board was aware in 2008 that that was the intent. I am wondering if you can make a statement in support. Board Comment: We can always make a statement to council. That is our job. Cumbo: This is a special meeting and the Board can take formal action if they want, correct? Waido: Yes. Board Question: I was confused that the Council was surprised. This has been around since 2006. Board Comment: CARE was good about pulling it out of the competitive process cycles and they returned the funds. It is time for it to be done. Board Comment: Loveland looked at this project and it seems to fit a model Loveland is trying to get as far as town homes. It is attractive and how it has come together. Board Comment: From city perspective, was the comment from Council merited? Cumbo: One of the things we are learning is that there is a volume problem. Sometimes it gets buried with other stuff. We want to raise issues and identify them early on. It was an unfortunate confluence of events, but there are also two new people on council and we need to find the best way to communicate better. Board Comment: Why didn't CARE want to do the deferral? Brewen: Their permanent loan went out farther than most to 20.5 years. That is the minimum deferral time line. Sometimes it takes a couple of years to process. Board Question: Regarding Provincetowne, do we want to make a statement? If so, what? It sounds like it will happen. 6 ATTACHMENT 6 7 Board Comment: I think we should endorse it and make a formal statement. Do you want a letter? Cumbo: If you made a motion to support the ordinance and waive the fees for Provincetowne, we can include that in the minutes and point that out to Council. That would be helpful. Board Comment: We should it keep it simple. We should talk about the wording more. A Motion? Motion: The Affordable Housing Board makes a motion to support the ordinance as proposed to waive the fees for Provincetowne. Sollenberger: I so move. Miller seconded. All in favor. Motion passed. Board Comment: We would like to be as involved as we can on the changes going forward in the future. Waido: One of the criticisms of the City is that fees add to the cost of housing. That is the way new infrastructure get built and so new development pays its way. Years ago they decided they can't afford to waive fees outright for affordable housing. The delay program was developed. It saves on the loan amounts and interest payments. That was one attempt to reduce the impact. Cumbo: There are legal issues that the fees for utilities are not waived. Most communities don't waive these fees. Julie: At what point do the fees come due? At what point are they needed for more capitol expansion? More research is beginning. Board Comment: Please take back to Council we are empathetic about the financial impact. Meeting Adjourned at 5:00 PM. 1 1 Waiver of Fees –– Ordinance No. 071, 2011 Affordable Housing Project Provincetown, Filing III July 5, 2011 Karen Cumbo, PDT Director 2 Fee Waiver for Affordable Housing: Under Colorado statute and Fort Collins ordinance, projects of housing authorities are exempt from taxes and fees Colorado Statute (CRS 29 - 4- 227) • A Housing Authority is exempt from payment of any taxes and fees ATTACHMENT 7 2 3 Fort Collins Ordinance 65, 1999 • Housing Authority Projects Exempt From Certain Fees: – Appeal Fees – Building Permit Fees – Development Review Fees, Plan Check Fees – Parkland Fees, Park Capital Improvement Fees – Street Oversizing Fees – Vested Property Right and Zoning Variance Fees – Library Capital Improvement Fee – Police and Fire Capital Expansion Fees – General Government Capital Expansion Fees – Fee-In-Lieu of School Site Dedication 4 Provincetown PDP, Filing 3 • 85 Unit Townhome Project • CARE Housing (non-profit) partnering with Fort Collins Housing Authority (FCHA) • Currently under construction • First Units occupied late June • Serving households with annual incomes between $23,000 and $38,350 NN E. Trilby Rd. Carpenter Rd. S. College Ave. Lemay Rd. 3 5 Fees subject to waiver: • Utility Development Review Fees $ 4,762 • Permit and Plan Check Fees $ 42,720 • Capital Expansion Fees* $509,896 TOTAL FEE WAIVER: $557,378 *Capital Expansion Fees include: Fire, Police, Street Oversizing, School District, Community and Neighborhood Parkland, Larimer County Road, and General Government 6 Capital Expansion Fees for Provincetowne Affordable Housing project: • Fire $ 13,523 • Police $ 9,233 • General Government $ 16,920 • Larimer County Road $ 15,725 • Parkland Community $118,830 • Parkland Neighborhood $106,590 • City Street Oversizing $148,665 • School District $ 80,410 TOTAL CAPITAL EXP. FEE WAIVER: $509,896 4 7 Policy Issues to Consider: • Financial Impact of waiving $557,378 • Percent Ownership of Fort Collins Housing Authority: – Technically only a .001 percent partner – Fee waiver passes to other funding partners – FCHA guarantees up to $1.4M in unanticipated costs 8 New Information • Project Chronology • Information About Provincetowne Project • Previous Affordable Housing Fee Waivers • Ramifications if Fee Waiver Not Granted • Other Communities’ Practices • Affordable Housing Board Recommendation 5 9 Council Action Requested: Staff recommends: • Approval of Ordinance No. 071, 2011 – Granting waiver of fees for CARE Housing/FCHA townhomes in Provincetown 3rd Filing • Future Council policy discussion regarding waiver of fees and definition of “ownership” ORDINANCE NO. 071, 2011 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROVING THE WAIVER OF CITY FEES FOR THE CARE HOUSING AFFORDABLE HOUSING PROJECT IN THE PROVINCETOWNE SUBDIVISION WHEREAS, the Fort Collins Housing Authority (the “Housing Authority”) has been formed under the auspices of Section 29-4-101, et seq., C.R.S., for the purpose of providing affordable housing to residents of the City; and WHEREAS, the provision of such housing serves an important public purpose; and WHEREAS, in order to foster the provision of affordable housing, both state and local law exempt projects of the Housing Authority from the payment of certain fees and taxes; and WHEREAS, more specifically, Section 29-4-227, C.R.S. states that a housing authority is exempt from the payment of any fees to the state or any subdivision thereof, and that the property of an authority is exempt from all local and municipal taxes, as are bonds and other evidences of indebtedness of an authority, all property leased to an authority for the purposes of a project, and the income derived from the authority by the lessor under such lease; and WHEREAS, Section 29-4-227, C.R.S. also provides that the portion of a residential project that is occupied by persons of low income and that is owned by or leased to an entity that is wholly owned by an authority, or an entity in which an authority has an ownership interest, or an entity in which an entity wholly owned by an authority has an ownership interest shall likewise be exempt from taxation, together with the income derived from the above entities by the lessor under a lease; and WHEREAS, it is unclear under the foregoing state law whether an affordable housing project that is only partially owned by a housing authority is exempt from both fees and taxes; and WHEREAS, Ordinance No. 065, 1999, of the City Council states, in Section 2 thereof, that any housing authority organized pursuant to the provisions of Section 29-4-101, et seq., C.R.S., shall be exempt from the payment of certain City fees specified therein; and WHEREAS, similarly, Section 7.5-17 of the Code of the City, dealing with the City’s capital improvement expansion fees, exempts from the payment of such fees any housing authority organized pursuant to the provisions of Section 29-4-101, et seq., C.R.S.; and WHEREAS, the Housing Authority has entered into an agreement with CARE Housing, a local non-profit corporation, for the purpose of providing affordable housing in the City through a large, multi-family affordable housing project in the Provincetowne subdivision, which is currently under construction; and WHEREAS, because of the tax credit financing arrangement through which the Project is being funded, the Housing Authority currently holds only a small ownership interest in the Project; and WHEREAS, the Director and Board of the Housing Authority have nonetheless recommended that the City waive the Project’s payment of the fees specified in Section 2 of Ordinance No. 065, 1996; and WHEREAS, the City Council believes that the waiver of fees for the Project is in the best interests of the City; and WHEREAS, the City Council also believes that, because the status of these kinds of affordable housing projects under state and local law is unclear with regard to the waiver of City fees, the Council should consider revising the provisions of Ordinance No. 065, 1999, and Section 7.5-17 of the City Code so as to more specifically address, as a matter of ongoing policy, the question of whether and under what circumstances the City fees specified in Section 2 of Ordinance No. 065, 1999, should be waived for affordable housing projects in which the Housing Authority has only a partial ownership interest. NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS AS FOLLOWS: Section 1. That the payment of those fees specified in Section 2 of Ordinance No. 065, 1999, is hereby waived for the Project. Section 2. That, to the extent that the waiver of fees contained in Section 1 of this Ordinance may conflict with the provisions of Ordinance No. 065, 1999, Section 7.5-17 of the City Code, or with any other provision of the City Code, City Land Use Code, or with any other ordinance or resolution of the City Council, the provisions of this Ordinance shall supersede any such other conflicting provision. Section 3. That the City Council hereby finds and determines that the provision of incentives by the City to affordable housing projects located in the City is a matter of local concern and that, to the extent that the waiver of fees contained in Section 1 above may be construed to be in conflict with the provisions of Section 29-4-101, et seq., C.R.S., or any other provision of State law, the provisions of this Ordinance shall prevail and shall supersede such other law. Section 4. That the City Manager is hereby directed to prepare a report and recommendation for the City Council’s consideration at an upcoming work session with regard to whether and under what circumstances the City fees specified in Section 2 of Ordinance No. 065, 1999, should be waived for affordable housing projects in which the Housing Authority has only a partial ownership interest. -2- Introduced, considered favorably on first reading, and ordered published this 7th day of June, A.D. 2011, and to be presented for final passage on the 5th day of July, A.D. 2011. _________________________________ Mayor ATTEST: _____________________________ City Clerk Passed and adopted on final reading on the 5th day of July, A.D. 2011. _________________________________ Mayor ATTEST: _____________________________ City Clerk -3-