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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 01/26/2016 - RESOLUTION 2016-008 EXPRESSING THE CITY COUNCIL'SAgenda Item 1 Item # 1 Page 1 AGENDA ITEM SUMMARY January 26, 2016 City Council STAFF Sue Beck-Ferkiss, Social Sustainability Specialist Beth Sowder, Director of Social Sustainability SUBJECT Resolution 2016-008 Expressing the City Council's Direction and Intent to Facilitate the Fort Collins Housing Authority's Proposed Affordable Housing Development on the City's Land Bank Property on Horsetooth Road. EXECUTIVE SUMMARY The purpose of this item is to authorize City staff to continue to pursue the Fort Collins Housing Authority's (FCHA) proposal to develop the Horsetooth Land Bank parcel at 1506 West Horsetooth Road in a manner that would serve the needs of low income residents that is consistent with the intention of the land bank program's guidelines but that would require a change to City Code. This Resolution also states that the City expects to sell the parcel to the FCHA for a qualifying development that complies with City Code and the Land Use Code. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BACKGROUND / DISCUSSION City policy has long promoted the provision of housing options that are affordable to our residents. Affordable housing needs continue to outpace supply in the City. The City’s only long term affordable housing incentive is the Land Bank Program that was established by ordinance in 2001. The objective of the Program was to purchase properties with development constraints at a discount and hold them until the property appreciated and/or some correction of the development impediments occurred through neighboring development. Once those conditions were met, the properties would be sold at a discount to allow for the development of affordable housing. Proceeds from the sale of land bank parcels are intended to be used to buy new land bank parcels. Disposition of land bank property is guided by Section 23-354 of City Code (Attachment 1). Disposition or sale of these properties must meet, among others, the following criteria:  For the provision of rental housing for households at or below 50% Area Median Income (AMI) and/or homeownership housing for households at or below 60% AMI  Solely for residential purposes  Not for the development of non-residential or market rate housing  Must be affordable in perpetuity  May not be sold for more than ninety percent (90%) of its fair market value as determined by the City. Agenda Item 1 Item # 1 Page 2 Housing Affordability Policy Study Recommendation In 2014, the City decided to analyze the housing needs of the community. Economic & Planning Systems, Inc. (EPS) wrapped up this work in a report called the Housing Affordability Policy Study. One of the recommendations from that study was to identify a disposition strategy for the City’s land bank properties. EPS recommended that the City put at least one of its properties into play for affordable housing. This study and the resulting recommendations were presented to City Council during two work sessions. (Attachments 2 and 3) Land Bank Property Disposition Study Recommendation In 2015, EPS was contracted to conduct a Land Bank Disposition Study. This study concluded that several of the land bank parcels had achieved the requisite appreciation and that development impediments had been sufficiently mitigated by surrounding development to make them development ready. Again, the recommendation was to start developing one or more of the land bank holdings. This study was also presented to City Council at a work session in September 2015. (Attachment 4) Affordable Housing Strategic Plan The 2015-2019 Affordable Housing Strategic Plan (AHSP) was drafted and adopted by City Council on October 6, 2015. The AHSP sets forth goals, strategies, action items, and metrics to guide the City’s affordable housing policy and funding for a five year period. This Plan anticipates annual reviews of the Land Bank Program properties to determine if they are ready to develop and if appropriate to sell these properties for the development of affordable housing. Request for Proposals for Horsetooth Based on Council’s desire to start developing one or more land bank parcels, the City issued a request for proposals (RFP) for development teams that could design and construct a project on the Horsetooth land bank parcel at 1506 West Horsetooth Road that could comply with the requirements of the Land Bank Program. The City timed this process to allow the chosen development team to apply for state tax credits and Community Development Block Grant Disaster Relief funding that will be available in 2016. The City received 3 proposals, two of which proposed initial plans for a complying community. These two proposals were vetted with oral interviews. Both development teams indicated a need for additional gap funding for a community developed under existing City Code. The Fort Collins Housing Authority (FCHA) was chosen as the development team to partner with to develop the Horsetooth parcel. The present intention of the City is to support FCHA’s qualifying project, and assuming it meets the requirements of City Code and the Land use Code, sell this Horsetooth parcel to the FCHA. Contained in the FCHA’s response to the RFP were 3 sample options of possible sales prices based on the income levels of the intended end users. All three options provide units targeting households in the 30% AMI and below category, which is the hardest income category to house and is the City’s highest affordable housing need. Housing for this demographic is not provided by the real estate market because it cannot be built without subsidy. Two of these options capped the income of the residents at 50% AMI. Both these options had gaps in financing that would require additional funding. The FCHA planned to ask for federal grant dollars from the City’s competitive process to fill the gap. The third option presented by FCHA would not require additional federal grant dollars from the City, and would allow FCHA to pay a sales price for the land close to the maximum of 90% of the fair market value, but would require more flexibility in end user AMI levels than the current Code would allow. In order to offer the maximum sales price, the development would need to include some rental housing for households at the 60% AMI level. The overall community demographics of this third option would still average housing for 50% AMI. (Attachment 5) Agenda Item 1 Item # 1 Page 3 Recommendation Staff would support a Code change that would allow land bank parcels to be developed with rental housing priced at 60% AMI if the overall community average still was at or below 50% AMI. Such a Code change would preserve the Land Bank Program’s original intent while adding flexibility for our development partner to provide the strongest possible community. Staff believes this could strengthen the resulting community because:  It allows for a broader range of economic diversity and generally mixed income communities are healthier than communities that only target low income levels  Most funding sources such as Low Income Housing Tax Credit programs allow housing for households up to 60% AMI and this change would allow maximization of other necessary funding programs required to capitalize the project  The program continues to focus on the lower end of the affordable spectrum which is defined in the City as housing for incomes not exceeding 80% AMI  It allows the chosen development partner to pay a higher purchase price without seeking additional City investment, allowing the competitive process funds to go to other affordable housing projects. It should be noted that the Land Bank Program Code language has never been amended and contains its original language. A holistic review of the entire Land Bank Program is scheduled for this year, with proposed changes likely to come to City Council for consideration by the fourth quarter of 2016. Staff is requesting City Council’s direction to continue to work with the FCHA on the sale option for the Horsetooth parcel that allows for a greater sales price but requires a Code change, and to enter into a negotiated agreement with FCHA that will support FCHA’s efforts to obtain Low Income Housing Tax Credits and HUD CDBG disaster assistance funds required to finance development of the Horsetooth property. Staff will ultimately be bringing an ordinance forward for City Council consideration that would approve the final development project and authorize the sale of the property. Any required Code changes would also be brought forward at that time. Staff is requesting the Council’s approval of this Resolution now because FCHA’s application to the Colorado Housing and Finance Authority (FCHA) for tax credits and funding is due on February 2, and CHFA requires that FCHA show it has “site control” of the property in order to consider FCHA’s application. CITY FINANCIAL IMPACTS The City will receive proceeds from the sale of this land bank parcel. The amount of that will depend in part on the direction City Council provides staff with this Resolution. BOARD / COMMISSION RECOMMENDATION Many boards and commissions weighed in on the Affordable Housing Strategic Plan which recommends activating the Land Bank Program to develop affordable housing, but this Resolution was not reviewed by any board or commission. PUBLIC OUTREACH Extensive public outreach was done for the Housing Affordability Study and the Affordable Housing Strategic Plan, but not specifically on this Resolution. Agenda Item 1 Item # 1 Page 4 ATTACHMENTS 1. Land Bank Ordinance (PDF) 2. Work Session Summary, May 27, 2014 (PDF) 3. Work Session Summary, November 25, 2014 (PDF) 4. Land Bank Work Session Summary, September 8, 2015 (PDF) 5. RFP Sales Options (PDF) 6. Powerpoint presentation (PDF) ATTACHMENT 1 ATTACHMENT 2 ATTACHMENT 3 ATTACHMENT 4 ATTACHMENT 5 Land Bank Program LL Horsetooth Property City Council Meeting January 26, 2016 Sue Beck-Ferkiss, Social Sustainability Specialist 1 ATTACHMENT 6 City Intention to Convey ©Copyright 2015 City of Fort Collins. All Rights Reserved. 2 Resolution does two things:  Provides Staff guidance on whether to prepare a code change as well as sale documents  Demonstrates City’s intention to sell property to FCHA for the purpose of developing affordable housing Activation of Land Bank Program HAPS Land bank Disposition Study Affordable Housing Strategic Plan RFP Horsetooth ©Copyright 2015 City of Fort Collins. All Rights Reserved. 3 2014 2015 2015 November 2015 Purpose/Goal of Land Bank Program: • Provide land for future Affordable Housing • Develop through partnership Horsetooth Location 4 Horsetooth Request For Proposals ©Copyright 2015 City of Fort Collins. All Rights Reserved. 5 • RFP issued in November for a Development Team for the Land Bank Program parcel on Horsetooth • 3 Proposals Received • 2 Teams Interviewed Fort Collins Housing Authority chosen as development partner Project Options Option 1 Option 2 Option 3 Land Cost $500,000 $0 $1,107,000 Target AMI 30%-50% 30%-50% 30%- 60% City CDBG Request $1,037,000 $417,655 $0 RAD Equity $2,765,655 $2,790,000 $2,615,000 FCHA Equity $488,000 $488,000 $673,835 ©Copyright 2015 City of Fort Collins. All Rights Reserved. 6 RFP Timeline November RFP December Decision February 2 Funding application deadline ©Copyright 2015 City of Fort Collins. All Rights Reserved. 7 -1- RESOLUTION 2016-008 OF THE COUNCIL OF THE CITY OF FORT COLLINS EXPRESSING THE CITY COUNCIL’S DIRECTION AND INTENT TO FACILITATE THE FORT COLLINS HOUSING AUTHORITY’S PROPOSED AFFORDABLE HOUSING DEVELOPMENT ON THE CITY’S LAND BANK PROPERTY ON HORSETOOTH ROAD WHEREAS, on April 17, 2001, the City Council adopted Ordinance No. 048, 2001, establishing the City’s Land Bank Program at Article XI of Chapter 23 of the City Code; and WHEREAS, the purpose of the Land Bank Program is to help affordable housing providers secure sites for future affordable housing development throughout the City by purchasing sites that will likely appreciate in the future while they are less expensive, and holding them for five to fifteen years; and WHEREAS, Section 23-352 of the City Code sets criteria for acquiring land for the Land Bank Program, and Section 23-354 places limits on how the City can dispose of Land Bank properties, including that:  any sale must be to a housing provider legally bound to the City to provide rental housing for households at or below 50% of area median income (“AMI”) for Fort Collins, or homeownership housing for households below 60% of AMI;  the land cannot be sold for speculation, appreciation, development of nonresidential uses, or development of market-rate housing;  the property must remain affordable in perpetuity, and if it is ever not used for affordable housing the City must have the right recover title to the property; and  the land may not be sold by the City for more than 90% of its fair market value as determined by the City; and WHEREAS, under Section 23-355 of the City Code, the proceeds from the sale of any Land Bank property must be returned to the affordable housing trust fund to be used for additional property acquisitions for the Land Bank Program; and WHEREAS, between 2002 and 2006 the City acquired five parcels of land for the Land Bank Program, one of which is located at 1506 West Horsetooth Road (the “Horsetooth Property”); and WHEREAS, in 2014 the City commissioned a report called the Housing Affordability Policy Study (the “HAPS Study”); and WHEREAS, one of the recommendations of the HAPS Study was that the City identify a disposition strategy for the Land Bank properties and work towards developing at least one of the properties; and -2- WHEREAS the HAPS Study was presented to the City Council at Work Sessions on May 27, 2014 and November 25, 2014, and at the November 25, 2014 Work Session the City Council expressed interest in looking at the best way to activate the Land Bank Program; and WHEREAS, to follow up on the Council’s interest, staff in 2015 commissioned a Land Bank Disposition Study, which concluded that several of the Land Bank parcels are development ready, and recommended that the City start developing one or more of the properties; and WHEREAS, the City Council considered the Land Bank Disposition Study at a work session on September 8, 2015, and expressed interest in: (1) deploying one or more of the Land Bank properties; (2) including the Land Bank Program as an action item in the 2015-2019 Affordable Housing Strategic Plan; and (3) using the Land Bank Program to maximize the density potential of the Land Bank properties, including a willingness to consider changes to the Land Use Code and City Code if needed; and WHEREAS, on October 6, 2015, the City Council adopted Resolution 2015-086 adopting the 2015-2019 Affordable Housing Strategic Plan; and WHEREAS, the Affordable Housing Strategic Plan anticipates annual reviews of the Land Bank Program properties to determine if they are ready to develop and, if appropriate, selling the properties for the development of affordable housing; and WHEREAS, in November 2015, based on the City Council’s expressed interest in developing one or more of the Land Bank properties, the City issued a Request for Proposals (“RFP”) to find a qualified development team to construct an affordable housing development on the Horsetooth Property in accordance with the requirements of the Land Bank Program (the “Project”); and WHEREAS, after reviewing the three proposals received by the City, the City selected the Fort Collins Housing Authority (“FCHA”) as its development partner for the Project; and WHEREAS, FCHA provided three approximate purchase prices for the Horsetooth Property based on the income levels of the eventual renters of homes in the development; and WHEREAS, all three options would provide units for households at 30% of AMI and below, which is the City’s highest affordable housing need; and WHEREAS, two of the purchase options cap the income of residents at 50% of AMI as required by the City Code, but would require additional grant funding from the City to complete; and WHEREAS, the third option (“Option 3”) would allow FCHA to pay the City more for the land and would not require additional City grant funding, but would require more flexibility in the AMI levels of residents by including some housing for residents at 60% of AMI; and -3- WHEREAS, Option 3, which is FCHA’s preferred option, would require an amendment to the City Code to increase the AMI limit for rental households from 50% of AMI to 60% of AMI; and WHEREAS, City staff also supports Option 3 because it still provides housing at an average income level of 50% of AMI, preserving the original intent of the Land Bank Program, but also gives FCHA flexibility to provide a more economically diverse community while maximizing the amount that FCHA can pay the City for the Horsetooth Property, returning more capital to the Land Bank Program; and WHEREAS, FCHA is in the process of applying for Low Income Housing Tax Credits and federal Disaster Recovery Funds for the Project from the Colorado Housing and Finance Authority (“CHFA”) based on Option 3; and WHEREAS, the application to CHFA is due on February 2, 2016; and WHEREAS, CHFA requires that FCHA show it has “site control” of the Horsetooth Property; and WHEREAS, CHFA has reviewed a proposed purchase and sale agreement between the City and FCHA, but concluded that such agreement does not give FCHA adequate site control because the City Council has not yet authorized the conveyance of the Horsetooth Property by ordinance pursuant to Section 23-111 of the City Code, and passage of such an ordinance is therefore a contingency in the purchase and sale agreement; and WHEREAS, the City Council has not yet authorized the sale of the Horsetooth Property by ordinance pursuant to Section 23-111 of the City Code, but wishes to show its support for the Project and its intention to authorize conveyance of the Horsetooth Property to FCHA provided the Project meets the requirements of the City Code and Land Use Code and acquires the necessary funding and development approvals to proceed as proposed by FCHA. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby makes and adopts the determinations and findings contained in the recitals set forth above. Section 2. That the City Council hereby directs staff to bring forward an ordinance for the Council’s consideration on February 16, 2016, authorizing the conveyance of the Horsetooth Property to FCHA should FCHA successfully obtain all necessary funding and development approvals for a project that meets the requirements of the City Code and Land Use Code and other applicable requirements. Section 23. That the City Council hereby directs City staff to continue to work with FCHA to develop and pursue FCHA’s Third Option for the Project, and to bring forward for the City Council’s consideration at a later date an ordinance amending the Land Bank affordability -4- requirements in the City Code to permit rental housing priced at 60% AMI if the overall average for a particular development is still at or below 50% AMI. Section 3. That the City Council hereby expresses its present intent to convey the Horsetooth Property to FCHA should FCHA successfully obtain all necessary funding and development approvals for a project that is substantially similar to what FCHA proposed in response to the City’s RFP and meets the requirements of the City Code and Land Use Code, subject to Council’s consideration and approval of an ordinance authorizing the conveyance of the Property. Section 4. That the City Manager is hereby directed to enter into a negotiated purchase and sale agreement or other appropriate agreement with FCHA on terms and conditions consistent with this Resolution, along with such other terms and conditions as the City Manager, in consultation with the City Attorney, determines are necessary or appropriate to protect the interests of the City and effectuate the purposes of this Resolution. Passed and adopted at an adjourned meeting of the Council of the City of Fort Collins this 26th day of January, A.D. 2016. __________________________________ Mayor ATTEST: _____________________________ City Clerk