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Home My WebLink AboutCOUNCIL - AGENDA ITEM - 07/21/2020 - RESOLUTION 2020-061 DETERMINING FAIR VALUE FOR THEAgenda Item 11 Item # 11 Page 1 AGENDA ITEM SUMMARY July 21, 2020 City Council STAFF Lindsay Ex, Interim Housing Manager Matt Robenalt, DDA Executive Director Ingrid Decker, Legal SUBJECT Resolution 2020-061 Determining Fair Value for the Lease of Property Owned by the Downtown Development Authority in Connection with the 140 East Oak Street Affordable Housing Project. EXECUTIVE SUMMARY The purpose of this item is for Council to determine fair value for a 99-year lease the Downtown Development Authority (DDA) is planning to enter into with Housing Catalyst for the purpose of developing DDA property at 140 East Oak Street. The site plan for the project includes 79 affordable rental units, which will be a mix of one- and two-bedroom apartments that serve individuals and households whose earnings range from 30-80% AMI (area median income) with the target of an overall average of 60% AMI. This item aligns with the Council Priority of Affordable and Achievable Housing Strategies and is a partnership between the DDA and Housing Catalyst. STAFF RECOMMENDATION Staff recommends adoption of the Resolution. BACKGROUND / DISCUSSION The DDA was created in 1981 with the purpose, according to Colorado state statute, of planning and implementing projects and programs within the boundaries of the DDA. The DDA and the City adopted a Plan of Development that specifies the projects and programs the DDA would undertake. One element of this Plan is housing, and in February 2019, the DDA and Housing Catalyst began to develop a project concept for the DDA-owned property at 140 East Oak Street to increase affordable housing options in downtown Fort Collins. Subsequently, the DDA and Housing Catalyst have entered into an Intergovernmental Agreement to develop this property. To ensure the financial feasibility of the project, the price of the lease needs to be nominal, and the state statutes governing downtown development authorities (the “DDA Act”) include specific provisions that must be followed. Specifically, Section 31-25-808(2) C.R.S. requires the Board of Directors of the DDA and the Governing Body (i.e., City Council) to make a determination that such lease is for fair value, with fair value being weighed in light of the uses and objectives identified in the DDA’s Plan of Development. The specific statute language is: “Any sale or letting of property by the authority shall be at not less than its fair value (as determined by the authority and the governing body) for uses in accordance with the plan of development. In determining the fair value of real property for such uses, an authority shall take into account and give consideration to the uses provided in such plan; the restrictions upon and the covenants, conditions, and obligations assumed by the purchaser or lessee; and the objectives of such plan.” Agenda Item 11 Item # 11 Page 2 On June 11, 2020, the DDA Board adopted Resolution 2020-03 (Attachment 1), which found that the lease of the 140 East Oak Street property for $100 for the 99-year term constitutes fair value for the purposes of the DDA Act, given the purpose of the property’s development for affordable housing. The DDA Resolution also requested that Council make the same finding. Additional project-specific information is as follows: • The DDA will be entering into a lease with a Housing Catalyst-controlled limited liability limited partnership (LLLP) for 140 East Oak Street (Property). • A limited liability company wholly owned and controlled by the DDA (FC DDA, LLC) will retain ownership of the Property subject to the lease. Once the building is completed, FC DDA, LLC, will own the Property and the building, and will manage the ground floor of the building, while the LLLP will lease all the floors above ground level for affordable housing. • Upon expiration of the term in 99 years, the DDA (or its successor) will own the building and any other structure or improvement then located on the Property. • The project is subject to Planning and Zoning Board approval and is currently in the development review process. If the project does not advance for any reason, the lease will terminate. • The lease will be subject to the following restrictions and covenants: o The LLLP will be prohibited from assigning the ground lease, except to another Housing Catalyst- controlled entity. o Leased premises may be used only for affordable housing. This project aligns with the following communitywide goals • Fort Collins, through the Affordable Housing Strategic Plan, has set a goal to have 10% of the total units in the community be affordable by 2040. To achieve this, there is an estimated goal of adding 300 units per year throughout the long-term planning horizon. • This project could bring an additional 79 affordable units into the community (26% of the annual need), all for households earning below 80% of area median income, which meets the City’s definition of affordable housing. CITY FINANCIAL IMPACTS While this Resolution does not directly impact City finances, the City has assigned Private Activity Bond capacity to Housing Catalyst for this project which is required for the low income tax credit financing that will be used to develop this project. It should also be noted that if Council should elect to dissolve the DDA, the City would become the owner of the 140 East Oak Street property and assume the obligations of the landlord under the proposed lease. BOARD / COMMISSION RECOMMENDATION At its June 11, 2020 meeting, the DDA Board unanimously adopted Resolution 2020-03. (Attachment 1) PUBLIC OUTREACH No public outreach was conducted regarding the determination of fair value of the DDA property. Neighborhood and community engagement regarding the site plan will occur through the City’s development review process and is outside the scope of this Resolution. ATTACHMENTS 1. DDA Resolution 2020-03 (PDF) ATTACHMENT 1 -1- RESOLUTION 2020-061 OF THE COUNCIL OF THE CITY OF FORT COLLINS DETERMINING FAIR VALUE FOR THE LEASE OF PROPERTY OWNED BY THE DOWNTOWN DEVELOPMENT AUTHORITY IN CONNECTION WITH THE 140 EAST OAK STREET AFFORDABLE HOUSING PROJECT WHEREAS, on April 21, 1981, the City Council adopted Ordinance No. 046, 1981, creating the Fort Collins, Colorado Downtown Development Authority (the “DDA”); and WHEREAS, the DDA was formed pursuant to, and is governed by, C.R.S. 31-25-801 et seq. (the “DDA Act”); and WHEREAS, the DDA adopted a plan of development, as authorized by Section 807(2)(d) of the DDA Act, on July 1, 1981, which plan of development was approved by the City Council on September 8, 1981, by Resolution 1981-129 (the “Plan of Development”); and WHEREAS, the DDA is the owner of the real property located at 140 East Oak Street, Fort Collins, Colorado (the “Property”); and WHEREAS, there is a shortage of housing options in general, and lower-income housing options in particular, within the boundaries of the DDA (the “DDA District”); and WHEREAS, the Plan of Development identifies “increasing the housing supply” as a primary objective and purpose of the DDA to help achieve the DDA’s goal of the DDA District as “an area of mixed-use residential, commercial and entertainment uses,” and “[encouraging] living within the District” as a way to improve the diversity and attractiveness of the DDA District; and WHEREAS, the DDA’s priorities within the Plan of Development include providing sites for land uses that are important to the economic vitality of the DDA District, and working with developers and builders if their project is highly desirable, is consistent with the plans and objectives of the DDA, and may not otherwise be economically viable; and WHEREAS, based upon substantial public outreach and community input, the Board of Directors of the DDA (the “DDA Board”) determined that construction on the Property of a mixed-use building containing qualified-affordable housing would be beneficial to the DDA District (the “Project Concept”); and WHEREAS, on December 16, 1971, the City Council adopted Resolution 1971-099, creating the Fort Collins Housing Authority, now known as Housing Catalyst (“Housing Catalyst”); and WHEREAS, the DDA and Housing Catalyst are collaborating to further develop the Project Concept and potential sources of financing for the Project Concept, with a goal of providing one- and two-bedroom units to a mix of households earning thirty percent of area median income (“AMI”), between thirty and fifty percent of AMI, between fifty and seventy -2- percent of AMI, and between seventy and eighty percent of AMI, with a target average household income of approximately sixty percent of AMI; and WHEREAS, the DDA and Housing Catalyst have determined that the most beneficial and economically viable project would consist of construction of a single multi-story, mixed-use building containing a ground floor commercial space, and seventy-nine or more qualified- affordable housing units on the upper floors (the “Building”), financed with low-income housing tax credit assistance through the Colorado Housing and Financing Authority; private activity bonds issued by Housing Catalyst; federal, state, and local grants and loans; and construction and permanent loans made by banks or other institutional lenders (the “Project”); and WHEREAS, the DDA and Housing Catalyst have agreed that the DDA, or a DDA- controlled entity, will retain ownership of the Property and the Building and will manage the ground floor of the building, while Housing Catalyst, through a Housing Catalyst-controlled entity, will lease the upper floors of the building for a nominal sum (one hundred dollars or less) for up to 99 years, and will control and manage the housing component of the Project; and WHEREAS, Section 808(2) of the DDA Act require that any sale or letting of property by the DDA shall be at not less than its “fair value”, as determined by the DDA and the City Council, for uses in accordance with the DDA’s Plan of Development; and WHEREAS Section 808(2) also states that this determination of fair value shall take into account and give consideration to the uses provided in the Plan of Development; the restrictions upon and the covenants, conditions, and obligations assumed by the purchaser or lessee; and the objectives of such plan; and WHEREAS, at its regular meeting on June 11, 2020, the DDA Board adopted Resolution 2020-03 making findings and determinations that the sale and/or lease of a portion of the DDA Property to Housing Catalyst, or a Housing Catalyst-controlled entity, for a nominal sum of one hundred dollars or less, for use in connection with the Project, constitutes “fair value” for purposes of C.R.S. 31-25-808(2), and requesting that the City Council make a similar determination; and WHEREAS, in making this determination the DDA Board found that the Project is consistent with the uses identified in its Plan of Development and that completion of the Project would advance the objectives of its Plan of Development in several ways, including, but not limited to: 1. Increasing the housing stock to help reverse the declining residential population within the DDA District; 2. Promoting a diversity of activities within the DDA District; 3. Improving and sustaining the economic vitality of the DDA District; and -3- 4. Maintaining the DDA District as a regional center for social, recreational and cultural activities; and WHEREAS, the DDA Board further found that the Project would be financially infeasible without the lease and/or sale of a portion of the DDA Property to Housing Catalyst, or a Housing Catalyst-controlled entity, for a nominal sum; and WHEREAS, the Property would be restricted by the terms of the lease and by covenants that will limit the use of the leased space to affordable housing and limit the assignment or transfer of the lease; and WHEREAS, pursuant to Section 808(2) of the DDA Act, City Council must also make a determination that the DDA’s proposed lease of a portion of the DDA Property as described herein, constitutes “fair value”, and the DDA Board is requesting that City Council make such a determination; and WHEREAS, the City Council supports the DDA’s goal of increasing the supply of housing within the DDA District, and finds that increasing economic diversity among residents of the DDA District contributes to the vitality of the District. 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 determines that the lease of a portion of the DDA Property to Housing Catalyst, or a Housing Catalyst-controlled entity, for a nominal sum of One Hundred Dollars ($100.00) or less, for use in connection with the Project, constitutes “fair value” for purposes of C.R.S. 31-25-808(2). Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 21st day of July, A.D. 2020. __________________________________ Mayor ATTEST: _____________________________ City Clerk