Discuss Subsidy Alternatives for Assisted Living Projects

The purpose of this case is to get HRA direction on the type of subsidy alternatives, if any, would be acceptable to the HRA for an assisted living project at this time.

The City currently has two parcels pending consideration by the City for one-level assisted living projects.  It is clear that both project would require significant assistance from the City.  The developer has indicated that they would be working on a timeframe to begin construction next year if an acceptable fianancial package could be put together.

Tools available to the City for housing assistance include:

-tax increment financing (up to 25 year district)
-tax abatement (city's portion of 37% of tax bill for up to 20 years)
-grants and/or loans from the HRA (County)
-state tax credits
-Livable Community Grants through the Metropolitan Council
-write-down on the price of the land
-reductions on City development fees




 

Comments regarding subsidy alternatives:
-tax increment financing (up to 25 year district)
TIF is prohibitied for new projects under the interim Housing Assistance Policy (HAP).  Furthermoremore, TIF District 144 is currently not generating any revenue and a new TIF housing district would need to be created to make this option viable.  This would be subject to income guidelines.
-tax abatement (city's portion of 37% of tax bill for up to 20 years)
The City could only abate 37% of the tax bill which is its portion.  Taxes could be abated for up to 20 years.  The property would need to be removed from the TIF distict in order to do tax abatement.  From a policy perspective, it should be noted that assisted living provides additional housing options for residents, but also would be a user of City services.
-grants and/or loans from the HRA (County)
Remaining one time fund balance monies from the County HRA could be used as a grant or loan.  These funds are limited, but could be replenished if the two recent property acquisitions are sold.
-state tax credits
State tax credits may be available for construction in 2015, if income guidelines can be met.
-Livable Community Grants through the Metropolitan Council
May be available in the spring of 2014, also subject to income guidelines.
-write-down on the price of the land
Concern with not recovering base price of land, or setting the market too low for future land sales.  Current basis in land (minimum $2.50 a square foot) is more than the developer is willing to pay at this time.
-reductions on City development fees
  The City practice is not to reduce development fees, but have approved outside funds (e.g., TIF) to pay developemnt fees.


 
 

Given the fact that it appears this type of development would need a large subsidy at this time, staff would recommend that the developer, with staff assistance, pursue options for loans, grants, and/or tax credits.  In addition, when the City reviews the interim Housing Assistance Policy this Fall, re-consideration can be given to the use of TIF and/or tax abatement as it relates specifically to this type of project.. 

Continue to explore options using existing staff resources.

Concensus direction to pursue options for loans, grants, and/or tax credits, and re-consider TIF and/or tax abatement as it relates specifically to this type of project in the final Housing Assistance Plan review this Fall..