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12/16/1996 - City Council SpecialAGENDA SPECIAL CITY COUNCIL MEETING Monday December 16,1996 5:00 p.m. I. ROLL CALL & ADOPTION OF AGENDA II. VISITORS TO BE HEARD III. EXECUTIVE SESSION/LABOR RELATIONS IV.. DIRECTION RE: CDBG FUNDING V. DIRECTION RE: PHASE II SENIOR HOUSING PROJECT VI. OTHER BUSINESS 1l/ 1 WN 03 010 .114 10 1 OW li MEMO city of eagan TO: HONORABLE MAYOR & CITY COUNCILMEMBERS FROM: CITY ADMMSTRATOR HEDGES DATE: DECEMBER 13,1996 SUBJECT: SPECIAL CITY COUNCIL MEETING/DECEMBER 16,1996 A Special City Council meeting is scheduled for Monday, December 16, 1996, at 5:00 p.m. in the Municipal Center building lunchroom for the purpose of reviewing the following items: EXECUTIVE SESSION/LABOR NEGOTIATIONS A closed executive session will be held to discuss negotiations with the Dispatcher unit. DIRECTION REGARDING CDBG FUNDING The City of Eagan receives an annual allocation of community development block grant funding which is administered by the Dakota County Housing & Redevelopment Authority. The City's fiscal year 1997 allocation is slightly below that of 1996. Staff has reviewed eligible projects with the HRA staff and has prepared a draft program and alternatives for consideration by the City Council. The program anticipates continuing to contribute funds to the City's Senior Housing Project, the Wescott Square Junior Program and the Housing Rehabilitation Program. In addition, the City Council is being asked to consider a contribution to OWOBOPTE, a non-profit Eagan facility, which provides employment programs, vocational services and training to persons with developmental, mental illness or brain injury challenges. If the Council chooses to commit a portion of its CDBG funds to this request, it would be necessary to reallocate them from one of the other identified expenditures. Additional information relative to the City's CDBG activity is described in the staff memorandum on pages through lo. The memorandum does include attachments concerning the OWOBOPTE request for Council review. ACTION TO BE CONSIDERED: To provide direction to staff concerning the proposed fiscal year 1997 CDBG funding allocation to permit the preparation of the required documentation and resolutions before the Council meeting of January 7. DIRECTION RE: PHASE II SENIOR HOUSING PROJECT Under the community development block grant funding allocations in recent years, the City has set aside funds for the second phase of its senior housing facilities. The Oakwoods facility has a waiting list representing over three times the number of units available and demand for senior housing within Dakota County and the City of Eagan is expected to triple in the next three years. Given the demand in the community, City staff and the Dakota County HRA have discussed alternatives to provide additional senior housing facilities within the City. Several alternatives have been discussed which vary in timing, level of rent and equity participation by the City. Briefly stated, the alternatives are as follows: 1. Construct second senior housing facility in 1997 with rent levels and equity participation to be determined by the City Council --The HRA has prepared three pro formas under which the second senior housing facility could be constructed as early as next year. Because Dakota County has yet to implement the second phase of its senior housing initiative, the HRA does not have a source of funds to contribute to this project as it did with the original Oakwoods building. The HRA has prepared pro formas for City contributions ranging from approximately $2 million to develop a facility with rents comparable to the existing Oak -woods Project to a City contribution of $860,000 which corresponds with the balance of 1/8th of 1 % of housing revenue funds and CDBG funds banked by the City to date which would require rents of $440 (one bedroom) and $540 (2 bedroom). A mid-range pro forma would require a City contribution of $1.4 million to $1.7 million for a project which would require rentals of approximately $50 per unit per month above the first phase building. 2. Coordinate second Eagan facility with second phase of Dakota County Senior Housing Program --The HRA is completing the last of the ten buildings authorized under the Dakota County Senior Housing First Phase Project. The first Oakwoods building is part of that program. In 1997, the HRA intends to approach the County Board for authorization for a second phase. if approved by the County Board and authorized by special legislation, this program would permit the HRA to enter into a cost participation project similar to that for the first phase buildings. If the City would choose to participate in this program, an additional facility could be constructed for a lower City contribution. In addition, it would need to occur in 1998 or later, depending upon County Board and legislative approval. Because of the County participation, rent levels could be set as appropriate within the funding priorities at that time. 3. Construct a second facility in 1997 and a third facility as part of the County's second phase of its senior housing program --Waiting lists and market studies suggest that there would be demand for at least three buildings in the City of Eagan within the foreseeable future. M The issues before the City Council relate to the timing of construction, the level of City equity contribution vs. rent level and other issues as may be defined by the Council discussion. The HRA Executive Director, Mark Ulfers, will be present at Monday evening's meeting along with staff to respond to any questions. For additional information relative to this matter, please refer to the staff memorandum on pages -21 through a narrative concerning the pro formas on pages through _LL and, if the Council wishes additional detail, the actual pro formas on pages _Qa through. Due to the amount of information in the pro formas, we apologize for the type size and hope the copies are legible. Within each rental range, the pro formas offer a range of alternatives which vary depending upon whether or not City fees are waived and whether or not the City is willing to offer general obligation backing to the project bonds. The equity participation necessary within each rental range is reduced if the City waives certain of its fees, offers GO backing or both.. ACTION TO BE CONSIDERED: To provide direction to staff to: 1) coordinate the construction of a second senior housing facility beginning in 1997 with a specified City equity contribution for the project, 2) delay construction of the second senior housing facility until there is availability of the second phase of the Dakota County Senior Housing Program funds or 3) proceed with the second senior housing facility in 1997 with an expectation that the City would also pursue a third facility at such time as HRA funds became available. OTHER BUSINESS There are no items for consideration under Other Business. /S/ Thomas L. Hedges City Administrator 3 city of eagan MEMO TO: Thomas Hedges, City Administrator FROM: Lisa From, Senior Planner DATE: December 11,1996 SUBJECT: 1997 FY Community Development Block Grant Funds 1997 Funding iAva lability The Dakota County HRA has indicated that the 1997 FY Community Development Block Grant (CDBG) funding level is $239,564. This Is a 1.4 percent decrease from the 1996 funding level of $243,000. Also, the City Council should consider reprogramming another $50,000 worth of funds previously allocated to the downpayment assistance program during this funding cycle. After 2 years of program implementation over $87,000 Is unused. Leaving $37,000 available for this program Is adequate to serve 17 to 20 clients. Prosect Ellaibility CDBG funded projects and programs must meet a test fulfilling one of two national objectives: 1) to benefrt low and moderate income families or 2) to aid in the prevention or elimination of slums or blight. A project can be funded for areas determined to have a high level of low/moderate income families, to target specifically low/moderate income families or categorically to benefit persons with disabilities. Status of Previous Expenditures Senior Housina Protect: Through a switch process permitted by Dakota County, the City exchanged CDBG funds for HOME funds. These funds unlike CDGB funds are eligible for new construction. Last year the City switched $100,000 of CDBG funds to HOME funds. Thus far approximately $811,000 of HOME fund equity is reserved for the nead phase of senior housing at Oak Woods of Eagan. The next phase could occur as early as 1997 depending on funding commitments, construction costs and the County's capacity to manage the project. Down-oavme t Assistance Program, in FY 1995 the City allocated $107,746 to adown-payment assistance program to assist families seeking first time home -buyer mortgages through the HRA program. As of September 30,1996, 9 clients received downpayment assistance and 2 clients have pending commitments. There is a uncommitted balance of $87;244.93 HRA and city staff suggests OW up to $50,000 of this money could be reprogrammed and still leave ample funding of $37,000 for this program. Housing Rehabilitation Loan ram: in 19% the City allocated $113,000 to the Housing Rehabilitation program administered by the HRA for the City. As of September 30, 1996 (only 3 months in the funding cycle) the HRA serviced seven loans totaling $67,150. The program balance is aPproximateiy $24,000 which is adequate funding to service about two mote loans. Youth -At -Risk Pmramr; In 1995, the Parks and Recreation Department began a Junior Program to serve the Wescott Townhomes neighborhood using $5,000 CDBG funding. In 1998, CDBG funded appro) mately 65 children took part tiinp�thhe program. Prograampmpin,,gy,�ranged ,,,from school. +and �crafwt�si, cooperative games, cooking, . science e� and preparation fbr back to sc ool. Wwu a Last year the City Coundl authorized expansion of the Junior Program with $5,000 of CDBG funds the the Quant' Park or the Cinnamon Ridge neighborhoods. The City Parks and Recreation staff decided to proceed with the Cinnamon Ridge neighborhood. In the spring of $998, the Dakota County HRA conducted a survey of the Cinnamon Ridge neighborhood. The neighborhoods could not meet the HUD eligibility requkements so the money was ,eprogrammed to the housing mhabilitaton program. Wescott Service genrter AcculsFtione The City allocated $35,000 for the acquisition of the Wescott Service Center unit used by Parks and Recreation staff for the Wescott youth ---risk programs. The f acquisition was studied extensively during 19% and various options were considered by the City Council but the acquisition did not move forward. These funds could be reprogrammed but staff feels it would be advisable to hold this funds in reserve for another year in case another more suitable opportunity for acquisition arises. 'Evescott square strr'et Reconstruction: In 1995 the city reconstructed the streets in this neighborhood and $30,000 of CDBG funds were aaocated to cover the coat of the project normally covered through assessments. d In the past, the City Council preferred using CDBG funds to assist Its housing goals, particularly single family home ownership Programs. The City's livable Communities Action Pian stated the City's intent to use CDBG funds to meet the required 1997 affordable and life -cycle housing (ALOHA) amount of $48,554. Both the senior housing project and housing rehabilitation count towards the Livable Communities action plan goals of affordable and life -cycle housing. The folowing suggestions are offered for allocation of the 1997 CDBG funds. Unused FY94 Proaram MZ Allocation Funds Total Senior housing $150,000 $150.008 Housing Rehabilitation $79,084 $50,000 $129,064 Wescott Jr Proararn 510.500 $103M Total $239,554 $W'000 $289,564 Details regarding each of these suggested programs are provided in Exhibit A. Qutside Agency Request The City received a request from Owobopte Industries for $125,000 of CDBG funds for the conshxtivn of their facility. Owobopte Industries, a rot-for-prok organization in Eagan providing employment Programs, vocational services and training to persons with developmental disabilities, mental Illnesses, traumatic brain kouries and other challenges. They currently own a building In Lakeville and lease space In Eagan at 3101 Sibley Memorial Highway. They have outgrown these fadlities and need more space. Owobopte has decided to cornstnxt a new facility and plan to purchase land in Eagandale Corporate Ceder for this project. They are approaching otter cities throughout the county for CM funds. Owobopte has provided the City with their strategic business and expansion pian for review and consideration, A copy will be available for your inview at the workshop on Monday. Owobopte receives revenue from state ON and county contracts with no allowance for capital funds. Based on their analysis, they have a funding pap for this new facility of $800,000. The proposed facility is $3.1 million building project. To raise capital funds for this gap they are seeking CDBG funds from Dakota County communities and money from Wirer grant and foundation sources. The HRA has indicated that the project would be qualify for CDSG funding. Louis Sesser president of the organization will present his request at the City Council workshop on Tuesday. If the City Council wishes to allocate CDBG funds to Owobopte Industries, staff suggests reducing the proposed allocation for housing rehabilitation. Schedule for Recommendina 1997 CDBG Praicc . The City needs to submit the required documentation to the HRA by January 10, 1997. Staff requests direction from the City Council at Tuesday's workshop in order to prepare the necessary applications and resolution for action at the January 7 City Council rnee;ng. Lisa J. Freese, Senior Planner Attachments: Exhibit 2 Letters from Owobopte Industries (2) Information Background Sheet on Owobopte Letter from HRA EXHIBIT A Suggested FY 1997 CDBG Project Details 1. Senior Housing Project. Building equity for phase two of the senior housing project Is a priority of the City Council. For the past several years the City has malbeated CDBG funds to HOME funds. The primary difference between the two funds is that HOME funds are eligible for new construction, A total of $611,000 have been allocated since 1993. Mark Ulfers indicates that the City Is allowed to swap another $150,000 during this funding cycle. The mac cash reserved for this project allows for more affordable netts and earlier construction schedule. In the first phase of Oak Woods, the City contributed $1 million in equity with the County HRA contributing an additional $1 million. With this significant cash outlay, the rents for the project were kept below $300 per month. 2. Wescott Junior program. The Junior Program was funded at $5,000 the last two years_ The funds were used for a variety of activities during the summer of 1995 and 1996. The Parks staff would like to use CDBG funds to continue and add new elements to Oils program in 1997. A total of $10,500 is requested with the $5,500 additional funding used to institute a drug awareness program ($1,000), purchase recreational equipment for the Wescott service center($1,5W), upgrade the deck to ADA standards, insulate the garage of the service center unit and install a trail to the basketball court. The site and building improvements would be financed 50-50 by the landlord and the City and the City cost is estimated at $3,000. The HRA has confrrrried that these new kdenttfred activities are eligible for CDBG funding. 3. Single Family Housing Rehabilitation. The County HRA has a Housing Rehabilitation Revolving Fund Loan Program. The loans are both no interest and low interest. The County funds this program and cities are able to contribute additional CDBG funds. The City contributed $113,000 of CDBG funds test year. As of September 30 only three months into the fiscal year $24,000 remained which will service 2 more bans. A minimum of $46,554 should be allocated to this program In 1997 to order to satisfy the ALOHA requirement for the Metropolitan Livable Communities program. This amount will service only 3 to 4 households. Because of the high demand, staff suggests alloca ng the maximum funds available to this program. FACTS ABOUT OWOBOPTEINDUSTRIES, INC. 3101 Sibley Memorial Hwy., Eagan, MN 55121 6121686-0405 DESCRIPTION: Founded in 1972, Owobopte (pronounced "Oh-ah-bop-te") is a 501(c)(3) not-for-profit organization annually helping more than 230 individuals experiencing daily challenges to independence and employment. We are the only nationally accredited full service rehabilitation facility located in and servicing Dakota County and are an equal opportunity employer. PEOPLE WE Men and women with developmental disabilities, mental illnesses, traumatic SERVE: brain injuries or other challenges. OUR MISSION: To empower persons with challenges and disabilities achieve gainful employment and independence. ACCREDITATION: Owobopte has been accredited by the Commission on Accreditation of Rehabilitation Facilities (CARF), a national organization commissioned to establish standards and requirements for organizations providing rehabilitation programs and services. EMPLOYMENT Long-term programs providing the support needed for skill attainment, PROGRAMS: income, and the satisfaction associated with long term employment. Two types of "real" work opportunities are provided: Center Based (offering on-site packaging and assembly employment) and Community Based offering off-site individual and group work in local businesses and organizations). VOCATIONAL Short-term programs providing services in center or community based SERVICES: settings: Vocational Evaluation (identifying employment skills and interests); Work Adjustment (developing effective work habits); .lob Development and Placement (matching participant needs and vocational goals to community jobs); .lob Coaching (one-on-one job training); and School Transition (assisting students in their transition from school to work settings). DT&H: Day Training and Habilitation (DT&IT) offers a wide range of services tailored for individuals to enhance their knowledge and abilities, and assist them in obtaining and maintaining successfid employment. Life skills training, a senior program and community integration opportunities are just a few of the many components of this program. LOCATION: Eagan, with community based employment located throughout Dakota County and surrounding areas. No OWOBOPTE October 23, 1996 Ms. Lisa Freese City of Eagan 3830 Pilot Knob Rd Eagan, hN 55122 Dear Lisa, Thank you for your follow up call concerning our interest in a Block Grant Application. Enclosed is a copy of our Strategic Business & Expansion Plan detailing the total project. We are in a desperate situation. We need a new facility soon. Our program enrollment is at capacity and we can no longer take new clients in our centered -based program Being a service organization the majority of our revenue is committed to client services as dictated by our state and county contracts. There is no allowance for capital funds. It is for this reason we seek assistance from the Block Grant Program In summary, the total building project will cost approximately $3,100,000 including land. Operational we are able to handle a mortgage payment up to about $15,500 per month. Based on present commercial mortgage rates, this translates to a mortgage in the range of $1,700,000 requiring $1,400,000 down payment. With the sale of our Lakeville Building we will have $600,000. The remainder would come from our Capital Campaign and support from the Dakota County Block Grant Program To date, we have received contributions and pledges totaling nearing $61,000 which includes: $30,000 - United Way of St. Paul Area • $20,000 - Otto Bremer Foundation $11,000 - Individual and Service Club Donations In addition we have ten foundations with pending applications totaling $300,000. Following the current United Way campaigns, Ow obopte will be making a formal announcement about its building program and will be going forward with an aggressive camp 8n- To rntpou rr perronr with rballenget and dirabilitirt to arliier e gainftrl enlpla)•nrent and indeprndeure. )BOPTE Industries, Inc. 3101 Sibley Memorial Highway, Eagan, MN 55121 612-686-0405 Fax 612-686-0312 An L• ytial Opporttniit) Eutplo)er With our expanded facility in Eagan, Owobopte will employ nearly 100 people serving 200 persons with disabilities. an addition number of persons with disabilities will be employed by businesses in the community. Today, in Eagan that number is 31. We are requesting an investment of $125,000 by the City of Eagan via the Block Grant Program Since we provide services to residents and businesses in nearly every city in Dakota County, we will be making similar applications to them A summary of individuals employed in various cities and supported by Owobopte are as follows: • Lakeville 35 • Eagan 31 • Apple Valley 29 • Mendota Heights 20 • West St. Paul l l • Farmington 9 I hope this gives you a better understanding of our needs and the need for your support. Thanks again for your time and effort. If you need any additional data please give me a call. My number is 686-0405, extension 101. Enclosed is some additional information about the agency. Sinc e1y, Louis E. Besser President /o OWOBOPTE October 23, 1996 Ms. Lisa Freese City of Eagan 3830 Plot Knob Rd Eagan, NV .55122 Dear Lisa, Thank you for the information regarding Block Grant Application. Owobopte Industries, Inc. is a 501(c)(3) non-profit organization incorporated in 1972 as a sheltered workshop at the Hastings State Hospital. Organization continued to grow over the years but expanding its programs and services to meet the needs of persons with all types of disabilities in Dakota County. Today, Owobopte is the only fullservice rehabilitation center serving nearly 250 persons in Dakota County. In 1991, Owobopte moved to Eagan to be more centrally located to its service area. This move was also a cost cutting move to consolidate two sites into a single site. This current site has served us well but we have reached capacity and can no longer take any additional participants. Approximately, a year ago we began looking into possible solutions which included building a neve building or buying an existing building. Initially, the new building was shelved because of unavailable land in our price range. Our specials needs also dictates that we have good access to serve our client transportation needs as well as being near public transportation routes. We also looked at existing buildings. Again older buildings were eliminated because of the high cost of renovations to meet ADA requirements and our own special needs. The only building that was possibly a fit is the Eagan Swim & Fitness but zoning problems could not be resolved. With the recent announcement of the Lexington Ave./Yankee Doodle Road development we are going back to building new. This land appears to be in our price range. Our intent is to build a 65,000 to 70,000 square foot office/classroom/production arWwarehouse building on 4 to 5 acres. We currently have approximately $650,000 from the sale of our building in Lakeville. We also have an active capital campaign to raise approximately To empou er pa -sons with challrnga and dirahilities to achiait gainful e+nplap pent and independent. OWOBOPTE Industries, Inc. 3101 Sibley Memorial Highway, Eagan, MN 55121 612-686-0405 Fax 612-686-031 An Egiwl Opporimnit) E,uplo)er S500,000 towards the special needs furnishings. To date we have received 520,000 from the Otto Bremer Foundation and $30,000 from the St. Paul United Way. With numerous private donations and pledges, we are very near the 5100,000 mark. The assistance of Eagan's Block Grant support and bopefully the assistance from some of the other Dakota County cities, we will meet our goal. The remainder of the budding would be financed by Signal Bank who already as reviewed our business plan and has given preliminary support. I hope this gives you sufficient information for preliminary consideration. If you need any additional data please give me a call. My number is 686-0405, extension 101. Enclosed is some additional information about the agency. Sincerely, Louis E. Besser President is DEC -02-96 MON 03:30 PM DAKOTA COLWY HRA DAKOTA COUNTY Dftea ber 2,1996 Louis E. Sesser, Arftw&4 OWOBOPTE Lldnstr a, Inc. 3 I Ol Sibley Memorial Fighway k'a►gaa, NN'55121 RB: C=Mmrty Development Block Gant Prog.�,, Dear Mr. Sesser. FAX NO. 6124238180 P-02 v---____�..t.a•...•.ar-a..11ll.Ill�- P1:.��i.{.��I� '-aNG�li3in �i.1Ct. • Rlscnrumr.11lN ii.Y,•r • 7JLLF1;..12i.�.�:: • I•A\ hJ:-�`#.a1�1 Over the past couple of weeks i haul had separate discllssions with staff from the cities of Eagan and Mtndota Heights regarding a request from your organiz&60.n for fiwding Community Development Block Grant prothrough Dakota County s program The i�ag request is is ooanociioa with your plans Far acquisition and cottstrud3on of a new faality is which to operate your programs. Dakota County HRA administers the CDBG Program for Dakota Omnsty, eel that it is appropriate to outline some of the requiremeats of the CDBG Program .that could apply to Your proposed project, in the hope that it Will aEow both you and the cities that participeac in the CDBG Program to Plan ac"ea Mort effectively. The application process for the next CDBG Program fending cycle (Fiscal Year 1997) is well under way, with applications due to be retumed to the Dakota County HILA by the end of this month (or as soon after that date as possible). AS MBG finds are luthOdZed annually by Congress, it is not possible to take appIicatiolls for or walnut foods from any year other than the =I el federal fiscal year. Fiscal Year 1997's CDBG Program in Dakota County officially begins on July 1, 1997. Appdcations being submitted now will be reviewed, approved by the four CDBG.DWTict Conmairter4, thea included In the CDB&HOME Program Consolidated Plan. Tke Cottsolidatod Plan will be the ulbject oblic a public hearing held by the C urq Board aroutad the first of May, 1997, djer which the approved plan will be submitted to the U. S. Dopar mw of Housing and Urban Dr valopment for revie�r and HUD approves the submitral m a timely manner, a Grant aFounty r t FYI 997 CDBG and HOME Agreement will he stet to the County for the Progra= on or about July 1, 1997. Only after the Grant ,pmt has been issued by mm can roods be committed to spedtc projects to be carried out through the FY1997 CDBG Program The key fact in the above discussion is that CDBG funds cannot be used for any ac tivhy for which a AnamW C*Mmitux= is made prior to the date of the FY1997 Grp Agreemcnt, 14 for =MTk you hove already entered h10 a Purchase AVVement for a sP=& Parcel ofland, CDBG toads owmA; be used for the acquisition cost of the parcel. fly, you should rat eater into an contract or professional 8W vx= coab,4 that might be flmded Y oonsdvction the 1997 Gant Agreement has been issued' CDBCi° or is part until WN EQUAL OPPORT LN17Y S PLOYM, 13 a- 95M 6124238180 12-02-96 04:20PM P002 #20 DEC -02-96 MON 03:30 PM DAKOTA COUNTY HRA FAX NO. 8124238180 P,03 Is Use of CDBG fuads for emsttuction costs WID Also er io workers l��g labor for the Project The �� certain requu�esits for F�� of wages P Dakota Corm BRA wMl raMde coatr= docume�ss omm'Aing these regwiremema and will be p aPP1Y to the project. The key factor cfwhi'c� ou.sh for monitoring = Pliance with thM should this if CDBG finds are used to cover sn you should be aware is regard to this �= is that eoatr8d is subject to the �,r sed nof the program cam' �P work under the 6gJ I want to stress to you that asa%at to yqu Pr,�W prO� is eligible for assistan CDBCi Prom because your programs carve s Ch atele that is pryouesumed to through the be moderate inoamc under the C,DBG regulations. I am daP�Dy low and through the prow== so see to ev+oid probla= that eouldad" lamr if were restric6ons on fim&4 �e4 restrictions. y Please call nae at 423-8113 ifyou i Pragr$m, quW= or oommeats about the Dakota County CDBG Sincerely, Lee Smith CoamiunftyDevelopment SITWpisor cc: Kevin Batchelder " Freese JR -sex E.: - E -. 1 166 FROM GREEK; MILL EAGAN, MN F`HONE 140. 612 686 7166 Nov. 15 19% 02:36pM CPl CII � �I I I i ;a /�' s ;; � ���,, .1��-ear. o< �✓Fc�A��r �--� Nsy �47 i•,l %400c.r- cC —,7.ocu� +� 77�- vodwl�' .E` ocx ��lT • �•��7Z /s �6F„!r 'r -'k Lo 77..'Sv'� moee c-biaim e-teJi�s/. /.e! Govt :��.�.�... -7'040 01M4.0. /W*A f440.*- 15--, EXPRESS' HOTEL&SUITES November 5, 1996 City of Eagan Dept. of Development and Planning Attn: Usa Freese 3830 Pilot Knob Rd. Eagan, MN 55122 Dear Ms. Freese, This letter is in support of Owobopte, an organization which is valued in our community and is of great value to our business. They provide valuable labor in our Housekeeping division. Their workers are dedicated and hard-working, and we recommend them. Because of their services to our corporation and the City of Eagan, we recommend that they receive support from the City of Eagan and Dakota County through the allocation of all or part of the Dakota County Block Grant monies. This would assist them in expanding their operations and providing more services to the community. It also allows us to provide employment through them to those dedicated people who need this assistance. Your consideration of this matter is greatly appreciated. If you have any questions, please call me personally at 661-9266. Sincerely, Anne Zwach General Manager rmg/AZ HOLIDAY INN EXPRESS HOTEL & SUITES EAGAN - MALL OF AMERICA AREA 1950 Rahndiff Court (35E $ Cliff Road, Exit 93) • Eagan, Minnesota 55122 (612) 681-9266 4, FAX (612) 688-6306 16 MEMO city of eagan TO: Thomas Hedges, City Administrator FROM: Lisa Freese, Senior Planner DATE: December 11, 1996 SUBJECT: Oak Woods Senior Housing -Phase 11 BACKGROUND in 1992 the HRA and the City completed the first phase of Oak Woods senior housing development. This project is fully occupied. Rents are based on income of the residents, but are not less than $275 for the one bedroom units and $375 for the two bedroom units. Currently, there are 163 households on the waiting list for the 1 bedroom units and 148 households on the waiting list for the 2 bedroom units. A recent needs assessment study findings indicate that the need for independent and assisted living housing for the City of Eagan's senior population, especially subsidized units will continue to rise through the year 2000. Since 1992 the City has been setting aside funds for phase II from its CDBG allocation. To date, the HRA has allowed the swap of $611,000 of CDBG funds to HOME funds for phase II. This year the City has an opportunity to swap another $150,000 of CDBG funds to HOME funds. The total equity currently in reserve at the HRA for phase II is $846,207 which includes 93-97 HOME funds and a small portion of funds left from phase 1. FUNDING OF PHASE 1 The phase I funding included approximately a $1 million dollar equity contribution from both the City and the Dakota County HRA. The County provided its portion of the equity from a property tax levy that is authorized through state statute. Through this tax levy, the HRA undertook a county wide senior housing construction program that provided for the construction of ten projects consisting of 40 housing units. The City contributed $952,000 equity to phase I which allowed the construction of 25 addition units and kept rents at a very reasonable level. In 1997, the County HRA will complete its tenth senior housing project in Rosemount These projects are financed through the year 2010 and the financing requires a dedicated property tax levy through that date. Presently, the HRA is considering a request to the County Board for an additional tax levy for more senior housing development, but to do this it will be necessary for state legislative authorization. If this funding is pursued, it is not likely to be available for any projects until at least 1998. PRO FORMA SCENARIOS In order to help the City assess the feasibility of phase 11, the HRA has prepared several pro formas involving different financing assumptions and equity requirements which are detailed in the attached HRA narrative. Phase II as proposed consists of 43 one bedroom units and 22 two bedroom units for a total of 65 units. Based on the financial analysis, staff have identified several factors for discussion with the City Council. Financina Structure Options The two financing options presented in the pro formas are the HRA Common Bond Fund and City of Eagan General Obligation (G.O.) authority pledged as security for the bonds. The main advantage of city G.O. backing is a lower interest rate because of the City's higher gond rating. The city assumes some risk if the income and reserves are not sufficient to cover the debt payments, but risk appears low given the housing demand projections. Equity Sources. In addition to the HOME funds currerdly set aside for phase II, four potential equity sources could be considered. 1. Eag_an's Multi -family Housing Revenue Bond fund. This fund is earmarked for housing related activities. As of December 1 the fund balance is $860,000. 2. Cinnamon Ridae TIF loan repayment. TIF proceeds were used to secure a loan to the Cinnamon Ridge apartment owners. The last tax increment year is in 1997 and city's receivable is currently estimated $1.5 million. 3. Communh Investment Fund. 4. Additional HRA Tax Levy, The HRA is examining the possibility of an additional tax levy for future senior housing development throughout the County. Rent Levels. The desired rent level dictates how much additional equity is necessary to make the project feasible. For example, if the Multi Family Housing Fund were used with the HOME fund equity, monthly rents could be as low a $440 for one bedroom and $550 for two bedroom units, depending on the financing structure. Generally, for each $10,000 of additional equity invested the rents can be reduced by $1. To keep rents at the same level as phase I units, an additional $1.9 to $2.1 million equity contribution is necessary. The HRA staff indicated that they believe that all rent scenarios presented in the pro formas are marketable. Waiving City Fees With phase I, the city waived development fees normally collected for construction projects. To reduce equity requirement, the City may also want to consider waiving fees for phase II of the project. The Protective Inspection staff calculated fees based on 65 units and a $4.35 million building valuation using the 1997 rate schedule. Metropolitan SAC charges and state building surcharges cannot be waived by the City. The project costs can be reduced by $73,500 if the fees identified exhibit A are waived. Timing The scheduling of the project dearly depends the desired rent levels and how the City Council wishes to pursue the equity needs for the project. The HRA has indicated that if the equity requirements for the desired rent levels can be met, they have the capacity to handle the construction project. Altemative Site Potential The HRA is attempting to acquire a tax forfeited parcel in the town centre area west of Denmark Avenue and south of Town Centre Drive in section 14. Based on the County's need assessment it is very likely that another site will be necessary to meet the projected senior housing demands. While the HRA is positioned to move forward at the Oak Woods site, they are open to pursuing this new site for construction of a second housing project first if the City Council desires. RggUESTED DIRECTION In order to continuing planning for phase II of the project, staff is asking the City Council to provide initial policy direction on financing structure, equity sources, rent levels, fees, time and site preference. Mark Ulfers the HRA Executive Director will be present at the City Council workshop on December 16. %-01 r Lisa J. Freese, Senior Planner Attachments: HRA Narrative & Pro Formas for Phase II Excerpts from Dakota County Senior Housing Needs Assessment 1997 City Fee Projections - Phase 11 /V OAK WOODS ADDITION PRO FORMA NARRATIVE In August of 1992, the construction of Oak Woods in Eagan was completed. This 65 -unit apartment building was designed specifically for elderly residents. It is a three-story building that was situated on its site to allow for the construction of a second 65 -unit building. The site is 7.0 acres and located at the intersections of Cliff Road and Cliff Lake Road. Oak Woods contains 43 one -bedroom units ranging from 689 to 726 square feet and 22 two-bedroom units ranging from 968 to 1027 square feet. The amount of rent to be paid by a resident depends upon his or her annual income. Residents pay, as rent, 30% of their monthly income, but not less than $275 for a one - bedroom unit and not less than $375 for a two-bedroom unit. Currently, there are 163 households on the waiting list for 2 bedroom units and 148 households on the waiting list for 2 bedroom units. The City of Eagan contributed approximately $952,000 of its funds to the original project, which allowed the Dakota County HRA to develop 65 units rather than the 40 units originally planned. • Four pro formas are provided with rents at $336 for 1 bedroom units and $436 for 2 bedroom units. Four similar pro formas are provided with rents at $386 and $486 respectively. • Two pro formas calculate the development with the City fees waived, as they were with the original Oak Woods development, and two pro formas include City fees. The two different City fees scenarios were then calculated with the two different financing scenarios (Common Bond Fund and City G O Backing), thus producing four pro formas in all. • The total cost of this development reflects a per-unit construction cost of $58,000. This is reflective of rising construction costs found in recent HRA housing developments. • HOME funds invested include previous and current years HRA funds equaling $611,000 to be exchanged for City CDBG funds. 1997 funds equaling $150,000 are also included and would be a similar exchange with the City. • An annual debt service coverage of at least 115% was used. • A vacancy rate of I% was used. • An inflation rate of 2% was used. /9 Some of the Oak Woods addition would be financed through the issuance of tax exempt revenue bonds. One option, is to finance the addition through the HRH's Common Bond Fund Financing Program. The Common Bond Fund is a series of bonds issued that are secured and payable from the pledged revenues of the projects developed with these proceeds and the HRA special tax levy. The Common Bond Fund has a BBB+ rating from Standard and Poor's. The second financing option, is for the City of Eagan to pledge its general obligation authority as additional security for the bonds issued by the HRA. This is possible due to a 1992 change in state law that enabled general jurisdiction governmental units to pledge their general obligation as additional security for bonds payable from income or revenues of the project. The City has a AA- rating from Standard and Poor's. Using finance option number two, City G O Backing, would reduce the interest rate on the bonds by over 1%. By reducing the interest rate on the bonds, the project is able to acquire more debt through increasing the amount of bonds issued and thus require less equity be invested. If more debt is not acquired with a lower interest rate and the same amount of bonds are issued, the savings can be found in reduced rents. The bonds will be structured to be payable solely from rental income and will have significant funds in reserves. The project would have a replacement reserve and an operating reserve. State statute requires debt service coverage equal to 110% of the principal and interest due on the bonds for each year. The project would maintain 115% debt service coverage. However, if the City pledges its general obligation authority for the bond issuance, it would be taking some risk. If at some point in the future, the rental income and reserves are not sufficient to cover debt payments, the bondholders would look to the City. The City has the opportunity to assist the HRA in achieving significant efficiencies and cost savings in financing the addition to Oak Woods by pledging its general obligation authority and reducing the interest rate of the bonds. The reduced interest rate would reduce the rents required or reduce the amount of equity needed. The amount of equity invested in the development from the City directly affects the rents necessary. The approximate correlation between rents and City equity is for each S 10,000 invested in the addition, the rents can be reduced by S 1. Therefore, if rents are reduced by $50, an increase in City equity is necessary equaling approximately $500,000. The City can also reduce the amount of equity necessary for the development and/or reduce rents by waiving the City fees that would be charged to the development, approximately $90,000. The first stage of the Oak Woods development received a similar waive of City fees. The following scenarios would achieve rents at the stated amount: RENTS AT S336 (1 BR) AIND $436 (2 BR) Financing . ' 'r fily, F4uiVRe ui d G 0 Backing (AA-) w/ City fees waived $1,880,000 G 0 Backing (,AA-) w/ City fees included $1,970,000 Common Bond Fund (BBB+) w/ City fees waived $2,040,000 Common Bond Fund (BBB+) w/ City fees included $2,130,000 RENTS AT 5386 (1 'BR) AND 5486 (2 BR) Financing Structure G 0 Backing (AA-) ws' City fees waived G 0 Backing (.A -,k-) w' City fees included Common Bond Fund (BBB+) w/ City fees waived Common Bond Fund (BBB—) w/ City fees included Cil: Fguiri.L� Re' sir d $1,390,000 $1,490,000 $1,600,000 $1,700,000 This scenario requested shows the rents necessary to keep City equity fixed: CITY EQUITY AT $8601000 Financing Rructure Rents Reg uir d G 0 Backing (AA-) w/ City fees waived $440 (1 BR) & $540 (2 BR) G 0 Backing .(AA-) w/ City fees included $450 (1 BR) & $550 (2 BR) Common Bond Fund (BBB+) w/ City fees waived $475 (1 BR) & $575 (2 BR) Common Bond Fund (BBB+) w/ City fees .included $485 (1 BR) & $585 (2 BR) IS RJQpoo000101Ioo Qeeg8 gR �58� etSw ��aa aeE- i�S73 W � � r � LLS1� ~ UU � J 111 YY :' 1 i ggaoeooeoQogQoe4�oe18 QQR RQR as 7Tii1l as iisSS � � iii is 9 i 11§ aa000000Q0prow,I? ,$ �So^ iiKKw, � I I s III j y W S LL< W Q s Hw Yo a� Ir i i 0oiR 0 O vol o n� o vO p 0 0 O t �i � a � Ji fill 000 o 0 a� Ir i S sEE id�i! $ a i F=( .; as I Is_ 00g N � O lit ■ M ace o -'s- n `j (SZSQO W O a rr �n � Mss i gone , O O 00g N � O lit ■ M ace o -'s- n `j (SZSQO W ��aooeoeeQoQQooQQoog8 �R ' ii^55 7:�ii �ZwSS iii{{ 22nff �RiR w i�l � g $ < W go' O r gu aha HIS N0 §$§°.0.,_1©■$°©■§°©§®R , B � ■ ■ � § 7 § § §�� t&�&k��q�■§�§� �k He $ § S$§§ Elk §§ MiHflu II C:� � k I � | | | C,,§ | . ■§©£ A� ©©$ _ ©§ . , � ! 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Scm lw a=n m R aria — > a°' c 0 r > m coC U LU F- mx y co C >O.CL, _O 75 0 � O to cm co aa�w Y CL Q� a> 21 <, C to � a R o m isnm € N � ca o IX, E � C o 4) ca 2�2 n� 0 .`�• ~ 0 z T� 100 Sheetl Oak Woods Senior Mousing -Phase II Assumes 65 units, $4.35 million valuation Fee 1997 Rate Permit Fee $14,224.75 Surcharge' $1,435.00 Plan Review $9,246.09 Met Council SAC" $49,400.00 City SAC $5,200.00 Sewer Water Permit $100.00 Sewer Water Surcharge' $0.50 Treatment Plant $21,840.00 Road Unit $22,880.00 $124,326.34 Fee that cannot be waived Page 1