Agenda - Economic Development Authority - 06/04/2015

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Patrick Brama Housing Assistance Policy Measures May 27, 2015 Page 2 per unit if other public funding sources are being utilized (policy should state that developer will maximize use of grants and other funding sources to the extent available). We recommend a cap of City funds at $15,000 to $20,000 per unit If no other public funding sources are available, knowing that it does not provide as much flexibility. • Maximum City participation: Another way of capping assistance can be through a maximum percent of total development costs (TDC). We would recommend a cap of 5% of TDC, with other public participation (This may work well for larger projects, but could be problematic for smaller projects). We recommend a cap of City funds at 10% of TDC If no other public funding sources are available. Affordable Housing Measures Most affordable housing is being built using either 4% or 9% tax credits. This model generates tax credit equity, but generally includes very little (if any) developer equity. For this reason, rate of return is not a useful measure. Others options include: • Limit TIF assistance: Limit TIF to 15 years, rather than the full 26 allowed by law. Since most city involvement in these types of projects includes TIF, this can be useful. Rationale for this approach is: o Affordable housing projects within the Metropolitan Area are being constructed with this term of TIF o The duration of assistance is generally commensurate with the required affordability period for tax credit projects o There is clarity up front with the developer about what the city will do o The developer can structure other financing/grants around this o Exceptions can be made for extraordinary circumstances • Waiver of Fees: Tax Credit projects typically request that a city waive certain fees such as park dedication, building permit and any city WAC fees and city SAC Fees (above what the Met Council charges. We recommend that the City include in its policy what fees it is willing to waive. Typically most cities' WILL NOT waive building permit fees. City's MAY waive park dedication fees if they view the development will not have an impact on parks (i.e. senior independent or senior assisted living). Also, some Cities have been willing to waive WAC fees and City SAC fees (dependent upon the liquidity of these enterprise funds). • Equity Requirement: As noted, for the majority of the Tax Credit projects, the developer does not have any of their own cash in the deal (equity). The City may want to consider requiring that the developer have a minimum amount of equity so they have something at risk. We would recommend a minimum of $50,000 to $100,000.