Agenda - Council Work Session - 05/23/2023

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CC Work Session Meeting Date: 05/23/2023 Information Title: Review Proposal for Market Rate Apartment on City Owned Land in the COR 2.1. Purpose/Background: The purpose of this case is to review a proposal from Norhart to construct a Market Rate Apartment project on City -owned land in the COR and to receive guidance on the sale of City owned land. On March 28 2023, the City Council reviewed a number of varying development proposals on Parcel 46. The proposals reviewed included two separate single-family housing projects on the northern part of the site and a 150 unit market rate apartment on the site north of the hotel and south of the future West Ramsey Parkway. The heart of the discussion on March 28 was spent on the 2 single family housing projects on the majority of the parcel. The item only had 20 minutes set aside for work session discussion, so there wasn't time to further discuss the Council position relating to the sale of City -owned land for apartments. Consensus of the Council on March 28, 2023 was to bring back the discussion relating to the sale of City -owned property for a market rate apartment project to a future work session. Norhart has updated their proposal to include information relating to the market in Ramsey and submitted a Letter of Intent to purchase a +/- 3.2 acre site north of the proposed hotel project. Norhart has expressed an unwillingness to accept a restricted use agreement prohibiting short-term apartment rentals under six months for this site. The proposal includes a 5000 SF retail/office component on the first floor to meet the spirit of the COR mixed -use vision. The project is amenity rich and would be considered a "high -end" apartment product. The Developer is not asking for any assistance with this project. Marybeth Wise, from Norhart will be in attendance to answer questions relating to the proposed project. Parcel 46 is located within TIF District No 14 which runs through 2040. Staff shared some tax estimates from the varying proposals on March 28, 2023 and attached updated information. Based on other market rate apartment projects in the COR Staff estimated that the Norhart project would have a tax assessed value of $37,500,000. Based on the estimates provided, the market -rate apartment project had the highest local tax revenue per acre value at $120,000. The single family housing project by Capstone had a rate of about $16,708/acre. The large format retailer concept came in at about $20,000 per acre in local taxes. If the proposed Norhart project was completed by December 31, 2024, it would be fully taxable for taxes Payable 2026. Preliminary TIF calculations based on 15 years of increment (2026-2040) for the apartment project are estimated to be close to $5,600,000 (379K X 15) on 3.2 acres of land. In 2020, the City Council communicated to staff that it wanted a "pause" on the sale of City -owned land for apartments in the COR. One item relating to the pause was the need for more commercial/retail development before considering more apartments on City land in the COR. Since 2020, the City has seen the following projects competed in the COR: Gigi's Salon (9,000 SF), O'Reilly Auto Parts (7,000 SF), West Armstrong Retail (15,000 SF) and Northstar Marketplace retail (7,200 SF). We currently have a 5,000 SF COR Trust Bank, a 98 unit Hilton Home2 Hotel and a 20,600 square foot Aldi, under purchase agreement and engaged in the site plan process. Staff would like to know if a "pause" on apartments in the COR is still the consensus of the Council or if they are now open to the possibility of selling city land for apartments. Planning Staff has reviewed the proposed site location, and it is currently zoned COR 2B. If the Council was supportive of the project, a re -zone to COR 1, COR 4c, or another accommodating district would likely be needed if the project were to move forward on the proposed site. Based on previous discussion with the City Council