Olmsted County Regional Housing Needs Forum. Stacie Kvilvang Ehlers

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1 Olmsted County Regional Housing Needs Forum Stacie Kvilvang Ehlers July 23,

2 Housing Finance Tools and Strategies Tax Increment Financing Tax Abatement HRA Levy Creative uses of local funds Public Policy Framework Strategies for housing Development 2

3 What is TIF Development occurs Increased value from development = TIF Original Tax Capacity There is Value in the District when created (also called base value ) Tax revenues continue go to all local governments

4 Housing TIF District 26 Year Term Affordable Housing - Income test is main qualification 100% tax increment used for affordable housing 20% of project s value can be used for commercial development Rental Income adjusted by number of occupants 40% of units restricted to 60% of median income; or 20% of units restricted at 50% of median income Can be used for owner occupied housing subdivisions Different income qualifications 95% of units must qualify Used in out state more where the City is completing the subdivision Reimbursing themselves for TIF eligible expenses

5 Redevelopment District 26 Year term Parcels consisting of 70% of area must be improved Improved area equals 15% area of parcel More than 50% of buildings must be substandard 90% of TIF used to correct redevelopment issues No restrictions on end use No income restrictions on housing

6 Renewal and Renovation 16 Year Term Parcels consisting of 70% of area is improved (same as redevelopment) Difference is in substandard findings 20% of buildings are structurally substandard 30% of other buildings require substantial renovation or clearance No restrictions on end use No income restrictions on housing

7 Defining the Gap in Rental Housing 150-Unit Market Rate Apartment Development Rent Matrix Market Rate Rent Differential Annual Income Market Rate - Metro $ 2,870,400 Market Rate - Rochester $ 2,404,200 Difference Between Market Rate & 60% of County AMI $ (466,200) Market Rate VS. 60% of AMI Rent Differential 150-Unit Market Rate Apartment Development Rent Matrix Annual Income Market Rate - Rochester $ 2,404,200 60% of AMI $ 1,807,680 Difference Between Market Rate & 60% of County AMI $ (596,520)

8 How TIF Helps As a Tool Project Type TIF * Present Value District Type TIF Per Unit General Occupancy/Senior Apartment - 60% Market/40% affordable at 60% of AMI Housing $13,000 General Occupancy/Senior Apartment - 80% Market/20% affordable at 50% of AMI Housing $14,500 General Occupancy/ Senior Apartment 100% affordable (Assumes at 60% and below) Houisng $9,400 General Occupancy/Senior Apartment - 100% Market Rate Redevelopment $14,200 Senior with Services - 100% Market Rate Redevelopment $17,000 * Assumes a discount/financing rate of 5% Olmsted County Per Unit TIF Assumptions

9 What is Abatement OR Increased value from development = Abatement Amount (just like TIF) Original Tax Capacity 100% of value (existing and new development) = Abatement Amount Tax impact to existing residential and commercial

10 Abatement Up to 20 Years City, County and School have to approve to participate Unlike with TIF If all 3 entities approve (City, County, School) 15 year term If 1 or 2 entities approve 20 year term School district may approve if housing is developed

11 HRA Levy The County has the ability to levy a tax in the amount of percent of estimated market value Funds collected through this levy can be used for housing activities within the County Provides a consistent and flexible source of local funding to leverage other outside funding

12 HRA Levy (Olmsted County) 100% PROPERTY TAX INFORMATION Actual Net Tax Capacity ,447,671 HRA Levy 100% 2,568,113 Estimated Tax Capacity Rate: Payable 2014 County Tax Rate - Current % Payable 2014 County Tax Rate - WITH LEVY INCREASE % Estimated Tax Rate Increase 1.754% 12

13 HRA Levy (Olmsted County) 100% Type of Property TAX IMPACT ANALYSIS Taxable Proposed ANNUAL Proposed MONTHLY Proposed DAILY Market Value Tax Increase* Tax Increase* Tax Increase* $ 100,000 $ $ 1.05 $ , , Residential 250, Homestead 300, , , $ 500,000 $ $ $ ,000, Commercial/Industrial 1,500, ,000, , $ 3.85 $ 0.13 Agricultural 500, $ 4.58 $ 0.15 Homestead ** 600, $ 5.31 $ , $ 6.77 $ ,000, $ 8.23 $

14 Why These Funding Sources Matter Communities need matching funds in order to obtain other outside funding sources What you provide at the local level can leverage outside dollars significantly

15 Creative Uses of Local Funds Housing TIF can be used alone, or as a local match for rental tax credit housing projects TIF and abatement can offset development costs to promote affordability TIF and abatement can provide a source to offset redevelopment and/or remediation costs HRA levy funds are flexible and can be used for various housing programs and initiatives

16 Creative Uses of Local Funds Don t forget about existing homes Aging housing stock that you want to see reinvestment in Great source of market rate housing Can be remodeled to meet today s needs Solutions Abatement for homeowner-driven rehabilitation County/HRA sponsored housing rehab program 16

17 Homeowner Rehabilitation Using Tax Abatement Median value home is $187,000 Annual property tax of approximately $2,598 (assuming located in Rochester) City portion approximately $929 36% of tax bill County portion approximately $1,053 41% of tax bill Rebate to homeowners who purchase a new or renovated home Can be remodeled to meet today s needs 17

18 Housing Rehab Brooklyn Park Provided gap financing for rehab of homes by private developers Funded using TIF and HRA/EDA funds 18

19 Housing Rehab Program

20 Housing Rehab Program

21 Housing Rehab Program

22 Housing Rehab Program

23 Creative Uses of Local Funds Special TIF legislation Its all in your story Request ability to create non income restricted housing on limited number of sites and provide defined term to create them (i.e. within 5 years) Possibly reduce term from 26 to 20 years Request lowering base value to zero Capture more TIF, but.. Tax impact to City and County 23

24 Creative Uses of Local Funds Special TIF legislation Using industrial development to assist in financing housing Create a TIF district on new industrial Use big job generating businesses Set aside X % to be used for housing development Create a TIF district on existing industrial Treat like a new TIF district with base value of land so TIF is based upon difference between that and the total market value (building) Limit parcels to be included to generate an expected pool of funds over time Tax impact to City and County Obtain authority to create a TIF district on new office/commercial development Use 100% for housing or set aside X % for housing 24

25 25 Inclusionary Zoning

26 26 Inclusionary Zoning - Policy Contents Affordability requirements Define the number, type, and income limitations of affordable units required to meet the policy Percentage of affordable units typically range from 10% to 30% Many policies apply to for sale housing May apply to rental housing as well Affordability targets range from 50% to 120% AMI for owner-occupied housing and 30% AMI to 60% AMI for rental housing and Applicability Defines which projects are subject to the policy and what triggers application of the provisions contained within the policy Land-use approval such as rezoning Size of project some policies apply only to larger projects Provision of city funding Geographic Area Subject to Policy Targeted development area, entire city, Undeveloped land, etc.

27 27 Public Policy Framework

28 Strategies to Promote Housing Development Prioritize housing needs Identifying available sites to meet the needs Identify funding resources and partners Match resources to needs Develop legislative strategy for funding tools Implement housing plan 28

29 Discipline of Effective Communities Strategic Financial Decision Making Measurement 1. Strategic discipline maintaining clear vision, values and strategy to achieve vision 2. Financial discipline developing and maintaining a long-term financial plan that serves as a framework for financial decisions (including annual budget decisions) 3. Decision-making discipline adhering to a structured decision-making process that provides clear and differentiated roles for elected officials and staff 4. Measurement discipline - Rigorously measuring and testing whether the chosen strategies are achieving the goals helps adjust course along the way 29

30 Stacie Kvilvang