HomeMy WebLinkAbout2019-02-28 HRA Regular Meeting PacketAgenda
Edina Housing and Redevelopment Authority
City of Edina, Minnesota
Edina City Hall Council Chambers
Thursday, February 28, 2019
7:30 AM
I.Call to Order
II.Roll Call
III.Approval of Meeting Agenda
IV.Community Comment
During "Community Comment," the Edina Housing and Redevelopment
Authority (HRA) will invite residents to share new issues or concerns that
haven't been considered in the past 30 days by the HRA or which aren't
slated for future consideration. Individuals must limit their comments to
three minutes. The Chair may limit the number of speakers on the same
issue in the interest of time and topic. Generally speaking, items that are
elsewhere on today's agenda may not be addressed during Community
Comment. Individuals should not expect the Chair or Commissioners to
respond to their comments today. Instead the Commissioners might refer the
matter to sta- for consideration at a future meeting.
V.Adoption of Consent Agenda
All agenda items listed on the consent agenda are considered routine and
will be enacted by one motion. There will be no separate discussion of such
items unless requested to be removed from the Consent Agenda by a
Commissioner of the HRA. In such cases the item will be removed from the
Consent Agenda and considered immediately following the adoption of the
Consent Agenda. (Favorable rollcall vote of majority of Commissioners
present to approve.)
A.Minutes: Regular Meeting, February 14, 2019
VI.Reports/Recommendations: (Favorable vote of majority of Commissioners
present to approve except where noted)
A.Support for Preservation of Naturally Occurring A-ordable Housing at 7008
Sandell Avenue
VII.Correspondence
A.Correspondence
VIII.HRA Commissioners' Comments
IX.Executive Director's Comments
A.Project Update
B.Special Legislation Update
X.Adjournment
The Edina Housing and Redevelopment Authority wants all participants to be
comfortable being part of the public process. If you need assistance in the way of
hearing ampli@cation, an interpreter, large-print documents or something else,
please call 952-927-8861 72 hours in advance of the meeting.
Date: February 28, 2019 Agenda Item #: IV.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Minutes
From:Sharon Allison, City Clerk
Item Activity:
Subject:Minutes: Regular Meeting, February 14, 2019 Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Motion approving draft regular minutes of February 14, 2019.
INTRODUCTION:
None.
ATTACHMENTS:
Description
Minutes: Draft Minutes, February 14, 2019
Page 1
MINUTES
OF REGULAR MEETING
OF THE EDINA HOUSING AND REDEVELOPMENT AUTHORITY
FEBRUARY 14, 2019
7:30 A.M.
I. CALL TO ORDER
Chair Hovland called the HRA meeting to order at 7:30 a.m.
II. ROLLCALL
Answering rollcall were Commissioners Anderson, Brindle, Fischer, Staunton and Chair Hovland.
III. APPROVAL OF MEETING AGENDA
Motion made by Commissioner Staunton seconded by Commissioner Brindle approving the
meeting agenda.
Ayes: Anderson, Brindle, Fischer, Staunton, and Hovland
Motion carried.
IV. COMMUNITY COMMENT - None
Hope Melton, 4825 Valley View Road, commended the HRA on its support and responsiveness to the issue of
affordable housing.
Carolyn Jackson, 5716 Continental Drive, said she attended the Metropolitan Council screenings last evening
and noted all candidates spoke to the issue of housing.
V. CONSENT AGENDA
Motion made by Commissioner Staunton seconded by Commissioner Fischer approving the
consent agenda.
V.A. Approve Minutes of Regular Meeting of January 31, 2019
V.B. Receive payment of the following claims as shown as per pre-list dated February 11, 2019,
and consisting of 2 pages: $47,583.85
Ayes: Anderson, Brindle, Fischer, Staunton, and Hovland
Motion carried.
VI. REPORTS/RECOMMENDATIONS – (Favorable vote of majority of HRA Board Members present to
approve except where noted).
VI.A. REQUEST FOR FINANCIAL PARTICIPATION FOR 7200-7250 FRANCE AVENUE
Economic Development Manager Neuendorf outlined the history and current conditions of the 7200 and 7250
France Avenue buildings and shared how the parking structure had become unstable. He stated both buildings
were Class C office space but were aged and outdated. He summarized how Tax Increment Financing (TIF) was
used in projects such as this. The developer had requested $12 million in TIF support to make their project
viable and the gap could be resolved through a combination of additional equity, TIF, and outside grants. Mr.
Neuendorf highlighted the property tax capacity and estimated market value with minimum improvements that
included all demolition and site preparation, two apartment buildings with commercial street-level space,
prepared pad for 10 townhomes to be constructed by another developer, and delivery of all easements. He
shared the return was within reasonable limits, Ehlers and Associates had reviewed three possible scenarios for
this site, and recommended pursuing the proposed project with TIF support as it delivered the highest long-
term tax benefit to the community. He outlined the terms that would create a 20-year special housing TIF
District with a pledged amount of $12 million while the applicant would pursue grants from DEED and the
Metropolitan Council and would sign a prepared TIF redevelopment agreement later in 2019.
Mr. Neuendorf answered questions of the HRA regarding assurances that the townhome development would
be completed, the pad not used for a surface parking lot, the City’s costs to establish the TIF district were borne
by the developer, the but-for test, risk to the City, what the City would get in exchange, assurance that the
Minutes/HRA/February 14, 2019
2
townhome development moved forward, the second level plaza and assurances that the area would be ADA
accessible and during all weather.
Dean Dovolis, DJR Architects, responded that developers want the equity and there was never an intent to
complete the townhomes. He explained how the $12 million would help them prepare the project and pad,
which would be fully covered in the final development agreement.
Motion made by Commissioner Fischer seconded by Commissioner Staunton to approve the
Term Sheet and authorize staff to engage legal and financial professionals to prepare a full
Redevelopment Agreement based on the approved Term Sheet with modification to item 3.d.
Ayes: Anderson, Brindle, Fischer, Staunton, and Hovland
Motion carried.
VI.B. RESOLUTION 2019-05: FINDING THAT PARCELS ARE OCCUPED BY STRUCTURALLY
SUBSTANDARD BUILDINGS, 7200-7250 FRANCE AVENUE
Mr. Neuendorf said while staff did not anticipate the need for this action, staff requested certification of the
substandard building conditions in the event there was a concern and an emergency demolition was needed.
Motion made by Commissioner Brindle seconded by Commissioner Fischer to adopt Resolution
No. 2019-05 finding that parcels are occupied by structurally substandard buildings.
Ayes: Anderson, Brindle, Fischer, Staunton, and Hovland
Motion carried.
VI.C. RESOLUTION 2019-06: REQUESTING A PUBLIC HEARING ON THE PROPOSED
ESTABLISHMENT OF THE 72ND AND FRANCE TAX INCREMENT FINANCING DISTRICT
Mr. Neuendorf explained the action called for a public hearing to create a TIF district with the formal request
scheduled for the March 19, 2019, City Council meeting that would provide the public an opportunity to
comment in support or opposition to the proposed TIF district.
Motion made by Commissioner Anderson seconded by Commissioner Fischer to adopt Resolution
No. 2019-06 requesting a public hearing on the proposed establishment of the 72nd and France
Tax Increment Financing District.
Ayes: Anderson, Brindle, Fischer, Staunton, and Hovland
Motion carried.
VI.D. APPROVE AMENDED AFFORDABLE HOUSING POLICY
Manager Neal confirmed that while action was required on the affordable housing policy, postponement would
not be a concern at this time.
Motion made by Commissioner Brindle seconded by Commissioner Staunton to table
consideration of the Amended Affordable Housing Policy to the February 28, 2019, meeting.
Ayes: Anderson, Brindle, Fischer, Staunton and Hovland
Motion carried.
VII. CORRESPONDENCE
VII.A. Correspondence – None
VIII. HRA COMMISSIONERS’ COMMENTS – None
IX. EXECUTIVE DIRECTOR’S COMMENTS
IX.A. Project Update – None
X. ADJOURNMENT
There being no further business on the HRA Agenda, Chair Hovland declared the meeting adjourned at 9:15
a.m.
Respectfully submitted,
Minutes/HRA/February 14, 2019
3
___________________________________________
Scott Neal, Executive Director
Date: February 28, 2019 Agenda Item #: V.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Bill Neuendorf, Economic Devel. Manager &
Stephanie Hawkinson, Affordable Housing Devel.
Manager
Item Activity:
Subject:Support for Preservation of Naturally Occurring
Affordable Housing at 7008 Sandell Avenue
Action
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
Approve the Term Sheet and authorize staff to engage third-party advisors (at HRA expense) to prepare full legal
agreements to provide grant funding for the preservation of affordable housing at 7008 Sandell Ave.
INTRODUCTION:
This item pertains to the preservation of naturally occurring affordable housing in the southeast quadrant of Edina.
Monies from the Southdale 2 Tax Increment Financing District are recommended to be provided to Aeon, a
nonprofit housing operator and developer, to preserve the affordability of an 11-unit apartment building located at
7008 Sandell Ave.
The property is currently for sale on the open market. Aeon intends to acquire this site and is willing to preserve
the affordable rents for at least 30 years.
Staff recommends that the HRA provide financial support at the real estate closing. A term sheet has been
prepared for review and consideration.
ATTACHMENTS:
Description
Staff Report: Support for NOAH Property at 7008 Sandell Ave
Term Sheet: 7008 Sandell Ave.
Staff Presentation: 7008 Sandell Ave
February 28, 2019
Chair & Commissioners of the Edina HRA
Bill Neuendorf, Economic Development Manager, and
Stephanie Hawkinson, Affordable Housing Development Manager
Support for Preservation of Naturally Occurring Affordable Housing at 7008 Sandell Avenue
Information / Background:
Aeon, a Minnesota nonprofit affordable housing operator and developer, intends to acquire a portfolio
consisting of 220 units located in 16 properties which are considered Naturally Occurring Affordable
Housing (NOAH). Of these 16 properties, one 11-unit property is located in Edina at 7008 Sandell Avenue,
with the remaining properties located in Minneapolis. The seller is requiring that all assets be sold through a
single transaction. Aeon is viewing the portfolio holistically as one mixed-income preservation project, with
the goal of preserving the units’ affordability and avoiding displacement of current residents. Current rents
charged at the properties are less than 80% of the area rents serving households with incomes ranging
between 40% and 70% of Area Median Income (AMI).
The only way that nonprofits like Aeon can pay the fair market value for these properties that sellers
demand and still keep rents affordable is through public financial participation. Since they are competing with
value-add investors who are underwriting large rent increases, they frequently require public subsidy to
achieve a similar Net Operating Income (NOI). In this case, the City of Minneapolis has committed
$4,500,000 towards the preservation of the 209 units in their city, and Aeon has requested $350,000 from
Edina. These funds allow Aeon to compete for the portfolio against investors who otherwise could achieve a
higher NOI based on converting the existing building to market-rate rents.
The property in Edina is called Galleria Flats located at 7008 Sandell Avenue. Currently, none of the units
have rents that are at or below the 60% limit. In exchange for the HRA financing, Aeon has agreed to
reduce the rents on five of the units to the 60% AMI limit and enter into a Declaration of Restriction
Covenants to keep them at 60% AMI with the remaining six units priced at or below 80% AMI for a
minimum of 30-years. The requested subsidy equates to $31,818 per unit. This is significantly lower than a
typical subsidy for new affordable housing construction which generally ranges from $84,000 to $140,000
per unit or higher. The property is currently operating and nearly fully leased. The building is expected to
remain occupied and leased during acquisition and rehab.
The preservation of NOAH properties is a key component to addressing the need for affordable housing in
Edina. Generally, private developers do not create enough new units of affordable housing to keep up with
the loss of affordable units through market conversion. Aeon has taken an active role over the last few years
STAFF REPORT Page 2
to compete for these properties and stabilize rents. The preservation of existing affordable units is an
important part of the City’s strategy to make sure Edina provides high quality housing opportunities at a
variety of income levels.
This is a one-time request for financial support that requires no additional support from the City. Because
the public monies would be pooled from the existing Southdale 2 TIF District it is not necessary to create a
new TIF District to support this request. Also, since this request is only financial in nature, review and
consent of the City Council is not required.
The process to consider support for this project includes two steps: (1) HRA consideration and approval of
terms and conditions; and (2) HRA approval of grant agreement and acceptance of Declaration of
Restrictive Covenant.
Staff prepared a preliminary Term Sheet to guide a potential agreement with Aeon and recommends that
the Term Sheet be approved and seeks authorization for the following:
1. Authorize staff to draft a Declaration of Restrictive Covenants and Grant Agreement for the HRA’s
review and approval at the regular March 28, 2019 meeting.
2. Approval to deviate from the typical TIF policy by using existing Southdale 2 TIF funds to pay the
fees to engage third-party financial advisor and legal advisors rather than passing this expense on to
Aeon.
Galleria Flats
7008 Sandell Avenue
Proposed Term Sheet – Tax Increment Financing
DRAFT February 28, 2019
1) Purpose and Scope
a. This “Term Sheet” identifies basic business points that establish the framework of the
potential use of public funds to support the acquisition and retention of a Naturally
Occurring Affordable Housing (NOAH) property within the City of Edina. This
document is intended to serve as the general framework of a future Grant Agreement
that is executed by the Developer and Edina HRA.
b. This document is intended for discussion purposes with the Board of the Edina HRA.
Based on the response and direction provided by the HRA Board, the City staff is
prepared to engage third-party legal and finance professionals to prepare a full legal
contract (the Grant Agreement).
c. City and HRA Out of Pocket Costs – Staff is requested a deviation from the TIF policy
by using the Southdale TIF 2 funds to pay the third-party costs directly rather than
requesting a deposit from the Developer. Staff recommends that Dorsey & Whitney
and Ehlers Associates be engaged to provide assistance in preparing the necessary
documents and legal agreements. The total cost of this work is anticipated to be less
than $20,000.
2) Project Ownership
a. The property is under contract to be acquired by Aeon, a 501(c) 3 nonprofit affordable
housing developer and operator. Aeon is located at 901 North 3rd Street, Suite 150,
Minneapolis, MN 55401.
3) Project Description
a. Location –A single parcel I.D. #310282411-0020 located one block west of France
Avenue at 7008 Sandell Ave., Edina 55435.
b. Existing Conditions – One 11-unit apartment building. Each unit has two bedrooms.
The building was constructed in 1961. It is two stories in height with a partially exposed
basement level. A row of detached garages is also located on site for use by the
residents. On-street parking and a few surface parking stalls are provided for guests.
Each of the existing units are currently leased at rates comparable to 72 percent Area
Median Income (AMI).
c. Renovation Project – Aeon has entered into a purchase agreement to acquire this
property together with 15 other NOAH properties that the Seller requires to be sold
Galleria Flats Proposed Term Sheet DRAFT FOR REVIEW February 28, 2019
Page 2
in the same transaction. The other properties are located in Minneapolis. Aeon will
complete a moderate rehabilitation of the building to update and replace worn
elements. The rehab work is not anticipated to require relocation of the tenants. The
developer has no intention to expand the existing structures.
d. Minimum Improvements: Rehabilitation of 11-unit existing apartment building, leased at
rates commensurate with 60 percent AMI (5-units) and 80 percent AMI (6-units). The
scope of rehabilitation work will be in response to a Property Needs Assessment with
particular focus on building systems, the roof, and windows and will repair or replace as
needed in addition to worked needed within the building.
4) Public Benefits –
a. Retain the existing two-story apartment building with detached parking garages
b. Preserve the affordability of 11 units of Naturally Occurring Affordable Housing for at
least 30 years.
c. Provide a public easement of 10 to 15 feet for the construction of a future sidewalk,
trail or street along Sandell Avenue frontage
5) Project Timeline
February 25, 2019 Buyer and seller executed Purchase and Sale Agreement
February 28, 2019 Introduction to Edina HRA Board for consideration of terms
March 28, 2019
Edina HRA to consider and potentially approve Grant
Agreement and Declaration of Restrictive Covenant for
Affordability
April 19, 2019 Deadline to secure financial pledges from City of Minneapolis
and City of Edina, completion of Property Needs
Assessments, appraisals, and environmental reports of each
property.
May 11, 2019 Expiration of Due Diligence Period
May 26, 2019 Acquisition Closing
November 16, 2019 Complete all required improvements to property
6) Project Budget
a. The total development cost is estimated to be $31,288,952. This includes acquisition
and rehabilitation of all 16 properties in the portfolio.
Use of Funds Amount
Acquisition $28,000,000 90.52%
Capital Improvements $1,833,260 5.93%
Transaction Costs $1,099,122 3.55%
TOTAL $30,932,382
Galleria Flats Proposed Term Sheet DRAFT FOR REVIEW February 28, 2019
Page 3
7) Project Financing
a.
Source of Funds Amount
Equity TBD $7,820,169
Debt Freddie Mac $18,212,213
Grants City of Minneapolis Energy Improvement $50,000
Grants City of Minneapolis NOAH Fund $4,500,000
Grants City of Edina $350,000
TOTAL $30,932,382
8) TIF Assistance
a. Staff recommends that existing incremental property taxes from the Southdale 2 TIF
District be pooled to support the retention of the existing affordable units.
b. Staff recommends a grant amount not to exceed $350,000. The grant funds will be made
available at real estate closing provided that the Declaration of Restrictive Covenant is
simultaneously executed.
c. Staff does not recommend the creation of a new TIF District at this time.
d. Pooled TIF Assistance provided shall comply with all applicable MN Statutes.
e. The acquisition, retention and rehabilitation of affordably priced housing (at least 40
percent of units priced to households at 60 percent AMI) is a qualified TIF expense per
MN TIF Statute.
9) Other Terms and Conditions
a. Affordable Housing
i. The Developer agrees to keep the building affordable for 30 years as required
by a Declaration of Restrictive Covenants.
ii. The current tenants will not be displaced. Upon lease turnover, the units will be
leased to and priced to be affordable to the following types of households.
Level of Affordability Number of Units
60% AMI
(approximately $1,273 for a
2-bedroom unit in 2019)
5 units
80% AMI
(approximately $1,698 for a
2-bedroom unit in 2019
6 units
TOTAL 11 units
Galleria Flats Proposed Term Sheet DRAFT FOR REVIEW February 28, 2019
Page 4
iii. The Developer will provide the Edina HRA with a right of first offer if the
Sandell property is sold during the term of affordability.
iv. The Developer and HRA agree to discuss the potential extension of the term of
affordability prior to the conclusion of the 30-year term. It is recognized that
both parties seek permanent affordably-priced housing at this site.
b. Public Easement
i. The Developer will provide a permanent public easement to the Edina HRA or
City of Edina along Sandell Avenue for the creation of a future public walkway,
trail or street. The easement shall be at least 10 feet but no more than 15 feet
in width and shall extend for the entire Sandell Avenue frontage.
c. Existing shell and footprint
i. The developer will not expand the existing footprint nor enlarge the shell of the
apartment structure without the consent of the Edina HRA.
Draft prepared February 22, 2019
The CITY of EDINA
Affordable Housing Preservation
Proposal for 7008 Sandell Avenue
Presentation to Edina Housing and Redevelopment Authority
Bill Neuendorf Stephanie Hawkinson
Economic Development Manager Affordable Housing Development Manager
February 28, 2019
The CITY of EDINA Background
Residential Development Mix
“There is also recognition of some need for
additional multi-family options to create more
diversity in housing affordability.”
Strategic Action #4
“Work to create affordable housing options close
to transit, shopping and employment centers.”
- Vision Edina – Strategic Vision Framework – May 2015 (page 7)
www.EdinaMN.gov 2
The CITY of EDINA Background
www.EdinaMN.gov 3
•Well located existing
apartment buildings are
attractive targets for real
estate investors
•Several properties have
been acquired and
repositioned in recent
years
The CITY of EDINA Edina’s Affordable Housing Strategies
www.EdinaMN.gov 4
•PRODUCE new affordable units
•PROTECT residents of affordable housing
•PRESERVE existing affordable housing
The CITY of EDINA PRESERVE existing affordable housing
•29 of 94 multi-family rental properties with
4 or more units include some affordable
units (31%)
•994 of 5,411 apartments are affordable
(18%)*
www.EdinaMN.gov 5
18%
Affordable
82% Market
Rate
* Costar data from November 2018; does not include all condominium units; “affordable” defined as rent at or below 60% AMI
The CITY of EDINA 7008 Sandell Avenue
www.EdinaMN.gov 6
•11 units
•2 story with garden level
•All 2-bedroom units
•Detached covered parking
•Built in 1961
•0.6 acres
•Assessed Value = $1,849,500 (2018)
The CITY of EDINA Proposed Preservation Plan
•Aeon, a 501 (c)3 nonprofit organization, intends to acquire the
Sandell building in spring 2018
•- Part of a 16 property housing portfolio
•Moderate rehabilitation will be completed in fall 2019
•- (likely roof, windows and HVAC, as needed)
•Retain affordability for at least 30-years but likely permanently
•Five units (40%) to be affordable with rents at the 60% AMI level
•Six units (60%) to be affordable with rents at the 80% AMI level
•No tenants will be displaced.
www.EdinaMN.gov 7
The CITY of EDINA Staff Recommendation
1)Work with Aeon to preserve these existing affordable units
2)Provide a grant of $350,000 to allow ongoing affordability
1)- Use existing incremental property taxes pooled from
Southdale 2 TIF District
3)Apply a restrictive covenant on the property to require at least 30-
years of affordability
4)City/HRA to retain right to consider extension of term and to
acquire sidewalk/trail easement along Sandell Ave. frontage
5)Engage legal counsel to prepare documents
1)- also funded with Southdale 2 TIF monies
www.EdinaMN.gov 8
The CITY of EDINA
Questions?
www.EdinaMN.gov 9
Date: February 28, 2019 Agenda Item #: VI.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Other
From:Jennifer Garske, Executive Assistant
Item Activity:
Subject:Correspondence Information
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
None.
INTRODUCTION:
There has been no correspondence since the last meeting.
Date: February 28, 2019 Agenda Item #: VII.A.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Scott Neal, Executive Director
Item Activity:
Subject:Project Update Information
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
No action necessary; for informational purposes only.
INTRODUCTION:
An update on recent and active projects undertaken by the HRA is attached.
ATTACHMENTS:
Description
Project Update: Feb. 28, 2019
HRA Redevelopment Project Update
February 28, 2019
Address Project Description Status North of Hwy 62 4500 France
Ave.
Redevelopment of vacant Edina
Cleaner site; request for TIF for 4-
story mixed-use project by Orion
Investments
TIF Agreement executed. Environmental
remediation began Dec. 2018;
demolition and reconstruction
anticipated Spring 2019
3925 Market
St.
Redevelopment of the former Center
Parking Ramp with Nolan Mains
apartments and new public parking
Actively under construction; completion
Fall 2019
3930-3944
Market St.
Expansion of North Parking Ramp to
include more public parking and first
floor retail space
Construction is substantially complete
and the ramp is fully open for use.
5146 Eden
Ave. Former Edina Public Works site
The future redevelopment of this site
was discussed in Jan. 2019. Further
discussion required to clarify next steps.
Hwy 100 @
Vernon &
Eden Ave.
Far term planning concept to explore
viability of creating new public park
(Grandview Green) on top of Highway
100 using a “freeway lid”;
infrastructure to be funded by new
property taxes generated from private
construction on 8-acres of new land
created when the tax-exempt, un-used
right-of-way is reconfigured to be
usable. This is conceptual only with no
specific implementation date.
Recommended language was approved in
summer 2018 for potential inclusion in
the Comprehensive Plan.
Based on the HRA directive on Oct 16,
no additional legal or consultant fees will
be incurred at this time. Greater Southdale Area 7008 Sandell
Ave.
This existing 11-unit apartment
building is for sale. Aeon, a not-for-
profit developer intends to purchase
and preserve it as affordable housing.
Staff has prepared a term sheet to
provide financial assistance in the
acquisition and preservation of this
building. Terms will be discussed at the
Feb. 28th Board meeting.
7001 York
Ave.
Redevelopment of Hennepin County’s
Southdale Regional Library with
potential for addition development on
unneeded portion of the site
In addition to rebuilding a new library on
the same site, the County is also
considering a relocation to the
Southdale Mall.
No specific date is known for a decision.
Edina HRA Project Update
February 28, 2019
Page 2
Address Project Description Status Greater Southdale Area 7008 Sandell
Ave.
Redevelopment of two older office
buildings; owner has submitted full
proposal for preliminary rezoning after
generally positive feedback from
Planning Commission and City
Council. The project now includes
both sites and the redesign strives to
address the concerns raised about the
previous concepts.
The HRA and Council approved a Term
Sheet to guide a future Agreement.
A public hearing is scheduled for March
19th to consider the creation of the 20-
year TIF District.
The full Agreement is anticipated to
completed in March or April.
4100 W. 76th
St.
Redevelopment of office building;
request for City support to develop
70-units of affordable housing by Aeon
HRA pledged $3.4 million in local funds
to support this new housing in May
2018. A new Housing TIF District was
established in Nov. 2018.
The developer continues to assemble
the outside funding.
Staff anticipates bringing a proposal
forward to have the HRA acquire the
site and incur the holding costs until the
new housing is ready for construction in
2020 or 2021. Pentagon Park 4815-4901
W. 77th St.
and 7710
Computer
Ave.
Redevelopment of 12-acres of the
Pentagon Park South property for
retail, hotels and market-driven
office/residential uses by Solomon Real
Estate & Hillcrest joint venture.
A full TIF Redevelopment Agreement
(capped at $18.1 M in 3 TIF Notes) was
approved in Oct. 2018. Site work began
in late Oct. 2018.
A minor amendment to the TIF
Agreement was approved in Feb. 2019.
The TIF Note is anticipated to be sized
and issued in June/July 2019. Other 7075
Amundson
Former site of Waldorf
Nevins dry cleaning facility
– now vacant.
Edina Housing Foundation has acquired the site and
entered into agreement with MWF Properties to
construct 62 units of affordable housing on the site.
Although no formal request has been made, staff
anticipates that the use of TIF will be necessary to
make redevelopment of the site financially feasible.
Rezoning and financing activities anticipated in Q1 or
Q2 2019.
Prepared February 22, 2019
Date: February 28, 2019 Agenda Item #: VII.B.
To:Chair & Commissioners of the Edina HRA Item Type:
Report / Recommendation
From:Scott Neal, Executive Director
Item Activity:
Subject:Special Legislation Update Information
Edina Housing and Redevelopment
Authority
Established 1974
CITY OF EDINA
HOUSING & REDEVELOPMENT
AUTHORITY
4801 West 50th Street
Edina, MN 55424
www.edinamn.gov
ACTION REQUESTED:
No action required; for informational purposes only.
INTRODUCTION:
This item pertains to funding of affordable housing in Edina.
Proposed legislation has been introduced in the Minnesota House and Senate to expand the ability for the City to
use incremental property taxes collected in the Southdale 2 Tax Increment Financing (TIF) District to fund
affordable housing. Similar, but limited, authority was granted to the City in 2014.
This current legislative request seeks to extend the time period during which incremental property taxes can be
invested in affordable housing from 2019 to 2021. T his requested deadline corresponds with the anticipated
decertification of the Southdale 2 TIF District.
The legislative request also seeks to consider affordable housing as qualified "in-district" expense so that the
existing pooling limits are not applicable.
These requests are intended to maximize the monies available to support affordable housing without creating an
undue burden on Edina tax payers.
Please note that the proposed legislation does NOT seek to lengthen the 8-year term of the existing TIF District.
This proposed legislation is not related to the City's past efforts to investigate the potential for the Grandview
Green highway lid.
Additional background and information about this effort is attached.
ATTACHMENTS:
Description
Special Legislation Update: Overview Feb. 22, 2019
S.F. No. 685 and H.F. No. 1193 Proposed Legislation: Special Law
to Create and Retain Affordably Priced Housing in the City of Edina
EXECUTIVE SUMMARY
PURPOSE
The legislation is intended to release an existing short-term revenue stream of property taxes in
order to help finance the creation or retention of affordably priced housing in the City of Edina.
The Metropolitan Council has identified the need for 1,220 new affordable units in Edina by 2030.
BACKGROUND
Families, seniors and individuals of limited incomes continue to face difficulties in finding safe and
convenient housing in many suburban communities. While the post-Recession recovery in the
housing market has delivered more than 1,800 new luxury housing units in Edina, the market has
delivered only a meager number of new affordable units. Meanwhile, investors continue to acquire
existing affordably priced housing complexes and reposition them in the market place, often
resulting in displacement of people of limited means.
In 2014, the State Legislature approved a Special Law to allow Edina to use a portion of the
incremental property taxes collected to support affordably priced housing. The application of that
Special Law expires in December 2019.
As of January 2019, the City of Edina has applied this Special Law to support new affordably priced
developments by Beacon Interfaith (66 West Apartments) and Aeon. Two additional mixed-income
developments are currently under consideration to use this Special Law.
FINANCIAL STRATEGY
In 2012, the City of Edina established the Southdale 2 Tax Increment Financing (TIF) District to
stimulate job creation and reinvestment in and around Southdale Mall. This TIF District has been
very successful. A $5 million TIF Loan to Simon Properties (the owners of the mall) leveraged $40+
million of private investment in the shopping mall itself. More importantly, this public-private
investment yielded nearly $300 million of additional private investment in the properties
surrounding the mall. The vast majority of this additional investment delivered high-end market
rate commercial and residential properties and only a meager number of affordable units.
The City proposes to use the incremental property taxes (that have already been collected) to
support the creation or retention of affordable units in the City. This public investment is
anticipated to provide approximately $15 million of local public financing. These local funds will be
used to leverage other private and public funding sources. Ultimately, these incremental taxes
could provide at least 400 units in up to eight sites scattered throughout the City of Edina. This local
investment could be made without an additional levy increase to the taxpayers.
Additional detail is attached.
S. F. No. 685 and H. F. No. 1193 City of Edina Legislative Summary Page 2
What is “redevelopment”?
Edina is a fully built out
community with no easy sites for
new real estate development. In
order to attract new investment,
older buildings need to demolished
and contaminants removed or
remediated to ensure safe
conditions for the future users.
These are the conditions that
make “redevelopment” of brown
field sites more expensive than the
cost of new development in green
field locations.
Redevelopment sites are often
attractive due to existing
community assets like parks,
schools, employment
opportunities and access to transit
and transportation routes.
What are “increment taxes”?
When a TIF District is created, the “base” tax rate is
temporarily frozen. The base property taxes continue to be
distributed to the various taxing agencies – primarily cities,
schools and county.
Incremental property taxes are generated by new investment
that yields more tax value than the original development.
These incremental taxes remain within the District and are
typically used to reimburse the developer for extraordinary
costs related to the higher than usual cost of redevelopment
or the lost revenue attributed to the reduced rent that is
collected from affordably priced units.
What does “affordable” mean?
For the purpose of this legislation, affordable units are
assumed to be leased to households earning no more than
60% of the Area Median Income (AMI). For the Twin Cities
metro area, the AMI for a family of four is currently $90,430.
Tenants in affordable units must have adequate credit to
qualify for leases and a single person can earn no more than
$39,660 annually. A family with three members can earn no
more than $50,940 annually.
In 2018, the maximum rent that could be charged was limited
to $1,062 for a one-bedroom apartment and $1,273 for a two-
bedroom apartment. By comparison, the market rate for a
typical one-bedroom is $1,400 and $1,900 for a two-bedroom.
The City strives to work with developers and property
managers to include some units priced to be affordable to
households earning 30% AMI and 50% AMI. The income and
rents for those families are adjusted proportionally
downward.
Who lives in “affordable housing”?
Affordable housing is needed for seniors, families with
children and individuals. The salary of a new teacher in Edina
Public Schools starts at $39,000. The salary of a new 911
Dispatcher and most beginning administrative/clerk positions
would also qualify for affordable housing.
Does TIF hurt schools?
This is a common misconception.
Bodies with taxing authority like a
school district levy a specific
amount of property taxes each
year. That levy amount is spread
over the total property tax base
regardless of the presence or
absence of a TIF District. These
local property taxes supplement
the school district funding – which
predominantly comes from state
and federal sources.
A February 2016 letter from the
Edina Public School District stated
in part “…the school board
recognizes a TIF district does not
directly impact the amount of the
school district’s local revenue…”
S. F. No. 685 and H. F. No. 1193 City of Edina Legislative Summary Page 3
WHY PURSUE AFFORDABLE HOUSING IN EDINA?
Edina has long been a community of choice. The City is well-located in the Twin Cities metropolitan area and has
convenient access to the downtown and suburban employment centers, higher education, recreational
opportunities and the airport. Edina also hosts multiple employment opportunities and an outstanding school
system. Edina is a safe community with outstanding parks and services. There are many options for goods and
services to meet the day-to-day needs of residents and visitors.
People of diverse backgrounds and incomes are welcome in Edina. The community recognizes that diversity can
create stronger bonds and greater understanding among neighbors. This is embodied in the School District’s
motto of “All for All” and the City’s housing program called “Open Doors Edina”.
Residents and members of the local business community have both identified concerns with the lack of affordable
housing options for family members, seniors wishing to downsize and employees. To afford a typical home in
Edina –with an average sales price of $530,000, the household income would have to be more than $118,000.
Renters typically have to earn approximately $60,000 to afford a typical apartment with $1,500 rent. These
conditions hinder many individuals and families from living in Edina.
Being home to strong employers from many different industries, more people work in Edina than live in Edina.
Approximately 40,000 people commute into Edina for work. It is in the best long term interest of the community if
individuals and families with a variety of incomes can live and work in Edina.
To that end, the City is taking proactive steps to ensure that reasonable actions are taken to preserve some of the
existing affordably priced housing and to create new affordably priced housing. While the focus of this proposed
legislation is on multi-family developments, the City is also exploring strategies to preserve the affordability of
single family houses and create new affordable ownership opportunities.
PROGRESS TO DATE
Under current Minnesota law, Economic Development TIF Districts must use 80% of revenue for qualified
economic development purposes within the boundaries of the TIF District and may pool up to 20% of incremental
property taxes toward activities outside the district boundaries. Under current law, a local HRA may choose to
increase this 20% pooling by an additional 10% as long as the pooling is for certain qualified housing projects.
In 2012, the City of Edina and Edina Housing and Redevelopment Authority created an 8-year Economic
Development TIF District to encourage and attract investment in and around the Southdale Center shopping mall
which had reached a period of stagnation and decline.
In 2014, the City of Edina was granted special legislation that allows the Southdale 2 TIF District to increase the
pooled amount by an additional 25%. In total, this means up to 55% of incremental property taxes collected in
the Southdale 2 Economic Development TIF District may be expended toward qualified affordable housing
developments. This proposed 2019 legislation would remove the 55% ceiling completely for affordable housing
purposes and would extend the sunset of the existing affordable housing legislation from 2019 to 2021 (same
timing of decertification of the Southdale 2 TIF District).
S. F. No. 685 and H. F. No. 1193 City of Edina Legislative Summary Page 4
ADDITIONAL BACKGROUND
In 2012, the City of Edina established the Southdale 2 Tax Increment Financing (TIF) District to stimulate job
creation and reinvestment in and around Southdale Center Mall. The TIF strategy was selected to counteract
several years of declining property values as the mall suffered from uncertainty in the retail marketplace. This
public-private effort was highly successful in attracting new market-rate investment but was less successful in
delivering new housing units that are affordable for seniors, working families and individuals with limited
incomes. The table below summarizes recent projects within the boundaries of the Southdale 2 TIF District:
Project Name Description Commercial
Space
Residential Units
Market Affordable
Southdale Center
Mall Renovations
Full renovation and improvement to America’s original indoor
climate-controlled shopping mall – a $5 million TIF loan leveraged
$25+ million in private investment in the mall plus $15+ million in
tenant improvements and boosted investor confidence in the
area
1.3 million
SF -- --
One Southdale
Place Apartments
Luxury apartments with indoor parking and public streetscape
improvements; completed in 2016; privately funded – no TIF -- 232 0
Homewood Suites Mid-tier extended stay hotel on a site previously used for
overflow parking; completed in 2018; privately funded – no TIF 146 rooms -- --
Lifetime Fitness Flagship fitness center on site of former JC Penney; completion
expected in 2019; privately funded – no TIF 120,000 SF -- --
Lifetime Work and
Lifetime Soccer
New co-working and athletic training facility on site of former JC
Penney; completion expected 2019; privately funded – no TIF 65,000 SF -- --
Shake Shack New fast casual restaurant on a site previously used for overflow
parking; completed in 2018; privately funded – no TIF 5,000 SF -- --
Restoration
Hardware Gallery
New furniture gallery on a site previously used for overflow
parking; completion expected 2019; privately funded – no TIF 58,000 SF -- --
Galleria Edina Expansion of existing shopping center to accommodate new
luxury retailers; completed in 2018; privately funded – no TIF 40,000 SF -- --
Bank of America Flagship banking facility on site previously used by former credit
union; completed in 2018; privately funded – no TIF 7,100 SF -- --
Medical Office at
6545 France Ave
New medical office addition on site formerly used for patient
drop off/pick up; completed in 2015; privately funded – no TIF 60,000 SF -- --
Taco Bell Complete reconstruction of fast casual restaurant on site of
previous restaurant; completed in 2014; private funded – no TIF 1,900 SF -- --
The Onyx
Apartments
Luxury apartments with street level commercial space, indoor
parking and public streetscape improvements; completed 2016;
privately funded – no TIF
11,500 SF 240 0
Aria Edina
Apartments
Luxury apartments with indoor parking and public streetscape
improvements; completion expected 2019; privately funded – no
TIF
-- 179 6
Aurora on France
Senior Apartments
Luxury senior (55+) facility featuring independent, assisted and
memory care units with indoor parking, skyway access to
Fairview Hospital and public streetscape improvements;
completed in 2016; privately funded – no TIF
-- 172 10
66 West
Apartments
Expansion of former bank to create new affordable housing
targeted to young adults who had previously experienced
homelessness; completed 2017; financed with public and private
funds including a $550,000 TIF grant
-- 0 39
Total 1.67 million SF 823 55
The Southdale 2 TIF District will expire in 2021. The City seeks authority to use the incremental property taxes
collected until the expiration date to jump start affordably priced housing in Edina. When the TIF District expires
in 2022, the greatly increased property tax base will be added to the tax rolls to benefit all taxing agencies.
S. F. No. 685 and H. F. No. 1193 City of Edina Legislative Summary Page 5
IMPLEMENTATION STRATEGY
Upon authorization, the City is prepared to move forward by identifying potential sites and working with
the private sector to advance the shared goal of affordably priced housing. A four-step implementation
process has been prepared to guide these efforts.
Step 1 Identify amount of local TIF funding available from Southdale 2 District
Step
2
A Pursue at least 3 and up to 8 projects during 2019-2021
B Distribute units in all four quadrants of Edina, using caution not to overload
any particular elementary school or school district with new households
C Seek a combination of new construction and preservation of existing buildings
D Focus on multi-family housing for TIF-funded projects since TIF can be a
cumbersome financing mechanism for single-family homes
E Seek a combination of rental and ownership opportunities
F Seek a combination of 100% affordable developments and mixed-income
developments where 20% of the units are affordably-priced
G Seek a variety of unit sizes from studio to 3-bedrooms to provide realistic
choices for seniors, working families and individuals
Step 3 Negotiate potential acquisition terms and redevelopment terms with owners
and private sector developers
Step 4 If terms and outcomes are desirable, create a new Housing TIF District using
Southdale 2 funds as a stimulus
Preliminary community input has been
taken into consideration as the City
prepared this implementation strategy.
Please note that the City’s standard
development review process – which
encourages transparency and community
engagement – will be applied to each site
prior to the consideration of a new TIF
Housing District.
This map shows approximate locations
where affordable housing could be
pursued. The potential sites are
distributed among all four quadrants of
the City and are all located with the
boundaries of the Southeast Edina
Redevelopment Project Area (shown
dashed red lines). These sites could
accommodate new construction or
renovation of existing apartment
buildings.
Southdale 2
TIF District
S. F. No. 685 and H. F. No. 1193 City of Edina Legislative Summary Page 6
PREPARATION OF LEGISLATION
City staff engaged public finance advisors at Ehlers Associates to review Minnesota’s TIF Statutes to consider
modifications that could achieve community goals regarding diversity of housing choices. Proposed language was
prepared in 2018 working collaboratively with House and Senate research staff.
The proposed legislation seeks two key modifications to maximize the availability of local revenue:
1) Extend the deadline to use these funds from 2019 to 2021. This termination date coincides with the
expiration of the Southdale 2 TIF District.
2) Consider any affordably priced housing development within the boundaries of the Southeast Edina
Redevelopment Project Area to be considered an “in-district” expense for TIF purposes. This would
remove the limitation on pooling from one TIF District to another TIF District. This change is temporary in
nature and only applicable to affordably priced housing.
PROPOSED LEGISLATION FOR 2019 SESSION
Prepared by City of Edina, Updated February 22, 2019