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Forgivable Loan Pilot Program to Incentivize Housing Creation in Central Avenue CorridorCity of Dubuque City Council Meeting Action Items # 2. Copyrighted November 1, 2021 ITEM TITLE: Forgivable Loan Pilot Program to Incentivize Housing Creation in Central Avenue Corridor SUMMARY: City Manager recommending approval of a pilot program using no more than $200,000 of currently available funds in the Downtown Housing Creation CI P to incentivize the addition of quality affordable residential choices in the Central Avenue Corridor. SUGGESTED Suggested Disposition: Receive and File; Approve DISPOSITION: /_1if_Td:I�,I=1kihI'S Description Type Central Avenue Forgivable Loan Pilot Program-MVM City Manager Memo Memo Staff Memo Program Proposal Staff Memo Supporting Documentation THE CITY OF Dubuque DUB TEE All -America City Masterpiece on the Mississippi � pp zoo�•*o 13 zoi720zoi9 TO: The Honorable Mayor and City Council Members FROM: Michael C. Van Milligen, City Manager SUBJECT: Forgivable Loan Pilot Program to Incentivize Housing Creation in Central Avenue Corridor DATE: October 22, 2021 Economic Development Director Jill Connors recommends City Council approval of a pilot program using no more than $200,000 of currently available funds in the Downtown Housing Creation CIP to incentivize the addition of quality affordable residential choices in the Central Avenue Corridor. The pilot program would run from now through June 30, 2022. The incentive would be monetarily the same as the housing creation grant ($10,000/unit), but would provide more flexibility for eligibility of projects (available for units that are currently occupied if the project meets the other project requirements), while simultaneously requiring the commitment to meet a $500,000 investment threshold (increasing the neighborhood impact). This incentive would be in the form of a 10-year forgivable loan as opposed to a grant. This serves two purposes: 1) the City benefits by continuing to control the outcome of the project for 10 years, and 2) developers who choose to use certain state and federal tax credit programs benefit by not having the $10,000/unit reduce their cost basis for those programs — making the projects more financially feasible by being eligible for higher levels of tax credit. I concur with the recommendation and respectfully request Mayor and City Council approval. Mic ael C. Van Milligen MCVM:jh Attachment cc: Crenna Brumwell, City Attorney Cori Burbach, Assistant City Manager Jill M. Connors, Economic Development Director THE CITY OF E Masterpiece on the Mississippi Dubuque Economic Development Department 1300 Main Street All-AmericaCiity Dubuque, Iowa 52001-4763 fvtll["JVtL i T7(: fJ iY'L9= Office (563) 589-4393 I I TTY (563) 690-6678 ® http://www.cityofdubuque.org 2007-2012.2013 2017*2019 TO: Michael C. Van Milligen, City Manager FROM: Jill M. Connors, Economic Development Director SUBJECT: Forgivable Loan Pilot Program to Incentivize Housing Creation in Central Avenue Corridor DATE: October 20, 2021 INTRODUCTION This memorandum presents a proposed pilot program using current downtown rehabilitation funds to incentivize the addition of quality affordable residential choices in the Central Avenue Corridor. BACKGROUND The Downtown Rehabilitation Grant Program provides several incentives from the Economic Development Department for the rehabilitation of historic buildings in our greater downtown. This program has had a positive impact on the appearance and livability of our downtown, which leads to a more attractive business and residential environment. The Economic Development Department also finds these programs to be great tools for attracting and retaining a quality workforce for our businesses. The current programs have resulted in the improvement of dozens of buildings and the addition of hundreds of new apartments throughout the downtown. DISCUSSION For several years, the City Council had identified a Central Avenue Reinvestment Strategy as a priority. The Corridor continues to be an area of focus through other priorities such as Historic Building Rehabilitation/Preservation and the implementation of both the Imagine Dubuque Comprehensive Plan and the Equitable Poverty Prevention & Reduction Plan. As a way of encouraging a concentration of redevelopment in this area of our downtown, I am proposing the creation of a downtown housing creation incentive pilot program that would focus on the Central Avenue Corridor. The incentive would be monetarily the same as our department's housing creation grant ($10,000/unit) but would provide more flexibility for eligibility of projects (available for units that are currently occupied if the project meets the other project requirements), while simultaneously requiring the commitment to meet a $500,000 investment threshold (increasing the neighborhood impact). This incentive would be in the form of a 10-year forgivable loan as opposed to a grant. This serves two purposes: 1) the City benefits by continuing to control the outcome of the project for 10 years, and 2) developers who choose to use certain state and federal tax credit programs benefit by not having the $10,000/unit reduce their cost basis for those programs — making the projects more financially feasible by being eligible for higher levels of tax credit. Projects will be scored by a committee of City staff from the Housing, Planning, Shared Prosperity, and Economic Development departments using a rubric yet to be designed, although based on the proposed point allocation described in the attached program proposal. The elements of the proposed program are attached to this memo. RECOMMENDATION/ ACTION STEP I respectfully request authorization to implement this program as a pilot program between now and June 30, 2022. No more than $200,000 will be earmarked for this program from our currently available funds in our downtown housing creation CIP (current balance of approximately $330,000). 2 PROPOSED Forgivable Loan Pilot Program to Incentivize Housing Creation in Central Avenue Corridor This program is designed to support transformative projects that improve the quality of life and availability of affordable housing options through quality historic building redevelopment along the Central Avenue Corridor. To be eligible for consideration for the program a project must: - Define a specific historic redevelopment project that includes at least one historical structure. - Involve the significant, transformational improvement of a minimum of four affordable housing units or the creation of a minimum of four affordable housing units. - Agree that all improved or created housing units would not discriminate based on source of tenant's income. - Represent a total capital investment of not less than $500,000, including purchase price of the property if not already owned at time of application. - Increase the assessed value of the property by at least 15%. - Be within the Central Avenue Corridor and an urban renewal area. Applications will be reviewed and scored on the following considerations, with a minimum of 75 points required for funding consideration: - Potential transformative impact of the project for the area in which is it located (30 points). - Leverage of private capital investment represented (20 points). - Project feasibility (20 points) - Historic preservation capacity of the project (15 points). - Housing needs being met by proposed new capacity (15 points). Scoring shall be done by a committee composed of the Director or his/her designee of the following departments: - Housing and Community Development Department - Economic Development Department - Office of Shared Prosperity & Neighborhood Support - Planning Services Department An approved project may receive a reimbursement of $10,000/unit for the significant, transformational improvement of a minimum of four affordable housing units or the creation of a minimum of four affordable housing units in the form of a ten-year forgivable loan. If during that ten-year period applicant fails to continue to meet any minimum requirement of this program, or compliance condition included within their award, repayment of the loan shall be required. This program is a pilot, and funding is limited to $200,000 until June 30, 2022. The City has no obligation to fund qualified projects once this funding has been exhausted. Continuation of the Pilot and any future funding of the Pilot is not guaranteed and subject to future City Council action.