Housing Creation Incentives Staff RecommendationsCity of Dubuque
City Council Meeting
Action Items # 02.
Copyrighted
September 6, 2022
ITEM TITLE: Housing Creation Incentives Staff Recommendations
SUMMARY: City Manager recommending City Council adopt a resolution allowing the
City Manager to use the recommended housing creation incentives
outlined to incentivize additional housing unit creation in the city and is
sharing a presentation on Housing Incentives Policies.
RESOLUTION Authorizing the City Manager to offer and amend
Housing Development Incentives
SUGGESTED Receive and File; Adopt Resolution(s), PresentationSuggested
DISPOSITION: Disposition:
ATTACHMENTS:
Description Type
Housing Creation Incentives-MVM Memo City Manager Memo
Staff Memo Staff Memo
Resolution Resolutions
Housing Creation Incentives Summary Supporting Documentation
Urban Revitalization Area Map Supporting Documentation
Urban Renewal Area Map Supporting Documentation
Debt Reduction Strategy Summary Supporting Documentation
Dubuque Chamber Memo on Housing Creation Supporting Documentation
I ncentives
THE C
DUjIBQTE
Masterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Housing Creation Incentives Staff Recommendations
DATE: September 1, 2022
Dubuque
WAWca 914
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2007-2012.2013
2017*2019
Housing & Community Development Director Alexis Steger is recommending City
Council adopt a resolution allowing the City Manager to use the recommended housing
creation incentives outlined to incentivize additional housing unit creation in the city and
is sharing a presentation on Housing Incentives Policies.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
v
Mic ael C. Van Milligen
MCVM:sv
Attachment
CC' Crenna Brumwell, City Attorney
Cori Burbach, Assistant City Manager
Alexis Steger, Housing & Community Development Director
Dave Lyons, Sustainable Innovation Consultant
Jenny Larson, Budget and Finance Director
Wally Wernimont, City Planner
Jill Connors, Economic Development Director
THE CITY OF
Dubuque
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TO: Michael C. Van Milligen, City Manager
FROM: Alexis M. Steger, Housing and Community Development Director
SUBJECT: Housing Creation Incentives Staff Recommendations
DATE: September 1, 2022
Background
The City Council identified Housing Incentive Policy as a High Priority in the 2022-
2024 City Council Goals and Priorities. Currently, the City of Dubuque has several
programs that incentivize the creation and rehabilitation of housing units; however,
the city is projected to be 1,100 units short of what is needed to support our residents
in the next 10 years. City staff has identified changes that can be made immediately
to the Housing Incentives Policies that could encourage additional housing creation
and rehabilitation.
City Efforts in Housing Creation
The City of Dubuque has several programs to rehabilitate vacant single-family homes
and occupied single family homes to keep the current housing stock in the city viable.
Creating new units does not increase the number of housing units available in the City
of Dubuque if other housing units are in such disrepair that they cannot be utilized as
housing. The purchase/rehab/resale program purchases vacant homes, rehabilitates
them using the youth HEART Program and then sells them to first-time homebuyers
who are low -moderate income residents. The city works to complete one home with
the youth HEART program each year, but the past two years the city has completed
additional homes using the adult HEART program.
The CHANGE (Comprehensive Housing Activities for Neighborhood Growth
Enrichment) Program also rehabilitates dilapidated single-family homes and resells
them to first-time homebuyers and low -moderate income residents utilizing Housing
Tax Increment (TIF) generated by Residential Urban Renewal Areas. The city aims to
complete 5 of these properties each year. Additionally, the city partners with the
Affordable Housing Network Inc (AHNI) to complete an additional five homes under
this same model.
Additionally, the city partners with AHNI to rehabilitate 3-4-unit structures in
neighborhoods that have fallen into disrepair, to put back on the rental housing
market. HOME fund loan repayments are utilized for this program.
Current City Incentives for Developers/Partners
Today, the City of Dubuque utilizes Community Development Block Grant (CDBG),
Urban Renewal Areas and Urban Revitalization Areas to incentivize housing creation.
In 2019, the city completed a comprehensive review of the valuation of homes by
census tract and created the Dubuque Revitalization Area (see map attached). This
allows the tax abatement of any assessed value increase in a residential property that
was rehabilitated in that designated area for ten years. This created an incentive for
property owners to rehabilitate dilapidated structures, but also encouraged
developers/investors to rehabilitate vacant/abandoned structures in the
neighborhoods to get the property back into habitable condition.
Developers that are interested in applying for the Low -Income Housing Tax Credit
(LIHTC) from the Iowa Finance Authority can request an Urban Revitalization Area
Designation for their project. When feasible, the city will create these districts to
support the application for housing creation. This provides a 10-year tax abatement
on any assessed value increases.
Utilizing Tax Increment Financing Districts, the city also offers the following housing
creation incentives in existing Urban Renewal Areas:
• Fagade Grant — Up to $10,000 to support exterior rehabilitation of historic
buildings
• $10,000 per unit — Downtown rehab of vacant/abandoned residential rental
units. Vacant/abandoned for 3-years or more.
• Design Grant — Up to $10,000 for pre -development costs incurred by
Downtown Rehabilitation Program participants
• Financial Consultant Grant — 1:1 match up to $15,000 for financial
consultants to analyze feasibility of project for the Downtown Rehabilitation
Program.
• Tax Increment Financing Rebates of assessed value increases to support
development (see yellow portion of example below)
IM&WAN,I■1Mmi
a1,000 ----
5100 ----
TODAY 10 YEARS
TIF STARTS TIME TIF ENDS
CDBG funding is also available to help acquire buildings for rehabilitation and creation
of housing units, as well as for the rehabilitation of the building/units. The City offers a
revolving application so developers can apply for the funds at any time of the year and
the Community Development Advisory Commission reviews and approves those
applications for City Council consideration. Several housing units have been kept
affordable and on the market through this program. To qualify, the housing units must
remain affordable. There is no maximum award for this program; however, the City only
receives approximately $1,000,000 per year for all CDBG activities so awards of these
funds often range from $50,000 to $300,000.
Discussion
Recommended Additional Incentives
Urban Revitalization
Urban Revitalization Areas are currently used for LIHTC projects; however, it can be
utilized for market -rate and workforce housing per Iowa Code Chapter 404. To increase
the incentives available for any housing unit creation, using Urban Revitalization for
market -rate and workforce housing is recommended.
A different schedule of tax abatement would be used for Market-Rate/Workforce
housing than for LIHTC projects, since the rents collected support a larger portion of the
development in Market -Rate units. The three schedules identified in the Iowa State
Code Chapter 404 recommended are:
• 3-year 100% tax abatement on the increased assessed value
-or-
For the first year, eighty percent.
For the second year, seventy percent.
For the third year, sixty percent.
For the fourth year, fifty percent.
For the fifth year, forty percent.
For the sixth year, forty percent.
For the seventh year, thirty percent.
For the eighth year, thirty percent.
For the ninth year, twenty percent.
For the tenth year, twenty percent.
-o r-
• 115% Tax Abatement up to $20,000 in increased valuation for 10 years.
Different types and sizes of developments will drive which schedule is most beneficial or
able to be offered and would be determined when a development agreement was
drafted. This incentive would be available for owner -occupied, attached/detached
single-family homes and multi -family apartments with 8 or more units being
developed.
Urban Renewal
Another recommended additional incentive is the use of Urban Renewal Area
designations for Market -Rate residential subdivisions or multi -family units. This
incentive would provide 100% tax increment financing generated by the development
minus the affordable housing percentage (-40%) and several other levies and capital
funds (-10%) for 10 years. The increment (-50%) generated may be used by a
developer to reimburse the costs of public improvements required for the development,
such as streets, street lighting, sidewalks, utilities, curb and gutter, etc. Additionally, the
developer has the option to donate a parcel of land in the development to the City of
Dubuque to build a neighborhood park with the generated tax increment.
Housing TIF (Affordable Housing Percentage of Tax Increment Financing)
If a developer chooses to utilize the Urban Renewal Area incentive, they may access a
portion of the Affordable Housing Percentage of the TIF if they build a mixed -income
development. The city would negotiate the percent that would be allowable based on
the number of affordable units being created in the development. The affordable
housing TIF would be used to off -set the direct costs to construct the affordable units
only. None of these additional funds can be used on the market -rate portion of the
development.
Currently the $10,000 per unit creation is limited to the Greater Downtown TIF District
Area. This recommendation is proposing adding a $10,000 per new LIHTC unit for
projects outside areas of concentration of poverty using the Housing TIF collected
in current and future Residential TIF Districts. The number of units supported will be
dependent on the availability of funds from this funding source.
Additional Requirements/Eligibility for Incentives
Any developer utilizing the current or proposed city incentives must accept Housing
Choice Vouchers and are required to install fiber conduit in new subdivisions. When
utilizing Urban Renewal Area Incentive, CDBG Incentives or Housing TIF incentives a
development agreement is required and is subject to City Council approval. The
creation of new Urban Revitalization Districts is also subject to City Council approval.
Rehabilitation of single-family homes/duplexes that result in the conversion to a multi-
family unit will NOT be eligible for these incentives. The current Urban Revitalization
District Plans will be amended to ensure these conversions are not eligible in any
current or future district.
Budget
The incentives being recommended do not require additional budget, as they utilize tax
increments generated by the developments. Nor will they increase taxes for property
owners. However, there is an administrative cost to creating development agreements
and creating new Urban Renewal/Revitalization Districts. The City Attorney will review
the Iowa State Code to determine which administrative costs can be the direct burden of
the tax increment generated by the development being served. This cost would be part
of any development agreement as the Iowa State Code allows.
City staff considered the option to include private developers access to City debt as
allowed per Iowa Code in the Urban Renewal Areas as an incentive. This is not being
recommended. The City has a long-standing policy not to provide private developers
access to City borrowing capacity. This policy was reinforced in 2015 when the City
Council adopted a debt reduction strategy. In the strategy, the City Council
acknowledges there are instances where additional City debt is appropriate, but not to
provide private developers access to the City debt capacity. Please see the attached
information regarding the City debt reduction strategy.
Recommendation
I respectfully request City Council approve the attached resolution allowing the City
Manager to use the recommended housing creation incentives outlined to incentivize
additional housing unit creation in the city.
Cc: Crenna Brumwell, City Attorney
Jenny Larson, Budget and Finance Director
Wally Wernimont, City Planner
Jill Connors, Economic Development Director
Prepared by: Crenna Brumwell, City Attorney, 300 Main Street, Suite 330, Dubuque, IA 52001
RESOLUTION NO. 292-22
AUTHORIZING THE CITY MANAGER TO OFFER AND AMEND HOUSING
DEVELOPMENT INCENTIVES
Whereas, the City Manager is the authorized negotiator of development
agreements and incentive packages on behalf of the City of Dubuque; and
Whereas, the City Council has a 2027 goal of Livable Neighborhoods and Housing:
Great Place to Live; and
Whereas, the City Council has made Housing Incentive Policy: Review and
Direction a High Priority for 2022 — 2024; and
Whereas, staff has created a framework for a Housing Incentive Policy and
presented on the framework to the City Council.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY
OF DUBUQUE, IOWA:
Section 1. The City Manager is authorized to develop and offer housing
development incentives.
Section 2. The City Manager is authorized to amend the conditions and
incentives as needed to fit projects as best possible and in a flexible manner.
Passed, approved and adopted this 6th day of September, 2022.
Attest:
Adrienne N. BreitFelder, City Clerk
.•T\A. ��agh, Mayor
Housing Creation Incentives
For Council Consideration September 6, 2022
*All incentives are for residential portions of a development only. Any public improvements serving
non-residential purposes are ineligible for these incentives.
Urban Revitalization — Tax Abatement
Development Type New Area Affordable Multi -Family Developmen
Housing Type Apartment/Townhouse
Use Residential Only, Non-residential is not eligible
Incentive 100% Tax Abatement on Increased Valuation
Term 10 Years
Requirements Must Accept Housing Choice Vouchers, Must incr
by 10%
Eligible Cost N/A - tax abatement, not reimbursement
Approval Subject to City Council Approval
Development Type
Housing Type
Use
Incentive
Term
Requirements
Eligible Cost
Approval
Existing Revitalization Area Residential Rehabilitation
All Residential, Residential portion of a Commercial Building
Residential Only, Non-residential is not eligible
100% Tax Abatement on Increased Valuation
10 Years
Must increase value by 10%
N/A - tax abatement, not reimbursement
Confirmation of Improvements and Certification by Council
11Page
--'-Development Type Residential Units with No/Limited Public Improvements
Housing Type Owner -Occupied, Attached/Detached Single -Family Home
Multi -Family Apartment — Market Rate
Use Residential Only, Non-residential is not eligible
Incentive Decreasing % of Tax Abatement over 10 years
For the first year, eighty percent.
For the second year, seventy percent.
For the third year, sixty percent.
For the fourth year, fifty percent.
For the fifth year, forty percent.
For the sixth year, forty percent.
For the seventh year, thirty percent.
For the eighth year, thirty percent.
For the ninth year, twenty percent.
For the tenth year, twenty percent
-o r-
100% Tax Abatement for 3 years
-o r-
115% Tax Abatement up to $20,000 in increased valuation for
10 years. Amount cannot fall below the homestead credit
valuation.
Requirement Accept Housing Choice Vouchers, Must increase value by 10%
Eligible Costs N/A —Tax Abatement, not Reimbursement
Approval Subject to City Council Approval /
Development Type
Housing Type
Use
Incentive
Requirements
Eligible Cost
Housing Tax Increment Financing
Affordable Multi -Family, Single -Family Subdivision
Residential, Residential portion of a Commercial Building
Residential Only, Non-residential is not eligible
$10,000 per affordable unit created
Outside Area of Concentrated Poverty, Accept Housing Choice
Voucher, Install Fiber Conduit
Construction Related
2 1 P a g e
Urban Renewal — Housing Tax Increment Financing
Development Type Market Rate Residential Subdivision, Multi -Family Units
Housing Type Owner -Occupied, Attached/Detached Single -Family Home,
Multi -Family Units/Apartments
Use Residential Only, Non-residential is not eligible
Incentive 100% Tax Increment generated by the development minus
Affordable Housing Percentage, Dubuque Community School
District and Northeast Iowa Community College instructional
support levy (ISL), Dubuque Community School District
Physical Plant and Equipment Levy (PPEL), general fund debt
payments, etc.
Term 10 Years
Requirement Installation of Fiber Conduit, Accept Housing Choice Vouchers
Eligible Costs Public Improvements
Approval Subject to City Council Approval
i
Development Type
Housing Type
Use
Incentive
Term
Requirement
Eligible Costs
Approval
Mixed -Income Residential Subdivision
Owner -Occupied, Attached/Detached Single -Family Home
Multi -Family Apartment
Residential Only, Non-residential is not eligible
100% Tax Increment generated by the development minus
Affordable Housing Percentage, Dubuque Community School
District and Northeast Iowa Community College instructional
support levy (ISL), Dubuque Community School District
Physical Plant and Equipment Levy (PPEL), general fund debt
payments, etc.
also
Negotiated % of Tax Increment that is captured for Affordable
Housing for creation of units that are affordable
10 Years
Installation of Fiber Conduit, Accept Housing Choice Vouchers
Public Improvements
Subject to City Council Approval
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Total Debt (in millions)
(Adopted FY2023 Budget)
Debt is being issued each year, but more is being retired than is issued.
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30
Statutory Debt Limit Used
(Adopted FY2023 Budget)
90% This chart shows the percentage of statutory debt limit in the
Fiscal Year (FY) 2023 recommended budget. By FY2027, the
City will be at 32% of the statutory debt limit.
41%
■ 32%
(FY2023 Adopted)
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27
Comparison of Statutory Debt Limit Utilized
(FY2021)
62% 61%
54% 53% 51% 50%
41%
33%
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The City of Dubuque's use of
debt can be compared to many
average homeowners who borrow
to buy their home. The City has
borrowed money at low interest
rates to invest in infrastructure.
Unlike the federal government,
the City does not borrow money
to cover operating expenses.
# Project Description and Amount Outstanding
1 Stormwater Improvements
$76,527,913
2 Water & Resource Recovery Center
$57,395,000
3 Water Improvements
$30,069,008
4 Parking Improvements
$23,769,184
5 Downtown TIF Incentives/Improvements $20,177,588
6 Sanitary Sewer Improvements
$13,301,860
7 TIF Rebates/Bonds to Businesses
$8,216,815
8 Industrial Park Expansions
$6,412,953
9 Caradco Building Iowa Finance
Authority Loan
10 Street Improvements*
Total
$3,470,309
$2,941,387
$242,283,017
* $162 million has been spent on street improvements from 1997-2021
CM028-040522
DUBUQUE AREA
CHAMBER
WHERE BUSINESS BELONGS
To:
Mike Van Milligen, City Manager
City of Dubuque
50 W 13th St
Dubuque, IA 52001
CC:
Jill Connors, Economic Development Director, City of Dubuque
Alexis Steger, Housing Director, City of Dubuque
Crenna Brumwell, City Attorney, City of Dubuque
RE: Comments on proposed housing creation incentives
Dear City Manager and Staff,
First, we want to extend our thanks for being given the opportunity to comment on the city's proposal
regarding incentives to improve housing construction and rehabilitation in Dubuque. As we all recognize,
the city is facing an extreme housing shortage leading to home vacancy rates below 1% and rental vacancy
rate below 1.5%. Now is the time to act and we're pleased to see the city doing so.
However, the city's package of incentives for development represent a solid foundation, but fall short of
meeting this moment.
Many of the proposed incentives represent a modest change in city policy which will certainly assist in
promoting development (for instance, the expansion of TIF usage for public improvements within a
subdivision). The resulting impact of the proposed incentive changes will merely put us on par with other
communities rather than elevate us above the competition.
This is particularly problematic for a community like Dubuque where rents and home prices are less
competitive than in many peer markets in Iowa. Rents in Sioux City, Waterloo, Des Moines, Ames, Council
Bluffs, and Iowa City' are on average higher than in Dubuque and home sale prices are higher in peer
counties of Scott, Story, Polk, Johnson, and Dallas'. This means that developers get a lower return on their
investment in Dubuque than other communities.
We contend that the incentive packages proposed should also include additional incentives to make
Dubuque an even more desirable place for developers to invest in our community across the housing
spectrum (high end homes, townhomes, condos, multiplexes, and large multi -family development). Based
on the National League of Cities 2022 report: Local Tools to Address Housing Affordability', we request
the city consider a few additional tools to promote housing development.
1. Density/Height Bonuses: A key factor impacting housing in Dubuque is a lack of available stock.
It therefore would behoove the city to promote dense development that creates more units per
development, perhaps emphasizing missing middle development (condos, townhomes, etc...).
This would allow the cityto more efficiently meet its goal of increasing the available housing stock.
Example 1: A subdivision that includes percent of missing middle housing could receive'$x' per
unit on the such missing middle units. Example 2: New construction in the downtown that
requires steel frames (generally greater than 85 feet), could receive '$x' additional funding for
construction. The city could consider requiring additional items such as provision of affordable
housing within that development to ensure multiple city goals are met.
2. Transit Oriented Development: The City has lofty sustainability goals and encouraging infill
development near existing transportation locations would support the attainment of those goals.
Greenfield development is more costly due to the infrastructure improvements required and
forces occupants to have access to a vehicle, thus increasing traffic (and road upkeep) and
emissions in the community. A transit oriented development incentive could be structured
similarly to a density bonus.
Lastly, one of the biggest obstacles for development is the upfront cost of construction and land
acquisition. Other communities have utilized the city's ability to bond against future TIF revenues in a
project area to provide upfront financing which is paid back through taxes paid into the TIF fund by the
project after completion. This would be one of the more effective ways to attract developers to our
community by allowing them to include city financing as part of their capital investment plan. Layered on
top of this, the city owns numerous properties in the downtown area — for instance surface level parking
lots, which could be leveraged to incentivize development by selling such property for less than market
value.
We hope this serves as productive feedback and look forward to hearing the discussion at council.
Sincerely,
Ryan Sempf
Vice President, Government & External Affairs
Dubuque Area Chamber of Commerce
Footnotes:
1. HUD Data: https://www.huduser.goy/portal/datasets/fmr/fmrs/FY2022 code/2022state summary.odn
2. Iowa Association of Realtors Housing Market Statistics:
http://marketstatsreports.showingtime.com/IR 11msx3/sst/202206/0sf.htm
3. NLC Report: Local Tools to Address Housing Affordability: https://www.nlc.org/wp-content/uploads/2022/03/Local-
Tools-to-Address-Housing-Affordability A -STATE -BY -STATE -ANALYSIS 2022-Update.pdf