Rose of Dubuque ProjectMasterpiece on the Mississippi
TO: The Honorable Mayor and City Council Members
FROM: Michael C. Van Milligen, City Manager
SUBJECT: Local Commitment to Rose of Dubuque Project
DATE: March 2, 2011
j '
Mich el C. Van Milligen
MCVM:jh
Attachment
cc: Barry Lindahl, City Attorney
Cindy Steinhauser, Assistant City Manager
David J. Heiar, Economic Development Director
David Harris, Housing and Community Development Department Director
Dubuque
All-America City
1111 '
2007
Rose Development is proposing to build a $9.3 million 70 -unit "affordable assisted living
facility" on Lake Ridge Drive. This would be the sixth Rose development built in Iowa
since 2005.
The Rose developments have all been assisted by the Iowa Finance Authority (IFA)
through the Low - Income Housing Tax Credit Program. Award of tax credits reduces the
need for conventional mortgage financing and lowers development costs, allowing lower
rents.
Economic Development Director Dave Heiar recommends City Council approval of a
letter of support and the IFA form committing to a local financial commitment not to
exceed $19,355 per year for 10 years through the utilization of Tax Increment Financing
for the Rose of Dubuque Project. While there are other assisted living facilities in
Dubuque, this would be the only one of a price affordable to low- income individuals.
I concur with the recommendation and respectfully request Mayor and City Council
approval.
Masterpiece on the Mississippi
TO: Michael Van Milligen, City Manager
FROM: David J. Heiar, Economic Development Director
SUBJECT: Local Commitment to Rose of Dubuque Project
DATE: March 1, 2011
Dubuque
ALAmedcaclty
11111 r
2007
INTRODUCTION
This memorandum outlines a recommendation for the City Council to approve a local
financial commitment to the Rose of Dubuque project.
BACKGROUND
Rose Development, controlled by Greg McClenahan, is proposing to build a $9.3 million
70 -unit `affordable assisted living facility' on Lake Ridge Drive. This would be the sixth
Rose development built in Iowa since 2005. The others are located in Ames, Des
Moines, East Des Moines, Waterloo and Council Bluffs. The Police Department
checked and these facilities do not create any policing problems.
The Rose developments have all been assisted by the Iowa Finance Authority through
the Low - Income Housing Tax Credit Program. Award of tax credits reduces the need
for conventional mortgage financing and lowers development costs, allowing lower
rents. McClenahan has additionally used a variety of other assisted financing at his
developments, including urban revitalization tax abatement, enterprise zone credits and
HOME Program grants.
Residents in these projects must all qualify by income, at 60% or less of area median
income. Many qualify for Section 8 housing vouchers and Medicaid services. Rents
are capped at no more than 30% of tenant income. The services the resident receives
are provided by a contracted licensed health care provider, such as the VNA. The costs
for those services are paid by Medicaid HCBS waiver programs. With this package of
subsidies, the low- income resident can afford the full spectrum of housing and
supported services that would otherwise approach $3000 per month.
Greg McClenahan provided the Housing Department with documentation outlining the
need for such a facility in Dubuque. He responded that he had reviewed the IFA market
studies performed for the Applewood III (2009) and Dubuque Senior Apartments (2010)
complexes. While these are not assisted facilities, they did document the need and
absorption rates for new affordable senior housing units in Dubuque. Both of these
projects were awarded tax credits by IFA.
McClenahan provided some additional analysis. He stated the existing market rate
Dubuque facilities are beyond the economic means of his target market (under 60%
AMI.) Further, he stated that these facilities do not accept persons using the Medicaid
Waiver — which pays the cost of the supportive services needed by the frail elderly.
Finally, he mentioned that he had conferred with Linda McDonald, Executive Director of
Scenic Valley Agency on Aging, which administers the Medicaid Waiver program
locally. He characterized her position as very supportive of an affordable assisted
facility in Dubuque.
There is no other similar facility in Dubuque. The only assisted senior housing is offered
at market rates. IFA will commission an independent market study for this proposed
project as part of its underwriting of McClenahan's application. That is a requirement for
every application.
DISCUSSION
Greg McClenahan reports that competition for Low - Income Housing Tax Credits is
strong, with application requests exceeding available funds. He states that 5 -10 points
often separate successful from unawarded applications. This makes the category of
'local government contribution' an important variable in scoring. This category awards 5
points for a local contribution of each 1% of total project cost.
With a total development (less land) cost of $9.3 million, this project will score 5 points
for each $93 000 of local contribution. McClenahan has requested a yearly commitment
of $19,355 for 10 years. This commitment would allow the project to borrow $185,000
out of IFA's Senior Living Loan program, a 1% interest loan program to assist project
like the Rose of Dubuque. This amount equals 2% of development costs, resulting in
10 points on the application.
This level of financial assistance in turn allows McClenahan to project 100% of rents
within HUD Fair Market Rent (FMR) guidelines, at $449 /month. This will make 100% of
the units available to our Section 8 seniors, without even needing the higher 'exception
rents' we could provide at this location. This in turn produces an additional 20 points in
the scoring, further illustrating the importance of the local government contribution:
And, as mentioned, all units in this facility would then rent at levels affordable to our
Section 8 seniors. That could be a strong inducement for their enrollment in the
Program, increasing their level of participation and further enrolling more Section 8
households at a west side location.
The use of Tax Increment Financing is the only tool proposed to create the $19,355
annual local assistance to the project. The City Council would need to create an Urban
Renewal District encompassing the project. This process typically takes 2 -3 months to
complete. The City Council could commit to create the district should the project be
awarded the tax credits from IFA.
The City will negotiate a development agreement to maintain for a 10 year period the
rent for the units at an amount not to exceed the HUD Fair Market Rent with the City
providing a 10 year property tax rebate through tax increment financing not to exceed
the amount of taxes allowed to be distributed through TIF based on the assessed
valuation or $19,355 per year, whichever is Tess.
In return for committing to the annual payment, the City will receive a commitment that
the units in the project are compliant with the HUD Fair Market Rent for the 10 years.
RECOMMENDATION
It is recommended that the City Council approve the attached letter of support and IFA
form committing to a local financial commitment of $19,355 per year for 10 years
through the utilization of Tax Increment Financing. This would provide a greater
likelihood the project will receive Low - Income Housing Tax Credits to finance the
project.
ACTION STEP
The action step for the City Council is to approve the attached letter of support and IFA
form.
Iowa Finance Authority
2015 Grand Avenue
Des Moines, Iowa 50312
Re: The Rose of Dubuque
Letter of Support and Preference
Dear Sir or Madam:
Place on City of Dubuque Letterhead
This letter of support and preference is being provided to the Iowa Finance Authority in
connection with the tax credit and financing application for the proposed Rose of
Dubuque, a 70 -unit, affordable assisted living facility located at 3390 Lake Ridge Drive,
Dubuque, Iowa 52003.
The project applicant has requested local contributions from the city, which requests are
progressing through the appropriate municipal review and approval processes. The types
of local contribution include the award of project -based Section 8 Housing Choice
Vouchers for 17 dwelling units and the designation of an Economic Development Area
pursuant to an Urban Renewal Plan, which designation, as requested, will afford the
project a partial tax rebate for the assessed value of the improvements on the real
property for a period of ten years. The establishment of an urban renewal district will be
subject to a public hearing process as required by Iowa law. The intent of the City of
Dubuque is to enter into a development agreement where the City will provide a 10 year
property tax rebate through tax increment financing not to exceed the amount of taxes
allowed to be distributed through TIF based on the assessed valuation or $19,355 per
year, whichever is less, and the developer will commit that for a 10 year period the rent
for the units in the project will not exceed the HUD Fair Market Rent.
The Council has resolved that the proposed facility is a greatly needed housing
development for the low and moderate income, frail and elderly citizens of Dubuque and
supports the need to provide quality housing options for persons of all income levels.
The Council supports this project and herewith requests that the Iowa Finance Authority
give favorable consideration to this application.
Sincerely,
City of Dubuque
Roy D. Buol
Mayor
AmountNalue
Market
Interest
Rate
Below- Market
Interest
Rate
Describe How Calculated
Savings Was Determined
Name of Entity Making Contribution
Amount
Source of Cash
Name of Entity Making Contribution
EXHIBIT 5S
LOCAL GOVERNMENT CONTRIBUTION
(This form must be completed by the City /County.)
RE: Project Name The Rose of Dubuque
Project Address 3390 Lake Ridge Drive, Dubuque, Iowa 52003
Ownership Entity Name The Rose of Dubuque, L.P.
Iowa Finance Authori
I N V E S T I N G I N NONE AND C O N N U N I T
This form will verify the local government contribution effort referenced in the Qualified Allocation Plan (QAP). A
local government contribution can be provided by a City or County. Iowa Finance Authority (IFA) rules state that
the following items will constitute a local government contribution:
1. Cash contribution
2. Gift of land
3. Tax abatement
4. Tax increment financing
5. Enterprise zone credit (equity value)
6. Enterprise zone sales tax rebate
7. Waiver of fees
8. Below- market interest rate loan (value calculated on imputed savings)
IFA's rules provide that the agency making the local government contribution must indicate the value of its
contribution. The value of the local government contribution is the value of the contribution made by the
City /County minus the value of any consideration or accommodation received by the City /County in return for the
contribution. Evidence of payment and the authority to provide the funds shall be furnished upon request of IFA.
The City /County completing this form understands that IFA will rely on these valuations to determine whether the
Applicant has met the requirements of the QAP to receive points for Local Government Contribution.
CONTRIBUTION(S) DERIVED FROM FEDERAL SOURCES
❑ CASH CONTRIBUTION
❑ GIFT OF LAND
AmountNalue
Describe How Value Was Determined
Name of Entity Making Contribution
Description of property.
Is land held free and clear of encumbrances? ❑ YES ❑ NO
If NO, disclose all known liens and encumbrances and explain how and when these will be satisfied.
❑ BELOW- MARKET INTEREST R
2011 Round - 1/20/11
N Inn II`1l#IFLIVILIV 1
AmountNalue
1 11\fIfv11 ••
Mil Rate
Term of
Financing
Describe How Amount Was
Determined
Name of Entity Making Contribution
$185,000
$35perK
10 years
The section 42 assessed
value of the improvements
was calculated to be
$552,498, which yields an
annual abatement of
$19,355. This amount will
support a $185,000 loan
over a 10 year
tenn/amortization at 1%
interest, as proposed by the
project owner.
Taxing entities of Dubuque
County
J DCLUVV - IVI/ArNMC 1
AmountNalue
11 1 GIIL.V
Market
Interest
Rate
1 ni, 1 6.. w, k.u..................+.....
Below- Market
Interest
Rate
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Describe How Calculated
Savings Was Determined
_,
Name of Entity Making Contribution
J vvi u V CR Jr 1 -
AmountNalue
.7
Type of Fees
Describe How Amount Was
Determined
Name of Entity Making Contribution
Name of Entity Making Contribution
J 1 n/\ nun 1 G1V11 -1
AmountNalue
1
Mil Rate
Term of
Abatement
Describe How Amount Was
Determined
Name of Entity Making Contribution
CONTRIBUTION(S) NOT DERIVED FROM ANY FEDERAL SOURCES
❑ CASH CONTRIBUTION
Amount
Source of Cash
Name of Entity Making Contribution
❑ GIFT OF LAND
AmountNalue
Describe How Value Was Determined
Name of Entity Making Contribution
Description of property.
Is land held free and clear of encumbrances? ❑ YES ❑ NO
If NO, disclose all known liens and encumbrances and explain how and when these will be satisfied.
❑ ENTERPRISE ZONE CREDIT
AmountNalue
Name of Entity Making Contribution
❑ ENTERPRISE ZONE SALES TAX REBATE
AmountNalue
Name of Entity Making Contribution
2011 Round - 1/20/11
City of Dubuque
Agency Name (Typed) Date
Roy D. Buol, Mayor
Name of Agency Representative (Typed)
Signature of Agency Representative
2011 Round - 1/20/11