03-09-2010 Council Work Session Packet

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. � _� Orono City Council 2750 Kelley Park�vay ''�'"'��::'��I `�' C��stal Bay,1��N 55323 ,;`�,' '."' February 25,2010 Dear Mayor and Council Members, CommonBond Communities(CommonBond)has beeu working«�itl� the City of Orono to develop much needed quality affordable housing for residents of Orono and adjacent municipalities. GommonBond, in partnership with its service partner-Itrterfaith Ouh•each Community Partners- is proposing the development of a 42 unit townhome community on the City's W illow Drive parcel. The development will provide two and three bedroom townhomes for residents earning bet�veen 30% and 60%of the area median income. The proposed housing conununity will suppoirt the area's need for workforce housing aY�d will pro��ide an oppoi�tunity for families to live in quality affordable housing in tlte amenity-ricli City of Oi•ono environment. HISTORY CommonBond�resented its concept for workforce housina develapn�ent in the City of Orono to the City Councii on September 29'�', 2009. The Willow Drive site,adjacent to the Fire Statiou, was identified as a likely development parcel. CommonBond met with City staff to determnle the parameters of the development and presented its concept to the City Council on January 26'�', 2009. The City Counci( was then pi-esented with three development concepts and advised CommonBonc]to move forward��vith planning on the 42 unit townhome/rowhouse concept. In early Februaiy,2010, CommonBond requested the support of the City Cow�cil for tvvo Counry financing applications for CDBG and HOME funds. CommonBond would lilce to continue to move the Willow Drive project toward fruitioil by applyi»g for Low Income Housing Tax Credits(LIHTCs)fi•om the Minnesota Housing Finance Agency. The application for LIHTCs is due in mid June 2010 and requires that CommonBond obtain a purchase agreement to evidence site control and have the site rezoned to allow multifamily development. CommonBond will continue to work with the Council and City staff to understand and tracl:the City's acquisition and rezoning process. SECTION 42 The LIHTC Proa-am,which is based on Section 42 of the Internal Revenue Code,was enacted by Congress in 1986 to provide the private market with an incentive to invest in affordable rental housin�. Federal housing ta�credits are awarded to developers of c�ualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, wliich reduces the debt that the developer would otherwise have to borrow. Because d1e debt is lower,a tax credit property ca�l in turn offer lower, more affor•dable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar- for-dollar credit against their Federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount ir�vested in the affordable housin�.