7.1 Multi-Housing Tax CreditCITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1/24/2011 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: APPROVED FOR
NO: 7 AGENDA:
Development Services
ITEM
NO. 1
BY:
BY: Gary Hobbie
Page 1
ITEM: Resolution No. 11-6799
Consider approval of a resolution expressing support fo r a Housing Tax Credit application being submitted by
MRE Capital, LLC to the Kansas Housing Resources Corporation on behalf of MRE Capital of Kansas City, MO
for the development of a proposed forty unit single family housing project to be located on South Ohio Street
south of the Reserves at Prairie Glen.
BACKGROUND:
MRE Capital, LLC is planning to submit an application to the Kansas Housing Resources Corporation for
federal income tax credits for a proposed affordable housing project in Salina. The Kansas Housing Resources
Corporation (KHRC) was created by Governor Sebelius as a new state agency reorganized from the Kansas
Department of Commerce and Housing. The proposed Low Income Housing Tax Credit program goals include
leveraging the construction of more affordable rental housing in communities throughout Kansas. These tax
credits are designed to attract and secure private equity capital for the project by selling the tax credits to
investors who wish to reduce and enhance the developers’ debt financing. KHRC believes the Housing Tax
Credit Program is responsible for developing more than 27,000 dwelling units in Kansas.
Tax credits are sold and provide 75% to 80% of the total development costs and in some cases, projects have
been delayed or eliminated due to the poor performance of the sale of tax credits, mainly due to the present
economy. The tax credits are sold to investors allowing the investors to receive a ten year tax benefit, based on
an annual 9% of the eligible basis for a qualified development, after the housing projects have been completed.
Tax Credits will sell for $.65 to $.70 on the dollar and prorated throughout the ten year period. Developers
obtain funding to supplement their construction loan, allowing renters to have increased affordable housing
choices within the community while increasing the housing stock options and increasing the real estate tax
base.
Each year the KHRC has the authority to allocate appr oximately 60 million dollars of tax credits, which are
awarded on a competitive basis two times each year, with one in February and one in August with awards being
announced in May and November respectively. Non-profits and for-profit developers are the typical applicants
each year.
Salina has had several Housing Tax Credit applications submitted in the past year. This project makes the
fourth project that will be submitted for Salina, most likely in the February 2011 round of applications. Staff
understands that two of the existing projects under consideration were not funded and may be abandoned for
the time being. The tax credit projects are ranked on a competitive basis and community support factors into
the scoring process. The most recent tax credit application projects include Reserves at Prairie Glen West
located south of Kmart on Armory Road and a multi-family project located on Choctaw just south of West
Crawford, which was proposed in conjunction with the local CHODO. Both of those projects involved the
Overland Property Group of Topeka, KS. A third Overland Property Group project that was awarded tax credits
was a 32 unit two story apartment project located on the Hawthorne School site. City staff is supportive of
efforts to develop additional good quality affordable housing units in Salina.
MRE Capital LLC has been involved in numerous proj ects throughout the Midwest, employing creative
financing solutions that include Low Income Housing Tax Credits (LIHTC), New Markets Tax Credits (NMTC)
and Historic Tax Credits. MRE Capital, LLC operates as a tax credit investment company bringing tax credit
equity into real estate and renewable energy developments. Headquartered in Prairie Village, Kansas MRE was
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1/24/2011 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: APPROVED FOR
NO: 7 AGENDA:
Development Services
ITEM
NO. 1
BY:
BY: Gary Hobbie
Page 2
established with an eye towards federal and state tax credit funded projects that would not be financially
feasible without additional government and private equity available from various sources. With a focus on
development throughout the mid-west and mountain states they believe they are able to avoid the volatility in
revenue associated with coastal markets. They state that their unique specialty is the innovative use of
development incentives to make otherwise financially unfeasible developments a reality.
MRE Capital is a multi-faceted, fully integrated development firm with the “In-House” capability to assemble and
deliver full legal, administrative, financial, managem ent, accounting, development, site selection, site
assemblage and construction services. Given the unique structure of the company, and its network of
relationships, the principals of MRE Capital can move quickly and decisively to assess development
opportunities and strives to negotiate, complete due diligence and close transactions rapidly.
MRE Capital has a contract to purchase 8.85 acres of land currently owned by Stan Byquist and is proposing a
forty unit single family housing project, Lakeview Villas, proposed as a newly constructed forty unit single-family
project located on South Ohio, approximately one/third m ile south of East Magnolia Road. This project would
be located in a planned community which would require annexation, re-platting and rezoning prior to
construction of the 40 single family homes, which will be rented for a period of fifteen years when the owners
may finance the remaining value of the home converting them to homeownership. This property is shown as
future Urban Residential in the city’s Comprehensive Plan but is currently zoned Agricultural in the county.
The homes will be 1,700 to 1,800 square feet, single story, slab-on-grade, with three bedrooms and two
bathrooms. Included in the homes will be a two car garage and a full complement of appliances. There will be
an onsite community room with a leasing office, a business center, workout facility and a kitchenette
City staff anticipates that annexation of the planned co mmunity property as well as a change in zoning would
need to be completed, prior to construction of this project. Public infrastructure would be required to be
constructed including streets, water, sewer and natural gas piping systems prior to construction of the homes.
The remaining area near this project would be considered as a future housing project area and should remain
for use as a single family housing neighborhood.
State Requirements:
In order to be eligible to compete in the allocation process for housing tax credits the Kansas Housing Resource
Corporation requires a resolution of support from the local government in the jurisdiction where the housing
units would be built. A resolution has been prepared for City Commission consideration based on a format
suggested by KHRC. The resolution while approving and supportive of the proposed project includes language
that subjects it to final annexation, zoning, and platting approval.
FISCAL NOTE:
The proposed increases in fees are consistent with intended increases in revenues anticipated by the 2011 City
of Salina budget. As our cost of services rise each year, contractors and developers are being asked to share
in operating Development Services Department.
CONFORMANCE WITH THE COMPREHENSIVE PLAN
The updated Comprehensive Plan shows the area on the east side of South Ohio Street as suitable for future
Urban Residential development. The Urban Residential designation is intended to accommodate a mix of
housing types, including multi-family housing, in a neighborhood setting.
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
1/24/2011 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: APPROVED FOR
NO: 7 AGENDA:
Development Services
ITEM
NO. 1
BY:
BY: Gary Hobbie
Page 3
CONFORMANCE WITH THE STRATEGIC PLAN:
Development of affordable single-family housing in t he proposed location would appear to be consistent with
the following strategic goal in the City’s Strategic Plan:
GOAL: THE CITY WILL CREATE A COMMUNITY OF MIXED-USE, QUALITY DEVELOPMENT AND
REDEVELOPMENT.
The following alternatives have been identified for the Commission’s consideration
:
1. Approve the attached Resolution of Support supporting the issuance of housing tax credits for the
proposed Lakeview Villas project.
2. Postpone consideration of the resolution if the Commission feels it needs additional information about
the project or the attached resolution.
3. Decline to approve the attached Resolution of Support for the use of the housing tax credits for the
proposed Lakeview Villas project at this time.
STAFF RECOMMENDATION:
As this request is consistent with the City’s Comprehensive Plan, staff would support Option #1.
Enclosures: Vicinity map
Site plan
Business Profile
cc: MRE Capital
Wally Storey
Stan Byquist