8.1 Resolution 21-7928 Consider Support for a Low Income Housing Tax Credit ApplicationCITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
01/2512021 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: FISCAL APPROVAL:
NO: Community BY:
and Development Services
ITEM Planning Division FINAL APPROVAL:
NO:
Page 1 BY: Dean Andrew BY:
BY:
ITEM: Resolution No. 21-7928
Consider a Resolution of S-ipport for a Low Income Housing Tax Credit application being submitted by
Sunflower Development Group to help finance development of 47 senior housing units in the former
St. John's Hospital building at 139 N. Penn Avenue.
BACKGROUND:
The Sunflower Development Group of Kansas City, Missouri has submitted an application to the
Kansas Housing Resources Corporation requesting approval of federal Low Income Housing Tax
Credits (LIHTC) to help finance the redevelopment of the former St. John's Hospital building into a
housing facility containing 47 one and two bedroom apartments for seniors.
The Tax Reform Act of 1986 established a tax credit to replace previous federal tax incentives for
investment in low-income rental housing. The credit offers a reduction in tax liability to an investor in
an eligible low-income residential housing development. The tax credit program was retained and
extended in the tax reform bill passed by Congress in December 2017.
The Kansas Housing Resources Corporation (KHRC) is responsible for administration and allocation
of the LIHTC program for the State of Kansas. The state's LIHTC program goals include leveraging
the construction of more affordable rental housing in communities throughout the state of Kansas. The
program is 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 that
LIHTC are responsible for developing more than 27,000 affordable rental housing units in Kansas.
Tax credits are made available through a competitive application process.
The application requirements, selection criteria, overall process and required forms are described in
greater detail in the KHRC document entitled Qualified Allocation Plan for 2029 Housing Tax Credit
Program. One of the suggested support items for an application is a Resolution of Support from the
local governing body. Applications will be considered without a Resolution of Support but applications
that have a Resolution of Support may gain additional points in the project evaluation by KHRC.
The application timeline for 2021 is as follows:
Deadline Item Date
Preliminary Applications Due Friday, January 22
Preliminary Application
Announcement
Qualified Applicants Invited to
Submit Full Applications
Full Applications Due
Announcement of Full
Applications Received
Award Announcements
Friday, January 29
Friday, February 26
Friday, May 7
Friday, May 14
July
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
01/25/2021 4:00 P.M.
AGENDA SECTION ORIGINATING DEPARTMENT: FISCAL APPROVAL:
NO: Community BY:
and Development Services
ITEM Planning Division FINAL APPROVAL:
NO:
Page 2 BY: Dean Andrew BY:
On December 16, 2016, the City Commission approved Resolution No. 16-7423 supporting a similar
application by Sunflower Development Group for LIHTC to help finance a senior housing project in the
former St. John's Hosptial building. The Kansas Housing Resources Corporation did not award tax
credits for the project in the 2017 round of applications. On February 26, 2018, the City Commission
approved Resolution No. 18-7529 supporting a similar application by Sunflower Development Group
for LIHTC for the 2018 round of applications. This application competed with an application submitted
by Lee Lofts, LLC for renovation and reuse of the Lee Buildings. The Lee Lofts project was awarded
tax credits. The St. John's Hospital project was not awarded tax credits in the 2018 round of
applications. KHRC staff has indicated that it is acceptable for a community to submit multiple
Resolutions of Support recognizing that all projects supported by a community will be reviewed within
one statewide competitive process..
Nature of Current Request
City staff was recently contacted by Mr. Jason Swords of the Sunflower Development Group
expressing a desire for a Resolution of Support for Sunflower Development Group's 2021 application
for Low Income Housing Tax Credits to help finance their plan for converting the former hospital
building into housing for seniors. The Kansas Historic Sites Board of Review has approved the
nomination of this property to the State and National Register of Historic Places. However, the National
Park Service has not yet approved the listing of the former St. John's Hospital on the National Register.
Sunflower Development Group also has an application for historic tax credits pending. If their tax credit
applications are successful, Sunflower Development Group plans to move forward with the demolition
and removal of the non -historic elements of the hospital building.
As part of the tax credit application process, KHRC encourages a resolution from the local governing
body indicating its approval and support for any proposed housing development using housing tax
credits. A resolution has been prepared for City Commission consideration based on a format
suggested by KHRC. The resolution, while approving and supportive of additional senior housing
facilities in the former St. John's Hospital, includes language that subjects the final plans for the project
to building permit review and the City's other regulatory review processes.
FISCAL NOTE:
Approval of a Resolution of Support should have no fiscal impact on the City. The former St. John's
Hospital property is located in the city's Neighborhood Revitalization Area and would potentially be
eligible for property tax rebate if the project moves forward. This project falls short of meeting the
criteria for a "Project of Exceptional Community Significance" but would potentially be eligible for the
standard 10 year property tax rebate.which would be 100% in years 1-5 and 50% in years 6-10.
AGENDA SECTION
NO:
ITEM
NO:
Page 3
COMMISSION ACTION:
CITY OF SALINA
REQUEST FOR CITY COMMISSION ACTION DATE TIME
01/25/2021 4:00 P.M.
ORIGINATING DEPARTMENT
Community
and Development Services
Planning Division
BY: Dean Andrew
Staff has identified the following alternatives for the Commission's consideration:
FISCAL APPROVAL:
BY:
FINAL APPROVAL:
BY:
1. Approve the attached Resolution of Support supporting the issuance of housing tax credits for
the rehabilitation of the former St. John's Hospital into housing for seniors.
2. Postpone consideration of the resolution to a future meeting date if the Commission feels it
needs additional information about the project before acting on the attached resolution.
3. Decline to approve the attached Resolution of Support for the use of LIHTC for rehabilitation of
the former St. John's Hospital to create 47 senior apartment units.
In light of the City Commission's previous support for the use of housing tax credits to help finance
rehabilitation of this building, staff recommends approval of Resolution No. 21-7928.
Enclosures: Project proposal
Brochure: What is LfHTC?
Resolution No. 21-7928
cc. Jason Swords, Sunflower Development Group
SUNFL WER
Development Group
January 21, 2021
Mayor Rose Hodges & Salina City Commission
300 W. Ash Street
Salina, KS 67401
Re: St. John's Hospital Senior Living
Mayor Hodges and Salina City Commission,
St. John's Hospital is an important building in Salina as it served as the town's only hospital
since it was opened in 1914 until a new state of the art hospital was built in early 2000s. The
building had gone through several expansions to keep up with the demand for healthcare in
Salina.
SDG toured the property in 2015 and hired a historic consultant to evaluate the historic
significance and if the building could be put on the National Register of Historic Places. The
consultant, along with the Kansas Historic Preservation Office (KSHPO) concluded that the
newer construction must be removed to reveal the old historic building, but when that was
complete the historic building would likely be eligible for the National Register.
SDG has moved forward with some fairly extensive demolition on the building in order to get
the building on the National Register to qualify for Historic Tax Credits.
SDG hired an environmental consultant to assess the contaminants in the building. The
completed reports show that a significant amount of mold, lead and asbestos will need to be
abated before the buildings can be repurposed.
The historic structure is primarily intact and the additions were applied with proper control
joints and separation and leaving almost all of the historic fabric intact. We anticipate being
able to separate the buildings cleanly, preserving 90-95% plus of the original historic
components.
1125 Grand Blvd, Ste 202 www sunflowerke com
Kansas City, N10 61108 info@)sunflowerkc com
office{316)SB1-3991
SUNFL WER
Development Group
The Kansas Housing Resource Corporation (KHRC) indicated that they would not support an
application for 9% LIHTC credits in 2020 due to the recent award given to the Lee Buildings
redevelopment.
SDG intends to submit a 9% L1HTC application in the upcoming round of 2021 and has
recently submitted a Part 2 application to the National Park service and KSHPO for approval
of the historic renovation.
SDG plans to redevelop the property into Affordable Senior Housing. The property will be
highly amenitized and will feature a combination of one, and two, bedroom apartments. Full
applications are due to KHRC on May 141h.
If successful in securing a 9% award, SDG will move forward quickly to begin construction and
environmental abatement. We are asking the City of Salina to support our application to
KHRC, so that we might bring this historic building back to life.
Sincerely,
Chris Vukas
Sunflower Development Group
-, Application #CA16-6
139 N. Penn Avenue
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What is LIHTC?
As part of the Tax Reform Act of 1486, the United States Congress
created the Low -Income Housing Tax Credit (LIHTC) Program to
promote the development of affordable rental housing for low-
income individuals and families. To date, it has been the most
successful rental housing production program in the nation, creating
thousands of residences with very affordable rents.
The housing tax credit, rather than a direct subsidy, encourages
investment of private capital in the development of rental housing
by providing credits to offset an investor's federal income tax
liability.
Affordable Rents
In exchange for the financing provided through the credit, owners agree to keep rents affordable over a 30 -year
period for families with incomes at or below 60 percent of the local median income.
Debt Reduction
Financial institutions, such as banks, insurance companies and government-sponsored enterprises make equity
investments in exchange for receiving the tax credits. Equity from the sale of tax credits reduces the amount of
debt financing that the property owner incurs. This process reduces the property's monthly debt service, lowers
the operating costs, and makes it economically feasible to operate the property at below-market rents.
KHRC's Role
KHRC administers the LIHTC program on behalf of the State of Kansas. The Corporation allocates credits
based upon selection criteria and application ranking procedures set forth in KHRC's housing allocation plan. In
addition, KHRC monitors tax credit properties during the compliance period to ensure that rents and residents'
incomes do not exceed program limits, and that properties are well-maintained. KHRC has authority to allocate
approximately $60 million of ten year credits each year.
http://www.kshousingcorp.orgAihtc.aspx?skin=printerfriendly 214
212012018 LIHTC - Kansas Housing Resources Corporation
How Does the Program Work?
Owners of tax credit properties are eligible to take the federal tax credit each year for 10 years, provided the
property continues to operate in compliance with federal guidelines. Excluding land, the annual amount of the
tax credit is approximately 9% of the qualified cost of building or rehabilitating the property.
Credit Value
The property owner typically sells the tax credits to a corporation or group of investors. Currently the average
rate per credit is 77 cents on the dollar. The proceeds provide equity in the development, which reduces the
amount of debt required to build the property, and therefore reduces the monthly debt service and the amount of
rent income that is required.
Eligibility
Tax credit rents must be affordable to households earning 60 percent or less of the local median income.
Residents are responsible for their own rent payments, unless rent subsidies are available from other sources.
KHRC is required by the Internal Revenue Service to monitor tax credit properties for the compliance period to
ensure that rents and resident's incomes do not exceed federal limits and that the properties are well maintained.
Rules and Regulations
Owners of properties receiving tax credit allocations must follow IRS rules and regulations that oversee the
program. Owners are required to provide certain reports to KHRC and maintain certain records for the agency's
review. The tax credit program operates under a Qualified Allocation Plan (QAP) which is amended annually.
Application Process
KHRC evaluates housing tax credit applications based on several characteristics, such as:
• Site/Location
Development Design
• Development Team
• Targeting/Extended Use
• Financial Characteristics
Federal Regulations
Federal regulations require KHRC to allocate tax credits giving preference to proposals that:
• Serve the lowest income tenants
• Serve qualified tenants for the longest periods
• Contribute to a concerted Community Revitalization Plan
• Are intended for eventual tenant ownership
RESOLUTION NO. 21-7928
A RESOLUTION EXPRESSING SUPPORT FOR A LOW INCOME HOUSING TAX
CREDIT HOUSING PROJECT AT THE FORMER ST. JOHN'S HOSPITAL BUILDING
LOCATED AT 139 NORTH PENN AVENUE IN THE CITY OF SALINA, KANSAS.
WHEREAS, the City of Salina, Kansas has been informed by Sunflower Development Group of
Kansas City, Missouri that a $9,400,000 Historic Renovation of the original St. John's Hospital Building is
being planned and the Sunflower Development Group plans to file an application with the Kansas Housing
Resources Corporation for 9% Low Income Housing Tax Credits within the Affordable Housing Tax Credit
program.
WHEREAS, the proposed St. John's senior housing project will be located at 139 North Penn
Avenue, the former St. John's Hospital, with construction beginning upon the demolition of the structures
added to the property after 1955; and
WHEREAS, this senior housing project will contain approximately 47 units within the 50,500
square foot building footprint when demolition of newer portions of the existing structure has been
completed, with rents ranging from $460 to $580 per month; and,
WHEREAS, the fully accessible units will be targeted to those seniors with low to moderate income
levels, aged 55 and over; and,
WHEREAS, the Sunflower Development Group has completed acquisition of land and buildings
and is proceeding with the demolition of various portions of the existing structure to expose the original
facade of the former hospital, at which time final plans will be completed for the renovation of the historic
structure into newly constructed units; and,
WHEREAS, the structure known as the Medaiile Center has been sold to another developer and a
the remaining portions of the post 1955 hospital structure will be demolished and made ready for parking and
access to support additional rental housing; and,
WHEREAS, the property will have the following amenities: one and two bedroom accessible
housing units, community room with a leasing office, a business center, a workout facility and a kitchenette
to be used by community patrons, a washer/dryer in each unit, garden area, accessible appliances, and
Energy -Star ratings for extremely efficient utility bills; and
WHEREAS, the Heritage Commission has approved the demolition of the 1958 lobby and covered
drop off area in order to expose the original 1914 fagade of the building and the Sunflower Development
Group is in the process of seeking historical designation of the original buildings, and
WHEREAS, the Affordable Housing Tax Credits will be used for the purpose of re -constructing the
subject property as outlined in the proposal submitted to City staff; and
WHEREAS, the Developers agree to meet all City building and zoning codes and all other City
codes applicable to the project; and
NOW, THEREFORE, BE IT RESOLVED BY THE GOVERNING BODY OF THE CITY OF
SALINA KANSAS, AS FOLLOWS:
SECTION 1. The Governing Body supports and approves the use of Low Income Housing Tax
Credits to help finance the development of the described senior housing project within the community,
subject to all applicable ordinances, rules and regulations of the City.
SECTION 2. In the event the final approval from Kansas Housing Resources Corporation for this
senior housing project does not receive all local and state regulatory approvals, this resolution shall become
null and void.
SECTION 3, This resolution shall be in full force and effect from and after its adoption until
January 24, 2022.
Adopted by the Board of Commissioners and signed by the Mayor this 251" day of January, 2021.
[SEAL]
By:
Cheryl Mermis, Deputy City Clerk
UA
Melissa Rose Hodges, Mayor