10/31/1988 CONF MTG - 5040�
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F���
TO:
FRO]!K :
DAT]E :
REG;!�RDING :
C01�/[MUNI"['Y DEVELOPMENT'
DEPARTMENT
MEMORANDUM
;�,
William Burns, City Manager ry��
Jock Robertson, Community Development Director
Barbara Dacy, Planning Coordinator
October 28, 1988
Summary - Senior Housing Issues
The following summarizes the key points and conclusions regarding
sen:ior housing which are more fully discussed in the attached
mem��randum. Our analysis has identified three key points about
sen.ior housing in Fridley:
1. The elderly need a wide range of housing types and services.
2. The City's population exemplifies the trend known as "the
graying of the population". The rate of senior population
growth from 1970 to 1980 exeeds the rate of the metropolitan
area. In the year 2000, approximately 20$ of Fridley's
population will be aged 65 and over.
3. Federal and state participation in senior housing will continue
to decrease. In view of elderly population trends and
declining federal and state participation in senior housing,
it is appropriate for the City to examine its role in providing
elderly housing.
Recc�gnizing these factors, we recommend the following to initiate
Cit�� Council discussion of senior housing policies:
1. The market for market rate rental housing at this point in time
can absorb approximately 115-150 units, according to a 1987
private market study. The success of a rental market unit
project depends greatly on its location, pricing and ability
to provide other amenities. Given the number of pending
housing proposals, private sector developers, both profit and
non-profit, appear to be satisfying the demand.
2. Given the waiting list at Village Green and the recent income
data, there is a need to provide housing for low and moderate
income seniors who cannot afford market rate units. City-wide
information could not be obtained to determine how many low
income households are in the "active" senior age bracket and
how many constitute the "more frail" senior population. This
information could dictate housing type policies since the data
indicates a younger senior would prefer a one story townhome
versus a more elderly person preferring a multi-story building.
Senior Housing Summary
Oci:ober 28, 1988
Paqe 2
3. Additional research needs to be accomplished to determine
senior housing needs. The City Council, as part of a strategic
planning process, may want to consider including some or all
of the following additional studies in prioritizing future work
direction:
a. Inventory existing housing stock and identify housing
needs, including update of 1984 Metropolitan Council
information.
b. Determine age of low and moderate income seniors.
c. Determine low and moderate income seniors housing
preference.
d. Determine extent of City participation in a low to moderate
income housing development.
e. Analyze potential of housing improvements and relocat.ion
assistance programs.
4. The City should encourage a range of elderly housing in
order to provide a choice of housing options for seniors. A
preliminary analysis reveals that townhomes and multi-story
rental units should be added to the current housing stock.
The types of market rate housing proposed by St. William's
church and Arkell Development Corporation respond to these
needs.
5. In reviewing elderly housing development applications, the City
should evaluate the proposal to determine compatibility with
surrounding property by utilizing the Comprehensive Plan and
Zoning Ordinance guidelines. Restrictive covenants should
be required to insure that developments remain as elderly
projects. The City may want to pursue a more proactive role
and conduct an analysis to identify sites for senior housi:ng.
6. The City can financially assist senior housing�via a range of
options which vary in degree of participation. Current
assistance policies help make potential projects more
affordable (St. William's proposal). Requests for assistance
such as the one proposed by Arkell Development Corporation
represent a departure from current policy by requesting a
higher degree of financial commitment. The City, in cases
where it owns land, should continue its policy of soliciting
proposals on a competitive basis. Conductinq the studies
identified in item #3 may better define levels of participation
for the City Council.
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Se:nior Housing Summary
October 28, 1988
Pa�ge 3
7. Because senior housing and senior services are related, the
City Council may also want to include a senior service needs
analysis in a strategic planning process to determine future
work direction.
Co:pies of the written sources listed at the back of the memorandum
ar�e available for review.
BD,/dn
M-88-298
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cinroF
F� ��
TO:
FROM„
DATE�
REGP,l2DING :
C01�/1MUNIT'Y DEVELOPMENT
DEPART'N�ENT
MEMORANDUM
William Burris, City Manager
Jock Robertson, Community Development Director
Barbara Dacy, Planning Coordinator
October 28, 1988
Senior Housing Issues
STAT]�MENT OF ISSUE
The City Council directed staff to prepare
rega�rding potential policies on senior housing.
anal��zes key points about senior issues in general
prel:iminary recommendations the City Council can u
City policy.
THE l3ENIOR POPULATION
recommendations
The following
and identifies
se to formulate
Avai:Lable demographic data confirms that the senidr population in
Frid:ley, those persons aged 65 and older, has increased more than
the rate of increase of seniors in the seven county metropolitan
area. Table 1 enumerates the change in senior population from
1970-1980 compared to the metropolitan area.
Tabl�e 2 identifies the number of persons in the 55-64 age bracket
in 1980 which will become seniors in 1990. An additional 7,800
pers��ns will be added to the senior category in the year 2000
(ass�uming little change in migration, birth and death rates).
Frid:ley truly exemplifies the trend known as the "graying of the
popu:lation" (this phrase was coined by the Metropolitan Council).
As tiie City's population grows older, service delivery implications
aris�e which must be considered.
:1
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Se;nior Housing
Oc�tober 28, 1988
Pa��e 2
F:ridley
TABLE 1
CHANGE IN SENIOR (65+) POPULATION
1970 - 1980
Change
1970-1980
1970 1980 Number Percent
613
M�etro Area 163,746
1,374
188,207
761
24,461
124.1$
14.9$
S��urce: U.S. Bureau of Census, Maxfield Research Group Study,
A�ugust 1987
TABLE 2
CITY OF FRIDLEY
AGE DISTRIBUTION
1980
AGE NUMBER PERCENT
�Under 5 Years . . . . . . . 2, 082 . . . . . . 7$
5 - 9 . . . . . . . . . . 2, 182 . . . . . . 7$
10 - 14 . . . . . . . . . . 2, 794 . . . . . . 9$
15 - 19 . . . . . . . . . . 3, 367 . . . . . . 11%
20 - 24 . . . . . . . . . . 3,418 . . . . . .11o
25 - 29 . . . . . . . . . . 2, 618 . . . . . . 9%
30 - 34 . . . . . . . . . . 2, 383 . . . . . . 8$
35 - 44 . . . . . . . . . . 4, 229 . . . . . . 14%
45 - 54 . . . . . . . . . . 3, 654 . . . . . . 12�
55 - 59 . . . . . . . . . . 1, 270 . . . . . . 4�
60 - 64 . . . . . . . . . . . 857 . . . . . . 3$
65 - 74 . . . . . . . . . . . 883 . . . . . . 3$
75 - 84 . . . . . . . . . . . 352 . . . . . . 1�
85+ . . . . . . . . . . . . . 139 . . . . . . 1$
'rOTAL 30,228 100%
S��urce: U.S. Bureau of Census
Senior Housing
Oc�tober 28, 1988
Pac�e 3
Th�a needs of an elderly population pose two primary serv.ice
im�?lications for a community: housing and general services, i.e.
tr<3nsportation, in-home services, social, health and others.
A Metropolitan Council report entitled "A Blueprint for Local
Acition: Housing and Services of Elderly and Disabled People in the
Community" states that: "housing needs and services have
tr<3ditionaly been thought of as separate systems"... "but it makes
se�lse to think of them as one, because we cannot separate people's
hoiasing and service needs". Housing for the elderly and elderly
se�rvices have typically been associated with nursing homes or other
in:�titutional facilities. However, the number of seniors in these
in:atitutions comprise a much smaller part of the senior population,
anci, as the demographic statistics verify, there is a larger
po��ulation of persons aged 65 - 75. Moreover, a significant number
wi:ll enter this age bracket in 1990 and beyond. Yet, a"continuum"
of housing and services for seniors should be provided to address
thEa needs of both younger seniors and older seniors.
Th�a attached graphic portrays an example of a housing continuum,
ranging from a single family detached home to rental units to
housing with a minimal amount of services to supervised liv:ing
ar�rangements to institutional facilities. Also attached is a
de:scription of each type of housing and its related service. The
Mei�ropolitan Council's study, "A Blueprint for Action...",
rec�ommends communities take an inventory of the range of exist:ing
housing for the elderly, and then identify what housing types are
neE.ded. Although the study also recommends an inventory be taken
of other senior services for the purposes of this memorandum,
is:�ues regarding the housing inventory are discussed.
FR:CDLEY'S HOUSING CONTINUUM
ThE. 1980 Census indicates that 70% of senior households in Fridley
own single family detached houses. Other housing styles available
in Fridley for the elderly consist of rental apartments, the
Vi�Llage Green development, a small number of existing townhomes,
anci area nursing homes. A 1984 Metropolitan Council study analyzed
eac,h County's elderly housing continuum. The study estimated
housing needs for Anoka County as follows:
Sm�ill Owned Units (200): Most additional units are needed in the
inner suburbs and outlying area.
Rental Units: All Ages (500): Some additional units are needed
in all parts of the country.
Rerital Units: Elderly (400): Most additional units are needed in
the: inner suburbs and outlying area.
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Table 3
HOUSING AND SERVICE ARRANGEMENTS
Housing
Ovvned and Rental Options
Single-family home
Smaller, owned units (condominium, cooperative,
tovvnhouse, mobile home)
- for general population
- for elderly people only
Apartment, duplex, etc.
- for general population
- for elderly people only
Shared Housing Options
Single-family home with others as renters
-- as pari of family
- in separate apartment
Re��tal in someone else's home
-- as part of family
-- in separate apartment
Foster Care
Rent as part of small group
-- �vith friends, etc.
- in specially designed, shared living quarters
l�-onnredical Supervised Housing
lV'ursing Home
Services
Most older people do not need supportive services
to live in the housing arrangement of their ch�oice;
however, if services are needed, they can be
provided in any of these settings either by
info�mal (family, friends, neighbors) and/or formal
(health and social service agencies) sourc�s of help.
Services provided as part of the housing, plus
24-hour nonmedical supervision.
Same as preceding category, plus medical carE;
and supervision.
Ca�n�us Arrangements are a combination of several of the above categories located together, for
example, apartments and a nursing home; nonmedical supervised housing and a nursing home;
apartments and nonmedical supervised housing; or apartments, nonmedical supervised housing arid a
nursing home.
SOURCE: ,�'bre Than Shelter, Metropolitan Council, 1984
Senior Housing
October 28, 1988
Page 4
Shared Housing (100): Most additional units are needed in the
inner suburbs.
Supervised Housing (100): Most additional units are needed in the
outlying area.
Nursing Homes: No need for additional beds.
This information needs to be updated in conjunction with Anoka
County and other communities so that Fridley's share can be
identified.
SENIOR HOUSING MARKET CHARACTERISTICS
The Maxfield Research Group, in August 1987, completed a market
feasibility study for the senior housing proposal by St. William's
Church. This extensive study identified a market demand of 115 -
150 market rate rental units in the study area which included
Fridley, Columbia Heights, New Brighton, Spring Lake Park,
Moundsview, Coon Rapids, Blaine and Brooklyn Center (see map on
next page). It is important to clarify the difference between
de:mand and need. Need can be defined as consumers which can use
any particular product, and demand can be defined as those
consumers that have the ability to purchase the product. Although
there are a number of seniors who need housing, the demand is only
a percentage of that population. The Maxfield study analyzed the
in�come, age and household information for the study area and
determined that approximately 15 - 20� of the senior population
desire to move to senior housing and have the ability to afford
market rate units.
A�zumber of studies and interviews with individuals confirmed that
a majority of seniors want to live in their homes as long as
possible, but there is a portion of the population which desire to
live in another form of housing. In fact, the demand of this
se�gment of the senior population has been so great that the number
of market rate units has increased significantly in the
me�tropolitan area. Moreover, the Department of Housing and Urban
Development will not provide assistance to any market rate senior
pr��jects, since the supply of units is exceeding the demand, and
va�cancy rates in existing units exceed the vacancy rate for the
me�tropolitan apartment market.
Ye�t, there appears to be a demand for market rate housing in
Fridley. The St. William's proposal totals 70 units and the Arkell
Development proposal totals 92 units. Another senior project is
pl,anned in Blaine at Highway 10 and University Avenue, to be
co:nstructed in the fall of 1989 or 1990 (90 units). Already, these
th:ree projects exceed the amount of anticipated demand identified
by the Maxfield study. However, the study also pointed out that
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Se�nior Housing
Oc�tober 28, 1988
Pa��e 5
pa:rticular areas of need may exist at various locations. In any
ca;se, additional market rate projects will have to conduct careful
st�udies to ensure a demand exists.
Th�ese projects also exemplify the different approaches to senior
ho,using. The location of each project is important to the success
of the project and its appeal to the targeted residents. The St.
Wi:lliam's project is located near shopping facilities, the Senior
Ce�nter and other services which provides easy access for seniors
to important services. The proposed building is a three story
st:ructure. In-house services will be tailored to the needs of the
re�sidents once identified by them. According to Community
Development Corporation, an older population is expected to live
th�ere (65 - 80), despite Maxfield's estimate of younger seniors
oc�cupying the building (60 - 70) . The Arkell proposal is targeting
yo�unger seniors desiring independent living in a residential
setting. A one story townhouse unit is proposed to minimize home
maintenance expenses but yet allowing a feel for "home ownership".
Also important to the success of these and other senior projects
ar�e the rental rates. HUD estimates that the elderly will spend
between 40g and 50$ of their income for housing costs. According
to the Maxfield study, $15,000 is used as the income threshold for
persons which can afford market rate units. As an example, the
proposed rents at St. William's range from $575.00 for a one
be�droom to $800.00 for a two bedroom. This would dictate an income
of $17,600 to $32,700. Community Development Corporation advises
that five of the units will have a rent reduction provided by St.
William's church of $150.00. This would reduce rents to $375.00
which would dictate an income of at least $13,800.00 to $17,400.00.
HUD defines a one person household receiving a"very low income"
as $14,250.00 and a two person household as $16,300.00 ("very low"
means 50� of the median income). The Maxfield study estimated that
49� of the senior households in 1986 had an annual income of less
than $15,000.00. This data suggests that a need exists for income
assisted housing in addition to the market rate housing.
Subsidized projects, such as Village Green, according to Thomas
Melchoir, author of the Maxfield study, do not compete with market
units. Although HUD will no longer assist market rate projects,
it will still provide assistance for senior projects via Section
202 funds (low interest construction loans). However, HUD has
identified certain priority communities for assistance. According
to Tom Koon from the HUD area office, Columbia Heights is the only
community in Anoka County which is identified as an "A" community
or one that is deficient in 202 projects. Mr. Koon did encourage
an application from Fridley if proof can be provided for need and
demand. Funds for rehabilitation of existing rental units are also
available, via Section 312. Another program available to
developers is the low income housing tax credit program which was
Senior Housing
Oci�ober 28, 1988
Paqe 6
aui�horized in the 1986 Tax Reform Act. This program assists the
financing of construction and rehabilitation of housing for
families for low and moderate incomes and for senior projects. The
housing tax credit offers a reduction in tax liability to owners
and investors in new construction or rehabilitation of existing
rental housing. However, the program is authorized only through
19E39. A building must be placed in service in 1989 to receive the
cr�dit, therefore, the building wauld have to be under construction
in 1988. The City Attorney advises that a bill is pending in
Congress to authorize extension for one year. While it may appear
the�t a number of inethods exist for federal or state assistance, all
ha��e requirements which restrict applicants or are subject to the
di:�cretion of national legislation. Given these factors, it
ap�ears that the amount of federal and state participation will
dec:rease in the future.
Bot:h non-profit and for-profit organizations have proposed and are
constructing senior units. Profit or non-profit status does have
an effect on ability to achieve other financing. For example, the
Sec;tion 202 funds provided by HUD can only go to non-profit
agE�ncies. On the other hand, both for-profit and non-profit
ageancies are eligible for the low income tax credit program.
In the interview with Mr. Melchoir, it was his opinion that a
subsidized housing project in Fridley would do well. The need for
sui�sidized housing is also confirmed by the length of the waiting
li:�t at Village Green. Thirty-five seniors are listed on the
wa�Lting list for Village Green and an additional five handicapped
ser�iors are also on the waiting list. Three people who were on the
wa�Lting list used to live in Fridley and have family in Fridley and
want to move back to Fridley. Already there is an identified need
foi- at least 43 cases in need of some kind of income assisted
housing.
Gi��en the decreasing role of the Federal and State government,
County and municipalities have now become more aware of the need
to fill the gap left by the lack of Federal and State monies. To
this end, some counties in the Metropolitan area have initiated
seriior projects through the County HRA programs. The electorate
in Dakota County, for example, authorized mill levy increases of
.33 mills in 1987, 1988 and 1989. With the tax monies obtained,
th�► County conducted a market analysis, identified sites for senior
housing and established a citizen task force to prioritize various
seriior services. The County HRA is working with the City of
La}+;eville to acquire a site and construct a housing project
coritaining both market rate and subsidized units. If Fridley were
to pursue this approach, the same type of analysis should occur.
Senior Housing
Ocitober 28, 1988
Page 7
Th�s Washington County HRA has also been active in acquiring sites
fo�r senior housing, most recently a site in Cottage Grove, for 36
ap��rtments with a subsidy up to 10� of the rent per unit or as much
as $20,000 annually. JoAnn Wright, Anoka County, advised that
Anc�ka County's policy regarding senior housing is to have the
communities take the lead in initiating their own policies for
se�zior housing. The City of Blaine, for example, will be provid.ing
as:sistance to the developers of the project proposed at Highway :10,
de�?ending on whether or not they submit a proposal by April 1,
19l39.
PO]LICY ISSUES
Land Use and Zoning
As was noted earlier, the success of a senior housing project
de��ends on its location in order to serve the proposed residents
to occupy the development. For example, a project which is
ta�:geted for the more frail, persons 75 and over, will more than
lilcely contain in-house services and be located adjacent to a
nu��sing home or other health care institution. On the other hand,
a�project oriented toward active seniors will be adjacent ta a
re:�idential area and convenient to shopping and transportat:ion
se�^vices. The housing style is also different, with the more frail
typically occupying a highrise building, while the more active
senior population preferring a one-story townhome or midrise
bu'�lding. Both types of housing pose different compatibility
is:�ues (scale, height, lot coverage, open space, density) which
should be evaluated based on the site's location and surrounding
land uses. Elderly developments, in general, have lower traffic
anci parking generation rates and, because of their character, can
be compatible with residential neighborhoods.
As is exemplified by the two pending housing applications, rezoning
applications are needed in some cases to allow the proposed
de�ielopment. In processing these applications, the City cannot
igriore zoning and land use guidelines. These guidelines should be
use�d to determine compatibility between the proposed development
anci surrounding properties. This includes analysis of density,
traffic, landscaping, aesthetics, drainage, etc.
Another issue of concern is whether or not a senior housing project
wi].l remain as senior housing. The City Attorney's office advises
that restrictive covenants can be required to insure the
de��elopment remains to be occupied by the elderly. The two elderly
prc�jects in New Brighton were cited as examples. Further, elderly
housing is a special use permit in the residential zoning
di:�tricts. A stipulation can be required to have the project
remain as elderly, and if proposed to be converted, reapplication
would have to occur.
Senior Housing
October 28, 1988
Page 8
Also of concern is whether the City can reasonably be assured that
Fridley seniors will be accommodated by the market rate rental
projects. The City Attorney's office advises that the City does
not have a legal basis to require developers to rent to Fridley
seniors. However, in the case of St. William's Church application,
there is a high probability that Fridley seniors will occupy the
building given that it is cosponsored by a local institution.
Further, given the demographic statistics and the length of the
waiting list at Village Green, it is very likely that Fridley
seniors will be served by proposed projects in the area. Further,
the City should work with Anoka County and other communities to
inventory the area's housing needs so that a proper balance can be
ac:hieved. The aging of the population is a metropolitan, if not
nation wide, phenomena.
Financial Commitment
The City can financially assist senior housing via a range of
options which vary in degree of participation. Current City policy
provides the following forms of assistance to development projects
in tax increment districts: grants for soil corrections, land
writedowns, or a second mortgage. It appears that the available
HRA programs can assist projects, such as the St. William's
proposal, to be less costly and more affordable. The City's
current policy should be maintained.
Ho�wever, Arkell Development Corporation is requesting both land
do:nation and a tax abatement. This proposal requires more
participation by the City, and is a departure from current City
policy. If the City were to make its site on Rice Creek Road
av,ailable, the City may want to solicit competition from other
in�terested parties. The City has not established a process to
de�termine the best use of this site. The Arkell request, if
gr,anted, may be seen as establishing a precedent for future
re��uests and it may also be seen as preferential.treatment for one
de,veloper without the benefit of a competitive process.
Be��ause there is a need for low to moderate income assisted
ho�using, the City may want to pursue additional study to determine
a:specific housing type and site, potential co-sponsors, and other
re:lated issues for a senior housing development. This should also
in�clude some type of survey of local seniors. This recommendation
is consistent with the process conducted by the Dakota County HRA.
This option represents a higher degree of participation if the City
ch��se to acquire a site, assist with construction costs or, at the
hi��hest level of participation, assumes all costs for the project.
An�3 the option which deserves further investigation is
es•tablishment of an HRA program to rehabilitate existing single
fa�nily houses to accommodate elderly needs, such as wider doorways
�
Senior Housing
October 28, 1988
Page 9
for wheelchairs, grab bars in the bathrooms, or first floor
bedrooms. Since most elderly persons want to stay in their homes
as long as possible, this type of assistance would be appreciated
by those who do not wish to relocate. On the other hand, an
assistance program for those who do want to move could also be
investigated. In either case, research needs to be conducted to
determine need, extend of assistance, etc.
Building Design and Quality
Building design for elderly housing is improving with each project
be�cause local architects are learning from past mistakes. Quality
co:nstruction and insured long term maintenance policies should be
en�ouraged if not required for these projects. Architectural
review by the City can be required if financial assistance is
re��uested from the HRA.
PR:ELIMINARY CONCLUSIONS
Given the above analysis, the following conclusions are offered as
a basis to begin discussion of city policy. It is important to
re�member that this memorandum deals solely with housing. The
se:rvice needs of the elderly also deserve the same type of
an�3lysis. The Council may want to discuss senior services issues
as part of a strategic planning exercise to determine its
im�portance in relation to other city priorities.
Th�e following conclusions are based on a recognition of a growing
older population and a diminishing role of Federal and State
pa:rticipation in providing senior housing:
1. The market for market rate rental housing at this point in time
can absorb approximately 115-150 units, according to a 1987
private market study. The success of a rental market unit
project depends greatly on its location, pricing and ability
to provide other amenities. Given the number of pending
housing proposals, private sector developers, both profit and
non-profit, appear to be satisfying the demand.
2. Given the waiting list at Village Green and the recent income
data, there is a need to provide housing for low and moderate
income seniors who cannot afford market rate units. City-wide
information could not be obtained to determine how many low
income households are in the "active" senior age bracket and
how many constitute the "more frail" senior population. This
information could dictate housing type policies since the data
indicates a younger senior would prefer a one story townhome
versus a more elderly person preferring a multi-story building.
Senior Housing
Oci�ober 28, 1988
Paqe 10
3. Additional research needs to be accomplished to determine
senior housing needs. The City Council, as part of a strategic
planning process, may want to consider including some or all
of the following additional studies in prioritizing future work
direction:
a. Inventory existing housing stock and identify housing
needs, including update of 1984 Metropolitan Council
information.
b. Determine age of low and moderate income seniors.
c. Determine low and moderate income seniors housing
preference.
d. Determine extent of City participation in a low to moderate
income housing development.
e. Analyze potential of housing improvements and relocation
assistance programs.
4. The City should encourage a range of elderly housing in
order to provide a choice of housing options for seniors. A
preliminary analysis reveals that townhomes and multi-story
rental units should be added to the current housing stock.
The types of market rate housing proposed by St. William's
church and Arkell Development Corporation respond to these
needs.
5. In reviewing elderly housing development applications, the City
should evaluate the proposal to determine compatibility with
surrounding property by utilizing the Comprehensive Plan and
Zoning Ordinance guidelines. Restrictive covenants should
be required to insure that developments remain as elderly
projects. The City may want to pursue a more proactive role
and conduct an analysis to identify sites for senior housing.
6. The City can financially assist senior housing via a range of
options which vary in degree of participation. Current
assistance policies help make potential projects more
affordable (St. William's proposal). Requests for assistance
such as the one proposed by Arkell Development Corporation
represent a departure from current policy by requesting a
higher degree of financial commitment. The City, in cases
where it owns land, should continue its policy of soliciting
proposals on a competitive basis. Conducting the studies
identified in item #3 may better define levels of participation
for the City Council.
7. Because senior housing and senior services are related, the
City Council may also want to include a senior service needs
analysis in a strategic planning process to determine future
work direction.
WRITTEN SOURCES
1. "A Study of the Market Feasibility of Senior Housing Adjacent
to St. William's Church", Maxfield Research Group, August 1987.
2. "Blueprint for Local Action: Housing and Service Needs of
Elderly and Disabled People in the Community", Metropolitan
Council, September 1988.
3. Memorandum from Jim Robinson dated April` 3, 1986, and
containing memos and reports on St. William's Parishioner Servey
and Elderly Housing Task Force.
4. "Estimated or Demand for Market Rate Housing for the Elderly
in the Twin Cities Area", February 18, 1986, Minnesota Housing
Finance Agency.
5. "Maturing Market: Twin Cities Soaked with Senior Housing"
Minnesota Real Estate Journal, March 28, 1988.
6. "Cottage Grove Approves Plans for HRA Senior Family Units",
Minnesota Real Estate Journal, August 29, 1988.
7. "Brooklyn Center Housing Units Suits Older Folks", Metro
Monitor, date unknown.
8. "Meeting Needs: Archdiocese Builds Affordabale Housing" ,
Minnesota Real Estate Journal, November 9, 1987.
9. "Posh Housing for Elderly is Booming", Minneapolis Star
Tribune, April 4, 1986.
10. "Suburbs Face Challenge as Residents Grow Older", Minneapolis
St�ar Tribune, November 4, 1985
11. City of Fridley Comprehensive Plan
12. City of Fridley Housing Plan and Program
13. "�Iore Than Shelter: Housing and Service Plan for Older
Pe��ple", Metropolitan Council, February 1984.
a
0
INTERVIEWS
1. Thomas Melchoir, Maxfield Research Group
2. Tom Koon, Housing and Urban Development
3. Connie Thompson, Senior Center Coordinator
4. Councilwoman Nancy Jorgenson
5. John Madsen, Minnesota Housing Finance Agency
6. Michelle Schnitker, Dakota County HRA
7. Meg McMonigal, City of Apple Valley
8. JoAnn Wright, Anoka County
9. Hal Freshley, Aging Department, Metropolitan Council
10„ Marlene Fearing, Twin Castle Homes
11.� Y. A. Korsunsky, A.I.A., Korsunsky Krank Erickson Architects,
Inc.
12., Shari Buss, Aging Department, Metropolitan Council
13. Evelyn Franklin, University of Minnesota
. s
�
�
cinroF
F���
TO:
FROM:
DATE:
COl1/IMUNI"fY D�VELOPMENT'
DEPARTMENT
MEMOR.ANDUM
William Burns, City Manager ���
�� �
Jock Robertson, Community Development Director
October 28, 1988
REGARDING: Tax Increment Financing Policy
In Minnesota, as in most states, cities have the prime
responsibility for the care and development of urban land. Tax
increment finance (TIF) is virtually the only tool available to
cities for positive action to reduce decaying and underutilized
areas and to precipitate sound economic development.
1988 Legislature
The 1988 Minnesota Omnibus Tax Bill contained a number of
provisions that could restrict the future use of TIF in the City
of Fridley. Attachment A, prepared by the League of, Minnesota
Cities (LMC) analyzes these changes. We in Fridley have been very
careful in our use of TIF and are not affected by most of the
additional restrictions, but two changes may well change our
ability to manage our land resources to create new jobs and tax
base.
1. Soils Condition District limits were reduced from 25 years to
12 years, and 50 percent of the qualifying acreage must have
development agreements. As you are aware, most of the
remaining vacant industrial land in the City has wet soils
requiring corrective measures before development. With these
restrictions, it would have been very difficult to create the
North Area TIF district. This district has assisted seven
projects which made a big difference in improving the northern
entrance to the City and stimulated a greater number of quality
industrial and business projects.
2. Two thirds of mixed use housing districts are now required to
consist of low income and moderate income housing. This
restriction may limit our ability to use TIF to assist elderly
housing projects outside existing districts.
Efforts to extend the "four year knockdown" provision to pre-1979
districts did not pass. This would have affected our top priority
Center City TIF district. As we know from experience, more than
Tax Increment Financing Policy
October 28, 1988
Page 2
four years are required to successfully negotiate development
agreements and to complete quality redevelopment projects.
Instead of rigorously pursuing redevelopment for the SW 1/4 and NE
1/4 of University Avenue & Mississippi Street, the HRA would have
to leave the future of these obsolete properties to the wishes of
absentee landlords.
1989 Legislature
At the end of the 1988 session, the Legislature served notice that
this had a warmup for much more extensive restrictions in the 1989
session. The LMC Development Strategies Committee has prepared a
policy statement on further limits of TIF (Attachment B) and the
LMC Board has been advised of the political implications for the
1989 session (Attachment C).
In discussion with LMC staff and staff from the ANSM, Senator
Reighgott has indicated that she would like to address some or all
of the following issues during the next session.
* tightening the "but...for" test
* veto authoritiy for counties.(and possibly schools)
* limits on "pooling"
* restrictions on economic development districts
* capping the percent of city value in TIF, or capping TIF
by dollar limits
Senator Frank is thought to share a number of these concerns,
particularly the issue of compliance with the "but...for" test.
He has also cited Wisconsin as a successful example of a situation
where counties and schools have veto authority. I have attached
(D) a comparison between Minnesota's Wisconsin TIF laws prepared
by Hennepin County.
While in the past, a few cities have misused the TIF enabling
Legislation, many of the restrictions proposed by Senator Reighgott
and used in Wisconsin are, in my opinion, too heavy handed, if not
downright counterproductive. For instance, the Wisconsin veto
option by other taxing districts is said to promote "log-rolling"
for "sweetheart" projects promoted by a taxing jurisdiction which
is not responsible for utilities or land use controls.
I have attached (E) a description of Fridley TIF projects completed
to date, with staff notations. While the LMC and the Northern
Mayors Association (NMA) are in the process of preparing some more
reasonable and productive guidelines for TIF use, I would suggest
consideration of the following ideas:
1. Incentives should be directly proportioned to benefits.
Tax Increment Financing Policy
October 28, 1988
Page 3
2. Time limits on the TIF district should be set by completion
of the projects and paying off of the bonds and other
financinq.
3. Cities should use predictable and explicit administrative
procedures in reviewing applications for TIF proposals. For
instance, the City of Oakdale requires application and review
fees refundable if the project proceeds and bonds are sold.
JR:ls
M-88-305
ATTACHMENT A
183 Uni�•ersit�• A�•c. East
St. Paul, AZI� 55101-2�26 May 9, 1988
League of I�'Iinnesota Cities ts12� 22�-5sc►o cF�x:2?�-os�s►
TAX INCREMENT FINANCING
-------------------------------------------
A Summary of Changes Made by the 1988 Legislature
The 1988 Omnibus Tax Bill contains a number of provisions that will
restrict cities' use of tax increment financing (TIF). Although some
of these restrictions are quite significant, the League was
successful in defeating several harmful measures that would have
tightened the tax increment law even more severely.
Next year the TIF lak� will face a more major challenge. The Senate
author, Senator Ember Reichgott (DFL-New Hope), has stated that she
intends to develop far-reaching TIF legislation for the 1989
legislative session. Some of the issues under consideration include
volume caps, restrictions on pooling projects, the "but-for" test,
and county veto authority.
O� Economic Development Districts
The 1988 tax law imposes new restrictions on economic development
districts within the seven-county metropolitan area. The increment
from these metro-area districts may not be used for development where
at least 25 percent of the square footage of the buildings is used
for retail food and beverage service, automobile sales or service,
recreation or entertainment facilities, galf courses, massage
parlors, tennis clubs, skating facilities, racquet sports facilities,
or racetracks. ' These restrictions do not apply outside the metro
area. Effort�to restrict economic development districts to
industrial development use only passed the Senate, but the conference
committee removed the provision.
Soils Condition Districts
The new tax law repeals soils condition redevelopment districts which
had a 25-year durational limit. Instead, it allows a special soils
condit'on district with a shorter au ation of 12 ears. The law '
defines the conditions necessary o qua i y as a soils condition
district. These requirements include: the restriction that unusual
terrain or soil deficiencies (that require substantial filing,
grading, or other preparation) account for 80 percent of the acreage
in the district; and that there be development agreements for at
least 50 percent of h s q afffying acreage.
uaCX�l.� ��1%� �� �/�i��l�-� � �7� 7%i� �r�� �Ist��
�J� il'N�LE-�l't�l�' '«-t� �R'4S�-t k1 [R� �T�1� '�Sr1C1CTIOlIiS
� The law restricts the use of increment from soils condition districts
to acquire the parcels, pay the costs of correcting the soil
problems, and pay associated administrative costs. Parcels within
the district cannot sell for less than the cost of acquiring the
property. An area which contains a wetland cannot qualify for a
soils condition district unless the development agreement provides
binding legal assurance for preservation of the wetland. For
districts in the metro area, the proposed development must also be
consistent with the city's land use plan and the Metropolitan Council
must review the plan. Outside the metro area, the proposed
development must be consistent with the city's comprehensive land use
plan.
Flaw in Calculating Original Mill Rate Affects 1988 Disticts
AThe new tax law contains a flawed provision that would reduce by 55
percent the original mill rate (original mill rate * 0.45 percent) of
districts certified during calendar year 1988, created after May 1,
1988. This original mill rate is used for the life of the district.
This provision was included in the House bill, and would have
adjusted mill rates according to the new classification ratios that
were in law for taxes payable 1989. These classifications were not
included in the final tax plan, however this adjustment was not
removed with the rest of the language. The State Revisor of Statute's
bill would have corrected this technical error, but it failed to pass
in the Senate. At the time this Bulletin went to press, it was not
known whether the revenue department would have authority to issue an
administrative order to disregard this technical error. Legislative
staff advise that the provision will remain in law if the legislature
is not called back for a special session, and that a retroactive
_� ! correction might be passed during the 1989 session.
D� Excess Increment � ,.
� � � �
The law now specifies the distribution of the excess taxes from the
captured value of a district. If the actual mill rate applied
against the captured value is higher than the original mill rate, the
resulting excess tax are to be distributed to the municipality,
county, and school district. The county auditor will calculate the
distribution according to mill rate growth by each jurisdiction since
the certification of the district.
dKSchool Referendum Levies
Certain districts certified before May l, 1988 will have to reimburse
school districts for tax increment attributable to mill rate
increases due to school referendum levies. In all cases, the
referendum must be approved after the TIF district was certified.
�-_. _ _ _
dK County Road Improvements
County boards may require TIF authorities to pay all or part of the
cost of county road improvements if: use of the road(s) would
substantially increase and be needed for the project, or if it is
soils condition district. If the road costs, combined with other
project costs, exceed the projected district revenues, the county
the TIF authority must negotiate a compensation agreement before
project may be approved. Counties may require new and existing
districts to also pay the "actual administrative expenses" by
February 15 of the year after the year the county incurred the
a
and
the
expenses. The county auditor must submit a record of the actual costs
to obtain payment.
Four-Year Knockdown
'i� ► / _ _ '�' t�'� �
r i .: -
�- -
.,
districts, and to exclude road and highway construction or
improvements as sufficient qualifications for the provision did not
pass. The only change to the knockdown provision was to require the
county auditor to be responsible for its enforcement based on
evidence submitted by the local authority before February 1 of the
fifth year following certification.
�Pre-1979 Districts
Pre-1979 districts, which originally had 30-year cut-off dates for
completion, must now end by April 1, 2001. Outstanding bonds issued
prior to April 1, 1990 for pre-1979 districts will be exempt from
this restriction and will need to adhere to the 2009 deadline.
The law clarifies the prohibition concerning "general government use"
of increment revenues to include pre-1979 districts. Increment may
not be used for aquisition, construction, renovation, operation, or
maintenance of a government building.
�'Three-Month Window
It will no longer be possible to exclude from the assessed value of a
project the value of improvements for which building permits have
been filed within the three months prior to the district's
certification. This provision had been known as the "three month
windok�,^' for previously planned improvements.
Housing Districts � �LY TO �. ��5�� �� N� ��`S��s
The new law modifies the definition of a"'housing district" to
require that two-thirds of the fair market value of mixed-use housing
projects consist of low-income and moderate-income housing. Thus,
one-third of housing projects may consist of commercial or other
non-housing properties. Current law does not regulate the percentage
of mixed-use housing projects. Increments from housing districts may
only finance housing projects (including related public improvements
and allocated administrative expenses).
__ _
N�
N�
Hazardous Substance Sites "
nHazardous substance� sites are created. A hazardous substance site
is an area for which the authority has entered into a development
agreement that provides for the clean-up, or a development response
action plan which provides moneys for clean-up. Development response
action plans are to include removal plans that have been approved in
writing by the PCA commissioner. Qualifications for these districts
are referenced in the waste control and environmental response and
liability acts.
The law stipulates that towns may not undertake TIF projects if they
are located outside the metro area or have a population of 5,000 or
less.
Miscellaneous
Unless both county boards agree to waive the requirement, cities
located in more than one county may not use the increment generated
by a district located in one county for project costs incurred in the
other county.
Along with county boards, school district boards must now receive
information on the fiscal and economic implications of a proposed TIF
plan at least 30 days prior to the public hearing on the district.
ATTACHMENT B
1988 LMC POLICY
DEVELOPMENT STRATEGIES
DS-1 Tax Increment Financing (A)
The Legislature should
th rnerstone of red
ze that tax increment finance (TIF) is
economic
e co
throughout Minnesota The Legislature should preserve TSF ra
seeking ways to curtail and limit municipal TIF authority.
s
than
Cities have the responsibility for the physical conditions and the
development of the state's urbanized land. Tax increment finance is
virtually the only tool available to cities for positive intervention
to arrest the spread of blight and slums and encourage sound economic
development. Moreover, since cities have the responsibility for
preserving and maintaining the state's physical development, cities
must have the authority for discharging that responsibility. TIF is
indi'spensable to cities in order to execute that responsibility.
Tax increment finance has permitted cities to plan and carry out
housing and economic development projects on their own initiative. It \
represents the most feasible and effective legal strategy which is
currently available to cities to preserve and improve their physical
and economic environment.
In view of the dramatic reductions in federal assistance for
development and housing, tax increment finance remains one of the few
options available for cities to promote growth and development in their
cities.
The League opposes volume limits or penalties for municipal use of tax
increment finance and the granting of a project veto to other taxing
jurisdictions.
Should the Legislature decide that particular tax increment finance
practices should be modified, those practices should be dealt with
through specific proposals rather than the establishment of a volume
limitation.
�
.�
__
League of Minnesota Cities
May 10, 1988
TO:
FROM:
RE:
ATTACHMENT C
183 Unirersih• A�•e. East
St. Paul, MN 55101•2526
(612► 22i•5600 (FAh: 221-0986)
LMC Board of Directors
Donald A. Slater, Executive Director
Tax Increment Financing
4.1
The Legislature enacted an ostensibly "non-controversial" set of tax
increment finance amendments as an article in the omnibus tax bill.
While the League succeeded in preventing the enactment of long-term,
substantive limitations, it was a close call. The Legislature
moreover, served notice that the 1988 session was only the prelude to a
much more extensive consideration of this vital area of municipal
authority.
The Reichgott bill
Senator Reichgott intrcduced a bill early in the session which dealt
with the recoa►mendations of the Legislative Auditor's office from their
report on tax increment of three years ago. Senator Reichgott also
included elements of League/NAHRO 1986 tax increment bill, which she
thought were non-controversial. The bill turned out to have a number
of problems for city tax increment pzograms which were unearthed as
the League/NAHRO Committee analyzed the bill.
Representatives of the League and NAHRO suggested a number of
improvements to the Senator. The greater part of which, she accepted.
We developed, in effect, an acceptable compromise.
The Reichgott bill moved through the legislative process--reviving
itself from the dead at least once. When the Senate Committee on
Taxes considered the bill, it was amended to eliminate economic
development projects and very nearly amended to exclude the proceeds
from the education portion of the levy from the increments Zeturning
to the municipality.
Floor consideration of the bill improved the economic development
prohibition by allowing economic development projects for industrial
uses and, in a surprise move, removing the application of the four-year
knock down provisions to pre-79 projects.
Representative Voss 4.2
Gordon Voss was a tax increment supporter and advocate three years ago
when the Schreiber tax increment finance bill was considered by the
House. He resisted the bill ir. committee and sought amendments on the
floor of the House. When he became chairman of the House Committee on
Taxes, he specifically assured the League that he did not £hink that
the Legislature needed to enact any tax increment legislation.
Representative Voss changed his mind. He responded to the
establishment of a soils correction district in Blaine--the city he
represents. He concluded that this Nabuse~ of tax increment should be
eliminated. He recruited Representative Rest to sponsor a bill
using the Reichgott's original bill as a model and adding further
restrictions.
A subcommittee of House Taxes held one brief hearing on the Rest bill
and approved it with negligible changes. The Rest bill next appeared
as an article in omnibus tax bill on its way to conference with the
Senate.
�
Conference_Report
Serious bargaining produced the tax increment amendments of 1988 which
did no major damage to tax increment but contained an error. The error
�- was corrected in the Revisor's bill, but the Revisor's bill died in the
Senate when it became laden with other failed, substantive bills. The
error--requiring that the original mill value of tax increment
districts certified after May 1, 1988 for the balance of the calendar
year be reduced by 55$. We are seeking correction of this error
through requesting administrative action by the Revenue Department.
Implications
The Legislature served notice that more regulations of tax increment
are a distinct possibility. Senator Reichgott promises to return to
the controversial issues--overall tax increment limits; county veto
of municipal projects; pooling projects; and the �but for� test--in the
next session of the Legislature. -
The Senate Tax Committee proved a very hostile environment for tax
increment, falling only one vote short of adopting the elimination of
education mills from increments returning to the municipality.
The House Committee proved totally willing to follow the lead of their
chair in adopting restrictive amendments.
County governments produced a host of full time representatives to
pursue with great vigor tax increment limits.
0
0
Response
4.3
The League is developing a program to improve our posture.on tax
increment for the 1989 session. Action steps include:
A general meeting of tax increment cities for current
status reports
The convention of a general meeting of all the friends of
tax increment from the private and public sectors
Contacting the developers organizations
Contacting appropriate labor unions
Reconstituting an alliance of all tax increment
supporters
H�� �
Reconsidering the tax increment study���^' �`' i �"-
Developing an affirmative press program
Scheduling several positive tax increment exposures by
members of the Legislature before the 1989 session
The general involvement of inembership in the campaign
�- l�C-�.�C c�-n, �+�x�rr � .
���
_ _
AT AC�MENT D
C rison oi Select !'eatures of
at�
Minnesota and Wisconsin Tax Increment La�ws
WISCONSIN MIrII�ESOTA
TYPES OF D2STRICTS:
Incremen a D s r c Ae eve opmen D s r c
Housinq District
Econoaaic Developnent District
Grnndfathered Districts
APPRONAL PROCESS:
Approva Jo n ew Boar P an s e o aun y c o0
ceamprised of tepres�ntatives fro;a Board, but their approva�l is not
affected Taxing Di$tricts and the required. Public hearinq required,
public. but no public approval required.
APPRaVAL CRITERIA:
But For Test. But For Tes .
2? Does econanic benefft outweigh costs
of improvements t�nd loss of tax revenue
of overlying taxing districts?
BLIGHT TEST:
AL 1!ZlSL 5U� OI �ret► IAt!$t D@
1j In neea of rehabilitr�tion
conservation work, or
2) Area must be suitable for
site.
or
industrial
1) 70$ of parcels occup�ed by improve-
ments, and 50� of the ba�ildings
require substantial renovntion;
or, 20$ of buildings structurnlly
substandard and 30� requfre sul}
stantial renovation or clearance to
remove inadequate, inco�tible,
overcrawded conditions, obsolete
buildings or other ha�zards to w�ell-
being of community.
2) Unusual soil/terrain deficiencies.
3) Underutilized nir rights.
4) Vacant or inappropriately u�sed rail
yards or rail facilities.
VAC�11�t'I' LANll:
Not more o area may vacant, Re eve opmen :
land, except for industrial sites. 70� of pnrcels vacant, but with soil
or terrain deficiencies.
Economic Development:
May be 100� vt+ct�nt land. ,
Com�arison of Selected Features of
Mir�nesota and wisconsin Tax Increment Lews
2
WISCONSIN MINNESOTA
CONTIGLIOUS PARCELS:
Must contiquous parce 6. May con iquous or noncon guous.
TIP'iE LIMIT TO C�Oi�'�LETE IMIF'RONFrN�NTS :
No expen itures a ter: No time inu ta on on expe i ures
1) 5 years for districts after 12/31/80; UNLESS no w�rk has bequn on � p�►rcel
2) or 7 years after 5/ln6 to 12/31/80; within four years of certification;
3) or 8 years - districts created before then, parcel deleted fro�n district.
5/4�16 ;
unless plan is modified and approved.
LIMITATION OR CAP ON CAP'I'lJRP:D VALUE:
Aggregnte va ue o equa ze e No r� on.
value" may not exceed 5� of total value
within a city.
D1JR11TION OF DISTRICTS:
Termination at ear er o: Gran a ere s r cts- ore
1) When TIF equals expenditures/cogts, 30 years from 8/1/79.
or
2) 15 years after the last expenditures
are made. No expenditures can be
made later than 5 years after creation
of district certified after 12/31/80.
Redevelopment: 25 years from date of
receipt of first increment.
Housing: 25 years from date of
receipt of first increment.
Economic Development: 8 years from
receipt of first increment, but
not more than 10 years after
crention.
REPORTING REQUIREMP�QTS:
Department o Revenue or CPA must �+u it Unau ite annua i6c osure repor s.
to determine if all transactions are
made in a legal and proper manner in
accordance with the project law.
Prepared by The Department of Property Tax and Public Records, Hennepin County
3/23/88
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