CITY OF TALLAHASSEE
CITY COMMISSION AGENDA ITEM
ACTION REQUESTED ON: November 10, 2009
SUBJECT/TITLE: Discussion of K2 Urbancorp’s Request for an Extension to the Evening Rose Inclusionary Housing Unit Letter of Credit
TARGET ISSUE: N/A

STATEMENT OF ISSUE

On July 10, 2006, the City entered into an agreement with K2 Urbancorp that provided development incentives in exchange for the developer’s commitment to build ten (10) inclusionary housing units within phase I of the Evening Rose development within a three (3) year period. As with many other developments, lot sales in the Evening Rose development have slowed substantially, which has reduced the cash flow available to move the development forward. For this reason, the developer is requesting an extension to allow an additional two (2) years to construct the inclusionary housing units.

RECOMMENDED ACTION

Option #1: Approve a two (2) year extension to the Evening Rose Letter of Credit with the conditions outlined in Attachment #1.

FISCAL IMPACT

If the extension to the Evening Rose Letter of Credit is not approved, the City is authorized to draw the $200,000 for deposit into the City’s Inclusionary Housing Trust Fund. However, while the proposed extension would delay the time frame for collecting the funds, it would facilitate the developer’s ability to provide the inclusionary housing units onsite. If the units are not constructed, the City could still draw the funds within two (2) years. The Budget Office and City Attorney’s Office have reviewed this item and concur that it meets City guidelines.

Robert L. Herman, Director, Growth Management Department

Anita Favors Thompson, City Manager

For information, please contact:  Karen Jumonville (850) 891-7030

 

SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES

The Evening Rose development consists of two (2) phases and is planned to include up to 209 residential units (99 dwelling units in phase 1 and up to 110 dwelling units in phase 2) and up to 185,000 square feet of retail and office uses. The City and K2 Urbancorp entered into the “Evening Rose Development Agreement” on January 22, 2007, which specified the standards and incentives for the development. The agreement stipulated that ten (10) inclusionary housing units would be provided in each of the two phases of development for a total minimum of 20 inclusionary housing units. The incentives provided to the developer in exchange for the inclusionary housing units included concurrency reductions, expedited permit application reviews, reductions in landscaping and urban forest, and flexibility in development standards through the designation of the development as a Traditional Neighborhood Design (TND) pilot project. The City and the developer memorialized these commitments in the Evening Rose Inclusionary Housing Agreement executed on July 10, 2006.

The Evening Rose Inclusionary Housing agreement specified that K2 Urbancorp would commit to providing ten (10) onsite inclusionary housing units and required a $200,000 letter of credit as performance security prior to approval of the preliminary plat. The agreement further stipulated that if the inclusionary housing units are not provided within three (3) years from the approval date of the preliminary plat, the performance security shall be forfeited. The terms of the letter of credit authorize the City to “call” the letter of credit no later than November 30, 2009.

Unfortunately, the severe downturn in the economy has impacted the demand for new residential housing units nationwide. Because the downturn has affected the sale of lots within Evening Rose, the developer is requesting an extension to allow an additional two (2) years to construct the inclusionary housing units. The Tallahassee State Bank has acknowledged their willingness to extend the letter of credit for this time period.

While the City has the authority to call the letter of credit and deposit the $200,000 in the City’s inclusionary housing trust fund, staff is recommending approval of the extension request in an effort to facilitate construction of the inclusionary housing within the Evening Rose development, as originally envisioned. The inclusionary housing component was an integral part of the Evening Rose concept plan, as the development was predicated on the notion of providing a range of housing opportunities through a variety of residential types. Furthermore, the development was designed to encourage the distribution of affordable housing opportunities throughout the Evening Rose community. While depositing the $200,000 in the inclusionary housing trust fund may provide more immediate housing benefits, staff recommends providing an extra two (2) years to allow the developer the opportunity to provide the housing within the Evening Rose development as originally conceived.

If the Commission chooses to approve the extension of the letter of credit, staff recommends establishing “milestones” to ensure that adequate progress toward construction of the inclusionary housing units is made in a reasonable time period. Specifically, staff has developed the following construction sequencing milestones for your consideration:

Staff believes the milestones above constitute reasonable thresholds with which to evaluate the progress of the development. As mentioned above, the terms of the Letter of Credit could be written to specify that the City is authorized to draw the $200,000 prior to the expiration of two (2) years (30 days after the elapsed deadline) if any of the construction milestones are not met by the developer. The proposed terms are described in Attachment #1, which is a letter from Robert Herman to Dave Wamsley dated October 13, 2009.

CHARITABLE CONTRIBUTIONS

N/A

OPTIONS

1. Approve a two (2) year extension to the Evening Rose Letter of Credit with the conditions outlined in Attachment #1.

Pros:

a) Encourages the provision of inclusionary housing within the Evening Rose development as originally envisioned.
b) Provides the developer with some relief during the economic downturn.
c) Ensures that the developer makes adequate, continuous progress or the City can draw the letter of credit.

Cons: The $200,000 will not be immediately available in the City’s Inclusionary Housing Trust Fund.

2. Approve a two (2) year extension to the Evening Rose Letter of Credit without the conditions outlined in Attachment #1.

Pros: Provides the developer with more flexibility regarding the timing of construction within the two (2) year time frame.

Cons: Does not give the ability for the City to draw the letter of credit until the end of the two (2) year time frame if the units are not constructed.

3. Do not approve a two (2) year extension to the Evening Rose Letter of Credit.

Pros: The City has the authority to draw the Evening Rose Letter of Credit and deposit $200,000 into the City’s Inclusionary Housing Trust Fund.

Cons: The inclusionary housing units will not be constructed within the Evening Rose
Development, as originally envisioned.

4. Provide alternative direction to staff.

Attachments/References

Attachment #1: October 13, 2009 Letter from Robert Herman to Dave Wamsley, K2 Urbancorp.