Title
Agreements with TWG Phoenix LP and Ratification of Applications for Grant Funds for Development of Sunland Flats Affordable Housing Project (Ordinance S-47752)
Description
Request to authorize the City Manager, or his designee, to enter into a development agreement and deed restriction, and any other agreements as necessary (Agreements), with TWG Phoenix, LP, or its City-approved designee (Developer), for the development of the Sunland Flats affordable housing development project at 227 W. Sunland Ave. (Site). Also request ratification of the City's applications for Community Development Fund Grants from the Phoenix Community Development & Investment Corporation (PCDIC) and the Phoenix IDA (PIDA). Further request authorization for the City Treasurer to accept funds, and for the City Controller to disburse funds, related to this item.
Report
Summary
The Developer has a reservation of nine percent Low Income Housing Tax Credits (LIHTC) awarded by the Arizona Department of Housing (ADOH) under its 2020 Qualified Allocation Plan (QAP) for the proposed development of Sunland Flats, a 90-unit affordable housing community to serve households making no more than 50 percent of the Area Median Income (Project). The Project, aimed toward families, will include 60-three bedroom with two bathroom units, 30-two bedroom with one bathroom units and will feature a playground and swimming pool. The Project is located approximately 1/4 mile from the South Central Light Rail Extension currently under construction.
Upon receiving its LIHTC reservation under the QAP, Developer conducted its pre-construction activities and found significant archaeological findings, including human remains, on the Site. The extent of the archaeological findings and the requirements to the Developer to excavate, catalog and transport artifacts at the Site has placed a tremendous financial burden on the Project making it unviable. Developer engaged the City to request participation in the Project to financially assist in remedying the Site so it can be developed as planned.
City staff identified grant funds available from the PIDA and PCDIC that could be utilized as part of the assistance package to the Developer. Staff applied for these grants and on May 25, 2021, was awarded $110,000 from the PIDA, and on May 27, 2021, the PCDIC approved the City’s application for an award of $110,000. These awards are contingent on City Council's approval of this item. Each grant is for the purpose of defraying Site-specific archaeological costs in order for the Project to be built. In addition to the $220,000 in grant funds, staff proposes to make up to $280,000 in City reimbursements available for the Project for an assistance package not to exceed $500,000 to the Developer. This assistance is subject to the following business terms negotiated between the Community and Economic Development Department (CEDD) and the Developer:
Developer and City shall enter into a Development Agreement (DA) within six months of City Council approval.
Within six months of City Council approval, Developer shall receive building permits to construct the Project.
Upon City Council approval and execution of the DA, the City Treasurer shall accept up to $220,000 in grant funds from the PIDA and PCDIC. These funds shall be subject to the following terms and restrictions:
Once the DA is signed, Developer may apply in writing for the PIDA and PCDIC grant funds to be directed toward qualifying archaeological costs, which shall be reviewed and approved by CEDD and the City Archaeologist.
Should the Developer fail to obtain a Certificate of Occupancy (CofO) for the Project by December 31, 2023, the Developer must reimburse any grant funds utilized to the City.
Additional conditions on Developer's use of the grant funds may be specified in the DA.
4. Upon receiving the CofO for the Project, Developer must execute a 15-year deed restriction on the Site, restricting the use of the Site to providing affordable housing only (Deed Restriction).
5. Upon receiving the CofO for the Project and recording the Deed Restriction, Developer may submit to the City in writing for the following reimbursements:
City will reimburse the Developer for public infrastructure improvements constructed by the Project. Developer must obtain the City's written pre-approval of the exact scope and cost of the public infrastructure improvements to be eligible for reimbursement, and the public infrastructure improvements pre-approved by the City must be accepted by the City prior to reimbursement. Improvements eligible for reimbursement may include curb, gutter, sidewalk, streetlights and landscaping in the public right-of-way. Developer estimates these improvements to cost approximately $87,000. Developer must substantiate infrastructure improvement costs for the City to verify prior to reimbursement.
City will reimburse the City's share of construction sales tax generated by the Project. Developer estimates this amount to be approximately $136,000. Construction sales tax revenues must be verified by the City prior to reimbursement.
To account for cost overruns in the public infrastructure and construction sales tax categories, Developer may reallocate the reimbursable amounts between categories so long as the total reimbursable expenses in these categories do not exceed $280,000.
Should Developer fail to maintain its obligations under the Deed Restriction, the Developer will be responsible for a partial reimbursement to the City for amounts reimbursed, including the grant funds. This reimbursement will be calculated based on a ratio reflective of the amount of term not satisfied under the Deed Restriction by the Developer, and the City may place a lien on the Site if the Developer does not timely reimburse the City.
6. The Agreements may contain other terms and conditions deemed necessary by City staff.
Developer anticipates construction commencement in July 2021 with completion in December 2022. Affordable rents at the Project will be secured under a Land Use Restriction Agreement between the Developer and ADOH. The estimated value of the year-one public benefit generated from the Project is $651,240.
Financial Impact
Funding to reimburse the Developer for the public infrastructure improvements is available in the Downtown Community Reinvestment Fund and will not exceed $144,000. The construction sales tax reimbursement will not exceed $164,500. The total City combined reimbursement shall not exceed $280,000.
Location
227 W. Sunland Ave.
Council District: 7
Department
Responsible Department
This item is submitted by Deputy City Manager Ginger Spencer and the Community and Economic Development Department.