Council Provided Information - 9/13/20221
BOARD STAFF REPORT
THE REDEVELOPMENT AGENCY of SALT LAKE CITY
TO:RDA Board Members
FROM: Allison Rowland
Budget & Policy Analyst
DATE:September 13, 2022
RE: RESOLUTION: SELLER’S NOTE AND GAP LOAN FOR SPARK, AT 1500 WEST NORTH
TEMPLE
ISSUE AT-A-GLANCE
The Board will consider adding $8 million in financing to the Spark mixed-use, mixed-income project at the site
of the former Overniter Motel, on 1500 West North Temple. As mentioned in the previous project briefing (See
Attachment C1), RDA staff proposes that $4 million of the amount would be in the form of a “seller’s note,”
which would allow the developer, Brinshore, to repay the RDA for the original purchase price of the land over 30
years at 1.25% interest. The request for the remaining $4 million comes as the result of construction cost
increases, which are estimated to raise project costs from $70 million to $93 million. This amount is proposed to
be filled by a 30-year emergency gap loan, at 2.00% interest, which could be drawn from available amounts in
several existing RDA funds.
The Spark development is planned as a mixed-use, mixed-income development on the two-acre site, with 200
deed-restricted residential units, including 63 family-size units (two, three, and four bedrooms) whose rents
would range from 20-80% AMI. It also would include approximately 4,000 square foot daycare facility to serve
Spark residents and others with fees on a sliding scale based on income, and about 5,000 square feet of
commercial space. In addition, it would offer 100 structured parking spaces, a transit-oriented plaza, and a
publicly accessible mid-block walkway that connects Cornell Street and 1460 West.
RDA staff suggests that the Board could provide final approval for the $4 million seller’s note during the
September 13 meeting, as well as potentially taking a straw poll on the first step toward approval of the gap loan
proposal, which would be to approve concentrating funds from various RDA accounts (see section B below).
RDA staff could then include that $4 million in RDA Budget Amendment #2 for authorization in the October
meeting, and potential adoption in the November meeting. This would ensure the funds are available by the
project’s planned December closing. Groundbreaking has been tentatively rescheduled from Fall, 2022 to Spring
2023.
Item Schedule:
Briefing: September 13, 2022
Set Date: n/a
Public Hearing: n/a
Potential Action: October 4
Page | 2
The RDA Finance Committee reviewed the seller’s note terms plus the gap loan terms, and unanimously
recommended approving both.
Goal of the briefing: Discuss proposed additional RDA financing totaling $8 million for the Spark
development at 1500 West North Temple. Consider approving the resolution included in the transmittal for the
$4 million seller’s note. Consider strawpolling the proposal to consolidate $4 million in RDA funds for the
emergency gap loan, which would be included in RDA Budget Amendment #2.
ADDITIONAL INFORMATION
A.Seller’s Note. RDA staff proposes that $4 million of the financing amount would be in the form of a
“seller’s note.” The seller’s note does not require any additional expenditure by the RDA at this point
because it purchased the property in 2017. The seller’s note mechanism would allow Brinshore to repay the
purchase price of the land over 30 years at 1.25% interest. The amount of this seller’s note is based on the
land’s appraised value at that time. It was determined as the price for the property in the 2018 pre-
disposition and RFP process, plus the subsequent Purchase and Sale Agreement with Brinshore.
B.Gap Loan. The $4 million gap loan would carry 2.00% interest, with funds drawn from available amounts
in several RDA Funds (see below). It would be repaid over 30 years with cash flow payments.
1. Proposed sources
Primary Housing Fund, Property Acquisition $1,500,000
North Temple Strategic Intervention Funds $1,500,000
Housing Development Loan Fund (HDLP),
Fall 2022 NOFA $1,000,000
Total for Project Gap Loan $4,000,000
2.Proposed approval process
September Board straw poll to potentially approve
concentrating funds from various RDA accounts
October Briefing on RDA Budget Amendment #2 for $4
million gap loan
November Potential adoption of Budget Amendment #2
C.Interest Rates. In response to a Council staff question about how the proposed rates were set, RDA staff
provided the following information.
“The project received two NOFA allocations prior to the Gap Loan request (in
2018 and 2019) and the terms for that funding were established through the
NOFA process. The 2018 allocation terms were a 2% interest rate, 30-year term,
and cash flow repayment. The 2019 allocation terms were a 1-3% interest rate,
up to 40-year term, and cash flow repayment. In order to combine the
allocations into one loan for efficiency, Brinshore agreed to both allocations
having the same terms (within what was previously approved) at a 2% interest
rate, 30-year term, and cash flow repayment. With the Gap Loan request, it also
Page | 3
matches the terms of the NOFA allocations so that the Agency can reduce
complication and issue and manage one loan for efficiency. For the Seller’s Note,
our most recent Note transaction was for the project on 255 S. State which had a
proposed interest rate of 1%. The interest rate is proposed as higher for this
project at 1.25, but also is lower than Fed rates so that the project can still
pencil.”
D.Total RDA Investment. If the seller’s note and gap loan are approved, total RDA participation in the
Spark project would be $14,456,000, which is slightly lower as a share of the full project cost than initially
estimated.
August 2020 September 2022
2018 NOFA 2,500,000 2,500,000
2019 NOFA 3,956,000 3,956,000
NEW Seller's note 4,000,000 4,000,000
NEW Gap loan request 0 4,000,000
Total RDA participation if
new loans approved $10,456,000 $14,456,000
Total development cost
(approximate) $60,000,000 $93,000,000
RDA Share 17.5%15.5%
E.Funding Background. The Board authorized RDA purchase of the former Overniter Motel property in
2017 for $4 million. In 2018, the project was awarded to Brinshore through a competitive RFP process, and
City funding totaling nearly $6.5 million was awarded through the 2018 and 2019 Notices of Funding
Availability (NOFAs). RDA staff reports that the project is now in the final due diligence stage with
Brinshore finalizing their capital stack in anticipation of closing in December. The project received 4% Low
Income Housing Tax Credits (LIHTC) with a closing deadline of March 1, 2023. The project is anticipated to
begin construction in Spring 2023, and the project completion date was recently updated to 2025.
In an earlier staff report it was reported that Brinshore had been awarded 9% LIHTC in 2021 but the
developer decided to opt for a 4% only project because the 9% credits would have expired before the project
could be completed. Also, combining 4% and 9% credits would create significant design and cost
implications, and funding the project with only 4% credits is more efficient for ongoing operations and
compliance once the project is complete.
F.Site Plan Details.
1.Midblock Crossing. The midblock crossing will be publicly-accessible and privately owned and
maintained. It will be located on the north side of the building.
2.Internal Courtyards. In response to a question, RDA staff reports, “There are two separate internal
courtyards within the central section of the project. The on-grade courtyard – adjacent to the
commercial – will be publicly accessible, while the private residential courtyard will be located on the
rooftop of the first story. [..] The separation between the public and private courtyards will be created
by the elevation change between the ground level and first story.”
Page | 4
G.Board Resolution on Affordability Limits. In 2017, the RDA Board expressed concern about the
potential for a project on this site to further concentrate less-valuable housing on the City’s West Side. It has
been the Board’s policy, instead, to try to disperse new affordable housing units across parts of the City
where access to opportunities for residents is greatest, while encouraging greater diversity in the housing
choices offered on the West Side. For this reason, in 2017 the Board passed a resolution to prohibit future
site development at the former Overniter location from offering more than half of the total units as
affordable housing. As provisionally planned, RDA staff considers the Spark development to meet the
criteria established in the resolution because the unit mix for the project includes 50% of units at 70-80%
AMI (per LIHTC standards) which is currently above market-rate rents for the neighborhood.
ATTACHMENT
Attachment C1. RDA Staff Report, August 24, 2021