HomeMy WebLinkAboutCouncil Provided Information - 8/24/20221
BOARD STAFF REPORT
THE REDEVELOPMENT AGENCY of SALT LAKE CITY
TO:RDA Board Members
FROM: Allison Rowland
Budget & Policy Analyst
DATE:August 24, 2021
RE: INFORMATIONAL: UPDATE ON THE SPARK! PROJECT (FORMER OVERNITER
MOTEL) AT 1500 WEST NORTH TEMPLE
ISSUE AT-A-GLANCE
The Board will be updated on several proposed changes to the Spark project agreement with the developer,
Brinshore, for their project at the former Overniter Motel site, on 1500 West North Temple. The new project
would be a mixed-use, mixed-income development on the two-acre site, with 200 residential units and 4,000
square feet of retail space. It would also include a transit-oriented corner plaza to meet the applicable policy
goals of Salt Lake City’s Transit Station Area zoning, as Board directed in a 2017 Resolution authorizing the
Request for Proposals (RFP) for the site. The total cost for the project has been estimated at about $70 million
but volatile prices for construction materials mean this number will continue to fluctuate. Ground breaking has
been tentatively scheduled for fall, 2022.
The property was purchased by the RDA in 2017 and at that time, in an effort to avoid further concentrating less-
valuable housing on the City’s West Side, the Board’s RFP resolution also prohibited future site development
from offering more than half of the total units as “affordable” under Federal guidelines (Attachment C1). 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). Most recently,
9% LIHTC (Low-Income Housing Tax Credits) were awarded in 2021. This has allowed Brinshore to move
toward a more detailed proposal for the mix of affordability and sizes for the residential units in the project.
Further refinement of the proposal will depend on whether the developer is awarded 4% credits later this year.
The Board is not asked to make to any decisions on the project at this time, but may wish to consider the policy
question listed at the end of this staff report.
Goal of the briefing: Receive information on several potential changes to the Spark mixed-use, mixed-
income development project which is located at the former Overniter Motel property at 1500 West North
Temple.
Item Schedule:
Briefing: August 24, 2021
Set Date: n/a
Public Hearing: n/a
Potential Action: n/a
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ADDITIONAL INFORMATION
A.Board Resolution on Affordability Limits. 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
(Attachment C1). As provisionally planned, RDA staff considers the Spark development to meet the criteria
established in the RFP because LIHTC policy now considers rental prices below 60% AMI as “affordable.”
See Policy Question section, below.
B.Provisional AMI Mix. Beginning in 2018, the LIHTC program changed its policies to allow “income-
averaging,” which means these credits can be used in projects where the average of all unit rental prices is 60%
AMI, rather than only where all units are priced at or below that level. This means some units in a development
may rent at higher levels (70% to 80% AMI), which can help subsidize new, deeply affordable rents for other
units. In the Spark development, Brinshore currently anticipates that exactly half (100) of the total units be
priced at 20% to 50% AMI, while the other half be offered at 70% to 80% AMI (see chart below). The 70% to
80% range currently coincides with market rate prices in the area. The standard 50-year deed restriction on
affordability would still apply to all of these units, which would guarantee they remain affordable as market
rates rise. The developer will further refine the unit mix depending on whether the project is awarded 4%
LIHTC, so some changes are possible, but the plan is to provide a mix similar to the structure below. Brinshore
anticipates that roughly 30% of the units will be “family size,” that is, two-, three-, or four-bedroom units.
Provisional AMI Mix
Affordability
range
Number of
units
80% AMI 30
70% AMI 70
60% AMI 0
50% AMI 22
40% AMI 30
30% AMI 43
20% AMI 5
Total units 200
C.Potential Financing Gap. RDA staff will continue to work to determine the Spark project’s funding gap,
which will depend on whether 4% LIHTC are awarded, the unit mix, and the evolution of construction costs. A
rough estimate of funding sources appears in the RDA staff’s August 9, 2021 transmittal, but these will be
refined as the process continues. The key point is that adding unrestricted (market rate) units to the project
would result in a larger financing gap because this reduces LIHTC equity. This means that if RDA were to
fund a gap created by adding market rate units to the project, it would essentially be directing public subsidies
to these.
Depending on how the finalized unit mix, sources and costs play out, RDA staff may propose to provide a
seller’s note to Brinshore to help fill any remaining gap. This would essentially finance the project’s purchase of
the property, which cost $4,000,000 in 2017. RDA staff will continue to work with the developer to evaluate
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land disposition options and related cost-benefit analyses, and any potential discount options will be brought to
the Board for final approval. An RDA seller’s note is also part of financing for Brinshore’s 255 S. State project,
most recently reviewed and amended by the Board in 2020.
POLICY QUESTION
1.Would the Board like to discuss whether the Spark project may be a good candidate for an
exception to the general policy of encouraging new affordable housing units to be dispersed
across parts of the City where access to opportunities for residents is greatest? The Board
might wish to consider this question in the context of the ongoing housing crisis, which includes an
especially pressing need for housing for people with low to middle incomes, as well as a desire to see this
property developed since the City has owned it since 2017 and it could help further the RDA’s broad efforts
along North Temple.
SPARK!
1 5 0 0 W . N O R T H T E M P L E
A U G U S T 2 0 2 2
TRAX
LOCATION 1500 W. North Temple
Former Overniter Motel
North Temple Project Area
PARCEL DETAILS
Formerly the Overniter Motel
Tier 1 Property
2.07 acres
North Temple/Cornell Station Area Plan
TODAY
Background
Public Benefits
Affordable Housing Elements
Project Funding Sources, RDA
Participation & Seller's Note Financing
(Solving For): Gap Financing Request
Options
Next Steps
2017
Acquisition
funds
approved
2018
Developer
selected:
NOFA
awarded
2021
Due
diligence:
LIHTC
financing
finalized
2025
Project
completion
2019
Due
diligence:
NOFA
awarded
2022
Due
diligence:
Financing
finalized
Closing
2023
Spring:
Break
Ground
PROJECT TIMELINE
Affordable workforce & family size housing units
200 residential units
63 family sized units, 20-80% AMI
Healthy Living Programs such as meditation,
yoga, exercise
~5,000 sf of Neighborhood Serving Retail
Neighborhood activation
Outdoor Dining Opportunities
~4,000 sf Daycare Facility
Serves Spark residents and low-income
members of the community at a sliding
scale cost
Midblock Walkway
High Level of Design
Building Sustainability Measures: Enterprise
Green Communities, ENERGY STAR
Multifamily New Construction
PUBLIC BENEFITS
Transit, Pedestrian, & Bicycle Oriented Design
Corner Plaza
Open Leisure Space
Bicycle Storage
Interconnected Location
Structured Parking
Free to low-income residents per LIHTC requirements
~10 EV Charging Stations
Davis Bacon fair wages
63 family-sized units
50% of the units (100 total) affordable to households at
or below 60% AMI (ranging from 20-60% AMI)
50% of the units (100 total) affordable to households
between 70% and 80% AMI (currently market rate
range for the neighborhood)
100% deed restricted for affordability into the future
Unit mix maximizes ~$42.5 Million LIHTC equity to be
invested in the North Temple area
200 Total Units
IMPACTFUL UNIT MIX Affordable workforce & family size housing units
FUNDING SOURCES
*Pie chart & capital stack provided by Brinshore
~$42,540,000
RDA PARTICIPATION TO DATE
2018 NOFA: ~$2.5M
2019 NOFA: ~$3.9M
2%, 30 year term, CF
Total: ~$6,456,000
Paid back in full, plus interest
SELLER'S NOTE FINANCING
$4M
Established in 2018
1.25%, 30 year term, CF
Paid back in full, plus interest
GAP LOAN REQUEST
$4M
2%, 30 year term, CF
Paid back in full, plus interest
COST SAVING MEASURES
~$6.1M in Value Engineering
Removal of underground parking, balconies,
unit reconfiguration, reducing green roof space
Applied for/received UHC increased basis: $.5M
Applied for additional Olene Walker Funds
Applied for additional Philanthropic Funds
DEVELOPER CONTRIBUTION
Funding predevelopment (~$1,600,000)
$3,000,000 deferred developer fee
Guarantees (construction completion,
operating deficit, tax credit compliance)
Commercial Master Lease (~$70,000/year)
Construction cost increases
Material & transportation costs
Supply chain issues
Interest rates rising
Cost of power infrastructure
COST INCREASES
POTENTIAL FUNDING OPTIONS
~$60M TDC
RDA Participation: $10,456,000 (2018 & 2019 NOFA and
Seller's Note)
RDA % of TDC: 17.5%
~$93M TDC
RDA Participation: $14,456,000 (2018 & 2019 NOFA, Seller's
Note, and Gap Loan)
RDA % of TDC: 15.5%
2020:
2022:
Further Value Engineering / Removal of
Commercial:
~$650-700K in additional cost savings
September:
Seller's Note approval
Gap Loan straw poll
October:
Gap Loan:
Agency staff returns with applicable Budget Amendment
Public hearing
November:
Gap Loan final approval
December:
Spark project closes by end of year and within deadline
POTENTIAL NEXT STEPS
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