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Silvertip Apartments Summary Economic Background According to recent Census number, over 4,400 Missoula renter households pay at least 30% of their income towards housing costs, a situation the U.S. Department of Housing and Urban Development (HUD) considers “cost burdened.” o Of the 4,400 cost burdened households, almost half pay over 50% of their income for housing, a situation HUD considers “severely cost burdened.” The vacancy rate for all rental housing in Missoula has remained low—below 5%—for most of the past five years, and is closer to 1% or less for assisted housing. The Area Median Income (AMI) for a household of 4 in Missoula is $59,400. The same size household at 50% AMI (low income) earns $17,800, at 80% AMI earns $47,500 (moderate income), and at 120% AMI (middle income) earns $71,280. The average price of a home is $209,000. Assuming a 10% down payment and a 30 year mortgage at even households at 120% AMI would be paying well over 30% of their income for housing if they purchased a home. Tax credit projects and most nonprofit housing projects serve individuals and families earning below 60% of area median income. There are few serving moderate and middle income individuals and families earning between 60-120% of area median income, which Silvertip will serve. The Project Located at 1311 E. Broadway, site of former Missoula Athletic Club, which has been foreclosed. Components of the project are: o Purchase of site o Demolition/deconstruction of former gym and climbing wall on-site; climbing wall may be sold or donated o Construction of 115 units of rental housing The City of Missoula and Rocky Mountain Development Group (RMDG), a national developer with its headquarters in Missoula, are partners in the development. There will be a 35-year use restriction with a land use restriction agreement encumbering the deed ensuring the property is operated as affordable housing—affordable so that those households making 120% AMI or less pay no more than 35% of their income on housing. A minimum of 9 units will be ADA compliant—at least 6 for physical disabilities and 3 for sensory (sight, hearing) disabilities. RMDG has initiated discussions with Opportunity Resources, Inc. (ORI) about exceeding the minimum federal ADA compliance standards to meet the greater needs of ORI clients. As per the NSP guidelines, rents will be limited to the lesser of 35% of gross income or the published HUD Fair Market Rent (FMR) making the units highly affordable and competitive for the target population. o Fair market rents are $722/month for a two-bedroom unit, and $572 for a one-bedroom unit. o Unit rents include all utilities. The Funding Sources (type) o $5,000,000 Neighborhood Stabilization Program (NSP) (grant ) o $1,000,000 from the Missoula Housing Authority for 20 of the units to be designated as public housing ($50,000/unit) (equity share) January 22, 2010 Page 1 ---PAGE BREAK--- o $300,000 from the Federal Home Loan Bank (loan) o $5,000,000 from a HUD 221(d)(4) (loan) o TOTAL: $11,300,000 Uses o $174,000 Administration (including $150,000 for OPG grant administration) o $2,035,000 Land acquisition and demolition o $6,317,090 Construction o $265,000 Professional fees (architect/engineering) o $493,200 Construction fees (interest, legal, etc. for construction loan) o $197,550 Financing fees (recording fees, legal, etc. for permanent loan) o $12,000 Soft costs (appraisal, market study, environmental) o $1,147,000 Developer’s fee (overhead and fee) o $258,440 Reserves (rent-up and operating reserves) o TOTAL: $11,300,000 The City of Missoula will have no financial obligation. The developer, RMDG, will be responsible for the $5,300,000 in loans. The City of Missoula will hold a lien against the property to allow the City, in a worst case scenario, to receive a portion of the proceeds of foreclosure sale of the property. These proceeds represent the City’s investment of the NSP grant money and could be used by the City to reinvest in affordable housing or could be returned to the federal government. The Tenants Project will be “mixed income housing,” a widely recognized industry Best Practice. 25% of the units are restricted to households earning 50% of Area Median Income (AMI) or less (e.g. “low income households). No household earning more than 120% would be housed at Silvertip. The balance of the units restricted to households earning no more than 120% AMI. Unit number breakdown by income group: o 29 low income households (minimum) Of the 29 units, 20 of them will be public housing for clients of the Missoula Housing Authority o 86 units serving moderate, median and middle income households (maximum) Of the 86 units, no more than 5 may be middle income (100-120% AMI) Housing developed with NSP grant money, unlike housing developed with Low Income Tax Credits, is eligible for student tenants. Thus, this project would be able to serve income qualifying students (students earning less than 120% of AMI) while most other affordable housing projects in Missoula are not allowed to accept students as tenants. Tenants will be required to apply and undergo screening, and once accepted will be governed by a tenant policy. Income will be verified annually. A manager will be housed on-site. Benefits Taxes o The current owner of the property at 1311 E. Broadway has nearly $400,000 in accrued back taxes. These taxes will be paid in full at closing. o When operated as an athletic club, the facility generated about $22,000/year in taxes. City Finance projects the Silvertip Apartments will generate between $60,000 and $80,000 per year in tax revenue. January 22, 2010 Page 2 ---PAGE BREAK--- January 22, 2010 Page 3 Transportation o RMDG has been working with Mountain Line to create plans to improve access to public transportation at the site and along the East Broadway corridor. These plans include relocating and improving the current bus stops, installing a crossing for pedestrians and residents along the corridor to have a safe crossing point to catch west bound public transportation. o Construction of the apartments will include curbs and gutter, and likely sidewalks, along the street frontage of the property. River trail access and riparian protection o RMDG is working with the City Parks and Recreation Department to develop a plan for maintaining public access to an informal trail currently on-site, and cooperating if further improvement of the trail is desired. o The project has an environmental review, including a biological assessment, to ensure that the riparian areas and endangered or protected species are preserved during demolition and construction. o Construction of the apartments will include curbs and gutter, and likely sidewalks, along the street frontage of the property. Neighborhood o The project has received the support of most of its neighbors, including the Missoula Housing Authority which owns the adjacent property to the east, Paul Teagle of the Goodman Group which manages the adjacent property to the west, WGM group which just purchased a property to the west, as well as the support of other local experts in the field of affordable housing including homeWORD, the Missoula Housing Authority, the Human Resource Council, and Opportunity Resources, Inc. o The development of residential housing is consistent with other uses in the neighborhood. o Construction of the Silvertip Apartments will eliminate a source of blight of a vacant, deteriorating commercial building and parking lot. o Development in the area may spur greater community discussions and actions leading to a safer state road adjacent to the property, Highway 20.