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Plans for ESSBY in the making
By MaryHelen Swanson
 The city of North Branch wanted to know its potential for new housing, particularly in the ESSBY area, and now the city has it in the form of a completed analysis.
Prepared by Maxfield Research, Inc., the half-inch document essentially indicates that rental housing is the most viable option right now in the ESSBY project area.
This is the light industrial/commercial/housing district created when the city purchased about 300 acres northwest of town, on the east side of the freeway in the vicinity of 400th Street.
While the completed analysis was for the whole of North Branch, it specifically focused on the residential portion, (about 100 acres) of the ESSBY project.
As agreed upon early on, the housing is expected to be limited to 360 units.
Approximately 40 acres lie south of 400th and 60 north of it.
In the past, it was determined that the 40 acres should contain single-family units, perhaps on larger lots, as a bridge between the planned denser residential area to the north of 400th and the present housing development.
But Mary Bujold, president of Maxfield, in presenting the housing analysis at a city council work session Feb. 7, suggested that homeowners on that 40 would not be happy with the expected high traffic on 400th.
Bujold went through population growth projections which show an increase in the aging population to the year 2026.
She also noted that the study shows there is a significant inventory of platted lots which were created during the housing surge from 2000-2005.
While single-family homes are the most popular, especially with first-time home buyers, and generally more affordable, with the current shift in economy, rental units are now in demand.
The analysis shows a demand for 165 units in NB to 2010, with demand for senior housing at 90 units to 2012, and assisted living/memory care at 18 units.
Bujold does not recommend any increase in single family units unto 2010.
The city should be looking at rental units for the next few years, she said, and south of 400th is a good site.
Bujold said the potential there was for both market rate rental and affordable rental, with some single-family units.
Her recommendations for the ESSBY area include rental products, and units for ownership by the empty nester and active senior group.
She recommends units of multi family now and single-family units from 2010-2015.
Continued from front
That recommendation included twin homes from 2008-2010, and as noted above, single family homes after 2010 on the north end of the residential area.
She recommends a “name” be chosen to give this residential area an identity and that it include shared amenities and walking paths and green space.
Bujold cautioned against “for sale” products because of the large current inventory in NB.
There needs to be job growth in the area to get housing inventories in balance, she said.
At the worksession Feb. 7, City Finance Director David Stutelberg detailed a brief history of the ESSBY project.
Initially, the city wanted to increase industrial land without the use of property taxes.
And because of the findings of a housing study group, wanted to include workforce housing. At that time, housing in NB was booming, he said.
The residential and some commercial aspects of the project would help offset infrastructure costs, he noted.
Costs included $5.6 million for land, professional services and residential development, $1.8 million for infrastructure. But there soon became a $1.4 million deficit and $3.8 million of a $7 million bond was for residential that was not being developed.
The city as two options, he assumes.
Sell a 20-year TIF (housing) $5.6 million bond with a annual payments of $400,000 which would require a development plan and purchase in place for about 22 acres.
The city would have a defined debt schedule, he said, and the liability would be spread out over a longer period of time with assessments paid by the developer.
The disadvantage of this is the added $1 million in interest.
A second option is to wait until the $7 million bond is due in 2009 and refinance at 5.5 percent interest. The advantage is that the city would not have any financial commitment for five years, except the $639,000 to the bond holder.
The disadvantage is that the city will be $1.4 million in the hole and the deficit will continue to grow causing cash flow problems in the future. The city will also continue to pay assessments.
More positively, Stutelberg noted that building 24, $150,000 homes a year would be a plus to the water and light and school district. NB tax base is largely residential, he said. But the tax capacity is better than surrounding cities.
These 24 homes per year over 15 years, with no increase in fees and no increase in state aid, would mean $34 million to the city. When built and the debt service is paid off it would be more than $54 million in taxable market value, he said.
The annual fiscal impact of 100 homes not being built, which was what was anticipated a few years ago, is a loss of $1.6 million in building permits fees and SAC and WAC and trunk fees.
There is a loss of $157,000 in user fees, a loss in state aid to the school district of around $325,000, loss of tax revenue to the city of $67,000, and a loss overall to the city’s economy of $4 million annually.
To say that the housing slump has affected the economy of North Branch is an understatement.
So, where does the city go from here.
Stutelberg said it is critical for the council to come to an agreement on what direction it wants to go.
It is imperative, he said, that the council formalize this direction and the parameters in which it will proceed.
A discussion has begun with Prairie Partners, a group of local businessmen interested in developing the residential area of ESSBY.
It is hoped that by June there will be a letter of intent and developer’s and purchase agreements.
Stutelberg said the success of the project can be achieved only by a combined effort of the city council, developers, the planning commission and the city’s EDA.
Compromise is imperative on all sides, he went on, noting that change will be inevitable over the next 15 years.
The city is working with the developers on their concerns.
Financial advisor Sid Inman of Ehlers and Assoc., had noted at the Feb. 7 meeting that NB was not in as bad a situation as those cities whose projects were more advanced when this housing slump arrived.
He said 2010 is not far ahead, when the housing slump turns around, he said, the city will be ready.
Of the councilors present at that worksession, the consensus was that option one held the least amount of debt for the city.
The councilors agreed to move forward that night. However, Councilor Theresa Furman said there were some things she still could not bend on, but she was willing to look at them.
The theme of the evening might have been “Get ‘er done.”
However, developer Steve Mork, a partner in the Prairie Partners group cautioned the councilors that “there is no knight in shining amour coming down the street to save North Branch from this predicament.”
At a Feb. 25 worksession, the council reviewed issues raised by the developers who, it was noted, are eager to come to agreement on a development and purchase agreement.
The issues were:
• Each party (city and developer) will cover its own expenses. This means the city would wait longer to recover administration costs associated with the project because of reimbursing itself from TIF funding.
• A security deposit will be required for each phase, understanding that the project will be done in phases with the city in full control over each phase. Stutelberg noted that the developers would pay $1 for the first 20-acres in phase one. When phase two comes, he said, that could change.
• A portion of the land south of 400th will be rezoned to LU2, four units/building. The concept here shows a 200-ft. wide no-build area on the south of the property and 11.43 acres of park/open space near the freeway.
• The rezoning of the 10 acres of commercial area north of 400th to LU2 or LU3. Councilor Amy Oehlers was opposed to this.
• Remove the 36 unit (building) per year restriction. Stutelberg said it could be benefit to city to have as many as the market will allow. Steve VandenHeuvel, one of the Prairie Partners had said at this meeting that numbers should not be restricted in case the city grows.
• Street and utility projects within the development will be bonded for by the city and assessed to the developer.
• Developers want city to change policy on paying trunk fees to allow five years or at the time of building permits instead of three.
• The city should show support for the project such as letters, resolutions which may be needed so the developer can get certain types of funding.
• Phase the project out over 15-20 years rather than 10-12.
• The TIF requirements should be set out for rental and owner occupied housing.
• The total number of units (360 now) may have to be increased to insure there will be enough TIF to cover the cost of the bond.
VandenHeuvel doesn’t want regulations about what can be built, (numbers). Mork said they have to be able to follow the market.
This is only phase one, Stutelberg had said, there may be as many as four or five.
He assured the councilors the city will have control over each phase.
At the end of the worksession Feb. 25, Stutelberg , with a big sigh, said it was a burden lifted off him that the council was willing to consider something different and is willing to work with the developers.
There will be a worksession Thursday night on the industrial portion of the ESSBY project.
Housing tax increment financing district
A multi-family facility must be intended for families of low and moderate income to qualify for multi-family housing tax increment financing.
To maintain qualifications as a housing district, rental projects must satisfy the income requirements for qualified residential rental projects under Section 142(d) of the Internal Revenue Code. Two options for income limits on a standard housing district are 20 percent of the units at 50 percent of median income or 40 percent of the units at 60 percent of median income.
For a family of four, median income at 50 percent is $39,250, for 60 percent it is $47,100.
In this TIF district, in addition to income restrictions, the city and EDA may choose to place rent restrictions on the units.
The housing TIF also includes single-family developments where at least 95 percent of the houses assisted with tax increment must be initially purchased and occupied with persons at 100 percent of median income for a family of two or less and 115 percent median income for families of three or more. Chisago County is included in the Minneapolis-St. Paul MSA, and the median income is $80,900 for 2008. The statewide median is $70,200. A family of three or more could earn up to $93,035 (115 percent of $80,900) and still qualify to live in the homes. There are no restrictions on the value of the houses built or upon the income of the subsequent purchasers of the houses. Houses not meeting the qualifications may be built, but not assisted with tax increment.
Both rental and single-family housing TIF districts have a maximum duration of 25 years from receipt of the first increment.
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