2016 Human Rights Symposium Local Economic Development Groups What they are, why theyre important, and how to help them flourish. Tony Schertler Executive Director, Dakota County Community Development Agency Board Member, Economic Development Association of Minnesota [email protected] 651-675-4430 December 8, 2016 Industry Best Practices Community development efforts affect your financial reputation Moodys Key Credit Factors Legal Structure Economy Finances
Debt Management Community Development Strategies Standard and Poors Top 10 ways to Improve or Maintain a Municipal Credit Rating Number 10 Have a well-defined and coordinated economic (community) development strategy. The question is not whether there should be a formal program, but rather how significant a resource commitment should be dedicated to running these programs and offering incentives. Public Resources for Private Use/Benefit Community Development efforts can be summed up as direct efforts undertaken by a local government to encourage private investment. Ultimately there will be private ownership or occupancy. Three Types Housing Development needs based vs. market demand Economic Development increase market value Building Capacity workforce development, social service
3 Affordable Housing Development - definition Providing housing for persons who do not have the financial capacity to access housing provided by the private market. Some communities choose to target those who would pay more than 30% of their income for housing by providing rents that are affordable and measure success by ensuring that the affordable units are provided in a financially sustainable manner. This has an indirect and induced benefit to the community. Economic Development definition In partnership with others, to encourage investment in the community. The goal is to enhance the quality of life in the community. Choose to focus this effort and use the increase in market value of real estate as a primary measure in evaluating potential public investment in private development in our community. Believe this is appropriate because increased market value is a direct reflection of ultimate customer behavior producing tangible public benefits in the
form of higher occupancy rates, increasing rents, increased retail sales, more visitors contributing to the local economy and increased taxes. Avoid picking winners and losers. Avoid competing with private sector developers. Public Purpose Objectives (Policy) Increased private investment (consequently market value) through: Increased employment Added housing units (Affordable or Market Rate) Attraction of visitors who contribute to the local economy Increased sales volume Addition of infrastructure and/or public improvements which results in increased private market value Elimination of negative or blighting influences effecting surrounding property (Blight Curve) 6 6
Two ways to evaluate Economic Development opportunities Financial incentive approach The community return on investment (ROI) Can be qualitative as well as quantitative Needs or Gap analysis approach The developers return on investment (ROI) Need to understand what is driving the gap Barrier to investment is contamination cost of $500,000 Helps illustrate when the request becomes a subsidy Still need to satisfy minimum statutory requirements Building Capacity Community capacity building often refers to strengthening the skills, competencies and abilities of people and communities so they can overcome the causes of their exclusion and access or participate in the economy. Strength of Opportunity
(Professional) Statutory authority to use financial tools Demand for the use developed Qualified provider Healthy growing employer (industry evaluation) Extent to which the expected positive consequences of an effort outweigh the negative consequences Probability that the project will leverage additional private investment or spin-off investment 9 Public Cost (Professional & Policy) Existence of a financial gap (the amount of the difference between total development cost and private market/investment value) In absolute terms, the availability of public or philanthropic resources to fill the gap for a specific project (outside partners often do not know a communitys financial capacity limits) In relative terms, the amount of subsidy required for a given project in contrast to amounts provided for similar projects in the
past or current alternative projects (If everything is a catalyst what is catalyzed?) 10 10 Framing the approach Policy Guidance How much of the vision is going to be implemented by the public and how much by the private? Important because the return on investment for public is typically different than the return on investment for private Prioritize public benefit outcomes then start to apply a cost to them Start looking for the fiscal values generated by the development opportunity (self sustaining) What role does the community want to play to encourage
development? Simply grant the permit and zoning allowance Lowest risk Conduit issuer of tax exempt financing Low risk (reputation) Reimburse the prospect as benefits are completed Low risk Be the lender Medium risk Be the borrower or guarantor Higher risk Be the developer Highest risk and complexity 13
What about other returns for accepting more risk? There are no published benchmarks for what an appropriate public financial return (ROI) should be for projects that blend public purpose outcomes and financial risk with private sector investments Expect local governments to negotiate desired outcomes such as shared appreciation concepts and risk mitigation strategies Professionals job is to disclose risk, the community must agree on the price to pay for the benefits 13 www.dakotacda.org MISSION: To improve the lives of Dakota County residents through affordable housing and community development. Separate distinct organization from Dakota County; however, the two organizations collaborate in a number of ways Established in 1971 by a special act of the Minnesota Legislature as the Dakota County Housing & Redevelopment Authority
In 2000, added economic development powers to become the Community Development Agency Housing, economic development, housing finance and redevelopment powers Administers over 30 programs Large Property Management component within the agency Office is located in Eagan Collaboration Dakota County Business & Property Owners Cities & Townships CDA Federal & State
Agencies Developers (Private & Non-Profit) Financial Partners Federal & State Agencies HUD Minnesota Housing MN Dept. of Commerce Minnesota Pollution Control Agency (MPCA) Minnesota Department of Employment & Economic Development (DEED) CDA - Today BY THE NUMBERS
$61.6 million annual operating budget $5 million in Limited Partnership budgets $398 million in assets Employs 109 FTEs STRIVING FOR EXCELLENCE Achieve High Performer designation regularly for administration of Public Housing and Housing Choice Voucher Programs No audit findings for the past 20 years Consistently meet spenddown requirements for CDBG and HOME Create innovative programs to solve problems
No compliance findings for management of tax credit properties CDA Today Over 10,000 people are served by CDA rental housing programs daily. Annually, over 700 households access homebuyer and homeowner education, loan and grant resources. Manage portfolio of over 2,700 units of housing. Administer state and federal rental assistance programs serving over 2,800 households. Provide financing tools for affordable housing developers (tax credits, bonds, HOPE, HOME). Over $10 million has been awarded to cities to address redevelopment needs through the Redevelopment Incentive Grant Program. Allocate federal CDBG resources to eligible activities. Provide support for economic development initiatives. CDA Housing
Economic Development Broadband Study Open To Business $140,000 contract Partnership with Metropolitan Consortium of Community Developers (MCCD) Business counseling to current and prospective Dakota County entrepreneurs Greater MSP $100,000 investment annually 19 Redevelopment Activities Acquisition, Demolition & Site Clean-up Old commercial buildings (many different kinds of uses) Grain elevators Old school Single family homes
Shopping center Contaminated soils (site clean-up) Redevelopment Incentive Grants $1 million budgeted annually Planning Redevelopment Adding environmental clean-up funds from Dakota County in 2017 20 Housing Finance As a Housing Finance Agency, the CDA has a several programs to assist in the development and preservation of affordable housing in Dakota County. Dakota County Housing Opportunities Enhancement Program (HOPE) gap financing Low Income Housing Tax Credits Multifamily Housing Revenue Bonds Tax Increment Financing Home Investment Partnership Program (HOME)
Single Family Bond Financing (First Time Homebuyer Program) CDA as a Developer 2000 1800 1731 1600 1400 1200 1000 807 800 600 400 328
200 0 90 9 1 92 9 1 94 9 1 96 9 1 98 9 1
Senior Units 00 0 2 02 0 2 04 0 2 06 0 2 Workforce Units
$465 $615 328 Number of Units Average Rent CDA Units Number of Units Lincoln Place *CDA also has 22 4BR and two 5BR units in its portfolio. Demand On average, wait time for applicants of Dakota County CDA programs is at least 12-24 months. Dependent on turnover rates. Current # of households on waiting lists by program: Senior Housing = 2,300
Public Housing = 4,000 Workforce Housing = 2,700 Housing Choice Voucher (Section 8) = 2,000 2016 Human Rights Symposium QUESTIONS?
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