Building for the Future: Affordable Redevelopment on Wayzata Boulevard Humphrey School Capstone Report The Hubert H. Humphrey School of Public Affairs The University of Minnesota Aidan Breen Zachary Farmer Dwight Klingbeil PA 8081 Capstone Workshop Section 006 Instructor: Peter Brown, FAICP, FAIA, PHD Spring 2024 City of Wayzata Subject Keywords: Park & Ride, Redevelopment, Development, Affordable Housing, Multi-family residential, Mixed-Use, Low Income Housing Tax Credit, Metro Transit, Wayzata, Low-income Housing Tax Credit (LIHTC), Tax Increment Financing (TIF) Report Abstract: The way we think about commutes and suburban transit is changing, all the more rapidly since the COVID-19 pandemic. Transit agencies nationwide are seeing demand for Park & Ride decline, and the same is true for Metro Transit in the Twin Cities of Minnesota. This study examines possible site plans for an underutilized suburban Park & Ride site near the corner of Wayzata Boulevard and Barry Avenue in Wayzata. Utilizing 1) Existing site conditions, 2) City regulations and documentation, 3) an Affordable Housing finance literature review, and 4) Developer interviews, our team compiles a development switchboard, which is used to propose two primary paths for redevelopment on the site. These two paths are used to illustrate tradeoffs that would be involved in the future development at this site. The first development path, As-of-Right, examines what is possible on the site under current zoning constraints, and how it may correspond and conflict with the goals of the City, Metro Transit, and a theoretical development team. The second development path, Maximize Residential, asks what zoning and policy changes would be required to successfully develop affordable housing at a meaningful scale, including accessing the resources of Housing Tax Increment Financing (TIF) and the Low Income Housing Tax Credit. The final section of the report outlines the past community engagement regarding this site and presents an equity-oriented engagement framework to incorporate key community member feedback throughout the process of site redevelopment. 2 Table of Contents Table of Contents 4 Glossary of Terms 5 Executive Summary 8 Recommendations 8 Research and Development Paths 8 Community Engagement Plan Summary 10 Future Action Items 11 I. Introduction 12 Methodology 13 Current Site Conditions 15 II. Findings - Regulatory Framework 16 Summary 16 Wayzata 2040 Comprehensive Plan 16 Zoning Code 19 Wayzata Boulevard Corridor Study 20 Wayzata Design Standards Handbook Findings 22 III. Findings - Tools for Funding Redevelopment 25 Summary 25 Recommendations: 25 Relevant Affordable Multifamily Rental Subsidy Programs 27 IV. Findings - Developer Interviews 33 Summary 33 Purpose and Methodology 33 Interview Themes and Quotes 34 V. Analysis - The Development Switchboard 35 Switchboard Elements 36 VI. Development Paths & Recommendations 41 Development Path 1: As-of-Right 45 Development Path 2: Maximize Residential 51 Development Paths: Possible Futures 55 VII. Community Engagement Strategy 56 4 VIII. Future Action Items 68 Appendices 70 Appendix A: Citations and Additional Links 70 Appendix B: Affordable Housing Tools 71 Appendix C: Questions asked in Developer Interviews 72 Appendix D: Site Fact Sheet Provided to Developers 74 Appendix E: Full Developer Responses 75 Appendix F: Slide Deck fromMay 7th Council Workshop 80 5 Glossary of Terms LIHTC: Low Income Housing Tax Credit, Section 42 of IRC TIF: Tax-Increment Financing, District applied by City MHFA:Minnesota Housing Finance Agency, primary allocator of Housing Tax Credits QAP: Qualified Allocation Plan, document used to direct Tax Credits towards desirable projects MLUPA:Minnesota Land Use & Planning Act of 1976, aiming at distributing low andmoderate income housing across the 7-County Metropolitan Area RFP: Request For Proposal, issued by the City to attract development proposals HRA: Housing and Redevelopment Authority (of Wayzata) CDFI: Community Development Financial Institution NOAH: Naturally Occurring Affordable Housing AMI: Area Median Income, used to determine income/ rent limits LP: Limited Partnership, structure used to attract investors for LIHTC projects AIT: Average Income Test, which provides flexibility on unit makeup within the “20-50” or “40-60” affordability standards SME: Subject Matter Expert HUD: US Department of Housing and Urban Development BIPOC: Black/ Indigenous People of Color FAR: Floor area ratio, which dictates the height and footprint of a building LAPU: Lot Area Per Unit, a density restriction in Wayzata’s zoning code LEED: Leadership in Energy and Environmental Design, a widely used green building standard IOCP: Interfaith Outreach & Community Partners, a Plymouth-based nonprofit offering a wide range of community support services TOD: Transit-Oriented Development 6 7 Executive Summary Recommendations This report recommends pursuing theMaximize Residential development path, which seeks to utilize external sources of capital subsidy to produce subsidized rental housing. By making a few key regulatory changes to 322 Wayzata Boulevard E, including a rezoning to the R-5 category and requesting a parking reduction, the City and future development team can competitively apply for 9% Low Income Housing Tax Credit (LIHTC) funding and applying Housing Tax Increment Financing (TIF) district to the parcel to subsidize the project. With a combination of these and smaller subsidy sources, this site can feasibly supply approximately 40-45 units of high-impact, family-sized rental rental units for likely 30-50 years. Beyond the type of development, the Humphrey Student Team recommends a course of action that includes a land purchase by the City of Wayzata from its current owner, Metro Transit, in order to impose deed restrictions and design an RFP. It is also recommended that this development process is a collaborative effort between the City, Metro Transit, and the eventual developer. While this development path is most optimal for meeting Wayzata’s goals for the site, it is constrained by a few key variables: 1. Gaining access to sufficient housing subsidies. 2. Designing a development that incorporates the necessary transit facilities. 3. Including the necessary minimum parking on the site 4. Obtaining the appropriate density bonuses to ensure the development meets the Land Area per Unit (LAPU) requirements in city code TheMaximize Residential path will maximize the site’s potential in providing high-quality, affordable living to support Wayzata’s goals for a diverse housing stock andmulti-generational community. Research and Development Paths In order to establish a baseline understanding of the history and future development along Wayzata Boulevard, the Team assessed a number of City documents to identify the City’s needs and requirements for a redevelopment of the Park & Ride site. The Humphrey Capstone Team also reviewed financing programs and subsidies that could be applied to a development that 8 incorporates some affordable housing. This was supplemented by interviews with 4 city-selected developers and consultants about how they might approach such a development. Using this background research, a development ‘Switchboard’ was created to visualize and categorize the main constraints and options available to the City and a development team. Using this Switchboard, the Humphrey Team evaluated potential development designs, ultimately selecting to present two development paths: 1. As-of-Right This path is designed to present a path of development that minimizes changes to the site and city regulations. It maintains the current zoning of C-1 and aligns with both the 2040 Comprehensive Plan, Corridor Study, and Design Standards Handbook. The site design prioritizes the city’s existing land use goals from the comprehensive plan, while emphasizing an activated streetscape along Wayzata Boulevard, benefitting the commercial tenants of the site and the corridor as a whole. The site design also recommends landscaping and developing the area around the stormwater pond to create a privately-owned public space. The primary constraints of this path derive from the regulatory framework and associated funding sources. The C-1 zoning district has specific requirements, such as minimum floor area per dwelling unit, maximum height and lot coverage, and aminimum of 80% non-residential use on the ground floor. Developers expressed skepticism about incorporating commercial space, and the site restrictions under mixed-use zoning lead to a maximum number of 35 residential units, which greatly limits the site’s capacity to pursue subsidy through county, regional, and state subsidy. The As-of-Right development path would be more readily accessible to the city and developers, but it fails to maximize the full potential of the site or further the city’s goals of providing more affordable housing for its residents. 2. Maximize Residential This development path seeks to maximize the potential of the site through funding tools and strategic regulatory change. It advocates for rezoning the site to the R-5 High-Density Residential category, increasing the total number of possible units on the site. 9 The interaction of the zoning requirements (such as parking requirements) and funding mechanisms available to affordable housing developments leads us to suggest a development of ~42 residential units. The major benefit of this increase is the site’s eligibility for 9% LIHTC funding, which is typically awarded to developments of 40 units or above. Making this site eligible for LIHTC opens the possibility of unlocking a massive capital subsidy, with an expected 70% of development equity being covered through these credits. Additionally, the site would also be eligible for Housing TIF under this development path, as it meets the requirement of a minimum of 80% residential use by gross square footage. Obtaining LIHTC funding could take 24-36 months, but the funding it provides is incredibly impactful in constructing affordable units. Public ownership ensures that the city is able to cooperate with Metro Transit to develop the site using LIHTC funding in a prudent manner The site design explores compressing the bus turnaround footprint while maintaining its current location. However, a variance from the minimum residential parking requirements may be required to accommodate a multi-family building of this size with a bus turnaround. This location of the turnaround would also deviate from city design standards, requiring additional approval. We also recommend pursuing an energy-friendly development, prioritizing family-sized units, and landscaping the area around the stormwater pond. These factors would increase the site’s score in applying for LIHTC funding, as well as contribute to an appealing development for future residents and their neighbors. TheMaximize Residential development path would maximize the potential of the unique factors of this site: an infill redevelopment opportunity of a publicly-owned site that would provide public amenities and affordable living opportunities to further the city’s goals of providing diverse housing options and a forward-thinking, sustainable, andmulti-generational community. Community Engagement Plan Summary This report also provides a community engagement plan for the City to reference throughout the development process. This community engagement plan is split into two separate sections, one for the student recommended path of “Maximize Residential”, and one for the “As-of-Right” path. Both of these sections contain a timeline exhibit that illustrates the sequence of events for each development path, potential time requirements, and opportune times to conduct community engagement events. The goals and targeted participants for each event are different and will depend on the development path taken. Engagement methods are also provided as a starting point for the facilitators, and are not entirely prescriptive. 10 Future Action Items This report does its best to provide a robust summary of several components that impact this development, but there are several questions left unanswered that the City should consider in the years following this report. Because of the variety of constraints affecting this site, it is recommended that cooperation between City Staff, Metro Transit, and eventually a developer, continue throughout the process to ensure a successful completion. Through this cooperation, further action will be required for Site Design & Physical Layout, Housing TIF, 9% LIHTC, Land Sale, and Housing Needs Assessment. 11 I. Introduction The City of Wayzata has tasked the Capstone Group from the Humphrey School of Public Affairs at the University of Minnesota-Twin Cities with conducting comprehensive pre-development research to assess the feasibility of a mixed-use development project with affordable housing at the Park & Ride site located at 322 Wayzata Blvd E. This report represents the culmination of meticulous research, incorporating site analysis, and exploration of funding assistance programs, design considerations, and community interests. The objective is to identify key benefits and opportunities for the redevelopment of this site, with a particular focus on enhancing the affordable housing inventory within Wayzata, while also balancing the diverse needs of the City of Wayzata, Metro Transit, potential development teams, and other stakeholders in the community. 12 Methodology To inform the recommendations, the Humphrey Student Team undertook a methodology that encompassed a review of city policies, housing funding mechanisms, Metro Transit engineering and bus operation standards, as well as interviews with four city-selected subject matter experts (SMEs) in housing development and finance. Our detailed examination of existing site conditions and regulatory frameworks was directed by city staff toward four key documents that govern the current and future use of the site: the Wayzata 2040 Comprehensive Plan, the municipal zoning code, the Wayzata Design Standards Handbook, and the 2023 Wayzata Boulevard Corridor Study. Reviewing these documents, we identified key variables and policies that applied to the site and cast a vision of the future of the city, neighborhood, and boulevard. Recognizing the importance of financial viability of any redevelopment plan, our group also conducted extensive research on state and regional funding assistance programs oriented toward housing development and affordable housing initiatives. The group identified a number of programs identified by the City within the 2040 Comprehensive Plan. The subsidies of primary consideration are: 9% Low Income Housing Tax Credits (LIHTC), establishment of a Housing TIF District, and other gap financing programs, such as the Met Council’s Livable Communities Demonstration Account (LCDA) and Local Housing Incentive Account (LHIA), Hennepin County’s Affordable Housing Incentive Fund (AHIF), and a variety of low-interest loan products. By exploring different combinations of these programs and assessing their impact on the redevelopment feasibility, the Humphrey Student Team aims to facilitate an efficient and desirable financial outcome for this site. These site conditions and financial tools were then brought to four SMEs in housing development: one large-scale (100+ units) affordable housing developer, one affordable housing finance consultant, one West Metro-basedmarket rate housing developer with more local expertise, and a representative from a very large-scale metro-wide development firm. In these interviews the Capstone Group sought to confirm our findings as to the key variables to consider when envisioning a future development on the Park & Ride site. We also sought their intuitions on how each would approach developing the site with and without the regulations taken into account. The feedback of these developers had two primary functions: 1) Unearth and confirmwhich variables would be most important constraints for a development at 322 Wayzata Boulevard, and 2) Confirm that the development paths we propose in the report were realistically attainable and would be attractive to prospective developers in a Request for Proposal (RFP) process. 13 Finally, the Humphrey Capstone team compiled a history of community engagement involving the site, and provided recommendations on opportunities for future engagement. These recommendations are designed to coincide with inflection points along both of our development paths to produce an engagement process that centers a wide variety of community voices. The engagement events will serve as opportunities for these community members and stakeholders to express their ideas about developing the Park & Ride site, and provide both the City and development teamwith valuable guidance. Effective community engagement will allow the City, and later the development team, to incorporate valuable public feedback while attending to the sensitive timelines of a redevelopment process. 14 Current Site Conditions Address: 322 Wayzata Blvd E, Wayzata, MN 55391 Lot Size: 1.79 Acres Current Footprint (estimate): 1.10 Acres Owner:Met Council/Metro Transit Current Zoning: C-1 (Mixed-Use, Office and Limited Commercial District) Uses:Must maintain Metro Transit bus stop and bus turnaround on site for Route 645. Must have a restroom accessible to bus drivers. Topography: Grade sloping down to the south side of the site (at Rice St). Stormwater pond at southern end of site. 10’ decline fromWayzata Blvd to Rice St. (addl 5’ for pond). Multiple mature trees along property lines. Site Context: Park across Wayzata Blvd. Small businesses on lots to West, NOAH multifamily and new SFH to East. High end SFH across Rice St to the South. 15 II. Findings - Regulatory Framework Summary To establish a baseline understanding of the history and future of development along Wayzata Boulevard, our group reviewed city documentation and regulations that applied to the Park & Ride site. The documents were: City of Wayzata 2040 Comprehensive Plan (Oct. 2023) Wayzata City Zoning Code Wayzata Boulevard Corridor Study (Oct. 2023) Wayzata Design Standards Handbook (June 2021) The team used these documents to establish the site’s constraints, align our recommendations with the established goals and vision of the City, and understand where the needs of the site may conflict with these objectives. Wayzata 2040 Comprehensive Plan Summary While Wayzata has made efforts to preserve existing affordable housing in the community, local and regional housing needs continue to evolve, with the need for affordable options increasing across income levels. In pursuance with the goal of infill development for a range of incomes, 322 Wayzata Boulevard E should aim for producing additional affordable housing, with the maximal objective to meet the Metropolitan Council’s allocation requirements. However, the current goal of producing new affordable residential development in mixed-use zoning districts presents a significant challenge for accessing the subsidies necessary to achieve this allocation. Full Findings Land Use Categories ● C-1 Mixed-Use Commercial/Residential: Mixture of uses can be achieved through vertical or horizontal mixed-use on a single lot, or on the block level. Development in this category is anticipated to be 50% commercial/office uses, and 50% residential. Residential/Commercial uses will comprise 10-30 units per acre. 16 ○ Areas designated for Mixed-Use are primarily located along the Wayzata Boulevard corridor. ● R-5 High Density Residential: Standalone residential development with densities of 12-40 units per acre. Mainly comprises multi-unit andmulti-story buildings. Current state of affordable housing and policy goals Current Affordable Housing Stock: ● Goal: Support housing typologies and development that helps the City fill the existing affordable housing gap. 2030 affordable housing allocation NEED: As statutorily required by the Metropolitan Land Use Planning Act (MLUPA), the Metropolitan Council allocates responsibilities to produce affordable housing to each community in the 7-County Metro Area. This calculation is based on forecasting population growth, existing affordable housing stock, and the ratio of low-wage jobs to low-wage earning residents. Fulfilling this need in Wayzata will require pursuing available redevelopment opportunities and access to subsidies, as demonstrated by the goals outlined in the Comprehensive Plan. The additional units required in Wayzata are listed below: 17 ● Goal: Consider opportunities to protect property values through consistent relationships of land uses, street configurations, natural resources, and property maintenance. ● Goal: Research and utilize Federal, State, and local funding sources to establish housing rehabilitation loan and grant programs for rental and owner-occupied units ● Goal: Explore opportunities for infill development to provide housing options for all incomes. Net Density All residential development from 2021 to 2040 is proposed within three land use categories: mixed-use (commercial/residential), central business district, and estate single family. This illustrates the goals for what type of development is prioritized in Wayzata, and can present challenges when proposing development falling outside of these guidelines. Nevertheless, the following table lays out the goals for increasing density under the existing “high-density” districts in Wayzata’s zoning code, with a clear preference for mixed-use development. 18 Zoning Code Summary The zoning code is the source of most of 322 Wayzata Boulevard’s physical constraints, while also outlining the steps needed to maximize the potential of the parcel. For a site with a buildable area of just over an acre, one of the main concerns will be including the requisite parking while also maintaining a healthy unit count. For a mixed-use development, joint facilities can be justified, and space reductions may be necessary to ensure a successful development with ample green space. Full Findings The zoning code contains most of the physical limitations and requirements on the site, which will apply to any future development on the site. The development paths we present in Section VI adhere to these requirements, as well as include recommendations for potential variances or conditional uses. While the relevant zoning districts are detailed later in this report, this summary presents the most relevant general ordinances as they relate to and guide mixed-use/ multifamily residential uses and parking provisions: General Ordinances ● Minimum Floor Area Per Dwelling Unit (§919.06) Multiple Dwelling Units (919.06[B]) ○ Efficiency/ Studio Units: 500 square feet ○ One-Bedroom Units: 700 square feet ○ Two-Bedroom Units: 900 square feet ○ More than Two-Bedroom Units: 900 sq ft + 150 sq ft/additional bedroom Elderly Housing (919.06[C]) ○ Efficiency/ Studio Units: 440 square feet ○ One-Bedroom Units: 520 square feet ○ More than One-Bedroom Units: 520 sq ft + 80 sq ft/additional bedroom ● Parking Area Location & Design (§ 920.05) ○ Location (920.05[C]): Required off-street parking shall be on the same lot and under same ownership as the principal use. ○ Setbacks (920.05[D]): Front, Rear, and Side setbacks of at least 10 feet from property lines shall be maintained from parking areas in all zoning districts. Off 19 street parking must be set back 15 feet from any street surface. ○ Design (920.05[E]): Parking spaces shall be a minimum of 9 feet wide and 20 feet long. Curb cut openings shall be located a minimum of 10 feet from the side yard lot line. ● Joint (Parking) Facilities (§ 920.09) ○ The City Council may approve a Conditional Use Permit for a mixed-use site to provide the required off-street parking facilities by joint use of one or more sites where the total number of spaces provided are less than the sum of total required spaces for each use, if they were provided separately. *Process is delineated in the zoning code. ● Off-Street Parking & Loading Requirements (§ 920.11) ○ Calculating Space- More than one use (920.11[A]{4}): Calculate the gross floor area of each use, removing 10% for non-productive space. Mixed-use buildings can increase reduction to 20%, subject to review (920.13). ○ MinimumNumber of Spaces (920.11[B]{16}): Two fee-free spaces for each living unit, of which one is to be enclosed. One loading space for each building over four units. ● Space Reductions (§ 920.13) ○ (920.13[A]): The City may allow reductions in the number of parking spaces as warranted by unique characteristics or documented parking demand, which must be articulated by a proof of parking plan. Wayzata Boulevard Corridor Study Summary The Wayzata Boulevard Corridor Study locates the Park & Ride site within its West Gateway district, and contains substantial recommendations for improving the pedestrian experience in this area of the corridor. The study also names the Park & Ride site as a redevelopment opportunity for Medium-Intensity Mixed-Use, recommending that structures be oriented toward the street and providing recommended sizes and designs of various streetscape elements. The Corridor Study also documents the results of substantial community engagement efforts, in which community members place a high emphasis on bike and pedestrian safety and public realm improvements. 20 Full Findings The Wayzata Boulevard Corridor Study published in 2023 provided significant insight into the value and vision of Wayzata Boulevard as a key thoroughfare and opportunity area for safety improvements, public realm improvements/placemaking, and future development. In particular, the corridor study indicated the following for the Park & Ride Site: ● Vehicular traffic estimates for the site ○ 10,000 vehicles per day (vpd) ○ Expected increase to 12,300 vpd by 2040 ● Identifies the site as a part of a future Medium-Intensity Mixed-Use District ○ The Medium Intensity Mixed-Use District supports a combination of general commercial and high-density residential uses as horizontal or vertical mixed-use developments. Additional development may support service or office uses on upper floors, in addition to residential uses. ○ Structures should be oriented to the street with parking located in the rear. ○ Future development to be guided for shared access and parking as possible with parking located in the rear. Additionally, tools to manage parking use throughout the day can be used to limit the overall parking need (day versus evening parking). Access points should be avoided within 100 feet of an intersection and should be spaced at least 300 feet from another access. ○ This district provides opportunities to increase access to affordable housing with higher densities. Additionally, horizontal mixed-use may function best within this district and create additional housing options. ○ Viable commercial uses may include more neighborhood commercial (e.g. coffee shop, office, etc.) that support surrounding residential uses and are not dependent on drive-by customers. ● We are in the West Gateway of the corridor ○ Opportunities for the West Gateway focused onmaintaining overall mobility, extending the aesthetic and sense of place from the Town Core, and enhanced multimodal infrastructure. The design modifications maintain the overall travel lanes but include the introduction of a center median. Recommendations are also included to support bicycle and pedestrian connections. There are several sidewalk gaps that can be closed and the development of a shared use trail would support bicycle movement. ○ The West Gateway is the first experience travelers from the west have into the community. This creates opportunities for gateway signage to emphasize the arrival into Wayzata and establish the overall sense of place. 21 ○ In addition to specific gateway improvements, other opportunities to introduce public art could be explored through the Pedestrian and Frontage Zones. At a minimum, the addition of planted medians introduces additional vegetation areas with opportunities for art installations. Adjacent public uses also create an opportunity to introduce public art installations or other investments. Source: Wayzata Boulevard Corridor Study, 2023 ● Substantial public engagement collected feedback that community members place a high emphasis on bike and pedestrian safety and public realm improvements, emphasizing open space & parks along the boulevard. ○ Multimodal and pedestrian safety is listed as one of the key corridor strategies and an opportunity for early implementation. ○ Six intersections were specifically identified for safety improvements, including the intersection of Wayzata Blvd. and Barry Ave. ○ Plans for the boulevard show the future introduction of a high-visibility crosswalk at the site location to provide a physical connection between the bus stop and Klapprich Park. ○ The study also makes recommendations to add pedestrian/bike trails along the West Gateway section. This will be especially valuable to provide increased access to a planned regional bike trail connection that will travel along Barry Ave. Wayzata Design Standards Handbook Findings Summary Development in Wayzata should embody a small-town, village character and emphasize walkability, open space, and lakefront views. Any development of the Park & Ride site should 22 abide by the Bluff District design standards. These standards take the form of architectural requirements, most notably a three-story height limit, a stepped-back third floor, and required massing breaks and building recesses. This site is classified as a medium-density, mixed-use opportunity, and development should reflect the “finer” scale of the neighborhood. Parking should be located behind the primary structure where possible. Full Findings The design standards for the city of Wayzata present a clear and consistent vision of a city with a village, small-town character with multiple design districts. The key findings from this document were: ● Design choices should be made in service of achieving a village, small-town character. ○ There is a firm three-story limit on all construction. ○ Massing breaks, building recesses, and third-story setbacks will be required to create the feel of a two-story main street with smaller buildings through new development in the city. ○ Public-facing facades require massing breaks required every 150’ and building recesses every 50’ (starting at facades with a minimum of 100 feet of public-facing frontage). ● The city’s lakefront identity and views to natural elements are crucially important to highlight and preserve. ● Walkability and pedestrians should be emphasized as much as possible, especially through open space (usable open space, recesses, massing breaks, interior walkways). ● Prioritize people over automobiles. ○ Locate buildings adjacent to public streets and walks, with parking behind buildings whenever possible. ● The Park & Ride site should be a Medium-Scale, Mixed-Use development in the Bluff District on Wayzata Blvd. 23 ○ Development in the Bluff District should respect the finer scale of its surroundings through careful massing and attention to fine grainedmateriality. Source: Wayzata Design Standards Handbook, 2021 24 III. Findings - Tools for Funding Redevelopment Summary This section compiles and describes a variety of affordable housing subsidy sources for multi-family rental, and provides recommendations for how these sources could be utilized to maximize the potential of this site. The most relevant programs are laid out in detail, with value, application and administrative processes, and requirements all provided, in order of their impact on the development’s outcome. In general, this site has the potential to use a variety of capital subsidies, and a development team should pursue any programs they can compete for. Producing affordable housing presents a more complex andmultifaceted capital stack than a traditional market rate development, but pursuing these sources will ensure a successful deal occurs and the project is completed in a timely manner. Recommendations: ● Under an R-5 rezoning in theMaximize Residential Path, we recommend creating and leveraging a Housing Tax Increment Financing (TIF) District to incentivize development of this property and to demonstrate the city’s commitment to increasing its affordable housing stock. ● This site presents a unique opportunity in Wayzata to utilize the largest supply-side subsidy for affordable rental housing: the Low Income Housing Tax Credit. Under certain conditions (most notably a rezoning), this site can be highly competitive for the “9% Tax Credit”, awarded through Minnesota Housing’s Consolidated RFP. This path involves a variety of requirements and considerations, but will pay off with far deeper affordability than could be achieved without it; 9% LIHTC funding would provide approximately 70% of the project’s equity. ● In the As-of-Right Development Path, the City and development team should still search for low-interest loans or gap subsidies to induce additional affordability beyond what a market-rate development can provide. This should involve consultation with allocating agencies regarding the best products for this site. However, opportunities will be extremely limited. 25 The tables below summarize the basic information regarding the applicable subsidy programs, organized into those that will drive affordability (large-scale) and those designed to fill financial gaps left in the project after the larger sources are in place. While these are not comprehensive lists, they are the programs a development team should prioritize pursuing as soon after winning the project as possible. 26 Relevant Affordable Multifamily Rental Subsidy Programs Listed roughly in order of applicability and value to this site Low Income Housing Tax Credits Summary LIHTC represents the most reliable path to producing new, affordable housing on ameaningful scale at 322 Wayzata Boulevard E. The site offers a promising opportunity for a 9% development that can deliver a massive boost to the affordable housing stock within Wayzata. However, pursuing this option requires dedication on the part of the city, expertise from a developer, and a competitive Tax Credit application to MHFA. These elements extend the project timeline, and specific requirements for obtaining LIHTC funding may be controversial to the public. However, this site hosts a variety of advantages in the current QAP goals, and may present the best opportunity for the City to utilize LIHTC subsidies for a generation. History & Context The Low Income Housing Tax Credit programwas created in 1986 as Section 42 of the Internal Revenue Code, and has since become the most significant supply-side subsidy for multi-family rental affordable housing production in the United States. Alongside the program, a professional industry of developers, funders, and syndicators has emerged and evolved, specializing in utilizing the credits and producing housing that complies with the expectations of the program. LIHTC contains two separate sources, or paths, for subsidy, commonly referred to as “4% LIHTC” and “9% LIHTC”. Each source involves a different process for receiving funds, apply to different types of projects, and provide different magnitudes of equity to put towards eligible development costs. 4% vs. 9% Credits As the less competitive and significant subsidy, 4% LIHTC produces Annual Federal Tax Credits equal to 4% of the project’s eligible cost basis. On average, this produces about 30% of the project’s required equity through Tax-Exempt Bond issuance. 4% LIHTC has come to be used for larger projects over 100 units, and would require bond issuance from either the City of Wayzata or Minnesota Housing. 4% LIHTC is not applicable for this project, and should not be pursued unless project constraints change significantly. 9% LIHTC is the deeper andmore competitive subsidy model, producing Tax Credits equal to 9% of the eligible basis. With this greater sum of possible tax credits, the development team can sell these credits to investors for around 70% of the project’s required equity. This deeper subsidy is more competitive, and funding decisions are made by the Minnesota Housing 27 Finance Agency through their Consolidated RFP, which is usually processed mid-summer. 9% credits are traditionally awarded to projects between 45-75 units, making this site far more compelling for a 9% deal. If the goal for the project is to achieve deep affordability, 9% Tax Credits offer the greatest opportunity for deep subsidy. 9% Credit Requirements In order to be eligible for Tax Credits, the housing project must comply with the minimum requirements and expectations of the program: ● Affordability Standards: LIHTC’s most impactful standard is on the depth and breadth of affordable units. Two calculations can apply: 20% of units affordable at 50% AMI, or 40% of units affordable at 60% AMI (Commonly referred to as the “20/50 test” & “40/60” test). These standards can also be achieved through equivalent mixes of units, in accordance with the Average Income Test. ● Duration of Affordability: Affordability is expected to be maintained for a minimum period of 15 years. For these years of compliance, rents must be maintained within the tests described above, and the original Limited Partnership is kept intact. ● Limited Partnership Structure:While a developer is responsible for applying for and receiving the Credits, they must be converted to real equity through a Limited Partnership with an investor. In exchange for 10 years worth of Tax Credits, the investor will front about 90% of their value in cash, providing funds for various development costs. This contractual relationship creates a limited partnership where the investor 28 owns about 99.99% of the project, with the developer retaining a 0.01%minority share. In exchange for the equity, the investor expects the project to remain in compliance with LIHTC standards for the duration of the (typically) 15-year relationship. If standards are not being met, the investor partner can replace the property manager. Over the first ten years of operations, the developer will deliver Tax Credits to the investor on a yearly basis. The Limited Partnership’s relevance to the project itself is that this separate entity will likely be the eventual landowner, rather than the developer organization itself. Minnesota Housing Finance Agency- Qualified Allocation Plan While the above sections articulate the minimum expectations for eligibility, Minnesota Housing imposes additional expectations through the Qualified Allocation Plan (QAP) that this teammust aim for to make the project competitive for LIHTC funding. While the full expectations should be rigorously examined by the development team via the Self-Scoring Worksheet, a few notable provisions are worth being mentioned here: ● Unit Mix: The QAP highly values the provision of large family affordable units, preferring projects with at least 75% of units being two bedrooms or larger. ● Supportive Services: The QAP also favors projects with units set aside for populations with high barriers to housing stability, such as High Priority Homeless (HPH) or People with Disabilities (PWD). However, the number of these units is contingent on a demonstration of need through the Continuum of Care network. The development team should inquire about these expectations before submitting an application. ● Serving Lowest-Income Tenants:While a project is made eligible by adhering to the 20/50 or 40/60 tests, preference is given to projects with even deeper levels of affordability, or affordability that is guaranteed for longer. ● Long-Term Affordability:While the minimum length of affordability is 15 years, preference is given to projects that guarantee affordability for 40 or 50 years. ● BIPOC &Women-owned Business Enterprises: The QAP favors diverse development teams that include partners representing historically marginalized communities. This should be in consideration while the development team is assembled. ● Readiness to Proceed:Minnesota Housing prefers to award projects where all other sources of funding are in line, and the development process is well underway. This must be demonstrated through written agreements, and a completed financial model of the development. While not every point category will be maximized on this development, earning as many points as possible will ensure the project receives tax credits between 1 and 3 rounds of applications. 29 Tax Increment Financing District Summary Housing TIF offers Wayzata an opportunity to guarantee a source of capital subsidy without relying on competitive RFPs with MHFA, the Met Council, or other allocators. Depending on the structure of the TIF agreement, this option can provide a large, secondary source of funding for construction. While TIF can be utilized without LIHTC or other sources, both TIF and LIHTC impose the same affordability standards, which a TIF-funded development likely cannot achieve without other subsidies. Notably, Housing TIF can only apply to the Maximize Residential development path due to both the residential usage and affordability requirements, and is a significant reason behind recommending R-5 rezoning. With a site that is currently publicly owned, the original tax capacity is expected to be $0, with any additional property taxes generated being deferred through the TIF process. The City of Wayzata will have significant discretion over the application of TIF on this site. Context Tax-Increment Financing (TIF) is a common tool that cities use to incentivize development that meets their goals and requirements. While there are many types of TIF districts, Housing TIF is the only applicable District for the size and uses on 322 Wayzata Boulevard E, and could provide a meaningful source of financing for a project with significant affordability. TIF functions by capturing the additional property taxes generated by improvements and redirecting them back into the project budget, traditionally for 10- 25 years. Roles & Responsibilities ● County Auditor: Certifies the “original tax capacity” on the site before redevelopment. ○ “Captured tax capacity” is the additional tax value that gets redirected towards development costs. The final “Tax Increment” is calculated by multiplying the original tax rate on the parcel by the captured tax capacity. The County is responsible for administering the TIF law. ● Local Government:Wayzata’s HRA is responsible for determining the applicability of TIF and entering development agreements with all interested parties. The municipality must approve these decisions through democratic means (typically a decision by the City Council), and guide the development towards its goals. Housing TIF For 322 Wayzata Boulevard, a “Housing TIF District” provides the most practical course to developing affordable multifamily rental housing. The policy allows up to a 25-year delay in 30 the collection of increments, which can instead be used for site acquisition and/or construction. The primary requirements are that the project must dedicate 80% of total building square footage towards residential use, and the project must pass LIHTC’s minimum affordability standards. Miscellaneous Gap Financing Opportunities Summary While none of the following programs provide sufficient subsidy for an affordable housing development on their own, each can be pursued by a development team in order to marginally decrease rents or subsidize construction costs. Wayzata should direct their development partners to pursue these sources through applications and consultations with the administering agencies, no matter which alternative is chosen for the development model, with the understanding that providing deeper affordability will cast a wider net for these products. ● Metropolitan Council The Met Council operates a variety of housing affordability programs, some of which are viable options for 322 Wayzata Boulevard. These programs offer some of the best opportunities for further reducing rents or ensuring project completion. ○ Livable Communities Demonstration Account (LCDA): LCDA is applied to directly through the Met Council, and is aimed at developing affordable housing with access to jobs and regional/ natural amenities. Affordability requirement is 60% AMI for 15 years. 322 Wayzata Boulevard boasts a competitive location for this source. ○ Local Housing Incentive Account (LHIA): Applied for through MHFA’s Consolidated RFP, LHIA is designed to support affordable housing production that helps municipalities meet their NEED allocation goals, making this site highly attractive. ○ Miscellaneous: Other potential sources are administered through the Met Council, which the development team should exhaustively pursue. An expanded list is featured in Appendix B. ● Minnesota Housing Finance Agency While Minnesota Housing administers a host of affordability programs, award decisions are made through the Consolidated RFP, which also awards Low Income Housing Tax Credits. Any development that applies for LIHTC will also be eligible for a variety of bridge loans and gap subsidy programs, about which the development team should inquire to ensure the project’s viability. 31 ● Hennepin County ○ Affordable Housing Incentive Fund: Hennepin County offers low-interest loans through their Coordinated Affordable Housing Development RFP, which opens each January. While the fund is limited, the development team should consult with the county regarding the project’s eligibility. ● Greater Minnesota Housing Fund GMHF is a state-wide housing CDFI that advocates, researches, and subsidizes affordable rental housing. GMHF offers a variety of mezzanine loans and bridge loans to supplement the primary sources in this deal, including TIF and Tax Credits. 32 IV. Findings - Developer Interviews Summary ● The developers we interviewed consistently expressed that the site was small compared to their preferences. ● The affordable housing developers and consultants were bullish on the financial viability of a project that pursued 9% Low-Income Housing Tax Credits (LIHTC) on this site. They were excited by the prospect of constructing affordable housing in a great city like Wayzata, which would be extremely valuable to future residents. ● All of the interviewees expect significant neighborhood opposition to an affordable housing development at any level of affordability. ● All interviewees saw the mixed-use zoning of the site as an obstacle, preferring residential-only zoning. Most saw the bus turnaround similarly as a negative, though not as problematic to development. ● One developer was skeptical of even a market rate development’s viability on the site without removing the bus turnaround and the mixed-use commercial requirement. Purpose and Methodology As this project progressed, our understanding of the site’s stakeholders and their goals evolved. After reviewing city regulations andmeeting with Metro Transit, who owns the site and operates the bus station there, it became clear that another, crucial voice was missing from our findings: the perspective of developers and their advisers. Our pre-development work needed to be checked against those who would be answering future Requests for Proposals put out by the city. These interviews effectively provided the third axis for our research: the goals of the city and Metro Transit could be weighed against those who would actually build out the site. Our team conducted four virtual interviews with developers and consultants in both the affordable andmarket rate construction space. Three of Subject Matter Experts (SMEs) were selected by the City of Wayzata as examples of developers who have previously operated in the city, and the final interview was conducted with a financial consultant with expertise in affordable housing real estate development. In these relatively informal interviews, these SMEs were provided with an abbreviated version of our preliminary findings as presented in Sections II and III of this report, as well as our 33 questions in advance (Appendices C & D). Based on the site context we provided, we inquired about the attractive and challenging features of the site and how each SME would proceed with its development. The key findings are presented below with themes that arose in each interview. Full interview responses may be found in Appendix E. Interview Themes and Quotes 34 V. Analysis - The Development Switchboard After the findings from our analysis of the site, pertinent municipal guidelines, available financing tools, and developer interviews were collected, we distilled the information to a number of key decisions needing to be made regarding: the development’s design, its financing structure, zoning and density requirements, and the incorporation of Metro Transit’s bus stop facilities on the site. Below, we display these decisions as a “Development Switchboard”, which was used to inform the development paths we present in this report. Each key variable that arose constitutes a “switch” on this switchboard, which is intended to provide Wayzata and the development team the range of potential development paths that were reviewed, as well as demonstrate their interrelated nature; selecting an option from one switchboard category often directly affects other choices. The options presented below are organized roughly in order from the most impactful to least impactful decision in each category. This switchboard can help orient the development as it evolves or faces unexpected hurdles. In this , the Humphrey Capstone Group utilizes the switchboard to illustrate opportunities and challenges for each development path presented to Wayzata. Each path we present in Section VIwill indicate which “switches” have been flipped. Below, we display the full switchboard, and describe each decision point and the options that have been considered or eliminated for each. 35 Switchboard Elements Design A central piece of analyzing the redevelopment opportunity of this site is the physical layout and design of the building, parking, and transit facilities. While this list may not be comprehensive, the main variables are distilled as follows: ● Number of buildings- Our development paths feature 1-building designs, as well as designs with multiple buildings that allow for greater flexibility in uses on the site. Developers may seek to minimize construction costs with fewer buildings, though designs with more buildings or multiple building styles (mixed-use, multi-family, townhomes, etc.) may be found in designs that more closely align with the goals in the Design Standards Handbook. The Humphrey Student Team considered alternatives to the single building design, but encountered complications in the zoning code that would require subdivision. Considering the small footprint of the parcel, subdivision andmulti-building developments present a number regulatory and financial hurdles. ● Building location- The options for any building’s location are contingent on Wayzata’s design standards, which encourage projects to create a desirable street frontage. The need for street-fronting design is influenced by zoning category and the orientation and size of bus facilities. ● Parking location- Possibilities for parking location and design are also influenced by zoning category and the orientation of bus facilities, as well as the orientation and density of residential and commercial units on the site. ● Stormwater Pond- The Team considered alternatives for removing or altering the stormwater pond on the south end of the site in order to increase our buildable area. The benefit of increasing the site footprint is weighed against the financial cost of these alterations, as well as the disruption to the surrounding neighborhood and public utilities. Bus Facilities To incorporate Metro Transit’s need for continuing transit accommodations, the layout and design of each element can bemodified to maximize flexibility in the buildable area of the site. Through the Team’s meetings with Metro Transit, it was determined that dedicated parking spaces for transit users are no longer required on site. Required facilities include: 36 ● Bus turnaround - The existing turnaroundmay be larger than is necessary, so the development paths explore options for compressing the turnaround and bus stop footprint and present two different orientations on the site. ● Bus layover space - In conjunction with the turnaround, ample space must be provided for idle buses during layovers. This space is likely to be provided adjacent to parking, but must be oriented as to not cause disruption to the other uses. ● Restroom - Metro Transit has asked for a restroom to be available to transit operators during layovers. This can be achieved through granting operators access to a quasi-public restroom in the ground floor lobby or by a dedicated restroom only accessible to operators. Finance In order to achieve maximum affordability, this development will likely pursue a variety of sources for subsidizing acquisition fromMetro Transit, capital/construction costs, and potentially operating and rental costs. Depending on the zoning, layout, and density of the development, different sources will be more or less applicable. ● Low Income Housing Tax Credits- As the primary public subsidy for affordable housing production, the decision to pursue Tax Credits is one of the most influential on the switchboard.. As discussed in Section III, Wayzata and the development team should pursue 9% LIHTC through Minnesota Housing’s Consolidated RFP. In competing for these limited funds, the project would be expected to maximize affordability, sustainability, and connection to the community, as outlined in the Qualified Allocation Plan. If the City and development team decide to pursue 9% Tax Credits through the Consolidated RFP, the timeline will likely be contingent on when the project receives an award, which could take multiple application cycles. ● Tax Increment Financing (TIF) - For the City of Wayzata, the primary opportunity for construction/ acquisition subsidy falls with Tax Increment Financing. Creating a Housing TIF District on the parcel allows the city to reroute additional property tax value, created by improving the site, back into the project by deferring their collection for up to 25 years. While not providing the same depth of subsidy as LIHTC, TIF is initiated by the County, City, and Housing Authority, meaning it can be a far more predictable source for gap financing. Refer to Section III for more information. ● Smaller Opportunities (Gap Financing) - Beyond these more substantial sources of subsidy, there are a variety of other programs that can provide additional gap financing and introduce even deeper affordability. Minnesota Housing’s Consolidated RFP also functions as an application for many of these sources, including the Metropolitan Council’s Local Housing Incentive Account (LHIA). Alongside the Met Council’s separate 37 application for the Livable Communities Demonstration Account (LCDA), these programs each offer important opportunities for this development. Beyond Met Council resources, there exists a variety of other affordable housing programs the development team should consider pursuing. Section III offers a deeper dive into the requirements, application processes, and potential awards for each gap financing method. Policy In determining the preferred development path, the City must determine whether to maintain the existing regulatory regime on the site, modify it through easements or variances, or change the regime wholesale. Specifically, the zoning designation will determine the maximum number of residential units, dedicated commercial space, and the lot area per unit. Based on the applied zoning category, this development will be more or less competitive for subsidy sources such as 9% LIHTC. ● Zoning ○ C-1 Office and Limited Commercial District - This is the site’s current zoning category under the Wayzata 2040 Comprehensive Plan. The purpose is to “provide a high-density district that can include administrative office buildings and related office uses, so long as those uses have limited contact with the public”. Generally, this designation calls for at least 80% non-residential use on the ground floor, with the upper two floors designated for residential use. Under this formulation, the site can hold a maximum of approximately 35 residential units. Generally, development models under this zoning category will be less competitive for LIHTC, andmay be precluded from becoming a Housing TIF district. ■ Notable Permitted Uses: Health clinics, personal services, professional services, outdoor public recreation, or parking. Multifamily dwellings. ■ Setbacks: Front, rear, and side yard setbacks must be a minimum of 10 ft. ■ Lot Coverage: ● Lot coverage of all buildings may not exceed 50% ● FARmay not exceed 2.0 ● Buildings may not exceed a height of three stories or 35 ft. ● The lot area must be at least 9,000 sq ft. ■ Special Limitations: The first story must be 80% non-residential by that floor’s Gross Floor Area. The remaining 20% is intended for common areas. 38 ○ R-5 High (Average) Density Multiple Residential District- The second development path recommends rezoning to this category, motivated by the additional units that can be achieved through residential use on the ground floor. With this zone, the maximum number of units for a 1.79 acre site increases to 65. Due to parking requirements, a development closer to 42 units is much more realistic, and far more competitive for 9% LIHTC than a 35-residential unit market rate development. Removing any non-residential uses also allow the site to be incorporated into a Housing TIF District. This may allow the development to incorporate far deeper affordability. ● Affordability: Depending on a variety of factors on the switchboard, as well as Wayzata’s goals enshrined in an RFP and/ or deed restrictions, the depth and breadth of affordability on this site will change significantly. The Student Team’s recommendations aim to maximize affordability while ensuring a redevelopment can successfully occur. Density City regulations legislate the density of parcels in two ways: The comprehensive plan provides a range of allowable “unit counts” for each parcel based on the site’s uses and size. City zoning regulations also dictate a minimum lot area per unit for certain residential zoning categories. ● Unit Count - At 1.79 acres, the 2040 Wayzata Comprehensive Plan update provides the following allowable density ranges for the Park & Ride site. For mixed-use categories, the total unit count is divided between residential and non-residential uses (Ex: commercial, parking, or open space) ○ C-1 (Mixed Use): 10 to 30 units per acre allowable under the comprehensive plan, for a maximum of 53.7 overall units. Assuming slightly less than⅓ of building square footage will be non-residential under C-1 zoning (80% of the first floor in a three floor building), this equates to 35 residential units, 17 non-residential “units”, and 1 “unit” allocated to the transit uses on the site. ○ R-5 (High Density Residential): 12 to 40 units per acre allowable under the comprehensive plan, for a maximum of 71.6 units. However, this maximum unit count is heavily moderated by the zoning code’s parking requirements and Lot Area Per Unit calculations described below. A realistic unit count would be much closer to 40 residential units. ● Lot Area Per Unit (LAPU) - The Wayzata Zoning Code specifies a required minimum lot area per unit for R-5 zoning, with density bonuses that can reduce the minimum LAPU amount. The minimum starts at 2,175 square feet per unit, which would only permit around 20 units on the park & ride parcel without density bonuses.The following bonuses are available: 39 ○ Subtract 300 sqft per underground/under-building parking space provided per unit ○ Subtract 300 sqft for the incorporation renewable energy/LEED standards in alignment with city goals ○ Subtract 100 sqft per each 1000 sqft of privately-owned public space on the site ■ Note: The total maximum reduction for A, B, and C is -675 sqft, down to a minimum of 1,500 sqft LAPU. ○ Subtract an additional 300 sqft if the development includes affordable housing in alignment with city goals. Obtaining all available density bonuses would allow for a minimum of 1,200 sqft LAPU, or roughly 65 residential units on the Park & Ride site. Other Considerations: ● Parking - Toward the end of our research process, parking requirements became a key variable that concerned developers about the site. Wayzata’s zoning code requires that any multi-family building allocate two (2) parking spaces per unit. This became a significant challenge, particularly for our second development path, which maximizes the number of residential units on the site. ○ For our As-of-Right development path, this would amount to 70 parking stalls for residential alone (24,500 sq ft or 0.56 acres of land area), plus additional for any commercial use ○ For our Maximize Residential development path, this would amount to 84 parking stalls (29,400 sq ft or 0.67 acres of land area) ● MinimumUnit Size - Wayzata zoning code specifies a minimum residential unit size based on the number of bedrooms in the unit: ○ Efficiency/Studio Units- 500 sq ft ○ 1 bedroom- 700 sq ft ○ 2 bedroom- 900 sq ft ○ More than 2 bedrooms- 900 + 150 sq ft/ bedroom. The developers we interviewed indicated that these minimum sizes were slightly larger than typical affordable housing developments, but not significant barriers. Based on the unit breakdown of our proposed development paths, we will indicate whether a variance from these standards will be necessary. 40 VI. Development Paths & Recommendations Our analysis of the 1) Site constraints, 2) City regulations, 3) Financial tools for funding affordable housing, and 4) Developer interviews led us to identify the key “switch” under the city’s control: the zoning of the parcel. We find that zoning is the foundational tool in the city’s hands that will dictate future development on this site. With this in mind, we present our findings as two paths of development, whose key difference is their zoning. These two development paths are titled “As-of-Right”, which maintains the site’s current C-1 mixed-use zoning, and “Maximize Residential”, which proposes a rezoning to the R-5 high-density residential category. 41 The names of these paths reflect their primary objectives: The “As-of-Right” path evaluates what could be built on the site as-of-right today with minimal physical, economic, or policy changes made to the site. The “Maximize Residential” path instead seeks to fully realize the site’s housing potential in order to provide quality homes for more Wayzata residents, and maximize the potential for funding the development of either market rate or affordable housing. These two paths were selected after significant consideration of the balance of interests between affordability, obstacles to immediate development, and attractiveness for a competitive RFP process. Our recommendations are not intended to cater to developers’ interests, however anticipating their concerns and wishes for the site will encourage a wider variety of proposals. More proposals gives the city and its residents more options, providing leverage to pursue the development that best suits local interests. Within these two paths of development, we explore the interaction of many other variables (as seen on the Development Switchboard). These variables are not intended to present a static, “A or B” choice, but rather serve as case studies to illustrate the balance of variables in two of the most viable routes forward. We highly encourage mixing andmatching elements from both development paths to construct Community Engagement materials, an RFP for development, site designs, or anything else where the information may be valuable. 42 Development Path 1: As-of-Right Development This development path is intended to illustrate the most direct path to a development as-of-right with the city’s current zoning, comprehensive plan, and design goals in mind. The result is a case study of a mixed-use building with ground floor commercial offices and/or covered parking and residential units above, designed to front Wayzata Boulevard and routing the bus turnaround further into the site, circling around the structure and parking lot. Due to the limitations to residential density, this path would not be qualify for the two highest-impact financing tools (LIHTC and TIF), and as a result would likely result in a market rate development with the possibility of including several affordable units that are subsidized by the other residential units and/or lower-impact financial tools, such as funding from an HRA levy, a newly-established housing trust fund, or funds from the Met Council Livable Communities Demonstration Account (LCDA). Development Path 2: Maximize Residential Our research and interviews clearly indicated that this site and the allowable unit count under C-1 zoning were lower than typical affordable housing projects in the Twin Cities, and developers indicated an interest in increasing the residential unit count. As a result, the Maximize Residential development path imagines a site configuration under a rezoning to the R-5 High Density Residential category. By opening the ground floor to residential uses, we maximize the possibility of accessing two key financing tools: 9% Low-Income Housing Tax Credits (LIHTC), and a Housing Tax Increment Financing (TIF) district. Our design for this path also explores consolidating the bus turnaround and parking behind a U-shaped building that better conforms to design standards and corridor study recommendations. 43 Development Path 1: As-of-Right Objective: Tomaximize the developable value of the site under its current physical and regulatory constraints. The “As-of-Right” development path is designed to demonstrate the possibilities—and limitations— of a project constructed under the current regulatory regime. The current policy prescription, particularly the zoning designation of C-1, emerged from the Wayzata 2040 Comprehensive Plan and the Wayzata Boulevard Corridor Study, and generally articulates a desire for mixed-use development that contributes to an active streetscape. The priorities of the As-of-Right path are to maintain the objectives written into City policy and plans, contribute to the mixed-use corridor vision for Wayzata Boulevard, develop housing that responds to high demand, and understand what opportunities and challenges exist for the inclusion of affordable housing. Key Features: - Maintains zoning, bus shelter, design standards, and public realm goals for Wayzata Boulevard. - Orients the building closer to the Boulevard, shifting parking and the bus turnaround deeper into the site. - Minimizes entitlements and variances. Consistent with established land use goals. - Provides market rate residences with flexibility for unit makeup. 45 Zoning: C-1 (Office and Limited Commercial District) The purpose of this zoning district is to allow development that can relate to and adjoin high-density or residential districts, and include administrative office buildings and related office uses, so long as those uses have limited contact with the public. C-1 allows for a 3-story development, with the ground floor consisting of all non-residential uses (80% non-residential use, 20% circulatory/ common use), and the upper two floors containing multi-family residential units. Two parking spaces are required for each unit, with at least one enclosed (920.11). Potential for joint facilities (920.09) or space reductions (920.13) should be considered, given the limited buildable area on the site. Under this zoning district, 322 Wayzata Boulevard can support a maximum of 35 residential units, with the ground floor reserved for commercial and circulatory spaces. While 35 units is the stated maximum, the Capstone team recognizes that practical constraints are likely to bring the unit count below 35, primarily due to parking requirements and the third-story stepback outlined in the Design Standards. Due to this, we expect that developers will propose projects with mostly efficiency and 1-bedroom units in an effort to increase unit count. While this zoning district provides potential for great development, the expectation of commercial space is largely seen as a detriment to the site’s developability, and restricts the residential unit count below thresholds important to the project’s financial feasibility and the inclusion of affordability. Finance & Affordability The inclusion of affordable units is the greatest challenge to this development path, largely related to the requirement of commercial space andmaximum residential units of 35. This section discusses the applicability of the primary subsidy options detailed in Section III under the current site constraints. Low Income Housing Tax Credit Beyond the zoning change, the largest difference between each development path is the competitiveness of the site for LIHTC. Generally, Minnesota Housing does not award Tax Credits to projects under approximately 40 units, without specific justifications. Beyond this, compliance with LIHTC’s Federal and State standards benefits from the economy of scale that more units can produce. Without access to the equity that Tax Credits attract, the development will rely on traditional real estate investors, many of whom are hesitant to invest in commercial 46 properties in the current real estate climate. For raising equity on this redevelopment, we project that a developer will rely on “friends & family” to support construction and finance. Without access to LIHTC, this property will not be able to produce any deep affordability, and the breadth of affordability will be significantly reduced. Housing Tax-Increment Financing District As the other largest source of subsidy for affordable housing considered for 322 Wayzata Boulevard, eligibility for Housing TIF is critical to producing affordable units at a rate that meets Wayzata’s goals. Whereas LIHTC eligibility would require tact when selecting a development team, building and filing applications, and creating a Limited Partnership with investors, Housing TIF provides more than just monetary value—the City-led process provides more municipal control than the LIHTC application process, allowing the city to articulate a commitment to redevelopment on this site. To meet the criteria for the establishment of a Housing TIF district, the site must be designated for at least 80% residential uses. Due to the three-story height limit and requirement of commercial use on the ground floor, the maximum residential use in the As-of-Right Path is around 67%. Therefore, State Law prohibits TIF being applied to this site under its current regulatory status. Without TIF or LIHTC, the As-of-Right path has very few options to subsidize development of affordable housing, even to meet the 10% of units at 80% AMI minimum set out by the client. Additional Funding Opportunities Other funding opportunities may still provide potential for affordability in this development. However, most of these opportunities, described in more detail in Section III, will have smaller financial impacts on the project, andmay enforce more compliance work and affordability targets than a developer is willing to finance. Nevertheless, creativity is required to meet the affordability goal under this development path, and all opportunities should be pursued or consulted on. Lastly, opportunities for cross-subsidization of a few affordable units by a majority market-rate development are small, but may exist. In Section IV, the developers we interviewed believe there are too few units to make this option a reality. In order to achieve cross-subsidization, Wayzata may need to find amarket-rate developer willing to sacrifice on their financial returns, or establish some ad hoc development subsidy, such as helping to construct parking and the required transit facilities. 47 Overall, the As-of-Right path is greatly limited in its options to pursue subsidized affordable housing, and is the main justification behind rezoning in the second development path. As currently regulated, this development path would result in a market-rate, mixed-use development. Site Design Considerations The site design presented for the market-rate development path seeks to maximize building frontage along Wayzata Boulevard, while maintaining sufficient space to the side and rear of the building to support some surface parking and space for the 645 bus to turn around. The remainder of the parking is housed on part of the building’s ground floor, qualifying as a “non-commercial” use under the C-1 zoning category. The building’s L-shape provides access to the rear of the building, while emphasizing the streetscape. The public-facing frontage of the building further activates the pedestrian realm through public art, seating areas, street trees, and other placemaking opportunities. The bus stop and shelter are located to the western end of the site, serving as a continuation of the activated streetscape. Both development paths recommend landscaping and developing the area around the stormwater retention pond, creating a privately-owned public space with a walking trail, gazebo area, and an overlooking patio for the building’s residents. The design seeks to maintain as many mature trees as possible, which are located around the perimeter of the site and currently cover much of the undeveloped southern portion. This will serve as a natural buffer between the denser development and surrounding single-family homes, while providing a natural amenity for the neighborhood. The building design will comply with the standards identified by the city, including a 3-story limit and stepped-back third story. With a building frontage of roughly 175’ along Wayzata Boulevard, one significant massing break will be needed, with no additional building recesses required. Summary & Recommendation The As-of-Right development path presents a valuable baseline to understand how current city regulations guide development of 322 Wayzata Boulevard. Through this analysis, we have identified crucial points of dissonance between the goals of the 2040 Comprehensive Plan and 48 Corridor Study against the City’s desire for affordable housing and MLUPA requirements. By pursuing the As-of-Right Path, we can illustrate the limited potential of the site as-is and the possible need for rezoning to deliver on the most beneficial options. Even still, this site holds the ability to deliver a market-rate development that meets the standards and character of the City of Wayzata, and should be seriously considered. 49 Development Path 2: Maximize Residential Objective: Use rezoning as a powerful tool to increase the site’s ability to produce affordability and increase developer interest during the RFP process. The Maximize Residential Path explores the possibility of rezoning the site to the R-5 High Density Multiple Residential District, to increase the site’s unit count. This alternative zoning district increases the viability to create affordable units compared to the as-of-right option. Rezoning to R-5 removes the ground floor commercial requirements, opening the door for more residential units on the site. This district allows for a density range of 12- 40 units/ acre. Combining the density range with a minimum lot area per dwelling unit of 1200 square feet, the maximum number of units for this site is 53.7. In the interest of pragmatism, our design pursues 42 unit development, acknowledging parking and LAPU constraints. Key Features: ● Rezone property to High Density Residential (R-5) ● Single, L-Shaped building with activated public space in central recess. ● Compressed bus turnaround that maintains its current orientation on Wayzata Blvd. ● Pursues Wayzata’s Housing and Affordability goals described in Section II. 51 Zoning: R-5 (High Density Multiple Residential District) The purpose of this zoning district is to provide a district for high density residential uses in areas that would relate well to other land uses and thoroughfares, or where such use may act as a transition between different types of uses. This zoning district allows for a unit density of 10-30 units per acre. Multi-family buildings in the R-5 district have a minimum lot area per dwelling unit of 2175 square feet, which may be reduced to as low as 1200 square feet with additional design elements. Finance and Affordability As was previously discussed in Section III, LIHTC 9% offers the greatest opportunity for deep subsidy and lasting affordable units. These credits should be one of the major funding tools that the city considers during the redevelopment process. The 9% credits are typically awarded to residential projects between 40-75 units. The envisioned development of 42 residential units would be situated nicely to be competitive. The 9% LIHTC is highly competitive, andmay require multiple application cycles. If the city and development teamwould like to maximize the site’s competitive potential, it will need to maximize the proposal’s points under the Qualified Allocation Plan process as described in Section III. Additionally, rezoning the site to R-5 introduces the possibility of establishing a Housing Tax Increment Financing (TIF) district, unlike a C-1 mixed-use development, where such a district would not be feasible. This provides both additional financial support to the project, and increased competitiveness for 9% LIHTC. While a TIF district will provide a meaningful source, it will not provide a subsidy deep enough to support its minimum affordability standards on its own. Developer Considerations Rezoning the site to R-5 not only makes the site more competitive for tax credit programs, but it also makes the site more attractive to suitable developers. Feedback received during the developer interviews suggest that multi-family residential is more attractive thanmixed-use on a site of this scale. Developers felt that the costs and complexities of a multi-use development 52 outweighed the return for 35 residential units. A singular emphasis on residential development would provide a streamlined process for development and lease-up. Reducing the complexity, number of uncertainties, and potential hidden costs will help attract some of the top developers in the Twin Cities. Rezoning to R-5 helps address these challenges by simplifying the process to a single use for the site, which requires the developer to fill one space rather thanmultiple, and opens the door for LIHTC assistance. Utilizing LIHTC is a complex process involving financial know-how and the ability to comply with the program’s requirements. With this in mind, the pool of potential developers for this site will look different than a market-rate option, with more nonprofits likely to express interest. Finally, it is important to recognize that affordable housing deals generally take longer thanmarket rate, due to the contingencies of receiving funding from a wide array of sources. The City and development team should be prepared to withstand temporary delays related to the Consolidated RFP and other moving pieces. Site Design Considerations As in the as-of-right development path, the specific design of an affordable housing development can vary depending on the developer. Rezoning the parcel allows more building area to be allocated to housing units, which is necessary to provide a competitive application for obtaining key funding tools. The proposed design includes a mix of unit sizes from studios to 4-bedroom, family-sized apartments. In our vision, this development is more likely to be pushed farther back into the site, since residential uses do not benefit from street frontage like a commercial use would. This is also done to preserve as much existing infrastructure on the site as possible, namely the bus stop, turnaround, and some parking spaces. The bus turnaroundmay be compressed to unlock more of the site while also keeping development costs down. In this scenario, the stop would remain in its existing location in between the street and the bus layover area, an option more favorable for Metro Transit. Residential parking would then be provided behind the bus turnaround, but is significantly limited by the building’s size, the bus turnaround, and utilizing the entire building footprint for 53 residential units and amenities. In this path, a variance to reduce the municipal parking requirement will be needed. As in the as-of-right path, we recommend landscaping and developing the area around the pond to provide a privately-owned, publically accessible space. Development should also pursue energy-friendly goals, such as LEED certification or renewable energy (e.g. solar) to meet city natural and community resource objectives , bolster the application for LIHTC, and provide a density bonus per the zoning ordinance specifying the allowed land area per unit (§959.07.B). Summary & Recommendation If the City is committed to achieving its housing affordability goals, then the Humphrey Capstone Group recommends leveraging LIHTC 9% to subsidize the project. If awarded these credits, the development team can sell these credits to investors for around 70% of the project’s required equity, which goes a long way toward creating new affordable units. Additional funding support may be granted through Housing TIF, which is not available in mixed-use developments. To qualify for these valuable credits, the site will need to be rezoned to R-5. This is due in part to the allowed residential unit density of the R-5 district. These credits are typically awarded to applications of 40 to 75 units, which can only be achieved through the R-5 district. The maximize residential development path recommends the development of 42 residential units on the site. 54 Development Paths: Possible Futures The development paths discussed above are intended to be practical and solutions-oriented; we wanted to provide the city with actionable information for next steps in the process for redeveloping the Wayzata Boulevard Park & Ride site. In our research, however, we did encounter variables with limited city control that could significantly change the best practices for developing the site. Here, we briefly discuss those variables and their implications for future development of the site. Bus Stop & Turnaround Location In conversations with Metro Transit, it was expressed that there is a possibility, however slight, that the bus turnaround could be located away from the Park & Ride site at some point in the future. This could involve re-routing the 645 line entirely, or simply locating the turnaround elsewhere, such as a nearby parking lot that could accommodate the transit needs. Developers expressed that the bus turnaround is one of the most significant challenges for developing the site. If redevelopment no longer required maintaining the bus turnaround on-site , our team expects that developer interest in the site would substantially increase, and an RFP process should reflect the changed needs and increased interest in such a scenario. Lot Subdivision Some designers we interviewed explored creating a development with multiple buildings to align with the city’s design standards. These ideas ranged from “missing middle”-style development with multiple 4-12 unit buildings, to townhomes overlooking the landscaped retention pond to the south end of the site. City zoning currently prohibits these types of development, and city staff had advised against pursuing a PUD for the Park & Ride site. As such, we would advocate further research into the process of subdividing the site to unlock more development opportunities. 55 VII. Community Engagement Strategy Identifying stakeholders When conducting community engagement, it is important to have a wide range of participants to ensure that the results accurately reflect the community as a whole. To avoid homogeneous answers from a select portion of the community, a diverse pool of stakeholders is necessary. The following is a brief list of potential stakeholders who will have an interest in the site: ● Future site residents ● Developers ● Neighborhood Residents ● Neighborhood Associations ● Business Owners (especially the adjacent businesses) ● Park users ● Bikers & Pedestrians ● School District, especially the nearby Middle School and its Parent-Teacher Organization ● City entities ○ Housing and Residential Authority ○ City Council ○ Planning Commission ● Metro Transit ● Shoppers ● Housing advocates Discussions surrounding affordable housing are poised to have significant implications for some of the most vulnerable populations in the Wayzata area. It is important to consider engaging a diverse range of the community, beyond the immediate neighborhood, which is largely composed of existing homeowners. Avoid engaging with a homogenous group, as this is likely to produce skewed results. To ensure that all voices are heard and that there is fair representation throughout the engagement process, the City or a third-party contractor should prioritize the following in their community engagement events: ● Include diverse groups (e.g., race, age, gender, income) ● Varied meeting times and locations ● Childcare on-site ● Variety of media presentations (visual, audio, digital tools, paper maps, etc.). 56 ● Strategic invitations to local partners with connections to marginalized groups. ● Activities translated to a variety of Languages ● Accessible transportation options ● Food and beverages provided Local Partnerships Strategic partnerships may also prove to be beneficial in reaching segments of the community that are not typically engaged with City projects. Some of the local organizations that the City may want to consider partnering with include: ● Nearby Churches ○ St. Barts, Redeemer Lutheran ○ Wayzata Community Church ● IOCP/Outreach Development Corporation ● Three Rivers Park District (trails and riders) ● Chamber of Commerce ● Wayzata School District ● Others Previous Engagement Over the past seven years, the topic of redevelopment has been revisited onmultiple locations, with the Park & Ride site being repeatedly identified as a potential site. While the topic of redeveloping the site has been ongoing as far back as 2017, formal adoption into the Council’s strategic plan didn’t occur until 2019. Previous engagement initiatives and studies conducted over the years will provide the necessary context for the city’s affordable housing goals and redevelopment goals. Summary of previous engagement The City of Wayzata has conducted various engagement initiatives within the last several years. Some were catered to a specific area within the city, such as the Wayzata Boulevard Corridor Study, and others followed amore comprehensive approach, such as the Wayzata 2040 Sailing Ahead project. Though these initiatives had different goals and objectives, there was overlap of themes presented by the respondents. The need for housing access was one prominent concern that was raised in multiple engagement initiatives. Respondents expressed desires for a multi-generational community, and were fearful of their children getting priced out as they got older. The response to these concerns was identifying the goal to optimize housing access and affordability through supporting development at a variety of affordable levels. The theme of this goal was reiterated within each of the 57 engagement initiatives. Another overlapping goal is the redevelopment of underutilized parcels throughout the city, including the Park & Ride site. The previous engagement methods have articulated a clear need for additional access to affordable housing in the city, and has identified the Park & Ride site as a redevelopment opportunity. ● 2017 ○ Wayzata 2040, Sailing Ahead: The Sailing Ahead project was the community engagement portion in the early stages of the 2040 Comprehensive Planning process. The main goal of Sailing Ahead was to engage with City residents and stakeholders to determine where they see the direction of the City of Wayzata. The process gave the community an opportunity to provide valuable input into shaping the future of the City. The Sailing Ahead project included a variety of engagement activities throughout a 3-month span. These included Meetings and Interviews, Visioning Workshops, Think Tank sessions, and stakeholder surveys. 58 During these sessions, a number of key themes emerged. These key themes were used to create the eight guiding principles that support the implementation of the Wayzata 2040 Vision. Two of these are a “Multi-Generational Wayzata” and creating “City Nodes with Greater Housing Diversity”. The study found that one of the strongest desires for the preferred future of Wayzata is the desire for a multi-generational community. Over 80% of survey respondents believed that Wayzata should be geared toward a diverse, mixed-age community, and 79% of respondents believed that Wayzata should allocate its resources to infrastructure to foster an intergenerational community. One major barrier to achieving this goal is the high property costs within the city. Housing affordability and availability was a recurring theme in the engagement sessions. The study indicates that housing diversity would enable younger families to move to the city. This may result in the need for higher density nodes throughout the city. There were a couple of sites mentioned as possible redevelopment opportunities, one of which being the Park & Ride site. ● 2017-2020 ○ 2040 Comprehensive Plan Update The 2040 Comprehensive Plan is designed to regulate and guide growth, redevelopment, and improvement throughout the city. The City of Wayzata noted the concerns raised during the Sailing Ahead project, and implemented strategies to have them addressed. As was previously identified as a major issue during the Sailing Ahead project, housing affordability was a concern for participants. The Housing chapter of the comprehensive plan detailed a number of affordable-housing related goals and actions for the city. A sample of these are: providing safe, affordable and quality housing stock for a range of affordability levels; supporting housing types and development that helps fill existing 59 affordable housing gaps; and exploring partnerships with organizations to identify opportunities for affordable rental, multi-family, & single-family housing units. The Land Use chapter also identified some land-use related goals for the future of the City. One of the relevant goals is to create connected neighborhoods that provide access to services, housing and recreation for all ages andmobility types. Within this goal, there are policies to: examine reinvestment in properties through funding programs; recognize the Metropolitan Council affordable rental and life-cycle benchmarks; and encourage and promote a balanced housing supply. Additionally, the Land Use Chapter also recognized the need for infill and redevelopment within vacant and underutilized properties within the City. One such property is the Park & Ride facility on Wayzata Boulevard. This parcel was identified as a Stage 3 redevelopment opportunity, which was anticipated to occur sometime between 2030 to 2040. The Land Use chapter also identified the future land use of this site as Mixed-Use Commercial/Residential. ● 2022-2023 ○ Wayzata Boulevard Corridor Study: This corridor study was conducted to identify the desired vision for Wayzata Boulevard and created a set of guiding principles to achieve it. The study contains guiding principles, framework & corridor strategies, and implementation plan. The Wayzata Boulevard Corridor Study contained two phases of engagement. The first phase occurred between August-October, 2022. This phase included a pop-up event, business and organization stakeholders meeting, and a community survey, which received 217 responses. The second phase of engagement occurred in February and March of 2023, and included two pop-up events, stakeholder conversations, and an open house event which engaged over 100 community members. 60 The Corridor Study provided valuable information on the desired vision and guiding principles for the corridor. To support the corridor vision, the study created a number of guiding principles: ● Gateway to the Community ● Safe, convenient, and pleasant ● Optimize economic development and housing growth ● Increase housing access and affordability ● Natural and open spaces ● Physical connections ● Investment and redevelopment ● Unified corridor Three of the guiding principles support the concept of redeveloping the site for affordable housing: optimize economic development and housing growth, increase housing access and affordability, and promotion of investment and redevelopment. The study contains a robust list of implementation actions that align with these guiding principles, which range from short-term, medium-range, and long-range implementations. The short-term and medium-range implementation actions include a few actions related to the Park & Ride site. The identified actions include: continued coordination with Metro Transit regarding redevelopment of the site; support the due diligence work of Metro Transit, including market research efforts; and supporting tools needed to reinforce the redevelopment of the site. Future Engagement Future engagement strategies will largely depend on which development path the City pursues. This section provides a contextual timeline illustrating the City’s immediate next steps, and two timelines illustrating each development path. These timelines also identify potential engagement opportunities throughout. These identified points will each have a unique goal and will help guide the process in shaping the development of the site. These timelines are also meant to illustrate the potential timeframes of each development path, as well as layout the sequence of events toward breaking ground. 61 Engagement Opportunity - Feedback on the pre-development study Before making a decision on the development paths, the City may consider conducting a brief community engagement initiative. This opportunity should take place in the summer of 2024, shortly after the Council’s work session reviewing the Humphrey Capstone Group’s pre-development study. This opportunity should focus on deciphering the findings of the student report. This engagement opportunity will inform the City Council of the community’s perspective on the findings of the report and help guide their decision regarding the zoning of the site. Due to the long history of this site and the various goals of the City, this engagement point should comprise of a small group of 5-15 participants, primarily made up of previous engagement participants/city volunteers. This includes participants from either the Wayzata Blvd Corridor Study or the Sailing Ahead project, and/or members of the HRA/Planning Commissioners. This round of engagement should provide the City Council with a recommendation based on nuanced discussion of both development paths. The deliberations from the participants will assist the Council to comprehensively evaluate each aspect of both paths. The potential activities for this engagement opportunity include: ● Focus group discussion Participants will engage in discussions on the pros and cons of both development paths. The facilitator will keep detailed notes of the items discussed, and will provide minutes and findings from the discussion to the City Council. ● World Cafe In this activity, participants will rotate throughmultiple small-group discussions, each focusing on a specific aspect of the development paths. At the end of each round, each group will share their findings to the facilitator, and the findings will be recorded. Then 62 the participants will switch tables, which will allow for cross-pollination of ideas and perspectives. ● Structured Interviews Participants will be asked a series of predetermined questions crafted by the facilitator. The responses are recorded and aggregated and the results will be shared to the City Council. Future Engagement - As-of-right Should the Council decide to proceed with the As-of-Right development path, then the likely result is a market-rate development, which is a shorter process than the maximize residential development path, andmay lead to a quicker project completion. This is due in part to the site’s inability to apply for tax credits. Because of this, the site will likely develop as a market-rate development. In this scenario, the developer should take responsibility for the community engagement efforts for the redevelopment of the site. As-of-Right Engagement Opportunity 1 The first engagement opportunity for this development path should occur shortly after the land sale/purchase agreement is made when a private developer. This round of engagement should focus on building a positive relationship with the local stakeholders and address the concerns they may have. This round of engagement should contain one or more of the following treatments: ● Community Meeting/Workshop - This meeting should provide both the developer and the stakeholder with the opportunity to have an open dialogue regarding the 63 development. These interpersonal conversations can be a productive way of identifying and addressing concerns of the development. ● Partnerships with Local Organizations - Another method to foster a positive relationship with the community is to collaborate with local organizations. This method would involve the developer collaborating with these organizations to host events, workshops, or discussions regarding the development. Partnering with local organizations can demonstrate a commitment to community investment. ● Community Events and Sponsorships: The developer may also want to participate in one or more community events, such as festivals, fundraisers, or fairs. This helps build rapport with the residents and can integrate the development into the fabric of the community. As-of-Right Engagement Opportunity 2 The second engagement opportunity for this development path should occur after the developer has created a positive relationship with the community stakeholders but before the site plan is finalized. During this phase, the goal should be to address the concerns raised from the first round of engagement. One or more of the following engagement strategies may be considered: ● Issue-specific workshops - If there is a theme among the concerns raised, then the facilitator may want to host several workshops that focus on each specific theme. This allows for in-depth discussions on each of the issue areas, and will allow both parties to cooperate to alleviate the concern. ● Interactive virtual tour - The facilitator would develop an interactive 3D tour of the proposed development that would allow participants to explore different aspects of the project virtually. ● Site tours/open house - The developer may want to host an open house on a previously developed site that is of similar scale. This would allow participants to gain additional perspective on the scope of the development beyond drawings and rendered images. 64 Future Engagement - Maximize Residential Should the City Council proceed with the Maximize Residential development path, then the City will need to rezone the parcel to R-5. Rezoning the parcel to R-5, it is recommended that the City conduct twomore engagement events. Maximize Residential Engagement Opportunity 1 The first engagement opportunity for this path should occur prior to the issuance of the RFP. The purpose of this engagement is to identify specific site plan concepts for this development. The facilitator will be responsible for presenting the relevant design standards of the site, and will gather community feedback to create a series of site plan designs. The group size for this engagement should be a small-medium sized group, ranging from 10-30 participants. The reason for targeting small to medium sized groups at this stage is to allow the facilitator to provide a detailed background on the site and the City’s goals. Doing this in a smaller setting allows for more in depth understanding among the participants. The facilitator may want to chose one or more of the following treatments during the first round of engagement: ● Design Charrettes Charrettes allows participants to collaborate in small groups to quickly generate design ideas. Having multiple groups will allow a number of potential site layouts to be generated, which the facilitators can use to craft a series of site scenarios. ● Visioning Workshops 65 These workshops allow participants individually express their ideas and aspirations for the site, within the context of the zoning regulations. Facilitators will identify key themes presented throughout the workshop to craft site scenarios. ● Role-playing exercises Participants will be assigned to different stakeholder groups, such as City Staff, Metro Transit, nearby neighbors, and renters who live and work within the area. This role-playing exercise can help foster empathy and understanding among participants, andmay prove to be beneficial in finding compromises for the site layout. Maximize Residential Engagement Opportunity 2 The second engagement opportunity of this development path should occur after the City issues the RFP, but before the final site design is selected. This round of engagement may focus on crowdsourcing community feedback on the concept designs for the site. This feedback will provide an indication of the general communities preference to the site design options. This should involve a large group, ideally of 75 or more total participants. Site scenarios will be presented in a neutral tone and participants will provide general feedback on the various scenarios, including what they liked, why they liked it, what they disliked, and why they disliked it. Facilitators will then take that feedback into consideration and come away with a final site design. This engagement opportunity may require multiple pop-up style events, and should be present at largely gathered community events. These events include: community held recreational events, Wayzata Art Experience, Wayzata Crazy Days, James J. Hill Days, etc. Facilitators may choose one or a combination of the following treatment types: ● Gallery Walk Facilitators will display poster boards showcasing the different design scenarios created. Participants will rotate through the stations, viewing each display and providing feedback on a sticky note or comment card. Facilitators will gather the comments from each scenario and aggregate them to come to a final design. ● Site Visit Located on the site, participants will have the opportunity to provide feedback on the site scenarios while having the added context of seeing the site in person. Facilitators will conduct this pop-up event on a day that there is programming occurring at Klapprich Park. ● Community Dialogue Circles Facilitators will set up designated areas where participants can gather to discuss specific information of each design scenario. Each dialogue circle can be facilitated by a moderator to ensure productive and inclusive discussions. Each circle should have 66 visual aids, handouts, or discussion prompts to guide conversations and encourage thought sharing. Participants will then rotate through the various dialogue circles to provide feedback on each design. 67 VIII. Future Action Items While this report outlines many elements of the path towards redevelopment at 322 Wayzata Boulevard East, there are a multitude of open questions that should be considered in the following years. As the recommended development path involves working within a variety of constraints, we recommend continued work by the development team, City Staff, and Metro Transit representatives to ensure this project is completed successfully. Below, we have compiled some potential action items to be researched, completed, or interrogated by any or all of the involved parties in this redevelopment. Each of these elements are considered crucial to project success, but fell beyond the scope and timeframe of this Capstone Project. The following list is not comprehensive, and instead serves as a collection of tasks we have encountered throughout the course of this project. The tasks are separated by category, and many are assigned to specific actors in the process: Project Tasks ● Determine budget and staff time required for next project steps. ● Establish a functional project timeline. Site Design & Physical Layout Tasks ● Negotiate layover placement and orientation between Metro Transit’s needs and those of the developer. ● The City should determine preferences and requirements for building orientation and relation to Wayzata Boulevard. ● Design standards should be examined further and articulated in the City’s RFP. ● Determine the vision and objectives for the stormwater pond, including the potential for beautification and adaptive use as publicly-accessible space. ● Determine anticipated parking needs and whether parking requirement reductions are necessary. ● The City should decide whether providing public parking on the site is of value. Each of these tasks should be undertaken before a LIHTC application, andmay be appropriate questions for community engagement. Housing TIF District Tasks ● County Auditor must certify the site’s original tax capacity and provide estimate for the expected deferred increment ● Wayzata HRAmust enter development agreements with the developer/ landowner. ● City must approve the TIF District on the site. 68 A written agreement andmonetary estimate should be provided prior to filing a Tax Credit application with Minnesota Housing. 9% LIHTC Tasks ● Discuss the project with potential developers. ● Establish goals for earning points on the Qualified Allocation Plan ○ Optional components: Renewable energy? Supportive Services? HPH/ PWD unit set-asides? ○ What does the City want to see? What can the development team finance? Aligning goals for the project should occur prior to filing a Tax Credit application. Land Sale Tasks ● Potential for a market study on the parcel’s sale value. ● Easement process and transit facility needs should be agreed upon prior to land sale. Housing Needs Assessment Tasks ● What types of affordable units are most needed in Wayzata? ● Howmany units can be supported on this site? ● Are Section 8 Project-Based Vouchers available? 69 Appendices Appendix A: Citations and Additional Links Section II: Wayzata 2040 Comprehensive Plan Wayzata Zoning Code Wayzata Boulevard Corridor Study Wayzata Design Standards Handbook Section III: LIHTC Average Income Test (AIT) Minnesota Housing- 2024-2025 Qualified Allocation Plan Minnesota Housing- Self-Scoring Worksheet Minnesota Tax Increment Financing District Statute Livable Communities Demonstration Account (LCDA) Homepage Local Housing Incentive Account (LHIA) Homepage Minnesota Housing- Amortizing Mortgages and Bridge Loans Minnesota Housing- Housing Tax Credits Homepage Hennepin County- Affordable Housing Incentive Fund Homepage Greater Minnesota Housing Fund- Interim Financing Opportunities Greater Minnesota Housing Fund- Permanent Financing Opportunities Section VII: Wayzata 2040 Community Vision (Sailing Ahead) 70 https://www.wayzata.org/DocumentCenter/View/5518/2040-Comprehensive-Plan---October-2023-Update https://www.wayzata.org/164/City-Code-Charter https://www.wayzata.org/DocumentCenter/View/5496/Final-Wayzata-Boulevard-Corridor-Study_October-2023 https://www.wayzata.org/DocumentCenter/View/3968/Design-Standards-Handbook https://www.novoco.com/notes-from-novogradac/final-average-income-guidance https://www.mnhousing.gov/content/published/api/v1.1/assets/CONT1AA7D74FD7AF4F898E7FA143B08782E0/native?cb=_cache_57a5&channelToken=294436b7dd6c4570988cae88f0ee7c90&download=false https://www.mnhousing.gov/content/published/api/v1.1/assets/CONTBD852D0EEBCC43B39A4E8C709ECCE223/native?cb=_cache_57a5&channelToken=294436b7dd6c4570988cae88f0ee7c90&download=false https://www.revisor.mn.gov/statutes/cite/469.174 https://metrocouncil.org/Communities/Services/Livable-Communities-Grants/LCA-Programs/Livable-Communities-Demonstration-Account-(LCDA).aspx https://metrocouncil.org/Communities/Services/Livable-Communities-Grants/LCA-Programs/Local-Housing-Incentives-Account.aspx https://www.mnhousing.gov/rental-housing/housing-development-and-capital-programs/amortizing-mortgages.html https://www.mnhousing.gov/rental-housing/housing-development-and-capital-programs/housing-tax-credits.html https://www.hennepin.us/business/work-with-henn-co/ahif-program https://gmhf.com/finance/interim-financing/ https://gmhf.com/finance/permanent-financing/ https://lab.future-iq.com/wp-content/uploads/2018/03/Wayzata-2040-Community-Vision.pdf Appendix B: Affordable Housing Tools 71 Appendix C: Questions asked in Developer Interviews Question ● Immediate Reactions ○ What jumps out to you about the site ○ What do you see as the biggest advantages & constraints for the site ● Development Walkthrough ○ Howwould youmaximize this site? (Design ideas) ○ How do you blend this site within the existing neighborhood? ○ Howwould you accommodate the Park & Ride facility within your design? ■ What has been your experience developing affordable housing with TOD components ● Financial Tools ○ What has been your experience with affordable housing tools (LCDA, LHIA, LIHTC, etc.) ○ Can you provide some examples of successful utilization of one or more of these tools? ○ Requirements & realistic timeline for one or more of these tools? ● Site Feasibility ○ What is a realistic unit count on this site? ○ Thoughts on a ground-level commercial/office user. ○ Howmany units could be included as affordable while still having the project be feasible? ● Contextualizing the site ○ Provide a base site layout with natural features ○ Refer to Buildable Area Notes ■ Lot size: 1.8 acres ■ Current Footprint est. (acres): 1.1 ○ Current zoning, setbacks, design guidelines, future land use, etc. ○ Student group to display an aerial image of the site for context. ○ Acknowledge the different goals for the site ■ City’s goals: Create affordable housing. ■ Metro Transit’s goals: Continue to operate Park & Ride from site. ● Immediate Reactions ○ What jumps out to you about this site? 72 ○ What do you see as the biggest constraint for this site? ○ What is the biggest advantage of this site? ● Development Walkthrough ○ What financial funding programs would you pursue to develop this site? ○ Howwould you design the building to maximize the space allotted? ■ (Student group to provide an empty site plan for the developer to quickly sketch their ideas) ○ Are there any flexibilities/variances that you foresee requesting? ● Financial Projection ○ Howmany units could you realistically fit with the current constraints? ○ Determining the share of affordable units (80% ami?) ○ Ground leasing opportunities? ○ Describe the sequence of events for each funding programs ■ What are the impacts to the project timeline? ○ Lease vs. own ● Site Feasibility ○ Howwould you forecast development costs/what would those costs be? ● Experience on other sites ○ Do you have any experience working specifically on sites that are < 2 acres? ○ What is your experience developing affordable housing with ground leasing/commercial users? ○ What is your experience developing affordable housing with TOD components? 73 Appendix D: Site Fact Sheet Provided to Developers 74 Appendix E: Full Developer Responses *NOTE: Direct Quotes in bold Developer A: Large-scale affordable housing developer, Minneapolis/St.Paul Key Takeaways: After reviewing the site context, this developer saw “twomain routes for the site”: ○ “A development pursuing LIHTC 9% credits championed by the city” ■ This approach would require rezoning to R-5 high-density residential and likely include a minimum of 40 residential units ■ The developer emphasized that they would expect neighborhood disapproval for such a development, and would need significant support from city staff in public engagement, pursuing additional funding sources, and communications with local stakeholders throughout the entitlement process. ○ “A 30+ unit market rate project”with the possibility of including a small number of affordable units. ■ This development would be constructed under the current C-1 zoning and would require some support or subsidy from the city (TIF, waived fees, etc.), though less than the LIHTC 9% development. Overall, the developer was pessimistic on the feasibility of constructing affordable housing on this site, though they warmed to the possibility over the course of the interview. The developer indicated that accessing more buildable land (via a larger site or removing the required bus turnaround) would make the site muchmore attractive to a wider array of developers. General Notes: ● Overall, the developer was pessimistic on the feasibility of constructing affordable housing on this site, though they warmed to the possibility over the course of the interview. ○ The site is smaller than those they typically develop, and the requirement of non-residential uses on the majority of the ground floor were perceived as an obstacle. 75 ○ The site does have advantages in obtaining LIHTC funding (e.g. strong local school districts), but these advantages carry less weight than other crucial factors (e.g. providing family-sized units) in the MHFA funding application ● Smaller funding sources, such as LCDA from the Met Council, would be helpful and have less-burdensome requirements, but these funds are less meaningful in building an equity base for development. Consultant: Affordable Housing Finance Consulting Firm, St. Paul Key Takeaways: The Park & Ride site would suit a LIHTC 9% deal well, but does not provide enough space for the larger developments that typically qualify for LIHTC 4% credits. This consultant believes affordable housing developers “would be willing to stretch to get to this site” ○ Manymight just see the bus turnaround as “cost of entry” ○ Getting Affordable Housing into a great location like Wayzata would be an additional motivation for many affordable housing stakeholders Their biggest concerns are related to public sentiment around constructing a larger, affordable development. ○ They reiterated the need for the city to support the project, especially in community engagement efforts “It’s a great opportunity, and it would be a shame to just domarket rate when we can get some really high impact [affordable] units” General Notes: ● Having a public seller of the land is valuable in developing affordable housing, as affordable housing development can be a long process, and public owners can often be more patient than a private seller. ● This SME advised to expect needing 2 parking stalls per unit, and cautioned against any multi-building developments, as those are often prohibited by the cost of additional elevators and exterior materials. ● This interview provided very valuable information about specific details related to funding affordable housing projects, such as the average timeline until breaking ground (24-30 months) for a project of this size and the unit breakdown needed to obtain the highest scores on affordable housing funding applications. This information has been incorporated into Section III of this report. 76 Developer B: Medium- to Large-Scale Market Rate Developer, West Metro Key Takeaways: The site’s size is its primary constraint. The developer would seek to make lots of small units to provide access to middle-class residents who are already priced out of Wayzata. They cited something more like a “workforce model” of housing. ○ “I would pursue affordability via unit size rather than tax credits” ○ “I’m thinking of a single teacher at the school down the street” would be an example of the demographic he would pursue. This developer was particularly concerned with both the bus turnaround and commercial requirements of mixed-use zoning. ○ “I think you gotta get rid of the Metro Transit piece” ○ Would want to rezone to even attempt market rate; wouldn’t be interested in mixed-use on this site. “The sense in Wayzata is that the existing NOAH alreadymeets the affordable housing needs” ○ The developer cited the high number of Naturally-Occurring Affordable Housing Units per capita in Wayzata as a primary reason that many residents are opposed to the construction of new affordable housing. “If I was doing this, I’d chasemarket rate, pack in the density, do studios for $2500/unit, that’d rent all day long.” General Notes: ● TIF or Tax Abatement from the city would be a very valuable incentive for developers ○ This site is starting from $0 tax income due to Metro Transit ownership, so any increment that is created would be meaningful, and obtaining maximum increment could be game-changing for a developer ● The developer would want some help from the city to “get it on the tax rolls” ○ The developer would look for grants or a loan from the city, and would work to to prove out the TIF model with Ehlers (the city’s financial consulting firm) ● The developer expects that a market rate development on this site would be priced around $3/sqft for rentals to account for currently-inflated construction costs 77 Developer C: Large-Scale Developer (affordable andmarket rate), Metro-Wide Key Takeaways: This developer’s sense was that the site is too small to be attractive to institutional investors at this time. Equity would need to come from other sources, such as LIHTC, a friends and family equity-raise, grants, forgivable loans, deferred developer equity. “Mixed-use is a detriment, hands down.” They do not see the scale of the site supporting cross-subsidizing any affordable units in a market rate development ○ This type of cross-subsidy, where the profit frommarket rate units subsidizes some affordable units, is typically only seen in projects with 200+ units This developer does not see that an RFP for a C-1 project with affordable housing would be competitive. ○ “Youmay find one or two people who really fall in love with the site,” but it’s much easier for investors to find lower hanging fruit at this time. General Notes: ● The developer cited the following factors as positive factors from a development perspective: ○ The site is on a quieter part of an arterial street (Wayzata Boulevard), with a nice balance of proximity to nearby services, but a quieter, site with a smaller “boutique-y” feel ○ The park across the street ○ Close to the lakefront ○ Bus service on the site ○ Lots of mature trees and the pond that could be maintained and developed as a “nice backyard” for any development ● The developer cited the following factors as negative factors from a development perspective: ○ The bus turnaround ○ Themixed-use commercial requirement ○ Likely neighborhood opposition to any multi-family development on the site, and evenmore so with any affordable housing component. ○ The smaller site will be limited by parking constraints. 78 ■ This developer would want 2 parking stalls per unit, especially for any market rate development. ■ Can also be a concern for neighbors if they anticipate that the development will increase street parking at all. ● The developer expressed some serious market concerns - raising equity is difficult right now, especially from institutional investors. ○ With so much commercial/office inventory whose pricing devalued, it’s hard to bite on a small site with so many constraints. Easier to invest in vacant office real estate. ○ As a result, LIHTCmay be better path financially right now ● The developer indicated that the unit counts allowed under the comp plan/zoning for both C-1 and R-5 “are feasible, definitely”. ○ However, the sense is that anything under 50 units wouldn’t be worthwhile for affordable housing due to the additional costs of development, legal fees, etc. ● As a C-1 site, they would try to create a pro forma that calls for around $5M in equity as a target, which would be a more plausible to raise from friends and family ● The developer would pursue anything they could in terms of city subsidy. ○ TIF is far and away most common, but the site would not be eligible under its current C-1 zoning. ○ Tax abatement isn’t common at all in Minnesota, but would be helpful to pursue. ● The developer provided other funding sources they would pursue in developing this site, which have been incorporated into Section III of this report. ● The water table on the site may prohibit any underground parking. They provided a rough estimate of construction costs for underground parking at $50k per stall, which would not be viable on this site. 79 Appendix F: Slide Deck fromMay 7th Council Workshop 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99