02.21.23 FIN UCH-TIF Presentation — File 23-0110

Winter Hill Urban Center Housing – Tax Increment Financing 02.21.23

Outline 2 A. Project Background B. A Little About UCH-TIF C. Documents Being Discussed Tonight

A. Project Background 3

A.1. Project Background: Project Site 4 Vacant Since 2007

A.2. Project Background: Winter Hill Neighborhood Plan (2016) 5 299 Broadway a/k/a Temple Square has been imagined as a redevelopment site with 200+ units of housing, at least 20% of those affordable, and additional green space since the 2016 Winter Hill Neighborhood Plan 2016 Concept Plan for redeveloping “Temple Square”

A.3. Project Background: Winter Hill Urban Renewal Plan (2020) 6 2020 Concept Plan for redevelopment of “Temple Square” from the Winter Hill Urban Renewal Plan carried the same concepts forward with small changes

A.4. Project Background: Developing Partnerships 7 Spring 2021 ● Winter Hill Urban Renewal Plan is approved by City Council ● Property owner for the Star Market grants development option to Mark Development 2021: Moved ahead with fulfilling Community Involvement goals ● 2 preliminary community meetings with Mark Development ● 3 permitting neighborhood meetings with Mark Development ● Setting up a Civic Advisory Committee for ongoing local feedback

A.5. Project Background: Developing Partnerships Continued 8 ! Mid-stage environmental study of the site revealed asbestos contamination that prevents underground parking Option 1 Build above ground parking garage Option 2 Build a highrise Option 3 Build more affordable housing Financeable options … Spring 2022 - Mark Development brings in Beacon Communities, a specialist in affordable housing development as a project partner

A.6. Project Background: Current Site Plan 9 2022 Site Plan submitted to the ZBA maintains key site layout goals ❖ 288 Units ❖ 132 Affordable Units ➢ 17 units @ 80% AMI ➢ 99 units @ 60% AMI ➢ 16 units @ 30% AMI ❖ Community green space ❖ Pedestrian right-of-way through center

Current Submitted Proposal $22.8M Acquisition ~ 300 Units ~ 50% Affordable 0.0 spaces/unit $13M - $20M Deficit Revised Mark/Beacon Proposal $22.8M Acquisition ~ 300 Units ~ 40% Affordable 0.0 spaces/unit No Deficit Original Mark Development Proposal $22.8M Acquisition ~ 300 Units ~ 20% Affordable 0.5 spaces/unit $18M Deficit A.7. Project Background: Evolution of Project Proposals 10

A.8. Project Background: Current Financial Gap 11 Rising Construction Costs & Increased Interest Rates: Costs Associated with Increased Affordability: $9M - $16M $4M Total Estimated Deficit: $13M - $ 20M Estimated Cost Escalation

B. A little about Urban Center Housing – Tax Increment Financing (UCH-TIF) 12

B. About UCH-TIF A statutory program operated by the Department of Housing & Community Development (DHCD) that authorizes cities and towns to promote housing and commercial development through real estate tax exemptions on all or part of the increased value of improved real estate for up to 20 years. 13 UCH-TIF Requires: ● The area of benefits to be a primarily commercial district ● New development to be primarily residential ● New units to satisfy certain affordability thresholds ○ 15% at or below 80% AMI; or ○ 25% at or below 110% AMI; or ○ Meet existing inclusionary zoning requirements

B. About UCH-TIF ● A financing tool to help close the gap in affordable projects struggling to get underway due to rising interest rates and escalated construction costs ● An opportunity to redevelop the decadent Temple Square site; and ○ Meet the goals of the Winter Hill Neighborhood Plan and Urban Renewal Plan ○ Restore Winter Hill as a main street destination ○ Create significant affordable housing opportunities and new jobs ○ Increase future tax revenue 14 Temple Square

C. Documents Being Discussed Tonight 15

C. Documents Being Discussed Tonight 1. Draft UCH-TIF Zone and Plan 2. The draft negotiated Agreement to be signed between the City of Somerville and 299 Broadway Property Owner LLC 3. Memo from Abramson & Associates 16

C. Documents Being Discussed Tonight 17 Appendix A: Draft Zone and Plan • First 30 pages are the draft zone and plan • Following 300+ pages are appendices Key Elements: Zone – which properties can receive tax increment financing Plan – explains the goals for applying this financing tool to this area Form of Agreement – a template agreement that could be used to start discussion on any property in the zone

Appendix A: Draft Zone and Plan • First 30 pages are the draft zone and plan • Following 300+ pages are appendices Key Elements: Zone – which properties can receive tax increment financing Plan – explains the goals for applying this financing tool to this area Form of Agreement – a template agreement that could be used to start discussion on any property in the zone C. Documents Being Discussed Tonight 18

Appendix B: Draft Negotiated Agreement Agreement between City of Somerville and 299 Broadway Property Owner LLC Parties Involved: • 299 Broadway Property Owner LLC • Mark Development • Beacon Communities w/ minority stake partner Rise Together • City of Somerville • Department of Housing and Community Development C. Documents Being Discussed Tonight 19

Appendix B: Draft Negotiated Agreement Terms of the Tax Exemption (Section 6) • 100% exemption on the increment for 20 years • Construction cannot commence for either building until Low Income Housing Tax Credit funds are secured • Starting point for the 20 years is when the first building reaches 92% occupancy, and the second building has a vertical building permit • Requirement to review these terms again before the first building receives a building permit C. Documents Being Discussed Tonight 20

Appendix B: Draft Negotiated Agreement Revisiting the exemption percentage and period (Section 6.4) • Prior to the first building receiving a vertical building permit, the UCH-TIF must be reviewed again with the City Council • Confirm that 100% for 20 years is still appropriate OR revise the terms City will retain consultants once again to review the development team’s numbers and look for reasonableness & work with the City Council on priorities if terms are revised C. Documents Being Discussed Tonight 21

Appendix C: Memo from Abramson & Associates Abramson & Associates, at the direction of OSPCD, has evaluated the preliminary pro forma information provided by Mark Development and Beacon Communities Key Findings: • Assumptions are in the range of reasonableness for this early stage • For this stage, the maximum exemption (100% of the increment for 20 years) is necessary • Conservatively – additional subsidy may be needed • Optimistically – there may be room to renegotiate at construction C. Documents Being Discussed Tonight 22

Thank you! 23