Clarendon_06.08.22 — File 213952

Clarendon Hill Development Project June 9, 2022 1

Proposed Development 2 Total of 591 Units • 295 Market • 296 Affordable

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Proposed Development 6

Proposed Development 7

Proposed Development 8

Proposed Development 9 Phase 1A Phase 1B Phase 2 Phase 2 TOTAL SUMMARY Block E (POAH/SCC) Block A & B (Redgate) Building D (POAH/SCC) Townhouses (POAH/SCC) Replacement Units 130 15 43 28 216 Affordable (<80% AMI) 38 16 15 6 75 Affordable (<110% AMI) 0 5 0 0 5 Unrestricted 0 295 0 0 295 Total Units 168 331 58 34 591

Why Clarendon? 10 • Sustain and strengthen the existing Clarendon Hill community • Residents of the original 216 affordable housing units will have the right to return to Clarendon Hill when the project is complete, at the same affordable rent. • The 1-to-1 replacement of these 216 deeply affordable units ensure affordability in perpetuity. • Moving this project forward now will help ensure residents can be in their new homes as soon as possible. • Provide new housing options to Somerville families • The project will create 375 new mixed-income units to reduce Somerville’s housing deficit and facilitate connections with the wider Somerville community. • Eighty of these new apartments will be permanently affordable homes. • Reflect resident and community input • Active resident and community involvement since 2016 has been critical in identifying goals and developing designs that achieve those goals.

Why Clarendon? 11 • Invest in safer streets and transit equity • Clarendon Hill is surrounded by three busy, high-speed roadways; roadway improvements will make possible the calm, safe, neighborhood environment envisioned by the City and Clarendon residents. • It will also improve physical access to the surrounding community and allow safe access to the large, green, open space at the Mystic River Reservation across the street. • Create new community green space • The development team will construct a new 0.4 acre public park at the center of the redeveloped site accessible to all members of the community. • Upgrade and modernize utility connections • Accommodate the increase in density with a focus on electrifying the buildings’ heating and cooling systems to ensure long-term sustainability.

Project Timeline 12 3/1/2016 SHA calls for development proposals 5/15/2016 SHA selects team (POAH/SCC/Redgate) 10/1/2016 First resident meeting 2017-2019 Additional resident meetings 2/1/2017 CPA application submitted 4/1/2017 State PEHO Grant Awarded 11/14/2017 CPC funding recommended 5/31/2018 Council approves home rule petition 7/1/2018 Tenant Relocation Agreement finalized 8/9/2018 State approval of modified home rule petition 9/30/2020 ZBA unanimous approval 12/7/2021 City Council approves DIF plan and bond 4/27/2022 CPC reconfirms approval of CPA funding

Public Funding for Clarendon through the City of Somerville 13 • CPA bond – $4 million – dedicated to workforce affordable units on-site • DIF bond – up to $10 million – dedicated to infrastructure work on-site and off-site • Earmark of state ARPA funds – $250k • MassWorks funded intersection work - $4.9 million • Permit fee waiver – (approx. value $1.5 million)

Discussion 14

15 DIF background slides (for reference)

16 DIF 101: What is District Improvement Financing?

What is DIF? 17 Tool used to encourage economic development: • DIF was created in 2003 and is authorized under MGL Chapter 40Q and with implementing regulations at 402 CMR 3.00 et seq • The DIF program is regulated at the local level through a community’s legislative body • DIF geography tax base is locked at the beginning of DIF period with future tax increment used to secure issuance of bonds

How is DIF used? 18 Uses of DIF proceeds: • Debt service on project infrastructure costs, e.g. road improvements, streetscapes, sewer, etc. • Eminent domain takings • DIF related administrative costs, e.g. legal, financing, etc. All money not used for DIF related expenditures reverts to the General Fund.

Example DIFs in Massachusetts 19 Redevelopment Initiatives: • Assembly Square, Somerville MA • Union Square, Somerville MA • Downtown Quincy, Quincy MA • City Square, Worcester, MA

20 DIF 101: Financial Model

DIF Logic Model • Residential program • Commercial program • Timing • Phasing Development Program • Base year data • Current year assessment values • Assessment factors • Tax rates • Historical and projected growth rate Basic Assumptions • Estimated tax increment • Net project benefit • Bonding capacity Model Output

DIF Model – Key Assumptions & Variables 22 Base year is 2021 Model is “built-up” parcel-by-parcel from Assessor’s database • Can be updated each year with latest values and parcel changes Future Assessment Values • Commercial (office, lab, and retail) uses on a dollar per SF basis, • Residential uses a dollar per unit basis Underlying base parcel valuation of development block is removed at time of new development All values are inflated at historical rate (2% every year) Includes internal bond tables to calculate debt service • Size and time of bond ‘tranches’ to meet public infrastructure needs • Includes interest only BANs (Bond Anticipation Notes)

Key DIF Inputs/Assumptions 23 Source: City of Somerville, and RKG Associates, 2021 Assessment Factors: • Residential Condos - $750,000 per Unit • Residential Apartments - $300,000 per Unit • Commercial - $240/SF • R&D/Lab - $900/SF • Retail - $250/SF • Arts & Creative - $240/SF • Hotel Room - $100,000 per Key • Affordable Condos • 80% AMI - $136,364 per Unit • 110% AMI - $187,500 per Unit • 140% AMI - $238,636 per Unit • Affordable Apartments • 50% AMI - $26,500 per Unit • 80% AMI - $50,750 per Unit • 110% AMI - $75,000 per Unit Assessed Value Inflation Rate • 2.0% per year Bond Interest Rates: • 4% • 30-year term BAN Interest Rates: • 2% • 5-year term

Analysis and Findings 24

Full Build Scenario 25 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 Dollars Captured Increment on Full Build of All Phases, 2021 - 2051 Yearly Tax Increment on Full Build Source: Somerville Assessor, RKG Associates Inc., 2021 Estimated cumulative tax increment over 30 years is nearly $39,000,000 Estimated increment dependent on underlying assumptions • Dev. Program • Assessment Values • Interest Rates

Estimated Bonding Capacity for Infrastructure 26 Source: Somerville Assessor, RKG Associates Inc., 2021 Based on conservative assumptions, the upfront bonding capacity for infrastructure is estimated at about $12.5M Financing of infrastructure depends on the development program and market realities Changes to underlying assumptions will affect total bonding capacity 0.0 2.0 4.0 6.0 8.0 10.0 12.0 $0 $200,000 $400,000 $600,000 $800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 $2,000,000 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 Debt Coverage Ratio Dollars DIF Revenue vs. Potential Debt Service, 2021 - 2051 Tax Increment Debt Service Debt Coverage Ratio BANS BONDS

Example of Change in Interest Rates 27 Source: Somerville Assessor, RKG Associates Inc., 2021 Phases Scenario 1 Scenario 2 Scenario 3 Scenario 4 Total Increment $39 Million $39 Million $39 Million $39 Million Bonds Interest Rate 4% 3.5% 3% 2.5% Bondable Amount $12.5M $13.3M $14.2M $15.1M Debt Service Coverage Ratio Minimum 1.5 1.5 1.5 1.5 • Debt service coverage ratio of 1.5 is conservative • Bondable amount is composed of a 30-year bond and 5-year BAN • Alignment of tax increment revenues with debt service costs is key to minimizing funding gaps