TO:Missoula City Council
FROM: Chris Behan, Assistant Director
DATE: March 16, 2012
RE: Development at Former Intermountain Lumber Site In 2003, the Missoula Housing Authority (MHA) purchased the nearly 12-acre former Intermountain Lumber site along Russell Street. At that time the site had been vacant for several years. Through an affiliated entity, Intermountain Development Company, the MHA marketed the property to find a private developer to co-develop the site to include public, low-income subsidized, and market rate housing along with commercial use of the Russell Street frontage. Over the years, MHA/Intermountain Development Company worked closely with several potential developers but no buildable project arose. Along with the high cost of providing infrastructure to the site, changes in the development community conventions and federal guidelines decreased the feasibility of that vision.
In 2008, MHA “re-platted” the area under the subdivision name “Garden District” which subdivides the property into five lots aligned along a new street (Milwaukee Way) running between Catlin and Russell Streets. During 2009, MHA built 37 public housing rental units in three structures in southwest corner of the subdivision along Catlin Street at a total construction and materials cost of $4.54 million. MRA provided MHA assistance that was used for water and sewer main improvements; construction of the initial section of Milwaukee Way and improvements to Catlin Street.
The remainder of the site remained vacant while the MHA continued to seek a purchaser that would continue the vision of developing a mixed-use, mixed-income neighborhood with commercial uses along Russell Street. Soon after MHA bought the property it removed all the buildings on the site but left the concrete foundation walls and floor slabs. Over time, the slabs and large asphalt areas on the site continued to crumble and a wide variety of weeds grew up through the cracks that have accumulated blowing debris. Since there are no sidewalks, lights, or curbs on Russell Street, pedestrians compete directly with passing vehicles for space on the right-of-way and accumulated trash and weeds on the private area.
More recently, MHA and the local development business, Farran Group, entered into a purchase agreement in which Farran will acquire four lots totaling over nine acres for a private mixed-use development. The development plan includes two distinct phases. The first phase will be construction of 196 apartments similar in design, amenities and layout to the developer’s successful 192-unit Copper Run project on Mullan Road east of Reserve Street. The lease rates are configured to meet the levels associated with “workforce housing” which is defined as being housing available to those at 80% - 120% of the area median income determined by HUD. The apartments will be within seven, three-story “garden-style” buildings (see attached building elevation and site plan). Amenities shared by the residents will include a community clubhouse, swimming pool, and large landscaped lawn areas.
The second phase, whose timing is dependent on completion of work to rebuild Russell Street, includes construction of two commercial buildings of two - three stories each, along Russell Street south of Milwaukee Way totaling 15,000 square feet of floor space. A third commercial building which will be occupied by MHA will be built along Russell Street north of Milwaukee Way when MHA can assemble their portion of the construction funds. According to the sale agreement, Farran will also assist MHA in constructing new space for their offices in the commercial section of the proposed project.
Although difficult to develop because of lack of infrastructure and access, Farran’s interest in the site is based on having a variety of transportation modes that provide easy access to downtown amenities and job centers, the University of Montana. For the second phase commercial uses, the property is highly visible along one of Missoula’s most heavily traveled transportation corridors. Occupants of both phases will benefit from direct access to the Milwaukee and Riverfront Trails, a non-motorized travel corridor from Reserve Street neighborhoods through the riverfront park system and downtown Missoula to The University of Montana. The developers also feel the project will benefit from, “the surrounding area’s mix of residential, commercial and light industrial uses… including the Good Food Store, downtown Missoula, the Missoula Osprey minor league baseball park, Missoula’s new aquatic center at McCormick Park, a new 55,000 square foot Safeway grocery store and the future Old Sawmill District.”
In summary, the proposed project offers many of the use and design elements that were hoped for along Russell Street as far back as the 1991 URD II Urban Renewal Plan. Although perhaps a “perfect world” project may have included structured parking to allow more development density and green spaces, the cost of providing parking structures is well in excess of what local market rates for housing can support, even if additional density is factored in. The development designer has done a good job of providing outdoor space for residents and designing the mix of parking lots, landscaped open space, and buildings to minimize visual impact from Russell Street and the perception of expanses of asphalt serving the structures. If built as currently designed, the subsequent phase will provide Russell Street with appropriately designed and located commercial space that will complete the urban street front aesthetic for the site in a way MRA has long sought in URD II along Russell, Third Street, and West Broadway.
Costs and Financing:
The project cost is estimated at $17.9 million including land acquisition and “soft costs”. Of that amount nearly $11.9 million is associated with construction of apartments, parking, and amenities shared by the residents such as site improvements. The remainder is land cost, design and engineering charges, impact and utility fees, financing costs, etc. TIF eligible items in the project include the cost of constructing the remainder of Milwaukee Way (with curb and boulevard sidewalk required by the City), which was started to provide access between the MHA project and Catlin. Eligible items also include clearing the site of concrete foundations and expanses of asphalt left from the lumber yard use, extension of potable water, storm water and wastewater mainlines along Milwaukee Way (private laterals serving individual buildings are not eligible), and providing improvements to Russell Street such as sidewalks. The cost of the TIF eligible items is estimated at $1,152,000. (Given the unknown timing and cost of the commercial buildings that are dependent on construction of Russell Street (assumed by the developer to be 2015) only the first phase is being considered the “project”.) MRA participation in this project at the requested amount will require a TIF revenue bond.
In 2006, the City sold a tax increment revenue bond based on the entire Urban Renewal District II to buy out the Idaho Timber lease of the Champion Mill Site property (now called Old Sawmill District). Three properties, Intermountain Lumber, the new Broadway Safeway, and the Old Sawmill District, were excluded from contributing to debt service for that bond. The exclusion recognizes the large cost of the infrastructure that would be encountered by development of each of those properties by enabling TIF bonds for infrastructure assistance to utilize all new taxes generated by redevelopment projects specifically on those sites. Therefore, the final bond amount must be sized to fit the taxes generated by the project.
At their January 2012, meeting, the MRA Board gave an initial approval of the project and directed Staff to enter into agreements with bond counsel Dorsey-Whitney and financial advisor, Springsted, Inc. to provide services leading to preparation of a draft development agreement and initial bond documents. The bond is currently being negotiated and, after receiving MRA Board recommendation, will be presented to the City Council for approvals which will include a Resolution of Intention to sell the bond and declaration of the site as an official Urban Renewal Project, setting a public hearing for the bond and Project, and consideration of approving the two actions after the public hearing.
140 West Pine Street Missoula MT 59802 phone 406.552.6160 fax 406.552.6162 email firstname.lastname@example.org www.ci.missoula.mt.us/mra