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HomeMy WebLinkAboutDMCC Resolution No. 168-2025 (Approving Amendment To Resolution No. 147-2024 In Connection With Request For Private Development Funding (West Transit Village Liner Housing Project))DESTINATION MEDICAL CENTER CORPORATION RESOLUTION NO. 168-2025 A RESOLUTION APPROVING AMENDMENT TO RESOLUTION NO. 147-2024 IN CONNECTION WITH REQUEST FOR PRIVATE DEVELOPMENT FUNDING (WEST TRANSIT VILLAGE LINER HOUSING PROJECT) The following Resolution was offered by James Campbell, seconded by Douglas Baker, Jr. BACKGROUND RECITALS A. Pursuant to Resolution No. 147-2024, the Destination Medical Center Corporation (“DMCC”) approved up to $3,900,000 in funding through a reallocation of the Strategic Development Fund (the “Approval”) to support the development of the West Transit Village Liner housing project, as further described in Resolution No. 147-2024 (the “Original Proposed Project”). The Approval was subject to the Original Proposed Project achieving certain affordability metrics across the proposed 94 units (the “Project Requirements”). B. Subsequent to the Approval, the Applicant (as hereinafter defined) was unsuccessful in its application to the Minnesota Housing Finance Agency for financing of the Original Proposed Project. As a result, Applicant has revised the Original Proposed Project thereby precluding the project from satisfying the Project Requirements. On April 27, 2017, the DMCC approved Resolution No. 51-2017, which requires additional review of projects upon material deviation from the approvals granted, to ensure that “as-built” projects are consistent with approvals that have been granted. As a result, an amended joint funding application was required to be submitted. C. Aeon, a Minnesota nonprofit corporation (the “Applicant”) amended its joint funding application (the “Request”) for funding to facilitate the construction of the “Proposed Project” as originally defined in Resolution No. 147-2024, provided that the following has been revised: (1) the total units have been reduced from 94 units to 75 units and (2) the 75 units will include 61 one-bedroom and 14 two-bedroom units at or below 50% Area Median Income (“AMI”), with approximately 16 of the units at or below 30% AMI (the “Revised Proposed Project”). D. The DMCC is charged with evaluating whether a proposed project (i) is consistent with the Destination Medical Center (“DMC”) vision, goals and objectives; (ii) is consistent with the Development Plan, adopted by the DMCC on April 23, 2015, as amended (the “Development Plan”) and any updates; (iii) is consistent with adopted strategies, phasing and capital improvement planning; (iv) is financially viable; and (v) complies with or support the economic- fiscal goals and objectives of the DMC initiatives (collectively, the “Evaluation Criteria”). E. Staff from the City of Rochester (the “City”) and the Destination Medical Center Economic Development Agency (the “EDA”) have reviewed the Request and the Revised Proposed Project in light of the Evaluation Criteria. 2 F. The EDA has recommended approval of the Revised Proposed Project based on the summary and recommendations attached hereto as Exhibit A and recommends the Approval be amended as follows: (1) reapproved $3,900,000 in funding through a reallocation of the Strategic Development Fund and (2) approving supporting the City’s financing of up to $4,900,000 in funding from tax increment financing, without seeking credit to the City’s $128,000,000 local contribution. This recommendation of approval is based on the application of the Evaluation Criteria. G. As originally set forth in Resolution No. 147-2024, the Revised Proposed Project continues to sufficiently advance the goals of the Development Plan despite the removal of the Project Requirements. H. The DMCC has considered the recommendation of the EDA and based on the materials submitted, has independently evaluated whether the Revised Proposed Project is consistent with the Development Plan and the goals of the DMC. RESOLUTION NOW, THEREFORE, BE IT RESOLVED, by the DMCC Board of Directors, that the DMCC approves the Request based on the following findings of fact: 1. The Revised Proposed Project meets the definition of a public infrastructure project within the meaning of Minnesota Statutes, Section 469.40, subdivision 11. 2. The Revised Proposed Project lies within the Development District. 3. The Revised Proposed Project is consistent with the goals and priorities set forth in the Development Plan. 4. The Revised Proposed Project reapproves up to $3,900,000 in DMC funding and a approves support of the City’s financing of up to $4,900,000 in funding from tax increment financing to contribute towards the approximate $36,960,000 total project costs. 5. The Revised Proposed Project may not proceed without the public funding, and the requested DMC funding will provide gap financing to support extraordinary growth in the market, as contemplated in the Development Plan. 6. The Revised Proposed Project supports a livable, accessible, and equitable downtown environment, a goal and priority set forth in the Development Plan, through promotion of aging place, a reduction in dependency on automobiles, and providing affordable options near health services and public amenities. 7. The Revised Proposed Project will serve as a catalyst or anchor development in the subdistrict. 8. The Revised Proposed Project activates the area through the introduction of commercial space or visible recreational building amenity uses on street level. 3 9. The Request provides sufficient evidence of financial viability. 10. The Request supports the economic strategies of the Development Plan by providing civic/cultural uses and/or public amenities that support strategic growth in the Development District and/or specific business development and economic development strategies that are adopted as part of the Development Plan. BE IT FURTHER RESOLVED, that the DMCC Board of Directors approves the Approval being amended to reapprove the approval up to $3,900,000 in funding through a reallocation of the Strategic Development Fund and to support the City’s financing of up to $4,900,000 in funding from tax increment financing, without seeking credit to the City’s $128,000,000 local contribution, subject to the following conditions: 1. The Applicant must provide evidence of financing for the Revised Proposed Project from the Minnesota Housing Finance Agency. 2. The Revised Proposed Project must meet all City requirements, including, without limitation, execution of a development assistance agreement by and between the Applicant and the City. 3. The Revised Proposed Project must meet all conditions set forth in Exhibit A. 4. The Applicant must provide, at the reasonable request of the DMCC, EDA or City, financial and operating progress reports to ensure the Revised Proposed Project, as-built, is consistent with the Revised Proposed Project as approved in this Resolution. 5. Any modification to the scope of the Revised Proposed Project, as set forth in Exhibit A, will be subject to subsequent approval by the DMCC. 6. The Applicant must provide evidence of long-term income affordability criteria and appropriate enforcement as set forth in the City’s approved development assistance agreement. 7. The DMCC Board of Directors shall receive periodic updates from the EDA as to the status of the satisfaction of the conditions set forth in this resolution, the Revised Proposed Project expenditures, and the ongoing status of development of the Revised Proposed Project. BE IT FURTHER RESOLVED, that the DMCC Board of Directors hereby authorizes its legal counsel and the EDA to work with the Applicant to structure the assistance being approved per this Resolution appropriately. BE IT FURTHER RESOLVED, that DMCC Resolution No. 51-2017 is incorporated fully herein by reference. BE IT FURTHER RESOLVED, that the Chair or the Treasurer of the DMCC is authorized to transmit this Resolution to the City, and to take such actions as are necessary and appropriate to effectuate the findings and approvals of this Resolution. 31604439v3 The question was on the adoption of the Resolution and there were YEAS and NAYS,as follows: BOARD OF DIRECTORS Destination Medical Center Corporation ATTEST: YEA Douglas M.Baker,Jr. James R.Campbell Kim Norton Randy Schubring Mark Thein Pamela Wheelock Paul D.Williams TED on May 22,2025. amela Wheelock,Chair Destination Medical Center Corporation NAY OTHER 7 0 X X X X X X X EXHIBIT A West Transit Village Phase 1 (Aeon) To: DMCC Board of Directors From: DMC EDA Date: May 16, 2025 Request of the board of directors: Recommend to the DMCC to re-authorize the commitment of $3.9 million in General State Infrastructure Aid (GSIA) funds to the revised Aeon project and recommend the DMCC consider the allocation of up to $4.9 million in tax increment financing (TIF) be directed towards this project, without credit towards the City’s $128 million DMC contribution. These funds are contingent upon: -75 units of senior affordable housing at 60% AMI or lower income restrictions -Mutually agreed upon final design for the public space and the design relationship to the pending Mayo parking ramp and BRT project -Enhanced ground floor activation design -No developer adverse tax event as part of receiving GSIA funds Background: The DMC vision for the West Transit Village is to provide an authentic place where people want to be and leverage the opportunity to make the BRT journey better than a trip in a private single occupant vehicle. To realize this ambitious vision, Mayo Clinic, the City of Rochester, DMC, and the selected developer team of Kraus Anderson (master developer and market rate housing) and Aeon (affordable housing developer) have worked in collaboration for over two years. The parties have agreed to a public-private partnership approach and are also driven by the FTA transportation funding schedule for the transit elements of the site as well. A master plan has been developed by the development team in close coordination and partnership with Mayo Clinic, DMC, and the City of Rochester: To realize this vision will require additional infrastructure outside of the Federal BRT project scope as well as support for the housing components of the project. In May 2024 DMCC and City Council authorized the commitment of $3.9 million in GSIA funds to the project in order to optimize the Aeon’s application to MHFA in July 2024. In the fall of 2024 Aeon was notified by MHFA that they would not receive funding in 2024 due to the high volume of projects and shifting priorities for limited MHFA funds. In January of 2025 DMCC and City Council authorized the establishment of a DMC tax increment financing (TIF) district establishment authority for the West Transit Village, without crediting the TIF toward the City’s $128 million DMC obligation. This enables the increment in new taxes that will be generated by Mayo’s parking ramp and the housing built on site to be utilized for project support and site infrastructure needs. Aeon has continued to work with local, regional and community partners and MHFA to optimize the project to score as high as possible in this year’s MHFA funding cycle in July 2025. This continued refinement has led them to reduce the total number of units in the project in order to improve their chances of securing State funding. By reducing the number of units from 94 to 75 that reflects a more than 10% change to the project and therefore it needs to be brought before the Board. In addition, now that the TIF District has been established a TIF request has been formulated by the development team for Board consideration. Following this is a memo from the City of Rochester further describing the proposed project and the City’s recommendations, as well as the DMC EDA staff evaluation. Approvals, milestones, and decision points: - Request for DMC funds to bolster Aeon application to MHFA for July 11 application deadline - If approved by DMCC, moves to City Council in June - Partners continue to develop and refine the overall site infrastructure and market rate housing needs MEMO To: DMCC Board of Directors From: City of Rochester, Administration Date: April 23, 2025 Subject: Consideration of the West Transit Village: Aeon Phase 1 Project GSIA Request The City of Rochester provides the following update on the West Transit Village: Aeon Phase 1 Project. Aeon (the “Applicant”) has submitted revised materials, and the City finds that the project aligns with the Destination Medical Center (DMC) vision and the shared goals of both the City and DMC. Affordable senior housing in transit-accessible, mixed-income settings remains a top priority for both entities. In May 2024, the DMC Corporation Board and the City Council approved an allocation of up to $3.9 million in GSIA funding in 2024 for the project. In response to changes in Minnesota Housing's funding criteria and to improve competitiveness of the project in the pool of requests for 9% Housing Tax Credits through Minnesota Housing’s 2025 Multifamily Consolidated RFP, Aeon has adjusted the project, reducing the unit count from 95 to 75. Despite this reduction, the project continues to align with DMC goals and will maintain its key features. With a change of great than 10% in the number of units (95 to 75), the Applicant needs to seek re-approval of the GSIA funding allocated in 2024. Project Overview: The updated project proposes 75 units at 100% affordable, age-restricted 55+ housing units, including: •Approximately 16 units at or below 30% AMI (Area Median Income), including units for High Priority / Long-Term Homeless populations •59 units at or below 50% AMI The project includes a four-story building, with a design featuring an expanded open courtyard along 2nd Street W. The project will also wrap around the north and west sides the parking ramp currently under construction by Mayo, effectively concealing it from view and enhancing the aesthetic and functional appeal of the site. This will improve the visual streetscape and create a more pedestrian-friendly environment, aligning with the City’s goals of promoting walkable, vibrant neighborhoods. Sustainability Features: The sustainability elements of the design include: •$429,000 investment in solar energy •$2,442,000 investment in geothermal systems with heat pumps •Eligibility for federal Investment Tax Credits and 45L energy-efficiency credits •Compliance with a higher tier of Minnesota Housing’s Enhanced Sustainability rubric •Participation in Rochester’s Energy Benchmarking program Minnesota Housing Strategy and Changes in the 2025 Funding Environment: Minnesota Housing has communicated significant changes for the 2025 funding cycle that affect the competitive landscape for affordable housing projects. The agency anticipates selecting only 10-12 projects statewide through the Consolidated RFP, a reduction from around 20 projects in 2024. This reduction is due to a shift in funding priorities and an overall increase in demand for affordable housing projects across Minnesota. Additionally, Housing Infrastructure Bonds (HIBs), a critical financing tool for senior housing projects, will no longer be available in 2025. This marks a significant shift from previous years, where 100% senior or supportive housing projects could leverage HIBs as a deferred loan to fill funding gaps. Without this resource, the need for local financial support, such as DMC General State Aid Infrastructure dollars and PAYGO Tax Increment Financing (TIF), becomes even more crucial to bridge the funding gap. Financial and Development Support: The Applicant has provided a detailed list of eligible public infrastructure improvements associated with the project. These include site preparation and remediation, utility connections, streetscape enhancements, sustainable energy systems (solar and geothermal), parking infrastructure, site clean-up, and the integration of publicly accessible community amenity spaces. The project also directly supports DMC goals related to energy efficiency and sustainable development. The total cost of these improvements exceeds the amount of public assistance requested. The Applicant has shared comprehensive financial documentation with City and DMC EDA staff. The project will leverage a mix of private and public funding sources, including tax credit equity, HOME funds, and other financing tools. Aeon is pursuing competitive 9% Housing Tax Credits through the 2025 Minnesota Housing Consolidated RFP. Despite these funding efforts, a verifiable financing gap remains, based on a reasonable return on private investment. A significant driver of this gap is the project's commitment to deeply affordable rents—limiting units to 30% and 50% of Area Median Income (AMI)—rather than maximizing revenue through higher rents. Aeon has demonstrated that the project is not financially feasible without public support. Based on a joint review of the project’s financials, the City and DMC EDA will analyze the appropriate level of public assistance, which includes DMC General State Aid Infrastructure dollars and PAYGO TIF. Alignment with DMC Goals: Given the changes in the broader funding environment for 2025, this project represents a critical opportunity to provide affordable age-restricted housing near transit and services, reinforcing the DMC’s long-term goals. The project will: •Provide affordable, age-restricted housing near transit access and downtown services •Contribute to community resilience through sustainability-focused investments •Align with the Rochester Downtown Master Plan and the City’s Comprehensive Plan •Support aging in place and equity in housing access •Collaborate with Southeastern Minnesota Area Agency on Aging (SEMAAA) and Elder Network to advance health and resiliency goals, consistent with the County’s Hazard Mitigation Plan Public Infrastructure Improvements: Eligible public infrastructure elements for the project include: •Site preparation and remediation •Utility and streetscape improvements •Geothermal and solar energy systems •Parking and environmental clean-up •Publicly accessible courtyard and community amenities The project’s parking ramp, which will be concealed by the development’s wraparound design, is considered a critical public infrastructure improvement. By integrating the parking into the overall design and concealing it from view, the project helps improve the surrounding urban environment, enhancing both aesthetics and functionality. This integration supports the creation of a more welcoming, walkable space for the public. City Staff Recommendation: Approval of the Aeon project by the DMCC Board as a DMC Public Infrastructure Project is required before the City Council can take action. Any approval by the DMCC should be contingent upon subsequent approval by both the City and the City EDA of the Development Assistance Agreement (DAA) and the final Tax Increment Financing (TIF) assistance amount. The City recommends that the DMCC Board approve the allocation of up to $3.9 million in General State Infrastructure Aid (GSIA) funds to the revised Aeon project. In addition, the City recommends that the DMCC reauthorize the commitment of up to $3.9 million from the Strategic Redevelopment budget and consider authorizing up to $4.9 million in TIF support. These steps would allow the project to continue moving forward through the City’s review and approval process. The applicant has submitted an application for TIF assistance. That application is currently under review, and a recommendation regarding the amount of assistance will be presented at a future Rochester EDA meeting. Sincerely, Josh Johnsen Strategic Initiatives Director City of Rochester DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY MEMORANDUM To: Chair Pam Wheelock and the Destination Medical Center Corporation Board of Directors From: Dr. Clark Otley, President of the Board of Directors Patrick Seeb, Executive Director Destination Medical Center Economic Development Agency Date: May 16, 2025 Re: Aeon (West Transit Village Liner Housing) DMC Funding Recommendation Dear Chair Wheelock and members of the DMCC Board of Directors: The DMC legislation provides that the DMC EDA must assist the DMCC by “evaluating proposals for development and evaluating and making recommendations to the (DMCC) and the city regarding those proposals.” Accordingly, please find enclosed with this letter the DMC EDA staff evaluation of the DMC Joint Funding Application submitted by Aeon for an affordable senior housing project at the West Transit Village. Following our evaluation, the DMC EDA board of directors recommends that the DMCC board of directors approve up to $3,900,000 in DMC General State Infrastructure Aid (GSIA). This figure is equal to the amount requested by the applicant. We provide this recommendation following thorough consideration of the project as described in the Joint Funding Application and the evaluation prepared by staff, the priorities expressed by the DMCC, and the goals and objectives of the DMC Development Plan. The evaluation report details our analysis of the proposed project. In addition to our project-specific evaluation, other factors may weigh in your independent consideration of this funding request and our recommendation. These factors may include: •Public Benefit. The proposed project includes several elements that the DMC EDA deemed to be of specific public benefit, including that seventy of the planned housing units will be affordable to residents who earn thirty to fifty percent of the Area Median Income (AMI). The project will substantially advance the mixed-use vision of the transit village. •Opportunity Cost. We fully recognize that this recommendation is being provided alongside several others and that, if approved, these combined recommendations will draw DMC “strategic development” funds down to approximately $300,000. Even so, we heartedly offer DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY this recommendation and, should the approval of a future funding request require the authorization of funding outside the usual capital budgeting process, we will balance that request against competing demands on DMC resources. •Alignment with DMC Priorities. Each application for DMC funding is unique, and the considerations around each proposed project necessitate careful, singular evaluation. An additional consideration of the DMC EDA is whether—and if so, how—a given project aligns with our understanding of the priorities of the DMC Corporation and City of Rochester. This is an inherently subjective determination, but DMC processes, including a standard application, advisory review by City staff and the DMC EDA, successive agreement by the DMC Corp. and City of Rochester, and final approval of expenditures by DEED, safeguard against the non- aligned or imprudent allocation of public funds. We recognize and appreciate this process. In closing, we note that our evaluation report also outlines several conditions we recommend be applied to the project to ensure that DMC interests are protected and goals are met. For the reasons noted above and in our report, the DMC EDA board of directors respectfully submits our funding recommendation. Thank you for your consideration. Respectfully, Clark Otley, M.D. Patrick Seeb President of the Board of Directors Executive Director DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 1 West Transit Village- Aeon Phase 1 Development Evaluation Report May 9th, 2025 EXECUTIVE SUMMARY / RECOMMENDATION STATEMENT OF RECOMMENDATION: Based on information provided by Aeon (the “Applicant”), WTV - Aeon Phase 1 (the “Proposed Project”) aligns with the Destination Medical Center (“DMC”) vision and is consistent with the DMC goals, objectives, and values. Development of affordable housing units connected to the West Transit Village Bus Rapid Transit infrastructure (WTV BRT) is among the highest priorities for the DMCC Board of Directors. The following report is an updated evaluation of the Proposed Project on all criteria as required by the Development Plan. This project was reviewed and funding authorized in 2Q2024 by the DMCC Board and Rochester City Council. The project unit count has been adjusted by more than 10% since that time, so the project must come forward for a re-evaluation and new request. Based on these criteria, the Destination Medical Center Economic Development Agency (“DMC EDA”) would categorize the Proposed Project as a high priority DMC project that has immense potential to help realize the vision, goals and objectives of the DMC initiative. DMC EDA recommends DMC support for the project in the amount of $3.9 million, using the DMC general state aid infrastructure dollars provided by the State of Minnesota. In addition, the City of Rochester and the DMCC Board have now established a TIF District at West Transit Village (“WTV”) and DMC EDA is also recommending allocation of a portion of the TIF increment for $4.9 million also advance for DMCC and City Council consideration. We further recommend an on-going financial audit to ensure the project built is consistent with the project proposed and approved and to confirm the costs of the relevant public infrastructure components of the project. It is understood that the applicant will provide all requested documentation to facilitate this audit and work in good faith with representatives of the DMCC and DMC EDA, or their consultants, in this process. STATEMENT OF ELIGIBILITY: This project meets the definition of a "public infrastructure project" under the DMC Act and lies within the DMC Development District boundaries (St. Mary’s Place Subdistrict). PROJECT SUMMARY: Aeon WTV Phase 1 is a deeply affordable, age-restricted housing project for seniors (55+) located at 2905 2nd Street SW, Rochester, MN. The 4-story, 75-unit building includes 61 one-bedroom and 14 two-bedroom apartments, all affordable to households at or below 50% AMI, with 16 of the units targeted at 30% AMI. This project will physically wrap two side of the privately developed Mayo Clinic parking garage, a critical component in establishing the WTV identity as a transit village, a key priority of the DMCC. The project is designed with Universal Design features, enhanced community amenities (indoor common spaces, courtyard, gardens, and public plaza), and strong transit connectivity. The development will activate a currently underutilized site, fulfilling a pressing need for senior housing connected to transit and healthcare, as well as go well beyond the minimum sustainability requirements of DMCC and the City of Rochester. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 2 RELEVANT PROJECT HIGHLIGHTS: The following list outlines relevant project highlights for consideration: General Project Information •Located in the St. Mary’s Place DMC Subdistrict •75 deeply affordable senior units •Adjacent to Mayo ramp and future BRT transit station •Walkable access to trails, retail, and healthcare Job Creation •Approximately 100 construction jobs •3 permanent full-time jobs (resident coordinator, maintenance, property manager) Energy & Sustainability •Geothermal heating and cooling system •157 kW solar energy system •Compliance with SB2030 or ZERH •Construction waste diversion goal of 75% •Water and irrigation reduction targets •EV charging and transit-supportive design •Participation in Rochester's Energy Benchmarking Program Financial Details •Total project cost: $36.96 million •Identified financial gap: $8.8 million •Requested DMC funding: $3.9M GSIA + $4.9M TIF Note •Estimated annual tax increment: $469,750 DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 3 EVALUATION REPORT SECTION 1.0 PROJECT OVERVIEW Aeon Phase 1 at West Transit Village will deliver 75 units of deeply affordable housing targeted to seniors age 55+, providing vital housing options along Rochester’s expanding transit corridor. The project emphasizes accessibility, affordability, and sustainability, and is designed to serve older adults with limited incomes. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 4 SECTION 2.0 MINIMUM ELIGIBILITY REQUIREMENTS OF DMC ACT Check the following that apply to the Project: "Public Infrastructure Project"  General Infrastructure Project or Within DMC Development District Boundaries For a project to be eligible for DMC Funding, the project must be (1) a “public infrastructure project” and (2) within the DMC Development District Boundaries. Per Minnesota Statutes, Section 469.40, Subdivision 11, a “Public Infrastructure Project” is described as a project financed in part or in whole with public money to support Mayo Clinic’s development plans, as identified in the DMCC Development Plan, the Proposed Project would qualify as a “Public Infrastructure Project” as required by the DMC Act. The Applicant provided a detailed list of eligible infrastructure related improvements including: The project meets DMC eligibility criteria under Minnesota Statutes Section 469.40, Subd. 11. The public infrastructure components include land acquisition, utility and sewer/water connections, geothermal systems, solar arrays, parking, streetscaping, and drainage infrastructure. The Proposed Project is within the DMC Development District Boundaries. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 5 SECTION 3.0 EVALUATION CRITERIA The DMC EDA’s recommendation for the project outlined herein was formed in consideration of the following criteria: 3.1 DMC Vision, Goals and Objectives / Development Plan Strategies 3.2 Consistency with Development Plan and Other Planning Documents 3.3 Financial Viability 3.4 Consistency with Adopted Strategies, Phasing and Capital Improvement Planning 3.5 Targeted Business Enterprise Strategies 3.6 Compliance with Economic---Fiscal Goals and Objectives 3.7 Other Project Policy Considerations DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 6 SECTION 3.1 DMC VISION, GOALS AND OBJECTIVES / DEVLOPMENT PLAN STRATEGIES Does the project include a plan for achieving the DMC vision, goals and objectives and is it critical to driving the strategies included in the Development Plan? Is the project consistent with the stated DMC Goals & Objectives and specifically contributing to job creation? •Does the project meet one or more of the goals and objectives established for the Development Plan? This development directly supports the DMC vision for a livable, accessible, and equitable downtown environment. It promotes aging in place, reduces dependency on automobiles, and offers affordable options near health services and public amenities. The Proposed Project is a mixed income all-affordable housing project located in a DMC sub- district and within the City of Rochester transit-oriented development (TOD) zoning district. Second Street is a major future transit corridor within the City when the LINK BRT system commences operations in 2026. Senior affordable housing is needed to support the growth resulting from the DMC project. The project provides housing near downtown retail and services, transit access, while offering units at a variety of deeper-need income levels. In addition the project sponsor is partnering with community organizations to ensure the design meets the specific needs of the Rochester area senior population. Is the project consistent with DMC Vision? •Is the project part of a bold and aspirational concept for the future? The Proposed Project is consistent with the DMC vision of creating a place to Live, Work, Play and Thrive. Based on an economic analysis of housing needs for Rochester, the City needs over 630 units of housing for individuals earning between 30-50% AMI by 2040. The 75 units incorporated in this project will help build toward meeting this demand. •Does the project fit with the principles of the vision? With Mayo Clinic at its heart, the Destination Medical Center (DMC) initiative serves as a catalyst to position Rochester, MN, as the world’s premier destination center for health and wellness, attracting people, investment, and jobs to America’s City for Health and supporting the economic growth of Minnesota and its biosciences sector. The proposed project aligns with this core principle by providing essential infrastructure for linking housing opportunities to the transit investment and creating a connected and supportive choice for seniors to downsize from larger housing units. •Does the project provide a framework for growth in this sub‐district? The vision for the West Transit Village has been refined over several years and this project is the first residential component of the site coming forward alongside the transit infrastructure that has already been approved for funding by the DMCC Board. Further, constructing units along a transit corridor provides an opportunity for residents to live in Rochester without depending on a vehicle. This development revitalizes a surface parking lot and provides opportunities to live adjacent to a high frequency mobility option that connects directly to all the major downtown assets of Rochester. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 7 Does the project build infrastructure to support growth and drive investment? •Would the investment occur without the public infrastructure to be funded? The Applicant states they would not be able develop this project without public assistance. Based on our own independent analysis, we concur. As stated above, the mixed income approach of this project helps provide affordable units for seniors connected to the downtown and community. •Is the proposed public infrastructure solely for the benefit of the project or does it also support the broader vision of the DMC District? As identified in the Infrastructure Master Plan, there are six (6) key areas of infrastructure requirements: (1) public utilities, (2) bridges, subways and skyways, (3) shared parking, (4) parcel development, (5) civic uses, cultural uses and public amenities, and (6) technology improvement. The Proposed Project includes elements encouraging pedestrian engagement, alternative modes of transportation, promotes sustainable building practice, is connected to a major mobility investment, and will provide much-needed housing for seniors which is in undersupply. •Will the public funding accelerate private investment in the Development District or applicable sub district? The Proposed Project contributes 75 units of housing ranging between 30-50% AMI units. To meet the needs of renters – the majority of whom live in Rochester – Olmsted County needs to build 1,274 affordable housing units by 2030 (Olmsted County, 2020). Additionally, an October 2023 report commissioned by Aeon found significant demand for senior housing projects, affirming that new, 55 plus senior housing developments have been well-received in Rochester, with strong absorption in their first years (Cadence Marketing Solutions, LLC, 2023). The Project is meant to act as the catalyst for future development and job growth within the district as well as the first step in evolving the West Transit Village site beyond the mobility infrastructure already planned. Does the project provide a catalyst for/or anchor for an approved strategy? •Can the project reasonably be expected to catalyze or anchor development in one of the six sub districts? The proposed project will contribute 75 units of affordable senior housing. Based on an economic study completed for the Rapid Transit Circulator, there is a need for 630 units in this income range by 2040 in the downtown area. This project helps the downtown meet approximately 12% of this target. The project is intended to act as a catalyst for future development and job growth within the district. The Proposed Project will be the catalyst for the TOD corridor and provide a key piece of housing infrastructure. Its location is an example of how complex TOD development can happen in Rochester and the state of Minnesota, and will generate momentum for other developments – residential and otherwise. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 8 •Can the project reasonably be expected to catalyze necessary transportation/transit strategies? The Proposed Project will encourage the use of alternate means of transportation with the availability of bike storage and electric vehicle chargers. Moreover, the project is located at the west hub of the LINK BRT project, the largest single investment in public transportation in Rochester to date and the first Bus Rapid Transit system in the State of Minnesota outside of the Twin Cities metro area. Between the facility amenities that foster alternative transportation possibilities and its adjacency to a transit hub the Project will provide a range of options for the residents to move throughout the district and City. SECTION 3.2 CONSISTENCY WITH DEVELOPMENT PLAN, OTHER PLANNING DOCUMENTS Does the project include a plan for achieving consistency with the Development Plan (and any updates thereto) and other relevant planning documents? Is the project consistent with the DMC Planning Documents? •Is the project consistent with the current DMC Master Plan, Transportation Master Plan, and/or Infrastructure Master Plan? The proposed Aeon WTV Phase 1 project aligns with the vision and principles outlined in the DMC Master Plan. It supports the goals of the Transportation Master Plan by promoting transit-oriented development along the Link Bus Rapid Transit (BRT) corridor, enhancing connectivity and reducing reliance on personal vehicles. Additionally, the project's infrastructure components are consistent with the Infrastructure Master Plan's emphasis on sustainable and integrated urban development. •Is the project consistent and/or supportive of the Finance Plan, Business Development Plan and other Implementation strategies of the DMC? Yes, the project supports key strategies of these plans by providing affordable housing options for seniors, a demographic integral to Rochester's workforce and community. By offering units at various income levels and incorporating energy-efficient design elements, the project aims to minimize utility costs for residents, aligning with the DMC's objectives for economic inclusivity and sustainability. Is the project consistent with the City/County Planning Documents? •Is the project consistent with the RDMP Plan or City Comprehensive Pan? The proposed project is consistent with the RDMP and the Rochester 2040 Comprehensive Plan. It is situated in a transit-oriented development zoning district, identified as suitable for higher- density redevelopment. The project repurposes an underutilized TOD-zoned parcel, contributing to the city's goals of increasing housing density and revitalizing urban spaces. •If a Transit/Transportation project, is the project consistent with the ROCOG long‐‐‐range Transportation Plan? The project aligns with the ROCOG Long-Range Transportation Plan by supporting the development of the Link BRT system, which aims to enhance public transit options and reduce DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 9 single-occupancy vehicle use. The inclusion of bike storage facilities and proximity to major roadways further reinforces multimodal transportation strategies envisioned in the plan. The Proposed parking structure, bike parking facilities, location at the major transit hub on the western end of LINK BRT, and the retail and service options within walking distance help reinforce and carry the vision of the DMC Integrated Transit Studies. Does the project support sustainability principles as a core objective in the development and operations of the project? As part of the project’s Application for Funding, relative to Sustainable Elements, our team acknowledges and is working towards the (9) listed goals of the DMC Plan below, including a whole- building energy performance evaluation process. •The Aeon WTV Phase 1 project incorporates several sustainability initiatives consistent with the DMC Plan's goals: •On-site geothermal (Darcy Wells) to support HVAC loads. •Green Communities Tier 2 has been selected as the third-party green building rating system. After multiple rounds of design and analysis, and according to Aeon’s standard level of design, construction, and operation, we expect this project will perform well above the minimum level of compliance. •Integration of energy-efficient HVAC systems, occupancy sensors, high-performance glazing, and potential photovoltaic panels to achieve targeted Energy Use Intensity (EUI) benchmarks. •Implementation of a construction waste management plan aiming to divert a significant percentage of waste from landfills through recycling and reuse strategies. •Use of low-flow WaterSense fixtures and efficient irrigation systems to reduce water consumption. •Selection of a site within walking distance to essential services, public amenities, and along a major transit corridor, promoting reduced vehicle dependency. •Provision of infrastructure to support electric vehicle charging and secure bicycle storage, encouraging alternative transportation modes. •Commitment to third-party green building certification, demonstrating adherence to recognized sustainability standards. •Participation in the City of Rochester’s Voluntary Energy Benchmarking Program to monitor and improve energy performance over time. labeled weather-based irrigation controllers. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 10 SECTION 3.3 FINANCIAL VIABILITY [Form may vary based on size/scope of project] Does the project include a plan that is financially viable?  Project Summary (e.g. concepts, detailed program, project team, etc.)  Total Project Budget Sources of funding, demonstrating a verifiable gap that justifies DMC Funding  Project Operating Pro Forma including an overview of any operations and maintenance funding that may be required  A Project Plan and/or Market Study supporting the demand/need for the project  Demonstration of financial capacity to support the project Is the project supported by current market conditions and comprehensive feasibility studies? Yes. A prior West Transit Village traffic study was conducted in 2021, and Aeon has shared market data with DMC EDA staff to support their request, indicating comprehensive due diligence. Does the project leverage additional private funds, maximizing the use of DMC Funds? Yes, the proposed project leverages multiple sources of funds, including philanthropic and other public sources. Is the preliminary project finance plan comprehensive and viable based upon Project Team and financial capacity? Yes, but conditional. The project is viable only with the proposed public assistance. Without the $3.9M DMC GSIA award and the $4.9M in TIF increment and other public support, it faces an $8.8M gap and risks losing competitiveness for critical LIHTC funding that would also be added into the full capital stack. The MHFA process for procuring LIHTC occurs in July of each year and the sequence and sizing of these requests to DMC, as well as the changes from last year’s application are all to optimize their chances of obtaining the highly competitive MHFA funds. Is the project inclusive of an Operation and Maintenance pro forma? Yes. The pro forma includes staffed services (e.g., resident connections coordinator), indicating a plan for ongoing operations and maintenance. Is there a verifiable gap for funding based upon a reasonable return on private investment? Yes. Aeon identifies a significant $8.8M funding gap if public sources are not secured, while also maintaining deep affordability levels (e.g., 16 units at 30% AMI), which limit potential rental income. Is the proposed operating structure sustainable? Yes. The project includes sustainable operations planning, including on-site staffing, and is aligned with affordability goals and transit-oriented development principles. We believe the operating structure is sustainable due to Aeon’s strong standing and track record in affordable housing in the state of MN. Does the Project impose any financial obligations on the DMC or City for ongoing operational or maintenance support? No. There are no ongoing operational or maintenance financial obligations imposed on the DMC or City. Has the project applicant agreed to execute the DMC Development Agreement? If awarded TIF and DMC funding the applicant has stated that they will agree to execute the DMC Development Agreement consistent with all expectations of the City and DMC. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 11 SECTION 3.4 CONSISTENCY WITH ADOPTED STRATEGIES, PHASING, AND CAPITAL IMPROVEMENT PLANNING Is the project consistent with adopted strategies and/or one or more projects for the current implementation phase of the DMC initiative? Is the project part of an approved strategy and current focus? Is the project outlined as an approved strategy for the project within the Development Plan? The proposed project is consistent with the DMC priority surrounding transit-oriented housing development to support housing at a variety of price points. Is the project recommended as a focus for the particular phase of the project in the Development Plan? The Proposed Project aligns with the needs Olmsted County has identified for various tiers of affordability for housing and is located within the DMC District. Is the project consistent with the DMC CIP? •If public, is the project specifically listed in the DMC---CIP? Or is the project necessary to facilitate a DMC related strategy? NA •If private, is the project otherwise compatible with the planned public improvements in the DMC---CIP? Yes, this project is part of a larger investment known as the West Transit Village component of the LINK BRT project. Funding would come from the Strategic Development line item of the CIP budget and is tied to the overall BRT infrastructure investment. SECTION 3.5 TARGETED BUSINESS ENTERPRISE STRATEGIES [Form may vary based on size/scope of project] Does the project include a plan for achieving Local Business, S/M/WBE Project Requirements and other project requirements, as applicable? Has the applicant agreed to execute the DMC Development Agreement? (The terms of which are provided in form to all applicants)? Yes. Aeon has agreed to execute the DMC Development Agreement and adhere to requirements including targeted business and S/M/WBE goals. DESTINATION MEDICAL CENTER ECONOMIC DEVELOPMENT AGENCY 12 SECTION 3.6 COMPLIANCE WITH ECONOMIC---FISCAL GOALS AND OBJECTIVES Does the project include a plan to comply with or support the economic---fiscal goals and objectives of the DMC initiative? Does the project generate substantial economic-fiscal gain based upon job projections? Yes. The project is anticipated to provide 50-100 temporary construction jobs and 5-10 new permanent jobs. Does the project maximize the opportunity for investment by attracting other private capital? To meet the needs of low-income senior renters – the majority of whom live in Rochester – Olmsted County needs to build 1,274 affordable housing units by 2030 (Olmsted County, 2020). Additionally, an October 2023 report commissioned by Aeon found significant demand for senior housing projects, affirming that new, 55 plus senior housing developments have been well received in Rochester, with strong absorption in their first years (Cadence Marketing Solutions, LLC, 2023). Is the project required (e.g. public works) to continue to seed investment in the DMC District? The project will add to the overall eligible costs that are certified by DEED each year, increasing the amount of available public investment. Does the project support the economic strategies of the project by providing civic/cultural uses and/or public amenities that support strategic growth in the DMC Development District and/or specific business development and economic development strategies that are adopted as part of the DMC Development Plan? The project will add new, diverse income level housing, contribute to the sense of place at West Transit Village and meet DMC design guidelines. It is designed to meet different income levels for jobs available within downtown Rochester. SECTION 3.7 OTHER PROJECT POLICY CONSIDERATIONS Is the project inside the DMC Development District? Yes. If the project is not inside the DMC Development District, are they asking for a boundary change? N/A Does the project include any distinctive social and/or community benefits that are not specifically required by the DMC Act? WTV - Aeon Phase 1 is consistent with the DMC vision of a mixed use walkable and transit-oriented downtown, diversifying the housing options available within the district, densifying at a critical transportation node, and leveraging transportation investments. Aeon has a strong track record in affordable housing, both development and property management.