AGENDA #9c and #9d

MEMORANDUM

TO:	Roger L. Stancil, Town Manager
FROM:	J.B. Culpepper, Planning Director George Small, Engineering Director Gene Poveromo, Development Coordinator Kumar Neppalli, Engineering Services Manager
SUBJECT:	The Residences at Chapel Hill North – Request for Partial Revocation of the Chapel Hill North Phase I Special Use Permit and Application for a Special Use Permit (File No. 9880-36-1885)
DATE:	April 11, 2007

INTRODUCTION

Tonight, the Council continues consideration of: 1) a request for a partial revocation of the Chapel Hill North Phase I Special Use Permit; and 2) an application for a Special Use Permit. The proposed multi-family planned development would consist of 123 dwelling units and 238 parking spaces. The site is located in the northeast portion of the Chapel Hill North Shopping Center and is located in the Mixed Use-Office/Institutional-1 (MU-OI-1) zoning district.

RECOMMENDATION

We recommend that prior to approval of the Chapel Hill North Special Use Permit application, the Council approve the request for a Partial Revocation of the Chapel Hill North Phase I Special Use Permit with the adoption of Resolution A. This action and the enactment of the accompanying Land Use Management Ordinance Text Amendment are required prior to approval of the application for the Chapel Hill North Special Use Permit.

We note that the property has been approved for office development at a greater intensity than that proposed. We believe the associated traffic impact of this 123-unit residential development would be less than that of office development.

This package of materials has been prepared for the Town Council’s consideration, and is organized as follows:

Cover Memorandum: Provides background on the development proposal, discusses key issues raised at the February 12, 2007 Public Hearing, presents evidence in the record thus far in support of and in opposition to approval of the application, offers recommendations for Council action and includes resolutions of approval and denial.
Attachments: Includes Quick Reports from the Council Affordable Housing Committee, the March 26, 2007 Special Use Permit memorandum and the February 12, 2007 Special Use Permit memorandum with attachments.

KEY ISSUES

We believe that the key issue raised during the February 12, 2007 Public Hearing focused on affordable housing. Subsequent to the February 12^th meeting, we also identified a second issue associated with vehicular access and circulation between the proposed development, Old University Station Road and Weaver Dairy Road. A discussion on both issues follows:

1. Affordable Housing: During the February 12^th Public Hearing, the applicant expressed a concern with the staff’s recommended affordable housing stipulation. Because the proposed development involves rental units, and due to anticipated difficulties associated with an affordable rental housing program, the applicant asked for Council direction and guidance in revising the stipulation.

In response, the Council created a Council Committee to meet with the applicant and staff to discuss affordable housing options. The Council recessed the Public Hearing to March 26. On March 26 the Council recessed the hearing to April 11 in order to provide the Council Committee, staff and the applicant time to finalize their recommendations.

Comment: The Council Committee met with the applicant, staff and a representative from Orange Community Land Trust (Robert Dowling) on March 12^th, March 19^th and April 3^rd. A main point of discussion involved information presented by the applicant as outlined on Attachment 1 and Attachment 2 of this memorandum.

Attachment 1: Includes information related to a range of monthly rental rates (market, 80% of medium income, and less than 60 percent of medium income) for the proposed development and the anticipated net loss of income (on a yearly basis) realized by the applicant as a result of providing affordable rental units:

	Market rate	Affordable rental units
		Rate for a family at 80% median income	Rate for family at less than 60% median income
1 bedroom	$ 980	$ 819	$ 630
2 bedroom	$1,250	$ 978	$ 785
Total # units	N/A	18 units (15% of total units)	9 units (7.5% of total units)
Net loss income/year	N/A	$42,768	$42,600

For discussion purposes Attachment 1 also includes a proposed payment-in-lieu option ($389,527) as an alternative to providing affordable rental units. The proposed payment-in-lieu was calculated based on the net present value of the net loss income ($42,768) per year over a period of 30 years.

Attachment 2: Includes a list of existing rental apartment projects in Chapel Hill. The projects are divided into three groups: developments less than 10 years old, developments over 17 years old and development supported by tax credits (Dobbins Hill).

Based on the discussions between the Council Committee and others attending the committee meetings, some general conclusions were:

1) that the supply of rental apartments in Chapel Hill currently provides a number of rental opportunities for families making between 80 percent and 60 percent medium income; and

2) that the greater need for the community is an increase in the number of available rental units for families below 60 percent medium income; and

3) that providing affordable rental units, in a project that is not subsidized (such as the tax credited Dobbins Hill) for families below 60 percent medium income, would be a financial burden to an applicant.

With respect to this particular project, the Council Committee determined:

4) that in this particular case, a payment ($22,000 for each required affordable unit-$405,900) in lieu of providing 15 percent affordable rental units, would be acceptable; and

5) that at such time, if the development converts from rental to condominium ownership, the applicant may either deed affordable units to an affordable housing provider or provide an additional payment based on a formula that

a. Credits the applicant for the initial payment of approximately $405,900 in terms of affordable units (as satisfying requirement to provide about one-third or six units); and

b. Calculates an addition payment based on the subsidy (amount of money) necessary for a local non-profit housing organization to make a dwelling unit available, multiplied by the remaining number of required affordable units (approximately two-thirds or 12 units) not satisfied by the number of credited units described immediately above .

The Council Committee agreed that in this particular case, a payment-in-lieu of affordable rental units would provide a greater benefit than providing units that could be difficult to rent to qualified, low-income families. In calculating the payment the applicant determined a payment-in-lieu of $22,000 for each required affordable unit ($405,900). The $22,000 per unit payment of affordable rental units was calculated by:

1) Determining the annual total loss in income from market rate dwelling units for 12 one-bedroom units and six two-bedroom units ($42,768); and

2) Calculating the net present value[1] of $42,768 over 30 years at 7 percent ($389,527 or $21,640 per unit). The applicant agreed to round up the per unit fee to $22,000 for a total payment of $405,900.

The Council Committee’s recommendations for an affordable housing proposal for the Residence at Chapel Hill follow. The recommendation requires the use of several numerical formulas based on the variables described in the box below:

A - [“Residential Units”] = Number of Residential Units Constructed by Applicant

B - [“Affordable Housing Unit Obligation”] = 15% X A

C - [“Net Present Value”] = $22,000 per unit (rounded up from calculation provided by applicant- see Attachment 2).

D - [Initial Payment in Lieu of Providing “B”] = B X C

E - [Current subsidy required by Affordable Housing Provider as determined by the Inclusionary Task Force] = $75,000

F - [Affordable Housing Unit Obligation with Condo Conversion] = B – (D4E)

G - [Payment-in-lieu obligation with Condo Conversion] = F X H

H - [Subsidy required by Affordable Housing Provider] = amount to be determined by the Town Manager at time condo conversion occurs.

1. Initial Payment-In-Lieu of Affordable Rental Units: That the applicant shall provide an initial payment-in-lieu to the Town Affordable Housing Fund equal to $22,000 per affordable housing unit multiplied by the affordable housing unit requirement of the proposed development. The required number of affordable housing units is 15 percent of the total number of units to be developed according to building plans approved by the Inspections Department. The payment-in-lieu shall be a one-time payment prior to issuance of the first Certificate of Occupancy.

Required payment in lieu (D) = Affordable Housing Unit Obligation (B) multiplied by $22,000 (C) [Formula: D = B X C]

2. Conversion From Rental Residential Community to Ownership Condominium Community: If the rental development is converted to an ownership condominium development, the developer/owner of The Residences as Chapel Hill North may choose to provide either: 1) for sale affordable housing units; or 2) a payment-in-lieu according to the following two options:

Option 1: Permanently Affordable Condominium Units – Affordable units for ownership shall be deeded to an affordable housing provider, according to Town Inclusionary Zoning and Affordable Housing standards and shall be approved by the Town Manager prior to recordation of the condominium plat. The required number of affordable units shall be based on a formula that credits the developer/owner for the initial payment-in-lieu.

Affordable Housing Units Required with Condo Conversion (F) = Affordable Housing Obligation (B) less the initial payment in lieu (D) divided by required subsidy of the $75,000 (E) [Formula: F = B – (D4E)]

Option 2: Payment-In-Lieu with Condo Conversion - If a payment-in-lieu of affordable ownership units is proposed, in addition to the initial payment-in-lieu of affordable rental units, the payment shall be calculated at such time the development converts to condominium ownership. The additional payment-in-lieu shall be provided to the Town’s Revolving Acquisition Fund prior to recordation of the condominium plat. The total payment amount shall be based on the funding (subsidy) necessary, as determined by the Town Manager, for a local non-profit housing organization to make a dwelling unit affordable (At the time of this approval, April 2007, an affordable housing subsidy was calculated as $75,000 per dwelling unit.). The total payment shall be equal to the funding (subsidy) multiplied by the number of required affordable units, according to the following formula:

Payment-in-lieu of condo conversion (G) = Affordable Housing Units Required with Condo Conversion (F) multiplied by a to be determined subsidy required by Affordable Housing Provider (H) [Formula: G = F X H]

We have included stipulations to this effect in Revised Resolution B, the staff revised resolution.

2. Vehicular access and circulation between the proposed development, Old University Station Road and Weaver Dairy Road: Following the February 12, 2007 meeting, Town staff met with NCDOT staff several times and discussed possible options for installing a traffic signal on Weaver Dairy Road between Martin Luther King Jr. Boulevard and Kingston Drive. The discussion included information about current and proposed developments in the area and associated traffic volumes.

As part of that discussion, Town staff developed a traffic simulation model with the existing and proposed conditions, including an option for a median opening with a traffic signal connecting Old University Station Road to the proposed public street through the Residences in Chapel Hill North. The results of the traffic simulation indicate that connecting the proposed public street, within the Residences in Chapel Hill North to the existing Old University Station Road, would improve the traffic circulation and reduce congestion in this area.

Comment: We believe that a public street connection, from the proposed Residences in Chapel Hill North to Old University Station Road is important in addressing access, circulation and congestion issues relating to the existing and proposed traffic in the area. We have revised our recommendation regarding how the proposed public street, within the Residences at Chapel Hill North, connect to Old University Station Road as outlined below:

We recommend that the applicant dedicate a 30-foot wide public right-of way, in the southern portion of the site, in order to create a public street connecting Perkins Drive to Old University Station Road.
We recommend that the location and design of the intersection with Old University Station Road, be reviewed and approved by Duke Energy and the Town Manager.
If the recommend roadway connection between Perkins Drive and Old University Station Road requires additional right-of-way from properties abutting or adjacent to the site of the Residences in Chapel Hill North, we recommend that the Town be responsible for acquiring the necessary right-of-way.
If the Town is unable to obtain the right-of-way, we recommend that applicant build the proposed public street as shown on the approved site plan, revised December 20, 2006, Sheet 5.

These recommendations have been incorporated into Revised Resolution B.

SUMMARY

We have attached a resolution, which includes standard conditions of approval as well as special conditions that we recommend for this application. With these conditions, our conclusion is that the Council could make the finding necessary in order to approve the application. The staff recommendation incorporates input from all Town departments involved in review of the application.

RECOMMENDATIONS

The advisory boards recommended that the Town Council approve the Special Use Permit with conditions. Please refer to the matrix on page 5 to compare the differences between resolutions and part of Attachment 3 for Advisory Board Summaries of Action.

Additional Recommendations Incorporated into the Staff Recommendation, Revised Resolution B:

Following the February 12 Public Hearing, the following recommendations have been incorporated into Resolution B, the Staff Revised Recommendation:

· Affordable Housing Plan: Revised stipulations authorizing an initial payment-in-lieu with an option for future payments or transferring units to a non-profit affordable housing provider.

Comment: See Key Issues section for additional discussion of this subject.

· Vehicular access and circulation between the proposed development, Old University Station Road and Weaver Dairy Road: Revised recommendation regarding the proposed public street across the southern part of the site connecting Perkins Drive and Old University Station Road.

Comment: See Key Issues section for additional discussion of this subject.

Staff’s Revised Recommendation: Based on our evaluation of the application, our revised conclusion is that, with the stipulations in Revised Resolution B, the Special Use Permit application complies with the standards and regulations of the Land Use Management Ordinance.

We recommend that the Council adopt Resolution A, approving the request for a Partial Revocation of the Chapel Hill North Phase I Special Use Permit with conditions.

We also recommend that the Council then adopt Revised Resolution B, approving the Special Use Permit application with conditions. Changes to Resolution B, since the February 12, 2007 Public Hearing, include revisions to the affordable housing plan stipulation and the stipulation requiring access to Old University Station Road (as described above).

Alternative recommendations by the Town’s Advisory Boards and Commissions are shown in the table on the following page, Differences among Resolutions.

Resolution C would deny the application.

The Residences at Chapel Hill North - Special Use Permit

Differences Among Recommendations

Issues	Revised Resolution B (Approval) Staff Revised Rec.	Planning	Transportation	Design Commission	Bicycle & Pedestrian	Parks & Greenways
Affordable Housing Proposal	Authorize payment-in-lieu with options for future transfer of units to non-profit affordable housing provider	*	*	*	*	*
Connect Perkins & Old University Station Rd. with public right-of-way	Yes	*	*	*	*	*
Provide Bus Service Along Perkins Drive to Serve Dev.	To Be Determined By Chapel Hill Transit	*	Yes	*	*	*
Provide Right-In/Right Out Traffic Movements at Perkins/WD Rd.	No	Yes	*	Yes	*	*
Provide Bus Stop Improvements on NC 86	Yes	*	*	*	*	*
Fencing Around Play Area	Yes	*	*	*	*	Yes
Northern Greenway Trail Connection to Westernmost Access Drive	Yes	*	*	*	*	Yes
Greenway Trail Maintenance	Owner of CHN Site & Permitting Periodic Town Maint.	*	*	*	*	Owner of Chapel Hill North Site & Permitting Periodic Town Maint

*Issue not discussed at this particular meeting and is therefore not included in this Resolution. 3-30-07

ATTACHMENTS

[1] Net Present Value: The difference between the present value of the cash inflows and the present value of the cash outflows associated with an investment.