City holds steady at 10% financing for residential development

The city of Medford is continuing to refine its guidelines for addressing how much support to give to contractors looking to bring housing projects to the city.

At Tuesday’s city council meeting, members heard from a developer saying that a 10% city contribution is not enough for the project and asked it to be raised to 20%.

Garett Krug and his wife Grace, are currently building a high-end duplex in the city with plans to build additional duplexes in the future. Krug explained that as area natives returning to the community as young professionals they found there were not housing options for them. He said he saw the need for more duplexes in the city and started one last fall. He said they were looking at building another one this spring. He said they had designed these to accommodate people age 50 and older with single level construction and doorways wide enough to accommodate wheelchairs. The units measure 1,600 square feet on each side with 2.5 car garages. He said the unit they have under construction is already rented out leading them to wanting to build more. He said it costs about $425,000 to build each of the higher-end duplexes.

He said with interest rates going up and building costs high additional help is needed with securing financing. He said raising the amount the city is willing to contribute from 10% of the project cost to 20% would be the difference between building a second unit this spring and waiting four years to build one.

The city had pledged up to $1 million to help support housing efforts. Under the guidelines the city has in place, the money will be loaned at zero percent interest amortized over 20 years with a balloon payment due on the remaining amount at 10 years. The guidelines are intended to provide direction for the mayor and city coordinator in negotiating developer agreements. The agreements are then brought back to the city council for final approval.

“Our goal is to help as many builders as possible,” said Mayor Mike Wellner. He said they have been approached by a number of builders who are looking for the help to get their projects over the financing hump and help make them happen.

“I think a 10% loan is a nice incentive,” Wellner said, noting that it has been surprising the number of contractors who have approached the city since it was first talked about.

Council member Greg Knight noted that if they went with 20% loan support, it would mean less people could be helped with the same amount of money. He also questioned the possibility of helping with water and sewer hook-ups.

Wellner said they would be part of that 10% of the project costs the city is willing to finance. It was noted that some hookups could be much more expensive than others and he said it was important the city treat all developers equally.

Council member Mike Bub asked that the city also include a clause in the guidelines that says the development cannot be sold to a non-profit entity until the loan is paid back. Part of the plan is that the city is foregoing charging interest on the loans due to the increase in property taxes that will result from the new development. At 10%, the city would be helping bring in $10 million of new growth while at 20% it would help bring in $5 million of new growth.

There were also some questions over the number of units needed to qualify.

City coordinator Joe Harris said that as long as they were started within six months of each other, he would see that as part of the same project, noting that they would not even have to be in the same location. In the end, it would be at least four more new housing units in the city.

Resident Gabriel Gelhaus spoke in support of the project urging the city to go to 20% financing. He said the 10% helps developers who are already established but is a barrier to those who are starting out. “It deters us to the point where it is not going to happen,” he said.

Wellner said that while it sounds like a good idea to increase the city’s support, he was also concerned about developers having skin in the game. At the 20% level, it would be the city and the financial institution taking all the risk for the projects with the developer having no risk.

Wellner noted the city has given no incentive in the past and that the 10% is a big step forward.

Harris explained the guidelines were set up based on the agreement the city had with Fore to build the apartment complex on Pep’s Drive. “I wish I had a big piggybank and we could loan this money out,” Harris said.

Holmes said she felt the city had set a precedent with the apartment complex project and should follow that precedent.

In the end, council members voted unanimously, if reluctantly, to approve the guidelines at 10% financing from the city.

Playground support

Council members went on record giving unanimous support to a community project to renovate the other half of a playground area by the city pool.

Phase 1 of the “Our Village” accessible playground project was approved by the city in 2017 and was completed with the support of community groups the following year. Now, the group is looking to replace the existing pea gravel surface and equipment in the southern half of the playground area and install a poured in place accessible surface and new equipment.

Committee chairman Joe Greget was at Monday’s meeting to present the project and seek formal approval for it from the city council. He noted they have already received major support from the Medford Kiwanis Club and Nestle as well as a number of other businesses and individuals in the community. In addition he said the project has made it to the phase 2 review stage for a Fulcrum Foundation grant.

According to Greget, the project will include the installation of additional playground equipment including items geared for the two-to-five year old age group. There will be a slide, swings and a pirate ship themed climbing structure in the center of the playground. The total cost of the project is expected to be $288,734, which he is hoping to raise through support in the community. If successful in raising the funds, Greget said they would look at a fall 2023 installation.

According to city coordinator Joe Harris, the current equipment in the park is still usable and the plan is for the city to relocate that equipment to use to develop a new park space along Pep’s Drive to serve those newly-developed residential areas. Holmes asked if the city would consider putting the same sort of poured in place surface as in the main city park, noting how much nicer it is for parents with strollers and adults to walk on that pea gravel. Harris replied they would work out the details as the plans progressed for that.

“I love this project,” Bub said, before asking for clarification about ongoing maintenance after it is built.

Mayor Mike Wellner said that he saw the city’s contribution as working with the contractors to get the site ready and donating trucks and labor. He noted they did that with the first phase of the playground and that they were able to save a lot of money for the project. Once built, the city would take over maintenance of the equipment going forward. Harris noted there has not been a lot of maintenance needed with the equipment that was installed in the first phase.

Council member Dave Brandner asked if there were plans for benches. Greget said they looked at benches and additional canopies dependent on reaching fundraising goals.

In other business, council members:

  Approved revisions to the city’s sidewalk ordinance. According to city clerk Ashley Lemke, the revisions cleaned up the language in the ordinance removing references to the director of public works, but did not change the substance of the ordinance. “Nothing in the body of the ordinance has changed,” she said.

  Approved the final designs for the Whelen Ave. parking lot project and bandshell project with Bub opposed. Bub said he voted against it because he does not want a splash pad and skating rink in the Whelen project.