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Financial Feasibility Analysis
FINDINGS

ASSOCIATES INC

evelopments target middle income households
(60% AMI to 90% AMI) created unrealistic return expectations.

5

Downtown area market fundamentals are through use of certain incentives... if the City
different than other growth areas. returns to adhering to existing regulations.

Financial Feasibility Analysis
STRATEGIES

ASSOCIATES INC

TARGET THE ‘MISSING MIDDLE’ IN CURRENT DEVELOPMENT TRENDS

¢ Recent development has focused on 100% affordable housing and
100% market rate housing

* No development has targeted the ‘missing middle’ incomes

¢ The analysis reveals that delivering to this group is financially
challenging and there are no Federal programs to help

¢ Targeting the IZ policy to this cohort creates a stronger continuum

¢ 80% of AMI is recommended target
¢ $55,950 for 1-person HH
¢ $92,700 for 6+ person HH

VARY INCLUSIONARY % BASED ON THE SIZE OF THE DEVELOPMENT

¢ The analysis shows that larger developments have greater capacity to
accommodate inclusionary units

¢ Smaller projects experience greater financial impact due to having fewer
market rate units to compensate for the income-controlled units

¢ Recommended thresholds
¢ Under 10 units = 0% inclusionary
* 10-25 units = 10% inclusionary
¢ 26-100 units = 15% inclusionary
* 101+ units = 20% inclusionary

Financial Feasibility Analysis
STRATEGIES

CREATE SEPARATE THRESHOLDS FOR DOWNTOWN

¢ City priority (from previous plan) is to increase diversity Downtown since
it already has higher share of affordability than other parts of Nashua

¢ Cost to develop housing is higher in Downtown, particularly due to the
need for structured (podium) parking

¢ Th city should consider a lower inclusionary requirement for Downtown
into the near future to continue to promote development while balancing
price diversity citywide

¢ Recommend a lower % requirement Downtown

USE BONUS DENSITY TO MITIGATE IMPACTS ON FINANCIAL FEASIBILITY

¢ The analysis shows that the financial impacts of an inclusionary zoning
policy can be mitigated through a bonus density program
¢ Effectively, the city would offer additional units to the developer in
exchange for the inclusionary unit requirement
¢ The analysis revealed the following ratios create a financially neutral
impact
* 1:1 bonus density ratio outside Downtown
* 2.5:1 bonus density ratio in Downtown

¢ This would only work if current practices of allowing maximum density
without inclusionary units are halted

ASSOCIATES INC

Financial Feasibility Analysis
STRATEGIES

CONSIDER PAYMENT IN LIEU OF UNITS IN CERTAIN CIRCUMSTANCES

¢ A payment in lieu of units allows for the city to elect to receive a cash
payment to the Housing Trust fund instead of having the units delivered
Payment in lieu strategies oftentimes are used to avoid affordable units
being concentrated in select areas

The approach also is common to alleviate an additional financial burden
when a ‘partial unit’ is calculated

¢ 75-unit development with a 10% IZ requirement = 7.5 units

¢ A payment in lieu allows for a cash equivalent to be paid for the 0.5 unit
RKG recommends Nashua use payment for partial unit calculations

¢ Current value differential between 80% AMI and market rate about $36,000
City also can consider special exception in mitigating situations

¢ This would be exclusive decision of the city

¢ Situations such as avoiding concentrations or to capitalize the Housing Trust

fund for an impending project

ASSOCIATES INC

UNIT VALUE DIFFERENTIAL
FROM MARKET RATE UNITS

MARKET RATE

-$35.940

80
%
AMI

p= -$62,370

p= -$115,230

50
%
AMI

AGENDA MEETING OF THE BOARD OF ALDERMEN SEPTEMBER 28, 2021

7:30 PM Aldermanic Chamber and by Zoom

Join Zoom Meeting: https://us02web.zoom.us/j/87809222661? pwd=UnBPS24 1loW9id VIXb20vR2pzT29XUT09
Meeting ID: 878 0922 2661 Passcode: 209661

Join by phone: 1-929-205-6099
Meeting ID: 878 0922 2661 Passcode: 209661

If for some reason you have problems with connectivity, please contact us at (603) 589-3329 and someone will assist you. The
public may also view the meeting via Channel 16.

1. PRESIDENT LORI WILSHIRE CALLS ASSEMBLY TO ORDER

PRAYER OFFERED BY CITY CLERK SUSAN K. LOVERING
PLEDGE TO THE FLAG LED BY ALDERMAN-AT-LARGE BRANDON MICHAEL LAWS
ROLL CALL

REMARKS BY THE MAYOR

RESPONSE TO REMARKS OF THE MAYOR

RECOGNITIONS

o NO oO Fk WN

PRESENTATION
e =Inclusionary Zoning Financial Feasibility Study by RKG Associates

9. READING OF MINUTES OF PREVIOUS MEETINGS

Special Board of AIGErMe N...... 0... ccc cece cece ee cee eee eee cee n ee nee ene ene ete een EE EEE EEE eae eta EEE EEE 09/08/2021
Board of Aldermen. ........ 02.2.2... ccc eee cee eee cee cee cece e eee ee eee cee eae ceases eee aeesaeaeeceeaeeeeessnises 09/14/2021
Special Board of AIGErMen............ cc ccc ccc ee ee cee cence eee ee eee een nee nee ene ene ete bend eE GEE ene eta aes 09/16/2021

10. COMMUNICATIONS REQUIRING ONLY PROCEDURAL ACTIONS AND WRITTEN REPORTS
FROM LIAISONS

From: Lori Wilshire, President of Board of Aldermen
Re: Calling a Special Board of Aldermen meeting on Monday, November 15, 2021 at 7:00 p.m. Relative to an
Assessing Update on the Revaluation

From: Lori Wilshire, President of Board of Aldermen
Re: Calling a Special Board of Aldermen meeting on Tuesday, December 14, 2021 at 7:00 p.m. Relative to a
Presentation from the Beautification Committee

From: Matthew Sullivan, Planning Manager

Re: Referral from Board of Aldermen on Proposed R-21-169, relative to the authorization of the City of
Nashua to enter an Agreement and Consent to Joint Use with Liberty Utilities and making a supplemental
appropriation of $38,394

From: Matthew Sullivan, Planning Manager
Re: Referral from Board of Aldermen on Proposed R-21-170, Relative to the Approval of the Imagine Nashua
2021 Master Plan

From: Lisa M. Fauteux, Director of Public Works
Re: Referrals from Board of Aldermen — R-21-165, R-21-166 and R-21-169

9(a). PERIOD FOR PUBLIC COMMENT RELATIVE TO ITEMS EXPECTED TO BE ACTED UPON THIS EVENING

9(b). COMMUNICATIONS REQUIRING FINAL APPROVAL

From: Mayor Jim Donchess

Re: Multi Year Interpreting Services Contract in the amount not to exceed $3,500 funded from accounts 55699

Other Contracted Services (Police Department)

From: Mayor Jim Donchess

Re: Engineering Consulting in the amount not to exceed $2,600,000 funded from accounts SFR Loan
(Engineering Department)

From: Mayor Jim Donchess

Re: Postage Machine Lease in the amount not to exceed $6,000.60 funded from accounts 55607
Postage & Delivery (Library)

PETITIONS

NOMINATIONS, APPOINTMENTS AND ELECTIONS

Appointments by the Mayor

11. | REPORTS OF COMMITTEE

Personnel/Administrative Affairs Committee... .....0.00.00000 cece eee e eee eee 09/07/2021
Human Affairs Committee... 0.0.0... cee cee cee ee eee e eee ee cae eesseeeeevaeeea vanes 09/13/2021
Finance Committee... 00.0.0... cee cece eee see eee cesses dee aee sae eeaeee eae aeaeeegs 09/15/2021

12. CONFIRMATION OF MAYOR’S APPOINTMENTS

UNFINISHED BUSINESS — RESOLUTIONS

R-21-143
Endorsers: Mayor Jim Donchess
Alderman Thomas Lopez
Alderman-at-Large Brandon Michael Laws
Alderwoman-at-Large Shoshanna Kelly
Alderman Patricia Klee
Alderman Jan Schmidt

PROPOSING AN AMENDMENT TO THE CITY CHARTER RELATIVE TO THE MANNER OF APPOINTMENTS TO THE

NASHUA BOARD OF POLICE COMMISSIONERS
e Tabled at Board of Aldermen August 10, 2021 meeting

R-21-163
Endorsers: Mayor Jim Donchess
Alderman-at-Large Michael B. O’Brien, Sr.
Alderman Patricia Klee
Alderman Richard A. Dowd
Alderman-at-Large David C. Tencza
Alderman Linda Harriott-Gathright
Alderman June M. Caron
Alderman Jan Schmidt
Alderman-at-Large Lori Wilshire
ESTABLISHING THE USE OF FUND BALANCE FOR TAX RATE
e Budget Review Committee — anticipated recommendation for final passage

R-21-164
Endorsers: Mayor Jim Donchess

Alderman-at-Large Michael B. O’Brien, Sr.
Alderman Patricia Klee
Alderman Richard A. Dowd
Alderman Skip Cleaver
Alderman Linda Harriott-Gathright

RELATIVE TO THE TRANSFER OF $30,000 FROM ACCOUNT 70100 “GENERAL CONTINGENCY” TO

ACCOUNTING CLASSIFICATION 51 “SALARIES & WAGES” IN ADMINISTRATIVE SERVICES ($25,000) AND

2

ECONOMIC DEVELOPMENT ($5,000) FOR THE PURPOSE OF FUNDING SALARIES
e Budget Review Committee — anticipated recommendation for final passage

R-21-168
Endorsers: Mayor Jim Donchess

Alderman-at-Large Michael B. O’Brien, Sr.
Alderman Patricia Klee
Alderman Richard A. Dowd
Alderman Jan Schmidt
Alderman Linda Harriott-Gathright
Alderman Skip Cleaver
Alderman-at-Large Lori Wilshire

ESTABLISHING AN OPIOID ABATEMENT EXPENDABLE TRUST FUND FUNDED BY APPROPRIATIONS AND

MAKING A SUPPLEMENTAL APPROPRIATION OF $27,223.40 INTO THE EXPENDABLE TRUST FUND

e Budget Review Committee — anticipated recommendation for final passage

R-21-169
Endorsers: Alderman Patricia Klee
Alderman-at-Large Michael B. O’ Brien, Sr.
Alderman-at-Large Ben Clemons
Alderman Skip Cleaver
AUTHORIZING THE CITY OF NASHUA TO ENTER INTO AN AGREEMENT AND CONSENT TO JOINT USE WITH
LIBERTY UTILITIES AND MAKING A SUPPLEMENTAL APPROPRIATION OF $38,394
e Budget Review Committee — anticipated recommendation for final passage
e Planning Board with favorable recommendation
e Board of Public Works with positive recommendation

UNFINISHED BUSINESS —- ORDINANCES
NEW BUSINESS —- RESOLUTIONS
R-21-171
Endorser: Mayor Jim Donchess
ISSUING PRECEPTS TO THE SELECTMEN OF THE CITY WARDS FOR THE MUNICIPAL GENERAL ELECTION ON
NOVEMBER 2, 2021
R-21-172
Endorser: Mayor Jim Donchess
AUTHORIZING THE MAYOR TO ENTER INTO A SECOND AMENDMENT TO CONCESSION AGREEMENT WITH
GRANITE DIAMOND, LLC
NEW BUSINESS —- ORDINANCES
O-21-071
Endorsers: Alderman Patricia Klee
Alderman Thomas Lopez
REMOVING THE FINE LIMITATION ON ANIMAL ORDINANCE VIOLATIONS RELATING TO DOGS
PERIOD FOR GENERAL PUBLIC COMMENT
REMARKS BY THE MEMBERS OF THE BOARD OF ALDERMEN

Committee announcements:

ADJOURNMENT

e Cc ity Devel t
City of Nashua Planning and Zoning
. sone Building Safet
Community Development Division Code Enforcement

Urban Programs

City Hall, 229 Main Street, PO Box 2019 Conservation Commission
Nashua, New Hampshire 03061-2019 Transportation
www.nashuanh.gov FAX

589-3095
589-3090
589-3080
589-3100
589-3085
589-3105
880-0100
589-3119

Date: September 22, 2021

To: Ald. Lori Wilshire, Board of Aldermen President
Jim Donchess, Mayor
cc: Board of Aldermen
From: Sarah Marchant, Community Development Director

Re: Inclusionary Zoning Financial Feasibility Study

In October of 2020 the Economic Development and Community Development Divisions partnered with
RKG Associates to complete a comprehensive Housing Study to better understand the dynamics in
Nashua and the surrounding region that impact housing supply and demand. That study in conjunction
with the Imagine Nashua effort over the last year, highlight the critical need to understand the financial
constraints and opportunities in Nashua affecting the creation of more affordable housing.

To that end, one of the recommended strategies from the Housing Study was for the City to update its
Inclusionary Zoning Ordinance to encourage affordable housing and ensure the City’s ordinances are
financially feasible. We have continued working with RKG Associates to complete a Financial Feasibility
Study, the final draft of which is attached to this memo and will be presented to the Board for discussion
at the September 28" meeting.

Following the presentation of this study, Economic Development and Community Development will
bring RKG Associates in for a series of three worksessions with the Board to create a draft Inclusionary
Zoning Ordinance implementing these findings. The Planning Board and other land use board members
will be encouraged to attend the worksessions.

It is important to remember the current housing situation was not created overnight, but based on
many years of policy decisions and market forces. Inclusionary Zoning is one of several strategies we
need to move forward to change course. Many others will be discussed with the revisions to the Land
Use Code in the coming year. All will take time and a measured and thoughtful approach, with
community support, to improve our community and housing for all Nashua residents.

1| Page

City of Nashua
Inclusionary Zoning:

Financial Feasibility Analysis

September 1, 2021

PREPARED FOR:

City of Nashua
Community Development Division
229 Main Street, Nashua, NH 03060

PREPARED BY:

RKG Associates, Inc.

CONTENTS

EXECUTIVE SUMMARY ........ccccsccsssssssssssstsssssssessescaessaessnessaessaessnssensscassenssaeseaessaessaesnesenessnessaessaessneesass 3
Scope Of WOK... cccccseseceesescesenssessececesssseseesececenssessseecesensssseessneecavssssessecesessisaenensececesssessseeessacassneneneeceseneneseeseeasisaeneneeses 3
PLOCESS oo. eeeeecssessesseceecnecocenceseeseeseesacencenessesesaecnecnecnsessessesaeaecaaeseeseeseeseesaseasenessessesaeenscaecaaesaesaesaecaecaeeaeeseseesesensensenessesneeaee 3
Summary Findings... cececcssssseseececesereseseesescecsnssessseeceressseseeseneecevsnssessececessssassnensececesssssseesessecasseneneeceensseseeseeeasaseneneneeses 3

INTRODUCTION 0.0... cccccccsscsssccscesscesscesscssscesscesscesseesseessessseesseesseeseesseeseeeseeessessseesseeseeesaeeseessnesseeesaessansaes 5

MODEL .........:ccsscsssccsscesscsscessccssccsscesscesscssscesscesscesscesseesseessesacesseesseesseesseescesuesseeesseeseeeseeeseeesacsaesseeeseeeseeseaeesaes 5
Model Data Collection... ccccssessescesesescscenesececeeceecassecaesaceecarsecneceesecaesegaecaeseseeseesesaesessesaesesaseeesesaeaeeaeseeetsaeeeeersaeerenees 6
Component of the Model 0... ccceseseesescscessseseseecenersssseeneneecessssessececessasaveveneececesssessseecessacassneseneecenensneseeseseasaseeneneecesenens 7
Development REVenue ........cscseseseesescecesseseseecesersseseenenescenessseseecesencnsassneneecesenenensseecesensseseeseneecereseneseesesessasasseenesceseneney 11

Rents 11
Sales Values 11
Other Income 11
Development Costs .....ccssccceesessseerescecsnsssssssecsensssssenessecansnsnessecessssssasseneececensnesessecesessnsseeseseecarensnessesesensasassnenesceseneney 11
Land Costs 11
Construction Costs 12
Parking Costs 12
FAM AN CIING «eee eeceeeeseeeee ces eeee ces esenecesesenecesesenenesesanenenesenecesasenenessnenesssesenecesesenesseneneessseaenessseneresessenssssenensseeensseeneeeneeeys 12
Equity 13
Terms 13
Interest Rates 13
Density BOMUS.........ccccccccceteneseseeteeenereseseneresesenesesesenssesesenerssesenenesesenersseseneresesensnssesenerssesenerssesenenssesensnssesenenssssensnsseseneeey 13
Cash Payment/Pay ment in Lieu... ccceccsessesesseceesssssneseececenssesssseceressassneneneecenssssesseceeasasaneneneececessnessneeeessasaseneneneesess 14

SCENARIO ANALYSIS ........cccccccssccsssessesscentcensssecccssccssseneseasscscessseseseaeseseasseasseasseauseatseesenesentsensseaseeas 15
Development Programs ........csceseseesescecessseseseecesesssssesnenescersnsnessecesessssassneneececesesesessecessnsneseeseneecenesenessecesessasasenenesceseneney 15
Comparative SCOMariOS....ccccsesesescseseesenescersnssessececesssssssnenescesenssessseecessnsassneseneecersssseseeceeeasasaeneneecesesenessneeessasanensneneesess 16

Current Market/Baseline Scenario 16
Target Return Scenario 16
Inclusionary Policy SCENARIO 16
Inclusionary/Bonus Density Scenario 16
Interpreting ReSults .......cccessssceereseseeseescesssssessececesssssssensecesesssessssecessssassneseneecesssesesseseessasaenensecesessneseseesessasanensneneeess 17
Analysis Limitations ........ccccsesceercssseesenescensssessececenssssssneneececenssessssecesenssssneseneecerssssesseseeeasasanenenseceseseneseseeeeasasanensneneeess 17

10-UNIT SINGLE FAMILY OWNERSHIP DEVELOPMENT. .............sssssscsssssseesseeseesseeeseeeseeeseeeees 18

25-UNIT MULTIFAMILY (STICK) RENTAL DEVELOPMENT ............c:sscsscsscssessessesssestesseeoeeaees 18

25-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT ............:ccsccscsssssessesssssseseeeeesees 22

50-UNIT TOWNHOUSE OWNERSHIP DEVELOPMENT ............:sscsssssscsseesseeseeseeeseeeseeseeeseeeeees 22

125-UNIT MULTIFAMILY (STICK) RENTAL DEVELOPMENT. ..............c:csscsscsssssessesssesseseeeeeaees 25

125-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT. .........cc.ssssssssecseeeseseetsseeseeeeees 25