Scott Street housing project to move forward with deep MRA subsidies

Martin Kidston

(Missoula Current) After years of planning, moving earth and laying infrastructure are likely to be begin next month as plans for a housing and retail project off Scott Street move forward.

The Missoula Redevelopment Agency on Friday approved bonding up to $5.7 million to cover infrastructure costs and $3.2 million to cover the construction gap in developing 45 income-restricted housing units.

The Missoula City Council must approve the two bonds.

“This is definitely a project in the making – over 20 years of affordable housing,” Mayor Andrea Davis said. “The private sector would never take this level of risk on its own. I appreciate what MRA has done to get the project to this extent. It’s clearly going to be something that will be a model.”

The $5.7 million directed toward infrastructure includes $2.5 million to extend Charlo, Shakespeare and Palmer streets into the development, and to make improvements along Scott Street as it fronts the property.

The costs also cover utilities, soil testing and earthwork for public infrastructure.

“That will be the first piece of work, likely beginning as early as January, to occur,” said assistance MRA director Annie Gorski.

The city purchased 19 acres off Scott Street in 2020 for $6.6 million. Roughly half the property, which formerly served as White Pine Sash, was cleaned to residential standards and will soon accommodate a blend of workforce and market-rate housing.

However, a portion of the $5.7 million in infrastructure costs is earmarked for additional soil removal.

“You’re in a second or third generation construction site. You don’t know what you’re going to find when you start digging,” said MRA Director Ellen Buchanan. “We were encouraged to put pretty deep contingencies on this so we don’t have to keep coming back to the board. Also, it’s a delay in the process. You literally have to stop work to wait for funding.”

MRA equated the project’s challenges to the Old Sawmill, which formerly served as a lumber mill until the city remediated the property. It now holds hundreds of millions of dollars in new development, including housing and commercial properties.

A new program approved by the Legislature could help the city in it’s share of the Scott Street project. The Montana Board of Investments can help buy down the interest rate on debt associated with housing development, MRA said.

“They would participate in the bond for the infrastructure. They would purchase 50% of the bond to bring down the interest rate on half of the bond, saving us significant dollars in terms of interest rate costs,” said Gorski.

Housing

As part of its agreement with Ravara LLC, the city expects a blend of income-restricted housing units on three acres set aside as a community land trust. Portions of that project are still being worked out, but MRA said the townhomes will include a blend of three- and four-bedroom units while the condominiums will provide studio- one- and two-bedroom units.

Gorski said the project will include 46 income-restricted units in all. The cost to deliver those at the price the city has set has resulted in a $3.2 million construction gap, which MRA will cover if City Council approves issuing the bond.

“We’re talking about workforce housing and vertical construction in projects that used to pencil and now they don’t and they need a gap filler,” said Gorski.

The project will include two income-restricted townhomes and 44 condos attainable to households earning 105% of the area median income on average – a figure expected to widen the pool of potential buyers.

Applying tax increment to develop workforce housing was another change adopted by the Legislature. It added such housing to the definition of infrastructure, and MRA is looking to take advantage of the tool.

But members of MRA’s Board of Commissioners still see the project having some level of risk given the size of the city’s investment and when financing can be used. MRA on Friday permitted the $3.2 million in gap funding to be used up front to help free up other funding.

“It’s ambitious and impactful and creates more risk than we’ve encountered,” said board member Tasha Jones. “But we’ve taken bold steps in this community to be leaders, and this feels like one of those moments to me. I think we should accept it with optimism and hope.”

Aside from housing, the project could also deliver around 32,000 square feet of retail space including a grocery store, food and drink, and a day care. It’s expected to generate 50 permanent jobs and the workforce housing element will generate around $400,000 a year in new taxes.

Gorski added that the city’s investment will further leverage $32 million in public and private sources while the market-rate piece of the project carries a value of around $90 million in private funding.