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Analysis of Townhome Development and Evaluation of Subsidy Request
Client: Wheat Ridge, Colorado
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The City of Wheat Ridge Urban Renewal Authority, Renewal Wheat Ridge, engaged Gruen Gruen + Associates ("GG+A") to complete an analysis of a 1.4-acre infill townhome development and a property tax rebate request associated with the proposed development.  The development had been proposed within the City's 38th Avenue Urban Renewal Area. 

To complete the analysis of the proposed development and property tax rebate request, GG+A performed the following tasks:

  1. Reviewed a proforma established by the land owner;
  2. Met with and interviewed the land owner and a representative of the proposed townhome builder;
  3. Interviewed multiple residential real estate brokers familiar with the site location and market area;
  4. Obtained and reviewed comparable townhome unit sale data from the Jefferson County and Denver County Assessor's offices; and
  5. Developed a financial model to simulate the economics of the proposed for-sale housing development.

GG+A prepared a real estate economic analysis of the proposed townhome development program in order to: (a) estimate the land value supported by the project; (b) determine whether a feasibility gap existed; and (c) identify the amount of public funding necessary to bridge feasibility gap, if one existed.  Given development cost, investment, and sale revenue parameters applicable to the proposed 26-unit townhome project, the results of the analysis indicated a gap of approximately $200,000 existed between the residual land value supported by the development and the land reservation price of the property owner.  To evaluate how the gap could be bridged over time (rather than through upfront public subsidy), GG+A prepared a projection of property tax increment revenue likely to accrue to Renewal Wheat Ridge as the result of development of the project.  The share of increment revenue needed to be rebated to the land owner/developer, in order to provide a present value dollar amount consistent with the size of the feasibility gap, was identified. 

GG+A prepared a report summarizing the results of the research and analysis, key findings and conclusions drawn from it, and resulting policy considerations and recommendations.  A GG+A representative also attended a Renewal Wheat Ridge Board Meeting to review and discuss the implications of the analysis.  Based on GG+A's analysis and recommendations, Renewal Wheat Ridge put forth a property tax increment sharing agreement and the City of Wheat Ridge City Council subsequently approved the development and the tax increment sharing agreement. 

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