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Key Financial Strategy Memo - Navigating the New Normal N CITY OF MEMORANDUM CHANHASSEN TO: Todd Gerhardt, City Manager 7700 Market Boulevard FROM: Kate Aanenson, Community Development Director PO Box 147 Chanhassen, MN 55317 DATE: February 19, 2013 - ry , • � Administration SUBJ: Key Financial Strategy Phone: 952.227.1100 Navigating the New Normal Fax: 952.227.1110 Building Inspections This memorandum is a follow -up to our meeting with Gordon Hughes, the facilitator Phone: 952.227.1180 for "Navigating the New Normal" and to get it on the calendar for the Council and Fax: 952.227.1190 Planning Commission. Engineering The workshop is scheduled for Tuesday, April 2 from 5:30 -8:00 p.m. in the Fountain Phone: 952.227.1160 Conference Room. The workshop will be divided into a four parts: Fax: 952.227.1170 • Cathy Bennett with ULI Minnesota will give an overview of national and state Finance trends. Phone: 952.227.1140 • A Profile of Chanhassen will be presented. Fax: 952.227.1110 • Discussion with real estate and P development professionals: p Park & Recreation o Office/Industrial Market Phone: 952.227.1120 o Housing Market Fax: 952.227.1110 o Planning Sector o Financial Sector Recreation Center • Interactive discussion with industry leaders and policy makers. 2310 Coulter Boulevard Phone: 952.227.1400 The intended audience is the City Council, including their role as the HRA, and the Fax: 952.227.1404 Planning Commission. Mr. Hughes will provide a summary of the workshop a few weeks after the meeting. Planning & Natural Resources Phone: 952.227.1130 Fax: 952.227.1110 Public Works 7901 Park Place Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone: 952.227.1125 Fax: 952.227.1110 Web Site www.ci.chanhassen.mn.us g: \plan \ka \navigating the new normal \memo to todd 2- 19- 13.doc Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow lin Urban Land ULI Institute Minnesota 1 1 • 1. IL ‘) , :, ,''' i I ''' -'''' : x i . . 0 . 1 t' _ Nav the N ew N ormal Navigating tthe New Normal A ULI Minnesota public official education workshop What A two -hour interactive workshop for city officials that provides a practical approach to the new challenges of (re)development. Three -part forriiat 1. Overview of the New Normal. 2. Profile of community change information. 3. Discussion and dialogue among real estate industry leaders and city policy makers. Audience City councils, planning commissions, economic development and housing committees, and staff. Uutcome Develop a better understanding of: • The impact of the New Normal on your city, demographic trends, and market preferences. • The connection between your city's demographics, new market preferences, and future growth patterns. • The importance of partnerships between cities and developers. • Strategies to position your community to be competitive and sustainable, and to attract the best quality development. "The data, but especially the perspectives of the panel, were very helpful and stimulated a great deal of discussion. Please let them know how worthwhile this was for us as a city. We would be more than happy to recommend this program to other mayors /managers." — Nancy Tyra - Lukens Mayor, City of Eden Prairie #1 Best Place to Live in America, Money Magazine I. - ; r 4 7 ., ,, 'T` « �t x r 4r 4 .t ,� a` fi 4 Y � c ' �1 . � al .: , a iFii As, i New Neighbors New Preferences New Responses Changing demographics and new market preferences are creating demand for different housing choices. Projected Minnesota Population 1,399,960 Our region is rapidly getting older. The number of Minnesotans 65 or older Ages 65+ 1,299,460 1,133,920 will nearly double in the next 20 years, At the same time, generation Y, with 947,520 792,590 41141,10 , 80 million Americans, accounts for a greater percentage of the population 623,241 677,270 than the generation that preceded it (generation X, born between 1965 and III MP 1979, with 46 million Americans). Three - quarters of Minneapolis /St. Paul 2005 2010 2015 2020 2025 2030 2035 households are projected to be without children by 2035, and the number of new immigrants has grown an average of 12% since 2000 in Minnesota. These changing demographics bring new market preferences — amenity -rich "These things usually creep along at the speed of a glacier. Not so with aging. In demographic terms, this is a tsunami. walkable neighborhoods, rental housing, multi - generational homes, work/live It doesn't get much bigger than this ... " spaces — creating a mismatch between housing inventory and market demand, kivineLita Side LIrnoTaphe and a need for different services and amenities. To be competitive, we must . offer choices that reflect these shifts in a time of increasing financial constraints. It's about priorities. It's all part of the New Normal. 2003 Housing Supply versus I 2025 Housing Demand I. 2003 Supply 0 2025 Demand ; 60 MN Net new units ' 50 0 gm .- needed o 40 ' -- Lt' 30 20 0 § 0° o 10 ©- , uw Ln F N CO r ► ,�f w ,.r;` 0 r r ' 6 Y y _ j - 10 Attached Small Lot Large Lot "�` (< 1/6 ac) (> 1/6 ac) thousands .r ' - nrlIc e A C Nelson. "Leadership in a New Lra. " Jo Journal of the Ain", rir;fa l = iai t, ; ;nr.iai;r)1 . :7 - vol. i2, 1.•sw 4 2006'. f)1 ,'t,) : n NI \ \1/4 r . _ , _ \ ,1 , l„ , 2/3 say that living in a walkable community is important t \ _ .4 41_, _ , • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • _ ` _ 1 /3 will pay p a y more to walk to shops, work, and entertainment Geri Y Born between 1980 and 1996 d . ,/ M I . Make up 30% of our population "If ille ' 80 million Americans , t Viii Influence as much as half of all :!:+1 spending in the U.S. economy �' "As a developer, it is great to have an opportunity to interact with city officials in such an open way. The reality is that we are more often negotiating from opposite sides of the table. In this environment, we are getting to know each other and developing a deeper sense of what is possible. 1 believe that this is an important investment on both sides." — John Breitinger, Vice President — Retail Advisory Services, Cushman & Wakefield - Northmarq New responses are needed. The way development is financed has changed, making it harder to complete quality projects. An increase in equity requirements has resulted in fewer vvhat s the Norrnal . developers who have the financial ability and risk appetite to deliver quality development. Local governments that embrace a collaborative approach to _ . P problem solving with developers will be more competitive and successful The term New Normal has been used to describe major in implementing their vision for a prosperous community. changes to our economy. It has been shaped by a confluence What are the key policies and practices that cities can embrace in times of scarce public resources to attract private investment, create of powerful forces — some arising directly from the financial jobs, and build the tax base? An approach that provides clarity, transparency, crisis and some that were at work long before it began. and efficiency in the development process helps attract investments that - sustainable communities. Working together to solve Th ew Nor . ! has been characterized as a time of create thriving, g g identify and pursue new partnerships, and manage development problems, d fy s p p p, g p slower economic rowth, higher energy costs, a slumping g g 9Y p g risks will improve key decision - making skills, with the reward of being housing market, an aging and more diverse population, and a competitive community. Navigating the New Normal provides a forum to foster meaningful dialogue between public and private sector changing market preferen . New Normals are not a new leaders and builds trust and collaboration for common goals. 1 phenomenon. This confluence of forces has a strong impact n the development and redevelopment of our communities lip and perhaps the American dream. i *; ., . ,. ,,.: e- , 70 „ 00:41 ,,, LL .� Want higher connectivity & more walkable areas _ . 6) ' * ' 4 ••• ••••••••••••••••••••••••••••••• iLL 0 ` ' '' Seek active lifestyles, more interaction ' . - I Noomer IL/ t illitt -4 Born between 1946 and 1964 75 million Americans .. ..,,,mmmmlmIIm (R e )D eve l opmen t_R ea d y G L ocal and P • Cities can implement ( re)development policies and practices that support St rategy. . quality, competitive, and sustainable communities. • ULI MN provides technical assistance to local government through the Opportunity City and Navigating the New Normal programs. Establish a vision and clearly articulate development expectations creating (re)development -ready sites. Foster collaborative and integrated strategies. Provide transparency that clearly defines the development process. Work as a team to coordinate the approval process across all agencies, departments, elected offices, and investment partners, e.g., planning, engineering, parks, metropolitan council, county, state, watershed districts, schools, and private sector. Provide existing due diligence information to developers up -front to increase efficiency and reduce development time and cost. Shift project review and approvals from reactive to proactive; fast track approvals when the project meets certain requirements; be flexible to achieve project goals. Analyze and modify land use regulations to allow for a _ I � I compact mix of uses with increased flexibility that reflects changing market demands. Alk (,, — - ef t . , r . ,. f j , . I scoverles pip ' 1: ,. ,.. ,,, , Cities will be more competitive when: Land uses are integrated. Walkability and accessibility to community assets are enhanced. (Re)development tools are refocused to support future growth. Diverse housing choices are offered to accommodate changing demographics. Public engagement is an effective component of the ( re)development process. Trust and partnerships between the public and private sectors are strengthened. About the Urban Land Institute ULI Priorities ULI Minnesota actively The mission of ULI is to provide leadership in the responsible use of land and in engages public and creating and sustaining thriving communities worldwide. private sector leaders Creating Resilient Communities • What are the best new business models in the real estate and land use industry, and how can we support to foster collaboration, their development? share knowledge, and • How can we best adapt and reuse existing real estate while eliminating obsolete space to create thriving communities? join in meaningful, • How can we influence land use leaders locally and around the world as they reshape the process of community building and developing both social and physical infrastructure? strategic action to create thriving, Understanding Demand and Market Forces • How can we best understand the demand (quantity, type. price, and location of the need) for real estate and sustainable discover what the market wants short-term versus what it needs long-term? • How can we help balance local, regional, national, and global interests, as well as public and private interests. communities. in terms of how they affect land use decisions and development? • How will changing technology influence building and buildings. and how will people's use of technology influence how they interact with the physical environment? Connecting Capital and the Built Environrnent through Value • How can we best generate value in the built environment that is greater than its cost? • What are the best ways to ensure the attractiveness of real estate as an investment as institutional capital CONTACT US allocators continue to change and become more global? ULI Minnesota • What is the most effective way to demonstrate and explain the relationship between investment in both public 81 S. 9th Street, Suite 310 projects (including infrastructure) and amenities and the impact on real estate value? Minneapolis, MN 55402 612.338.1332 Promoting Intelligent Densification and Urbanization minnesota.uli.org • What are the most responsible ways to provide cost-effective housing for a rapidly increasing global uli.org population that is becoming increasingly urbanized? Caren Dewar • How can we advance the understanding of the relationship between a high quality of life and the built Executive Director environment in order to promote creation of high-quality, appropriately priced density that is attractive to users? caren.dewar@uli.org • What is the relationship between a thriving economy and a thriving city — between a dynamic society and the Cathy Bennett built environment? Housing Initiative cathycbennett@frontiernetnet Integrating Energy, Resources, and Uses Sustainably Katherine Anderson • How can we best reduce the negative impact of the built environment on our natural resources and climate? Associate • What are the best ways to use the world's energy resources and protect the built environment from volatile and katherine.anderson@uli.org unpredictable conditions? • How will trends in energy and resources affect the future best use of land? Urban Land Thanks to generous financial support from the ULI 75th Anniversary ULI Institute Urban Innovation Fund Grant Program, Family Housing Fund, Minnesota Housing, and the Metropolitan Council. Minnesota