Council reviews term sheet for 452-unit Parkway Neighborhood Apartments; staff recommends up to nine years of pay-as-you-go abatement

City staff presented a proposed term sheet for a proposed three-phase, 452-unit development (Parkway Neighborhood Apartments) and the council discussed a negotiated financing package that would combine fee waivers and a pay-as-you-go (PAYGO) tax abatement to make the project minimally feasible for private investors.

Staff said a detailed pro-forma and market study (Maxfield Research) support the project’s rents and financial assumptions. Because the developer must finance on-market rates, staff recommended a PAYGO payment stream that would total about $1.9 million in present value over nine years (this assumes the city’s portion only; county and school levies are not part of Dayton’s abatement decision). The proposed structure would direct 75% of the increased city property tax attributable to the project to the abatement note and retain 25% for the city’s general levy to cover operating impacts. Staff said the proposed assistance is intended to raise the project’s yield-on-cost metric from below-developer thresholds to roughly a 6% range and that a nine-year term, combined with partial fee waivers already discussed with the developer, achieves that threshold.

The term sheet presented for council feedback included: (a) developer obligations to construct the three phases and the related infrastructure and to cover city costs for legal/financial review; (b) a PAYGO note tied to the city’s incremental tax receipts for up to nine years at an illustrative 6.25% note rate; and (c) a “look-back” provision that allows the city and developer to recalculate assistance after stabilization, reducing future payments if the completed project produces higher-than-projected returns.

Councilors asked several questions about alternatives. Some asked whether the city could build part of the required roadway (reducing developer costs) instead of providing tax abatement; staff said the city could do so but would assume more direct financial risk (a “road to nowhere” risk if the project did not proceed). Councilmembers also asked about timing: staff expects the council to consider a public hearing and abatement resolution in March 2025, with detailed agreements brought forward before final abatement approval. No final abatement resolution was adopted at the meeting; staff will return with a draft agreement and more details, and council set a target for a public hearing on March 25 (or March 20 meeting referenced in staff report) to consider the abatement agreement and related approvals.