City Council Meeting - FINAL (AMENDED)

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Meeting Date: 11/07/2023  
Co-Submitter: Sarah Darr From: Jennifer Mikelson, Housing Planning Manager

Consideration and Adoption of Resolution No. 2023-51: A resolution adopting the Rental Incentive Bond Program, providing framework for the expenditure of $5,000,000 in general obligation bond funds for incentivizing the creation of affordable rental units.
  1. Read Resolution No. 2023-51 by title only
  2. City Clerk reads Resolution No. 2023-51 by title only (if approved above)
  3. Adopt Resolution No. 2023-51
Executive Summary:
Consideration of a Resolution adopting the Rental Incentive Bond Program (RIBP), a Program to incentivize the private sector to incorporate affordable rental housing into new developments. This Program will utilize general obligation bond funds totaling five million dollars ($5,000,000) resulting from the voters approving Proposition 442 in November 2022.
Financial Impact:
The RIBP will utilize general obligation bond funds, as approved by Flagstaff voters in the November 2022 election.
There is no financial impact to the city’s general fund.
Policy Impact:
This Program is being established to utilize general obligation bond funds approved by the voters in Proposition 442 for the purpose of incentivizing the private sector to incorporate affordable rental housing into new developments. The RIBP will not replace the existing Incentive Policy for Affordable Housing document (IPAH).
Connection to PBB Priorities/Objectives, Carbon Neutrality Plan & Regional Plan:
10-Year Housing Plan:
  • Create housing options for households at all income levels and family sizes occupied by local residents.
  • Create 1: Incentivize the creation of affordable units through various programs and mechanisms.
  • Protect people from housing discrimination and remove housing barriers.
  • Protect 2: Ensure affordable housing is a part of every Flagstaff neighborhood and work to address disparate impact as part of any development or redevelopment.
PBB Priority:
Livable Community: Actively support attainable & affordable housing through City projects & opportunities with developers. 
Carbon Neutrality Plan:
  • HA-1: Create housing options for households at all income levels and family sizes occupied by local residents.
  • HA-2: Connect people to equitable housing solutions.
  • HA-4: Protect people from housing discrimination and remove housing barriers.
Regional Plan:
  • Goal LU.9. Focus reinvestment, partnerships, regulations, and incentives on developing or redeveloping urban areas.
  • Goal NH.3. Make available a variety of housing types at different price points, to provide housing opportunity for all economic sectors.
  • Policy NH.3.1. Provide a variety of housing types throughout the City and region, including purchase and rental options, to expand the choices available to meet the financial and lifestyle needs of our diverse population.
  • Policy NH.3.3. Increase the availability of affordable housing for very low-income persons, through innovative and effective funding mechanisms.
  • Policy NH.3.5. Encourage and incentivize affordable housing.
Has There Been Previous Council Decision on This:

Yes, City Council placed Proposition 442 on the ballot for the November 2022 election with one of the funding items being “Incentivizing the Private Sector to Incorporate Affordable Rental Housing in New Developments.”

A Work session on the Rental Incentive Bond Program was held October 24, 2023

Housing Bond Background
Proposition 442 – authorizing the use $20 million dollars of general obligation bonds for “Creating Rental and Ownership Opportunities for Residents of Flagstaff” was approved by the voters in the November 2022 General Election. Proposition 442 identified four affordable housing spending categories, including incentivizing the private sector to incorporate affordable rental housing into new developments as one of the identified purposes. Provided below is language from both the ballot itself and the publicity pamphlet:
Ballot Language:
“To create rental and homeownership opportunities for residents of Flagstaff, shall the City of Flagstaff be authorized to issue and sell general obligation bonds in a principal amount up to $20,000,000 for the purpose of:
• redeveloping City owned housing to create additional affordable rental units;
• repurposing existing available buildings into rental units;
incentivizing the private sector to incorporate affordable rental housing into new developments; and
• expanding the homebuyer assistance program? “

From the City of Flagstaff Information Pamphlet, below is the language specific to the program under consideration: 
Incentivizing the Private Sector to Incorporate Affordable Rental Housing in New Developments (Approximately $5,000,000)
"Funding will be utilized to incentivize private developers, including non-profits, to incorporate affordable rental units in market rate developments. This investment is anticipated to create an estimated 400-500 new rental units affordable to the residents of Flagstaff, in addition to the market rate units in the new developments.
The proceeds of the bonds may be used for any and all costs relating to such projects, including the costs of designing, engineering, acquiring, administering, improving, constructing, reconstructing, and equipping such projects and any and all appurtenances or land related thereto.”
A working group of Housing Commission members and Housing staff developed the RIBP draft in summer 2023. The 13-member Housing Commission has membership reflective of specific professional categories. The working group membership was comprised of Commissioners representing the following professional categories: Realtor/Property Manager, Builder, Developer, Low-Income Housing Expert and Real Estate Professional.
The draft RIBP was reviewed by the Housing Commission at the September 28, 2023, meeting. After discussion and feedback, the Commission voted unanimously to forward the draft RIBP to City Council with a recommendation for approval, reflective of recommended changes and allowing for technical and conforming changes to be made by staff as needed. At the October 24, 2023, work session Council discussed the draft Program and provided feedback for the final draft.
Program Overview
The RIBP will provide loans to eligible developers of rental housing choosing to provide a minimum of 10% affordable units in new rental developments in Flagstaff serving households at or below 80% area median income ($65,450 for a household of 3). One of the critical elements of the Program is to leverage bond funding to the greatest extent possible to assist in the creation of the largest number of rental units, including affordable.

The RIBP calls for a competitive application process through a Notice of Funding Availability (NOFA). Every effort has been made to make the application and award process as simple and expeditious as possible for developers and staff, while maintaining the necessary safeguards surrounding expenditure of public money.
The five-page document outlining the RIBP contains the following sections:
  • Funding Background
  • Program Creation and Administration
  • Program Description
  • Program Eligibility (including eligible applicants)
  • Submittal Requirements
  • Ranking Committee and Award Process
  • Compliance
The attached RIBP document includes changes requested by Council at the October 24th work session including:
  • Clarifying language about the NOFA process being repeated if there are remaining or returned Program funds
  • Moved ‘acquisition’ from Eligible Uses of Program Funds to Ineligible Uses
  • Clarifying language about funds being made available after Council approval of contracts and recording of associated documents.
Additionally, after consulting with city staff, the timeframe requirement for an awardee to obtain building permits was extended by 6 months, from 18 to 24 months. Providing this additional time for a project to progress through the development process will increase developers’ opportunity for success in meeting Program requirements.
Key Considerations:
The overarching goal of this Program is to assist in the creation of 400 – 500 new affordable rental units. Progress toward this goal will be considered during the award process.

A NOFA process will ensure that bond funds are maximized and leveraged with other funding sources.

By staff’s estimate, there are currently more than ten unbuilt affordable rental developments in various stages of pre-development that could be eligible for these funds.
Community Benefits and Considerations:
City Council has declared a Housing Emergency and this funding will be used to assist in the creation of new affordable rental units in Flagstaff. As documented in the 10-Year Housing Plan, the need for increased affordable housing options remains high. Nearly half (47%) of Flagstaff residents are low-income, earning no more than $55,350 annually. In Flagstaff's current housing market, 65% of households that fall within or below the moderate-income level could benefit from some form of subsidy to achieve housing that is considered affordable.
Community Involvement:
Proposition 442 was placed on the November 2022 ballot via a public process and was approved by voters.  Additionally, the RIBP was created and recommended by the City of Flagstaff Housing Commission for approval by City Council.
Res. 2023-51
Redline of Draft RIBP
Clean RIBP


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