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| Information |
| TITLE: |
| Consideration and Adoption of Resolution No. 2023-13: A resolution authorizing the City of Flagstaff to loan one-hundred thousand dollars ($100,000) to Foundation for Senior Living, or its successor, as gap financing for a Low-Income Housing Tax Credit application under the Arizona Department of Housing's 2022-2023 Qualified Allocation Plan |
| STAFF RECOMMENDED ACTION: |
1) Read Resolution No. 2023-13 by title only
2) City Clerk reads Resolution No. 2023-13 by title only (if approved above)
3) Adopt Resolution No. 2023-13
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| Executive Summary: |
| Consideration of a standby loan request from Foundation for Senior Living (FSL) of one-hundred thousand dollars ($100,000) to be used as local gap financing for its 2023 Low-Income Housing Tax Credit (LIHTC) application for a 100% affordable multi-family development known as San Francisco Square Apartments, in the event that FSL does not receive gap financing from the Federal Home Loan Bank. |
| Financial Impact: |
This loan would be funded with American Rescue Plan Act (ARPA) revenue replacement dollars allocated for purposes of addressing the Emergency Housing. There are no bond funds being utilized for this loan.
Loan terms:
- $100,000 loan
- 30-year term
- 3% interest
- Annual interest-only payment on a cash flow basis
- Balloon payment of principal (and any deferred interest) at the end of 30 years
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| Policy Impact: |
| There is no policy impact. |
| Connection to PBB Priorities/Objectives, Carbon Neutrality Plan & Regional Plan: |
| Priority Based Budget Key Community Priorities and Objectives
Livable Community: Actively support attainable & affordable housing through City projects & opportunities with developers.
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.
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.
Policy LU.1.3. Promote reinvestment at the neighborhood scale to include infill of vacant parcels, redevelopment of underutilized properties, aesthetic improvements to public spaces, remodeling of existing buildings and streetscapes, maintaining selected appropriate open space, and programs for the benefit and improvement of the local residents.
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.3.4. Reuse former brownfields, vacant buildings, and commercial buildings to provide new mixed-use and/or housing options.
Policy NH.3.5. Encourage and incentivize affordable housing.
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| Has There Been Previous Council Decision on This: |
| While there is no previous decision on this loan request, City Council approved a site plan for the San Francisco Square Apartments on April 5, 2022. The 100% affordable project qualified for several modifications to development standards, per the Flagstaff Zoning Code, Section 10-30.20.040.B.4 (Affordable Housing Incentives). |
| Background/History: |
LIHTC Program Information: The LIHTC Program, based on Section 42 of the Internal Revenue Code, was enacted by Congress in 1986 to provide the private market with an incentive to invest in affordable rental housing. Federal housing tax credits are allocated to states who then award the credits to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, this reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property is required to offer lower, more affordable rents. Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their federal tax liability each year over a period of 10 years. Since the program’s creation during the Reagan administration, LIHTC has proven to be the most successful rental housing production program nationally.
Loan Request: FSL is applying for tax credits for the 2023 round. Applications are due to ADOH April 3, 2023. If awarded tax credits, FSL will be notified by the Department by June 2023.
Given the highly competitive nature of the LIHTC Program, the developer is attempting to secure the highest number of points possible; the higher the score, the more likely the award of tax credits. Specifically, FSL is pursuing points under the Local Gap Financing category, worth a total of 10 points. Per the 2022-2023 QAP, to receive points in this category a minimum of a $100,000 loan is required of communities located outside of Maricopa and Pima. FSL has requested this loan as a standby commitment. It is in the process of seeking gap financing from the Federal Home Loan Bank which, if finalized, the loan from the City of Flagstaff will not be necessary.
Project Information: San Francisco Square Apartments is a 70-unit development for seniors and is the first phase of a larger 146-unit affordable multi-family project located on an entire city block in downtown Flagstaff at 320 N Humphreys Street. All of the units will serve residents with an Area Median Income (AMI) of 60% or less. The first phase will provide:
- 60 one-bedrooms
- 10 two-bedrooms
A subsequent phase includes a 76-unit multi-family development and parking garage.
Developer’s mission statement: “FSL is a registered 501(c)(3) organization whose mission is to provide home and community-based services and develop energy-efficient, affordable housing to promote health, independence and dignity for all.” |
| Key Considerations: |
- The LIHTC Program is a highly competitive application process based on a point system detailed in the Qualified Allocation Plan.
- This loan is being requested as a standby to funding from the Federal Home Loan Bank. If that funding is secured, there will be no need to issue this loan.
- This loan is also contingent upon FSL receiving a LIHTC award from ADOH in the 2023 round.
- Staff from ADOH confirmed that FSL is the only LIHTC developer they are aware of pursuing tax credits in Flagstaff in 2023.
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| Community Benefits and Considerations: |
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.
Once all phases are built, this development would add 146 new affordable units to the community, bringing the city closer to its stated goal of creating or preserving 7,976 housing units by 2031, with a minimum of 10% of them being affordable. |
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