ELM CITY COMMUNITIES Housing Authority of New Haven

1. ELM CITY COMMUNITIES Housing Authority of New Haven “Making A Difference” Organizational and financing structure for elm city communities rental assistance demonstration (RAD) portfolio Prepared by jimmy miller Censere consulting, llc

2. ELM CITY COMMUNITIES Vision We envision a New Haven where every resident has a safe and decent home that they can afford and opportunities to fulfill their goals Mission To make a positive difference in the lives of residents of the City of New Haven through the development and operation of affordable communities of choice and by providing opportunities for greater self-sufficiency “Making A Difference”

3. Elm City Communities (ECC) establishes 3 non-profit instrumentalities to enable it to apply for a separate State of Connecticut Housing Finance Authority (CHFA) Housing Tax Credit Contribution (HTCC) funding for each project group. CHFA restricts the amount of HTTC funding to $500,000 for each non-profit entity per year. • Each of the 3 non-profit instrumentalities will establish several single purpose taxable entities (LLCs). • ECC sells improvements (ground lease) to the appropriate ownership entity for market price based on market rents to facilitate getting the 4% LIHTC acquisition credits. • The improvements revert back to the ECC or the non-profit instrumentalities at the end of the regulatory period. RAD Organizational structure

4. RAD Organizational structure

5. RAD projects have been placed into 3 groups based on housing type, population served, etc. • It is anticipated that each group will be financed using a common financing plan, which is another reason for ECC to establish 3 new instrumentalities. RAD Organizational structure

6. Related Party Issues Under the Internal Revenue Code • ECC cannot have 50% or more ownership or economic interest in both the buyer and the seller. • ECC owns 100% of seller. • The tax credit investor will own 99.99% of the buyer (i.e., LLC) • Cash flow would ordinarily go 90% to GP, 10% to LP • You can not do this because of related party issues. • ECC gets economic gains through the seller’s note. Related party issues

7. Multi Family Properties are generally valued using an income approach • Net Operating Income / CAP Rate = Value • Where you have zero or negative NOI there is no value • For Acquisition Credit purposes the property needs to be valued • Without income restrictions • Utilizing market expenses • Taking into account the property’s current condition • We want the valuation as high as possible for acquisition credits VALUATION OF EXISTING IMPROVEMENTS

8. Total Development Cost is estimated at $95.4M, which includes $15.9M that will be deposited into the Initial Deposit to the Replacement Reserve (IDRR) at final closing. • Approximately $13M of the TDC is for Energy Conservation Measures (ECMs) that are designed to reduce consumption. • ECC is looking for ways to integrate the financing of the ECMs with the financing of other capital improvements. • Several options are being explored to accomplish this objective. Financing options

9. 4% Low Income Tax Credits • Given that ECC anticipates applying for 4% LIHTCs for acquisition and rehabilitation through its instrumentalities, any financing scheme has to meet the 50% tax exempt bond financing test: • At least 50% of the project’s aggregate basis (basically land plus depreciable assets) must be financed by volume cap tax exempt bonds plus interest earned on the bonds for the entire eligible basis of the project to be exempt from the state housing agency’s competitive 9% tax credit allocation process (and, thereby be fully eligible to claim the 4% credits) Financing options

10. 4% Low Income Tax Credits • ECC will transfer ownership of each development via a ground lease to each project partnership to generate acquisition credits and funds for the project. • Equity From Acquisition Tax Credits can then be used to fund rehabilitation expenditures or make a payment under the Seller’s Note. Financing options

11. Energy Saving Performance Contract (EPC) • Ameresco, an ESCO, has completed its energy audit and submitted recommendations for ECMs and associated savings. Under an EPC, these savings can be used to finance improvements. • We are currently discussing the integration of energy performance funding into the RAD program. • We are currently discussing how to integrate Commercial Property Assessed Clean Energy (C-PACE) funding for ECMs into the ESCO model. Financing options

12. Commercial Property Assessed Clean Energy (C-PACE) • C-PACE allows building owners to finance qualifying energy efficiency and clean energy improvements through placing a voluntary assessment on their property tax bill. • Property owners pay for improvements over time through this additional charge on their property tax bill and the repayment obligation transfers automatically to the next owner if the property is sold. • C-PACE is an open program and any qualified entity can become a lender. • Additional guidelines state that the total debt to value cannot exceed 80%. Financing options