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Gilbert A. Rosenthal C. Alyn Pruett Alex Morris Olusegun Obasanjo , Finance

Charlottesville Redevelopment and Housing Authority Master Plan - Community Visioning Phase July 29, 2009. Gilbert A. Rosenthal C. Alyn Pruett Alex Morris Olusegun Obasanjo , Finance David Gilmore, CSS/Operations Meg Sowell, Market Analalysis. Introduction:.

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Gilbert A. Rosenthal C. Alyn Pruett Alex Morris Olusegun Obasanjo , Finance

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  1. Charlottesville Redevelopment and Housing AuthorityMaster Plan - Community Visioning PhaseJuly 29, 2009 Gilbert A. Rosenthal C. Alyn Pruett Alex Morris OlusegunObasanjo, Finance David Gilmore, CSS/Operations Meg Sowell, Market Analalysis

  2. Introduction: • What is the problem we are trying to solve? • Long Term Sustainable (fundable) Models for Redeveloping CRHA’s 11 housing sites • With Expansion of Affordable Housing Opportunities in Charlottesville (if possible) • With Creation of Mixed Income Communities (if possible) • What forces are at work?

  3. Aligning Agendas: CURRENT RESIDENTS CITY PARKING RECREATION NEIGHBORS PHAR STORMWATER CRHA LEGAL AID MARKET ANALYSIS WAITING LIST Development FINANCE Operations FUNDING SOURCES FUTURE RESIDENTS DEVELOPER PARTNERS

  4. Schedule: (Where are we?) We Are Here Phase I: Inventory and Analysis Phase II: Community Visioning Phase III: Alternative Scenarios Phase IV: Final Plan Preparation

  5. Youth Meeting Westhaven Resident Meeting Introduction to Planning and Design

  6. Approaches: 1 Madison Ave. • No Change/ Modest Change • Continue ops / Repairs as needed • Add front porches, new kitchens, ac • Access HUD Capital Funds; Bonds and 4% credits; • Timeframe – as money is available • Benefits • Maintain control • Minimal relocation • Maintain 376 ACC units Elsom • Drawbacks • Minimal impact long term • No mixed income, no expansion Crescent Halls

  7. Approaches: 2 Combine Infill with Rehab • Benefits • Easier relocation • Increases stock Levy • Drawbacks • “Mis-Match” between new and rehabbed • Too few units for LIHTC transaction costs? • Hard to accommodate market-rate units. South 1st Street Madison Ave. Riverside Michie

  8. Infill at Riverside – 4 Units Infill at Michie Drive – 8 Units Infill at Sixth Street – 12 Units Infill at South 1st Street – 32 Units

  9. Approaches: 3 Concentration (with Infill) and Deaccession Sell off one or more sites to raise funds Build infill replacement units on other sites • Benefits • Maximizes value of land to fund construction Infill at South 1st Street – 32 Units • Drawbacks • Deaccession politically difficult for larger sites Infill at Michie Drive – 8 Units New Construction at Levy – 50 Units Infill at Riverside – 4 Units Infill at Madison Avenue – 4 Units Infill at Sixth Street – 12 Units

  10. Approaches: 4, 5, 6 (low, med, high density) Partner to Replace with New Affordable Housing Use land and access to federal funding to leverage LIHTC and other funds Westhaven – 160 Units • Benefits • Mixed Income Potential (add 30-60% AMI) • Increased Affordable Housing Potential • Complete Redevelopment • Neighborhood Transformation South 1st Street – 116 Units Sixth Street – 67 Units • Drawbacks • Requires partnering with developer • Multiple phases over many years

  11. Approach: 7 Mixed Income Approach Mix market rate and affordable housing May Allocate ACC’s to private developments • Benefits • Mixed income at broader range • “Public Housing” stigma may be removed Westhaven – 160 - 220 Units • Drawbacks • May dilute resident power base? • Requires partnering (no experience) • Highest density in order to achieve mix • while retaining all ACC units South 1st Street – 116 – 130 Units

  12. Approach: 8 • Mix and Match Approaches 1 - 7 • Uses the most appropriate approaches for each project site • Combines them to create a multi-year rehab, infill and redevelopment plan • Can create multiple scenarios and development sequences • Can be tailored to a plan to minimize permanent relocation Approaches Modest Change Rehab Infill Sell Redevelop Mixed Income ?? Westhaven South 1st Sixth Street Michie Dr. Madison Riverside Crescent Halls Scattered Sites Levy ?? ?? ?? ?? ?? ?? ?? ??

  13. Example: Westhaven Westhaven Redevelopment Approach – 160 Units, connect site to 10th Street Westhaven Redevelopment Approach – 160 Units, connect site to 10th St. & West Main Westhaven Redevelopment Approach – 220 Units, connect site to 10th St. & West Main and Add Seniors (202)

  14. Example: South 1st Street South 1st St. Redevelopment Approach – 116 Units, Redevelop Entire Site South 1st St. Redevelopment Approach – 32 Units, Infill on Ballfield and Across Street

  15. Sixth Street Sixth Street Approach – Infill with 12 Units Sixth Street Approach – Redevelop with 67 Units

  16. Michie Michie Drive Approach – Infill with 8 Units

  17. Example: Madison and Riverside Riverside Approach – Infill with 4 Units Madison Approach – Infill with 4 Units

  18. Financial Glossary of Terms • Sources of Funds - funding available for the project • Uses of Funds - what you are spending the sources on • Total Development Cost (TDC) – total costs of the project • Public Housing Mixed Finance Development – development of housing with a mix of public housing funds and other affordable housing financial resources • Mixed Income Development – development of housing for a range incomes • HOPE VI – Housing Opportunities for People Everywhere – federal grant program that provides funding for redeveloping public housing sites, including housing, infrastructure and social services • LIHTC – Low income housing tax credits – tax credits sold to encourage investment in affordable housing • Tax-Exempt Housing Revenue Bonds – bonds with below-market interest rates used to finance affordable and mixed income housing • VHDA – Virginia Housing Development Authority – allocates LIHTC, tax-exempt bonds and other funds • Community Development Block Grant - federal funds allocated to states and municipalities to use for housing rehabilitation, community facilities and infrastructure for low and moderate income individuals • HOME Funds - Federal funds allocated to states and municipalities to use to build, buy, and/or rehabilitate affordable housing for rent or homeownership or provide direct rental assistance to low-income people. • Conventional Debt – construction and permanent loans from banks or similar financial institutions • FHLB – Federal Home Loan Banks – provides grant and loan funds for affordable housing

  19. Funding Programs: Public Housing Mixed Finance Development • Layered financing-to redevelop public housing, including LIHTCs, tax-exempt bonds, City and State funding • Public Housing Funds -Typically includes PHA Capital Funds, Replacement Housing Funds or HOPE VI • HOPE VI– for severely distressed public housing emphasized leveraging federal funds • Employs New Urbanist design principles • Emphasizes social services, mixed income housing and homeownership • Program slated to end in 2009 (one more funding application round, due November 17, 2009) • Choice Neighborhood Initiative - new federal program replacing HOPE VI begins 2010 • $250-million available • not focused solely on public housing revitalization • open to other government agencies, and non-profits and for-profit developers • Mixed Income – Can be a mix of PH units, LIHTC units and Market Rate units • Mixed Tenure – Can be a mix of rental and for-sale units (including affordable for-sale)

  20. Funding Programs: • LIHTC (Low Income Housing Tax Credits) • Affordability - At least 20% of the units must be affordable to households earning 50% of AMI ($36,400 for a family of four in Charlottesville) or at least 40% must be affordable to households earning up to 60% of AMI ($43,680). • Allocation - Awarded by the federal government to each state, which allocate them to projects based on qualified project costs. • VHDA has public housing set aside for projects competing for a maximum $750,000 annual allocation. • Types - There are two categories of LIHTCs: • The 9% credit: new construction or rehabilitation projects. Awarded on a competitive basis. • 4% credits: As-of-Right Credits/Non-Competitive for tax-exempt bond projects, and competitive credits for acquisitions of existing buildings. • Compliance - Projects must remain in compliance 15 years or IRS penalties. • Investors and Pricing - Current prices are $0.60 to $0.65 per $1.00 of LIHTC.

  21. Funding Programs: • Housing Revenue Bonds • Issuers, Purchasers and Term • Interest Payments and Credit Enhancement/Mortgage Insurance • Taxable or Tax-Exempt - Tax-exempt bonds carry a lower interest rate as the interest earned on the bonds is exempt from federal, state and local taxes. • Private Activity Bonds -Tax-exempt revenue bonds issued to finance projects owned by for-profit entities are “Private Activity Bonds.” • State Allocation. To issue private activity bonds for a project, a state must first grant that project an allocation of its private activity volume cap (“volume cap”). Awarded on competitive basis. • Use with LIHTC. Private Activity Bonds can be used with 4% LIHTCs (provide access to “as-of-right” LIHTCs). Cannot be used with 9% LIHTC. • Income restrictions mirror LIHTC requirements.

  22. Funding Programs: (Bonds Continued) • Governmental Purpose Bonds- Tax-exempt bonds issued by government agencies to fund publicly-owned projects. • Capital Funds Financing - Debt service to be paid from Capital Funds the PHAs receive on an annual basis from HUD. PHAs can pledge up to 1/3 of annual Capital Funds to debt service on the CFFP financing. • Fannie Mae has a program to provide tax-exempt capital funds financing to small PHAs. • Build America Bonds –PHAs and HFAs can issue taxable bonds for affordable housing. Does not need state allocation, but rate is similar to tax-exempt rates. Stimulus funding - must be issued in 2009 or 2010. • Projects must be owned by a governmental entity (not tax credit partnerships) – such as of traditional public housing or community center.

  23. Funding Programs: • Community Development Block Grant (CDBG) - Federal funds for housing rehabilitation, community facilities and infrastructure to benefit low and moderate income individuals (up to 80% AMI). • Section 108 - States and municipalities transform a small portion of their CDBG funds into larger federally guaranteed Section 108 loans for housing rehabilitation, community facilities and infrastructure.. • HOME funds - Federal funds for building, buying, and/or rehabilitating affordable housing for rent or homeownership or provide direct rental assistance to low-income people. 90% must be for households at no more than 60% AMI and maximum income overall 90% AMI. If more than 5 units 20% must be for 50% AMI. • FHLB Funds - The Affordable Housing Program (AHP) funds through member banks for rental acquisition and construction, and can provide loans to first time home buyers. • VHDA SPARC Loans - Below market loans for affordable housing preservation and development and assistance for affordable homeownership.

  24. Financing Issues: • Demolition, environmental remediation, relocation and new infrastructure associated with revitalizing a public housing site adds costs typically not carried by a suburban development or in-fill development on a vacant site. • 9% LIHTC are extremely competitive. VHDA set-aside for public housing will be very helpful in securing tax credits, but limits on size of awards may mean ideal size of phases are 40-50 units unless significant additional funding secured. Projections are based on LIHTC price of $0.60, but price increases in next few years are possible (although unlikely to get to high $0.90s peak in 2007-2008. • ACC units cannot carry debt, and tax credit equity raised by ACC units covers a little over 50% of the costs to develop those units.

  25. Financing Issues: Additional Funding Sources • Choice Neighborhood Initiative - New federal program replacing HOPE VI, begins in 2010 -- $250-million available per year • Affordable Housing Trust Fund – Obama administration’s proposed budget included a new $1 billion affordable housing trust fund. • Capital Funds Financing - CRHA could leverage capital funds through capital funds financing. Can be used in combination with as-of-right 4% LIHTC and other funds. • City Funding – CDBG, Section 108, HOME, CIP (Capital Improvements Program). City could also help provide credit support for Build America Bonds. • State Funding – VHDA could work with CRHA to make its SPARC loan program more flexible and better able to be used for public housing revitalization. • Land Sale Proceeds – funds raised by selling CRHA land for market rate rental or for-sale development or commercial uses.

  26. Financing Issues: Project Based Vouchers • Use of Project-based Vouchers (PBV) in lieu of a portion of the ACC units would improve funding situation as these units can carry debt, while providing similar affordability. • If PBV’s are used, need to determine alternate, economically efficient on and off-site locations to build replacement ACC units or determine impact of reduction of total ACC units. Partnering • Partnering with private developers could add capacity for securing City and State funds, and LIHTC investors, bond issuers/purchasers/credit enhancers and other lenders will want financial guarantees. • Depending on funding secured for each transaction, some sharing of fee and cash flow by CRHA or deferral of developer fee by private developer could be negotiated. • Management capacity is also a major concern for LIHTC investors.

  27. How might some of these financing models work with some of these redevelopment approaches ?

  28. Westhaven – Financial Case Study 1 • Westhaven – Financing Example 1 • Complete Redevelopment • 160 new units, built in 3 or 4 project phases (or 220 with senior midrise added) • Connects Hardy Drive to West Main and 10th Streets Westhaven – Existing Conditions

  29. Westhaven: Financing of Three Options

  30. South 1st St. – Financial Case Study 2 • South 1st Street – Financing Example 2 • New infill housing on ballfield and across street • Rehabilitate existing units and community center • 90 Units (32 new, 58 existing rehabilitated) • 2 project phases South 1st Street – Existing Conditions

  31. South 1st St.: Financing of Three Options

  32. Summary of Finance Scenarios:

  33. Market Observations • Some LIHTC properties have high income (up to 60% of AMI) families using Housing Choice Vouchers. • Extremely low income households (30% of AMI and below) cannot afford LIHTC units which are priced at the upper end of eligibility --- yet vacancies outside of Charlottesville point to a softness in the LIHTC Market, while market-rate units serve many of these same households. (Would this be true of a new property close in?) • Households with extremely low incomes need affordable housing yet LIHTC minimum rents often exclude these households. • Low/Middle Range LIHTC rentals would be in big demand

  34. Income and Rent Analysis Demand for Housing – By the Numbers

  35. Affordablilty Levels in The Market Units on the Market on July 2, 2009 (City analysis) • Only one 2br unit for families below 30% AMI

  36. More Availability Findings Units on Craig’s List by Asking Rent (City analysis) • Note availability at the higher end of eligibility

  37. Findings on the “Market” • Large percentages of Charlottesville renters have incomes below 30% of median

  38. Dilemma:Great need at 30% AMI…and very hard to finance (need HUD grants)Softness in LIHTC units at 60% AMI…but easier to finance (LI

  39. Summary:

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