The Dollars Side of the CAF Equation

1. The Dollars Side of the CAF Equation Alliance for Housing Solutions (AHS) 2012 Leckey Forum November 9, 2012 Presented By: Kathleen McSweeney

2. AHIF: What is it? • Affordable Housing Investment Fund • Low-interest revolving loan fund • Secondary, subordinate loans used as incentive for developers to provide affordable housing • Used to commit or buy-down apartment units as affordable long-term (30 years standard, longer in some cases)

3. AHIF: What are the sources? • Local general revenues • Federal HOME funds • County recordation taxes (~$1 million in 2011) • Developer contributions • Calculation made under Affordable Dwelling Unit Ordinance for site plan projects in Arlington (~ avg $3 million annually) • Loan Repayments & Payoffs

4. AHIF: How is it used? • New construction • Acquisition of existing multi-family buildings • Rehabilitation of affordable housing • Housing Services Grants ($100,000/yr)

5. AHIF: How does it help? • Finances funding gaps in exchange for affordable housing commitment • Demonstrates County commitment to project • Leverages additional funds, and makes projects competitive in the state-wide Low Income Housing Tax Credits (LIHTC) pool

6. AHIF: Funding History

7. AHIF: How much is required? • Let’s do the math: • Annual County Goal: create 400 net new affordable units (Goals and Targets report, Target 5B) • Average cost to develop a Committed Affordable unit (CAF): $85,000 • 400 X $85,000 = $34 million • In FY 2013, a bit more than half ($20M) is AHIF projections

8. AHIF and The Columbia Pike Neighborhoods Plan – Adopted July 2012 • Establishes affordable housing goals: • 100% of MARKS up to 60% AMI • 100% of MARKS between 60-80% AMI • 9,000 rental apartments on Columbia Pike* • 1,200 CAFs • 2,900 60% MARKS • 3,200 80% MARKS • Over 30 years, requires an additional $7-10 million in AHIF per year *Source: page 6 of Columbia Pike Neighborhoods Plan, Tools Report, June 7, 2012

9. AHIF: Considerations • Amount to achieve all stated goals solely through AHIF approximately $40 million per year • County defines CAF at 60% AMI • Committing units below 60% (at point of construction) would require an even larger capital investment • Additional tools explored • Columbia Pike Tools Technical Report

10. TIF: What is it? • Tax Increment Financing • Leverages public financing in order to attract, finance and maintain development • Takes the increment over the baseline of tax revenues generated by a district, and invests them to fund specific development in that district

11. TIF: What does that mean? • The County would: • Define physical boundaries of TIF district • Analyze current land values and determine what tax revenue the area generates now (creates a baseline) • Determine the increased revenue based on improvements or increased values over a specified period • Tax revenues above the increment are used to finance debt without increasing taxes or reducing the existing tax revenues to the general fund. Source: Tax Increment Finance Best Practices Reference Guide at icsc.org

12. TIF: Where does the money come from? • TIF revenue bonds would be issued, based on projected higher property taxes collected as a result of increased values • TIF bonds are sold to finance the projects for which the use is earmarked • Special fund established to hold incremental taxes collected • Funds cover debt service on the bonds • Developers may agree to guarantee debt service Source: Baltimore Development Corporation, Pilot & TIFs, www.baltimoredevelopment.com/pilot-tifs

13. TIF: What are the typical uses? • Encourage targeted development • Eliminate blighted areas (as well as brownfield and greyfield re-development) • Land Acquisition • Infrastructure Development (streets, sidewalks, utilities, sewer expansion, etc.) • Libraries, Schools and Emergency Facilities • Affordable Housing Source: Tax Increment Finance Best Practices Reference Guide at icsc.org

14. TIPIF: What is it? • TIPIF – Tax Increment Public Infrastructure Fund • Framework for evaluating and investing in public infrastructure to complement specific private investment projects • Used twice on Columbia Pike, for additional public parking in the mixed use developments Penrose Square and the Halstead. Source: Arlington County, CPHD

15. TIF vs. TIPIF • Chief differences: TIF is generally used over a defined geographic area, and TIPIF is specific to a given development project • When using TIPIF or TIF, County may have a guarantee from a development partner or partners

16. TIF: Where has this been used? • 49 states, including Virginia, have TIF-enabling legislation • California has used TIF for affordable housing, and has even used TIF funds to build outside the designated area • New Kent County, Virginia (40 affordable units) • Milwaukee, WI, 50 blocks of housing and neighborhood revitalization Source: Tax Increment Finance Best Practices Reference Guide at icsc.org

17. TIF: Considerations • Serves to front-load funding, because timing of needs can’t be predicted • TIF is gap funding and not the only financing source; other tools like density and AHIF will also be needed • Taxes are not increased, but increment will not feed into the General Fund • Having TIF could reduce ability to use other tools (tax abatements, exemptions, etc.) • If revenues don’t materialize, then what?

18. Questions?

19. HOUSING GRANTS INFO • 16,612 (7.7%) of the population lives below Federal Poverty Limits (up from 5.9%) • Housing Choice Vouchers - #? • Housing Grants = 1,142 (344 working families, 422 w/disabilities and 374 over 62 yo) Renters pay 40% of income toward rent, $540-550 is avg subsidy • PSH – 160 on 2012 • Avg income $26,612 (families), $14, 738 (w/disabilities) and $15,142 elderly over 62