Consideration and Adoption of Resolution No. 2015-04:  A Resolution authorizing the City of Flagstaff to provide a loan for up to one-hundred twenty-five thousand dollars ($125,000) to Oakwood Village IV / Flagstaff LP as local government contribution for a Low Income Housing Tax Credit project under the Arizona Department of Housing 2015 Qualified Allocation Plan.

Oakwood Village IV / Flagstaff LP is seeking a Local Government Contribution (LGC) loan to strengthen its Low Income Housing Tax Credit (LIHTC) application to the Arizona Department of Housing. The 2015 Qualified Allocation Plan (QAP) for the LIHTC program awards up to ten points to any project located in a jurisdiction with a population of less than 550,000 when at least two (2) percent of the total construction cost of the affordable rental project is from a Local Government.  The request from Oakwood Village IV / Flagstaff LP is for a loan of up to $125,000 (2% of the Project’s total construction cost), resulting in forty (40) new rental units for households earning less than sixty percent of the Area Median Income (AMI), currently $35,700 for a household of four.

Funding dedicated for affordable housing is available for this purpose within the Land Acquisition account in the Housing Section budget.  Expending the funds will not negatively impact any Housing Section projects.  City funds will only be provided if the developer receives a LIHTC allocation and, if so, not until Certificate of Occupancy is obtained by the development, thus allowing the funds to be secured against the completed development. In addition, the developer will be paying 3% interest annually over the course of the loan, resulting in income to further other affordable housing objectives. Interest on the $125,000 loan will be paid annually, based on cash flow available as determined by an independent auditor at an annual rate of 3% for the 15-year life of the loan.

COUNCIL GOALS:
4) Explore and adopt policies to lower the costs associated with housing to the end user
 

REGIONAL PLAN:
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.

There has not been a previous Council decision on this project or request.

Approve Resolution 2015-04 - Will have the effect of strengthening a LIHTC application for Oakwood Village IV / Flagstaff LP by making it eligible for 10 points in the Local Government Contribution category 

Amend Resolution 2015-04 - Providing between $62,500 and $124,999 will have the effect of making the LIHTC application for Oakwood Village IV / Flagstaff LP eligible for 5 points in the Local Government Contribution category.

Reject Resolution 2015-04 and not provide a Local Government Contribution

The LIHTC Program, which is 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 awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow.  Because the debt is lower, a tax credit property can, in turn, 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. The amount of the annual credit is based on the amount invested in the affordable housing.
According to the Arizona Department of Housing, it has been the most successful rental housing production program in Arizona to date, creating thousands of residences with very affordable rents.

There are currently more than 700 LIHTC units in Flagstaff.  The City of Flagstaff has partnered with developers in the form of a LGC several times in the past.

Oakwood Village IV will be located adjacent to Oakwood  Village I, II, and III, all LIHTC properties.  Currently the Oakwood Village Apartments contain 201 units.  If built, the addition of Oakwood IV would bring the total units to 241.

The LIHTC process is highly competitive and the 2015 QAP from the Arizona Department of Housing awards points to any project in which a Local Government with a population of less than 550,000 provides new funding towards the development budget. If credits are not awarded in this round, Oakwood Village IV / Flagstaff LP intends to submit the application again in the 2016 QAP round. 
 

The request of the City of Flagstaff from Oakwood Village / Flagstaff LP is for a loan of $125,000 in order to strengthen the application.  While the City has not previously worked directly with this LP before, the City has successfully worked with the developer on High County Estates and Cedar Crest acquisition/rehabilitation project and has worked with an additional party also involved with the LIHTC application, WESCAP Inc., on numerous occasions.  The loan is contingent on tax credits being awarded in either 2015 or 2016.  

Funding dedicated for affordable housing is available for this purpose within the Land Acquisition account in the Housing Section budget.  Expending the funds will not negatively impact any Housing Section projects.  Funds will not be provided if the developer does not receive a LIHTC allocation from the Arizona Department of Housing in either the 2015 or 2016 funding rounds, and if so, not until Certificate of Occupancy is obtained by the development, thus allowing the funds to be secured against the completed development. In addition, the developer will be paying 3% interest annually over the course of the loan, resulting in income to further other affordable housing objectives. Interest on the $125,000 loan will be paid annually, based on cash flow available as determined by an independent auditor at an annual rate of 3% for the 15-year life of the loan.

Similar to past requests like this, multiple layers of financing are anticipated and the City's loan will be subordinate to the balance of the financing. Functionally, the execution of one or more subordination agreements may be required in order for this to be accomplished.   

The need for additional low-income rental housing is well documented in Flagstaff and is evidenced by the lengthy waiting list maintained by the Flagstaff Housing Authority.  This project will result in the construction of an additional forty (40) units of rental housing affordable to households earning 60% or less of the Area Median Income, currently $35,700 for a household of four.

Inform

Approve Resolution 2015-04 - Will have the effect of strengthening a LIHTC application for Oakwood Village IV / Flagstaff LP by making it eligible for 10 points in the Local Government Contribution category. 

Amend Resolution 2015-04 - Providing between $62,500 and $124,999 will have the effect of making the LIHTC application for Oakwood Village IV / Flagstaff LP eligible for 5 points in the Local Government Contribution category.

Reject Resolution 2015-04 and not provide a Local Government Contribution in support of the LIHTC application for Oakwood Village IV / Flagstaff LP.