City of Sacramento
City Council - 2PM Report
915 I Street Sacramento, CA 95814
www.cityofsacramento.org
File ID: 2024-00566 4/9/2024 Public Hearing Item 11.
(City Council) Tax Equity and Fiscal Responsibility Act (TEFRA) Hearing and Approving Issuance of Tax-Exempt Bonds for 440 Arden Way Apartments File ID: 2024-00566
Location: 440 Arden Way, District 2, Represented by Councilmember Thao Recommendation: Conduct a public hearing and upon conclusion adopt: 1) a City Council Resolution which a) indicates the City has conducted a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing related to the proposed development of 440 Arden Way Apartments (Project) b) approving issuance of Tax-Exempt Bonds by California Municipal Finance Authority (CMFA).
Contact: Christine Weichert, Director, Development Finance, (916) 440-1353, [email protected]; Sacramento Housing and Redevelopment Agency
Presenter: Roman Singh, Housing Finance Analyst, (916) 440-8547, [email protected], Sacramento Housing and Redevelopment Agency
Attachments:
1-Description/Analysis
2-City Council Resolution-TEFRA
3-Vicinity Map - 440 Arden Way
4-Project Renderings
5-Residential Project Summary
6-Cash Flow Proforma
7-Maximum Income and Rent Limits
Description/Analysis
Issue Detail: This report will serve as the required public Tax Credit Equity and Fiscal Responsibility Act (TEFRA) hearing for 440 Arden Way Apartments (Project), approval of the issuance of tax- exempt bonds not to exceed $55 million by California Municipal Finance Authority.
The Sacramento Housing and Redevelopment Agency’s (SHRA) Multifamily Lending and Mortgage Revenue Bond Policies (Policies), adopted by the City Council in December 2019, authorize the Housing Authority to issue Mortgage Revenue Bonds (Bonds) within the City of Sacramento. The Bonds provide below market rate financing for qualified rental projects. Among other things, these
File ID: 2024-00566 4/9/2024 Public Hearing Item 11.
bonds increase and preserve the supply of affordable rental housing. As the Bond issuer, SHRA ensures the necessary project due diligence, financial feasibility, quality management, and on-site services. SHRA confirms adequate management and oversight by performing annual on-site inspections of units, common areas, and amenities. On-site property records and resident files are reviewed, along with reviews of resident services, and monthly bond resident activity reports.
Additionally, SHRA provides direct technical assistance to ensure projects succeed in meeting the affordable regulatory requirements.
In limited situations, SHRA's policies permit alternative issuers to issue bonds for multifamily housing projects within the City of Sacramento. It's essential to note that all of SHRA's affordability requirements and procedural standards remain in effect for projects utilizing alternative issuers.
Initially, Bridge Housing, the developer, approached SHRA to issue bonds for 440 Arden Way Apartments, however, due to the stringent timeline requested by Housing and Community Development (HCD), SHRA found itself unable to conduct a comprehensive review of the project within the necessary timeframe to serve as the bond issuer. As a result, all parties involved recognized the essential need for an alternative bond issuer to maintain project momentum.
Consequently, Bridge Housing requested to enlist California Municipal Finance Authority (CMFA) as the bond issuer instead. This ensured the project continue to progress without compromising the thoroughness of the review process. This adjustment was deemed necessary to adhere to HCD’s deadlines and uphold the integrity of the evaluation process.
BRIDGE Housing Corporation (Developer) has requested that California Municipal Finance Authority, a statewide bond issuer, rather than the Housing Authority, issue bonds for the Project. Regardless of the issuer, the TEFRA states the issuance of bonds must be approved by representatives of the government unit with jurisdiction over the area in which the project is located. The purpose of the public hearing is to provide an opportunity for interested people to express their views on the proposed bond issuance and the nature and location of the project. With CMFA as the issuer of the bonds, SHRA will not have an obligation or authority to monitor the Project. This will eliminate SHRA's ability to conduct compliance visits, investigate resident concerns, or replace property management.
Development: The Project is new construction workforce housing proposed on 1.07 acres of land located at Arden Way near Del Paso Boulevard. A vicinity map and project rendering are provided as Attachments 2 and 3.
The City of Sacramento and State of California (State) previously owned the land. In 2021, the State issued a competitive Request for Proposal for the disposition of land and selected Bridge Housing. A Property Acquisition Agreement was executed in December 2023 which transferred the City-owned parcels to the State for incorporation into the development sites. All parcels within the site will be under one ground lease between the Developer and the State. Additionally, it is important to note that demolition of an existing building and other associated structures must occur prior to the construction
File ID: 2024-00566 4/9/2024 Public Hearing Item 11.
of the Project. Lastly, on December 1, 2022, the City of Sacramento awarded the developer $3.7 million for the predevelopment and permanent financing of the Project.
The proposed project includes a single five-story building with 124 affordable units, comprised of 60 one-bedroom units, 32 two-bedroom units, and 32 three-bedroom units. One two-bedroom and one three-bedroom unit are reserved for the managers. The units will be restricted to 25-60 percent Area Median Income (AMI). The project will encompass a range of amenities, including a community room, multipurpose space, inviting courtyard, dedicated children's play area, and communal garden plots.
The construction and operating budgets have been reviewed and approval by SHRA staff.
Affordability
Restrictions
Units % of Units Project Based Vouchers
Extremely Low Income
(25% AMI)
19 15% 19
Extremely Low Income
(30% AMI)
15 12% 12
Very-Low Income (50%
Income)
36 29% 0
Low Income (60% AMI) 52 42% 0
Management Unit
(Exempt)
2 2% 0
Total 124 100%
Developer: BRIDGE Housing, a mission-driven nonprofit operating since 1983, is dedicated to enhancing communities and enriching the lives of residents through affordable housing initiatives, with a robust track record of developing over 19,000 homes and apartments across California, Oregon, and Washington.
Property Management: SHRA has reviewed and approved BRIDGE Property Management, management plan, and leases, for the Project. The Property management company will provide 24- hour desk coverage for residents' needs.
Resident Services: Lutheran Social Services of Northern California (LSS) will deliver comprehensive resident services. SHRA has reviewed and approved LSS's resident services plan, which will offer 60 hours of adult education workshops and community building activities for the residents. These activities will include onsite service coordination, adult education workshops, crisis intervention, health coordination, job readiness training, after-school educational support, relationship building, transportation coordination, public benefits advocacy, and life skills training, aimed at fostering stability, independence, and self-sufficiency among residents.
File ID: 2024-00566 4/9/2024 Public Hearing Item 11.
Case Management: LSS will provide comprehensive intensive case management services with the support of two full-time case workers aimed at providing targeted services for the 31 permanent supportive housing (PSH) residents. These services may include group counseling, psycho-social education, property management advocacy, referrals for medical and mental healthcare.
Project-Based Vouchers: On September 1, 2023, the Project was awarded 31 Project Based Vouchers (PBV) by SHRA to benefit homeless households. PBVs are awarded in accordance with SHRA’s administration of the Housing Choice Voucher Program as authorized by section 8(o)(13) of the U.S. Housing Act of 1937 (42 U.S.C. 1437f(o)(13)) and is based on the Public Housing Authority’s Annual Plan. The Federal Department of Housing and Urban Development (HUD) approves the Plan annually.
Project Financing: The proposed financing of the Project includes a permanent loan, tax-exempt bonds, tax credit equity, Affordable Housing, and Sustainable Communities (AHSC) funds, HCD Local Government Matching Grants, the City of Sacramento HHAP Grant, and a deferred developer fee. A Project Summary, Cashflow Proforma and Income and Rent Limits are included as Attachments 5-7.
Bond Issuer: CMFA was created on January 1, 2004, pursuant to a joint exercise of powers agreement to promote economic, cultural, and community development through the financing of economic development and charitable activities throughout California. CMFA was formed to assist local governments, non-profit organizations, and businesses with the issuance of taxable and tax- exempt bonds aimed at improving the standard of living in California.
Policy Considerations: The recommended actions are consistent with 1) SHRA’s Multifamily Lending and Mortgage Revenue Bond Policies, priority level 2(iii) - New Construction 2) the 2021- 2029 Housing Element, Goal H-2.2 Housing Production. This project is located in the Sacramento Promise Zone, which aims to provide equitable access to essential resources such as healthcare, education, employment, economic advancement, and sustainable community development for all residents across diverse zip codes.
Economic Impacts: The multifamily residential project is expected to create 600.33 total jobs, 337.03 and 263.30 through direct and indirect and induced activities and create $52,660,521 in total economic output ($32,362,946 from direct output and another $20,297,575 from indirect and induced activities).
Environmental Considerations: California Environmental Quality Act (CEQA): CEQA review is categorically exempt pursuant to Guidelines Section 15332 because it is an infill project and the site is not more than five acres, is substantially surrounded by urban uses, the project is consistent with the General Plan, and will not result in any significant impacts of noise, air quality or water quality.
File ID: 2024-00566 4/9/2024 Public Hearing Item 11.
National Environmental Policy Act (NEPA): An Environmental Assessment was prepared in order to analyze the project in accordance with NEPA and it was determined that with mitigation measures incorporated, the project would not result in a significant impact on the environment.
Sustainability: The proposed project has been reviewed for consistency with the goals, policies and targets of the City Sustainability Master Plan and the 2030 General Plan. If approved, these projects will advance the following goal, policy, and target of goal number one - Energy Independence, specifically by reducing the use of fossil fuels and providing long-term affordable and reliable energy.
Commission/Committee Action: At its meeting of April 3, 2024, it is anticipated that the Sacramento Housing and Redevelopment Commission will recommend approval of the attached resolutions. In the event it fails to do so, Staff will advise the Council at the meeting.
Rationale for Recommendation: The actions recommended in this report are consistent with the City of Sacramento 2021-2029 Housing Element as part of Sacramento’s 2035 General Plan.
Financial Considerations: The Housing Authority received a one-time Underwriting TEFRA Fee of $12,500. The Developer will be responsible for the payment of all costs, fees, and deposits related to the bond application. Multifamily housing revenue bonds do not represent a financial obligation of the Sacramento Housing and Redevelopment Agency, Housing Authority, or the City of Sacramento.
Local Business Enterprise (LBE): M/WBE & Section 3 Considerations:
The items discussed in this report have no M/WBE or Section 3 impact; therefore, M/WBE and Section 3 considerations do not apply.
RESOLUTION 2024-
Adopted by the Sacramento City Council
April 09, 2024
Resolution of the City Council of the City of Sacramento Approving the Issuance of the California Municipal Finance Authority Exempt Facility Bonds for a Qualified Residential Rental Project in an Aggregate Principal Amount Not to Exceed $55 Million for the Purpose of Financing or Refinancing the Acquisition, Construction, Improvement, and Equipping of 440 Arden Way and Certain Other Matters Relating Thereto
BACKGROUND
A. Arden Armory Affordable LP (the "Borrower") a partnership of which BRIDGE Housing Corporation (the "Developer") or a related person to the Developer is the general partner, has requested that the California Municipal Finance Authority (the "Authority") adopt a plan of financing providing for the issuance of exempt facility bonds for a qualified residential rental project pursuant to Section 142(a)(7) of the Internal Revenue Code of 1986 (the "Code") in one or more series issued from time to time, including bonds issued to refund such exempt facility bonds in one or more series from time to time, and at no time to exceed $55 million in aggregate principal amount (the "Bonds"), to finance or refinance the acquisition, construction, improvement and equipping of a multifamily rental housing project located at 440 Arden Way, Sacramento, California (the "Project").
B. Pursuant to Section 147(f) of the Code, the issuance of the Bonds by the Authority must be approved by the City of Sacramento (the "City") because the Project is located within the territorial limits of the City.
C. The City Council of the City (the "City Council") is the elected legislative body of the city and is one of the "applicable elected representatives" required to approve the issuance of the Bonds under Section 147(f) of the Code.
D. The Authority has requested that the City Council approve the issuance of the Bonds by the Authority in order to satisf y the public approval requirement of Section 147(f) of the Code and the requirements of Section 4 of the Joint Exercise of Powers Agreement Relating to the California Municipal Finance Authority, dated as of January 1, 2004 (the "Agreement"), among certain local agencies, including the City.
E. Pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the Bonds by the Authority.
BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:
SECTION 1.
The foregoing resolutions are true and correct.
SECTION 2.
The City Council hereby approves the issuance of the Bonds by the Authority. It is the purpose and intent of the City Council that this resolution constitutes approval of the issuance of the Bonds by the Authority, for the purposes of (a) Section 147(f) of the Code by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located, in accordance with said Section 147(f) and (b) Section 4 of the Agreement.
SECTION 3.
The issuance of the Bonds shall be subject to the approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to the Bonds.
SECTION 4.
The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing to acquire or construct the Project or any refinancing of the Project; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, construction, rehabilitation, installation or operation of the Project; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein.
SECTION 5.
The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents which they deem neces sary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby.
SECTION 6.
This resolution shall take effect immediately upon its adoption.
CHANGING LIVES
"§[I]�
§[I]§
Barrette A __ ve"--�-
- 440 Arden Way --+---+ Light Rail
440 Arden Way
0 Woodlake
Park
Feet
250 500
Attachment 3
Woodlake
Elementary
School
SHRAGIS
February 9, 2024
440 Arden Way ApartmentsAttachment 4
440 Arden Way Area Median Square Total Gross Utility Net Net Rent per Total Monthly Current Unit Type Income % (AMI)Number Feet Sq Feet Rent¹ Allowance Rent Sq Foot Net Rent Annual Rent 1BR/1BA (PBV) 25% 19 575 10,925 469 $ 79$ 390$ 0.68$ 7,410$ 88,920$ 1BR/1BA (PBV) 30% 1 575 575 644 $ 79$ 565$ 0.98$ 565$ 6,780$ 1BR/1BA 30% 1 575 575 644 $ 79$ 565$ 0.98$ 565$ 6,780$ 1BR/1BA 50% 19 575 10,925 1,072 $ 79$ 993$ 1.73$ 18,867$ 226,404$ 1BR/1BA 60% 20 575 11,500 1,287 $ 79$ 1,208$ 2.10$ 24,160$ 289,920$ 2BR/1BA (PBV) 30% 6 837 5,022 724 $ 100$ 624$ 0.75$ 3,743$ 44,910$ 2BR/1BA 50% 8 837 6,696 1,206 $ 100$ 1,106$ 1.32$ 8,850$ 106,200$ 2BR/1BA 60% 17 837 14,229 1,448 $ 100$ 1,348$ 1.61$ 22,908$ 274,890$ 3BR/1BA (PBV) 30% 5 1156 5,780 804 $ 121$ 683$ 0.59$ 3,415$ 40,980$ 3BR/1BA 30% 2 1156 2,312 804 $ 121$ 683$ 0.59$ 1,366$ 16,392$ 3BR/1BA 50% 9 1156 10,404 1,340 $ 121$ 1,219$ 1.05$ 10,971$ 131,652$ 3BR/1BA 60% 15 1156 17,340 1,608 $ 121$ 1,487$ 1.29$ 22,305$ 267,660$ 2BR/1BA (Exempt Manager) 1 0 0
3BR/1BA (Exempt Manager) 1 0 0
Totals 124 125,124 $ 1,501,488$
¹Pursuant to 24CFR 983.301, contract rents approved by HUD may exceed the tax-credit rent limits; and the AMI change is due to income averaging regulation by CDLAC. The tenant rent will not exceed 30% of the household adjusted gross income with PBV.
Annual 2026 2027 2028 2029 2030 2035 2040 2045 2055
Income Increase Per Unit Year 1 Year 2 Year 3 Year 4 Year 5 Year 10 Year 15 Year 20 Year 30 Gross Potential Rent 2.50% 1,577,501 1,616,938 1,657,362 1,698,796 1,741,266 1,970,082 2,228,967 2,521,872 3,228,209 Other Income 2.50% 18,760 19,229 19,710 20,202 20,707 23,429 26,507 29,991 38,391 Rental Subsidy 2.50% 608,585 623,800 639,395 655,380 671,764 760,040 859,915 972,915 1,245,414 Less Vacancy 5.00% -110,242 -112,998 -115,823 -118,719 -121,687 -137,678 -155,770 -176,239 -225,601 Effective Gross Income $2,094,604 $2,146,969 $2,200,643 $2,255,659 $2,312,051 $2,615,873 $2,959,621 $3,348,539 $4,286,413 Expenses
Operating Expenses 3.50% 8,113 1,077,610 1,115,326 1,154,362 1,194,765 1,236,582 1,468,671 1,744,321 2,071,706 2,922,345 Property Management 3.50% 720 95,639 98,986 102,451 106,037 109,748 130,346 154,810 183,866 259,361 Resident Services 3.50% 484 64,274 66,523 68,851 71,261 73,755 87,598 104,039 123,566 174,302 Taxes and Insurance 2.00% 1,181 152,315 155,361 158,468 161,637 164,870 182,030 200,976 221,894 270,487 Replacement Reserves 0.00% 500 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 62,000 Total Expenses 11,708 $1,451,837 $1,498,196 $1,546,133 $1,595,700 $1,646,955 $1,930,645 $2,266,146 $2,663,031 $3,688,496 Net Operating Income $642,767 $648,773 $654,511 $659,959 $665,096 $685,228 $693,475 $685,508 $597,917 Debt Service amount rate amort
Senior Loan $3,342,000 6.11% 20 289,868 289,868 289,868 289,868 289,868 289,868 289,868 289,868 0 AHSC Monitoring Fee $29,269,970 0.420% 122,934 122,934 122,934 122,934 122,934 122,934 122,934 122,934 122,934 CMFA Issuer fee $4,000 0.000% 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 Debt Service Subtotal $416,802 $416,802 $416,802 $416,802 $416,802 $416,802 $416,802 $416,802 $126,934 DCR 1.54 1.56 1.57 1.58 1.60 1.64 1.66 1.64 4.71
Cash Available after Debt Service $225,965 $231,971 $237,709 $243,157 $248,294 $268,426 $276,672 $268,706 $470,984 Priority Distributions
Limited Partner Asset Management Fee $7,500 3.00% 7,500 7,725 7,957 8,195 8,441 9,786 11,344 13,151 17,674 Managing General Partner Management Fee $0 3.00% 0 0 0 0 0 0 0 17,727 23,823 Administrative General Partner Fee $0 3.00% 0 0 0 0 0 0 0 1,970 2,647 Priority Distributions Subtotal 7,500 7,725 7,957 8,195 8,441 9,786 11,344 32,848 44,145 Net Cash after Priority Distributions $218,465 $224,246 $229,752 $234,962 $239,852 $258,640 $265,328 $235,858 $426,839 Deferred Developer Fee/GPContribution
Principal Balance $8,067,231 0.00% 8,067,231 7,848,766 7,624,520 7,394,768 7,159,807 5,918,883 4,606,667 0 0 Interest for Period 0 0 0 0 0 0 0 0 0
Payment 218,465 224,246 229,752 234,962 239,852 258,640 4,606,667 Balance $7,848,766 $7,624,520 $7,394,768 $7,159,807 $6,919,954 $5,660,243 $0 $0 $0 Net Cash after Deferred Developer Fee $0 $0 $0 $0 $0 $0 $0 $235,858 $426,839 Investor Cash Flow
Residential NOI after Debt Service, Priority Distributions & Deferred Developer Fee $0 $0 $0 $0 $0 $0 $0 $117,929 $213,419 AHSC Loans
Principal Balance $29,269,970 3.00% 29,269,970 29,269,970 29,269,970 29,269,970 29,269,970 29,269,970 29,269,970 29,269,970 29,269,970 Interest for Period 878,099 878,099 878,099 878,099 878,099 878,099 878,099 878,099 878,099 Accumulated Interest 878,099 1,756,198 2,634,297 3,512,396 4,390,496 8,780,991 13,171,487 17,073,912 23,545,443 Payment 0 0 0 0 0 0 0 117,929 213,419
Balance $30,148,069 $31,026,168 $31,904,267 $32,782,366 $33,660,466 $38,050,961 $42,441,457 $46,225,953 $52,601,994 Capitalized Resident Services Reserve
Beginning Balance $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 Deposit (or Withdrawal)
Ending Balance $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751 $662,751
440 Arden Way Cash Flow ProformaAttachment 6
Attachment 7
Fam
ily Size 25% AMI 30% AMI 50% AMI 60% AMI
1 person 18,775$ 22,550$ 37,500$ 45,060$ 2 person 21,450$ 25,750$ 42,900$ 51,480$ 3 person 24,125$ 28,950$ 48,250$ 57,900$ 4 person 26,800$ 32,150$ 53,600$ 64,320$ 5 person 28,950$ 35,140$ 57,900$ 69,480$ 6 person 31,100$ 40,280$ 62,200$ 74,640$ Unit Size 25% AMI 30% AMI 50% AMI 60% AMI
1 Bedroom 502$ 810$ 972$ 1,134$
2 Bedroom 603$ 971$ 1,165$ 1,359$
3 Bedroom 696$ 1,122$ 1,347$ 1,571$
¹Pursuant to 24CFR 983.301, contract rents
approved by HUD may exceed the tax-credit
rent limits. The tenant rent will not exceed 30%
of the household adjusted gross income with
PBV.
Maximum Gross Rent Limits
440 Arden Way
MAXIMUM INCOME AND RENT LIMITS 2024
Rents at 25%, 30%, 50% and 60% of Area Median Income (AMI) Low-Income Housing Tax Credits, Mortgage Revenue Bonds, Affordable Housing and Sustainable Communities program, HCD Local Government Matching Grants, City of Sacramento, Deferred Developer Fee, Donated land Maximum Gross Income Limits