BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL May 2, 2023
Item 3.4
Approval of the Bond Issuance
for 1860 Alum Rock
Apartments
Rachel Vander Veen
Assistant Director of Housing
Banu San
Housing Policy and Planning
Administrator
Qianyu Sun
Deputy Director
Finance Department
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL Development Overview
2 Located at 1860 Alum Rock Avenue
Developed by Charities Housing
59 apartments for extremely low-
income and very low-income
individuals and families
30 apartments set aside for
residents at risk of homelessness
through County’s Rapid Rehousing
partnership
52% of apartments are 2-bed and
3-bed apartments for large families
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL 1860 Alum Rock Sources of Funding
3 Source Construction
Amount
Permanent
Amount Entity Type of
Funding
Citibank Tax-exempt Loan $29,457,157 $9,498,000 Private Loan Citibank Taxable Loan $2,502,522 $0 Private Loan
County of Santa Clara $9,006,176 $9,006,176 Public Loan City of San José $8,087,753 $8,087,753 Public Loan
Housing Trust Silicon Valley $2,700,000 $2,700,000 Private Loan Private Equity Investment $2,597,128 $26,651,816 Private Equity Total $54,350,736 $55,943,745
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL $29,468,877 in tax-exempt bonds and $4,000,000 in
taxable bonds
The bonds are purchased by Citibank - City of San José, as conduit issuer, loans the bond sale proceeds to the
developer to finance the construction of 1860 Alum Rock Allows the developer to qualify for $27,630,717 in Low
Income Housing Tax Credits over 10 years
1860 Alum Rock Bond Issuance
4 BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL May 16 Council Meeting
(2 issuances)
• Tamien Station, 135 homes
o $66,100,000 in tax-exempt
bonds
• The Charles, 99 homes
o $44,562,052 in tax-exempt
bonds
o $12,000,000 in taxable bonds
May 23 Council Meeting
(1 issuance)
• 777 West San Carlos, 154
homes
o $70,700,000 in tax-exempt
bonds
o $1,300,000 in taxable bonds
Upcoming Bond Issuances
5 The City issues Multifamily Housing Bonds to provide low-cost financing (through tax-exempt bonds) for developers along with low-income housing tax credits
The City is considered a "conduit issuer”
• Multifamily Housing Bond proceeds are loaned to a developer to finance a portion of the cost of the affordable housing project
• Project rents and tax credits are used to repay the bonds Tax-exempt bonds can only be issued by a governmental entity (such as the City)
64/28/202
3 Importance of City-issued Multifamily Housing Bonds
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL Protect other subordinate loans the City has made to the developer to subsidize housing
Collect issuance and annual fees to recover some costs
The City’s taxing power and credit are NOT pledged to the bonds.
Benefits of City-issued Multifamily Housing Bonds
74/28/2023
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL Tax-exempt housing bonds must meet the requirements of the Federal tax code.
Key requirements:
• Income set-asides: either (a) 20% of the units must be set aside for households earning 50% of AMI or (b) 40% of the units must be set aside for households earning 60% of AMI. In most cases, 100% of the units are affordable.
• Public Tax Equity and Fiscal Responsibility Act (TEFRA) Hearing on the Project • Private activity volume cap from CDLAC, which allocates California’s annual private activity bond ceiling (~$4.7 Billion in 2023). As CDLAC limits the volume cap it will award, there may be need to issue taxable bonds The receipt of a CDLAC allocation automatically qualifies the Developer to receive 4% Federal low-income housing tax credits, which are administered by CTCAC
Requirements for Tax-Exempt Housing Bonds
84/28/2023
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL Typical Multifamily Housing Bond Structure
94/28/2023
Bank as Bond or
Note Purchaser
City as Conduit Issuer
Borrower
Bond/Governmental Note
Repayments
Bond/Governmental Note
Proceeds
Borrower Loan Repayments Borrower Loan
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL The Borrower is required to fulfill compliance responsibilities. The Bank and tax credit investors take active roles in ensuring the Borrower fulfills these responsibilities.
Monitor expenditure of the bond proceeds – The City will still require the use of a trustee or fiscal agent to track payments
Ensure bond covenants are met
Remit revenues for bond repayment
Provide suitable property management
Provide information as to occupancy and income of residents Perform arbitrage rebate calculations and make arbitrage rebate payments Provide continuing disclosure to the Bank, tax credit investors, City and other subsidy providers
Compliance for Multifamily Housing Bonds
104/28/2023
BUILDING GREAT PLACES INVESTING IN PEOPLE PROVIDING HOUSING FOR ALL May 2, 2023
Item 3.4
Approval of the Bond Issuance
for 1860 Alum Rock
Apartments
Qianyu Sun
Deputy Director
Finance Department
Rachel Vander Veen
Assistant Director of Housing
Banu San
Housing Policy and Planning
Administrator