ARLINGTON COUNTY, VIRGINIA

Transcription

1 ARLINGTON COUNTY, VIRGINIA County Board Agenda Item Meeting of October 14, 2006 DATE: October 14, 2006 SUBJECT: Allocation of additional Fiscal Year (FY) 2007 Affordable Housing Investment Fund (AHIF) assistance to AHC Inc. for the development of Fairview Manor Apartments/The Shelton project. RECOMMENDATIONS: 1. Allocate up to $970,418 in FY 2007 AHIF funds ( ) to AHC, Inc. or its designated County-approved ownership affiliate, as financing assistance for Fairview Manor Apartments/The Shelton project. This financing assistance would be in the form of a subordinated loan subject to the terms and conditions outlined in this report. 2. Authorize the County Manager to approve the ownership affiliate, if any, and to execute the required loan documents for a loan of up to $970,418 to AHC, Inc. or its affiliate, and authorize and direct the trustees for the County s Deed of Trust to execute the required loan subordination documents subject to approval by the County Attorney. 3. Authorize the use of $1,101,102 in the AHC Multi Family Revolving Loan Fund for the redevelopment of Fairview Manor Apartments/The Shelton by AHC Limited Partnership Authorize the County Manager, with the concurrence of the County Attorney, to act as the County Board s representative in approving financing or program revisions that are necessary to remove any ambiguity or inconsistency or which improve the County s financial security, financial position, or enhances the housing program and which changes do not adversely affect the County financially, prior to execution of the County s financing documents. ISSUE: Should the County make an additional AHIF allocation of up to $970,418 to fund a portion of the increased construction costs of the Fairview Manor Apartments/The Shelton? SUMMARY: AHC is requesting an additional $970,418 in AHIF loan funds for the Fairview Manor Apartments/The Shelton redevelopment to cover the cost of an increased scope of utility County Manager: County Attorney: Staff: Robert Noland, DCPHD, Winsome Craig, DCPHD and David Cristeal, DCPHD Report Date: 10/14/06

2 infrastructure and a reduced Low Income Housing Tax Credit (LIHTC) award. BACKGROUND: On January 21, 2006, the County Board approved an AHIF/HOME loan not to exceed $3,297,031 to AHC, Inc. for the redevelopment of the Fairview Manor Apartments. The project involves the demolition of the 22-unit Fairview Manor Apartments and the construction of The Shelton, a new apartment building on the same site. The table below shows the unit mix and rent structure for the proposed development. Approved Unit Mix and Rents Number of Affordable Units Unit Type/Size 60% AMI 50% AMI 40% AMI Monthly Rent Efficiency 2 units $572 Efficiency 1 unit $707 1-bedroom 26 units $846 - $950 1-bedroom 2 units $746 - $782 1-bedroom 1 units $615 2-bedroom 43 units $1,135 2-bedroom 2 units $934 2-bedroom 2 units $733 3-bedroom 13 units $1,305 3-bedroom 1 units $1,073 3-bedroom 1 units $841 Total 82 units 6 units 6 units DISCUSSION: The current estimates for all phases of construction (including the storm sewer and underground electric utility vault) are $1.3 million greater than when the Board approved the original AHIF loan request in January. Approximately $848,000 is due to increased material and comprises much of the increase. The existing storm sewer was damaged by the torrential rains of Spring, 2006 and the County made a temporary repair. AHC was required to replace the storm sewer as part of their project including a new pipeline path around the property, as opposed to through it. There is also a requirement that the sanitary sewer and water main must be replaced. The storm sewer increases cost by $302,000 and the underground electric utility vault adds another $150,000. AHC s projected financing sources decreased because of a smaller allocation of tax credits. Tax credits totaling $14,000,000 were projected as a source of funds in the application for the original AHIF request. When AHC applied to the Virginia Housing Development Authority (VHDA) several months later, they reduced the amount of credits in order to make their application more competitive due to the cap on the total amount that can be awarded in 1 year. That strategy was successful but it resulted in an estimated reduction of $1.8 million of equity. (AHC also has a LIHTC project in Fairfax County that was approved at the same time.) AHC has reduced its construction budget by $300,000 through value engineering and by reducing other development expenses, such as administrative and financing fees, by $500,000. AHC is 2

3 seeking additional loans from VHDA in the amount of $3.5 million. Revised Sources and Uses: The table below compares the revised sources and uses with the previous budget. Sources Original Revised Change Senior Note $7,027,192 $5,490,000 ($1,537,192) LIHTC Tax Credit Equity 14,000,000 12,238,776 (1,761,224) Arlington County AHIF 3,297,031 4,267, ,418 VHDA SPARC & REACH 0 3,500,000 3,500,000 CDBG Long Term Loan 1,101,102 1,101,102 0 AHC Equity 725, ,000 (425,932) Reserves/Deposits 120, , ,700 Deferred Developer s Fee 1,213,707 1,294,382 80,675 Total Sources $27,484,964 $28,476,410 $991,446 Uses Acquisition $2,538,819 $2,636,068 $97,249 Construction 17,907,400 19,244,181 1,336,781 Development Expenses 3,404,500 2,352,276 (1,052,224) Financing Fees 1,135,612 1,655, ,096 Developer s Fee 2,498,633 2,588,765 90,132 Total Uses $27,484,964 $28,476,410 $991,446 The request for $970,418 additional AHIF funds would increase the County s loan from $3,297,031to $4,267,449. This increased amount represents an AHIF per unit subsidy of $43,398. As reported in January, 2006, the proposed redevelopment of the property will add 72 additional units to the County s affordable housing stock (94 minus the existing 22 units). The Nauck Village Center Action Plan (NVCAP) calls for the development of affordable housing in mixed-use projects along Shirlington Road. AHC s proposal also follows the NVCAP design and land-use guidelines. Nauck Civic Association/Community Process The Nauck Revitalization Organization (NRO) heard AHC s request for community support on September 27, The NRO is sending a separate letter to the County Board with its affirmative recommendation for this project. The Nauck Civic Association heard AHC s request for community support on October 2, The Civic Association is sending a separate letter to the County Board with its affirmative recommendation for this project. Housing Commission The Citizens Advisory Commission on Housing is scheduled to review AHC s request for a grant from the Commercial Revitalization Program funds and additional Fiscal Year (FY) 2007 Affordable Housing Investment Fund (AHIF) allocation on October 5, The Housing Commission will send a separate letter to the County Board with its recommendation for this 3

4 project. Terms and Conditions 1. The applicant shall execute a generally standard AHIF Program Agreement and loan instruments for the County loans in a form acceptable to the County Manager and the County Attorney. 2. The $4,267,449 AHIF loan shall be in the form of a subordinated residual receipts loan, secured by a deed of trust, and repayable from the cash flow of the property. This loan will be made at an interest rate of 4.75%, compounded annually over a term of 30 years. 3. The CDBG loan will be in the form of an unsecured deferred payment loan at an interest rate of 4%, compounded annually over a term of 30 years and payable to the County only in the event that the property is refinanced or sold. 4. The affordable housing set-aside for the rental units will be as follows: Ninety four (94) rental units will be affordable to households earning 60%, 50%, and 40% of the AMI for 60 years as set forth in the chart at the top of page 4 of this report. The developer agrees that the affordable rents shall be established in accordance with VHDA/LIHTC rent limits set for Arlington County. Rents shall not exceed the established affordability level for the unit size, minus a utility allowance (if applicable) as per schedule annually approved by HUD for Arlington s Section 8 Housing Choice Voucher Program. 5. The applicant shall provide a minimum of 5 units (2 efficiency units at 40% and 50% of the AMI and 3 Jr. 1-bedroom units at 60% of the AMI) affordable to the County s Department of Human Services (DHS) s clients through one of two financing mechanisms: 1) if Housing Choice Project-based Vouchers are available, the non-profit affiliate developer or its designee shall utilize the Housing Choice Project-based Vouchers to subsidize the rents of 5 DHS clients, or 2) if Housing Choice Vouchers are not available, the affiliate developer or its designee shall utilize DHS Project-based Supportive Housing Program to subsidize the rents of 5 DHS clients for a term of 60 years. 6. The AHIF Agreement between the County and AHC Inc. or its designated ownership affiliate shall include an Affirmative Marketing Plan in substantially that form as required by the HUD for the federal HOME program and including, at a minimum, the elements specified in the Developer s final Affordable Housing Plan and Affirmative Marketing Plan. The Affirmative Marketing Plan shall be in a form and substance acceptable to the County Manager, with the concurrence of the County Attorney, according to the County s criteria for such marketing plans. AHC agrees that the proposed marketing plan shall call for the initial advertising and marketing of the affordable units for a period of at least 45 days before projected occupancy. 7. The developer agrees to provide 2 affordable units (1 one-bedroom Jr. for DHS and 1 two-bedroom unit) as Type A dwelling units in compliance with the International Construction Code (ICC) and American National Standards - ANSI A117.1 for persons with physical disabilities and to fully cooperate with an affirmative marketing plan to market these units to households in need of such accommodation. 4

5 8. AHC Inc., its designated ownership entity, heirs or assigns shall provide a purchase option including a right of first refusal to the County or its designee, if the developer decides to sell the property any time prior to or at the end of the 60-year affordability term, wherein the County or its designee shall have the right, but not the obligation, for a period of up to 180 days, to purchase the property at 90 percent of its then-appraised fair market value. If the owner s appraiser and County s appraiser do not concur on the fair market value of the property, the two appraisers shall select a third appraiser using the industry-standard three appraiser method to determine the fair market value. FISCAL IMPACT: The FY 2007 AHIF balance is $1,171,068 and, with the anticipated carryover of $8,159,674 in AHIF unallocated funds, the balance will increase to $9,330,742. If $970,418 in AHIF/HOME is allocated, the balance will decrease to $8,335,742. There are two other items on this County Board agenda that are requesting AHIF funds: $795,000 for Fisher House and $2,500,000 for the buyback of condominium units. If all three requests are approved the balance of AHIF funds would be $5,065,324. 5