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07/11/2023 - Meeting Materials    Board of Directors of the REDEVELOPMENT AGENCY OF SALT LAKE CITY   AGENDA   July 11, 2023 Tuesday 2:00 PM Council Work Room 451 South State Street, Room 326 Salt Lake City, UT  84111 SLCRDA.com In accordance with State Statute and City Ordinance, the meeting may be held electronically.  After 5:00 p.m., please enter the City & County Building through the main east entrance. This is a discussion among RDA Board Directors and select presenters. The public is welcome to listen, unless otherwise specified as a public comment period. Items scheduled may be moved and / or discussed during a different portion of the Meeting based on circumstance or availability of speakers. Item start times and durations are approximate and are subject to change at the Chair’s discretion. Generated: 14:50:06 Comments:A.   1.General Comments to the Board ~2:00 p.m.  5 min The RDA Board of Directors will receive public comments regarding Redevelopment Agency business in the following formats: 1.Written comments submitted to RDA offices, 451 South State Street, Suite 118, P.O. Box 145455, Salt Lake City, UT. 84114-5455. 2.Comments to the RDA Board of Directors. (Comments are taken on any item not scheduled for a public Hearing, as well as on any other RDA Business. Comments are limited to two minutes.)   B.Public Hearing - individuals may speak to the Board once per public hearing topic for two minutes, however written comments are always accepted: NONE.   C.Redevelopment Agency Business - The RDA Board of Directors will receive information and/or hold discussions and/or take action on:   1.Informational: Tax Increment Reimbursement Program Policy and Housing and Transit Reinvestment Zone Tax Increment Reimbursement Policy ~ 2:05 p.m.  30 min. The Board will receive a briefing about two policy updates. The first is a proposed amendment to the existing tax increment policy, which is designed to support development projects with wide-reaching, regional impact. The second would establish a new Housing and Transit Reinvestment Zone (HTRZ) Tax Increment Reimbursement Program Policy to account for the different requirements in a separate section of the Utah Code governing HTRZs, which differ from traditional project areas.   2.Motion: Releasing Funding for the Affordable Housing Initiative - Perpetual Housing Fund ~ 2:35 p.m.  25 min. The Board will receive a briefing from RDA staff regarding a draft term sheet creating a partnership with the Perpetual Housing Fund of Utah (PHF) for a tenant wealth building program. The Administration is requesting the Board review the draft term sheet, and if acceptable, release the $10 million from American Rescue Plan Act (ARPA) dollars approved in Budget Amendment No. 6 of Fiscal Year 2022-23 for this purpose. For more information on this item visit https://tinyurl.com/SLCHousingProposals. 3.Resolution: Amendment to Terms for Loan to Ville 1659, LLC, and Clarification of Housing Development Loan Program ~ 3:00 p.m.  30 min. The Board will be briefed about and will consider approving, a resolution that would modify the terms of Ville 1659 project’s Housing Development Loan Program (HDLP) loan located at 1659 West North Temple. Changing the type of loan from a construction gap loan with cash-flow payments to a bridge loan with a balloon payment at the end of the term. The term of the loan would be reduced from 40 years to three, at a one percent interest rate rather than two percent.   4.Report and Announcements from the Executive Director TENTATIVE  5 min. Report of the Executive Director, including a review of information items, announcements, and scheduling items. The Board of Directors may give feedback or policy input.   5.Report and Announcements from RDA Staff TENTATIVE  5 min. The Board may review Board information and announcements. The Board may give feedback on any item related to City business, including but not limited to; •Property Update;  •Project Milestone Update; and  •Scheduling Items. 6.Report of the Chair and Vice Chair TENTATIVE  5 min. Report of the Chair and Vice Chair.   D.Written Briefings – the following briefings are informational in nature and require no action of the Board. Additional information can be provided to the Board upon request: NONE.   E.Consent – the following items are listed for consideration by the Board and can be discussed individually upon request.  A motion to approve the consent agenda is approving all of the following items: NONE.   F.Tentative Closed Session The Board will consider a motion to enter into Closed Session. A closed meeting described under Section 52-4-205 may be held for specific purposes including, but not limited to:  1.discussion of the character, professional competence, or physical or mental health of an individual;  2.strategy sessions to discuss pending or reasonably imminent litigation;  3.strategy sessions to discuss the purchase, exchange, or lease of real property:   (i)disclose the appraisal or estimated value of the property under consideration; or   (ii)prevent the public body from completing the transaction on the best possible terms;  4.strategy sessions to discuss the sale of real property, including any form of a water right or water shares, if:   (i)public discussion of the transaction would:    (A)disclose the appraisal or estimated value of the property under consideration; or    (B)prevent the public body from completing the transaction on the best possible terms;   (ii)the public body previously gave public notice that the property would be offered for sale; and<   (iii)the terms of the sale are publicly disclosed before the public body approves the sale  5.discussion regarding deployment of security personnel, devices, or systems; and  6.investigative proceedings regarding allegations of criminal misconduct. A closed meeting may also be held for attorney-client matters that are privileged pursuant to Utah Code § 78B-1-137, and for other lawful purposes that satisfy the pertinent requirements of the Utah Open and Public Meetings Act. Adjournment  G.   CERTIFICATE OF POSTING On or before 5:00 p.m. on Thursday, July 6, 2023, the undersigned, duly appointed City Recorder, does hereby certify that the above notice and agenda was (1) posted on the Utah Public Notice Website created under Utah Code Section 63F-1-701, and (2) a copy of the foregoing provided to The Salt Lake Tribune and/or the Deseret News and to a local media correspondent and any others who have indicated interest. CINDY LOU TRISHMAN SALT LAKE CITY RECORDER Final action may be taken in relation to any topic listed on the agenda, including but not limited to adoption, rejection, amendment, addition of conditions and variations of options discussed. The City & County Building is an accessible facility. People with disabilities may make requests for reasonable accommodation, which may include alternate formats, interpreters, and other auxiliary aids and services. Please make requests at least two business days in advance. To make a request, please contact the City Council Office at council.comments@slcgov.com, 801-535-7600, or relay service 711. 1 BOARD STAFF REPORT THE REDEVELOPMENT AGENCY of SALT LAKE CITY TO:RDA Board Members FROM: Allison Rowland Budget & Policy Analyst DATE:July 11, 2023 RE: INFORMATIONAL: POLICY UPDATES ON TAX INCREMENT REIMBURSEMENT PROGRAM POLICY AND HOUSING AND TRANSIT REINVESTMENT ZONES (HTRZs) ISSUE AT-A-GLANCE The Board will receive a briefing on two proposed policy changes to the RDA’s tax increment reimbursement policies. In the first, RDA staff proposes several amendments for its existing tax increment policy, which are designed to simplify and strengthen project criteria for tax increment reimbursement, ensuring “only the most transformative projects with wide-reaching public impact” are eligible (see section A below). The second would create a new tax increment policy for areas known as Housing and Transit Reinvestment Zones (HTRZs) (see section B below). Since 2021, State law has allowed municipalities to establish HTRZ project areas around public transit facilities to encourage mixed-use, affordable housing development and increased public transit use. RDA staff recommends that the Board adopt a policy specific to HTRZ tax increment because these zones are subject to different requirements and regulated by a separate section of State Code than traditional project areas. Goal of the briefing: Discuss proposed modifications to existing tax increment policy and HTRZ tax increment policy. ADDITIONAL INFORMATION A.Proposed Thresholds for Existing Tax Increment Policy. The proposed amendments for the existing (non-HTRZ) tax increment policy are below. 1. Projects would be required either to: Item Schedule: Briefing: July 11, 2023 Set Date: n/a Public Hearing: n/a Potential Action: n/a Page | 2 a. provide a significant economic impact by creating a regional amenity or use that incorporates a significant amount of land area or is supported by a high level of private investment. The criteria for significant land area and high level of private investment would be defined in policy. OR b. preserve a historic structure and be supported by a high level of private investment. The criteria for a high level of private investment would be defined in policy. In addition, projects would be required to: c. include activated, ground-floor space. d. comply with the RDA’s Sustainable Development Policy. e. provide sufficient evidence that tax increment funding is necessary for the project to succeed. f. for housing projects, include a minimum level of affordable housing. RDA staff notes that while the HTRZ Act requires a minimum of 10% of units be affordable at 80% or less of Area Median Income (AMI), the City’s HTRZ tax increment policy could require a higher threshold, for example, 20% of units at 80% AMI, or 10% of units at 60% AMI. This threshold could also include the RDA’s annual housing priorities. g. for non-housing projects, meet at least two of the RDA’s qualifying livability benchmarks (see the transmittal’s Attachment A). Policy Question: In item 1a above, the Board may wish to ask RDA staff to further elaborate the criteria for providing a “significant economic impact,” as well. For example, would it be important to include who would benefit from this impact, or the expected timing of the benefits? 2.Tax Increment Participation Rate and Term. The reimbursement rate and term (within the remaining years of the project area’s collection period) would be negotiated according to both the level of public benefit and the demonstrated financial need of each project. This would allow RDA staff to be able to “consider increased participation for the most exceptional projects.” B.Proposed Policy Components of RDA HTRZ Tax Increment Policy. 1.Background. The RDA’s first HTRZ application in the general area of the Granary District, submitted in April 2023, is currently under review by the State. It proposes using 10% to 40% of tax increment from an HTRZ for large public infrastructure projects in that area, with the remaining 60% to 90% available as tax increment revenue to specific developments there. (One percent of the total would be used for related RDA administration costs.) RDA staff plans to use the HTRZ tax increment policy as guidance for negotiation and distribution of this revenue among specific projects for any applications approved by the State. 2.Project Thresholds. RDA staff proposes that to be eligible for HTRZ tax increment revenue projects must: a. meet the standards and objectives of the HTRZ Act. b. include activated, ground-floor space. Page | 3 c. comply with the RDA’s Sustainable Development Policy. d. provide sufficient evidence that tax increment funding is necessary for the project to succeed. e. for housing projects, include a minimum level of affordable housing. RDA staff notes that while the HTRZ Act requires a minimum of 10% of units be affordable at 80% or less of Area Median Income (AMI), the City’s HTRZ tax increment policy could require a higher threshold, for example, 20% of units at 80% AMI, or 10% of units at 60% AMI. This threshold could also include the RDA’s annual housing priorities. f. for non-housing projects, meet at least two of the RDA’s qualifying livability benchmarks (see the transmittal’s Attachment A). 3.Tax Increment Participation Rate. RDA staff proposes that a project which meets the threshold criteria would provide the developer 60% of the tax increment collected. An additional 10% increment, reaching up to 90%, could be included to reflect each additional public benefit incorporated into the project. This would include those related to the level and amount of affordable housing in a project. 4.Tax Increment Reimbursement Term. The State mandates the proposed maximum HTRZ terms depending on the type of transit in the area. It is the lesser of 15 years for a light rail or bus rapid transit station and 25 years for a commuter rail station, or the total remaining collection years on the project parcels. TAX Increment reimbursement Policy Updates RDA Board July 11, 2023 A financial incentive/tool in the RDA's toolbox --- Allows for a portion of property tax generated by a development to be reimbursed back to the developer over time Direct payments - don't need to be paid back Post-performance based Should be used to incentivize most impactful development WHAT IS A TAX INCREMENT REIMBURSMENT? State standards within HTRZ Act Activated ground floor space Sustainable development policy Financial need Affordable housing minimum - 20% of units at 80% AMI, or, 10% of units at 60% AMI First four requirements Policy needed to guide tax increment reimbursements in Housing and Transit Reinvestment Zones (HTRZs) THRESHOLDS --- Housing projects: Non-housing projects + Meet at least 2 of the RDA's qualifying livability benchmarks TERM --- set by the State PARTICIPATION RATE --- baseline of 60%, can garner more with more benefit HTRZ TAX INCREMENT POLICY PROPOSAL Activated ground floor space Sustainable development policy Financial Need Affordable housing minimum - 20% of units at 80% AMI, or, 10% of units at 60% AMI Updated policy for tax increment reimbursements outside of HTRZs (Community Reinvestment Areas) THRESHOLDS --- Regional in nature with wide-reaching, beneficial community and economic impact that incorporates at least five acres of land or is supported by a significant level of private investment, OR; Preserves a historic structure that is at least 50 years old in a National Historic District to be used for a beneficial, community-serving use and is supported by a significant level of private investment. AND; + Meet at least 2 of the RDA's qualifying livability benchmarks TERM & PARTICIPATION RATE --- to be negotiated TAX INCREMENT POLICY UPDATE N E I G H B O R H O O D V I B R A N C YECONOMIC O P P O R T U N I T Y E Q U I T Y + I N C L U S I O N V A L U E S Leveraging Timeliness Return of Investment Permanent Job Creation & Retention Affordable Commercial Spaces Ownership Transit Opportunities Mixed-Income Neighborhoods Neighborhood Safety Community Engagement & Support Housing for Everyone Displacement Mitigation Affordable Housing Preservation Public Space Public Art Architecture & Urban Design Sustainability Walkability Building Preservation, Rehabilitation, & Adaptive Reuse Missing Middle & Unique Building Types We prioritize people-focused projects and programs that encourage everyone to participate in and benefit from development decisions that shape their communities. We cultivate distinct and livable built environments that are contextually sensitive, resilient, connected, and sustainable. We invest in the long-term prosperity and growth of our local economy. L I V A B I L I T Y B E N C H M A R K S SALT LAKE CITY CORPORATION 451 SOUTH STATE STREET, ROOM 118 WWW.SLC.GOV · WWW.SLCRDA.COM P.O. BOX 145518, SALT LAKE CITY, UTAH 84114-5518 TEL 801-535-7240 · FAX 801-535-7245 MAYOR ERIN MENDENHALL Executive Director DANNY WALZ Director REDEVELOPMENT AGENCY of SALT LAKE CITY DATE: June 23, 2023 PREPARED BY: Lauren Parisi, RDA Senior Project Manager RE: Tax Increment Reimbursement Policy Updates REQUESTED ACTION: Briefing on the Proposed HTRZ Tax Increment Reimbursement Policy and Amendments to the Current Tax Increment Reimbursement Policy POLICY ITEM: Tax Increment BUDGET IMPACTS: N/A EXECUTIVE SUMMARY: In 2021, the State of Utah passed the Housing and Transit Reinvestment Zone (“HTRZ”) Act (“Act”) and subsequent amendments in 2022 and 2023. The Act allows for municipalities to establish project areas known as HTRZs around public transit facilities to facilitate mixed- use, affordable housing development and an increased utilization of public transit. Because HTRZs are subject to different requirements and regulated by a separate section of State Code than traditional project areas, the Redevelopment Agency of Salt Lake City (“RDA”) should consider adopting a separate policy to guide the disbursement of tax increment (“TI”) in these areas. In addition to establishing an HTRZ Tax Increment Reimbursement Program Policy (“HTRZ TI Policy”), there are amendments that may be made to the RDA’s existing Tax Increment Reimbursement Program Policy (“TI Policy”) to support the most transformative development projects with wide-reaching, regional impact. This memo summarizes both policy proposals for the RDA Board of Director’s (“Board”) initial review and discussion. BACKGROUND: Tax increment reimbursement (“TIR”) allows for a portion of the property tax generated by a development to be reimbursed back to the developer over a given period of time. TIRs are a powerful tool to incentivize high-quality development because unlike a loan, the funding is a direct payment that does not need to be paid back. TIRs are post-performance based in that the amount of the reimbursement is calculated as a percentage of the property tax revenue generated by the development. Projects often use TIRs to fund significant development costs and it often allows developers to attract additional funding sources. ANALYSIS: HTRZ TI Policy Components – HTRZs differ from the more traditional RDA project areas like Community Reinvestment Areas (“CRA”) in that they are intended to facilitate transit-oriented development around public transit stops and, importantly, are regulated by a separate section of State Code 2 than CRAs. The RDA submitted its first HTRZ application to the State in April 2023 (currently under review) and intends to submit additional requests in the future. A Board-approved HTRZ TI Policy will help guide RDA staff in the negotiation and distribution of TIR to specific projects if/when an HTRZ is approved by the State. In the April 2023 HTRZ application, the RDA proposed using 10% to 40% of the tax increment collected by the RDA from the HTRZ for large public infrastructure projects in the area. The Agency is authorized to capture 1% for administration costs related to the HTRZ. The remainder of the increment (60% to 90% of the tax increment collected by the RDA) would be available for TIR to specific developments. Components of the draft HTRZ TI Policy have been outlined for the Board’s review below. 1. HTRZ TI Policy Thresholds – Projects must • Meet the standards and objectives of the HTRZ Act (Utah State Code 63N-3) • Include activated, ground-floor space • Comply with the RDA’s Sustainable Development Policy • Provide sufficient evidence that tax increment funding is necessary for the project to succeed • (Housing Projects) Include a minimum level of affordable housing – The HTRZ Act requires a minimum of 10% of units be affordable to those at 80% of the Area Median Income (AMI) or less. The HTRZ TI Policy could require an increased threshold of 20% of units at 80% AMI or 10% of units at 60% AMI to generate more affordable housing. This threshold may also consider the RDA’s annual housing priorities. • (Non-Housing Projects) Meet at least two (2) of the RDA’s qualifying livability benchmarks (Attachment A). 2. Tax Increment Participation Rate – Meeting the threshold criteria would allow for a developer to capture up to 60% of the tax increment collected by the RDA from the subject property. The draft policy allows for an increased participation rate of 10% for each additional public benefit (including an increased level/amount of affordable housing) that is incorporated into the project, up to a total potential participation rate of 90%. 3. Tax Increment Reimbursement Term – The maximum reimbursement term will be fifteen (15) years for an HTRZ centered around a light rail or bus rapid transit station and twenty-five (25) years for an HTRZ centered around a commuter rail station, or the total remaining collection years on the project parcels, whichever is less. These terms are established by the State in the HTRZ Act. Amended TI Policy Components – In addition to the RDA’s recommendations for creating a new HTRZ TI Policy (as described above), multiple amendments are proposed for the current TI Policy. As the policy is currently written, developments must generally align with the relevant RDA project area plan and meet one public benefit. The intent of the proposed amendments is to simplify the policy and, most importantly, 3 strengthen the criteria by which projects are eligible for a TIR – reserving this tool for only the most transformative projects with wide-reaching public impact. Components of the amended TI Policy have been outlined for the Board’s review below. 1. TI Policy Thresholds – Projects must • Result in a significant economic impact by creating a regional amenity or use that incorporates a significant amount of land area or is supported by a high level of private investment (criteria for significant land area and high level of private investment to be defined in policy). OR: • Preserve a historic structure and be supported by a high level of private investment (criteria for high level of private investment to be defined in policy). AND: • Include activated, ground-floor space • Comply with the RDA’s Sustainable Development Policy • Provide sufficient evidence that tax increment funding is necessary for the project to succeed • (Housing Projects) Include a minimum level of affordable housing – 20% of units at 80% of the Area Median Income (AMI) or 10% of units at 60% AMI to generate more affordable housing. • (Non-Housing Projects) Meet at least two (2) of the RDA’s qualifying livability benchmarks (Attachment A). 2. Tax Increment Participation Rate and Term – The reimbursement participation rate and term will be negotiated based upon a project’s level of public benefit as well as demonstrated financial need. This allows for the RDA to consider increased participation for the most exceptional projects. The term would never exceed the remaining years of project area’s tax increment collection period. NEXT STEPS: The Board may wish to review the proposed policy components and discuss whether they’re adequate and/or if additional considerations should be made. Staff will return to the Board with formal policies for additional discussion and potential adoption. ATTACHMENT: • Attachment A – RDA Livability Benchmarks 4 ATTACHMENT A – RDA Livability Benchmarks Public Benefit Description & Intent EC O N O M I C O P P O R T U N I T Y Leveraging To promote the leveraging of non-RDA/City sources of funding to maximize private investment. Timeliness To support projects that have a reasonable timeframe for completion. Return of Investment To promote the return on RDA resources, thereby enabling resources to extend further in the community. Permanent Job Creation To promote neighborhoods with a balanced economy that produces quality jobs. Affordable Commercial Spaces To reduce the displacement risk of existing community businesses and/or reduce barriers to entry for new, underrepresented business and service types, particularly locally-owned and independent businesses and non-profits that promote neighborhood identity, economic vitality, and local economic multipliers Ownership To encourage the creation of opportunities for residents/business owners to build wealth and/or establish permanent roots through affordable home/commercial ownership. EQ U I T Y & I N C L U S I O N Transportation Opportunities To promote a multimodal transportation network and ensure convenient and equitable access to a variety of transportation options. Mixed-Income Neighborhoods To promote mixed-income developments, economically integrated communities, and housing opportunities for low-income residents. Neighborhood Safety To reduce the number of vacant and distressed buildings and lots to reduce crime and return land to a productive use. Community Engagement & Support To provide a stronger platform for community members to inform and influence development project during initial planning stages and to preserve cultural heritage. Housing for Everyone To promote housing for families, underserved populations Displacement Mitigation To mitigate the displacement of current residents and residents with generational ties to the neighborhood or provide opportunities for those who have already been displaced to return. Affordable Housing Preservation To preserve existing affordable housing NE I G H B O R H O O D V I B R A N C Y Public Space To promote community amenities that provide opportunity for social interaction; support cultural events; promote neighborhood identity; and reinforce neighborhood character. Public Art To promote cultural expression and add to the experience and value of the built environment through art that is publicly visible or accessible for all to experience. Architecture & Urban Design To promote high quality architecture that enhances the public realm, strengthens the neighborhood’s unique character, and uses enduring materials. Sustainability To promote a built environment that assists with protecting resources and promoting greater resiliency. Walkability To promote walkable neighborhoods and connectivity, and support a safe, engaging pedestrian experience. Building Preservation, Rehabilitation, or Adaptive Reuse To acknowledge a neighborhood’s history and maintain its unique character through preservation, rehabilitation, or repurposing of historic or underutilized structures. Missing Middle & Unique Housing Types Promote an array of scale of project types to diversify the City’s housing stock/forms and provide more affordable living options for residents. STAFF REPORT BOARD OF THE REDEVELOPMENT AGENCY of SALT LAKE CITY TO:RDA Board Members FROM: Jennifer Bruno, Deputy Director DATE: July 11, 2023 RE: Releasing City ARPA Funds for Perpetual Housing Fund (PHF) Investment PROJECT TIMELINE: Briefing: May 2, 2023 & July 11, 2023 Set Date: April 18, 2023 Public Hearing: May 2, 2023 Potential Action: TBD ISSUE AT-A-GLANCE The Board will receive a briefing from RDA staff regarding a draft term sheet creating a partnership with the Perpetual Housing Fund of Utah (PHF) for a tenant wealth building program, using City American Rescue Plan Act (ARPA) dollars. The Administration is requesting the Board review the draft term sheet, and if acceptable, adopt a motion to release the $10 million from ARPA dollars approved by the Council in Budget Amendment #6 of FY 23 for this purpose. Goal of the briefing: Review the proposed term sheet and consider releasing funds previously appropriated in conjunction with Budget Amendment #6. Draft Term Sheet Based on the Council’s discussion during Budget Amendment #6, and consistent with the motion adopted by the Council in June 2023 (see attached), the Administration/RDA have returned with a draft term sheet to formalize the City’s partnership with PHF and expectations as it relates to the City’s $10 million investment. The project (515 East 100 South) and wealth building tools are detailed in the Administration’s transmittal and in the previous staff report (starting on page 2 of this memo), along with general goals of the PHF. The following are some key elements of the draft term sheet, which is included as an attachment to the Administration’s transmittal: •The funding is tied specifically to property at 515 East 100 South •The $10 million in City funds will be used to purchase property by June 30, 2024 •RDA will be treated like an equity investor and receive a 2-6% annual return paid each year •PHF commits to an additional 1,000 by year 20, although these additional projects are NOT tied to the $10 m investment. From the term sheet: “These additional projects shall also include the tenant wealth building initiative and, if new construction, will achieve an energy star score of 90 or higher, participate in the City’s Elevate Buildings Program, and be designed to operate without onsite fossil fuel combustion.” •The term sheet allows for the waiver of the RDA’s Sustainability Policy if necessary, due to the adaptive re-use element of the 515 project. Page | 2 •It outlines the terms of a restrictive covenant and the plans for wealth-building opportunities (which means these opportunities would be included in the contract) •“Receive approval from the RDA and the City Attorney’s Office on all matters pertaining to title, legality of the funding agreement, and the legality, sufficiency, and form and substance of all other documents that are deemed reasonably necessary for the funding transaction.” •PHF will provide biannual progress reports to the RDA •Remedy if the project defaults (PHF fails to construct 515 project in timeframe, fails to maintain affordability or reports, fails to comply with other city, state, federal requirements) – RDA may file a breach of contract claim for damages, relief, or “any other remedy available at law or equity” ➢The Board may wish to discuss elements of the term sheet with RDA Staff. Concerted Community Revitalization Plan (CCRP) The Perpetual Housing Fund is also planning to develop and submit a Concerted Community Revitalization Plan (CCRP), which would outline and formalize it’s partnership with the City. This would increase the scoring points for Perpetual Housing Fund LIHTC proposals into the future. The transmittal indicates that the CCRP document “is a plan from a local jurisdiction which establishes an active partnership between local government and a community=-based organization that commits to measurable goals, actions, and timetables to foster the construction or rehabilitation of affordable housing. This document must be approved by the local jurisdiction’s governing body…”. Staff note: The CCRP is not yet before the Board/Council for consideration. ➢The Board may wish to discuss with the Administration if there are other community partners that it would make sense to include in this kind of plan before it is transmitted to the Board/Council for consideration. Attachments Attachment 1 – Budget Amendment #6 Motion Adopting $10 Million ARPA with contingency – June 6, 2013 Attachment 2 – PHF Presentation to City Council - May 2, 2023 The following information was provided for the Council discussion on May 2. It is provided again for reference. Staff note: Council staff is working with the Administration to clarify exact figures referenced in this report, as new information was received immediately prior to publishing. The Administration has transmitted a proposal in Budget Amendment #6 that would invest $10 million of the City’s American Rescue Plan Act (ARPA) dollars to create “lasting, generational changes for families in Salt Lake City”. These dollars would be provided to the Perpetual Housing Fund of Utah, LLC, (PHF) an external non-profit housing developer. This non-profit would then leverage tax credits and other private dollars to acquire properties and/or existing structures for the construction of affordable units. The City’s investment would essentially be seed money for a portion of an initial development (515 East 100 South), and profits in the form of both equity and cash flow, would shared with residents on a 75% basis. 2-6% of cash flow would be paid to the City/RDA for administrative expenses, and the remaining project profits would be used to construct additional projects in the City. The Perpetual Housing Fund is a non-profit affordable housing developer with a mission to share profits and equity with PHF project residents, unlike a typical non-profit housing development model that uses profits to build more units. See www.perpetualhousing.org for more information. Page | 3 The transmittal indicates that over a period of 15-20 years, the City’s partnership with PHF could create as many as 1500 affordable units, whose profits and equity would be shared with the residents (see Policy Question #1). The transmittal indicates that PHF’s first Salt Lake City project would create just over 100 wealth/equity sharing units over multiple phases and break ground by 2024, with a priority to acquire additional land in the City for subsequent projects. Staff note: Council Staff is working with the Administration to clarify exactly how many units will be built with the City’s $10 million investment, and in which phases. See key elements section for more details on the first project. The PHF would share profits from the City’s component part of any project in the following ways (note: these are not mutually exclusive, but amounts would be dependent on actual cash flow and actual equity created. Accessing cash flow is a different tool than accessing equity in the sense that Equity is based on the total value of the project in current and future years, whereas cash flow is actual cash generated from the project after bills and operating expenses are paid): •Annual Rent Rebate (funded from Cash flow) – a portion of the annual cash flow (after paying all building operating expenses and debt service) would be allocated via cash payment distributed on an annual basis. This would be paid to the tenant each year automatically. •Profit Payout (funded from Equity) – If the developer refinances, or if there is another “event” that generates profit, all the cumulative residents over time will receive a payment that represents a proportional share (proportionate based on the length of time they lived in a PHF unit). This would be paid to the tenant automatically. Note: if the property is financed with LITHC this would not occur until at least 15 years into the life of the project b/c of LIHTC investor exits. •Profit advance (funded from Equity) – PHF will set aside a portion of its initial developer fee to establish an account that a resident could access for a zero interest loan in the event of an emergency or major life event (medical, educational, entrepreneurial, etc). This is an optional benefit and each resident could access only their proportionate amount of equity accrued. •Profit Tradeup (funded from Equity) – PHF will be partnering with the Rocky Mountain Homes Fund to build missing-middle home ownership options for households at 60-120% AMI. The first 100 units planned are in the 515 East 100 South project, although more are contemplated in SLC. The transmittal indicates that PHF tenants could transfer accruals from a PHF project for a reduction in purchase price on an RMHF home. This is an optional benefit and each resident could access only their proportionate amount of equity accrued. Goal of the briefing: Review the proposed Perpetual Housing Fund and consider appropriating funds in conjunction with Budget Amendment #6. KEY ELEMENTS A.The Model – the following graphics from the PHF website illustrate the model in concept: As compared to the typical funding model for projects: Page | 4 B. Initial Projects - The Administration has provided information on the first two projects using this model, so that ARPA funds can be expended by the middle of 2024. 1. The first project, which includes two to three phases, is an adaptive reuse of a 14 story commercial office building and a new build residential tower into approximately 250 mixed-income units, and is located at 515 East 100 South. Construction estimated to begin in late 2023/early 2024. i. The City’s investment would initially build 38 equity-sharing units as the first phase of the project, that would operate under the above-mentioned equity/wealth sharing model. ii. These units would be a mix of 1, 3 and 4 bedrooms, targeted to 25-50% Area Median Income (AMI). iii. The project is unique in its financing mechanism, as it is split into several component parts and phases to ensure project profits from one area are tracked separately from other areas. The City’s $10 million investment would be directed solely towards those 38 equity/wealth sharing units. See attached cash flow which illustrates one phase of the project. Staff is working with the Administration to get information about how the City’s initial investment relates to the overall project cash flow. iv. The Administration and PHF notes that absent the City’s investment “…the overall number of SLC households served…would be significantly reduced and [units would] take far longer to come online…”. v. Other components of the project – information from the Administration indicates that the second phase would be constructed in partnership with the Rocky Mountain Homes Fund, and would build 100 for-sale condominium units targeting 60-120% AMI, and two additional equity-sharing phases one in the office conversion tower which would be around 40 units, one in a new-build tower which would be around 48 units. 2. The Administration indicates that they have selected the June 2024 deadline for all the City investment to be spent with the PHF, so that if there is a delay in construction for some reason, the City can deploy those ARPA resources in other ways before the December 2024 federal deadline. C.Conditions for funding – The Administration’s transmittal proposes a number of conditions, with an invitation for Council feedback, that the Administration (via the RDA) would include in a contract with the PHF: 1. PHF will deploy 100% of the City’s Rescue Plan Funds on eligible projects in Salt Lake City and in compliance with ARPA requirements before June 30, 2024. More specifically, the funds will be spent by PHF on the purchase of the condominium-ized affordable units and construction costs for the project at 515 east 100 south. 2. The Rescue Plan Funds will be distributed concurrently with PHF closing on the acquisition of the affordable units. Page | 5 3. At the same time that the Rescue Plan Funds are distributed, PHF will record a restrictive covenant requiring PHF to maintain affordable housing at the 515 east 100 south project at 25-50% AMI, construct and maintain a mix of unit sizes, and wealth building (as detailed above) for a period of not less than 30 years. The restrictive covenant will also require PHF to provide a quarterly report to the RDA. 4. The funding agreement will require PHF to commit to developing future projects in Salt Lake City and ensure those projects contain units affordable to those at 65% AMI and below. 5. PHF will implement an equitable process for tenant selection and, as permitted by law, potentially prioritize certain applicants if the City desires. 6. As permitted by ARPA, the RDA, as a transformational seed funder, will be treated like an equity investor and receive between a 2% and 6% return on its capital contribution, paid annually every year. 7. RDA to approve all legal agreements as recommended by the City Attorney. 8. Prior to distributing the funds, PHF will have received all required City approvals for the project to move forward. 9. Prior to distributing the funds, PHF will demonstrate sufficient construction financing for the project to move forward. 10. Prior to distributing the funds, PHF will demonstrate compliance with the RDA’s sustainability policy, which requires the project demonstrate that the units be designed to achieve an energy star score of 90 or higher and participate in the City’s Elevate Buildings Program. The units must also be designed to operate without on-site fossil fuel combustion. 11. Adequate security and remedies should PHF default on their obligations under the funding or restrictive use agreement. D.Logistical Arrangements with tenants – 1. While the RDA would have a contract with the PHF containing the conditions above to receive the $10 million, each project would create a tenant non-profit organization, who would administer contracts with each tenant in order to receive their project benefits. The RDA would receive quarterly reports. 2. The tenant non-profit would contract with a third party property management company to handle day-to-day logistical issues and track/manage payments to tenants. The Administration notes that it expects these tenant NPOs to have annual meetings to establish rules of the fund and management of the payments. 3. Tenants would not be kicked out of the project if their income situation changed, and the Administration notes that LIHTC rules allow incomes to increase by 40% before changing rent categories. 4. The following graphic is provided on the perpetual housing fund’s website and illustrates how the longer a resident stays in a unit, the greater their potential benefit is: Page | 6 POLICY QUESTIONS 1.Timeline for projects/potential investment needed in the future – the Administration’s information from the PHF indicates an aggressive financing and construction schedule, with 2-4 projects annually in the near terms, and 6-8 projects annually in the 5-10 year term. The Council may wish to ask the PHF or Administration how inflation and increasing interest rates may impact these projections, and whether the PHF will return to the City for additional funding. 2.Coordination with the City’s Community Land Trust or RDA’s Westside Community Initiative – The Administration indicates that this model is well suited to both of those City programs, although no official relationship has been proposed. The Council may wish to discuss this further with the Administration, particularly as conversations about how to creatively grow/maximize those City programs continue. 3. Questions relating to the 515 East 100 South project a. The Council may wish to clarify if the 38 units will be spread around the building or if they will be on floors 2-4. The pro forma indicates floors 2-4 while the transmittal indicates they are on floors 9-11. Staff received information from the Administration immediately prior to publishing that the attached pro forma relates to a future phase of the project. Staff is working with the Administration to get information relating to the City’s initial investment. b. Separating project components. The Council may wish to discuss with the Administration and PHF the legal logistics and reasoning for separating project components from within the project (100 for sale units, 38 rental equity-sharing units, separately tracked mixed- income units), and advantages and potential disadvantages this approach. ATTACHMENTS Attachment 1 – Cash flow for a future phase in 515 East 100 South conversion project – 38 Units within the project located at 515 East 100 South Attachment – Motion for Budget Amendment #6 – Adopted June 6, 2023 (Staff note: both the main and optional motions were adopted by the Council) MOTION 2 – ADOPT PERPETUAL HOUSING FUND ITEM I move that the Council adopt an ordinance amending the Fiscal Year 2023 final budget of Salt Lake City including the employment staffing document for item A-15 as shown on the motion sheet. Optional Additional Motion: I further move that funding for item A-15 is a contingent appropriation subject to Council approval of a term sheet, and the adoption ordinance shall be updated to reflect this condition. Item Being Adopted A-15: ARPA Funding to Perpetual Housing Fund External Developer ($10 Million from ARPA Solutions for Uta h’s Most Intractable Housing Problems May 2, 2023 The Problem Source: 2019 Federal Reserve Board’s Survey of Consumer Finance $255,000 Net Worth 40x $6,300 Net Worth Net Worth 2019 Average Homeowner 2019 Average Renter Homeownership is vital to the American Dream. The opportunity for homeownership is disappearing for the average Utahn. The Problem 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2015 77% 82% 77% Percentage of Utah Home Sales Aordable to Households Earning Area Median Income* 67% 48%45% 32% 11% 2016 2017 2018 2019 2020 2021 2022 Sources: Federal Reserve Economic Data; US Census Data; Utah Multiple Listing Service; Freddie Mac HFA Advantage *Include single family and multifamily. Five percent down payment, prevailing interest rate. Mortgage is 80 percent of payment remaining 20 percent taxes, insurance, and PMI. Ratio of mortgage to income 28%. Current State of Utah Housing Market Estimated $42B Home ownership subsidized RENTAL SUBSIDY Rental costs stabilized, but no pathways to wealth generation Mortgage Interest Tax Deduction Housing Choice Vouchers & Public Housing LIHTC Estimated $30B High/Middle Income Homeowners Middle/Moderate Income Renters Moderate/Low Income Renters Wealth Generation Wealth Stagnation Can’t aord a home, but makes too much to qualify for assitance Estimated $8B Traditional ownership opportunities are leaving most Utahns behind. OWNERSHIP SUBSIDY Wealth Stagnation Density - A Potential Solution Land $150K/Unit Construction Construction $350K/Unit Traditional Single Family Traditional Multifamily $315K/Unit Density has the potential to create aordability by lowering land costs per unit. Land $35K/Unit Potential Build Cost $500,000 Potential Build Cost $350,000 Density - A Missed Opportunity Apartments vs. Condos • Condos are dicult to develop. - Apartments are easier to conceptualize, finance, build, and exit than condo projects. • Architects, engineers, contractors, investors, and banks will charge substantially more to be involved in condo projects. - Insurance costs are much higher in condo projects for all parties involved. - Current tax law favors apartments over condos for investor exit strategies. • Condos are a risky product type. - Selling individual condos is harder, takes longer, and is generally more risky than leasing or selling a traditional apartment building. Only high-end condos make enough money to justify this additional risk. Developers are building more multi-family than ever, but almost none of it creates ownership for residents. Traditional Condo Building residents own and finance legally separate units Benefits of Shared Ownership: 1. Shared ownership avoids the additional liability, cost, complexity, and risk of traditional condos. 2. Residents enjoy the flexibility and ease of apartment living. 3. Residents gain benefits of ownership without the often prohibitive requirements of traditional mortgages. Shared Ownership Building residents each own shares of an entity that owns their entire building Density - Shared Ownership Shared ownership oers residents the benets of both apartments and condos. Estimated $42B RENTAL SUBSIDY Housing Choice Vouchers & Public Housing LIHTC Moderate/Low Income Renters Wealth Stagnation Potential Utah Housing Market OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Middle/Moderate Income Renters Wealth Generation Wealth Generation DENSE OWNERSHIP Real Missing Middle Shared ownership creates opportunities for more families, but still leaves some behind. Estimated $8B Home ownership subsidized Rental costs stabilized, but no pathways to wealth generation Can’t aord a home, but makes too much to qualify for assitance OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Wealth Generation Home ownership subsidized Aordable Housing - Potential Solution Low Income Housing Tax Credits (LIHTC), a federal subsidy, can signicantly decrease rents for residents. Debt Market Return Market Project Capital Stack LIHTC Project Capital Stack Debt Market Return Amount of Private Capital Requires Market Rents Equity Market Return LIHTC Gov. Subsidy Reduced Debt Service Allows Affordable Rents Aordable Housing - A Missed Opportunity Aordable Rent Existing Tax Credits Investors Residents LIHTC Apartment Project Project Equity & Annual Return Upfront Construction Subsidies With LIHTC, residents benet from aordable rents, but annual returns and wealth generation goes to investors. Our Solution - The Perpetual Housing Fund Aordable Rent Existing Tax Credits PHF Project Project Equity & Annual Return Upfront Construction Subsidies PHF pairs existing LIHTC subsidies with shared ownership to benet building residents. Special Purpose Entity PHF Residents 25% 75% Wealth Generation Estimated $42B RENTAL SUBSIDY Housing Choice Vouchers & Public Housing LIHTC + PHF Moderate/Low Income Renters Wealth Generation Wealth Generation Potential Utah Housing Market OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Middle/Moderate Income Renters DENSE OWNERSHIP Real Missing Middle The PHF will use this model to provide ownership opportunities to low income households. Estimated $8B Home ownership subsidized Rental costs stabilized, but no pathways to wealth generation Can’t aord a home, but makes too much to qualify for assitance Wealth Generation OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Home ownership subsidized SLC's Investment Projected Outcomes Salt Lake City's $10MM ARPA Investment in PHF will provide: •2-6% Return on Investment for 20+ Year Term •1,000 Equity-Sharing PHF Units for individuals and families making 65% of AMI and below •500 Condo Units in Salt Lake City affordable to individuals and families making 60%-120% of AMI 100 Units 515 New Tower 200 Units Condo Project 200 Units Condo Project 20 2 3 20 2 4 20 2 5 20 2 6 20 2 7 20 2 8 20 2 9 20 3 0 20 3 1 20 3 2 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 SLC Unit Delivery Schedule 9% Projects 25% to 50% AMI 4% Projects OR Combined 4% + 9% 25% to 60% AMI Condo Projects 80% to 120% AMI 38 Unit 515 Conversion 38 Units 515 Conversion 39 Units 515 New Tower 50 Unit Project 200 Unit Project200 Unit Project200 Unit Project200 Unit Project 50 Unit Project 215 Units 800 Units 500 Units Typical Future 200 Unit Project 10-Year PHF Projections Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 2,943,351 3,002,218 3,062,262 3,123,508 3,185,978 3,249,697 3,314,691 3,380,985 3,448,605 3,517,577 Additional Income 87,480 89,230 91,014 92,834 94,691 96,585 98,517 100,487 102,497 104,547 Cell Tower/Commercial Lease Income - - - - - - - - - - Total Potential Income 3,030,831 3,091,448 3,153,276 3,216,342 3,280,669 3,346,282 3,413,208 3,481,472 3,551,101 3,622,123 Less Vacancy (151,542) (154,572) (157,664) (160,817) (164,033) (167,314) (170,660) (174,074) (177,555) (181,106) Effective Gross Income 2,879,289 2,936,875 2,995,613 3,055,525 3,116,635 3,178,968 3,242,547 3,307,398 3,373,546 3,441,017 Operating Expenses (842,310) (867,580) (893,607) (920,415) (948,028) (976,469) (1,005,763) (1,035,936) (1,067,014) (1,099,024) Capital Reserve (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) Net Operating Income 1,976,979 2,009,295 2,042,006 2,075,110 2,108,608 2,142,500 2,176,785 2,211,463 2,246,533 2,281,993 Debt Service 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 Net Cash Flow 300,436 332,752 365,462 398,566 432,065 465,956 500,242 534,920 569,990 605,450 DSCR (all loans)1.18 1.20 1.22 1.24 1.26 1.28 1.30 1.32 1.34 1.36 Asset Value 35,945,072 36,532,645 37,127,374 37,729,265 38,338,321 38,954,537 39,577,906 40,208,416 40,846,051 41,490,788 Debt Reduction 123,794 156,185 165,030 174,460 195,239 206,677 218,879 231,898 245,790 260,615 Equity in Project 13,708,069 14,295,642 14,890,371 15,492,262 16,101,318 16,717,534 17,340,903 17,971,413 18,609,048 19,253,785 Cash Flow to Residents (75% of net)225,327 249,564 274,097 298,925 324,048 349,467 375,181 401,190 427,492 454,088 Annual Cash Flow per Resident 1,127 1,248 1,370 1,495 1,620 1,747 1,876 2,006 2,137 2,270 Residents' Share of Equity (75%)10,281,052 10,721,731 11,167,778 11,619,197 12,075,988 12,538,150 13,005,677 13,478,560 13,956,786 14,440,338 Avg New Equity Generated Per Resident 51,405 2,938 2,974 3,009 3,045 3,081 3,117 3,153 3,188 3,224 Accumulated Equity Per Resident 51,405 53,609 55,839 58,096 60,380 62,691 65,028 67,393 69,784 72,202 Pro Forma Assumptions: 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,212 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve Yr 1 6.75%Construction Loan Rate 6.75%Perm Loan Rate/40 Yr Am Resident Typical 200 Unit Project - Resident Perspective $1,127 1/200 Share YEAR 1 CASHFLOW SHARE** per person EQUITY SHARE AT STABILIZATION $51,405* 1/200 Share per person *Asset appreciation will be distributed upon events such as a renance event or sale of building. Tenants will also have the ability to "draw" on their equity for "allowed events" in a vehicle similar to a HELOC (funded and run by the PHF). **Cashow Share will be distributed as rent rebates to the extent that LIHTC rules allow. $1,500,000 $1,000,000 Dev. Fee Deferred to Project Funding Resident HELOC Vehicle $225,327 75% to Residents Annual Rent Per Resident $10,281,052 75% to Residents $2,500,000 To Project/ Resident Benet Special Purpose Entity PHF Residents 25% 75% SPE Pro Forma Year 1 SPE Value + Equity Upon Stabilization Rents + Additional Income Less Op Expenses + Capital Reserve Net Operating Income Less Debt Service Net Cash Flow Asset Value Owner’s Equity Developer Fee Contribution ($902,310) $14,396 $1,976,979 ($1,676,543) $300,436 $35,945,072 $13,708,069 $2,879,289 Typical 200 Unit Project - Developer Perspective SPE Pro Forma Year 1 SPE Value + Equity Upon Stabilization Rents + Additional Income Less Op Expenses + Capital Reserve Net Operating Income Less Debt Service Net Cash Flow Asset Value Owner’s Equity Developer Fee Contribution $1,500,000Dev. Fee Upon Groundbreaking $1,500,000Dev. Fee Upon Stabilization Forms SPE + Retains 25% Ownership and Control Special Purpose Entity PHF Residents 25% 75% PHF Develops and Manages Project YEAR 1 CASHFLOW SHARE $75,109 (25% Share) EQUITY SHARE AT STABILIZATION $3,427,017 (25% Share) DEVELOPER FEE $3,000,000 (100% to PHF) $2,879,289 ($902,310) $1,976,979 ($1,676,543) $300,436 $35,945,072 $13,708,069 Asset Appreciation + Debt Reduction Conceptual Graph Shared Ownership - How It Works (200 Unit Project) 25% PHF Resident Share Annual Cashflow UNIT 1 UNIT 2 $19.3MM $4.9MM $14.4MM $13.7MM $3.4MM $10.3MM Ye a r 1 Ye a r 2 Ye a r 3 Ye a r 4 Ye a r 5 Ye a r 6 Ye a r 7 Ye a r 8 Ye a r 9 Ye a r 1 0 Re n a n c e E v e n t Resident A - 10 Years Resident B - 3 Years Equity Share - $72,202 Cashflow Share - $16,559 Equity Share - $21,660 Cashflow Share - $3,745 Equity Share - $50,541 Cashflow Share- $13,152 Resident C - 7 Years $225,327 $249,564 $274,097 $298,925 $324,048 $349,467 $375,181 $401,190 $427,492 $454,088 Example Resident Dividend Typical PHF 9% Project 10-Year PHF Projections Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 433,169 441,832 450,669 459,682 468,876 478,253 487,818 497,575 507,526 517,677 Additional Income 17,059 17,400 17,748 18,103 18,465 18,834 19,211 19,595 19,987 20,387 Commercial Lease Income - - - - - - - - - - Total Potential Income 450,227 459,232 468,417 477,785 487,341 497,087 507,029 517,170 527,513 538,063 Less Vacancy (22,511) (22,962) (23,421) (23,889) (24,367) (24,854) (25,351) (25,858) (26,376) (26,903) Effective Gross Income 427,716 436,270 444,996 453,896 462,974 472,233 481,678 491,311 501,137 511,160 Operating Expenses (183,247) (188,745) (194,407) (200,239) (206,247) (212,434) (218,807) (225,371) (232,132) (239,096) Capital Reserve (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) Net Operating Income 232,769 235,825 238,889 241,956 245,027 248,099 251,171 254,240 257,305 260,364 Debt Service 199,609 199,609 199,609 199,609 199,609 199,609 199,609 199,609 199,609 199,609 Net Cash Flow 33,160 36,217 39,280 42,347 45,418 48,490 51,562 54,631 57,696 60,755 DSCR (all loans)1.17 1.18 1.20 1.21 1.23 1.24 1.26 1.27 1.29 1.30 Asset Value 5,172,635 5,240,566 5,308,634 5,376,805 5,445,044 5,513,312 5,581,571 5,649,779 5,717,892 5,785,864 Debt Reduction 25,928 32,149 33,337 34,589 35,910 37,305 38,778 40,335 41,979 43,718 Equity in Project (Value less debt)1,830,781 1,904,934 1,974,189 2,043,612 2,113,172 2,182,835 2,252,567 2,322,331 2,392,089 2,461,801 Cash Flow to Residents (75% of net)24,870 27,163 29,460 31,761 34,064 36,368 38,671 40,973 43,272 45,566 Annual Cash Flow Per Resident 638 696 755 814 873 933 992 1,051 1,110 1,168 Residents' Share of Equity (75%)1,373,086 1,428,700 1,480,642 1,532,709 1,584,879 1,637,127 1,689,425 1,741,748 1,794,067 1,846,350 New Equity Generated Per Resident 35,207 1,426 1,332 1,335 1,338 1,340 1,341 1,342 1,341 1,341 Accumulated Equity Per Resident 35,207 36,633 37,965 39,300 40,638 41,978 43,319 44,660 46,002 47,342 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,699 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve/Yr 6.10%Construction Loan Rate 6.50%Perm Loan Rate/40 Yr Am 4.50%Cap Rate Pro Forma Assumptions: Solutions for Utah’s Most Intractable Housing Problems May 2, 2023 Investor Initial Capitalization Utilization $10MM $2MM Project Capital Pre-Development Reimbursement Land Acquisition & Pre-Development Capital Additional Capital for Land Acquisition & Pre-Development Annual Cashflow & Developer Fee at Groundbreaking 2-6% Return on Investment Initial Capitalization Guarantor Reserve Interest-Bearing Impact Investments (6% Return) PHF PHF Model Project PHF OF UTAH 0-2% Return for Operating Expenses (501-c-3) Tax credit equity & construction lenders require $12MM (2MM liquid) to fund a meaningfully-sized LIHTC vehicle. 75% Cashow 90% Cashow 100% Developer Fee to PHF of Utah 10% Cashow 25% Cashow 2-7% Return on Initial Investment Remaining Cashow Initial $12MM Investment How It Works - The Perpetual Housing Fund 200 Unit PHF Building $2MM$10MM Operating Account PHF of Utah Interest Bearing Account* Special Purpose Entity 25% Owner (M.M.) PHF 0.01% Owner, M.M. (PHFU) 501(c)(3) Investor 99.9% Owner (PHFU) Impact Investor Resident Entity 75% Owner (200 Shareholders) Managing Member 0.01% Owner (SPE) Tax Credit Investor 99.9% Owner (SPE) 515 Use + Unit Mix PHF Portion of New Building48 Units AMI 25%-65%38 25%-65%40 PHF Phase 1 PHF Phase 2* 78Total Existing Tower Residential Units AMI 80%-120%100+ 25%-65%48 Condo Portion PHF Portion 148+Total Addition Tower Residential Units 100+ Condo Unitsin partnership with RMHF Mixed-Income Childcareand Playground Impact Oce &Building Amenities PHF Conversion Phase 138 Units PHF Phase 2 of Conversion~40 Units Impact Food &Retail Break Ground in 2024 Units Completed in 2026 (Break Ground Q4 2023, Units Completed Q4 2024) (Phase & timing dependent on U of U leasing plans) 515 Tower - Conversion of Floors 9-11 10-Year PHF Projections - Projected Groundbreak Q4 2023/Q1 2024 Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 372,358 379,805 387,401 395,149 403,052 411,113 419,335 427,722 436,276 445,002 Additional Income 16,621 16,954 17,293 17,639 17,991 18,351 18,718 19,093 19,474 19,864 Commercial Lease Income - - - - - - - - - - Total Potential Income 388,979 396,758 404,694 412,787 421,043 429,464 438,053 446,814 455,751 464,866 Less Vacancy (19,449) (19,838) (20,235) (20,639) (21,052) (21,473) (21,903) (22,341) (22,788) (23,243) Effective Gross Income 369,530 376,920 384,459 392,148 399,991 407,991 416,151 424,474 432,963 441,622 Operating Expenses (162,770) (167,653) (172,683) (177,863) (183,199) (188,695) (194,356) (200,187) (206,192) (212,378) Capital Reserve (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) Net Operating Income 195,360 197,867 200,376 202,885 205,392 207,896 210,395 212,887 215,371 217,844 Debt Service 168,677 168,677 168,677 168,677 168,677 168,677 168,677 168,677 168,677 168,677 Net Cash Flow 26,683 29,191 31,699 34,208 36,715 39,219 41,718 44,210 46,694 49,168 DSCR (all loans)1.16 1.17 1.19 1.20 1.22 1.23 1.25 1.26 1.28 1.29 Asset Value 4,341,330 4,397,053 4,452,804 4,508,553 4,564,265 4,619,906 4,675,439 4,730,824 4,786,022 4,840,988 Debt Reduction 26,928 33,321 34,471 35,675 36,939 38,264 39,654 41,114 42,646 44,256 Equity in Project (Value less debt)1,250,612 1,312,728 1,369,629 1,426,582 1,483,558 1,540,524 1,597,447 1,654,292 1,711,022 1,767,598 Cash Flow to Residents (75% of net)20,012 21,893 23,775 25,656 27,536 29,414 31,288 33,158 35,021 36,876 Annual Cash Flow Per Resident 527 576 626 675 725 774 823 873 922 970 Residents' Share of Equity (75%)937,959 984,546 1,027,221 1,069,937 1,112,669 1,155,393 1,198,086 1,240,719 1,283,266 1,325,698 New Equity Generated Per Resident 24,683 1,226 1,123 1,124 1,125 1,124 1,123 1,122 1,120 1,117 Accumulated Equity Per Resident 24,683 25,909 27,032 28,156 29,281 30,405 31,529 32,651 33,770 34,887 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,274 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve Yr 6.10%Construction Loan Rate u 5.75%Perm Loan Rate/40 Yr Am 4.50%Cap Rate Pro Forma Assumptions: 515 New Tower - Floors 2-4 10-Year PHF Projections - Projected Groundbreak 2024 Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 433,169 441,832 450,669 459,682 468,876 478,253 487,818 497,575 507,526 517,677 Additional Income 17,059 17,400 17,748 18,103 18,465 18,834 19,211 19,595 19,987 20,387 Commercial Lease Income - - - - - - - - - - Total Potential Income 450,227 459,232 468,417 477,785 487,341 497,087 507,029 517,170 527,513 538,063 Less Vacancy (22,511) (22,962) (23,421) (23,889) (24,367) (24,854) (25,351) (25,858) (26,376) (26,903) Effective Gross Income 427,716 436,270 444,996 453,896 462,974 472,233 481,678 491,311 501,137 511,160 Operating Expenses (183,247) (188,745) (194,407) (200,239) (206,247) (212,434) (218,807) (225,371) (232,132) (239,096) Capital Reserve (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) (11,700) Net Operating Income 232,769 235,825 238,889 241,956 245,027 248,099 251,171 254,240 257,305 260,364 Debt Service 199,609 199,609 199,609 199,609 199,609 199,609 199,609 199,609 199,609 199,609 Net Cash Flow 33,160 36,217 39,280 42,347 45,418 48,490 51,562 54,631 57,696 60,755 DSCR (all loans)1.17 1.18 1.20 1.21 1.23 1.24 1.26 1.27 1.29 1.30 Asset Value 5,172,635 5,240,566 5,308,634 5,376,805 5,445,044 5,513,312 5,581,571 5,649,779 5,717,892 5,785,864 Debt Reduction 25,928 32,149 33,337 34,589 35,910 37,305 38,778 40,335 41,979 43,718 Equity in Project (Value less debt)1,830,781 1,904,934 1,974,189 2,043,612 2,113,172 2,182,835 2,252,567 2,322,331 2,392,089 2,461,801 Cash Flow to Residents (75% of net)24,870 27,163 29,460 31,761 34,064 36,368 38,671 40,973 43,272 45,566 Annual Cash Flow Per Resident 638 696 755 814 873 933 992 1,051 1,110 1,168 Residents' Share of Equity (75%)1,373,086 1,428,700 1,480,642 1,532,709 1,584,879 1,637,127 1,689,425 1,741,748 1,794,067 1,846,350 New Equity Generated Per Resident 35,207 1,426 1,332 1,335 1,338 1,340 1,341 1,342 1,341 1,341 Accumulated Equity Per Resident 35,207 36,633 37,965 39,300 40,638 41,978 43,319 44,660 46,002 47,342 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,699 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve/Yr 6.10%Construction Loan Rate 6.50%Perm Loan Rate/40 Yr Am 4.50%Cap Rate Pro Forma Assumptions: 515 Tower - Conversion of Floors 6-8 10-Year PHF Projections - Projected Groundbreak 2027 Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 372,358 379,805 387,401 395,149 403,052 411,113 419,335 427,722 436,276 445,002 Additional Income 16,621 16,954 17,293 17,639 17,991 18,351 18,718 19,093 19,474 19,864 Commercial Lease Income - - - - - - - - - - Total Potential Income 388,979 396,758 404,694 412,787 421,043 429,464 438,053 446,814 455,751 464,866 Less Vacancy (19,449) (19,838) (20,235) (20,639) (21,052) (21,473) (21,903) (22,341) (22,788) (23,243) Effective Gross Income 369,530 376,920 384,459 392,148 399,991 407,991 416,151 424,474 432,963 441,622 Operating Expenses (162,770) (167,653) (172,683) (177,863) (183,199) (188,695) (194,356) (200,187) (206,192) (212,378) Capital Reserve (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) (11,400) Net Operating Income 195,360 197,867 200,376 202,885 205,392 207,896 210,395 212,887 215,371 217,844 Debt Service 168,677 168,677 168,677 168,677 168,677 168,677 168,677 168,677 168,677 168,677 Net Cash Flow 26,683 29,191 31,699 34,208 36,715 39,219 41,718 44,210 46,694 49,168 DSCR (all loans)1.16 1.17 1.19 1.20 1.22 1.23 1.25 1.26 1.28 1.29 Asset Value 4,341,330 4,397,053 4,452,804 4,508,553 4,564,265 4,619,906 4,675,439 4,730,824 4,786,022 4,840,988 Debt Reduction 26,928 33,321 34,471 35,675 36,939 38,264 39,654 41,114 42,646 44,256 Equity in Project (Value less debt)1,250,612 1,312,728 1,369,629 1,426,582 1,483,558 1,540,524 1,597,447 1,654,292 1,711,022 1,767,598 Cash Flow to Residents (75% of net)20,012 21,893 23,775 25,656 27,536 29,414 31,288 33,158 35,021 36,876 Annual Cash Flow Per Resident 527 576 626 675 725 774 823 873 922 970 Residents' Share of Equity (75%)937,959 984,546 1,027,221 1,069,937 1,112,669 1,155,393 1,198,086 1,240,719 1,283,266 1,325,698 New Equity Generated Per Resident 24,683 1,226 1,123 1,124 1,125 1,124 1,123 1,122 1,120 1,117 Accumulated Equity Per Resident 24,683 25,909 27,032 28,156 29,281 30,405 31,529 32,651 33,770 34,887 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,274 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve Yr 6.10%Construction Loan Rate u 5.75%Perm Loan Rate/40 Yr Am 4.50%Cap Rate Pro Forma Assumptions: REDEVELOPMENT AGENCY OF SLC PERPETUAL HOUSING FUND RDA BOARD OF DIRECTORS MEETING – JULY 11, 2023 PERPETUAL HOUSING FUND OF UTAH (PHF) Utah non-profit affordable housing organization with mission of reimagining housing programs to share profits with project residents. •RENT-RESTRICTED UNITS – serve those at 25% to 125% AMI •ANNUAL RENT REBATES – from project's cashflow •PROFIT PAYOUTS – at time of refinancing or exit of partner •PROFIT ADVANCE – funds available for major life events •PROFIT TRADEUP – funds applied to home purchase GOALS & OBJECTIVES – 515 EAST 100 SOUTH •$10M in ARPA Funds for acquisition and development of affordable housing •Adaptive reuse of existing office building will include 60+ housing units •All 60 units affordable between 25%-50% Area Median Income (AMI) •Overall project will also include additional housing, co-working, retail, and daycare space •Family housing with 3-4 bedroom units •Significant opportunity to promote wealth building for Salt Lake City residents RDA GUIDING FRAMEWORK RDA GUIDING FRAMEWORK 515 PROJECT BENCHMARKS MET: •LEVERAGING: Our investment will help project secure tax credits •OWNERSHIP: Project will provide an opportunity for residents to build wealth •RETURN OF INVESTMENT: The initial investment will garner 2-6% RDA return through the PHF •HOUSING FOR EVERYONE: Project provides 3- and 4-bedroom units for families and targets underserved populations at 25-50% AMI •MIXED-INCOME NEIGHBORHOODS: The larger 515 project will include a mix of affordable AMIs and market rate housing units •BUILDING PRESERVATION, REHABILITATION, OR ADAPTIVE REUSE: The project will repurpose and rehabilitate an existing office building for housing. FY24 ANNUAL HOUSING PRIORITIES AFFORDABLE FAMILY HOUSING DEEPLY AFFORDABLE HOUSING MISSING MIDDLE HOUSING WEALTH BUILDING OPPORTUNITY Project meets priority PROPOSED TERMS AMOUNT: $10,000,000 in American Rescue Plan Act funds TERM: 50-year deed-restriction recorded against portion of property that obligates PHF to develop 60 or more rent and income restricted units at 25-50% AMI DISBURSEMENT: One lump sum to be paid as part of acquisition of units subject to recording of restrictive covenant on the property and associated subdivision plat process. USE OF FUNDS: PHF must deploy 100% of funds by June 30, 2024 of ARPA eligible uses SUSTAINABILITY: PHF will work to comply with RDA's sustainability policy, but may be waived if necessary due to the adaptive reuse element of the 515 project RETURN:RDA to receive 2-6% return paid annually every year ADDITIONAL PROJECTS: Develop 1,000 additional units in Salt Lake City that will be affordable for those between 25% and 65% AMI NEXT STEPS •The RDA Board may wish to discuss the proposed terms to determine if any additional considerations should be made for funding •Upon approval of Term Sheet, staff will negotiate the necessary agreements Solutions for Uta h’s Most Intractable Housing Problems July 11, 2023 The Problem Source: 2019 Federal Reserve Board’s Survey of Consumer Finance $255,000 Net Worth 40x $6,300 Net Worth Net Worth 2019 Average Homeowner 2019 Average Renter Homeownership is vital to the American Dream. The opportunity for homeownership is disappearing for the average Utahn. The Problem 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2015 77% 82% 77% Percentage of Utah Home Sales Aordable to Households Earning Area Median Income* 67% 48%45% 32% 11% 2016 2017 2018 2019 2020 2021 2022 Sources: Federal Reserve Economic Data; US Census Data; Utah Multiple Listing Service; Freddie Mac HFA Advantage *Include single family and multifamily. Five percent down payment, prevailing interest rate. Mortgage is 80 percent of payment remaining 20 percent taxes, insurance, and PMI. Ratio of mortgage to income 28%. Current State of Utah Housing Market Estimated $42B Home ownership subsidized RENTAL SUBSIDY Rental costs stabilized, but no pathways to wealth generation Mortgage Interest Tax Deduction Housing Choice Vouchers & Public Housing LIHTC Estimated $30B High/Middle Income Homeowners Middle/Moderate Income Renters Moderate/Low Income Renters Wealth Generation Wealth Stagnation Can’t aord a home, but makes too much to qualify for assitance Estimated $8B Traditional ownership opportunities are leaving most Utahns behind. OWNERSHIP SUBSIDY Wealth Stagnation Density - A Potential Solution Land $150K/Unit Construction Construction $350K/Unit Traditional Single Family Traditional Multifamily $315K/Unit Density has the potential to create aordability by lowering land costs per unit. Land $35K/Unit Potential Build Cost $500,000 Potential Build Cost $350,000 Density - A Missed Opportunity Apartments vs. Condos • Condos are dicult to develop. - Apartments are easier to conceptualize, finance, build, and exit than condo projects. • Architects, engineers, contractors, investors, and banks will charge substantially more to be involved in condo projects. - Insurance costs are much higher in condo projects for all parties involved. - Current tax law favors apartments over condos for investor exit strategies. • Condos are a risky product type. - Selling individual condos is harder, takes longer, and is generally more risky than leasing or selling a traditional apartment building. Only high-end condos make enough money to justify this additional risk. Developers are building more multi-family than ever, but almost none of it creates ownership for residents. Traditional Condo Building residents own and finance legally separate units Benefits of Shared Ownership: 1. Shared ownership avoids the additional liability, cost, complexity, and risk of traditional condos. 2. Residents enjoy the flexibility and ease of apartment living. 3. Residents gain benefits of ownership without the often prohibitive requirements of traditional mortgages. Shared Ownership Building residents each own shares of an entity that owns their entire building Density - Shared Ownership Shared ownership oers residents the benets of both apartments and condos. Estimated $42B RENTAL SUBSIDY Housing Choice Vouchers & Public Housing LIHTC Moderate/Low Income Renters Wealth Stagnation Potential Utah Housing Market OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Middle/Moderate Income Renters Wealth Generation Wealth Generation DENSE OWNERSHIP Real Missing Middle Shared ownership creates opportunities for more families, but still leaves some behind. Estimated $8B Home ownership subsidized Rental costs stabilized, but no pathways to wealth generation Can’t aord a home, but makes too much to qualify for assitance OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Wealth Generation Home ownership subsidized Aordable Housing - Potential Solution Low Income Housing Tax Credits (LIHTC), a federal subsidy, can signicantly decrease rents for residents. Debt Market Return Market Project Capital Stack LIHTC Project Capital Stack Debt Market Return Amount of Private Capital Requires Market Rents Equity Market Return LIHTC Gov. Subsidy Reduced Debt Service Allows Affordable Rents Aordable Housing - A Missed Opportunity Aordable Rent Existing Tax Credits Investors Residents LIHTC Apartment Project Project Equity & Annual Return Upfront Construction Subsidies With LIHTC, residents benet from aordable rents, but annual returns and wealth generation goes to investors. Our Solution - The Perpetual Housing Fund Aordable Rent Existing Tax Credits PHF Project Project Equity & Annual Return Upfront Construction Subsidies PHF pairs existing LIHTC subsidies with shared ownership to benet building residents. Special Purpose Entity PHF Residents 25% 75% Wealth Generation Estimated $42B RENTAL SUBSIDY Housing Choice Vouchers & Public Housing LIHTC + PHF Moderate/Low Income Renters Wealth Generation Wealth Generation Potential Utah Housing Market OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Middle/Moderate Income Renters DENSE OWNERSHIP Real Missing Middle The PHF will use this model to provide ownership opportunities to low income households. Estimated $8B Home ownership subsidized Rental costs stabilized, but no pathways to wealth generation Can’t aord a home, but makes too much to qualify for assitance Wealth Generation OWNERSHIP SUBSIDY Mortgage Interest Tax Deduction Estimated $30B High/Middle Income Homeowners Home ownership subsidized SLC's Investment Projected Outcomes Salt Lake City's $10MM ARPA Investment in PHF will provide: •2-6% Return on Investment for 20+ Year Term •1,000 Equity-Sharing PHF Units for individuals and families making 65% of AMI and below •500 Condo Units in Salt Lake City affordable to individuals and families making 60%-120% of AMI 515 Tower Phase I AMI 25%-65%25 25%-65%5 Studio 1 Bedroom 60Total Phase 1 Unit Mix Units 3 Bedroom 4 Bedroom 25%-65% 25%-65% 20 10 Future Mixed-Income Childcare &Playground Impact Oce & Building Amenities PHF Conversion Phase 160 Units RMHF or PHF Phase 246 Units Impact Food & Retail Inline AdditionPhase II 515 Tower - Floors 7-11 10-Year PHF Projections Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 699,650 713,643 727,916 742,474 757,324 772,470 787,919 803,678 819,751 836,146 Additional Income 38,244 39,009 39,789 40,585 41,397 42,224 43,069 43,930 44,809 45,705 Commercial Lease Income - - - - - - - - - - Total Potential Income 737,894 752,652 767,705 783,059 798,720 814,695 830,988 847,608 864,560 881,852 Less Vacancy (36,895) (37,633) (38,385) (39,153) (39,936) (40,735) (41,549) (42,380) (43,228) (44,093) Effective Gross Income 700,999 715,019 729,320 743,906 758,784 773,960 789,439 805,228 821,332 837,759 Operating Expenses (282,179) (290,644) (299,363) (308,344) (317,595) (327,123) (336,936) (347,044) (357,456) (368,179) Capital Reserve (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) (18,000) Net Operating Income 400,820 406,375 411,956 417,562 423,189 428,837 434,503 440,183 445,877 451,580 Debt Service 349,809 349,809 349,809 349,809 349,809 349,809 349,809 349,809 349,809 349,809 Net Cash Flow 51,011 56,566 62,147 67,753 73,380 79,028 84,694 90,374 96,068 101,771 DSCR (all loans)1.15 1.16 1.18 1.19 1.21 1.23 1.24 1.26 1.27 1.29 Asset Value 8,907,121 9,030,557 9,154,581 9,279,147 9,404,209 9,529,717 9,655,617 9,781,855 9,908,371 10,035,104 Debt Reduction 38,974 48,654 50,820 53,108 55,525 58,081 60,783 63,641 66,663 69,860 Equity in Project (Value less debt)3,211,888 3,345,003 3,471,192 3,598,047 3,725,527 3,853,590 3,982,193 4,111,288 4,240,826 4,370,756 Cash Flow to Residents (75% of net)38,259 42,425 46,610 50,814 55,035 59,271 63,520 67,781 72,051 76,328 Annual Cash Flow Per Resident 638 707 777 847 917 988 1,059 1,130 1,201 1,272 Residents' Share of Equity (75%)2,408,916 2,508,752 2,603,394 2,698,535 2,794,145 2,890,193 2,986,644 3,083,466 3,180,619 3,278,067 New Equity Generated Per Resident 40,149 1,664 1,577 1,586 1,593 1,601 1,608 1,614 1,619 1,624 Accumulated Equity Per Resident 40,149 41,813 43,390 44,976 46,569 48,170 49,777 51,391 53,010 54,634 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,274 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve Yr 6.10%Construction Loan Rate 6.10%Perm Loan Rate/40 Yr Am 4.50%Cap Rate Pro Forma Assumptions: Resident 515 Phase I - Resident Perspective $638 1/60 Share YEAR 1 CASHFLOW SHARE** per person EQUITY SHARE AT STABILIZATION $40,149* 1/60 Share per person *Asset appreciation will be distributed upon events such as a renance event or sale of building. Tenants will also have the ability to "draw" on their equity for "allowed events" in a vehicle similar to a HELOC (funded and run by the PHF). **Cashow Share will be distributed as rent rebates to the extent that LIHTC rules allow. $250,000 $500,000 Dev. Fee Deferred to Project Funding Resident HELOC Vehicle $38,259 75% to Residents Annual Rent Per Resident $2,408,916 75% to Residents $750,000 To Project/ Resident Benet Special Purpose Entity PHF Residents 25% 75% SPE Pro Forma Year 1 SPE Value + Equity Upon Stabilization Rents + Additional Income Less Op Expenses + Capital Reserve Net Operating Income Less Debt Service Net Cash Flow Asset Value Owner’s Equity Developer Fee Contribution ($300,179) $11,683 $400,820 ($349,809) $51,011 $8,907,121 $3,211,888 $700,999 515 Phase I - Developer Perspective SPE Pro Forma Year 1 SPE Value + Equity Upon Stabilization Rents + Additional Income Less Op Expenses + Capital Reserve Net Operating Income Less Debt Service Net Cash Flow Asset Value Owner’s Equity Developer Fee $500,000Dev. Fee Upon Groundbreaking $500,000Dev. Fee Upon Stabilization Forms SPE + Retains 25% Ownership and Control Special Purpose Entity PHF Residents 25% 75% PHF Develops and Manages Project YEAR 1 CASHFLOW SHARE $12,752 (25% Share) EQUITY SHARE AT STABILIZATION $802,972 (25% Share) DEVELOPER FEE $1,000,000 (100% to PHF) $700,999 ($300,179) $400,820 ($349,809) $400,820 $8,907,121 $3,211,888 Asset Appreciation + Debt Reduction Conceptual Graph Shared Ownership - How It Works (515 Phase I) 25% PHF Resident Share Annual Cashflow UNIT 1 UNIT 2 $4.37MM $1.09MM $3.28MM $3.2MM $.8MM $2.4MM Ye a r 1 Ye a r 2 Ye a r 3 Ye a r 4 Ye a r 5 Ye a r 6 Ye a r 7 Ye a r 8 Ye a r 9 Ye a r 1 0 Re n a n c e E v e n t Resident A - 10 Years Resident B - 3 Years Equity Share - $54,634 Cashflow Share - $9,535 Equity Share - $16,390 Cashflow Share - $2,122 Equity Share - $38,244 Cashflow Share- $7,413 Resident C - 7 Years $38,259 $42,425 $46,610 $50,814 $55,035 $59,271 $63,520 $67,781 $72,051 $76,328 Example Resident Dividend Solutions for Utah’s Most Intractable Housing Problems July 11, 2023 Investor Initial Capitalization Utilization $10MM $2MM Project Capital Pre-Development Reimbursement Land Acquisition & Pre-Development Capital Additional Capital for Land Acquisition & Pre-Development Annual Cashflow & Developer Fee at Groundbreaking 2-6% Return on Investment Initial Capitalization Guarantor Reserve Interest-Bearing Impact Investments (6% Return) PHF PHF Model Project PHF OF UTAH 0-2% Return for Operating Expenses (501-c-3) Tax credit equity & construction lenders require $12MM (2MM liquid) to fund a meaningfully-sized LIHTC vehicle. 75% Cashow 90% Cashow 100% Developer Fee to PHF of Utah 10% Cashow 25% Cashow 2-7% Return on Initial Investment Remaining Cashow Initial $12MM Investment How It Works - The Perpetual Housing Fund 200 Unit PHF Building $2MM$10MM Operating Account PHF of Utah Interest Bearing Account* Special Purpose Entity 25% Owner (M.M.) PHF 0.01% Owner, M.M. (PHFU) 501(c)(3) Investor 99.9% Owner (PHFU) Impact Investor Resident Entity 75% Owner (200 Shareholders) Managing Member 0.01% Owner (SPE) Tax Credit Investor 99.9% Owner (SPE) Resident Typical 200 Unit Project - Resident Perspective $1,127 1/200 Share YEAR 1 CASHFLOW SHARE** per person EQUITY SHARE AT STABILIZATION $51,405* 1/200 Share per person *Asset appreciation will be distributed upon events such as a renance event or sale of building. Tenants will also have the ability to "draw" on their equity for "allowed events" in a vehicle similar to a HELOC (funded and run by the PHF). **Cashow Share will be distributed as rent rebates to the extent that LIHTC rules allow. $1,500,000 $1,000,000 Dev. Fee Deferred to Project Funding Resident HELOC Vehicle $225,327 75% to Residents Annual Rent Per Resident $10,281,052 75% to Residents $2,500,000 To Project/ Resident Benet Special Purpose Entity PHF Residents 25% 75% SPE Pro Forma Year 1 SPE Value + Equity Upon Stabilization Rents + Additional Income Less Op Expenses + Capital Reserve Net Operating Income Less Debt Service Net Cash Flow Asset Value Owner’s Equity Developer Fee Contribution ($902,310) $14,396 $1,976,979 ($1,676,543) $300,436 $35,945,072 $13,708,069 $2,879,289 Typical 200 Unit Project - Developer Perspective SPE Pro Forma Year 1 SPE Value + Equity Upon Stabilization Rents + Additional Income Less Op Expenses + Capital Reserve Net Operating Income Less Debt Service Net Cash Flow Asset Value Owner’s Equity Developer Fee Contribution $1,500,000Dev. Fee Upon Groundbreaking $1,500,000Dev. Fee Upon Stabilization Forms SPE + Retains 25% Ownership and Control Special Purpose Entity PHF Residents 25% 75% PHF Develops and Manages Project YEAR 1 CASHFLOW SHARE $75,109 (25% Share) EQUITY SHARE AT STABILIZATION $3,427,017 (25% Share) DEVELOPER FEE $3,000,000 (100% to PHF) $2,879,289 ($902,310) $1,976,979 ($1,676,543) $300,436 $35,945,072 $13,708,069 Asset Appreciation + Debt Reduction Conceptual Graph Shared Ownership - How It Works (200 Unit Project) 25% PHF Resident Share Annual Cashflow UNIT 1 UNIT 2 $19.3MM $4.9MM $14.4MM $13.7MM $3.4MM $10.3MM Ye a r 1 Ye a r 2 Ye a r 3 Ye a r 4 Ye a r 5 Ye a r 6 Ye a r 7 Ye a r 8 Ye a r 9 Ye a r 1 0 Re n a n c e E v e n t Resident A - 10 Years Resident B - 3 Years Equity Share - $72,202 Cashflow Share - $16,559 Equity Share - $21,660 Cashflow Share - $3,745 Equity Share - $50,541 Cashflow Share- $13,152 Resident C - 7 Years $225,327 $249,564 $274,097 $298,925 $324,048 $349,467 $375,181 $401,190 $427,492 $454,088 Example Resident Dividend Typical Future 200 Unit Project 10-Year PHF Projections Year 1 2 3 4 5 6 7 8 9 10 Potential Gross Income 2,943,351 3,002,218 3,062,262 3,123,508 3,185,978 3,249,697 3,314,691 3,380,985 3,448,605 3,517,577 Additional Income 87,480 89,230 91,014 92,834 94,691 96,585 98,517 100,487 102,497 104,547 Cell Tower/Commercial Lease Income - - - - - - - - - - Total Potential Income 3,030,831 3,091,448 3,153,276 3,216,342 3,280,669 3,346,282 3,413,208 3,481,472 3,551,101 3,622,123 Less Vacancy (151,542) (154,572) (157,664) (160,817) (164,033) (167,314) (170,660) (174,074) (177,555) (181,106) Effective Gross Income 2,879,289 2,936,875 2,995,613 3,055,525 3,116,635 3,178,968 3,242,547 3,307,398 3,373,546 3,441,017 Operating Expenses (842,310) (867,580) (893,607) (920,415) (948,028) (976,469) (1,005,763) (1,035,936) (1,067,014) (1,099,024) Capital Reserve (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) (60,000) Net Operating Income 1,976,979 2,009,295 2,042,006 2,075,110 2,108,608 2,142,500 2,176,785 2,211,463 2,246,533 2,281,993 Debt Service 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 1,676,543 Net Cash Flow 300,436 332,752 365,462 398,566 432,065 465,956 500,242 534,920 569,990 605,450 DSCR (all loans)1.18 1.20 1.22 1.24 1.26 1.28 1.30 1.32 1.34 1.36 Asset Value 35,945,072 36,532,645 37,127,374 37,729,265 38,338,321 38,954,537 39,577,906 40,208,416 40,846,051 41,490,788 Debt Reduction 123,794 156,185 165,030 174,460 195,239 206,677 218,879 231,898 245,790 260,615 Equity in Project 13,708,069 14,295,642 14,890,371 15,492,262 16,101,318 16,717,534 17,340,903 17,971,413 18,609,048 19,253,785 Cash Flow to Residents (75% of net)225,327 249,564 274,097 298,925 324,048 349,467 375,181 401,190 427,492 454,088 Annual Cash Flow per Resident 1,127 1,248 1,370 1,495 1,620 1,747 1,876 2,006 2,137 2,270 Residents' Share of Equity (75%)10,281,052 10,721,731 11,167,778 11,619,197 12,075,988 12,538,150 13,005,677 13,478,560 13,956,786 14,440,338 Avg New Equity Generated Per Resident 51,405 2,938 2,974 3,009 3,045 3,081 3,117 3,153 3,188 3,224 Accumulated Equity Per Resident 51,405 53,609 55,839 58,096 60,380 62,691 65,028 67,393 69,784 72,202 Pro Forma Assumptions: 2.00%Annual Increases in Rent & Additional Income 5.00%Vacancy Rate 3.00%Annual Increases in Operating Expenses 4,212 Operating Expenses/Unit Yr 1 300 Per Unit Capital Reserve Yr 1 6.75%Construction Loan Rate 6.75%Perm Loan Rate/40 Yr Am SALT LAKE CITY CORPORATION 451 SOUTH STATE STREET, ROOM 118 WWW.SLC.GOV · WWW.SLCRDA.COM P.O. BOX 145518, SALT LAKE CITY, UTAH 84114-5518 TEL 801-535-7240 · FAX 801-535-7245 MAYOR ERIN MENDENHALL Executive Director DANNY WALZ Director REDEVELOPMENT AGENCY of SALT LAKE CITY STAFF MEMO DATE: June 23, 2023 PREPARED BY: Danny Walz, Director RE: Affordable housing and tenant wealth building initiative led by the Perpetual Housing Fund (PHF) REQUESTED ACTION: Review the proposed Perpetual Housing Fund term sheet POLICY ITEM: Affordable housing BUDGET IMPACTS: $10 million in American Rescue Plan Act funds (Rescue Plan Funds) EXECUTIVE SUMMARY When the City first received notice of the significant Rescue Plan Funds that it would receive, the Administration set out to identify the principles by which it would propose this money be allocated. In addition to taking care of the City’s most urgent needs (revenue replacement, public safety, and emergency shelter), the Administration’s goal is to allocate a large portion of Rescue Plan Funds in a way that leverages private investment and creates lasting, generational changes for families in Salt Lake City. This proposal, to be carried out in partnership with the Perpetual Housing Fund of Utah (PHF), provides funding for an affordable housing development with a unique tenant wealth building program. The City’s funds are anticipated to be used as transformational seed funds for development costs, including the cost for PHF to acquire existing structures to construct affordable units. With the help of other partners and the leveraging of City funds, PHF’s ultimate organizational goal is to provide approximately 1,000 safe, stable, and affordable homes in Salt Lake City that benefit individuals and families by helping them build income. Over the next 20 years, PHF anticipates that this investment will translate into $50 million in the hands of lower- and middle-income City residents. 1 On June 6, 2023, Salt Lake City Council adopted an ordinance to amend the final budget of Salt Lake City, which included the approval of a $10 million contribution in Rescue Plan Funds to PHF, contingent on the Council’s approval of an associated term sheet. This memo reviews PHF’s proposal and the terms or conditions upon which the approved funding would be released to the organization. BACKGROUND/DISCUSSION About the Perpetual Housing Fund of Utah PHF is a Utah non-profit affordable housing organization whose mission is to reimagine existing housing programs to share profits with PHF project residents. PHF exists to help remove financial barriers that keep a rapidly expanding portion of population from building wealth where they live. Unlike other non-profit affordable housing development entities that use profits to build more affordable units, PHF will share their profits with residents in a variety of ways, as detailed in the next section. PHF plans to develop projects in Salt Lake City that provide rent and income restricted affordable units. PHF anticipates breaking ground on two affordable housing projects in Salt Lake City in 2024 that will serve those at 25-120% AMI. From there, they plan to develop over 1,000 affordable units over the next decade. PHF’s first two projects will be located in Salt Lake City, with a priority to acquire additional land in the City for subsequent projects. Through this investment from the City, PHF will be able to develop wealth-building affordable housing units at the 515 east 100 south location, and ensure that future PHF projects are not driven by maximizing return to financial investors but rather remain committed to sharing wealth with PHF project residents. How the profit-sharing model works PHF projects are anticipated to be financed with traditional affordable housing resources and may include Low Income Housing Tax Credits (LIHTCs). Under PHF’s model, PHF will share with PHF project residents the majority of profits generated from annual cash flow, long-term equity generation, and future refinance and sale proceeds. The amount of cash flow and profit (which will translate into payouts to the tenants) will largely depend on annual rent increases and the paydown of the project’s mortgage. Over the past several years, area median incomes (AMIs) have been increasing much faster than is projected when development projects are underwritten and financed. With LIHTC-funded projects, rental rates are tied to AMIs and, as such, rents have been increasing faster than projected. Traditional developers and their investors have been receiving the financial benefits of these rapidly escalating rents that increase annual cash flow of the project. Instead of reaping these benefits for the developer and investors, PHF would share these financial benefits with PHF project residents. PHF will establish a nonprofit tenant entity that, while not having a fee ownership interest in the development, will have a permanent interest in the development and the contractual obligation to 2 ensure PHF project residents will receive profits from the project. The ownership and profits- interest structure will vary slightly, depending on if the project utilizes LIHTCs and has a tax credit investor in the ownership structure during the first years after a PHF project is placed into service. The ownership structure and profits-interest will generally be as follows: LIHTC PROJECTS: YEAR 1 – 15 OWNERSHIP % PROFIT % LIHTC INVESTOR 99.99% 10% PHF & FUND INVESTORS 0.01% 15% RESIDENTS/TENANT NPO 0.00% 75% NON LIHTC PROJECTS & LIHTC PROJECTS: YEAR 16 + OWNERSHIP % PROFIT % PHF & FUND INVESTORS 99.99% 25.00% RESIDENTS/TENANT NPO 0.00% 75.00% The profits-interest not otherwise allocated to the PHF project residents will offset costs associated with developing and managing the units. PHF project residents will not have ownership or shares in the real estate itself. Rather, there will be an agreement between the tenant nonprofit entity and the PHF project residents to distribute proceeds in the following ways. • Annual rent rebate – A portion of the project’s annual cash flow (profit after collecting all rent and other income, paying all operating expenses, paying debt service, and setting aside cash reserves for future repairs) that would typically be received by the developer will be allocated to current PHF project residents as a rent rebate via cash payment to be distributed on an annual basis. • Profit payout – When there is an event that generates profit, or further cashflow (refinance, exit of the limited partner, etc.), all the cumulative residents over time will receive a payment that represents a proportionate share of the available profit. The proportion of the profit a household receives will depend on the length of time they lived in a PHF unit. With projects that involve LIHTCs, the profit generating event will often happen 15 years after the project is placed into service because that's when the tax credits end and the LIHTC investor exits the ownership structure. 3 • Profit advance – PHF will set aside a portion of its initial developer fee for the project to fund a 0%, zero payment revolving fund to help PHF project residents access a portion of their anticipated profits early in the event of an emergency or major life event (medical, educational, entrepreneurial, etc.). These funds are replenished from the PHF project resident’s share of profit whenever a profit payout would naturally happen. • Profit tradeup – PHF will be co-developing hundreds of units with the Rocky Mountain Homes Fund (RMHF), an entity that provides a missing-middle home ownership option for households making 60-120% AMI (and occasionally less). Subject to availability, PHF tenants will be able to transfer their accruals from a PHF project for a 1:1 reduction in purchase price on a RMHF home. PROJECT DETAILS 515 East 100 South • Adaptive reuse of an existing office building and new construction of an additional building, to occur in phases. • This property will have multiple social-equity based future uses and is slated to be acquired by Fall 2023. The floors on which affordable units are constructed will be condominiumized and separated and then sold to PHF prior to ARPA City funds being utilized on the project. o Phase 1: Adaptive reuse.  Estimated to begin construction Q2 2024 and be completed by the end of 2024.  60 or more units with a mix of studios, 3-Bedrooms, and 4-Bedrooms located on floors 3-11 of the existing office tower.  All 60+ residential units will be affordable to incomes at 25%-50 of AMI.  Currently slated to also include profit-sharing coworking/office model similar to PHF in other floors. o Phase 2: New building. (Note: Depending on PHF’s pipeline, PHF may choose to begin a different project in Salt Lake City with more units prior to beginning this project which could delay or alter the amount of units in this project.)  Estimated to begin construction Q3 2024 and be completed in 2026.  Approximately 40 new units (depending on final construction estimates/cost constraints) with a planned mix of 5% Studios, 25% 3- Bedroom, and 70% 2-Bedroom (depending on final construction estimates/cost constraints)  All ~40 units will be PHF affordable to (25-50% AMI)  Affordable daycare on bottom floor, available to building users and community members of all incomes. 4 CONDITIONS FOR FUNDING The Administration (acting through the RDA) and PHF must execute a funding agreement with conditions to ensure that Rescue Plan Funds are deployed in accordance with federal regulations and in a manner that brings the greatest public benefit for City residents and prospective residents. These conditions have been outlined within the term sheet under Attachment A for the Board’s initial review. As a condition of the $10 million budget allocation, the Board must review and approve the final term sheet. PHF is also working to establish a Concerted Community Revitalization Plan (CCRP) as a part of this partnership with Salt Lake City. A CCRP is a plan from a local jurisdiction, which establishes an active partnership between local a government and community-based organization that commits to measurable goals, actions, and timetables to foster the construction or rehabilitation of affordable housing. This document must be approved by the local jurisdiction’s governing body and may be brought to next month’s RDA Board or City Council meeting for potential adoption. Partnership details and goals within the CCRP will align the information included in the attached term sheet. Establishing this plan would garner additional points for PHF’s LIHTC proposals (for projects that are within Salt Lake City and incorporate the wealth- generation model described in this term sheet) to Utah Housing Corporation within a very competitive application process, and especially in this upcoming competitive cycle for the 515 Phase I project. Establishing this CCRP will ensure PHF can achieve its 1,000-unit commitment and help to accelerate the delivery of the units. NEXT STEPS The Board should review the draft term sheet included under Attachment A to determine if adequate for future approval. ATTACHMENTS A. Draft Funding Agreement Term Sheet – Perpetual Housing Fund 5 ATTACHMENT A DRAFT Funding Agreement Term Sheet Perpetual Housing Fund Parties The Perpetual Housing Fund of Utah, LLC, a Utah limited liability company (PHF), and the Redevelopment Agency of Salt Lake City (RDA). Property 515 East 100 South, Salt Lake City, Utah 84102 Project Description and Affordability PHF will use the Rescue Plan Funds by June 30, 2024 to acquire real property that will have been converted into large condominiums that will be subsequently subdivided into 60 or more residential units in the existing building at 515 east 100 south (515 Project). These units will be converted from office spaces to residential apartments and will be affordable to those at 25-55% of the area median income (AMI). The 515 Project tenants will participate in the tenant wealth building initiative, which shares the profits of the residential project through rent rebates, profit payouts, profit advances, and profit trade-ups. Proposed Funding Terms • Amount: $10 million in America Rescue Plan Act funds (Rescue Plan Funds). • Term: Concurrently with the distribution of the Rescue Plan Funds, PHF shall record a restriction against the condominiumized portion of the building that obligates PHF to develop 60 or more rent and income restricted apartments for those at 25-55% AMI for 50 years. The restriction will also require the wealth building initiative to be maintained for a term of 50 years (the Restrictive Covenant). • Disbursement: One lump sum upon meeting the conditions for funding, as detailed below. PHF will not be required to repay the funds like a traditional loan. • Return on Investment: As permitted by the American Rescue Plan Act (ARPA), as a transformational seed funder, the RDA will be treated like an equity investor in PHF and receive a 2-6% return paid annually every year. • Use of Funds: PHF must deploy 100% of the funds by June 30, 2024 on ARPA eligible uses. • Additional Projects: For non-monetary consideration in addition to the $10 million investment, PHF will commit to developing additional affordable housing projects in Salt Lake City. More specifically, by year 20, PHF or its affiliates and subsidiaries will have 6 developed 1,000 additional units in Salt Lake City that will be affordable for those between 25% and 65% AMI. These additional projects shall also include the tenant wealth building initiative and, if new construction, will achieve an energy star score of 90 or higher, participate in the City’s Elevate Buildings Program, and be designed to operate without onsite fossil fuel combustion. • Waiver of Sustainable Development Policy: PHF’s is obligations to comply with the RDA’s Sustainable Development Policy may be waived, if necessary, in part due to the adaptive reuse element of the 515 Project as well as PHF’s commitment to incorporate these standards into the new construction of the additional projects, even though such incorporation is not required under the policy. Conditions for RDA to Distribute Funds Prior to dispersing the Rescue Plan Funds, the PHF will complete the following: • PHF will be ready to close on the acquisition of the condominium spaces within which to build 60 or more affordable apartments on or before June 30, 2024. Implied in this requirement is that PHF’s predecessor-in-interest will have acquired the Property and condominiumized the Property so the portions within which the residential apartments will be constructed can be acquired by PHF. • PHF and RDA will agree on the form of the Restrictive Covenant to be recorded against the Property concurrently with funding. The Restrictive Covenant will require PHF to maintain, for a term of 50 years, 60 or more affordable housing units at 25-55% AMI, maintain a mix of unit sizes, and the following wealth building opportunities for tenants: o Annual rent rebate – A portion of the project’s annual cash flow (profit after collecting all rent and other income, paying all operating expenses, paying debt service, and setting aside cash reserves for future operations and repairs) that would typically be received by the owner will be allocated to current PHF project residents as a rent rebate via cash payment to be distributed on an annual basis. o Profit payout – When there is a capital transaction event that generates profit, or further cashflow (refinance, exit of the limited partner, etc.), all the cumulative residents over time will receive a payment that represents a proportionate share of the available profit. The proportion of the profit a household receives will depend on the length of time they lived in a 515 Project unit. With projects that involve Low Income Housing Tax Credits (LIHTC), the profit generating event will often happen at the end of the LIHTC compliance period, which is typically 15 years after the project is placed into service. o Profit advance – PHF will set aside a portion of its initial developer fee for the project to fund a 0%, zero payment revolving fund to help PHF project residents access a portion of their anticipated profits early in the event of an emergency or major life event (medical, educational, entrepreneurial, etc.). Disbursements 7 made to a PHF project resident from this revolving fund will be replenished from the PHF project resident’s share of profit whenever a profit payout would naturally happen. o Profit tradeup – PHF will be co-developing hundreds of units with other impact partners that target missing middle home ownership opportunities for households making 60%-120% AMI (and occasionally less). Subject to availability, PHF tenants will be able to transfer their accruals from a PHF project for a 1:1 reduction in purchase price on these homes. • PHF shall establish all required legal entities to fulfill the profit-sharing obligations and demonstrate such establishment to RDA’s satisfaction. • Receive approval from the RDA and the City Attorney’s Office on all matters pertaining to title, legality of the funding agreement, and the legality, sufficiency, and form and substance of all other documents that are deemed reasonably necessary for the funding transaction. • Provide evidence of insurance in such amounts and with such coverage as deemed necessary by the RDA. PHF’s Obligations after the Funds are Distributed • Prior to the Rescue Plan Funds being distributed, PHF and RDA will agree on the form of a funding agreement. The funding agreement will require PHF to do the following after the funds are distributed: o PHF shall demonstrate to RDA’s satisfaction, sufficient sources of project financing for the 515 Project. Sources of financing must equal the total project cost. o PHF will have applied for Low Income Housing Tax Credits for the 515 Project by June 30, 2024. o PHF shall obtain all required city approvals to convert the 515 Project office spaces to residential units, including all necessary approvals from the City’s Planning and building services’ division. Additionally, PHF will commit to commencing and diligently pursing the completion of construction. o PHF will provide RDA biannual progress reports on the construction and operation of the units. o PHF will agree to implement an equitable process for tenant selection and as permitted by law, potentially prioritize certain applications. o PHF will commit to develop additional affordable housing projects in Salt Lake City to meet the following terms and conditions:  Within 20 years, PHF or its affiliates and subsidiaries will have developed 1,000 affordable housing units in Salt Lake City for those at 65% AMI and below. 8  These additional housing units must also participate in the tenant wealth building initiative as detailed above.  All newly constructed PHF projects shall achieve an energy star score of 90 or higher, participate in the City’s Elevate Buildings Program, and be designed to operate without onsite fossil fuel combustion. Defaults and Remedies Events of default under the restrictive use or funding agreements may include, but are not limited to: • PHF fails to construct the 515 Project within the timeframe provided in the funding agreement. • PHF fails to maintain the affordability (as required under the Restrictive Covenant) of the 515 Project units or the tenant wealth building initiative in the 515 Project. • PHF fails to provide regular development reports. • PHF fails to develop and maintain the additional affordable housing/tenant wealth building projects in Salt Lake City. • PHF fails to comply with any other city, state, or federal requirements. Remedies if PHF fails to cure in the event of a default may include, but are not limited to: • If PHF does not meet the initial conditions for funding, the RDA will not distribute the funds. • Once funds are distributed and upon an event of default, the RDA may: o File a breach of contract claim, which may include claims for:  Liquidated damages,  Injunctive relief, and/or  Specific performance. o File a direct action against PHF to comply with their obligations. o Any other remedies available at law or equity. 9 1 BOARD STAFF REPORT THE REDEVELOPMENT AGENCY of SALT LAKE CITY TO:RDA Board Members FROM: Allison Rowland Budget & Policy Analyst DATE:July 11, 2023 RE: RESOLUTION: AMENDMENT TO TERMS FOR LOAN TO VILLE 1659, LCC, AND CLARIFICATION OF HOUSING DEVELOPMENT LOAN PROGRAM ISSUE AT-A-GLANCE The Board will consider approving two modifications to the $1 million Housing Development Loan Program (HDLP) loan approved in January 2023 to the Ville 1659 project for development of deeply affordable housing at 1659 West North Temple, the former Ramada Inn. The Board may also wish to consider changes to the plans for this property, which the Board approved last January based on information in its HDLP application (see section C, below). These result from changes to the developer’s overall financing structure, as well as additional RDA staff review of the project. The RDA Finance Committee chose not to discuss this proposed amendment before forwarding it to the Board for its review, but the transmittal includes an email from one member of the Committee that outlines some concerns. These are listed in Policy Question 2 for the Board’s review and consideration. In addition to the proposed changes to the Ville 1659 project, RDA staff also requests that the Board consider approving a clarification within the HDLP resolution approved last January. This would apply to all projects approved for funding at that time, including the Ville 1659 project (see section D below). Goal of the briefing: Discuss and consider approving: 1. proposed modifications to RDA financing of $1 million for the Ville 1659 development at 1659 West North Temple; and 2. a clarification within the HDLP resolution approved in January 2023 which would apply to all projects approved for funding at that time which rely on the Low Income Housing Tax Credit (LIHTC). Item Schedule: Briefing: July 11, 2023 Set Date: n/a Public Hearing: n/a Potential Action: TBD Page | 2 ADDITIONAL INFORMATION A.Ville 1659 Background. Previously approved funding for this project includes a loan from the RDA and a grant from a grant program administered by the Community and Neighborhoods Department (CAN). 1. In its January 2023 meeting, the Board approved funding allocations and preliminary loan terms for eight projects totaling nearly $8.4 million through the RDA’s 2022 Notice of Funding Availability (NOFA). This included a $1 million loan for the Ville 1659 adaptive reuse project, with a forty-year term and two percent interest rate, which would be amortized over forty years, with cash flow repayments. The purpose was to transform the former motel into 197 studio units, which would be rented at 30% AMI (Area Median Income) or below, with preference to people who have experienced or are at risk of becoming homeless. 2. Last fall, the Council approved the Administration’s proposal to open a NOFA managed by CAN to award $6 million for a new Homeless Housing Grant Program. The funds came from money originally allocated by the Council to CIP and re-purposed in fiscal year 2023 for affordable housing initiatives to avoid exceeding the 25% fund balance threshold. The purpose of the program is to provide “a critical subsidy for housing that is the most difficult to develop,” allowing qualified projects to leverage other sources of funds specifically to acquire and rehabilitate former motels as new permanent supportive housing. The Ville 1659 project was awarded $2 million from these funds for 197 units and case management services, including community and behavioral health and substance use support. B.Proposed Changes to Ville 1659 Loan. 1. The first modification to the loan as approved would change the type of loan from a construction gap loan with cash-flow payments to a bridge loan with a balloon payment at the end of the term. The second would reduce the term of the loan from 40 years to three. The current RDA proposal results from changes to the developer’s overall financing structure and additional RDA staff review of the project. In total, the cost of the project drops to $16.9 million from $18.3 (see chart below). That section reflects a sharp reduction to the amount needed for property acquisition, which would drop from $12 million to $9.5 million based on documentation received by the RDA after the application was filed. The other major reduction would be in the developer fee, which would fall by nearly three-quarters, to $280,000. Sources and Uses in Original and Revised Ville 1659 Project ORIGINAL APPLICATION REVISED APPLICATION Sources Amount % of Total Sources Amount % of Total Difference Senior Debt $7,500,000 41.1% Senior Debt (Sundance Bay Bridge)$9,065,361 53.7%$1,565,361 RDA Loan $1,825,000 10.0%RDA Loan $1,000,000 5.9%$ (825,000) OWHLF $1,000,000 5.5%OWHLF $- 0.0%$(1,000,000) Owner Equity $2,066,378 11.3%Owner Equity $953,000 5.6%$(1,113,378) Utah Office of Homeless Services $3,858,622 21.1% Utah Office of Homeless Services $3,858,622 22.9%$- SLC HHGP Funding $2,000,000 11.0% SLC HHGP Funding $2,000,000 11.9%$- Deferred Fee --Deferred Fee --$- Total Sources $18,250,000 100% Total Sources $16,868,361 100%$(1,381,639) Page | 3 In terms of Sources, the developer did not receive $1 million from the Olene Walker Housing Loan Fund (OWHLF), as was anticipated in the original application. In the revised application to the RDA, OWHLF would contribute $0 to Sources, and the amount of Owner Equity also is reduced by $1.1 million. The apparent reduction in the RDA Loan reflects the Board’s decision in January 2023 to fund the project at $1.0 million, rather than $1.8 million. At the same time, the amount of “senior debt,” which takes precedence for repayment over the RDA loan, increases by $1.6 million. C.Changes to the Ville 1659 Project. 1. The revised project would add ten dedicated recreational vehicle (RV) parking spaces to the parking lot. In response to Council staff questions about servicing these spaces and whether the developer plans to apply for any of the Fiscal Year 2024 funds approved by the Council for subsidizing camping spaces, RDA staff stated: “The revised site plan shows the RV parking spots located behind a secured fence. The developer has told staff Ville 1659 will provide electrical, water, and sewer services, for which it is projecting a total of $450/month rent per RV site.” and “Our analysis and transmittal were being finalized around the same time the Council was approving the FY24 Budget. We have not discussed any potential terms or conditions for the funds related to this project or if it would qualify to apply.” RDA staff also noted that the construction costs for the RV parking spaces have been included in the Construction Costs line item of the sources and uses document (summary in section B3 above). 2. Ville Property Management (the project’s property manager) has leased space to Mental Health America of Utah (MHA) to provide mental health services to tenants and the general public. In response to Council staff questions about the terms of access for potential clients and other information, and the length of the contract with this organization, RDA staff replied that MHA’s specific operations or requirements for clients to qualify for services are not know and that the organization “is currently on a month-to-month lease with an intent to sign a 10-year lease at project stabilization.” D.Clarification to Tax Credit Requirement. In addition to the changes in the loan outlined above, RDA staff requests that the Board approve a clarification within the approved HDLP resolution to state that if a Uses Uses Source Amount % of Total Source Amount % of Total Difference Property Acquisition $12,000,000 65.8% Property Acquisition $9,500,000 56.3%$(2,500,000) Construction Costs $4,000,000 21.9% Construction Costs $4,297,653 25.5%$297,653 Soft Costs $1,000,000 5.5%Soft Costs $1,000,000 5.9%$- Developer Fee $1,000,000 5.5%Developer Fee $280,000 1.7%$(720,000) Project Contingency $250,000 1.4% Project Contingency $265,000 1.6%$15,000 Financing Costs $0 0.0% Financing Costs $1,525,708 9.0%$1,525,708 Total Uses $18,250,000 100%Total Uses $16,868,361 100%$(1,381,639) Page | 4 project does not receive tax credits in the next allocation cycle, the funding would need to be returned to the RDA. This would apply to all projects approved for funding in 2023 that rely on the Low-Income Housing Tax Credit (LIHTC). The clarification would state: “If these projects do not receive 9% tax credits in the 2024 Utah Housing Corporation 9% allocation cycle, or these projects do not receive an allocation of Tax Exempt bonds for the 4% tax credits by December 31, 2023, these funding commitments shall be returned to the RDA's Housing Development Loan Program. POLICY QUESTIONS 1.Board Resolution on Affordability Limits. It has been the Board’s policy to try to disperse new affordable housing units across parts of the City where access to opportunities for residents is greatest, while encouraging greater diversity in the housing choices offered on the West Side. Would the Board like to request an update on the geographical distribution of currently funded affordable housing developments? 2.RDA Finance Committee Member Concerns. The Board may wish to consider asking RDA staff about the reasons one RDA Finance Committee Member stated she could not recommend the loan as structured. The reasons are summarized by Council staff below; the full email sent to the RDA was attached to responses to staff questions (see Attachment C2). a. It is unclear whether the operating budget includes a line item paying for case management services from an organization with experience working with the people experiencing homelessness. b. The size of the permanent loan ultimately needed to pay off the construction/bridge loan is unknown due uncertainty about: 1. potential shifts in interest rates, and 2. estimates of the actual operating cashflow. These factors affect the project’s ability to repay the RDA loan because it is subordinate to the construction/bridge loan. c. The specifics of the guarantees required from the developer apparently were not made available to the RDA Finance Committee, so it is not clear how the RDA would be able to force repayment of the loan. d. The issue above may be of particular concern because the proposed project does not have project‐based rental subsidies. This means that any tenant who does not have HUD Section 8 vouchers would be charged only $556 per month (including utilities), rather than HUD’s Fair Market Rent of $910 for Section 8 voucher holders. The proforma assumes that all units would pay the larger Section 8 voucher amount, but if the number of non-Section 8 tenants is significant, it could result in a significant shortfall for RDA loan repayment. ATTACHMENT Attachment C1. RDA Staff Report, January 10, 2023. Attachment C2. RDA Finance Committee Member email listing concerns with project loan repayment. CITY COUNCIL OF SALT LAKE CITY 451 SOUTH STATE STREET, ROOM 304 P.O. BOX 145476, SALT LAKE CITY, UTAH 84114-5476 SLCCOUNCIL.COM TEL 801-535-7600 FAX 801-535-7651 BOARD STAFF REPORT THE REDEVELOPMENT AGENCY of SALT LAKE CITY TO:RDA Board Members FROM:Allison Rowland Budget & Policy Analyst DATE:January 10, 2023 RE: RESOLUTION: HOUSING DEVELOPMENT LOAN FUNDING ALLOCATIONS FOR AFFORDABLE HOUSING ISSUE-AT-A-GLANCE The Board will review and potentially approve recommendations for allocating up to $8.36 million in affordable housing funds offered through a Notice of Funding Availability (NOFA) in 2022. The purpose of these low- interest, 40-year loans is to incentivize the inclusion of affordable housing in new construction and in preservation projects. The ten applications forwarded to the Board have requested a total of nearly $16.8 million (an eleventh application was withdrawn). The applications were reviewed and ranked by the RDA’s Housing Development Loan Program (HDLP) Selection Committee. Their specific recommendations for allocating $6.0 million of funds approved by the Board in 2022 (as part of the fiscal year 2023 budget) are presented in the Transmittal’s Attachment C, along with recommendations for an additional $2.36 million which became available when a project approved in 2021 was withdrawn. The Board makes the final determination of which applications to fund and for what amount. This competitive NOFA was administered under the RDA’s Housing Development Loan Program (HDLP) and based on the Board’s April 2022 directive to require that proposals meet new “threshold criteria” for eligibility. These include minimum environmental standards, and that 10% of total housing units in each project are either deeply affordable, or family-sized—or both. (Additional information can be found in Section A below.) In the same April meeting, the Board also approved the complete list of 2022 Funding Priorities for the HDLP, which are used to encourage development that meets other key goals (see Section B). The RDA has released multiple NOFAs since late 2016 to facilitate the development of affordable housing units in Salt Lake City. This follows previous direction from the Council to concentrate housing development activities Item Schedule: Briefing: January 10, 2023 Set Date: N/A Public Hearing: N/A Potential Action: January 10, 2023 Page | 2 in the RDA and housing program activities in the Housing Stability Division of Community and Neighborhoods (CAN). Goal of the briefing: Discuss and consider adopting the Resolution entitled 2022 Affordable Housing – Housing Development Loan Program (HDLP) Funding Allocations. ADDITIONAL INFORMATION A. 2022 Threshold Criteria. In April 2022, the Board adopted new “threshold criteria” for the HDLP, which require that every application must meet the following criteria. 1.Environmental Criteria. The Board shifted two measures of environmental impact of a proposed project to threshold criteria. These are that the completed building(s) would receive an “Energy Star” score above 90, and that it would not install natural gas to power appliances, relying instead on electricity for this purpose. These requirements would apply to all proposed projects. The other eligibility threshold could be met by fulfilling either of the two following requirements, or both: 2.Deeply Affordable Units. At least 10% of total units in a proposed project must be deeply affordable, accessible for individuals or families that are homeless or at risk of homelessness. These units will be rent and income deed-restricted to households earning 40% or less AMI. 3.“Family-Sized” Units. At least 10% of total units in a proposed project have three or more bedrooms. These units will be rent and income deed-restricted to households earning 60% or less AMI. B. 2022 Funding Priorities. In addition to the Threshold Criteria, in April the Board set additional annual Funding Priorities for 2022 (see Transmittal, Attachment E). The funding priorities are part of a point system that is used in the evaluation process to encourage development that meets its additional Board goals. A project with a higher point total is typically more highly ranked than one with a lower total. 1. Approved FY23 Priorities. a. Priorities worth three points: •Family Housing •Target Populations •Homeownership •Missing Middle and Unique Housing Types b. Priorities worth one point: •Transportation Opportunities •Neighborhood Safety •Expand Opportunity •Architecture and Urban Design •Commercial Vitality •Historic Preservation /Adaptive Re-use •Public Art •Sustainability 2.Interest-Rate Reductions. In addition to increasing their point total, applicants also can receive interest-rate reductions on their HDLP loans, depending on the number of Board Page | 3 priorities their project would meet. See also Policy Question #2 below. For each funding priority included, a project is eligible to receive a 0.5% reduction to the Base Interest Rate, down to a minimum of 1% for four or more priority incentives that would be met. C. Applications for Projects in High Opportunity Areas. For the 2022 NOFA, none of the applications proposed projects located within “high opportunity areas,” a designation for census tracts where residents have relatively greater chances at upward mobility. In 2017, the Board first reserved $4.5 million for projects located in such areas. Two years later, the Board approved a $1.8 million loan for the Richmond Flats development, leaving the current balance at $2.7 million. ➢The Board may wish to consider the costs and benefits of continuing to reserve affordable housing funds for projects in areas of high opportunity, or whether to reserve additional funds for this purpose. ➢The map used by RDA staff to determine whether a proposed project is eligible for the loan funds reserved for high opportunity areas was part of research published in 2015, and the underlying data for the map dates from still earlier. Given the City’s rapid socioeconomic changes in the past decade, the Board may wish to request that the Administration work with the Gardner Policy Institute to update the map of high opportunity areas, at least to the extent new data is available in time for the next NOFA process. D. Evaluation Process. 1.Application Dates. The NOFA was released on September 6, 2022, and originally was closed on October 24, 2022. The application process was then re-opened from October 31 to November 14, after RDA staff clarified the Sustainable Development Policy to ensure applicants had time to apply the relevant requirements to their applications. The 2022 HDLP Annual Affordable Housing Funds Guidelines and Application Handbook can be found here. 2.Project Evaluation. As part of the application review process, RDA staff first analyzed applications to ensure they met the HDLP’s eligibility requirements. The Selection Committee (see below) then considered the Board’s funding priorities, along with factors related to the feasibility and technical qualities of each application. These include developer experience, the completeness and quality of the application, the amount of requested funding per affordable unit, the unit mix, community impact, and the financial and regulatory readiness of the proposed project. ➢The Board may wish to request information about how the selection committee balanced the Board’s annual priorities with the feasibility and technical qualities of each application, particularly developer experience and community impact. 3.Selection Committee. The selection committee was drawn from members of the Housing Trust Fund Advisory Board, the RDA Finance Committee (a subset of the Redevelopment Advisory Committee), and City staff in RDA and the Community and Neighborhoods Department, including members of the Division of Housing Stability. E. Background. The framework for allocating Housing Development Loan Program (HDLP) funds was adopted over several stages beginning in 2020. Since then, the RDA Board discussed and adopted the following: Page | 4 1.Housing Funds Allocation Policy. This policy establishes four housing funds based on fund source. The revenues, expenditures, interest, and payments for each fund source are separately accounted for to ensure the control and oversight required by statute. 2.Housing Development Loan Program (HDLP) Policy. The purpose of the HDLP is to incentivize the development and preservation of affordable housing in Salt Lake City through low-cost financial assistance. The HDLP provides a centralized application, underwriting, and approval process regardless of the fund source. 3.Setting Annual Affordable Housing Priorities. Under the recently adopted process, in the spring of each year, the Board adopts annual priorities to provide policy direction for RDA staff for reviewing applications to City affordable housing development support made available through a NOFA. The goal of adopting priorities on an annual basis is to direct resources to specific policy priorities depending on available resources, community need, and policy objectives. POLICY QUESTIONS 1.Does the Board agree with the strategy presented in the funding recommendations for using the potential additional $2.36 million from the 2021 project that was withdrawn? Alternatively, the Council may wish to consider: a. concentrating this amount in one or two key projects, rather than splitting it among several; or, b. using some or all of this amount for “emergency gap funds” available to affordable housing projects currently under construction that encounter funding shortfalls due to current economic and market conditions. (The Board also may wish to ask whether any HDLP funds are set aside for this purpose for FY23.) c. Re-allocating these funds to different affordable housing programs, like Strategic Acquisition, or to completely different uses. 2. The projects reviewed by the Selection Committee would be charged interest rates that range from 1% to 2.5% on 40-year loans. In the context of sharply rising interest rates in the broader economy, would the Board like to discuss the potential advantages and disadvantages of changing how the Base Interest Rate is set for HDLP loans? 1 Taylor, Austin From:Taylor, Austin Sent:Wednesday, July 5, 2023 12:30 PM To:Taylor, Austin Subject:FW: (EXTERNAL) RE: RDA Finance Committee: Proposed Modification for Ville 1659 Loan and HDLP LIHTC Condition From: Amy Rowland <amy@cdfautah.org>   Sent: Friday, June 30, 2023 7:11 PM  To: Taylor, Austin <Austin.Taylor@slcgov.com>  Cc: Tran, Tracy <Tracy.Tran@slcgov.com>; Werrett, Kate <kate.werrett@slcgov.com>  Subject: RE: (EXTERNAL) RE: RDA Finance Committee: Proposed Modification for Ville 1659 Loan and HDLP LIHTC  Condition    Austin –   I’m sorry I was unable to get back to you today, and thank you for your responses to my first questions.    From the available information, I’m still not comfortable that this is a good loan for the RDA.  My primary concerns are  as follows:  ‐ I can’t tell if this developer has a track record of experience in working with the homeless population and I don’t  see that the operating budget includes a line item paying for case management services from an organization  that does.   ‐ Since the RDA’s loan will be subordinate to the construction/bridge loan, the ability to repay the RDA’s loan  hinges on whether they can get a permanent loan sufficient to pay off the construction/bridge loan.  The size of  that permanent loan is unknown due to interest rate uncertainty, as well as the actual operating cash flow the  project will experience. The proforma used an interest rate with no cushion for that uncertainty.  ‐ The proforma assumes all units will pay the Fair Market Rent of $910 from a HUD Section 8 voucher.  However,  since the project doesn’t have project‐based rental subsidies, the rents they can charge any tenants who don’t  have vouchers will be much lower – approximately $556 including all utilities.  If a significant number of their  tenants don’t come with vouchers, their proforma NOI will be much lower, and so will the term loan  amount.  Without specifics on the guarantees required from the developer, I don’t understand how the RDA will  be able to force repayment in this case.    I understand the project will be moving forward to the RDA Board for approval, but due to the above concerns, I wanted  to be on record as not recommending this loan as structured.    Thanks for the opportunity to provide my input.    Amy Rowland  801‐557‐1537  REDEVELOPMENT AGENCY OF SLC Ville 1659 Loan Term Changes & HDLP Financing Condition Update RDA BOARD OF DIRECTORS MEETING -JULY 11, 2023 VILLE 1659 •1659 West North Temple •Conversion of mid-century motel (Ramada Inn) •197 studio apartments •10 RV parking sites •30% AMI •On-site mental healthcare •Taste of India restaurant UPDATED SOURCES AND USES Sources Original Current Sundance Bay Bridge Loan $7,500,000 $9,065,361 Olene Walker Fund Loan $1,000,000 $0 SLC RDA Loan $1,825,000 $1,000,000 Owner Equity $2,066,378 $953,000 SLC Grant $2,000,000 $2,000,000 State Grant $3,858,622 $3,850,000 Total Sources $18,250,000 $16,868,361 Uses Original Current Property Acquisition $12,000,000 $9,500,000 Construction Costs $4,000,000 $4,297,653 Soft Costs $1,000,000 $1,000,000 Developer Fee $1,000,000 $280,000 Project Contingency $250,000 $265,000 Financing Costs $0 $1,525,708 Total Uses $18,250,000 $16,868,361 PROPOSED LOAN TERM CHANGES Approved Proposed Loan Type Construction to Perm Bridge Loan Amount $1,000,000 $1,000,000 Payment Type Cash Flow Balloon Payment at End of Term Interest Rate 2%1%* Amortization Period 40 Years N/A; balloon payment Term 40 Years 3 Years *This change aligns with the HDLP Guidelines and does not require Board approval. CONDITION CLARIFICATION FOR LAST ROUND OF HDLP •Condition included to ensure funds would not be held up •Condition states that if project does not receive 9% tax credits, funds would be returned to RDA HDLP •Proposed clarification: If project does not receive 9% tax credits or allocation of tax-exempt bonds for 4%, funds would need to be returned to RDA HLDP REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. _____ Affordable Housing–Gap Housing Development Loan Program (HDLP) Amendment to Proposed Loan Terms RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING AN AMENDMENT TO PROPOSED LOAN TERMS FOR AN HDLP LOAN TO VILLE 1659, LLC. WHEREAS, the Redevelopment Agency of Salt Lake City (“RDA”) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act (the “Act”). WHEREAS, the Act provides that tax increment funds may be used for the purpose of increasing the affordable housing supply within the boundaries of Salt Lake City. WHEREAS, the Housing Development Loan Program (“HDLP”) was created to enable the RDA to incentivize the development and preservation of affordable housing. WHEREAS, the RDA Board of Directors (“Board”) previously approved the Housing Funds Allocation Policy (“Funds Policy”), which establishes policies with respect to dedicating and directing resources for the HDLP based on funding source (“Housing Funds”). WHEREAS, the Board also adopted the amended and restated Housing Development Loan Program Policy (the “HDLP Policy”) to provide a centralized application, underwriting, and approval process for accessing the Housing Funds, including granting the authority for review and approval of applications by the RDA Finance Committee (“Finance Committee”). WHEREAS, pursuant to resolution R-3-2023, the Board previously approved funding allocations and preliminary loan terms for eight projects selected to meet the goals established by the HDLP, amounting to a total allocation of $8,360,000. WHEREAS, included in that funding allocation was a proposed loan in the amount of $1,000,000 to Ville 1659, LLC (“Developer”) for development of a deeply affordable housing project to be located at 1659 West North Temple (the “Ville 1659 Project”). WHEREAS, preliminary loan terms for the approved funding allocation for Ville 1659 originally included a two percent (2%) interest rate, forty-year term, forty-year amortization, and cash flow repayments. WHEREAS, due to changes to Developer’s overall financing structure, RDA staff proposes making modifications to the preliminary loan terms, changing the type of loan from a construction gap loan to a bridge loan, to support the Ville 1659 Project until it reaches stabilization. WHEREAS, the proposed modifications include shortening the term to three years and changing the repayment structure from cash flow payments to a balloon payment due upon expiration of the term. WHEREAS, the Board agrees to allocate the funding with the preliminary loan term modifications as reflected in the Amended HDLP RDA Board Funding Allocations attached hereto as Exhibit A. NOW THEREFORE, BE IT RESOLVED by the Board of Directors of the Redevelopment Agency of Salt Lake City that it approves the funding allocations and preliminary terms as amended in the Amended HDLP RDA Board Funding Allocations attached hereto as Exhibit A, subject to revisions that do not materially affect the rights and obligations of the RDA hereunder. The Board authorizes the waiver of the Policy to set the base interest rate at the rate stated on the Term Sheet, which waiver shall be valid for three months from the date of this resolution. The Board authorizes the Executive Director to negotiate and execute the loan agreement and any other relevant documents consistent with the Amended and Restated Term Sheet, and incorporating such other terms and agreements as recommended by the City Attorney’s office. Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this _______ day of July, 2023. ________________________________ Alejandro Puy, Chair Approved as to form: __________________________________ Salt Lake City Attorney’s Office Sara Montoya, Senior City Attorney Date: The Executive Director: ____ does not request reconsideration ____ requests reconsideration at the next regular Agency meeting. ________________________________ Erin Mendenhall, Executive Director Attest: ________________________ City Recorder July 6, 2023 EXHIBIT A: AMENDED HDLP RDA BOARD FUNDING ALLOCATIONS PROJECT/APPLICANT ADDRESS PROJECT PRIORITIES/INTERES T RATE REDUCTION AND WEIGHTED NOFA RANKING** FUNDING REQUEST PRELIMINAR Y TERMS* TOTAL FUNDING ALLOCATIO N FUNDIN G RANKIN G 2 -Victory Heights 1 1060 E 100 S Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 $1,865,00 0 1% interest rate, 40-year term, 40-year amortization, hard repayments $1,865,00 0 1 BCG Holdings 3 - Victory Heights 2 1060 E 100 S Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 $280,000 1% interest rate, 40-year term, 40-year amortization, hard repayments $280,000 2 BCG Holdings 4 - Atkinson Stacks*** 543 S 500 W Target Populations: 3 Unique Housing Types: 3 Architecture & Urban Design: 1 Sustainability: 1 TOTAL: 8 $2,500,00 0 1% interest rate, 40-year term, 40-year amortization, hard repayments $500,000 8 HAME 5 - Book Cliffs Lodge*** 1159 S West Temple Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 TOTAL: 8 $540,000 1% interest rate, 40-year term, 40-year amortization, hard repayments $540,000 7 HAME 6 - Citizens West 2 509 W 300 N Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 $1,850,00 0 1% interest rate, 40-year term, 40-year amortization, hard repayments $1,850,00 0 3 Giv Development 7 - Citizens West 3 509 W 300 N Family Housing: 3 Target Populations: $1,200,00 0 1% interest rate, 40-year $1,200,00 0 4 Giv Development 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 term, 40-year amortization, hard repayments 8 - Ville 9 1025 N 900 W Unique Housing Type: 3 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 5 $1,700,00 0 2.5% interest rate, 40-year term, 40-year amortization, cash flow repayment $0 9/10 Ville Property Mgmt 9 - Ville 1659 1659 W North Temple Target Populations: 3 Unique Housing Type: 3 Transportation Opportunities: 1 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 9 $1,825,00 0 2% interest rate, 40-year term, 40-year amortization, cash flow repayment 1% interest rate, 3-year term, balloon payment $1,000,00 0 5 Ville Property Mgmt 10 - Liberty Corner*** 265 W 1300 S Family Housing: 3 Target Populations: 3 Missing Middle: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 TOTAL: 13 $3,000,00 0 2% interest rate, 40-year term, 40-year amortization, cash flow repayment $1,125,00 0 6 Cowboy Partners 11 - 9Ten West 910 W North Temple Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 5 $2,000,00 0 2% interest rate, 16-year term, 30-year amortization, cash flow repayment $0 9/10 Great Lakes Capital TOTAL $16,760,000 $8,360,000 *Final Terms shall comply with the requirements, standard loan terms and conditions, interest-rate reductions, and all other details laid out within the 2022 Housing Development Loan Program (HDLP) Guidelines. Changes to repayment type may occur (hard repayment versus cash flow repayment) and shall be based on requirements listed in the HDLP Guidelines or if required by a senior lender. Changes in repayment type will cause a change in the base interest rate. Repayment priority and lien position shall be based on the size of the loans. **Projects receive a 0.5% interest rate reduction for each included priority. Sustainability allows for a 1% or 2% reduction. The maximum reduction per development is 2%. The interest rate is calculated as follows: Base Interest Rate minus (-) Interest Rate Reductions (up to 2%) = proposed interest rate; Base interest rate shall be locked within a month of closing. Projects shall maintain project priorities and the same weighted score at closing. Deviation from project priorities met may require Board approval. ***If these projects do not receive 9% tax credits in the next 2024 Utah Housing Corporation 9% allocation cycle, or these projects do not receive an allocation of Tax Exempt Bonds for the 4% tax credits by December 31, 2023, these funding commitments shall be returned to the RDA's Housing Development Loan Program. Funds Availability HDLP Committed Funds $6,000,000 Additional HDLP Funds Approved by Board $2,360,000 Total Potential HDLP Funds $8,360,000 REDEVELOPMENT AGENCY of SALT LAKE CITY SALT LAKE CITY CORPORATION 451 SOUTH STATE STREET, ROOM 118 WWW.SLC.GOV · WWW.SLCRDA.COM P.O. BOX 145518, SALT LAKE CITY, UTAH 84114-5518 TEL 801-535-7240 · FAX 801-535-7245 MAYOR ERIN MENDENHALL Executive Director DANNY WALZ Director STAFF MEMO DATE: June 23 , 2023 PREPARED BY: Austin Taylor, Project Manager Tracy Tran, Senior Project Manager RE: Ville 1659 – Modified Terms for FY 2022-2023 Housing Development Loan Program (“HDLP”) Funding Allocation and Clarify Condition in HDLP Resolution. REQUESTED ACTION: Review and consider approving modified loan terms and clarification to HDLP resolution POLICY ITEM: Affordable Housing BUDGET IMPACTS: Proposed modifications include a balloon repayment of the $1,000,000 loan under a 3-year term versus the originally approved cash flow-based repayment under a 40-year term. EXECUTIVE SUMMARY The Redevelopment Agency of Salt Lake City (“RDA”) and Ville 1659, LLC (“Developer”), are proposing modifications to the previously-approved terms of the Housing Development Loan Program (“HDLP”) loan for the Ville 1659 permanent supportive housing project located at 1659 West North Temple and to clarify one of the conditions listed within the same Resolution. At the January 10, 2023, meeting, as part of the larger competitive Notice of Funding Availability (NOFA) through the RDA’s HDLP, the RDA Board of Directors (“Board”) approved a $1,000,000 construction to perm loan to the Ville 1659 project. As the Developer moved towards closing, staff reviewed updated financials and details and determined that the project would be able to pay off the loan within 3 years as opposed to 40 years. In addition, RDA staff is requesting that the Board approve a clarification to a condition within the approved HDLP resolution that states if a project does not receive 9% tax credits in the next allocation cycle, the funding would need to be returned. The clarification would state that if a project does not receive the 9% tax credits in the 2024 Utah Housing Corporation 9% allocation cycle, or if a project is not allocated the 4% tax credits by December 31, 2023, funding would need to be returned to the RDA’s Housing Development Loan Program. 1 BACKGROUND INFORMATION Ville 1659 is an adaptive reuse real estate development project that will convert the former Ramada Inn at 1659 West North Temple into a permanent supportive housing complex. The project aims to convert 197 hotel rooms into studio apartments for households earning 30% AMI or less, with tenant priority given to individuals who have been, currently are, or are at risk of becoming homeless . Ten (10) dedicated RV parking spaces will also be added to the parking lot. Ville Property Management (the project’s property manager) has leased space to Mental Health America of Utah to provide mental health services to tenants and the general public. PROPOSED LOAN MODIFICATIONS At the January 10, 2023 RDA Board meeting, as part of the larger competitive Notice of Funding Availability (NOFA) through the RDA’s HDLP, the RDA Board approved a $1,000,000 loan to the Ville 1659 project. Ville 1659 ranked fifth out of 10 applicants and was one of 8 projects that were allocated HDLP funds in the FY 2022-2023 HDLP funding cycle. Please see Attachment C – Resolution Approving 2022 HDLP Funding Allocations. Due to changes in the project’s financial sources and uses (Attachment B – Ville 1659 Updated Sources and Uses), Staff finds that the project will not require RDA funds long-term, and as such the RDA and Ville 1659, LLC are proposing a change in terms. The primary change requiring Board approval is the type and term of the loan. The project applied for Gap Financing: Rental Construction to Permanent, which generally has a term of 30-40 years. The proposed modifications include changing the term to a 3-year bridge loan to support the project during construction and through stabilization only. Under the modified proposal, the RDA will be refinanced out of the capital stack after stabilization at the project’s first refinance event—this is anticipated to occur within 3 years from the date of loan closing. These term changes put the RDA in a better financial position and will result in the RDA being paid back 37 years earlier than expected. The RDA would then be able to use this money to finance the construction of other affordable housing projects. This project is different than other projects the RDA has funded as the project is not using Low Income Housing Tax Credits (LIHTC). 2 LOAN TERMS The following table compares the loan terms that the RDA Board approved on January 10, 2023, to the modified loan terms that the RDA and Ville 1659, LLC, are proposing now: Approved Proposed Loan Type Construction to Perm Bridge Loan Amount $1,000,000 $1,000,000 Payment Type Cash Flow Single Balloon Payment at End of Term Interest Rate 2% 1%* Amortization Period 40 Years N/A, no repayment schedule Term 40 Years 3 Years *This change aligns with the HDLP Guidelines and does not require Board approval. CLARIFICATIONS TO CONDITION IN HDLP RESOLUTION The RDA Board approved the HDLP allocation of funds in January 2023. As part of the approval, the Board included a condition that states if a project does not receive 9% tax credits in the next allocation cycle, the funding would need to be returned to the RDA’s HDLP. This condition was included to ensure RDA funds would not be held up if a project experiences delays in receiving tax credits. RDA staff is proposing to clarify this condition as some projects may be able to move forward with their development by obtaining 4% tax credits. The clarification would state that if a project does not receive 9% tax credits by in the 2024 Utah Housing Corporation 9% allocation cycle, or if a project is not allocated 4% tax credits by December 31, 2023, funding would need to be returned to the RDA’s Housing Development Loan Program. NEXT STEPS If the Board approves the amended loan terms, Staff will finalize loan documents and work toward closing under the revised conditions. PREVIOUS BOARD ACTION: The Board approved a $1,000,000 HDLP loan for Ville 1659 at the January 10, 2023, meeting. ATTACHMENTS A.Ville 1659 Project Summary Sheet from January 2023 B.Ville 1659 Updated Sources and Uses C.Resolution approving 2022 HDLP Funding Allocations D.Amended Resolution 3 Attachment A: Ville 1659 Project Summary Sheet from January 2023 4 PROJECT NAME: 9 - Ville 1659 ADDRESS: 1659 W North Temple OVERVIEW Developer Ville Property Management Request Type HDLP Loan Project Type Renovation Existing Land Use Motel RDA FUNDING REQUEST Funding Request $1,825,000 Total Project Cost $18,250,000 RDA Loan to Cost 10% PROPOSED TERMS Interest Rate 2% Term, Amortization 40 year, 40 year Repayment Terms Cash Flow Repayment Lien Priority Subordinate to senior construction & permanent debt HDLP THRESHOLD REQUIREMENTS & PRIORITIES Family-Sized Units and/or Deeply Affordable Units Deeply Affordable Units Sustainability: Energy Star Score of 90+ Condition of Approval 100% Electric Condition of Approval Priorities Met Target Populations Unique Housing Type Transportation Opportunities Commercial Vitality Adaptive Reuse HOUSING UNITS Bedroom Count Total Units Market Rate 41-60% AMI <40% AMI Studio 197 - - 197* *All units restricted at or below 30% AMI TIMELINE Construction Start: 12/2022 Construction Completion: 5/2023 CONSTRUCTION DEBT AHEAD OF RDA PERMANENT SOURCES USES LOW-INCOME HOUSING TAX CREDIT Applying for Tax Credits (Y/N) No Tax Credits Reserved (Y/N) No Use Amount % of Cost Senior Construction Debt $7,500,000 41.1% Source Amount % of Cost Senior Debt $7,500,000 41.1% RDA Loan $1,825,000 10.0% OWHLF $1,000,000 5.5% Owner Equity $2,066,378 11.3% Office of Homeless Services $3,858,622 21.1% SLC HHGP Funding $2,000,000 11.0% Deferred Fee - - Total Sources 18,250,000 100.0% Source Amount % of Total Property Acquisition $12,000,000 65.8% Construction Costs $4,000,000 21.9% Soft Costs $1,000,000 5.5% Developer Fee $1,000,000 5.5% Project Contingency $250,000 1.4% Total Sources $18,250,000 100.0% 5 PROJECT NAME: 9 - Ville 1659 ADDRESS: 1659 W North Temple PROJECT SUMMARY From Developer: “Ville 1659 is a hotel conversion project that will create 197 studio apartments and 10 RV stalls that will be deeply affordable and low barrier for singles and couples near downtown Salt Lake City. Our organization, Ville Property Management (VPM), will be the developer, in partnership with Camp Construction, Design West, and Ward Engineering. Ville 1659 will offer much needed affordable housing that is targeted towards housing the most vulnerable individuals within our community and provides on-site case management to support housing stability. We will prioritize housing individuals experiencing literal homelessness, individuals that have previously experienced homelessness, and individuals that are at risk for becoming or returning to homelessness. Our service provider partnerships include: SLVCEH, The Road Home, the VA, Volunteers of America, Housing Connect, Housing Authority of Salt Lake City, Fourth Street Clinic, First Step House, Valley Behavioral Health, Mental Health America of Utah, and Salt Lake City Police Department.” DEVELOPER SUMMARY From Developer: “Ville 1659 is an entity of Ville Property Management (VPM). VPM has over 20 years of experience leasing, managing, and providing services across a range of affordable and market rate housing programs. VPM's current portfolio includes management of 580 units with experience working with Housing Subsidies (Permanent Supportive Housing, Section 8, and Rapid Re-Housing). VPM also offers deeply affordable housing to individuals that earn between 60% and 30% and below the Area Median Income (AMI) for the region. VPM also provides on- site Case Management services to the Salt Lake County residential properties to help tenants maintain their housing through our Case Management Model. Our focus is to provide affordable housing and extensive support to our tenants who have experienced homelessness and/or live below 30% AMI, to strengthen the wellness and livelihood of our tenants. Our unique team is dedicated in providing the needed services, supports, and programming to positively impact our tenants and community. Whether market rate or deeply affordable, we believe that everyone deserves the right to fair and supportive housing.” SITE MAP 6 PROJECT NAME: 9 - Ville 1659 ADDRESS: 1659 W North Temple PROJECT RENDERINGS 7 Attachment B: Ville 1659 Updated Sources and Uses Sources Original Current Sundance Bay Bridge $7,500,000 $9,065,361 Olene Walker Fund $1,000,000 $0 SLC RDA $1,000,000 $1,000,000 Owner Equity $2,066,378 $953,000 SLC Grant $2,000,000 $2,000,000 State Grant $3,858,622 $3,850,000 National Housing Trust Fund $825,000 $0 Total Sources $18,250,000 $16,868,361 Uses Original Current Property Acquisition $12,000,000 $9,500,000 Construction Costs $4,000,000 $4,297,653 Soft Costs $1,000,000 $1,000,000 Developer Fee $1,000,000 $280,000 Project Contingency $250,000 $265,000 Financing Costs $0 $1,525,708 Total Uses $18,250,000 $16,868,361 8 Attachment C: Resolution Approving 2022 HDLP Funding Allocations 9 1 REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. _______________ Affordable Housing – 2022 Housing Development Loan Program (HDLP) Funding Allocations RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING CITYWIDE AFFORDABLE HOUSING PROJECT FUNDING ALLOCATIONS. WHEREAS, the Redevelopment Agency of Salt Lake City (“RDA”) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act the “Act”). WHEREAS, the Act provides that tax increment funds may be used for the purpose of increasing the affordable housing supply within the boundaries of Salt Lake City. WHEREAS, the RDA Board of Directors (“Board”) approved the Housing Funds Allocation Policy (“Funds Policy”), Resolution R-1-2022, which establishes policies with respect to dedicating and directing resources for the development and preservation of housing based on funding source (“Housing Funds”). WHEREAS, the Board has set aside $6,000,000 of Housing Funds for affordable housing through the RDA’s Housing Development Loan Program (“HDLP”). The Board may also allocate an additional $2,360,000, which is the result of a loan commitment from the 2021 that was rescinded. The allocation of funds is contingent upon an application and review process administered by the RDA to facilitate funding of qualified projects that meet the goals established by the HDLP. WHEREAS, through a Notice of Funding Availability (“NOFA”), the RDA administered a loan application and review process pursuant to the HDLP policy set forth in resolution R-2-2022 (the HDLP Policy”) and the RDA’s Housing Funding Priorities for Fiscal Year 2022-2023 set forth in R-4-2022 (“Funding Priorities”) that resulted in ten requests for funding totaling $16,760,000. WHEREAS, on December 21, 2022, the RDA’s Finance Committee (“Finance Committee”) reviewed the HDLP applications and recommended funding allocations and preliminary terms as further described in on Exhibit A. WHEREAS, based on the Finance Committee’s recommendations, RDA staff recommends that the Board approve the funding allocations and preliminary terms described in Exhibit A. WHEREAS, following the Board’s approval of the funding allocations and preliminary terms as set forth on Exhibit B, the RDA shall provide a 24-month conditional commitment period during which the approved applicant shall have the opportunity to obtain needed financial, legal, and 03 of 2023 10 2 regulatory approvals, as well as satisfy other conditions determined by the RDA, to finalize the loan terms. WHEREAS, pursuant to the HDLP Policy, applicants that successfully meet the conditions of the conditional commitment shall be invited to execute a Letter of Commitment to finalize the loan terms, subject to a set of conditions precedent to closing of the loan. NOW THEREFORE, BE IT RESOLVED BY THE BOARD that it approves the funding allocations and preliminary terms as further described in Exhibit B, subject to revisions that do not materially affect the rights and obligations of the RDA hereunder. For approved applicants that successfully meet the required conditions, the Board authorizes the Executive Director to negotiate and execute the conditional commitment letter, the Letter of Commitment, the loan agreements, and other relevant documents consistent with the funding allocations and contained on Exhibit B and incorporating such other terms and conditions as recommended by the City Attorney’s office. Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this _______ day of January 2023. Approved as to form: __________________________________ Salt Lake City Attorney’s Office Allison Parks Date:____________________________ The Executive Director: does not request reconsideration requests reconsideration at the next regular Agency meeting. Erin Mendenhall, Executive Director Attest: City Recorder 10th Allison Parks (Jan 17, 2023 14:22 MST) Jan 17, 2023 Alejandro Puy (Jan 18, 2023 15:16 MST) rachel otto (Jan 18, 2023 16: 55 MST) 4 11 PROJECT/APPLICANT ADDRESS PROJECT PRIORITIES/INTEREST RATE REDUCTION AND WEIGHTED NOFA RANKING** FUNDING REQUEST PRELIMINARY TERMS* HDLP COMMITTED FUNDS: $6M POSSIBLE ADDITIONAL HDLP FUNDS: $2.36M TOTAL FUNDING RECOMMENDATION FUNDING RANKING 2 -Victory Heights 1 BCG Holdings 3 - Victory Heights 2 BCG Holdings 4 - Atkinson Stacks*** HAME 5 - Book Cliffs Lodge*** HAME 6 - Citizens West 2 Giv Development 7 - Citizens West 3 Giv Development 8 - Ville 9 Ville Property Mgmt 9 - Ville 1659 Ville Property Mgmt 10 - Liberty Corner*** Cowboy Partners 11 - 9Ten West Great Lakes Capital TOTAL $16,760,000 $6,000,000 $2,360,000 $8,360,000 Funds Availability 6,000,000 6,000,000$ Recommended Funding: HDLP Committed Funds 2,360,000 $0 Funds Remaining: HDLP Committed Funds 8,360,000 2,360,000$ Recommended Funding: Possible Additional HDLP Funds 0 Funds Remaining: Possible Additional HDLP Funds 8,360,000$ Recommended: Total Potential HDLP Funds 0 Funds Remaining - Total Potential HDLP Funds HDLP Committed Funds Possible Additional HDLP Funds Total Potential HDLP Funds 8 540,000 7 1,865,000 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 1 280,000 2 500,000 Target Populations: 3 Unique Housing Types: 3 Architecture & Urban Design: 1 Sustainability: 1 TOTAL: 8 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 TOTAL: 8 1060 E 100 S $280,000 $280,000 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 1060 E 100 S $1,865,000 $1,865,000 1159 S West Temple $540,000 $540,000 543 S 500 W $2,500,000 $500,000 0 Unique Housing Type: 3 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 5 Target Populations: 3 Unique Housing Type: 3 Transportation Opportunities: 1 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 9 3 509 W 300 N $1,200,000 $1,200,000 $1,200,000 4 509 W 300 N $1,850,000 $1,850,000 $1,850,000 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 FUNDING RECOMMENDATIONS Final Terms shall comply with the requirements, standard loan terms and conditions, interest-rate reductions, and all other details laid out within the 2022 Housing Development Loan Program (HDLP) Guidelines. Changes to repayment type may occur (hard repayment versus cash flow repayment) and shall be based on requirements listed in the HDLP Guidelines or if required by a senior lender. Changes in repayment type will cause a change in the base interest rate. Repayment priority and lien position shall be based on the size of the loans. 6 910 W North Temple 1,125,000 9/10 1659 W North Temple $1,825,000 $805,000 $195,000 $1,000,000 2,000,000 265 W 1300 S $3,000,000 $1,125,000 Family Housing: 3 Target Populations: 3 Missing Middle: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 TOTAL: 13 5 1025 N 900 W $1,700,000 Funds Recommended by Finance Committee 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 2.5% interest rate, 40-year term, 40-year amortization, cash flow repayment 2% interest rate, 40-year term, 40-year amortization, cash flow repayment 2% interest rate, 40-year term, 40-year amortization, cash flow repayment Finance Committee Recommendation: If these projects do not receive 9% tax credits in the next Utah Housing Corporation allocation cycle, these funding commitments shall be returned to the RDA's Housing Development Loan Program. Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 5 Projects receive a 0.5% interest rate reduction for each included priority. Sustainability allows for a 1% or 2% reduction. The maximum reduction per development is 2%. The interest rate is calculated as follows: Base Interest Rate minus (-) Interest Rate Reductions (up to 2%) = proposed interest rate; Base interest rate shall be locked within a month of closing. Projects shall maintain project priorities and the same weighted score at closing. Deviation from project priorites met may require Board approval. 0 9/10 2% interest rate, 16-year term, 30-year amortization, cash flow repayment EXHIBIT A: RDA FINANCE COMMITTEE RECOMMENDED HDLP FUNDING ALLOCATIONS The RDA Finance Committee recommends that funding be allocated to projects in order of priority ranking. 3 12 PROJECT/APPLICANT ADDRESS PROJECT PRIORITIES/INTEREST RATE REDUCTION AND WEIGHTED NOFA RANKING** FUNDING REQUEST PRELIMINARY TERMS* TOTAL FUNDING ALLOCATION FUNDING RANKING 2 -Victory Heights 1 BCG Holdings 3 - Victory Heights 2 BCG Holdings 4 - Atkinson Stacks*** HAME 5 - Book Cliffs Lodge*** HAME 6 - Citizens West 2 Giv Development 7 - Citizens West 3 Giv Development 8 - Ville 9 Ville Property Mgmt 9 - Ville 1659 Ville Property Mgmt 10 - Liberty Corner*** Cowboy Partners 11 - 9Ten West Great Lakes Capital TOTAL $16,760, 000 $8,360,000 Funds Availability 6,000,000 2,360,000 8,360,000 Final Terms shall comply with the requirements, standard loan terms and conditions, interest-rate reductions, and all other details laid out within the 2022 Housing Development Loan Program (HDLP) Guidelines. Changes to repayment type may occur (hard repayment versus cash flow repayment) and shall be based on requirements listed in the HDLP Guidelines or if required by a senior lender. Changes in repayment type will cause a change in the base interest rate. Repayment priority and lien position shall be based on the size of the loans. Projects receive a 0.5% interest rate reduction for each included priority. Sustainability allows for a 1% or 2% reduction. The maximum reduction per development is 2%. The interest rate is calculated as follows: Base Interest Rate minus (-) Interest Rate Reductions (up to 2%) = proposed interest rate; Base interest rate shall be locked within a month of closing. Projects shall maintain project priorities and the same weighted score at closing. Deviation from project priorites met may require Board approval. If these projects do not receive 9% tax credits in the next Utah Housing Corporation allocation cycle, these funding commitments shall be returned to the RDA's Housing Development Loan Program. HDLP Committed Funds Additional HDLP Funds Approved by Board Total Potential HDLP Funds 8 540,000 7 1,865,000 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 1 280,000 2 500,000 Target Populations: 3 Unique Housing Types: 3 Architecture & Urban Design: 1 Sustainability: 1 TOTAL: 8 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 TOTAL: 8 1060 E 100 S $280,000 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 1060 E 100 S $1,865,000 1159 S West Temple $540,000 543 S 500 W $2,500,000 0 Unique Housing Type: 3 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 5 Target Populations: 3 Unique Housing Type: 3 Transportation Opportunities: 1 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 9 3 509 W 300 N $1,200,000 $1,200,000 4 509 W 300 N $1,850,000 $1,850,000 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 6 910 W North Temple 1,125,000 9/10 1659 W North Temple $1,825,000 $1,000,000 2,000,000 265 W 1300 S $3,000,000 Family Housing: 3 Target Populations: 3 Missing Middle: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 TOTAL: 13 5 1025 N 900 W $1,700,000 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 1% interest rate, 40-year term, 40-year amortization, hard repayments 2.5% interest rate, 40-year term, 40-year amortization, cash flow repayment 2% interest rate, 40-year term, 40-year amortization, cash flow repayment 2% interest rate, 40-year term, 40-year amortization, cash flow repayment Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 5 0 9/10 2% interest rate, 16-year term, 30-year amortization, cash flow repayment EXHIBIT B: HDLP RDA BOARD FUNDING ALLOCATIONS 4 13 RDA Resolution 03 of 2023 Affordable Housing Funding Allocations for 2022 Notice of Funding Availability (NOFA) Process Final Audit Report 2023-01-20 Created:2023- 01-17 By:Thais Stewart (thais.stewart@slcgov.com) Status:Signed Transaction ID:CBJCHBCAABAATrDTy6jfF_-BJnbFO3LWv20Mdpm4-Ixn RDA Resolution 03 of 2023 Affordable Housing Funding Allocat ions for 2022 Notice of Funding Availability (NOFA) Process" His tory Document created by Thais Stewart (thais.stewart@slcgov.com) 2023-01-17 - 9:11:30 PM GMT Document emailed to Allison Parks (allison.parks@slcgov.com) for signature 2023-01-17 - 9:13:23 PM GMT Email viewed by Allison Parks (allison.parks@slcgov.com) 2023-01-17 - 9:21:58 PM GMT Document e-signed by Allison Parks (allison.parks@slcgov.com) Signature Date: 2023-01-17 - 9:22:08 PM GMT - Time Source: server Document emailed to alejandro.puy@slcgov.com for signature 2023-01-17 - 9:22:09 PM GMT Email viewed by alejandro.puy@slcgov.com 2023-01-18 - 7:38:56 AM GMT Signer alejandro.puy@slcgov.com entered name at signing as Alejandro Puy 2023-01-18 - 10:16:10 PM GMT Document e-signed by Alejandro Puy (alejandro.puy@slcgov.com) Signature Date: 2023-01-18 - 10:16:12 PM GMT - Time Source: server 14 Document emailed to Erin Mendenhall (erin.mendenhall@slcgov.com) for signature 2023-01-18 - 10:16:14 PM GMT Email viewed by Erin Mendenhall (erin.mendenhall@slcgov.com) 2023-01-18 - 10:16:40 PM GMT Document signing delegated to rachel otto (rachel.otto@slcgov.com) by Erin Mendenhall erin.mendenhall@slcgov.com) 2023-01-18 - 10:16:50 PM GMT Document emailed to rachel otto (rachel.otto@slcgov.com) for signature 2023-01-18 - 10:16:51 PM GMT Email viewed by rachel otto (rachel.otto@slcgov.com) 2023-01-18 - 11:55:38 PM GMT Document e-signed by rachel otto (rachel.otto@slcgov.com) Signature Date: 2023-01-18 - 11:55:51 PM GMT - Time Source: server Document emailed to Cindy Trishman (cindy.trishman@slcgov.com) for signature 2023-01-18 - 11:55:52 PM GMT Document e-signed by Cindy Trishman (cindy.trishman@slcgov.com) Signature Date: 2023-01-20 - 10:38:33 PM GMT - Time Source: server Agreement completed. 2023-01-20 - 10:38:33 PM GMT 15 Attachment D: Amended Resolution 16 REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. _______________ Affordable Housing –Gap Housing Development Loan Program (HDLP) Amendment to Proposed Loan Terms RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY APPROVING AN AMENDMENT TO PROPOSED LOAN TERMS FOR AN HDLP LOAN TO VILLE 1659, LLC. WHEREAS, the Redevelopment Agency of Salt Lake City (“RDA”) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act (the “Act”). WHEREAS, the Act provides that tax increment funds may be used for the purpose of increasing the affordable housing supply within the boundaries of Salt Lake City. WHEREAS, the Housing Development Loan Program (“HDLP”) was created to enable the RDA to incentivize the development and preservation of affordable housing. WHEREAS, the RDA Board of Directors (“Board”) previously approved the Housing Funds Allocation Policy (“Funds Policy”), which establishes policies with respect to dedicating and directing resources for the HDLP based on funding source (“Housing Funds”). WHEREAS, the Board also adopted the amended and restated Housing Development Loan Program Policy (the “HDLP Policy”) to provide a centralized application, underwriting, and approval process for accessing the Housing Funds, including granting the authority for review and approval of applications by the RDA Finance Committee (“Finance Committee”). WHEREAS, pursuant to resolution R-3-2023, the Board previously approved funding allocations and preliminary loan terms for eight projects selected to meet the goals established by the HDLP, amounting to a total allocation of $8,360,000. WHEREAS, included in that funding allocation was a proposed loan in the amount of $1,000,000 to Ville 1659, LLC (“Developer”) for development of a deeply affordable housing project to be located at 1659 West North Temple (the “Ville 1659 Project”). WHEREAS, preliminary loan terms for the approved funding allocation for Ville 1659 originally included a two percent (2%) interest rate, forty-year term, forty-year amortization, and cash flow repayments. WHEREAS, due to changes to Developer’s overall financing structure, RDA staff proposes making modifications to the preliminary loan terms, changing the type of loan from a construction gap loan to a bridge loan, to support the Ville 1659 Project until it reaches stabilization. 17 WHEREAS, the proposed modifications include shortening the term to three years and changing the repayment structure from cash flow payments to a balloon payment due upon expiration of the term. WHEREAS, the Board agrees to allocate the funding with the preliminary loan term modifications as reflected in the Amended HDLP RDA Board Funding Allocations attached hereto as Exhibit A. NOW THEREFORE, BE IT RESOLVED BY THE BOARD by the Board of Directors of the Redevelopment Agency of Salt Lake City that it approves the funding allocations and preliminary terms as amended in the Amended HDLP RDA Board Funding Allocations attached hereto as Exhibit A, subject to revisions that do not materially affect the rights and obligations of the RDA hereunder. The Board authorizes the waiver of the Policy to set the base interest rate at the rate stated on the Term Sheet, which waiver shall be valid for three months from the date of this resolution. The Board authorizes the Executive Director to negotiate and execute the loan agreement and any other relevant documents consistent with the Amended and Restated Term Sheet, and incorporating such other terms and agreements as recommended by the City Attorney’s office. Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this _______ day of July 2023. ________________________________ Alejandro Puy, Chair Approved as to form: __________________________________ Salt Lake City Attorney’s Office Sara Montoya, Senior City Attorney Date: The Executive Director: ____ does not request reconsideration ____ requests reconsideration at the next regular Agency meeting. ________________________________ Erin Mendenhall, Executive Director Attest: ________________________ City Recorder June 23, 2023 18 EXHIBIT A: AMENDED HDLP RDA BOARD FUNDING ALLOCATIONS PROJECT/APPLICANT ADDRESS PROJECT PRIORITIES/INTEREST RATE REDUCTION AND WEIGHTED NOFA RANKING** FUNDING REQUEST PRELIMINARY TERMS* TOTAL FUNDING ALLOCATION FUNDING RANKING 2 -Victory Heights 1 1060 E 100 S Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 $1,865,00 0 1% interest rate, 40-year term, 40-year amortization, hard repayments $1,865,000 1 BCG Holdings 3 - Victory Heights 2 1060 E 100 S Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Adaptive Reuse: 1 Public Art: 1 TOTAL: 10 $280,000 1% interest rate, 40-year term, 40-year amortization, hard repayments $280,000 2 BCG Holdings 4 - Atkinson Stacks*** 543 S 500 W Target Populations: 3 Unique Housing Types: 3 Architecture & Urban Design: 1 Sustainability: 1 TOTAL: 8 $2,500,00 0 1% interest rate, 40-year term, 40-year amortization, hard repayments $500,000 8 HAME 5 - Book Cliffs Lodge*** 1159 S West Temple Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 TOTAL: 8 $540,000 1% interest rate, 40-year term, 40-year amortization, hard repayments $540,000 7 HAME 6 - Citizens West 2 509 W 300 N Family Housing: 3 Target Populations: 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 $1,850,00 0 1% interest rate, 40-year term, 40-year amortization, hard repayments $1,850,00 0 3 Giv Development 7 - Citizens West 3 509 W 300 N Family Housing: 3 Target Populations: $1,200,00 0 1% interest rate, 40-year $1,200,000 4 19 Giv Development 3 Transportation Opportunities: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 10 term, 40-year amortization, hard repayments 8 - Ville 9 1025 N 900 W Unique Housing Type: 3 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 5 $1,700,00 0 2.5% interest rate, 40-year term, 40-year amortization, cash flow repayment $0 9/10 Ville Property Mgmt 9 - Ville 1659 1659 W North Temple Target Populations: 3 Unique Housing Type: 3 Transportation Opportunities: 1 Commercial Vitality: 1 Adaptive Reuse: 1 TOTAL: 9 $1,825,00 0 2% interest rate, 40-year term, 40-year amortization, cash flow repayment 1% interest rate, 3-year term, balloon payment $1,000,000 5 Ville Property Mgmt 10 - Liberty Corner*** 265 W 1300 S Family Housing: 3 Target Populations: 3 Missing Middle: 3 Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 TOTAL: 13 $3,000,00 0 2% interest rate, 40-year term, 40-year amortization, cash flow repayment $1,125,000 6 Cowboy Partners 11 - 9Ten West 910 W North Temple Transportation Opportunities: 1 Neighborhood Safety: 1 Architecture & Urban Design: 1 Commercial Vitality: 1 Public Art: 1 TOTAL: 5 $2,000,00 0 2% interest rate, 16-year term, 30-year amortization, cash flow repayment $0 9/10 Great Lakes Capital TOTAL $16,760,000 $8,360,000 *Final Terms shall comply with the requirements, standard loan terms and conditions, interest-rate reductions, and all other details laid out within the 2022 Housing Development Loan Program (HDLP) Guidelines. Changes to repayment type may occur (hard repayment versus cash flow repayment) and shall be based on requirements listed in the HDLP Guidelines or if required by a senior lender. Changes in repayment type will cause a change in the base interest rate. Repayment priority and lien position shall be based on the size of the loans. **Projects receive a 0.5% interest rate reduction for each included priority. Sustainability allows for a 1% or 2% reduction. The maximum reduction per development is 2%. The interest rate is calculated as follows: Base Interest Rate minus (-) Interest Rate Reductions (up to 2%) = proposed interest rate; Base interest rate shall be locked within a month of closing. Projects shall maintain project priorities and the same weighted score at closing. Deviation from project priorities met may require Board approval. ***If these projects do not receive 9% tax credits in the next 2024 Utah Housing Corporation 9% allocation cycle, or these projects are not allocated the 4% tax credits by December 31, 2023, these funding commitments shall be returned to the RDA's Housing Development Loan Program. 20 Funds Availability HDLP Committed Funds $6,000,000 Additional HDLP Funds Approved by Board $2,360,000 Total Potential HDLP Funds $8,360,000 21