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Transmittal - 8/26/2021 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: August 9, 2021 PREPARED BY: Tammy Hunsaker RE: FY 2021-22 Affordable Housing Development Funding Priorities Follow-up REQUESTED ACTION: Follow-up briefing on the FY 2021-22 Affordable Housing Development Funding Priorities and consider approval of a resolution establishing annual Funding Priorities. POLICY ITEM: Affordable housing. BUDGET IMPACTS: N/A. EXECUTIVE SUMMARY: The Board of Directors (“Board”) of the Redevelopment Agency of Salt Lake City (“RDA”) recently had a series of discussions regarding housing funding priories for fiscal year 2021-22 (“FY 22”), on May 4, May 18, and July 20, 2021. This memorandum provides follow-up information to these discussions and proposes a revised funding priority strategy that is based on the Board’s feedback. The concept of annual housing funding priorities is new for this fiscal year due to the recent adoption of two housing policies. First, the RDA Housing Allocations Funds Policy (“Funds Policy”) establishes guidelines for allocating and directing resources for the development and preservation of housing by funding source. Second, the Housing Development Loan Program Policy (“HDLP Policy”) creates a program that centralizes the application, underwriting, and approval process across all funding sources, providing a one-stop-shop for community partners to access resources for the development and preservation of affordable housing. In accordance with the Funds Policy, an annual Funding Strategy shall be proposed that includes funding allocations for housing activities and funding priorities for the Board to consider as part of the annual budget adoption process. The annual funding priorities are intended to 1) prioritize projects during the funding allocation/ selection process and 2) provide for interest rate reductions for projects selected for funding. By adopting priorities on an annual basis, the RDA will be able to direct resources to specific policy priorities depending on current resources, community need, and policy objectives. RDA staff transmitted proposed funding priorities for the May 4, 2021 Board meeting. Subsequently, the Board has had multiple discussions expressing the desire to modify the previously proposed priorities. Currently, a revised funding priority strategy has been prepared by RDA staff (Attachment A). Once approved by the Board, the final funding priorities can be attached as Exhibit A to the FY 2021-22 Affordable Housing Funding Priorities Resolution (Attachment B). ANALYSIS & ISSUES: The housing funding allocation as provided within the Funding Strategy was approved as part of the Agency’s FY22 budget. The related annual funding priorities, once established, will be utilized in two ways, as follows: 1. Funding Allocation Priorities: HDLP funds shall be administered through a transparent notice of funding availability (“NOFA”) process and shall incorporate the funding priorities as determined annually by the Board. RDA staff will evaluate and rank applications based off the funding priorities, with the final funding decision authorized by the Board. Based on recent discussions, the Board has expressed the desire to modify these priorities in one or all of the following ways: reduce the number of, weight, and/or create threshold requirements. 2. Interest Rate Reduction Priorities: The HDLP policy provides for a 0.5% interest rate reduction for each funding priority a project aligns with, down to a minimum of 1%. The interest rate typically begins at ~3%, and a project would need to quality for 4 funding priorities to reduce the inte rest rate from 3% to 1%. On a $1,000,000 loan with a 30-year term, each 0.5% interest rate reduction would provide $77,000 in savings over the term or $2,500 annually. Projects applying for gap financing are not financially viable and often require low interest rates to adequately fill the gap. These interest rate reductions not only help incentivize the development of affordable housing, but can also incentivize other public benefits such as ground floor commercial or publicly visible art. As such, the Board may wish to keep the list of priorities utilized for interest rate reductions a bit more robust than the list of priorities utilized in the funding allocation/selection process. RDA staff has taken feedback expressed by the Board and revised the proposed FY 22 housing funding priorities (Attachment A). Within this revised approach, priorities for funding allocations for housing activities and interest rate reductions have been differentiated. Fund leveraging and sustainability have been set as a threshold requirement for accessing funding, with heightened sustainability also available as an HDLP interest rate reduction. In addition, regarding the priories utilized for ranking projects for funding, certain priorities have been weighted higher than others. Ideally, the heightened threshold requirements and weighted priorities will facilitate the funding of projects that align with specific policy objectives. Once projects are selected for funding, they will be eligible for interest rate reductions from a broad set of twelve funding priorities. A resolution for the Board to approve FY 22 housing funding priorities is provided as Attachment B to this memorandum, with the final funding priorities to be provided as Exhibit A to the resolution (Exhibit A is currently blank). PREVIOUS BOARD ACTION: • July 20, 2021: The Board continued its discussion on FY 22 housing priorities. • May 18, 2021: The Board continued its discussion on FY 22 housing priorities. • May 4, 2021: RDA staff presented draft FY 22 housing priorities with a subsequent policy discussion by the Board. • March 2021: The Board adopted the Housing Development Loan Program Policy. • February 2021: The Board adopted the RDA Housing Allocation Funds Policy was briefed by RDA Staff on a draft Housing Development Loan Program Policy. • December 2020: RDA Staff presented a draft RDA Housing Allocation Funds Policy Resolution and briefed RAC and the Board on the forthcoming draft Housing Development Loan Program Policy. • July 2020: RDA Staff proposed two draft frameworks that were envisioned to be expanded into legislative policies that would carry out the Board’s direction and intent to 1) direct the allocation of resources for affordable housing development and preservation and 2) consolidate loan administration for the development of affordable housing into a single location. • January - February 2020: RDA Staff briefed RAC and the Board on the Draft Salt Lake City Housing Implementation Framework, a framework that outlines the various roles and responsibilities across City divisions and departments for the implementation of housing. • June 2019 and June 2020: The Board and Salt Lake City Council allocated sales tax funds to the RDA with legislative intent of consolidating loan administration for the development of affordable housing into a single location. • May 2018 to March 2019: RDA Staff presented a series of briefings to RAC and the Board regarding housing, including on topics such as historical practices and funding allocations, statutory requirements, and interdepartmental coordination. • December 2017: The Board adopted a motion directing RDA Staff to draft an RDA Housing Allocation Policy. ATTACHMENTS: A. Proposed FY 2021-22 Affordable Housing Funding Priorities B. FY 2021-22 Affordable Housing Funding Priorities Resolution REDEVELOPMENT AGENCY OF SALT LAKE CITY RESOLUTION NO. _______________ FY 2021-22 Affordable Housing Funding Priorities RESOLUTION OF THE BOARD OF DIRECTORS OF THE REDEVELOPMENT AGENCY OF SALT LAKE CITY ADOPTING HOUSING FUNDING PRIORITIES FOR FISCAL YEAR 2021-22 WHEREAS, on February 9, 2021 the Board of Directors of the Redevelopment Agency of Salt Lake City (“Board”) confirmed approval of the Housing Funds Allocation Policy (“Funds Policy”) which establishes polices with respect to dedicating and directing resources for the development and preservation of housing by funding source (“Housing Funds”). WHEREAS, the Funds Policy provides that annually the RDA shall present to the Board a Housing Development Funding Strategy (“Funding Strategy”). WHEREAS, the Funding Strategy shall include a projected amount of revenue to be allocated to the Housing Funds, proposed funding allocations for housing activities, and proposed funding priorities (“Funding Priorities”) for the upcoming fiscal year. WHEREAS, pursuant to the Funds Policy, the Board shall consider the Funding Strategy as part of the annual budget adoption process. WHEREAS, on March 23, 2021 the Board adopted the Housing Development Loan Program Policy (“HDLP Policy”) to create a program to centralize the application, underwriting, and approval process across all funding sources, providing a one-stop-shop for community partners to access resources for the development and preservation of affordable housing. WHEREAS, the HDLP Policy provides that the annual Funding Priorities, as proposed through the Funding Strategy, shall be subject to approval by the Board on an annual basis. WHEREAS, the Board desires to adopt Funding Priorities to direct resources for the development of affordable housing through the Housing Development Loan Program for fiscal year 2021-22. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Redevelopment Agency of Salt Lake City: The Fiscal Year 2021-22 Affordable Housing Funding Priorities as shown on Exhibit A are hereby adopted. Passed by the Board of Directors of the Redevelopment Agency of Salt Lake City, this _______ day of ________________, 2021. ________________________________ Ana Valdemoros, Chair 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 August 6, 2021 Exhibit A: Fiscal Year 2021-22 Affordable Housing Funding Priorities Attachment A: Proposed FY 2021-22 Affordable Housing Funding Priorities CATEGORY POLICY OBJECTIVE NOFA RANKING WEIGHT* 0.5% INTEREST RATE REDUCTION** 1 Fund Leveraging*** Maximize impact by leveraging funds with the private market and with other available public resources. Threshold N/A 2 Sustainability**** Achieve green building and energy conservation standards to lower housing expenses, conserve resources, and promote resiliency. Threshold X 3 Family Housing Provide opportunities for families to enjoy the many benefits of urban living by encouraging the development of housing that is more conducive to larger household sizes. 3 X 4 Target Populations Expand the availability of units for extremely low-income households and special populations, thereby providing housing options for individuals or families that are homeless or at risk of homelessness. 3 X 5 Neighborhood Safety Utilize the development of housing as a method to remove blight, reduce crime, revitalize neighborhoods, and stabilize communities. 3 X 6 Homeownership Create opportunities for those who have historically rented in the community to build wealth and establish permanent roots through homeownership. 3 X 7 Transportation Opportunities Promote a multimodal transportation network and ensure convenient and equitable access to a variety of transportation options. 3 X 8 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. 2 X 9 Expand Opportunity Provide for Neighborhoods of Opportunity by promoting the economic diversity of the housing stock within neighborhoods. 2 X 10 Neighborhood Impact Encourage housing that is high-quality, enduring, and that contributes to neighborhood context and livability through architectural and urban design best practices. 2 X 11 Commercial Vitality Foster a mix of land uses and unique neighborhood business districts that adequately meet the local community’s needs. 2 X 12 Historic Preservation /Adaptive Reuse Encourage the preservation and/or reuse of buildings to preserve the character of neighborhoods. 1 X 13 Public Art 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. 1 X *Note: NOFA Ranking Weight: Uses a number (the weight) between 1 and 3 to assess the importance of the funding priority, with 1 being of lower importance and 3 being of the highest importance. **Note: .05% Interest Rate Reductions: While 12 interest rate reductions will be available, the maximum a project can quality for is four, thereby reducing the interest rate to a minimum of 1%. ***Note: Fund Leveraging: RDA funding will be limited to 10% or less of the project’s financing sources as a threshold requirement. ****Note: Sustainability: The threshold sustainability requirement will be as follows: Enhanced Energy Performance - All affordable housing construction loans of four hundred thousand dollars ($400,000) or more shall be designed to achieve an energy use intensity (EUI) target that is 25% lower than the median EUI of similar building types or a “Designed to Earn ENERGY STAR” Score of 80 or higher and participate in the City Sustainability Department’s Elevate Buildings Program. The EUI and ENERGY STAR targets shall be based on ENERGY STAR or comparable source. A project that has increased sustainability standards beyond the threshold requirement will be eligible for an HDLP interest rate reduction. ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ---------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------------------------------------