Council Provided Information - 7/11/20231
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
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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)
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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)
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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.