|
Leon County
Board of County Commissioners Agenda Item#26 December 13, 2022 |
| To: | Honorable Chairman and Members of the Board |
| From: | Vincent S. Long, County Administrator |
| Title: | Consideration of Support of the Local Government Area of Opportunity Application for Proposed Lakeside Flats Apartments |
| Review and Approval: | Vincent S. Long, County Administrator |
|
Department/Division Review and Approval: |
Alan Rosenzweig, Deputy County Administrator Wanda Hunter, Assistant County Administrator |
|
Lead Staff/ Project Team: |
Shington Lamy, Director, Office of Human Services and Community Partnership Jelani Marks, Housing Services Manager |
Statement of Issue:
As recommended by the Housing Finance Authority of Leon, this item seeks Board approval to support the proposed Lakeside Flats Apartments’ application for federal 9% low-income housing tax credit and provide $115,000 as the County’s portion of the required match funding. Approval of this request aligns with the County’s effort to preserve and increase the stock of affordable housing in the community.
Fiscal Impact:
This item has a fiscal impact. The total local contribution required to be eligible for the federal 9% low-income housing tax credit is $460,000. The County and City would each provide $115,000 and the Housing Finance Authority of Leon County would provide the remaining $230,000. Federal Emergency Rental Assistance 2 (ERA 2) funding is available to support the County’s portion. Leon County, City of Tallahassee, and Housing Finance Authority of Leon County funds would not be obligated or expended if Lakeside Flats Apartments is not awarded tax credits.
Staff Recommendation:
Option #1: Approve the utilization of $115,000 in Emergency Rental Assistance 2 funding for a local contribution for the proposed Lakeside Flat Apartments in the form of a reduced interest rate loan, should the project be awarded 9% federal low-income housing tax credit for the Local Government Area of Opportunity Fund Application 2022 Cycle, and authorize the County Administrator to complete and execute the Local Government Verification of Contribution Form required to be submitted with the Lakeside Flat Apartments Application (Attachment #1), as well as any documents necessary to effectuate closing.
Option #2: Approve the Resolution and associated Budget Amendment Request realizing funding from the Housing Finance Authority of Leon County and the City of Tallahassee in the amount of $345,000 for a local contribution in the form of a reduced interest rate loan for the proposed Lakeside Flat Apartments should the project be awarded 9% federal low-income housing tax credit for the Local Government Area of Opportunity Fund Application 2022 Cycle (Attachment #2).
Report and Discussion
Background:
As recommended by the Housing Finance Authority of Leon, this item seeks Board approval to support the proposed Lakeside Flats Apartments’ application for federal 9% low-income housing tax credit and provide $115,000 as the County’s portion of the required match funding. Approval of this request aligns with the County’s effort to preserve and increase the stock of affordable housing in the community. The required local financial commitment totals $460,000. Leon County (County) and the City of Tallahassee (City) would each provide $115,000 and the Housing Finance Authority (HFA) would provide $230,000. The City Commission is considering the City’s funding commitment at its December 7, 2022 meeting.
The Lakeside Flats Apartments project, owned by Archway Partners of Orlando, Florida, proposes the construction of 66 new affordable rental units in Leon County. As described in further detail in the Analysis section, the highest affordable housing need in Tallahassee-Leon County is rental units for very low-income households earning less than 50% of the area median income in Leon County. Additionally, according to the Shimberg Center for Housing Studies (Shimberg Center) at the University of Florida, Leon County needs more than 7,000 affordable units to meet the housing needs of very low-income households currently living in the community. To address this need, the County collaborates and coordinates with local partners such as the HFA to increase and preserve the stock of affordable housing through policy development, program implementation, and strategic investments. Comprised of 7 Board appointed members, the HFA is a dependent special district established by the Board in 1980 to alleviate the shortage of affordable housing, primarily through capital investment and bond financing of multifamily housing developments. The HFA actively recruits and incentivizes developers to build multifamily affordable housing developments in Leon County through its bond financing authority and opportunities for capital investment to support construction.
On May 11, 2021, the Board approved an interlocal agreement with the HFA authorizing it to establish an application and evaluation process for the consideration of County support of developers’ requests for federal 9% tax credit through the Local Government Area of Opportunity Fund (LGAOF) (Attachment #3). The federal 9% tax credit award is highly competitive and typically funds approximately 70% of the total costs of a rental housing development. For example, in the 2021 cycle, the Florida Housing Finance Corporation (FHFC) received 89 applications for the LGAOF 9% tax credit and awarded only 11 projects across the state. FHFC is the state agency responsible for oversight of programs that fund affordable multifamily housing development including tax credit programs.
FHFC created the LGAOF to provide local governments the opportunity for input on the projects that are considered for the 9% tax credit award within their jurisdiction. The LGAOF is a lottery system that allows local governments (counties or cities) to designate a preference for one affordable rental development project within its jurisdiction for the consideration of the 9% tax credit award. The local government must commit a significant level of funding as confirmation of its support of the proposed project. The local funding amount required for the LGAOF is determined annually by FHFC as part of the federal tax credit application submitted for the project. Historically, the average required local contribution for LGAOF application is between $400,000 and $600,000.
As a result of several joint Affordable Housing Workshops, the County and City mutually support and prioritize increasing and preserving the community’s affordable housing inventory. For example, in 2020, the Board authorized the HFA to issue an $18 million Multifamily Housing Revenue Bond for the first phase of the three phase Orange Avenue Apartments redevelopment project. In 2021, the County provided funding to support the City’s preference designation of the 9% tax credit award for the second phase of the Orange Avenue Apartments project, approximately $20 million in tax credits. The Orange Avenue Apartments are located within the City limits and owned by the Tallahassee Housing Authority (THA). Due to FHFC program rules, THA is prohibited from submitting an LGAOF application in the 2022 cycle for the third and final phase of the project. Furthermore, the City is prohibited from supporting an LGAOF application in the 2022 cycle. However, the County may support an LGAOF application for an affordable housing project in the 2022 cycle, and the City has committed to providing financial support equivalent to that of the County, provided the application is approved and the project is located within the City limits.
As mentioned earlier, the Board approved an interlocal agreement authorizing the HFA to establish an application and evaluation process for the consideration of LGAOF applications. On September 1, 2022, the HFA released a notice of funding availability (NOFA) to solicit applications for proposed developments seeking County support and funding contribution for the LGAOF program. Proposed developments were required to be located within the urban services area of Leon County (including the City limits); set aside rental units equal to or greater than the FHFC standard for 9% tax credits; and ensure that the set aside rental units remain affordable in perpetuity. The property for proposed development must be owned or optioned for ownership by the developer, and zoned for multifamily housing use. The application for the proposed Lakeside Flats Apartments was the only application submitted by the October 31st deadline in response to the NOFA.
The Lakeside Flats application proposes the construction of 66 garden-style apartments on a 3-acre property located on Mahan Drive (Attachment #4). In accordance with the interlocal agreement, the HFA evaluated the proposed project including the experience of the developer; the number and mixture of units that will remain affordable in perpetuity; the proximity of the proposed development to mass transit, healthcare services, and employment centers; and the financial feasibility of the proposed development. On November 10, 2022, following its evaluation of the application, the HFA voted to recommend that the County designate local preference and support the LGAOF Application for federal 9% tax credit award for the proposed Lakeside Flats Apartments, and provide a commitment of a local contribution in the amount of $460,000 as requested by the developer. Additionally, the HFA voted to provide 50% of the requested local contribution ($230,000) to the County for the Lakeside Flats Apartments LGAOF application, should the project be awarded the 9% tax credit. On December 7, 2022, the City Commission will consider a commitment in the amount of $115,000. The HFA and City funding would total $345,000. This item recommends the County commit the remaining $115,000 from existing ERA 2 funding. Board approval of this request would increase the stock of affordable housing in the community.
Analysis:
As mentioned earlier, the Lakeside Flats development would be developed by Archway Partners on a 3-acre property located on Mahan Drive, just east of the Blair Stone Road and adjacent to Florida Highway Patrol building. The developer, Archway Partners, plans to construct 66 units of garden style apartments: 36 one-bedroom apartments and 30 two-bedroom apartments. The units would be constructed in three buildings and each building would be three stories.
Board support of the Lakeside Flats development project would address the highest affordable housing need in the community. All 66 units (100%) of the Lakeside Flats development would be set aside for low-income households and would remain affordable in perpetuity. As defined by the U.S. Department of Housing and Urban Development (HUD), which establishes the area median income (AMI) for all geographic areas in the U.S., low income refers to individuals or household earning less than 80% of the AMI.
As highlighted during the February 22, 2022 Joint County-City Workshop on Affordable Housing, the greatest housing need in Leon County is affordable rental units for households that earn 50% or less of the AMI ($28,435 for a household of one). According to HUD, the maximum amount of income a household should expend on housing cost is 30%, which includes rent/mortgage, HOA fees, and utilities. HUD indicates that household that spend more than 50% of their income on housing are cost burdened. In Leon County, most households earning less than 50% of the AMI are cost-burdened as they pay more than 50% of their income on housing costs. In June 2022, the Shimberg Center prepared and released a rental market study that determined Leon County needs an additional 7,340 affordable rental units to address the current need for households in this community that earn 50% of less of the AMI.
Also, in 2020 the Florida Housing Coalition conducted a study for the City which assessed that Leon County generally lacks smaller (1 to 2 bedroom) affordable units, and affordable rental units for extremely low and low-income households. All Lakeside Apartment units will be one-bedroom or two-bedroom apartments. As reflected in Table #1, most of the units of the Lakeside Flats development will be set aside for individuals and households that earning 60% or below the AMI in Leon County. Additionally, the monthly rent limits for the development are projected to be significantly lower than the current Leon County monthly rent averages of $1,188-$1,375 for 1 and 2-bedroom units.
Table 1. Area Median Income for Lakeside Flats Development Units
|
Area Median Income % |
Area Median Income for Household of One |
# of Units |
Monthly Rent Limit* |
|
30% |
$17,050 |
10 |
$460-$550 |
|
60% |
$34,122 |
26 |
$900-$1,100 |
|
70% |
$39,809 |
30 |
$1,000-$1,300 |
*Rent range based on number of bedrooms in a unit
The developer, Archway Partners is based in Orlando, Florida and has 15 years of experience in real estate development. Archway has stated that the development would be completed with high quality features and finishes such as solid surface flooring throughout the units, granite countertops, energy efficient appliances and bathroom fixtures, window coverings, and adequate parking. The development would include in-unit washer and dryer hook-ups, a fitness center, a multipurpose community room for resident programs, activities, and catering, as well as a library, coworking space, and tech lab. The development would also provide onsite management during business hours as well as support services for residents such as financial counseling, computer training, smoking cessation classes, and first-time homebuyer seminars.
The total development costs of the Lakeside Flats project are estimated at $22.1 million. The developer anticipates it would receive approximately $18.3 million tax credits should the project be awarded. The remaining funding would consist of bank financing, deferred developer fees, and the local contribution of $460,000. As previously mentioned, the HFA voted to provide 50% of the requested local contribution ($230,000) to the County for the Lakeside Flats Apartments LGAOF application. On December 7, 2022, the City Commission will consider a commitment in the amount of $115,000. The total HFA and City funding would be $345,000 with a remainder of $115,000 needed to fulfill the required local funding contribution in the form of a reduced interest rate loan.
Should the Board wish to support the LGAOF and the requisite funding for the Lakeside Flats project, it is recommended that the County utilize a portion of available Emergency Rental Assistance (ERA) 2 funding to meet its $115,000 commitment. The County was allocated $8.9 million for ERA 1 in January 2021 and $10.8 million for ERA 2 in March 2021 to assist eligible County residents with rent, utilities, and internet costs. The Leon County ERA Program funds have already been used to provide assistance to approximately 3,150 households for a total of more than $15 million. Approximately $2.4 million remained available in the County’s ERA 2 funding following the review and award of all eligible applications.
During the May 25, 2021 Budget Workshop and December 14, 2021 regular meeting, the Board was informed that an agenda item would be brought back recommending options for allocating the remaining ERA 2 funds as it was anticipated that the U.S. Department of the Treasury (Treasury Department), which oversees the ERA Program, would release further guidance to provide flexibility on the utilization of ERA 2 funding for affordable housing purposes beyond rent, utilities, and internet payments.
In July 2022, the Treasury Department released revised guidance authorizing, in relevant part, that a portion of ERA 2 funding that is unobligated on October 1, 2022, can be utilized for “the construction, rehabilitation, or preservation of affordable rental housing projects serving very low-income families”. The ERA 2 funding must be obligated by September 30, 2025, and fully expended “no later than 120 calendar days after September 30, 2025”. As a result, the County’s remaining ERA 2 funding can serve as an appropriate source for the required local contribution for Lakeside Flats should it be awarded the 9% tax credit. It is important to note that, during the November 22, 2022 meeting, the Board approved utilizing $1 million of the ERA 2 funding to address the funding request from the THA to support phase two of the Orange Avenue Apartments Redevelopment project. The current balance in the ERA 2 account is approximately $1.4 million.
FHFC is anticipated to announce 9% tax credit awards for the 2022 application cycle in the Spring of 2023. Should the Lakeside Flats project be awarded, Archway Partners anticipates credit underwriting to commence in April 2023, permitting through the City completed by October 2023, and closing to occur in December 2023. During the City permitting process, residents, and businesses within 1,000 feet of the property would be notified of the proposed development as well as City meetings on the project via mail and signs posted on the property. These notices will allow area residents opportunity to provide input on the proposed development. Construction is projected to commence in December 2023 and be completed in March 2025.
The LGAOF application must be submitted to FHFC by December 28, 2022. A Local Government Verification of Contribution Form (Attachment #1) must be completed, executed, and submitted with the LGAOF Application. It is recommended that the County Administrator be authorized to complete and execute the Local Government Verification of Contribution Form, should the Board approve the commitment for local contribution to Lakeside Flats Apartments. The Local Government Verification of Contribution Form would be completed for the full requested amount by the developer $460,000 ($230,000 from the HFA; $115,000 each from the County and City). No County, City or HFA funds would be obligated or expended if Lakeside Flats project is not awarded the 9% tax credit for the 2022 cycle. The requisite Resolution and associated Budget Amendment Request have been included with this agenda item as Attachment #2.
Options:
Recommendation:
Options #1 and #2
Attachments: