Fiscal Note
The proposed resolution authorizes the award of up to approximately $5.5 million in Affordable Housing Funds to four (4) organizations that submitted applications to the Affordable Rental Housing Development: Non-Tax Credit Request for Proposals (RFP) released in April 2024. The resolution also authorizes the Mayor and City Clerk to execute agreements and take other actions as needed to accomplish the purpose of the resolution. The 2024 Adopted Capital Budget includes $20.0 million of funding for the Affordable Housing - Development Projects program (Munis program 17110, minor project 14938). The funding sources of the 2024 project include TID 51 increment to be used within TID 51 or within 1/2 mile of TID 51 ($3.0 million), TID increment from closed TIDs ($4.9 million), and General Fund-supported GO Borrowing ($12.1 million). No additional City appropriation required.
Title
Awarding up to $2.77 million of City Affordable Housing Funds authorized in the City’s 2024 Adopted Capital Budget, and up to $2.75 million of City funds also authorized in the 2024 Capital budget within TID #51 for affordable housing to help finance the development and preservation of approximately 152 units of affordable rental housing, in projects selected through a Request for Proposals (RFP) process; and authorizing the Mayor and the City Clerk to enter into agreements with agencies to implement the development projects. (District 3, District 6, District 14, District 15)
Body
Background
The City of Madison’s 2024 Adopted Capital Budget includes $20 million in authorized spending for the City’s Affordable Housing Fund (AHF). Of that, $1.5 million is for use to support affordable housing developments that are not seeking Low Income Housing Tax Credits to help finance the projects. The Community Development Division (CDD) made these funds available through the 2024-2025 Affordable Rental Housing Development: Non-Tax Credit Request for Proposal(s). The recommended awards described in this resolution draw from funds authorized for 2024, including funds committed through a previous CDD RFP process that were subsequently decommitted in favor of alternate sources of financing.
The Common Council established the AHF in the 2015 Capital Budget to help increase and/or preserve the supply of affordable rental housing. While the City’s primary strategy in investing AHF is to leverage the federal Low-Income Housing Tax Credit, the City has, since 2020, also invested AHF into alternative forms of development, especially prioritizing creative and/or under-utilized approaches to non-traditional development types and financing structures in order to diversify the structure and ownerships types of long-term affordable rental housing opportunities for residents.
The CDD released the Affordable Rental Housing Development: Non-Tax Credit RFP on April 26, 2024. Six organizations submitted proposals, responding to various preferences and goals set forth in the RFP. Four of the six proposals have been deemed most responsive to those goals and preferences and are recommended to receive funding. They include:
• Small Scattered Site Homeless Housing Program - a site-specific rehabilitation and new construction proposal submitted by Catalyst 4 Change LLC
• Parker Place - a site-specific rehabilitation and preservation proposal submitted by Hispanic Housing Development Corporation
• The Point on Washington Apartments - a site-specific rehabilitation proposal submitted by Repvblik Madison Apartments LLC
• Red Pine Cooperative - a site-specific acquisition and rehabilitation proposal submitted by Sunny Side Development & Red Pine Coop, Inc.
This resolution seeks authorization to commit City funds for these four proposals. It also seeks authorization for the Mayor and City Clerk to execute the corresponding loan agreements and other documents necessary to proceed with the approved financial commitments. All commitments of City funds are contingent upon developers securing other needed financing, and satisfying all City land use, tenant selection, and other requirements.
Action
WHEREAS, as part of ongoing efforts to advance the City’s objective of expanding the supply of affordable rental housing and improving housing stability, the Community Development Division issued a Request for Proposals (RFP) in April 2024 seeking affordable rental development proposals not also seeking Low-Income Housing Tax Credits; and,
WHEREAS, in response to the RFP, the City received six proposals from entities seeking financial assistance; and,
WHEREAS, a review team, comprised of staff from the City’s Community Development Division, Planning Division, and Community Development Authority evaluated proposals based on criteria set forth in the RFP that addressed issues such as conformance with the goals and objectives of adopted City Plans; the number and mix of housing units; project locations; financial viability; gap financing needed; per-unit subsidy requested; sustainability features; likelihood of securing needed land use approvals; and conformance with Tenant Selection Plan Standards; and,
WHEREAS, in addition to this review, the CDD staff team also evaluated each proposal for its consistency with the goals and requirements set forth in the City’s 2020-2024 Five-Year Consolidated Plan, formally adopted by the Common Council on February 25, 2020, which guides the use of U.S. Department of Housing and Urban Development funds; and,
WHEREAS, based on these reviews, the staff team concluded that four of the six projects were more sufficiently responsive to the City’s criteria, supported by adopted City Plans, and in position to proceed; and,
WHEREAS, the CDD staff team formulated recommendations to allocate $2,771,000 in City AHF funds, and $2,750,000 in City funds authorized for use in Tax Increment District (TID) 51 in South Madison, consistent with the TID 51 Project Plan, to support the following four development proposals to construct, and/or acquire/rehabilitate, and/or preserve approximately 275 units of rental housing, approximately 150 of which will be maintained as affordable for a period not less than 40 years:
• Up to $622,000 to Catalyst 4 Change LLC, or an affiliate entity, for rehabilitation and new construction of the Scattered Site Homeless Housing Program, located at 3507 Milwaukee Street
• Up to $2,750,000 to Hispanic Housing Development Corporation, or an affiliate entity, for rehabilitation and preservation of the soon-to-expire affordable housing at Parker Place Apartments, located at 2401 Parker Place
• Up to $1,500,000 to Repvblik Madison Apartments LLC, or an affiliate entity, for rehabilitation of The Point on Washington Apartments, located at 3917 Lien Road
• Up to $649,000 to Sunny Side Development and Red Pine Coop, Inc., or an affiliate entity, for acquisition and rehabilitation of the Red Pine Housing Cooperative, located at 212 Merry Street
WHEREAS, funds awarded to projects involving new construction will be provided in the form of a zero percent, long-term deferred loan payable upon sale, transfer, or change in the use of property; and,
WHEREAS, at least 50% of the funds awarded to projects involving acquisition and/or rehabilitation will be provided in the form of a zero percent, long-term deferred loan payable upon sale, transfer, or change in the use of property; and the accompanying promissory note will require repayment of either a percentage of the appraised value after rehab or construction, based on the amount of CDD funds invested in the property, or a percentage of the net proceeds, whichever is less; and, and,
WHEREAS, up to 50% of funds awarded to projects involving acquisition and/or rehabilitation will be provided in the form of a zero percent 15-year loan that requires no repayment so long as there is no sale, transfer, or change in the use of the property within 15 years of the date of final City disbursement of funds. Each year after the final City disbursement in which the project continues to operate as the intended use, a portion of the loan amount will be forgiven. After year 15, no repayment is required and the balance of the note is forgiven; and,
WHEREAS, as development proposals proceed through final design stages and required City approvals, agencies/developers may need to make minor project adjustments, including to the number and mix of housing units, if such changes are necessary to improve project feasibility and/or comply with land use requirements; and,
WHEREAS, the developers of these projects, either via agency or via an affiliate LLC, will be prepared to execute loan agreements and related loan documents with the City.
NOW, THEREFORE, BE IT RESOLVED, that the Mayor and the Common Council approve the recommended funding allocations described herein; and,
BE IT FURTHER RESOLVED, that the Council authorizes CDD staff to approve minor alterations to development projects, including to the number and mix of housing units if such changes are deemed necessary to improve prospects for securing all financing required to complete the project as presented and/or comply with City land use requirements, but not to increase the level of City financial assistance specified herein without Council approval; and,
BE IT STILL FURTHER RESOLVED, that the execution of a loan agreement and disbursement of City funds will be made contingent upon each project agency/developer demonstrating that it has (1) secured financing sufficient to complete the project; (2) received from the City all necessary land use and permit approvals; and (3) satisfied any other City requirements, including, but not limited to, providing a Tenant Selection Plan and Affirmative Marketing Plan consistent with the Standards published in the RFP and recording access easements necessary for long-term use of the development; and,
BE IT FINALLY RESOLVED, that the Council authorizes the Mayor and City Clerk to execute, deliver, publish, file and record such other documents, instruments, notices and records, and take such other actions as shall be deemed necessary or desirable to accomplish the purpose of this Resolution, and to comply with and perform the obligations of the City hereunder.