The Dollars Side of the CAF Equation Alliance for Housing Solutions (AHS) 2012 Leckey Forum November 9, 2012 Presented By: Kathleen McSweeney

AHIF: What is it? Affordable Housing Investment Fund Low-interest revolving loan fund Secondary, subordinate loans used as incentive for developers to provide affordable housing Used to commit or buy-down apartment units as affordable long-term (30 years standard, longer in some cases)

AHIF: What are the sources? Local general revenues Federal HOME funds County recordation taxes (~$1 million in 2011) Developer contributions  Calculation made under Affordable Dwelling Unit Ordinance for site plan projects in Arlington (~ avg $3 million annually) Loan Repayments & Payoffs

AHIF: How is it used? New construction Acquisition of existing multi-family buildings Rehabilitation of affordable housing Housing Services Grants ($100,000/yr)

AHIF: How does it help? Finances funding gaps in exchange for affordable housing commitment Demonstrates County commitment to project Leverages additional funds, and makes projects competitive in the state-wide Low Income Housing Tax Credits (LIHTC) pool

AHIF: Funding History

AHIF: How much is required? Let’s do the math:  Annual County Goal: create 400 net new affordable units (Goals and Targets report, Target 5B)  Average cost to develop a Committed Affordable unit (CAF): $85,000  400 X $85,000 = $34 million  In FY 2013, a bit more than half ($20M) is AHIF projections

AHIF and The Columbia Pike Neighborhoods Plan – Adopted July 2012 Establishes affordable housing goals:  100% of MARKS up to 60% AMI  100% of MARKS between 60-80% AMI 9,000 rental apartments on Columbia Pike*  1,200 CAFs  2,900 60% MARKS  3,200 80% MARKS Over 30 years, requires an additional $7-10 million in AHIF per year *Source: page 6 of Columbia Pike Neighborhoods Plan, Tools Report, June 7, 2012

AHIF: Considerations Amount to achieve all stated goals solely through AHIF approximately $40 million per year County defines CAF at 60% AMI  Committing units below 60% (at point of construction) would require an even larger capital investment Additional tools explored  Columbia Pike Tools Technical Report

TIF: What is it? Tax Increment Financing Leverages public financing in order to attract, finance and maintain development Takes the increment over the baseline of tax revenues generated by a district, and invests them to fund specific development in that district

TIF: What does that mean? The County would:  Define physical boundaries of TIF district  Analyze current land values and determine what tax revenue the area generates now (creates a baseline)  Determine the increased revenue based on improvements or increased values over a specified period  Tax revenues above the increment are used to finance debt without increasing taxes or reducing the existing tax revenues to the general fund. Source: Tax Increment Finance Best Practices Reference Guide at icsc.org

TIF: Where does the money come from? TIF revenue bonds would be issued, based on projected higher property taxes collected as a result of increased values TIF bonds are sold to finance the projects for which the use is earmarked Special fund established to hold incremental taxes collected Funds cover debt service on the bonds Developers may agree to guarantee debt service Source: Baltimore Development Corporation, Pilot & TIFs,

TIF: What are the typical uses? Encourage targeted development Eliminate blighted areas (as well as brownfield and greyfield re-development) Land Acquisition Infrastructure Development (streets, sidewalks, utilities, sewer expansion, etc.) Libraries, Schools and Emergency Facilities Affordable Housing Source: Tax Increment Finance Best Practices Reference Guide at icsc.org

TIPIF: What is it? TIPIF – Tax Increment Public Infrastructure Fund  Framework for evaluating and investing in public infrastructure to complement specific private investment projects  Used twice on Columbia Pike, for additional public parking in the mixed use developments Penrose Square and the Halstead. Source: Arlington County, CPHD

TIF vs. TIPIF Chief differences: TIF is generally used over a defined geographic area, and TIPIF is specific to a given development project When using TIPIF or TIF, County may have a guarantee from a development partner or partners

TIF: Where has this been used? 49 states, including Virginia, have TIF-enabling legislation California has used TIF for affordable housing, and has even used TIF funds to build outside the designated area New Kent County, Virginia (40 affordable units) Milwaukee, WI, 50 blocks of housing and neighborhood revitalization Source: Tax Increment Finance Best Practices Reference Guide at icsc.org

TIF: Considerations Serves to front-load funding, because timing of needs can’t be predicted TIF is gap funding and not the only financing source; other tools like density and AHIF will also be needed Taxes are not increased, but increment will not feed into the General Fund  Having TIF could reduce ability to use other tools (tax abatements, exemptions, etc.)  If revenues don’t materialize, then what?

Questions?

HOUSING GRANTS INFO 16,612 (7.7%) of the population lives below Federal Poverty Limits (up from 5.9%) Housing Choice Vouchers - #? Housing Grants = 1,142 (344 working families, 422 w/disabilities and 374 over 62 yo) Renters pay 40% of income toward rent, $ is avg subsidy PSH – 160 on 2012 Avg income $26,612 (families), $14, 738 (w/disabilities) and $15,142 elderly over 62