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Elizabeth Pagano is the editor of the Austin Monitor.
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Travis County studies complex funding plan for affordable housing
Wednesday, March 20, 2013 by Elizabeth Pagano
Travis County Commissioners took a second look Tuesday at a complicated plan to bring more affordable housing to the county. Critics say the current plan, which requires no financial investment by the county, is an attempt to game the system. However, county officials are hoping that the complex plan can create opportunity without putting taxpayer funds at risk.
Though Commissioners Court held off on taking any further action, it did reopen the public hearing, ultimately determining to revisit the topic in two to three weeks. At that time, they expect to have more information on the proposed funding from the Texas Department of Housing and Community Affairs and input from Ed Wendler, Jr., a member of the county’s Strategic Housing Finance Corporation Board of Directors.
Currently, the plan is for the county’s Housing Finance Corporation to establish a line of credit at a local bank, with enough money to borrow the funds the projects are seeking – just over $2.2 million. Then, if one or both of the two applicants receives tax credits, they would provide collateral, which would then be pledged to the bank, which would make the loan to the county’s Housing Finance Corporation, who would then make the loan to developers.
When asked who would benefit from the “money circle” by Commissioner Sarah Eckhardt, Travis County Corporations Manager Andrea Shields explained that the interest generated by the loans would go to the bank.
Walter Moreau, who is the executive director of Foundation Communities, detailed his concerns to the commissioners. He urged the county to put money into the loans if they were truly supportive. He pointed out that the point system, which determines which projects do and do not receive tax credits, is weighted to reflect local support, and intended to get local governments more involved in the process.
Local endorsements are one of the factors taken into consideration when evaluating affordable housing projects, and determining which will receive federal tax credits, which typically account for the majority of the projects’ financing. They are graded on a scale, depending on the amount jurisdictions are willing to invest. This year, the rules have changed,
“The rules were changed this year to make local funding a primary driver. So you are faced with the question of: Is this loan ethical? Does this loan really represent county money in the project or not?” said Moreau.
Moreau reminded them that while they had granted the developers the ability to apply for loans, they would have another opportunity to vote on the terms and conditions of how that loan would work in the future.
“I just want you to be fair about following the literal interpretation and the intent of the rules. I think the state intention here was very clear, and that is to really use county dollars. They have known for a long time that this practice of developer-collateralized lending at the banks has gone on. They shut it down in the rules for regional finance corporations,” said Moreau. “It’s really come back to the local decision. If you really want to support these other projects, the safe ground to stand on is putting in county money.”
The plan was brought back to the Commissioners Court by Commissioners Eckhardt and Margaret Gomez.
“I’m a little concerned about the risk-free aspect of it,” said Eckhardt. “Usually if it’s risk-free, it means we’re doing something for the look of it, which I think we are. That’s not a bad thing, unless we’re undermining, or putting our thumb on the scale.”
“I do think perhaps we were too hasty, because we’ve learned since that it is, possibly, going to have an unintended consequence that we hadn’t considered,” said Eckhardt.
Partner Cynthia Bast of Locke Lord, spoke on behalf of Realtex Development Corp, which has proposed the larger project seeking funding from the county. The 120-unit Windy Ridge Apartment Homes is currently ranked second in the region, and is asking the county for $1.8 million. (The other project, which is proposed by Resolution Real Estate, is asking for $425,000 to build a 117-unit development in Pflugerville, and is ranked fourth in the region.)
Bast said that the collateral loans weren’t putting a finger on the scales, but rather a way to even out the resources of poorer counties with richer cities. She urged the county to continue forward with both projects, and let the state determine the best course of action.
Foundation Communities has two projects vying for the tax credits. The city of Austin has pledged money to both projects. The money comes from the city’s budget surplus, and is contingent on receipt of the tax credits. In all, the city has made a contingent funding commitment on six projects, with funding to be made available to up to two of those, should they be approved.
Because the credits are so competitive, only two or three of the projects are expected to receive funding in Region Seven, which includes both Austin and Travis County.
In jeopardy is the Foundation Community Homestead Apartment Project which would, if built, offer 138 units of affordable housing at 3226 West Slaughter Lane. The total budget for the project is about $23.8 million, with $2.25 of that to come from the city if the other funding is secured.
The other, a South Lamar project that is the result of a unique partnership with Goodwill, has $1.8 million in city funds set aside to complete the proposed Skyway Studios that will be a 110-unit affordable housing project at 2800 South Lamar when complete.
The four projects are in competition with each other for the funding. The two county projects and the two Foundation Community projects are the top four, currently, for Region 7.
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