Creation of a dedicated revenue fund for affordable housing was
approved by City Council in FY 2006. For the first four years (FY 2006-2009),
one penny of the real estate tax rate (valued from $3.2 million to $3.5 million
during this period) was dedicated to affordable housing. The impact of
Alexandria’s “penny for housing” fund, the first penny program to be adopted in
the Northern Virginia region, was amplified by the City’s initial use of some
of the dedicated revenue as a source to service general obligation debt. For affordable
housing providers, the City typically provides a subordinate loan (with their
rents restricted, these developments are limited in how much conventional/first
trust debt can be financed) to fill the gap that is not supported by tax
credits and first trust debt. City loans are usually repaid from project cash
flow remaining after first trust debt and all operating expenses and other fees
are paid. This is called the residual receipts.
Typically, repayments on City loans are projected to begin 9 to 10 years
or more after a project is first “placed in service” after development or
renovation. Since rental revenues at affordable properties are capped, there is
a limit on how much hard pay debt can be borrowed. The City fills the gap that
cannot be financed or covered by low income housing tax credit equity. At the
time of the penny fund’s adoption in 2006, it was estimated that nearly $23
million of general obligation bond debt could be serviced from each penny.
With the economic downturn, in the City’s FY 2010 budget the dedication
for affordable housing was reduced to 7/10 of a penny ($2.2 million) and was
further reduced in FY 2011 to 6/10 of a penny ($1.9 million). These reductions
were set at amounts to meet existing debt service obligations only (around $15
million), and not service any new general obligation bond debt. The 6/10 of a
penny continues to be the rate proposed in the City’s FY 2017 budget, however,
as the City has paid down bond debt and refinanced its general obligation
portfolio to more advantageous terms and interest rates, a portion of the funds
provided within the 6/10 of a penny has become available again for some
affordable housing purposes. In recent years, some dedicated revenue dollars
have been used directly as part of the City’s overall funding support for
various affordable housing developments; during the Beauregard Small Area Plan,
these dollars were also identified as the source to fund a Relocation
Coordinator (approximately $126,000 in the FY 2017 budget).
From FY 2006-2016 the penny fund has generated over $27.9 million in
dedicated revenue and has leveraged $18.1 in bonds. General obligation bonds
and dedicated revenue have helped develop, preserve and/or renovate nearly 600
units of affordable housing and to fund the Beauregard Relocation Coordinator
position. Among the projects funded or partially funded through these sources
are Arbelo (34 units), Lacy Court (44 units), Parcview (151 units), Quaker Hill
(60 units), Longview Terrace (41 units), Miller Homes (ARHA replacement units
for James Bland) (16 units), Jackson Crossing (78 units), St. James Plaza (93
units), and The Gateway at King & Beauregard (74 units).
Since the City’s support for affordable housing projects is provided as
a loan, over time the City’s investment will be repaid and create a revolving
fund for future housing. Some of the first loans made with penny funds are
reaching the project timeframe to begin repayments and Housing’s Asset Manager
is reviewing development financials to ensure these loans perform as anticipated.
Specifically, Housing’s FY 2017 proposed budget includes $2.3 million (0.6 of a penny) that is dedicated to affordable housing be used in the following way: $1.4 million for debt service on previously issued bonds, $127,000 for one Relocation Coordinator FTE, and $758,000 to leverage up to $5.2 million, as/if needed to supplement Housing Trust Funds, for AHC’s 132-unit affordable housing project at 2280 N. Beauregard.