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City Council moves forward with public housing ordinances

Charlottesville City Council on Monday moved forward the framework to provide funding for affordable housing projects, while keeping an eye on the long-term affordability of the units.

During its virtual meeting Monday, the council conducted a first reading of two ordinances for the Charlottesville Redevelopment and Housing Authority that are related to funding redevelopment projects.

One of the ordinances is for Crescent Halls and one for the first phase of redevelopment on South First Street.

The ordinances deal with previous council allocations for the first phase of CRHA’s redevelopment of public housing stock. The council has previously put $1.9 million toward Crescent Halls and $1.2 million toward the first phase of work on South First Street.

The council has to approve the money again because it is being provided to a Community Development Corporation created by CRHA for the projects, requiring a different type of bond issuance. CRHA is transferring the money to the corporation on a 30-year term at no interest.

The ordinances came with an agreement that requires the housing authority to reach certain milestones before it can receive the money.

The combined projects come with an expected construction cost of about $26.94 million, with a total development cost of about $34 million. Work at Crescent Halls would cost $15.39 million and South First Street would be $11.55 million.

Crescent Halls will be modernized with improved access for residents, who are primarily seniors and people with disabilities. The renovated building will have 98 one-bedroom and seven two-bedroom apartments.

Crescent Halls work will start in conjunction with the first phase of work on South First Street, where 58 existing units will be redeveloped and 142 units will be added, at a total estimated cost of about $38 million.

CRHA was concerned with the requirement to complete a sustainability plan before requesting a third payout of the funds set aside for the projects.

The plan would show how CRHA will establish and provide operational and capital funding and other reserves to guarantee the units would remain affordable for at least 40 years. The agreement would have required the plan to be completed, presented and approved by City Council before the third request could be made.

Executive Director John Sales said the agency would be unable to close on loans because it couldn’t show the requirement for a plan had been met.

Sales said it would likely take at least a year to complete the plan, but the third request of funds is expected in March or April. He requested the plan be tied to payments associated with the second phase of redevelopment.

Future phases of redevelopment include projects on Sixth Street, modernizing public housing on Madison and Riverside avenues and Michie Drive and redeveloping Westhaven.

Councilors were firm that a plan must be completed to ensure the city’s commitment to affordable housing doesn’t go to waste down the road.

“I just want to know by the time we get to that third draw, we’re seeing some progress toward a reasonable end of that sustainability study,” Councilor Heather Hill said.

Sales said CRHA supported the plan and is working toward an advertisement for consulting firms.

The council agreed to remove the requirement from the payment installments.

CRHA was also alarmed over requirements to pay full real estate taxes after 15 years. Currently, the agency contributes a payment to the city rather than a full real estate tax. Sales said the amount for all its properties is about $85,000.

Sales said combined property taxes for the first phase at South First Street and for Crescent Halls would be $95,000.

The agreement has a 15-year commitment to reimburse the housing authority for real estate taxes, but CRHA wanted to ensure a longer term commitment.

Because the council cannot legally appropriate future funds, the agreement is nonbinding and only shows the city’s intent to follow the requirements.

Councilors wrestled over how forgoing real estate tax revenue would impact the city’s ability to fund future projects.

The new units will be owned by an LLC controlled by CRHA. Under state law, the city cannot allow the LLC to use the regular payments or waive its taxes. Acting City Attorney Lisa Robertson said, however, the city regularly makes such performance agreements in which the real estate revenues are paid and then reimbursed to the property owner.

Construction on phase one is expected to start this fall or winter, pending approval from the U.S. Department of Housing and Urban Development.

The council also conducted a first reading of an ordinance authorizing a forgivable loan to the Piedmont Housing Alliance for the first phase of its redevelopment of Friendship Court.

Phase one includes 106 units on about four acres of the property off Monticello Avenue. It includes units designated for those making an income ranging from 80% of area median income to less than 30%.

Construction will take place on undeveloped land along Sixth Street Southeast and includes 35 multi-family homes and a 71-unit apartment complex. Of those units, 46 will be used by current residents who will be moved from the next area of development.

The first phase of the four-part redevelopment is estimated to cost $30 million.

The council approved about $5.6 million for the project in its fiscal 2020 budget.

The loan will be for 40 years and would be forgivable if all units remain affordable in that timeframe. The units are required to have a 99-year affordability period to be enforced through the state. If the units do not remain affordable after 40 years, the city can file a court injunction to maintain their affordability.

The ordinances will go on council’s Nov. 2 agenda for a second reading.

The council also approved a revenue-sharing agreement with the Piedmont Housing Alliance to generate the money necessary to start the project.

The agreement only applies to phase one of the project and requires the city to contribute real estate tax revenues above the current tax bill to PHA as a grant. PHA will then use the grant to leverage other loans.

The agreement does not ask for new current revenue, only the future revenue coming with the increased tax base.

The property was valued at $8.2 million in 2020, translating to $77,714 in annual real estate taxes. Once the project is underway, the value will increase and the city will contribute the difference in the tax bills to PHA.

City documents say phase one is expected to come with a value of $20 million, translating to an additional $190,000 in tax revenue.

The grant payments begin 15 months after the annual assessment once at least half of the units have received a certificate of occupancy.

Under the agreement, the funds will be transferred after performance criteria are met and will repeat annually until reaching a maximum of $6 million.

The agreement requires PHA to construct all 106 units. PHA must make all reasonable efforts to complete construction by June 1, 2022.

PHA plans to start construction on phase one in the spring. Executive Director Sunshine Mathon said the agreement was critical to securing the remaining financing.


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