City of Alexandria, Virginia
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MEMORANDUM
DATE: DECEMBER 5, 2023
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
THROUGH: JAMES F. PARAJON, CITY MANAGER /s/
FROM: HELEN MCILVAINE, DIRECTOR, OFFICE OF HOUSING
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Consideration of a Request from the Alexandria Redevelopment and Housing Authority for City Council Approval to Establish an Independent Nonprofit Entity, Premier Housing.
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ISSUE: Alexandria Redevelopment and Housing Authority (ARHA) requests City Council approval to form an independent nonprofit entity, Premier Housing.
RECOMMENDATION: That City Council:
(a) Approve ARHA’s request to establish Premier Housing subject the City Manager’s satisfaction that safeguards described herein regarding Premier Housing’s activities, operations, and reporting obligations to the ARHA Board and to the City are incorporated in the nonprofit’s governing documents, including its articles of incorporation, operating agreement, and by laws, as appropriate; and
(b) Authorize the City Manager to conduct reviews of changes to Premier Housing’s organizational documents and or reports regarding its activities to ensure that the nonprofit is performing in ways consistent with the mission of ARHA and subject to the safeguards established herein.
BACKGROUND: ARHA has requested that it be allowed to establish an independent nonprofit entity to support its activities as an affordable housing developer which are currently limited by U.S. Department of Housing and Urban Development (HUD) regulations related to its role as a public housing authority. The practice of public housing authorities establishing separate nonprofit entities has become common, including in Virginia, especially among local housing authorities pursuing development activities and/or offering development or other fee consulting services. It is noted that Premier Housing is proposed to be entirely separate from the Virginia Housing Development, LLC (VHDLLC), another ARHA-created development entity, approved by City Council, that is fully subordinate to ARHA.
In response to a request from the City- ARHA Redevelopment Work Group at its June 2023 meeting, legal counsel for ARHA provided the attached memorandum (Attachment 1) describing how the creation of Premier Housing, a 501(c)(3) (nonprofit) organization will advance ARHA’s mission and its aspirations to develop, manage, and operate affordable housing successfully, and how it can additionally assist in participating in tax credit partnerships to leverage resources and fees not available to ARHA as a housing authority.
Among other things, Premier Housing would be used by ARHA to carry out activities consistent with its repositioning strategy which is proposed to improve the quality of its housing portfolio and ensure the long-term organizational sustainability by converting properties now operated through HUD contract payments to various project-based voucher programs that will increase rent subsidies to approximate fair market rents based on the submarket. Activities that might be conducted by Premier could include applying for grants available to eligible 501(c)(3) organizations and not otherwise accessible by ARHA, acting as a developer of affordable housing and forming single purpose entities (SPEs) to manage and control affordable housing development owners, and sharing in financial benefits resulting from development in which ARHA’s participation is currently not permitted based on its status as a housing authority.
ARHA has proposed that Premier Housing - which is required to be independent of the housing authority - be structured to be governed by a board comprised of ARHA senior staff (e.g., the Chief Executive Officer and Chief Financial Officer) along with three affordable housing professionals or subject matter experts. ARHA proposes that Premier’s organizational documents state that its purpose is to support and further ARHA’s mission, purposes, and development activities; that ARHA will provide initial capital funding to operationalize the nonprofit; and that ARHA will record restrictions requiring long term affordability for development Premier undertakes on ARHA’s account.
DISCUSSION: Housing staff have consulted the City Attorney in reviewing ARHA’s request. Staff are generally supportive of approaches that enhance ARHA’s mission to increase and preserve affordable housing within Alexandria; however, staff believe that some safeguards should be adopted to bound the authority, reach, and potential liability of the organization in order to be consistent with the City Charter mandate which requires that the ARHA Board of Commissioners be appointed by, and subject to, City Council’s oversight, as well as the statutory requirement of Virginia Code Section 36-19(12) that City Council approve ARHA created- organizations.
To ensure ARHA’s proposed extension of its operations to Premier align with these guidelines, City staff recommend the organizational documents of Premier Housing specifically incorporate the following provisions:
• That Premier Housing be created for affordable housing purposes only, including advancing ARHA’s mission and vision;
• That Premier Housing’s development activities be limited to the geographic boundaries of the City of Alexandria;
• That only senior executive staff who are permanent employees of ARHA serve on Premier’s board and help select its other directors;
• That City Council receive the names and credentials of the affordable housing professionals proposed to be appointed to Premier’s board thirty days in advance of their appointments;
• That Premier, through ARHA, provide the names of all projects, developments, and activities in which it is participating and/or consulting in any capacity through updates at City-ARHA Redevelopment Work Group monthly meetings;
• That Premier, comply with all federal, state, and local laws, as well as public reporting requirements, typical of nonprofit organizations; and
• That Premier, through ARHA, provide an annual report regarding its work to City Council, within thirty days of the organization’s fiscal year end, including a listing of Premier staff and directors throughout the reporting period.
In addition to the above, staff recommend that the City have the right to review and approve future proposed amendments to the organizational documents of Premier Housing and its sub-entities, if any, with 30 days’ advance notice of proposed changes. Authority for this review will be delegated to the City Manager and his designees.
FISCAL IMPACT: None for the City. ARHA proposes to provide initial capitalization to set up the nonprofit.
ATTACHMENT:
Memorandum from Ballard Spahr (ARHA’s legal counsel) regarding Premier’s role
STAFF:
Emily A. Baker, Deputy City Manager
Christina Zechman Brown, Deputy City Attorney
Eric Keeler, Deputy Director, Office of Housing
Kimberly V. Cadena, Housing Analyst