City of Alexandria, Virginia
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MEMORANDUM
DATE: JUNE 20, 2023
TO: THE HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL
THROUGH: JAMES F. PARAJON, CITY MANAGER /s/
FROM: HELEN S. MCILVAINE, DIRECTOR, OFFICE OF HOUSING
DOCKET TITLE:
TITLE
Consideration of Funding Plan for Housing Alexandria’s Mount Vernon - Glebe Development, including a Loan of $31.5 million in FY 2023 to FY 2024 City Housing Funds and a Commitment of up to $22 million in FY 2025 to FY 2026 Housing Funds, as Needed, to Facilitate Infrastructure, Parking, and 206 Affordable Units.
BODY
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ISSUE: Commitment of balance of FY 2023 to FY 2024 City Housing Funds as well as FY 2025 to FY 2026 funding of up to $22 million, as needed, to be provided as a loan to Housing Alexandria (HALX) to enable construction of the initial phase of the Mount Vernon - Glebe Development Project, including land acquisition, site work, infrastructure improvements, underground parking, city flex space, and 206 units of affordable rental housing.
RECOMMENDATION: That City Council approve the following:
1) An additional loan of $31.5 million in FY 2023 to FY 2024 housing funds, as planned, for upcoming components of Building One (to be partially funded with tax credits), as well as a commitment of up to $22 million in FY 2025 to FY 2026 City Housing/CIP funds to complete the City funding package for Phases Zero and One to facilitate a Summer 2023 start on the Arlandria project;
2) Authorization for the City Manager to execute all documents required to facilitate the application and receipt of federal funds for the project; and
3) Authorization for the City Manager to execute agreements and all related documents to implement the loan and project.
BACKGROUND: Housing Alexandria’s Mount Vernon - Glebe project received development approvals in early 2022 and, with City loan support of $10.5 million, was successful in applying for a competitive tax credit award later that year for a first tax credit-funded building (Building One - Phase 1). Besides the Housing Opportunities Fund (HOF) loan, City Council approved the transfer of a city-owned parcel (currently operating as an interim public parking lot) valued at $1.7 million, as well as a grant to enhance deep affordability in 10% of the units in the first building. Overall, 25% of all units at the site will offer rents affordable to households at 40% AMI or below.
Over the past year, Housing Alexandria and the City have worked to identify and secure multiple sources of funding to enable the construction of Phases Zero and One, including the first 206 affordable rental units (of a total of 416 affordable units that comprise “Building One”). Phase Zero includes land acquisition, site work and infrastructure improvements, and the underground parking that will serve Building One (and future Building Two).
The remainder of Building One, and Building Two, a separate structure, will be sequenced to be built in the near term when their funding packages are complete, including some sources cyclically available this year and next (new market tax credits and potential Community Development Financial Institutions (CDFI) funding, among others). With ~30,000+ sf of neighborhood-serving commercial space on the first two floors of Building Two, the stories above are planned as 58 for-sale affordable condominiums. The largest anchor of the commercial space has signed LOIs with HALX, and now that their square footage is set, it is anticipated that other commercial tenants will execute LOIs this summer for Building Two’s remaining space. The flex space planned to bring City services to the neighborhood has been incorporated into Building One to accommodate robust interest in Building Two’s commercial space.
DISCUSSION: At this time the City is moving forward with support for Phase 0 and Phase One, the first phase of Building One (206 units). City support for the project so far includes 2022 $10.5 HOF Loan; the city parcel valued at $1.7 million; a federal earmark of $1.5 million (awarded in December 2022 through sponsorship from Senators Warner and Kaine and Congressman Beyer); $1 million in HOME funds; $12 million in ARPA-derived funds (for infrastructure improvements and costs associated with the City flex space); and a Community Development Block Grant Section 108 loan of approximately $6 million. Besides these sources, additional FY 2023 to FY 2024 City housing monies reserved for this project are now requested as a loan to support HALX’s upcoming applications for non-competitive credits and bonds (Attachment 2 - Sources and Uses table for Phases Zero and One; and Table of Projected City Housing Fund Sources). To launch this phase with as much soft money as possible, since revenue to repay loans depends on the completion of vertical construction (apartments), the City also successfully applied for competitive Virginia Housing (VH) Amazon Impact REACH grant funding of $16.8 million which VH has released to the project.
The City and HALX are working to secure a reinvestment of $20 million in proceeds from HALX’s refinancing of a 2022 Amazon Housing Equity Fund (HEF) loan provided to acquire Park Vue Apartments for the early phases of the Arlandria project. City leadership and Housing Alexandria are also pursuing other investments and loans for later Phases from Amazon and have received expressions of support. However, at this time, Amazon has temporarily paused HEF activity through Q2, pending new direction, so staff has not been able to firm up this commitment.
The City funding commitment being requested is intended to provide sellers, investors, and lenders involved in the project comfort that resources will be available to move forward with, and complete, with Building One/Phase One. The City will also provide a comfort letter to Housing Alexandria indicating its commitment to the overall project. In addition to the sources described above, HALX will be applying for other philanthropic monies, state and national housing trust fund grant dollars, additional non-competitive 4% tax credits, and state housing opportunity tax credits, as well as drawing on construction financing once the multiple layers of soft funding are drawn down.
Land acquisition and site work to set the stage for infrastructure improvements to serve the project and the neighborhood will begin this Summer, followed by construction of the 379-space underground parking structure. Vertical construction of the first two components (“Phase I”) of Building One will begin in about 18 months.
The funding plan for the project was reviewed by the Alexandria Housing Affordability Advisory Committee’s (AHAAC) Investment Committee in late May and on June 1, the full Committee unanimously recommended that City Council approve the plan and the proposed loans.
FISCAL IMPACT: An additional loan of $31.5 million in FY 2023 to FY 2024 City housing funds and a commitment of up to $22 million in FY 2025 to FY 2026 City housing funds. Additional City commitments may be considered in the future as the funding packages to complete Buildings One and Two are assembled. At all times, the City’s financial interests will be secured by the underlying property and the value of the planned improvements. FY 2022 funds were previously approved in the amount of $10.5 million loan for the competitive tax credit funded building. Staff suggests that all City HOF funds be provided as a loan to HALX and/or its entity for this development while funds secured as grants may be provided as grants to HALX, at the City’s discretion.
As the City’s designated “highest housing priority,” funding for the Mount Vernon - Glebe project will be set aside, as needed, over several budget cycles to ensure its completion. Besides this development, funding has been approved in FY 2024 for a loan to Witter Place (currently anticipated to be awarded tax credits) and for a loan in support of the Samuel Madden Redevelopment (currently anticipated to be awarded tax credits).
ATTACHMENTS:
(1) Graphic of Mount Vernon - Glebe Development, by Phases
(2) Sources and Uses for Phases Zero and One/Building One, including table of projected City funding sources
STAFF:
Emily A. Baker, Deputy City Manager
Eric Keeler, Deputy Director, Office of Housing
Tamara Jovovic, Housing Program Manager, Housing
Kenneth Turscak, Housing Analyst, Housing