Affordable housing: City of Missoula to issue tax exempt bonds to boost Trinity project
The city of Missoula on Wednesday agreed to issue tax exempt revenue bonds to finance the construction of an affordable rental project that will include wraparound services when it opens to tenants and clients in 2022.
Trinity Apartments will provide 202 housing units on two parcels of property, one of which was donated by Missoula County last month. BlueLine Development LLC will build the project using 4% low income housing tax credits and tax exempt bonds.
Members of the City Council gave preliminary approval Wednesday for the city to issue the bonds at no cost to local taxpayers. A public hearing will be held in late November when a final vote will be rendered.
“This has no financial impact on the city of Missoula or the taxpayers,” said Eran Pehan, director of the Office of Housing and Community Development. “This is a significant investment the city of Missoula can make today without having to allocate any actual funds, and it's one of the creative financing tools we’re trying to pilot as part of affordable housing implementation.”
By issuing the bonds as a project partner, the city will save BlueLine roughly $672,000, allowing the developer to pass the savings on to low-income tenants through reduced rent. It will also enable BlueLine to set aside a $1 million cash reserve to cover future service costs associated with maintaining and operating the development.
“The low income housing tax credit is arguably the most important tool available to us today to develop affordable housing in our communities,” Pehan said. “This financing model provides significant benefits to local governments and our community as a whole.”
The tax credits are issued to the state by the federal government. The Montana Board of Housing then awards the credits to private and nonprofit developers. Developers can then sell the credits to private investors, who can claim the tax credit over a period of 10 years.
“The most compelling argument for this financing structure is it's leveraging effect on limited local public resources,” said Pehan. “In any one project, you can expect as much as a 40% reduction in the need for local funding sources when this model is used.”
The city this year adopted its new housing policy and is exploring funding models to address Missoula's lack of housing, including low-income and workforce housing.
The Trinity project, owned 50-50 between Homeword and the Missoula Housing Authority, will include 202 units on two parcels, including 72 low-threshold homes off Cooley Street and 130 homes off Mullan Road.
That latter parcel was donated by Missoula County and will include 30 supportive housing units, along with 100 units of workforce housing. It will also include an on-site navigation center to provide 24-hour resources, from food security to medication support.
“It'll have a multitude of resources within that building to help this population be successful,” said Keenan Whitt, the project manager with BlueLine Development. “It's an opportunity for us to partner with area nonprofit and service providers and create a model that doesn't duplicate current services in the community.”
The city sees sustained opportunities in using the 4% low income tax credit, and the Trinity project may be among the first projects of its kind to include such a wide net of partners.
Pehan said the city's goals around affordable housing would be unattainable without the program and the broad community support.
“Our housing policy benchmarks are aggressive,” she said. “We're working toward the development of 590 low income housing tax credit homes within the next five years. Without the use of the 4% housing tax credit model, we simply won't get there.”
Nate Richmond, president and CEO of BlueLine Development, has built similar projects in Colorado. He said operational funding will come largely from 30 housing vouchers committed to the project by the Missoula Housing Authority.
“We're looking at serving some very low income tenants, and perhaps a lot of zero income tenants in those 30 units,” he said. “The (tax-exempt) bond gives us the opportunity to have a longer amortization period than you can get from a conventional loan, and a lower interest rate, because of the tax-exempt status.”
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