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HomeMy WebLinkAboutAPPROVED_Minutes_SKHHP_ExecutiveBoard_Jan_19_2024 SKHHP Executive Meeting January 19, 2024 MINUTES I. CALL TO ORDER Traci Buxton called the meeting to order at 1:02 PM. ROLL CALL/ESTABLISHMENT OF QUORUM Executive Board members present: Merina Hanson (alternate), City of Kent; Colleen Brandt- Schluter, City of Burien; Traci Buxton, City of Des Moines; Brian Davis, City of Federal Way; Victoria Schroff (alternate), City of Maple Valley; Eric Zimmerman, City of Normandy Park; Ryan McIrvin, City of Renton; Dennis Martinez (alternate), City of Tukwila; Sunaree Marshall, King County. Others present: Claire Goodwin, SKHHP Executive Manager; Dorsol Plants, SKHHP Program Coordinator; Tina Narron, SKHHP Advisory Board; Laural Humphrey, City of Tukwila; Dafne Hernandez, City of Covington; Matt Torpey, City of Maple Valley; Nicholas Matz, City of Normandy Park; Angie Mathias, City of Renton. II. PUBLIC COMMENT No public comment was provided. III. APPROVAL OF NOVEMBER 17, 2023 MINUTES Brian Davis moved to approve the November 17, 2023 minutes as presented, seconded by Victoria Schroff. Motion passed (8-0) IV. AGENDA MODIFICATIONS No modifications to the agenda were made. V. BOARD BUSINESS a. APPOINTING MEMBERS TO THE SKHHP ADVISORY BOARD AND INTRODUCTION Claire Goodwin provided an overview of the recruitment and selection process for the six SKHHP Advisory Board appointment candidates: In June, we presented a plan to recruit members to the SKHHP Advisory Board and solicited the names of individuals the Executive Board identified to target. Since June, Dorsol Plants, SKHHP Program Coordinator, has been actively engaged in a recruitment effort to identify potential candidates and communicated with over 40 individuals. We received 13 applications to fill six vacancies, and 11 interviews were conducted. The interview panel consisted of SKHHP's Executive Board Chair and Vice Chair, Nancy Backus and Dana Ralph; SKHHP Executive Board Member Brian Davis; Advisory Board Member Dr. Linda Smith, who participated in the first interview; and Advisory Board Member Maju Qureshi, who participated in the second and third interviews. By way of background, the SKHHP Interlocal Agreement (ILA) requires us to establish a 12-15 community member Advisory Board appointed by the Executive Board. The role of the Advisory Board is to provide advice and recommendations to the Executive Board on land and/or resource allocation for affordable housing projects, input on policy needs related to housing stability, program design, and development, recommendations for emergency shelter and other immediate affordable housing needs, and to provide public education and community outreach services. The ILA requires members appointed to the Advisory Board to know and understand affordable housing, be committed to furthering affordable housing in South King County, and represent diverse community perspectives. Appointments last four years, with service limited to two consecutive terms. The Advisory Board provides feedback and recommendations on two significant bodies of work during the work plan development process and the Housing Capital Fund recommendations. I am excited to present the six candidates for your consideration to appoint to the Advisory Board today. First is Hamdi Abdulle. Hamdi is a resident of Kent and would represent African Community Housing & Development. Hamdi brings her experience leading this non-profit housing developer and has deep experience working with the African diaspora immigrant and refugee community. Second is Marie Arns. Maria is a resident of Kent and would not be representing an organization. Maria brings her passion for addressing affordable housing challenges and her background as a person who has experienced homelessness, which is a crucial perspective for our Advisory Board. Third is Kent Hay. Kent is a resident of Auburn and would not be representing an organization. He brings deep experience working to address homelessness in South King County. Fourth is Kathleen Hosfeld. Kathleen is a resident of Seattle and would represent Homestead Community Land Trust. You may recall Katheleen’s presentation to the Executive Board earlier in the year on the community land trust model for maintaining affordability through homeownership. Kathleen brings her experience leading a successful non-profit community land trust and developing affordable housing with projects in South King County. Fifth is Olga Lindbom. Olga is a resident of Federal Way and would represent Open Doors for Multicultural Families. Olga brings her experience supporting families with an intellectual and/or developmental disability through a social services organization. And sixth is Rumi Takahashi. Rumi is a resident of Seattle and would represent SMR Architects. SMR architects designs, preserves, and advocates for affordable housing, and they have projects in South King County. Rumi brings her passion for affordable housing development and perspective as an architect of affordable housing. All candidates identified experience working with low-income households, BIPOC community members, immigrant and refugee populations, people experiencing homelessness or housing insecurity, veterans, aging adults/seniors, and youth. Most candidates identified experience working with LGBTQ+ communities, people living with disabilities and/or behavioral health needs, people with a criminal history, and multigenerational households. Brian Davis added that after having the opportunity to interview all the candidates, he was excited about who was being recommended. Deliberations took some time, and the panel had the excellent problem of picking from a group of strong candidates. He is looking forward to working with the six selected candidates. Brian Davis moved to adopt Resolution 2024-01, appointing the recommended candidates to the SKHHP Advisory Board for a term of four years, seconded by Colleen Brandt-Schluter. Motion passed (8-0) Eric Zimmerman joined the Executive Board meeting at 1:20 PM. Claire Goodwin asked each of the new Advisory Board members to introduce themselves and any current Board Members present. Hamdi Abdulle said she was excited to join the SKHHP Advisory Board and has worked to support her community in SeaTac for a long time. The road was very steep coming to the US and the State of Washington, but my experience has taught me a lot, and I am glad to share that with the Advisory Board. Kathleen Hosfeld is the CEO of Homestead Community Land Trust and the proud new owner of a rental housing project in Renton. While Homestead is new to rental work, the governance structure is unique and creates greater resident autonomy. She is excited to work in partnership with everyone moving forward and bringing more homeownership to South King County. Olga Lindbom said she is honored to be a part of the SKHHP Advisory Board and to add the voice of the communities she is a part of and represents. She has worked for the past ten years at Open Doors for Multicultural Families, providing programs and services for families at the intersection of cultural/linguistic diversity and disability in South King County. Rumi Takahashi said she is excited to join the organization and get to know her fellow board members. She has worked behind the scenes on the design and construction of affordable housing and is excited to jump into the policy side to help develop better housing. Tina Narron is the Chief Lending Officer at Verity Credit Union and joined the Advisory Board in February 2023. What drew her to SKHHP is that it matched Verity’s mission to help build generational wealth and support affordable housing. SKHHP is one way to ensure that someone is speaking about the need for equitable housing programs. Uche Okezie serves as a private citizen on the Advisory Board and is a resident of Burien. She joined to help create change and ensure affordable rental and homeownership opportunities. She has been a board member since November 2021 and has enjoyed the work, including funding projects through the Housing Capital Fund. Claire Goodwin thanked the Advisory Board members for introducing themselves and congratulated the new Advisory Board members. She confirmed with Dorsol Plants that the next Advisory Board meeting was on February 1, 2024. Traci Buxton stated she was grateful and impressed by the quality of the candidates and their work professionally and as volunteers to improve their community. VI. BRIEFING a. INTRODUCTION TO TAX INCREMENT FINANCING (TIF) Claire Goodwin began by reminding the Executive Board that at the June 2023 meeting on long- term funding strategies for the Housing Capital Fund, the Board identified tax increment financing (or TIF) as a topic of interest to learn more about. The Executive Board confirmed their continued interest at the November 2023 Board meeting, and subsequently, SKHHP staff identified one of the TIF subject matter experts. That subject matter expert is Morgan Shook, Partner/Senior Policy Advisory at ECOnorthwest, and Morgan has graciously offered to present to us today. Morgan has deep expertise in economic, market, and financial analytics that he brings to bear in business, enterprise, and policy settings. Morgan regularly works for various government, business, and non-profit clients, providing analyses highlighting opportunities, consequences, and trade-offs of land and infrastructure decisions. After Morgan’s presentation, Brian Davis from the City of Federal Way will discuss his perspective of TIF and Federal Way’s utilization of the tool to redevelop a vital area of the city. Morgan Shook explained that his expertise is twofold: on the housing and infrastructure sides. On housing, he has worked on land development for affordable housing developers and local government, particularly transit agencies in Washington, Oregon, and California. In Washington, the focus has been on helping to steer equitable development to create deeply affordable units and advance other community benefits. His early history of policy development was working with cities when Washington State offered a tax credit to encourage the annexation of large areas, which led to an understanding of the fiscal challenges many cities face. Washington has had a TIF program for roughly thirty years and was initially called Community Revitalization Financing (CRF). CRF was only used between the City and County of Spokane, and it was a tax-sharing arrangement between the two entities to allow neighborhood-level community planning for infrastructure. This process needed more support for economic development and led to the creation of two laws in the 2000s: the Local Infrastructure Financing Tool (LIFT) and Local Revitalization Financing (LRF). LIFT was very popular and allowed a sales tax credit of up to $25 million back to the jurisdiction, which several cities successfully used. The downside was that it required the state to provide funding for the program. LIFT would morph into the LRF, which was not competitive but was a first-in, first-out tool. Roughly 25 cities would receive funding over five rounds between the two programs. Over the years, the Association of Washington Cities and others would lobby for the state legislature to provide some specialized infrastructure funding tool. In 2021, the legislature would establish a robust TIF process in response to the economic challenges brought on by COVID-19. TIF is an economic development tool available to cities, counties, and ports that allows increased property tax revenue stemming from private development to be used "up front" to invest in infrastructure to support the development. TIF is designed to benefit a specific site or area with high certainty that development will occur. TIF is established by a "but/for" agreement, meaning the development would not occur without the infrastructure improvements. This can include the argument that the development would only occur on-time, at-scale, or match the community's desires with that investment. The Tax Increment Area (TIA) is sometimes known as a TIF district and is the area where the incremental values are calculated. Inside a TIA, the base value is the taxable value of properties in the TIA at the time it is created based on the tax year it is established. The increment value is any positive change above that base value in any given year the increment is being measured. Finally, public improvement is defined by the infrastructure funded by the TIF investment, and there is a legal requirement that a local government must own these. TIF funds can be spent in two general ways. The first side is what is in the "but/for" argument or the things which must be built to support the development. These can be things inside and outside of the TIA and can include road construction, water/sewer connections, parks, transit facilities, brownfield mitigation, and other items generally considered public infrastructure. An example of an improvement outside of the TIA might be a roadway intersection a 0.5 mile away, which requires improvement to allow for the increased traffic the new development will bring to the area. The second group of expenditures are things you can spend TIF funds on that do not fit into the "but/for" argument. This can include purchasing, rehabilitating, retrofitting for energy improvements, and constructing housing to create or preserve long-term affordable housing. Energy retrofits are not required to be tied to affordable housing but can be used separately or to rehabilitate affordable housing. Additionally, funds can be spent to improve security and maintenance for public improvements and relocate and construct government facilities. A TIF is created by an ordinance that designates the TIA and identifies the public improvements being financed. The ordinance must be adopted by June 1 to create it for the following tax year. If a jurisdiction wanted to meet this year's June 1 threshold, you would use the certified assessed tax values in the TIA from 2023, and next year, the increment will be calculated off the increased value in 2024. Because there is a lag between when taxes are assessed and collected, most jurisdictions would not receive actual money in hand until late 2025 or early 2026. Once the ordinance is adopted, a jurisdiction cannot change the boundary of the TIA or add additional public improvements. Outside the ordinance, some procedural steps exist to establish a TIF. The jurisdiction must hold at least two public meetings solely on the proposed TIF. A project analysis must also be submitted to the State Treasurer for review and comment. Based on their analysis, the Treasurer has 90 days to issue a letter and comments back to the jurisdiction. Responding to the letter or comments is not required, but the letter must be made available for public review. The Treasurer will look at several items during their analysis. This will include TIA boundaries, the duration of the increment area, and a description of the expected private development with scenarios describing the project with and without proposed public improvements. The real property in the TIA will be assessed for its value and any impacts necessary to address or mitigate, such as impacts on the local business community, affordable housing, and public schools. Additionally, if 20% of the assessed valuation of fire districts is included in the TIA or there is an increased level of service, a mitigation plan must be implemented. The fire districts are the only ones named for mitigation because many areas see the fire district as having the highest property levy. As a provider, fire districts have a different level of control related to these issues than a city. In the first two years, Morgan Shook has supported the analysis of 18 proposed TIFs in Washington. Four jurisdictions have created TIF districts, and another three are likely to begin this year. During the analysis, the Treasurer is keenly looking at the financial risks and creditworthiness. They want to ensure that the jurisdictions have done their math but also considered downside risks, such as how much a developer is sharing the risk or what reserves may be available during a downfall. Ultimately, the jurisdiction is on the hook, unlike LIFT or LRF, and the Treasurer’s desire is to see mitigation plans in place. Boundary considerations for TIF include that the sponsoring jurisdiction cannot have more than two TIAs at a time, and the boundaries cannot overlap. Increment areas at the time of creation can total up to $200 million in assessed valuation or be at most 20% of the total assessed valuation for the sponsoring jurisdiction. It is important to note that the $200 million, or 20% limit, is the summation of both TIAs in a single jurisdiction. The 20% limit is most likely to impact decision-making for smaller jurisdictions, but the $200 million limitation is more likely to be the limiting factor for larger jurisdictions. An ideal TIA is an area with a low base valuation near significant near or long-term development. Most of the TIF value will occur later in the life of the area, and to keep the risk low, one should limit the list of infrastructure investments to small, essential projects. A TIA is not a "set it and forget it" arrangement; there is uncertainty, such as a project delay or the assessment failing to capture everything that could occur in a year. Calculating the base value of a TIA is the added taxable value inside the boundary area. This will remain the base value over the potential 25 years of TIF. The increment is a non-negative number and is the district's valuation in that year minus the established base value. When the developer pays property taxes to the State, the State sends the increment value back to the sponsoring jurisdiction for investment. It is important to note that TIF affects regular property tax levies. A regular levy is subject to constitutional provisions such as the 1% limit factor. This means almost all property tax levies are included except state school levies, excess levies, and local school levies. Using an example from Shoreline, the 2023 tax rate was $9.68, and the property tax levies eligible for TIF sum $3.46, giving a 36% levy capture rate. By looking at the tax rate and the levies impacted, you can better understand what is available for TIF allocation. TIF dollars can only be spent on public improvements outlined in the ordinance and can only run for 25 years. Bonds issued will count against the jurisdiction's debt capacity, and no state backup exists. Any additional revenue after covering the cost of public improvements or repaying the bonds must be returned to the tax district in proportion to the regular tax levy rates. Local governments may be responsible for reimbursing the County Assessor, but this has yet to occur in King County. The state legislature is considering a bill allowing junior tax districts to opt out of a TIF. This would lessen the revenue available and is likely based on a misunderstanding of the state tax structure. Compared to other states, Washington has a unique tax structure, which causes things to look and work differently. Many jurisdictions interpret TIF as a way they lose revenue and on the face that seems easy to understand. The state law has a provision known as "Do no harm," which changed how district levies are computed to stay within the 1% limit factor but also provided new levy capacity to pay for the money going out of TIF. You can only increase your levy by 1% a year plus some amount of add-ons such as the value of new construction times last year's levy. The TIF law created an "increment add-on," which allows you to multiply the increment with last year's levy to compensate for funds lost to a TIF. You do lose money at the TIF level, but new money at the district level offsets that amount. The Alexan, located in Shoreline, is used as an example to determine how much money would be available. The Alexan is a 300-unit multifamily project assumed to begin construction in 2025. The preconstruction assessed value of the site is around $5.2 million. If the city were to create a TIF around the immediate area of the development, there would be a nominal cash flow of $11.2 million over twenty-five years. This would support a bond of up to $7 million for the development of affordable housing, childcare, or other infrastructure. This example looks at a single development, but most of the analysis work done so far includes multiple sites in a single area. One example includes planning around the Kirkland, WA, Link light rail station area that can potentially bond $50-$80 million against the present value. The bigger you get means more revenue, but the greater number of projects reduces the certainty. TIF cash flow can take time to ramp up, and most of the revenue will come in the later years. Sponsors must have a financial plan to cover early 'deficit' years. Even for an entirely sure TIF project, there will be shortfall years. The Treasurer’s review will examine how carefully jurisdictions have looked at these problems and how they will mitigate small to larger shortfalls. Project analysis must look at a project's potential impacts on affordable housing. It has been understood that it is not about broad impacts, such as affordability going up or down in the area, but specific impacts, such as demolishing an existing affordable housing unit. Thus far, most of the TIA's have been in urban, commercial areas and have not impacted existing affordable housing. The conversation around affordable housing has tied more directly into planning and policy discussions, such as using TIF dollars to help fund land acquisition, pre-development activities, or gap funding. No one has done that, but many cities have been thinking about that. The first phase of TIF has been building new areas for jurisdictions. The second phase appears to focus more on using TIF to meet the need for affordable housing. Some top issues impacting the TIF conversation include opportunity costs and tying low-value areas with a desire to develop or being limited to only two TIFs simultaneously. Development scaling and timing are also a challenge, as more development creates a greater sense of uncertainty. A TIF will have to be managed year after year and cannot be set in place and left alone. Additionally, managing and preparing for the deficit years that will occur over the 25 years of the TIF is more challenging for some jurisdictions than others. Finally, infrastructure demands are significant, and there is a constant need to balance those against the impact on the taxpayers. Brian Davis provided a brief update on the City of Federal Way's use of TIF. Federal Way is currently working on a mitigation plan with the fire district as part of its efforts to utilize TIF. TIF is a long-game strategy, and fire districts tend to focus more on the moment due to the nature of their services. If it is possible to consider the long game, TIF can be a truly effective strategy. While working in Oregon, TIF enabled revitalization and started several developments only possible with the investment TIF allowed. Federal Way has had some great discussions and hopes to redevelop a portion of the city's downtown area around the 320th Street corridor to include mixed-use development. This area is adjacent to one of the incoming Link light rail stations, a prime location for future development. The City is monitoring the changes at the state legislature, which would allow junior districts to opt-out and potentially have a negative impact on future TIF development. There is a real challenge when choosing to forgo current tax revenue for future development, which may be years from completion. Traci Buxton wanted to confirm that TIF fundamentally works by taking out a bond to support development in the area, and the jurisdiction receives taxes based on the increased value to pay back the bond. Morgan Shook confirmed that was the basic concept when utilizing TIF. Victoria Schroff asked if the slides would be made available after the presentation. Claire Goodwin confirmed that it would be available and could be found in the agenda packet. Traci Buxton asked if it was possible to bond against the projected value, not just the current one. Morgan Shook confirmed yes, and nothing prevents a jurisdiction from paying as they go as an alternative. Due to issues each jurisdiction faces, some have considered doing multiple debt issuances, but it does get more complicated. Traci Buxton asked how a tax-exempt status, such as an MFTE, may interact with a TIF and if you would want to avoid having an MFTE project inside the TIA. Morgan Shook confirmed that you would not want an MFTE inside a TIA, though you could account for the loss in tax revenue as part of the financial planning. Brian Davis added that Federal Way is currently looking at this interaction and considering the impacts of an MFTE inside their projected TIA. It is essential to avoid cannibalizing your tax revenue too much. You can consider and mitigate the impact of a tax-exempt project inside a TIA. b. 2024 STATE LEGISLATIVE UPDATE Dorsol Plants provided an update on the 2024 Washington State Legislative Session. The intent is to provide a high-level overview of a few housing and land use bills that tie into SKHHP's legislative priority or have seen a lot of attention in the last two weeks. The SKHHP 2024 legislative priority focuses on funding all aspects of affordable housing. This includes homeownership for moderate-income households and below, preservation of naturally occurring affordable housing (NOAH), land acquisition to secure permanent affordability, permanent supportive housing (PSH), infrastructure around affordable housing developments, and workforce housing. Reviewing the legislative session timeline, the next key date is January 31, which is the policy committee cutoff or when policy bills need to be voted and approved out of committee to continue in the session. The final day of the legislative session will be March 7. Some highlights from the Governor’s proposed 2024 budget for housing and homelessness include $100 million for rapid capital acquisition and $4.5 million to support housing for those with intellectual and/developmental disabilities. Additionally, $10 million to backfill document recording fee lost revenue, $7.5 million for landlord mitigation and tenant preservation, and $2.5 million for an emergency housing fund for cities, counties, and non-profits to support people needing emergency housing assistance. Not shown on the slides but included in the budget is an additional $10 million proposed for the Right of Way Initiative and $10 million for an encampment resolution program. Several bills related to funding housing this year are in the legislative session. One bill to highlight is SB 6173. SB 6173 was in its first public hearing today and is now scheduled for Executive Session on January 24; the bill would add language that would enable SHB 1406 funds to be used to support the development of affordable homeownership opportunities up to 80% AMI. HB 1892 would create the Workforce Housing Accelerator Revolving Loan Fund Program (WHLP) within the Department of Commerce (DOC) and direct DOC to contract with the Washington State Housing Finance Commission (WSHFC) to administer the revolving loan program. The funding would be drawn from the General Fund, and as of the time of this presentation, the funding amount has yet to be decided. A current limit of $20 million per county per year strives for geographic equity. Like last year, we have a transit-oriented development bill (TOD). HB 2160 and SB 6024 have had some changes when introduced and since the session began. The bill defines "station areas" as within a 0.5 mile walking radius of light rail, commuter rail, and streetcars and within a 0.25 mile walking radius of bus rapid transit. Within station areas, cities are prohibited from imposing a maximum density in terms of homes per acre and from imposing parking requirements, except those dedicated exclusively to individuals with disabilities. While there is a lot in these bills, one item to call out is the requirement for the Department of Transportation to designate a liaison as a point of contact for local governments and project proponents regarding land use decisions and processing development permit applications. SB 5961 and HB 2114 have seen a lot of attention in the legislature and the media. Both bills are commonly referred to as “Rent Stabilization." They both seek to limit rent increases for most tenants to 5% per year. However, it exempts tenancies in homes built within the past ten years or those operated by a public development authority, housing authority, or non-profit organization where maximum rents are already restricted. It will also require six months’ notice for a rent increase of 3% or more. Additionally, it will ensure that fees count as rent to calculate a rental increase and limit move-in fees to the equivalent of one month's rent or less. It will also limit late fees to $10. While only some legislative bills were reviewed, the housing and land use bills that SKHHP staff will track through the legislative session are listed in the PowerPoint presentation. Each bill is hyperlinked so you can easily see current status information or read the bill at your convenience. Dorsol Plants thanked the Executive Board for the opportunity to present and informed them he would provide a legislative update each month through the end of the session. Claire Goodwin added that she wanted to highlight SB 6173, which she mentioned has been discussed by the Executive Board on several occasions and had sent information to the Executive Board earlier that week. Several board members signed in and spoke on the bill, which would enable SHB 1406 funds to serve households up to 80% AMI for homeownership. She will continue to send alerts she believes are of interest to the Board. UPDATES/ANNOUNCEMENTS Claire Goodwin provided an update on the SKHHP Chair and Vice-Chair elections. Nominations for Nancy Backus for Chair and Dana Ralph for Vice-Chair have been received. Elections will be held at the February Executive Board meeting due to several board members needing to attend the Conference of Mayors. Claire Goodwin informed the Executive Board that the City of SeaTac will take final action on January 23, 2024, to join SKHHP. If the City Council does approve the Interlocal Agreement, the Board will take action at the February meeting to incorporate the City of SeaTac as a member of SKHHP. Claire Goodwin provided an update on planning for the Executive Board meeting over the next few months. Based on feedback from the Executive Board, developers will come to present their current work in South King County. This will start at the February meeting, where we will hear from the 2023 Housing Capital Fund recipient, Multi-Service Center. Additionally, SKHHP staff will begin visiting each member city council to receive concurrence on the 2023 Housing Capital Fund recommendation over the next few months. Finally, the work on the 2025 Work Plan and 2024 Housing Capital Fund guidelines will begin in February and move quickly in preparation for Claire Goodwin’s maternity leave from May to September. Claire Goodwin will be on vacation from January 22 to 26. Executive Board members needing support can contact the SKHHP Program Coordinator, Dorsol Plants. Sunaree Marshall provided an update that she will also be on maternity leave around the same time as Claire Goodwin and will provide an update on who will serve on the Executive Board in her absence soon. Traci Buxton congratulated both Claire Goodwin and Sunaree Marshall. VII. ADJOURN Traci Buxton adjourned the meeting at 2:47 PM. Program Coordinator-SKHHP Dorsol Plants