September 17, 2012

City Bonds Slated To Finance 2175 Market Street Development

2175 Market Street Rendering

According to the City and County of San Francisco Residential Mortgage Revenue Bond Law, the City of San Francisco is empowered to issue and sell mortgage bonds "to finance the development of multi-family housing including units for lower income households and very low income households."

With 15 percent of the proposed 88 apartments to be built at 2175 Market Street earmarked to be affordable, as is required for development per San Francisco's Planning Code, this week San Francisco’s Board of Supervisors is slated to approve the issuance of up to $31,000,000 in tax-exempt mortgage revenue bonds to help finance Forest City's mostly market rate project.

From 76 Station To 88 Apartments At 2175 Market Street As Proposed [SocketSite]
A Negative Yet Positive Step Forward For 2175 Market Street Project [SocketSite]
Multifamily Housing Revenue Bonds Resolution: 2175 Market Street [sfbos.org]
Raising The Threshold For Requiring Below Market Rate (BMR) Units [SocketSite]

First Published: September 17, 2012 5:15 PM

Comments from "Plugged In" Readers

Hm. So the bonds will pay about a million dollars a year in interest, and so the tax subsidies are about a third of that.

Make 13 apartments "affordable", and you get $300,000 a year for a long time. Not bad. If all developments are required to include affordable units, why aren't all developments taking advantage of it?

Posted by: Alai at September 17, 2012 8:15 PM

That is a great questoin Alai - maybe the team behind forrest city ie Strada which is led by Jesse Blout former Deputy Chief of Staff to Newsom and Michael Cohen Director of Economic and workforce development has pretty good ties behind the scenes and was able to steer the bonds - I'm pretty sure the board will pass this - any conflicts of interest?

Posted by: joeblow at September 18, 2012 8:05 AM

Hello, This is Andres Power from Supervisor Scott Wiener's Office.

This article is completely inaccurate. TEFRA resolutions are common practice and are used to finance increased on-site affordability in development projects. No city funds are used whatsoever in these transactions.

Market-rate sponsors may use Multi-family Housing Revenue Bond financing to fund their inclusionary obligations under the City’s Inclusionary Housing Program. When using bond financing, sponsors must provide 20% of the total number of on-site units as affordable and target the rents at 50% of Area Median Income, as defined by the Mayor’s Office of Housing, or lower.

These financing's are conduit financings, which do not require the City to pledge repayment of the bonds. Rather, the bondholders’ only recourse for payment are the project revenues themselves and the credit enhancement provided by lenders. The TEFRA/Bond Inducement Resolution is to apply to the State of California for the authority to issue bonds.

The City of San Francisco is providing ZERO subsidy, capital or otherwise, to this project.

Posted by: Andres Power at September 18, 2012 11:08 AM

Thanks for the response.

The city isn't providing the subsidy, the federal government is, in the form of foregone income tax from the bonds. On $31 million, that's a lot of money-- I think my estimate of $300,000 a year is conservative. Here is an article about the subject.

So the bonds are provided in exchange for increasing the number of affordable apartments from 15 to 20 percent and making them 50%-median-income instead of 100%-- is that right?

Posted by: Alai at September 18, 2012 3:53 PM

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