Denver City Council Adopts Inducement Resolutions to Help Finance Affordable Housing Projects
By Robert Davis
The Denver City Council Finance & Governance Committee (FINGOV) adopted two inducement resolutions on May 25, declaring Denver’s intent to invest up to $27 million to help finance the construction of 167 dedicated affordable housing units.
Inducement resolutions are promises by bond issuers that they will help fund a specific project. In this case, it is a sign that Denver has struck a deal in principle with private developers to build low-income housing, and is working to hash out the specifics of each deal.
One resolution dedicates an amount not to exceed $19 million to the Montbello Organizing Committee (MOC) to support the Montbello FreshLo project at 12300 East Albrook Drive in Council District 8.
The building will provide 97 affordable units within its seven-story frame. Residential units will be available for people earning between 30% and 70% of the area’s median income (AMI).
FreshLo will also contain a cultural center, a two-story grocery store, retail spaces, and community meeting rooms.
MOC partnered with Burgess Services to develop the project. The Multifamily Housing Bonds that Denver will allocate are one part of the project’s financing package, which also includes Low Income Housing Tax Credits (LIHTC), and New Market Tax Credits.
Last year, Denver loaned the Department of Economic Development $700,000 to help with pre-development costs and acquire the former RTD bus station land for the project. The loan originated from the city’s Community Development Block Grant coffers and carried a seven-year, interest-free repayment term.
Construction is expected to commence in the winter of 2021. The first residents could begin moving in as early as the spring of 2023, according to the resolution.
The other resolution declared up to $8 million in support of Rhonda’s Place, a project that will bring 50 affordable housing units to southwest Denver. Forty-nine of the units are expected to be one-bedroom residences available at 30% AMI.
Other amenities included with the project are a fitness room, laundry services, and a common activity room for residents.
The resolution says construction is scheduled to begin during the summer of 2021.
Both projects are financed by Private Activity Bonds (PAB), a bond issued by local or state governments that support the construction of a building that will be owned by a private entity.
Each state is allocated a PAB capacity by the Internal Revenue Service (IRS) based on its population. This year, Colorado’s capacity is $638,849,090, according to the Department of Local Affairs (DOLA).
Local issuers like Denver receive 48% of the funds while the other half is retained by state housing agencies. The remaining two percent makes up a statewide balance that DOLA can issue to projects upon request.
The IRS requires any projects that receive a 4% LIHTC to secure at least half of their funding through PABs. Denver has used PABs to attract investment for several low-income housing developments. Some of which include 2300 Welton, The Stella, The Colburn, and The Mariposa Stage VII—all of which combine to provide over 500 affordable units.
Before any monies can be distributed, both resolutions must receive multiple approvals. Their stop before FINGOV was the second step of four, and the resolutions will be brought before Denver City Council on June 7