Adler defends affordable housing deal; critic counters

Mayor Steve Adler is defending an affordable housing deal his office helped negotiate to create permanent affordable housing in the Easton Park development in Austin's Pilot Knob area.

Mayor Steve Adler is defending an affordable housing deal his office helped negotiate to create permanent affordable housing in the Easton Park development in Austin’s Pilot Knob area.

All corners are gearing up for Tuesday’s discussion regarding the $51 million affordable housing initiative Mayor Steve Adler and Council Member Delia Garza negotiated recently. City leaders are being criticized — and rightly so — for not publicly disclosing key details of the deal prior to the council voting on it in December. The item is scheduled for the Council’s Tuesday’s work session at City Hall.

The Easton Park deal to be built in Austin’s Pilot Knob area is notable for its creation of 1,000 affordable housing units of which 650 homes would be sold to lower-income people, not just for the first group of buyers, but for all buyers in perpetuity when those homes are put up for sale. Another 350 apartments would remain affordable for decades.

The mayor’s Friday post on the Austin city council’s message board drew a pointed rebuttal from community activist Brian Rodgers. Both are posted below.

Also writing on the topic is John-Michael Cortez, who negotiated the deal on the mayor’s behalf, who rightly admits that the office did a poor job in publicly communicating the deal’s details, but defends it as a good deal for the city.

American-Statesman editorial writer and columnist Alberta Phillips, who also wrote about it recently, called it “a bold initiative” to answer an affordability crisis, but noted that the deal lacked the transparency required for such policy changes.

Here is Mayor Steve Adler’s post from Feb. 5.

Council Members,

From recent media reports and brief discussions with Council colleagues and their staffs, it is very apparent that there are questions and concerns regarding the affordable housing component of the Pilot Knob PUD. Council Member Garza and I will be putting this matter on the work session agenda for next Tuesday so that we can discuss the matter among us. We have also asked staff for a briefing on the Pilot Knob PUD and the related process and policies and they will let us know when they’re able to do this.

In retrospect, we should have more clearly communicated the mechanics of the agreement and the broader policies implicated in the days leading up to the council meeting and from the dais at third reading. I take responsibility for not taking the opportunity to explain the deal in greater detail. But we welcome the upcoming chance to do so, because we believe it is a fiscally sound deal that makes meaningful progress on one of our city’s top priorities – affordability, and does so in a way that does not irretrievably divert any money from the City’s water or any other department.

First, the developer is still obligated to pay all of the money he was to pay in fees for the project and does not save any money, and the requirement to pay that those monies is not forgiven, waived or excused.

Second, while the agreement obligates the developer to make a significant number of properties or homes available at below market prices, the City is not bound to buy those properties or homes at the discounted price with the money that was paid by the developer. If there was a need in the City’s water department, or any department for that matter, that required the Council to pass on the purchase of significantly reduced properties or homes, the Council at that time has full discretion to do so. There is no danger of a future gap in infrastructure needs that has been created here.

The City has an existing SMART housing policy that allows fee waivers, such as happened here, to be approved up to 1,500 units per year. The pro forma for the Pilot Knob development anticipates about 300 to 350 lots per year. So, while this development is big, it is a long term project and the numbers involved are a relatively small number within the existing policy limits for the SMART housing program. Of course, if the developer were to sell 2,000 lots per year or if we wanted to focus attention on different projects, the Council could vote to pass on the Pilot Knob opportunity. See above. We are told that the City processed about 800 to 900 last year. We left a little affordability on the table.

In the Pilot Knob case, instead of paying at least $50 million over the course of 20-30 years in fees (which totals less than $2M per year), the developer will instead deposit that full amount into an affordable housing fund so we can create an estimated 650 permanently affordable homeownership units, or 10 percent of the ownership units planned within this development. Additionally the developer will provide to approximately 350 rental units which will be affordable to households who earn 60% or less of the area’s median family income for 40 years from the date of their completion. The properties or homes that the City will buy from the developer with the housing fund will be priced at below market rates so as to drive the affordability levels. Of course, if the then Council wants to take money out of the affordable housing fund to plug any gaps in the City’s water department, or another place, it can certainly do that. Only the developer’s obligation to offer those lots to us at the lower price cannot change.

In addition to funding the affordable housing component, the PUD requires the developer to provide:

• An additional cash contribution of up to $6 million for affordable housing, which may be used for development of additional affordable units in the Pilot Knob PUD, buying down unit prices so they can be sold or rented at even deeper levels of affordability, down payment assistance, and other affordability programs.
• Ten acres of land in a planned town center donated to Capital Metro for a future transit facility or Park & Ride, giving all residents in the development access to affordable transportation options.
• Approximately $30 million in water/wastewater infrastructure that would likely otherwise be paid for by the water utility
• Parks and open space, trails, public art, and other infrastructure and amenities that are requirements of PUD agreements.

However, if the impact of the SMART housing program gives Council any pause, we would welcome a broader conversation about our existing SMART housing policy and we would support the Council if it wants to reconsider and add any further detail to the ordinance we passed. But know, this is a valuable tool to create affordability, and I would hope that we find many more opportunities to use this tool at the scale we have achieved with the Pilot Knob development.

Mayor

Steve Adler

 

Here is Rodgers’ rebuttal sent to city council members and the Statesman on Monday, Feb. 8.

MAYOR – “does not irretrievably divert any money from the City’s water or any other department.”

RESPONSE – How can the money be “retrieved” if lots are already purchased?

MAYOR – “developer… does not save any money.”

RESPONSE – (1) The $8 million developer deposit into the affordable housing fund from First Reading has been reduced to $6 million, a developer savings of $2 million -see Part 8D and (2) the developer now has a buyer for 650 lots “at a price agree upon by both parties” – likely paying too much given the city’s history of weak negotiating.

MAYOR – “the agreement obligates the developer to make a significant number of properties or homes at below market price”

RESPONSE – No it doesn’t. Where does it say in the agreement “below market price”?   It says “at a price agree upon by both parties” – See Executed Ordinance Part 8C1 (Bottom of Page 6)

An earlier deleted contract paragraph required a discount but not the final version – See Part 8C1&.

MAYOR – “the City is not bound to buy those properties or homes at the discounted price with the money that was paid by the developer.”

RESPONSE – There is no discounted price. See above.

MAYOR – “If there was a need in the City’s water department, or any department for that matter, that required the Council to pass on the purchase of significantly reduced properties or homes, the Council at that time has full discretion to do so.

RESPONSE – (1) “Significantly reduced”. Not in contract, see above, and (2) is the mayor saying that future councils can claw back the money from AHFC for any other purpose at will?

MAYOR – “There is no danger of a future gap in infrastructure needs that has been created here.”

RESPONSE – AWU raised water rates 22% last year, cut costs and postponed scheduled maintenance. There is already need. Money that would be saved by impact fee bond defeasance and cash payments rather than more debt could be used to offset rates and perform deferred maintenance.

MAYOR – “The City has an existing SMART housing policy that allows fee waivers”

RESPONSE – (1) The land trust clause is far too generous and should have never been used here and, (2) the council members weren’t made aware of the impact of this rarely provision, and (3) Impact fees waiver must be in corporate city limits.

MAYOR – “if the developer were to sell 2,000 lots per year or if we wanted to focus attention on different projects, the Council could vote to pass on the Pilot Knob opportunity.

RESPONSE – If the developer sells 2,000 lots, then the diverted fees would still end up at AHFC and not at AWU.

MAYOR – “We left a little affordability on the table”

RESPONSE –  But the Mayor wants to expand these waivers to include two or three giant PUDS coming at council soon which will overcommit to the Smart Housing Limit. What then? He wants to revisit old MUD deals and do the same thing – take the income stream and divert it at great consequence to the utility and it’s bond rating, currently a negative outlook.

MAYOR –  “instead of paying at least $50 million” RESPONSE – More like $80 million at full buildout of 14,300 total residential units – see Page 115.

MAYOR – “over the course of 20-30 years in fees (which totals less than $2M per year)”

RESPONSE – $2 million a year of impact fee revenue would only allow the AHFC to buy only 44 lots per year. Does 44 lots solve anything?

MAYOR – “Additionally the developer will provide to approximately 350 rental units which will be affordable to households who earn 60% or less of the area’s median family income for 40 years”

RESPONSE – Mayor says ‘additionally” as if the fee waived earned this – it was already part of the First Reading.

MAYOR –  “if the then Council wants to take money out of the affordable housing fund to plug any gaps in the City’s water department, or another place, it can certainly do that.”

RESPONSE – Do you think some future council is going to know about this pot of money and that it’s ok to empty the bank account of AHFC?

MAYOR – “Only the developer’s obligation to offer those lots to us at the lower price cannot change.”

RESPONSE – What’s he talking about?  That’s no

longer in the deal. See above.

MAYOR – “An additional cash contribution of up to $6 million for affordable housing”

RESPONSE – Reduced from $8 million (see above)

MAYOR – “Ten acres of land in a planned town center donated to Capital Metro for a future transit facility or Park & Ride”

RESPONSE – This appears in the deal in documents at Second Reading. Maybe it’s new but doubtful it was a result of the fee waivers.

MAYOR – “Approximately $30 million in water/wastewater infrastructure that would likely otherwise be paid for by the water utility”

RESPONSE – Don’t take the bait. The MUD pays its own infrastructure costs and had offered up another $3.97 million in utility oversizing to the benefit of the city in first reading.

MAYOR – “Parks and open space, trails, public art, and other infrastructure and amenities that are requirements of PUD agreements.”

RESPONSE – Mayor is “regifting” what was already in the deal on First Reading.

Brian Rodgers