Santa Rosa last week approved the sale of nearly $30 million in bonds to help fund three affordable housing projects, including the sale and renovation of the city's tallest building, the 14-story Bethlehem Tower.
The decision by the City Council last Tuesday will help the developers of the three projects -- two remodels and one new development -- get the financing they need to move forward.
The city says it isn't incurring any debt or liability in the transactions, nor is it guaranteeing the bonds. The decision merely helps project lenders tap a tax-exempt source of funds and allows the developers to access other tax credits.
The bonds, known as multifamily housing revenue bonds, are commonly used in affordable housing projects. But three projects coming forward at the same time is unusual and a sign of the tight lending environment.
"A lot of the funding for affordable housing has been drying up," said Marjorie Jackson, a program specialist in the city's housing department.
The most visible of the projects is the sale and rehabilitation of the 40-year-old Bethlehem Tower, which has 159 affordable apartments for seniors.
The landmark Tupper Street tower opened in 1972 as a partnership between Bethlehem Lutheran Church, a local congregation that had its original church on the site, and the federal government's urban development agency, which provided a construction loan.
The loan was paid off in March, which would have allowed the building to begin charging market rate for 58 of the units. But the board of the nonprofit that owns the building, Bethlehem Tower, Inc., was looking to increase affordability of the building, not reduce it, said Tom Torgerson, board president.
"Our mission has always been from day one to offer low-income housing to seniors," Torgerson said.
The board was in the process of investigating how to extend the affordability of the complex when it accepted a purchase offer from Reiner Communities, an Irvine firm that specializes in the renovation and management of multifamily affordable housing, Torgerson said.
The sale and renovation of the building is something the federal Department of Housing and Urban Development supports as a way to keep affordable housing stock in a community, Torgerson said.
"For them it's cheaper to keep an existing building in place than to go out and build a new one, so this was their way of doing it," Torgerson said.
The bonds approved by the council will cover up to $19 million in project costs. The total purchase and renovation, including temporary relocation of the residents, will cost nearly $27 million, said Sean Burrowes, investment director at Reiner.
That includes a $15 million purchase price and $6 million for upgrades, with the balance covering various project and transaction costs. The sale is expected to close in November, with work beginning in early 2013. Construction is expected to take about eight months, he said. Typical upgrades would include new windows, cabinets and floor coverings, he said. Common areas and the exterior also will be spruced up.
"You shouldn't see anything too dramatic other than everything just looking better," Burrowes said.
Residents will be displaced for less than a week each, and they'll be fully compensated for their trouble, he said.
If completed, the sale would extend the building's life as an affordable housing complex for 55 years. About 80 percent of the units would be dedicated to low-income seniors, defined as those earning less than 60 percent of the median income for the area. The balance of the units would be for very-low-income seniors, or those earning less than 50 percent of median.