The Finance Committee met 01/23/2023. A little over 20 minutes of that meeting was taken up with discussion on the request to award $1 million in American Recovery Plan Act (ARPA) funds to RISE Apartments, LLC in the form of an affordable housing grant. The committee ended up voting 5-0 to approve the awarding of the grant.
I’ve prepared a transcript of the complete discussion for your downloading pleasure.
RISE Apartments, LLC currently has a development agreement with the city to build a 48-unit affordable housing development on the block between Franklin, Packard, Oneida, and Appleton Streets. 43 of those units are intended for households earning less than 60% of the Area Median Income.
Since the project was first approved, construction costs have escalated quite a bit. The developer already had Wisconsin Housing And Economic Development Authority (WHEDA) tax credits for the project and was now seeking ARPA grants from both the city and the county in order to keep the project solvent.
Although he was not a member of the committee, Alderperson Chad Doran (District 15) was present and asked to clarify if the project could not move forward without the grant.
Tom Klister, part of the development team for MF Housing Partners which is the company working on the project, told the committee that ARPA funding was the only thing currently allowing affordable housing to still be built within the state of Wisconsin and probably around the entire country. Market rate projects could respond to inflation by raising their rents, but with affordable housing rents were fixed and could not be increased. As a result, developers needed something to make it financially possible to build these apartment buildings. “Without ARPA dollars, these projects are not getting built. And to answer your question, Chad, yes, without the ARPA dollars, this project will not go forward.”
Mr. Klister also told the committee that for affordable housing developments, the developer’s fee was fixed, and more funding did not equal more profitability for a developer.
Alderperson Sheri Hartzheim (District 13), who was also not a member of the committee, expressed concerns about the city subsidizing the project and wondered if it would be possible to scale the development back so that it did not require extra money.
Mr. Klister responded that the answer was, unfortunately, no. In addition to the ARPA grant from the city and possibly also some grant funding from the county, the project was being funded with $7 million in WHEDA tax credits. Only 20% to 30% of the project was funded through traditional debt, which, given the caps on rents was the most that it could be if the project were still to still be financially viable. If they decreased the number of units they built, the amount of WHEDA tax credits they received would decrease which in turn would cause the amount of traditional debt to increase, and they would probably end up needing $2 million rather than $1 million.
The city had actually earmarked $3 million in ARPA funds for affordable housing grants, but, apparently, they only received a few applications, this one from RISE Apartments being one of them. Alderperson Doran was disappointed they had not received more applications and wondered if the city had received any feedback from developers as to why there had not been more applications, but Finance Director Jeri Ohman said they had not received any feedback of that nature.
Alderperson Doran confirmed with staff that the city had adequately scrutinized the grant application and the money being awarded was what was necessary to make a project work and not simply whatever a developer expressed a desire for.
Community and Economic Development Director Kara Homan responded, “I don’t think ARPA requires that, but it’s my estimation that the project doesn’t cashflow now without this.”
Several alderpersons expressed support for awarding the grant. Alderperson Denise Fenton (District 6) noted that just the previous week the Council had expressed concerns about affordable housing and now they had an opportunity to use funds already in the budget to go toward an affordable housing project.
Alderperson Kristin Alfheim (District 11) said, “If we have these dollars, I’m not sure there’s a better place to put them than a project like this. There is no one profiting from these dollars being placed. It is a matter of making the books work, so that we can provide this investment in the community.”
Alderperson Katie Van Zeeland (District 5) felt comfortable approving the awarding of the grant because the development agreement had been in place prior to the grant for ARPA funding. “We understand that this isn’t just an inflated number. You know, we have the numbers for the project. It’s not just a handout.”
The committee voted 5-0 to approve awarding the grant.
View full meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=1077209&GUID=1903C1F5-6815-4097-8F54-AA3E0328D2A6
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