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opportunity. Since then, the Mayor has also requested a discussion of the CSCDA program be agendized, and it is therefore before the City Council for consideration. Additional information provided by CSCDA, with respect to the Workforce Housing Program is included as Attachment 1 . DISCUSSION Overview of the Workforce Housing Program As noted, the CSCDA Workforce Housing Program is effectively a public-private partnership that leverages the benefits of tax-exempt public purpose bonds issued by CSCDA to acquire market-rate rental apartment buildings and then convert them to deed- restricted units, typically targeted at rent levels between 80 percent and 120 percent AMI. Although it is possible to deed-restrict rents at lower income levels, to be financially feasible units below 80 percent AMI can typically constitute only a relatively small proportion of the total units in a project; and/or more units at the upper end of the moderate-income range may be required to balance the lower rent receipts and avoid needing any additional public subsidy.' As noted above, affordability splits can vary among projects (typically some proportion of units at 80 percent, 100 percent and 120 percent AMI), but this can be negotiated to some degree through a project-specific agreement. As further noted, annual rent increases are capped at 4 percent, irrespective of increases to the AMI or other factors over time. In addition to the cost of purchasing the property, additional costs and fees accrue to the project to fund various parties involved in the transaction and/or long-term management of the property. As a result, a typical transaction will involve issuance of multiple bonds — in recent transactions reported by CSCDA-CIA this has included Series A and B bonds for the property purchase, and Series C bonds that pay a manager and other parties for transaction fees and other ongoing costs incurred to maintain and manage the property. Parties involved in a transaction, in addition to CSCDA and the City, would include a project sponsor2, a property manager who is paid to manage and maintain the property over time, and a financing team (including underwriters, financial advisors, and bond counsel). It can sometimes be the case that the seller of a property acquired through the program is then retained to offer management services, meaning that they benefit from both sides of the transaction. As part of the arrangement, CSCDA acquires the property and records a regulatory agreement (to which the City is a party) specifying the affordability terms, allowable annual rent increases, and other aspects of the program. The repayment obligation for the bonds (typically a 30-year term) is payable solely from the revenues (i.e., rents) derived from the project. Thus, the amount available to pay annual debt service of the bond, including any new debt that might accrue to the project, would be dependent on the overall cash flow of ' For example, the City's existing Inclusionary Housing Program requires 15% of units in new apartment buildings to be rented to persons at 50% AMI very-low income or 51-80% of AMI low-income. Major participants in this market include companies such as Windstar, Catalyst Housing, and Opportunity Housing Group. Page 3 of 9