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the project (e.g., costs of management, repairs, maintenance, capital improvements, etc.,
<br /> versus rents received).
<br /> The City is not required to contribute any equity or direct public funding for the project, and
<br /> since the property is considered to be publicly-owned it is tax-exempt. Therefore, the City,
<br /> County, Pleasanton Unified School District, East Bay Regional Park District, and other
<br /> public agencies would no longer receive property taxes so long as the property is owned
<br /> by a public agency (be it CSCDA, the City, or another entity), or during the bond term. In
<br /> the transaction, the City does not itself incur any debt or obligation to repay the bond,
<br /> which is held by CSCDA.
<br /> The City would, however, enter into a Public Benefit Agreement which provides, after 15
<br /> years, the City the right of first refusal to acquire the property for the amount of debt on the
<br /> property at that time (i.e., the City would assume any remaining debt, which would
<br /> continue to be paid down from revenues and receipts from the project). If the City does not
<br /> wish to purchase the property, it can force a sale of the property, with outstanding debt
<br /> repaid, and excess sale proceeds (if any) distributed to the City.3
<br /> Costs and Risks
<br /> Although there are several benefits of the program, particularly the ability to secure, long-
<br /> term, difficult-to-attain moderate-income housing units, there are still some questions
<br /> about costs and risks with respect to the WHP financing model. Some of these were
<br /> highlighted in memoranda prepared by City of San Jose staff in reviewing these types of
<br /> programs (see Attachment 2), and in a December 2021 article in Forbes (see Attachment
<br /> 3). Key issues include the following:
<br /> Loss of Property Tax Revenue. Taking the project that was previously requested for
<br /> consideration for purchase through the WHP as an example, a total of$1.4 million
<br /> annually in property taxes would have been foregone in the first year, including $343,311
<br /> to the City of Pleasanton.4 With property values typically increasing by about two percent
<br /> annually, the amount of property tax lost would increase each year. However, based on
<br /> current year taxes, and with 354 units, this would have reflected an annual subsidy of
<br /> $3,988 per unit (all agencies' property tax).
<br /> Since this initial discussion and recognizing the loss of property taxes as a concern of
<br /> many cities, CSCDA has developed the concept of a "Host City Charge" which would be
<br /> paid as an operating expense of the project and serve to backfill the foregone property
<br /> taxes. While the Host City Charge could help to alleviate the fiscal impact of the
<br /> acquisition on the City, it would add to the overall operating costs of the project and could
<br /> reduce the net revenues available to pay down the bonded indebtedness over time, or
<br /> Even if the City did opt to force a sale of the property, considerable debt is likely to remain outstanding on
<br /> the property at the mid-point of the bond term, and sales price would likely be suppressed if it were sold as a
<br /> deed-restricted project, meaning any returns to the City might be minimal, at best.
<br /> 'The Pleasanton Unified School District would have also lost$333,542 in property tax revenues in the first
<br /> year, with the amount lost increasing in subsequent years. The State currently gives school districts an
<br /> annual reimbursement payment for such property tax revenues lost from this type of program. However, that
<br /> is an annually funded state program which can be modified or discontinued at the state's discretion.
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