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HONORABLE MAYOR AND CITY COUNCIL April 16,2021 Subject:JPA-issued Bonds for Moderate-Income Housing Page 3 entity working with a single developer, the most appropriate way to compare these programs would be to issue a request for responses. This would allow all interested parties to submit information to the City about their programs and would provide a transparent way for staff to negotiate the terms of entering one(or more)JPAs. The Rules Committee referred the item to the December 15, 2020, City Council meeting for further discussion. On December 15, 2020,the City Council received the referral from the Rules Committee. Staff released a supplemental memo2 prior to the Council meeting that included a detailed discussion of the items and areas where staff had further concerns and questions related to the structure of the financing model involved in both JPAs. The City Council accepted the staff report and directed staff to return to the City Council in April 2021 with a further evaluation of the model and with proposed terms that could be used as part of a request for proposals (RFP) issued shortly after the April City Council meeting. ANALYSIS Staff has had an opportunity to do additional analysis of the financing structure since the December Council meeting and has had conversations with other cities looking at the model. This additional analysis has confirmed staff's concerns surrounding this new financing model. In short,the program as it has worked in other locations would present risks and costs to the City,while providing only modest affordability gains. Although staff is now recommending the Council not move forward with an RFP,the previous direction from the City Council in December was to bring forward a set of proposed business terms in Apri1.3 If the City Council elects to move forward in pursuit of joining one or more of these JPAs,despite the concerns raised by a consensus of the departments, staff would release a Request for Proposals (RFP) that would include the City's desired terms within the scope of the RFP. These are terms that the City would stipulate for project underwriting and product structure as a condition to joining any one of the JPAs and would be incorporated into the agreement that would be approved by the City Council.These terms can mitigate some of the concerns outlined further below, but do not completely eliminate many of them. Following is a short summary of the product structure, and new information from other municipalities considering this structure. Structure Summary As a reminder of the basic mechanics of the model, the City would have to elect to become a member of a JPA as a non-voting alternate member. The JPA structure allows for the issuance of tax-exempt public purpose bonds, these bonds are used to purchase multifamily properties, and because they are government owned, they are not subject to property taxes. The structure relies on z https://sanjose.legistar.com/View.ashx?M=F&ID=9016977&GUID=3EA0D528-80EA-4124-A I E6-92B29DC294C8 3 Draft business terms will be submitted as a supplemental memorandum to this memo.