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HONORABLE MAYOR AND CITY COUNCIL April 16,2021 Subject:JPA-issued Bonds for Moderate-Income Housing Page 10 CONCLUSION It is highly likely that no interested party will agree with all the City's terms and will wish to negotiate modifications extensively. Further, there is a significant amount of staff work involved in finalizing and issuing a Request for Proposals (RFP) and term sheet, evaluating proposals, and entertaining potential follow-ups from applicants. Directing staff to undertake this time-consuming endeavor would be contrary to the City Council's de-prioritization of a Moderate-Income Housing Plan in its March 2021 roadmap exercise and would distract staff time away from projects that generate deeper affordability to the San José community. Based on further analysis and information, it is not at all clear that the benefits of the products outweigh the risks and costs to the public. The product may convey some value to some renters in these buildings and to the City in the long-term. However, early evidence on the few transactions done to date indicates that foregone property tax revenues have garnered only modest affordability benefits. Also, there is little advantage to joining the JPAs on a pilot basis, as the model relies on 30-year bond financing; thus, any problems or issues may take many years to present themselves and longer to unwind. For these reasons and the information contained in this memo as well as the previous staff memos, the Administration recommends against moving forward with issuance of an RFP with the possible intention of joining one or more JPAs. EVALUATION AND FOLLOW-UP With the staff recommendation, no further work would be done related to this financing model or the associated JPAs and staff diverted to this project would rededicate energies to prioritized projects that produce more tangible benefits to City residents. CLIMATE SMART SAN JOSE The recommendation in this memo has no effect on Climate Smart San José energy, water, or mobility goals. POLICY ALTERNATIVES Alternative #1:Direct staff to issue a Request for Proposals (RFP) with term sheet before the end of the fiscal year. It would take several months to select any respondents that met the criteria and to negotiate and agree on final terms. If all City terms are accepted by one or more respondents, staff would negotiate the required joint powers agreement amendments and return with proposal(s) and the necessary amendments and agreements to join one or more JPAs. If not, staff would report back on results and end the work.