K. Miller LetterCITY OF
. Federal Way
October 14, 2013
Karen Miller, Chair
Washington State Housing Finance Commission
1000 Second Avenue, Suite 2700
Seattle, WA 98104 -3601
Cm HALL
33325 8th Avenue South
Federal Way, WA 98003 -6325
253 835 -2402
www. cityo ffederaiwa y. com
RE: Housing Finance Commission Issuance of Tax Exempt Revenue Bonds - DevCo
Dear Ms. Miller:
The City recently became aware of the Washington State Housing Finance Commission's
(Commission) financing mechanism to issue Tax Exempt Revenue Bonds (Bonds) when DevCo,
Inc informed the City that they were requesting Bonds for three multifamily housing projects
within city limits, totaling approximately 800 dwelling units.
The city is appreciative of the need to provide housing affordable at a broad spectrum of
income levels and has historically supported a diverse range of housing options for our
socioeconomically diverse community. While the City's CDBG Consolidated Plan is supportive of
affordable housing, that plan specifically is intended to complement and work within the
structures of the existing policies and "strategic " planning documents of the City and uses
information from these documents as referenced throughout the Plan.
24 CFR 91.510 (c) mandates that "[the] jurisdiction's certification that an application is
consistent with its consolidated plan means the jurisdiction's plan shows need, the proposed
activities are consistent with the jurisdiction's strategic plan, and the location of the proposed
activities is consistent with the geographic areas specified in the plan."
The City's Comprehensive (Strategic) Plan clearly enacts the Growth Management Act (GMA)
and County Wide Planning Policies preferences for equitable mixes of housing affordability
within cities and regionally. We are concerned that approval of the Bonds would result in an
oversupply of a specific range of low- income housing in our community, counter to the goals of
the GMA and County Wide Planning Policies (CWPP) and thus are unable to extend a Letter of
Consistency for the proposed projects.
Washington State Housing Financing Commission
Page 2 of 3
This Bond program appears to provide incentives for a concentration of low- income housing in
communities with already lower- than - median income levels — communities that already tend to
have a larger supply of affordable housing. In a community like Federal Way, the marginal
increment between the rent -cap associated with low- income housing and the rent possible at
market -rates is minimal. Thus from a financial perspective, the Bonds more than make up for
the marginal increment in rent that could be achieved by developing market -rate housing and it
is therefore more profitable to develop Bond - supported, low- income housing than privately
financed, market -rate housing. Whereas, in areas with high median income levels, market -rate
rents far exceed the rent -cap associated with Bond - supported, low- income housing. The value
of the tax credits does not come close to compensating for the rent spread, thus making it far
more profitable to develop market -rate housing.
As the Brookings Institution has documented in the Suburbanization of Poverty and Confronting
Suburban Poverty in America, for the past decade south King County has experienced a number
of economic and demographic trends resulting in a significant shift towards a lower- income
population. We believe that the best use of tax - incentive policy would be to counteract this
trend and incentivize a more equitable regional distribution of low- and moderate - income
housing.
Based on the adopted CWPP, the city should provide 16% of our housing stock at levels
affordable to families earning between 51% and 80% of King County Average Median Income
(AMI) — the same category of families for which DevCo wishes to develop their three projects.
Based on our most recently available data, the city currently provides approximately 35% of our
housing stock at a level affordable to families earning between 51% and 80% of AMI — far in
excess of the CWPP target. For this reason we do not believe that the city has a need for
additional housing in this segment of the affordability spectrum.
The CWPPs call for a logical and equitable mix of affordable housing throughout the region and
should provide guidance for Commission policy. Public policy in the area of affordable housing
should result in a broader mix of income levels within communities and less income disparity
between communities. Thus, these types of tax incentives should be utilized to encourage
development of more affordable housing in communities with higher median incomes, less
existing affordable housing, and higher need for new affordable housing supply. The City's
Comprehensive Plan supports this position in that it includes a number of goals and policies
that call for a diverse range of housing types and an equitable distribution of low- income
housing throughout the region.
For the above reasons we do not support the use of Bonds to facilitate additional housing in
this part of the affordability spectrum in Federal Way, when we have clearly exceeded the
targets set by the CWPPS. We, therefore, respectfully request that the Commission take these
comments into consideration both in terms of policy formulation and when evaluating requests
for Bond issuance.
Washington State Housing Financing Commission
Page 3 of 3
Thank you for the opportunity to comment. Please do not hesitate to contact me if you have
any questions. I can be reached at 253.835.2410 or skip .priest @cityoffederalway.com.
Sincerely,
Skip Priest, Mayor
nne Burbidge, Councilmem
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Kelly Malorle.y, Councilmember
frf Ferr-II, Deputy Mayor
Bob Celski, Councilmember
Susan Honda, Councilmember
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