Department of Finance
Reference: Assignment of the City of Brighton’s 2022 Private Activity Bond Allocation
To: Mayor Gregory Mills and Members of City Council
Through: Michael Martinez, City Manager
Prepared By: Catrina Asher, Director of Finance
Date Prepared: April 5, 2022
PURPOSE
To assign Brighton’s 2022 Private Activity Bond allocation to the Colorado Housing and Finance Authority (CHFA) with a request to prioritize those bonds for use by the Brighton Housing Authority in support of the Hughes Station Project.
STRATEGIC FOCUS AREA
Financially Responsible
Strong Regional Relationships and Partnerships
BACKGROUND
Each year, cities throughout the State of Colorado receive an allocation of Private Activity Bonds which are tax-exempt bonds offering low-cost financing for private projects that serve a public purpose. Examples of eligible projects include acquisition, construction or rehabilitation of housing for low- and moderate-income individuals and families, mortgage loans or mortgage credit certificates for income-qualified, first-time home buyers. While Private Activity Bonds can fund projects other than housing, they are primarily directed towards housing projects because there are other financing options that are better suited for non-housing projects.
The City of Brighton has a 2022 allocation of $2,227,841 in Private Activity Bonds.
In order to utilize the bonds, a government authority would partner with a private organization to finance a project. Private Activity Bonds are issued by a government authority and then investors purchase the bonds. The underwriters use the investors' money or bond proceeds to create a low-interest loan for the project. The project manager pays back the loan and the investors get repaid with interest. The Colorado Housing and Finance Authority (CHFA) is the primary agency that issues bonds for housing projects in Colorado.
In 2021, the Brighton Housing Authority (BHA) notified the City that BHA would like to use Brighton’s Private Activity Bonds to refinance and rehabilitate Hughes Station Apartments at 233 N Main Street in Brighton. BHA asked that Brighton assign the full 2021 Private Activity Bonds amount to CHFA so that CHFA could issue the bonds to fund the project. BHA worked directly with CHFA to obtain the bond proceeds and proceed with the project. At the time of this request, BHA acknowledged that this project would take multiple years and that future Private Activity Bond allocations would be requested.
BHA has submitted a request that the City again assign its full 2022 allocation of Private Activity Bonds to CHFA for use on this project.
Hughes Station Apartments was built in 2003 by the nonprofit organization Almost Home. The apartments are at the site of the first train depot in Brighton built in 1862, and the complex is named after this depot. Owned and operated by the Brighton Housing Authority since 2017, this multi-family apartment complex has 120 units that are rented to low- and moderate-income families.
CRITERIA BY WHICH COUNCIL MUST CONSIDER THE ITEM
Council has the option to assign the funds to CHFA for use on this project or without a project preference. If assigned without a project preference, CHFA would attempt to use the bonding capacity for projects within the City of Brighton or our region. However, as use of the bonding capacity requires that there be a private organization ready to partner on a project, it is possible that CHFA could use the bonds outside of the City of Brighton.
If no assignment is made, the bonds would revert to the State of Colorado’s Private Activity Bond pool to be used on projects at the State’s discretion.
FINANCIAL IMPACT
There are no financial implications for the City since CHFA will issue the bonds for this project and will work directly with BHA, and/or the organization managing the project, on the finances. The City's role is strictly to decide whether the City would like the bonds allocated to this project.
STAFF RECOMMENDATION
Staff recommends approving the resolution which authorizes assigning Brighton’s 2022 Private Activity Bond allocation to CHFA, requesting that the Brighton Housing Authority’s Hughes Station project be given priority for the bond proceeds, and authorizing the City Manager to execute the Assignment of Allocation document.
OPTIONS FOR COUNCIL CONSIDERATION
Ø Approve the resolution allocating the City’s bonding capacity to CHFA for use by BHA.
Ø Consider alternative uses of the City’s Private Activity Bond allocation.
Ø Do not approve the resolution. This will result in the Private Activity Bonds automatically reverting to the State of Colorado’s Private Activity Bond pool.
Attachments:
Ø Resolution
Ø BHA Letter of Interest
Ø Assignment of Allocation Agreement