Finance & Housing Committee 9/10/21

Thank you very much for joining the Finance and Housing Committee meeting.

I'm Teresa Mosqueda.

The time is 9.31 a.m.

and the date is September 10th.

The Finance and Committee meeting will come to order.

Madam Clerk, will you please call the roll?

Vice Chair Herbold?

Vice Chair Herbold?

Here.

Council President Gonzalez?

Here.

Councilmember Lewis?

Present.

Councilmember Strauss?

Present.

Chair Mosqueda?

Present.

Madam Chair, that is five present.

Excellent.

Thank you all for joining us today.

We do have everybody from committee with us today.

So thank you again for your time on this holiday week.

As we have moved our normally scheduled Finance and Housing Committee to a Friday morning, we will try to be respectful of your time and make sure to end by noon today.

Thanks again for your participation in today's discussion.

In front of us today, we have a discussion on the Strategic Investment Fund Proviso.

This is a piece of legislation that would lift the proviso to allow for $30 million in the acquisition fund that the council approved in 2021 budget to be applied to various projects that especially serve our BIPOC community as we think about community investments and equitable investments.

There's a community advisory group that has been working on developing recommendations about which projects to focus on and we will have a briefing on and discussion on that.

These funds are a result of the Mercer Mega Sale.

We will also have a briefing and discussion and possible vote on the long-anticipated multifamily tax exemption annual report and extension legislation from the Office of Housing.

And again, I want to thank the partners at the Office of Housing who have been eagerly anticipating the opportunity to present that information in our committee today.

So the majority of the meeting will be focused on those MFTE pieces of legislation.

If there's no objection, today's agenda is adopted.

Hearing no objection, today's agenda is adopted.

Let's begin with public comment.

I appreciate everybody's opportunity to continue to participate in our Finance and Housing Committee meetings remotely.

We do publish the link to our website two hours prior to the start of our meeting so that people can sign up as usual.

We want to make sure that everybody has the chance to provide public comment at the beginning of our meeting.

Before I read the script about the process for engaging in public comment this morning, I just want to confirm, I do not see anybody listed for public comment.

And I just want to confirm if that is accurate from our team from IT and the clerk's office.

We have one public comment registrant.

You do?

Okay.

I do not see that person on my list, but I will go ahead and open up public comment at this time.

Thank you to all who have signed up for public comment.

And again, you will have two minutes to speak, and you'll hear a little chime at the end of your allotted time.

That means it's about 10 seconds till you wrap up.

We appreciate you dialing in today.

After you get the chance for public comment, there's various listen-in options listed on today's agenda, including at Seattle Channel.

So, why don't we go ahead and have the one individual share their name and we will get started.

Good morning.

Good morning, council members.

Can you hear me?

I do hear you.

Good morning.

Is this Miss Natalie Quick?

It is.

Good morning Councilmember.

Good morning.

Thank you.

Good morning.

Thank you for the opportunity to comment this morning.

I am Natalie Quick here representing NAIOP today our state's commercial real estate association with hundreds of members in Seattle.

We want to thank Councilmember Mosqueda and her staff as well as the Office of Housing for working with us on the MFTE legislation before you today.

I believe it's Council Bill 120156. As the first few MFTE projects prepared to come to the end of the 12-year program we have a shared goal with the City of ensuring we do not lose affordable housing units and that all existing participants choose to renew and stay in the program.

We believe today's legislation moves us solidly in that direction and especially appreciate the quarterly check-ins which allow us to pivot if it looks like we may lose participation.

Again approaching the 12-year mark for this first set of program participants is a first for MFTE.

being flexible and making adjustments will be important as we move forward.

Thank you again to Council and the Office of Housing for working with us on this important legislation.

Thank you.

Thank you very much, Natalie, and appreciate you dialing in this morning.

Sorry, I did not see you on my list.

I'm very glad that you were able to provide that public testimony.

At this point, I'm going to pause to see if any additional people have signed up for public testimony before we close public comment this morning.

There are no other public comment to registrants.

Thank you very much, son.

Thanks, everybody.

This is the end of our public comment.

If you did want to speak to anything on our agenda today and didn't have a chance to call in this morning, you can always email us at council at Seattle.gov.

That ends our public comment.

Let's go ahead and move into the first item of business on today's agenda.

Agenda item number one, strategic investment fund proviso lift for briefing and discussion.

Wonderful, and I see our team from Central Staff here.

Thank you very much to Tracy Ratcliffe and Lish Whitson from Central Staff for being here.

We also want to welcome Director Kidding-Dongo from OPCD, UBA, and Julia as well.

Julia, I see on the line.

UBA, I see on the line.

I know we're slightly earlier than we had anticipated, so want to check in with the department to make sure, I didn't miss the director, but happy to have you all start us off.

And then if Director Kering-Ngong'o joins us, we will make sure to announce that as well.

But very, very appreciative of the work done by the department and really excited colleagues to have this piece of legislation in front of us today.

I will save some of my remarks for after central staff does any comments that they might have, and then we'll turn it over to the department.

Any comments from central staff?

I'll just tee this up really quickly just to remind you the strategic investment fund.

So this fund was first established in the 2020 adopted budget, remembering that it was based on the anticipated sale from the Mercer Mega Block properties.

The 2021 proposed budget was delivered to council last year and that money for the SIF was not included in the budget but was reallocated to other mayoral priorities.

the council wanting to hold to the original promise of 2020 added back in the $30 million for the strategic investment fund, and the executive went forward with implementing that proposal as the council had intended.

And I think they will do a good job of talking about the process that they went through, which was really an excellent one.

Central staff had a chance to participate in that process and was really impressed with how well it went and fulfilled, I think, the intent of council regarding these funds.

Thank you very much, Tracy, for that context.

Alish, anything else from you at this moment?

No, thank you.

Okay, wonderful.

Well, before I turn it over to Uba and Julia, who are also not only leading this effort, but very much respected among community members for their participation in this effort, but also prior to their work in the city, I think that this is going to be an exciting opportunity for us to showcase the really collaborative work done with community partners.

This is also a huge milestone for us in a long process and years of advocacy by community organizations who've worked very hard over the years to make sure that we make good on our promises that when there is a public piece of land that if it is If there is the opportunity for us to use that for the public good, then we should.

In the sale of the Mercer Mega Block, which happened many years ago, a few years ago, that sale went through and the community said, really, we want to have a public benefit from this as well.

And so having these dollars go towards making sure that we're investing in communities, especially communities who are hardest hit by displacement, was really an important component of the sale of the Mercer Mega Block, as Theresa Ratcliffe described.

We also have been working to make sure that we created more opportunities to hold land in public hands as a result of the sale.

In 2018 and 2019, when the city was negotiating the sale of Mercer Mega Block, we heard from advocates that we should be holding on to public land instead of selling it to the highest bidder, and that we should be making the request for those public lands to be shared among the community, excuse me, among the city to see if we can use it for developing things like housing.

If the city doesn't want to use it, if we don't have the need for the surplus land, then we should be prioritizing it for communities who We have a lot of people who are interested in building affordable housing and community assets.

So I was really proud to not only have worked to support this work to make sure that the Mercer mega sale did have this important element of community assets being created out of the sale, but also making sure that we followed up on resolution 31837, which is for surplus which is also City Light surplus property, so that when there is surplus property in this city, we prioritize making sure that there's affordable housing and community-driven development on those parcels.

I'm very excited, though, that this piece of legislation in front of us included using the profits from the Merce Omega sale to include a large range of public benefits.

We've seen some of those public benefits on site.

to be more public benefits like child care centers within the Mercer Mega footprint and that we also use more of those proceeds for things like these investments that we will talk about today.

In 2019, in addition to the allocation of the portion of the Mercer megas to make a block to historic investments including housing, council passed a provision requiring this $30 million that we are talking about so that there's truly community-driven strategic acquisition that is being developed as a result of these funds.

I'm excited to hear more about the projects that you selected.

I know you've worked very hard and diligently with community to figure out how to spend these dollars so that we're investing in equitable development and that we're serving those with the highest rates of displacement across our city.

And I'm also proud, as Tracy mentioned, that the council reasserted the importance of using these dollars, the 30 million dollars, for the purpose that it was originally intended for when we passed our 2021 budget that year.

So with that background and a lot of anticipation and excitement from the community, I will turn it over to our department representatives and just want to thank Uba and Julia in advance, and we will note the director's attendance when he arrives as well.

Thank you so much for being here today.

Thank you, councilmember.

It's an exciting day.

Actually, the director is not here because he's in a press event announcing another $9.8 million for the EDI fund that we are also about to move to community.

So happy Friday, everyone.

So we're going to talk about the proviso left.

Next slide.

We are going to introduce the strategic investment fund.

the baseline criteria that was used and then provide additional context that supported the potential applicants.

Next.

As you heard right now, the city investment fund is a real estate acquisition fund that will fund the purchase of land, land with existing buildings or buying a portion of an existing or planned building like the ground floor of an affordable housing development.

The funds from SEAF, again, as you heard, originated from the sale of the Mercer Mega Block, publicly owned property in Salt Lake Union, and were allocated by the Mayor and Council to root communities in place.

And, again, Council confirmed this purpose in the 2021 budget.

I just want to start by saying that discriminatory practices in public and private investments, these investments in public policies, have significantly impacted Black, Indigenous, and people of color communities, as well as queer and transgender, BIPOC communities, people with disabilities, and low-income families.

And the Strategic Investment Fund will support site acquisitions for community-led projects in growing and changing neighborhoods.

SEAF was stewarded by an interdepartmental team from the Office of Planning and Community Development, Office of Housing, Office of Arts and Culture, the City Budget Office, Office of Economic Development, Department of Neighborhoods, and central staff, and leadership of the amazing Julia.

Next.

A committee representing communities of risk of displacement and economic development experts met initially in 2019 and were convened in 2021 to focus the purpose of these funds.

The strategic investment fund will fund proposals that, one, respond to immediate displacement pressures, create long-term impacts by strengthening relationship and communities while building, combining affordable housing and other benefits such as affordable commercial space, public office space, cultural space, and child care.

And the proposals that were recommended for funding do not need to include all, but must include at least one of these community benefits.

Also, the core criteria included filling the gaps in existing funding for community development.

Next.

The RFP was released in early June, was open for six weeks, and staff hosted three info sessions that brought in over 85 potential applicants.

And then once the applications were received, city staff prepared the applications for review and send it to the interdepartmental team.

And individuals representing communities at risk of displacement and economic development practitioners that I mentioned scored, read, and made funding decision based on consensus process and the criteria that I mentioned earlier.

Next.

Through this fund, the community advisory group considered proposals for acquisitions of real estate, whether it's a vacant property, a property with an existing building, or buying a portion of an existing or planned affordable housing development.

We capped the funding ask to $5 million, and there was no minimum funding threshold.

and the funds could be used to fill gaps in existing acquisitions or acquire a property in its entirety, as you've been hearing.

Next.

I just want to revisit these maps and just say that the strategic investment fund proposals fund high-risk displacement neighborhoods, red areas in the map on the left, and or low access to opportunity areas, areas in brown on the right.

with proximity to significant land or recent investment in parks and transportations.

We were intentional to not define this at a granular level because we do not want to exclude important projects because of how the city defines in these geographies.

So the project sponsors told us how their proposed sites met our geographic goals.

who applied commercial or residential tenants at risk of displacement, including BIPOC and QT BIPOC communities, low income tenants and businesses with an idea or momentum for community and wealth building experiments in their building.

For example, a locally owned small business who rent storefronts in an older commercial building learned about the building that may be going up for sale.

They end up reaching out to a nonprofit real estate group or a public development authority that is a mission driven to support their desire to control their own real estate and together they begin to fundraise and build partnership.

But still they have a significant gap between their resources and their appraised value of the building.

So these are like examples since we can't share the projects themselves, examples of groups that ended up coming together and applying for the Strategic Investment Fund.

I also really want to hand it over to Julia from slide number nine, but just again, just recognize her leadership and brilliance in stewarding this project.

And yeah, I'm going to have her take it from here.

Thanks, Uba.

So we talked a little bit about the community advisory group who was represented, but just to give you a different sense of all the different groups who are represented, we had community-based organizations, equitable development practitioners, philanthropy, funders, and made sure to have representation from the equitable equitable communities, equitable development initiative, equitable communities initiative task force and the cultural space agency with the office of arts and culture.

Just so we had strong ties across all of the different efforts of the city to address displacement and through capital projects and land acquisition.

This diagram represents the process that we went through.

So on July 14th, we received 100 applications totaling over $330 million of asks.

It's indicative of the demand and the need for these types of resources for community-based organizations, for tenants, for small businesses to be able to secure property, to secure their communities.

Once we received that application, we advanced all of them to the community advisory group, who then signed conflict of interest and nondisclosure agreements.

For the first round of review, we split the CAG, the community advisory group, into four groups, both to manage conflicts and assign a reasonable reading list.

Each group reviewed 25 applications and then advanced their top 5 to the next round.

Then everybody read the remaining applications that they had not yet read and we had facilitated consensus process.

to identify the $30 million in award.

And I think it's important to know that all of the applications that were advanced from the first day to the second day were extremely qualified.

And if we'd had an additional $50 million, we would have funded all of them, or the CAG would have funded all of them.

It was a very hard process.

And to give you a sense of where the conversation, you know, the focus of the conversation, this is our evaluation criteria and rubric that we.

Published in our guidance document that.

sat along the RFP on our website so we could have maximum transparency with applicants about what comprised an excellent application that would have a high likelihood of getting funding and what might be a lower scoring application that might not be funded.

And I bolded some of the Some of the language that we ended up focusing a lot of the conversation on, that these were transformational once-in-a-generation opportunities for asset and wealth building.

They had a systemic community impact, addressed an immediate displacement risk, factored in capacity building.

So we weren't just funding shovel-ready projects, but we were also able to fund some projects that were still in a visioning stage.

that had an impact beyond this one project and amplified systemic resources, financial and non-financial.

The community advisory group recommended awarding funds to 13 projects across the city, Lake City, Central Area, Rainier Valley, Southwest Seattle, Chinatown International District, representing Black-led organizations, Indigenous-led organizations, and mixed coalition or multiracial BIPOC-led organizations.

The public benefits that would be created through these investments include affordable housing for families and seniors, child care, cultural space preservation and creation, community space preservation and creation, small business incubation and preservation, open space and historic preservation.

And just a note for this group, because I'm sure you all have burning questions about who the awardees are.

It's considered sensitive real estate information that we will be discussing in executive session with the full council plan for September 20th.

We will be able to see the full list.

We have not published any of the details in order to protect some of the sensitive real estate, ongoing real estate transactions and negotiations.

But the reason that we're here today is to discuss the Proviso-Lift legislation.

And as mentioned in the 2021 adopted budget, The council appropriated the funds with a proviso pending a spending plan from the executive and the spending plan, the legislation denotes the spending plan as moving the $30 million allocated to finance general to the office of planning and community development.

And there's further detail that will be discussed in executive session about who the awardees are, which was designated through the RFP process and collective decision making.

Once the proviso or if the proviso is lifted, OPCD will begin contracting with awardees.

And as I mentioned, awardees will not be announced publicly, but we will be able to announce the individual awards on a rolling basis once the transactions are finalized.

And that's the end.

We'd love to hear any questions or comments

I'm not seeing any hands up.

I just want to say thank you again for this work.

Colleagues, just as a reminder, we're going to have another committee discussion and possible vote next Friday, September 17th, as noted by Julia, an executive session to hear more about the confidential matters and with a hopeful full council vote on September 27th so that we can get this out of our hands by the end of the month.

Thank you very much for providing this overview.

Are there any additional questions, colleagues?

I would love to know more about the role that you two will continue to have with some of these contracts, given the relationships that you have and your detailed understanding of the awardees.

Can you talk more about the ongoing work that you might be able to do as it relates to these recipients?

Yes, the both of us and actually the team will be project managing and offering technical assistance on a regular basis to all the awardees.

And some of the folks who have been awarded also got EDI capacity building funds.

So I will be closely working with these groups.

to one, bring them together through grantee convenings for them to learn from each other and to continue the regular, you know, technical assistance and project management that we have been doing with the EDI projects.

Excellent.

Thank you.

Vice Chair Hurdle.

Thank you.

I remember I'm asking about this when the criteria were developed, but I don't know how it was resolved.

It looks like the geographic criteria allows for projects that are either in areas that are of high displacement risk or low access to opportunity.

It does not require that both criteria be in place.

My recollection is that OPCD in the past in some land use decisions have sort of melded the two maps and overlaid areas of high displacement risk and access to opportunity in those neighborhoods that meet both criteria, for instance, not receive a large MHA bump because of the concern that a large MHA bump would have a negative impact on the residents of folks who live in high displacement risk areas that also have low access to opportunities.

Can you confirm that it's just one criteria that needs to be in place?

And what's the thinking of sort of of not requiring both criteria in place and having sort of that overlay and identifying those areas that share both triggers.

It's a great question, and I think your understanding is correct that we did not require an and, it was both and, high displacement risk neighborhoods and low access to opportunity neighborhoods, with the caveat that there was a displacement risk to the community that was applying.

Does that make sense?

So, you know, The immediate displacement risk was a criteria that that the committee evaluated on.

And I think mentioned this before that we know that the maps don't.

Reflect the full nuance of what displacement looks like in our city and so we were very clear in our.

info sessions and in the one-on-one meetings that if you are a community that's at high risk of displacement, your community center is being sold, your small business is feeling the pressure of rent increases, that you should apply and tell us how you're being impacted by displacement.

And we received a handful of applications that did not fit within the hotspots and map And we can talk through some of those in the executive session.

That's super helpful.

Really, really appreciate that.

Thank you.

And I add a quick thing there.

And the low access to opportunity neighborhoods will probably just three or four neighborhoods, you know, south of the ship canal, Rainier Beach, Othello, you know, South Park, and then areas like CID and Chinatown are both high risk displacement and high access to opportunity.

And the reason that they show up as, you know, displacement risk is because the communities there that normally will benefit from these types of investments don't have access to, you know, their jobs or, you know, at high risk displacement and things like that.

That's why we ended up having and or just not focusing on low access to opportunity neighborhoods, for example.

Thank you.

Really appreciate it.

Thank you for your question.

Thank you for your answers.

Thank you for all the work that you've done.

And will we see you again then next week when we consider the final passage?

Okay, great.

We will see you at the next committee meeting.

And if there is any questions, colleagues, in the meantime, just note the team will be back next Friday to be there for discussion and possible vote.

Thanks for all your work.

Congratulations to the community members to be announced at some point in the very near future.

And I'm sure we will be looking forward to working with you on identifying additional strategies to fund those who did not get into this final round, because I can only imagine how I'm hopeful that we will continue to see more opportunities for funding in the future.

Madam Clerk, let's move on to items two and three that are listed on today's agenda.

If you could read those both into the record at the same time, that'd be great.

Agenda item number two, Council Bill 120156, an ordinance relating to the Multifamily Housing Property Tax Exemption Program, and item number three, Resolution 32017, a resolution calling for research, engagement, and presentation of information of the Mayor and City Council of the Multifamily Tax Exemption Program prior to considering the renewal of the program in 2023 for briefing, discussion, and possible vote.

Thank you very much, Madam Clerk, and thank you to our team at the Office of Housing.

I know you all have been on our agenda for the last two or three times, and we have had an unfortunate need to reschedule a few of those meetings, so we are here today for final passage on these two items and we have two hours for it.

So I hope we are making up for some of our delay by giving additional time today.

I just want to note the importance of this legislation and thank you for your work.

We have Office of Housing Jennifer LeBreck with us, Tracy Ratcliffe from Central Staff and we may be joined by I will let Tracy, if there's any opening comments, and then maybe I'll make some comments before handing it over to you, Jennifer.

Council members, I think I'll just let Joanne go ahead and begin the presentation on the actual legislation that is before you today, just to say that I have worked really closely with the Office of Housing on these two proposals to address some of the questions, concerns that have been raised in particular by some of the stakeholders that we're testifying to today to address some of those concerns.

Again, with our very first round of MFTE projects that are expiring and with the goal of trying to maintain as many of those affordable housing units in the program as possible.

I will leave it to you and to Jen to go forward with the presentation.

Okay, great.

Well, I will make my comments brief, too, and then have some comments at the end about the policy.

I did just want to say thanks to Office of Housing and Tracy for working with my office, Aaron House, who spent a lot of time on this as well, and really excited about the narrow legislation in front of us.

working to make sure that it included monitoring requirements, that this legislation will help to track how this extension is functioning, and including projects that we will, I think, see a huge benefit to the city in future years.

So thanks for all of your work.

Again, colleagues, this is a continuation of proposed, excuse me, a continuation of the review that we had on the agenda from our August 17th meeting.

So you have seen the materials in your packet before.

and this is our opportunity to walk through in greater detail.

Okay, I'll turn it over to you, Jennifer.

Great, good morning, council members.

Thank you for having me back today to do a deeper dive into the legislation.

I'm going to share my screen here.

All right, and somehow I think I ended up at the very end, so give me a moment.

All right, so again, thank you for having me here today.

I'm Jennifer Labreck.

I am the planning and programs manager with the Office of Housing, and I'm here to do a deeper dive into some proposed legislation to update the MFTE program to accommodate some recent changes in the state law.

As a reminder, the multifamily tax exemption program provides an exemption on the entire residential portion of a property owner's tax bill in return for the property owner income and restricting either 20 or 25% of the units.

The remaining 75 or 80% of the units can be rented at full market rates.

The tax exemption currently lasts for 12 years, and at the end of that 12-year period of time, both the affordability restrictions and the tax exemption end.

The program is authorized by the state under a state RCW and then implemented locally through an ordinance.

As you all know, several changes were made to the RCW authorizing the program during the 2021 legislative session.

The ones that we're really focused on today include that there is now jurisdictions can now provide a 12-year extension option for projects that are currently participating in the program and facing expiration.

There are new tenant relocation assistance and notification requirements that all jurisdictions have to require as a part of their program.

The RCW now allows for a longer tax exemption period for a certain type of homeownership project.

And jurisdictions are now allowed to have labor equity requirements as a condition of participation if they so choose.

We have chosen in our proposed legislation a pretty narrow and focused approach that is really about accommodating those changes to the RCW that are time sensitive or are required, things that the jurisdictions have to do.

and have to update their code to acknowledge.

We also recognize that there are broader programmatic goals that are not addressed with this narrow piece of legislation.

In part, that's because this is a difficult time to calibrate or make changes to a market-based incentive program, especially given the uncertainty in the real estate market caused by COVID.

As such, we are proposing a resolution that states the city's intent to address other programmatic priorities to be considered at that time as well.

So we have three different sets of updates.

The first update addresses an extension option for a small set of properties that are expiring over the next two years.

The second set of updates addresses tenant stability.

And the third update is a small one that has to do with a handful of permanently affordable homeownership projects.

And then, of course, there's the accompanying resolution.

So the first update I want to talk about is the extension option for rental projects.

We are proposing to provide an extension option for projects that are expiring in 21 and 2022. That's nine projects with about 350 MFTE units.

Again, you know, there are obviously other projects that are expiring, and the idea is that projects that expire in 2023 and beyond will be addressed during program renewal in 2023. Over time, as you all know, changes have been made to the MFTE program as various iterations have been passed by City Council.

Some of the major ones include an introduction of an annual rent moderator, which limits increases in the maximum allowable rent to no more than 4.5% a year.

and a requirement that tenants income qualify for the units on an annual basis and not just at initial lease up.

So these nine projects predated both requirements as they both vested under an older version of the program.

However, if these projects opt for the extension, both the rent moderator and the income annual certification requirements will apply.

So we are essentially bringing these projects up to the current standards.

Additionally, we are proposing deeper affordability levels than what is currently required for new developments, and I will dive into the details of that in just a couple minutes.

This is an overview.

These are the nine projects that are currently expiring over the next two years.

These projects all vested under MFTE Program 3, so they all came online in either 2009 or 2010. And these projects are under program three studios and one bedrooms were regulated at 80% AMI and two and three bedrooms were regulated at 90% AMI.

And these projects sort of predated a CDU, CDU is in the land use code.

So anything that would today be considered a CDU type unit was also regulated at 80% AMI, just like a studio.

So I want to provide some background on our proposed affordability limits, and then I can go into what those are.

Under the RCW, the RCW requires that extending properties meet, at minimum, the affordability requirements for properties receiving a 12-year exemption.

So in other words, at minimum, extending properties would need to meet the affordability requirements established under Program 6, which City Council passed in 2019. However, we also know that extending MFTE properties will be between 13 to 24 years old.

As such, our proposed extension limits are calibrated to result in continued program participation, given lower rents in older buildings as compared to comparable newer buildings.

And this chart walks you through a few things.

The column on the left here, those are the current affordability limits for expiring projects.

Again, those are the program three income limits.

And the column all the way on the right hand side shows the proposed affordability limits for extensions, which are modestly lower than what is required under program six for new developments.

So essentially 10% lower than what would be required for new developments.

Proposed affordability limits are 30% for C-type units and buildings with mixed unit types, 50% for studios, 60% for one bedrooms, 75% for two bedrooms, and 80% for three bedrooms.

And I do want to note that the RCW caps the maximum income at 80% AMI for any project receiving an extension.

It can go higher for new exemptions, but if the project is to receive an extension, the cap is 80% AMI.

So I want to move on to the second set of updates, which are around supporting tenant stability.

We want to ensure that the changes that we're implementing, or that we are implementing these changes in a way that provides tenant stability, right sizes for housing costs and prevents displacement.

This is especially important because we are, in our proposal, we are instituting annual income certifications and lowering AMIs and occupied MFTE units.

And we know that those changes could really have an impact on existing tenants.

Under our approach, tenants that meet the new lower AMI requirements get the new lower rents once their current lease expires.

So if a tenant qualifies under the new lower income limits, their rent will go down.

Tenants that are over the new income limits but still within the old MFTE income limits, the Program 3 income limits, will be grandfathered in at old MFTE rent levels.

Those units will continue to be designated as MFTE units and will continue to count towards the MFTE set-aside percentage.

And then at unit turn, all MFTE units will convert to the new limits through the life of the extension.

So this chart provides an overview of the difference in rent that tenants will see.

So this would be a chart that would apply, for example, to a tenant who's currently paying Program 3 rents but qualifies for the new extension rents.

And they would see a pretty significant reduction in their rent.

The RCW also made some changes related to tenant protection.

So the RCW now requires that property owners must pay tenants at or below 80% AMI, I'm sorry, MFTE tenants at or below 80% AMI one month's rent when the MFTE rent restriction ends.

It is important to note that this relocation assistance does not apply universally across the MFTE portfolio.

It applies to new projects that were authorized after July of 2021 and to projects that choose the extension when they reach the end of their new 12-year period.

So it does not currently apply to most MFTE tenants in the portfolio.

And there's also a notification requirement that property owners do need to tell tenants, their MFTE tenants, about these relocation assistance in the two years as they approach the end of the rent restriction.

And the final update is a fairly small one, but it's helpful for our permanently affordable homeownership projects.

So right now, the permanently affordable homeownership projects get a 12-year tax exemption, just like all the other projects.

Under the state RCW, they now qualify for a 20-year exemption.

I do want to note that the RCW has a pretty stringent definition of permanently affordable homeownership.

So this can really only be used for a small, for a pretty select type of project.

And their definition includes things like a 99-year ground lease and ensuring that resales happen to households at or below 80% AMI.

This change supports five permanently affordable projects that are currently receiving city funding in our pipeline, and we anticipate that it will be useful to more projects as well in the coming years.

And finally, I just want to address the accompanying resolution.

As I noted before, the legislation is accompanied by a resolution to address other program priorities during the renewal process in 2023. The resolution states affirmatively that MFTE will continue to achieve affordable housing, advance labor equity outcomes, and provide an extension option for projects that are expiring after 2022. As part of renewal consideration in 2023, OH will provide data and analysis to help inform these outcomes and also meet with a variety of stakeholders to gain their input and perspective.

And that's all I have.

Thank you.

Thank you for walking us through this.

Very exciting with obviously more work to come on the horizon.

Vice Chair Herbold, did you have a comment?

Yes, thank you.

The benefit of forgetting to put your hand down is it's already up and you're ready to ask another question.

So I want to talk a little bit about the relocation assistance requirement.

Can you first confirm for me that this is a relocation assistance requirement that is authorized by the state?

Yes, it is authorized under the RCW.

And did the state identify 80% AMI as the threshold?

Yes, they did.

So I just want to flag this as something that is a really potentially useful precedent for us to use in trying to convince the state legislature to change the threshold for the tenant relocation assistance program for tenants that are displaced because of renovation, change of use, or demolition.

Right now, the threshold is 60% AMI.

And so if the state legislature, in their wisdom, is saying there should be relocation assistance for tenants displaced because of large rent increases in these projects for tenants who are displaced, who earn 80% AMI, I think we could potentially use that to convince them that they should make changes in the state authorizing legislation for the tenant relocation assistance ordinance.

We can't change our threshold.

in our program in the city of Seattle until they authorize it.

So just want to flag that for a potential item for the state legislative agenda this year.

It's really, really helpful to see that the state legislature made this wise choice.

Don't you agree?

Yes, I do.

Wonderful.

Thank you very much, Vice Chair.

Any additional comments?

All right.

Well, I am I am excited to vote on this.

I'm going to get the legislation two pieces in front of us.

And I understand that there is a potential amendment as well related to the resolution.

Just summarizing the concepts here that you've outlined for us.

Thanks again, Jennifer.

I think that this is going to be helpful for us as we consider additional priorities as we take on the comprehensive plan in 2023, especially when we include these monitoring requirements that will help us weigh policies and trade-offs and really have a better understanding of what that data provides for us, we'll be able to make some really informed decisions as we lead up to the comp plan.

I also want to underscore a piece that both Tracy and Jennifer, you set up as well, that this is narrow.

It is narrow legislation.

It does not address all of the multiple things that people often reach out to us about related to MFTE, and there will be follow-up action, especially with some of the actions that the state legislature took earlier this year to address how we can continue to provide additional policy enhancements to the program, but this is specific to the expiring units that are currently under MFTE, and we are granting program extensions for those projects to make sure that they don't expire in the near term.

And I think as you outlined, Jennifer, there's also some really good benefits to the community, positive impact for those who have been previously grandfathered under the old requirements and now coming under the fold of some important protections as well.

So that's a good component, even though the legislation is narrow.

And I understand that this really only applies to nine different projects, as you said.

So I think that that's another important piece to lift up, that this is something that is going to lead us to have some important data in front of us.

But we are going to have more comprehensive changes to come and a lot of engagement, a lot of engagement with various community partners and stakeholders before we take on additional changes to MFTE more robustly.

And that will include conversations with our partners at the Seattle Building and Construction Trades Council as well as other labor unions and our community and housing providers as well.

Okay, let's move the resolution in front of us so that we can consider that and then we will consider the legislation.

I move the committee recommends passage of resolution 32017. Is there a second?

Second.

We do have one potential amendment.

Councilmember Herbold, would you like to move the amendment to your resolution and we will have central staff speak to it and you as well.

Thank you very much.

I will second that.

And Tracy, would you like to provide any additional details?

Council members, this amendment was sent to you last night by Council Member Herbold's office.

It would add to the list of data and information that OH will provide in anticipation of the renewal in 2023 that would request them to include information on the total cost to buy down rents for MFTE units to what would be new proposed affordability levels, and to look also at the total amount of the property tax exemption that is foregone, as well as shifted, broken down by the city and other taxing jurisdictions, to essentially kind of do a cost-benefit analysis about agreeing to extend those MFTE projects with an extension versus ending the program because the cost of the tax foregone is greater than what it might cost us to do, to enter into perhaps a rent buy-down situation should owners of those MFTE projects that are expiring be willing to do so.

Vice Chair Herbold, would you like to add to that?

Sure.

A little bit on the, behind the amendment.

I think we all want to ensure that the rents stay lower for these units that are in expiring properties, but there may be a different approach to maintaining the lower rents than the MFTE.

program.

A different approach might involve the city using its resources to buy down the rents.

the city, because it's a tax exemption program, some of the taxes that are exempted are shifted to other taxpayers to pay, but some are not shifted and are just foregone taxes to the city.

And so the idea is we should figure out what the cost of the foregone tax is to the city and compare it to the cost of buying down the units and make sure that whatever approach that we're using to save the affordability of these units is an approach that is the most cost effective for the city and for taxpayers.

So I'm hoping that with this information, we'll be able to examine whether or not rent buy-downs are a tool that we should be considering to preserve this particular set of affordable housing units as they are expiring.

Thank you.

Thank you very much.

Any additional comments on that?

Okay, Vice Chair, I will add a few comments.

I think that the reporting requirements in this amendment fit well with the other criteria called for in the resolution to weigh programmatic changes and really help prepare us for the comprehensive proposal or the comprehensive review that is coming in 2023. and I think you said well.

I think as a tax exemption program initiative, MFTE involves trade-offs and this information could potentially help us in making future informed decisions as we weigh those various priorities, including how we invest in additional affordable housing and wanting to make sure that we're also meeting our values and goals around racial equity and supporting labor partners as well as housing our community as well.

So I will be supporting this amendment as well.

With that, I'm not seeing any additional hands.

Madam Clerk, can you please call the roll on the adoption of the amendment?

Mr. Herbold?

Yes.

Council President Gonzalez?

Aye.

Council Member Lewis?

Yes.

Council Member Strauss?

Yes.

Chair Mosqueda?

Aye.

Madam Chair, that is five in favor and none opposed.

Thank you.

The motion carries and the amendment is adopted.

The resolution as amended is now before the committee.

Are there any additional comments?

It's not aware of any additional amendments.

Okay.

Well, we have come to the point of passage.

Thank you very much to the Office of Housing.

We are going to go ahead and move this out.

Madam Clerk, we call the roll on the passage of Resolution 32017 as amended.

Vice Chair Herbold?

Yes.

Council President Gonzalez?

Aye.

Council Member Lewis?

Yes.

Council Member Strauss?

Yes.

Madam Chair?

Aye.

Madam Chair, that is five in favor, none opposed.

Thank you very much, Madam Clerk.

The motion carries, and the committee recommendation that the resolution pass as amended will be sent to the September 20th Seattle City Council meeting for a final vote.

Let's move on to the council bill.

I move the committee recommends passage of Council Bill 120156. Is there a second?

Second.

Thank you, Vice Chair.

It's been moved and seconded.

Is there any additional comments on the council bill?

Okay, well, I will use this as a chance again to say thank you.

Thanks to Office of Housing, Teresa Ratzliff, Erin Howes in our office, and to all of you for your support in strengthening the legislation in front of us today.

Much more to come as we talk about this with community partners.

But today, let's go ahead and move this out.

Madam Clerk, will you please call the roll on the passage of Council Bill 120156?

Vice Chair Herbold?

Yes.

Council President Gonzalez?

Aye.

Council Member Lewis?

Aye.

Council Member Lewis?

Aye, yeah, yes.

Council Member Strauss?

Yes.

Madam Chair?

Aye.

Madam Chair, that is five in favor, none opposed.

is unanimous.

The motion carries.

The committee recommendation will be sent to the September 20th Seattle City Council meeting for a final vote.

Jennifer, thank you.

Please pass on our appreciation to your whole team, including Director Alvarado, who I know has been eager to get this done.

So we did it and we did it only within a half an hour and we had, I think, a lot of time anticipated, but this was such great work and earlier briefings in our August 17th meeting.

So I'm happy to see this legislation move forward and we will celebrate its passage on September 20th with the full council.

Fingers crossed.

Okay, thanks everybody.

I'm just looking at my agenda and we have gotten through the entire agenda within an hour.

Is there any additional comments for the good of the order?

Hearing none, I will say thanks to all of you.

We have one last finance and housing committee for our regular committee that is set up for next Friday, September 17th.

That also begins at 930 a.m.

We do have a little bit longer of an agenda, colleagues, so I want to make sure that you save the full time.

We are going to have the office of labor standards, racial and social justice initiative presentation.

The strategic investment fund provides a lift, so the actual legislation that goes with the presentation we had today.

And we will have a briefing from Director Noble on the update, any updates from that last revenue forecast that we'll have that in our hands prior to considering the proposed budget that the mayor will be submitting to council on September So we are still finalizing our agenda, but those are the confirmed items.

So please do save that full time on Friday, September 17th.

That is a specially scheduled time since the following week did not work for the calendars and appreciate your time in advance.

Thanks so much for joining us today.

Have a great Friday and enjoy the rest of your weekend.

Take care, everyone.

Thank you.