The Alexandria Redevelopment and Housing Authority, which was created to fund housing projects there, has found that it can make money floating tax-exempt industrial revenue bonds to finance housing projects in other jurisdictions.
Of the $8.3 million in tax-exempt bonds issued by ARHA this year, more than half went to fund two housing projects in Arlington; in the process, it earned $49,000 in fees. And ARHA is planning to finance a project in Manassas that will net the authority between $40,000 and $60,000.
ARHA only funded one Alexandria project this year, the renovation of the George Parker Homes.
ARHA, which owns nearly 1,000 units of public housing which rent for less than they cost to maintain, almost went bankrupt last year when federal housing subsidies evaporated. Now, however, ARHA is reaching out for business beyond Alexandria's borders and is finding that the entrepreneurial spirit can be as useful in reviving a public agency as it is in resuscitating failing companies.
"It's a nice chunk of revenue, I'll admit that," said Angus T. Olson, executive director of ARHA, discussing the fees ARHA will collect from the Manassas project. "We're always looking for ways of raising revenue or cutting costs. The challenge today is finding how to continue to provide public housing in an era of waning federal subsidies. We've had to be innovative."
Under a provision in the Virginia code, a housing authority in one jurisdiction is allowed to issue tax-exempt bonds to finance housing projects in other jurisdictions in the state that do not have housing authorities. And, since fewer than half of Virginia's cities and counties have established their own authorities, a number of the local housing authorities have reached beyond their borders to do business for others.
ARHA's rates for financing outside projects are 1 percent of the first $10 million of the total bond issue, 0.4 percent of the next $10 million and 0.2 percent for the amount above $20 million. In addition, ARHA charges an annual administration fee for each bond issue of 0.125 percent of the remaining bond balance per year until they are repaid, a period that can be as long as 40 years.
Olson said, however, that the fees are not "fixed in concrete," and might be lowered if the developer of a project was a charitable group not be able to afford the project at such high rates.
The developers for the Manassas project, James Edmondson and Thomas Gallagher of McLean, will be purchasing and renovating the 149 units at The Colonial Village Apartments on Nichol Street with the money raised by the ARHA bonds. Rental rates after the rehabilitation will range from $325 for an efficiency to $475 for a three-bedroom unit. Rents at the complex today range from $300 to $420 a month.
According to regulations from the U.S. Department of Treasury, at least 20 percent of the units in projects financed by tax-exempt bonds must be rented at rates affordable for low- and moderate-income people.
"All of the units at Colonial Village will be affordable to low- and moderate-income people after the rehabilitation," said Olson. "We don't think anyone will be displaced." He said the renovation of the approximately 20-year-old apartment complex would include installing new applicances, new heat pumps and upgrading the electricity.
To finance the rehabilitation and acquisition of the Patrick Henry Apartments in Arlington, ARHA floated $3.4 million in tax-exempt bonds earlier this year and took a commitment fee of $34,000. Edmondson and Gallagher are also the developers for the Patrick Henry project. Of the 110 two-bedroom units at the apartment complex, 45 will house people who are receiving housing assistance, and rents for the remaining units will rise from $425 a month before the work, to $505 when it is finished.
To finance Wesley Housing Development Corp.'s purchase and rehabilitation of Whitefield Commons in the Buckingham area of Arlington, ARHA floated $1.5 million in tax-exempt bonds and received a $15,000 fee. All of the 64 units at Whitefield Commons are rented by people receiving housing assistance.
"It's impossible to say whether or not these projects would have been done without the tax-exempt financing from ARHA, but I'm sure they could not have kept the rents as low without the financing ARHA provided," said Edward Brandt, section chief for housing in Arlington. "It is true that virtually no one is buying and rehabing garden apartments around here and them keeping them rentals without tax-exempt financing."
All the projects financed by ARHA are required to remain as rentals for at least 10 years, and, in some cases, longer.
Although ARHA enjoys broad public support in Alexandria, from citizens and politicians, Olson says he is well aware that other jurisdictions might be wary of ARHA's cross-jurisdictional work.
"We don't solicit projects outside Alexandria, and we don't work without the support of the local board of supervisors or city council," said Olson. "We are there only at the request of the locality."
Arlington and ARHA have a cooperative agreement that was drafted, said Olson, to formalize the role ARHA can play in financing housing projects in Arlington. Arlington citizens rejected an initiative to establish their own housing authority in a public referendum two years ago.