Ms.

Spears, can we get started?

Please call the role.

We sure can.

Council Member Willard.

Here.

Councilmember Morrell.

Here.

Councilmember McCarran.

Councilmember Green.

Councilmember Hughes.

We have a four.

All right.

Thank you, Ms.

Spears.

Thank you to everybody who's here today for this economic development committee meeting.

Today we are going to have a discussion on the pilot agreement for the Ravana apartment.

Before we do that, can we move into approval of the last meeting minutes?

Second.

Second.

Move by Council President Morrell, seconded by Council Vice President Willard.

All in favor?

All right.

And for the record, Councilmember Hughes is present.

Four years, zero nays.

The minutes are approved.

At this point, I'll turn the meeting over to Councilmember Harris.

Thank you, Chair Willard.

I am really excited today because we are moving one step closer to the vision of the river district neighborhood that I've stood behind, a mixed-use neighborhood with affordable housing right in the heart of District B with accessible amenities.

As I've said so often, the river district is required to build 900 units of housing, at least 450 of which must be priced with affordable or workforce level rents.

The Ravana, which we are discussing today, is the first phase of developing the affordable housing with 220 units that are all required to remain affordable for 40 plus years.

Test piles are in the ground, and I know RDI and Providence need to get to financial closing by July 29th in order to maintain their key funding sources, which includes state uh and local braided sources.

As folks may remember, the river district has its own unique approval process for pilots involving the RD and I subdistrict, the state body created through the New Orleans Exhibition Hall Authority Economic Development District.

State law requires approval of the RD and I subdistrict as well as the council, including a hearing before the Economic Development Committee that we're doing right now.

Thank you again to Councilmember Willard for accommodating this hearing today on a schedule that allows this per project to move closer to its July closing.

As I mentioned, the Ravana exceeds the standards set for its pilot, and we will meet all other city requirements, including local hire rules, DBE participation, and applicable zoning, including the convention center overlay rules.

Uh we have the developers here.

If y'all would like to come up and introduce yourselves, I know we have a presentation on the Ravana and the pilot.

Thank you, Council Members.

Uh good morning, thank you all as Councilmember Harris noted for calling such a uh a meeting on such short notice.

Um I'm Jeff Schwartz, I am the Deputy Mayor for Economic Development for the City of New Orleans.

Uh I'm joined here by my colleague uh Tracy Jackson, who is the city's Jackson Voice, excuse me, who is the city's uh incentives administrator.

He's prepared a report uh to brief uh this committee uh on.

Uh and I'm also joined by uh Emily May and Michael Meredith, who are uh some of the uh alchemists uh and lead developers uh behind the uh Ravana uh project.

Uh Tracy, do you want to walk us through the presentation and I uh can provide any color commentary and then we can go to uh any any questions.

Great, thank you.

Absolutely.

Good morning, council members.

Uh once again, my name is Tracy Jackson Bush with the Office of Economics Development.

Uh thank you all for this opportunity.

Um to provide OED's review and recommendation of the Ravana uh pilot application.

Uh pilot uh pilots are just such a vital tool in our economic uh development toolbox as it relates to encouragement of large investment in the city.

Much like the myriad of like public and private subsidies uh involved with this project.

Uh the pilot incentive plays a vital role in making sure that this uh development comes to reality.

So I'll just first begin with an overview, uh followed by the pilot terms, fiscal impacts, job creation, economic impact, and conclude with the OEDs uh with OED's recommendation.

If I can jump in just very briefly, um sorry to interrupt Tracy.

Um, as you all think are aware, uh, Act 212, I believe in uh 2023's legislative session actually created the ability for uh the state um uh economic development district that the uh convention center um uh helps manage uh that uh provide for provided for this process that we're going through here today.

So uh the subdistrict that governs the river district made a recommendation uh of a term sheet that the Office of Economic Development and Tracy then subsequently reviewed.

Um we are presenting that here today, and um uh this hearing is required as a part of a process before it goes to uh the full city council.

Um and then uh upon review there uh either be recommended for approval or denial at full council.

So thank you.

Tracy, take it away.

Awesome, thank you, Jeff.

So as it relates to the project overview, RDI but tour commits to deliver long-term high quality affordable housing and retail.

Uh the developers have a financial closing deadline scheduled at the end of July, followed by construction commencement in August of this year, and a projected completion date of June 2028, roughly uh looking at like 18 months uh time frame.

Uh the commercial project component is estimated to generate 10 plus permanent employees and is in and is anticipated to expand over time.

Uh the Ravana apartments is part of a larger uh river district development.

The proposed apartment building will consist of 240,000 two hundred and forty-two thousand uh square feet, 18,000 square feet of which will be allotted to commercial tenants.

Uh, the project will be located at 1480 Chapatula Street between Uturp and Race Streets, uh, as well as retail entrances on the front park are also called uh the Riverfront for All Park and Future Pedestrian Promenade on Convention Center Boulevard.

So this is just uh a snapshot of the aerial map, uh just identifying the property at uh 1480 Chapatoulis.

Uh you will see that there is the parcel number that is uh associated with it as 1484 Chapatula Street.

So Jeff kind of uh touched on the pilot terms as it relates to uh the revised statute in which the New Orleans Exhibition Hall Authority um and the RD and I subject district are granted the ability to approve pilots on avalorum taxes within the river district.

Uh once again, the New Orleans City Council has authority to approve or deny pilot agreements referred to the city by the board or the RD and I subdistrict.

Applications are reviewed by the city uh uh Office of Economic Development, followed by a hearing before the city council uh city council's economic development committee.

Then we're gonna move on to pilot terms.

Uh in regards to the pilot terms, there was a there's a 300,000 application pay uh I'm sorry, a three thousand dollar application fee paid to RD and I subject at the time of the term seat signage and a five thousand dollar closing fee paid to RD and I as well uh upon execution of the pilot lease.

There's also an annual administrative payment of $5,000 paid to RD and I subject district, escalating at 3% annual over the term.

Um, and this is scheduled over the first day of December in each calendar year commencing uh the year of the conveyance of the project or substantial portion thereof.

And then lastly, the pilot shall be in effect for a 40-year term commencing in the year of the certificate of occupancy and choice, potentially in 2028.

So we're looking at a 480 month uh term.

Next, we have uh public uh project funding, which I'm sure that the development team will expound upon.

But the project will be funded by public-private investment generated through low-income housing tax credits, C DBG funds, debt financing, soft debt, as well as developer equity.

So to maintain affordable uh unit pricing for the promised full full 40-year term, this capital stack of funding along with the pilot is critical to the development of this mixed income density property.

And you'll see here we like I said we have a mix of funding from Capital One in regards to uh debt financing, we have some federal public funds in the amount of 16.5 million from D CDBG uh rent funding, as well as uh developer equity from the $6.5 million gap financing with the convention center as well as the can as well as with the convention center uh with public state funds in regards to the $6.2 million dollars in capital bond funds, and not to mention uh the soft debt in regards to the 1.6 million in deferred developer fees.

So with respect to fiscal impacts, uh total development subsidies are estimated at 105 million.

Uh the total pilot value has been estimated by the assessor's office at uh $33.4 million over the course of 40 years.

Uh the property is currently owned by the convention center and is therefore exempt uh for Avalorum taxes, and in the first five years after the pilot has expired, uh the property is estimated to generate uh roughly 4.2 million in new property tax revenue, and long-term rental income is also projected to uh stand at 3.3 million annually.

Next, we have Can I ask a question?

You said something about 4.2 million.

Yes.

And I can expound upon that.

So in regards to uh the calculation uh provided by the assessors office, um, roughly we can't we basically did a calculation over the course of 40 years in regards to the current millage of I think it's one in 33 point something to deduce what the calculation would be uh provided the year one 41 through I think it's 45 in regards to what that value would be.

It's roughly 835,000 annually um after the expiration of the pilot.

This would be once it came back on the debt.

So gotcha.

Yes, and then you said uh over the 40-year period it's about 33 million.

Yes, while it's under the pilot.

Exactly.

Okay, and we'll also um expound upon what actual um payments will be made during that course of the 40 years as well.

Thank you.

Thank you.

Um, next we have housing impact.

Um, and so we're looking at 220 affordable and workforce housing units that will be created at the River District.

So rents will remain affordable for the life of the 40-year term, uh meaning that household incomes much range between 20 to 80 percent uh area median income to be eligible.

So we're looking at uh a rough mix of uh four buckets of AMI uh percentages that like I said range from 20 to 80 percent um for a hundred and forty units at sixty, fifty units at eighty percent AMI, as well as nineteen units at 30 percent AMI, and 11 units at 20% AMI.

So uh for example, the average upper income for two-bedroom would roughly be approximate it's at 55,600, and the average monthly rent may not exceed 30% of the gross household income.

So while the average annual gross residential income is projected at $3.3 million, and we have some additional like breakdowns, um, just to just in case y'all have any questions in terms of what those uh specific rents and incomes are over the course of the one to four.

Oh, I'm sorry, one to two unit uh configurations.

Next, we have job creation.

Uh the Ravana project is estimated to create 225 construction jobs.

Uh the development team commits to complying with all city standards and requirements.

Um as it relates to construction.

I know uh council member Harris uh spoke to that in regards to the higher NOLA and the city local uh hiring requirements um as well as the living wage terms and the DB requirements.

Um RD and I will monitor uh EB compliance via monthly reports, financial records, and project site inspections.

So upon completion, upon project completion, the commercial project component is estimated to create uh 10 total permanent jobs uh with additional employment to come over time once uh tenant businesses are established.

So without said uh OED recommends uh approval of the proposed Ravana Apartments pilot lease agreement.

Uh the proposed project will serve as the first residential anchor in the NOLA uh Road River district.

Uh this productive mixed income asset will yield high quality construction, long-term affordable housing, white box commercial retail space, job creation, all of which uh will support a long-term sustainability of the city and the expanding district.

Um expected annual impact includes over uh $3.8 million in rental income.

That includes um $3.3 million gross potential residential rental income, as well as $471,000 in commercial tenant income, as well as $835,000 in property tax uh revenues, which which of course additionally uh leads adds up to long-term economic benefits to come.

Lastly, um we have just an aerial snapshot of phase one, which is gonna be pretty busy in addition to the Ravana project, um, which will happen of like I said, over the course of 18 months, uh, construction crews will be working across the district on other projects such as the Shell Riverside Regional Headquarters, which is well underway and near completion, as well as well, not near completion, but underway, um, as well as Louisiana Heritage Music Music Experience and the Cultural Uh Center, just to name a few, so that wraps up our presentation.

Thank you, council members, for your time.

Um, with the support um of the development team, OED is happy to answer any questions that you may have.

Thank you very much.

Thank you.

Um, so I just want to be clear: this is the first phase of housing at the river district.

Yes.

There's 900 units committed to be built contractually, correct?

Correct.

And of those 450 needs to be affordable workforce, but there's also market rate housing that will also go on the site as well.

That's correct.

Okay.

We're also contemplating things like retail, grocery stores, pharmacies, essentially a new neighborhood in the middle of a place that had nothing on it except for Mardi Gras.

Yeah, parking.

Okay.

Any questions from the dais?

Jason.

Okay.

Council Member Hughes.

Sorry about that.

Thank you very much.

Um, good morning, everyone.

Um, let me uh I will admit I'm probably the least intelligent person on the city council, so forgive my my questions.

We use a lot of terms like like pilot and AMI, and you know, the the average resident just doesn't understand what that means.

So, I want you to be very specific with me when we say pilot, okay.

What what is the city giving up here?

What skin in the game is what what are we doing?

So break that down for me and be very, very specific.

Absolutely.

Uh thank you, Councilmember Hughes.

So, yes, there's a there's a lot of jargon, especially when it comes to affordable housing development.

Um, so happy to try to demystify any of that.

Um, what happens in a in a pilot transaction?

It stands for a payment in lieu of taxes, and mechanically, what happens in that is that um a public entity takes ownership over a property, unlike a restoration tax abatement or ITEPs or other incentives that we hear about frequently.

In a pilot, a public entity is taking possession of a property, and that is what creates the tax abatement.

And in doing that, there's a lease that happens between that public entity and the development that happens on that piece of property, and that lease sets forth the terms under which uh the development will pay taxes and will meet other provisions that the public entity wants to require in that transaction.

So that at its simplest level, that's what happens in a pilot, and that's why it's different than a lot of other types of incentives.

I I really just want to know what is the city, what are we giving up?

What skin in the game are we putting here?

Or what are we losing?

What are we giving up?

What are we forfeiting?

Yeah, what are we foregoing?

Absolutely.

So there's two ways to look at that.

One is we're foregoing nothing currently.

This property is currently owned by the convention center.

It has been for I think 20 23 years, maybe.

And um I think in a in a very real sense, if if a project like the river district doesn't happen on that site, um it almost certainly will remain uh a vacant piece of property that the convention center owns for the foreseeable.

And so I think in in one sense, there the city isn't actually giving up anything because we're not we're not making any money on this property currently.

So I think that's an important baseline.

I think what you're also asking council member is if this project were somehow financially feasible with the ability to pay taxes to the city, that's the the 33 million over 40 years, I think that the assessor um uh generated.

Um and uh and so that that I think is is the number you're probably looking at.

It's about $800,000 a year in property taxes that the property would pay.

Is that is that correct, uh looking to the developer here.

So that it if the project was feasible, which I think what you'll hear today is that the project is not feasible without this type of public investment in the property, um, there would be a potential advalorum tax of about eight hundred and thirty-five thousand a year to the city.

And in exchange, the city would be getting the 220 units of affordable and workforce development.

So so yeah, I'm I'm confused.

So are you saying that we will be collecting 800,000 a year in property taxes, or we're we're we're not gonna collect.

So on under the pilot proposal, we would not be collecting that.

Right.

That that that's what I want you guys to just be very specific with me.

I feel like you all are uh talking around the world and I'm I'm not trying to do a gotcha exercise, but uh I think sometimes when we sell these things, we're we're just not really transparent and honest with the public, and so as an appropriator, I want to fully understand, especially in these challenging financial times, you know, uh what we're doing.

So um this this type of pilot for this type of housing development.

Uh have we done that for other developments throughout the city?

Absolutely.

Give me some examples.

Give me some examples for district E that we've done this for.

Sure.

Um so district D has had a number, um, the TKTMJ project next to Executive Plaza is a low-income housing tax credit project.

Um there are a number of of other ones.

Um you're talking about a read in Lake Forest.

Reading Lake Forest, yes.

Yeah, that that's a senior living facility.

That's correct.

100% affordable controlled, right?

No market units, right?

That's right, yes.

And and pilots happen through throughout the city.

Um they're evaluated on a case-by-case basis.

Um how do we pick and choose?

Um, there's a rigorous application process.

So, um, to be clear, the city doesn't do pilots for for very good reason, um, and that is that the city uh would have to take possession of these properties, um, which there's a charter defined process by which uh the city uh acquires and and disposes of property, and so um around the city, around the state, uh around the country, these payment in lieu of taxes uh happen through uh other public entities.

So in the case of the city, that's either finance New Orleans or the Industrial Development Board.

And they have a rigorous application process by which those projects are evaluated.

Okay.

Um let's dig into uh AMI.

That's a term that people love to throw around that I'm not sure I completely uh understand what it means.

And um I think I just have a really different definition of affordable um compared to you know other people.

I think sometimes we we're just out of touch with with the reality, you know, of the citizens who actually live in the city.

So 11 units, 20% uh AMI.

What does that mean?

Break that down for us.

Sure.

So give me an example.

Absolutely.

So I'm gonna let um Emily and Michael speak to the specific rent amounts, but just to um for the for the public's benefit, um, area median income is a jargony term.

It is a term that's set by the federal department of housing and urban development.

And so it's a it's a rigorous term, and it's it's an analysis of every city in the country in the country that HUD does each year, and it sets rents based on what income levels are and and some other variables.

So when we when we do this AMI, is it that the median income only within the city of New Orleans?

Correct.

It's I'm sorry, it's at a at a market level, so that for the whole MSA for the New Orleans metro area.

So when we say metro area, that's very different than the than the city itself, right?

So when we so I want to be clear here, is it just the city of New Orleans, or when we say metro area, are we taking into account Jefferson Parish, St.

Tammany?

Tell me what we're taking account.

That's right, it's a whole New Orleans uh MSA.

So New Orleans Metary Counter, I believe.

Yeah, so that that that that becomes very tricky, right?

Because uh, you know, you can have people in in St.

Tammany and Jefferson, right?

Totally different income brackets, right?

St.

Tammany's actually not in our MSA.

But give me give me the places that are.

Sure.

Well, uh it's really the South Shore of Lake Pontchartrain, would be in the MS.

Break it down for me.

Uh Orleans.

Orleans, Jefferson, uh St.

Bernard, put Blackman, I think is is also in that calculator.

Yeah.

Yeah.

So again, you could have hypothetically in a situation where now you have the income level sort of inflated, right?

Not necessarily matching the jobs in this city, not necessarily matching the incomes of this city, right?

So now tell me about the 11 units, that's 20% AMI.

Tell me what the cost of of those units would be.

The cost of the unit, the rent, the rent.

Yeah, the rent.

Correct.

Right.

Oh, okay.

Um, so for a zero bedroom, those are gonna be the twenty percent.

Defined zero bedroom.

And the th well um zero bedroom is a studio.

Studio, yes.

So everything is in one setting.

Yes.

All right.

Um so you have your 20% AMI and your 30% AMI are our permanent supportive housing units.

Um, those are usually covered by a state voucher.

Um in this case, the Louisiana is not receiving federal funds.

I just want to know the cost.

So the right, we're utilizing a subsidized voucher from the housing authority.

So the rents for a zero bedroom under that is one thousand six hundred and seventeen.

Um, sixteen hundred dollars.

Right.

So that is it's a subsidized.

So that's the lowest lowest rent.

Right, but it's a subsidized rent, and so the it the resident will only pay 30% of their income.

So that's where your income levels come in.

So the HUD income limit for an extremely low income is one person who makes eighteen thousand six hundred and fifty dollars a year, and so they would never pay more than thirty percent of that amount.

What if you're making thirty thousand dollars?

So then you would not be in your 30 percent, you would be for one person, you'd be more closer to under sixty percent.

So your fifty percent AMI for one person is thirty-one thousand fifty dollars a year.

Okay, so all right, stick with me here, right?

So if you're making thirty-two thousand dollars a year.

Right.

Okay, what would be your your rent amount?

You are gonna for a one-bedroom unit.

For a one-bedroom unit, you are gonna pay nine hundred and ninety-seven dollars because you're gonna fall into a tax credit unit, which is sixty percent AMI.

Okay, so roughly a thousand dollars a month, right?

Right.

Uh, so roughly twelve thousand dollars a year, and that would be for a one-bedroom unit.

Yep.

Okay, and how many of those units do we have reserved?

So we have a hundred and forty, which are sixty percent and below AMI, sixty percent and below.

Okay.

Um, and Jason, just for clarity, these are the gross rents.

What they do is they actually back out the utilities, the electric and the water.

So this is the gross amount.

I won't actually what actually they'll be paying out of their pocket.

They're going to back out what the estimated electric water sewage out of that amount.

So that amount may be a little bit less there, too.

What's the total cost per unit to construct?

Right.

So we've uh per unit.

About 318,000 per unit.

Or then the value of my house.

Right?

Yeah.

Yes.

Wow.

Imagine what we can do with that amount of money if we we decided to invest it in a place like the lower ninth floor.

Right.

Which was once the beacon of black home ownership in the city of New Orleans.

I have a lot of questions and a lot of concerns, quite frankly.

But I'm gonna leave it there.

I appreciate uh your presentation.

Thank you.

Thank you.

Thank you.

Any other comments from the diet?

Council President Morel.

Yeah, I just really brief question.

So I understand the pilot also captures the retail space as well.

Because I understand it.

Yes.

Yes.

Yeah, because it's the whole building.

It's it's the whole building, correct?

But the the um the sales taxes from the retail spaces will be.

But that argument can be made for any building built in the city of New Orleans.

So if someone builds a if someone builds a store on Magazine Street, we get property tax and sales tax, right?

So I I appreciate that's a that's a kind of a insane argument to say that, well, you know, we get the sales tax.

We get the sales tax from everyone.

So that's not really a give.

My question is currently the pilot does not discriminate between the affordable units and the commercial rentals, correct?

Correct.

Why?

I can give a little context in that.

So in the tax credit world, we have one investor that's investing into this deal, and what they really like is 100% affordable deals because their investors on the back end don't want to take the risk of us getting out of compliance, right?

And so by us adding retail as a service to that component, it actually adds more risk to the deal for our financiers.

Where we're underwriting in the market where we think we could get $25, $30 per square foot from a commercial, our banker is only underwriting us to $11 a square foot and then taking into account a 30% vacancy.

So they won't let us pick and choose, you know, the high value that we're adding to our service on the commercial versus you know the lower rents that we're charging in our basis.

So it's a it's a financial mechanism that we're using to make sure that we can hit our overall debt service on the property.

Okay, hit that from me again.

So you're saying that the investor devalues the retail part.

However, your argument is having the retail part helps you meet your debt service.

Why would an investor valuate that you are making sure debt service can be paid?

They're hedging their risk, right?

So the tax credit investor right now is a large bank, right?

And the worst case scenario for them is we don't do what we say you're gonna do, we don't do our compliance, and then they're all of their tax savings gets backed out, right?

And so the worst thing they can have for them is we go under, we don't our commercial tenants don't show up, we've got high vacancy, we can't service our debt, and now they have a huge IRS penalty that they've got to recapture.

So the hedge that risk, they discount our commercial rent significantly and increase our vacancy to make sure that they can sell that to their investors on the back end to be able to, you know, fund our deal on the affordable tax.

I understand generally, I mean that's the risk every single investor has in any type of tax credit deal.

I get that.

But I guess the question for me is that being said, why not make the entire building affordable housing?

I think that is a a component of services in the neighborhood.

We've got a larger master development, right?

I think that's good neighborhood planning to make sure that the folks upstairs can walk down and sit in the coffee and get a smoothie.

The folks across the street can be.

Do you have tenants for all these spaces already?

We're out currently uh so when you say that there'll be a pharmacy below, that's the hope, but they could also just not be a pharmacy label.

It could be whoever is willing to pay the rent.

Could be, yeah.

And I think this is a district-wide, right?

So this is a master plan.

Our conversation with Shale, their employers, there are further phases of uh housing that are coming along, the convention center as a party to this and investing for, you know, their largest fit of services, the port of New Orleans, uh, all of those things that come into play, retail made sense here to be a neighborhood advocate for for long term.

Well, and I guess my assumption, and I say this out loud because I it might be incorrect.

This is essentially going to be the template for all of the Ravana projects, correct?

Not necessarily.

This is a very this is a higher density, it's a smaller lot.

If you look at parcel one, it's a little bit less less dense.

We can probably go three-story, smaller retail components, but this specific site uh is a lot more dense, different construction type of.

But from a position as a developer, the intent of the developers more than likely will be to not pay property tax on any of the housing properties in the Ravana district.

That's the most likely scenario.

Um, but I think that would that would carry over for any ground-up multifamily deal in the city of New Orleans today.

It was if you look at most of the deals, you can walk to South Market any of those components.

It's interesting just because obviously from my perspective, there's a different consideration when I look at different types of affordable housing projects when you have developers who are non-profits, for example, who um when you look at how they structure the project, it's not it's it's to make a project affordable, but also there's less of a focus on things like developer fees, for example.

They just want to make sure the project makes sense and that it kind of nets to zero that we aren't in we aren't on the hook, but we aren't making money from it.

This is not that kind of project.

We are a nonprofit.

So Providence has joined the project with RD and I, and so we are RD and I is not a nonprofit.

They're not a nonprofit.

Providence is the 51%.

Uh we brought in uh enterprise community investments, so they were the investor on our most recent LaFitte project.

Uh, which I which was a fantastic project.

Thank you.

I was at that roundbreaking.

I will say to Councilman Hughes' point, it is a bit jarring when you hear the cost of you per unit.

Oh, yeah, generally speaking.

And there is certainly a lot of concern from a lot of policy makers that as those costs continue to escalate, number one, the federal government has been volatile as far as it comes to affordable housing spending.

And though the reliance on things like state and federal tax credits has filled the gap for some point, it is beyond concerning to me that the cost of dealing these developments continues to go up to a point that might not be sustainable.

Because at the end of the day, if the federal government tomorrow decides that, I mean we are at the whims of a federal administration on how much they will subsidize or underwrite affordable housing rents.

We know from just recently uh dealing with a lot of our relocation of individuals who who are homeless, that just as we speak, the Trump administration is looking at moving money away from housing to treatment.

And so when I look at these kind of deals and I look at a lot of the assumptions that are made to make these deals work, a lot of the assumptions are based upon things operating in a way that is coherent and sane, and at the federal level, it is not coherent.

So I just I have some concerns.

Can I add a few things?

I think you're hitting on a really essential point in that the you know, setting aside the New Orleans landscape, which I think you're right, that when you look around the city, it's incredibly difficult to even do market rate development in the city, and I think we all, you know, collectively, the administration and the council are consistently getting approached by developers looking for some kind of public investment.

And I think when you when you narrow the universe down to the affordable housing developments, you've hit the nail on the head, and that.

These are tax credit driven projects through and through everything that Council Member Hughes, you you've asked about and the sort of the risk uh environment that you're hitting on, Councilmember Morrell, is entirely driven by the tax credit world.

And uh as I know you're you're aware, that's that is not just federal risk, there's also state risk.

You know, these projects have to go through state bond commission where a lot of these you know very similar questions get asked, and we know the politics that can play there.

And when you look at this project, Tracy uh ran through this, this project is uh is a 4% low income tax credit deal.

It has to go through a subsidy layer in review both locally and at the state level, and that actually caps developers' fees per IRS and PUD regulation.

So whether it's a for-profit developer or a nonprofit developer, the developer's fee is actually capped.

They cannot go above a certain amount.

And what you still see, even with this project digging as deep as it can, there still needed to be six million dollars of public money, six million dollars of convention center money, and sixteen and a half million dollars of prime three money from the state in order to close the gap because of the amount of debt service that this project can support.

And I think what you're hitting on is exactly right, because you know, we are literally at the point, and I say this, this is perverse, but this is this is actually true.

At this point, the state of Louisiana and and all of the the cities that are trying to do affordable housing development have to effectively hope to get hit by a hurricane so that we have disaster community development block grant allocations in order to be able to close the gap in these projects.

Without the Prime 3 program, that is even even with the the federal low-income housing tax credit program, this project would have a $16 million gap in it without without Prime 3.

That's that state DC DBG program.

NSA would not have closed, BW Cooper would not have closed, um, Esplanade DeLeal, I believe, would not have closed.

And so you are absolutely right that we are we we do not collectively have the resources that we need in order to be able to do these low-income housing tax credit projects.

Um and yes, you are right.

There are tweaks that we can make around the edges, but it is entirely driven by how these federal tax credit programs work.

And you know, this is one in the hand.

I agree with you that uh, you know, we we need to think very creatively about how we get off of this hamster wheel uh so that we can get more affordable housing at the at the singles and doubles level, all the way up through the larger multifamily level.

Well, I think two things I would say that need to be said out loud and cannot be discounted.

One, the city is also bearing a significant amount of risk in projects like this.

Fundamentally, I think that there's always an emphasis on everything involved in this pilot is the best case scenario.

And part of the reason why I think you see from some council members some skepticism is that we're all betting on the best case scenario, though there's a lot of uh a lot of obvious worst case scenarios kind of pending as we speak.

The situation with the federal government regarding the housing for unhoused is very, very troubling just because if we continue to operate as if what has been done before is what will be done in the future and we don't change.

And like I said to Councilman Hughes' point, the amount we're spending per unit is staggering.

I mean, and part of what we have to do as policymakers is justify that, for example, on a pilot, we're foregoing property taxes on a large development and talking about basically zero property tax on a large development where we are building units at over $300,000 per unit, and the average New Orleans resident is looking going, I pay property tax on my house that's $125,000.

And it is really absolutely necessary that there is an argument made in a coherent way, as Councilman Hughes said, that the average person understands why we are doing this, why it's necessary, and what is the long-term community benefit, because when that person watches this video, when that person sees that we are doing zero property tax on a large scale unit, we on one hand, we certainly want to promote affordable housing.

That's why the people of New Orleans voted for the Affordable Housing Trust Fund.

But on the other hand, we have a tremendous amount of employees who are on furlough.

The number one way we reliably collect money in the city of New Orleans is property tax.

And when they are saying, I'm a city employee, I live at a house that's worth $125,000, and I'm being furloughed and I pay property tax, and here is the council approving the project where the units cost over twice the value of my home, and they pay no property tax, there has to be a presentation made to us that explains that the overall benefit means that that person's gonna walk away after understanding going, oh I get it.

Because right now I'll tell you what's in front of us, that person doesn't get it.

And I would encourage you, I do not believe this item is gonna be on consent.

I think that what you need to do between now and full council vote is have that explanation because it was not made today.

Yeah, I mean, I think we will hear you loud and clear, and I think the citizens have the right to understand and these Vitech transactions can be complicated, right?

I think we want to continue that conversation because I think there's some things that we can do in policy, there's some things that we can do together and collectively.

But I'll just talk specifically about some of the economic or the construction drivers on this project that we had to do to be competitive at the state level.

Um the first of that is is fortified, right?

Um if we were to build this project and you know a regular piece of land, nobody would require us to be the fortified standard.

So that's an increased construction cost.

One thing that these dollars came from was Ida, right?

And what happened at Ida, we had a ton of affordable residents who had to stay in apartments with no power and no water for weeks.

What's required in this project is that we have constant power generation, additional costs, as well as constant potable water.

So those increased construction costs that that drive up this space here were driven by federal dollars that came into Ida, but are adding additional elements to low income tenants they wouldn't have uh if not for those things in this project.

So I just wanted to understand that those dynamics are here.

Uh these 20-30% tenants who most of them don't have cars, don't have the opportunity to evacuate during a hurricane, can stay in a place that will have continuous power, will have continuous potable water, and the base flood elevation at their cabinet levels is maintained in a flood type of scenario.

Councilmember Willard.

Thank you.

I want to I want to go into like worst case scenario, five years down the road, numbers aren't working.

What happens in that situation?

Because Council President Morrell was talking about the risk that the city of New Orleans takes on these affordable housing developments like Ravana.

I can start and you all please pitch in.

So to be very clear, the developer is obviously sharing in the risk.

Um what happens in these long-come housing tax credit projects is that all of the public investors in the project and and the private investors for that matter require a compliance period.

So these units are um guaranteed to be at these affordable rates for it's 40 years, right?

Um 40 year uh compliance period.

And Jeff, that's what I'm I'm getting at.

So you guys wouldn't be able to increase rent.

Correct.

The rents cannot be increased.

And in the worst case scenario that you're highlighting, Councilmember Willard, um, where the project goes belly up, right?

Something happens and and this development group goes away, there's a regulatory agreement that runs with the property.

And so there's virtually no scenario.

I can't say with 100% certainty because nothing in life is certain, but with 99.99% certainty, this project is going to remain affordable.

It might be a different developer and a different set of investors if this project uh hits that level of turbulence.

Um, but it will remain affordable.

So, what I was getting at is like if it if it comes out to be just financially unfeasible in whatever year, uh perhaps the development team has to declare bankruptcy.

Is it possible that the rents can go to a market level?

In almost no scenario.

There's a regulatory agreement that requires it.

I think, you know, there's I think a lot of times folks cite the American Can example, and that was um a scenario where it was the opposite of this, where the compliance period was only a 15-year compliance period.

And so the so that was after that 15-year period.

Okay.

So this is a regulatory agreement, it runs with the land, it is not uh a part of or it's a part of the transaction, but it doesn't um get unwound if the if the project goes bankrupt.

Okay, and you guys said part of the tax credit deal includes an assumption of a 30% uh vacancy, right?

On the commercial, the commercial, on the commercial side, not on the affordable housing side.

Okay.

Um, well, I wanted to know if there's a component that's not factored into the finances to account for if that 30% is occupied.

Like, is there a potential upswing on that on that?

And if so, what what type of numbers are you looking at?

I mean, I think it's it's TBD.

I'll kind of go on the back side of first of the downside scenario is what the financier requires is a personal guarantee or from from us development team of that minimum standard, right?

And so let's say there is a vacancy, and for some reason that we're not able to pay that us as developers have to step up and and carry debt.

So I think the upside component of that is something that allows us to carry more debt service in a in a worst case scenario on the housing side, right?

We're pretty thin in a regular standard.

If I was to go do a regular deal, I'd want to be at least 1.25 on my debt service.

Well, on these affordable deals, they allow us to 1.15.

So there's not a lot of room and cash flow uh, you know, for anybody because we've got a CDBG cash flow as well, too.

So I think that component um provides us, I think, more of a hedge against some downturn on the residential component.

Okay, um I wanted to know.

I was curious if the per unit cost breakdown on this deal is uh calculated in sort of a standardized way.

Like if you compare the Lafitte Greenway project was brought up, um was the cost per unit on that project calculated the same as this project?

Yes, or is there any differences that were used to calculate it for this project?

So that so that project, since it's more single family and duplexes, was closer to about 550,000 per unit cost for construction.

Um we usually calculate.

Because that was my next question.

Right.

Um that was the same.

Oh no, that was a TD.

That was TDC.

That was total development.

So with the number I gave you here was just for construction.

Yeah, so you gave us it's about 318, 318,000 per unit for development costs.

And for uh, but then total cost per unit is about 477, that's correct.

477,000 per unit.

So that's the total development.

The 318 um I was the construction cost per unit.

There's a lot of financing and transaction costs you know, all the local housing tax credit uh, you know, transactions.

Yeah.

Yeah, I think you know, the there are certainly to Councilmember Hughes and Morel's point as well, you know, thinking about where we are as a city.

I think we've all looked at population growth and and making sure that New Orleans families are able to return to the city.

And you know, I think that again, this is entirely being driven by um by subsidy, right?

This is where uh if we could get other pots of money that are uh in any way at the same scale as what the low-income housing tax credit um brings uh to to affordable housing, um, you would see a lot more of singles and doubles and other types of uh affordable housing development in the city.

I think um, you know, because this low-income housing tax credit since 1986 has been the major way that the federal government invests in affordable housing, it drives uh uh development to being in these multi-family uh settings.

And so I think that um you know it's something we want to figure out how to develop more different typologies of of affordable housing.

Um, but uh frankly, this is this is how um you can get affordable housing built in the current environment.

Um, look, the those numbers just immediately cause sticker shock.

And I know you guys are working with the hand that you're dealt and um everybody working in the affordable housing realm.

Um I just don't see how this is uh sustainable or even scalable.

I mean, that's just a high price tag per unit, you know, for for what is categorized as affordable housing.

How many what's the maximum number of bedrooms in the Ravana project?

Two bedroom.

So two bed so the the most you'll get is a two-bedroom apartment and the the I mean I I know y'all understand we've had meetings about this.

Y'all understand where I'm coming from.

It sounds like some of my colleagues have have issues with it too, or concerns with it as well.

Um my office is looking at other ways to approach it.

Um I guess I would challenge y'all to do the same.

My last question um is related to um, I guess overall um affordable housing in the city.

Um I think there's five Ravana projects lined up, right?

Three to four phases.

Okay, so there's three to four phases.

Um earlier you said that there's a component of units that will be market rate?

Yeah, uh up to half of the units in the project.

Okay, so this first fade is phase is all affordable, but the next phase may be all market rate?

Likely not all, but I I think it's TBT.

More likely a mixed income deal.

Mixed income.

Okay.

Oh all on the same property?

The same footprint.

We've got about 30 plus acres there on site.

So I think more than likely our our next one is in parcel one.

Did you see to the the top of the top, you know, less debts, more in-core of retail neighborhood type of things.

And um I guess what I would ask is does the the market rate mixed income project come with a pilot like this.

I I think it's TBD, depending on yeah.

So we'll go through an underwriting process.

So this pilot won't govern all of the Ravana project.

No, so each one will come with a separate pilot.

One of the benefits of pilots is that they can be bespoke to a given transaction and to council member Morrell's point.

You know, if there's ways of getting creative to carve up a building or condo out a portion of it subject to the pilot agreement, we can do that.

If I can't just go back to your your previous point, Council Member Willard, not to belabor it, um, but I think it's an essential point that that Council Member Hughes and Morrell also hit on.

You know, um we understand the sticker shock, right?

We understand that this is a conversation that affordable housing developers uh and the affordable housing development community have day in and day out.

This has been an issue at the state level, frankly, as I know you all are aware.

And um I think uh Mr.

Meredith went through some of the things that drive some of those costs in multifamily projects that that get those numbers up, right?

These are very high quality construction units.

Um, and so the the alternative is let's say we were trying to get 220 uh individual housing units built, right?

We want to build a single uh on an individual lot somewhere.

Um, you know, you you're looking at at a comparable build level of I would say a minimum of 200 a square foot today.

Um, and so you know you quickly look at you know, a 1500 square foot house is is easily 300,000 just on your hard costs.

Um, and uh, you know, that's that's at the low end.

And I would say that um the driving factor here is that there's nothing any there's nothing like a low-income housing tax credit for uh for an individual unit.

You you will occasionally see scattered site developments that will um you know build 15 or 20 units.

There's blueberry hill in the lower ninth ward that has uh been successful, and that developers trying to replicate that example, but you don't get anywhere near the economies of scale, and there isn't anywhere near the federal subsidy programs that the that drive these projects, and so that is why you see projects like the these multi-family units because that is the way right now that we can realistically get units at scale.

We absolutely need to be doing singles and doubles.

Uh the Office of Community Development could not be more excited to be partnering with Nora and FNO.

And I know you all are well aware to implement the housing trust fund, that's gonna be 16 million dollars going into fortified ruse, owner-occupied rehab, small rental repairs.

Um, but that's gonna that's gonna be impacting a couple hundred units max, right?

When we do our solve second program, we spend four million a year.

There's no guarantee that those units are affordable on for any period of time, and we put sixty plus thousand dollars uh into those units.

And so I think you all are are exactly right that there is there is no magic wand here, there's no solution, but um what we need isn't all of the above approach when it comes to housing in in my estimation, and we need to be taking advantage of these these programs.

When the state and the federal government are putting these dollars on the table, we need to be really good about going and getting those dollars while we're also looking at these programs that can benefit singles and doubles.

But council members, you are hitting on the exact issue and the frustration that I think everyone who works in the affordable housing development community every day faces where you get these eye-wateringly large numbers, you get the need.

We've lost 30,000 people in the city since the pandemic.

We need to be creating housing and jobs at scale.

Um, and I think what we're hitting on is you know uh diagnosing the problem, we need to uh be really creative all together to come up with those those solutions.

The the fundamental question that I've been struggling with is I mean, yes, we we lost people, we need to get people back, we need to grow the city, we need to develop every corner of the city, really.

Frankly, um, if we really want to have a vibrant and robust economy, um, and I think everybody would to some degree agree with that.

Uh, but as you develop the city and build on uh pieces of land that are you know undeveloped right now, um, ideally you want that to be generating some type of revenue.

Absolutely.

Uh and if everything is on a pilot where we don't get anything, it actually makes it harder with the more people that you that you bring in because now you're essentially trying to do more with less because you have more people to provide services for, but you don't.

I mean, I guess you can make the argument that your sales tax revenue is gonna go up.

Um, but you know, um so that's like a fundamental struggle that I've had.

Uh what I would suggest is that um you guys reach out to council members separately and sit down, run through the numbers with them, um, like you did with my team uh before this comes uh back to the full council for vote.

Thank you.

Thank you, guys.

Thank you.

We have several comment cards.

I just want to take a second butt at the Apple if you don't know.

Okay.

Thank you.

Um let me just say, um, Jeff, look, I appreciate everything you said, and I appreciate all of you look.

I know these these deals are complex, but you gotta realize I represent District E.

And um, you know, we have a lot of multifamily complexes that already exist.

And so what my residents just don't understand, you know, every time they see something new and shiny going up around the city, they ask, well, well, why can't we just rehabilitate what already exists?

Okay, so you're gonna you're gonna have to explain that uh to the people that I serve.

Secondly, as an appropriator, and you know, I take this job very seriously.

No, I'm not a member of the budget committee, but under the city charters, one of the three primary responsibilities that I've actually elected to do uh is to focus on the budget.

And at a time when we're broke, let's just call it for what it is.

Um at a time when our city's workforce is showing up every day are loaded when gas is sky high and groceries are sky high.

Uh, it's gonna be a really high bar.

It's perplexing to me that we just keep at a time when we crime broke, we keep just foregoing property tax revenue.

Okay.

And the only solutions that people are coming up with to balance the budget is let's just tax the hell out of the people who are already struggling.

That's just not gonna work for me.

And so, respectfully, your presentation today was just too academic.

You're gonna need to break it down in a way where the citizens of the city can really understand.

Let's stop the fancy terms, and let's really break it down and tell the citizens this is what the city is really for going.

And this is the benefit, okay?

Um, but for me, you're gonna have a very, very high bar.

I'm very skeptical today, and I'm very concerned as we try to get a grip on this budget.

So thank you all.

I look forward to visiting with you all in the future.

Thank you, Councilmember Hees.

Let me just break down a couple things.

Right now, this property, the river district gets no, the city gets no taxes from it.

Because it is owned by the convention center, which is an economic district of the state, so it does not pay taxes.

Correct.

If there's no development on this property, it will sit there again, not paying taxes.

Is that correct?

I don't see an alternative use.

The benefit of this development and foregoing taxes that we're already foregoing, is 220 units of affordable and workforce housing.

Is that correct?

That's correct.

With, as you said, resiliency measures, making sure that people can stay if there's a storm, stormwater management, close to downtown, close to transportation hubs, close to jobs.

Is that correct?

That is correct.

That's the benefit that I see in this project.

So I hope my colleagues, when they speak to you offline, understand the benefit of having 220 units of affordable and workforce housing.

I know I do.

I've had at least three of my neighbors in Central City fall into homelessness because they can afford to live in the city of New Orleans.

So that's the benefit of this project.

And with that, I will take comments.

Nicole Weber, followed by Gary Crockett.

And please limit your comments to two minutes.

You need to say whether or not you're a paid person to be here.

Nicole Weber, 2131 VN Bill Street.

I'm not paid to be here.

I'm actually paying to be here as an investor and partner in the river district and in the Ravana.

I just wanted to point out we talk a lot about optics that we're giving up, that we're giving away.

But the reality is is that the voters have overwhelmingly supported housing trust fund, the bond sale.

They've overwhelmingly supported affordable housing.

They are demanding it because they're the people who live here.

And let's not ignore the studies that have been done.

The fact that smart asset determined last year, in order to live comfortably in the city of New Orleans, one individual needs to make over $85,000 a year.

In fact, it's 86,445,000 a year.

A family with two kids needs to make uh $201,000 a year, $200 grand they need to make in order to live comfortably in the city of New Orleans.

We also need to be talking about the HRA report that the council had commissioned that was done late last year that we have not been presented with.

It was done to talk about MIZ, the mandatory inclusionary zoning.

But what it brought to light is that any type of development in this city needs to have some type of subsidy, and they break it down for you.

The math is mathing, and we need to recognize the fact that reality speaks louder than optics.

Thank you.

Gary Crockett, followed by Terry North, followed by I can't read your last name, sir.

I think it's Alan.

Okay, Dune.

Gary Crockett.

Uh, yes, I'm Gary Crockett.

I'm not being paid or I'm just representing myself.

Uh, first of all, uh, where does the housing go?

Too many times here in New Orleans we've had affordable housing that go to Tulane students whose parents can afford over 40,000 dollars for tuition, which means that they should be able to afford the housing as well.

Um, will this housing go to true residents or will it go to transients?

We have quite a few citizens here that have been waiting on housing for quite some time.

Uh, there needs to be something in these contracts that say, well, you know what, this is going to go for those that are true residents here.

Uh there's a huge gap between the cost of these units and the actual financing cost.

Uh that is an issue for me as well.

Um, as far as 300,000 for the actual building cost, but the actual cost is going to be 500,000 overall.

Uh you didn't speak of what the retail cost is.

Uh at the end of the day, given that there are a lot of unknowns as well.

Adding a nonprofit that doesn't bring value to the citizens, does mean anything to the residents.

And that's who we all owe.

Um, they'll speak about an urgency of now in order to get this done, but the urgency isn't about the residents, and I think that's what we need to pull back and say what is going to be the true benefit of the residents.

10 jobs for 100 million dollars doesn't make sense at all.

We could actually definitely be even fortified homes at a lower cost here in New Orleans.

I own a commercial construction company.

I looked at these numbers, and there's a lot of money on the front end for development.

Terry North, followed by Mr.

Adun.

Hello, hi, I'm Terry North.

I'm CEO of Providence Community Housing.

I wanted to um in Providence is a 501c3, and we were brought in as the 51% partner on this transaction to bring it to fruition.

And why did we get involved?

220 units of affordable housing.

We haven't been able to get a hit like that in a very, very long time.

And the folks that are going to live in these units that work in the CBD and work in the warehouse district, work um throughout the French quarter, will be in an area of opportunity.

Earning $15 an hour will qualify you for a 60% AMI unit, and you'll be able to pay affordable rent.

Keeping the rents affordable is really the key here.

And we otherwise would be in a market transaction, would be earning a lot more revenue and wouldn't necessarily need a subsidy or as much subsidy.

But affordable housing, unfortunately, as you said, is very expensive to produce.

It's not affordable to produce, it's affordable for the people who live there.

And for 40 years, this will remain affordable.

We are the operator, we're the main operator for 40 years.

Um we've been a partner with this city since right after Katrina, been 20 years of doing this.

We have over 2,000 units in New Orleans proper.

We have 3,300 units throughout the area, and we are committed to affordability and operating good properties, and we need these folks to stay in the city and be able to thrive, and that's what we are about.

So I hope that you all will consider that.

Thank you.

Thank you, Mr.

Dean.

Hello, also doing here.

9217 Apple Street.

Uh I'll keep this brief.

I just want to say thank you to Mr.

Hughes and um JP Morrell for looking at this um these scenarios holistically and breaking down the breaking down the obfuscation that typically happens when people or uh investors rather um explain.

Payment in lieu of taxes, um.

Looking at the opportunity cost of this development um and the precarious situation of our city, uh, the austerity, the increasing risks that we have to take environmentally, economically, in terms of um just development in general, human development.

Um as a resident of the city of New Orleans, it is difficult to see how this, given the context, um and the geographical segregation, um, to be frank, um, that our city is currently uh I guess undergoing.

It's difficult to see how this benefits the city of New Orleans from a people perspective.

So I guess I would recommend to maybe defer uh this until people grasp tangibly how tangibly how this development will um I guess pay dividends in lieu of another development.

So yeah, that's all I wanted to say.

Thank you.

Thank you all for being here.

Thank you for your work on this for the past two years.

I'm excited about this project.

I hope my colleagues understand the value that this project brings, including two hundred and twenty units of affordable and workforce housing on a plot of land that pays zero taxes right now.

The convention center could have easily done something else with this property, but they agreed with us contractually that nine hundred units of housing, for 150 of which will be affordable will be on this plot of land.

Thank you for your work.

Thank you for the information today.

It was a class on pilots and economic incentives, but one that was greatly needed to educate everybody up here and the public.

And thank you, Councilmember Willard for having this today.

Yep.

Uh motion to adjourn.

Do I have a second?

All right.

Meeting is adjourned.

I'm sorry, we have one online comment.

And what do you want to do with the resolution as it relates to the full council because I'm reading the enabling legislation, you guys have to consider it.

So do you want it to go on the July ninth of this?

Okay.

And then for the online comment just to add it to the record.

Okay, thank you.

Thank you.

Meetings adjourn.

Thank you, everybody.

Thank you.

Thank you.