afternoon chairman hart and finance committee members before i get started on my presentation i'd like to point out we have three members from the housing authority and the front row and at the end of my presentation rob frederick's would like to make a few comments about johnson court so this is a so this is a request that the finance committee consider and recommend that city council approve a request from the housing authority of the city of santa barbara for a one million dollar loan to eight one three east carrillo lp to support the development and construction of new very low income rental project for veterans located at eight one three east  projects known as johnson court authorized the appropriation of one million dollars from the housing successor fund reserve to fund the requested loan and authorize the community development director to execute such agreements and related documents subject to approval as to form by the city attorney as necessary the housing authority acquired the property at eight one three he's carrillo with the understanding that they would develop the property for affordable housing for veterans the city of santa barbara approved the project for seventeen units which includes one managers unit the tenants will be very low income veterans and the plan to finance this project is to apply for nine percent low income housing tax credits this summer in the second round the project cost totals seven million eight hundred and forty four thousand four hundred and thirty three dollars the project financing the bulk of the financing is coming from the tax credit equity about two thirds of the financing or five million one hundred fifty seven thousand nine hundred and six dollars there'll be a permanent loan of one point one million most likely from ccrc the cal lutheran homes is going to provide a loan of a half a million dollars and of course the city of santa barbara alone for one million dollars housing authority lead the developer of the project and also the property manager and is typical in an ownership structure when you apply for tax credits you form a limited partnership this limited partnerships known as eight one three east crio lp the general partners will be garden court inc second story associates and hearthstone the limited partner is the tax credit investment fund the city lawn itself will have a thirty year term with a three percent interest rate and repayment to the city is based on residual receipts calculation the calculation is you take the a income subtract the operating expenses subtract an allocation for reserves and any superior debt service and what's left over is known as positive cash flow and that would be the payment to the city of santa barbara based on this one million dollar loan the subsidy cost per unit is sixty two thousand five hundred which is low typically for the city our typical subsidy cost is a hundred and twenty thousand dollars per unit and of course this city loan qualifies as public contribution which will significantly increase the chances of johnson court being awarded tax credits in a very competitive application process in which only about twenty percent of the applicants receive tax credits as a condition of this loan the city will be guaranteed long term affordability by executing a ninety year affordability covenant to expire  and seven if johnson courts awarded tax credits they'll be also a fifty five year tax regulatory agreement executed and once again these tenants are very low income veterans so in summary the staff recommends this one million dollar loan to johnson court because its housing for homeless veterans the housing authority of the city of santa barbara is the city's partner and an exceptional developer and this project meets the city's consolidated plan objectives and housing element priorities and so with that i'd like to have rob frederick's come up and talk a little bit more about johnson core and then we can open it up for questions good afternoon chair hart councilmembers rob frederick's with the housing authority of the city of santa barbara i have my colleagues skip szymanski and dale exam with me who can also answer any questions that you might have that i'm not able to  first i just wanted to say that homelessness is a huge issue nationally at the state and local level on any given night nationally there are five hundred thousand people that are homeless and more than sixty eight thousand of those are veterans and while we've done a good job locally getting our veterans housed last year we housed forty eight veterans from the city of santa barbara proper seventeen of which were reunifications we still have a lot more work to do as there's a by name list of homeless veterans at about the two hundred and seventy level and finding a stable place to live is one of the central issues facing returning veterans without a home it's hard to find a job get back to school or heal from war injuries these pieces of successful transition to civilian life go together a home strengthens access to employment education and health treatment and that's why we purchased eight hundred and thirteen east korea with the intention of creating permanent supportive housing to serve veterans here locally that can be successfully housed and retain their housing live heal and thrive we put great care into the design of the development with the design review boards so that it fits in terms of neighborhood compatibility and livability for the residents that will live there it's also important to us that as with all of our developments that were good neighbors to the surrounding homes businesses and schools and we've made a commitment to that for that development and we're very excited about getting this off the ground and putting these final pieces of financing together and getting it constructed so with that i'll leave leave any questions to you and again we can answer any questions hopefully you may have thank you mister frederick's are there any questions so the term very low income is at a term of art as you're using it here or a layman's term it's a little bit of both the the project is targeting  see twelve of the units at forty five percent of area median income and two of the units at at thirty percent area median income and below so the majority  low or or below because very low income is fifty percent area median income and two of the units will be at fifty percent i think i mentioned there presents classified as extremely low income and that's the majority of the units and then the other two units are market based no not market base they'll all be low low income low income or below so what's the cutoff for those other two units you said there's  two i'm sorry there there are two units at thirty percent extremely low income twelve at forty percent area median income and two at fifty percent area median income and one of the units as a manager unit and the way we  design that is to have a gatehouse at the front of the property to manage the the streetscape and courtyard area in the back for the for the residents themselves so you have to at fifty percent in twelve at forty five percent forty percent forty percent mm hmm okay then the this is maybe more of a comment but the the million dollars the subsidy cost ends up being sixty to five hundred per unit so that's just a million divided by seventeen so what came up during our discussion on housing impact mitigation fees the affordable housing versions was was what can we get with that so just looking at this math here just struck me that for half of that so thirty one to fifty per unit if we were charging developers thirty one thousand per unit we would have only needed thirty four units to be built market rate free market apartments like we've seen go in in order to pay for this this loan amount so i just wanted to share that and make sure that the math does that math make sense so am i getting the math right yes it sounds correct we'd have to run some numbers on but the idea of taking housing impact fees and using them for things such as this you get great leverage off of the tax credits giving you two thirds of the financing as equity and so that really brings home the if this had to flip to conventional financing you couldn't do this without taking on additional debt okay or even simpler math ten thousand dollars a unit if we were to charge ten thousand dollars a unit as an affordable housing mitigation fee then it would only take one hundred units so if we went for the lower end i think thirty thousand is kind of what you're seeing around the state in different cities so we could go really low and say ten thousand and then i would have taken one hundred units so either way i just wanted to bring that up as an as we engage in this is how is the city santa barbara doing visa vie other communities are we doing more than our fair share and so that's how are we do how's the rest of the the region doing the two hundred and seventy vets is that city of santa barbara is that that the rioni y county what two hundred and seventy so i sure like to see other communities you know pitching in and and and doing their fair share and the other piece is just obviously is that is the concerns that i had about the hope he said how south hope project where i supported the funding to begin with and then was was not satisfied with how the design encroached into stated setbacks creek setbacks so understand that that's an area a real concern you're the the successor head of this agency  and just hear that that that's a really a big concern of at least of mine and of course i hope that i can sway other colleagues to to bring that into the picture all the while i i hated voting against that project because i think that's the only affordable project that i have not supported in in eight years so but those issues are really important to me and i raised this for the neighbor where is this in the land use process and so we've received all of our development entitlements today and and to answer your concern we took great care at the outset when we purchased this property to meet with the neighborhood  we met with the milpas association we met with the school district because it's near the high school right and we we took a lot of care in getting their input and and take their concerns into account as we develop this and who we're going to serve at the property and so it it the entitlements are in place and it was not a pitched battle to get the the it was not through it was not okay thank you thank you and i think your comments  highlight an opportunity to explain a little bit more about the tax credit program the difficulty in the competitiveness because the hope project is my understanding did not successfully make it through that tax credit program i incorrect about that well we don't know for sure yet where it's most likely we did not make on the the two fifty one south hope project in this first round of funding so both this development we're planning and the two hundred and fifty one to go back in on the second round of funding for tax credits and as mister ral mentioned low income housing tax credit program is really the only permanent source of funding that's available for affordable housing development of any size and it's because of that it's very competitive only about one out of every five applications are are awarded every round and it's a limited pot of money and there's just not enough of those dollars to go around as well so and the reason they're so valuable the nine percent credits will pay for about seventy percent of the overall construction of the development brings in the equity that's needed to pay for seventy percent so if you couple that together with the local financing with the land that the housing authority purchased through its own account you bring in all those resources together it's how you're able to get these developments built it's a really important program and it's as you said they're really the only leverage that we have to take our local dollars and your resources and provide affordable housing how did can you explain a little bit more about how the scoring system works in relation ho project in santa barbara given the high land costs compete with projects in other parts of the state where it's so much cheaper too we do get a difficult to develop area boost this year our santa barbara is still in that area so we get a percentage boost there you also get you compete against all the other areas in the state for tax credits so you have to have a perfect score so every applicant is submitting with a perfect score but then how they rank them is a tiebreaker and they give you tie breaker points for local dollars that are put into the project local public dollars and they also also for other leveraged subsidy sources such as project based section eight if you're willing to if your housing authority has the the the necessary or an available funding to put in project based voucher you'll get some leverage there to raise your tiebreaker score and so that all applications go in essentially a perfect application score i think it's one hundred and thirty eight points and then you get tie breakers and up to a hundred percent but nobody ever makes a hundred percent it's usually a seventy eight percent is the highest tie breaker i've ever seen with the public funding sources and then the grant funding is set at the level that equals the amount the number of projects that get those tiebreaking scores until that funding source is exhausted and so you don't really know what that score e needs to be depending on the competition so are competing against yourself with the two projects unfortunately which is a dilemma but it is gives you two shots at the apple yes okay any other questions from members of the committee is there a motion what's technically just outside although this the sphere of influence would definitely so let's see i move that we music support the development  construction of this project and recommend it to city council so that's recommendations a b and c on the staff report all those in favor say aye aye opposed and abstain is important to kind understand what that is our investment strategy and approach some long term trends benchmarks see how we're doing relative to you know other stated benchmarks and then just to be kind of a summary of what we would happen this last quarter and as you know we bring this to you every quarter so this is a quarter investment report to give you an idea of what we've been doing in terms of buying and investments maturities and then what the interest rate environment is and for us it's important going forward not not going back but going forward what's the interest rate environment today what are interest rates what are we buying at and that's going to affect things in the next several years but just keep in mind that you know as we're buying things it's gonna take a while for whatever those changes are to interest rates to  interest rates for example whether go up we can start incrementally investing in those interest in those securities but it'll take a while before we start to see a real impact it's sort of like you know a ship that turns slowly but what's happening now is as you may have heard the loud last year and a half or so we've seen three changes to the interest rates where a federal federal funds rates have been increased by a quarter percent back in december fifteen and then again in a year later in sixteen and then more recently in march  still very very low historically it's at zero seventy five percent and the reason for the the upward movement is what you've been reading about the expanding economy it's that it's growing although it's a moderate pace unemployment is very very low at four and a half percent it's the lowest it's been since in the last almost ten years and then the target that that the federal reserve looks at is two percent and we're just about there at one nine percent so as it's inching toward that they feel it too compelled to raise interest rates and then we're seeing a strong housing market so those are the things that are kind of have guided the the federal reserve and raising interest rates at least recently what we've seen right now is the treasury rates are steady again they're still very low historically they haven't moved much reserve the longer in has been pretty pretty stable the federal reserve continues to hint that they're gonna raise rates throughout the rest of the calendar year which from an interest earnings perspective that's good news if you're looking to borrow money you're not not so good  and then one of the things we've just read is that they allowing or raising interest rates gives them some cushion if we receive an economic downturn or some type of recession to lower rates to to respond to that so what's going on also kind of that some of the other factors that may impact impact rates in the future global uncertainty and what this means is that the united states is still considered a safe haven or kind of a what we can call a flight to safety other other agency other countries month of march was down so they'll fact they'll fact that into their considerations the low interest loan employment is still factored as i mentioned inflation being close to two percent the the uncertainty are the presidential policies you know there's this idea of maybe increas spending through increased taxes although they're talking to me president trump is talking about lowering the corporate tax rate to fifteen percent but it's gonna have to be made up somewhere else either through cuts or taxes somewhere else so anyway what we're seeing today is probably could be just a law w e are seeing stability in the long end as i mentioned that could change in the future in the near future but as i mentioned the outset you know if interest they start to rise it'll take you know wild for us to see that translate into interest earnings this is a look at what's happened over the last several months with regard to the interest rates at their various terms three months all the way down to thirty years we only invest in securities up to five years we could with cars council approval to go beyond that when we just generally don't but you can see it the kind of the bottom and i would focus on the five year range because that's the longest we would go you could see that that's been very stable at about one point nine percent whereas the three month has inched up from zero point five one some our strategy is you know we call this sly this is a term of art safety liquidity and then yields so we are our primary concern is safety investing things are not going to lose principle and then liquidity and you'll see how we hold some money in just in kind of either cash or near cash to pay our bills and then yield is the last thing we consider and we just essentially buy into the market so we're not looking to see to make more money on the in day on returns we just look and we buy into the market when we have interest rates are very low they were investing in in a bad interest rate environment so we want to just have a stadium a charity ladder and it also gives us you know money coming in to pay our bills on a more radical  basis we show this to just to kind of show that we the blue line is is our portfolio yield just that we're generally in the right direction along with other benchmarks this is good it means that we're not doing anything of too aggressively go out of you know out of the ordinary again i think it's because the lower end has gone up recently in anticipation of potential fit front increases in the next calendar year i think the longer end being stables may be indicate some uncertainty about what's happening in your term from a macroeconomic perspective but that's just my own sort of the performance we are yield has increased slightly over the quarter to one point three three seven percent from about one point two percent our interest earned during the quarter about half about a half million dollars the general fund person is about a hundred forty one thousand i will tell you that i remember a time when the half million dollars was the general fund portion that's so low interest rates are these days and as i mentioned earlier our total cash and investments are about hundred sixty eight million dollars this is what's happened in the last quarter we've made about twenty million dollars in purchases we've had a our property tax half of the property taxes that we get in december came in so we were investing a lot of that money in the last several months and we also got some money back from the state loan reimbursement for  dsl and our wastewater projects we have two million dollars called and two million dollars matured and this is a summary of our portfolio you could see that the second row is the state of california that's a local agency investment fund that's a statewide investment pool we had a fair amount of money in there we're still anticipating more cost for some of our bigger projects and we generally hold a fair amount of money and they're just to pay our bills but most of the money is in we call federal agencies issues those are not us treasury securities but like things like fannie mae's freddie mac's and they're they're almost as secure as and this is the same table but broken down to a pie chart you can see we're pretty diversified in our portfolio in a fiscal year two thousand through two thousand and two everyone was doing much better portfolio rate treasury rate so was that driven by treasuries being that much higher y we back in and i can't see the chart but you know we had interest rates normally in the five percent range and then we had the recession that hit us during through to two thousand and one and to we saw interest rates really declined steeply and then they recovered again and then they've the economy is overheating inflation is is inching upward then they're gonna raise interest rates to to slow down that activity when the economy is sluggish then it's going to lower interest rates to stimulate the economy so you mentioned that  there's a lag time because of our entering the market so is there a corresponding lag time in terms of the slowdown so were we getting six percent and five percent a year into this once the interest rates were dropping did it do well before we felt the negative impacts yeah excellent point it's true so but in the early s and we were at about a five or six percent range and then the fed funds rate started to be lowered treasuries started to go down into low interest rate environment just started to go down substantially it took a couple years for three years for environment and so we've had requests to talk about our some of our corporate notes and who we invest with is it possible to switch some of our invest it's midstream with with council approval we will and we we can in divest ourselves of any security i will tell you that we have to look at what the market is because when we buy investments we hold in the maturity we have a fixed interest rate that stated with when we buy that security and so we're guaranteeing that interest in when it matures were guaranteed the full amount of the principal depending on where we are in the market that the value of that security could be up or down and we're talking about the wells fargo security we own right now that value is down and relative to what we paid for so we're decided we'd probably generate somewhere in the thirty to forty thousand dollar loss but that's up to council to make that decision great thank you sure any other questions for mister smart is there a motion adjourned thank you no you have one more okay that's the real reason we're here all right so today we are going to be presenting the the two year financial plan for two thousand and eighteen and nineteen and as you know the finance committee has an important role in that regard we meet with you to go over some certain things such as proposed fees for both the general fund departments as well as enterprise funds next week our plan is to go over with you in more detail our revenue assumptions and a multi or forecast that's been updated based on more information we have and we have a some topics if you look at you're not sure you have it we have some topics already sort of lined up but this is just about us asking you are there any other topics that you would like us to include in over the next several weeks as we present to you certain parts of the budget as we normally  and then we'll also hear on that date any funding requests from outside organizations we refuse received a few and then at the end on may rd we will be cover any other topics you may want to cover and yeah we don't cover expenditures because that's it's there's no you know we don't make real big assumptions other than we plan for next year one percent of sumption for salaries but the things just to go up naturally are things like retirement health insurance and the like  so we don't usually spend a lot of time on that category or that area we could when we're doing a budget where we're going over expenditures right yeah any and you to the departments will be bring into you you know their their respective you know budgets which are the cover a lot a large part of their expenditures we cover revenues because those are not covered generally in the departmental presentations because they're non departmental revenues taxes and like they'll present fees and then their own operating expenditures so that'll be part of their presentations to the full coun we just don't bring expenditures here as a category other than the past we've talked about pensions and things like that well i'd appreciate the perennial update on pensions would be something i appreciate hearing where we are i had asked previously of staff about what are what is going on throughout the state visa vie pensions and i appreciate that that would not necessarily be a finance committee topic but as i recall there was there was a suggestion that at least a an email correspondence goes out updating us on what what is happening in the state as far as the looks changes to the pension system and and whose is there legislation is there initiative processes and what what is going on out there so that we're we're just understanding we i appreciate that we don't have the city  barbara has minimal influence over over the broad policy issues but at least to for us to understand what's going on i think might be useful sure it i would i would assume that i'd be include that in the discussion of pensions what's some of the recent decisions of the pers board regarding for example the discount rate and where we're at with regard to longer term projections for interest rate for rate increases so we can cover that anybody else have any other additional items of interest come summer doing this this may be kind of below the level of detail or too much detail but one of the things we've been talking about is sustainability and resiliency and i know we have certain we have a certain fund where we reinvest money we save through enhanced energy opportunities so does that come up in any of these reports yeah it should i would suspect that when public works presents their budget and they'll be kind of first in line the the portion that will be part of the facilities budget i'm sure they'll include that but if not i'll make sure that they do that this is this utility revolving fund that they're trying to that they're creating where they're using those savings from energy projects to reinvest in northern energy projects and then in in terms of this report and and as a revenue source i'd be curious to hear your opinion if it if it's relevant to these other reports is this something we can double down on ten times down on because it seems like it's a win win we're saving money making money and making the environment better so if there's a way the city can get more aggressive or more assertive without having a an impact i'd like to hear what your opinions  and then one thing i'm interested in is the specificity of sales tax generation by geographic area i don't know how you what information you have about that but there's obviously a lot of concern about downtown's economic viability and lots of people have different views about that and that are predicting different trends so it would be helpful i think for us to eliminate the community about you know where we generate sales tax in citywide what sectors what geographic areas to put some perspective to that conversation so we i know we get the information by sector so retail sector versus restaurants i'm pretty sure that we have that information  block we can't go down to the store individual business because that's confidential information but i'm pretty sure we can get down to the sort of individual blocks and i think you know so we can see how they're doing how they're performing so i presume that would be helpful yes that's exactly what i was thinking about it and if you could break it down by sector you know so we can have a relative weight of you know retail sales tax generation versus auto sales versus you know other components of that any any fine granularity of that that you could