Affordable housing developers seeking tax exempt bond financing, which comes with an allocation of 4% Low Income Housing Tax Credits (LIHTC), will usually request a portion of the bond capacity they need from the local jurisdiction where the project is located and the balance from the State of Nevada Housing Division. The local jurisdiction’s allocation to a project would serve as evidence, to the Housing Division, of the local government’s support for a project. However, last August the City of Sparks allocated its 2013 bond cap to the Nevada Housing Division’s single-family, first time homebuyer mortgage program. Local governments’ allocations automatically revert to the State in September if not otherwise allocated.

Because the City of Sparks will not receive notice of its 2014 tax exempt bond capacity allocation until sometime in 2014, and since the Pacific Rim Development Company (“Pacific Rim”) is seeking to proceed with a project in Sparks in the next few months, they are asking the Nevada Housing Division to provide all the tax exempt bond capacity they need for their proposed project. The State has, however, requested that Pacific Rim provide evidence of the City of Sparks’ support for their proposed acquisition and rehabilitation of the Marina Gardens Apartments, which are located at 550 Howard Drive. For this reason Pacific Rim has requested a Resolution of Support from the City of Sparks to submit with their application to the Nevada Housing Division for tax-exempt bond financing and the 4% LIHTC.

Marina Gardens Apartments were constructed in 1973 and consist of 200 apartments in 31 two-story buildings on an 11.8 acre parcel directly east the Silver State Plaza shopping center. Pacific Rim is proposing to invest approximately $23,500 in hard costs per apartment to modernize units with new appliances, countertops, paint, flooring, fixtures, door and window treatments. They also plan to provide improved amenities for residents by addressing deferred maintenance on the property, updating building exteriors and common areas and adding a community room. The property’s energy efficiency will be improved through the replacement of windows, upgrading building insulation, and the addition of energy-efficient water heaters and other HVAC upgrades. Total costs for acquiring and rehabilitating the Marina Gardens Apartments are estimated at $23.8 million, including approximately $7 million in equity from the sale of LIHTC. The preliminary draft project budget, as well as Pacific Rim’s request for a resolution of support and a project description, are attachments to this staff report.

Use of tax-exempt bond financing and 4% LIHTC would require a 30 year commitment to rent the Marina Gardens Apartments to households with incomes at or below 60 percent of the U.S. Department of Housing and Urban Development’s area median income. Pacific Rim anticipates that at least 80% of the current tenants will qualify to continue residing at the Marina Gardens Apartments after renovation of the property. The Nevada Housing Division will be responsible for underwriting issuance of the bonds and Pacific Rim anticipates the bonds will be secured with Freddie Mac credit enhancement. The project will also be closely scrutinized by the investors who will be providing equity for the project by purchasing the LIHTC. Significantly for the City of Sparks, Pacific Rim is not seeking federal HOME funds and a property tax exemption.

Marina Gardens will be owned by a new sole purpose entity, Lake Vista Apartments LP, a Nevada limited partnership. The project team is described on pages 4-5 of the attached project description.

City staff recommends approval of the proposed Resolution of Support for this project because it would result in a significant upgrade to an aging apartment complex and provide additional rent- and income-restricted apartments in the “East Sparks” submarket, which according to the quarterly Johnson-Perkins & Associates apartment survey has the highest rental rates in the Reno-Sparks market.