Blog Post < Back to Search
Village at Oak Hill
Village at Oak Hill seeks rental guarantees from the County and Marin School Districts
The Marin County Public Financing Authority (MCPFA) is a Joint Powers Authority (JPA) established in 2023 to fund the development of the “Village at Oak Hill” – a 135-unit, affordable housing apartment complex for teachers and county workers, located on land adjacent to San Quentin State Prison. (Click here to view the presentation) However, the project has been stalled because interest rates and construction costs have risen significantly since it was first proposed, resulting in a $17.4 million funding shortfall.
To partially remedy this, the developer, Matthew Hymel (MCPFA's Executive Director and former Marin County Administrator until his March 2024 retirement) and the MCPFA Board are proposing that individual school districts and the County, whose employees will live in the project, become “guarantors” of rents for the number of units they are allocated (about 75% for the school districts and 25% for the County), whether those units are occupied or sitting vacant, for the duration of the project’s long term debt (30 to 35-year revenue bonds).
As presented at the JPA’s recent hearing, the idea is that the school districts and the County will be “backstopping shortfalls in rental revenue on subscribed units at the end of each year.”
These rental “revenue guarantee” commitments would allow the developer to obtain more favorable bond interest, to financing the project.
As a practical matter, this proposal would transfer the majority of the financial liability off the shoulders of the developer, the bondholders, and their underwriters (who are collecting significant fees at every step of the way) and make it the responsibility of Marin County taxpayers and local school districts in the event of the project’s failure to be managed and maintained properly, failure to be fully occupied at all times, or when faced with unforeseen capital improvements, or net operating income shortfalls due to unpredictable inflation in operating costs (e.g., costs of insurance, utilities, project employee salaries, etc.)
Worse still, Wulff, Hansen & Co. admits,
“Our analysis is based entirely on assumptions, not independently verified by us, provided by various parties including Education Housing Partners, Inc. (the “Developer”), the Marin County Public Financing Authority (the “Authority”), and the Developer’s proposed bond underwriter, Raymond James. As no Bond Counsel has yet been retained, we have as yet been unable to obtain important information and opinions on certain tax and legal aspects of the Project.” [Emphasis added]
The extent of the County and school district’s future financial liability is unknowable but on projects of this size and complexity, it could be substantial. As such, history has shown that many affordable housing development projects, even those developed by seasoned housing developers, much less one overseen by an inexperienced JPA and its Board, have been forced into bankruptcy because of these same kinds of unforeseeable circumstances.
One must ask, then, what business do the County, and our Marin school districts have venturing into and assuming the bulk of the financial liability for an affordable housing development project by private developers?
To be clear, these rental guarantees would be mandatory, which means the County and, more importantly, individual school districts, would be forced to cover unpredictable amounts of rental income at any time in the future: funds they have not been budgeted for and which they would have little capability to raise. And all this at a time when Marin school districts are struggling to make ends meet, cutting back on programs, and laying off staff to balance their budgets.
MCPFA claims there is little to worry about because there are waiting lists for units, but the reality is more complex. Each unit must be occupied according to the designated income level and household size. For instance, if the next applicant on the waiting list has an income of 60% of AMI ($89,580 per year for a family of three) and a second household member with no income, they cannot qualify for a three-bedroom unit due to the household size and assigned income level (80-120% of AMI).
Having built and managed affordable housing for seniors and veterans for nearly two decades, I can attest to the importance of finding additional funding sources during project shortfalls, putting projects on hold, or sacrificing our developer fees to cover gaps.
In this instance, Education Housing Partners, the developer, will develop the property and receive a $5.9 million developer fee. But once the project is completed, they will walk away, leaving a third-party management company providing day-to-day operations while MCPFA continues to oversee the project at an annual cost of $150,000. The County has already approved a loan for $109,000 for operating costs of the JPA.
This project was originally proposed to be “cost neutral.” The County and MCPFA have already invested over five million dollars and are now asking the schools to "backstop shortfalls."
This is not the way to build affordable housing in Marin.