Sacramento, Calif.—The ambitious Phoenix Park development is set to rise in the midst of what has been one of the most troubled housing subdivisions in the city.
After a two-year legal process and behind-the-scenes work, construction recently began on the approximately $80 million rehabilitation project that will turn 116 buildings that are four-plexes with a total of 464 units into 360 new apartments for low-income families and seniors.
The Sacramento Housing and Redevelopment Agency (SHRA) has secured 20 sources of funding, including low-income housing tax credits, to take on the project.
Their efforts are an example of what one housing authority is doing to take control of a bad neighborhood.
Long known as Franklin Villa, the development has been one of the most notorious in the city, with some of the highest crime rates in Sacramento. SHRA officials said that about 40% of the residents were under 14 years old, and 71% of its families were extremely low income.
Franklin Villa was a difficult project for city leaders to get their hands around because of its large size, fractionated ownership and the lack of common management. Not only did every building have a different owner (mostly absentee landlords), but many of the units were also individually owned because the project had been developed in the late 1960s as condominiums for seniors.
"You had the potential of every unit being owned by someone else," said Janet Rice, SHRA's assistant director of special projects and the project manager of Phoenix Park.
Multiple homeowners associations were also in existence, and officials continue to work with neighborhood representatives, added Beverly Fretz-Brown, director of policy and planning for SHRA. She serves as president of Norwood Avenue Housing Corp., the managing general partner of Phoenix Park.
During the mid-1980s, the housing had fallen into severe disrepair, and the property became plagued with crime and poverty. Since 1994, more than a dozen social services organizations and local agencies have provided various services for residents, including job training, child care and adult education.
A major step toward transforming the neighborhood, however, occurred in 1998 when the Sacramento City Council adopted the Franklin Villa Revitalization Plan. A year later, city officials partnered with the Department of Housing and Urban Development (HUD) to allow SHRA to purchase vacant FHA-foreclosed units in the area.
A joint powers agency created by the city and county of Sacramento, SHRA owns 3,600 units of public housing and is one of the largest landlords in Sacramento. The agency administers about 11,700 rental-assistance vouchers per month.
The next turning point came in 2001 when city leaders adopted an implementation strategy to reverse the social and physical deterioration of the community.
Since then, SHRA leaders have negotiated with hundreds of owners to buy the 464 units or have moved to acquire the property through eminent domain proceedings. At the end of last year, they had orders of possession for all of the units.
While the hunt for the homeowners was going on, SHRA was also searching for the funds necessary for the massive deal. It recently closed on the major pieces of financing.
A significant component of the financing is housing tax credits- $25.8 million in federal credits and $4.7 million in state credits-awarded by the California Tax Credit Allocation Committee last year.
MMA Financial, LLC, syndicated the tax credits. It is one of the company's largest transactions
"We are thrilled to be playing a major role in the revitalization of this community and were thoroughly impressed with the level of commitment on the part of the Sacramento Housing and Redevelopment Agency and the numerous local agencies who participated," said Catherine Talbot, principal at MMA Financial. "Phoenix Park would not have been possible without this group of dedicated individuals who have devoted significant resources and time over the years to bring the deal to fruition. One of our investors in the property, HSBC Bank, ultimately invested because of their comfort with the scope of work, the ability of the development team and the community involvement."
Because of the size of the project, the financing had to be divided into two parts, according to Laurie Share, president of LB Share Associates in Sausalito, Calif., a finance and development consultant on the project.
The tax credits are the key financing for the first 178 units. For the remaining units, officials will apply to the California Debt Limitation Allocation Committee for tax-exempt bonds this year. They have also received a commitment for $1 million in Affordable Housing Program funds through the Federal Home Loan Bank of San Francisco through Union Safe Deposit Bank.
Other financing for the project included $9.1 million in a deferred-payment loan from the state Department of Housing and Community Development through its Multifamily Housing Program and $2.5 million from the HELP (Housing Enabled by Local Partnerships) program from the California Housing Finance Agency. The city of Sacramento has also committed $24.2 million in HOME, Community Development Block Grants, local trust funds and redevelopment tax increment funding.
Bank of America provided a key $6 million secured line of credit to finance the predevelopment activity. Citibank provided a $22.9 million construction loan and a $9.1 million permanent loan.
"Everyone had to come together and understand the project and support the project and be willing to take a portion of the risk of the project," Rice said.
As a result, one of the lessons from this deal is that government agencies can step up and take back a bad neighborhood, Share added.
Because the project is large and unique, a key was assembling the right team, including the various financing partners, who could be involved in the two-part plan.
One way to help mitigate the risk was to establish a high level of reserves, Share said.
SHRA had never done a deal of this size but made it work, she said.
Not everyone is as enthusiastic. Jon Coupal, president of the Howard Jarvis Taxpayers Association, doesn't dispute that there is a housing crisis in the state. He is, however, concerned about the use of eminent domain and the loss of the properties from the tax roll. Overall, he supports the use of vouchers so that there isn't a concentration of low-income families in a neighborhood.
There will be no public housing units at Phoenix Park, but 80% will be project-based Sec. 8. HUD provided a waiver to allow the large number of Sec. 8 units to be in the development. The rest of the apartments are tax credit units.
The development used to feature all two-bedroom units, but Phoenix Park will provide a mix of one-, two-, three- and four-bedroom apartments. Bigger apartments are needed for the large families at the site. In some cases, two families had been sharing a single apartment.
SHRA officials estimate that half of the Franklin Villa residents will return to Phoenix Park. A thorough screening process will be used. In addition, The John Stewart Co. is managing the property. The firm is expected to bring strong management to the property, which had been lacking.
Residents are expected to move into the first of the new apartments at the end of the year.
As the project moves into the construction phase, officials say the name of the project is fitting. The development is rising up from the ashes.
"I'm excited about what this means to the community," Rice said. "The residents there do have hope and are anxiously waiting for the Phoenix to soar."