Bringing housing bonds out of the shadows

In yesterday’s Slant post, I took Gov. Andrew Cuomo to task for his proposal to strip New York City of its control over tax-exempt affordable housing bonds – or volume cap – giving veto power over the bonds to the three-member Public Authorities Control Board.

One justification the governor and Budget Director Robert Mujica gave for the proposal was that it would bring increased transparency to approving statewide projects.

If we assume bringing the bond allocation process out of the shadows is really what this proposal is about – rather than a clear vindictive play against Mayor Bill de Blasio’s housing plan and the city’s Housing Development Corporation (the city agency that negotiates the bond allocation) – then there are more serious concrete steps that can be taken to provide more accountability.

The federal volume cap allocation is driven by a per-capita formula, with a third of the pool going to state agencies, such as the Dormitory Authority and the state Housing Finance Agency, another third placed in reserves to be doled out later in the year as needed, and the final third going to industrial development agencies across the state.

If HDC or any other industrial development agency requires more volume cap for funding a housing or economic development project, they have to report on how much cap they have already used, and go back to the state to request additional bonds. As far as housing is concerned, HDC has been enormously successful in using its bonds – generating over $4 billion in tax equity through volume cap that would otherwise have to be made up with city subsidies.

The state is a virtual black box as far as publicly reporting this bond-allocation process, with most of the negotiating with IDAs conducted behind closed doors. None of the IDAs publicly list the number of projects they have in their pipeline, including HDC.

Instead of giving the Empire State Development Corporation veto power over any reallocation of volume cap from an IDA to another eligible local agency – which would severely hamstring the city’s IDA from transferring those bonds to HDC – why not amend the proposed legislation to force these agencies publish detailed information on their development projects? This information would include the name of every housing development, the developer, the distribution of market-rate versus affordable units, as well as the amount of volume cap and debt subsidy used to finance the project.

This would allow the state to better prioritize who gets these bonds, and also allow the state industrial agencies, and HDC, to better manage expectations on how much bond financing they will receive, so they can organize their development pipeline accordingly.

It’s certainly a better course of action then allowing the governor-controlled Public Authorities Board and Empire State Development Corporation to interfere with the city’s affordable housing goals.