term than the resources based upon the section 9. and that is another huge, huge difference. in terms of taking advantage of the situation and the realities of the situation. it's not necessarily fair. it's not necessarily just. but for us to be able to move forward we need to take advantage of that situation. the other thing that section 9 doesn't do is it has not funded any new public housing forever. and it has not funded any new modernization for forever. so really what the secretary was doing was saying, here guys, i will give you this tool, and this tool unlocks the access to loan income housing tax credits and debt financing. and why does it do that? we are creating these sort of

rental assistance vouchers. the lenders a s ans and investo used to project-based rental vouchers. in the 80s there was lots of projects with project-based rental assistance vouchers. and in san francisco after the 20-year cycle, the lenders and the investors are very familiar with this tool. they can underwrite with this and buy credits based on it, they couldn't do that with that section 9 financing. this is part of reason this is part of the solution. in terms why we are looking at rental assistance demonstration program. and the other part, the rental assistance program comes with an obligation. we will talk a little about the

rehab obligations and the tenant obligations. and one of the reasons, to take part of this program, you need to be obligated for 20 years. and we have to put more money and we have to increase the housing quality in these units. therefore a part of this, and i wanted to answer the question about whether this is a demalatide demoliti demolition. absolutely not. this is a rehab program. there is no demos. this is not like (inaudible) or choice neighborhoods. so we are going through and rehabbing everything for the next 20 years. it doesn't mean that in 20 years from now or 15 years from now, we as a city decide we should

improve this housing and utilize it to a higher level. but for now, this is a rehab. there is no intention for displacing anyone. and no issue of one for one replacement. all the units will be replaced. it does allow for minimal loss of units to create community rooms and property management space and things like that. but it's primarily a rehab program. >> mr. lee, can i ask a question about the units or the properties that we know we have to completely rehab, like west side cords or holly cords, they are not necessarily included in this rad program. >> they are absolutely included, we will rehab them. >> we are not going to demolish them at all sign?

>> this program is a rehab program. it doesn't mean in the future -- >> mr. washington, please, i am trying to conduct a hearing, if you need to have a conversation, if you can take it outside, thank you. >> this is a rehab program, and what it will do, it will provide for permanent affordable housing as it is rehabbed. if people in the future want to do something different to the site. perhaps to do more housing on the site. more affordable housing. different affordable housing. you can do that. but it has to be affordable housing. and this program is intended to rehab and permanently provide affordable housing. >> mr. lee, west side courts, holly courts, those places were

not meant to last this long. the plumbing issues, and the rodent issues. all the things we're trying deal with now, are things that no rehabilitation can address. i am trying to understand -- >> well, again. >> and this is -- i am very, as you can see, i am blown away by the fact that i have been aggressively working to get west side courts in particular on the priority list, because holly courts and west side courts are two of the oldest housing developments. and in desperate need of repair where we continue to have significant challenges. i am trying to understand how realistically we can make a commitment for rehabilitation. i don't see it. >> we are in the process of

getting the actual information about the scope of rehab for each development. we have done physical assistance assessme assessments. the developers that are responsible for the site will have to take those physical assistance assessments and work programs on them. you may be right. >> we are not as a city looking at the possibility of demolition. >> not under this rental assistance program. >> but before this we were. >> before this we were looking at a variety of things. and some developments, including potrero and sunnyvale are looked at total rebuilds. >> just for clarity, if we decide to move in direction we won't have the option to demo

these properties? >> you are right, we have 20-year obligations at minimum to provide as rental housing. and there is a 20-year renewal for the rental assistance project. but they have to meet the standards. >> that's not going to work for west side. >> with all due respect, i would say let's see what the rehab scope maybe. and we will have happily share that with you, to ensure that it does indeed meet the standards for 20-year livability. but one of the things we have to balance right now, we are trying to do a variety of housing in the city overall. including we are working on

hunter's view and alice griffith, and on pipeline units and a variety of things. instead of making one of these developments wait for 20 years, or 10 years for potentially a demolition and a rebuild. we will provide for better housing within two years. and that better housing the last at least 20 years, while we try to make up our minds which projects to address and make sure we have the funds to deliver on the promises. again this is about improving housing today as opposed to when we may have the funds. sort of accumulated to do a significant demolition and rebuild. there is no concern about loss of units. it is about a rehab.

it is definitely one-for-one replacement. moving on with this presentation, one thing we are layering with the rental assistance program is section 18 application. and this allows for additional resources from the federal government in the form of slightly higher rents coming from the federal government. as you asked the regional administrator. hud is not giving us the capital. what they are giving us is a flow of income. first based upon the rad. which is very similar to the income they gave us under section 19 -- section 9. and we are also applying for additional rental assistance under this section 18 program.

and it's a combination of those two sources that allows us to leverage all the funds we are seeking. and to do all the rehab work that we are seeking to do. so again, it allows us to again get the loan tax credit equity, and allows us to borrow additional funds than under section 9. and the other part of this, it allows us to have higher operating costs. it allows us to do more at the development. so one of the things that hud did not allow the housing authority to do, is to establish operating replacement reserves. the lenders and the investors will insist on operating reserves. the notion of who pays for the roof in year 15, or who replaces

the water heater that breaks is not a question that goes to washington, d.c. but just goes to the property manager and says, i have actu actually set aside the money based on this income stream do that. and the goal and the last things on the question of operations. the other thing that this program will facilitate is a service connector on each property. which is something that the housing authority has not been able to afford. as mrs. vascal said, rad is a limited program. it's limited to 60,000 units under the current authorization. 172 units were applied for. that means that obviously there are 112,000 units who are waiting to get access to this

program. and unless hud does some things through the budget process and the president does something through the budget process to increase the cap. or through authorizations. it will be limited to 60,000. which is unfortunate, because if we are -- if we are successful in pulling all of this together, we will need more rad. for additional units in san francisco. but we will be behind the rest of the people who have applied today. the other thing about this where we are, san francisco portfolio, though we are not the largest to apply. we were the largest portfolio to apply and be accepted. the chicago portfolio is awaiting. they are behind us.

so again the central component of this is preservation. the $312 tenant rent is not sufficient by itself to even cover operating expenses. clearly there has to be an operating subsidy some place to cover operating expenses. to run the buildings in a manner that renters and investors would like, that level of support has to be higher. we talked about how we are converting this from section 9 funding to section 8 funding. it provides a more stable, long-term subsidy and provide for that leveraging. again this is a combination of two different programs we are doing. we are doing rad, which we applied for and the house

authority has applied for which they have received authorization. the housing authority is in the process of applying for section 18. and that process is underway. these developments will be using 4% lower tax credits and tax exempt bonds. one thing was whether a question from hud, whether that was a scarce resource in california. as for now it's not. in other states it indeed a scarce resource and they it were concerned about the 4% credit and the bonds it make the financing work. and the projects will be new ownership structure and property management structure. and the tenant protections will be established and codified.

so rad basically transfers the building to the developer and operator. and then the developers then seek the private equity and the lenders to finance the buildings. so it was really important in terms of this process, that we are involving the lender in that community in looking and bringing those resources to the housing authority. and those are resources that were not available. again the section 18 provides additional rental assistance in helps to leverage debt. so what does this sort of

rubic's cube puzzle produce? well, it produces over $200 million in tax credit equity. and produces approximately 240 in additional debt. the overall scope of the project financing is about somewhere in excess of half a billion dollars. and it produces over 3500 units that will meet health and safety standards and be affordable for at least 20 years. but under a 99-ground lease, hopefully forever. we have better units and better building management, and better housing services for the residents and preserved long-term affordability under the approved land trust model. where are we now? >> on that, i might ask this

later as well. you have project managers for different assets in the public housing portfolio, and is each one a stand-alone system so that you people are not transferred from one, should we call public housing sites but to another, the transfers now. is everything self-contained in those projects? in those assets? >> could i hold that question for a moment. >> sure. >> i will hold it too. >> okay, thank you. let me make a note of it to make sure i cover it. so where we are right now is again the chap, which is the additional housing payment contract was approved by hud and

accepted by the housing authority commission in january. the typical rad process says you have to be in construction by 12 months, because of the portfolio nature of this work. hud agreed to give san francisco 18 months to be basically underway with our construction. the housing authority released the developer rfu in january of 2014, and the housing authority completed the developer selection in april of this year. one of the things in terms of housing authority developer rfq, i think one of the goals in the process of utilizing rad is how can we create a san francisco centric solution? what works in san francisco? in terms of building affordable housing, managing affordable

housing. working with neighborhood organizations. working with residents. so the rfq was really tailored in a way to ensure that we had a san francisco centric sort of solution. and sort of if you read the rfq, if you have spare time late at night. it outlines a lot of san francisco principles in the rfq. it talks about the san francisco experience in building and owning and managing affordable housing. why is that important? it's important because san francisco based affordable housing developers are really the envy of the country. they have done a wonderful job of creating up to this point somewhere between 12 and 15,000 units of affordable housing in san francisco. and when you compare that to the

size of the housing authority portfol portfolio, it dwarfs the housing authority portfolio. they have had a long track record of working in san francisco and boards and with residents in san francisco. we want to award that through the rfq process. >> any other city or county like that? >> no, even in new york city. most cities have one or two nonprofit developers. even new york city has a few nonprofit developers. obviously their scale is greater and they rely much heavier for-profit developers. and we use for-profit developers in the city too, but they have san francisco experience. and it's important whether

through the planning process or the commission process or the board process or through the building department requires a knowledge of what it takes to get through that process. as opposed to coming and sort of saying, well, i did this in st. louis, i can do it anywhere; right. so we really wanted to sort of encourage those folks who have been working in the field, providing affordable housing to take on this responsibility. one reporter early in the process asked me, these developers will get paid millions of dollars, won't they. i said they will get a developer fee from the mayor's office schedule. it's barely enough to compensate them for two things. one the time they take on the

development and the risk. these developers in san francisco are guaranteeing that tax credit equity and the repayment of the debt on the property. and in exchange they get less than the maximum developer fee, because that's the city's practice. and they get a restricted cash flow, because that's also the city's practice. and in part because we subsidize those developments or heavily. the developers are doing this in part, because they are part of the solution and part of affordable housing system as the case may be. and trying to assist the housing authority in this process. >> what other structures make san francisco unique, you referenced in the rfq, and talked about we have providers, and what else in terms of

financing? >> it's the financing, what the board has put in my budget. it's what the voters have authorized as prop c. it's our history of supporting developers as they do affordable housing. >> with prop c, was it clear to the voters that prop c dollars would go to public housing? >> i think the whole question about -- it's about the question of preserving, and then producing affordable housing. and this is clearly preserving affordable housing. and i think we could -- if we don't save this housing and improve this housing as affordable housing, and spend the rest of the time building new housing. this is actually more cost effective if you want to do it on dollar and cents basis, but

also san francisco residents deserve better housing. we are looking at this as part of the mayor's goal for affordable housing and as we look at the pipeline of income and pipeline for new family housing and supportive housing. this is something that is clearly in the guidelines of prop c. >> it seems laced up to use prop c for building, rebuilding affordable housing. in rad it's a lot of community housing developers. it's almost locked in to be this way. that we would have developers operating and managing the sites. so we are also losing dollars on the other part of the affordable housing as well. >> hopefully we will expand capacity through other things. but you raise good points, these

are some of our familiar developers. and because they have the experience with the form of the financing. and they also have the confidence of the outside len r lenders and investor that is we have to seek out. and they also will pass the hud test. they won't take our word for it that these are good developers. hud will review it. and the investors will have say whether these developers selected by the housing authority pass the mustard or not. we do like them and feel they are confident, but we are not the final word on this. there is at least three other groups of people that will decide if we made a good choice of the developers or not. >> who are they? >> the lender will be lending

money to the developers, and they will decide if the developer is capable of returning the money. or the guarantees is worth the paper they are executing. the investor that will be putting the money up and buying the tax credits. they will want to know if this developer has a track record of owning and managing tax units, and if they screw up, they it will pay for the cost of the development. and hud. hud wants to know that these developments will be affordable. and managed well for the next 20 years. >> and who is the lender and who is the investor? >> we don't know yet. >> who is interested? >> i think that everyone is interested. the housing authority will be doing an rfp and rfq, rfp for

lenders and investors. and the goal is to obviously to get the best price to do more work for the developments. so moving on. where we are now, we will seek the approval of the section 18 applications. the developers continue their due diligence at the properties. the goal is to extend the bond by january and begin work by june 15. part of the reason why we don't have lenders and investors right now. we want the developers to get onsite, to look at the buildings, work with the residents and determine the scope of work and get a costing on it. we had a consultant do a preliminary estimate of the cost. but that does not sort of substitute for developer and

contractor trying to get the cost of the particular development. so we talked a little about -- so we talked a little bit about, and the questions were raised about what does this do for the reside residents; right. one there is no change in how the rents are calculated. no rescreening. again this is not a demolition program. so hopefully we will not have people out of their units for less than a short period of time. and no displacement. the other aspects for the residents. this is a long-term affordability. we are not selling off the land. it's not going to some other

corporation. it's being held by the housing authority, in terms of the 99-year lease. there is a 55-year tax credit affordability requirement. there will be requirements related to the project-based rental assistance contract. mocd will have secondary loans on the property. to ensure stewardship of the sites as long-term well-run affordable housing. the residents will have the same eviction protections. will have the same affordable rents. will maintain the same grievance procedures, and maintain the right to file complaints with housing authority and hud. there was some mention about the wait list. this remains a centralized wait list with some modification.

residents on the wait list with identify specific sites they wish to be preferenced for, but it's a sprlized -- centralized wait list. >> just to point out the same protections and the same standards, is that going to be codified? >> it would absolutely be codified at some point, whether in the land agreement or loan agreement, it would be codified. >> are we able to apply a city-wide standard as well? >> our goal is to do the best practice. whatever they are. we will work with the tenant adsoicaa advocat advocates, with the tenants themselves. this is an opportunity to change things, to blur the lines between affordable housing. and take thepp