By Curt Prendergast Nogales International | August 14, 2013
What can you do with $10 million? For a local group looking to rejuvenate a downtown landmark, the answer is 48 units of affordable senior housing, with commercial and community spaces to boot.
The Bowman Senior Residences, formerly the Bowman Hotel, built a century ago, was awarded $1.03 million in tax credits from the Arizona Department of Housing on Aug. 1, credits that are renewed every year for the next decade, bringing the funding to a grand total of $10.25 million.
The award was announced at Wednesday’s regular meeting of the Nogales City Council by Yvonne Delgadillo, executive director of the Nogales Community Development Corporation, which has led the charge in searching for funding for the project.
“For us, it’s a huge accomplishment because as I’ve said, we’ve been working on it for seven years and it always seemed really difficult to identify the resources that were needed,” she said.
The finished project will combine the Bowman Hotel property with the De Anza property next door to create 48 units of housing for low-income seniors, with the bottom floor to be used for commercial and community spaces, she said.
“What does it mean to us as a community? It means that we’ll be able to secure the resources that we need for a project that we’ve been envisioning as a community,” she said.
Now that the funding has been secured, contracts to begin work on the project should be awarded by March 2014, she said.
Delgadillo thanked the city council for their support, saying “you guys were instrumental in this process. We really couldn’t have done it without the city’s support and without the community’s support.”
Not only was the funding a key part of realizing the project, it also showed that Nogales could compete with larger cities, she said, noting that only seven projects were awarded funding this year.
“What’s really neat is that a small community like Nogales was able to compete at the same caliber as Tucson and Phoenix projects that bring in millions of dollars are able to compete,” she said.
To secure the funding, the NCDC partnered with Gorman and Co., a Phoenix-based developer.
When all is said and done, the NCDC will own 51 percent of the project and Gorman and Co. will own 49 percent. Both worked together to secure the financing and that partnership will continue operating the residences, said Brian Swanton, of Gorman and Co.
How it works
So how will the NCDC and Gorman and Co. take those tax credits and turn them into money they can use?
The $1.03 million comes in the form of Low-Income Tax Credits (LIHTC), a federal program begun in 1986 that has provided $75 billion in tax credits to fund more than 2.5 million affordable rental homes, nearly all of the affordable housing projects in the U.S. built in that time.
Every year, the Bowman project will receive another $1.03 million in tax credits, which will be sold at a discount to investors, usually large banks, insurance companies, or corporations, Gorman said.
“They’ll buy them for anywhere from 80 to 95 cents on the dollar and then they get an annual tax credit in the amount of their allocation every year for 10 straight years,” Swanton said.
Investors in the Bowman project likely will pay 80 to 85 cents on the dollar, Delgadillo wrote in an email, which should generate at least $8.3 million, which she estimated would amount to about 80 percent of the project’s total cost.
As part of the LIHTC, the rent is restricted for 30 years and in the case of the Bowman Senior Residences, rent will be set at a rate that is affordable to seniors who earn less than 60 percent of the median income in Santa Cruz County, Swanton said.
The U.S. Department of the Treasury allots about $14 million annually to Arizona through the LIHTC program. In Arizona’s 3rd Congressional District, which includes Santa Cruz County, the tax credits have funded 5,627 apartments through $5.65 million in tax credits.