HEHFB PILOT Program
INTRODUCTION
The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee is a public not-for-profit corporation duly organized and validly existing under the laws of the State of Tennessee (the “HEHFB”, “Lessor” or “Board”). The HEHFB was created pursuant to Tennessee Code Annotated Section 48-101-301 et seq., as amended (the “Act”) for the purposes, among other things, to provide quality, safe, affordable, and sanitary housing through issuing revenue bonds and exploring other methodologies for financing the acquisition, development, and maintenance of residential rental facilities for the benefit of low and/or moderate-income families and individuals as set forth in the Act. It is the intention of the HEHFB to conduct its activities consistent with its statutory and public purpose pursuant to the provisions of the Act, any and all other laws of the State of Tennessee, and with the enactments of the local legislative bodies of the Memphis City Council applicable to the HEHFB.
The Board of Directors of the HEHFB, all of whom are duly qualified electors of and taxpayers in the City of Memphis are nominated by the Mayor of the City of Memphis and approved by the Memphis City Council to serve in staggered terms. Pursuant to Tennessee Code Annotated Section 48-101-307, “…if at the expiration of any term of office of any director a successor to the director shall not have been elected, then the director whose term of office shall have expired shall continue to hold office until a successor shall be so elected…” The Board of Directors serve without compensation, except that they shall be reimbursed for their actual expenses in and about the performance of their duties. The HEHFB’s Board of Directors, Board Officers, staff and General Counsel are set forth on the inside cover of these Policies and Procedures (as defined hereinbelow).
General
The HEHFB originally adopted its Policies and Procedures during its regular meeting duly held on April 3, 2002, and revised it on September 2, 2015; June 8, 2016; February 6, 2019; and November 2, 2022, respectively (the “Policies and Procedures”). The HEHFB created its Policies and Procedures with the intent to ensure compliance with applicable laws and regulations, give appropriate guidance to applicants, lessees, lenders and related third-party beneficiaries for better informed decision-making, and streamline internal and external processes. Similarly, the HEHFB created Policies and Procedures each for its multifamily bond financing transactions and for the Memphis Housing Authority’s PILOT transactions.
The HEHFB reserves the right to amend or waive these Policies and Procedures, all PILOT applications, and other related documentation duly adopted and approved by the Board of Directors, as necessary, for good cause shown, upon a majority vote of the Board of Directors, in order to effectively perpetuate its mission of fostering the preservation and financing the acquisition, development, and maintenance of quality and sustainable affordable multifamily housing through exploring other methodologies and economic avenues to appropriately meet the health, educational and affordable housing needs of low and moderate-income families and individuals residing in the City of Memphis, including the adoption, incorporation, and implementation of any available laws, programs, or other measures made available under the laws of the State of Tennessee and the City of Memphis.
PILOT PROGRAM
General
The HEHFB, pursuant to its authority under the Act, created a payments-in-lieu of ad valorem taxes (“PILOT”) program as a further aid to facilitate the preservation, growth, and development of low and moderate-income multifamily housing. In accordance with the requirements of Tennessee law, each development project that is presented for approval to the HEHFB must be in the public interest. The intent of the PILOT program is to encourage and facilitate new construction and substantial rehabilitation of affordable multifamily housing through providing an abatement on property taxes, for a designated period, to qualified lessees for properties situated within the City of Memphis. The primary purpose and function of the PILOT program is to prioritize, enrich and maintain the quality of life, health and wellness, and safety for low to moderate-income families and individuals residing in the City of Memphis. Any monetary savings that the PILOT lessee (the “Applicant” or “Lessee”) retains while participating in the HEHFB’s PILOT program shall not be retained as a windfall to the Lessee, but such savings shall be utilized to implement certain qualified Tenant Benefits (as hereinafter defined) for the Qualified Tenants (as hereinafter defined) of the property through providing availability of access to a variety of approved tangible benefits that the Qualified Tenants would not otherwise have availability or access to thereby creating a higher-quality daily living environment.
Statutory Authority
The HEHFB is authorized under the Act to acquire and develop residential rental facilities for low and moderate-income families or individuals and is also authorized to enter into lease agreements with qualified lessees who are responsible for operating and maintaining such residential rental facilities.
The HEHFB is further authorized by a Resolution adopted on May 7, 2002, as amended and supplemented by a Resolution adopted on August 28, 2018 (collectively, the “Resolution” and together with the Act, are hereinafter referred to as the “Controlling Law”) by the Memphis City Council to negotiate with qualified lessees to enter into payments-in-lieu of ad valorem taxes agreements (“PILOT Agreements”) for the primary purpose of making certain payments-in-lieu of ad valorem taxes (“PILOT Payments”), provided that such PILOT Payments are deemed by the HEHFB to be in furtherance of its statutory public purpose. The Controlling Law allows the HEHFB to enter into PILOT Agreements with qualified lessees.
Basic Eligibility Requirements
For any Applicant applying to participate in the HEHFB’s PILOT program to facilitate the preservation, growth, and development of low and moderate-income multifamily housing through new construction, acquisition and/or substantial rehabilitation must, upon submission of the PILOT application, meet the following basic eligibility requirements to be considered for approval:
(a) Site Control – the Applicant must either own the property and provide evidence of such ownership in the form of a deed or have an option or right to purchase the property in order to be eligible to apply for a PILOT. The site control shall be the equivalent of fee simple title or a 99-year lease with an option to purchase with no contingencies, with the exception of financing.
(b) Financial Investment – the Applicant’s substantial rehabilitation of the property shall mean financial investment in construction costs (i.e. hard costs) equal to or greater than fifty percent (50%) of the acquisition cost of the project. This financial investment is inclusive of costs associated with (i) property acquisition, (ii) building improvements, (iii) site improvements, and (iv) new construction. This financial investment does not include any soft costs.
(c) Financial Commitment – the Applicant must provide written evidence of its financing commitment(s) with any lenders and/or guarantors in connection with the security and payment of the Total Project Costs (as hereinafter defined) for the project through providing a commitment letter or a proposed or executed term sheet.
(d) Financial Analysis – the Applicant must provide a five (5) year cash flow analysis illustrating the proposed project’s income, expenses and its ability to service its debt obligations. Please note that this cash flow analysis should be completed and illustrated in two ways: (i) one way through illustrating the analysis calculated with the monetary savings generated from the PILOT; and (ii) the second way through illustrating the analysis calculated without the anticipated monetary savings generated from the PILOT, inclusive of a brief description therewith describing the proposed Tenant Benefits made possible because of the PILOT. The HEHFB reasonably expects and anticipates that these cash flow analysis calculations will be reviewed by a licensed financial advisor.
(e) Target Market – means and includes families and individuals of low and/or moderate income within the meaning of Section 142(d) of the Code and applicable regulations promulgated under the Code, as the same may be amended from time to time (to the extent that such amendments are applicable to the project). In accordance with these Policies and Procedures and the Code at least forty percent (40%) of the completed units of the project, at all times, shall be rented to and occupied by families and/or individuals whose income is sixty percent (60%) or less of the area median income. The Applicant shall, at all times, stay in compliance with these minimum income set-aside requirements for the full term of the PILOT. Failure to do so may cause the PILOT to be terminated by the HEHFB (the “Qualified Tenants”).
(f) Tenant Benefits – means approved benefits available and accessible to the Qualified Tenants through offering: (i) new energy efficient tenant amenities coupled with additional property enhancements and renovations; and (ii) social services and special services that foster experiential learning, job and employment training and related development opportunities provided directly through the Applicant and the on-sight property management company cooperatively working in conjunction with established nonprofit/community agencies and/or neighborhood network centers for the benefit of the Qualified Tenants residing on the property (collectively the “Tenant Benefits”). Tenant Benefits are a central component of the PILOT program and full compliance shall be maintained by the Applicant at all times throughout the duration of the PILOT in order for the PILOT to be considered in good standing. In connection with obtaining PILOT approval, the Applicant must provide a written narrative and projection of how the monetary savings generated from the PILOT will directly benefit Qualified Tenants. For more information on Tenant Benefits and the requirements and expectations in connection therewith, see “TENANT BENEFITS” herein.
(g) Property Boundaries – the Applicant’s real property and the corresponding tax parcel numbers associated with the proposed project must be situated within the limits of the City of Memphis, in order to be eligible to participate in the PILOT program.
(h) Phase I Environmental Site Assessment Report – the Applicant must conduct a Phase I Environmental Site Assessment Report on the land of the proposed project, wherein this report must illustrate conclusive findings of no recognized material environmental conditions or hazardous risks located on the land for the real property associated with the proposed project. This report must be completed, at a minimum, within two (2) years of applying for a new PILOT, unless such requirement is expressly waived in writing by the Board of Directors. Phase I Environmental Site Assessment Reports must explicitly grant the HEHFB the legal right to rely on such reports and such reports shall be completed in accordance with all applicable laws and regulations. This requirement only applies to Applicant’s applying for a new PILOT term.
(i) Valid Legal Entity – the Applicant must be a valid legal entity that: (i) is duly authorized to conduct business under the laws of the State of Tennessee; (ii) is in good standing under the laws of the State of Tennessee; (iii) has the power and authority to enter all applicable PILOT documentation and all other related agreements and written instruments to be executed and delivered by the Applicant in connection with the PILOT for the proposed project.
PILOT APPLICATION SUBMISSION AND APPROVAL PROCESS
PILOT Application Submission
All PILOT applications must be complete and timely submitted a minimum of sixty (60) days prior to the scheduled regular meeting of the Board of Directors at which time the submitted application will be considered for approval. Incomplete PILOT applications will not be accepted nor reviewed by the HEHFB. The HEHFB meets every first Wednesday of the month, subject to change as needed. Public meeting notices and meeting dates can be found on the HEHFB’s website at http://www.mememphishehf.com. The PILOT application must be submitted in compliance and conformity with these Policies and Procedures. If the format of the submitted PILOT application does not comply with these Policies and Procedures and the guidelines set forth and more fully described herein for submission, then the PILOT application will not be accepted or reviewed.
To appropriately submit a PILOT application to the HEHFB staff, the Applicant shall submit: (i) an electronic copy of the PILOT application in portable document format (PDF) to the HEHFB staff and (ii) the non-refundable application fee due and payable upon submission of the PILOT application. If any minor errors exist within a submitted PILOT application, then the HEHFB staff may, in its sole discretion, allow the Applicant up to ten (10) business days to make the necessary corrections.
The submitted PILOT application must contain the following subject line in the email:
“HEHFB PILOT (Type of Application) (Name of Applicant); (Month/Year)”
All PILOT applications shall be collectively emailed to the individuals listed below:
Stephanie Bryant, Office Manager: Stephanie.Bryant@memphishehf.com
Martin Edwards, Jr., Executive Director: Martin.Edwards@memphishehf.com
Charles E. Carpenter, Esquire: General Counsel: Charlesc@386beale.com
Corbin I. Carpenter, Esquire: General Counsel: Corbinc@386beale.com
Upon submittal of a PILOT application, all application fees associated therewith must be paid in full prior to the scheduling of the Submittal Conference (as hereinafter defined).
The Applicant acknowledges and agrees that any and all paid PILOT application fees are non-refundable.
PILOT applications for all properties that are participating in any current United States Department of Housing and Urban Development (“HUD”) program must include the: (i) HUD application; (ii) HUD approval notifications; and (iii) latest HUD REAC inspection report and/or other third-party related report, as applicable.
Please click the below links to access the Board’s complete PILOT Policies and Procedures and PILOT Appllication:
HEHFB PILOT Program Policies and Procedures