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Littleton council hears how private-activity bond cap can leverage affordable housing
Summary
City staff and South Metro Housing Options told Littleton council that the city's $2.9 million private-activity bond allocation can be assigned or carried forward to help finance low-income housing projects; council asked staff to return with a resolution before the state's Sept. 15 relinquishment deadline.
Littleton City Council discussed using the city's 2025 private activity bond volume cap to support affordable housing development at a study session, with South Metro Housing Options and bond counsel outlining how the tool works and asking council to consider assigning the cap to an issuing authority.
The discussion mattered because private-activity bond volume cap unlocks tax-exempt financing and federal 4% low-income housing tax credits that can supply equity for multifamily affordable developments, presenters said.
Kathleen Osher, deputy city manager, introduced the discussion and invited South Metro Housing Options and bond counsel to explain how Littleton could use its allocation. Bond counsel Corey Kalanak of Taft Law described the volume cap as "a little bit more like a permission slip to issue private activity bonds," and explained that Colorado's allocation is set by a statutory formula and administered in part by the Colorado Department of Local Affairs (DOLA).
Kalanak told council that Colorado's 2025 statewide cap is calculated at about $130 per person (the nationwide formula), and that Littleton's 2025 share is roughly $2.9 million. He said municipalities may do one of four things by the statutory relinquishment date (Sept. 15): issue bonds as the conduit issuer, carry the allocation forward (with additional IRS filings) and use it within the carry-forward window, assign the allocation to another governmental issuing authority (for example the local housing authority), or allow the allocation to revert to the statewide balance administered by DOLA.
Sarah Burr, representing South Metro Housing Options, said the housing authority has projects in a pipeline that would require private-activity bond cap to access 4% low-income housing tax credits and attract tax-credit equity. "We absolutely will have a project on which we would be able to use this," Burr said.
Presenters and council discussed operational details: assignments must be to eligible governmental issuing authorities (not private developers), an assignment document must state that the allocation is not a debt or indebtedness of the assignor and cannot be sold for monetary consideration, and carry-forward requires filing with the state and the IRS. Osher and Kalanak said CHFA (Colorado Housing and Finance Authority) and DOLA routinely factor local allocations into tax-credit award decisions and that consolidated local allocations can help projects compete.
Councilor Reicher pressed on borrower risk and collateral; Kalanak and South Metro representatives said the conduit bonds are typically revenue-backed by project rents and tax-credit equity, and that underwriting and multiple layers of review are standard in such deals.
No formal vote was taken. Staff recommended bringing a resolution and draft assignment documents to a regular council meeting so the council could decide whether to assign or carry forward the city's 2025 allocation before the Sept. 15 relinquishment date. Council agreed to see the item at the next regular meeting.
Looking ahead, staff said they would return with draft documents and an option for council action before the statutory deadline; if Littleton does nothing, the allocation will revert to the statewide balance and be redistributed by DOLA.
