City housing office urges reallocations within 2015 bond as Prop C loan program is readied

Kate Hartley, of the Mayor’s Office of Housing and Community Development, told the committee the office is shifting some 2015 bond funds to avoid delays in spending bond proceeds and to maximize affordable and middle-income housing production.

"We are pleased to be before you today to give you an update on the 2015 housing bond," Hartley said, reporting that 70 percent of the first bond issuance is encumbered and that the middle-income down payment assistance loan program is fully subscribed.

Hartley explained the department intends to move Prop A construction funding originally allocated to stalled projects at 4840 Mission and 250 Laguna Honda to developments already advancing — notably 88 Broadway and 1296 Shotwell — so the bond funds can be spent without delay. She said the use of the funds will remain the same; only the project that receives the funds would change.

Benjamin McCloskey, deputy director for finance and administration at MOHCD, clarified that earlier board approval identified funding "buckets" (public housing, low-income housing, Mission-specific set-aside and middle-income housing) rather than specific projects. He said because the proposed changes remain within those buckets the controller’s office advised the department that returning to the Board of Supervisors was not required.

"They didn't identify specific projects in their board resolution," McCloskey said. "Since we're staying within those buckets, there's nothing for the board to change in the resolution itself."

Several committee members pressed for transparency and clear governance for significant reallocations. Peg Stephenson, acting for the Comptroller’s Office, said she would verify whether other bond programs with different approval language — such as MTA bond resolutions — had required return to their boards in similar circumstances.

Hartley also described possible funding shifts from new-unit production toward programs with high demand, like down payment assistance and the Small Sites program, and noted that some developments — including Potrero (a HOPE SF project) — have started construction while others remain in predevelopment or require environmental review.

On a related topic, Adam Cray of MOHCD described plans to repurpose the city’s 1992 seismic safety loan program funds under the 2016 Prop C authorization. Cray said about $105 million remains in the affordable housing loan program and $150 million in the market-rate loan program; MOHCD is considering four delivery models (direct lending, takeout financing, pooling/securitization and whole-loan purchase) and expects to complete implementing legislation and bond issuance steps in 2018 with loans funded later that year.

"We will finalize and secure approval of the chapter 66 and 66a legislation," Cray said, adding the office hopes to issue the first general obligation bond under the program in May 2018 and fund the first loans in July 2018.

Committee members sought assurances that predevelopment loans already issued to developers would not be rescinded; Hartley said predevelopment encumbrances would remain in place and that the department was proposing to reallocate construction funding only. MOHCD and the Comptroller’s Office agreed to provide clearer budget tables and more frequent reporting to the committee.

Next steps: MOHCD will continue analysis of the proposed reallocations, provide updated budget tables (pages 27–28 of the bond report were cited as current detail), and return with more detailed recommendations and supportive documentation for the committee’s oversight role.