Board approves bond inducement for LDG Development project after TEFRA hearing; second phase inducement discussed

The Health Education Housing Facilities Board of the City of Chattanooga voted to approve a preliminary bond inducement authorizing up to $50,000,000 for the LDG Development-backed Phase 1 multifamily project after conducting a TEFRA hearing.

Joshua Hasten, who said he runs LDG Development’s Tennessee office, told the board the overall plan is a multi-phase, mixed-income community near Hamilton Place. Hasten said the team proposes a 259-unit phase and a separate 223-unit phase, and plans to use the 4% low-income housing tax credit (LIHTC) program together with tax-exempt bonds as the equity and bond-financing components. "We're coming to you guys early for this TEFRA and bond inducement hearing as we work through the beginnings of the financing," Hasten said.

The developer explained how the 4% LIHTC works with tax-exempt bonds and a bank investor to provide the equity layer for construction. Hasten described an "income averaging" approach that targets an average of about 60% area median income (AMI) across the development — meaning some households will be below and some above 60% AMI, but the overall average must meet the requirement. He also said Tennessee’s LIHTC timeline requires a minimum 30 years of affordability and that the developer and the housing authority aim for longer-term restrictions when possible.

Board members pressed for details. Chair (speaker 1) and others asked whether unit mixes (one-, two-, three-bedrooms), rent levels, and compliance mechanics were clear; Hasten responded that final unit configuration and bedroom counts were still being tailored to market study and THDA rules and that the team did not expect to draw the entire $50 million cap immediately. He said property managers will vet applicants’ income documentation to verify eligibility and to maintain compliance.

Joe Kelly, identified in the hearing as general counsel to the housing authority, said it is the authority’s intent that the units remain available under the intended affordability structure. Hasten added that the inducement for Phase 2 is being requested now to satisfy THDA/HUD application timing: locking in the conduit issuer inducement helps support conditional commitments in upcoming THDA bond rounds.

The board closed the TEFRA hearing for Phase 1, then moved and voice-voted to approve the preliminary bond inducement authorizing up to $50,000,000 for the Phase 1 project. The record reflects the board voted in favor of proceeding with the bond inducement; developers and housing authority representatives said the inducement is a procedural step to allow the project to apply to THDA and HUD, not a final bond issuance.

Hasten said the developer plans to lease up Phase 1 before beginning Phase 2; he estimated Phase 2 construction might take roughly two years from groundbreaking and said he expects to apply for bonds by the June 30 THDA application deadline. The board’s action allows the developer to proceed with THDA and HUD application steps. The TEFRA hearing and inducement do not by themselves create a city liability; presenters emphasized the city would serve as conduit issuer and that privately placed bond transactions would not encumber the city’s bond capacity.

The board heard additional technical questions about AMI impacts and the market’s role in rent-setting; Hasten cautioned that while legal rent limits may rise with AMI, market realities and tenant income constrain actual charges. The hearing closed with the board directing staff to proceed with the procedural steps required for the inducement and THDA application.