Item 4 - Low-Income Prop Tx Ex. - Laserfiche WebLink

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Schedule 6 Property taxes are an operational expense to any income property. Excluding property taxes, the operational expenses for an affordable housing property are actually somewhat higher than for a market-rate property. In effect, it is the Property Tax Exemption that allows affordable housing to offer rents that are significantly below market rates. (See the attached Operating Budget from the State of Oregon Apple Orchard CFC Application.) The Operating Budget shows a Net Annual Income of $179,539 for year one. Annual expense and debt service payments total $176,924. This leaves a Net Cash Flow per year of $2,615. This assumes 31%, 41% and 51% rents ranging from $226 per month to $505 per month. If property tax payments of $73,635 were added to the Annual Operating Expense Budget, without increasing rents, the result would be a negative Annual Cash Flow of $71,020. In order to have a financially viable project, rents would have to be raised, on average, by $153 per unit per month to cover the property tax obligation. This would effectively make Apple Orchard a market-rate apartment project. The 20 year Net Present Value calculation of the property tax exemption (provided in the application) shows the total value of the exemption at $1,125,285. If one were to perform a like calculation on the value of the additional rents that would be charged over 20 years without the exemption, the benefit of the exemption to Apple Orchard residents is clearly in excess of property tax exemption offered. VVhen likely market factors over the next 20 years are added into the equation, it is likely that Apple Orchard rents would have to rise to a level higher than market-rate. The required rents do reflect the full value of the Property Tax Exemption.