Dallas Public Facility Corporation Projects Still Going Strong Despite City’s Lack of Outreach

The public facility corporation structure — a new kind of housing project — was introduced in Dallas last year, but it seems that few have a tight grasp on how it works and what the return on investment is. 

That’s due in part to the city’s resistance to marketing Public Facility Corporation projects and confusion over legislation protecting against housing authorities that are poorly managing PFCs — an issue that doesn’t appear to be relevant to Dallas. 

Quiet Rollout of Public Facility Corporations

The Dallas Public Facility Corporation Board was quietly created in 2020 and projects began sailing through PFC board meetings and garnering mostly-unanimous Dallas City Council votes last year. 

When requesting a PFC financing structure, a developer leases land from the PFC, and the property is taken off the tax rolls for a 75-year period. In exchange, the developer provides at least half of the units at an affordable rate. 

District 12’s Cara Mendelsohn routinely votes against PFC projects, not because she’s anti-housing, but because she doesn’t like the loss of revenue to the general fund. She also has argued that the city is forfeiting that revenue in the name of much-needed affordable housing, but some districts already are saturated with apartments and it would serve the city better to promote programs that help individuals purchase homes. 

City staff is actually working on incorporating homebuyer assistance programs into the PFC structure, but haven’t talked about it publicly until last week. 

Thirteen PFCs have been approved thus far, with three currently under construction. No one has been able to give us a dollar figure on the total revenues foregone or how much the projects are expected to bring in. 

The Dallas City Council’s Housing and Homelessness Solutions Committee heard a briefing May 22 with a project overview, update on PFC-related legislation, and what’s to come.

Legislative Update

Texas Sen. Paul Bettencourt’s legislation reforming the PFC structure looks to be a done deal. 

As of Friday, House Bill 2071 was awaiting the governor’s signature. Another PFC bill filed by Bettencourt, Senate Bill 805, was listed as “pending” in the Senate Local Government Committee. Texas Gov. Greg Abbott has a veto period through June 18.

Major REFORM LEGISLATION passes! It took 3 years of collecting Public Facility Corporation (PFC) horror stories, trying to passing bills out of the Senate twice in 2021 and again in 2023, holding interim hearings, and FINALLY HB 2071 by @JaceyJetton PASSES 115 TO 20. As the…

— Team Bettencourt (@TeamBettencourt) May 25, 2023

Dallas Director of Government Affairs Carrie Rogers said she would file a memo outlining what the legislation means for Dallas, but it had not yet been posted ahead of the holiday weekend. 

Bettencourt has said the legislation is not aimed at Dallas, but rather at housing authorities that bring in PFC projects, take them off the tax rolls, and don’t agree to the affordable housing component because there’s no municipal oversight. 

Dallas Housing Finance Corporation Administrator Aaron Eaquinto said in the May 22 briefing that city staff is still analyzing any potential impacts the legislation will have on Dallas. 

“Generally they’re trying to enact some further guardrails … Other jurisdictions have used the PFC in a way different than we have,” Eaquinto said. “They have been acquiring projects, taking them off the tax rolls, and not necessarily providing a lot of rent savings. We haven’t done that. Most of the changes that are going to be enacted won’t affect us. We’ve been doing it the right way, so it’s something we can be proud of.” 

Rogers said last-minute amendments made to the bill are targeting “bad actors,” and Dallas is remaining neutral on the legislation. 

Ineffective Marketing For PFCs

District 11 Councilwoman Jaynie Schultz suggested last week that the city distribute information to better explain to the public how the projects work. 

“There’s a lot of pushback as we saw by the legislation that was initiated on this,” she said. “I think what we need, that would be extremely helpful for the public, is to do our own marketing piece that would help people understand … Why we want to do these projects is to create a Class A affordable rather than a Class C or even worse. I think that peace and understanding that it’s not just about the rents in the area would go a long way toward some of the [Not in My Backyard]ism about some of these deals.”

Schultz also pointed out that some of the controversies around PFCs extend from the fact that it’s unclear whether the return on investment is worthwhile when properties are taken off the tax rolls for decades. 

“Helping the public understand that, just like when we put in a new road, it may cost a million dollars, but it’s going to save us X or Y,” Schultz said. “That piece is very important. The other argument against these types of projects is the impact on housing values in the area. We know that’s a myth. We know that when you put in Class A properties, regardless of what the rent is being charged, it increases the value of homes in the area. We have not effectively marketed that to the public.” 

HFC versus PFC

Eaquinto gave an overview at the May 22 briefing of the Dallas HFC, which provides tax-exempt mortgage revenue bonds for the acquisition, construction, or rehabilitation of multifamily housing. 

“The HFC and the PFC are basically using tax exemptions to leverage the savings on operating costs to create more affordable housing through those savings in operating costs,” Eaquinto said. “We use low-income tax credits and essential-function bonds on the HFC side. The PFC side has a little different structure legally and we can hit the targeted workforce area, whereas the HFC, we can hit a little deeper affordability down to the 30 percent level using the various programs.” 

The HFC has 10 completed projects with 20 in progress. 

“There’s been some controversy about acquiring properties and taking them off the tax rolls,” Eaquinto said. “The ones we’re acquiring are all Class A in high-opportunity areas. They’re areas where we really want to immediately provide affordability to those residents. It’s been really successful so far and we’re going to continue to look at it and its effectiveness.”

The PFC has only taken on ground-up development, Eaquinto explained. He highlighted the 212-unit Oakhouse development will offer 50 percent affordable units at Colorado Boulevard in North Oak Cliff. 

“That’s kind of where the PFC has its advantages,” Eaquinto said. “We can build these brand new projects but in higher-quality, higher-opportunity areas, and that’s where we’ve targeted the use of this structure.” 

Developers approach the PFC with sites where a need exists or they want to develop. 

The revenue collected through the HFC and PFC allows the boards to act as an issuer through the state to use bond funds for low-cost mortgages to qualified single-family homebuyers. In about six months, 90 home loans have been issued totaling $22 million, Eaquinto said. 

Future plans for the corporations include acting as sub-recipients for Community Development Block Grant and other funds. 

“We can use larger chunks of this money, deploy it faster, and get it out to the community much more efficiently,” Eaquinto said. “That’s currently a plan and an idea, and we’ll develop that further as the funds become available.”