(1) (a) On or before April 1, 2023, the authority shall publish the first solicitation for proposals as part of an initial pilot program and must complete the review and selection process on or before July 1, 2023, in accordance with the requirements set forth in this section. The authority may continue to solicit proposals as part of the initial pilot program; except that the authority shall select proposed affordable rental housing projects that will develop an aggregate of not more than three thousand five hundred units. Affordable rental housing projects selected in the initial pilot program must have geographic, income, and project-size diversity and be by a variety of developer entities. When the authority has determined it has enough information from the pilot program set forth in this subsection (1)(a), the authority shall prepare a report and publicly present to the general assembly a comprehensive evaluation of the authority's impact on middle- income individuals and families and on housing of all types in the state. The report must include recommendations on whether the pilot program should end and recommendations for legislative changes to improve or modify the program as implemented by the authority. (b) Subject to the provisions of subsection (1)(a) of this section, the authority shall select affordable rental housing projects based on proposals from local governments, housing authorities, nonprofit organizations specializing in housing, and experienced real estate professionals with proven track records in developing and operating projects of similar scale and complexity using a fair and transparent process that creates competition and limits private sector development fees to an amount that is less than the private sector development fees that are customarily received as of June 3, 2022, for projects receiving a federal low-income housing tax credit provided by section 42 of the "Internal Revenue Code of 1986", referred to in this section as the "LIHTC". The authority's overall portfolio of affordable rental housing projects must maintain that eighty percent are new build construction projects. (c) The authority shall establish a process for soliciting and evaluating proposals and selecting projects that includes but is not limited to prioritization criteria that gives preference to proposed affordable rental housing projects that promote one or more of the following goals and objectives: (I) Increase the supply of affordable workforce housing in urban, rural, and rural resort communities across the state, as each term is classified pursuant to subsection (1)(d) of this section, that responds to each community's demonstrated need for middle-income projects in which at least sixty percent of units within a particular development are available to rent or are actively rented to middle-income individuals and families as defined in section 29-4-1103 (7); (II) Create opportunities to build intergenerational wealth for families; (III) Meaningfully contribute to the alleviation of housing pressures the local workforce faces; (IV) Provide for the long-term affordability of rental units; (V) Have minimal negative impact on existing or planned affordable housing projects in the state, which impacts shall be evaluated by the authority in consultation with other housing authorities, nonprofits, local governments, or any other applicable entity; (VI) Target a diverse range of income levels within the income restricted housing component for middle-income individuals and families as set forth in section 29-4-1103 (7) and proposes at least thirty percent of the rental units for individuals and families with annual income of the household at eighty percent of the area median income of households of that size in the county in which the housing is located or demonstrably targets the lowest possible area median income for middle-income individuals and families as set forth in section 29-4-1103 (7) given the proposed scope of the development; and (VII) Promote mixed-income development where a percentage of units, proportional to the local demonstrated housing needs within a particular development, have restricted availability to households at the income levels for middle-income individuals and families as set forth in section 29-4-1103 (7). The percentage of restricted units and affordability levels must comply with any local laws promoting the development of new affordable housing units pursuant to section 29-20-104 (1). (d) On or before September 1, 2022, the division of housing, created in section 24-32- 704 (1), shall classify each county in the state as "urban", "rural", or "rural resort" based upon the definitions of the terms as specified in the final report of the Colorado strategic housing working group, dated July 6, 2021. The division of housing shall regularly update and publish modifications of this initial classification. (2) (a) In addition to any other criteria established by the authority, a proposal must: (I) Include a comprehensive plan of finance to finance the affordable rental housing project from the proceeds of bonds issued by the authority and sold by approved underwriters identified in the proposal and other sources, with all bonds issued by the authority being payable solely from revenue generated by and secured solely by the affordable rental housing project using initial restricted rents and with no upward trending of rents, except as otherwise allowed under this part 11, with no financial obligation or other liability of the state; (II) Show how the development aligns with the identified needs of a community where the proposed affordable rental housing project will be located, as defined in the community's housing needs assessment, where available; (III) Include an estimate of the rent savings to income-restricted tenants, an estimate of the tax savings resulting from the affordable rental housing project's exemption from state and local taxes, a comparison of the estimated rent savings and estimated tax savings, and a description of how the tax savings will be used to produce rent savings or other benefits to income-restricted tenants; (IV) Limit private sector development fees to an amount less than the private sector development fees that are customary for LIHTC projects as of June 3, 2022; (V) Comply with all terms of this part 11; and (VI) Include an explicit disclaimer that the state has no liability for any obligations of the authority, that the bonds, contractual, and other obligations and liabilities of the authority are special limited obligations of the authority and are not bonds, obligations, or liabilities of the state, and that the state shall have no obligation or liability with respect to any of the bonds, contractual, or other obligations or liabilities of the authority. (b) In addition to any other criteria established by the authority, a proposal may provide that a portion of the bonds issued by the authority to finance the affordable rental housing project be sold to investors identified in the proposal. (c) An applicant may, at any time, request that the board grant the applicant an exception to the upper limits of the area median income levels for middle-income individuals and families as set forth in section 29-4-1103 (7) based upon demonstrated unique economic and housing cost attributes in the local community in which the affordable rental housing project is proposed to be located. (d) If required by a local community in which a proposed affordable rental housing project will be located, an applicant may request that the board grant the applicant an ability to provide a limited number of units in the affordable rental housing project below eighty percent of area median income, only as is required by local ordinance, zoning incentives, or similar rules and regulations in the local community in which the proposed affordable rental housing project will be located. A proposed affordable rental housing project that receives a waiver by the board pursuant to this subsection (2)(d) must still have a primary purpose of providing rental housing for middle-income individuals and families. (3) To incentivize quality affordable rental housing projects that will operate consistently and efficiently, in evaluating proposals the authority shall favor proposals that include an agreement from the developer and the operator identified in the proposal to continue as developer and operator of the affordable rental housing project for a period of at least ten years, subject to the authority's right to remove them. (4) (a) The authority shall establish a process to provide notification to local governmental entities where a proposed affordable rental housing project will be located prior to selection of the project. (b) (I) The authority must provide and deliver written notice of a proposed affordable rental housing project to the county and municipality where the project is proposed to be located within fourteen days of the authority receiving a project proposal. The county or municipality may object to a project in accordance with this subsection (4)(b) at any time within ninety days after receipt of the notice. The authority shall not select a proposed affordable rental housing project if the county or municipality in which the project is to be located objects to the project in accordance with this subsection (4)(b). (II) Each county and municipality in which a proposed affordable rental housing project will be located must solicit feedback from other local governmental jurisdictions in the area in which the project will be located to determine the impact of the proposed affordable rental housing project on the other local governmental jurisdictions. (III) During the ninety day notice period pursuant to subsection (4)(b)(I) of this section, the authority shall use best efforts to work in cooperation with overlapping local governmental entities for any proposed affordable rental housing project. If after negotiations, a county or a municipality, or both, within which boundaries a proposed affordable rental housing project will be located and that has opted into the pilot program set forth in subsection (1)(a) of this section, provides written notice to the authority that the proposed affordable rental housing project is not feasible as proposed, with the reasons why the project is not feasible, the authority shall not select the proposed affordable rental housing project or shall request that the proposal be resubmitted for reconsideration by the authority and the applicable county or municipality, or both, and shall take into account feedback received from the local governmental entities. Nothing in this subsection (4)(b)(III) precludes a local government from objecting to a project proposal that is resubmitted to the authority. If the proposal is approved by the county or municipality, or both as applicable, or if no feedback is received by the authority from the county or municipality, or both as applicable, then the authority may select the affordable rental housing project. (IV) If a county or municipality has not approved or objected to the project within seventy-five days of the date the authority delivers its first notice regarding the proposed project in accordance with subsection (4)(b)(I) of this section, the authority must deliver a second notice reminding the county or municipality that any objections to the proposed project are due within ninety days after receipt of the first notice sent pursuant to subsection (4)(b)(I) of this section. (V) A county or municipality may approve a proposed affordable rental housing project at any time, which approval ends the ninety day objection period set forth in this subsection (4)(b). The authority may offer incentives to obtain such approval. (5) When an affordable rental housing project is selected, the authority shall enter into a contract with the person or group that submits the proposal based on the terms set forth in the proposal and any additional terms deemed appropriate by the authority and in accordance with the provisions set forth in this part 11. The authority may establish additional restrictions on developer fees, including caps on operating fees and other markups, which shall be set forth in the contract. (6) All interests of the person or group whose proposal for an affordable rental housing project is selected will be transferred to the authority or transferred as otherwise provided in a public-private partnership; except that, and subject to approval by the authority, a housing authority whose proposal is selected may retain a portion of interest in the affordable rental housing project. Notwithstanding the provisions of this subsection (6), the person or group of a selected affordable rental housing project shall not retain or otherwise be entitled to any interest in the affordable rental housing project or any right to payments from the revenues from the affordable rental housing project transferred to the authority or otherwise transferred in accordance with a public-private partnership, except for the person's or group's right to compensation and to reimbursement for expenses, which shall be clearly detailed in the contract between the authority and the person or group set forth in subsection (5) of this section. A public-private partnership may also provide for a person's or group's right to compensation and to reimbursement for expenses in connection with an affordable rental housing project. (7) An affordable rental housing project and revenue from an affordable rental housing project proposed by a person or group shall not be pledged or otherwise used for the payment of bonds or other obligations of projects proposed by any other person or group without the consent of both the person or group and other person or group. (8) The affordable rental housing projects, assets of the authority, and the appreciation in value and proceeds of any sale of an affordable rental housing project must be used to provide affordable middle-income workforce housing and shall not be diverted to any other use or for any other purpose while the authority is in existence. (9) The authority shall contract with an outside group to evaluate the success of its affordable rental housing projects. (10) (a) Income-restricted rental units in affordable rental housing projects must be affordable middle-income workforce housing, and rents for units of affordable rental housing projects must remain as stable as is financially feasible. To determine rent, the board shall consider information from market studies prepared in connection with the development of the affordable rental housing project and other available information adjusted as the board deems appropriate for the period since the information was compiled and any additional facts and circumstances applicable to the affordable rental housing project and the area in which it is located, with a goal of not exceeding thirty percent of the individual's or family's income. Rent set by the authority for income-restricted units must be at least ten percent below market rental rates and shall not exceed maximum rents for households of a given size and income level as established by the United States department of housing and urban development or published by the Colorado division of housing or other statewide authority on housing. (b) Rental units in an affordable rental housing project shall not be rented on a short- term basis. (11) The authority shall create priorities for selecting tenants for units in an affordable rental housing project that favor individuals who work, or families where at least one member of the family works, in the area in which the affordable rental housing project is located, in addition to other priorities that the board determines are appropriate based on the facts and circumstances applicable to the affordable rental housing project and the area in which it is located. (12) The authority shall not utilize state funding where the money originates from the federal "American Rescue Plan Act of 2021", Pub.L. 117-2, as the act may be subsequently amended, for any loan, grant, or other program established by Senate Bills 22-146, 22-159, and 22-160, enacted in 2022, and House Bills 22-1282 and 22-1304, enacted in 2022. (13) The authority shall not use any funding available to it to acquire existing properties supported with the federal low-income housing tax credit provided by section 42 of the internal revenue code, the Colorado state affordable housing tax credit authorized under part 21 of article 22 of title 39, or the United States department of agriculture 515 rural rental housing loan program subsidized properties. (14) The authority shall not issue exempt facility bonds, as defined in section 142(a) of the internal revenue code of 1986, as amended, use private activity bonds volume cap allocation in the issuance of any bonds, or receive a direct allocation, statewide balance award or assignment of allocation of state ceiling under the Colorado private activity bond ceiling allocation act set forth in part 17 of article 32 of title 24, and the authority shall not use federal LIHTC or the Colorado state affordable housing tax credit authorized under part 21 of article 22 of title 39 for its affordable rental housing projects.
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