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REDWOOD CITY FAIR AND AFFORDABLE HOUSING ORDINANCE <br /> <br />Economic & Planning Systems, Inc. 36 Affordable Housing Impacts <br />As illustrated in Figure 2, debt service coverage remains above 1.0 throughout the <br />full 40-year period in the “Baseline” and “Post-1995 scenarios. Under Scenario 3, <br />the pre-1995 scenario, debt service coverage declines more quickly because the <br />project is affected by both new fee burdens and lower allowable rent growth. The <br />project reaches the minimum DSCR threshold around Year 17 and remains at <br />approximately 1.0 for several years as the model reduces other funding uses to <br />preserve debt service coverage. By approximately Year 35, however, those <br />sources of flexibility are no longer sufficient, and DSCR falls below 1.0. At that <br />point, the project can no longer fully cover required debt payments from <br />operating income and may require restructuring, additional subsidy, or other <br />intervention to remain financially viable. The project may also be able to petition <br />for an upward rent adjustment under the proposed Ordinance to maintain a fair <br />return, although the timing, outcome, and administrative requirements of that <br />process may create additional uncertainty. <br />Figure 2. Debt Service Coverage by Scenario <br /> <br />Figure 2 should be read as a cumulative measure of impact after the model <br />applies the project’s operating waterfall. In other words, the figures do not show <br />the immediate effect of new fees and slower rent growth before other cash-flow <br />adjustments are made; it shows the resulting effect on debt service coverage after <br />the model has first applied available operating flexibility. The flat portion of <br />Scenario 3 at a DSCR of 1.0 reflects this modeled adjustment: the project <br />maintains the minimum debt service threshold only by reducing other available <br />uses of cash flow. <br /> <br />0.80 <br />0.85 <br />0.90 <br />0.95 <br />1.00 <br />1.05 <br />1.10 <br />1.15 <br />1.20 <br />1.25 <br />1.30 <br />1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 <br />Scenario 1: Baseline <br />Scenario 2: Post-1995 <br />Scenario 3: Pre-1995 <br />8.A. - Page 95 of 168 <br />105