Social Housing Task Force

SOCIAL HOUSING TASK MEMBERS City Councilor Kate Sykes, Co-Chair FORCE City Councilor Sarah Michniewicz Paul Styslinger Wednesday, November 19, 2025 at 6:00 Bill Stauffer Jason Spector PM Cat Buxton Via Zoom Wendy Cherubini Cullen Ryan Matthew Peters Kristin Leffler Jon Fetherston, Co-Chair Jonathan Culley Tim Wells REMOTE ACCESS INFORMATION: The Social Housing Task Force will conduct this meeting remotely via Zoom pursuant to the Remote Meeting Policy adopted by the Social Housing Task Force. Allow your computer to install the free Zoom app to get the best meeting experience. If you are not able to attend live either in person or via Zoom, a recording will be available in the Agenda Center following the meeting. For public comment via Zoom, you will need to use the "raise your hand" feature. To raise your hand via the telephone, please hit *9. You will be unmuted by the host when it is time for public comment. https://portlandmaine-gov.zoom.us/j/88236119598?pwd=eL6T8mjDTHIqgVx1yuURgXm734aFc2.1 Passcode:185491 Phone one-tap: +13017158592,,88236119598#,,,,*185491# US (Washington DC) +13052241968,,88236119598#,,,,*185491# US Join via audio: +1 301 715 8592 US (Washington DC) +1 305 224 1968 US +1 309 205 3325 US +1 312 626 6799 US (Chicago) +1 646 931 3860 US +1 929 205 6099 US (New York) +1 253 205 0468 US +1 253 215 8782 US (Tacoma) +1 346 248 7799 US (Houston) +1 360 209 5623 US +1 386 347 5053 US +1 507 473 4847 US +1 564 217 2000 US +1 669 444 9171 US +1 669 900 6833 US (San Jose) +1 689 278 1000 US +1 719 359 4580 US Webinar ID: 882 3611 9598 Passcode: 185491 International numbers available: https://portlandmaine-gov.zoom.us/u/ksWOEiPw9 1 Page 1 PUBLIC COMMENT INFORMATION: To submit written public comment on an agenda item, email socialhousingtaskforce@portlandmaine.gov. Submissions must be received by 12:00 pm the day before the Social Housing Task Force meeting to guarantee their inclusion in the agenda packet. All submissions must include the commenter's name and legal address. To help ensure your comment is submitted for the correct item, please include the name of the agenda item (see below). AGENDA: Welcome and Introductions - Greg Watson, Housing and Economic Development 1. Department Director City of Portland Municipal Bond Program - Presented by Brendan O'Connell, 2. Finance Director i. City of Portland Power Point State Tax Exempt Bond Program - Presented by Adam Krea, Sr. Director Finance 3. and Lending, MaineHousing i. Maine Housing Bonds Overview 4. Task Force Members Discussion, Questions and Requests for Follow-up Information 2 Page 2  City of Portland, Maine Bonds & Debt Discussion PRESENTATION TO THE SOCIAL HOUSING TASK FORCE NOVEMBER 19, 2025 Page 3 Brendan T. O’Connell, CPA,MSA  Agenda ● Review the two different types of City of Portland bonds outstanding a. General Obligation Bonds b. Revenue Bonds ● Review City’s $423M+ of debt outstanding by type a. General Obligation Bonds, Other Debt, Revenue Bonds b. Credit ratings discussion ● City Budget & Fiscal Impacts of General Obligation Bond Issuance ● Questions & Answers Page 4 2 General Obligation Bond (GO) A general obligation bond (GO bond) is a type of municipal bond primarily relying on an issuing government's full faith and credit including taxation ability for its backing, rather than revenue from a specific project. With no assets held as collateral, general obligation bonds reflect confidence in a municipality’s capacity to meet its financial obligations via tax revenue. GO bonds provide local governments with the ability to fund public projects like facilities, equipment, streets, sidewalks, vehicles and more without being tied to specific project revenue. Maturities typically match the underlying asset useful lives (5-30 years). Page 5 3 GO Bonds - Advantages for Investors High Security and Low Risk: GO bonds are considered low-risk investments because they are backed by the issuer's unconditional pledge of its full taxing authority (property, sales, or income taxes) to repay bondholders. This broad revenue base provides a high level of security, making default rare. Stable and Fixed Income: These bonds offer a predictable and stable stream of regular interest payments (coupons) and the return of principal at maturity, which appeals to conservative investors and retirees. Tax Advantages: Interest earned on most municipal bonds, including GO bonds, is typically exempt from federal income tax and may also be exempt from state and local taxes if the investor resides within the state of issuance. Capital Preservation and Diversification: GO bonds can help preserve capital due to their relative safety compared to other investments like stocks and are a good tool for diversifying an portfolio. Marketability: They are generally marketable and are easily traded in the secondary market, offering a degree of liquidity and flexibility. GO bonds are a great tool in municipal finance and an attractive, Page 6 4 stable investment option for those seeking reliable, tax-advantaged income. GO Bonds - Advantages for Issuers Flexible Funding for Public Projects: GO bonds allow municipalities to finance a wide range of capital projects that may not generate their own revenue stream. Lower Borrowing Costs: Due to their high credit quality and low risk profile (backed by the issuer's "full faith and credit" and taxing power), GO bonds typically receive high credit ratings than other types of bonds, which translates to lower interest rates for the issuer towns and cities. Cost Matching: Costs of a project are spread over the full period of benefit (i.e. the useful life of the asset being funded) rather than being fully borne within a single year. Utilization of General Funds for Operations: Using bond financing for major capital projects frees up the annual operating budget to be allocated toward ongoing costs and essential services like public safety and personnel salaries. Voter Approval and Community Support: The requirement for voter approval on many GO bond issues ensures community buy-in and transparency for projects being funded, increasing public confidence. Page 7 Revenue Bond A revenue bond is a type of municipal bond paid for by the revenue generated from a specific project or entity, such as improvements at Portland International Jetport, rather than from the full faith and credit of the issuer. The money from these projects is used to pay the principal and interest to bondholders, making them different from general obligation (GO) bonds that are backed by a government's taxing power. They are often tax-exempt and mature in 20 to 30 years. Page 8 6 Revenue Bonds - Advantages Tax Exemption: Interest income from revenue bonds is typically exempt from federal, state, and local taxes, making them attractive for investors with higher tax brackets. Higher Yields: Revenue bonds often offer higher yields compared to general obligation bonds, as they are backed by specific projects that generate income. Predictable Income: The income from revenue bonds is generally predictable and low in volatility, providing a stable investment option. Support for Infrastructure: Revenue bonds are used to finance public infrastructure projects, such as toll roads, airports, and utilities and other types of public infrastructure. Lower Risk: While revenue bonds carry a higher risk of default compared to general obligation bonds, they are considered a safer investment option for those seeking to invest in infrastructure. Page 9  City of Portland ● $292,910,000 of general obligation bonds ● $48,225,195 of notes payable from direct Outstanding borrowings ● $82,430,000 of Jetport revenue bonds Debt $423,565,194 of total outstanding debt as of 6/30/25 (as of 6/30/25) Page 10 8 City of Portland General Obligation Bond Portfolio as of 6/30/25 - $292.9M Page 11 9 City of Portland Other Direct Borrowings as of 6/30/25 - $48.2M Page 12 10 City of Portland Revenue Bond Portfolio as of 6/30/25 - $82.4M Page 13 11 Municipal credit ratings are critical because they provide investors with an assessment of the creditworthiness and risk associated with municipal bonds. They help investors determine the likelihood of the bond issuer City of Portland fulfilling its financial obligations, which is crucial for their investment decisions. Higher-rated bonds typically offer lower interest rates, lowering costs for municipal issuers, while lower-rated Credit bonds may carry higher risks but offer higher yields. Ratings ● $292,910,000 of general obligation bonds (Rated AAA by both S&P and Moodys) ● $82,430,000 of Jetport revenue bonds (Rated A3 by Moodys) 12 Page 14 Sample Secondary Market High Yield Tables (as of 11/18) by Bond Type and Rating Page 15 13  5 Year Tax Levy & Operating Budget History - Council has approved tax levy increases of approximately $53M since FY22 (a 28% increase) over the period. - Council has approved budget increases of approximately $135M (a 25.5% increase) over - the period. - Figures exclude capital and grant budgets which are separately approved by Council. Page 16 14 ● The current overall City mill rate is $11.98. This rises by $0.01 for each $202,970 of increase to the tax levy. ● Changes to the tax levy result from City Budget increased expenditures, loss of revenues, or a combination of both. & Fiscal Impacts of Bond Issuance Page 17 15  Financing with Bonds and Fiscal Impact (Example) • Debt service expense created by City Council municipal borrowing is typically repaid over 10 or 20 years and has a lower initial impact to the property tax levy and sewer/stormwater rates than if projects were paid in cash. The impact in total is larger over the full 10 or 20 year period of debt service repayment due to interest cost but better synchronizes the costs and benefits of infrastructure over time. • “Borrowing allows a municipality to enjoy the immediate benefit from the capital improvement, which is not always possible when relying on current revenues. Current revenues (taxes and user fees) are usually not sufficient to fund large expenditures on a “pay-as-you-go basis” (PAYGO).....Borrowing allows municipalities to avoid large year-to-year fluctuations in tax rates.” -UN Habitat (Guide to Municipal Finance Page 18 ) 16 Page 19 17 Capital Improvement Plan: Financing Example City needs to purchase 10 fire trucks (estimated cost = $20M) Paying in full via operating budget (aka PAYGO) has an immediate $20M, one year impact to the operating budget. The fiscal impact is an estimated 99 cent increase to the tax rate in Year 1 only. This represents an 18.7% increase in City municipal portion of property tax levy in a single year from $5.26 to $6.25. Financing the trucks with a 10 year bond reduces volatility in City operating budget, with only $2.8M of Year 1 debt service costs. This fiscal impact of a 10 year financed purchase is approximately 14 cents, a 2.6% increase in the municipal property tax levy. Costs under this option are higher in total ($24.4M vs $20M) but the impact is spread over the useful life of the asset. Page 20 18  Q&A Questions and Answers Date Page 21 19  An Overview of Bond Types Issued by MaineHousing Adam Krea, Senior Director of Finance and Lending November 19, 2025 Page 22  Bonds Issued for Housing MaineHousing issues the following types of Bonds: Mortgage Revenue Bonds = more than 90% of our bonds Single family bonds for First-Time Homebuyers Multifamily bonds for affordable rental housing Only type of bond that can generate the 4% automatic Low Income Housing Tax Credit Subject to private activity bond cap (a limited resource allocated by the IRS) 501c3 bonds = <10% of what MaineHousing issues for bonds For non-profit owners if more flexibility is needed than allowed under Mortgage Revenue Bonds Not subject to private activity bond cap Governmental Bonds for Housing = part of a very few bond issues When lending to a Public Housing Authority for a wholly-owned property (not owned by the non-profit development corp.) No limit on issuance 17 Page 23  Pooled Issues MaineHousing issues revenue bonds on a pooled loan basis, creating our bank structure More than 200 MaineHousing pooled bond issues since 1972 Pooled financings are generally part of a program with defined parameters, has a credit rating based on the financial strength of the pool, and allows the issuer a certain level of financial flexibility depending upon the structure of the pool Bonds are not backed by a single asset, but rather by the strength of the entire pool and the defined parameters that cannot be changed without bondholder consent 10 Page 24  Bonds Issued for Housing Advantages of a bank structure All single family and multifamily loans are in one pool All bonds are issued on parity Insured single family loans boosts overall portfolio of uninsured multifamily loans Net Assets/Fund Balance cover haircuts of multifamily and Supportive Housing loans, which are riskier (rating agencies assume a greater number of loans are non-performing) Individual projects are not rated on their own merits Entirety of MaineHousing “the bank” is rated based on the credit and safety of combined assets 20 Page 25 Disclaimer This presentation is for discussion purposes only and is not meant to be an exhaustive overview of all aspects of MaineHousing-issued municipal bonds and the financial markets. MaineHousing is not providing financial or legal advice. Federal, state, and municipal laws; market conditions; and financial forecasts are subject to change making information potentially outdated after the date of this presentation. 21 Page 26