In the fall of 1995, when I last wrote for Company, I was in my second year of Stanford's MBA program. I wrote about being missioned there to develop my skills in nonprofit management so that I could continue the community development work I had done previously.

While I was exploring ministry options after Stanford, I received a call from Mid-Peninsula Housing Coalition, an affordable housing developer in the San Francisco Bay Area where I had interned during my Stanford years. A project manager there was taking a leave of absence; would I be willing to fill in for a year? It was a good opportunity. After talking with my provincial I took the position in July 1996. The person I replaced did not return, so my one year stretched into two.

I see my work as project manager as an Ignatian form of ministry, of working in urban areas where needs are greatest, of finding and revealing God in all things. While Mid-Peninsula is a nonsectarian organization, its primary goal of providing decent and affordable housing to the working poor of our region is in line with Gospel values and the thrust of Jesuit life today. As a Jesuit, I have helped the organization make solid connections with church groups that participate in this mission. While I don't identify myself as a Jesuit in most situations, word gets out. For many people, my role gives them a new look at the Church and the ways we do what needs to be done.

What does a project manager do? While my work involves planning, design, and interaction with local government, it really revolves around money. Until a housing project is financed, it is only a dream. Financing affordable housing is a challenge. Funds are scarce, and competition for them is stiff; as we want to charge our tenants the minimum possible, we strive to bring multiple funding sources to each project. Every project manager spends countless hours working on proformas, refining cost estimates, and making sure that there are funds to cover those costs. In my two years at Mid-Pen, I have talked to bankers, negotiated loans, evaluated bonds, and closed financing gaps. By way of example, let me give a "financing tour" of two projects¯an acquisition/rehabilitation project and a new construction development¯for which I have served as the project manager.

Shorebreeze Apartments

Situated in Mountain View, a suburb near San Jose, the Shorebreeze Apartments were built in 1980 under Section 8, a federal program that provides subsidies to landlords so that low- and moderate-income tenants pay no more than 30 percent of their income for rent. It is one of the most effective programs for providing affordable housing; unfortunately, it is one that Congress most wants to reduce.

Shorebreeze was in trouble. Its Section 8 contract was due to expire in 2000, at which point its residents (69 seniors and 51 families) would have to pay market-rate rents.

That would be devastating to most tenants. The typical senior in the development lives on Social Security, most families there are headed by blue-collar workers, and there are many single-parent families. As the average senior in the development pays less than $300 a month for a one- bedroom apartment that would otherwise go for nearly $1,000, the affordability gap is real.

Shorebreeze's owners intended to wait until the Section 8 contract expired and then turn the development into market-rate apartments with only a year of reduced rents for current tenants. But these owners had a balloon second mortgage coming due and no money to pay it. This provided Mid-Peninsula the opportunity to put together four major sources of financing for the $10.5 million cost of purchase and rehab: tax-exempt bonds, tax credits, a city loan, and debt forgiveness.

The first challenge was to qualify for the right to sell tax-exempt bonds to finance some of the $10.5 million. Because the bonds are tax-exempt, investors accept lower interest rates, and this savings is critical in refinancing an existing development like Shorebreeze. After striking a purchase agreement with the owners, we requested a bond allocation in May 1997 from the State of California (which limits the amount of tax-credit financing available) and received it. This was fortunate, as the bond limit for the entire year was surpassed that month.

Bond allocation in hand, we investigated various bond structures: fixed rate, multiple series, and private placement, to name a few. Our goal at Shorebreeze was to save as much money as possible so that we could keep extra income in a Tenant Affordability Fund to subsidize those most in need when the Section 8 runs out.

For this reason, we chose "low floaters," seven-day, tax-exempt bonds that large companies use as short-term "paper" when they shift funds between investments. The current rate we pay on these floaters is about 3.5 percent, which saves considerable interest cost. These bonds are backed by a letter of credit from Comerica Bank and remarketed every Thursday by Stone and Youngberg, our underwriters. We sold $6.7 million of these bonds in July 1997.

With those tax-exempt bonds comes the right to sell 4 percent tax credits. Most affordable housing in the United States is now financed through low-income housing tax credits. In this program, investors support affordable housing by purchasing Shorebreeze's tax credits and using them to offset their own future tax bills. The money Shorebreeze gets from selling these credits reduces the amount of debt that needs to be paid from rental income, and that allows us to keep rents low.

Shorebreeze qualified for about $300,000 in tax credits. This means that an investor who buys them can receive a credit against federal taxes of about $300,000 per year for ten years, $3 million total, plus other tax deductions.

Through formulas involving net present value or internal rate of return, investors decide how much they are willing to pay up front for such future tax credits. Our investor, Transamerica Real Estate Services, was willing to pay approximately $2.4 million over eighteen months to purchase the credits.

Adding that $6.7 million we got from selling the bonds to the $2.4 million from selling the tax credits, we still needed $1.4 million to reach Shorebreeze's purchase price of $10.5 million. Fortunately, the City of Mountain View, which wanted to preserve Shorebreeze as affordable housing, lent the project $1 million from its federal housing funds at 3 percent. The final $400,000 came from the holder of the balloon second mortgage, who agreed to give us a 15 percent discount on its value. This was the last piece of the financial puzzle, and we were able to take title to Shorebreeze in August 1997. With this financing, we will keep Shorebreeze's rents affordable for at least 55 years.

Italian Gardens

There is a banquet facility on six and a half acres in San Jose named Italian Gardens. Since the 1930s it has hosted generations of wedding receptions and fraternal organization events. One of the property's owners, Murphy Sabatino, is a benefactor of Sacred Heart Catholic Church, the local parish. In a conversation with the pastor, Fr. Mateo Sheedy, Sabatino expressed an interest in doing something with the property that would benefit local parishioners.

With rents in San Jose topping $1,500 for a two-bedroom apartment, Sheedy saw an opportunity to provide stable, affordable housing for his largely immigrant, working-class community through a collaboration with Mid-Pen. Our goal was to provide affordable housing and, at the same time, preserve one of the three banquet halls so that the tradition of Italian Gardens could be preserved.

Working with the architecture firm of Seidel/Holzman, we have designed an attractive development of 146 one-, two-, and three-bedroom apartments that will rent for about 35 percent of market rate. Included in the design is common space for residents, a swimming pool, and play space for children, among other amenities. The cost is about $21.5 million. Needless to say, this money does not come easy.

The City of San Jose loaned the project $4.4 million from its affordable housing funds, California Federal Bank agreed to underwrite a mortgage of about $2.5 million, and, through the bank, we received an additional $500,000 through the Affordable Housing Program of the Federal Home

Loan Bank of California.

The biggest part of the financing will come through tax credits¯about $13 million¯and the only way to do this is through 9 percent tax credits. Because these 9 percenters generate so much more than those 4 percent credits mentioned above, they are typically sought by new construction projects, which are generally more expensive than rehab projects.

Even with these tax credits, the project was still short. At this point Sabatino and his co-owner, John Bruzzone, made the project possible. They accepted a purchase price over $1 million below its appraised value. Their generosity will allow the vision of Italian Gardens to become a reality . . . someday.

Fr. Smolich puts his Stanford MBA to creative use on a financial package to turn the architect's plan for Italian Gardens into actual brick and wood for working-class residents of San Jose.

That day has not yet come. Getting your project to qualify for the right to sell these 9 percent tax credits is tough. Of the over 250 projects that applied for these credits in California this year, only about 60 will receive funding as dictated by a complicated formula involving lottery numbers and geographic distribution. Italian Gardens didn't make the cut.

We will spend this next year refining estimates, performing value engineering (read cost cutting) on the design, and preparing our tax-credit application for 1999. We will also look to increase our sources of financing to deal with the inevitable increases in costs.

We will also work with other affordable-housing developers to increase the amount of tax-credit financing available and to increase the number of projects funded in areas like San Jose where the need for affordable housing is so severe.

While I will continue at Mid-Peninsula, my full-time stint as a project manager has ended. I am now California province's assistant for planning and programs, with responsibilities in the areas of strategic planning, formation, and vocation development. This new ministry is an opportunity to use my gifts in a different area, and it all goes to remind me that what I have learned is not a goal in itself but a tool for the service of God.

When I entered the Society of Jesus 24 years ago, I had no idea that I would go to business school, much less work on $20 million projects. While the Gospel tells us that we cannot serve both God and money, I have learned that we can put money at the service of the Kingdom of God. I feel fortunate that the Society of Jesus has given me the opportunity to learn to do so.