Loading...
HomeMy WebLinkAboutAffordable Housing Board - Minutes - 06/01/1995APPROVED JUL 06 1995 0, 'g95 AFFORDABLE HOUSING BOARD MEETING MINUTES June 1, 1995 The meeting of the Affordable Housing Board began at 4:00 p.m. in the Community Planning Conference Room, 281 North College Avenue, Fort Collins, Colorado. Board members present were Chairperson Mary Cosgrove, Craig Welling, Joanne Greer, Ann Sanders, Christa Sarrazin, Tom Sibbald, and Sue Wagner. Staff members present were Ken Waido, Dickson Robin, Greg Byrne, and Joe Frank. Paul Eckman was present from the City Attorney's Office. Public comment was solicited. John Meleski, of the Building Review Board, stated that that Board's position had changed with regard to the roofing material ordinance and that the Board was unanimously recommending that Council adopt the Class C roofing ordinance of the County. In response to questioning by Mr. Sibbald, Mr. Meleski made the following comments regarding the ordinance designating Class A materials: The removal of competitive materials from the marketplace forces prices up. The ordinance was originally intended for residences. Due to exemptions, the ordinance no longer addresses historic buildings or Class C asphalt roofing for residences, thereby making the original purpose moot. No further public comment was heard. Moved by Ms. Greer, seconded by Mr. Welling: To approve the minutes of May 4, 1995. Motion approved unanimously. The revised agendas were distributed. Moved by Mr. Sibbald, seconded by Ms. Sarrazin: To amend the agenda to address Agenda Item E before Agenda Item D. Mr. Sibbald stated that he wished Mr. Shepard to be present for the discussion. Motion approved unanimously. Mr. Eckman advised the Board concerning the ultimate meaning of the HUD letter regarding conflicts of interest: No member of the Board would be allowed to benefit from the HOME program, either personally, members of the family, or business associates. Ms. Cosgrove expressed the following opinions concerning the letter: In a city the size of Fort Collins with its close interactions - particularly in the housing realm - almost everyone could be eliminated from consideration; City Council made a decision to stock the Board with people who have experience in housing in order to receive cogent advice; AHB Minutes June 1, 1995 Page 2 The City Attorney has already rendered an opinion regarding conflicts of interest on the Board; The City should advise HUD of the specific circumstances regarding the Board, open a dialogue, and request further clarification; Different members of the Board are members of, or employed by, or have working relationships with nonprofit housing organizations, for -profit housing efforts, housing lenders, and the City Housing Authority. To eliminate every person so engaged would be ludicrous; The Board does not make direct decisions regarding the funds but serves in an advisory capacity. Mr. Eckman stated that he had spoken with a HUD representative regarding the term "any functions or responsibilities," and that the Board did not exercise responsibility over HOME fund activities. The HUD spokesman was not favorably persuaded. Mr. Eckman requested examples that he could use in his argument to HUD to decide conflicts on a case -by -case basis. Ms. Cosgrove offered the following: To better define "business relationship" so the Board has clear guidelines; To establish a due process to determine conflicts; Ms. Cosgrove's program uses Housing Authority office space; would that relationship rise to the level of conflict of interest for the Housing Authority; Nonprofit organizations having volunteers who sit on the Board; Private -public partnerships who have linkage to the Board in some fashion. Ms. Cosgrove offered to go to Denver to attend any meetings with HUD. Mr. Sibbald stated that representation on the Board by the financial community has always been important. He queried whether Norwest, who employs Sue Wagner, and First National, who employs Susan Nabors, could not finance a HOME -assisted activity. Ms. Cosgrove asked that the City play an active role in advising HUD that the conflict criteria negatively affects the way the City addresses affordable housing. Mr. Waido informed the Board of past conflict -type problems wherein CDBG members were affiliated with applicants, leading to resentment by applicants whose applications were turned down. He stated that the City is sensitive to the issue; is supportive of further discussion with HUD; and is cognizant of the potential repercussions should HUD hold to their decision. Mr. Eckman noted that due to the requirement of the term of membership plus one year thereafter, an appeal that was denied would serve to set the one-year calendar back. AHB Minutes • • June 1, 1995 Page 3 Ms. Cosgrove advocated an approach with HUD to note the lack of decision -making power of the Board; and, failing that, to extract from prior minutes the past recommendations of the Board and the effect of those recommendations upon any projects associated with members of the Board. Mr. Sibbald noted exceptions to conflicts under the HUD guidelines and suggested that the HUD opinion would negate participation by First National and Norwest and would thereby act to the detriment of the participating jurisdiction. Mr. Eckman noted a further exception of providing a significant cost benefit or essential degree of expertise. Ms. Cosgrove and Mr. Eckman further discussed holding a meeting with HUD in Denver and requesting tighter definition of "business tie"; to point out the differences between Fort Collins and Denver business community interactions; and that such a meeting be held as quickly as feasible. Mr. Waido advised the Board of the options presented by Planning staff for a process regarding zoning appeal fees. Mr. Waido and Mr. Frank reviewed the appeal process for an administrative change and for a P&Z decision. The Board discussed balancing the issues of faimess to the developer in not being unduly penalized by an appeal; of making due process available to the appellant; and of not allowing an appellant to delay the process with frivolous appeals. Mr. Sibbald expressed support of a concept that impose a penalty to make the City whole for its costs in the case of a frivolous appeal. Mr. Frank noted Option No. 3 as echoing that spirit. Mr. Eckman and Mr. Waido expressed a lack of confidence that an appeal would be found frivolous. Concern was expressed about the $1500 proposed fee and its affordability to lower - income appellants. Mr. Waido stated that such a fee would be conducive to true neighborhood appeals but would discourage individuals from singular attempts to obstruct the process. A question was raised whether Council would rule on appeals favorable in order not to penalize the appellant $1500. Mr. Sibbald stated that Council could provide a mechanism to waive the fee as it considers appropriate. It was noted that appeals often have a large financial impact on the developer. Mr. Sibbald and Mr. Byrne discussed the upcoming Council/P&Z meeting on June 13. Council and P&Z members will be returned a ballot for issues they would like discussed. Moved by Mr. Welling, seconded by Ms. Sanders: To recommend to City Council to assess a $1500 appeal filing fee, paid upon filing; that the fee be refunded if the appeal prevails; that a mechanism be in place to waive the fee if the appeal is denied but substantial merit found; that the appeal time not be increased from the present ten-day requirement; that Council research and be mindful that the cost of the appeal is to compensate the City for its expenditures and does not address the costs incurred by the developer of a project. Motion approved unanimously. AHB Minutes June 1, 1995 Page 4 Mr. Waido introduced Kip Shepard, representing Kaufman & Broad, developer of the Woodlands PUD, and Mr. Hart and Mr. Pollet from the State Division of Housing. Mr. Shepard gave the following background on Kaufman & Broad: single-family home builder with 40 years experience, primarily in California, but have branched out to other Western states; have built over 7500 single-family homes in the last year; in 1987, began investing in low-income housing tax credit purchases as an equity purchaser of the credits; decided about 18 months ago to develop projects as well and formed the Multihousing Group; the largest builder on the West Coast, and third or fourth largest in the nation. In response to questioning by the Board, Mr. Shepard stated: In working with research market groups and inquiring of parties in Fort Collins, Kaufman & Broad perceived a larger -than -usual need for affordable housing in Fort Collins, and found the area to be viable, strong, and supportive of the proposed project. Kaufman & Broad will contract with Insignia Management Group for management of the project. That group manages 200,000 apartment units nationwide, 50,000 affordable units, and have up to 6,000 in the Front Range area. Their Denver office will be the regional managing office. Insignia will have an on -site manager who will live in the project. Mr. Shepard presented drawings of the project. The project is for 116 total one-, two- , and three -bedroom units. The rents are restricted to 60 percent or below of median income, with further breakdowns at 45, 55, and 60 percent of median income. Rents will start at $295 per month. The project is 100 percent affordable units by HUD standards. Rents are 10 to 30 percent below -market. Market research has been done, and Kaufman & Broad is very comfortable that a comprehensive market is available for the units. Approximately 30 percent of the units will be three -bedroom, targeted for the low-income families. The project will have garden -level, second - story, and three-story apartments. It will have a pool, volleyball court, and rec building. The PUD was originally approved for 120 units. Due to neighborhood opposition and market study, the unit mix and building plans have changed but not the building footprints. A request for administrative change was submitted to change the previously planned one- and two -bedroom units to one-, two-, and three -bedroom units. Kaufman & Broad feels the project has been enhanced through the changes. In response to questions by the Board, Mr. Shepard stated some neighbors still oppose the project and have filed an appeal to the administrative changes requested. Mr. Shepard will track the costs generated through the appeal process. He is not sure what the grounds are for the appeal. Kaufman & Broad submitted for tax credits on 5/15. It is a competitive process, and they are not guaranteed success. The tax credit committee is reviewing the ` AHB Minutes • • June 1, 1995 Page 5 submittal. HOME funds have been requested from the State, with approval conditioned upon the tax credits and the City's participation with HOME funds. Loan structuring has not been worked out pending tax credit approval. They are working with a general contractor to estimate costs. Their prior expertise has been in Southern California, and they have restructured this project to fit better for this area. Mr. Shepard further stated: Kaufman & Broad has committed to State Housing that the project will continue for 50 years. Costs are higher due to the resulting higher construction standards. Davis -Bacon wages will probably be triggered due to the HOME funds. Kaufman & Broad wish to be known in the community as a builder of well-built, long-lasting, affordable housing. Mr. Shepard displayed architectural elevations for the Board. Garden -level units will meet all ADA requirements for handicapped and vision -and hearing -impaired. Four units originally planned were removed in favor of installing the rec building due to its importance to the project. Other enhancements are being studied. Mr. Hart outlined the application process for the State Division of Housing. The Woodlands project was positively received. The State Housing Board was receptive to a feasible, quality development by a quality developer in a community with high affordable housing needs. The State Division of Housing is providing Federal funds, which the developer will take as a loan. The dollar amount has not yet been allocated. The provision of funds will be assessed throughout the developer's cost analysis and application for tax credits. The State has added a condition that Fort Collins place $200,000 into the project in order for the State and City to share costs in the project. The Division of Housing is impressed with the City's Affordable Housing Trust Fund and will make that fund the owner of the $613,000 note so that the Fund will receive the loan proceeds. Mr. Hart showed different scenarios of how that payback will be effected. In response to a question by Shelley Stephens, Mr. Hart expressed hope that the funding commitments will not be impacted by the length of the appeal process. In response to questions by Ms. Cosgrove, Mr. Hart and Mr. Pollet stated that one reason for the larger -than -usual funding is the longevity of the project. Affordability is committed to and is subject to adjustments in income due to inflation. Mr. Shepard stated that rents will inflate with the area income. Mr. Shepard further stated that Kaufman & Broad is deferring 50 percent of their fee on the project and are looking at ways of repayment on the $613,000 loan. They will also be purchasing the tax credits, probably at above -market rates, resulting in more equity in the project. In response to questions by Ms. Sarrazin, Mr. Shepard stated: The developer should AHB Minutes June 1, 1995 Page 6 have an indication on tax credits within 10 to 14 days; the formal announcement is made late July. At that time they will pursue HOME funding at the State and City level. The appeals process will take time. It is hoped that construction will start around November 1, if all factors proceed positively. The developer has an extensive line of credit and does not need a construction loan to proceed. Hopefully, the first units would be available spring of 1996. No problem is seen with leasing out the apartments; the demand seems high, even with the competing units presently being built. In response to a question by Ms. Sanders concerning the difference in the State and City funds versus the 300,000 request, Mr. Shepard stated that he underwrote the loan conservatively in order to support the project fees on a financial feasibility perspective. The developer will find the best permanent loan that it can. The following information was stated by Mr. Sibbald and Mr. Shepard in their exchanges: The present mortgage is at eight percent, driving a $3.09 million mortgage. Mr. Sibbald stated the following: The $75,000 per unit cost would be more reasonable at $48,000-60,000 per unit; developer's fees of $820,000 are typical and allowable under tax credit guidelines. Part of the partnership administration fee will go to a nonprofit organization, Affordable Housing Alliance ll, based in Boulder, and not affiliated with Kaufman & Broad. They will be paid $1,000-1,500 per month for maintenance and operations. Concerning use of funds: Permanent financing costs are generated outside of Kaufman & Broad and will be paid to others. Interest during the lease -up period will be paid to the construction loan lender. Kaufman & Broad will start the project on their own if necessary but will have a construction loan lender. Marketing, leasing, and legal fees will be paid to others, although the actual costs may change. Kaufman & Broad is the recipient of the credit enhancement fees due to their offering of guarantees and commitments to compliance for the project, including 15- year operating deficit guaranty and construction guaranty. Bridge loan fees would go to Kaufman & Broad during the time of a bridge loan that they would supply. They are currently negotiating for First Interstate Bank to provide 100 percent of the bridge loan. The general contractor is not affiliated with Kaufman & Broad. The cost of construction is $39.50 per foot, with approximately $3.50 per foot of contractor profit and overhead added, which is within CHAFA guidelines. Architecture fees of $75,000 will be to Kaufman & Broad in-house. Engineering fees will go to local and regional consultants. Architectural plans had AHB Minutes • • June 1, 1995 Page 7 to be different from other existing Kaufman & Broad structures due to staying within the building footprints of the already -existing PUD. Construction interest was capitalized at 10 percent and will not be payable to Kaufman & Broad if a construction loan is present at the beginning of the project. If Kaufman & Broad begins construction with their own funds, it will be payable to them. Borrowing costs of 10 percent were put forth for presentation purposes. Kaufman & Broad will not make money on the interest or the money loaned to the project. They will lend at their own cost of money. Kaufman & Broad has purchased, at retail price from other syndicators and developers, approximately $40 million of other tax credits in the past. The estimated gross margin for this project is $1,025,000 to $1,050,000. The tax credit application is now at 660,000, reduced from 722,000 in January. This information, including the amount being paid for credits, was supplied to staff. Mr. Shepard was unsure of the rate of return for payment on tax credits at a 60-cent rate Mr. Shepard expressed his appreciation to the Board and noted that the pro forma will change as more information is gained. He expressed Kaufman & Broad's desire to build affordable housing in Fort Collins, provide any information desired, and work in partnership with the City. He observed that the City seemed more committed to affordable housing than other cities in similar situations. He further stated that nonapproval of tax credits would not necessarily negate the development. Mr. Sibbald inquired as to the availability of further tax credits if Kaufman & Broad were successful in their application. Mr. Hart stated that: the score would impact the availability; it is desirable to spread the tax credits regionally, but CHAFA is aware of the Fort Collins demand. Mr. Sibbald questioned whether a second Fort Collins project would qualify for tax credits once Kaufman & Broad were approved. Mr. Hart stated that it would depend on scores but that a subjective decision would ultimately be made for tax credit eligibility. In response to questions by Ms. Sanders, Ms. Wagner, and Mr. Sibbald, Mr. Shepard stated: The site was partially developed to the extent of a partial parking lot, utilities to the site, and curbs and gutters. Some infrastructure exists that will be utilized. The general contractor out of Denver will attempt to use subcontractors from Fort Collins. Some subcontractors have already called in response to a Coloradoan article, and Mr. Shepard has passed those names to the general contractor. If Kaufman & Broad does further development in Fort Collins, they will try to use more local involvement. Mr. Waido distributed a sheet to the Board showing an accounting of the Affordable Housing trust fund. Three allocations have been made, totalling 616, 000; four expenditures have been made, totalling 142,260; and the current balance is AHB Minutes June 1, 1995 Page 8 $473,740. A memo was not copied to Council because the purpose was to discuss a potential overpayment of rebate fees; no overpayment has been made. CARE is committing to restrict rents to justify the rebates paid. In response to questions by Mr. Sibbald, Mr. Waido stated that everyone with a financial interest in the CARE project is made aware of the rebate and the land use agreement with the City, and that they are to submit a written acknowledgment of such facts. Mr. Sibbald suggested that the tax credit investor be required in some fashion to abide by the land use agreement. Mr. Sibbald stated that CARE could at some point be removed from its general partnership role and a new general partner placed in by the tax credit investor and that the land use agreement could then be unenforceable. Mr. Robin distributed the draft version of the new Consolidated Plan. He outlined the elements reflected in the draft version. Mr. Sibbald voiced concern that acquiring existing apartments lessens the supply for students and others, thereby driving up rents for the remaining units, and thereby exacerbating the affordability problem. Mr. Waido stated that the Planning Department is working with a group within CSU to explore options of alleviating the impact of increased enrollment on existing housing. Mr. Sibbald expressed doubt that CSU would produce housing units and further stated that acquisition was not a solution to the city's housing problems. In response to questions, Mr. Sibbald stated that acquisition could be feasible in certain rehab situations but would still probably not be cost-effective for the CDBG and HOME funds used. He advocated a City policy of focusing on narrower and more specific goals and objectives rather than spreading funds through a variety of projects. Ms. Cosgrove advocated an approach of leaving goals flexible within HUD documents but to adopt more focused plans internally within the City. Mr. Waido noted that HUD rules have changed regarding the CHAS Plans submitted to HUD previously had been vague because Congress had not approved the HUD programs; therefore, applicants had to leave options open for programs. The CDBG pie historically has been sliced thin. The Consolidated Plan can be more specific to produce a specified number of units within a specified time. Mr. Robin requested that Board members review the Consolidated Plan draft, send in any suggestions, and discuss the matter for a recommendation to Council at the July meeting. Input will be received from other sectors dealing with housing. 30 days are allowed for public comment, and Council will consider the document on July 18. Regarding the Pioneer situation, Mr. Waido reviewed the gist of his memo to Council, in that staff now sees no project or property that can be developed in time to create relocation sites for Pioneer residents. Other options may be available for those residents who are willing to change housing modes. A survey is being developed by the homeowners association with the ultimate goal of devising individual action plans for families. AHB Minutes June 1, 1995 Page 9 Mr. Waido stated that Mr. Donaldson is: willing to assist in relocation; not willing to pursue development of an alternate site through the PUD process; willing to work within a joint venture for a site that is identified. The City is sending out an RFP on the Provincetown SID to have it developed as an affordable housing site. Staff continues to work with property owners, builders, and developers to seek ways to alleviate the Pioneer situation. Mr. Welling announced that he will be moving to Philadelphia. Mr. Welling moved adjournment, seconded by Ms. Greer. Upon a unanimous vote, the meeting adjourned at 6:30 p.m.