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HomeMy WebLinkAboutCommunity Development Block Grant Commission - Minutes - 02/10/1994CDBG COMMISSION February 10, 1994 Council Liaison: Bob McCluskey Staff Liaison; Ken Waido The February 10, 1994 CDBG Commission Hearing began at 6:35 p.m. in the CPES Conference Room, 281 North College Avenue, Fort Collins, Colorado. Commission members present included Chair Linda Coxen, Vice -Chair Dan MacArthur, Jim Elias, Harvey Nesbitt, Bill Steffes, Joe Zimlich, Tom Dougherty, Richael Michels, Bobbie Guye and Bill Bertschy. Commission members absent included Richard Ramirez, Tom Byington and Holly Sample. Staff members present included Ken Waido, Jackie Davis, Michael Ludwig and Kayla Ballard. Mr. Waido introduced Michael Ludwig, new City of Fort Collins Affordable Housing Planner. APPROVAL OF JANUARY 13 1994 MEETING MINUTES Member Steffes moved to approve the minutes with the correction that "Checker" taxi be changed to "Shamrock" taxi on Page 3, Paragraph 6. Member Nesbitt seconded the motion. The motion to approve passed 10-0. NEIGHBOR-TO-NEIGHBOR/SHIELDS STREET CORPORATION ROSETREE VILLAGE UPDATE Nancy McCambridge, Neighbor -to -Neighbor, Inc. Executive Director, stated that they are very encouraged about how this project is proceeding. She stated that the money received from City Council last year will be for land acquisition and the appraisal and environmental should be completed by the following week. She stated that they have been attempting to receive additional funding to add to the CDBG grant funding. She stated that they have received $23,800 from Karhoff monies of the Board of Realtors Association's Affordable Housing Fund. She stated that Neighbor -to -Neighbor participation in working to receive additional funding is to contribute $600,000 for the project, which is a $6.2 million project. She stated that they are searching for sources to acquire the approximate $160,000 to add to this obligation. She stated that construction financing has been committed, as well as the present financing. She stated that they are still waiting on tax credits. Tom Sibbald, Vice -President and Chief Operating Officer of Shield Street Corporation, stated this corporation is developer of multi -family housing and is one of the leading for -profit producers for affordable housing in the State. He gave a history and brief description of the property. He stated that the proposed development would consist of a total of 120 units with three different building types of 2 and 3 stories, and four different floor plans consisting of 1 bedroom/1 bath, 3 bedroom/2 bath, 2 bedroom/2 bath and 2 bedroom/l bath. He believed that there were not enough existing rehab units in the community to address the issue of low- and moderate -income housing and the only way to help resolve this problem is with new construction. He stated however, that CDBG funds cannot be used for new construction. He CDBG Commission Meeting Minutes February 10, 1994 Page 2 stated that this project is 100% low- to moderate -income housing and starts at 60% of moderate income and goes down to as low as 45 % low-income. He stated that the three bedroom units needed for larger households is a direct result of the Neighbor -to -Neighbor participation. He stated that 48 handicapped accessible and adaptable units are planned for this project. He explained that a three bedroom unit normally rents for $750 per month. However, with a 45% of median income, this project's three bedroom unit would rent at approximately $446. He added that a two bedroom unit market rate would be $575 and his market rate would be approximately $388. In addition, a one bedroom unit would market at $475 and his market rate would be $325. He stated that this discount would not stay at $325, for example, forever but is tied to a formula that moves with medium income. He stated that this has to stay rent - restricted for a minimum of 30 years. Mr. Sibbald stated that the site is under contract with land closing scheduled for March 31. He stated that it is fundamental that the Commission understand that the financing is committed. He stated that there is a $4.2 million construction loan that is committed through a loan committee and a $3.6 million first mortgage is committed, with Bank One being the lender for both. He stated that the equity investor has committed, the tax credit application has been submitted, the legal documents are in place, and the partnerships and corporations have been formed. He stated the next step is to close on the land then begin construction July 1994 and completed and full or substantial occupancy in March 1995. He stated that this project has a cost of $6,544,975. Mr. Sibbald stated that Shield Street Corporation lends their jobs a substantial amount of capital. He stated that this project is requiring a loan from his company of $1.8 million. He stated that the acquisition costs for this project is approximately $455,000 and Neighbor -to -Neighbor received CDBG grant funding of $415,000. He stated that his corporation also makes a capital contribution to the project of $70,000. He stated that they may get this money back over a 10- 12 year period of time. He stated that Chevron Oil is the equity investor for this project and has invested with his corporation in the past and are a major procurer of low income tax credits. He stated that their initial capital contribution of $475,000 is paid over a period of time, which is one of six installments. He stated that $650,000 is his profit on this project, or 10%. He stated that his margin of profit is fixed at 10% of total project cost regardless of what that cost. He stated that if he is efficient on a job and the cost goes down, his margin of profit goes down also. Member Nesbitt asked where Neighbor -to -Neighbor anticipates receiving the $165,000. Ms. McCambridge replied that they have approached the Division of Housing among other resources. CDBG Commission Meeting Minutes February 10, 1994 Page 3 PROJECT UPDATE Ms. Davis distributed and reviewed the CDBG FY 1993-1994, FY1992-1993 and FY1991-1992 Project Status Reports to the Commission (see attached). Ms. Davis stated that the C.A.R.E. project will be the project to be toured for National Community Development Week, March 28 - April 4, 1994. The Commission concurred that Thursday, March 31, at 12:00 noon, in the 281 N. College Conference Room, would be the day of the tour. Ms. Davis stated that a letter was received from TRAC that stated their project was still in the process of development (see attached). Chair Coxen asked if there was a problem in carrying monies from the FY1992-1993 to the FY1994-1995. Mr. Waido replied that it depends on what does and doesn't get spent. Chair Coxen asked if the issue of applicant performance for TRAC needs to be discussed in greater detail. Ms. Davis commented that, in all fairness to the applicant, some of the delays for this project has been due to the HUD process on conflict -of -interest and the time that it takes to go through this process. She added that the conflict -of -interest issue was resolved as of January 4, 1994 which puts TRAC only a month past the no -conflict issue. She added that they also had a conflict with the HOME funds. Chair Coxen stated that something should be presented by TRAC, either orally or in writing. Member Bertschy suggested that the Commission's time not be spent on an oral presentation. He suggested that the Chair meet with the TRAC representatives and then give a report to the Commission. Member Elias volunteered to meet with TRAC with Chair Coxen regarding their performance. Member Bertschy believed that it was getting too close,to the new funding cycle which would give them an unfair advantage to the other applicants. Member Elias stated that his feelings toward this project are largely negative. He stated that he would like to hear reasons for him to change his thinking. CDBG Commission Meeting Minutes February 10, 1994 Page 4 Mr. Waido stated that he talked with Louise Stitzel today and she indicated that TRAC would request an additional 12 lots with the new funding cycle. He stated that Ms. Stitzel also indicated that TRAC was discussing a joint partnership with the Ft. Collins Housing Authority, as stated in the letter. Mr. Waido stated that, in regards to the Ft. Collins Housing Authority, even though some properties may close September 30, and the money is essentially spent, that money cannot be counted as meeting the National Objective until the housing component part is completed. He added that CDBG is dangerously close to the carryover limit and TRAC and CARE are in that category of carryover. Member MacArthur asked what happens if too much money is carried over. Mr. Waido stated that CDBG can't carry over the limit or we would loose Federal money. Chair Coxen asked if there was anything the Commission could do to encourage the applicants to keep the Commission informed as to the status of their project. Mr. Waido stated that CDBG keeps fairly good track of these projects. He added that some things arise that are beyond an applicant's control. Ms. Davis stated that the tax credits is a good example of being beyond the applicant's control. Member Dougherty stated that it was discussed with Council the fact that a timeline gets devised then an applicant states that he wasn't aware his tax credits would be late. This is not unfortunate but is bad planning. He suggested that the Commission decide and prepare, during this cycle, to present the case as it is because this would be embarrassing to the City and would be a waste of money and, again, would fail to house people. Chair Coxen stated that this would be critical in their worksession with City Council. She stated that if this is going to be the Commission's focus in choosing the applicants that the Commission chooses to fund, because of the substantial carryovers, the embarrassment and the potential lack of future dollars. Mr. Waido stated that the final deadline to receive the tax credits on the Neighbor -to -Neighbor project is March 28. He added that the closing on the property is March 31. He added that the acquisition of the LCSI building would also be completed this year. Member Dougherty asked if the Commission could review the timeline and analyze these issues to expose it for what it is. He believes that there is a crisis. i CDBG Commission Meeting Minutes February 10, 1994 Page 5 Chair Coxen believed that was not that there was an investment in long term housing projects but rather that CDBG's dollar was the first on the table with no other dollars proposed at the time. She stated that she would not mind funding long term projects if CDBG's funding was the last in, not the first. PARTICIPATING JURISDICTION FOR HOME FUNDS Chair Coxen commented that this was a good opportunity for the CDBG Commission to oversee the HOME funds. She stated that the HOME fund's Federal regulations are very similar to CDBG regulations and HOME fund applications could be run simultaneously with CDBG fund applications. She stated that the alternative to this would be that it would betaken over by the Affordable Housing Board. Member MacArthur asked if the HOME fund application is the same as the CDBG application. Mr. Waido replied that it would be very similar in terms of types of information. He stated that the drawback for this year is that the HOME funds would not be received until May or June, which would not coincide with CDBG applications. He stated that the same application could not be used but there would be several crossovers of information. Mr. Waido distributed to the Commission a Participating Jurisdiction in the HOME Program document (see attached). He stated that the City of Fort Collins has been asked by HUD if they would like to become the participating jurisdiction for HOME funds program. He stated that, in terms of eligible activities, the HOME program is similar to CDBG. The significant differences are that HOME funds can be used for new construction costs whereas CDBG funds cannot; HOME funds can be utilized for payments (rental subsidies, mortgage subsidies, etc.) and CDBG funds cannot. He stated that HUD is suggesting $425,000 for the HOME funds with the requirement that there be a $500,000 program. He added that there is a verbal commitment from the Colorado Division of Housing that they would give the City $75,000 of their State HOME monies to bring the City's HOME program to the $500,000 minimum. He stated that, in terms of utilization of the monies, the City can utilize some of the funding, up to 10%, for administrative purposes, which will need to be done because the HOME program is a difficult program to administer. He stated that there is a requirement that 15 % of the monies be set aside for Community Housing Development Organizations (CHDO), which can get more than the 15 % but have to have at least 15 % earmarked for them. He stated that 5 % of the funds can be used for CHDO operations, which is administrative purposes within the CHDO. He stated that TRAC or CARE is an example of a CHDO in this community. He stated that the CDBG Commission has the ability to choose and approve CHDOs at the local level. He stated that applicants would have to apply for CHDO funds and criteria would have to be set, which applicants would have to prove that they were eligible. CDBG Commission Meeting Minutes February 10, 1994 Page 6 Mr. Waido stated that the HOME funds require matching from local sources and that CDBG funds and other federal programs cannot be used as a match. He stated that the amount of the match depends on what the funds would be used for and that funds allocated for new construction would be required to have a 30% match with all other activities only require a 20% match. He added that the community would need to come up with $87,000-127,000 of matching funds. He stated that the City can note, in it's program, that they would require the applicant to come up with the match. However, the City needs to recognize realistically that the types of applicants that come to CDBG for funding are not going to have the funding sources available to them and may recycle into the Housing Trust Fund. Mr. Waido continued briefly listing the items in the distributed document. He stated that the City received notification on February 2 asking the City to become a participating member. He stated that the City has 30 days to send HUD a confirmation of intent to participate. He added that once the City has passed a resolution of confirmation, HUD will designate the City for the program and will have 45 days to put together a program description identifying the estimated uses of funds. Member MacArthur asked if the HOME fund and CDBG fund cycles would be different. Mr. Waido stated that this year, they would be different. He believed that there was a movement to get the HUD programs on a concurrent basis. He stated that the HOME funds are similar to all the other programs that are in the National Affordable Housing Act as long as they are funded by Congress and reauthorized. He stated that HUD has indicated that next year's allocation would be approximately $325,000 but we would not have to make up the difference between $500,000 and $325,000. He stated that he would like the Commission to consider: 1) a motion and making a recommendation to City Council as to whether or not the Commission believes the City should become a participating jurisdiction for the HOME funds, and 2) whether or not the Commission would like to be the evaluating body for HOME proposals. Member Elias asked if the CDBG fund regulations set in stone and what would be the rationale for a homeowner needing to occupy the property for 15 years. Mr. Waido stated that if the homeowner is heavily subsidizing into public monies, you would not want them to buy the house for $60,000 then have the market go to $80,000 and then sell the house. Member Elias stated that one of the resale restrictions is that they must sell to another low income buyer, there must be some sort of language that the other low income buyer will need some sort of assistance. He asked why doesn't this allow for a sale with limited appreciation. Mr. Ludwig suggested that the concern could be windfall profits. CDBG Commission Meeting Minutes February 10, 1994 Page 7 Mr. Waido stated that there is an elaborate formula on how much equity a subsidized family can pull out of the house that they are moving into during a 15-20 year period so the public can recapture their share. Member Elias believed that although windfall could be a concern, all of the other considerations are important and that they all receive responses. Member Nesbitt asked if the Commission can limit themselves to one of the eligible programs. Mr. Waido replied yes. Member MacArthur asked what will be the Staff recommendation. Mr. Waido stated that the Staff recommendation will be that the CDBG Commission participate which is based on the Affordable Housing Policy which states that the City should be a funder for affordable housing projects. Member Bertschy moved that the CDBG Commission recommend to City Council that the City of Fort Collins participates in the HOME funds program. Member MacArthur seconded the motion. The motion carried 9-1 with Member Dougherty in the negative. Member Dougherty stated that he was not clear on the issue of a homeowner occupying the home for 20 years. Chair Coxen stated that funding can be given for all new construction for rental housing under the HOME program. Mr. Waido stated that when the HOME program came out, the first City allocations were only made to communities that qualify for at least $750,000 under the formula. He stated that the City of Fort Collins did not qualify under the initial funding allocation formula. He added that anyone in Fort Collins that wanted to get HOME funding had to apply to the State. He stated that HUD has now changed their calculations to get more decision -making down to a lower governmental level than the State and we have now qualified. He stated that agencies could still go to the State for HOME monies. Member Bertschy asked what is City Council's indication that they will provide matching funds and where would they get the money. Mr. Waido stated that the City could require the applicants to provide the matching funds. He stated that the applicants could apply the other way also. CDBG Commission Meeting Minutes February 10, 1994 Page 8 Member Nesbitt suggested that the Commission limit their participation in the HOME program to providing rental housing. Mr. Waido stated that Member Nesbitt is suggesting a detail issue that could be discussed later. He added that the City might be somewhat limited, not prohibited, as to how much owner - occupied rehab we can do because of the possible involvement in the county -wide rehab program. Member MacArthur suggested that the Commission deal with the concept now and the details later. Member MacArthur moved to address a letter to City Council encouraging them to designate the CDBG Commission as the reviewing agency for the HOME Fund Program should the application be successful. Member Steffes seconded the motion. The motion passed 10-0. REPORT ON JOINT MEETING WITH CHAIR & VICE -CHAIR OF AFFORDABLE HOUSING BOARD Chair Coxen informed that Commission that she and Vice -Chair MacArthur met with the Chair and Vice -Chair of the Affordable Housing Board. She stated that the A.H. Board stated that they would like to inform the CDBG Commission who to fund and how much to fund. She suggested that since there were so many similarities between the two boards, that they should consolidate and the CDBG Commission could recommend philosophical areas to fund. She stated that they concurred with this suggestion and that they would recommend funding for rental properties to the CDBG Commission. Member MacArthur stated that the AH Board wanted to make recommendations on specific projects, however, the CDBG Commission believed that this would be inappropriate although they could do nothing to prevent the AH Board from doing this. He stated that what was agreed was that the AH Board would make suggestions on classes of housing that they would like to see promoted. He stated that they have not specified a format for the AH Board to make these recommendations. Chair Coxen stated that the AH Board wishes to do a consensus item -by -item on the grant application process. Mr. Waido stated that some of the AH Board members are frustrated, as is some of the CDBG Commission members, that $1.2 million has been allocated to housing programs over the past three or four years and there is no product to show for it. CDBG Commission Meeting Minutes February 10, 1994 Page 9 Member Dougherty asked if, at the next meeting, there could be a presentation from Staff on how many units have been built and how much money has been allocated since the Commission was formed in 1989. Chair Coxen stated that the CDBG Commission Chair and Vice -Chair and the Affordable Housing Board Chair and Vice -Chair will be meeting 7:30 am, April 14 as a follow-up from the previous meeting. OTHER BUSINESS Chair Coxen reminded Members Zimlich, Guye, Nesbitt and Elias that their terms expire in July but they would be notified by the City Clerk's Office for re -application. The meeting adjourned at 8:12 p.m.