HomeMy WebLinkAbout01-17-2008 Housing & Community Development Commission
AGENDA
HOUSING AND COMMUNITY DEVELOPMENT COMMISSION
LOBBY CONFERENCE ROOM, CITY HALL
THURSDAY, JANUARY 17,2008
6:30 P.M.
1. Call Meeting to Order
2. Community Land Trust Presentation by Maryann Dennis of The Housing
Fellowship
3. Discussion of FY08 Projects that have not Performed per the Unsuccessful
or Delayed Projects Policy
4. Approval of the December 20,2007 Minutes
5. Public Comment of Items Not on the Agenda
6. Review of the FY09 Allocation Process & Proforma Basics
7. Monitoring Reports
. Crisis Center - Facility Rehabilitation (Drum)
. Iowa City Free Medical Clinic - Operational & Facility Rehabilitation
(Richman)
. Community Mental Health - FY07 Facility Rehabilitation (Drum)
. Iowa City Housing Authority - FY06 & 07 Tenant Based Rent Assistance
(Shaw)
8. Adjournment
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CITY OF IOWA CITY
MEMORANDUM
Re:
January 11, 2008
Housing & Community Development Commission (HCDC)
Tracy Hightshoe, Associate Planner
January Meeting Packet
Date:
To:
From:
Community land Trust Presentation
Maryann Dennis of The Housing Fellowship will be present to provide information about the
basics of community land trusts.
Discussion of Projects that have not Performed per the Unsuccessful or Delayed
Projects Policy
The Housing Fellowship was awarded $347,772 for an affordable rental housing project during
the FY08 allocation round. The application identified Low Income Housing Tax Credits as a
funding source needed to proceed; however THF was not able to apply for L1HTC in the
application round immediately following the allocation of local HOME funds. Maryann Dennis,
the THF Director will be present to discuss the project.
Below is the applicable section of the Unsuccessful or Delayed Projects Policy:
Should a recipient be unsuccessful in obtaining the funds listed in the application in the application
round immediately following the allocation of local CDBG\HOME funds, and the project will not be
able to proceed without the aforementioned funds, all CDBG/HOME funds will be recaptured by the
City of Iowa City and recommendations be made by the HCDC for re-use of the funds or HCDC
may allow the recipient to retain the funds for the previously approved project. If the project is
unsuccessful in obtaining the required funds listed in the application after two consecutive funding
rounds following the allocation of local CDBG/HOME funds, the City of Iowa City will recapture all
CDBG/HOME funds.
Review of the FY09 Allocation Process and Proforma Basics
Staff will review the allocation cycle for the benefit of the current and new commission members.
Staff will also provide a brief overview of the proforma sheet included in the housing application
for rental housing projects. Please review the packet of information regarding housing project
finance. This information will give you the basics in understanding the spreadsheet and rental
housing budgets. Staff will also be discussing conflict of interest issues as they relate to the
allocation process.
Monitoring Reports (contact information included)
. Crisis Center - Facility Rehabilitation (Drum)
Contact Dawn Newbill at 351.2726
. Iowa City Free Medical Clinic - Operational & Facility Rehabilitation (Richman)
Contact Sandy Pickup at 337.9727
. Community Mental Health - FY07 Facility Rehabilitation (Drum)
Contact Stephen Trefz at 338.7884 x211
. Iowa City Housing Authority - FY06 & 07 Tenant Based Rent Assistance (Shaw)
Contact Steve Rackis at 887.6065
If you have any questions about these agenda items, or will be unable to attend, please contact
me at 356-5244 or by email at tracy-hightshoe@iowa-city.org.
MINUTES
HOUSING AND COMMUNITY DEVELOPMENT COMMISSION
DECEMBER 20, 2007
LOBBY CONFERENCE ROOM, CITY HALL
DRAFT
Members Present: Jerry Anthony, Charles Drum, Andy Douglas, Holly Jane Hart,
Rebecca McMurray, Michael Shaw
Members Absent: Steve Crane, Marcy DeFrance, Brian Richman,
Staff Present: Tracy Hightshoe
Others Present: Bob Burns, Charlie Eastham, Andy Johnson
RECOMMENDA TIONS TO COUNCIL (become effective only after separate
Council action):
A motion to submit a letter of support for the Trust Fund's funding request to Council
was made by Hart, and seconded by Drum. Motion carried 5:0 (Anthony abstaining).
CALL TO ORDER:
Anthony called the meeting to order at 6:38 PM.
APPROVAL OF MINUTES:
Anthony asked the Board is anyone had changes or corrections they would like made to
the November IS, 2007 minutes. No comments were made. Drum made a motion for
approval of the minutes, and Douglas seconded the motion. The motion carried 5:0
(McMurray arrived late and did not vote on this matter).
PUBLIC COMMENTS OF ITEMS NOT ON THE AGENDA:
None.
STAFF/COMMISSION COMMENTS:
Hightshoe reported that the subcommittee established to review CITY STEPS priorities is
still meeting. Previously, subcommittee members attended three public meetings to
gather input on community needs and they are currently investigating resources for non-
housing related community development projects in high need areas. She hopes to have a
meeting set up sometime early in January with various local funding sources. The
committee did not pursue CITY STEPS changes at this point as the housing market
analysis results will be presented in January. The committee preferred to review and
recommend changes, if necessary, at the same time.
Shaw asked if there were any updates on the Big 10 zoning request and what's going on
with Planning and Zoning and the City Council in relation to that project. Drum said
Planning and Zoning acted on the proposal from Big 10, and voted 4:3 to not recommend
it to the City Council, which resulted in the applicant withdrawing their re-zoning
proposal. Shaw asked for clarification on what Big 10's action meant, and was told that
Big 10 can still develop under the current zoning code, but not go as large as they would
have liked.
LOW INCOME HOUSING TAX CREDIT PRESENT AION BY BOB BURNS OF
BURNS & BURNS, LC:
Burns, a local architect and developer, spoke to the Commission about the low-income
housing tax credit program. He reviewed background information, history, and funding
scenarios for the low-income tax credit, which is used for multi-family housing. The
program, created in 1986, is the government's longest-running assisted multiple-family
housing program. It is administered under Section 42 of the Internal Revenue Code, and
credit is allocated every year to each state's housing finance agency, and in Iowa's case,
the Iowa Finance Authority (IF A). States are allocated credit based upon population, and
in 2007 Iowa received $1.97 per person, equaling approximately a $5.8 million credit. He
said the program is popular on "both sides of the aisle" politically, and that businesses,
such as his, have grown-up around the program. Burns said the most difficult aspect of
utilizing the program in Iowa City is finding a building site that the owner is willing to
sell, and which is zoned properly.
Burns went through the process of how a developer applies for the credit, the Qualified
Action Plan and scoring criteria, how to calculate the credit for the project, the
responsibilities of the general partner and investors, and various monitoring requirements
if awarded funds.
DISCUSS THE HOUSING TRUST FUND OF JOHNSON COUNTY'S (HTFJC)
REQUEST TO SUBMIT A LETTER OF SUPPORT TO THE CITY COUNCIL:
Anthony said the purpose of the request is for the Commission to write a letter to the City
Council in support of the Trust Fund's request for $53,000 (based on population). He said
the Trust Fund is one of the top two in the state in regards to fund longevity and money
raised. Anthony added that last year the Fund received funds from North Liberty,
Coralville and Johnson County.
Andy Johnson, HTFJC Director, explained that the Fund's first priority is to bring in new
funds to Johnson County and not to be competing for funds that local housing providers
utilize. He said, so far, their primary source of funding has been the State Housing Trust
Fund. He explained that many housing trust funds around the county have dedicated
sources of funding, but the state's housing trust fund and our local housing trust fund do
not. He said the Fund is working on getting a part of the state's portion of the real estate
transfer tax, which would guarantee $200,000 for Johnson County. As part of the
application process they are required to have local matching funds. He said the Fund has
brought over a million dollars of state and federal funding into Johnson County over the
past three years. The Housing Trust Fund is looking for public funds from local
governments, as well as donations from private entities. Johnson explained that while the
request is only for money this year, the Fund hopes that in the future it will be allocated
money yearly by the community.
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Shaw asked Anthony if he would exclude himself from the vote because of his ties to the
fund, and Anthony said he would. Shaw asked why the request for funding was denied
by the City last year. Johnson explained the Fund was a "new beast," there seemed to be
. confusion over the funding allocation, and at the time the housing survey was competing
for Council funding as well.
A motion to submit a letter of support for the Trust Fund's funding request to Council
was made by Hart, and seconded by Drum. Motion carried 5:0 (Anthony abstaining).
Johnson said on January 25 the Housing Trust Fund is hosting the Second Regional
Housing Summit. He added that Mullin & Lonergan Associates, the consultants hired to
complete the housing market analysis, will present their findings to the City Council on
Wednesday night, to the University community Thursday afternoon, and the public on
Friday. Heather McDonald will present the results of the statewide affordable housing
study at the Housing Summit as well.
DISCUSS HCDC COMMUNICATION AND RECOMMENDATIONS TO THE
CITY COUNCIL:
Hightshoe touched on the Commission's previous questions about reviewing time-
sensitive material, forming a consensus, and relaying information to the Planning and
Zoning Commission and/or the City Council. She reminded the Commission they the
need to follow the intent of open meeting laws in Iowa. She said a HCDC member could
present his or her personal opinion, but to represent an opinion of the Commission, the
issue must be voted upon by HCDC members. In order for the Commission to vote on an
issue, 24 hours public notice must be given, and the meeting must be held in a public
meeting place to allow the public the opportunity to attend. Email and teleconferencing
are not allowed under the intent of the open meetings law.
She said Commission members could register online to receive P & Z announcements in
order to keep abreast of issues which might be of particular interest to HCDC. Hightshoe
stated she will email how to subscribe to City email alerts. Anthony stated that members
could review the agenda and staff reports and if any item needs further discussion the
member could contact Anthony or Hightshoe to include on the next HCDC agenda.
Commission members agreed to proceed in this manner.
FY06 PROJECT UPDATES: DOWNP A YMENT ASSISTANCE AND THE
HOUSING FELLOWSHIP-AFFORDABLE RENTAL HOUSING
Hightshoe said that our HUD representative contacted her recently about the Housing
Fellowship, Affordable Rental, and the Down-Payment Assistance Program. The
Housing Fellowship, which is a FY06 HOME project, had not withdrawn any funds.
Under the HOME agreement, THF would acquire two properties. As a site has not been
found, HUD requests the project terminated. The $175,000 in HOME funds will be
reallocated in the upcoming allocation cycle. The HUD representative also requests that
the FY06 downpayment assistance program be terminated and the funds reallocated due
to the slow expenditure rate. Only $1,000 of the $30,000 award has been spent. Since
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July 2005, Hills Bank administered the program, announcement ofthe funds was sent to
all local bankers and staff met with the Housing Authority to discuss the availability of
the funds for their clients. She said the fund appeared to have too many regulations
attached to it which made the application challenging for most potential homeowners and
there were other programs the banks could utilize for first time homeowners. She also
reported that the City might see a three percent reduction in the CDBG and HOME
entitlement amounts so the funds that will be available for reallocation will more than
offset the loss.
MONITORING REPORTS
VISITING NURSE ASSOCIATION:
Drum reported that Sue Ellen Novotny, with the VNA, said the Association received
$2,500 ofCDBG grant money. They have spent $1,173, while matching nearly $7,000,
to provide home health services for seven patients in the Iowa City area with mental
health problems.
lOW A V ALLEY HABITAT FOR HUMANITY-FY07 & FY08 AFFORDABLE
HOMEOWNERSHIP
Hightshoe, reporting for Crane, said IVHH was allocated $117,000 in FY08 funds, and
used $30,000 to purchase a lot on I St., with plans to purchase two more lots. For FY07
they purchased six lots in Whispering Meadows. Hightshoe stated one lot was removed
from the original purchase due to failure to notify staff regarding the household once
selected and the necessary income certification. Habitat repaid the City for this lot and
will be purchasing another lot in the same subdivision for a total of six homes. There
will be approximately $8,000 budgeted for each home for construction or landscaping
expenses. Habitat plans to use the funds for building one stall garages. She said the
homes won't have basements due to the high water table, so garages will be built
DVIP-F ACILITY REHABILITATION
Shaw said he didn't have exact numbers on how much money went into each aspect of
the remodeling project, but carpet and screens were done and pluming work is still
pending. Additionally, a local church did a "makeover" worth approximately $40,000 in
the facility's living room and kitchen. Shaw also said Bright Spaces did a makeover for
the children's space in the basement.
ADJOURNMENT:
McMurray made a motion for adjournment, which was seconded by Shaw. It carried 6:0,
and the meeting was adjourned at 8:40 PM.
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A practical guide to real estate financing for nonprofit developers
2nd EDITION
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ROBERT R. REAM
LYNN ARLINGTON PHARE
Commissioned by
a consortium of
New York banks
Rules of Thumb for Estimating Development Soft Costs
(Note: Soft costs vary according to the size, type and location of the de-
velopment project. Most of the guidelines presented below are based
on formulas currently used by the New York City Division of Housing
Preservation and Development (HPD) and the Community Preservation
Corporation (CPe). These rules of thumb reflect current (1996) cost es-
timates which are subject to change. Whenever possible, obtain
information about actual costs for your project.
Architect and Engineering: The fee charged by the architect for pre-
paring drawings and monitoring the project during construction. Usu-
ally 4% to 10% of the construction cost, not including the contingency
allowance. Government funders frequently set a maximum allowable
percentage. The architects fee includes the cost of hiring engineers
needed for structural and major system design.
Environmental Survey: Survey of building and lot for toxic sub-
stances including asbestos. Varies from about $1,700 to $2,500 per
building or site.
Appraisal: A determination of the value of the existing property and
the value of the property after completion of construction. The ap-
praised value determines the maximum loan amount based on the loan
to value formula used by the lender. Varies with the size and complex-
ity of the project. Cost will be higher for mixed-use and scattered site
projects. Allow at least $2,500 to $5,000.
Consultant Fees: Varies with the size and complexity of the project
and the extent of consultant services to be provided. Allowable con-
sultant fees are usually limited by government funders.
Survey: Determines the boundaries and exact location of the lot and is
required in order to obtain title insurance. Fee varies, allow $1,500 per
building or lot.
Tax Exemption Program Filing Fee: A fee paid to a government
agency for processing an application for real estate tax exemption
and/or abatement. Varies with the program.
Title Insurance: Insurance that protects the owner .and lender from
possible future losses caused by defects in the title. Estimated cost is
.007 x the amount of the mortgage or the total development cost.
Mortgage Recording Tax: A State tax charged when a mortgage is re-
corded in a book of public records. Calculate as 2.75% of the mort-
gage recorded. Calculate as 2.5% of mortgages over $500,000 and 2%
of mortgages under $500,000. This fee can be waived for certain types
of nonprofit development corporations.
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Developer Legal Lawyer's fees for reviewing and preparing docu-
ments and managing the legal aspects of the closing. Varies with the
complexity of the project. Allow from $10,000 to $25,000. Develop-
ers of projects with multiple sources of government and private financ-
ing may incur higher legal fees.
Developer Fee: Varies. Usually calculated at 3% to 10% of the total
project cost or as a flat fee based on the number of units. Certain gov-
ernment programs allow developer fees of up to 15% of the total devel-
opment cost. The fee is intended to compensate the developer for
project-related administrative costs, salaries, office rent, transporta-
tion, etc. Government funders may limit or disallow this fee.
Construction Period Real Estate Taxes: Real estate taxes on the land
and the building under construction. Calculate by using the present as-
sessed value x tax rate x length of the construction period. Real estate
taxes will be higher if the project is re-assessed during construction
and is not exempt from tax increases.
Construction Period Water and Sewer: Charges for water and sewer
service during construction. Calculated by assessment x length of the
construction period or as a flat fee for limited usage during construction.
Construction Period Insurance: Cost of fire and liability insurance
during construction. Insurance is in addition to insurance carried by
the general contractor. Use actual quote from your insurer or estimate
at $5 to $8 per $1,000 of replacement value.
Permanent Lender Fee: A fee charged by the lender for underwriting
and processing the loan. Usually 1 % to 2% of the loan.
Permanent Lender Legal: Legal expenses incurred by the lender in
connection with making the loan. Paid by the developer. Estimate at
$10,000 to $30,000 depending on the size and complexity of the project.
Construction Lender Fee: A fee charged by the lender for underwrit-
ing and processing the loan. Usually I % to 2% of the loan.
Construction Lender Legal: Legal expenses incurred by the lender in
connection with making the lpan. Paid by the developer. Estimate at
$10,000 to $30,000 depending on the size and complexity of the project.
Bank Engineer: Usually a consultant selected by the lender to inspect
the construction work and approve the release of funds to the general con-
tractor. Fee includes the initial review of construction drawings ($2,500 to
$5,000) plus a charge for each inspection of the building and review of the
contractor's requisitions for payment. Allow $500 to $750 for each inspec-
tion and assume one inspection per month during construction.
Construction Loan Interest: Interest paid monthly on the portion of
the loan that has been advanced to the borrower. Usually estimated at
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50% to 60% of the construction loan x the interest rate x the length of
the construction period.
Marketing and Leasing: Costs incurred during leasing of apartments and
commercial space or the sale of residential units can vary enormously-esti-
mates should be given careful consideration. For low and moderate income
residential rental projects, HPD allows $9,000 plus $300 per unit.
Soft Cost Contingency: This is an allowance for unforeseen costs and
overruns. Allow a lump sum of$10,000 to $25,000 depending on the
size of the project, or use 5% to 10% of the soft costs.
Income and Expenses
The Schedule of Pro Forma Income and Expenses is used for income
producing property only and is frequently referred to as the pro forma.
The pro forma presents the expected results of the first year of opera-
tion of the project after it has been completed and leased. The pro
forma is simply a detailed presentation of the following formula: Gross
Rents - Vacancy Allowance - Expenses = Net Operating Income. Each
of the components of this formula is discussed below. (In the case of a
sales project, the comparable schedule would show projected gross in-
come from the sale of the units less the expenses incurred in selling the
units such as legal costs, brokerage fees, advertising and transfer taxes.
The schedule should include a breakdown of the projected per unit
sales price for each unit or type of unit. For a sales project, the schedule
is a detailed presentation of the following formula: Gross Sales Pro-
ceeds - Sales Expenses = Net Sales Proceeds. The developer's profit
equals Net Sales Proceeds less the total development cost shown in the
Sources and Uses schedule.)
Gross Rents: This item includes all sources of income including resi-
dential rents broken out by unit type, number of units; commercial
units with square footage and rent per square foot, and any other in-
come such as coin operated laundry, parking, and other charges. The
total gross rent is the projected total income from the project if all
units are occupied for the full year and all rents are collected.
Vacancy and Loss Allowance: Gross rents are reduced by this allow-
ance for vacancies and uncollected rents. The rule of thumb for determin-
ing the vacancy and loss allowance is 5% for residential and at least 10%
for commercial space. Banks may require higher vacancy and loss allow-
ances depending upon the location of a project and market conditions.
While the demand for affordable rental housing is usually very strong, de-
mand for commercial space can vary greatly and the lender may require a
vacancy allowances of 20% or more for commercial space.
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Expenses: Lists all operating expenses, management fees, and alloca-
tions to reserve funds. Remember to include the operating expenses
for the superintendent's apartment. (See Rules of Thumb for Estimat-
ing Annual Operating Expenses, below.)
Net Operating Income: This "bottom line" is referred to as the Net
Operating Income (NOI). It is the most important number on the
spreadsheet because it will be used by the lender to determine the
amount of debt that your project can support. (Determining the maxi-
mum loan amount using the NOI is discussed in Chapter 3.)
Rules of Thumb for Estimating Annual Operating Expenses
(Note: Operating costs vary greatly depending upon the age, size and
location of the building. The guidelines presented below are based on
formulas used by the New York City Division of Housing Preservation
and Development (HPD) and the Community Preservation Corporation
(CPC). For cost estimates based on the number of rooms, calculate the
room count by using two rooms for studios, three rooms for one bed-
room units, four rooms for two bedroom units and five rooms for three
bedroom units.)
Real Estate Taxes: Varies with the type of tax exemption program.
Most projects in low and moderate income areas will be eligible for
tax exemption. For projects without tax exemption benefits, annual
taxes equal the estimated assessed value of the completed project x the
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applicable tax rate. . ,
Insurance: Includes fire and liability insurance. Estimate insurance
costs at $2.50 per $1,000 of coverage for fire insurance plus $250 per
unit for liability insurance. If possible, obtain an estimate from your in-
surance agent.
Payroll: Varies with the size of the building, location and the services
to be provided. This cost is usually estimated on a case by case basis.
HPD uses the following general guidelines:
Superintendent
Porter . . . .
$25,000
$12,000
Superintendents oflarger buildings (20+ units) are usually also given
a free apartment. A porter is usually required for buildings with more
than 35 units.
Elevator Maintenance: Includes the cost of the elevator maintenance
contract and an allowance for repairs. Estimate at $4,000 per elevator.
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Exhibit 3: Pro Forma Income and Expenses
DATE
NAME OF PROJECT
SCHEDULE 2 : Pro Forma INCOME AND EXPENSES
RESIDENTIAL INCOME
Unit Type Rent/Mo. Units GrosslY r
One Bedroom $650 6 $46,800
Two Bedroom $750 6 $54,000
Three Bedroom $850 -A $40.800
TOTALS 16 $141,600
COMMERCIAL INCOME
Gross Rentable SF 1,200
Rent per SFIYear $17.50
TOTAL COMMERCIAL INCOME $21,000
GROSS ANNUAL INCOME $162,600
(less) Residential Vacancy 5.00% ($7,080)
(less) Commercial Vacancy 10.00% ( 2,100)
EFFECTIVE GROSS INCOME $153,420
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EXPENSES
Real Estate Taxes $0
Insurance 7,348
Payroll 18,000
Elevator Maintenance 4,000
Water and Sewer 7,750
Heating 10,850
Utilities 2,790
Clean ing/Exterrn inat ing/S upp lies 2,604
Repairs and Replacements 3,680
Painting 2,480
Legal and Accounting 3,200
Management Fee (6%) 9,205
Building Reserve (2% of gross) 3..ill
TOTAL EXPENSES AND RESERVES $75.159
NET OPERATING INCOME $78.261
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Water and Sewer: Based on frontage or metered water use. Use the
actual assessment or calculate at $125 per room.
Heat: Varies with the age and type of the building and the type of
fuel used. HPD estimates at $150 to $175 per room per year. Build-
ings heated with gas or the best grade of fuel oil are estimated at $175
per room.
Utilities: Apartment gas and electricity is usually individually metered
and paid by the tenant. For common area utility expenses (hall-
ways,basement, exterior), the City uses $40 per room for walk-up
buildings and $45 per room for elevator buildings.
Supplies, Cleaning and Exterminating: Charge for contract with ex-
terminating service and for cost of supplies used by superintendent
and porter. Varies. CPC and HPD use $42 per room.
Repairs and Replacements: Estimate at $230 to $390 per unit depend-
ing upon the extent of the work. Includes the cost of repairing and re-
placing appliances. Gut rehabs and new construction projects will
have lower repair and replacement expenses, at least during the early
years of operation.
Painting: Annual allowance for painting apartments and hallways. Es-
timate at $40 per room.
Legal and Accounting: Covers legal fees for leasing and evictions
and accountant's fees. CPC and HPD estimate this cost at $1,600 plus
$100 per unit.
Management Fee: Use 6% to 8% ofthe net rent (gross income less
vacancy allowance). Note that lenders will require a deduction for this
expense even if your organization intends to manage the project.
Building Reserve: Annual payments into a fund used for future major
expenses such as replacing the roof or the boiler. Usually calculated as
2% to 3% of the gross rent. Total rehabilitation and new construction
projects should use 2%.
Questions To Ask The Lender
Before taking the time to prepare and submit a loan application, contact
prospective lenders and briefly describe the project and the type and ap-
proximate amount of the loan required for your project. Lender
guidelines regarding the type and size of loans being made are subject
to change. The fact that six months ago XYZ Bank made a construction
loan at 1.5% over prime for a mixed-use project in Brooklyn does not
assure that they would make the same loan today. The overall availabil-
ity of loans, the availability of particular types of loans, and the terms
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I.,
and conditions of those loans are all subject to change. Make sure there
is a match between your project and the type of loans currently being
made by the lender.
If the lender is willing to consider your application, ask for guidelines
regarding terms and conditions such as the current rate or range of
rates, the commitment fee, bank legal fees, and bank policy regarding
equity requirements and guarantees. (You may want to request a letter
confirming the lenders interest in the project.) Don't be afraid to ask
questions, but don't expect precise answers. Remember that at this
stage, information provided about rates, fees, and other terms will be
very preliminary and subject to negotiation and change during the loan
review and underwriting process. If your loan is approved, the lender
will issue a commitment letter detailing the terms and conditions of the
loan. Until the commitment letter has been signed by both parties,
terms and conditions can be negotiated and changed.
Listed below are some questions you may want to ask the lender prior
to submitting an application. (Many of these items are discussed in
Chapter 3.)
. For the type ofloan requested, what is the current interest rate or range
of rates? For variable rate loans, how is the rate calculated? (Construc- . ./
tion loans are usually keyed to the prime interest rate, variable rate
mortgages are usually keyed to treasury bill rates.)
Interest Rate
Loan-to-Value and Debt Service Coverage
Ask about the lender's guidelines for these underwriting criteria. (For-
mulas for calculating loan-to-value and debt service coverage are
presented in Chapter 3.)
Fees
For the type ofloan requested, what is the range of percentage points
charged as a commitment fee? (Although commitment fees usually
vary with the type of loan and the perceived level of risk, the lender can
usually provide an estimate that is within a fairly narrow range.) Does
the lender normally charge a lower commitment fee to non-profit bor-
rowers. Could payment of the commitment fee be deferred until the
loan closing? If not; what is the likely schedule for payment of the fee.
67
(This is an important consideration in planning for the pre-closing ex-
penses you will incur.)
If the loan is approved but does not close, will your organization still
be liable for payment of the commitment fee and other bank expenses?
Other Fees and Expenses
For the type ofloan requested, what is a reasonable estimate of bank le-
gal fees? Would the legal work be done in-house or by outside
counsel? (Fees for outside counsel are usually higher.) Ask about the
timing of payments for fees and expenses such as the cost of the ap-
praisal, surveys, and environmental reports. (The loan officer can be a
useful source of information about expenses you will incur and pay
prior to the closing.)
Equity Requirements and Guarantees
What is the lender's policy regarding corporate guarantees by nonprofit
organizations? What are the lender's guidelines regarding equity re-
quirements by nonprofits? Would grants and loans be accepted as
equity contributions? What types of expenses previously incurred in
connection with the project would be acceptable as equity? Will the
lender require that the equity be spent prior to release of funds by the
lender? ,oJ.
Nature and Timing of the Loan Review Process
What are the steps in the loan review process and how much time is re-
quired for each step? What types of information or documentation will
be required at each step?
Loan Application Checklist
A suggested list of documents and additional information that should
be submitted with the loan proposal is presented below. Some of these
items supplement information about your organization, others are pro-
ject specific. Prior to submitting your application, contact the loan
officer and list for her the items you plan to include in the application.
Ask about any additional items you should include. By submitting a
complete package to the lender now, you will avoid future delays and
frustration.
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City of Iowa City
MEMORANDUM
TO:
FROM:
DATE:
Staff of City Boards and Commissions
Marian K. Karr, City Clerk
January 9, 2008
(E-mail attachment; hard copy to follow)
The City Council has scheduled a budget work session addressing the FY08 budget
requests for Wednesday, January 23, starting at 6:30 p.m. If your Board or
Commission would like to address the Council during this work session, please call
me at 356-5041 (or email works too) to schedule a time as soon as possible.
Boards and Commissions are being scheduled 15 minutes apart, and suggest each
appearance include a 10 minute presentation followed by five minutes for questions.
It is intended this time be used to discuss changes to the proposed budget.
I will provide a schedule to you and include in the Council information packet of
January 17.
S:budget presentations-Boards & Commissions