HomeMy WebLinkAbout1-17-2013 Housing and Community Development CommissionAGENDA
HOUSING AND COMMUNITY DEVELOPMENT COMMISSION
IOWA CITY PUBLIC LIBRARY, MEETING ROOM A
123 S. LINN STREET
THURSDAY, JANUARY 17, 2013
6:30 P.M.
1. Call Meeting to Order
2. Public Comment of Items Not on the Agenda
3. Staff/Commission Comment
4. Review of the FY14 Allocation Process and Proforma
5. Monitoring Reports
• MECCA — Security Improvements (Dragoo)
• Habitat for Humanity —Acquisition and Rehab. (Dragoo)
• Neighborhood Centers of Johnson County — Aid to Agencies
(Zimmermann Smith)
• FY12 United Action for Youth — Transitional Housing (Clamon)
• FY12 Crisis Center — Parking Lot (Clamon)
• FY11 Habitat for Humanity — Industrial Park Property Acquisition
(Clamon)
6. Discussion Regarding FY14 Aid to Agencies Funding Requests
• Discuss Aid to Agencies Applications
• Develop Aid to Agencies Budget Recommendation to Council
7. Adjournment
CITY OF IOWA CITY
MEMORANDUM
Date: January 10, 2013
To: Housing and Community Development Commission
From: Community Development Staff
Re: January 17, 2013 HCDC Meeting
The following is a short description of the January 1.7�h agenda items. If you have any
questions about the agenda or if you are unable to attend the meeting, please contact
Tracy Hightshoe at 356-5244 or by email at tracy-hightshoe@iowa-city.org as soon as
possible.
FY14 Aid to Agencies Funding Requests
Please bring your FY14 Aid to Agencies funding applications to the meeting. At this
meeting, HCDC will formulate a budget recommendation to the City Council. At the
January 3, 2013 meeting, HCDC requested information from the Crisis Center (reporting
questions under the Emergency Assistance Program and performance measures) and
Mayor's Youth (job retention by youth). The agency responses are included. As a
reminder, HCDC has elected to provide an open process and consider all applications.
HCDC will have to consider when and at what level funds will make an impact and what
funding priorities, if any, the commission will establish with these funds.
Review of the FY14 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
• MECCA — Security Improvements (Dragoo)
• Habitat for Humanity — Acquisition and Rehab. (Dragoo)
• Neighborhood Centers of Johnson County —Aid to Agencies (Zimmermann Smith)
• FY12 United Action for Youth —Transitional Housing (Clamon)
• FY12 Crisis Center — Parking Lot (Clamon)
• FY11 Habitat for Humanity — Industrial Park Property Acquisition (Clamon)
NOTE: The January 17, 2013 HCDC meeting will be held at the
Iowa City Public Library, Meeting Room A at 6:30 PM.
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Tracy Hightshoe
From: Becci Reedus <becci.reed us@jccrisiscenter.org>
Sent: Wednesday, January 09, 2013 1:26 PM
To: Tracy Hightshoe
Subject: Re: Aid to Agencies
Attachments: UWJC FY 13.pdf
Tracy - we don't track that kind of specific information regarding subsidized housing. We do ask all GA
applicants is what happened to their financial situation to cause them to seek assistance from us. The top two
answers are related to a change in work hours, i.e., temporary or seasonal reduction in hours, laid off, or change
in work status.
We coordinate with other financial assistance programs, but quite honestly, options are limited. Please
remember that the assistance level from the Crisis Center is $100, and the end result of our financial assistance
is the family maintains housing or keeps utilities from disconnect. The individual seeking assistance is
expected to pay for a portion of the bill, as generally we do not pay the entire balance owed.
1 do remember entering all the Outcome Measurement information in ... as it was not easy entering in the
information. In fact, I had even double cheek it to make sure that I had save it each time. So, I'm not sure why
it wasn't in the complete application, and a little disheartening as I spent so much time on that
section. Nonetheless, I am attaching them via attachment.
Please let me know if you need any additional information.
On Fri, .Jan 4, 2013 at 2:02 PM, Tracy Hightshoe <Tracy-HightshoeCe iowa-city.or6> wrote:
Hello.
The Housing and Community Development Commission had a couple of questions about your Aid to Agency application
last night. In regards to your Emergency Assistance Program do you track how many households request assistance who
live in subsidized housing (Section 8 or HUD assisted housing)? If so, can you provide the number?
The application that I exported did not have any performance measures, however I know at the time of submittal you
were having difficulty with the application program. Can you provide me a copy with the performance measures that
you submitted?
If possible, please have this information to me by Wednesday, January 9 as I hope to have all written
comments/responses in the HCDC packet that goes out on Thursday, Jan. 10.
Thanks!
ar
319.356 .5244
a>: 319.356.5217
Form D
Performance Measurement
Agency The Crisis Center of Johnson County
Quantity
Quality
# of Clients
Common Measures (%)
(Row muck did we do?)
(How well did we do it?)
1. Crisis Line calls received*
1/2/3. % of surveyed Crisis Intervention
j
2. Crisis Chats received
clients who report that interaction was
3. Walk-in counseling clients
het ful
4. Pa icipants n Survivor Sup or
4. P of Survivors Group participants who
Group
report that group facilitators are
5. Participants in Johnson County
knowledgeable
wSuicide
Prevention Coalition (JCSPC)
5. % of JCSPC members who report
6. Participants in QPR Suicide
increased awareness of suicide prevention
Prevention training
resources
7. Food Bank clients
6. % of QPR participants who would
S. Emergency financial assistance
reconvnend training to others
clients
7. % of surveyed Food Bank clients
satisfied with food availability
S. % of surveyed EA clients who report
that financial assist was helpful
it of Activities (by type)
Activity Specific Measures (%)
1 ,# of calls requiring counseling
(Iv A nvone Better Off?)
2. # of suicide -related calls
1. % of surveyed Cl clients who report
3. # of Survivor Support Group
feeling better about their sitatuion after
meetings held
intervention
4. # of JCSPC meetings held
2. % of suicidal clients who develop a
5. # of QPR trainings held
crisis plan during intervention
6. # of Food Bank visits/distributions
3. % of survivor group participants who
f
7. # of Financial assists provided
report feeling less alone
4. % of JCSPC members who report their
agency is better able to respond to suicide
crises
5. % of QPR participants that increase
knowledge of suicide warning signs
6. % of Food Bank clients who report that
their visits) improved their food
insecurity situation
7. % of EA clients who maintained
housing
Additional Comments:
" Crisis Line calls include those made to the 24-Hour Crisis Line and to the National Suicide
Prevention Lifeline.
Mayor's Youth Retention
**Dcidra - Walmart super store, transfer to Walmart in Cedar Falls (where she attends UNI)
**Tajeria— (UNI )Reach for potential
**Jcmravic - Worked @city park rides until started intern �u University of Iowa Hospital (City)
**Venessa— Culverts (West)
**Valisia— McDonald's (West)
Miranda —worked until started cross country @ City high (NW)
**Sierra — City park until started school a, Kirkwood
**Cortez — Menards (until started college)
**Tiara — Kmart (City I figh )
Wynton—Menards (West) (NW)
**Staci — Victoria Secrets (UNI )
**Brenda — McDonalds (Kirkwood )
Emeral —Arby's (City)
**Fatimah — McDonalds (City High)
**Juwariah— Mcdonalds (City High )
**Naeema — Whitey's (City High )
Ronetta — McDonald (City High )
** Sydney —City Park Rides (City High ) (NW)
**Danellie—McDonald's (CityHigh)(NW)
** Veronica — City Park Rides (UNI )
Wallace Reach for potential (Kirkwood)
Natasha - McDonald's
**Jasper worked until left to attend college (August 2012)
Hector—Menards (Kirkwood)
All of these students started @ City park rides.
15 of 26 are currently working
4 of 26 worked until attending college on scholarship (2012)
1 worked until high school sports started (2012)
1 started an intern @ the University of Iowa in August
21 of 26 worked 6 months to 1 year in the same job
** Worked two years @ City park rides.
NW — Not working
Tracy Hightshoe
From:
c.clamon@mchsi.com
Sent:
Sunday, January 06, 2013 4:17 PM
To:
Tracy Hightshoe
Cc:
c
Subject:
Re: Aid to Agencies
Attachments:
10 percent aid to agencies worksheet.xlsx;
agencies.xlsx
Tracy:
enclosed please find 3 spread sheets: how I arrived at the numbers:
12 percent aid to agencies.xlsx; 15 percent aid to
1 all agencie9 initially funded at last year's allocation, those who did not apply last year because of confusion were
funded at 2012 rate. Rationale is that no agency's request over another's seemed to be appropriate to receive
extra/less funding.
2. extend the dream to CDBG
3. The Dream Center received zero because it seems to duplicate other programs
4. Hillcrest and ICCSD would receive funds if others received and additional percentage cut. See #5
5. totaled all requests minus those funded at less than $9,000 then applied an across the board percentage cut
a 10% across the board cut would leave $4016.00 for Hillcrest and ICCSD application
a 12% across the board cut would leave $15,805,00 for Hillcrest and ICCSD application. $2000 for Hillcrest $13805
ICCSD
a 15% across the board cut would leave $23,131.00 for Hillcrest and ICCSD application.
$2000 for Hillcrest, $21,131 for ICCSD Intuitively these numbers dont seem right. Did the math several times and
they dont seem to add up. HELP. Having said that, the concept is still the same.
Cheryll, whose math skills are lousy.
--- Original Message -----
From: "Tracy Hightshoe" <Tracy-Hightshoe@iowa-city.org>
To: "(Charles-drum @uiowa.edu)" <Charles-drum@uiowa.edu>, "(mystic_fool@hotmail.com)"
<mystic_fool@hotmail.com>, "Andy Chappell" <achappel@co.johnson.ia.us>, "c clamon" <c.clamon@mchsi.com>,
"Holly Hart (hhart2@mac.com)" <hhart2@mac.com>, jarrod-gatlin@uiowa.edu, jimjac63@gmail.com, "Michelle Bacon
Curry (mbaconcurry@yahoo.com)" <mbaconcurry@yahoo.com>, "Rachel Zimmerman Smith
(rachelzimmermannsmith@gmail.com)" <rachelzimmermannsmith@gmail.com>
Cc: "Steve Long" <Steve-Long@iowa-city.org>, "Doug Ongie" <Doug-Ongie@iowa-city.org>, "David Purdy" <David-
Purdy@iowa-city.org>
Sent: Friday, January 4, 2013 1:25:56 PM GMT-06:00 US/Canada Central
Subject: Aid to Agencies
Hello.
Attached is the excel spreadsheet for your use. Based on the City's FY14 budget, we have $378,700 available (as
opposed to $380,000) to allocate. This being said, Congress has not finalized a budget so this figure may change as we
are estimating $100,000 of the total available coming from CDBG.
FY14 Aid to Agencies Funding Recommendation
Housing and Community Development Commission
HCDC Member: Hart-2
Agency
FY12 Actual
FY13 Actual
FY14 Funding
Request
HCDC 1/17/2013
Recommendation
4 C's Community Coord. Child Care
$2,000
$2,000
$2,000
Arc of Southeast Iowa
$2,000
NA
$4,000
Big Brothers / Big Sisters
$32,000
$32,000
$40,000
$25,700
Compeer of Johnson County
$5,000
$5,000
$6,000
Crisis Center of Johnson County
$40,000
$40,000
$49,540
$35,000
Domestic Violence Intervention Frog.
$52,000
$50,000
$52,500
$45,000
Elder Services Inc.
$54,000
$52,000
$60,000
$45,000
Extend the Dream Foundation
NA
NA
$20,000
NA
Four Oaks
$1,000
$1,000
NA
NA
Free Lunch Program
$2,000
$2,000
$2,000
Hillcrest Family Services
NA
NA
$4,000
$3,000
Housing Trust Fund of JC
$8,000
$8,000
$8,000
$5,000
ICCSD Family Resource Centers
NA
NA
$50,000
$35,000
IC Free Medical/Dental Clinic
$7,500
$7,500
$10,000
$7,000
Johnson County Social Services
$14,000
NA
$10,000
$8,000
Mayor's Youth Lmp. Program
$10,000
NA
$15,000
$9,000
MECCA
$18,950
$18,950
$33,022
$18,000
Neighborhood Centers of
$60,000
$60,000
$70,000
$50,000
Pathways Adult Day Health Center
NA
$4,879
$5,000
Rape Victim Advocacy Program
$12,000
$12,000
$15,400
$9,000
Red Cross
$6,000
NA
NA
NA
Shelter House
$36,500
$36,500
$64,500
$34,000
The Dream Center
NA
NA
$39,300
United Action for Youth
$60,000
$60,000
$65,000
$50,000
Total Request:
$422,950
$391,829
$625,262
$378,700
FY14 Iowa City Aid to Agencies - Estimated Budget $378,700
($250,000 General fund)
($100,000 CDBG - Subject to change based on Congressional budget)
($28,700 Utility user fees)
CITY OF IOWA CITY
FY14 ALLOCATIONS TIMELINE
Dates Subject to Change
Dec. 5, 2012 Public notice that CDBG and HOME applications are available
Dec. 19, 2012 CDBG/HOME Applicant Workshop,
Emma Harvat Hall, City Hall, 4:00 PM
Jan. 8, 2013 CDBG/HOME Applicant Workshop
Emma Harvat Hall, City Hall, 11:00 AM
Jan. 18, 2013 Applications due to City of Iowa City by 12 noon
Feb. 21, 2013 HCDC meeting: question/answer discussion with CDBG/HOME
applicants. Iowa City Library, Meeting Room A, 6:30 PM
Feb. 25, 2013 HCDC ranking forms due to City staff
Mar. 7, 2013 HCDC meeting: review of groupings and consensus funding
scenario. Possible recommendation to City Council on CDBG/HOME
funding awards. Iowa City Library, Meeting Room A, 6:30 PM
(CDBG/HOME applicants encouraged to attend, but not mandatory)
Mar. 14, 2013 HCDC meeting: recommendation on CDBG/HOME funding awards
(if necessary). Iowa City Library, Meeting Room A, 6:30 PM
(CDBG/HOME applicants encouraged to attend, but not mandatory)
April 1, 2013 HCDCjustitications memo due for council packet
April 6, 2013 Draft FY14 Annual Action Plan done — 30-day comment period begins
April 18, 2013 HCDC meeting: Review FY14 Annual Action Plan and recommendation to
City Council
May 7, 2013 Expiration 30-day comment period on the FY14 Annual Action Plan
May 7, 2013 City Council: public hearing on the FY14 Annual Action Plan (If needed,
joint HCDC/City Council meeting) and resolution -approving the FY14 Annual
Action Plan
July 1, 2013 Start FY14 projects
(If awarded funding, no expenses may be incurred prior to both
July 1 AND execution of a CDBG/HOME agreement)
1013012012
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N
PROFORNIA SPREAD SHEET
Instructions for Completing This Attachment
The Horsing Application, as in the past, requires the developers of rental housing projects to complete and submit a
profmnra for the project being proposed. The purpose of this proforma is to help the Housing and Community
Development Commission (HCDC) and staff to make informed decisions on the allocation of local HOMF investment
Partnership and/or Community Development Block Grant funding.
All applicants for rental housing (including rehabilitation projects) are required to complete the attached proforma.
'this form will provide FICDC with the needed information in a format that is uniform among all applicants. The
following arc instructions for completing this form and some basic "rules of thumb" for your consideration. This form
allows for up to 20 years of information.
If you have any questions about the norm or need technical assistance please call Community Development staff at
356-5230. ***Fields shown in "grey" arc for number entry when using the excel spreadsheet***
Revenues [After YR 1 a rent escalator of 2% is calculated in the Spreadsheet which is consistentwith the Fair Market
RcntiFMR) increases for Iowa Cityl
Line 1 Gross Rene Is the total amount of rent generated from the housing units, based on proposed rent
levels (proposed rents may be less than FMRs but cannot exceed FMRs).
Line 2 Other Income: Include latmdry income, application or pet fees, and interest income.
Line 3 Tenant Contributions: Include other payments such as rent for parking or storage space.
Line 4 Gross Income: is the sum of Lines I through 3.
Line 5 Vacancy Loss: Line 1 multiplied by 5%.
Line 6 Effective Gross Income: Line 4 minus Line 5.
Operating Expenses [An inflation escalator of 3% is calculated in the spreadsheet]
Line 7 Operating Expenses: Estimated insurance expense (estimate from an agent).
Line 8 Operating Expenses: Repairs and Replacements ($230 - $390 per unit depending on
building age).
Line 9 Operating Expenses: Management Fee (usually 5 — 7"/� of Gross Rent).
Line 10 Operating Expenses: Miscellaneous Expenses (legal, accounting, advertising, water\sewer, etc.),
The total of lines tt7-10 shall be no less than $2,750/unit.
Line 11 Operating Expenses: Property Taxes (estimate may be obtained from the City Assessor's Office).
Line 12 Operating Lxpenses: Reserves. Operating reserve no less than $350/unit. If new
construction, include a rent -up reserve for Year 1 of gross monthly rent for all units x 3
months)
Line 13 Total Operating Expenses: is the sum of Lines 7 through 12.
Net Operating Income
Line 14 Net Operating Income: is Linc 6 minus Tine 13.
Debt Service I list mortgage payments for principal and interest only)
Line 15 Debt Set -vice for I" Mortgage.
Line 16 Debt Service for 2`1 Mortgage(s) (include the total payments for all junior mortgages on this
line).
Line 17 Total Debt Service: Is the sum of Lines 15 and 16 (should not be less than 87% of Line 14),
Cash Flow Available for Distribution
Line 18 Cash Flow: Equals Line 14 minus Line 17.
Equity Investment
Line 1813 is the amount of funds being invested in the project by the project developerAsponsor. This does not
include the equity raised through the sale of Law Income Housing 'fax Credits as they arc accounted for on
Line 33.
Cash on Cash Return on Investment I shows return to developer or investors on their equity contribution
before taxes or. lax credits arc includes
Line 19 Cash on Cash ROL Equals Line 18 divided by equity investment as shown on the application.
Debt Coverage Ratio
Debt Coverage Ratio (DCR): ratio of estimated net operating income to debt service. Line 14 divided by line
17. After year 3, DCR shall be no less than 1.20 during the affordability period. Encourage 1.20-1.50,
Determining Taxes
Line 20 Cash Flow: Carry over the figure from Line 18.
Line 21 Depreciation Expenses: Annual depreciation of property (27.5 year straight-line schedule).
Line 22 Amortization of Fees Annual amortization of project fees (15-year straight-line schedule).
line 23 Principal Payments: Calculate the amount of principal paid on all loans for each year.
Line 24 Reserves: Carry over the figure from Line 12.
Earnings (Loss) Before Taxes
Taxes
Line 25 Earnings Belot c Tax: Equals (Line 20 mums Lines 21 and 22) plus Lines 23 and 24,
Line 26 Tax Rate: Use a 35% tax rate on for -profit organizations and non -profits use 0%.
Line 27 Taxes Incurred (Saved): Equals Line 25 multiplied by Line 26.
Casb Flow After -Tax
Line 28 Cash Flow: Carry over figure from Line 20,
Line 29 Taxes Incurred (Saved): Carry over figure from Line 27,
Line 30 Cash Flow After-tax: Equals Line 28 minus Line 29,
Total Benefit Analysis
Lure 31 Cash Flow After-tax: Carry over figure from Line 30.
Line 32 Rehabilitation tax Credits: Calculate full value of rehab tax credits.
Line 33 Low Inemne IIousing lax Credits: Calculate full value of LIHTC annually for each of the L, 10
years.
Line 34 Net Sale Proceeds: In year 20, calculate the estimated future market value of the property by
taking the total cost of the project as presented in this application and compound it by 2% for each
year. Place this amount on line 34,
Line 35 Net Cash Flow After-tax: Equals the sum of Lines 31 through 34.
Line 36 Return on Investment: Equals the Net Cash Plow After'fax divided by the Equity Investment.
A practical guide to real estate financing for nonprofit developers
2nd EDITION
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 (CPC). These rules of thumb reflect current (1996) cost es-
timates which are subject to change. Whenever possible, obtain
infonnation 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 tunders may limit or disallow this fee.
Construction Period Real Estate'raxes: 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 dining 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 1 % to 2% of the loan,
Construction Lender Legal: Legal expenses incurred by the lender in
connection with snaking the loan. 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 daring 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.
i
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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
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 . . . . . . $25,000
Porter . . . . . . . . . . . . $12,000
Superintendents of larger 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.
64
k
Exhibit 3: Pro Forma Income and Expenses
DATE
NAME OF PROJECT
SCHEDULE 2 : Pro Forma INCOME AND EXPENSES
RESIDENTIAL INCOME
UnitType
Rent/Mo.
Units
Gross/Yr
One B-droom
$650
6
$46,800
Two Bedroom
$750
6
$54,000
Three Bedroom
$950
4
$40,8QO
TOTALS
16
$141,600
COMMERCIAL INCOME
Gross Rentable SF
1,200
Rent per SF/Year
$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
EXPENSES
Real Estate "Faxes
$0
Insurance
7,349
Payroll
18,000
Elevator Maintenance
4,000
Water and Sewer
7,750
heating
10,850
Utilities
2,790
Cleaning/Exterminating/Supplies
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)
_3 252
TOTAL EXPENSES AND RESERVES 11515_2
NET OPERATING INCOME 8,261
65
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 conunon area utility expenses (hall-
ways,basement, exterior), the City uses $40 per room for walk—up
buildings and $45 pc, room fo, elevator r 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% of the 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
66
Interest Rate
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 of loan 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.)
Loan —to —Value and Debt Service Coverage
Fees
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.)
For the type of loan 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 of loan requested, what is a reasonable estimate of bank le-
gal fees? Would the legal work he done in—house or by outside
counsel? (Fees for outside counsel arc 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?
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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