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HomeMy WebLinkAbout01-18-2007 Housing & Community Development Commission AGENDA HOUSING AND COMMUNITY DEVELOPMENT COMMISSION LOBBY CONFERENCE ROOM, CITY HALL THURSDAY, JANUARY 18, 2007 6:30 P.M. 1. Call Meeting to Order 2. Approval of the November 16, 2006 Minutes 3. Public Comment of Items Not on the Agenda 4. Review of the FY08 Allocation Process & Proforma Basics 5. Consideration of Potential 2007 Agenda Items 6. FY06 Downpayment Assistance Program Discussion 7. Monitoring Reports . Community Mental Health Center - Facility Rehabiliation (Crane) . MECCA - Facility Rehabilitation (Richman) . DVIP - Facility Rehabiliation (Shaw) . Visiting Nurse Association - Operations (Crane) . Compeer - Operations (Niblock) . FY04 Whispering Garden - Affordable Rental (Shaw) . FY05 The Housing Fellowship/ICHA - Rental Construction (Anthony) 8. Adjournment ,~ i ~~=-a:D~'" ~~W~~ ~~ ~~.~ CITY OF IOWA CITY MEMORANDUM Date: January 11, 2007 To: Housing & Community Development Commission (HCDC) From: Tracy Hightshoe, Associate Planner Re: January Meeting Packet This month we welcome Andy Douglas to the commission. Welcome Andy! Below is a brief description of the January agenda items. Review of the FY08 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. Consideration of Potential 2007 Agenda Items HCDC will discuss potential 2007 agenda items. FY06 Down Payment Assistance Program As we discussed previously, there remains $30,000 available in the downpayment assistance program available through the City. No funds to date have been utilized for this program. Staff will provide an update on this program and discuss options that may be pursued. Monitoring Reports (contact information included) . Community Mental Health Center - Facility Rehabilitation (Crane) Contact Stephen Trefz, 338.7884 x211 . MECCA - Facility Rehabilitation (Richman) Contact Ron Berg, 351.4357 . DVIP - Facility Rehabilitation (Shaw) Contact Kristie Doser, 351.1042 x112 . Visiting Nurse Association - Operations (Crane) Contact Sue lien Novotny, 337.9686 x148 . Compeer - Operations (Niblock) Contact Sherri Zastrow, 338.7884 . FY04 Whispering Garden - Affordable Rental (Shaw) Contact Tracy Falcomata, 338.7600 . FYOS The Housing Fellowship/lCHA - Rental Construction (Anthony) Contact Maryann Dennis, 358.9212 (Longfellow Manor $190,000) . ICHA - Tenant Based Rent Assistance (Hart) Contact Steve Rackis, 887.6065 . FYOS United Action for Youth - Facility Rehabilitation (Niblock) Contact Jim Swaim or Teresa Ulin, 338.7518 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. PRELIMINARY MINUTES HOUSING AND COMMUNITY DEVELOPMENT COMMISSION THURSDAY, NOVEMBER 16, 2006,6:30 P.M. LOBBY CONFERENCE ROOM, CITY HALL Call to Order: Meeting called to order at 6:40 P.M. Members Present: Jerry Anthony, Steve Crane, Marcy DeFrance, Holly Hart, Matthew Hayek, Thomas Niblock, Brian Richman, Michael Shaw Members Absent: None Staff Present: Tracy Hightshoe Others Present: Blake Mosher RECOMMENDATIONS TO COUNCIL (become effective onlv after separate Council action): None Approval of the October 19. 2006 Meetina Minutes Hayek moved to approve the minutes as submitted. Hart seconded, and the motion carried on a vote of 8-0. Public Comment of Items Not on the Aaenda Anthony said there was a regional Housing Summit on November 14, organized primarily by the Housing Trust Fund of Johnson County, but also with involvement from other groups. There were approximately 100 people in attendance. The keynote speaker was the CEO of the Silicon Valley Leadership Council, which helped raise funds for affordable housing in that area. Anthony said this is also the National Hunger and Homelessness Awareness Week. The Local Homeless Coordinating Board is sponsoring several activities for this the week. There was a hunger panel organized on the 15th and there is a Sleep Out on the 18th on the corner of Southgate and Waterfront. This is being coordinated by the Johnson County Local Homeless Coordinating Board. They had planned to do a Homeless Simulation on the 18th, but that has been cancelled. Crane asked how the summit went. Anthony said it went very well. The speaker had a lot of ideas and stated that for him the pursuit of affordable housing was a matter of enlightened self interest as well as for many partners in his community. His company was competing with College Station, TX, for new IT graduates out of college. College Station has very low housing costs compared to their region making first time homeownership very expensive and difficult. To compete with competitors outside the region, it became necessary to begin providing affordable housing in the Silicon Valley area to be able to recruit and retain their workforce. Hightshoe said the average housing price in Silicon Valley was over $800K per unit. Anthony said College Station's average was $180K. Housing and Community Development Commission Minutes November 16, 2006 Page 2 Hightshoe said Council appointed Andy Douglas to HCDC on the 15th. He will likely attend the next meeting. New Business Discuss and Review FY08 CDBG/HOME Funding Process Timeline Hightshoe noted that the meetings for the upcoming year do not always fall on the third Thursday of the month during the allocation period. In March the schedule was modified to avoid the University's spring break. Hightshoe said there are two meetings in March; the meetings will be on the 8 and 22nd. Also, the February meeting is on the 22nd due to scheduling difficulties with meeting rooms. Thus the meetings in February and March will not fall on the third Thursday. She asked the commission members to double-check their calendars and make adjustments as needed. Shaw asked whether any of the meeting dates were on Wednesdays. Hightshoe stated no, there were no HCDC meetings scheduled on Wednesdays. In the schedule, there may be some due dates for rankings forms and other matters on days other than Thursdays, but not HCDC meetings. Crane asked if two meetings in March are typical. Hightshoe said yes, those are the meetings when final decisions on funding allocations are made. The first meeting is a review of all the requests and available funds, while decisions are made at the second meeting. The recommendation made at the second meeting is then forwarded to council. Niblock asked how likely it is that the April 30 meeting will happen. Hightshoe said it has not been needed in the past few years. There have been times that commission members have attended council meetings to give additional information as to the rationale of what was funded or not funded. A separate meeting with council is not common. Crane asked if the two applicant workshops have only four commission members in attendance. Hightshoe said those meetings are for the applicants and staff; however they are open to commission members. HCDC members do not need to attend unless interested. She said the schedule includes the entire process, not just the HCDC meetings. HCDC members can attend council meetings or the applicant workshops, but it is not required. The timeline gives HCDC members knowledge of the entire process and what needs to happen at what time. Some of the deadlines, such as for the justification memo, are usually dealt with in a subcommittee. Anthony asked if a vote is needed on the timeline. Hightshoe said no, the commission only needs to review it. Hightshoe stated that the application forms stayed the same from last year except for the addition of a question regarding identity of interest issues. Joint financial interests are legal, but must be disclosed. Shaw asked what happens if this information is not disclosed. Hightshoe said it might raise questions or complicate other issues, even though it is legal, if it is not disclosed before the funding is granted. An example would be that the.owner or general partner is also the construction company. If a problem develops it would look bad to the public that the arrangement was not disclosed. It also helps when monitoring/evaluating the project to ensure each relationship is an arms length transaction and that poor performance will lead to sanctions or contract termination. Approve FY08 CDBG/HOME Application Materials Hightshoe said there is more money available this year for allocation as there was more program income than expected as well as the $89,000 in HOME funds that was not allocated last year. The council discussed the Economic Development Fund at a recent work session. There is currently $245K in the fund with a potential of an additional $75K added as a previous CDBG recipient may decline the award. If this happens, there will be approximately $320K in the fund. Council decided not to put a set-aside into economic development for FY08. The Housing and Community Development Commission Minutes November 16, 2006 Page 3 Council is looking to amend CITY STEPS by approving a resolution that states 15% of the CDBG entitlement be reserved for economic development activities unless the fund's balance is $25DK or over. If the fund's balance is over this amount, no additional funds will be allocated that fiscal year. Staff anticipates that there will be no economic development set-aside in FYD8. Hightshoe said staff will initiate a 3D-day public comment period for this change. She said she would be giving the commission an update regarding when the comment period begins, but that it should be resolved before the allocation meetings in March. Anthony asked when council made this decision. Hightshoe said council discussed it at a work session and directed staff to proceed. They will officially review it at a Council meeting after the 3D-day comment period. CITY STEPS requires a 3D day public comment period and Council action for any substantial amendment to the plan. Anthony asked if the 15 percent would be calculated from both CDBG and HOME funds. Hightshoe said the 15 percent will be calculated from CDBG only. Anthony confirmed that is an additional change from previous practice. Hightshoe said yes. She stated that for the years when no additional funds are allocated to the Economic Development Fund, the question is where to allocate those funds. Only two areas remain that are not limited by federal caps: housing and public facilities. Hightshoe said in the applicant guide the ED funds were distributed to the housing and public facility categories by the pro-rated percentages that are in the existing plan. Richman asked if the total includes the money that was not allocated last year. Hightshoe said yes. Crane asked if there were many requests for economic development funding last year. Hightshoe said there were two applications. One was denied and the other was referred to landfill reserves. Crane questioned if the issue is getting the word out about the availability of funds. Hightshoe said yes, that is one of the reasons. Hightshoe said the council Economic Development Committee recently revised the application form, so it looks like more like a small business administration (SBA) application form. The council approved the new application and staff will begin to market the fund to area lenders and the public. They hope to get some qualified applicants soon. Richman asked if there is a place on the housing application that specifically requests a pro forma. Hightshoe said yes, it's on the housing application. It states for rental housing applications a pro forma must be submitted with the application. Hightshoe said there is more money to allocate for Public Facilities and Housing, but not for Public Services. Anthony said it is a little more than last year. He asked what council decided to do with the Public Services allocation. Council had asked for HCDC input on the issue. Hightshoe said status quo for now. That was the commission's recommendation. Hayek asked if the balance could be put into Aid to Agencies. Hightshoe said that was discussed at the HCDC meeting, but the recommendation was to leave things as they were. The commission wanted to be able to fund new projects coming in, which is more difficult to do through the council process. Hayek said some of the most interesting applications come in for that category; it's just a very small amount to divide up. Hightshoe suggested having a resolution to approve the timeline and application materials unless there is more discussion. Housing and Community Development Commission Minutes November 16,2006 Page 4 MOTION: Shaw moved to approve the FY08 CDBG/HOME Funding Process Timeline and application materials (including the proforma for rental housing applications). Richman seconded, and the motion carried on a vote of 8-0. Old Business Discussion of the FY06 Downpayment Assistance Project Hightshoe said these funds were allocated in fiscal year 2006 for downpayment assistance. They have not been used to date. The commission discussed various options at the last meeting and needs to decide what to do with the money. The options include a recommendation to council to continue the program, change it, or recapture the funds for reallocation for FY08. Hightshoe said there have been no applications, which is likely attributed to a number of reasons. As discussed at the last meetings, possible reasons include: assistance can't be used for housing built before 1978 due to lead based paint, aggressive lenders that offer 100% financing, interest only loans, no down payment, etc, the availability of first-time homeowner programs, the maximum amount allowed in the program is only $5K, and it is a loan rather than a grant. Shaw asked if there was any chance some of those issues might change in the future, such as lenders being less likely to finance 100%. Crane said it is unlikely, since it is very easy now to get total financing from various places. Anthony asked how much was awarded to the program. Hightshoe said $30K. Anthony asked if the maximum amount was increased if the program might work. Hightshoe said it may help, but not change other barriers such as the home must be built on or after 1978. A lot of affordable homes were built before 1978. Anthony confirmed that the money could be used for any type of housing, not just single-family. Hightshoe said yes. Hayek said it seems like being able to get $10K for a $100K condo would make a difference. Richman asked what other concerns people have expressed with this program. Hightshoe said people do not like that they have to pay it back when they resell the home, or within 20 years. DeFrance asked about the interest rate. Anthony said zero. Crane said if the amount awarded was higher it might make more sense to take the program funding for a zero percent loan on a condo, as Hayek was suggesting, however the bank would most likely finance 100% of the loan. There is not a lot of incentive to refer clients to this program from a lender's standpoint if they are able to provide full financing. Hightshoe stated Hills Bank currently administers the program. Many lenders may not want to refer their clients to a different bank for incentives or assistance. Richman said the program makes sense from the standpoint of borrowing $6K at zero percent versus $6K at the current percentage rate. Crane said yes, from an economic perspective, this program would save people money, but the bank makes it so easy to go through them. Shaw said first-time home buyers are going to go with the simplest process possible. Crane said it is likely a matter of public education about the availability of the funds. Hightshoe said when the first down payment assistance program was offered, which was a conditional grant, it took six years to allocate all the funds. DeFrance asked if the city has a lien on the property with this program. Hightshoe said yes, the city places a mortgage on the property. When it is sold, the loan is repaid. DeFrance asked if there is a lien on the property already would the owners be able to get a second mortgage, or would the lien show up and prevent it. Crane said the lien would be already in a second mortgage behind the bank. DeFrance confirmed that the lien would have second position on the home. Any additional mortgages would be in third or fourth position. Housing and Community Development Commission Minutes November 16, 2006 Page 5 Crane said yes. DeFrance asked if the bank would frown on something like that. Crane said yes, most banks would prefer the borrowers to repay the debt in position before their loan even if that meant the borrower repays a 0% loan in exchange for a loan with a much higher interest rate. DeFrance said having a lien on a home does not make sense long term if the homeowner would want to make improvements and need an additional loan in the future. Crane said the purpose of this program is to get people into homes, while improvements are another issue. He said the program is a good idea if the amount is high enough and people know about it. DeFrance asked how the program has been marketed. Hightshoe said a few press releases went out, letters to area lenders sent and Hills Bank, the project administrator planned on doing some marketing. Hightshoe stated the bank may have done some marketing of the fund, but she wasn't aware of the publicity done by the bank. Hightshoe stated although Hills administers the program, they have not referred anyone to the program yet. Crane said if the amount was higher and resulted in a lower bank loan, the interest rate will be better. Hightshoe said it is feasible to increase the amount. Hightshoe said when the program was started, letters were sent to local banks and they did get some calls from lenders. Banks do have turn over so it is possible that several current lenders do not know about the program. Hayek asked if there is a CRA benefit to the bank to do this. Hightshoe said yes. It could have been a possible reason. Crane said if the house is located in a low-income area, there would be a CRA benefit. Hightshoe said in terms of consumer education, they have rehab loans that have conditional occupancy requirements that put a lien on the property but does not require repayment until the house gets resold. Despite the lenient terms, some homeowners will get a home equity or other loan and repay the zero percent loan with an interest loan. The city can't refuse to allow people to payoff their loans, despite the financial savings of the 0% loan and no payments until the house is sold. Richman asked for confirmation that if the money is recaptured it goes into the allocation for this year. Hightshoe said yes. Richman asked if she had any indication from developers or others about who might be planning to apply. Hightshoe said she received calls regarding two possible HOME eligible projects. Both were for transitional housing. One was looking for rental acquisition of 3-5 units and the other for a building that would allow single room occupancy (SRO) housing. There are not many places in the city that are zoned for SRO housing. SRO for transitional housing is allowed only in RS-12 or greater density zones. It may only be allowed in some commercial zones by special exception. Hightshoe said the city might come in with a HOME application as well. Staff will be informing area housing providers about the proposed changes to the investment policies that will allow more flexible terms. Anthony asked if that has been approved. Hightshoe said it formally goes before council after a 30 day public comment period, but the council reviewed it favorably at their work session. Anthony asked if the amount could be increased this year after the applications are received but before the final allocations are made. For example, if the commission does not decide to recapture funds from the down payment assistance program, but decide to do so in February, could it be added to the available funds. Hightshoe said yes, as long as it is done by January, but the recommendation to recapture does have to go before council. Richman said the commission has discussed this program two or three times already and the program is apparently not being marketed. Anthony said maybe it could be increased and given Housing and Community Development Commission Minutes November 16,2006 Page 6 a few months, and see if that generates any more activity. Hightshoe said the Housing Authority (HA) wanted to talk about some sort of home ownership program, though she does not have any details. Richman said doing something through a different venue would give the program more exposure. Hayek asked if the program is currently being done through the HA. Anthony said no. Hightshoe said it is only through the bank. Crane said if the banks do a first mortgage, they usually will go to a personal banker for the second loan. It is another incentive to keep the whole thing with the bank, which would be another reason not to use the banks for this sort of program later on. Anthony said going through the HA makes a lot of sense, since they operate the Family Self- Sufficiency Program, and try to transition people from rental status to home ownership. Hightshoe said the HA already has a tenant-to-homeowner program. She added that she knows only that the HA wanted to discuss potential applications, she did not know project specifics. Hightshoe said the commission could hold off on deciding until January, and she would talk with the HA to find out what they had in mind, and whether the program could roll over to be administered through them. She stated staff would have to review if this would constitute a substantial change and require a public comment period and council action. Anthony asked if the HA is a separate entity from the city. Hightshoe said yes in the fact that the federal government provides their funding. She thought that the funds received are routed through the city, but she is not sure. Hayek asked staff to check into shifting the program over to the HA, whether it is possible and they are willing. Monitoring Reports Iowa City Free Medical Clinic - Case Management Richman said he spoke to Sandy Pickup. The clinic is drawing down in equal monthly installments. They will have all funds drawn by June. The clinic had 470 clients in case management in FY06 and reported no reduction of patients since moving to the new facility. The only change to the program is tweaking some of the drug access programs they have with pharmaceutical companies. Everything else is going as planned. Shelter House - Outreach Coordinator Hayek said this was a $5K allocation to help fund a paid position at the facility. They have paid the amount internally but have not withdrawn it from the city. They have been busy with the Hunger and Homelessness Week activities that they have had trouble coordinating withdrawing the money. They offered to send more data on the number of beds. Hayek told them to just include it with their next application. No changes; this is a position that the commission funds almost every year, so no new information. Hightshoe added that Shelter House moved their administrative offices from Sycamore Mall over to Prentiss Street. ICHA - Tenant Based Rental Assistance Hart said she left messages with the contact, but has not heard back. Hightshoe said she does not think they have spent any funds for this program yet. The last conversation she had with the ICHA, they stated they have to utilize their vouchers before using TBRA, but she can find out more. Anthony asked for confirmation that they entered into the agreement by September. Hightshoe said it was not her project, but she was under the impression that they had. Wood Elementary - Playground Improvements Shaw stated the equipment is purchased and installed, but he does not know whether they have drawn any money yet. They are fundraising for additional pieces of equipment. Hightshoe asked if the flooring was out there yet. Shaw said no. Housing and Community Development Commission Minutes November 16, 2006 Page 7 Crane asked if a project does not use its funds, whether the money goes back into the fund for next year. Hightshoe said yes, it gets reallocated. Hayek said typically groups get a series of reminders and they end up using it eventually. Anthony asked how long they have to spend money. Hightshoe said the city gets measured on their timeliness with CDBG funds, so they usually pressure groups who receive those funds to spend them quickly. HOME funds must be utilized within 5 years. Hillel Student Center - FY06 Accessibility Hayek said he thinks the project is done, but was not able to talk with the contact person. The Housing Fellowship - FY05 Affordable Homeownership Anthony said he has details about several projects that have been funded. The Longfellow Manor Affordable Rental Project, for which they received $220K of city HOME funds, has been spent. The total construction budget was $931 K. They are constructing three duplexes, which are scheduled to be completed by November. The Housing Fellowship is currently advertising the units. Hightshoe said they are very nice units. United Action for Youth - FY05 Facility Rehabilitation Niblock said he was not able to talk to the contact person. He asked what the project was. Hightshoe said she believed it was to add an entrance, make the building accessible, replace windows, and add a childcare area. She said she thinks it is done, and suggested Niblock try contacting Theresa Ulin. Adjournment MOTION: DeFrance moved to adjourn. Hayek seconded, and the motion carried on a vote of 8-0. CITY OF IOWA CITY FY08 ALLOCATIONS TIMELINE Dates Subject to Change Dec. 7, 2006 Dec. 20, 2006 Jan. 10, 2007 Jan. 22, 2007 Feb. 22, 2007 Feb. 27, 2007 Mar. 8, 2007 Mar. 22, 2007 Mar. 27, 2007 Mar. 30, 2007 April 30, 2007 April 30, 2007 May 1, 2007 May 1, 2007 July 1, 2007 Public notice that CDBG and HOME applications are available CDBG/HOME Applicant Workshop CDBG/HOME Applicant Workshop Applications due to City of Iowa City by 12 noon HCDC meeting: Question/answer discussion with applicants HCDC ranking forms due to City staff HCDC meeting: review of groupings and consensus funding scenario HCDC meeting: recommendation on CDBG/HOME funding awards HCDC justifications memo due for council packet Draft FY08 Annual Action Plan done - 30-day comment period begins Expiration 30-day comment period on the FY08 Annual Action Plan If Needed - joint HCDC/City Council meeting City Council: public hearing on the FY08 Annual Action Plan City Council: resolution-approving the FY08 Annual Action Plan Start FY08 projects Items in bold are the scheduled HCDC meetings. Items in italics are for those items due from HCDC members to Community Development staff. 1/11/07 - . . an I I A practical guide to real estate financing for nonprofit developers 2nd EDITION \; l I \ 1 , \ i l t, II. L~l. '\'~\l * u. ~\~"\ . Ii 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. s 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. It .ds ) s: ; to 0- ~d by (l ~ .ction 03% Iry in- ~lop- md A list 61 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 $ I ,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 making 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 during construction. Construction Loan Interest: Interest paid monthly on the portion of the loan that has been advanced to the borrower. Usually estimated at 62 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 $1 0,000 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 of20% or more for commercial space. 63 -- I :1 J 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 Porter . . . . $25,000 $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 "1' f' 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 Gross/Yr One Bedroom $650 6 $46,800 Two Bedroom $750 6 $54,000 Three Bedroom $850 --4 $40.800 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 Taxes $0 Insurance 7,348 Payroll 18,000 Elevator Maintenance 4,000 Water and Sewer 7,750 Heating 10,850 Util ities 2,790 Clean i ng/Exterm inating/Suppl ies 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..2..5.2. TOTAL EXPENSES AND RESERVES $75.159 NET OPERA TING INCOME $78.261 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 offuel 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% 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 l' 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.) Interest Rate . 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 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 of loan 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? 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. 68 " j ~ ! -~= -.....tt ...---.... ~~~!! ~ I!II"" -~ . CITY OF IOWA CITY MEMORANDUM ~L. Date: January 2, 2007 City Council City Manager Housing Programs To: From: Re: Recognizing that a free market for housing is often not a fair market for low and moderate income residents, the City sponsors or participates in housing support programs and policies. These programs and policies are directed at individuals and families of low and moderate income who often are the elderly and people with disabilities. Through City initiative a variety of policies attempt to balance the market process. This is achieved through City housing support programs as well as community-based non-profit housing developers who invest and assist in providing affordability in housing to our most vulnerable citizens. The quantity, quality and diversity of our local housing stock are essential to the vibrancy and stability of our neighborhoods. Rehabilitation of the existing housing stock allows seniors to remain in their homes in neighborhoods they know and prevents the deterioration of modest homes. Rehabilitation of homes in our community is not only an investment in the single home, but an investment in the neighborhood. Homebuyer assistance allows first-time homebuyers to acquire a home in our community, and rent assistance allows those with little means to live in decent, safe and stable homes. Additionally, a housing policy helps support economic development activities by increasing work force housing, creating and/or sustaining construction and industry-related jobs, and lowers monthly housing costs where the savings is reinvested in the local economy. Attached is a list of housing programs you will find familiar. Clearly you can see the extent and diversity of these housing programs. Many of these were only just recently discussed by our Scattered Site Housing Task Force. Many will be reviewed as part of the proposed Housing Market Analysis Study. Following that study, it would seem that in this era of limited resources as a matter of policy we would want to assign our limited resources to our most effective programs and policies. In creating a City housing policy we need to understand the market. The process to hire a consultant to analyze the housing market of the Iowa City metropolitan area can begin on January 10, 2007 with the release of the Request for Proposals. The contract will be awarded on March 6, 2007 and we hope to have the report completed by September 7, 2007. The consultant will document the need for affordable housing units for income groups up to and including 110% of median income, analyze the existing housing market and its ability to meet that need, project future needs and suggest public policy approaches and implementation strategies to provide housing opportunities for the targeted income levels. It is my suggestion that as soon as the report has been completed we plan a meeting of the City Council where the staff can walk through each of the current housing programs, explaining the amount of monies invested and other measurable factors. This will allow the Council to consider its policy options. The Housing Market Study will then have a foundation in current Council policy and I believe make the review of options easier to conduct. January 2, 2007 Page 2 " Upon a review of these various programs and policies we can determine which programs should receive additional support from our community. We can also identify ways to address the issue on a regional level and encourage other communities to participate in shared outcomes. It was difficult at the time of the preparation of the proposed FY08 budget to find a "spot" in our budget document, in that this issue is both operational as well as capital, and much policy must yet be decided. It is because of this that I chose to present this issue to you under separate memorandum. Our operational funds remain scarce. However, we do have comfortable financial margins in our capital funds if the Council were to decide on their use to address a housing policy. Attachment mgr/mem/Housingmarket.12.5.06.doc ~~ Affordable Housing Funds/Programs Administered by the City of Iowa City CDBG funds (Community Development Div) Land acquisition {vacant lots for Habitat, Housing Fellowship, Shelter House} Building acquisition {Crisis Center, Salvation Army, existing housing acquired by Housing Fellowship} Housing rehabilitation {accessibility, exterior repair, mobile home repair & emergencies} Operational funds for housing service providers {Shelter House, MECCA, Elder Services} Rental deposit assistance {emergency rental or security deposit by Shelter House} Downpayment assistance for homeownership HOME funds (Community Development Div) Land acquisition {vacant lots for Habitat, Housing Fellowship, Burns & Burns} Housing Acquisition {HACAP transitional units, Successful Living, Housing Fellowship} New construction {Burns & Burns, MECCA, Housing Fellowship, Regency Heights} Housing rehabilitation {comprehensive rehab for owner-occupied housing} Tenant Based Rental Assistance (TBRA) TARP Program - GO Bond (Community Development Div) Owner-occupied housing rehabilitation --- income 81 % to 110% of area median Iowa City Housing Authority Public Housing Housing Choice Voucher Program Affordable Dream Homeownership Program Section 8 Homeownership Program Tenant-to-Ownership Program ROSS Grant Family Self-Sufficiency Program (FSS) Housing Authority FSSjROSS Program Coordinating Committee City General Funds Aid to Agencies - Operational funds for human service agencies Transitional Housing Acquisition {Successful Living} Housing Inspection Services {Housing Voucher inspections} General Obligation Bond Funds New Construction {Housing Fellowship Peninsula units} Preservation of Units {Housing Fellowship in 2007 preservation of 14 units} City Staff also participate in various housing related boards and committees Housing & Community Development Commission Planning & Zoning Commission Local Homeless Coordinating Board Housing Trust Fund of Johnson County Community Foundation of Johnson County The Children's Initiative HACAP Site Council Habitat for Humanity Site Selection Committee Johnson County Coalition for Domestic Violence Fair Housing Ambassadors FAIR The Junior Service League (donated money to Shelter House, Housing Authority and Children's Initiative) 12/11/2006 City of Iowa City MEMORANDUM ~pc~ TO: FROM: DATE: Staff of City Boards and Commissions Marian K. Karr, City Clerk January 5, 2007 (E-mail attachment; hard copy to follow) The City Council has scheduled a budget work session addressing the FY08 budget requests for Monday, January 29, 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 25. S:budget presentations-Boards & Commissions Housing Trust Fund of Johnson Coun~ Eligible Activities: Development/rehabilitation of emergency, transitional, rental or owner occupied housing and assistance to first time homebuyers. All funding must serve Johnson County households at or below 80% area median income. Eligible Applicants: Businesses, nonprofits and governmental agencies with proven track records and administrative capacity. Funds Available: $200,000 in below market loans. $40,000 at 0% interest for projects that serve extremely low income households; $160,000 at 1 % for loans of 12 months or less or 5% for loan of up to five years. Application Deadline: January 16, 2007 More information, applications and instructions are available at www.htfjc.org or 319-358-0212.