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
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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
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A practical guide to real estate financing for nonprofit developers
2nd EDITION
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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.
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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.
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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
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.
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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 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
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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.
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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
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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.