1995-03-22 (Report) (2)
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CITY OF ENCINITAS
AGENDA REPORT
HOUSING AUTHORITY
Meeting Date: March 22, 1995
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Previous Housing Authority decision to consider both Housing Authority or nonprofit ownership of housing
projects under the proposed Bond Acquisition Program.
(1) Whether to appoint subcommittee to work with staffin preparing recommendation for Board on whether
to confirm previous Authority decision to consider both Housing Authority or nonprofit ownership Qf
projects purchased in the Acquisition Program, and
(2) Whether to authorize Executive Director to select a finn to provide consulting to subcommittee and staff,
and
(3) Whether to confirm previous decision to consider either Hous,ing Authority or nonprofit ownership of
housing projects.
On June 16, 1994, the Board authorized the Five Year Work Plan which included acquisition of 160 existing
units (100 elderly and 60 family) for low income housing. On August 10, 1994, City Council awarded the
Housing Authority additional funds from Community Development Block Grant for the project bringing fund
allocation to $508,216 for project implementation. Another $5,500 was added to the project on January 25,
1995.
Staff has outlined the steps to be taken to implement the acquisitionlbond program.(See Attachment A, Steps
in Acquisition Program). In order to implement the program the duties of the various players are identified.
(See Attachment B, Duties of Acquisition Team)
Before the Board considers proceeding to Step Two, Hiring a Development Team, staff is asking for
clarification as to whether the Board wants to consider either the Housing Authority or a nonprofit as owners
. of the projects acquired. Initially both possibilities were discussed. If the Board determines that only a
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TO: Board of Commissioners
VIA: ~ Exeeollve Dlreetor
FROM: Community Development~e artment
Sandra Holder, Director
Lynn Brown, Housing an Grants Coordinator
SUBJECT:
ISSUE:
BACKGROUND:
ANALYSIS:
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Donpro{itcan be the owner of the property, considerations on the individual projects, and perhaps the entire
Bond Program, change. However, the final decision as to which option is the best financially may have to
be considered after individual packages of projects have been presented to the Board (Steps four and Five
in Program).
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In order to assist the Board in making this policy decision staff' is requesting assistance through the
establishment of a Board Subcommittee and hiring a consultant for a very limited contract to provide further
advice. The Subcommittee would then make a recommendation to the Board on whether ownership by the
Housing Authority is acceptable or not.
In anticipation of establishing a development team staff has received unsolicited proposals from eight persons
or organizations. Not all of these organizations are versed in the bond financing aspects of the duties (Duty
" 3, Attachment B), but there are at least three to four organizations from which the Executive Director could.
request an hourly bid.
There is $513, 716 atlocated for the bond program. (Budget, Attachment C). Estimated cost for a consultant
should be no more'iHan $1600 for attendance at subcommittee and Board meetings.
FISCAL AND STAFF IMPACTS:
Cost $1600 from $513,716 project budget.
RECOMMENDATION:
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Staff recommends the Board take the following action:
. (1) establish a subcommittee to work with the Executive Director,and
(2) authorize the Executive Director to contract with a consultant, meet with the subcommittee and
consultant, and provide a recommendation to the Board.
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ATTACHMENT A
STEPS IN THE ACQUISITiON PROGRAM
J 1. Hire consultant to work with Housing Authority to clarify understanding of policy
options for ownership, asset management, and property management. (housing authority
vs. private nonprofit agency)
2. Hire development team to assist Housing staff.
. Real estate team
. Financing/bond team
In later steps the Authority/Nonprofit contracts for other functions such as bond counsel,
underwriter, rehabilitation, asset management and management of units.
3. Identify projects and determine suitability. Real Estate team, with Housing Authority
staff assistance, identifies well designed, quality projects to be acquired. Goal is 100
units for elderly (one and two bedroom units) and 60 units for famjly (two and three
bedrooms). .
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4. Prepare several project packages for consideration of the Board. Each package will
be analyzed for financial feasibility, including cash flow projections, rehabilitation costs,
potential relocation costs, rent structures and funding options with related costs. As part
of package information will be provided management options including asset management
and property management so costs can be figured into project costs.
5. Determine ownership options based on funding possibilities if not previously
determined. For example, it may be more financially feasible to have Housing Authority
issue bonds than having a nonprofit issue bonds. It mayor may not be feasible to have
Housing Authority own project and sell to nonprofit.
6. Hire appraisers/ other consultants.
7. Negotiate with owners. Determine acquisition terms. The acquisition deals are
dependent on mortgage insurance.
8. Structure bond financing. Hire remaining functions for bond issuance such as
underwriters and bond counsel. Staff work with underwriter and counsel to identify funding
sources, rating of bonds, and term of bonds. Take package to TRI to determine kind of
FHA mortgage insurance. With firm FHA commitment, decide when to issue bonds.
9. Issue bonds, purchase properties.
10. Hire project manager to assist staff with rehabilitation.
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11. Determine who will be responsible for asset management and property management
if not previously determined. Contract with asset managers and property managers.
Board could decide to hire City staff, hire Housing Authority staff or contract with nonprofit
for asset manager and property manager or use any combination, such as the Housing
Authority providing asset management and contracting with property manager.
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HOUSING AUTHORITY
STEPS IN ACQUISmON PROGRAM
'IIU. Bondi
(polllbl. option)
Rehab
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Nonprofit
EHA Contract
D Determine
Proc.a. Staff
<> Doaoioo Nonprofit
Contract
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, Determine
V Org.....tion Staff
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ATTACHMENT B
DUTIES OF ACQUISITION TEAM
1, Property acquisition services.
.. Identify properties putting together several packages.
. Conduct initial feasibility studies, purchase and rehabilitation budgets, property
management projections for each property within package.
. Negotiate for properties.
. Maintain objectivity and impartiality of the process.
2. Legal services.
. Prepare purchase contract, escrow instructions. Assist in preparation of
necessary documents regarding acquisition, approval of title insurance policies and
other matters affecting title.
. Prepare and provide legal work necessary in connection with preparation of
applications for federal assistance (FHA).
. Prepare and/or review contracts with architects, appraisers, and similar
consultants.
3. Financing services.
. Work with staff and real estate team to determine financial feasibility as it relates
to bond issuance and other financing options.
. Identify funding sources such as low income tax credits and FHA mortgage
insurance and assist with preparation of necessary application documents.
4. Bond Counsel
. Prepare all original bond issue resolutions.
. Prepare invitation to bidders and advertise notice. If needed prepare original
bond issue statement.
. Prepare documents for settlement of the bond issue with bond underwriter.
. Prepare contract between Housing Authority and Paying AgenUTrustee, Insurers,
or Credit Agencies.
. Prepare the non-arbitrage bond certificate for original bond issue.
. Represent Housing Authority at all meetings and proceedings regarding legal
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opi'nions related to the issuance of bonds.
. Advise Housing Authority during the financial planning stage regarding legal
matters related to the issuances of debt inCluding fees to be collected, cost
reimbursements, agreements and authorizations to be requested of State and local
government.
5. Underwriter for bonds.
. Sells bonds and prepares all related documents.
6. Rehabilitation project manager.
. Oversee rehabilitation working with City on permits, architect on drawings, and
construction contractors.
7. Asset manager. .
. Oversee property management staff or contracts.
. Prepare budgets and monitor. Prepare reports for Board.
. Handle tenant complaints not resolved by property management.
8. Property management.
. Leasing, maintenance, and on site management.
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Revenue (CDBG)
Expenses
Development Team
Bond issuance
underwriter discount
legal fees
underwriter, bond, issuer
engineer/appraisal
accounting
loan servicer
trustee
closing costs
credit enhancement
~ehabilitation Project Manager
Asset and property manag~ment
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ATTACHMENT C
$513,716
55,000
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445,8716 ($7,000,000 bond)
(part of project cost from
bonds)
(cost of projects)
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