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BAHT Meeting Minutes Aug 23 17CITY OF BEVERLY Board: Date: Location: Members Present: Others Present: Recorder: Adjournment PUBLIC MEETING MINUTES Beverly Affordable Housing Trust August 23 2017 Beverly City Hall, Conference Room "B" Chair Aaron Clausen, Mayor Michael Cahill, Treasurer Bryant Ayles, Clerk Sue Gabriel, Richard Dinkin Assistant Planning Director Darlene Wynne, Environmental Planner Amy Maxner, Massachusetts Housing Partnership (MHP) Shelly Goehring, Guest Don Preston, Guest Andrew DeFranza, Guest Bob Butterworth Donna Musumeci The meeting was called to order at 2:40pm Meeting Minutes: Clausen suggests postponing review of minutes due to presentations. Presenters: DON PRESTON - HABITAT FOR HUMANITY Preston brought two financial analyses for recent Habitat projects [locations kept confidential]. In both cases, affordable housing funds were used. Overall, Habitat families are in the 40 -60% income range, there are no singles, sell them at % interest. First property was acquired for $250K, the seller knew it was Habitat and agreed to the price. Went to the trust for funds, the building was torn down and two units are currently under construction. The AFT said the community had been working for 7 years and had not produced any affordable housing, so Habitat was invited in and located a property. The town had other properties but this came up faster and Habitat acquired it. Other monies involved are CPC funds, who put up 60% of the construction costs for two 2BR units. $250K came from the trust, $60K from the CPC, and the rest are loans which become grants. The second property was a result of inclusionary zoning formula. The community owns the land. Habitat paid $100 symbolically, transferred through town meeting and voted it for AFH. Looking at 4BR construction, tremendous need for families of 6 -7. Partnered with Essex Tech who is doing all the manual labor. They also have donations for paint, legal, work, architectural plan, appliances, and solar /thermal systems. The community has a consortium, gets a token amount of money and has a competition for the money; they are all grants. The buyer receives a loan from Habitat, looks like a conventional loan but is at zero percent interest. Other Business Preston has a request of Beverly CPC for $300K to be available for acquisitions for two affordable properties, but he said you're not going to get anything for $300K in Beverly, citing some recent examples. Preston noted sometimes a real estate agent calls with a short sale, or if Beverly Affordable Housing Trust Regular Meeting Minutes August 23, 2017 the city has several properties they would like to be rid of, but that doesn't happen often. He has not seen properties bequeathed either. He feels the Housing Authority has the capability to do much more in Beverly. He suggested the City could also have a critical home repair program and use CPC funds; there is much that can be done to keep people in their homes. ANDREW DEFRANZA — HARBORLIGHT COMMUNITY PARTNERS DeFranza also discussed two recent projects [locations kept confidential]. In the first community, only CPC money is available. Rental affordable housing in the state is driven by low income housing tax credit, allocated on per capita basis to states, per head. That goes to DHCD to allocate. In Beverly these funds are used at Harborlight House, Turtle Creek, YMCA, and North Shore CDC buildings. It represents about 60% of the budget and drives the rules and schedules. He noted the state also drives the vast amount of subordinate debt. In most cases, 80% of the deal will be under the auspices of the state. He noted that municipal role is to create leverage around local priorities and specifically on early small money and permitting/zoning. It sends a signal to the state that the City is interested and leverages additional funds; the volume of the money is less important than timing and the leverage. DeFranza also noted that the smaller the project, the more local money spent per unit. Those projects cannot access the larger pools of money. In the inverse, the bigger the project, the less money required from the municipality. Most of the money comes from the state in the form of tax credit equity and subordinate debt. And, the big money comes later; the local money has to come first. He notes to think of the Trust's power as leverage rather than carrying all the water. He notes that he prefers subsidy as a grant that is still bound by a deed restriction and an affordability restriction. But he acknowledges from the municipality's viewpoint, it is safer for them to take it as a subordinate loan. Clausen asked what the sources of local grants are. Goehring said CPC is generally done as a loan and recommended he talk with the City Solicitor. DeFranza said he has taken CPC money 5 times as a grant, but that doesn't mean it is correct in every situation. Goehring clarified that there is still a deed restriction and grant terms that would require repayment if not met. DeFranza strongly recommends pre - development money be structured as debt, even if you decide to grant it later. Goehring asked what the minimum units is with LIHTC. DeFranza said the LIHTC is always for rental projects and the state's official floor is 12 units. But practically he would not do one below 23 units and 30 to 35 units is most common. Dinkin asked if he observes a preference for larger over smaller projects. DeFranza answered yes, adding there's a new program called community scale projects for 20 or less units, noting they cannot use tax credits and have a cap of $LOOK per unit and $1M per project, which is effectively a 10 unit cap. The first project he discussed received approximately $20K per unit from the CPC [20 -25 units total] and was half - funded by state tax credits. In some cases you need leverage, in others you need cash. Goehring adds it depends on the need for the project, how much money they have, and the comfort level of the community. DeFranza recommends using local funds to negotiate with the state to agree with requirements (e.g. local preference, etc.). 2 Beverly Affordable Housing Trust Regular Meeting Minutes August 23, 2017 Cahill asks if DeFranza is seeing Trust funds in either of the projects. He agrees that they would go after either CPC or Trust money. If they just need leverage, they will ask for as little as possible. DeFranza walks through the deal for the first project. He mentions there are two types of tax credit: 4% and 9% equity, noting that 9% gives you twice as much money. 9% tax credit equity that people will compete vigorously for at the state level. Two recent rehabs in Beverly use 4% tax credits. They are transferable in a sophisticated commodity market. Another source of funds is the Federal Home Loan Bank (which is not a federal agency, he adds) — it's a source of money made available once a year for competition. It is a contingent liability, or a grant; but they do have the ability to claw back funds within 15 years. A third is subordinate debt with a zero interest loan that is used to guarantee the affordability; it comes from a variety of sources that are all in equal position. DeFranza advised the big money comes later, but you first have to show you have the local money, then comes regional, then federal. He noted it is important to take care of business at home before you go to the state. Think more about strategy versus actual money. He noted there is 60 cents to the dollar on tax equity. DeFranza discussed timing of getting state credits, noting it can delay projects, for years, waiting on funding round to be announced from the state and that the developer often has to be nimble. Gabriel asked whether the Trust should give money while the applicant is waiting for the state. DeFranza suggested the Trust should not give the money at that time. Gabriel expressed concern with allocating money that is spent for year(s). Ayles indicated he would hold the money aside so it wouldn't be spent. Mayor Cahill asked questions about the 40R project and timing. DeFranza noted that if they apply this December, the funds will not be available until another 12 months. He laid out the expected timeline of the process for the site in question. DeFranza explained the difficulty getting through in one round, but that he is optimistic for this project. Ayles asked DeFranza about the options to use this structure for mixed - income and /or private developers. He responded that they generally don't do mixed - income housing, but he indicated that the City could use the capital to deed restrict certain units. He noted that there may not be the money to incentivize a for - profit developer to do that, because they'd be giving up income over time. Other Business: Somerville's housing trust is discussed again. Goehring will ask Kelly Donato, a Housing Attorney in Somerville, for advice. Discussion ensued on multi - family units, using CPC funds for rentals or funding individual homeowners. Goehring mentions that the City has to be cognizant of issues related to access to fair housing and take caution with providing public funds when units are already occupied; the affordable units need to be provided in an open and transparent process. Goehring recommends a conversation with the City Solicitor. She notes that Somerville is looking to work with nonprofits to purchase 3 properties, then use CPC for rentals. She says it has to be an open process for finding tenants. With public funds, it is more cumbersome. Cahill notes there is a growing concern that older housing stock is becoming less Beverly Affordable Housing Trust Regular Meeting Minutes August 23, 2017 affordable but also is not being kept up. The goal is to improve the quality of the units and build in affordability. DeFranza notes you could finance it as a scattered site project, but would have to have site control of all the properties and it would be difficult to manage. Discussion ensued on funding process regarding rehab of 1- and 2- family properties using public funds. Looking at Somerville, members discuss if Beverly should consider a program with a nonprofit partner. DeFranza notes that triple- deckers and multi - families are the hardest to manage. Clausen asks how managing a rehab program might be easier for a non - profit. Clausen further noted that the City had a housing coordinator at one time who would manage rehab projects. DeFranza suggests a TIF -like solution, but it would have to be looked it. He also suggested buddying up with other communities, ideally share a person or infrastructure. DeFranza said could do an acquisition structure, use local money to pull in for certain things. Preston mentions the Housing Authority and that it has the ability to do more than it is doing now. He notes they have the experience and they income - qualify people and could be much more active. He notes that Habitat has a critical home repair program. They have used CPA funds to make critical repairs with deed restrictions in Peabody and Danvers. He added that most of these projects are under $15,000, with 15 -year loan terms. He notes that an important issue is efforts to keep people in their homes. Bob Butterworth, member of the public, mentions the efforts of the North Shore Community Action Program (NSCAP), which has funds available to help people with energy needs. Next steps: Clausen said this has been helpful with thinking how to structure the guidelines. Members suggested the guidelines have too much detail. We will reach out to Preston and DeFranza for feedback on ours. For the next meeting, we will draft something up at a very general level so that we may be able to entertain applications soon. Clausen wants to keep the momentum going until the guidelines are done. Staff will circulate draft guidelines before next meeting. Adiournment• Motion to adjourn by Gabriel. Clausen seconds the motion. The motion passes (4 -0). Adjourned at 4:00pm 4