BAHT Meeting Minutes Aug 23 17CITY OF BEVERLY
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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
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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.).
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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
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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
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