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HomeMy WebLinkAboutHousing & Redevelopment Authority Minutes 11-19-2009APPROVED MINUTES PLYMOUTH HOUSING AND REDEVELOPMENT AUTHORITY NOVEMBER 19, 2009 PRESENT: Chairman Jeff Kulaszewicz, Commissioners Paul Caryotakis, Bob Stein and David Miller ABSENT: Commissioner Steve Ludovissie STAFF PRESENT: Housing Program Manager Jim Barnes and Office Support Representative Janice Bergstrom OTHERS PRESENT: Grace Management Representative Boedigheimer 1. CALL TO ORDER Chairman Kulaszewicz called the Plymouth Housing and Redevelopment Authority meeting to order at 7:00 P.M. 2. CONSENT AGENDA A. Approve HRA Meeting Minutes from October 22, 2009. B. Plymouth Towne Square. Accept October, 2009 housing report. C. Vicksburg Crossing. Accept October, 2009 housing report. D. Shenandoah Woods Apartments. Approve the restatement and amendment of the master Subordination Agreement and Estoppel Certificate for the Plymouth HRA's loan in the amount of $100,000. MOTION by Commissioner, seconded by Commissioner, to approve the consent agenda. Vote. 4 Ayes. MOTION approved unanimously. 3. NEW BUSINESS A. Vicksburg Crossing. Marketing Report. Housing Program Manager Barnes gave an overview of the staff report. Grace Management Representative Boedigheimer advised that it has been quiet in regards to leasing activities. She said there will be holiday open house at Vicksburg Crossing the weekend before Christmas, with carolers, holiday treats, and a fire out front. She said hopefully the open house would attract families who might be in town visiting parents. Approved Plymouth Housing and Redevelopment Authority November 19, 2009 Page 2 Commissioner Stein asked if the rents have been lowered yet for the units we discussed last month. Grace Management Representative Boedigheimer said yes, and anticipates a couple to lease one of the units at the lower amount. She added there was a late September open house with 15-20 people attending, and Grace Management is looking at planning events for 2010. Grace Management Representative Boedigheimer stated Vicksburg Crossing will start the new year very close to the projected number of units leased indicated in the 2010 budget. Housing Manager Barnes noted we are coming into the time of year where things are quiet, but believes we should do what ever we can to keep people interested. Grace Management Representative Boedigheimer said some one -bedrooms, and one large two bedroom remain vacant. Commissioner Stein questioned if the potential renters liked the reduced price or the two- bedroom unit. Grace Management Representative Boedigheimer said both factored in, plus they have friends residing in the building. Grace Management Representative Boedigheimer said she was unaware how long the potential tenants knew of the rent decrease. Commissioner Stein expressed surprise that the $75 reduction in rent made that much of a difference. B. Vicksburg Crossing. Long range financial update. Housing Manager Barnes said staff has been doing long range forecast projections for Vicksburg Crossing on an annual basis trying to incorporate actual expenses from the previous year to see where we are financially. Modifications for the TIF districts were approved by the HRA and will be presented to the City Council for approval. Different scenarios were used to project the future financial picture for the building. Housing Manager Barnes said it was reviewed using some HRA subsidy which is the tax levy and whether we need assistance annually from the TIF districts. Using the 3% increase in expenditures and revenues, Housing Manager Barnes predicted that in 2016 we would support the building financially. Housing Manager Barnes said by 2016 we would have an accumulation of reserve funds to maintain and meet our operating needs. He added that the bonds on this building were structured to escalate with time. He cautioned that it is difficult to project that far in advance because of many factors. Housing Manager Barnes said we anticipate a soft rebound with the market. He said if the market does go awry, we would have the TIF funds to fall back on as a stop gap measure, but only if necessary. He said they would request that City return any accumulated increment back to the county for redistribution if it is not needed by Vicksburg Crossing. Approved Plymouth Housing and Redevelopment Authority November 19, 2009 Page 3 Housing Manager Barnes also reviewed the scenario using a 3% income with a 5% expenditure increase. He said in this scenario, we would have to maintain some subsidy in the building throughout the life of the bonds. He said we would be short only in the final year. Housing Manager Barnes said with this scenario we would provide $80,000 of annual subsidy until 2035, and then we would show a negative of $35,000 for the final year of the bonds. Housing Manager Barnes reiterated we have been conservative with our budgets, and Grace Management has done a good job preparing the budgets and keeping our expenditures down. Commissioner Stein asked why expenses would grow faster than revenue. Housing Manager Barnes said when building a proforma for financing purposes, it is typically to use a budget that increase 2 or 3% on the revenue side and 4 or 5% on the expenditure side. We used a worse case scenario if expenses outpace market. We determine whether or not to recommend rent increase for approval for annual budgets based on what the market is doing. Housing Manager Barnes said if the market is flat with a lot of inventory, we may not be able to recommend a 3% increase. He said this proforma was created for Vicksburg Crossing because there are so many factors and variable that can change year to year. Chair Kulaszewicz said a critical assumption is the level of occupancy we start at before we increase the rents by 3 or 2%. He said he recalled after doing projections two years ago, it did not take a significant change in revenue assumptions to place the building in a deficit position. Chairman Kulaszewicz said we seem to start out with a projection using a high occupancy rate that is not really there, and historically with both Plymouth Towne Square and Vicksburg Crossing we have not had 3% rent increases annually. Housing Manager Barnes clarified the increase has been close to a 3% average at Plymouth Towne Square. He said Plymouth Towne Square did not have rents increased for seven years, and then experienced a 6-7 % increase to reach market rate. Housing Manager Barnes said at that point there was a commitment to review the rents annually, and minimum rents are moved up when appropriate. Chair Kulaszewicz said in his opinion the actual result over time for an increase in expenses would be more likely the 5% increase. Commissioner Caryotakis said as we pay down debt, we should be building some equity. He said the principle payments rise over time, and he asked about breaking even and refinancing. Commissioner Caryotakis asked about the costs of refunding the bonds. Housing Manager Barnes stated the cost to refund would be around $25,000 to $30,000. He said there is a ten year call date on the Vicksburg Crossing bonds, which means we would need to wait until 2015 to consider a refunding of the bonds. Housing Manager Barnes indicated that we would incur a substantial penalty if we tried to refund the bonds or sell the building prior to the 10 year call date. Approved Plymouth Housing and Redevelopment Authority November 19, 2009 Page 4 Commissioner Stein asked when year ten occurs, and said he didn't know it was an option to sell. Housing Manager Barnes said 2015, and said the question has been asked if we could ever sell these buildings. He said within certain perimeters we could. The downside is we are struggling with Vicksburg without a subsidy, and the private market would most likely request some subsidy to continue operate the building with low-income units. Without that subsidy, the City would lose our goal of affordability in the building, especially at Plymouth Town Square. Commissioner Caryotakis said it is ideal to hold the buildings, as things will only get more difficult for people on fixed income. Housing Manager Barnes said our financial consultants review all of the City and HRA bond issues periodically to determine if a refund can be done and if it will be beneficial. The City Council recently acted on two bond issues, because rates came down and saved some where in the neighborhood of $40,000 — $50,000. Housing Manager Barnes said in 2004 we did refund Plymouth Towne Square bonds, which were issued in the 1990s with 6% rates, and had substantial savings without increasing the term. Commissioner Stein asked what percent occupancy the revenue is based on. Housing Manager Barnes said the 2010 projection is based on 96% occupancy, or 90 units. He said we have 85 units rented now. Chair Kulaszewicz asked if the TIF for the tax levy is for the district boundary we recently approved modifications on. Housing Manager Barnes said it is referring to the two TIF districts TIF District 7-6 and TIF District 1-1, and reiterated both TIF districts would be used if needed only as last resort. Chair Kulaszewicz said the $80,000 shortage is the portion that appears as the HRA portion tax levy on the Plymouth resident's taxes. Housing Manager Barnes said we are not increasing our levy from last years. We are simply dividing the portion of the levy for the senior building differently in 2010 with $100,000 for Vicksburg Crossing. Plymouth Towne Square has more subsidy from the tax levy which is 240,000 per year. He noted that building is programmed differently from Vicksburg Crossing, as these are almost all affordable units based on 35% of a tenant's income. Commissioner Cartyotakis said he hopes as things improve with this project and as the economy improves there might be other opportunities for the HRA board to review for future projects. Housing Manager Barnes said staff always looks for potential projects to bring before the board as developers come forward and talk about their projects. Approved Plymouth Housing and Redevelopment Authority November 19, 2009 Page 5 Plymouth Resident Cheryl Jensen attended the HRA meeting and said she was interested in how the HRA Board operates. Housing Manager Barnes said he would be happy to talk with her outside of an HRA meeting if she had any questions. 4. ADJOURNMENT MOTION by Commissioner Miller, seconded by Commissioner Cartyotakis, to adjourn the meeting at 7:25 p.m. Vote. 4 Ayes. MOTION approved unanimously.