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Date
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December 8,
2008
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Agenda
Item No. 22 Roll
Call No. 08-
Communication No. 08-719 Submitted by:
Larry Hulse, Community Development Director |
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AGENDA
HEADING:
Support a Low Income Housing Tax Credit Project for the rehabilitation of 150 units of low income family housing located near 1236 Oakridge Drive, referred to as the Homes of Oakridge Phase I, and authorizes staff to negotiate a HOME loan of up to $250,000.
SYNOPSIS:
Allows staff to negotiate with
ONS Ventures, Inc. (Robert Rafferty, President, Homes of Oakridge
Associates, L.P., an Iowa limited liability partnership, ONS Ventures, Inc. its
general partner,) with offices at 1236 Oakridge Drive, Des Moines, for a HOME loan of up
to $250,000 to fill a financing gap on a 150-unit rehabilitation project that
has applied for an allocation of Low Income Housing Tax Credits from the Iowa
Finance Authority (IFA). City Council
had approved a preliminary commitment of $225,000 in
HOME funds on October 22, 2007.
FISCAL
IMPACT:
Amount: $250,000
Funding Source: Special Revenue Funds HOME Grants –
SP036 CDD049900HOME Funds
ADDITIONAL
INFORMATION:
In
the 2008 round of Low Income Housing Tax Credits (LIHTC), the Homes of Oakridge
was allocated tax credits for rehabilitation of 150 units of existing low
income housing. By Roll Call 07-2077 on
October 22, 2007, the Des Moines City Council preliminarily approved a HOME
loan of $225,000 to the Oakridge Neighborhood Associates, L.P. for
rehabilitation of 150 units of low income family housing. The applicant requested a loan of $250,000 at
that time, but the City only had $225,000 of HOME funds available.
Unfortunately,
after signing a preliminary agreement with the National Equity Fund (NEF) for
tax credit syndication, NEF was not able to buy the tax credits. Oakridge has subsequently
submitted a new application to IFA for a larger amount of tax credits under the
new rules as established in 2008. NEF
has indicated that it plans to buy the credits if additional credits are awarded
but at a lower price range.
The
general partner that has been formed for the LIHTC project purpose is now ONS
Ventures, Inc. but the board of the corporation is still the same as the board
of the Homes of Oakridge. Robert
Rafferty, as the Chair of the Homes of Oakridge Board, is the president of ONS
Ventures, Inc. and will be the signatory on the agreements. The Developer is Newberry Development
Company, Frank Levy, President, 3408 Woodland Avenue,
West Des Moines. IFA now requires that
an experienced developer manage the development of the LIHTC project and
Newberry has experience with projects both in Polk County and other areas of
the state.
After
a preliminary subsidy layering review, as required by the HOME regulations, it
appears the rehabilitation project requires an additional $25,000 of HOME
funding to meet required Debt Coverage Ratios.
The City has available an additional $25,000 that can be provided to the
project which would increase the City preliminary commitment of HOME funds to
$250,000. The loan amount of $250,000 is
in compliance with a City Council policy adopted March 20, 2006 by Roll Call
06-569 that states up to $250,000 of funding can be provided to a LIHTC project
with all the money repaid to the City at a minimum 1% interest rate.
The
developer has also submitted an application for $900,000 of HOME funds to the
Iowa Department of Economic Development.
In the past, City and State Home funds awarded to projects have often
been administered through the City of Des Moines. This saves some duplication for the developer
and allows the City to receive the payments for both the State and City HOME
funds for use in future affordable housing projects. It also allows the City and State to
coordinate awards so that the minimum amount of funds is committed to the
project.
The
current pro-forma shows a $1.3 million developer fee which is the first place
staff looks before negotiating for HOME funds.
This developer fee is $500,000 less than the $1.8 million dollar maximum
fee that is allowed under the tax credit program. In addition, the national syndicators are
insisting LIHTC projects budget for a substantial developer fee because it is
the only true contingency the developer can use for problems with the
project. Generally, a developer fee is
reduced throughout the project as unanticipated issues arise. Of the fee, $44,000 is being deferred at this
time.
Lastly,
the developer fee will be split between Newberry Development and the ONS
Ventures, Inc. ONS will utilize the developer
fee it receives for operating programs at the Homes of Oakridge and investing
in the development and residents of the development. The Development Services Agreement is also in
the process of being negotiated between the two entities.
The
buildings of the Homes of Oakridge are 38 years old and in need of
rehabilitation and updating. Occupying
the 300 units of the entire complex are 982 residents and 488 children.
The
architects for the projects are attempting to return to the best parts of the original
design and also incorporate needed upgrades to the buildings. When constructed, three building types were
erected with interior courts connecting the structures. The architects are proposing rehabilitation
ideas that range in complexity. Some simple
ideas are proposed that should make a big difference in appearance such as
ensuring the gutters and downspouts match the color of the roof and introducing
warmer residential colors for trim.
Other ideas are larger and will involve correcting drainage issues,
replacing railroad tie retaining walls with stone, and reopening some paths
between buildings. Many of the concrete
stoops and wooden patios will be replaced.
Safety issues are also a concern including replacing door jams, a trim
that contains lead paint and repairing any ceilings or walls that contain
asbestos.
Finally,
accessibility issues will be addressed at Oakridge. For example, the existing laundry facilities
are being converted to units, added on to and converted to four and five bedroom
accessible units with two baths. Door
jams etc. are being adjusted for accessibility in some of the ground floor
units in existing structures.
NCS
staff believes this is an excellent opportunity to maintain affordable housing
near downtown. The improvements should
increase the overall function of the buildings while improving their appearance
for the general public and residents.
PREVIOUS
COUNCIL ACTION(S):
Date: October 22, 2007
Roll
Call Number: 07-2077
Action:
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Applications
to Iowa Housing Finance Authority requesting low income housing tax credits
for the following: |
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(B) Oakridge Neighborhood Associates, L.P.
for rehabilitation of 150 units of low-income family housing at 15th
and Oakridge Drive. Moved by Coleman to adopt. Motion Carried 7-0. |
BOARD/COMMISSION
ACTION(S):
Date:
October 1, 2008
Board:
Neighborhood Revitalization Board
Action: Approve $250,000 HOME loan for Homes of
Oakridge Phase I Rehabilitation
ANTICIPATED
ACTIONS AND FUTURE COMMITMENTS:
Approval of Loan documents with Iowa Department of
Economic Development and ONS Ventures, Inc.
For more information on this and other agenda items,
please call the City Clerk’s Office at 515-283-4209 or visit the Clerk’s Office
on the second floor of City Hall,