ASHLAND HOUSING COMMISSION
OCTOBER 22, 2003
CALL TO ORDER - Chair Andy Dungan called the meeting to order at 4:07 p.m. Other Commissioners present were Matt Small, Joan Legg, Chris Oswald, Kim Miller and Larry Medinger. Staff present were Gary Collord, Brandon Goldman and Derek Severson.
APPROVAL OF MINUTES - The minutes of the September 24, 2003 meeting were approved as presented.
Jennifer Henderson of the Ashland Community Land Trust (ACLT) reminded members of the land trust event taking place October 30th at the Mobius Gallery. She also discussed the recent article on the land trust.
CDBG 2004 RFP EVALUATION
Goldman noted that there were two proposals to be considered. He explained that there was a $93,000 reallocation of unexpended funds leading to the approximate $285,000 CDBG grant for 2004. He stated that the two proposals were from the ACLT for a duplex on Grant Street, and from the Rogue Valley Community Development Corporation (RVCDC) to purchase land for a 16-unit townhome development. Goldman explained that the ACLT proposal would be to serve those at 80% of median income while the RVCDC proposal was at 80% with 5 units at 50% or less under Housing and Urban Development (HUD) guidelines. Goldman clarified that the total presented was based on last year. He stated that the amount fluctuated from year to year and that the city would have exact numbers in January. Goldman stated that he would present staff's impressions of each application.
Goldman discussed the ACLT proposal, noting that the site was less than ¼-acre with an existing duplex. He noted that there was some question of this project serving those at 80% of median income; he explained that while one tenant was clearly below 50% of median income, the other tenants were a retired couple earning $35,000 per year which exceeds the $31,700 guideline for a two-person household. Goldman questioned whether this would satisfy the HUD requirement that 51% of units be affordable.
Goldman pointed out that this would be a voluntary, arms length transaction at fair market value, and that the owner was willing to sell. He added that the staff report includes the strengths and weaknesses of each proposal, and he stated that in this case the proposal meets the need for affordable housing and rental housing, and retains existing affordable housing for current residents. He noted that if the property were sold to other buyers, rents would be raised and the tenants displaced. He explained that if the ACLT purchased the property, the land would be affordable perpetually. He stated that staff would recommend a minimum required duration for affordability, and he added that staff did not feel this would present a problem given the background of ACLT. He noted that CDBG only recommends a five-year requirement for affordability. He reported that no land use action would be required for this proposal.
Goldman reported that the weakness here was in the limited fund match by the ACLT. He explained that the ACLT was proposing a fund match that amounted to only 4.2%. He suggested that the needed to be increased through donations or other commitments, and he added that a 10% fund match as a requirement in the City's Consolidated Plan. ACLT's Jennifer Henderson confirmed that they could manage the 10% match. Goldman stated that this application also proposed a limited number of units, 2 versus the 16 proposed by RVCDC. He noted that the number of units was also small relative to the total project cost. He added that the applicant recognizes this in their application, and he pointed out that the project would be debt free. Goldman suggested that ACLT look at lowering the affordability threshold to 50% of median income from the 80% proposed.
Goldman discussed the ACLT proposal to use CDBG funds for relocation costs and rehabilitation of the structure. He noted that these constitute separate CDBG actions that make the application more complex, and he pointed out that if these items were removed from the total cost, the applicant's match would approach the necessary 10%.
Medinger questioned why the applicant was not using leverage, such as an equity loan to get more money for the ACLT. Goldman recognized that leveraging is seen as giving "more bang for the buck," but he stated that no other alternatives were proposed. Goldman noted that the commission could recommend funding one or both of these applications. He reiterated that the commission could recommend that the council split the award if it was believed that both applicants could complete their projects with less money.
Medinger stated that the lack of paid staff has long been an issue for ACLT; he stated that one-time vesting in a project like this might bring enough income to hire staff. Goldman agreed that the monthly rental income would go into ACLT coffers and as such must be considered by the commission. He emphasized that this would provide a perpetual benefit to ACLT. Goldman added that the staff recommendation to look at addressing tenants at 50% of median income would affect the rent and thus this benefit.
Dungan questioned whether Medinger was in any way tied to either of the applications before the commission tonight. Medinger confirmed that he was not involved in either and would not be in the future. Medinger and Legg stated that they were board members of the Creative alternatives Foundation, but both stated that they had no financial or personal interest regarding the RVCDC proposal. Each confirmed that they could evaluate the proposals without bias.
Medinger noted that he had served on the Housing Council, and he stated that this made him question the appraisal of the property in RVCDC's proposal. Medinger stated that he had verified with the council that the project could not be done at the funding level proposed. He noted that just a few years ago, the appraisal on the site was $20,000 per unit. He explained that allowing for a 5% annual increase, a current appraisal would be approximately $22,500 per unit by his estimation, or $360,000 with 16 units. He suggested that this was an important missing piece in the RVCDC proposal, and he added that he felt it needed to be dealt with here or the proposal would ultimately be rejected.
Miller noted that the relocation expenses listed by ACLT were specific and he questioned the rehabilitation costs. Henderson responded that these costs are not as clear as inspections have not been done. She stated that relocation might not be an issue. She added that it had been determined that the windows in the structure were double-pane. She emphasized that ACLT's goal in this proposal was to preserve existing affordable housing. She clarified that ACLT believed that both tenants qualified under affordable housing guidelines, and she added that when the existing tenants moved the rents would be lowered to address low or extremely low income tenants. She emphasized that if the existing tenants did not qualify relocation would be necessary, but she added that if the tenants' income were right on the margin ACLT might make an exception if this were allowed. Goldman pointed out that since the tenants were retired and on a fixed income, they might qualify as the median income levels were adjusted. Henderson reiterated that the opportunity here was to save existing affordable housing. She stated that given time, ACLT could come up with the required 10% fund match. She recognized the issue of providing two units versus sixteen.
Dungan asked how much rental income would be involved here, how it would be spent, and how much financing could realistically be expected. Henderson reported that the ACLT's Garfield property carries a debt of $105,000 on a value of $800,000. She explained that they are not allowed to carry more given the maintenance costs and the low rents. Dungan suggested that 12-25% of the value could likely be carried in debt here, as well. It was noted that the rent here is currently $795 minus maintenance, taxes and insurance. There was discussion of whether ACLT is required to pay property taxes, with Henderson indicating that she believed ACLT still paid taxes on its other properties. Medinger suggested that he felt it likely that $50,000 could be financed on this property.
Oswald questioned the timeframe involved with tonight's discussion. Goldman stated that the commission's recommendation would go to the city council on November 4th and a draft would be prepared by November 15th, leaving 45 days until the end of the program year. He noted that a recommendation was needed tonight so that the council would have it for consideration in their decision on the 4th.
Dungan/Legg m/s to direct staff that in the future, all CDBG proposals be presented at the commission's September meeting. Voice vote: All AYES. Motion passed.
Goldman pointed out that this year's September meeting had been to address modifications to the Action Plan.
Miller asked and Henderson confirmed that the ACLT would be managing this property. Henderson noted that the appraisal was $270,600. She added that while they do not yet have a committed benefactor ACLT believes that this will happen. She clarified that the proposal involves two, 880 square foot, 2-bedroom, 2-bath units. Miller expressed his support but stated that he had concerns with the per-unit cost and the lack of leverage.
Henderson responded that the three week turnaround given to prepare and submit the application process was an issue. Dungan urged staff to provide at least four weeks, and to pre-publish announcements to keep potential applicants aware that this would be occurring next September to allow them time to better plan and prepare. Goldman stated that this would be noted at the council discussion, and added that notice could be provided to all agencies. He suggested that staff would prefer not to place a display ad, however, given the high cost. Legg suggested that a planning calendar for the commission would be helpful. Dungan concurred.
Henderson addressed the high per-unit cost issue by noting that ACLT could promise that their proposal could be completed in January with no loose ends. Dungan questioned whether any other funds were available elsewhere. Miller recognized that the appeal of this proposal was the ease of getting it on the ground and running quickly. Henderson pointed out that the potential relocation cost for the non-qualifying tenant was $11,000 over four years. She stated that while this was not in the budget, it might well be able to come out of the renovation budget.
Duane Murray, vice president of RVCDC, and Andrea Miranda, staff person for RVCDC, introduced themselves.
Goldman gave a brief summary of the RVCDC proposal. He noted that they propose to use $285,000 for land acquisition at 631 Clay Street. He explained that their proposal was for a 16-unit townhome development. Goldman reported that the application involved: partitioning the rear half of the property to separate it from the church; purchasing ¾ of an acre of R-1-5 land; and changing the zoning to R-3 to allow for the proposed 16-units. He stated that the applicant had met and discussed the proposal with staff, and he noted that there were no obvious issues. He added that the applicant had not made any formal submittal to the planning department at this point, and he pointed out that the proposal was beyond the density approved in the previous proposal for this site. He also noted that the previous zone change approval was project specific.
Goldman stated that he felt that this proposal met all city and national objectives. He pointed out that the proposal for 5-units at 50% of median income was a clearly eligible use of CDBG funds. He noted that staff concerns were with the necessary planning hurdles and the other current projects being undertaken by RVCDC. He explained that this proposal involved mutual self help USDA 502 loans for the unit owners, and he clarified that the owners would take out the loan for construction with oversight by RVCDC. Goldman added that the owners would have sweat equity in providing 65% of the construction labor themselves. He stated that the owners needed to qualify for the project. He also noted that the project meets an urgent need, is an efficient use of land, and is near both a park and transit stops. He recognized that the proposed targets meet city requirements, and he added that there was a proposed cap at 35% of income for house payments. He stated that this was a comprehensive program that would give skills as well as housing and provide a true sense of ownership.
Goldman noted that the project cost was $1.944 million, with CDBG funds accounting for only 14.6% of that total. He suggested that the weakness of the proposal was that there was still $1.66 million to be secured, and that only $52,000 would be coming from RVCDC. He noted that the balance was dependent on competitive awards by the USDA. He also expressed concerns with the zone change process and the project phasing. Goldman questioned if Phase 1 was tied to Phase 2; Murray responded that it was not.
Goldman noted that there was a provision for 20-year affordability. He stated that this would enable owners to recapture their sweat equity after a 20-year commitment. He questioned the administrative capacity to oversee multiple projects given the eight units underway at Siskiyou and Faith, and he stated that if Phase 2 were delayed in may push the project out of the CDBG program year. He added that there is also another project underway in Medford, and suggested that the readiness to begin immediately was a concern. He concluded that the lack of date specificity in the proposal and the possibility for a delay concerned staff.
Goldman clarified for Miller that the window for completing the project for HUD was within 12 months of the award. He emphasized that HUD would not favor a purchase followed by 12 months of inactivity. Goldman reiterated that an award contract would set benchmarks from the award all the way to the occupancy date, and would require constant evaluation throughout the project. He added that the proposal was for 8-units per year for two years, and stated that if there was one year with no activity HUD would look at recapturing funds.
Goldman suggested that staff felt the zone change request would receive favorable response given the previous application for this site. He stated that he felt the applications to be comparable, but he added that it was difficult to say with any certainty how the planning commission would rule.
Legg questioned item 10 in the proposal stating that 5 of the 16 units would be for very low income tenants, at or below 50% of median income. Goldman noted that item 2 suggested that 40% of the units would be at 50%. Murray clarified that the proposal was to acquire the land and build 8-units per year. He stated that the 40% was to apply to the total of 16 units. Miranda added that the goal would be for 6 of the 8 units built each year to be at or below 50%, with a total of 12-units at this level over the two years. She stated that in any case, a minimum of 7 units would be at 50% of median income or less.
Legg inquired about the proposed $10,000 per unit recapture to the city if units were sold. Murray and Miranda indicated that they were uncertain of the logistics, but he stated that if a soft second mortgage were carried this would be possible if the property were sold to other than a qualified applicant. Murray stated that 20-years seemed a comfortable affordability requirement although only 5-years was required. He stated this should preclude challenges while providing some incentive. He added that 25-years might be possible, but he felt that it got questionable at that stage.
Murray noted that Self Help is encouraging to work with, and he stated that they would be hiring three new staff members. He pointed out that there had been fifty people interested in the program at three presentation locations in Talent, Medford and Ashland. He suggested that they are well-positioned and that the land acquisition will be the hardest part. He added that Phase 1 is giving them valuable experience.
Miranda added that Self Help has been in existence since 1971 and is well-guided. Murray stated that a typical timeline is 9-months per unit for construction. He noted that owners do not do electric, plumbing or mechanical work, but they each work 35-hours per week under the guidance of an experienced contractor.
Legg asked whether the $360,000 federal grant discussed in the application was conditional. Miranda explained that lots of hand holding was necessary. She stated that they have prepared a pre-application, and it was conditional upon submittal of their pre-application in 1 ½ weeks. She added that this would provide 15% of the total to administer the program out of Rural Development funds. She noted that Self Help was a separate program. Goldman pointed out that staff would consider this award to be tentative, not conditional or secured. He noted that both Medford and Central Point no longer qualify as rural and are ineligible for Rural Development funds. There was discussion of whether Ashland's increasing population would exclude it from this program.
Miller noted that he spent a week in New Orleans with Self Help looking at their program. He suggested that it was somewhat scary to consider that the project was dependent on 8 families who all must be eligible by both their income levels and their credit rating and that all must work at the same rate. He expressed concern with starting Phase 2 before Phase 1 was complete. Oswald questioned whether the 502 loans were competitively awarded. Miranda suggested that there was only one other program in Oregon. Miller added that he did not believe they would be very competitive, and he stated that the loans seemed to be less of an issue than finding eight willing, able and qualified owners. Murray explained that all owners work on all units and all wait to move in until the last unit is completed. He added that the process educates the owners about building and maintaining their homes and also builds a sense of community within the project. Murray also clarified that $1.1 million of the total project cost came from the 502 loans.
Medinger noted that the purchase price in the proposal is given as $675,000 which equates to $41-$45,000 per unit by the raw land cost. He emphasized that this was well beyond any appraisal that would be made in Ashland. He suggested that this was a major issue as any money awarded would wind up coming back to the commission since federal monies cannot be spent on property in excess of the appraised value. He emphasized that the regulations are clear on this matter. He questioned how the applicants had arrived at the $675,000 figure. He reiterated that even if the 16-units were zoned R-2 and appraised at $22,500 per unit it would only merit a $360,000 raw land cost. He noted that the appraisal would be less for R-3 zoned land. He stated that $360,000 was absolutely the highest defensible price for this land.
Medinger went on to state that if commissioners were good with the ACLT proposal's higher per-unit cost, he found it to be a more valid proposal. He noted that if RVCDC has $390,000 they could buy this property for $360,000 and get underway. He emphasized again that the $675,000 price used in the proposal relied on inappropriate numbers.
Goldman clarified that the applicants would need to demonstrate that they were paying fair market value, and he agreed with Medinger that if the purchase price was over market value then CDBG funds could not be used. Medinger stated that this purchase price was simply not possible in this market. Murray responded that the $675,000 purchase price was arrived at working with a Medford realtor.
Goldman noted that if there were no recommendation tonight, no action plan could be sent to HUD. He added that the city has requested and received a grace period extension before. Dungan expressed his concern with the lack of time. He stated that he was frustrated by the energy here not being served by the process. He noted his interest in the RVCDC proposal, but he also recognized that he would like them to have the experience of completing Phase 1 first. He added that he wanted ACLT to be successful. He suggested that making a decision now at the eleventh hour would be wrong as it was being done because it had to. He added that at this point, he was leaning toward ACLT.
Goldman noted that if RVCDC could renegotiate the land acquisition price back to market levels there would be no issue, and if they were unable the funds would ultimately come back. He suggested that commissioners base their decisions on the merits of each application and let the land price work itself out. He added that if RVCDC was unable to renegotiate, they might be able to give some indication of this at the November 4th council meeting.
Miller stated that he would like a decision tonight as a good model of decision making. Goldman concurred and added that any delay would not be considered to demonstrate expeditiousness by HUD.
Legg questioned previously-awarded CDBG funds. Goldman stated that staff has recommended that the remaining $13,800 originally awarded to RVCDC for pre-development costs on the Siskiyou site be retained by RVCDC. He added that since the planning/administration costs, representing 20% of the yearly award, have been reached these should be redirected to public facility improvements benefiting the Siskiyou site, such as curb, gutter and sidewalks. He noted the reallocation of funds from the Pines to Siskiyou, which resulted in a reduction of $161,000. He stated that what was left was next year's award and $120,000 on Hersey Street. He noted that there was a need to address the relocation issue with a tenant who moved in after the award and may require assistance for relocation. Additionally, Goldman mentioned that the Pioneer Hall bathroom remodel noted in prior action plans as an accessibility improvement is moving forward at a cost of approximately $15,000. CDBG funds were previously awarded to this use.
Oswald stated that she could go either way; she suggested that she would like to take a creative risk and take a bigger bite. She recognized that the two ACLT units would have a definite and immediate human effect now.
Medinger suggested that ACLT could seek a $50,000 loan, and the commission could award $50,000 to RVCDC which they could use along with their $52,000 to leverage the purchase of Clay Street.
Small concurred with Miller on the need to reach a decision tonight. He agreed that the land cost at Clay Street seemed too high. Murray indicated that he felt the seller was negotiable, but he added that he was not sure how much so. Legg questioned if Systems Development Charges (SDCs) would be an issue; Goldman responded that SDCs are forgiven on affordable housing projects.
Dungan stated that he would like to find a way to do both projects.
Small questioned whether other funds RVCDC was depending were CDBG-conditioned. Murray stated that he was not sure. Miller stated that he didn't feel it would be an issue with leveraging funds, and he noted that applicants are simply encouraged to seek funding from as many sources as possible.
Goldman confirmed for Small that the commission could recommend a split award to the council. He added that the council would verify that this would work for both applicants. He emphasized that things come back to the time crunch. He noted that the applicants might be able to revise their proposals for council prior to the November 4th meeting.
Medinger questioned whether this commission could commit future funds. Goldman stated that the commission could recommend that the applicants reapply in a subsequent year. He added this might end the project, but it might not. Medinger stated his feeling that RVCDC did not need the $285,000. He questioned the application timeline. Miranda responded that they would submit their pre-application in 1 ½ weeks, and would have word on the full application by February. She went on to note that from there, they would hire staff and move ahead. Murray noted that they need to complete 8 more units as part of Phase 1.
Medinger stated that he would like to help both projects, but he emphasized that he did not want to derail ACLT. He reiterated that he would like to help ACLT without abandoning RVCDC. Medinger suggested a secured option on a fair market deal, then trying to finalize the project with next year's award. Medinger added that he would say that the commission could be 99% positive next year, but he pointed out that the commission could not commit fully given the potential for other applications and the question of fund availability.
Legg stated that she did not feel that $675,000 was the actual value. She added that if the property could be acquired at market value she would recommend RVCDC for the award. She noted that otherwise, she would recommend that council consider the higher per unit cost of the ACLT proposal.
Legg/Dungan m/s to extend the meeting past 6:00 p.m. Voice vote: All AYES. Motion passed.
Miller suggested that it was impossible to please everyone, but it was very possible to cripple both proposals by trying to help both. Oswald noted that she would like to see a recommendation to encourage both through a financial award in some way. Oswald exited at 6:00 p.m.
Goldman emphasized that pre-development costs had been found to be ineligible for CDBG funds. Miller stated that he would prefer to make the award to ACLT with some caveats. Murray stated that $50,000 might help keep the property available for another year, and he added that he could answer this for certain by the November 4th council meeting. He emphasized that in any case, RVCDC needed another 8 units. Medinger stated that what would really help would be a certified appraisal for $675,000. He stated that he was nervous about advanced funding.
Goldman pointed out that if the city were found to be "untimely" in 10 days, all unexpended funds would be recaptured by HUD in 12 months, in November of 2004. He reiterated that all monies would be recaptured. Goldman also explained that a split award made the already complex project administration that much more difficult. He stated that staff time would be doubled, and he added that there was monitoring to be done, environmental reviews to be completed, and that a split award would tend to magnify any glitches experienced in the process. Goldman also pointed out that more CDBG money may be unavailable to RVCDC in the coming year if the property were already acquired.
Legg questioned whether a split award would be adequate for both applicants. Henderson stated that she empathized with the commissioners for the difficulty of decision, and she expressed her support for RVCDC. She suggested that the ACLT could ask the property owner to contribute through financing, and she noted that they could also look to other funding sources to supplement a split award. She explained that they needed to get inspections before they could establish the true cost of the project, and she added that they do not have funds to pay for inspections at this point. She pointed out that if the property were not purchased, it would go on the market and the tenants would likely be displaced.
Medinger noted that ACLT is an all volunteer group without a budget; he suggested that this award could be a step toward funding staff. He stated that this fact might well overcome the concerns with unit cost by having a stabilizing effect on the ACLT organization. Henderson recognized that the $6,000 rental income might be sufficient to hire an occasional grant writer, but she added that they would likely use the income to maintain the rental and to leverage funds to purchase another property.
Dungan suggested giving RVCDC the funds to leverage their purchase, and the remainder to ACLT to do what they need to do. He added that the commission could stipulate in their recommendation that if RVCDC could not use the funds to this end, the full award should go to ACLT. He expressed his regret at the idea of losing the opportunity presented by the Clay Street site.
Goldman suggested that a $50,000 award to RVCDC was too high for an option; he stated that $2,000 had been an acceptable amount for an option on Faith and Siskiyou. He added that CDBG funds could not be used to acquire an option.
Legg/Dungan m/s to recommend that CDBG funds be awarded to RVCDC for the Clay Street project if the property could be purchased at its appraised value, and if the property could not be purchased for this price, to recommend the full award to ACLT. Discussion: Legg noted that she was proposing the award go to the Clay Street purchase if it could be made within the appraised value and if not, the full award would go to ACLT. Dungan suggested that there could be a short time frame to get the funding back if the purchase fell through. Goldman stated that the motion could also stipulate an appraisal. Murray questioned whether it would need to be an MAI appraisal. Medinger stated that such an appraisal would cost roughly $2500, and he added that they would need to ask to have it rushed. Medinger indicated that he might be able to suggest an appraiser who could do this. There was discussion of the need for certified appraisers rather than realtors, and Medinger suggested that Evan Archerd might be someone to contact. He added that RVCDC might have a sense of how things were going to go by the November 4th council meeting. Goldman questioned whether a set timeframe for an appraisal would do anything to the availability of the property being sought by ACLT. Voice vote: Legg, Medinger, YES. Small, Dungan, and Miller, NO. Motion failed 2-3.
Small questioned whether the RVCDC project could be postponed one year. Murray stated that it could not, and he added that he felt that the ACLT proposal was a fine idea that keeps two tenants in their homes right now. Small added that he could approve the ACLT proposal, and that he did not see a compromise happening although he sees the merit of the RVCDC proposal. He emphasized that awarding them $50,000 now would likely prevent further funding for later land acquisition.
Small/Medinger m/s to grant the full award to the Ashland Community Land Trust. Discussion: Dungan recommended that ACLT look at options to leverage funds and bring funds back if possible. Goldman stated that ACLT could lessen their award voluntarily once true costs were determined. Dungan stated that the city could then immediately issue an RFP for those funds again. Voice vote: Small, Miller, and Medinger, YES. Legg, Dungan, NO. Motion passed 3-2.
Dungan suggested that this award could be amended to note that if the ACLT could leverage funds, the money come back and be redistributed through the RFP process. Collord questioned whether an award to the ACLT would be creating any issues with HUD over the high per unit cost.
Medinger exited at 6:35 p.m.
Commissioners thanked Collord for his service and wished him well.
Dungan noted that next month's regular meeting was the Wednesday before Thanksgiving Day; he requested that staff look at room availability and reschedule the meeting to one week earlier, on November 19th at 4:00 p.m. He asked that members be e-mailed to confirm this schedule change.
ADJOURNMENT - The meeting was adjourned at 6:37 p.m.
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