Fort Walton Beach Council agenda — 11-10-2009 - special — reading text

AGENDA CITY OF FORT WALTON BEACH SPECIAL CITY COUNCIL MEETING November 10, 2009 5: 00 pm CALL TO ORDER 1. APPROVAL OF AGENDA 2. SPECIAL PRESENTATIONS — 2. 1 Presentation and update on the Sound Side Housing Development. Synopsis: Staff will provide a summary of recent activities regarding this project. ( City Engineer /Building Official) ADJOURNMENT Quasi -Judicial —denotes that the item must be conducted as a quasi -judicial hearing in accordance with Florida Statutes Action- Direction — Discussion items may be acted upon by the City Council by either a motion with vote in accordance with Robert' s Rules of Order, or by a consensus of the Council. Any person who decides to appeal any decision made with respect to any matter at this meeting will need a record of the proceedings, andfor such purpose may need to ensure that a verbatim record ofthe proceedings is made, which record includes the testimony and evidence upon which the appeal is to be based. ( Chapter 286.0105 F.S.) The City of Fort Walton Beach adheres to the American with Disabilities Act and will make reasonable modifications for access to this meeting upon request. Please call City Clerk Helen Spencer at 850- 833 -9509 to make a request. For Hearing Impaired dial the City Hall TDD # 850- 833 -9925 or 1- 800 -955 -8771 ( TDD) or 1 -800- 955 -8770 ( Voice). Requests must be received at least 48 hours in advance of the meeting in order to allow the City time to provide requested service. City Council Special Meeting November 10, 2009  CITY COUNCIL SPECIAL MEETING November 10, 2009 Special Meeting Agenda Approval of Agenda Agenda Item Number: 1  CITY COUNCIL SPECIAL MEETING November 10, 2009 Special Meeting Agenda Presentation and update on the Sound Side Housing Development Synopsis: Staffwill provide a summary ofrecent activities regarding this project Agenda Item Number: 2  CITY OF FORT WANTON BEACH MEMORANDUM To: Robert T. Mearns, City Manager From: Timothy Bolduc, CBO, Building Official Through: Michael D. Beedie, P. E., City Engineer Date: November 5, 2009 Subject: Review of Sound Side Affordable Housing Project 1. BACKGROUND: 1. 1 In FY 2004 -05, the Fort Walton Beach Housing Authority (FWBHA) entered into an agreement with HomeCorp Affordable Communities, LLC to redevelop a FWBHA housing project commonly known as Germany Terrace, which is located at Carson Drive SE and Third Street SE. 1. 1. 1 The project included removing the existing 50 units and replacing them with a 200 -unit affordable housing project. The units would house families with an income level between 60 percent and 120 percent of the Area Median Income ( AMI). 1. 2 In April 2008, the City Council approved Resolution 2008 -19 authorizing the City to transfer 2.7 acres of land owned by the City within the Germany Terrace development to the FWBHA to include with the Sound Side development. 1. 3 Initially, the FWBHA applied for project funding via tax credits. The request was for a nine percent ( 9 %) tax credit, but after receiving a very low draw number, the project was " awarded" a four percent ( 4 %) tax credit funded by the Federal Home Mortgage Corporation, or Freddie Mac, which is a government- sponsored enterprise. When Freddie Mac experienced deteriorating financial conditions in 2008, the tax credit approach was no longer an option, and the FWBHA was forced to pursue a conventional loan. 1. 4 The FWBHA and HomeCorp approached the Department of Housing and Urban Development ( HUD) to pursue a conventional loan that would be insured by HUD through the Section 221( d)( 4) Program. 1. 4. 1 The Section 221( d)( 4) Program allows HUD to insure mortgage loans to facilitate the new construction or substantial rehabilitation of multifamily rental or cooperative housing.  1. 4. 2 The lenders for the Section 221( d)( 4) Program are required to be HUD approved. 2. DISCUSSION: 2. 1 In a Self Contained Appraisal Report, dated May 28, 2008, completed by Humphrey and Associates for the City prior to the transfer of the 2. 7 -acre parcel, the firm determined that the " demand for affordable multi -family residential rental properties remains strong in the subject' s effective market area despite the current downturn of the real estate market ". 2. 1. 1 The same report went on to state that the highest and best use of the property would be " multi- family residential development, such as an apartment complex" as the use provides a higher return on the underlying land than any other use analyzed ". 2.2 The property is located within the Community Redevelopment Area ( CRA) Sub - Zone 3 and is targeted to " propose a prototype for redevelopment of the Germany Terrace Housing Authority development ". 2. 3 A goal stated in the CRA Plan is to " provide a wide range of quality housing opportunities and choices for people of all income levels ". 2. 3. 1 The plan further lists as one of its objectives to " utilize Community Redevelopment Agency ( CRA) funding in a way that maximizes leveraging of other public and private funds for provision of attainable housing units throughout the CRA area, including rehabilitation of existing structures along side well- designed, new infill construction that preserves the character and values of each neighborhood ". 2. 4 The Sound Side Development will provide workforce housing and market housing within the same development through the allocation of units based on the income of potential residents. 2. 4. 1 Families earning 60 percent of the AMI will occupy 80 percent of the units, or 160 units. 2. 4.2 Families earning between 80 percent and 120 percent of the AMI will occupy the remaining 20 percent of the units, or 40 units. 2. 5 The estimated construction cost for Sound Side is $ 19, 948, 495, and the estimated funding shortage is approximately $ 2, 500, 000 based on the calculation of the Debt Service Ratio for the project per HUD' s requirements. 2.6 At the direction of the City Manager, Engineering Services staff began working with the FWBHA and HomeCorp to evaluate options to close the funding " gap ". 2-  26th, 2. 7 On October City Staff attended a meeting in Jacksonville with HUD, HomeCorp, and the FWBHA to discuss potential solutions for the gap in funding. At the meeting, it was determined that there were two ways that the City could contribute to the project to make it feasible. 2. 7. 1 The City could provide in -kind services that would increase the value of the property and therefore improve the FWBHA' s equity in the project to close the gap. The in -kind services include providing the labor and materials to construct the infrastructure for the development, including demolition, potable water, fire service, sanitary sewer, stormwater, site grading, sidewalks, curb and gutter, and paving. 2. 7. 2 The City could provide a grant in the amount of money needed to close the gap ". For this option, the City would provide the funding to the FWBHA at or prior to closing. 2. 8 The option to provide in -kind services for the demolition and infrastructure allows the City to utilize City personnel and resources to provide a greater value to the project with less of a cash investment, therefore resulting in a better return on the City' s investment. 2. 9 The estimated project schedule would allow the City to begin demolition within 26th six months from the October meeting with HUD. Work cannot begin on the site until a Firm Commitment is given by HUD for insuring the loan. The overall project schedule is listed below ( all timeframes are based on the October 26th meeting with HUD) : 2. 9. 1 45 days to submit the Pre -Application to HUD, including a revised market study 2. 9. 2 45 days for HUD review 2. 9. 3 30 days to submit the Firm Application 2nd 2.9.4 45 days for HUD' s review resulting in the issuance of a Firm Commitment from HUD 2. 9. 5 30 days to closing and issuance of the mortgage 3. FINANCIAL INFORMATION: 3. 1 To provide the in -kind services for the project, the City would be required to purchase the necessary materials for the infrastructure and site work, contract the demolition services via Invitation to Bid, and provide cash to the FWBHA for closing costs. The total preliminary estimate for the City to provide the in -kind services is $ 2, 000, 000. 3-  3. 2 The return on investment from the Sound Side Development includes the following items: 3. 2. 1 The closing costs, which are estimated at $ 160, 000, would be recouped by the City once the mortgage is issued. 3. 2. 2 The monthly revenue from services provided by the City, including water, sanitary sewer, stormwater, and solid waste, is approximately $ 8, 225. The annual revenue is $ 98, 700. This estimate is based on a minimum monthly water consumption of 2, 000 gallons per unit. 3. 2. 3 The FWBHA is exempt from paying property taxes. However, there is an agreement between the City and the FWBHA whereby the FWBHA makes an annual Payment in Lieu of Taxes ( PILOT) to the City. The development at 80 percent occupancy, using the rental rates provided in the project market study, would collect approximately $ 1. 6 million in rent revenue. At this occupancy level, the PILOT received by the City would be approximately $ 160, 000 annually. 3. 2. 4 HomeCorp' s typical occupancy goal is to have at least 80 percent of the units rented within six to eight months of project completion. 3. 3 The