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HomeMy WebLinkAbout1990-03-12 EHA MINUTES., . . I. II. III. IV. v. VI. VII. ENGLEWOOD HOUSING AUTHORITY Board of Commissioners Special Meeting March 12, 1990 'RECEIVED MAY -2 1 CALL TO ORDER The Special Meeting of the Englewood Housing Authority Board of Commissioners was called to order at 5:30 p.m. on Monday, March 12, 1990, at 3400 South Elati Street, Library Conference Room 2, Englewood, Colorado, 80110, by Chairman Thomas J. Burns. Members Present: Members Absent: Also Present: STUDY SESSION Thomas J. Burns, Chairman R. J. Berlin, Vice Chairman Roger Koltay, Commissioner Norleen Norden, Commissioner Bradley Zieg, commissioner None Paul Malinowski, Executive Director Janet M. Grimmett, Rehab Financial Spec. Mary A. Ryan, Recording Secretary There was no Study Session at this Special Meeting on March 12, 1990. MINUTES There were no minutes presented for approval at this Special Meeting on March 12, 1990. VISITORS There were no visitors at this Special Meeting. DIRECTOR'~ REPORT There was no Director's Report at this Special Meeting. DISCUSSION ITEMS, MOTIONS AND RESOLUTIONS The Chairman, Thomas J. Burns, stated that the purpose of this Special Meeting held March 12, 1990, was to review the financing of the WAND Project for the rehab work planned for the rental units. He stated the Executive Director (ED), Paul Malinowski, had some additional information the Commissioners needed to review; and for which there was not sufficient time to review at the last regularly scheduled meeting held February 28, 1990. EHA BOC Special Meeting 03/12/90 The ED stated that the Chairman had approached him concerning ways to hasten the rehab work planned for the WAND rental units. The EHDC must own the properties to be rehabbed before the rehab can commence; however, CHFA cannot disburse the loan proceeds until after the rehab work has been completed. Therefore, there is a time period where EHDC will own the properties (anywhere from four to six months); will have had to have closed on the properties with the EHA yet would have no money to pay the EHA for the properties. The ED stated that there were two options for the Commissioners to consider in order to work through this problem: Option No. l. The EHA could amend its sale agreement with EHDC (or execute a new sale agreement) to state that the EHA will carry the financing for a period of six months or one year or until the EHDC receives its permanent financing from CHFA and at whatever terms and conditions the EHA Board feels is appropriate. The ED stated that this would hopefully be at zero percent interest rate for the loan so that EHDC will not have to pay anymore money. He stated that the drawback of this option was the question of whether this action could be perceived as a violation of the arm's-length relationship between the EHA and the EHDC. Option No. 2, This option is more detailed than option No. 1, but does remove the question of violation of the arm's-length relationship. The ED stated that in talks with CHFA about this situation, CHFA was asked if they would be willing to disburse the permanent financing prior to the completion of the rehab work. CHFA stated they were committed to not disbursing the funds prior to completion of the rehab work. However, CHFA was willing to give the EHDC a "bridge" loan to, in effect, pay the EHA for the units at the time of closing and to hold the EHDC over until the permanent financing (from CHFA's bond sales) takes over on the properties. The ED stated that the drawback of this option No. 2, is that CHFA will charge interest on this loan, probably seven or eight percent. The ED stated that the EHDC would, obviously, have to pay this interest; and this amount could be as much as $15,000 for six months. The ED stated CHFA is very flexible about the repayment, and the interest could be rolled into the mortgage amount, but this would not work because the mortgage is based on the amount of income these units are projected to earn which in turn would not support a greater amount of debt service. -2- EHA BOC Special Meeting 03/12/90 The Chairman asked the ED if this situation had existed all along. The ED stated it had, but since the recent emphasis on an arm's-length relationship between the EHA and EHDC this situation was now creating problems. The ED stated that in the past, the EHA simply transferred the properties to the EHDC without worrying about a violation of the arm's-length relationship nor any payment; however, the EHDC now has to pay the EHA for the properties. With the sale agreement between the EHA and the EHDC for $447,000 or the CHFA mortgage amount {whichever is less), there is a contractual arrangement between EHA and EHDC with an actual transfer of funds to pay the EHA for these properties by the EHDC. Commissioner Zieg stated that the arm's-length relationship has already been established between the EHA and the EHDC. Chairman Burns stated that if the EHA is at arm's length to the EHDC already, and then an agreement is reached on financing, it does not lessen the arm's-length relationship. Vice Chairman Berlin stated that the financing is a way for the EHDC to pay for the properties they are purchasing from the EHA and does not pull the EHDC in closer than arm's length to the EHA. Vice Chairman Berlin stated as an example the dealings between a bank and one of their customers wouldn't be in violation of banking rules if the bank said because the customer is a preferred customer they get more favorable terms on their loans. He stated the same principle applies to the situation between the EHA and the EHDC in that the EHA is making it convenient for the EHDC to pay for the properties by making a zero-percent loan to the EHDC which does not violate an arm's-length relationship. Commissioner Norden stated that it seemed that if the EHA did not benefit from the arrangement this would create enough distance between the EHA and EHDC. Commissioner Zieg stated that once an arm's-length relationship was established, it did not require the EHA to do forevermore what good and sound business practices would dictate, especially in this situation. Chairman Burns stated that there seemed to be a difference between an arm's-length structural-legal association, and an arm's-length deal with a specific transaction that you have once you have established the arm's-length relationship. He stated that it was more crucial to establish the arm's-length structural-legal relationship in order to determine whether one entity has some control over the other board and thus could persuade or pressure that board as opposed to an individual deal which is made after this arm's-length relationship is established and which offers favorable terms. -3- EHA BOC Special Meeting 03/12/90 What interest rate the EHDC could afford to pay was also discussed. It was decided the EHDC could only afford to pay zero percent interest rate. Adding nominal points into the loan to cover administrative expenses was also discussed. It was decided to offer the loan at a zero percent interest rate to the EHDC with no points. MQ'.rl.Qli IT WAS MOVED BY VICE CHAIRMAN BERLIN TO AMEND THE SALE AGREEMENT BETWEEN THE EHA AND THE EHDC FOR THE TRANSFER OF THE FOLLOWING PROPERTIES: 3344 SOUTH LOGAN STREET 3316 SOUTH PENNSYLVANIA STREET 3350 SOUTH LOGAN STREET 3368 SOUTH PENNSYLVANIA STREET 3360 SOUTH LOGAN STREET 3380 SOUTH PENNSYLVANIA STREET 3370 SOUTH LOGAN STREET 3392 SOUTH PENNSYLVANIA STREET 3376 SOUTH LOGAN STREET 3375 SOUTH PEARL STREET 3396 SOUTH LOGAN STREET TO STATE THAT THE ENGLEWOOD HOUSING AUTHORITY WILL CARRY THE FINANCING ON THE SALE OF THE ABOVE-LISTED PROPERTIES TO THE EHDC AT ZERO PERCENT INTEREST WITH NO POINTS UNTIL THE EHDC RECEIVES ITS PERMANENT FINANCING FROM CHFA OR FOR A TERM NOT TO EXCEED ONE YEAR, WHICHEVER OCCURS FIRST. COMMISSIONER ZIEG SECONDED THE MOTION. Ayes: Nays: Abstained: Absent: · Burns, Berlin, Koltay, Norden, Zieg None None None The Chairman declared the motion carried. The ED stated that the next question to be discussed was the timing of the rehab of the WAND rental units. He stated this might be more in the hands of the EHDC, but one aspect the EHA can consider is the potential funding of the shortfall between the CDBG funds and what it will actually cost to complete the work. The EHA had told the EHDC to apply at two other sources for funding before coming to the EHA for funding of the shortfall. He stated the EHDC went to the Division of Housing (DOH) late in 1989 seeking funding for the rehab work. If DOH grants the EHDC funds to cover this shortfall, they will be granting this funding approximately June first of 1990. EHDC also had conversations with the McCauley Foundation as a second source and that was not possible because of the interest charged on a loan since they do not have a grant program. The ED stated the Board still has the option to loan the EHDC the shortfall if they so desire. -4- EHA BOC Special Meeting 03/12/90 The ED stated the EHDC also asked the DOH if they (EHDC) began the rehab work on these WAND rental units with the CDBG funds before the DOH decides who to grant their funds to, would that impair the EHDC's changes of getting funding from them (DOH). The EHDC received a letter back from the director of DOH stating they felt that starting the rehab with the CDBG funding would not hurt EHDC's chances of receiving DOH funding. The ED stated that if the Board desires to speed up the rehab process on the WAND rental units they could reconsider a loan of the shortfall funds. He stated that some of the contractors who gave the original bids are ready to go with basically the same prices they gave in their bids a year ago. He stated that by holding off to see what the DOH is going to fund (if anything) the rehab work will be set back approximately one to two months. He further stated that this would not be as "clean" as if the money were all DOH and CDBG funding. Commissioner Norden stated that the EHDC was not guaranteed that DOH was going to fund any of this project. She asked what would happen if the EHDC gets this rehab work started with the CDBG funds and the DOH decides not to grant any funds to the EHDC for this project. The ED stated that the work had been bid in groups of two and three houses, therefore the EHDC could sign contracts for the $150,000 CDBG funds and complete as much as possible with that amount. He stated that that DOH could grant partial funding at which time a decision could be made to cut back on some of the remaining rehab work. He stated that if DOH does not grant any funds at all, then EHDC would probably look for another source of funding to complete the work. The loss of another two months time before starting the rehab work was discussed. The ED stated that the EHA could recommend to the EHDC that they spend the CDBG portion now and get started with the rehab work quickly and hold off for sixty days to see what the DOH is going to grant, if anything. The image and the visibility of these houses to the public as well as landscaping of these units was discussed. Commissioner Berlin stated he felt strongly about landscaping being done on these units in order to make them look their best and also provide yards for the tenants. -5- . ,, EHA BOC Special Meeting 03/12/90 Discussion ensued regarding an offer made to the EHDC from the EHA which was then rescinded by the EHA in order to create an arm's-length relationship when the EHA told the EHDC to seek funding from two other sources before coming back to the EHA for the rehab shortfall. The ED stated he felt uneasy about guaranteeing the EHDC funding of the shortfall as this could relate to the arm's-length relationship which has been carefully established between the EHA and the EHDC. Commissioner Norden added that at the point the EHA guarantees the shortfall to the EHDC, it would lessen the EHDC's chances of receiving funding from DOH. She stated DOH sees itself as the financiers of last resort. She felt the EHDC would stand a better chance of receiving funding from DOH if they went to the DOH saying they had received funding from CDBG and have started the rehab work and that they {EHDC) really need the funding from DOH to complete the project. She stated further that if EHDC does not receive any funding from DOH then at that point the EHA could either loan the shortfall or encourage EHDC to seek the additional funds from another source than the EHA. The Commissioners decided that no motion was necessary on this subject. M Q ~ .I Q li IT WAS MOVED BY COMMISSIONER KOLTAY TO ADJOURN THE SPECIAL MEETING OF THE ENGLEWOOD HOUSING AUTHORITY BOARD OF COMMISSIONERS HELD MARCH 12, 1990. The Special Meeting of the Englewood Housing Authority Board of Commissioners held March 12, 1990, adjourned at 6:05 p.m. -6-