Travis County Commssioners Court
October 21, 2003
The Closed Caption log for this Commissioners Court agenda item is provided by Travis County Internet Services. Since this file is derived from the Closed Captions created during live cablecasts, there are occasional spelling and grammatical errors. This Closed Caption log is not an official record the Commissioners Court Meeting and cannot be relied on for official purposes. For official records please contact the County Clerk at (512) 854-4722.
Housing Finance Corporation
Now let's call to order the [multiple voices] Travis County housing finance corporation. 1. Consider and take appropriate action on the following: a. A budget transfer; and. B. Payments to Travis County for accounting and administrative services.
>> on item a, I'm requesting approval to trans -- 995.02 from allocated reserve to the line item called contract Travis County and that is so that that line item will have sufficient funds to pay the amount to Travis County and the reason for the transfer is that when we prepared the budget, the ending fund balance estimate was lower than the actual ending fund balance.
>> so moved.
>> second.
>> is that a and b.
>> just the a.
>> a, yes, sir.
>> any more discussion of a? And a motion. All in favor? That passes by unanimous vote.
>> and then on b, I'm requesting approval for the housing finance corporation to pay Travis County 45,689.04.
>> move approval.
>> second.
>> any more discussion? All in favor? Ifs that passes by unanimous vote.
>> move we adjourn.
>> no. One more item.
>> small matter here.
>> this has been confusing.
>> item no. 2 is to consider and take appropriate action on request to approve initial resolution prescribing the form and substance of an agreement to issue bonds, authorizing the execution of such agreement, and containing other provision relating to the issuance of bonds not to exceed $96,000,000 for the acquisition of five apartment properties by theop, llc, and affiliate of american housing foundation, a nonprofit corporation which is also a 501(c) (3) organization.
>> yes. Clifblunt with thompson co counsel for the corporation of the this is an -- this is an application that's been received for the corporation to finance the five properties that were described in the backup. This is a -- we have done some similar things in the past. Some representatives of american housing foundation are here to present this to you and i'll just let them take over and introduce themselves and --
>> all right. Thank you, mr. Blunt. Mr. President and members, I'm daniel owen vice-president of development for american housing foundation. Up here with me I have mr. Steve sturkle the president, mr. James Davis who is our vice-president of compliance and residence services. I would first like to thank you for the opportunity to come before you with this application to assist us with the financing of the acquisition of these five properties located throughout Travis County. Which will enable us to bring an additional almost 1200 units of affordable housing to the county. And with this financing, it would allow us the opportunity to provide rent that will be well below the current market rent, allow us to provide one of our primary functions in our missions of resident services, to all of the residents available -- currently residing on the property and some of these are basically just life skill education, we provide career opportunity training, we provide emergency financial relief, we provide home buyer education or -- other programs and services and then the other benefit to this transaction is that we will be providing the issuer, yourselves, the ability to oversee this transaction -- these transactions and how we own and operate the property in your different jurisdictions.
>> you asked -- you made the comment earlier that to bring this -- the market value -- the affordability of the units that are being looked at as far as renovating, what is that affordability as far as rental units? I notice it said here some of them are one to two bedroom units, I would like to know what that affordability is as far as what they would be renting for.
>> sure, there's two different tests really for affordability. The first being as a 501 c 3 we have to meet i.r.s. Affordability tests, which is based on income.
>> I understand that.
>> and your question is [multiple voices] excuse me.
>> yes, exactly. Median family income being the criterion, what is that -- in other words a person looking at it right now, they would ask well what in the heck is that, what would that actually be renting for [multiple voices]
>> well, from a rent standpoint we are going to be currently bringing in approximately over $415,000 in reduced rents for the residence at -- at the very low income level annually. Compared to the -- compared to market rents today.
>> but I still don't know what that is.
>> well --
>> how much would a one bedroom rent for.
>> one or two bedrooms rent for. I hear what you are saying, you are not giving me no numbers.
>> okay. At the various properties at arbors of Austin, we have current average rents for one bedroom of $502.
>> $502 for --
>> current market -- excuse me, current market rent is $599. We would be providing those units at $502.
>> 502 for one bedroom?
>> yes, sir.
>> all right. Two bedroom?
>> at that property, the current market is $767.
>> 767?
>> yes, sir.
>> one bedroom? I mean two bedroom, rather?
>> we would be able to provide that unit at $693. Savings. About $75 a month.
>> about $75 a month.
>> per month.
>> correct.
>> then take for example pinto creek apartments, current on one bedroom current market in that area is $697. We would be offering that unit, same one bedroom unit for $580 for a monthly savings of about $117. Then on the two bedroom for that area is $933 per market. We would offer that unit at $5,509, which would provide over $400 per month in reduced rents for those residents, those qualified residents.
>> I guess, i've had a chance to go over a lot of this, i've had a lot of significant questions floating narnd my head. -- floating around in my head. No one you are a choda, is that correct?
>> yes, sir.
>> all right, well I guess community housing development organization I guess is the term for it as far as that acronym, but as a chodo, I think that I have expressed this before, I need some answers, when a property is acquired by a chodo, it actually takes that property off the tax roll. In other words we will not be able to acquire taxes off that property once it's acquired by a chodo; is that correct.
>> that's possible, yes, sir, that's what happens.
>> right now, I really don't know exactly how many properties that we have here in Travis County that come up under this chod o'connor September, I really don't know -- chod o'connor September, I really don't know. I really need to know throughout all of Travis County that are under the chodo scenario that are actually taken off the tax roll. Once it's taken off the tax roll those taxpayers will have to make up the difference somewhere. The reason that I ask that question is I'm looking at the comparison of the rents at market value that you had stipulated, for one and two bedroom scenarios, it's really not that much difference in the variation, you know, $75 here, variation between market and the discount that you have provided for low income persons. And then versus the amount of money that will be taken off the tax rolls on I guess a permanent basis until it's probably returned back to the tax roll. So I'm looking at that and then how is -- how we will have to make up the difference of the shortfall of the money that is being taken off of the tax roll. Right now I don't really know what kind of compliance history that you have. But it's been brought to my attention that a letter from the city of Austin that was sent to my office, I guess, all of the other Commissioners, board members, probably got some of the same information. I just wants to know basically whether you were aware of a rehabilitation construction services division which is -- the city of Austin dated may 8th this year, that actually highlighted a lot of points that they brought up dealing with the fairway apartment complex and then the shortcomings that were illustrated in this particular letter. Are you all pretty much familiar with this?
>> yes, sir, I'm familiar with it.
>> okay. With a lot of shortcomings, a lot of sewage problems, a lot of whole lot of other things. It appears that this letter from the city of Austin asked a lot of questions about it. Did you see the article in today's paper, american-statesman.
>> yes, sir, I did.
>> yes, sir.
>> okay. Of course according to the american-statesman about $55 million being taken off the tax rolls. And I really don't know what that equate to. I guess that I would ask t cad based on the property that's being taken off the tax rolls, what would that equate to as far as tax dollars that the taxpayers will have to make up some way, form or fashion. Let me say this, I want to make this very, very clear to everybody here, I am a very, very strong supporter of affordable housing. I mean, there's things i've been involved in here with this Commissioners court to ensure that we keep affordable housing available to this community. But however in my opinion, not at the point where we have to risk it and throw away everything, especially taking properties off the tax roll. You know, Austin being as it is, a governmental type of city, there's a lot of properties that we can't tax anyway. [indiscernible], so I'm having a lot of struggling problems here with this scenario. And what you are basically trying to present. I notice that one of the properties that was in my precinct. Precinct 1.
>> yes, sir.
>> and of course I'm very concerned about continuing to provide affordable housing to all of Travis County. But of course after looking at this on a precinct by precinct basis, we have done things to bring affordable housing to precinct 1 and other precincts in Travis County without having to interfere with the tax base that's generating revenue to the rest of the entities that are depending on the tax base. As you know, I think we have very legitimate concerns here, trying to uncover, not being critical, but just uncover as many aspects of this as I possible can to ensure that we citizens of Travis County get affordable homes, but also not erode our tax base. Then the quality of those things. What is theoff set? What is the balance here? Right now I'm not really seeing too much of a balance to give up those kinds of things to get what you are doing. But anyway those are just some of the questions. I know a whole lot of [indiscernible], but I would like to have some of those questions answers, thank you.
>> sure. Thank you.
>> were you going to provide answers now or do you want me to ask my question?
>> no, you go.
>> I was kind of wondering if they had a presentation that they wanted to make and then we could kind of get into questions because this is getting awfully disjowntsed and there's -- disjointed and there's not really a good flow going.
>> did you all finish your presentation?
>> we are just going to address some of the issues regarding the properties that we currently own.
>> the amount of the property taxes that are currently being paid on the five properties is $1.43 million. That's total.
>> that's total.
>> all of the taxes.
>> not Travis County.
>> that's correct.
>> how much?
>> $1.43 million. Yeah, i've got that. Okay.
>> some other questions that Commissioner Davis asked that you want to try to answer?
>> I'm going to try to address as many as I can hear. In exchange for those taxes for that $1.3 million, what we are proposing is with our resident services programs at the five properties, we have designated a minimum of $200,000, which is $40,000 per property. And I say we are estimating because with an acquisition transaction versus a new construction project, you don't really know what all the needs are for the residents. What we do is we will go in and create an actual resident advisory council on each property and it gives those residents the opportunity to communicate with the directly with the ownership, it bypasses the management process, to where they can tell us, we send out a questionnaire, tell us what those needs are, what services they need on that particular property. In addition we are providing a replacement reserve to ensure the quality of the property and make sure that the funds are available for any repairs and maintenance outside of the normal course of dealings, business, with these types of properties of $350 per unit per year. That will be set aside and earmarked and we would not have access to those. Those would be held by a trustee. Then our annual rent reductions, $416,000 per year for those reduced rents and then we are also providing payments to the -- to the corporation as issuer of the bond to allow you all to further your mission as well as those funds because of the size of this transaction to help defer the costs of your staff as well as give you the opportunity to come in and provide an oversight of all five properties and again on how we own and operate the property. Because when you have a 20-year-old property, it's -- they are beautiful properties today. We do -- we acknowledge that and that's -- that's the reason we like 'em. But the question is what will those properties look like 10 to 20 years from now. With us as the -- as the owner of these properties and mr. Davis overseeing the operations of the property, he's able to go out there and drive by. We want to make sure that that quality is maintained over the terms of these bonds. And with that we have the -- a little over 430,000 that we paid annually estimated to the corporate which provides a positive benefit of over $150,000 a year. Versus the taxes.
>> I'm steve sturkle, thank you for allowing us to be here today. I would like to address fairway village. You have received letters about it, you have seen a report from the city, I'm sure most of you saw a television report on it. We're wrong. We made a mistake. We did not pay attention enough to the property. We were absolutely wrong and we accept all of the criticism. The question is how to get there and what are we doing. I would like to address that. We acquired fairway village and santa maria undering agreement with the united states department of urban housing development because the owner that had those was required to sell them because of the poor management and the extreme amount of deferred maintenance on the properties. We bought them in 2000. We received a tax -- tax credits on them in -- well, I believe we received them in August and completed the deal in the fall of 2000 to start construction. We had budgeted on fairway village to spend a million $300,000. Before we started we met with the residents, talked about what we were going to do, how the renovation was going to be planned, let them pick out the playground equipment, things that they wanted to have. We began rehabilitation. 1,335,000 expanded to just over $2,100,000 within the first two years. Each time we improved something, we found something else broke. If you noticed in the report from the city of Austin, it clearly states that the biggest problem that they've had with the sewer lines is the tremendous amount of grease that was in the system. They had to clean it out before they could get a camera down to find out about it. The grease is in the lines because of residents pureeing their grease down the sink. This is a deal that you have to begin to work with your residents. This didn't happen immediately. This happened over a number of years. This property was in Austin for 30 plus years before we came in and we spent the last two years trying to fix this property up. In 2002, after the tax credit money was spent, we spent an additional $262,000, this year we have spent a little over $300,000 and currently having budgets drawn up to begin replacing not only the sewer lines, but also the chiller lines because we found that when we put in a new chiller system, that it had too much pressure on the lines, we replaced all of the fan coil units in every unit and when they did that, it put it into the chiller system, we began blowing outlines because we had too much pressure. After the report came out we asked the residents to find a resident member that we could sit down and visit with to try to discuss some of the problems. One of the things that we found is they said we are having mold inside our units. We couldn't understand that because we had spent a little over $35,000 having all of the duct works cleaned out. It was in July, I said how many people go through the day without putting their sweaters on or slippers on when they are in their house? They said we all wear sweaters, socks, it's too cold in our units. We said why don't you turn the thermostat down, well, no, we don't want to do that. We want it to stay cold. We just open the door to let the air in, that warms it up. What happens then is if you have condensate. They say oh, yeah we wake up every morning with condensate. If we could turn the air conditioners why they are not so cold we wouldn't have those problems. In meeting with the residents and working with them, that's one of the things that we have got to correct. When we had that problem the first thing that we did is opened an office in Austin because being in amarillo, Texas we knew that we needed to be here 24/7. So we opened an Austin office, hired two very qualified people to be here at all times. We brought in a regional manager to this area to set that up. And we brought on one of the people that we are very excited to have working for us james Davis as our vice-president. I will let you talk a little bit about the residents.
>> thank you.
>> mr. Davis, my name is james Davis, I'm vice-president of compliance and resident services. And in regards to fairway village, I have here the latest review, which was conducted by southwest housing compliance corporation, which is h.u.d.'s contract administrator in regards to fairway village. If you don't mind, I would just like to pass this latest review out to you, to the Commissioners, is that okay?
>> that's fine.
>> okay.
>> you just give them to the Commissioner here, he will pass them down.
>> has this been shared with the city of Austin.
>> yes.
>>
>> I think you I don't your -- I think no your evaluation of that letter you will find that the latest review yields a satisfactory condition of fair way village. In addition to that, we are negotiating with one of the largest faith based resident service providers, I will not mention a name because we have not closed on that transaction yet. But one of the things that we are very keen on as life skills training for the residents, many of the skills that your average citizen would accumulate just from being home as a child, as a youth. Some of these residents are not aware of those skills such as house keeping skills, parenting skills, educational skills, some people need g.e.d. Training. These partners that we are negotiating with to provide resident services will be able to give those skills to those residents, which will yield a better unit because they will then have the skills to go forth and not contribute to the disruption [indiscernible] and we are very excited about that. Certainly with the budget that we have, the $200,000 for the -- for the slightly over 1500 units is well within reach of -- of achieving those goals.
>> what is the rental for a family of four? Do you have that on -- we have it by bedroom on each property. Let's just say Commissioner Gomez, I have it by -- for bedroom size I have the h.u.d. Maximum rents for a two bedroom is $800.
>> so we would assume that's for a family of four?
>> yes, ma'am. Again for a two bedroom unit.
>> if I may, if you -- if you are dealing with [indiscernible] section 8, basically, the -- h.u.d.'s guideline says two person per bedroom and if the resident is amenable he may also use the living room as a bedroom. So that guideline is something that we certainly employ. If he has it by bedroom, you can back into what the maximum rent would be for -- for a family of four. This action the maximum is not what we would be charging.
>> okay. Then regarding the -- this list of the sort of lines and other things that -- the sewer lines and other things that were wrong here, did all of those things get corrected, the sewer lines get replaced and the --
>> the city of Austin came out with their code inspectors and went through and did a complete review of the entire complex and came back in. All of the issues that they found in the entire complex were corrected. The sewer lines, there's an ongoing program. Because we are going to end up having to replace all of the sewer lines and all of the chiller lines and we are working through the process to do that.
>> when does that --
>> this will all be completed by the spring.
>> > by the spring. Okay. Have you all talked to the aisd folks the leadership over there about your taking the property off of the tax rolls?
>> no, ma'am.
>> no, ma'am.
>> I think y'all should because I have heard from some of the -- vice chair I think they are opposed.
>> yes, ma'am.
>> and that would be an important factor that I would need to consider.
>> yes, ma'am.
>> and because Travis County has a little kind of considered aisd because we -- well, I do, you know, I will speak for myself. I am very concerned about the education of children and the money that they have in order to operate. So it would be very important for me to know that you and the -- and the school board members who had a good discussion about -- about this proposal and in spite of the fact that I know you all are going to -- or are wanting to add other training programs on site, and -- but the -- the educational process through aisd is extremely important to me. That that get in place. Let's see. That was -- I think those are the ones that I was concerned about.
>> thank you.
>> thanks.
>> I also had a conversation with somebody, a business manager over at aisd today. And cliff or harvey, if you could answer this question, it's a relevant one. Related to everybody made suppositions about their budgets, we are in a new fiscal year as of October 1st or September 1st with this school district. When something gets taken off the tax rolls, they made assumptions that they would get in a certain amount of money over this next fiscal year. Is this impacting everybody's current fiscal year that they are dealing with and that somehow 700 some odd thousand dollars will be taken away from aisd that they had anticipated spending this current year? Cliff, can you help us out there?
>> it will not affect -- I'm not sure that I know the full answer to that. It will not affect the property taxes at least through the date of closing, which is going to be at least mid to late November, possibly over into December. So at least approximately 11 months of that will be not affected at all. I'm not sure if when they give the chodo designation if it's retroactive to the date of purchase.
>> they are shaking their heads.
>> I'm not 100% sure, but I believe it will not affect the property tax collections at all for this year because the assessments were done as of January 1st, 2003.
>> right. So then also in terms of the -- if they needed to get clarity on it, they didn't really know, is -- is aisd is having to pay zillions of dollars to other school districts right now. So the question that was being asked is gee does that get taken off of what we get to keep here in Travis County for aisd or does that get taken off of the other calculation of what gets sent away. Which basically says that the state of Texas has to absorb the loss of that property off the property tax rolls? Do we have any kind of clarity on that?
>> my understanding is that just reduces the taxes that are collected. Instead of collecting $100, they may collect $99. But if $80 was a threshold at which they had to start paying over, they would pay 19 into the fund and not to 20.
>> the reason they may not be impacting at all, these are all legitimate questions, but from them to understand their tax flow, it may not be hurting aisd one penny, it would be lowering how much is being transferred out of this community, out of our taxpayers. In terms of for Travis County if I'm seeing this correctly. We are getting about, harvey's memo which is a very good, the county is getting approximately [indiscernible] in property taxes. If this dealings through, we would be getting annual fees of $365,000; is that correct.
>> I think those are approximate numbers.
>> approximately. Is that 365 including the 50% of excess fees or that's would be on top of it? So base figure?
>> that's a base figure I believe. Then the 50% of the excess cash flows would be on top of that.
>> base we would be getting about $100,000 plus more, thousand dollars, than Travis County is receiving today, is that correct?
>> yes.
>> okay. And please understand that the 365 estimate is based on their having positive cash flow.
>> correct. Correct. And then on top of that, there is actually a one-time only closing fee of $445,000 that would come to the corporation as well.
>> that is correct.
>> and I know that we've had discussions here with our friends on the Commissioners court about a -- about an after school program and we have been kind of alluding into, well, gee, where could we find that money for that pilot. When I talked to aisd they said what are you all going do with this money. I said well, Travis County would be made whole if you looked at the property taxes and we would be getting annually more than the property taxes again based on estimates. But the -- in addition, you not only have that excess every year, but this -- this new 445 one time, we had been talking informally that that had been going into an after school program where we would be targeting middle schools in aisd where there are anger issues, violence issues, truancy issues. These are feeder schools into reagan where we know that we have some issues there in terms of dealing with young people. Working with our tour reins program. True reins program. Also -- truancy. Also filling a gap with the city of Austin i'll use the word gutted, but let's say reduce its after school programming through parks and recreation, we would be taking on and filling in a gap in a different way that is controlled by the corporation and the county, some things that are already ongoing related to -- to the city of Austin and aisd. So those dollars are replace understand a different sense of it in terms of trying to make people whole. I don't think it's a small matter that there is $415,000 in rent reductions to real people living in these units. I know a lot of folks say I'm for affordable housing but it doesn't come for free. There's a tradeoff somewhere. So I'm going to be looking at the big balance. I want to make sure that the questions that are legitimately being raised by aisd about what does this mean, that's the timing, is it really going to impact aisd or is it really going to impact the state of Texas in terms of a recapture money that they are getting there. And could this indeed do good things related to the after school program that we have talked about. My last question is if this corporation does not do this deal, would one of the other corporations that are involved in this pool transaction pick up these units? Or not? What -- give me some clarity there, please.
>> no, ma'am. You all are the primary issuer with regard to these five properties. If we are not able to complete this financing, those approximately 1200 units in affordable housing would be lost.
>> I do have, I'm sorry, I do have one last question. That is there is a legitimate question and concern that we have raised here related to the chodos. Has something changed that the laws related to those kinds of things are substantially changing and we may see few if any more of these kinds of things coming through simply because the tax vangs are change -- tax advantages are changing dramatically.
>> changing dramatically as of January first for the tax advantage. We don't have any other applications so this would be the -- unless the law changes again, this would be the last transaction that we would even look at under this particular set of laws.
>> yeah. Which are the legitimate issues that were being raised by other districts, I think spring and cy-fair down in the houston area really got hit hard.
>> I need to add one little thing here. I think those are good numbers to have there as on the sidelines to look, to focus on from time to time. What concerns me, though, is that we have housing that is safe, that is clean, that has all of the positive things that go with it for poor people. Just because poor people are going to habitat those places does not mean that we let them go and let them just go by the wayside. They are entitled to a lot more sitting tee than that. I want -- dignity than that. I want that part addressed first before I decide that it's great for us to have money coming in. If we don't have poor people living in good conditions, does it make us feel good to help poor people with another activity? No, I think it's what's basic to me is the housing of those families, those children and if you have activities there for them all the better. But I think the -- the safe, clean, housing for those families and those children, when they do come home is very important to me.
>> Commissioner Daugherty and I would like my chance.
>> okay.
>> back to you for another.
>> one more.
>> go ahead, Commissioner.
>> let me ask, what is the drop dead date that you all need to know from us on this? It's --
>> well, this transaction is part of a -- of a pool of 19 property, these are five of 19 properties with -- with the type of financing that we are pursuing, we need all of these properties or all of these transactions to close basically at the same time to go into this master pool it -- it provides the rating on these bonds. These bonds will all be rated and so we are anticipating mid November to the end of November, probably closer to the end of November to close all six transactions.
>> so you don't need to know from us today.
>> no, sir. I think in terms of assuming a -- just pick a date, November 20th closing, we would need to file a transcript with the attorney general's office for approval around November 1st or so. And we would need that -- to provide signed documents and approved resolutions to their office by about November -- about a week before the closing, right about November 13th. Two or three weeks from now in order to --
>> [indiscernible] public hearing.
>> next week.
>> next week. Next Tuesday.
>> for that -- that was important to me. I mean, you know, when you get something Thursday that looks like war and peace, it's $96 million, I mean, that's a little beyond my lunch money. So I would really like to look at that thing. There are some other things that I really just probably need to know. I think some of these questions probably could be answered by the Austin apartment association. I mean, they are -- they should be pretty big players in this. They ought to have some opinions about chodo's and my -- you know, I don't get on y'all for those guys not being here. With me having some time I would like to be able to go and visit with them about -- about these projects. I'm sorry that you have gotten into the issue with -- with your one project over the grease because I will tell you as a private business person you find out a lot much times things happen to you that's not really of any cause of yours. You know when the stay with us I mean when the backup comes back through the pipes and comes into your project, that happened where I had about four inches of raw sewage that came up into my place of business, you know what, the city of Austin said sorry that happened. So what happened to you may not be of any fault of y'all's, I'm sorry that you had to deal with it. But it's your project, you do have to deal with it just like I had to deal with it as a business person. You know, I -- what's going to happen on this if -- if -- if Travis County wants to participate but the other taxing entities bulk at the -- balk at the deal, is this an all or none? If aisd, you know, just absolutely pitches a fit over this.
>> I think I can answer that quickly. If the properties are purchased and the properties are owned by a chodo or an organization that qualifies as a chodo, the way the property tax law reads now they are entitled to the exemption.
>> it's going to be the responsibility of the county in this regard for the other authorities?
>> the responsibility of the chodo to go to the appraisal district and prove to them that they qualify for property tax exemption.
>> okay.
>> well, then my question is is that -- if we bought off on this, and you all went to aisd or you went to the city of Austin or whatever, they said we can't get comfortable with being in the program, obviously you need these exemptions from all of the taxing entities, right? In order to make --
>> the exemption would be granted by the appraisal district. The appraisal district makes the determination as to whether or not the organization as a chodo, once the determination is made that they are a chodo their prompt is exempt. It really wouldn't be a matter of dealing with the city of Austin or aisd or any other jurisdictions, if they own the property, which my understanding is the only way to be purchased is through this financing, but if they own the property and do qualify as a chodo the exemption comes right along where that.
>> okay. The other thing that is a little concerting to me on projects like this I have always been real interested in the level playing field, so to speak, these things do have effects on the industry as a whole, the apartment industry. I mean, you start taking, you know, 15, 1600 units out of the mix wherever people might be living in some other property that's going to come here, I mean basically because you are able to give them rent at a cheaper rate, you know, I'm all for people trying to find the cheapest rate that they can live. But it's -- it certainly does have some effect on the overall market, which I think is what the apartment, Austin apartment association will have readily, I would hope. I mean at their fingertips to be able to give us some of those sort of statistics. So, you know, I will follow up on that and I would suspect that that might be something that you all, you know, might want to know as well. You know, I'm glad that I have a little time to look at this because on the surface of it, if you just looked at the quick numbers, you know, looks like you have an additional $100,000. If you buy off on the fact that you all can hit reasonably the numbers that you are talking about hitting, I mean 50% participation or something like that is somewhat interesting, you know, to -- to everybody. Then it just really gets back to do you -- do you have a good feeling about what you are dealing with regards to are they going to be able to hit those numbers. Given that I have a few weeks to look at, there I will have lots of questions about it, know how to get in touch with you, something to look forward to, thank you.
>> what's the occupancy rate at fair way village?
>> fairway village.
>> I think it has three units vacant at this time.
>> the units that you currently own in other parts of the country, the closest ones to Austin are located where?
>> we've properties in college station, waco, Texas, houston, Austin -- port lavaca came, those are the nearest. We have 400 units in waco, 200 units in college station.
>> talking chodo units.
>> no, sir. No, sir. The units we have right now in Austin are paying full taxs.
>> where are the nearest chodo units to Austin.
>> in houston.
>> houston?
>> so we want to take a look at some of the units that you currently manage that are chodo, the closest place would be houston.
>> we can give you --
>> maybe let's take another look at it. Mr. Davis there is a good unit evaluator. [laughter]
>> I think that he was referring to Ron Davis. [laughter]
>> we have three Davis here. Two of them sitting out the table out there.
>> southwest housing compliance corporation made reference to a list of recommendations, deficiencies, observations, can you share those with us?
>> I think that was in regards to the -- to the subsidy payment that there is a system --
>> yes, sir.
>> uh-huh.
>> okay. That is -- we are working on that. That should be resolved.
>> [indiscernible] can you share those lists with mr. Davis.
>> I will do that. My backup says that the transaction contempt plates the acquisition 1,555 apartment units. You made reference to 1200 new units.
>> affordable, 1200 affordable units. It's actually 1166 affordable units.
>> of 1555.
>> yes, sir.
>> okay. I was wondering how those numbers are reconciled.
>> it's a mixed income. These would all be mixed income properties.
>> okay. The houston [indiscernible] [papers shuffling - audio interference] programs that you are recommending for Austin?
>> yes, sir.
>> yes, sir.
>> okay. Anything else from the court?
>> yes, judge, I have a couple more questions. That is I guess as I stated earlier, affordable housing, I'm a supporter of affordable housing, have been for a long time. I guess I'm coming from the same direction as far as Commissioner Gomez, yes, but we like quality homes. We've had a lot of eyesore situations. Throughout the county and we've had them in different precincts and of course we've had it up to here with that kind of stuff. However, I can recall several other person that's have come here before us and have actually asked us some recommendations as far as what you all are putting fort here today as far as requesting us to support you as far as the -- the issuance of revenue bonds to support your cause. My concern is that they did offer some of the same amenities, we wanted to make sure that it happened. We wanted to make sure sure there was performance based issues whereby the management was still being placed, where it wouldn't be an open ideal, where you could leave us hanging out there. Of course they eventually guaranteed that. Not only that, they have had comparable rents as you -- as far as my recollection, I guess that i'll have to check with harvey Davis to see those particular family units are written within a chodo scenario where we are still able to acquire tax revenue and they are comparable to what you are saying. We are talking about one, two, three bedrooms, units. And of course deal with the median family income requirement as they have demonstrated before us. We need to maybe look and see what's comparable. I think the -- I think the recommendation I think that the judge recommended as far as other
>>
>> [one moment please for change in captioners]
>> .
>> judge, I just have a couple more questions.
>> we'll just bring up those two on the end here. If you come forward, we'll be ready for knew a minute.
>> I have questions. In terms of the money you discovered you need to rehab is more than what you set aside, I think you had mentioned that before. You think you've got the problem fixed and you find another problem. Are you all being flexible in terms of putting more money into rehab if you find that's what's absolutely necessary?
>> yes, ma'am.
>> and the second question, I'm looking at the addresses that we've got here on these properties. The one that caught me especially is the one on north gate, the ashbury park. My memory is we have one or two oth chodo properties. All of these addresses are what I would call working class neighborhoods where this deal does not go through, there are rents that will be paid that are higher as opposed to the opportunity of something going lower. Final question for you --
>> we do have two bond properties at that location, but they are not shodos.
>> I'm having a seton moment, here, harvey. Looking at the deal that's being promised in terms of commitments and this is what you could potentially count on year after year after year, what is there to stop your corporation from deciding three years from now, five years from now, 18 years from now to say, you know what? We're going to take this whole pooled thing in all of these six cities and refile and all of this goes away and goes someplace else. Could you give me some sort of commitment to stick what the financing being -- by this corporation. We've been here and done this before and that -- what gets said here really does have a great deal of impact.
>> sure, I would love to. And I may defer to our bond counsel, but threubl is a 10 or 15 -- but threubl is a 10- or 15-year lockout.
>> 10 to 15 years.
>> yes.
>> so commitments could be counted on related to its going to be here and we can go -- like heads being nodded? Yes. 10-year lockout. That's real important because we had a situation that arose that we thought we had a 10-year deal and it lasted -- well, we got them to [inaudible]. Thank you.
>> my name is walter morro and iappreciate the opportunityo make communities. I'm a very strong advocates for affordable housing, especially very high-quality, deeply affordable. We have seven learning centers and provide a whole range of social services. I fought very hard at the legislature at the capitol this session along with a lot of colleagues of mission-driven, truly accountable nonprofit groups to close or reform the loophole that gives chdos tax exemption. It's been widely abused around the state. We had bipartisan support at the capitol to change that loophole, but ran into resistance in the last few weeks because earn housing foundation, walleden properties either be wanted to kill the deal or extend it to January 1st so they had an opportunity before the year is out to exchange as many properties as they could and get 100% exemption for as long as they could. I mean, witness, especially in houston, arlington and dallas, not so much in Austin or Travis County, these types of transactions take place. The number one question you need to ask is what's the public benefit versus the million four in lost taxes. You need to have in a evaluated independently. If you ask the applicant, they will tell you a couple hundred thousand for social services and so on. Evaluate that independently, not by somebody who gets paid only if the deal closes, because they are going to make it look as good as they can. I can tell you right now we spent over a million dollars a year to run seven learning centers that have as many as 800 kids a day and after-school care. You can't do much of anything on a couple hundred thousand dollars on five properties. $40,000 property, you can't even hire a full-time staff person to run anything. The $416,000 in rent reductions is that against other rents in the same property or is that just other rents at properties nearby? Rents are so soft in the rental market right now it's a very easy number to play games with. You also need to look at over the long run are the afford be affordability requirements. These apartments couldn't get that if they tried. Even 60% income targeting on rent formulas right now are well above many properties like these in the market. The -- you need to have somebody evaluate what is the likelihood that this rent cap, if you finance these deals, if the future over the next 15, 20, 30 years would actually save anybody anything on their rent. You might do that by looking back the last 15 years at what the rent formula would have been and what the actual rents were. Bottom line is does this make any difference for the residents that live there? Do they get nicer properties, more social services, do they real have I any benefits of lower rants, or does the financial -- rents or does the financial benefit flow to walden, all the different financial advisers. You should have full disclosure on everybody making fees. I think I should clarify a little bit about how this impacts the school districts. As long as robin hood is in place, the schools may or may not lose 2004 money they were counting on. Beyond that the state formula for robin hood is going to make up for some of that shortfall, assuming robin hood stays in place. Once you do this deal, you've permanently reduced the tax base for the school district or as long as these transactions stay on the roll. There's about a $40,000 or $50,000 hit to the Austin community college district. You need to have somebody give you a independent evaluation if a fair price is being paid for those properties, if this is an arm's length transaction, that the seller doesn't continue to play a role in the management and operations of these properties. That this isn't just a simple slip in order to wipe out -- you know, save a million four in taxes. I think it's worthwhile for you as a body to also look over the last three, four years at the other bond deals you've done. Nothing has been done of this size. But before you do a deal this size, what's in the actual success -- what's been the actual success rate of those deals that have been done. Do those properties -- this is the cap up here and the actual rent they are charging so did you really create affordable housing or were these houses affordable anyway. Are the properties maintained, are social services provided. I know there are a number of deals that have been done that are in default or close to it, some of them within 18 months of having been issued. Evaluation of the american housing foundation's track rorbd record is critical. You need to know who you are doing business with. It's not jugs an issue of someone making a complaint. The city financed a bond an almost didn't do it because of the issues at the tenants council. The city only financed those years a few years back on the condition of promises of social services and rehab at the other properties in Austin. Have those promises been kept?
>> what's the answer to that question? Do we know?
>> you should talk to the city of Austin and Austin tenants council. I don't have first-hand knowledge, but i've been told the anxious is no.
>> that they haven't been kept?
>> they have not been kept.
>> the promises have not been kept. That's what I have been told.
>> what's the name of your nonprofit? I'm trying to -- I'm just trying to get your name down and --
>> foundation communities, we're a united way agency. And I should have started out by saying that I don't want to mix issues, but we greatly appreciate the county's support of $50,000 for the garden terrace for the homeless. We are accountable to the community. We will run on our track record any day of the week.
>> but you all got assistance from this government as well.
>> absolutely.
>> okay to take the 50,000 from us.
>> absolutely. But it's absolutely important to me for the integrity of nonprofits that claim to do affordable housing that you run on your record.
>> accountability.
>> you can see what we do and how we do it.
>> that's right.
>> so I'm -- I want to be absolutely up front and transparent about that. And you should demand the same of any organization that you support.
>> exactly.
>> american housing foundation, I already mentioned, was a leader in lobbying hard to keep this loophole open. And it was contrary to the wishes and work of real nonprofits that are dedicated to their work every day around the state. Most of their staff now used to work for the Texas state housing finance group that issued about $300 million in bonds for the same buyer and seller just a couple years ago. They know how to do these deals and get these properties off the tax rolls. If they can recover you $100,000 to get your subpoena report -- offer you, that's what they are trying to buy on.
>> because we turned around and offered to you. That's where the moneys are coming in from. And they get turned around to do good things. And $50,000 of moneys that came into split between the housing finance corporation and health facility got turned around --
>> $50,000 in one year to help the homeless is a small, little grant compared to a million four to a grant in a group that will get that every year on and on and on for doing nothing in terms of affordability for these properties that the market is not already accomplishing. I know that it looks like sour grapes or that I'm competing, I just -- I really believe in affordable housing. To see a financial transaction like this done in the name of affordable housing is wrong, and somebody needs to stand up, call a spade a spade before you move forward. They've been working on this deal since the summertime. They've surveyed resident incomes. The bank of america securities newman associates, they wouldn't be financing this deal if these properties didn't already qualify and meet the tporbltd afford built requirements. They are only here because this is the last-ditch effort to get these deals done before the end of the year. If they had a stellar reputation in social services and commitment to lower income families and their properties in Austin really made a difference, I would be here cheering and championing the work that they do. That's not their track record. I'll stop there and answer questions. I hope I can be a resource about how these deals are done.
>> do you have anything in writing? I would like to check with you later, but not today. I would like to have a list of those things and the things you are saying.
>> I would too.
>> I would definitely like to see that. And we are going to have a little meeting.
>> I think it's important to have that information. I think -- i've been involved in this community too many years and too many promises have been broken to poor people. All in the name of, you know --
>> in terms of whether the rented is in fact below market, how would you demonstrate that? I guess I'm asking the applicants.
>> well, what we would do is go in and we can find based on other properties and the current property or the properties involved in this transaction, and mr. Monroe is correct that these properties already qualify. And one of the benefits with the seller, walden properties, is they have been involved in this type of financing in the past. We've all been involved in these financing. We understand the requirements the i.r.s. Puts on the properties. The properties have to meet a certain set-aside requirement before you are able to close on the bonds. So they as a for-profit owner has gone in and actually brought these properties into compliance and assumed that financial risk internally on their own to where that is not going to be a problem with these properties. They are currently in the compliance that the i.r.s. Requires. They were not in the past. They have -- they have gone out and brought the qualified residents on site to meet that threshold.
>> if I can respond to the comment about the i.r.s., I.r.s. Has a standard that 75% of the units in a nonprofit's portfolio, three-quarters, have to be affordable for families making 80% of median, which is $55,000, $60,000 a year. Works out to a monthly rent in excess of $1,000 a month, which is way above average rents in Austin. The i.r.s. Standard is very easy to meet. Basically in Austin, in Texas, it doesn't mean that you are doing affordable housing just to claim that standard.
>> that's a two-pronged test. Internal revenue service 9632, has 75 to 80%. Before you can complete a transaction, have you to have 20% of the units rented at 50% or less median income. So there's two prongs. It's not just 75 and 80, it's 20 and 50. But before you can close the bonds, the properties have to be in compliance. They have to be a 20% or 50%. Murrow is correct, we've been working with walden since spring with anticipation of bringing the rents down with these properties.
>> but the -- so if we were to go there right now, for the one bedroom, the first apartment complex you gave as an example, the rent would be $502.
>> for those qualified residents, yes, sir. The walden, the current owner, has voluntarily reduced those rents in order to -- because they had to lower those rents to those levels to be able to bring the qualified residents to the properties.
>> your commitment is to keep the rent there.
>> we will maintain that level, yes, sir.
>> we were told that market for the one bedroom at that first example project was 599.
>> yes, sir.
>> where did that figure come from?
>> that came --
>> was that a survey of the market?
>> that was provided --
>> that's what people in the same unit that are paying [inaudible].
>> we have a representative of walden properties here that can answer that question probably better. They provided those numbers.
>> 599?
>> we'll need to get out the microphone. Is my statement correct if I say that a person who does not qualify for low-income status would be in this apartment complex paying 599 for one bedroom?
>> yes, for the same unit. If the person is not qualified for very low-income status, that person would be charged the market rent that we're charging today is 599. Whereas for a very low-income person, we have over the course of the summer taken the initiative in anticipation of this transaction to reduce the rents for those people to 502. And I might add that for Travis County as a whole for the average of these five properties -- I'm sorry, I'm ted kerr and I'm an employee who represents the seller and the owner of the properties. For Travis County on average for these properties, for one-bedroom apartments, today we're charging residents who are -- our market rent for charging for residents who are know very low income, we're charging $636. We're charging very low-income residents $540. That's the rent those residents can pay and are willing to pay and able to pay to move into these apartments. That's a $96 rent reduction that we've self-impose understand anticipation of this transaction.
>> and that's per month, mr. Kerr.
>> but that was only adjusted after the interest as far as these folks, the seller, wanting to leave come into some type of compliance situation, what they are requesting for is the reduction in rents.
>> that's correct.
>> in other words, if that wasn't the case, then those apartment units that you represent would still be in existence is what you are telling me now is the way I'm understanding it. Nothing would have changed. -- maybe nothing would have changed. But because of the offer of the deal, this is the reason for the reduction of rents.
>> that's the only reason, yes, sir.
>> so, you know, so --
>> we lowered rents only because of the need to qualify for this transaction.
>> to bring in folks. Let me ask a question and that is if this deal does not come about and walden is still the owners of these properties, what will happen when whatever commitment you made related to these folks' lease come up? Will you toeupb offer them at 502 or go back up because you don't have to keep them at 502? Will they go back up to market? Folks perhaps may not be able to stay there.
>> we are strong supporters of affordable housing, which is one of the primary reasons we're supporting this transaction. But we're also a for-profit corporation and we have fiduciary obligations to our investors, who are primarily pension funds and public employees themselves. And we will raise our rents over the course of lease expirations back to the market that I just cited. So for example for two bedrooms, what we're charging today at market for these same apartments is $846 on average for the county for these five properties. We're charging the very low-income resident $688, which is a $158 rent reduction we've imposed. If this transaction were not to close, we would feel object obligated to raise those back to $846 per month.
>> a voluntary way to try to get clientele to qualify, but tals care of folks in need of affordable housing, you've volume fairly made that happen.
>> that's correct.
>> but if this does not happen, market conditions are also going force you to go back to the way things were before this deal came, and we would lose affordable housing stock that right now is voluntarily in that category.
>> that's correct.
>> thank you.
>> should I be impressed by these numbers?
>> given the speed of the transaction, you need to independently verify everything. I have always admired members of the court that are very fiscally conservative, but --
>> all of us claim to be that eye know that. [laughter]
>> to give up -- [indiscernible].
>> by your actions to eliminate a million four in local taxes in exchange for a list of potential benefits that are claimed, being sold a pig in a poke and I can't believe it. I'm amazed.
>> but if the rental a little we were just quoted are true, should I be impressed or --
>> they added that up to a grand total for the families that would be served of about 415,000. If I owned a bunch of apartments that paid taxes and could get to you drop my taxes a million tpourbgs I would value taylor drop my rents by $400,000 for a number of people.
>> 365,000 that the corporation will get, plus 50% of what are the excess cash flows which have ranged anywhere from 140,000 to almost a million dollars.
>> there are ways to make sure the properties don't ever cash flow again. If I'm running those properties, that's expensive. Depending on how you define cash flow. The devil is in the details.
>> I do not disagree.
>> and I'm not asking you to be as cynical and careful about how these transactions are evaluated. I'm asking you. You have financial advisers. Everybody involved in these transactions doesn't get paid a dime if they don't close this deal. They are all --
>> in terms of perspective, we've got almost $300 million coming into Travis County on property taxes. You are right, 1.4 million is nothing to sneeze at. But of that 300 million, 257,000 comes to Travis County in terms of this particular deal. That is a very miniscule part of this. We have $60 billion worth of taxable properties in this county. So I appreciate that, but it's not like 25% of our tax base it's a big hit -- the big hit is the kids at the school.
>> that's in another school district.
>> I came up when I heard my firm's name being mentioned by mr. Murrow. I'm tom gibson. We're co-managing underwriters of the transaction. I just wanted to clarify a couple of statements that I felt were misstated on mr. Monroe's part. The 75% test. He talked about affordability. 20% of the units will be at very low income. 15% below median income. He mentions we wouldn't finance this deal if they weren't in compliance, that's right. No one would. Bond counsel would not finance it and ted mentioned all the trouble they've gone through get these deals in compliance. He mentioned default that happened 18 months later. He mentioned look at the deals done in the last four or five years t fact of the matter is over the last couple of years in particular the Austin market has struggled greatly on the apartment sector. Everyone knows that. And because of that some of the deals you've done have gotten into trouble. We're underwriting the transaction based on current cash flows. Would I rather under write a transaction today or 24 months ago, today the the answer. We're underwriting stress flows, achieving high ratingsings. Our name is on the official statement that sells these bonds to the extent it gets in trouble in the future and your name is going to be tarnished, but so is newman. We're owned by gmac, one of the largest property lenders in the world and we under write these bills stringently to make sure our name doesn't get tarnished as well. A couple of other comments I would just like to mention, Commissioner Gomez mentioned poor people living in good conditions. One of the strengths of this type of transaction is the amount of money we require in replacement reserves. If you compare this structure with a fannie mae structure, the replacement reserve deposit is roughly double what it would be aupbd conventional type of loan transaction. Obviously that provides double rehab dollars. You look at the type of -- walden does just enough to maintain the properties and maintain the tenant profile. As a nonprofit, you know, steve's group perhaps could do more. That's one of the reasons why s&p and newman likes these transactions. They are not profit motivated, they do not have to distribute money to investors. They tend to as a whole invest more money back into their properties. And then mr. Davis, you mentioned rent reductions. You mentioned 412,000 doesn't seem a lot of money versus a million four. For those families that are living in those units, $96 on average for a one bedroom, 159 tore two bedroom, times 12, that's a lot of money to these people. That's a big impact to their lives. I would finally like to see mr. Murrow's organization is a great organization. He is a great advocate of affordable housing. If I look at the transaction and boil it down, I'm trying to find his problems to this transaction. If on the surface you buy off to fact and perhaps independently verify it that these rents are reduced by this amount, that in and of itself for someone who is a a proponent of affordable housing should be good enough to support this transaction. Sure, we're taking a million four off the tax rolls, but we will prove that Austin i.s.d. The way the school funding works, it won't actually impact them because the other school districts will share with you the other public benefits. But if I'm a pro opponent of affordable housing, which I am, I look at those tenants rents are going down significantly and I say it's a trade off and one that I can get comfortable with.
>> you mentioned my name and I would like to respond to it. I did -- what I was really looking at when I was talking about comparable rents, that's what I'm talking about, the transaction that we've done or the transaction that's happened to organizations that have come before this court, I'm going to look and have some research done to see where we are as far as comparable rents. In other words, the same amenities you are saying some of those folks are offering. And not only that, the rents may be just as comparable as far as what you are offering and their property is not taken off the tax roll. So that is an advantage as far as I'm concerned and I want to basically go back and look to see how close we are on those figures. And of course let me ask this last question. Have you all gone before the Austin housing finance corporation with the same suggestion or have you looked at that avenue other than coming to Travis County?
>> we've not looked at that avenue.
>> okay. Why?
>> I don't even know why.
>> I would like to know if you --
>> well, honestly, you know, we're doing a number of transactions. Austin -- this issue has been a proponent for transactions in the past so I think that's why we ended up here.
>> have been a what now?
>> you guys have done a number of chdo transactions in the past. We knew you were supporters of affordable housing. I think that's why we came here. I don't know why we didn't consider Austin.
>> administrators at the city of Austin would not have told me they would not consider doing this deal.
>> is that [indiscernible]?
>> honestly we did not go to them.
>> we never talked with them. [multiple voices]
>> let me say this. The last chdo I looked at, I was uncomfortable about doing it. Right now I don't know what the performance is and I'm going to have to ask these questions. What is the performance. Chdo out there right now? Right now I don't know any of these things, but I'm going to find out. And I still would like to welcome the young man as far as in writing what he is suggesting the things here. I'm looking at this, but I would like to look at his side and see it in writing also. That's basically where I'm at.
>> anything else we need to do today? The public hearing on Tuesday, the 28th of October.
>> that's what we had in the newspaper. I think that's what was posted.
>> posted at 9:00.
>> the public hearing is posted for 1:30.
>> okay. [no microphone on]
>> it would be my recommendation I guess and if we could have a written schedule showing us next week so we'll see what timetable needs to be if we proceed.
>> thank you.
>> in terms of a posting for the public hearing, we may ought to have just a little outline of the proposal. Something that gives a little bit more than our usual agenda posting. [no microphone on]
>> right. The public hearing is posted for 1:30 for the corporation. Are we also posting it for 9:00 stpwh-.
>> the corporation under the tax laws the corporation has to hold -- [inaudible].
>> if we come up with an agenda item that has some subpoints that describe in greater detail, simpler language for laymen's appreciation, basically the proposal.
>> judge, if I could have a request. I know that we have in our [indiscernible] where everything is located, but if we could have a one map where all five properties are located, that would be a whole lot easier in terms of some people seeing where they are. We've got the maps, but -- thank you.
>> we'll be happy to provide that.
>> thank you.
>> is it fair to say then whatever due diligence we plan to do before taking action, we need to do within the next two weeks?
>> for sure, judge. [no microphone on]
>> okay. Anything further today?
>> move adjourn.
>> move adjourn.
>> thank you all very much. Appreciate it.
>> thank you. All in favor? That passes by unanimous vote.
Last Modified: Tuesday, October 21, 2003 7:52 PM