Travis County Commissioners Court

May 22, 2007
Item 34

34 is to consider and take appropriate action regarding a resolution approving a tax exempt bond financing to be undertaken by capital trust agency to finance properties owned by theop ll c. Commissioner Davis requests that we thought take action this morning, discuss it this morning, call it up this afternoon after appropriations.

>> yes, that would be fine, judge. I really appreciate. I guess I had questions, and there may be others that have questions also.

>> let see if mr. Davis has comments. We asked him to do several things last week am then we wewe last week. Then we will take questions from the court.

>> I'm harvest Davis, manager of the corporation. I'm here with cliff blunt, our attorney. I did issue a memo during the last week in which our recommendation, our staff recommendation is that the court and the board of the housing corporation approve this transaction. And let me just believely go over the reasons why we do recommend approval of the transaction. First, we estimate that the savings from converting the bonds from taxable to tax exempt for the five properties will be about $5 $550,000 a year, and that--

>> you don't have an extra copy of your memo, do you , mr. Davis? You e-mailed this to us ?

>> I distributed it to you, yes, sir.

>> e-mail is from you, the memo is from you ?

>> yes, sir, it is, it's from me.

>> okay.

>> that is your copy.

>> okay.

>> anybody else need a copy of that while we are getting copies here? One for me and one for Commissioner Gomez. One for the clerk. That is three.

>> okay. So they are providing benefits that equal about that amount. The proposed scholarship program of $300,000 plus. The donation of 31 apartment units that include zero rent plus the utilities, we estimate that benefit to be about $20,000 a month or $ $240,000. Our financial adviser and I have reviewed their cash flows, and we do believe that this structure, that they will have a good opportunity to be able to make the promised payments of $25,000 a month beginning July 2008 for the continuation of the scholarship program. You recall the proposal is that they would fund $3 $300,000 when they close on this transaction. They are trying to close June 7. So there would be a $300,000 payment then and then $25 $25,000 a month starting July 2008.

>> 2008. When is this.

>> 2008.

>> if for some reason they are not able to provide a unit or more that is needed, they would pay us $600 a month for not being able to provide the per unit. Our attorney says that we don't, the corporation and the county do not incur any liability if this transaction is approved. Again, we are being asked to be what is called the host issuer to approve their hearing and to enter into the interlocal agreement with the florida issuer. Also, we believe this is, their being able to issue the tax exempt bonds, 501 c 3 bonds, is available to qualified tax exempt organization. They are a qualified tax exempt organization. We have looked at their recent audit, which does have a note change. So irs has recently reviewed their transaction. So it doesn't seem fair to put a road block into their making use of financing that would assist in providing affordable housing. Finally, the freddy mac structure we believe will strengthen their pool and provide them with more resources to provide better services at these apartments apartments. They, if you recall, there are five apartments in Travis County. The pool is 17 apartments located in dallas and tulsa oklahoma, I think a couple in florida. But this restructuring, they believe, will provide them about $1.7 million additional resources to hopefully plow back into good affordable housing endeavors. We do recommend that if the court approves this transaction, that we charge them a $11,000 application fee, which is what we would charge if we were being the issuer of the bonds. And out of that fee we would pay our financial adviser for his services.

>> I don't think that that, I was out last week, but I did watch the meeting. So I kind of stayed up with the discussion. As the precinct 4 commission Commissioner, though, I keep getting the feedback from people who live in the fair fairway village apartments, and I cannot ignore those remarks. I just remember going through that apartment build building, and there was an incredible amount of mold on the walls. Do you all know if that has all been fixed up? I know that it's a separate issue from these five, but the community and the people who live there still tie that fairway village to you.

>> yes.

>> and I guess any other kinds of projects that you work on. So I know that I walked through there and saw the molt all over the walls and saw people burning scented candles to try to disguise the odor. The danger is as people breathe that, regardless of what it smells like, it's going to do incrñdable damage. Especially to children. There was one woman who was pregnant, living in one of those apartments, and that was not a good situation. The other things, the complaints I have gotten are the managers. Managers are rude to the residents, they don't really listen to them, and they give them the impression that they, you know, it's just a job, and they are not there to serve anybody, and not treat anybody like a human being. And I have to listen to those kinds of remarks, and I cannot ig authority them. And I would hope that you would understand whywhy.

>> absolutely, Commissioner. Let me say this. We want to hear those things as well. As I think I have said before, we cannot fix things that we don't hear about. We have recently changed the management company, not just the manager but the manage management company on that property back beginning of January, and have in place now welden affordable group, which is the company that manages most of the properties in the portfolio. In the last three weeks a new manager has been put on the ground at that property, and we had actually, we had hired or walden had hired another manager a couple weeks before that and she didn't work out and they got rid of her right away. They have a new one on the ground that I understand is working out quite well and they are quite hopeful that will be a long-term fit, as am i. As far as the mold is concerned, I know that is an older property, and that is not to make any apologies for anything that would be a health problem for anybody, but I believe it is a 1970 property that the plumbing problems that we have had on that property have been well documented in the past am we had a huge problem with the underground sewer lines back three years ago. It's been fixed. But we do have ongoing plumbing issues on that property from time to time. We just stay on it and we fix it as it comes up, as people indicate to us if there is a problem. We have put a lot of money into that property over the last three years. I've been told this excess of $300,000 of outside resources in the property. We are committed to making that property as habitable and for those residents to have as fine a quality of life as relates to the the-- the--physical property that they live in as far as possible. As far as mold is concerned, I know there has been mold in the past. I'm told that there's not any at this point in time, at leads that we are aware of that we have been made aware of and could go out and address. I am not a property manage management guy and not a hva hvac guy but I know I have been told in the past that some of those problems relate to having the air kin kinners running running-- running--conditioners running and having the doors open and condensation. There's been an ongoing process of educating the resident about certain practices that do create mold and remediating that when it does occur. But it is a section 8 property, an older property, virtually 100 percent occupied all the tile of it's one of the properties in our portfolio that we have to stay after all the time. All the time.

>> at what point is the building replaced if it's such an old building? What is the tipping point for you to then replace the materials or replace the building and start over ?

>> well, I don't know that I can answer that question here at this point in time that I'm prepared to answer that. I mean, I wouldn't suggest that the building in any way is uninhabitable. It takes a lot more work to keep it going. But it would be a matter of resources. If you're talking about raz razing the property and erecting a new one, that would simply be an analysis of at what point in time we have the resources. Also you have the challenge of moving redents, relocating, during a lengthy process.

>> this is pretty legitimate stuff here. In other words, the quality of life for anybody living in Travis County, I don't care what they live in, as far as that is concerned. When you deliver a quality of life product. I didn't mean to cut you off.

>> that is fine.

>> I hear your concern. That happens a lot on the east side. It does. The quality of life issues are precious to everybody in Travis County. I want to be sure that what I'm hearing is a quality of life issue. I am not fussing at you this morning. I don't fuss at folks. But I do understand what it is to have quality of life versus not quality of life.

>> and--

>> I hear her concerns. And it is a real issue for us on the east side. Sorry, Commissioner.

>> no.

>> you go ahead. I'm sorry.

>> you know, for instance, there are a lot of complaints about the sewer lines backing up. Well, you know, I'm not a landowner, you know, landlord of any big sort. I do know that depending on the number of people who live in that building would determine the size of the pipe, the pipes that have to be, you know, used.

>> yes.

>> and perhaps somebody cut some corners way back when in the '70s and didn't put in the right size of pipes in there to handle the number of people living in the building. But at some point somebody should have said, you know, enough fixing things, let's go ahead and knock this building down. We want to stay in the business of affordable housing, let's replace everything and put in some up-to-date pipes in there for water and sewer. Even if we have to meet the code of the city of Austin. But at least we are going to give some people, poor people, you know, a decent place to live in. Because this has been going on for years and years and years. Anyway, the other question I have, I think it's a great effort to try to set up some scholarship program for kids kids. What I wonder, have you set up those kind of scholarship programs for the kids who live in those buildings?

>> are you talking about the program that we are contemplating setting up here ?

>> yeah, I think it's a great idea. My only question is have you set that kind of a program for like, for instance, the kids who live at fairway village? You know, as we also look at the education of poor children, we also find out that when they know that there is some money available to go to school, they excel.

>> absolutely.

>> if they don't think there is any money whatsoever , then they choose other alternatives that make them wind up in the criminal justice system. And then all of us have to pay for that bill, whether we want to or not. And so, I'm just really, do you have a scholarship program set up for children from fairway or some of the other properties where you have poor children living ?

>> that is, I mean, that is our intention and our hope for what we are trying to accomplish here. And that is one of the reasons why we have said, we are not requiring or suggesting that the recipients of this program be limited to residents in the five theop properties that are the subportfolio that we are asking to take the bonds tax exempt on, but that it would be up to you folks or whoever established the administration of that program, to choose, you know who they wanted the funds to go to and whether that was kids coming out of fairway village or sant avenue maria theop properties or other properties not owned by american housing foundation. We are open certainly to your suggestions and your wishes. We want to be the funding source for this, but we don't want to pretendnessly to come--pretend necessarily to come in and make choices for Travis County from amount amarillo of who is most deserve or how the most can best be spent.

>> you don't have any scholarship programs right now for those buildings that you own.

>> no. No, ma'am.

>> okay.

>> a few questions. Thank you so much for being here yesterday and making yourself available today.

>> it's our pleasure.

>> some of these questions you answered for me yesterday but I feel it's important to make the record on this. First, I asked you yesterday who is the owner of american housing foundation.

>> nobody technically is the owner of it. It is a 501 c 3, a public entity. As I think I expressed yesterday, you own as much of it as I do.

>> okay and steve sterkel is the president, is that the title title?

>> yes, that's correct.

>> and his mother sits on the board of directors.

>> she does, yes.

>> and his brother-in-law, is he on the board ?

>> yes.

>> does he hold an office on the board ?

>> no. I don't believe so, no.

>> his son is also employed by american housing foundation ?

>> he is.

>> and how many employees do you have total ?

>> I believe we have approximately 18 total employees.

>> has that number of employees remained pretty stable ?

>> it would. In terms of core administration, it's probably been pretty stable for, I would say, at least the last three years since I've been there. The actual number of employees of the foundation would have varied in the past depending on how many properties we were managing ourselves, and therefore employing people in manage management functions. And right now I believe there's one property left that we are managing ourselves.

>> so you actually are manag managing one property.

>> one property, yes.

>> so as far back as 2004, the number has remained pretty stable around the employees.

>> pretty stable, yeah, within a range of two or three probably.

>> looking back at the 99 ds that are required to be filed by the irs for non nonprofit organizations, when I look at the 990s and I'm looking at compensation, wages, benefits, all those going towards the 17 employees ?

>> they would be going towards the employees of the foundation, yes.

>> and when I look back over that time period in 2002, the total amount of benefits compensation salaries was $1 741, in 2003 was slightly less, $1,605, and in 2004 was $6,485 million.

>> that doesn't sound right, no.

>> this would be the combination of the 2004 filing for compensation, other salaries and wages, and other employees benefits.

>> you said that was a 2004 ?

>> the 2004, yes, saw a pregnant significant--pretty significant jump.

>> in four, I can't tell you exactly how many, I would have to go back and research but we did have quite a few additional employees engaged in the management of properties. We were in a transition in that year to putting most of our properties with walden affordable group. And in that transition we had brought quite a bit of that in house for good portion of that year. Then through the year transitioned it out. But there would have been a significant number of employees involved with that.

>> okay. And walden affordable group, just to everyone is on the same page walden affordable group is a separate corporate entity through which you all manage your properties. Is that--

>> they actually are a third third-party management company. It's a separate for profit company owned by its employees.

>> okay and walden affordable group manages all of the Travis County properties and all those in the portfolio ?

>> that's correct, they do now. They just took fairway village over, as I told the Commissioner, in January of this year.

>> okay. And this separate for-profit group was set up by rick crawford ?

>> he helped to establish it it. Rick had been an employee of the foundation, left the foundation in 2004, went over, hired, who really would have been the kind of the infrastructure of the management company from walden properties, from whom we had purchased this may get complex, I'll sorry, from whom we had purchased a couple of large portfolios. When we purchased those, and that includes the theop assets here in Travis County water--walden continued to manage those properties with folks they had on the ground at those prompts, in most cases for several years. They went for a year with that. They informed us they were selling off the balance of their market rate portfolio and getting out of the management business and that we had 30 or 60 days to come up with a new management company or new way to manage the property they had been managing for us. We had a couple of choices. We could have gone out and hired another independent management company and completely restarred the problems--restaffed the companies. We could have started a management company internally. We already made a determination we did not want to do that. We ended up going out and being quite successful in hiring most of the people already on the ground who were going to lose their jobs, with walden. Rick left the foundation, got that accomplished, set it up as a for-profit company owned by its employees with no ties to the foundation. And once he got that up and got it running, palm Gomez was installed as the president. She had been with that company for quit a few years a very capable person. Then rick came back to the foundation.

>> and what is rick's title with the foundation ?

>> executive vice-president.

>> what would you all describe is the mission of the american housing foundation ?

>> to provide quality, affordable housing for low to moderate income families, students, seniors, various residents service programs that enhance the lives of those residents.

>> is education part of that mission ?

>> more and more. Over the last couple of years, we have kind of agre agreed among ourselves that we believe that education is perhaps one of the most effective ways to break the cycle of trans generational affordable housing and subsidized housing.

>> this is sort of dovetail dovetailing on what Commissioner Gomez was inquiring b american housing foundation does not manage any scholarship programs at any of their properties in Texas or anywhere else.

>> no, we do not.

>> do you contract out to any other nonprofits or for profit organizations for the management of educational opportunities or scholarship programs ?

>> not on a contract basis, no. We provided funding for scholarship programs. For example, in charlotte, north carolina, where we developed a student housing facility for johnson and wales university, the cash flow goes to the university and they are required to use at least half of that in providing scol ships for first generation students and families with less than 60 percent median income in the area. We provided last year a half million through cta, due to a scholarship program add ministered through them of the and that was matched--

>> through cta ?

>> yes, in florida . That is the issuer.

>> this also, it's also part of the housing corporation attached to a governmental entity.

>> yes, that is correct.

>> which would be issuing the bonds, tax exempt.

>> that is right. That was matched at the level of a million dollars by two programs in the state of florida there. So the $500,000 was able to turn into a million and a half available. Then of course dallas housing authority to the phoenix fund.

>> all three of these examples are scholarship programs or educational opportunities that are manag managed through entities that are affiliated with entities that provided financing, bonding circumstances, for american housing foundation.

>> I guess you would characterize the university a little differently than that , but yes. That is how we have done it to date. Not that there's not another model that would not be acceptable.

>> is aviation part of the mission ?

>> aviation is not part of the mig, --mission, except as we discussed yesterday, we received a donation of 25 percent of a small airport that we are now working with the community college in ama amarillo, hoping to set up an aviation program at that college, vocational program, yes.

>> community college doesn't at this time have any aviation program.

>> I don't believe they do, no. That is kind of a pet project of steve sterkel . The corporation didn't buy the aircraft. It was donated to you ?

>> this is actually a portion of an airport, a small private airport.

>> okay.

>> and our plan is to donate that to the community college in conjunction with them hopefully setting up this vocational program. Amarillo is a small community in comparison to Austin. One of the things we have been blessed with an increase in the aviation industry of the it is the simply location for all the osprey aircraft. I think they employ 1500 people. They are looking to expanding their business with some other military and government contracts. We typically have a very low unemployment rate in amarill amarillo, but we see this as an opportunity for kids in troubled neighborhoods though come out and get into high paying jobs and be able to stay at home.

>> but bell doesn't currently have a relationship with this college for vocational training.

>> they don't, no.

>> and also american housing foundation has owned two airplanes, currently still owns one.

>> that's right.

>> but has sold the other.

>> that's right. We received, both of them were received as donations. The one that we currently own is a duke aircraft, frankly, I have never even seen it. We have never flown and have no intention of flying it, and it will be sold.

>> the first airplane was a 1965 model that went on your books at a donation valued at $250,000. K correct ?

>> that's about right, yes.

>> and went off of your books at sale price of 40 40,000. That is correct ?

>> that is probably right. That plane was used in the interim.

>> what explains the significant depreciation from 1998 to 2005?

>> I don't know if I can fully explain that. I'm not really an aircraft expert. I i--know the plane was used in the interim.

>> on that point, the plane, the original owner, jts aviation, retained some interest in the plane. Is that correct ?

>> it's my understanding a very small interest, yes.

>> and retained use rights.

>> the right to fly, pay the expenses associated, the use rights to fly it, that's correct.

>> presumably whoever jts aviation is, they made use of the plane during that time period.

>> I believe that is correct correct. That was before I was with the foundation. I'm pretty confident in saying they did.

>> did american housing foundation make any use of the airplane in flying it in.

>> they did, yes.

>> the second airplane came on the books in 2006, in 1976 model valued at $265 $265,000. But ahf doesn't use it.

>> no.

>> it's listed in the 990s as for lease purposes. Jts aviation is listed in the assets for lease purchases.

>> right.

>> lease purposes. Were either of these airplanes ever leased to anyone ?

>> you know, I would be shocked to learn that the previous airplane was not I'm certain that it was. I don't know that the duke has been flown at all.

>> okay. It's possible I has been.

>> did mr. Sterkel fly either of the planes ?

>> he flew the jet commander which was the previous airplane, yes.

>> the 1965 ?

>> yes.

>> did mr. Sterkel use the planes for any trips he donated to legislators?

>> I have no idea.

>> okay.

>> if he did, he would have paid for it personally. He is extremely scrupe scrupulous with those things.

>> mr. Sterke slñrks a considerable contributor of travel contributions to slat slators correct ?

>> that is what I understand understand. Again, as a private citizen.

>> how is credit realty invest mentsrelated to american housing foundation ?

>> how is credit ty realty investments related ?

>> uh-huhuh-huh. You don't know ?

>> I don't know. I don't know that there are any specific ties zor rep real--

>> or reply realty advisers.

>> that I believe is a company owned by rick crawford.

>> or realty predevelopment llc ?

>> again, separate company so far as I'm aware.

>> okay. According to the audit, the financial statement and auditor's report ending December 31, 2005, the republic realty advisers, the foundation owns 49 percent and 15 percent of realty predevelopment.

>> that is possible.

>> okay.

>> I'd say it's probable if that is what that says, yeah.

>> the net assets for 2004, I never laid my hands on the 2005990, but the net assets for 2004, anyway, were 98 million, a considerable amount of fees are generated for management by this business, correct ?

>> for management? You mean for the foundation foundation--

>> no, that the foundation would pay in management fees to, for instance, walden or to other corporations if affiliated to deal with the management of the real estate assets.

>> certainly with as many units as we have, yes.

>> I am very, very hopeful on the idea of providing additional resources towards a scholarship program. It's a wonderful idea. Have you all considered contacting, because Travis County doesn't have a scholarship program set up, have you all considered contacting or researching the Travis County market for nonprofits already in the business of managing success successful deeply penetrating scholarship programs for low low income individuals ?

>> as I told you yesterday, we would certainly be open to do that. I hope there hasn't been too much of a miss an understanding here because the path we have been going on and suggesting here was frankly what I was assuming you and we, you as a board, wanted to do kind of modeled after the dallas phoenix fund operation. But we are open to doing this, you know, in any way that you suggest would be most expeditious for Travis County, yeah. And using an existing operation that has a success successful track record of providing scholarships would certainly be acceptable to us.

>> given the amount of time you've been in Travis County with affordable units, engaged in providing affordable units, in your experience have you come in contact with any particular entities that you feel are very good at providing that kind of aid to low income children ?

>> I have not personally, but there may be someone in our organization that has.

>> okay.

>> why don't we do this. Are you done ?

>> I may have some catch up.

>> okay. If you are here on this item and cannot come back at 1:50 this afternoon, you may want to come forward now and give us your comments. At about 11:30 we need to call up the legislative item because we have our consultants here and we have the legislature working feverishly. If you are here on this item and will not be able to come back this afternoon, if you come forward now we will be happy to take your comments. If you can come back this afternoon there will be another opportunity to give comments.

>> I'd like to just hake one comment but I will be here this afternoon. Just so it doesn't livinger.

>> okay.

>> the management fee on this portfolio is four percent with one percent subordinated due to the cash flow. That one percent has never been paid. Three percent is a very tight management fee, an arm arm's length contract with a for-profit entity, no understand the table, nothing. But three percent, if you research with any of your sources, you will find is a very, very low management fee. And it's market. I didn't want there to be any implication that that was not the case.

>> I move that we recess this item until after the corporations this afternoon. Should we call this item up before the corporation, mr. Davis ?

>> second.

>> procedurally it doesn't really matter. Both the county and the corporation will need to take action.

>> since we started with the county let's call the county up first. Finish this discussion this afternoon. Then we assess and take up the corporation, the housing finance corporation where there is the only item. Okay. Everybody is welcome to come back this afternoon, by the way. Way. I am suggesting that at 1:40 or so we will be able to take this item up. Okay. Appreciate that.

I call back to order the voting session of the Travis County Commissioners court and take up item number 34.

>> I believe mr. Richards would like to respond to a few of the issues that were brought up this morning.

>> okay. State your full name for the record, please?

>> jeff richards.

>> I apologize for not being prepared to speak more explicitly to fairway village this morning. I didn't anticipate it coming up, but I spent some time in the interim researching exactly where we are today on that property. I'd like to present that to you if I may. And just as a little bit of background, I don't know if you understand, we purchased that property in 2000 at the of h.u.d. It was owned by a previous owner. The property was failing. H.u.d. Asked us to come in and purchase that and manage that property and try to bring it back be up to a satisfactory operating condition.

>> are you talking about property in precinct 4, the apartments in precinct 4?

>> I'm sorry, sir?

>> what property are you referring to?

>> this is fairway village.

>> I asked are you referring to that particular property.

>> I am, thanks. As I think we've mentioned two or three times now, it's been well documented the problems with the underground sewer lines back three or four years ago. That particular problem has largely been solved, al there are ongoing, continuing problem with the older plumbing. But I would like to bring it to the board's attention that in September of 2005 the property passed its react inspection with a score of aea, a indicating that there were no health problem with the property and the 80 a sufficient enough score to forego an additional inspection for two years, rather than undergoing an annual inspection. And in June of 2006 the h.u.d. Manager review conducted by southwest housing compliance corporation, the contract administrator for h.u.d., came back with a finding of no maintenance deficiencies and the general appearance of the property rated a satisfactory. Now, I talked a little bit ago with leeann rogers who has been here a couple of time. She is the regional vice-president with walden group. She's been working closely with that property. She relayed to me that the complaints that we have received -- by we I mean either the manager of the property, the management company or the foundation have come down drastically in the last few years to the point that there are very few complaints being made today. There have been several made in the last two days here, but they all surround a program that was just begun in the last couple of days of trimming back the vegetation on the property to comply with h.u.d. Guidelines. That the vegetation not touch the building and not be above windows and thing like that. And there are some residents that are objecting to that, don't want us to cut back the vegetation. We received, according to her, probably 35 to 40 work orders per week on that property. There is currently no backlog. Everything that comes in is addressed within 24 hours. Including plumbing problems. She went through the last 30 days' worth of work orders. That were no mold items, none whatsoever. In fact, she does not remember any going back to wall den affordable group taking over on January first and is confident in saying there are no mold issues. There are periodically mildew issues associated with the chiller system and when that's running and tenants leave their doors open and condensation accumulates around the return vents. And again, I'm not an air conditioning guy. This is how it's being explained to me. And that that condensation needs to be wiped away or mildew with form. But we have no indication here of any mold issue, and especially any mold issues that are of a harmful kind at least since January. And really have no knowledge of any from sometime before that, at least that we've been made aware of. And I would simply say again, we want very much, as we do with all of our properties, to have as complaint free an environment as possible. We want our residents to enjoy the finest life-style that we can provide for them, given the resources available to us. But we can't fix thing if we don't hear about them. And this is what I'm telling you here. This is what we have heard about, what's come to us either directly through tenants or through other sources.

>> so if you receive a mildew or mold complaint, whanz? What happens? Approximate.

>> well, as I said, we haven't received any mold complaints according to the management company recently.

>> if you receive a mildew or mold complaint. Who does what?

>> I would expect that we would go out and use whatever kind of cleaning or chemical is necessary to remediate it. Again, all that have is done within 24 hours.

>> that's the answer, I guess. That's what we do at the county if an employee called and complained about mildew or mold at a certain workplace that the county owns, we would get somebody out there as soon as possible to evaluate the situation, assess it and figure out what needed to be done to fix it and do it.

>> yes.

>> and if it poses health issues, we would take care of the employee first and then try to deal with the problem.

>> absolutely.

>> how many units does the fairway village have?

>> I believe it's 128.

>> 122, I believe.

>> it's approximately 120 to 130, yes.

>> any other update that you researched over the lunch hour that you want to advise us of?

>> yeah. It just so happened in several of the questions, Commissioner, that you asked that I did not have answers to, just didn't have knowledge of them, I called steve stirkwell, who is the chief executive of our foundation. He happened to be in houston and was able to make it here in time for this meeting, and he's here to answer your questions.

>> and I just have one additional question on management. Are you the person that I would call if I get any complaints about management.

>> I probably wouldn't be the first person, but Commissioner, I believe I've enyou my phone number be and invited you if there's anything that you think needs to be be solved at a higher level, you are welcome to call me at any time.

>> I have your number. I need to make sure if I get comments about the way people are treated by management that I'll have a direct line to call.

>> I'd like very much to know that if we're having a problem. Yes.

>> I have some questions that I haven't gotten answered yet. Most of them were answered yesterday. One question that was hanging out there was what is credit realty investments and does it have a relationship to

>> [inaudible - no mic].

>> credit realty investments is a for-profit corporation owned by a trust fund, which is from our family, they have loaned money to american housing foundation. I believe they've loaned a little over a million and a half dollars to american housing foundation at zero interest, but they are very low interest. I think they're now being required to pay three percent, but they loaned money to it, but they've on no business involvement and receive no funds from american housing foundation. They made their resources off of other business investments in the '90's.

>> okay. And air park acquisition partners?

>> air park acquisition partners is five acres of land at the amarillo airport. There was actually 10 acres originally. Five acres were sold to the city of amarillo to bring bell helicopter in as part of a community development. There was very few pieces of land left out there and we acquired it with the idea of doing community development because we wanted jocks in the eastern part of -- we wanted jobs in the eastern part of amarillo. The eastern part is basically considered our lowest income part of the community and we needed growth out there. So we acquired 10 acres of land, five of it went to bell helicopter and they produced 2500 jobs. The other five acres is still there and we're still willing to gift it to provide jobs in the airport area. It's part of our community development program.

>> okay.

>> american housing is -- I don't know if you are aware of this, but we're also certified by the treasury department as a community development entity, which is set up to provide not only housing, but also community development in lower income areas where they need jobs and other programs in lower income areas.

>> and republic realty advisors?

>> republic realty advisors was formed November 1st, 2003. It is 25 and a half percent owned by myself, 25 percent owned by rick crawford, 49 percent by american housing foundation. It was formed to provide -- rick crawford and I were requested by baptist community services to provide construction management on a project they were doing. We met with the board and said we would like to take this on because we felt there was an opportunity to do some other thing with that, but we wanted the board's involvement in it so the foundation owns 49% of it. They had no income in 2003 to speak of, maybe a small amount. In 2004 the construction contract generated 72,500 $72,500. Approximately 24,000-dollar of that was given to an individual by the name of danny howell. Danny was an individual who had multiple sclerosis. He had been in the construction business all his life. We helped him to become the construction mrk of that. In 2004 the net income for republic realty advisors was $16,847. In 2005 it had a loss of $25,466. And in 2006 it had a loss of $365. After the original project that we did the construction management for baptist community services, nothing else has come of that, but it gave us an opportunity to help a disabled opportunity build something and do something with that. But mr. Crawford and I realized that because we were employees of the foundation that we could not do any work without having the foundation's approval and involvement, and that's why we went to the board and got the approval and that's why the foundation owns part of it.

>> and the realty predevelopment llc?

>> realty predevelopment has 19 owners. It was formed I guess back 2003-2004. It is -- it actually owns two airplanes, of which there are 19 owners. American housing foundation by itself owns one airplane. It was given to us in December of 2006. It's a 1976 beach craft duke airplane. It has never been flown. It is sitting in a hangar. The foundation has never flown it. We've never been in it. It is sitting in a hangar and we plan on selling it. It was a gift to the foundation from an individual who said will you take this airplane? A lot of times you see in the newspaper here in Austin where safe place asks to you donate your car to save place and they sell the car and take the proceeds for their charitable mission. This individual came to us and said I'd like to give you this airplane. We took the airplane, it's worth approximately $275,000. We'll sell it, the money will go into the foundation. Realty predevelopment owns who airplanes. It eanz a 1985 mitsubishi and then also a piper malibu. It is they are financed in oklahoma city. There are 19 owners. And the reason for that is 19 different people use those airplanes. They guarantee the debt, they sign on to it and they own it. The housing foundation owned more of it at one point and has sold that off to other people that want to use those airplanes. It's just like a net jet or a share of an airplane or a leased airplane. We're not a charter company. We don't do charters. We don't do things like that. So if someone wants to use an airplane for personal use, political use or for whatever reason they may want to do it, they have to have an ownership interest. So they have to sign a note, guarantee a note and pay an hourly rate. They pay $300 for the piper. $600 for the mitsubishi per hour plus fuel and then they pay for the pilot's cost with that. That's what realty development it.

>> those fees are for what use now?

>> they pay for the airplanes. If you went out to the airport and chartered an airplane --

>> like a time share for an airplane.

>> exactly. The time share of airplanes. What a lot of people don't realize is when the internal revenue service out of Austin came to us, the i.r.s. Agent came in and she called me after she set up the original meeting. And her and the branch chief and two or three others were coming in, she called me and said how do you get to amarillo? I said you can fly southwest or you can fly continental or you can fly american airlines or you can fly great lakes. And she said no, I know the four airlines. How do you get there? I said I'm not sure what you mean. And she said it takes nine hours to get there. We're going to have to come on Wednesday, we're going have our meeting on Thursday. We'll have to spend the night Thursday night and go back out Friday. And I said yes, ma'am, that's correct. Leaving amarillo, Texas you can only go to five cities. You can go to dallas, houston, albuquerque, denver or las vegas. Other than that you're going to have to catch planes.

>> glad you put las vegas in there.

>> yes, sir. We have a gambling spirit. So when she came in and started the ault, we gave her the airplane logs because every airplane has to have a logbook that shows every single hour, who was in the plane and what it was for because you can't use -- if you use that personal, it's fine, but if it's a business aircraft, you can't do it. So they went through all the log books and asked us, do you have any problem with that? She said there's no way in the world when you have property scattered over florida, carolina, oklahoma, Texas, new mexico and arizona that you can go to your properties and do what you're doing and the size of your organization without an airplane. I said is it reasonable? And she said no because you're in the doing it all yourself. You have a time share, but you're only paying when you use it. We sit down every time before we take an airplane out and see what the cost is going to be and whether it was justified. Today I've been to waco, Texas, spring Texas, conroe and into hobby and then back here. I'll leave here and go down, do the inspection in brownsville, go back up to dallas and then to amarillo today. It costs less than $600 in fuel.

>> so american housing foundation has a 15% interest in those two airplanes?

>> I think it's less than that now.

>> listed as 15% interest I think in the 2005 audit.

>> it's gone down. We sold a couple of interests last year. I think they're down to 8.75 percent.

>> and then

>> [inaudible - no mic]. Issues that's an asset that we've never flown and we're selling it.

>> okay. And also at least as recently as 2005, there was also another airplane, the 1965, that was sold for $40,000. Right?

>> yeah. That was jtsa aviation. That was a 1965 rothwell jet commander that was given to you had. We actually flew it. A 40-year-old airplane, we flew it some. That airplane in -- it stopped flying in 2003 because he were not allowed to fly it in the united states because of the noise and because of the reduced vet kel separation measurements. You couldn't fly it. And gantt aviation sold it for american housing foundation to a guy in n in namimbia. It wasn't -- the only way that they could get it from there was to get a ferry permit to take it from georgetown, be up through iceland, greenland and over to namimbia. That was a gift given to the foundation, but we actually flew it.

>> aside from those four airplanes, is the trade wind airport separate from the air park acquisition partners airport?

>> yes, ma'am, it sure is. Trade wind airports, it was a stock given to american housing foundation in 2005. It was worth about a million and a half dollars. The airport itself is worth six million. And what we're doing with that is the corporation that has that, the i.r.s. Code section 367 doesn't allow it to make a gift to the airport. It's just an i.r.s. Ruling on transferring corporate assets to charitable organizations. What we've done with that is we've met with pat o'bryan with west Texas, Texas a&m and they're interested in forming an aviation department in the Texas panhandle. We've also met with amarillo college. And what we agreed to do is take the gifts from the owners, which none of us are involved in the ownership of trade winds air park. It was originally owned by jimmy whit enburg and recently by perry williams. They're making a gift of it to us. We're turning around and gifting it to the cleng to provide a training program in aviation for education. The reason that this is important to us is that an apartment complex that we've developed, if it's 100%, it's 60% or less of median income in the east side of amarillo is right by trade winds. They've taken the lands and perry williams has developed the land and trade winds over the last several years and has now built almost 600 homes there that are all low income homes. They've also actually built up enough to build an elementary school. And the city of amarillo has gone out and built an elementary school there. So that was a gift of stock. It was just like a lot of people will gift to a corporation, dell stock smvment will gift microsoft stock or things like that. Mr. Williams had trade wind airport stock and he gifted stock through to us, american housing foundation, and we hold it and we'll hold it for probably another year until we get the other 75%, and then we'll transfer the whole thing to either west Texas a&m university or to amarillo college. And with that we pledged one million dollars for a scholarship fund for low income kids to have an opportunity to learn aviation studies.

>> is this off the ground and running? Is that particular scholarship program, what stage is it in at this time, the one you just mentioned?

>> the trade winds? We have purchased -- basically what it was was we had an individual that had a life insurance policy on his life that he's agreed to allow us to sell his life insurance policy on his life to -- it's kind of like for individuals, it's called a life settlement. If you have a life insurance policy and you're going to die in so many years, somebody will come in and buy your life insurance policies at a lesser amount, expecting that they would receive that many dollars at the end of the day. It's called life settlement. And they gifted us an insurance policy that in September we feel like will have -- right now it's worth about 600,000. We feel by staim this fall it will be be worth approximately a million dollars. And that's been pledged to that scholarship fund, but we've not received the cash yet from that. It was a gift. The million dollars was a gift.

>> so the scholarship is not up and running yet. You plan to put it in place?

>> the only scholarship programs that are up and running right now is we've been giving 300,000 a year to dallas. That started in 2003 and we've continued to do that every year since then. We've given -- we have a program in charlotte, north carolina where we built a building, 10-story building downtown for student housing. It was worth about $36 million. We pledged that to the university and all of the cash flow that comes off of that to the university and that's up and running and they're receiving funds. We gave $500,000 last year in florida through capital trust agency to five different counties because the state agreed to match those funz for scholarships for low income kids, and we have a 25,000-dollar scholarship program at the university of wyoming for native american kids that the university agreed to match for 5,000. Right now we've entered into an agreement with temple university to acquire student housing complex in philadelphia, which we will be able to give the william penn foundation through a group called beach interplex, just at six million dollars and we pledge the building and the proceeds back to temple. And we agreed to close on June 28th with california baptist university in california on six student housing complexes that all of the income off of those buildings and the buildings themselves go back to the university for scholarships for low income kids in riverside, california.

>> these are all based on the model that we started in charlotte with that building in conjunction with the university putting student housing and then giving the cash flow off of that property annually to the university to use primarily for scholarships for low income kids.

>> we started that with johnson and wells, and we've now -- we'll close in June with temple, university and with california baptist university in June. We've got a meeting next week with coastal, arizona university to do the same thing with them on two of their student housing complexes.

>> how long have you been in the housing business?

>> we started in 1989 with the acquisition of two properties to help the catholic church out of two troubled properties.

>> are you asking about student housing?

>> we started in 1989.

>> community development?

>> we were approve in 2002 as a -- 2003 as a community development entity.

>> the person who made the gifts, they know you in this business be and what they're trying to do basically I guess is put it in the hands of somebody to do more scholarships?

>> yes, sir.

>> community development, housing development, etcetera?

>> that's correct. They're not on the board, they have no investments, they're just folks that have come to us and said we like what you're doing, we see what you're doing. We feel like we can have hands' on and they make gifts.

>> we don't solicit donations. I mentioned that.

>> I guess a couple of weeks ago there was an article that came out in the american-statesman. I guess y'all had a chance to read it.

>> the article in the american-statesman? Yes, sir.

>> you did have a chance to read it.

>> yes.

>> did you have an opportunity to respond to what they were -- what being suggested in the newspaper?

>> would you tell me specifically what --

>> just the point that --

>> I have talked to the fellow who wrote the article. I talked to him before and afterward.

>> it mentioned the fairway property and other things. I just wanted to know did you have a chance to respond to --

>> I have visited with him, yes.

>> I just had -- I wanted to maybe bring this to the evening session because I just anticipated that there would be a lot of questions. I haven't had a chance. I just had two or three questions that I wanted to ask. But let me ask this: last week when we discussed this item, there were person that did come from the -- during this public session that did bring up some points. There's one thing that we have tried to do, and I know I have been a real strong supporter of doing, and that is especially with dwellings that have been taken off the property tax roll to replace as much of that tax money back into benefits and opportunities for the residents that dwell within the particular units that have been taken off the tax rolls. I just think it's a fair exchange of doing that. I know we mentioned the scholarship programs and thing like that, which I think is a very strong plug and a very positive thing to do. We haven't figured out exactly how we'll deal with tand how we'll put our arms around it to make sure it works the way it should work. We maybe have to look at the dallas model or any other model that exists that you utilize as far as dealing with the program because we want to make sure that the funds get to the proper persons that are in need. But in saying that, I want to make sure that the services again are made available to the residents, that we know that we mentioned the 31 units that have been set aside, dedicated through the family elder care and also the basic needs coalition to outstanding entities. I think they work with the needs of the poor, even those that are severely disabled. And there has been a certain amount of money set aside to deal with that, I think $240,000.

>> that is our estimate.

>> so now we have about $540,000, with the $300,000 input as far as if the court decides to approve this particular item today which goes towards the scholarship money. But then there's another segment of money that I brought to harvest, I think it was $250,000, which finally was in the cash flow end of that. And it kind of maybe said something maybe briefly about enhancing affordable housing. What I'm trying to do is maximize as much of this deficit -- deficit meaning the money that has been taken off the tax roll, and making sure that we get as much as we possibly can contractually to provide those kind of services that we would still have to pay for. The county would still have to pay for it if you were not here to offset some of these services. In other words, the money being taken off the tax rolls. So I'm concerned that we get a bona fide entity to make sure that we actually get these things in the posture and the position, I guess, to make sure that it's a win-win situation for all, the poor getting what they need to have, but of course the financing mechanism that you would have in place as far as the cash flow that would be increased looking at the tax exempt bonds versus non-tax exempt bonds. So that is all kind of mixing -- I guess it's like putting things together. You mix it all up and then you see what it tastes like later. That's basically where I'm coming from is because there was some very detailing financial deficit probably with things being taken away from as far as tax paying entities. I think it even brought up about a million dollars that the feds would even lose. I think that was brought up last week. But I do know that the property taxes, which we have several persons that got their hand in the pot to receive those tax dollars, from the independent school districts to a.c.c. To the hospital district, city of Austin, Travis County, and on. So we're talking about substantial money that's being taken away from those entities. So what's the trade-off? Can you speak to that? That is a real big focal point of mine. Is it enough that we have here on the table today? Can we get closer to that amount of $1.2 million. I don't really know. And also a bona fide nonprofit throughout that's willing to make sure that these services are rendered, the after school care, all those other kind of things that we look at to make sure that the residents get those services, the educational aspects. Can you answer that long, long, long question?

>> let me try. First of all, in terms of a qualified nonprofit to administer those myriad resident service programs that should be conducted in these communities, let me say we already do that. I think that's something that's getting lost a little bit in translation here in our discussions. I have johanne with me today and she's been here a couple of times, but hasn't had the opportunity to come up and speak to you. She is our resident director for services for our foundation.

>> let her come up, if you don't mind. I want to make sure we have a match here, and especially with the new stuff that's coming online. There's some things that Commissioner Gomez brought up about fairway. Those are legitimate concerns about the apartments there. And with the scholar program there's another legitimate concern. How will it be administered? I need to know basically what have you to say.

>> if I may for a second before joann starts because I know in our discussion yesterday with Commissioner eckhardt, she voiced a concern that perhaps if we do do a scholarship program that it ought to be administered by a local nonprofit that already has its legs under it in terms of doing that. We have no objection to that whatsoever.

>> I don't either. I do not either, but I think for the record of those folks that are looking at this, they may be asking -- they're not seeing what we see. They may ask the question, Commissioner Ron Davis, this is what you did. You got this, da, da, da, da. What do we get in ex-chaik for this? That's what I'm bringing up is what's going on?

>> right. I would say this also to remind everyone again. What we're asking this court to assist us with is simply taking the taxable debt on the properties, which we believe on laferg create additional cash flow to the portfolio of $550,000 a year or committing to do in essence all of that back to the community, to our communities in the form of 31 units that we set aside, rent-free, utility-free, furnished for those who need it in the agreements that wheef talked about. We've proposed using a scholarship program that I think has been in conversation with you folks for some years now. If this court feels that there's a better use of all those funds, open to that. Whether that scholarship program is restricted to kids from our properties or opened up to kids sthrow Travis County, we're open to that. But the point I'm making is what we're trying to do is to give back in a measurable way all of the savings on the transaction that we're asking you help with. I understand what you're saying in relation to the properties now being off the tax rolls, which they have been for some time and the saving there. I would also ask the court to remember this. Our core business, our primary business is to provide affordable housing. What we have done in this portfolio is taken market rent properties and brought them affordable. That takes money to do in terms of foregone rents. We have a right to these exceptions that we have in order to provide that particular service, be which is a vying service in this community. So what we're trying to do had with this transaction is create cash flow which we put back into the communities on a measurable basis, particularly in Travis County. And other places will largely be continuing with programs that are already in place. But we are also attempting to take advantage of an opportunity to strengthen the operation of the overall portfolio to increase the cash flow, not all that have cash flow will go to designated communities and resident services, but it will strengthen the overall portfolio, make sure we have on an ongoing basis, cash to take care of ongoing needs, cash. Make sure we take care of the communities and to guarantee so far as possible that we will continue to be able to meet the promises that we've made to you folks and other folks on an ongoing basis?

>> I guess --

>> we've got two or three questions for ms. --

>> oh, yeah.

>> do you want her to describe the programs?

>> just briefly, judge.

>> Commissioner Davis, I guess what I want you guys to realize, I know you talk a lot of business here, but the mission of the foundation I think is our department and what we get to do on-site at the properties. We provide a diverse -- lots of programs to the residents depending upon the residents that live there, whether they're seniors, whether they're children. For example, we do spring break lunches, we do flu shots. We come in, we work with lots of community organizations here. And I think we had lots of support letters come in from the different organizations that we work with here in the Austin community. School supply distribution. We do financial literacy. We get university of Texas volunteers at many of our properties to come in and talk to the kids about the importance of going to school. We do home buyer education. That's a big goal. We don't want our residents to live there forever. We want them to obtain home ownership if that's realistic for them.

>> is this at all the five locations we have here in Travis County?

>> absolutely, yes.

>> and I think we had-- I actually had a really -- well, one of the letters was from nikki dean with I believe it's phoenix house, they're doing camps this summer. And not to say what's going on, but what we have been doing, we work with the y, we work with lots of organizations that come in there and provide spring cleaning program. We do a bingo program to show them how to clean better. And again, it depends upon that property. Some of them are the nuts and bolts and some you can talk to them about investing. It just depends upon the break down of the community.

>> this may an question for legal. If we the court agree to move forward with this today, because I understand that the closing of this particular issue is when? When do we have to close on this?

>> well, we've been working on a function a.m. Date of June the 7th. That could move some from that, but wire trying to hold to that from this point.

>> June the 7th? I guess my question is all of these things that we're talking about today, if the court acts today, how will we be able to make sure that we get what we're talking about here today, the scholarship program, all these other things we talk about into a contractual situation to make sure that happens? Even though we say we'll deal with with this today, but how does that happen? There's a lot of stuff that's been thron out here today. Since it has, I'd like to capture that in some sort of writing scenario whereby the closing won't affect what we discussed today and to make sure that it han. That's a big concern to me, all these things that we have suggested, how do we capture it?

>> there are draft greanlts related to owe on draft agreements related to these issues and resolutions -- are we on the county's agenda.

>> could you speak up, please?

>> in the county resolution it authorizes I think an agreement to sponsor the -- to be the sponsored jurisdiction. And the language authorizes anyone executing the document to approve any changes that are consistent with the intent of the court at the time. So I believe it is possible and there was similar language in the housing finance corporation item that y'all will eventually take up shortly. So there is provision for approving today and then allowing I believe in both cases it would be judge Biscoe as either county judge or president of the housing finance corporation, in this case to approve any changes. So, for instance, if there was some request to do something different than the scholarship program, that could be approved laisht according -- later according to the resolution that's before you today.

>> it's not ironclad? So it's something that we will continue from whatever action we take today, it will still be honored as far as what we are suggesting here today. Because I think it's pretty important that the bona fide nonprofit that looked -- however we decide to go, whoever ends up dealing with the scholarship end of this and also the other thing that committed ergo mez bought up about fairway that the apartments is something we can have in some format and we can move forward.

>> it's the housing finance corporation, not the county, but that agreement only at this point contemplates the provision of the units and the scholarship program. If necessary we can certainly make amendments to that draft and include whatever other items are requested.

>> okay. Judge, I wanted to make sure we had clarity.

>> we could give approval today if we think it's necessary, come up with a one-painfuller that sum -- a one-pager that summarizes quid pro quo between now and next Tuesday. We've talked about three or four things. I don't know if they're new. I think we've discussed most of them. Let me clarify one point. On page 2 of mr. Davis' memo to the court, page 1 being the first sheet of the concerns and benefits.

>> yes.

>> page 2 you say afc, the bottom bullet, left side, afc remains a 501(c)3 entity, da, da, da, the five Travis County property developments are currently exempt from property taxes. That's true?

>> that's true.

>> what's the difference between current exemption and this issuance? Are they exempted to the same amount?

>> as long as the properties continue to be owned by american housing foundation as a choad dough and since they purchased them before, I believe it was December 31st of '03, they'll remain tax exempt as long as that organization owns those properties. So this action will have no bearing on the property tax exejs.

>> I didn't fully appreciate that. So the notions that taxes are being received by local governmental entities today from these five units is not correct? These five properties were already tax exempt. But by being co-issuer or host issuer, we basically are thorgz reauthorizing or refinancing on better terms that would free up capital. I don't know that I fully appreciated that until today's discussion. Now, if you were here on this item, quick withly come forward, give us your new and different comments at this time. Any other grez the court?

>> i-- any other questions from the court?

>> I just had one additional question. In addition to the services, they're given at the different places, and including fairway. And I guess in particular fairway. What about -- what attention is given to the management in charge of that facility? Because I think that's extremely important in term of the comments that I keep getting from people who are there. And I've he should about this situation, the fairway situation for several years now. And I've kind of really put some trust in people making some changes there, and it's really annoying to put it mildly to know that changes haven't taken place so that the complaints don't keep coming forward. So in terms of -- I guess you know that you deal with poor people, and they probably communicate a lot differently than the way you and I communicate with each other. So is that taken into consideration when you interview people who will be good managers at facilities where poor people live?

>> yes, it is, Commissioner.

>> I just want to address on the resident service part of this that we meet with the managers before the new year begins and go over their calendar and talk to them about whatever the population may be and educate them about the cultural diversity on that property. It's reality, though, that the manager may change. We do get in there right after that and visit with them about the importance that american housing foundation has on these services. That's number one with them. And I just wanted to throw that in there.

>> and I might add also that I know we have discuss understand here that there have been some management changes on that property and those changes have continued to be made because we've not been completely satisfied with where we are from the standpoint of management. And that's not just from a financial standpoint, that's from the standpoint of our commitment to offer the best possible life-style we can for those residents. You have my personal commitment that that will continue to be the case. We've got a new manager in place now that so far we're pretty excited about. She seems to be working out. If that doesn't work out, we'll do something else.

>> if that doesn't work out, with you consider actually moving on from your relationship with walden to go with a different management concern?

>> absolutely.

>> I think it needs to be pointed out publicly because it is a legitimate concern in any of these apartment settings.

>> I would say this, we're really kind of happy about walden being involved now. They're the ones that were not for a couple of years. They've just come on board since January the first.

>> will h.u.d. Indicate to us whether management has improved or worsened since your acquisition and management in 2000?

>> I'll be be happy to give you copies of the h.u.d. Management report and the react inspection report on that property done in 2005 and 2006.

>> do they address that question?

>> does anyone here now?

>> I can answer that question. In 2000 h.u.d. Asked us to take over these properties. The owner had run them into the ground and they asked us to come in and change them because they were in such bad shape. The report we had in 2006 was satisfactory on the management, be and the property scored an 80 points, which failing is 60 or lower. So h.u.d. Is accepting --

>> you covered that this morning. Could we just get a simple letter from m.u.d. Saying since they've taken over this property, management and operating and whatever it is, it's a whole lot better now than it was before we asked them to come in?

>> I'd be haney to get that for you.

>> that's not to say future responsibility goes away, but it certainly casts it in a different light than we've been thinking about. Last time we had this discussion residents came in and basically complained and I didn't ask, well, what happened before 2000, but since you brought that up -- and I didn't know that h.u.d. Had come in and say, hey, we need you to take over this property because it's run down and we need better management and we with think you can do is, so take a shot at it. If they will just indicate in a short letter to mr. Davis, they haven't been perfect, but they've been a whole lot better than management was pre2000 or pretheir acquisition, I think it will help a whole lot. Still, I think when residents complain about certain problems at the complex, diligence says go out and try to address them and remediate them as quick as you can.

>> does h.u.d. Reach out and cherry pick specific organizations to take over properties?

>> yes, ma'am. We are meeting with h.u.d. In washington next week. We've been up there several times meeting with deputy secretary roy bernardi.

>> are you flying a plane up there?

>> probably will because it takes three hours and doesn't take three days. I probably will because I'm going to south carolina to meet with coastal south carolina first and then we have a development in neighborhood plan he wills, florida with -- naples, florida. So it takes about three and a half hours to get over there and it burns 32 gallons an hour, so it costs $180 to fly four of us to carolina and then on to washington. So yes, we will with take the airplane.

>> you can do in two days what would take a week to do.

>> [overlapping speakers].

>> seems to me that it would enage us to cast the fairways village complex in a different light if we had a simple letter like that.

>> I'd be happy to get that for you. They've asked for us to take over 27 more properties for them on the east coast similar to fairways. Oanters there have walked away from them. So I'll be be happy to get a letter from them. Be be meap to get that for you. -- be be happy to get that for you.

>> that would be very helpful, but I also believe that management is as important, if not more important than the services that the -- the other services --

>> oh, we agree with that.

>> yes, sir?

>> [one moment, please, for change in captioners]

>> do you remember the first question.

>> in the board backup there's actually an interest rate savings of a million seven, part of a model these guys did. The benefit to ahf to doing this transaction, the portion here roughly a third of that, the debt that we are restructuring. The second part of your question -- what was the second part?

>> join right now?

>> 17. 17 properties?

>> what happens if the court says no --

>> oh, I'll tell you, it's simple. Just like in 2003, we just do this part of the transaction as taxable debt. We are -- our proceeds go down slightly but in the cash flow will go down, you know, half a million dollar or so. But we just go about our business. We restructure all of the debt. The existing 12 properties remain tax exempt, we restructure it and these remain taxable.

>> we pay by not funding these things we were offering you.

>> the county loses out on an opportunity.

>> the motivation for share the cash is that if you have to go the other way, the cash goes away.

>> correct.

>> the higher interest we

>> [laug]

>> the projections that were given to harvey to use to -- to analyze the cash flows are -- are today's operating figures. They are basically based on a trailing 12 of the properties.

>> annualized 2007. So it's the most recent data, this is how the properties were operating today.

>> so if something happens and freddie mac were to have to step in, they would try to find another owner/manager.

>> that's exactly what they would do.

>> what was explained last time.

>> what they would do, they would find another chdo to basically step into the board, this deal essentially to maintain the exemption.

>> it would stay mirrored or you would never find somebody that would take it on. Meaning that it would continue to be a chdo, the taxes would be forgiven just like they are at this stage, otherwise you wouldn't find anybody that would come in.

>> from freddie's perspective if they were to foreclose the real estate taxes $10 million in value out the door to them. If they are for closing it's already a bad situation, it would be exacerbated by foreclosing and becoming the owner themselves. In all instances they would have a non-profit that they would bring in.

>> according to your rent structure it appears to be that below market

>> [indiscernible] type of dwellings, is that correct?

>> I'm sorry.

>> as far as the amount of rent?

>> I didn't hear the question, I'm sorry.

>> the amount of -- that's being charged in some of these dwellings, it appears to be below the actual rent that's actually being charged in the market.

>> correct. That was my --

>> [multiple voices]

>> each of the properties, yes.

>> which is really another benefit that makes it affordable.

>> that's correct.

>> all right.

>> any other questions.

>> just a couple more.

>> in the waterfall, 15 bucket waterfall that would determine the ability to pay the scholarship program, operating expenses for property and capital repairs, they get paid and --

>> prime debt service. Operating expenses comes first. A debt service comes second, then repair and replacement reserves come third, that a freddie mac requirement.

>> as part of the operating expenses asset management fees.

>> those are below.

>> it comes out after the charitable mission bucket. The only part of the management fee that gets paid as operating expenses is the 3% above the line. That's a documented fact.

>> we don't get american housing foundation does not get paid until you are paid.

>> yeah.

>> doesn't get paid?

>> we don't get paid anything until you are paid your money first. As a matter of fac cse this transaction ahf has to kick in their own money to fund a slight shortfall. There's no money at closing, no money ongoing until you guys are fully funded.

>> does the dallas minimum resident services $75,000 annual contribution come in before Travis County and dallas scholarship fund or after dallas scholarship fund.

>> I'm not 100% certain. Harvey actually asked me that in the hallway. I'm nearly certain it's

>> [indiscernible] with all of the other issue fees including the scholarship payments to both you and to dallas. I know for certain it comes out before ahf shares in any cash flow.

>> Commissioner Gomez this speaks to part of the question that you were asking earlier about management. The deal is also designed to incentivize the management company to -- you know to perform in an excellent way because one percent of their 4% fee is subboard nated below the line. In other words they don't get to get one quarter of their fee until after you guys are paid. On a par with us. And that gives them additional incentive to make sure that the properties are -- are operating as --

>> [indiscernible] as possible.

>> move that we approve the -- the requested resolution, approve a tax exempt bond financing to be undertaken by capital trust agencies to finance the five properties in Travis County owned by theop llc.

>> I would offer a --

>> seconded by Commissioner Davis.

>> I would offer a friendly amendment to say that we -- upon sealing the deal, move as quickly as possible to transfer our rights to the 300,000 payment and subsequent payments under the plan to a -- to a local non-profit already engaged in scholarship and educatal services to low income people.

>> that is not friendly to the maker of the motion. My preference is if this passes put it on the agenda, put it on the agenda have the full discussion of that really, how we would use the proceeds. There are several options to look at, that's not friendly to the motion. I would put it on the agenda to discuss and one prepare for that, second to discuss it.

>> I would be ready to discuss that because I have some -- some additional suggestions to make to that deal.

>> I guarantee you we will hear a lot more suggestions.

>> I understand.

>> I think the main thing it ought to be available to the children, students who live in these properties. They are making the big sacrifice of living in those housing -- that housing basically being disrespected by management and -- then they have to live in these really, you know, like fair way. Where -- where the -- the sewer lines are always clog and backing up, all of that, they have to live there. I think they ought to have the shot at these scholarships. If we are serious about breaking the cycle of poverty I think that's a big step that we could take. I'm sorry that the fairway village experience has just really been bad. I just -- as much as I try to be patient after five or six years, I kind of run out of it, you know. So I cannot move forward on this deal. Until -- unless you could tell me that you are going to improve fairway in a year's time or two years time, and that's the only thing that would be good for me.

>> Commissioner, I don't disagree with you on that. I think, you know, when we first started talking about the scholarship monies, I think we went originally we started looking at the categories and it may need to be agendized, I think might be to flush everything out as far as where we want to go with this. Of course when we talked about it earlier, we talked about single parents. We have children that have never had a chance to attend college, first time persons that will be able to attend college. Also know that also reside in the particular apartment complexes that we -- that they are benefiting from as far as what we are doing here today. I think there are several categories. I just don't want to exclude persons that are in poverty, maybe they are -- they may not live in the apartment setting but that doesn't mean they are not in poverty. And of course there may be a single parent that maybe need some assistance as far as acquiring college education of even better educational opportunities. I -- I'm just -- I'm seeing a mixture of -- of a lot of persons that are worthy of what we are doing here today. So it may need to come up under a -- an agendized item so we can flush it all out, then have a bona fide, qualified entity to -- to enhance all of these things that we are talking about here today. Right now I don't know, you know -- there are probably some that are -- that deal specifically with education nam needs for the -- educational needs for the poor in Travis County.

>> I think we ought to just commit to keep an open mind put this on the agenda.

>> I don't want to step into the policy decision. But from a legal standpoint, all that's being requested is the approval, the agreement says that the -- that ahf will fund the $300,000 at closing and $300,000 per year at $25,000 a month. Ongoing. So long as they own those properties, at least $5,000 per month per property. In the -- in the -- what the county decides to do and how the county decides to administer and to -- to put that program in place will be the county's decision and ahf will have very few, if any, restrictions on that, other than they are really providing the funding vehicle and it will be up to you or whoever you designate to --

>> you want to see what we propose and sign-off on it.

>> we would love to.

>> I would like to say Commissioner Davis we share your vision of this precisely. We could not have said it better.

>> as long as we benefit the residents of Travis County, share my vision.

>> yes.

>> any more discussion of the motion? Of the motion?

>> yes. Your point is extremely well take place from a legal perspective. I totally get it. And I am particularly concerned about this -- this legal arrangement and the relationship that it establishes, particularly in light of what's been going on with financial institutions and universities on very similar kinds of circumstances, completely above board deals where the financial institutions provide an extra bump as it were. We have seen how that's played out, that's the basis of my concern, why I won't be in favor of this deal as it's structured. If it were passing through us to a 501 c 3 I would have the comfort level but I do not as it's structured now.

>> it may get there at some point, we are not posted today to vote on that anyway. Are we posted to vote on that today legally.

>> [multiple voices]

>> not on the county agenda. That actually is with the other fine organization that you all are familiar with, the housing finance corporation.

>> we are running out of time on this item today.

>> I understand.

>> is there any -- there is a motion with a second, going to pass or not. My thing would be at the appropriate time we put another item on the agenda for any follow-up discussion as -- as provided by law.

>> that's fine. I just -- again, i, too, can understand the legal part of it. But the other thing is that we are saying that only 300 kids can -- can be eligible for the scholarships. If they were kids who were living in these -- in these facilities because, you know, normally you give a kid about a thousand dollars scholarship and even that is not enough to deal with -- with the tuition, to deal with books, to deal with -- with bus passes, whatever, however they -- however they get to their classes. A thousand, that's 300 students. That's all we think we can help?

>> do you want 150 --

>> I would like to have a million.

>> do you want 150 students?

>> I would like to have a million.

>> at $2,000.

>> as many poor people as there are out there, we need to cut that cycle of poverty.

>> Commissioner, to address that number, the amount of the scholarships will be an administrative decision that you all will make.

>> I understand! But having worked with those --

>> up to $5,000, right? Thousand, 2500, up to 5,000. That I think -- I mean we only have objective standards that determine what the amount is set at. It won't bother me if we choose an appropriate 501 c 3 to do it at the appropriate time in the future. I'm open on -- on how to use this. If it comes to us. So -- so my thing would be take a couple of weeks, put the best ideas together, stick it on the agenda, let's discuss them. May want to have some folk on the outside come and give ideas or make proposals. I'm completely open.

>> just 300 students --

>> [multiple voices]

>> the issue itself, I think everybody wants the same thing here. I guess it's just a matter of how do we get there. I don't disagree about what Commissioner Gomez is saying, nor do I disagree with what Commissioner eckhardt said. She would like to have a bona fide 501 c 3. I support the same thing, Commissioner Gomez I stated earlier she is looking to envision the youth of the money -- the money to assist some of the persons in some of the dwellings, units that are being served. I have no problem with that. I just think whatever we do we need to move forward and then hash the ins and out of this later on as far as the abuses to go with the service. So I -- I agree with both of them, but of course I have to move forward at least until we get to that point to identify those concerns and how we get at those concerns on other agenda. I have no problem with that.

>> Commissioner, if it would help, the $300,000 that we've offered to give at closing and ongoing on a monthly basis, from now forward, goes to this court, if this court and the Commissioners make the decision that -- that mr. Morrow who has a very good history, if mr. Morrow is the organization that you want to go with, take the 300,000, put it with mr. Morrow, we have no problems with that. That is at your discretion. We have no say-so and -- in what is done with those funds.

>> you will find no road blocks from us on how this administrative --

>> thank you. Let's make progress. Vote it up or down. All in favor of the motion? Show Commissioners Daugherty, Davis and yours truly voting in favor. Voting against Commissioners eckhardt and Gomez. Thank you all very much.

>> thank you.

>> thank you. Now I see our county clerk here, along with -- with counsel.

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.

Last Modified: Wednesday, May 23, 2007, 8:00 AM

May 22, 2007 Item 34

May 22, 2007
Item 34