MINUTES OF SPECIAL MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Tuesday, August 22, 2023
The special meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee (the “Board”) was held pursuant to public notice published in The Daily News on Tuesday, August 15, 2023, and posted on the Board’s website at: www.memphishehf.com. The published meeting time was 11:00 AM. The meeting was held in the conference room of the Board, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Monice Hagler, Secretary Buckner Wellford (Zoom)
James Jalenak (Zoom) Cliff Henderson
Katie Shotts (Zoom)
The following Directors were absent:
Daniel T. Reid, Chairman Dr. Manoj Jain
Staff and others attending: Stephanie Bryant, Bryce Miller and JP Townsend (Zoom); Charles E. Carpenter and Corbin I. Carpenter, General Counsel.
With a quorum present, the special meeting of the Board was called to order at 11:00 AM by Monice Hagler, Secretary, serving as Acting Chair.
Acting Chair Hagler stated that in compliance with the Open Meetings Law codified in Section 8-44-101 to 8-44-108 inclusive of the Tennessee Code Annotated, as amended, The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee is holding its special meeting on Tuesday, August 22, 2023 @ 11:00 AM as an open public meeting in its conference room located at 65 Union Avenue, Suite 1120, Memphis, Tennessee 38103.
Acting Chair Hagler further stated the agenda for this Special Meeting will not contain any regular action items to be considered for approval by the Board. The intent of the Special Meeting is solely for strategic planning purposes with the intent of evaluating its current policies and practices, and to ensure continuing compliance with its statutory and public purpose as set forth in Tennessee Code Annotated Section 48-101-301 et seq., as amended, and with other applicable provisions of Tennessee law and delegated authority.
The purpose of the Special Meeting is to allow the Board an opportunity to consider, evaluate and strategically discuss emerging issues regarding health, education, muti-family housing financing opportunities and the administration of the payment in lieu of tax programs available to the residents of the City of Memphis. The Special Meeting will have no action items and will only address items on the agenda below. All other business of the Board, including any ongoing items, new business or old business will properly come before the Board at its next regularly scheduled meeting on Wednesday September 13, 2023.
The following topics were discussed by the Board as follows:
1. Evaluation of organizational chart and related internal composition of Board committees and Board staff
Charles Carpenter began the discussion by stating that over the past few years, the Board’s PILOT program and the compliance obligations have become very robust. Carpenter stated that Board staff and legal counsel are now dealing with numerous matters in Environmental Court, Shelby County Code Enforcement, vendor materialmen's liens, etc., and it takes a lot of administrative and management time to address these matters. Carpenter stated that when the Board looks at its internal staff, Stephanie Bryant has maintained all administrative matters, working with legal counsel, and Bryce Miller and JP Townsend have been added as staff members for compliance purposes. Due to health issues of the Executive Director, Martin Edwards has been unavailable on a day-to-day basis, and his involvement has been limited to consultation and drive-through compliance inspections with staff.
Carpenter stated that the current structure of the Board provides for an executive director, reporting to the Board and staff reporting to the executive director. Thereupon a revised organizational chart was presented to the Board for discussion, setting forth a different structural organization providing for a President/CEO and the Chief Operating Officer/COO, then an office manager and compliance staff reporting up. Carpenter stated that discussions today should consider the best structure for the Board going forward based on its volume of activity, matters currently in the pipeline, forecasted activity and how best to organize staffing to accommodate how the Board can continue to grow in an efficient manner and have a staffing structure to sustain activity and accommodate growth. Carpenter then turned the meeting over to his law partner, Corbin Carpenter, for further detail on the information proposed before the Board today.
Corbin Carpenter began by going through the revised organizational chart and briefly referencing the general scope of responsibilities and duties for each staff position. Carpenter then moved to the composition of the Board, stating that the Board currently has two (2) vacancies, with a third vacancy to take place prior to year-end. Carpenter stated that the Nominating Committee has already submitted Howard Eddings as a nominee to the Mayor’s office for consideration and will interview Vincent Sawyer this week for consideration as a second nominee for submission to the Mayor’s office. Carpenter stated that Mayor Strickland has recommended Nanette Bean-Fisher as a potential Board member for consideration as well. Carpenter stated that he is hopeful that all three (3) individuals could be promptly presented to the City Council for approval, and the process could be complete prior to the October 5, 2023 election. Carpenter stated that precedent has shown that during an election cycle where there is a transition in administrations following the election, there is a point in time that the appointments cease, so it is important that the Board member nominations proceed expeditiously to have the Board fully reconstituted. Carpenter reviewed current Board member terms, stating that though some terms have expired, pursuant to statutory authority, until their successors are appointed, they remain valid and duly appointed to participate and vote on all Board activities.
James Jalenak commented that he is preparing to move to Germantown and has raised the question if that would affect his current membership term on this Board. Charles Carpenter stated that he is currently working with the City Attorney’s office to get some feedback from their office in order to have the proper facts moving forward. Carpenter stated that the issue is under advisement and is being evaluated and his office will advise the Board and Jalenak when an update on the matter is available.
Stephanie Bryant advised the Board, in regard to the current Board composition, that Cliff Henderson, Katie Shotts, and James Jalenak have all been submitted to the Mayor’s office for reappointment and Dr. Manoj Jain has expressed his desire to resign from his position with the Board and would not be seeking reappointment, which will be the third vacancy previously discussed by Corbin Carpenter. Charles Carpenter stated that with the Board roster, Board terms are staggered and with the resignation of Board Member Shelia Harris in 2022 and with Dr. Manoj Jain not seeking reappointment, there may be terms that are unexpired, and his firm and staff will work with the Mayor’s office to ensure those terms stay in their established rotation. James Jalenak commented that he has worked with potential Board member nominee Vincent Sawyer during his work with The Works and would support his nomination.
Corbin Carpenter proceeded into discussion of the staff positions, stating that the Board’s Bond and PILOT programs have gotten very robust, specifically over the last few years since the onset of Covid and the need for affordable housing remains great. As such, Carpenter stated that the proposed revised organizational chart would create a new structure that establish a foundation to allow growth and organization for the mission of the Board and for the constituents it serves. Carpenter stated that the current position of Executive Director would be proposed to change to a President/CEO position and the scope of responsibilities would focus on big picture oversight and expanding relationships with the various local and state government stakeholders, including future growth. Martin Edwards, Jr., the Board’s Executive Director, is the person currently proposed for that position. Carpenter proceeded by stating the next level would be the Chief Operating Officer (COO), which would primarily be responsible for facilitating and overseeing all day-to-day operations. Carpenter stated that Stephanie Bryant is being proposed to fill the COO position. Carpenter stated that although the decision would be up to the Board his firm’s experience working with Bryant, makes her uniquely qualified to serve in this capacity and the firm highly recommends her for the COO position. Further, such a decision would ensure a seamless transition; moreover, she is already currently completing the specified duties on a daily basis.
Carpenter continued by stating that the Board having a COO and expounding more on the compliance aspect with a compliance administrator, compliance inspector and office manager positions would be greatly beneficial for the day-to-day processes of the office, compliance and monitoring. Carpenter stated that with the one hundred fourteen (114) active PILOTs made up of over twenty-two thousand (22,000) units, creating a foundation for the staff to be able to grow and eventually add more people to have a specific focus would provide balance. Carpenter stated that with the PILOT program, each property has its own particular set of tenant benefits, and it is the responsibility of the Board and staff to be sure that the proposed tenant benefits as well as all other aspects of compliance are being met throughout the term of the PILOT. Carpenter stated that the Board always wants to prioritize the tenants and do what is best for the program, so overall compliance and monitoring is essential. Carpenter stated that sixty-six percent (66%) of the Board’s PILOT properties are out-of-town property owners and thirty-four percent (34%) are local property owners.
Buckner Wellford asked if scope of responsibilities for each staff position presented today are existing descriptions or newly prepared and asked particularly with the President/CEO position, if this description is what the President/CEO is supposed to do now. Corbin Carpenter responded that the scope of responsibilities before the Board today are actual and aspirational duties that are being performed now and the duties expected for each position to perform going forward. Wellford asked if the Board would be voting on the individuals to fill these positions. Monice Hagler stated that the personnel committee will meet to address any personnel changes to the President/CEO position.
Wellford stated that he understands that the Board will not be voting on the people, but the structure and asked for confirmation that the Board does not currently have a COO position. Charles Carpenter stated that the Board does, it is just not called that, and at this point as indicated by Corbin Carpenter, most of the responsibilities that are enumerated under COO, Stephanie Bryant is currently completing those duties. Wellford asked if the Board will be voting on a formal recommendation that Bryant become the COO effective January 2024. Hagler stated that is the proposal, but it would be voted on at the Board’s September 13, 2023 or October 4, 2023 Board meeting.
Charles Carpenter stated that the purpose of discussions concerning staff is to get the Board comfortable with a structure change. Carpenter stated that his firm works with the staff on a day-to-day basis and staff retention and growth is necessary. Carpenter stated that there is so much information and knowledge that is unique to what the Board staff does daily and without staff growth, the Board would be in disarray. Implementing a different structure is necessary because the Board’s program has grown and will continue to grow, and PILOTs that were predominantly ten (10) year PILOTs are now twenty (20) year PILOT commitments and the Board needs to look forward and be forward thinking as to how to operate efficiently and how to perpetuate this momentum and discharge responsibilities in a professional manner. Carpenter stated that this new proposed position is not one that someone could just come in to without any experience because there is a training process, an orientation process, and things that are so unique to the Board’s industry and the right people need to be in place through Board members rotating off and staff changes so that everything will continue to operate smoothly.
Buckner Wellford stated that he agrees, and these positions are self-funded out of the Board’s operations. Wellford stated that the Board should be focused heavily on financial analysis in the front end and on compliance on the back end and the Board should be spending more of its resources on those things because of the increased scrutiny and the importance of documentation of these things. Wellford stated that he is in favor of these changes, and they will be a necessary thing moving forward.
James Jalenak stated that he understands what is being asked of the Board in approving a new structure and selecting staff to fill the positions in that structure and move forward. Jalenak stated that this is a good process, and he agrees with the structure that has been proposed. Jalenak stated that he thinks Bryant will be the cornerstone of that new structure and whoever is next in line should be subject to her selection.
Katie Shotts stated that she supports the proposed staff structure changes as well and supports Bryant for the proposed position. Shotts stated that as Charles Carpenter mentioned in previous comments, this is not a position a person would be able to walk in and do and Bryant has already been performing these duties for quite a while. Shotts stated that Bryant is deserving of the position, that this needs to be done, she has been performing the work, and Shotts is excited that the Board can officially give Bryant a title and place her in that position, with the ability to select staff that she can work with. Shotts stated that she agrees with previous comments from Carpenter, Wellford, and Jalenak concerning increased scrutiny, and these changes should be put into place sooner rather than later for the betterment of the Board.
Cliff Henderson stated that he does believe the Board could make a structure change, and prefaced his comments by stating that anything he says is not in offense to any staff member. Henderson stated he is looking at this proposal from an outlook standpoint and asked if the Board felt like the recent increase in PILOTs will continue substantially over the next five (5) years or more, or do they think the portfolio will plateau. Henderson stated that the Board does need to adapt to the current level and undoubtedly, the current structure is not built to deal with the current volume, and he knows that a change needs to be made. Monice Hagler stated that this is a good point, and the Board may be having this discussion again in five (5) years and asked if Henderson’s point is to go ahead and project out five (5) years? Henderson stated that he just wants to challenge this to make sure that the structure that is being proposed is not one that will need to be revisited in the next couple of years. Henderson stated Wellford’s point made earlier that this organization is self-funded, and though the balance sheet through the Board’s investment accounts is high now, the burn rate has increased, or doubled, in the last three (3) years.
Charles Carpenter stated that this special meeting has been called to give the Board an opportunity to have in-depth discussions about the future and the efficiencies of current operations, as that is not able to be done during regular meetings of the Board that includes action items. Charles Carpenter stated that affordable housing is not going to slow down and is expected to increase because market rate housing is so expensive, and given the wages in Memphis, tenants are not able to afford market rate units. Charles Carpenter stated that the Board has perfected the PILOT program, and it is now being replicated in Nashville, TN and other parts of the state, and through monitoring this PILOT program statewide and with the cost of rehab and renovations and new construction, it cannot be done without incentive based on the restricted rents that Housing and Urban Development (HUD) approves as part of the Section 8 program and so forth. Charles Carpenter stated he does not believe the Board will have a plateau with PILOTs coming in, and the Board has a number of PILOTs that are scheduled to close this year, which will be significant, and the Board’s balance sheet will be a beneficiary of that. Charles Carpenter stated that these revenues coming in will help offset the expenses of operations.
Additionally, Charles Carpenter stated that the Board can modify the contractual arrangement with PILOT Lessees to capture some of those costs. Carpenter gave the example of PILOT Lessees who have required extensive oversight and compliance above and beyond the normal course, the Board could build recapture fees into the lease arrangement requiring payment to offset the costs of those extraordinary oversight services. Also, Charles Carpenter stated that with the ongoing cost per unit compliance fee, that fee can be adjusted as necessary, and it doesn’t have to be across the entire portfolio but could apply to properties that require extraordinary levels of oversight, which increase per unit compliance fee could offset the cost to the Board. Charles Carpenter stated that the Board is a large operation that if left running on the current structure would be more detrimental than worrying about how to fund the operation because there are adjustments that can be made all the time, and those adjustments could mitigate any lack of new PILOTs coming in.
James Jalenak stated that he believes the new proposed structure is a way of channeling Board funds to be more in line with the Board’s mission. Jalenak stated that this is something that the Board will need to constantly look at and to be sure that the Board is using its funds primarily to achieve its mission, which is to provide affordable housing to the citizens of Memphis, and the new structure feeds into that better than what is in place now. Monice Hagler stated that the Board also must consider the security issues that the City Council has raised regarding whether the Board should be providing assistance for security for multifamily projects, which would be an extraordinary expense for the Board as well. Cliff Henderson stated that if the Board continues and is able to retain the balance that it has, then the Board is in a good financial position.
Henderson stated that with the Board’s current portfolio, PILOTs have been approved and are in place into 2048 and the Board’s funding is intended to be allocated throughout that entire spectrum of years. Carpenter stated that to have a plan to be proactive, which he submits that the proposed organizational chart and other plans will do, and the Board would have a great opportunity to maintain and continue to grow and develop. Henderson stated that the Board will have to run parallel, just like the Board will have this new structure, it will also need to be ready to deal with a new incoming mayor and make sure the Board is able to retain its funding and or come to an agreement. All agreed. Hagler stated that she would also like to see a chart that includes the contractors that the Board has, including legal, audit, compliance, security, bookkeeper, etc. There were no other questions or comments.
2. Discussion of reconstituting a mandatory annual PILOT Lessee meeting, commencing in 2024
Monice Hagler presented this agenda item stating for informational purposes, that the Board previously held an annual meeting with required attendance for all PILOT recipients and that meeting was used to review information regarding PILOT Compliance, introductions to Board staff, and any changes and relevant information for the Board programs at that time. Hagler stated that the proposed outline draft provided to the Board for their review today is an excellent outline for a PILOT Lessee meeting and turned the meeting over to Corbin Carpenter for his comments.
Carpenter stated that an annual meeting needs to be reconstituted for the benefit of the Board’s PILOT Lessees and the on-site property management companies for those respective properties. Carpenter stated that as the program has grown and become more robust, the Board has made a lot of changes internally, particularly with the Board’s policies and procedures, compliance, and monitoring. Carpenter stated that the annual PILOT Lessee meeting is envisioned to be a four to five (4-5) hour meeting with mandatory in-person attendance for all PILOT Lessees, which will require the appropriate venue, as that will be a lot of people to accommodate given the size of the Board’s PILOT portfolio. For timing purposes, Carpenter stated that some portions would be pre-recorded, and the meeting would begin with an overall snapshot of the Board in a kind of state of the union address to the PILOT Lessees. This portion will discuss where the Board is currently, the total number of PILOT properties, the estimated economic impact in the city for the previous year, and different initiatives that the Board has undertaken.
Carpenter stated that major projects recently closed could be highlighted, for example the South City phases and the Rental Assistance Demonstration (RAD) program under HUD, of which the Board closed the first two (2) in the history of the City of Memphis last year 2022. Different strengths and challenges and general concerns of the community will be discussed, as well as an outlook for the year coming forward.
Moving through the agenda, the Board will invite several special guests to speak, including the city mayor, representatives from Tennessee Housing Development Agency (THDA), Memphis Housing Authority (MHA), and others. Carpenter stated that Board members and staff will be reintroduced and their associated roles and then move in discussions of current policies and procedures and the high-level changes to those. Carpenter stated that the submission process will be reviewed as well as the Board’s meeting attendance policy, which states that in-person attendance is required for any PILOT Lessee or applicant with an action item on a Board Meeting agenda, or with a property on the Board’s watchlist because of non-compliance or default.
Carpenter stated that the Board’s expectations and duties it plans to facilitate regarding compliance and monitoring will be discussed. This portion will also cover the Board’s relationship with Code Enforcement and the Environmental Court and the fact that it is the PILOT Lessee’s self-reporting (duty to disclose) that information to the Board and keep the Board updated on those ongoing litigation claims. This will lead to discussions concerning expectations for PILOT Lessees overall to self-report annually, quarterly, and monthly, as necessary. The importance of tenant benefits will be covered and keeping that program requirement to the highest degree of efficiency for the tenants since that is the hallmark of the Board’s PILOT program. Carpenter stated that both the Shelby County Trustee’s Office and City Treasurer’s Office will be invited to speak about PILOT payment billing and will lay out each of their duties and responsibilities in connection with the Board’s PILOT program and services they can provide to PILOT Lessees as far as point of contact, changes in communications, etc.
Carpenter stated that the annual meeting will also have a portion on the agenda where the Board will have an opportunity to hear from the PILOT Lessees. These questions from PILOT Lessees would be pre-submitted and could also include current PILOT Lessees who have had successes and can discuss different challenges that they face and best practices to share that they may be currently undertaking for their property, such as tenant benefits, social services, and things of that sort. The agenda outline provided to the Board at today’s meeting is all in draft form and Carpenter stated that feedback is welcomed and appreciated.
Hagler asked when the meeting was expected to take place, to which Carpenter responded the goal is around February or March of 2024. Hagler stated that may not allow enough time for a new mayoral administration and city council. Carpenter stated that his firm is putting together an overall presentation about the Board and its mission that they plan to present to the new city council in January 2024, as traditionally have retreats at that time. James Jalenak stated that the annual PILOT Lessee meeting may be a good opportunity to invite people who are aspiring to become PILOT Lessees, or applicants that have an application pending or contemplating going into that field. Hagler stated that those people would certainly be included as well, as they have been in past annual PILOT Lessee Meetings. There were no further questions or comments.
3. Discussion of current challenges and emerging strategies with external and internal compliance and monitoring of all PILOT properties
Corbin Carpenter introduced this agenda item stating that this item is in correlation with today’s first agenda item and is just an expansion of the ongoing duties, responsibilities, and expectations with internal and external compliance and monitoring. Carpenter stated that he would like to turn the meeting over to the Board staff at this time for them to explain how robust this has gotten and for them to explain what they do day-to-day internally from the monitoring standpoint and externally from the Board’s partnership with Wilbanks and Associates.
Stephanie Bryant began by stating the at the beginning of 2023, she met with Wilbanks and Associates and because of the increase in the Board’s PILOT property portfolio over the past few years, Wilbanks and Associates was asked to increase the number of inspections each year. Prior to 2023, Wilbanks and Associates performed one (1) scheduled in-depth inspection per year for each PILOT property and a scheduled lease-file audit, and Wilbanks and Associates reported their findings to Board staff. Beginning in 2023, Bryant stated that scheduled in-depth inspections of each property are now performed two (2) times per year, two (2) unannounced drive-through inspections per year were added, along with additional unannounced drive-through inspections of properties that are to appear before the Board on the regular Board meeting agenda each month. Bryant explained that in-depth inspections performed by Wilbanks and Associates are scheduled site visits to the property that are scheduled with on-site management and the inspector physically walks the entirety of the property, inspecting all four sides of each building, all common areas, and takes many pictures throughout the inspection and all reports and pictures are then submitted to Board staff for review and further handling. This process describes external monitoring and compliance.
Bryant continued by moving to internal compliance and monitoring. Bryant stated the JP Townsend was added to the compliance staff this year 2023 and is currently working on a part-time basis. Bryant stated that she is proposing that Townsend transition into a full-time position with the Board. A goal was set at the time of hire for Townsend to perform unannounced drive-through inspection of every PILOT property each quarter, and Bryant stated that Townsend performed those inspection along with reports of each inspection and was able to complete those inspections on an efficient basis. Bryant stated that Bryce Miller, the Board’s Compliance Coordinator, has taken on more of a management of compliance role, and his focus has been on troubled properties that are on the Board’s watchlist, inspections of properties that appear before the Board on the regular Board meeting agenda each month, review of reports from Wilbanks and Associates, and review of internal compliance reports. Bryant stated that in bringing Townsend on full-time, the goal is for him to continue his routine inspections of each property on a quarterly basis, as well as assist in office administration.
Currently, Bryant stated that she prepared the entirety of the Board packet, including compliance reports for action items before the Board each month, and in bringing Townsend on full time, Townsend and Miller will be able to take over some of those responsibilities and preparations of Board meeting compliance reports. Bryant stated that staff has found it is best practice with regular drive-through property inspections that each inspector, both internally and externally, inspect the properties separately and compare reports between Wilbanks and internal inspection reports to ensure inspectors are reporting observations from a neutral standpoint and ensure observations are consistent across all reports to provide the Board a thorough overview of compliance for each property.
Bryant informed the Board that staff are currently working on the development of a compliance scoring system. Bryant and staff have met with legal counsel as well as Wilbanks and Associates and legal counsel has distributed a first draft that Board staff and external monitors have reviewed. After reviewing and receiving initial feedback from internal and external inspectors, we will be modifying the first draft and some of the scoring criterion to be a little more simplified for use in the field during in-depth inspections. Bryant stated that a scoring system will give PILOT Lessees an overall view of where their properties rate in comparison to the overall portfolio of the Board, as well as provide additional insight to them on what areas of compliance needs to be better or modified to be in compliance with Board standards and expectations. The scoring system will address structural issues, safety issues, tenant benefit issues, common areas and overall maintenance and care of the property.
Bryant stated that both Miller and Townsend have been assets to the staff as inspectors in conjunction with Wilbanks and Associates and all work well together and have unified as a team to develop a great internal compliance and inspection system for the PILOT properties. Bryant then turned the meeting over to Miller and Townsend for comments on what each is doing in the field.
Miller stated that his focus, as Bryant indicated, is inspecting problem properties. One of the challenges he has faced is just the ability to see further than what is able to be seen on a drive through inspection when it comes to tenant benefits. Miller stated that the inspectors must take the PILOT Lessee at their word on some of the selected tenant benefits, as inspectors do not enter the interior of units, and it is also difficult to see some social services, such as computer labs, daycare operations, among other things. Miller stated that the staff is in discussions with Wilbanks and Associates about teaming up with the external inspectors on the in-depth inspections performed two (2) times a year to be able to further inspect PILOT properties and get a better idea of tenant benefits that are being provided and be able to put those into more of a quantitative scoring system. The discussion has been that while Wilbanks performs the external in-depth inspection of the property, Miller or Townsend would be able to accompany Wilbanks and use that opportunity to experience the stated tenant benefits that a PILOT Lessee offers. Miller stated that this would be a way to increase that aspect of compliance monitoring, because as of right now, it is more structural and exterior items that inspectors are able to see and if a tenant benefit is being offered apart from an external benefit like a playground, pool, or dog park, it is difficult to see those other internal tenant benefits. Miller stated that the staff is exploring different processes and options of how to get a little deeper into the tenant benefit compliance inspection aspect.
Miller stated that another issue he has experienced is the ability to get onto some properties to do an inspection. Miller stated that in one way, the best properties are the ones that you cannot get on to from a security standpoint, but from a compliance inspection standpoint, it makes it unable for inspectors to perform their duties. Miller stated that they can perform inspections on those types of properties when an appointment is made with management prior to the inspection to enter the property, but that sometimes negates the drive through inspections. Much of what internal compliance inspectors do is based on the unannounced drive through inspections because it gives inspectors the ability to see the properties and how they operate on a daily basis versus how a property may be set up to look when a visit is scheduled. Miller stated that this is one of the main issues he would like to find a remedy for, whether it is a universal gate code for inspectors to use, or some sort of operating list that inspectors can get from the PILOT Lessee for those particular properties.
Bryant stated that on that subject, the staff has expressed that this would be a good topic of discussion for the annual PILOT Lessee meeting, and to be sure that PILOT Lessees notify the on-site property staff, management, and security that the Board’s internal and external monitors should be granted access to the property for unannounced inspections. Bryant stated that on-site personnel should also be advised that inspectors do not enter occupied units, and the Board has no intention of changing that policy, but that in order for the property to stay in compliance with the Board’s policies and procedures and compliance monitoring in accordance with their PILOT Lease Agreement, inspectors must be able to enter the property during normal business hours.
Bryant stated that Miller and Townsend presented an idea about car magnets for their vehicles to be used during inspections and Bryant ordered and provided them and the feedback from that implementation has been more than positive. Miller stated that the car magnets have been a great help during inspections. Miller stated that many times during inspections, tenants and on-site staff look and show concern about someone being on the property that is not known to them, and something as simple as a car magnet that identifies who they are and what organization they are with has completely changed that. Miller stated that when they see that identification, it seems to give them ease, as opposed to stares and even to the point of people following the inspectors around the property. Miller stated that from a safety standpoint for inspectors, this has helped tremendously. Townsend stated that he agreed that the magnets have been a tremendous help not only for the safety of inspectors, but also for the safety of the residents. Townsend stated that tenants that live on these properties know the property and who lives there and when they see an inspector driving through the property and taking photos with this identification on the vehicle, it lets them know strangers are not just entering the property and puts them at ease. Townsend stated that since the addition of the car magnets, he has even had residents and maintenance staff approach him just to say hello or to notify him of an issue on site.
Townsend stated that it has been a great privilege to start with this organization, and he has accomplished his goals thus far, as has Miller. Townsend stated that his goal is when he observes issues at a property, he will contact Miller for further inspection and handling. Townsend stated that this has worked well, and they are able to catch a lot of issues early on and get them resolved before they escalate.
Cliff Henderson asked Miller if he has any ideas on how we can reduce the amount of time that some of these properties are on the watch list. Henderson stated that with some properties currently on the Board’s watchlist, once one set of issues is identified, then it seems like other issues arise and it becomes an ongoing cycle and how do we determine whether the property’s PILOT just needs to be terminated after a certain point, or if it is symbolic of a bigger issue. Henderson stated that he is looking at this from three (3) aspects: (1) the amount of time and effort it takes from the staff, (2) property owners are now looking at Miller and he is fearful of the expectation that is being put on Miller to be the voice, and does that put any liability back on the Board, and (3) the length of time that is used during board meetings on an ongoing basis to continue to review the same watchlist properties. Miller stated that he is hopeful that the scoring system the staff is currently working on, when implemented, will help. Miller stated that this will give the ability to set some sort of measure that once a property is above a certain level, it would deem a property compliant and able to be removed from the watchlist pending a Board vote, and if a property falls under a certain level, it will be placed on the watchlist. Miller stated that his hope is that the scoring system will give a property an end goal, which is what seems to be missing.
Hagler stated that once a property is placed on the watchlist and remains there for a longer period, the Board is hesitant to terminate the PILOT because we recognize that it will negatively impact the residents more than anything, so we will have to try to find a balance. Henderson stated that it seems like once a property is placed on the watchlist, and compliance inspectors delve deeper into the property, more issues are found. Henderson stated that if inspectors do see issues, a comprehensive review of that property should be performed, and maybe the scoring system will come into play here, but then we would address the PILOT Lessee at the forefront and let them know what the initial issue was that prompted a more comprehensive review, and then once that comprehensive review was completed, what additional issues were found and let the PILOT Lessee know that the issues as a whole will have to be addressed in order to get the property removed from the watchlist.
James Jalenak asked if there is any system or path by which tenants can communicate with Board staff in order to voice complaints. Bryant stated that her email address is published on the Board’s website, as well as the Board’s office phone number and both are responded to or answered immediately. Bryant stated that she has received calls and emails from tenants over her time with the Board, and currently, when a complaint is made, Miller and Townsend are asked to make a site-visit to the property. Once that is completed, reports are reviewed together concerning the condition of the property and an email is sent directly to ownership and management concerning the issue within twenty-four to forty-eight (24-48) hours. Miller stated that as far as what tenants are familiar with is Code Enforcement, and they typically will call Code Enforcement first. Miller stated that the Board staff is developing a relationship with Code Enforcement as well as the Environmental Court to streamline things. Miller stated this gives Board staff an opportunity to find out what is being reported to these two organizations and cross check it with what inspectors are seeing at these properties, and there are many times when the things being reported are issues the Board staff has already taken action on. Miller stated that other times, it may be an issue that is just being brought to the attention of staff. Miller stated that Board staff is working more with Code Enforcement and the Environmental Court to identify problems, as that seems like what residents are already used to, and so if Board staff can develop stronger communications between these entities, it will assist Board staff with a whole picture approach to these properties. Bryant stated that part of the new approach to compliance is developing those new relationships that have never been established before between the Board staff and these other entities.
Bryant stated that the Board staff is taking a more proactive approach from a compliance standpoint, rather than a reactive approach. Bryant stated that over her time with the Board, compliance has been based on more of a reactive approach up until the last couple of years, and some of that was due to staffing, and some of it was that the portfolio of the Board was not nearly as robust as it is today. Bryant stated that in working with Miller and Townsend, it has given the Board staff the ability to take that proactive approach to try and address some of the issues observed on these properties and as soon as a property appears to be trending down, we are better able to address it more quickly and reach out to ownership and management at the onset of a property trending down, rather than issues lingering on causing bigger issues.
Bryant stated that properties can begin to trend downward very quickly, so the more eyes that are on the property and the more often inspectors can be on these properties, the more likely the Board staff will be able to see in issue and get it resolved quickly before the property gets to a level of default. When a property is put into a notice of non-compliance level early on, it gives the Board staff the ability to address the changes needed early on to remedy issues. Bryant stated that she has received comments from others outside of this organization that have reported they have truly seen changes for the better from the Board’s PILOT properties, which gives the Board staff confidence that the changes we are making internally are making a difference. Miller stated that as the compliance department, if we are doing what we are trying to do successfully, the Board does not even hear about it because the compliance inspectors have identified a problem before it is a major problem, then the PILOT Lessee and the property managers, the PILOT Lessee corrects the issue, and the issue is resolved. Miller stated that a property does not typically come before the Board until it is in a legal default status, so the Board staff’s goal is to address the issues with the PILOT Lessees early on before it becomes a bigger problem and get to the legal default status point. James Jalenak stated that he would like to include a brief report from the compliance staff in the regular Board meetings to hear about some of these successes. There were no other questions or comments.
4. Discussion of opportunities for strengthening and streamlining communication protocols with the City government, local taxing authorities, code enforcement, and others
Corbin Carpenter introduced this agenda item stating that the Board staff would like to implement is to create that nuance stream of communication and opportunity for collaboration with Code Enforcement and Environmental Court. Carpenter stated that the Board is stated as the owner of each PILOT property due to the conveyance of the quit claim deed for the listing to enter into the Board’s PILOT program. Oftentimes, Carpenter stated that the Board does not receive notice of PILOT properties being in Environmental Court, Circuit or Chancery Court or even notified of a violation. Carpenter stated that his firm has communicated to those entities that whenever a property is involved with any of these entities, the Board would get immediate notification of that as well as ongoing updates. Carpenter stated that the purpose of this is not just for the notifications, but also for these entities to share their reports and findings with the Board staff. Carpenter stated that these relationships are still being developed to the point that are most useful and beneficial for all parties involved.
Carpenter advised the Board that after the third failure to remedy a Code Enforcement violation, a property then goes to Environmental Court. Carpenter advised that Environmental Court is categorized in many ways, such as vacant versus occupied properties. Carpenter stated that properties that have either been approved for a bond or PILOT or are active in the Board’s PILOT program are being tracked both by his firm and by Environmental Court reports. Carpenter stated that there are other PILOT properties where litigation claims have become much more robust. In the past, the Board would receive notice of a materialman’s lien, failure to pay construction costs, supply companies, etc. For various PILOT properties, but now the Board is getting notice of lawsuits, discriminatory allegations, and other claims/lawsuits where residents living on the PILOT property were hurt due to a slip and fall or criminal or legal activity took place on a PILOT property and the residents affected will bring a claim/lawsuit toward that property owner. As far as litigation claims, Carpenters firm has seen an increase in those types of cases. Carpenter reviewed the current ongoing cases in Circuit/Chancery Court and Environmental Court with the Board, stating that his firm monitors these cases monthly, and many times appears in person in the Environmental Court cases involving PILOT properties.
Monice Hagler asked what the reason is typically to get a property in Environmental Court. Carpenter responded that if a property is occupied, the first violation from Code Enforcement immediately puts that property in Environmental Court under the Neighborhood Preservation Act. An example of this would be when a property is under construction, failure to secure the property safely, especially when the construction is adjacent to an occupied area. Other examples would include environmental hazards such as construction materials that are open and not properly secured, failure to pull a permit for construction, among a list of other items. Carpenter stated that properties will be put in Environmental Court much more quickly is occupied versus unoccupied, and the property usually will get two or three notices to correct the Code Enforcement violation, and failure to do that will subsequently put the property in Environmental Court. Halger asked if once a property is placed in Environmental Court, does that trigger a default from the Board. Carpenter stated that it would trigger a deficiency notice, and the PILOT Lessee would have thirty (30) days to cure that deficiency. If the deficiency is not cured, then it would constitute a default.
Charles Carpenter stated that one caveat to that is there are many advocacy groups that will file complaints that trigger a property to go into Environmental Court and it could be a property that is undergoing a substantial rehabilitation with tenants in-place, and his firm will go before the judge and advise that a property has a PILOT, and it is a substantial rehabilitation, and the PILOT Lessee has projected a certain amount of time to complete the rehabilitation, and the property may only be in the beginning stages of that substantial rehabilitation. At that point, the Environmental Court will monitor that matter and give the developer the opportunity to go forward with their plan, which is helpful to everyone involved.
Corbin Carpenter stated that this is one side of this issue from a compliance and monitoring standpoint, is to streamline and strengthen those communications. Corbin Carpenter stated that the other side, which was alluded to earlier in the meeting, is communications with the Shelby County Trustee’s office, the office of the Shelby County Assessor of Property, and the City Treasurer's office. Carpenter stated that each respective office plays their own special role with the Board’s PILOT program. Carpenter stated this his firm has communication with the office of the Shelby County Assessor of property almost weekly concerning PILOT properties, but with the Shelby County Trustee and the City Treasurer’s office, there has been a lot of turnovers the last few years, so his firm tries to maintain regular communications with those offices. Carpenter stated that when each office's respective billing is due, communications increase, but each entity has its own internal systems and how they track PILOT properties is completely different from one another. Carpenter stated that with that, there are a lot of intricacies that must be worked through to ensure all parties are on the same page to keep the program fluid. Carpenter stated that all three (3) entities are expected to participate in the Board’s annual PILOT Lessee meeting. Carpenter stated that communications have increased with these entities between his firm as well as the Board staff.
Corbin Carpenter advised the Board that his firm is in the process of preparing a PowerPoint presentation to be presented to the incoming City Council during their retreat time in January 2024. Carpenter stated that a draft will be circulated to Board staff in September 2023 for review, and then will be presented to the Board for feedback. Once the Board has reviewed the draft and it is completed, the PowerPoint presentation will also be circulated to the Shelby County Trustee’s office, the office of the Shelby County Assessor of Property, and the City Treasurer's office to see if there are any items they would like to include. At that point, the Board would give final approval prior to the presentation to the City Council.
Carpenter advised the Board that it is one of the few entities, especially with the level of activity the Board has, that does not have a liaison from the City Council. Carpenter stated that this would be something that could be discussed in the coming year 2024 is an appointment of a liaison from City Council for the next four years. Carpenter stated that this would help dispel a lot of misconceptions and the unknown from the Board, as a liaison would learn about the Board and what it does and could express and relay the Board’s challenges and operations to the City Council. Monice Hagler stated that the Board used to have a liaison. Katie Shotts stated that having a liaison make sense, as Carpenter said, it is hard to get up to speed on what the Board does and is the Board had a liaison could attend Board meetings regularly and understand what the Board does and the scope of work, she believes that would go a long way toward the whole Council understanding it. Carpenter stated that this goes to the point that the Board would like to see an increase in overall communication. Carpenter stated that the City of Memphis Housing and Community Development (HCD), Memphis Housing Authority (MHA), and Economic Development Growth Engine (EDGE) all have regular meetings with the City mayor and the Board could implement something similar with the new incoming mayor. To the point made earlier in the meeting about establishing a budget and a five to fifteen (5-15) year pro-forma, this would provide a front row seat to both the new mayor and City Council to be able to present that and show what the Board does, what the Board is working on throughout the year and the impact that the Board brings to the City of Memphis. There were no other questions or comments.
Final Comments
Cliff Henderson stated that Bryce Miller and JP Townsend had mentioned earlier in the meeting that they have experienced issues with being able to get onto certain properties to inspect. Henderson asked if they felt these same issues would affect any emergency situation with the Fire Department or Police Department. Miller stated he does not believe those departments would encounter the same issues. Monice Hagler stated that many times, the siren triggers gate openings and allow access, and they are able to work that out through their emergency systems. Hagler stated that moving forward, there should be no reason why PILOT Lessees could not provide a code specific to the Board’s inspectors, as many times those are tracked. Henderson stated that he is also thinking that this would be a way to ensure those things are in operation and not failing in an emergency.
Board members thanked staff and legal counsel for their presentations and expressed the hope that James Jalenak can continue to serve, as he is such an asset to the Board.
Charles Carpenter stated that all items that were presented today are suggestions and recommendations to the Board, and as Board members think about these items, any ideas that arise are welcomed and asked that Board members reach out to Board staff with any ideas or questions and Board staff and legal counsel will work to refine this presentation for the Board. There was discussion on what items presented today would require a vote from the Board. Hagler stated that the organizational chart structure would require a vote from the Board, but the other items discussed today would not require a vote and were for informational purposes and discussion only. Charles Carpenter stated that the personnel committee would handle the staffing of those positions, following a vote on the organizational chart structure.
Stephanie Bryant thanked the Board for the kind comments made toward her in today’s meeting. Bryant stated that she loves what she does, has enjoyed her time with the Board, as it has been an honor to be a staff member and work with the Board, and appreciates the Board’s consideration of her for the newly proposed position.
Secretary Hagler stated that the next meeting of the Board is scheduled for Wednesday, September 13, 2023 @ Noon. There being no further business, the meeting was adjourned by the Chairman at 12:38 p.m.