MINUTES OF SPECIAL MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Monday, January 14, 2019
The special meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice on Monday, January 14, 2019. The published meeting time was 12:00 Noon. The meeting was held at the Board office, located at 65 Union Avenue, Suite 1120, Memphis, TN 38103.
The following Directors were present:
Daniel T. Reid, Chair James Jalenak
Monice Hagler Cliff Henderson
Nancy Willis (by phone) Brittney Rowe
The following Director was absent
Dr. Manoj Jain
Also present were:
Staff members Martin Edwards, Jr., Stephanie Wright, and Lauren Magallanes were in attendance. Charles Carpenter and Corbin I. Carpenter, General Counsel, and Cheryl Hearn, Assistant City Attorney, were also in attendance.
With a quorum present, the special meeting of the Board was called to order at 12:00 Noon by Chairman, Daniel T. Reid.
RESOLUTION OF THE COUNCIL OF THE CITY OF MEMPHIS, TENNESSEE MODIFYING ITS DELEGATION OF AUTHORITY GRANTED TO THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD OF THE CITY OF MEMPHIS TO NEGOTIATE AND ENTER INTO AGREEMENTS IN CONNECTION WITH PAYMENT IN LIEU OF AD VALOREM TAXES AND APPROVING THE TERM, AND METHOD OF VALUATION OF PAYMENTS IN LIEU OF AD VALOREM TAXES
Charles Carpenter began the meeting by stating the Board has demonstrated great due diligence in the process of finalizing new PILOT Program policies and procedures to reflect the recent modifications in the delegation of authority granted to the Board pursuant to the Resolution of the Council of the City of Memphis, Tennessee dated August 28, 2018.
It was recommended by Carpenter to separate PILOTs into categories as follows:
1. New Construction
2. Acquisition Rehab
3. Tax Credit
4. High Impact
Carpenter further recommended the focus of this meeting should be to determine basic qualifications for all categories and eligibility requirements for each category.
Martin Edwards stated that it will be important to keep the new application, policies, and procedures as simple as possible, as well as stating the importance of pre-submittal conferences prior to the receipt of PILOT applications, and that every application must be looked at on its own merits. Edwards then commented on the Resolution opening up the allowable term of a PILOT and that it is clearly stated that the terms may be “up to” 20 years, and “up to” 25 years for a “High Impact” project. This language provides the Board with the latitude to approve PILOTs for a term less than 20 years, or less than 25 years on a “High Impact” project, if determined by the Board.
The Board initially proceeded by discussing the Tax Credit PILOT Category and then engaged in deliberations on a wide array of topics in an attempt to find areas of consensus among the members of the Board. Discussions, as follows:
A. PILOT applications involving low income housing tax credits (LIHTC) from the Tennessee Housing Development Agency (THDA), would have an initial minimum term of fifteen (15) years, to comply with the tax credit compliance period is also fifteen (15) years as set forth in the Internal Revenue Code, as amended (the “Code”), and also assist in the underwriting process for financing of the LIHTC properties.
B. Minimum qualifications for PILOTs were discussed generally, including the new addition of an occupancy requirement, which the Board had not previously included as a requirement in policies and procedures for the PILOT program.
C. The deliberations continued to the possibility of establishing the minimum initial term for all PILOTs granted by the Board at a fifteen (15) year initial term, while maintaining the ability for the Board to consider a shorter term based on a case by case review of the merits of each application.
D. The aggregate PILOT term for all PILOTs would be twenty (20) years; except that the maximum aggregate term for “High Impact” PILOTs shall be twenty-five (25) years.
E. After further discussion among the Board, it was recommended that New Construction, Acquisition Rehab, and Tax Credit categories would have a fifteen (15) year initial PILOT term with a twenty (20) year maximum term. “High Impact” projects would have a twenty-five (25) year maximum term, and Expired/Re-established PILOTs would have up to a ten (10) year initial extended term, with an aggregate twenty (20) year maximum term.
F. The Board then commenced discussion of possible remedies short of termination of a PILOT agreement when a PILOT lease default occurs.
G. Further, discussions were had on what defines a PILOT extension according to the Resolution, as well as, the timing on when the PILOT payment increases should begin; which according to the Resolution, should be no less than a ten percent (10%) increase, to be determined by the Board, and payed to the City of Memphis, Tennessee and Shelby County, Tennessee taxing authorities.
H. After an extended discussion, it was recommended that the Board’s General Counsel meet with representatives of the City and County taxing authorities, who would be the entities’ collecting the increases, in order to discuss the various ramifications, e.g. the value or number the rate increases, timing and other considerations to help properties transition back onto the tax rolls at PILOT termination.
I. The Board discussed the new requirement of minimum occupancy rates to be maintained for all PILOT properties at an average minimum level of seventy-five percent (75%) occupancy requirement following the lease up and stabilization, for new and extended PILOTs.
J. It was also discussion of a required appraisal, as part of the PILOT extension eligibility requirement, if deemed applicable by the Board and/or staff based on each PILOT extension application, on a case by case basis.
K. PILOT extension fee rates were preliminarily discussed, and it was determined that the Board would reserve further deliberations until the next meeting.
L. Development cost certifications were discussed to be modified to a two (2) phase process, to wit: (i) at the PILOT closing budgeted costs provided and paid, and (ii) at completion of construction, actual costs provided and reconciled, as needed.
M. The importance of pre-submittal conferences was also discussed as well as the timeline for submission of all documents prior to the Board meeting at which the PILOT application will be considered.
N. Discussion of amending the time allowed for a vacant property before being placed into default was discussed to be revised to a maximum of three (3) months.
O. PILOT Transfer application timelines and materials being submitted to the Board for consideration was also discussed that materials must be submitted to the Board staff six (6) weeks prior to the Board meeting that the application will be considered.
P. It was also discussed that the draft revisions to the PILOT Application Policies and Procedures should be distributed to the City Attorney’s Office prior to finalization, to verify the new policies and procedures comply with the Resolution, as well as, confirm certain areas of the Resolution.
At the conclusion of the special meeting and confirmation of meetings with the City attorney’s Office and the City and County taxing authorities, a final special meeting of the Board would be convened in order to provide final recommendations and a final draft of the PILOT Application, Policies and Procedures to be presented to the Board at its February regular meeting for approval consideration.
There was no public comment.
It was announced that the next scheduled special meeting of the Board will be held on Wednesday, January 30, 2019 @ Noon. There being no further business, the meeting was adjourned by the Chair at 3:17 p.m.