MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, May 8, 2019
The regular meeting of The Health, Educational and Housing Facility Board of the City of Memphis, Tennessee was held pursuant to public notice on Wednesday, May 8, 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 Buckner Wellford
Monice Hagler Cliff Henderson (via phone)
Nancy Willis Brittney Rowe
The following Director was absent:
Dr. Manoj Jain
Also present were:
Staff members Martin Edwards, Jr., and Stephanie Wright were in attendance. Charles E. Carpenter and Corbin I. Carpenter, General Counsel, and Cheryl Hearn, Assistant City Attorney, were also in attendance.
Stan Sawyer, John Hatcher, and Curtis Carpenter representing Banks, Finley, White and Co. CPAs, Paul Young representing the City of Memphis, Sarah Jemison, Berkeley Burbank, and Dana Patterson with ALCO Management representing Chickasaw Place Apartments and Pershing Park Apartments, and Darin Burns and Stephen Turgeon representing Owens Place Apartments were also present.
With a quorum present, the regular meeting of the Board was called to order at 12:00 Noon by Chairman, Daniel T. Reid.
Approval of Minutes
Monice Hagler moved for approval of the Minutes of the April 10, 2019 Regular Meeting. Nancy Willis seconded, and the motion passed unanimously.
Review of Audit for the Year Ended December 31, 2018
Stan Sawyer, John Hatcher, and Curtis Carpenter of Banks, Finley, White & Co., CPAs, independent auditors for the corporation entered the meeting. Thereupon, the annual audit report for FY2018 was distributed to the members. Stan Sawyer presented the audit and the management report to the Board and confirmed that it was a clean audit with no findings cited. Thereafter, there was a brief question and answer session with members of the Board.
Buckner Wellford moved for acceptance of the Audit for the Year Ended December 31, 2018. Brittney Rowe seconded and the motion passed unanimously.
Stan Sawyer, John Hatcher, and Curtis Carpenter left the meeting.
Paul Young, Director of the Division of the Housing and Community Development for the City of Memphis (HCD) entered the meeting.
Memphis Affordable Housing Trust Fund Overview
Martin Edwards, Jr. began by introducing Paul Young to the Board and stating that an invitation was extended to Young to attend today’s Board meeting to explain the Mayor’s new initiative regarding affordable housing. Young began by first extending his thanks to the Board for its involvement in affordable housing throughout the City of Memphis (the “City”) and the work that has been done through partnerships between the Board and HCD. Young then began discussing the Memphis Affordable Housing Trust Fund, explaining that the initiative was born from the fact that much of the gap financing provided by the City is received in the form of federal dollars, either through Home Funds or Community Development Block Grants (CDBG). Young explained with the recently proposed funding changes at the federal level, it is important that the City has a local source of funding that can be used to help close the funding gap for local housing development. Young’s team has worked to identify a sustainable revenue stream that can be dedicated from local government, and hopefully other sources over time. The City is proposing to dedicate two thirds of a penny of the tax rate savings from Debt Reserve Fund for this initiative. This equates to roughly an annual amount of seven hundred thousand dollars ($700,000), which will be deposited into the fund in the first year and will support non-profit developers This budget will be presented to City Council for application in FY 2020, beginning July 1, 2019 – June 30, 2020. HCD is encouraging the non-profit developers to work with for profit developers, but the fund will be dedicated to the non-profit development community. Currently, the fund will focus on three (3) categories: (1) Development and preservation of multifamily units, (2) low- to zero- interest loans for rental and ownership repair programs, and (3) historic preservation/rehabilitation of rental and ownership for single family units. HCD will coordinate the activities, which will be guided by an Advisory Board to be determined. The Mayor will appoint the Advisory Board members, expected to be made up of between seven (7) to thirteen (13) members. The goal is to begin the first round of funding in early Fall of 2019. There will be several meetings held throughout the summer to make necessary decisions; such as, level of affordability to be funded, etc. Lastly, Young explained that while the City will be allocating funding, the funds will be transferred to a directed account at the Community Foundation for the Housing Trust Fund, which will allow for other corporations and organizations to deposit funds into the account. This presentation was followed by a brief discussion.
Paul Young left the meeting.
Finance Committee Report
Cliff Henderson presented the financial results for the month ended March 31, 2019. A discussion of the financials was completed and
Monice Hagler moved for acceptance of the Finance Committee Report for March 31, 2019, and properly seconded by James Jalenak, the motion passed unanimously.
Cliff Henderson also reported that the Finance Committee is currently working on its Investment Policy Statement and will keep the Board advised.
Charles Carpenter presented the legal report, as follows:
1. For the Board’s information, Carpenter reported no new lawsuits or claims for the period.
2. Carpenter reported for informational purposes that a fire had taken place at a newly constructed PILOT property know as Forum Flats; however, there were no injuries and there is no liability or current obligations on behalf of the Board. Carpenter reserved further comment until the Executive Director’s report.
3. Carpenter reported receiving a notice of non-judicial foreclosure sale on a PILOT property known as Sunrise Terrace Apartments. After communicating with the attorney for the Lender, they are in negotiations with the PILOT lessee/property owner and the foreclosure sale has been extended to June 3, 2019. Carpenter advised that he will monitor the foreclosure matter and advise.
4. Carpenter reported on the TEFRA Hearing held on May 8, 2019 at 10:30 am, prior to today’s Board meeting. This TEFRA hearing was held under the new TEFRA Hearing guidelines, which allowed for public notice to be published on the Board’s website, rather than a newspaper publication. Carpenter advised that the notice was published on the Board’s website for a minimum of seven (7) consecutive days prior to the May 8, 2019 hearing, as opposed to the prior requirement of publication for a minimum of fourteen (14) days in a newspaper of general circulation prior to a TEFRA hearing. There was a special section established on the Board’s website under “Public Notices” for current notices. Website changes will also include only current notices under the “Public Notices” section, and a separate section will be established for Public Notice Archives, so that past notices may be traced there. Carpenter also advised that the Board should establish as a matter of policy as to whether to continue newspaper publications in addition to website publications, so that the Board’s policy will be clear moving forward.
5. Carpenter reported on the Heritage Oaks Senior Living Bond Inducement Extension, which was tabled from the April 10, 2019 agenda and included on today’s May 8, 2019 Board meeting agenda. Carpenter reiterated from the prior Board meeting that his Firm has been requested to serve as bond counsel for this financing and he has agreed to serve in this capacity. Carpenter further advised that he has communicated with representatives of the applicant and they have provided satisfactory explanation of the current status of the financing, as well as, submitted the bond inducement extension fee payment to the Board. Carpenter reported that he would recommend approval of this action item on the agenda.
6. Carpenter reported on Owens Place PILOT closing extension, which was also tabled form the April 10, 2019 Board meeting agenda and included on today’s May 8, 2019 Board meeting agenda. Carpenter reported that he had communicated with the representatives of the applicant and received satisfactory explanation of the status of the project, as well as, the Board having received the PILOT extension fee payment. Carpenter reported that his Firm would recommend approval of this action item on the agenda.
7. Carpenter reported on a request received from Ridgecrest Apartments. This is a property that the Board had previously issued revenue Bonds and the Bonds have now been paid off; however, the property is still within the tax compliance period of fifteen (15) years. The current owners of the property are refinancing the property through an FHA process. FHA is requiring that an amendment be made to the Land Use Restriction Agreement (LURA) that contains certain parameters required under FHA’s financing program. Carpenter reported that this is something that his Firm, and the Board have seen before and approved. Carpenter reported that he is providing this information to see if there are any questions or objections before moving forward with the amendment. If there are no objections, Carpenter proposed that this matter be handled on an administrative basis so that the schedule that has been provided to Carpenter’s Firm by Ridgecrest Apartment representatives can close at our about the time of the Board’s June 5, 2019 Board meeting. Carpenter further advised that the amendment imposes no new responsibilities or liabilities to the Board. There were no questions or objections noted.
8. Carpenter reported on the ongoing discussion with the City Attorney’s office and various legal counsel for developers on the revised procedures of the Board’s PILOT Program as it relates to the extension of PILOTs. Carpenter explained that the Board is not being asked to make any decisions today and that these discussions will continue and will require a meeting among Board staff, City Council representatives, City Attorney representatives, and Board General Counsel in order to finalize a policy that is workable from all sides.
9. Carpenter reported that his Firm has been working with the Board’s independent auditors since the Board’s April 10, 2019 meeting.
10. Carpenter reported on discussion with HCD concerning the Memphis Affordable Housing Trust Fund Initiative. Carpenter’s Firm has advised that HCD is open for the Board’s input and participation, well aware of the Board’s experience with multifamily housing as well as possible resources that could be applied to assist in this endeavor. Carpenter explained that it will be up to the Board how it would like to participate and become involved into the process, if at all. Carpenter explained that his Firm thinks this would be a great opportunity to get involved and to lend some expertise to the tremendous housing need in our community. Carpenter stated that his Firm will be a resource to the Board moving forward and in determining how to go about structuring this involvement, if any.
11. Lastly, Carpenter provided an update on the status of the Jehl Cooperage environmental issue. Carpenter reported that his Firm is continuing to work with Sheila Jordan Cunningham. Cunningham has just responded recently indicating that EnSafe, the environmental specialist that will be utilized, has a few remaining questions as to the engagement and why there are so many parties involved with this engagement. Carpenter reported that his Firm will work through those questions and anticipates giving a start date by the next Board meeting.
Buckner Wellford asked Carpenter if it was his expectation of the Memphis Affordable Housing Trust Fund is to ultimately want a recurring contribution of revenue from the Health Ed Board. Carpenter responded with that may be, however there has been no direct discussion in that regard. Wellford stated that if that is the case, he would advise the Board to keep that in mind when considering other future Jehl Cooperage property types of requests.
The above concluded the legal report and there was a brief question and answer session with members of the Board.
PILOT COMMITTEE REPORT
Martin Edwards, Jr. reserved comment for the action items.
Berkeley Burbank, Sarah Jemison, and Dana Patterson entered the meeting.
AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR CHICKASAW PLACE APARTMENTS
Berkeley Burbank began by first, introducing Sarah Jemison and Dana Patterson, as members of the applicant’s team. Burbank reported that Chickasaw Place Apartments is located in Binghampton and is a two hundred seventy two (272) unit complex made up of one hundred percent (100%) low income housing with a Section 8 HAP Contract. Sarah Jemison then provided a brief background of the project, and went on to explain planned renovations including new kitchens, new bathrooms, larger community space, addition of an exercise room, additional computers on site for residents, a new ball court outdoors as well as a new playground, increases and updates to security, as well as other major systems that will be updated. These updates and additions will allow the property to extend the Section 8 HAP contract on the property, helping to sustain the inventory of affordable low-income housing available. The sources of funding for the renovations will be made possible by the recent Board approved revenue bonds, low-income housing tax credits (LIHTC) applied for through THDA, as well as, pending approval of the PILOT. Martin reported that the PILOT Committee met and recommended approval of this application. Martin went on to explain that this property is crucial to the community it serves, and the property is in excellent condition with an occupancy stated to be at ninety- eight to ninety-nine percent (98%-99%). Charles Carpenter asked for clarification in the listing of tenant benefits regarding the installation of property wide Wi-Fi, mentioning that the same tenant benefit was listed in the Pershing Park PILOT Term Extension application as a property paid amenity, however, Chickasaw Place Apartments application did not include monthly service charges for the property wide Wi-Fi system, as a property paid amenity. Burbank explained that this was an oversight and that ALCO Management (ALCO) is also proposing to pay all service fees associated with property wide Wi-Fi as a tenant benefit at Chickasaw Place Apartments as well. Burbank went on to state that ALCO feels that internet connection is becoming more of a utility in today’s environment and if the resources are there, ALCO feels that it should be provided as a benefit to the tenants. Carpenter stated that this is an impressive and real tenant benefit. Carpenter stated that even though there are similar parties in the proposed financing with the Bonds and the PILOT, there is a change in ownership, that will also include a new HAP contract so this will aid in the preservation and stability of this project for years in the future. There being no further questions or comments,
James Jalenak moved to approve AFFORDABLE MULTIFAMILY PILOT APPLICATION FOR CHICKASAW PLACE APARTMENTS for a twenty (20) year term. Brittney Rowe seconded and the motion passed unanimously.
AFFORDABLE MULTIFAMILY PILOT TERM EXTENSION APPLICATION FOR PERSHING PARK
Martin Edwards, Jr. reported that this is an existing property that is an oasis in the area that it is located and the property is in excellent condition. Edwards stated that the PILOT Committee met and recommends approval of this term extension application. Berkeley Burbank stated his appreciation for this new opportunity provided by City Council and the new delegation of authority given to the Board that allows for this opportunity of PILOT Term extensions. Burbank then introduced Dana Patterson. Patterson reported to the Board that Pershing Park is a one hundred sixty (160) unit property located in the Frasier neighborhood. Patterson provided background information on the property and the original LIHTCs and Bonds, and PILOT awarded to the property in 2008. Patterson provided background on renovations that were made possible by these awarded items, including renovated kitchens and bathrooms, improved accessibility to disabled residents, installation of perimeter fencing around the property, installation of security cameras and on-site security, and the construction of a community center, where Pershing Park is able to partner with the Neighborhood Christian Center, which provides many benefits and resources to the residents. Patterson stated that the property would benefit from this PILOT term extension, if approved, because it would allow the property to continue to provide all of these benefits, as well as provide the ability to install property wide Wi-Fi and cover all monthly charges for the residents as an added tenant benefit. Patterson also stated that this property is a Safeway’s Certified community and the property maintains a ninety-nine percent (99%) occupancy. Patterson also stated that this property has a twenty (20) year HAP contract on it serving one hundred forty-six (146) of the one hundred sixty (160) units. There being no further questions or comment,
Brittney Rowe moved to approve AFFORDABLE MULTIFAMILY PILOT TERM EXTENSION APPLICATION FOR PERSHING PARK. Nancy Willis seconded and the motion passed unanimously.
Buckner Wellford stated this this application brings up a broader issue. Wellford began by stating that first, ALCO is a great company and that the tenant benefit provided of property wide Wi-Fi can be argued to be either an amenity or a necessity. Wellford stated that in past Board discussions, the point of the PILOT Term Extension, conceptually, is that the Board wants something tangible that reflects new investment in the property. Wellford posed the question on where does the Board begin to draw the line on that, using the property wide Wi-Fi as a reference stating that this benefit is not actually building anything. Buckner stated that internet is a borderline necessity for this day in time, however, it is not the same investment as building new units, fencing, security, lighting, etc. Brittney Rowe mentioned a comment made by Sarah Jemison that internet is how many people are required to apply for jobs in today’s time, which makes internet a definite necessity. Wellford agreed that this point could be argued, and that he did vote in favor of approving the Pershing Park PILOT Term Extension application. Wellford went on to explain that PILOT Term extensions were discussed by the Board in past policy forming discussions, to include some sort of investment, and were not meant to only be able to maintain current benefits, which may provide unfair competition in the market. Charles Carpenter stated that with the new delegation of authority, the prior annual allocation cap limiting the Board has been eliminated, as well as minimum unit and minimum development costs. These changes allow for competitors to apply for the benefit of a PILOT, so long as the property complies with the eligibility guidelines set forth in the current application. Wellford stated that he is simply putting the issue on the floor for the Board to consider PILOT Term extension applications on more than just the continuation of the property’s current tenant benefits. Wellford stated that the Board is treading into new territory and he would like for the Board to consider the implication of these things moving forward.
Berkeley Burbank, Sarah Jemison, and Dana Patterson left the meeting.
1st PILOT CLOSING EXTENSION FOR UPTOWN 2
Charles Carpenter began by reporting that this property, Owned and Managed by Elmington Capital, first appeared before the Board with Bond Inducement for two (2) phase two properties: Patterson 2 and Uptown 2. The Bond Inducement was approved for both properties submitted as one application. When PILOT applications were submitted on the properties, the applications were separated into two individual applications. The Patterson 2 project has currently been placed on hold, but Elmington is moving forward with the Uptown 2 project with the PILOT and Bonds. Carpenter reported that working group calls have begun, Elmington is also processing their volume cap and tax credit applications through THDA. Carpenter reported that this closing extension request is in the normal course of Bond and PILOT financing, and therefore, his Firm recommends approval of this closing extension. Monice asked Carpenter what the time period of the extension would be. Carpenter responded that closing extensions are granted for a six (6) month period. There being no further questions or comments,
Monice Hagler moved to approve 1st PILOT CLOSING EXTENSION FOR UPTOWN 2. Buckner Wellford seconded and the motion passed unanimously.
1st BOND INDUCEMENT RESOLUTION EXTENSION FOR HERITAGE OAKS SENIOR LIVING
Charles Carpenter stated that Heritage Oaks is a senior living facility located in Collierville. This item was on the April 10, 2019 Board agenda, but was tabled because Carpenter’s Firm had not yet communicated with the applicant. Since the last Board meeting, Carpenter’s Firm has since communicated with the developer and the project is moving forward. Duncan Williams is the banker that is working with Heritage Oaks developers and the closing extension fee that was due has been paid to the Board. Carpenter also reported that this project and developer reported a problem getting all professionals together, and Carpenter’s Firm was asked to serve as Bond Counsel in order to aid in moving the process along. Carpenter’s Firm has agreed to serve as Bond Counsel, which Carpenter wanted to make that disclosure to the Board of his Firm’s additional involvement in this particular transaction. Carpenter reported that his Firm recommends approval of this closing extension. There being no further questions or comments,
Brittney Rowe moved to approve the 1st BOND INDUCEMENT RESOLUTION EXTENSION FOR HERITAGE OAKS SENIOR LIVING. James Jalenak seconded, and the motion passed unanimously.
Buckner posed the question of when a developer has a certain number of units set aside for low income residents, are the developers able to charge market rate rents on the remaining units? Carpenter responded that yes, the owner and or developer is able to charge market rate rents on remaining units. Carpenter further explained that at the time of financing, the developer will make an election to set aside forty percent (40%) of the units for residents earning sixty (60%) percent or less of the area median income, or set aside twenty percent (20%) of the units for residents earning fifty percent (50%) or less of the area median income. The remaining units of the complex after this election can be market rate units. Carpenter also explained that the area median income is established through the Tennessee Housing Development Agency (THDA).
2ND PILOT CLOSING EXTENSION FOR OWENS PLACE APARTMENTS
Darin Burns and Stephen Turgeon entered the meeting.
Darin Burns began by introducing himself. Burns is with the Church of God in Christ (COGIC), who is the developer of the Owens Place Apartments project. Stephen Turgeon introduced himself, and he is with Ambassador Management, the property management company for Owens Place Apartments. Burns reported that the closing extension fee due has been paid to the Board, and that the request for this closing extension is due to several challenges and setbacks due to the government shut down earlier this year which created timing challenges for the project. Burns reported that the project is now moving forward. Burns provided the Board with construction plan drawings of the property, and reported that these plans are expected to be presented to Code Enforcement on May 9, 2019 for approval of the project. This project is being funded by Greystone Funding, which Burns reported seeing no upcoming issues. Burns also reported that his team is waiting on an updated Market Study as well. Monice Hagler asked Burns what timeframe he expected in order to close on this project. Burns responded that he expects the project is ninety (90) to one hundred twenty (120) days out from closing on the PILOT transaction. Charles Carpenter explained to Burns that this closing extension, if approved, is a six (6) month extension, which will start in April of 2019 because the item was on the April 10, 2019 agenda, but was tabled for any action due to lack of communication from Burn’s team on the progress of the project. Carpenter explained that there needs to be a higher level of communication so that if any further issue arises, the Board can be made aware in a timely manner. Carpenter expressed his appreciation for the Church of God in Christ and the Affordable Housing Ministry that it provides. Given the explanation provided, Carpenter recommended approval of the closing extension. There being no further questions or comments,
Darin Burns and Stephen Turgeon left the meeting
Monice Hagler moved to approve the 2ND PILOT CLOSING EXTENSION FOR OWENS PLACE APARTMENTS. Brittney Rowe seconded, and the motion passed unanimously.
Executive Director Report
Martin Edwards, Jr. began his report by discussing the presentation made to the Board by Paul Young earlier in today’s meeting. Edwards explained that he feels this is an important initiative for this Board, and hopes that some of the Board members may be involved in the Advisory Committee that was mentioned by Young. Edwards also expressed that he feels that this is an initiative that would fit the Boards purpose as far as any financial resources that the Board may consider putting into this fund in the future. Edwards stated that he is not advocating a number or a motion today, only putting it on the table for consideration by the Board. Edwards also stated that he is not indicating that this be a revolving number to consider either. Edwards expressed his support for the fund and explained that he feels this is an extension of what the Board does by providing incentive and retention of affordable housing in the City of Memphis.
Edwards provided a report to the Board on Sunrise Terrace Apartments. This project has not performed the rehabilitation that was planned. The owner is being foreclosed on by the present lender. The owner provided Edwards and staff an update on the property, including a commitment letter for refinancing the property in order to proceed with the planned rehabilitation of the project. Edwards stated that he will keep the Board advised as to the progress of this property. Charles Carpenter mentioned that if a property is foreclosed on, that the PILOT does stay in place during those proceedings, and when a new owner arises, that new owner would then apply to the Board for a PILOT Transfer.
Edwards provided an update that his visits to Bent Tree Apartments have shown continued progress in both paving, and the drainage issue. Edwards also reported that there is now a guard present at the entrance gate to the property.
In addition, Edwards reported on the fire at Forum Flats, a current PILOT property. Edwards stated that he has reached out to John Shephard of Elmington Capital, the owner of the project and offered to help in any way he could. Edwards also reported that this rebuilding process will take time as the fire is being investigated and all possibilities and alternatives are considered as over one hundred (100+) of the two hundred twenty (220) units were significantly damaged by this fire. Charles Carpenter stated that the Board has no risk, liability, or exposure. Carpenter stated that his Firm will monitor and continue to advise the Board as new information is made available.
Edwards updated the Board as to the two (2) bond applications, Kensington Manor and New Forest Park, and stated that there has still been no information received on either project.
The above concluded the Executive Director Report.
Monice Hagler stated that she felt the Board would be better served to continue publishing Public Meeting Notices in a newspaper of general public circulated publication. Dan Reid stated that he would recommend staff to research available outlets for publishing public notices and obtain rate cards to know what we have been paying and possibly use a lower cost provider. Buckner Wellford expressed his support for continuing to publish the Public Meeting Notices as well.
There was no public comment.
It was announced that the next scheduled meeting of the Board will be held on Wednesday, June 5, 2019 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:41 p.m.