MINUTES OF REGULAR MEETING OF
THE HEALTH, EDUCATIONAL AND HOUSING FACILITY BOARD
OF THE CITY OF MEMPHIS, TENNESSEE
Wednesday, November 7, 2018
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, November 7, 2018. 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 Dr. Manoj Jain
Nancy Willis Cliff Henderson
Buckner Wellford Brittney Rowe
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.
Sheila Jordan Cunningham representing the Joint Mayor’s Environmental Team was also in attendance.
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
James Jalenak moved for approval of the Minutes for October 3, 2018. Cliff Henderson seconded and the motion passed unanimously.
Finance Committee Report
Daniel Reid presented the financial results for the month ended September 30, 2018. A discussion of the financials was completed and
Nancy Willis moved for acceptance of the Finance Committee Report for September 30, 2018, and properly seconded by Monice Hagler, the motion passed unanimously.
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 that a notice has been received of a pending foreclosure sale, which is part of the middle income down payment assistance program (MIDPAP) the Board facilitated for the City of Memphis years ago. It is unknown if the program is currently operational, but there is an administrator appointed for the program that has, over the past year, been charged with getting accounts up to date and has periodically filed foreclosure proceedings against certain delinquent accounts. Because the Board is listed as a mortgage holder as a part of the MIDPAP, the Board is in the required chain for legal notification. Notwithstanding, there is no legal exposure or liability to the Board, and no action from the Board is required due to the notification.
3. Carpenter reported on the current status of closings for Hope Heights Apartments PILOT and Bonds, which are currently scheduled to close in early to mid-December 2018. Carpenter reminded the Board that this is the third of three properties that Millennia Corporation, based in Ohio, is purchasing from Global Faith Ministries. The other two properties (i) Cavelier Court and (ii) Gospel Gardens were closed in mid-September 2018 and the Report on Debt Obligation for each of the stated properties is being filed with the State and Local Finance Office of the State following today’s meeting. He further advised that Hope Heights Apartments were delayed due to various interactions with HUD. Now those delays have been resolved and Hope Heights is moving forward to a December closing.
4. Carpenter next reported on the Highland Creek PILOT. As background, he reported that this property is located in the Whitehaven area and consists of over four hundred (400) units, located on Winchester Road. Renovation of this property had been delayed after entering into a PILOT Agreement in 2012, because market disruptions caused the nine percent (9%) tax credits to become less valuable and the initial tax credit investor withdrew from participating in the project, causing a lack of funds to complete the renovation and development of the project. The developer has worked with the Tennessee Housing Development Agency (THDA) and the nine percent (9%) tax credit commitment was extended. The developer has now found a new tax credit investor and is moving forward with the complete development of this property. During the period of the developer meeting with THDA, he also appeared before the Board, and it was discussed that since the project was approximately six (6) years into a ten (10) year PILOT term, the possibility of terminating the existing PILOT and entering into a new PILOT Agreement with the Board, so long as, the project would qualify under the current eligibility guidelines, thereby allowing the completed project to enjoy a ten (10) year PILOT term versus a four (4) year remaining term. The Board had preliminarily agreed to this approach and the developer has now indicated that this is how he wants to proceed. Therefore, Carpenter reported that he and counsel for the developer were moving forward with terminating the existing PILOT and entering into a new PILOT under our current guidelines. Moreover, in the future, when the revised PILOT guidelines are determined, the applicant will come back and seek an extension to the ten (10) year term based on the term the project will qualify for under the new guidelines. Carpenter reported that he has PILOT documents prepared for the Chair to sign following today’s meeting and the developer plans to close and fund the PILOT the following week.
5. Carpenter provided an update to the Board on the Internal Revenue Service (IRS) Audit of the Board’s Multifamily Housing Revenue Bonds, Series 2007 (Lamar Crossing Apartments). As previously reported, Peck Schafer, the law firm which served as Bond Counsel for the original bond financing has been dissolved and its attorneys disbursed to other law firms in the Ohio area. Carpenter advised that he was able to locate the attorneys who actually worked on the financing who were willing to accept the engagement for response to the IRS audit. However, after further research by the Ohio attorneys, it was determined that the original borrower in the financing is no longer in business. After determining all of the above, Carpenter went to work in reviewing all of its files, and after much diligence has been able to identify the current bond trustee in Oklahoma. The current bond trustee has advised that the Bonds have been defeased, not through payment, but have been written off as non-collectible. Carpenter further reported that he has been in direct communication with the Internal Revenue Service (IRS), provided updated information on a preliminary basis and is preparing a complete package to formally respond to the IRS Information Document Request. Carpenter will report further at the next Board meeting.
6. Carpenter reported on the receipt of an invitation from the City of Memphis to participate in discussions with City Staff and others regarding the (i) Health, Educational and Housing Facility Board of the City of Memphis PILOT process, (ii) Downtown Memphis Commission PILOT process, and (iii) EDGE PILOT process. The meeting will take place on November 8, 2018 at 1:30 pm at City Hall. Carpenter reported that after some discussion, he believes this is more of a coordination meeting to ensure that the records of the City are consistent, and each reporting entity are providing the City with all information needed because PILOT reporting requirements have been enhanced. Any noteworthy information will be shared at the next meeting.
7. Lastly, Carpenter reported on several PILOTs that are in default, Camelot Manor and Washington Manor, which the PILOT Committee addressed and will make a recommendation to the Board at this meeting. The other two properties in default are Graceland Farms and Eastwood Park Apartments. These two properties are pending. Carpenter is working with staff in making sure that all information is documented properly, and Carpenter expects the PILOT Committee to have recommendations for these two properties at the next Board meeting.
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. reported that the PILOT Committee met and considered the termination of Camelot Manor and Washington Manor. Edwards reported each property is in material default and that neither property has been improved per the original sources and uses. Both properties have been inspected and have been sent numerous letters and have not corresponded. Both properties have also neglected providing current occupancy reports. Edwards reported that this information has also been requested in his on-site visits, yet it was not provided. Edwards reported that the PILOT Committee recommends termination of Camelot Manor Apartments and Washington Manor Apartments effective as of this date, November 7, 2018.
PILOT TERMINATION OF CAMELOT MANOR APARTMENTS
Carpenter reported on the process in which the Board enters into PILOT agreements with eligible properties and the compliance procedures used by staff and Counsel, and further explained that Camelot Manor, nor Washington Manor are in compliance. Counsel and staff worked with the property owner because there was a pending sale, and the new purchaser had worked with staff, outlining the plan that they would use to really bring these properties in to compliance. This sale fell through, so the PILOT Committee felt that they had no alternative but to immediately terminate the participation of Camelot Manor and Washington Manor, from the PILOT program.
Edwards reported that he has pictures of both properties for the Board’s review. After a brief discussion,
Buckner Wellford moved to approve PILOT TERMINATION OF CAMELOT MANOR APARTMENTS. Dr. Manoj Jain seconded and the motion passed unanimously.
PILOT TERMINATION OF WASHINGTON MANOR APARTMENTS
There being no further questions or comment,
Monice Hagler moved to approve PILOT TERMINATION OF WASHIGNTON MANOR APARTMNETS. Nancy Willis seconded and the motion passed unanimously.
1ST PILOT CLOSING EXTENSION FOR HOPE HEIGHTS APARTMENTS
Carpenter reiterated some of the background concerning Millennia Corporation, based in Ohio, purchasing three properties from Global Faith Ministries. The delays with HUD have been resolved, and the matters will move forward with the closing of the PILOT and the Bonds early to mid-December 2018. Carpenter recommended approval of the PILOT closing extension. Carpenter also reported that according to precedent established, if this closes prior to the next Board meeting, there will be no closing extension fee assessed, if it does not, then the closing extension fee would be assessed at that time. There being no questions or comment,
James Jalenak moved to approve 1st PILOT CLOSING EXTENSION FOR HOPE HEIGHTS APARTMENTS. Buckner Wellford seconded and the motion passed unanimously.
Executive Director Report
Martin Edwards, Jr. stated that there would be a presentation made by Sheila Jordan Cunningham in connection with a contaminated property of which the Board has been asked to participate in funding certain environmental studies to evaluate the viability of developing the property.
Sheila Jordan Cunningham entered the meeting.
Sheila Jordan Cunningham introduced herself as representing the Mayor’s Environmental team as well as Neighborhood Preservation Inc, which are charged with addressing blighted issues in the City of Memphis. Cunningham who had previously presented an overview of the Jehl property to the Board, provided an update and additional background on the Jehl Cooperage property, located at 4 – 50 Virginia Avenue, comprised of 3.65 acres of land located north of Crump, and west of Main St., surrounded by certain affordable multi-family housing developments. Historically, the property was used as a drum cooperage manufacturing site, where drums were brought in, cleaned out and dumped on the ground, and refilled. This practice caused environmental contamination to the soil and a lot of EPA action against the Jehl Company, which ultimately lead to the bankruptcy of the Jehl Cooperation. Over time, due to death and succession issues, there is currently no owner for the property, and many years’ worth of delinquent property taxes due, creating additional obstacles to development. Because this would seem to be a natural site for a multi-family housing development, the Mayor’s Environmental Team sees the next step for this property is to determine the level of contamination on the site, which preliminary testing estimates indicate a cost of up to two hundred thousand dollars ($200,000.00). Once this testing is done, a determination can be made if the property can be developed. To complete the testing, it would take funding of the budgeted amount, as well as an entity to act as a receiver in Environmental Court. Thereupon, the Environmental Court would oversee the administration of the testing and funding; as well as , interfacing with the Environmental Protection Agency to determine next steps. Cunningham made a request of the Board for it to earmark two hundred thousand dollars ($200,000.00) that could be used toward the environmental testing. The funds would stay with the Board until a suitable plan is put into place and responsible receiver is identified, along with other conditions to be determined by the Board and its General Counsel. It was generally discussed that the Board had previously set aside and segregated the amount of two hundred thousand dollars ($200,000.00) for another project a few years ago that did not move forward, and those funds are still available, and specifically reserved for blight remediation. Afterwards, a question and answer session followed between the Board and Cunningham.
Monice Hagler made a motion that the Board would provide the commitment of two hundred thousand dollars ($200,000.00), subject to the condition of the Downtown Memphis Commission taking the title to the property or some other acceptable entity, to include any other condition that the Board’s General Counsel requires as necessary to protect the Board. Buckner Wellford suggested an amendment to the motion, which was accepted by Hagler, to state that the amount would be up to two hundred thousand dollars ($200,000.00) and that the source of funds is the designated fund that the Board has already set aside. Brittney Rowe seconded and the motion passed unanimously.
Buckner Wellford stated for the record that his vote in favor of the motion is only because the Board already has the two hundred thousand dollars ($200,000.00) in restricted funds set aside for blight remediation, and there will not be a designated blight fund in the future.
The above concluded the Executive Director Report.
There was no public comment.
It was announced that the next scheduled meeting of the Board will be held on Wednesday, December 5, 2018 @ Noon. There being no further business, the meeting was adjourned by the Chair at 1:25 p.m.