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Minutes 11-14-94 MINUTES OF THE CITY COMMISSION WORKSHOP MEETING HELD IN COMMISSION CHAMBERS, CITY HALL, BOYNTON BEACH, FLORIDA, ON MONDAY, NOVEMBER 14, 1994, AT 6:30 P.N. PRESENT Edward Harmening, Mayor Matthew Bradley, Mayor Pro Tem Jose Aguila, Commissioner David Katz, Commissioner Carrie Parker, City Manager Wilfred Hawkins, Assistant to the City Manager Sue Kruse, City Clerk CALL TO ORDER Mayor Harmening called the workshop meeting to order at 6:30 p.m., for the purpose of determining the status of Clipper Cove Apartments. Wilfred Hawkins, Assistant to the City Manager, introduced Jerry Cutrer, who will present a proposal this evening, and will be available tomorrow morning to answer any additional questions. Commissioner Aguila reviewed the report, and felt it was very well done and informative. However, he does not understand why the City would want to get into the housing business, and cannot come up with any reasons why the City should purchase this property either as a pass-through or as a complex to be administered by the City. Commissioner Katz agreed that the City should not get into the housing business, but has no problem with the City being the pass-through in order to realize the 5% commission. Commissioner Aguita feels that if this purchase makes sense in order to allow the City to have control over the property, or input on the type of housing the citizens of Boynton Beach are deserving of, then it is worth considering. If the City is considering this purchase only to prevent someone else from getting it or to make a 5% commission, then he feels this is awaste of time. Mayor Harmening said the property is located on a very important main thorough- fare in Boynton Beach. The acquisition of this property will allow the City to have control over what happens there. Mayor Harmening pointed out that he is opposed to the one agency acquiring this property which has expressed interest. He is opposed to that agency operating any housing units in Boynton Beach. There may be other agencies who will do a fairly good job, but it is a large, important piece of property and the City would be derelict in its duties if this is not taken to the City for control. City Manager Parker said that the Mayor's comments were the incentives to begin this process. The City has had experience with other public housing situations in the community. Clipper Cove is a major property within the City, and it was felt that it would be worthwhile to look into the alternatives to see what the City Commission would like to do with it. Several non-profits have expressed interest and the County Housing Authority is moving forward in the preparation of a package. Once this goes public, any private non-profit wanting to put together a package can do so. The Mayor's remarks with regard to control and location of the property are paramount in the decision. - 1- #INUTE$ - CITY C~IS$ION WORKSHOP HEETIHG BOYNTOH BEACH, FLORIDA NOVEHBER 14, 1994 Commissioner Katz feels the City can have control by selecting who its wants to convey the property to, and still get the 5% commission. ~ Cutter, CGMS, Inc,~ made the presentation. He has been retained by the City t6 PrePare a re~Ort"and make general recommendations. I. CGMS Engagement A. Credentials CGMS is a national financial advisory and consultant firm, representing eleven (11) State housing agencies throughout the United States, and fifty (50) local housing authorities and city governments. Their work is exclusively in the housing area. B. Scope of Work The scope of their engagement was to evaluate and report to the City on the feasibility of attempting to acquire Clipper Cove Apartments from the Resolution Trust Corporation. The scope of CGMS's engagement does not include telling the City Commission what to do; it provides recommendations on courses of action. II. RTC Affordable Housing Disposition Program A. Public Agency Direct Sale Program RTC has a program referred to as the Public Agency Direct Sale Program which makes certain properties available to eligible purchasers. 1. Eligible Properties When RTC takes over a financial institution, typically a Savings & Loan, and that S&L has foreclosed on multi-family apartments and holds that property in its own inventory, at a certain point that property must, by law, be disposed of by the RTC under an Affordable Housing Disposition Program. Clipper Cove meets the criteria. Clipper Cove was originally financed by a tax-exempt bond issued by the Palm Beach County Housing Authority in 1984. Those bonds were secured by a Letter of Credit issued by Far West Savings & Loan Association in California. Far West foreclosed on the propertyand they were taken over by RTC. 2, Eligible PurChasers Eligible purchasers are public entities, cities, counties, housing authorities, and non-profit organizations. The preference of RTC is to make the properties available to local communities, either city or county governments or their housing authorities, to give them an element of control over the ultimate dispo- sition of the property. The local government can elect to pass the property on to a non-profit organization. However, in the first stage, the local govern- ments or public entities have the first opportunity to purchase. -2- NINUTES - CITY COMMISSION WORKSHOP NEETING BOYNTON BEACH, FLORIDA NOVENBER 14, 1994 3. Sales Price (Affordable Market Value) The sales price of the property is a number which is artificially derived and is known as the Affordable Market Value (AMV). AMV is an attempt to value the property with the housing restrictions imposed on it. In the competition for the property, price is not a factor. The RTC determines the price and awards the property to an entity which, in their judgment, submits the best proposal, or has a superior affordable housing plan for it. B. Rental Restrictions 1. SetAstde Requirements The law which created the Resolution Trust Corporation creates certain set aside requirements for low and moderate income families. Thirty-five percent (35%) of the units in the property must be set aside and maintained for rental to low and moderate income families. a. 15% Lower Income Fifteen percent (15%) of the units must go to lower income. b. 20% Very Low Income Twenty percent (20%) of the units must go to very low income. 2. Income Restrictions Incomes are determined by factoring in the Area Median Income of the jurisdic- tion. a. Lower Income 80% of AMI Lower income families are defined as those who earn 80% of the Area Median Income or below. The West Palm/Boca Raton statistical area includes Boynton Beach, and has determined AMI for a family of four to be $44,500. Those figures are factored down by family size. Clipper Cove has one and two bedroom units. Either one, two or three persons would occupy the units. At 80% of Median, a single person could not earn more than $24,900; and a three-person family could not earn more than $32,000. b. Very Low Income 50% of AMI The 50% of Median earnings would be $15,600 to $20,000. This. is not a public housing project; therefore, there is no federal subsidy related to housing. This is an attempt by RTC to restrict it so that a minimum of 35% of the units are classified as affordable. The families who occupy the units must not earn more than the levels of income stated. The restrictions which are placed on this property are with the property for the remaining useful life of thirty (30) to thirty-five (35) years. The Median Income number is adjusted every year by HUD according to cost of living. As a consequence, the rent limitations will adjust slightly upward every year. -3- MINUTES - CITY COMHI$SION WORKSHOP MEETING BOYNTON BEACH, FLORIDA NOVEMBER 14, 1994 3. Rent Restriction The program requires that the rents be set with a "not to exceed" maximum. a. Lower Inc~rm $5% of adjusted AMI The lower income family's rent is based on 65% of the adjusted AMI. The program makes the assumption that after a deduction of the utility allowance of approxi- mately $800 per year, 30% of the maximum income is available for rent. That number is divided by twelve {12), resulting in rents of $559 down to $478. That does not mean that the rents charged to the set aside units must be those num- bers, but they may not exceed those numbers. If a municipal government or housing authority could make the project work economically, they could charge rents lower than those maximum allowable under the program. C. Affordable Market Value In the calculation of Affordable Market Value, there is a deduction for the cost of repairing the property, costs secured, and other adjustments built into the program. Mr. Cutrer has inspected the property and finds there are relatively minor amounts of deferred maintenance. However, some money will have to be spent. It is expected that RTC will price the property somewhere between $7½ million and $8½ million. That figure should be available shortly. D. AHDP Process If a city decides to participate, there are a number of steps to follow. 1. RTC Notice of Marketing Period RTC will issue a Notice of Marketing Period. That Notice will be sent to qualified organizations including the City of Boynton Beach. The Notice will include their plan to sell the property. The organizations will have a thirty (30) day period to respond. Included in the Notice of Marketing Period will be due diligence information. That information includes updated appraisals, en- vironmental reports, engineering reports, and updated financials. 2. Notice of Serious Intent If the City choses to participate, a "Notice of Serious Intent" would have to be submitted within thirty {30)days. There is a questionnaire which must be filled out. The Citywould have to tell the RTC what it intends to dowith the property. If the City makes the decision to transfer the property to a non- profit and had identified who that non-profit organization will be, then that information would be included. If the City intended to transfer the property to its own housing authority, that should be noted. However, if the intent is to transfer the property to another ownership entity, and no determination on who that would be has been made, then the application should include a description of the process the City plans to follow to select that entity. 3. RTC Selection The competition for the project is not based on price, but rather the quality of the affordable housing plan. -4- HZNUTE$ - CZTY COHHI$$ION WORKSHOP HEETING BOYNTON BEACH, FLORIDA NOVEHBER 14, 1994 OnCe the Notice of Serious Intent is submitted, the RTC will go through a review of the applicants to make a selection. Even if the City submits its Notice of Serious Intent to compete for the property, the RTC could still select someone else to purchase it. There is no guarantee that the City will be successful in its attempt to purchase. 4. Letter of Interest to Purchase and Sell Once the selection is made by RTC, the next step is a Letter of Interest to Purchase and Sell. The City will enter into a contract which establishes the purchase price. This will allow the City a sixty (60) day period to complete a detailed due diligence review of the property. 5. Purchase Contract Once the due diligence review is completed, the City enters into the Purchase Contract and a down payment of 1% of the purchase price must be made. The RTC offers financing by means of a 99% bridge loan. What that means is that 99% of the price is financed for two years by the RTC. 6. Closlng Almost everyone would close on the bridge loan because there would not be enough time to arrange ultimate financing. At the present time, it appears that the Notice of Serious Intent would have to be submitted in January, 1995. It would probably take four (4) months from the time of issuance of their Notice of Marketing Period to the time of closing. Commissioner Aguila felt that the City's effort to purchase would be futile since we do not have a housing authority. He asked for an opinion from Mr. Cutrer on how this would affect the City's application. Mr. Cutter said the presence or absence of a housing authority would be incon- sequential unless the City intended to purchase the property and transfer it to a housing authority. In a case where the City acts as a conduit, if the City knows which non-profit the property will be transferred to, then that information must be included in the Notice of Serious Intent, and that party will have significant weight in the selection by the RTC. However, Commissioner Aguil.a pointed out that other non- profits are able to request to be considered at the same time the City is making the request. The RTC may think one of them is a better choice. Haurtce Rosenstock asked for clarification on whether or not the City, once it acquires the property, can act as a vehicle to transfer that property to anyone it chooses. Mr. Cutrer said that statement is generally correct; however, in the Notice of Serious Intent, the City must tell what it plans to do with the property. The alternatives are: 1) ownership by the City; 2) transfer to a non-profit organization; 3) transfer to a City-sponsored non-profit; or 4) transfer to an independent non-profit. -5- HINUTE$ - CITY COMMISSION WORKSHOP HEETING BOYNTON BEACH, FLORIDA NOVENBER 14, 1994 With regard to Alternative #2, the City does not have to designate who that non- profit will be at the time it submits the application. However, if the City has already made that choice, it must designate who that will be. If the City has not made the selection, in order to have a competitive application, it must enu- merate the processes it will go through to select the non-profit. III. Cllpper Cove Apartments A. Description Clipper Cove is a 384 unit project consisting of fifty-six (56) one-bedroom/one- bath units, forty-eight (48) two-bedroom/two-bath units, and 280 two-bedroom/two bath units. It is one of the most attractive multi-family units because of the spacious grounds on which it sits. The ultimate disposition of this property can be a significant asset or risk to the City in terms of the housing market within the community. Everyone is concerned with who will ultimately own that property. B. Background The rents for the one-bedroom/one-bath units are presently $595, $635 and $695. By applying the 15% set aside {people who make 80% or less of the Median Income} the affordable housing rents would be $559, $628 and $628. That would impact the rents of fifty-seven {57) or fifty-eight {58) units by reducing the present rents by approximately $37,000 per year. In the 20% minimum set aside (people earning 50% of Median or less), 134 to 136 units would be impacted at an annual loss of income of $224,916. Expenses will be raised, but the income will drop. C. Due Diligence In terms of generating income, this property suffered in 1993 and 1994 because of a transition in management. RTC has owned the property for a few years and has had Mikelson Company managing the property under a contract which expired on December 31st. Another management company was brought in. Mr. Cutrer used the 1993 numbers of $2.9 million in rents. Clipper Cove had $83,000 in vacancies and $192,000 in concessions. This property has operated at the mid-90% range. If the $83,317 in vacancy loss is divided by $2,937,585, a 3% vacancy factor isderived, tf the $192,000 in concessions is added to. the $83,317, that amounts to $276,000. Divided by $2,9375,585, that amounts to a 9.4% vacancy factor. A property which is very strong will have a 5% to 7% vacancy and concession factor. Mr. Cutrer said he adjusted last year's income with the affordable housing ad- justments by reducing that income by $225,00. He added a downward reduction in management fee, added in the taxes which were paid last year by RTC, a new expense known as "regulatory monitoring", and a "Replacement Reserve". The "Replacement Reserve" is money set aside for capital improvements. Based on these numbers, taking the property manager's net operating statement from last year and adding adjustments we are aware of, we can project approximately $t.1 million in operating income before debt service at a 10% vacancy factor. -6- NI~JTE$ - CITY CONMI$$ION NORKSHOP NEETING BOYNTON BEACH, FLORIDA NOVENBER 14, 1994 Real estate often has a capitalized value set on it by applying a capitalization factor {discount). The lower the number, the higher the value. Grade "A" prop- erty, without affordable housing restrictions on it, has traded in recent months to big buyers at between 8% and 8~%. Lower grade property would trade at 12% or 13%. If Clipper Cove is capped at 10%, the market value of this stream of cash flow is approximately $11 million. It is expected that the RTC will sell the property for approximately $7.5 million to $8.5 million. Mr. Cutrer advised that when Congress created RTC, they were given two mandates for multi-family housing: 1) dispose of the property; and 2} promote and sup- port affordable housing. For a long time, RTC disposed of the properties, but they were not honoring their affordable housing mandate. Advocacy groups lobbied in Washington, and RTC now honors their mandates. D. Conclusion Regarding Property Mr. Cutrer feels the RTC is selling this property at an attractive price, and it has the ability to support good financing. Most lenders would want a 75% of value loan. If the purchase can be made at the net price range, a lender might be willing to lend on it. Lenders would also want to see debt coverage on the loan of approximately 1.25%. The debt coverage on this property could probably be done for approximately 1.35% or 1.4%. Commissioner Aguila recalled that during the presentation, Mr. Cutter made men- tion of the fact that repairs and some other expenses could be deducted from the purchase price; however, in the report, it appeared that certain costs were being added, rather than deducted. Mr. Cutrer said one current problem is that the number is still unknown because it has not been released by RTC. The cost of the repairs which RTC agrees to is deducted from the purchase price. Commissioner Katz inquired about the length of the loan a bank would offer on such a piece of property. Mr. Cutrer suggested getting an amortized loan over twenty-five (25) or thirty {30} years. Using a commercial bank, there will be a short-term note with a balloon. The only resource the owner of this property has is the cash flow from it. Mr. Cutter recommends that this be financed in a mechanism which is fully amortizing and pays itself off out of its cash flow through the ownership of it. IV. Ownership/Management Mr. Cutrer reached the conclusion that under the affordable housing restric- tions, Clipper Cove isa very feasible project. There are four alternatives which can be applied to the ownership of this property if the City elects to acquire it. ' A. Ownership Alternatives 1. City Ownership The affordable housing plan can say the City intends to buy the property, operate it and keep the profits. However, more points are gained with RTC if the cash flow after debt service is committed to affordable housing activities. City ownership has certain risks and rewards. This would put the City in the business of owning multi-family property. -7- MINUTES - CITY COI~IISSION WORKSHOP MEETING BOYNTON BEACH, FLORIDA NOVEMBER 14, 1994 2. Transfer to Another Publlc Enttty The most logical entity to transfer this property to would be a housing author- ity. Since the City does not presently have a housing authority, one would have to be created. One of the benefits of having the property in the hands of a public entity is that it would remove the direct ownership from the City Commission and City Manager's Office, and have a body, appointed by elected officials, to oversee and run the property. 3. Transfer to Clt$-sponsored Non-Profit The City could transfer the property to a non-profit entity created by the City. Many housing authorities create a non-profit where the Board of Commissioners of that authority also serve as board members for the non-profit, or they may appoint other people to serve. This would insulate the property from the City, and the City from the property while still allowing oversight of it. The City would control the appointments to the board. 4. Transfer to Independent Non-profit The City could transfer the property to an independent non-profit organization. This would be a non-profit not associated with the City. B. Property Hanagement Alternatives Management of the property includes the day-to-day rental and leasing opera- tions, maintenance of the facility, and hiring and firing of workers at the property. 1. Clty Management The City could take on the management of this property. personnel would have to be hired. However, experienced 2. Management by Property Owner If the property is transferred to another entity, it could be managed by that entity. National and regional non-profits have very strong organizations in-house and can do a very capable job. 3. Independent Thlrd Party Manager The City could have an independent thirty-party manager manage the property on a day-to-day basis under contract. That contract would give the owner the ability to relieve the property manager of his/her responsibilities if performance was unsatisfactory. C. Recommendations i. Transfer to Independent Non-profit Mr. Cutter's report recommends transferring the property to an independent non- profit which has a strong background in ownership of multi-family properties. There are a number of non-profits which have expressed an interest to the City. -8- MINUTES - CITY COHMIS$ION WORKSHOP HEETIHG BOYNTON BEACH, FLORIDA NOVEMBER 14, 1994 2. Independent Property Manager Unless Non-profit has Strong In-house Management Capability In terms of property management, Mr. Cutrer recommends retention of a third- party independent property manager unless the entity the City selects has a very strong in-house management group. 3. Selection process If the City elects to participate in the program by trying to purchase the prop- erty and transferring it to someone else, the recommendation is for the City to go through a selection process to invite all interested parties to submit pro- posals to the City to own and manage the property. The City should set up cri- teria and select the party best able to successfully operate the property and carry out the City's objectives. This selection process can by made by the City Commission, or by a panel appointed by the City Commission. This process would be a "Request for Proposals" process. v. Financing A. Seller Financing from RTC ~. 99X Bridge Loan RTC offers seller financing to the ultimate purchaser as ameans of financing the property. This is a 99% bridge loan which means that 99% of the purchase price would be financed for two years at an interest rate of 10~%. That bridge loan is only good in the hands of the public agency. If the property is trans- ferred to a non-profit, alternative financing would have to be arranged. If the City tries to buy the property, it could close with 1% down plus closing costs. RTC will finance the remaining 99%, and the City would have two years to refi- nance or transfer the property to another entity. 2. 95X First Mortgage Loan In terms of permanent financing, RTC offers a 95% first mortgage loan which requires 5% down with a 10~% interest rate on a twenty-five (25) year amortiza- tion with a fifteen (15) year balloon. The note would be due in fifteen years. 3. Equtty Requirement There is an equity requirement imposed on the City if it elects to try to buy the property. The City must come up with the 1% down payment ($75,000 to $85,000). Mr. Cutrer also recommends having independent environmental and engineering reports done by the City as part of the due diligence review. These reports would cost approximately $3,000 to $4,000 each. The cash flow from the property could then reimburse the City for the money advanced. B. Financing Provided by Ctty 1. HONE/CDBG Other alternatives could be financing by the City itself if funds are available through HOME/CDBG Funds. -9- MINUTES - CITY COMMISSION WORKSHOP MEETING BOYNTON BEACH, FLORIDA NOVEMBER 14, 1994 2. City General Fund Financing could be arranged through the General Fund if funds are available. 3. Tax Ex(~pt Bonds The use of tax exempt bonds is another alternative for financing the program. Bond counsel confirmed for Mr. Cutter that the City could issue bonds regardless of whether or not the City holds ownership or transfers it to a non-profit organization. Credit enhancements could be obtained for those bonds.. C. Financing Arranged byNon-Proftt Purchaser Another alternative would be for the non-profit purchaser to try to secure its own financing. Many non-profits are very well qualified to do that. If the City elects to purchase the property and transfer it to a non-profit, one of the criteria in the selection process would be their proposal for financing the property. VI. Affordable Housing Plan A. City Objective The City's objectives need to be laid out in an affordable housing plan. B. Ownership/Management One of the items which the plan must include will be the ownership/management issue. C. Lower/Very Low Income Set Aside Also included in the plan should be the lower/very low income set aside. RTC will lobby the City to increase the 35% set aside and the higher the City increases the set aside, the more points RTC will give in the selection process. Someone who commi~s to set aside 50% of the units will get more credit in the selection process. Credit will also be given on the purchase price. However, every time the set aside is increased, the income is lowered. D. Financial Integrity of Property It is important to arrive at a balance between public purpose and maintaining the financial integrity of the property. The City will decide on that number. VII. FeaslbtlltyAnalysl$ A. Public Policy Considerations This item was addressed earlier in the presentation. B. Economic Feasibility This item was covered earlier in the presentation. - 10 - HINUTES - CITY COMMISSION WORKSHOP HEETING BOYNTON BEACH, FLORIDA NOVEHBER 14, 1994 VIII. Immediate Action Required A. Decision on Whether to Pursue Acquisition of Clipper Cove The City will have to decide if it wishes to "run the race" within thirty {30) days of the date RTC issues its "Notice of Marketing Period". B. Identification of Source of 1% Down Payment The City will have to determine the source of the 1% down payment. At a mini- mum, the City will have to come up with $75,000 to $85,000 depending on the Affordable Market Value {AMV) set for the property. That money can be advanced and the City can earn it back when it takes title. C. Development of Affordable Housing Plan The City will have to develop an affordable housing plan detailing how the prop- erty will be owned and operated. D. Submission of Notice of Serious Intent The Notice of Serious Intent is worthless unless a decision has been made with regard to the ownership question. If the City is going to own the property for the next thirty-five {35) years, that must be stated on the application. If the City intends to transfer ownership to a non-profit, that also needs to be stated on the application so that it can be evaluated. Unless RTC knows our plan for the property, the application will not have much credibility. If the City decides to submit a Notice of Serious Intent and transfer the prop- erty, Mr. Cutrer recommends developing a "Request for Proposals" which will in- vite the public to submit proposals for evaluation. This should also be done for the property managers, assuming an independent property manager will be selected. If the City is selected to receive the property, a due diligence review must be done. Mr. Cutrer recommends securing updated engineering and environmental reports. IX. Discussion · Mayor Harmening questioned whether an experienced property manager could be part of the due diligence team in place of an engineer. He feels the property manager would be in a better position to evaluate the necessary repairs than an engineer or environmentalist. Mr. Cutrer said that in another community, an engineering report is being pre- pared to get a technical list of items requiring repair. The agency acquiring the property already has the property manager selected and the property manager will price the repairs. Commissioner Katz pointed out that if the City decides to enter the race and the non-profits decide to enter the race, and the the City makes a decision to transfer to a non-profit, there would be a parallel race between non-profits to make their case before the City. - 11 - HZNUTE$ -C]TY COHHZS$ZON WORKSHOP HEET]NG BOYNTON BEACH, FLORIDA NOVENBER 14, 1994 Mr. Cutrer said that the non-profits are not competing bidders under the Public Agency Direct Sale Program. If there are no public agencies competing, the RTC would market it to non-profits. Mayor Pro Tem Bradley inquired as to whether or not the designation of a non- profit would have a positive influence on the application. Mr. Cutrer said that designation would remove an element of uncertainty. It Could help or hurt depending on how the non-profit is evaluated by the RTC. In response to Mayor Pro Tem Bradley's question regarding the 5% commission, Mr. Cutrer said the RTC would look less favorably on an entity which intends to purchase the property, transfer it to a non-profit, pay off the bridge loan, and pocket the 5% commission. However, if that money was designated for a housing program, it would have a more positive influence on the application. It seemed to make sense to Commissioner Aguila that if the City decides to intercede in the acquisition of the property, it should do that with the whole package. He would support the proposal in that sense. He wondered about the amount of expenses over and above the RFPs and RFQs. If the RTC decides the City is the best choice, we would have to go for a bridge loan. If the property is then transferred to a non-profit, they would have to purchase it from us. Once they own it, what gives the City the right to manage it or control the managers, or control how the new managers operate it? Mr. Cutrer stated that we would only have the rights which are written into the sales contract. Commissioner Aguila left the meeting at 7:50 p.m. Mr. Cutrer said there is a presumption in the program that the facilitating entity would likely transfer the project to a non-profit at cost. If that entity chose to mark it up and sell it to the non-profit at a higher price, then, under certain circumstances, the facilitating entity can keep 50% of the profit, and 50% goes to RTC. Mayor Pro Tem Bradley questioned what other agencies would be in competition with the City for this project. Mayor Harmening responded that the Palm Beach County Housing Authority would also compete as a public agency. Mr. Cutrer said that until the Notice of Marketing Period goes out, and the thirty days have past, no one will know the answer to that question. Mayor Harmening posed a question. If the City decided to submit a bid to include a lease for~.operation.and maintenance to a national professional prop- erty management concern, which the RTC knows, how much influence would that have on the application? Mr. Cutrer said the weakness of that application would be that the City has no demonstrated track record of ownership; therefore, a concern would be, what is the oversight going to be by the City? Will there be oversight by elected of- ficials, or will there be an intermediate commission or board assigned to those responsibilities? Elected officials come and go. Some will have more experience and credentials in the housing area than others. There is a lack of credibility in the application as a property owner. On the other hand, there is a strength in the application of the ultimate public body within the community. - 12 - NINUTE$ - CITY CONI, IIS$ION NORKSHOP HEETING BOYNTON BEACH, FLORIDA NOVF. J4BER 14, 1994 Maurice Rosenstock inquired as to the tax implications on the City when the City holds the property, or a non-profit holds the property, or someone else holds the property. Mr. Cutrer said he is not an expert in Florida ad valorem taxes, but his inquiries have indicated that if the City were to own the property, it could elect to pay the some taxes; or what is more frequently done by housing authori- ties is, they sometimes pay a negotiated number as a contribution in lieu of taxes. That is a practice in the vast majority of communities across the United States. If the property is transferred to a non-profit, then under certain cir- cumstances, if the non-profit applies and the taxing body concurs, the property could be exempted from ad valorem taxes. Mr. Cutrer's recommendation to the City would be that the property has been evaluated for AMV purposes by RTC on a net income that includes the deduction of the property taxes. He can see no reason to give that up. Because the income has been lowered, would the County be impacted to have to lower the assessed valuation of the property? Mr. Cutrer said there is not enough experience with affordable housing disposition properties to have the answer to that question. He does not know how the property assessor approaches value. On a market value basis, the property has a somewhat reduced value. Mr. Rosenstock questioned whether or not Mr. Cutrer provides the City with an RFP formula, within the scope of his work, that could be sent out to bidders. Mr. Cutrer said that the scope of engagement of the firm terminates with this presentation, unless they are asked to do additional work. They have done that however, for other cities. ' ADJOURNRENT There being no further business to come before the City Commission, the meeting properly adjourned at 8:05 p.m. THE CITY OF BOY,TON BEACH Mayor ATTEST: g Secretary (Two Tapes) Vi ce Mayor ~ COnini ssioner ~Commi ssi oner - 13-