Council MIN 07-25-1994 Study Session
MINUTES
Federal Way City Council Study Session
July 25, 1994 - 9:00 a.m.
SENIOR HOUSING DISCUSSION
A Study Session of the Federal Way city Council, was called to
order on July 25, 1994, at the hour of 9:03 a.m., in council
Chambers, city Hall, 33530 First Way South, Federal Way,
Washington. Councilmembers present: Mayor Mary Gates, Deputy
Mayor Phil Watkins, and Hope Elder. Councilmembers absent: Ray
Tomlinson, Ron Gintz, Skip Priest and Bob Stead. Staff present:
Kenneth E. Nyberg, City Manager, Philip Keightley, Public Works
Director, and Maureen Swaney, city Clerk.
Councilmember Elder introduced Bob Arbios and Marilyn Simon,
representing HUD, and Dan Watson, representing King County
Housing Authority.
Mr. Arbios explained funding options, through HUD, and circulated
fact sheets on the Assisted Program for Rental Housing for the
Elderly or Disabled (Exhibit A), and on FHA Multifamily Mortgage
Insurance (Exhibit B). He asked all attendees to sign their name
and address on a sheet he circulated and those people on the list
will be notified of upcoming funding meetings. He told the
audience that HUD funds about 2 or 3 projects in the metro area
each year; in this competitive process, HUD receives from 2 to 6
applications. He said that municipalities are not eligible under
"202" but they can playa role in the management and development
of a project.
Dan Watson, Assistant Director of King County Housing Authority,
explained what his agency can do, and some of the strategies to
consider. He said his agency is an independent agency which was
originally established by King County; they are not a part of the
county. Mr. Watson told the participants that the first item is
the to consider is to target the needs. Next, is to decide on
the process, i.e. services included, or just living units. He
reviewed some funding options, including GO Bonds and
public/private partnerships. As an example he cited Bellevue's
donation of property to a private developer who then built a
facility under the auspices of the tax credit method. He
reviewed how to get a facility built less costly by using
competitive bidding, or by retrofitting/remodeling an existing
facility. He concluded by saying the Housing Authority's purpose
is to help figure out strategies and lend assistance. In
response to a question from the audience, Mr. Watson said that
the Kent facility rents are $300 to $500 with one (1) meal per
day included. The City of Kent paid for this particular facility
and the rental proceeds pay for staff, utilities and meals (this
is similar to City of Seattle).
COpy
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city Council study Session
July 25, 1994
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Earl Price, representing Senior Housing Association, showed a
drawing of a 92-unit facility in Kent, constructed under the tax
credit method, that is nearing completion. The rents run from
$331 to $395 with utilities included; no meals. He went on to
explain how his association select downtown core sites for
development. Mr. Price said that no services are provided other
than recreation - no van transportation, only affordable and
secure housing. He told the audience that his group does not
plan to operate any differently; the facilities are for seniors
(55 years and older) and for physically challenged. He continued
by saying they would not go into a city that does not have good
infrastructure, and the association likes to develop in cities
when the municipality is able to donate property because it keeps
the rent affordable. He concluded by saying that to proceed with
his association would be a public/private partnership where the
city becomes a catalyst, and donates property and infrastructure
along with fee waivers to insure affordability. Councilmember
watkins said he would like to explore this option in more detail.
councilmember Elder said that the seniors need to decide what the
seniors want; the decisions need to be made by the seniors. She
suggested formation of a senior housing citizens action committee
and requested volunteers. No one volunteered and this subject
was referred to the next Public Safety/Human Services Council
Committee's regular meeting, scheduled for August 4, 1994, at
7:30 a.m., at Federal Way City Hall.
The meeting adjourned at
:08 a.m.
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HUD FACT SHEET
ASSISTED PROGRAM FOR RENTAL HOUSING
FOR THE ELDERLY OR DISABLED
Region X
SECTION 202 ELDERLY AND SECTION 811 DISABLED
NATIONAL HOUSING ACT
UMT IT IS
A program designed to provide a capital advance to
assist private nonprofit corporations and consumer
cooperatives in the development of new or
substantially rehabilitated, or the acquisition of
existing housing and related facilities to serve
the elderly, the physically handicapped,
developmentally disabled, or chronically mentally
ill. It is combined with an assistance payments
program which subsidizes the difference between
the rental income and the operating cost of the
proj ect.
ELIGIBLE PROJECTS
May consist of detached, semi-detached, row, walk-
up, elevator-type multifamily structures or group
homes. Designed in conformance with HUD design
and cost standards.
TYPES
202 Elderly
limited to efficiencies and one-bedroom units.
Must include a percentage of handicapped designed
units in accordance with state and local codes and
must meet design requirements of the Fair Housing
law.
811/P~rsons with disabilities
1.
Physically handicapped--limit of 8 persons per
site for a group home, and 24 persons for an
independent living complex.
2.
Developmentally disabled, chronically
mentally ill--same as physically handicapped.
3.
Three+ bedroom units are allowed in indepen-
dent living complexes but only for ,families.
4.
All handicapped projects must meet the design
requirement of the Fair Housing law.
HUD will regulate operating costs and methods of
operation.
Income limits are a condition of occupancy.
ELIGIBLE OVNERS/SPONSORS
The "Sponsor" submits the application, gives
cont i nui ng support. The "Owner" is formed to
receive the advance and is responsible for the
construction, ownership, and operation of the
project.
Owne r
1.
The Owner must be a single asset entity.
2.
Owner purposes must include the promotion of
the welfare of elderly or persons with
disabil ities.
3.
No religious purposes may be stated in
Articles of Incorporation or By-laws, etc., of
the Owner, or the Owner will be determined to
be ineligible. Mere mention of religious
purposes (for IRS) is okay.
4.
Must be incorporated under laws of the State
if selected.
5.
Must show evidence of IRS tax exemption if
selected.
Sponsor
1.
Includes religious; minority, civic
organizations; associations representing
physically handicapped, developmentally
disabled or chronically mentally ill; centers
for the handicapped, etc.
2.
Does not have to be incorporated but does need
to be a nonprofit organization under 501c3.
3.
Must have a current IRS exemption at time of
application submission.
4.
Expected to have a history of interest and
successful activity in housing (or related
services).
5.
Expected to provide the funds for the Owner to
carry out the project and must assure housing
remains available for very-low-income
elderly/disabled persons for not less than 40
years.
PUBLIC BOOIES
Public or unincorporated institutions must be tax-
exempt under 501c3 to be eligible as sponsors.
May provide management or consultant services
pursuant to a contract between the public agency
and the owner.
PROPERTY REQUIREMENTS
Sponsors of elderly housing must have site control
at the time of application submission.
Sponsors of housing for the disabled must have
site control or identification of a site at the
time of application submission.
The project must be located on real estate held:
1.
In fee simple
2.
On a leasehold for not less than 99 years, or
having a period of 75 years to run from the
date the mortgage is executed.
Projects m2Y contain central dining and other
congregate facilities if approved by HUD.
Independent living units must contain kitchens and
baths.
Resolution Trust Corporation properties eligible.
DESIGN AND COST STANDARDS
limits or prohibits certain project amenities and
unusual building configurations.
limits size of units and number of units.
Cost not attributable to dwelling use (CNA) should
not exceed 10 percent of total project space.
RELATED PROGRAMS
Project Assistance Payment Program: the initial
term of the PRAC is 20 years with extensions,
subject to availability of funds, for not less
than 5 years. PRAC subsidy covers the operating
expenses of the project.
HOUSING CONSULTANTS
Use of professional housing consultants is
recommended. Fees of HUD-approved consultant are
included in project replacement cost.
TENANT OCCUPANTS
Must be income eligible.
No restrictions due to race, creed, color,
national origin, or sex.
FINANCING
Owners eligible for up to 100 percent of the HUD
estimated replacement cost funded by capital
advance.
DEVELOPMENT COST LIHITS
The capital advance is the lower of:
1.
HUD estimate of total development cost; or
2.
the development cost limit reserved for the
project.
Very-low-income occupancy restriction limited to
40 years.
Owners which incur actual development costs that
are less than the amount of the initial fund
reservation shall be entitled to retain 50% of
savings in a replacement reserve account or up to
754 for Owners who add energy efficient features.
APPLICATION PROCESS
HUD announces the availability of funding for the
202/Elderly and 811/Disabled programs once each
year, usually in the spring. Those on the Field
Office mailing list receive notice of the funding.
Appli cants respondi ng to the" I nvi tat i on" request
an application package (Developers Package) from
the Field Office.
HUD conducts workshops prior to application
deadline.
Recommendations for selection, in order of
ranking, are forwarded to HUD Regional and
Headquarters offices.
Project proposals selected for a funding
reservation are announced by September 30.
Field office issues Notification of Selection
letters.
No application or inspection fees.
SUPPORTIVE SERVICE PLANS
The application for a capital advance must include
a supportive service plan which outlines the
provision of supportive services and funding of
those services for the elderly or disabled group
to be served in the proposed project.
PROCESSING TIHE (following selection)
OVNER
HlAJ
Prepare application
for conditional commitment
120 days
Process conditional application
60 days
Prepare application for
firm commitment
90 days
Process firm application
60 days
Go to initial closing/
construction start
60 days
For further information, please contact
Bob Arbios, Housing Programs Branch,
Mailstop 10HDH, U.S. Dept. of HUD, 909 First
Avenue, Suite 200, Seattle ~A 98104-1000, phone
(206) 220-5212, extension 3254.
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LOOKING FOR FINANCING FOR YOUR RENTAL APARTMENT,
BOARD & CARE, OR NURSING HOME PROJECT?
Consider FHA multifamily mortgage insurance
Advantages to the developer/owner:
.
Up to 40 year term
.
Non:recourse
.
Fixed rate market interest
.
Fixed monthly payments
.
Fully assumable
.
No prepayment penalties
.
Mortgages up to 90% L TV
(depending on the
program)
.
Can be used with other
financing options, such as
tax-exempt bonds
.
Available anytime to both
profit-motivated and
non-profit developers/owners
.
Any FHA-approved lender
may obtain mortgage
insurance
General requirements:
.
.
.
.
.
.
.
Projects must be attractive, well-built, and designed for long-term success in the market
Property can be held in fee simple or lease for 50 - 75 years (depending on program. lessor)
A single-asset mortgagor entity (partnership, corporation. Sub S corporation) must be
created before closing
No tenant income requirements; no HUD regulation of rents; FHA mortgage insurance does
not provide a subsidy for low-income housing
CPA-certified project financial statements to HUD yearly
A portion of project cash flow goes to Replacement Reserve account, for long-term repair
items (e.g., re-roofing)
Project profits are released twice a year
How to proceed:
Contact Bob Arbios at the below address, Mailstop 10HDH, phone (206) 220-5212, extension 3254. When we
-~~eive a pre-application package. we will assign your project to one of our Development Teams. After consulting
.h the Office Manager's Screening Committee, the Team will set up a meeting with you to discuss the project
further.
U.S. Department of Housing and Urban Development
Seattle Federal Office Building
909 First Avenue Suite 200
Seattle, WA 98104-1000
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SECTION 221 d4
FHA mortgage insurance for new construction or
substantial rehabilitation of rental apartments
(minimum 5 units)
-~\
.
Covers both construction and permanent financing
.
Mortgages up to the lower of the following:
1.
What 90% of net income will support
2.
90% of HUD's estimated replacement cost
3.
The total of statutory unit limits, depending on geographic area and type of construction, plus
up to 15% more for costs not tied to individual units.
Example: Bellevue project will have 20 one-bedroom, 50 two-bedroom, and 30 three-bedroom
units. Area statutory limits for non high-rise construction: 1 BR == $55,668,2 BR == $67,288,
3 BR == $84,459.
(20 X $55,668) + (50 X $67.288) + (30 X $84,459):::: $7,011.530 X 115%
$8,063,260
::::
.
In some cases cash to close can be reduced by either land equity and/or
"BSPRA" (Builder's/Sponsor's Profit and Risk Allowance) if builder shares
project ownership
.
Fully engineered construction documents reviewed and accepted by HUD before Firm
Commitment stage must meet HUD Accessibility Guidelines; commercial space limited
to 10% of project area
.
Construction workers to be paid Davis-Bacon wages; 100% bonding or 15% cash
escrow for general construction contract; development costs to be certified by CPA
.
Fees:
.
Firm Commitment application fee == 0.3 % of mortgage amount (G.1 % collected at either
SAMA and/or Conditional Commitment stages will be credited to the 0.3 % total); application
fees are earned whether project closes or not
.
Inspection fee == 0.5 % of mortgage, paid at closing
.
Mortgage Insurance Premium (MIP) == 0.5 % of mortgage, paid at closing and yearly for life
of the loan
.
All above fees (except annual MIP) are potentially eligible for inclusion in the mortgage
~
Section 221 d4:
.
.
Stages of processing:
.
Site Appraisal/Market Analysis (SAMA): (optional but encouraged stage) establishes
environmental approval, market, rents, and land value for FHA underwriting; typical HUD
processing time = 60 days; major exhibit required to apply = site control document
.
Conditional Commitment: (optional stage) provides estimates of mortgage amount and cash
to close; typical HUD processing time = 60 days; major application exhibits = schematic
drawings, survey, project management plans, and principals' financial statements (OR full
capitalization of the mortgagor entity)
.
Firm Commitment: determines actual mortgage amount and cash to close; typical HUD
processing time = 60 days; major application exhibits = complete working drawings and
specs acceptable to HUD, financial statements for general contractor and other principals (OR
full capitalization of mortgagor entity), draft document (e.g., partnership agreement) creating
mortgagor entity
.
Initial Endorsement: loan closing, with first draw of insured advances, prior to start of
construction and typically 30 days from Firm Commitment issuance
.
Final Endorsement: following construction completion and cost certification, sets final mortgage
amount; HUD oversight shifts to Multifamily Loan Servicing Branch
Recent Section 221 d4 mortgages:
Proiect Location MortQaQe
250 units W. Wash. $17M
340 units W. Wash. $15.9M
215 units E. Wash. $7.7M
Cash to
Close
SAMA to
Const.Start
$1.3M
$1.5M
$400,000
7 months
11 months
12 months
For further information, please contact Bob Arbios, Housing Programs Branch, Mailstop 10HDH, U.S.
Department of Housing & Urban Development, Seattle Federal Office Building, 909 First Avenue, Suite 200,
Seattle WA 98104-1000, phone (206) 220-5212, extension 3254.
1/94
'"
SECTION 223f
FHA mortgage insurance for purchase or
refinance of existing rental apartments
(minimum 5 units)
.
For projects at least 3 years old; arms-length acquisition within last 12 months is considered
a purchase
.
For purchases, mortgages up to the lower of:
1.
What 85% of net income will support
2.
85% of HUD's estimated project value after required repairs
3.
The total of statutory unit limits, depending on geographic area and type of construction, plus up to
15% more for costs not tied to individual units.
Example: Bellevue project has 20 one-bedroom, 50 two-bedroom, and 30 three-bedroom units.
Locality statutory limits for Section 223f non high-rise construction: 1 BR = $54,588, 2 BR =
$65,202, 3 BR = $80,365.
(20 X $54,588) + (50 X $65,202) + (30 X $80,365) = $6,762,810 X 115% =
$7,777,232
4.
85% of HUD's estimated cost to acquire the project, including purchase price, repairs and closing
costs, and Initial Deposit to Reserve Replacement account
.
For refinances, mortgages up to the lower of:
1.
1, 2, 3, or 4 for purchases above
2.
The greater of the following:
a.
70% of HUD's estimated project value, after required repairs (cash back is possible)
b.
100% of the cost to refinance the project, including payoff of existing indebtedness, repairs
and closing costs, and Initial Deposit to Reserve Replacement account
.
Mortgage term up to 35 years or 75% of remaining economic life, whichever is less; projects
must have at least 10 years remaining economic life
.
Other mortgage insurance programs cover substantial rehabilitation, i.e., when repair costs
exceed the greater of 15% of HUD's estimated post-repair value or $6500/unit (adjusted for
locality)
Example:
Repairs for 100-unit Bellevue project = $1,500,000
15% of HUD's post-repair value ($6M) = $900,000
Per unit locality adjustment = 162% x $6500 = $10,530
X 100 units = $1,053,000
Project not eligible for Section 223f but may work under another program
Section 223f:
.
.
.
.
.
Initial Deposit to Replacement Reserve account will be either (depending on project condition,
other underwriting factors):
B.
0.4 % HUD's estimated Total Structures cost x age of project (not to exceed 15 years)
b.
HUD estimated cost to replace shortlived equipment items (e.g., roofs, flooring)
Commercial space limited to 20% of net rentable area; commercial income limited to 25%
of total project income
Fees:
.
Firm Commitment application fee == 0.3 % of mortgage amount 10.2 % collected at optional
Conditional Commitment stages will be credited to the 0.3 % total); application fees are earned
whether project closes or not
.
Inspection fee if repairs are:
$3000 or less per unit == $30/unit
More than $3000 per unit == 1 % total repairs
.
Mortgage Insurance Premium (MIP) == 1 % of mortgage, paid at closing and 0.5 % yearly for life of
the loan
.
All above fees (except annual MIP) are potentially eligible for inclusion in the mortgage
Stages of processing:
.
Conditional Commitment: (optional stage, when project is to be sold and buyer is not known) provides
estimates of mortgage amount and cash to close; typical HUD processing time == 90 days; major
application exhibits == last 3 years project financial statements, list of proposed repairs
.
Firm Commitment: determines actual mortgage amount and cash to close; typical HUD processing time
== 90 days; major application exhibits == same as for Conditional Commitment plus survey, princip?ls'
financial statements (OR full capitalization of mortgagor entity), draft document (e.g., partnership
agreement) creating single-asset mortgagor entity
.
Initial/Final Endorsement: typically 30 - 60 days from Firm Commitment issuance, a single loan closing
after HUD acceptance of the completion of all "critical repairs" required for the project ("critical
repairs" == to address health/safety concerns); all non-"critical repairs" are to be completed within 12
months of the closing; HUD oversight shifts to Multifamily Loan Servicing Branch
R~cent Section 223f mortgages:
Cash to Application
Proiect Location MortQaQe Close to ClosinQ
11 0 units W.Wash. $6M $100,000 7 months
1 20 units W.Wash. $3.3M $80,000 5 months
100 units W.Wash. $3.3M ($600,000) 5 months
For further information, please contact Bob Arbios, Housing Programs Branch, Mailstop 10HDH, U.S. Department of
Housing & Urban Development, Seattle Federal Office Building, 909 First Avenue, Suite 200, Seattle WA 98104-1000,
phone (206) 220-5212, extension 3254. 1/94
a:. "
SECTION 232
FHA mortgage insurance for Board & Care
and nursing homes
.
Board & Care homes (also known as assisted or adult congregate living) = residential facility
providing room, board, and continuous protective oversight, Le., availability of assistance
on 24-hour basis; must contain at least five bedrooms, with 1 full private bath for each 4
persons; central dining must be provided, while up to 25% of the projected number of
residents may live in units with complete kitchen and bath facilities
.
Nursing homes must have at least 20 beds and a Certificate of Need issued by the
appropriate state agency
.
For new projects (through new construction or substantial rehabilitation}, covers both
construction and permanent financing
.
For existing proiects not requiring substantial rehabilitation, refinancing is available if already
FHA-insured
.
Substantial rehabilitation is when either:
.
the hard costs of repairs. replacements. and improvements to an existing facility exceed 15% of HUD's
estimated value of the project after that work; work can be to meet current state or local standards,
or improve marketability; costs for additions to the property are not included in this definition
OR
.
two or more major building components are replaced, e.g., roof structures, ceiling, wall or floor
structures, foundations. plumbing systems, heating and air conditioning systems. and electrical
systems
.
Mortgages up to the lower of:
1.
What 90% of net income will support
2.
90% of HUD's estimated project value after improvements
3.
(for substantial rehab/refinance) the sum of:
a.
100% of HUD's estimate of the cost of rehabilitation, plus
b.
90% of HUD's estimated project value before improvements
4.
(for substantial rehab/acquisition) 90% of the sum of:
a.
100% of HUD's estimate of the cost of rehabilitation, plus
b.
The lesser of:
.
actual purchase price
.
HUD's estimated project value before improvements
Section 232:
.
.
.
.
.
" ., .
Mortgage term up to 40 years for new construction/sub rehab, and 35 years or 75% of
remaining economic life (whichever is less) for existing projects without sub rehab
Fully engineered construction documents reviewed and accepted by HUD before Firm
Commitment stage must meet HUD Accessibility Guidelines; up to 20% gross floor area and
total income may be for nonresident day care
Construction workers to be paid Davis-Bacon wages; 100% bonding or 15% cash escrow
for general construction contract; development costs to be certified by CPA
Fees:
.
Firm Commitment application fee = 0.3 % of mortgage amount (0.1 % collected at either SAMA
and/or Conditional Commitment stages will be credited to the 0.3 % total); application fees are earned
whether project closes or not
.
Inspection fee = 0.5 % of mortgage, paid at closing
.
Mortgage Insurance Premium (MIP) = 0.5 % of mortgage, paid at closing and yearly for life of the
loan
.
All above fees (except annual MIP) are potentially eligible for inclusion in the mortgage
Stages of processing:
.
Site Appraisal/Market Analysis (SAMA): (optional but encouraged stage) establishes environmental
approval, market, rents, and land value for FHA underwriting; typical HUD processing time = 60 days;
major exhibit required to apply == site control document, Certificate of Need (nursing homes only)
.
Conditional Commitment: (optional stage) provides estimates of mortgage amount and cash to close;
typical HUD processing time = 60 days; major application exhibits == schematic drawings, survey.
project management plans, and principals' financial statements (OR full capitalization of the mortgagor
entity)
.
Firm Commitment: determines actual mortgage amount and cash to close; typical HUD processing time
= 60 days; major application exhibits = complete working drawings and specs acceptable to HUD,
financial statements for general contractor and other principals (OR full capitalization of mortgagor
entity), draft document (e.g., partnership agreement) creating single-asset mortgagor entity
.
Initial Endorsement: loan closing, with first draw of insured advances, prior to start of construction and
typically 30 days from Firm Commitment issuance
.
Final Endorsement: following construction completion and cost certification, sets final mortgage
amount; HUD oversight shifts to Multifamily Loan Servicing Branch
,.. 'further information, please contact Bob Arbios, Housing Programs Branch, Mailstop 10HDH, U.S. Department of
Jsing & Urban Development, Seattle Federal Office Building, 909 First Avenue, Suite 200, Seattle WA 98104-1000,
phone (206) 220-5212, extension 3254.
1/94