Jul 18, 2024 Ad Hoc Committee on Land Use

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METRO TV 60S.

[Call to Order]

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[Roll Call]

[1. ID 24-0335     HOUSING 101 – Christy McCravey, Louisville Metro Affordable Housing Trust Fund; and Marilyn Harris, Office of Housing and Community Development]

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IT CAN BE ANYWHERE FROM A COUPLE OF YEARS FOR SMALL SINGLE FAMILY PROJECTS TO DECADES, ACTUALLY, FOR MULTIFAMILY, I WAS JUST AT A GROUNDBREAKING THIS MORNING THAT I KNOW STARTED, THEY STARTED OR HAD THE IDEA PROBABLY TEN YEARS AGO, BUT WE THINK OF IT IN CUBES, AND THESE ARE THE BITES THAT WE LOOK AT. SO FIRST IS KIND OF THE PLANNING STAGE. YOU'RE HAVING THE INCEPTION OF IT. THE COMMUNITY PLAN, MEANING YOU'RE HOPEFULLY GOING OUT. YOU'RE TALKING TO PEOPLE ABOUT THIS IDEA THAT YOU HAVE, YOU'RE LOOKING AT A SITE THAT'S WHERE WE THINK ABOUT ACQUISITION.

WHAT'S THE SITE? WHAT ARE WE LOOKING AT? YOU'RE GOING TO ASSESS THAT SITE DOING MARKET STUDIES, TALKING TO PEOPLE ONCE AGAIN, TRYING TO GET AN IDEA ABOUT WHAT ARE WE DOING. AND THEN WHEN IT SAYS ENTITLEMENT, WE KIND OF THINK MORE OF WHO DO I HAVE TO TALK TO ACQUIRE THE SITE? WHO DO I HAVE TO WORK WITH IN ORDER TO GAIN FULL SITE CONTROL? DO I HAVE TO PASS ENVIRONMENTALS, WAS IT AT ONE TIME A HAZARD SITE, ANY OF THOSE KINDS OF THINGS? SO THEN WE GET TO THE BUILD STAGE AND WE'RE STILL NOT BUILDING BECAUSE THE FIRST STAGE IS PRE-DEVELOPMENT.

WORK AND PRE-DEVELOPMENT CAN BE VERY EXPENSIVE. THAT'S WHERE YOU'RE TALKING ABOUT ARCHITECTS AND DESIGNS AND ALL OF THESE KINDS OF THINGS. YOU'RE PUTTING TOGETHER YOUR FINANCING STACK, MEANING ALL OF THE MONIES THAT GOES INTO THE PROJECT. YOU'RE, OBTAINING YOUR CONSTRUCTION TEAM OR PUTTING THAT TOGETHER, AND THEN YOU'RE LOOKING TO OPEN THE PROJECT. AND ONCE YOU OPEN THE PROJECT, YOU'RE READY TO OPERATE IT, BUT YOU'RE STILL NOT DONE. YOU'VE GOT TO GO THROUGH LEASING UP THE FACILITY. YOU'VE GOT TO MAINTAIN THE FACILITY, GOT TO MANAGE THE FACILITY, AND THEN YOU'RE DEALING WITH TENANTS AS WELL AS WHAT IS YOUR DISPOSITION AT THE END OF THE ROAD, BECAUSE YOU'RE NOT GOING TO BE THERE ALL, ALL THE TIME. SO ARE YOU GOING TO SELL IT TO ANOTHER ENTITY OR ARE YOU GOING TO, CHANGE IT OVER TO MARKET RATE? IS IT GOING TO STAY AFFORDABLE? THERE ARE A LOT OF THINGS THAT NEED TO BE DISCUSSED. AND IF YOU HAVE A QUESTION, JUST STOP ME. I KNOW I'M GOING TO JUST KEEP GOING, BUT IF YOU HAVE A QUESTION, PLEASE JUST FEEL FREE TO STOP ME. I WANT TO DISCUSS BRIEFLY THE SALE COMPONENT OF THIS. MOST OF THE TIME THAT SALE HAPPENS IF THERE ARE LOW INCOME HOUSING TAX CREDITS INVOLVED, THERE IS AN OPTION TO BUY OUT AT THE END OF YEAR 15, MOST OF THE PROJECTS I'VE BEEN DOING THIS FOR ABOUT 35 YEARS, AND I'VE ONLY KNOWN OF ONE PROJECT THAT OPTED OUT IN YEAR 15. MOST OF THEM STAY AFFORDABLE THROUGH THE EXTENDED USE PERIOD, WHICH IS 30 YEARS. AND IF THERE'S HUD FINANCING A, 221 D, IT'S JUST A TYPE OF FINANCING FROM HUD, OR A 203 B TYPE OF LOAN, THEN IT COULD BE UP TO 40 YEARS. SO, MOST OF THE PROJECTS THAT ARE DONE THROUGH THE TRUST FUND AS WELL AS THROUGH THE OFFICE OF HOUSING AND COMMUNITY DEVELOPMENT WITH HOME AND COMMUNITY DEVELOPMENT BLOCK GRANT DOLLARS, ARE AFFORDABLE FOR AT LEAST 30 YEARS. AND SOMETIMES IT'S EVEN MORE, SO WHEN WE THINK ABOUT HOUSING DEVELOPMENT FINANCE, REALLY WE'RE THINKING ABOUT AN

[00:15:01]

YOU'VE GOT, OH GOSH, SYNDICATORS. I WAS THINKING OF THE WORD, AND THEN YOU HAVE GOVERNMENT INVOLVED AND THEN YOU ACTUALLY HAVE A DEVELOPER EQUITY. SO THEY'LL, THEY'RE GOING TO THROW SOME OF THEIR MONEY IN THERE TOO. THEN YOU GET TO THE USES OF FUNDING. SO THAT'S WHEN WE TALK ABOUT PRE-DEVELOPMENT COSTS. AGAIN DRAWINGS. ZONING CHANGES, ALL THOSE KINDS OF THINGS THAT GO INTO ATTORNEY FEES. ALL THOSE COSTS THAT GO INTO THE USES ARE PRE-DEVELOPMENT. I'M SORRY. THEN YOU GOT TO ACQUIRE THE PROPERTY AND GAIN SITE CONTROL. THEN YOU HAVE CONSTRUCTION. AND WITH CONSTRUCTION WE ALWAYS WANT TO HAVE A CONTINGENCY BECAUSE WE JUST DON'T KNOW WHAT MIGHT COME UP. THEN YOU SAW IN THE PROCESS MAP, YOU SAW THAT THERE'S LEASE UP AND RESERVES. SO FROM A FINANCING STANDPOINT, WE WANT TO SEE RESERVES BECAUSE WE KNOW NUMBER ONE, ON DAY ONE YOU'RE NOT GOING TO BE LEASED UP 100. SO WHAT ARE YOU GOING TO DO. WE WANT TO SEE SOME DOLLARS RESERVED SO YOU CAN OPERATE THIS BUILDING. AND THEN YOU HAVE INITIAL OPERATIONAL COSTS OKAY. AND WE'RE GOING TO GO THROUGH AN EXAMPLE IN A LITTLE BIT. SO I KNOW IT'S A LOT. BUT LET ME GET THROUGH THE JUST KIND OF THE DEFINITIONS. SO THE SOURCES OF FUNDING ARE THE DIFFERENT WAYS THE PROJECT CAN RAISE CAPITAL. AND WE LOOKED AT THOSE DEFINITIONS AND THEN THE USES OF COURSE ARE WHAT THE MONEY IS GOING TO BE USED FOR. THIS IS KEY. IF THE SOURCES OF FUNDING DO NOT EQUAL THE USES OF FUNDING, THEN THERE'S A GAP. AND IN MOST CASES THE PROJECT CANNOT CLOSE, IT CANNOT MOVE FORWARD UNTIL ALL THE GAPS ARE FILLED.

THERE'S NOT A PERMANENT BANK. I MEAN A SENIOR BANK IN TOWN THAT'S GOING TO LET A PROJECT CLOSE WITHOUT ALL OF THOSE GAPS FILLED. SO HERE'S AN EXAMPLE. WHEN WE TALK ABOUT AFFORDABLE HOUSING FINANCE, WE TALK ABOUT IT IN TERMS OF A FINANCING OR A CAPITAL STACK. AND IT'S REALLY LAYERS. IT'S JUST THE LAYERS OF FINANCING. AND FEEL FREE TO JUMP IN WHEN YOU WANT TO. SO I'M GOING TO LOOK AT A TAX CREDIT DEAL ON THE FAR LEFT. WE'VE GOT A 9% TAX CREDIT DEAL. WHAT IS 9% TAX CREDITS 9% MEANS THAT FOR EVERY WELL YOU CAN BORROW, YOU CAN. SOMEBODY'S GOING TO GIVE YOU UP TO 9% ON THE DOLLAR. BUT THERE'S USUALLY A FORMULA THAT THEY COME UP WITH. YOU DON'T REALLY GET 9. I'M GOING TO GIVE YOU A, YEAH, WE'RE GOING TO GET TO LIKE I'M GOING TO GIVE YOU A TAX CREDIT 101 IN ABOUT 30S. SO, SO YOU'LL GET A GOOD UNDERSTANDING OF HOW TAX CREDITS WORK. SO BASICALLY SOMEBODY'S GOING TO GIVE YOU SOME MONEY AT A SPECIFIC RATE. I'LL SAY IT THAT WAY. FOR EVERY DOLLAR OF TAX CREDIT THAT YOU GIVE THEM, THE IRS IN CREATED THE TAX CREDIT PROGRAM TO INCENTIVIZE, THE PRIVATE MARKET TO COME INTO HOUSING DEALS OR OTHER TYPES OF DEALS. AND WHAT HAPPENS IS, IF MY TAX BILL AND I'M GONNA REALLY SIMPLIFY, THIS IS $500 AND I BUY $200 OF CREDIT BECAUSE I'VE INVESTED IN YOUR PROJECT, THEN NOW I ONLY SEND $300 TO THE IRS.

AND THAT'S HOW TAX CREDIT WORKS. OKAY. SO WITH THIS PARTICULAR DEAL, BECAUSE IT'S 9, THE TAX CREDIT EQUITY IS HIGHER. THEY HAVE A LOAN FROM A BANK THAT'S GOING TO GIVE THEM 15% OF THE MONEY. BUT AS YOU SEE THERE'S STILL A GAP. AND A GAP IS VERY COMMON WITH AFFORDABLE HOUSING.

WITH THE 4% TAX CREDIT DEAL, WHICH IS WHAT WE NORMALLY SEE IN LOUISVILLE, OR I SHOULD SAY MORE FREQUENTLY, SEE, THE WAY KENTUCKY HOUSING CORPORATION DOES IT, 9% CREDITS ARE COMPETITIVE, SO YOU DON'T GET A LOT OF 9% DEALS FUNDED IN THIS AREA. 4% ARE BONDS. SO WE SEE

[00:20:08]

SO JUST KIND OF THINK OF IT, THAT WAY. AND A 4, THEY GET ABOUT 40, $0.45 ON THE DOLLAR.

THEY HAVE A LESSER VALUE. SO THEY SELL THEM TO SAY FIRST BOSTON CORPORATION OR FIFTH THIRD BANK OR SOME BANK THAT HAS A HUGE TAX LIABILITY, AND THEN THEY GET TO TAKE THAT, CREDIT OFF OF THEIR TAXES. SO WHEN WE TALK ABOUT TAX CREDITS, IT'S NOT REALLY MONEY. IT'S NOT LIKE SHE'S GIVING OUT MONEY. THEY'RE GIVING OUT A PIECE OF PAPER THAT IS ESSENTIALLY A CREDIT AGAINST THE BUYER'S TAXES. AND SO CGC WILL THEN OR THE DEVELOPER, THEY'LL AWARD THOSE TO DEVELOPERS. AND THEN DEVELOPERS WILL THEN SELL THAT PIECE OF PAPER AT THE APPLICABLE RATE TO GET A CREDIT FOR THE SYNDICATOR. AND THE SYNDICATOR IS THE BANK OR THE ENTITY THAT BUYS THOSE TO GET A REDUCTION ON THEIR TAXES? SO, YOU KNOW, IN A 4% DEAL IS THE PRIVATE ACTIVITY BOND. THE 15% OF THE STATE THAT'S SHOWN ON THIS OR THE 20% STATE PIECE THAT'S SHOWN ON HERE? YES, IT CAN BE. IT'S REPRESENTED THERE GRAPHICALLY ON ON THAT BECAUSE THE 4% GETS YOU LESS SYNDICATION PROCEEDS. SO YOU GOT A BIGGER GAP. RIGHT. AND THEN ON THE FAR RIGHT YOU'LL SEE, 4% TAX CREDITS. BUT DEEPER AFFORDABILITY. THE THING TO THINK ABOUT IS THE LOWER THE INCOME THAT YOU'RE SERVING, THE BIGGER THE GAP. SO AS YOU SEE YOUR BANK LOAN STARTS TO GO DOWN. SO WE'LL TALK ABOUT WHY THAT BANK LOAN GOES DOWN IN A LITTLE BIT. BUT THIS IS VERY COMMON. THAT THAT BANK LOAN IS GOING TO GO DOWN BY SERVING MORE VULNERABLE POPULATIONS. AND AS WE JUST SAID, AS EQUITY AND DEBT DECREASES, THE NEED FOR MORE SOFT OR SUBORDINATE FINANCING INCREASES, RESULTING IN A WIDER GAP. SO WHAT WE PROVIDE IS WHAT WE CALL SOFT MONIES OR SUBORDINATE FINANCING. AND THE DEFINITION IS THERE IS JUST A TYPE OF MONEY THAT IS GIVEN WITH NEXT TO NO OR LITTLE INTEREST RATE. SO, YOU KNOW, IT'S MORE LENIENT EXTENDED PERIODS OF TIME. AND THAT'S BECAUSE YOUR MAJOR BANK OR YOUR SENIOR BANK DEBT WANTS TO MAKE SURE THIS DEAL CAN WORK IN. WE CAN'T BE EQUAL BECAUSE THEY'RE AFRAID OF BECAUSE OF THE LOWER RENTS. THEY WOULD BE AFRAID OF THE RISK OF A DEFAULT. SO AS CHRISTY SAID, THE LOW INCOME HOUSING TAX CREDIT REALLY IS A IT WAS ESTABLISHED BY THE INTERNAL REVENUE SERVICE. AND IT'S REALLY A CARROT TO GET THE PRIVATE MARKET TO INVEST IN AFFORDABLE HOUSING, BECAUSE IF THERE'S NO CARROT MARKET RATE DEVELOPERS, THERE'S NOTHING THERE'S NO INCENTIVE FOR THEM TO DO IT. SO THIS IS THE INCENTIVE, AND SO THIS IS JUST A GRAPHIC THAT EXPLAINS, YOU KNOW, IT COMES FROM THE IRS. IT GOES TO, IN OUR CASE, KENTUCKY HOUSING CORPORATION. THIS GRAPHIC IS FROM ALABAMA. BUT IT GOES TO KENTUCKY HOUSING CORPORATION. AND THEN IT GETS INVESTED INTO THE DEVELOPMENT. AND, WHEN IT GETS INVESTED, THE SYNDICATOR BECOMES THE 99% OWNER IN THE DEAL. AND THE DEVELOPER IS 1.

AND THAT'S REALLY IMPORTANT BECAUSE IF THE SYNDICATOR SAYS, HEY, I'M WILLING TO DO THIS DEAL, BUT THIS DEAL HAS TO BE TOWNHOUSES AND NOT GARDEN STYLE APARTMENTS, THEN THAT'S WHAT HAS TO HAPPEN. AND THEY WON'T. AND THAT'S THE ONLY WAY THEY'LL PARTICIPATE IN THE PROJECT. SO

[00:25:04]

WHEREAS THE MARKET RENT ITSELF, I MEAN, THE MARKET RATES ARE JUST THE PURE WHOLESOME RENTS.

OKAY SO JUST SOME MORE INFORMATION ON WHERE WE ARE TODAY. THIS INFORMATION COMES FROM ZILLOW ON WHAT THE RENTS ARE, YOU SAW THE FAIR MARKET RENTS, BUT MARKET RATE IS ALL OVER THE PLACE. AGAIN, FAIR MARKET IS THE VOUCHER NUMBER, BUT MARKET RATE IS THE REGULAR RENTS UNSUBSIDIZED? LET'S SAY IT THAT WAY. UNSUBSIDIZED RENTS FOR THE COMMUNITY. I WOULD LIKE TO POINT OUT ON THE, FAIR MARKET RENTS, LOUISVILLE METRO HOUSING AUTHORITY HAS BEEN REQUIRED BY HUD TO DO WHAT IS CALLED A SMALL AREA RENT, WHICH IS HUGE BECAUSE RIGHT NOW IT DOESN'T MATTER IF YOU'RE IN THE WEST END OF LOUISVILLE OR IF YOU'RE IN PROSPECT. THE RENT FOR A TWO BEDROOM IS THE RENT FOR A TWO BEDROOM UNDER THE SMALL AREA RENTS, WHICH GO INTO EFFECT IN OCTOBER. THEY HAVE TO SAY, OKAY, IN THE WEST END, THIS IS WHAT A FAIR MARKET RENT IS. AND IN PROSPECT OR EASTERN JEFFERSON COUNTY OR OKOLONA. THIS IS WHAT A, A, MARKET AREA RENT IS. AND SO IT WILL CHANGE THE IMPACT THAT THAT WILL HAVE FOR OUR CITIZENS IS THAT PEOPLE WHO CHOOSE TO LIVE IN PLACES OTHER THAN, RIGHT NOW, IT BASICALLY WITH A VOUCHER, YOU BASICALLY CAN LIVE WEST OF I-65 AND FIND A UNIT THAT MIGHT BE, AFFORDABLE UNDER THAT, THAT LIMIT. THIS WILL OPEN UP THE REST OF THE CITY. AND HUD HAS COME IN AND SAID IT'S REALLY A FAIR HOUSING VIOLATION BECAUSE IF YOU ARE EXCLUDING PEOPLE FROM LIVING IN AREAS WHERE THERE'S HIGHER OPPORTUNITY, THAT'S A FAIR HOUSING VIOLATION AND IT MAY NOT HAVE BEEN INTENDED, BUT THAT'S EXACTLY WHAT HAS HAPPENED. SO, LMA WILL START USING SMALL AREA RENTS WITH, IN OCTOBER FOR

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SO NOW I'M GOING TO LOOK AT A DEAL THAT WE'VE ACTUALLY HAD, THIS IS AN EXAMPLE OF A SOURCES AND USES OF FUNDS STATEMENT, WHEN YOU SEE SOMETHING THAT SAYS HARD PERMANENT FINANCING, WE ALWAYS LOOK AT IT IN THE PER UNIT COST AND THE TOTALITY. SO THE BANK LOAN BASICALLY FOR THE $16 MILLION DEAL, THEY CAN ONLY GET A BANK LOAN OF $5.6 MILLION. AND I CAN TELL YOU THIS IS A 50% AMI DEAL. YOU SEE, WE CAME IN AT $500,000. THERE ARE RESERVES THAT THEY'RE BRINGING INTO THE DEAL. AND WHEN IT SAYS SELL OR CARRY BACK, THAT JUST MEANS, THE SELLER IS GOING TO PROVIDE A LOAN, A LOAN TO THE PROJECT, AND THEN YOU'VE GOT YOUR EQUITY. THERE'S NO CASH FLOW IN THIS DEAL, BUT THERE IS DEFERRED DEVELOPER COST. SO THAT MEANS THE SELLER IS PROVIDING A LOAN AS WELL AS THE DEVELOPER IS PROVIDING A LOAN TO THIS PROJECT. AND THEN AT THE BOTTOM YOU SEE THE USES OF THE FUNDS, ACQUISITION COSTS, CONSTRUCTION, ALL THE PLANS, PERMITS, ALL OF THOSE THINGS. THE REPORTING BOND AND ISSUANCE COSTS MANY TIMES THERE ARE BRIDGE LOANS INVOLVED, DEVELOPER FEE, ALL OF THOSE THINGS. BUT AS YOU SEE, THE SOURCES AND THE USES MATCH AND THEY LOOK REASONABLE. THESE ARE REASONABLE FOR A PROJECT. SO WE LOOK AT THESE DOCUMENTS WHEN WE HAVE A, AN APPLICATION THAT COMES IN, WE ARE ALWAYS LOOKING AT THE BUDGET AND THE SOURCES OF USES OF FUNDING. THIS IS BEING EVALUATED BY OUR TEAM AND OUR PROGRAM COMMITTEE TO SEE IF THIS PROJECT IS FEASIBLE. IS THIS. IS THIS A RECENT DEAL, IS THAT IS THAT 168 921 PER UNIT? YORKTOWN'S PROBABLY THREE, FIVE YEARS OLD. SOMEWHERE IN THERE, I THINK IT'S THREE. OKAY. THREE YEARS. WHAT KIND OF COST PER UNIT ARE YOU LOOKING AT NOW, I ASSUME IT'S HIGHER THAN 168.

THIS IS A 50% DEAL, SO PROBABLY. WELL, MAYBE 175 TO 200. IT'S NOT 30. IT'S A 50% DEAL. IT WOULD BE HIGHER IF IT WAS A 30% DEAL. YEP SO THE NEXT THING WE LOOK AT AND WE LOOK AT THIS CLOSELY IS THE PROFORMA. THIS IS I JUST CUT IT OFF AT YEAR EIGHT. BUT WE LOOK AT A 15 YEAR PERFORMER FOR EVERY PROJECT IF IT IS MULTIFAMILY. SO THE FIRST THING WE'RE LOOKING AT ARE THE IS THE INCOME REASONABLE. WHAT ARE YOUR RENTS. WHAT IS YOUR VACANCY. YOU'RE PROJECTING. DO YOU HAVE ANY OTHER INCOME? SOMETIMES THAT'S NEGLIGIBLE. BUT IF THE PROJECT HAS A LAUNDROMAT, ALL THAT KIND OF STUFF, THOSE ARE THE KINDS OF THINGS THAT CAN PROVIDE OTHER INCOME. SO WE'RE LOOKING AT THE GROSS INCOME. THEN WE'RE LOOKING AT THE OPERATING COSTS, ADVERTISING, INSURANCE,

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WE'RE LOOKING AT, THAT AMOUNT BECAUSE THAT'S A, A DEFINITE NUMBER THAT WE NEED TO LOOK AT IN ORDER TO LOOK AT THAT DEBT COVERAGE RATIO THAT WE TALKED ABOUT. SO THEN YOU COME DOWN AND YOU'RE LOOKING AT HARD DEBT SERVICE BECAUSE REMEMBER THEY HAD A BANK LOAN. SO THEIR HARD BANK, THEIR HARD DEBT FOR THE FIRST YEAR WAS $10,000. 15,000 IN YEAR TWO. AND THEN IT JUMPS UP TO 197. SO THOSE FIRST TWO YEARS, IF YOU LOOK AT THE LINE ITEM THAT SAYS DEBT COVERAGE RATIO, THEY HAVE A STRONG DEBT COVERAGE RATIO. BUT THAT'S BECAUSE THEY'RE PROBABLY ONLY PAYING INTEREST ONLY OR SOMETHING. WHEN THE PROJECT ACTUALLY GOES INTO AMORTIZATION, THEY'RE PAYING PRINCIPAL AND INTEREST. YOU SEE IT DROPS. THIS IS NORMAL 2% YEAR 31.2, 1.2, 1.2 ALL THE WAY ACROSS. OUR REQUIREMENTS IN HOUSE ARE DEBT COVERAGE RATIO OF 1.15% AND DEBT COVERAGE RATIO MEANS THAT I CAN PAY MY BILLS ONE TIME IN 1.15 TIMES, SO I CAN PAY THEM ONCE, AND THEN I HAVE 15% LEFT OVER. THAT'S BASICALLY WHAT A DEBT COVERAGE RATIO SAYS. SO IF THE DEBT COVERAGE RATIO IS TWO, THAT MEANS I CAN PAY MY BILLS TWICE AND THAT NUMBER GIVES US THAT INFORMATION. AND THEN WE SEE SURPLUS CASH. SO THIS THIS TELLS US HOW FEASIBLE THIS PROJECT IS.

IT TELLS US HOW SUSTAINABLE THIS PROJECT IS. BECAUSE THIS FORM RIGHT HERE SHOWS US A LOT OF RED FLAGS. YOU KNOW, IF WE'RE SEEING COSTS THAT ARE MINIMIZED BEYOND WHAT THE MARKET SHOULD BEAR, THAT'S A RED FLAG. IF THIS, FORM SHOWS US OR THEY JUST DECIDED WE SEE ON THE SOURCES AND USES THAT THEY HAVE PERMANENT DEBT, BUT THEY JUST DECIDED TO LEAVE, YOU KNOW, DEBT SERVICE OFF THIS FORM. THAT'S A RED FLAG. IT'S LIKE, HOW DO YOU WHO'S PAYING THAT BILL? YOU KNOW, SO THOSE ARE ALL THINGS THAT HAVE TO BE CONSIDERED WHEN WE'RE LOOKING AT A PROJECT. AND AGAIN, OUR REQUIREMENT IS 1.15 FOR THE DEBT COVERAGE RATIO, A BANK MIGHT BE ONE AND A QUARTER, ONE AND A HALF. I THINK IT'S ALSO IMPORTANT TO UNDERSTAND THAT IN THE RENTAL INCOME, THE GROSS RENTAL INCOME, YOU'VE GOT SOME THINGS UP THERE CALLED BAD DEBT AND LOSS OR BAD DEBT AND VACANC.

WHEN WE, REVIEW A PRO FORMA, WE ARE LOOKING AT A STANDARDIZED, STANDARDIZED AMOUNT OF, VACANCY THAT'S GENERALLY SOMEWHERE BETWEEN FIVE AND 7, FOR AN ECONOMY LIKE CITYWIDE, THE ECONOMY, IF IT GOES BELOW 7, THAT'S KIND OF A RED FLAG, BECAUSE A UNIT WILL COME AVAILABLE. IT'LL BE, YOU KNOW, IT'LL TAKE A WEEK OR SO TO GET IT TURNED, FOR A NEW TENANT. AND SO YOU'RE ALWAYS TAKING THAT INTO ACCOUNT. AND SO YOU'RE LOSING RENT ON EVERY UNIT EVERY TIME IT TURNS. SO A COUPLE THINGS TO THAT. FIRST OF ALL, IT IS NOT IN A LANDLORD'S BEST INTEREST TO EVICT SOMEONE BECAUSE THEN THEY LOSE NOT ONLY THE RENT BUT THEY LOSE THE TIME AND THE MONEY IT TAKES TO TURN A UNIT, AND THE SECOND PART OF THAT IS THERE'S ALSO A LOSS TO LEASE, WHICH MEANS IF I'M CHARGING $1,000 RIGHT NOW AND MY COSTS HAVE GONE UP TO 1050 MID-YEAR, I'M LOSING $50 A MONTH, THAT I SHOULD BE COLLECTING TO WHOEVER IS IN THAT UNIT. AND SO THAT ACTUALLY ADDS UP TO A SUBSTANTIAL AMOUNT OVER THE COURSE OF A YEAR, AS LEASES ARE BEING RENEWED. AND SO THERE'S SOME THINGS THAT DEVELOPERS TAKE INTO ACCOUNT WHEN THEY DO THIS, BUT THERE'S SOME THINGS THAT WE TAKE INTO ACCOUNT WHEN WE'RE LOOKING AT IT TO MAKE SURE THAT IT'S STANDARD, BECAUSE SOMETIMES WE'LL SEE A PROFORMA THAT DOESN'T HAVE ANY LOSS TO LEASE, OR SOMETIMES WE'LL SEE A PROFORMA WITH LIKE 3% VACANCY. AND THAT'S JUST NOT REALISTIC. SO WE'RE LOOKING AT THESE THINGS TO MAKE SURE THAT THEY MEET THE INDUSTRY STANDARDS, AND WHEN CHRISTY SAID THAT THE TRUST FUND IS LOOKING AT A 1.15, I'VE BEEN DOING THIS A LONG TIME AND WE USED TO DO 1.10 TO 1.15 DEBT COVERAGE RATI, AND WE NOW ARE STARTING TO INCH UP TO THE 1.2 TO 1.25. JUST BECAUSE WE'RE FINDING THAT PROJECTS THAT HAVE BEEN IN EXISTENCE, IT'S REALLY HARD FOR, DEVELOPERS TO COME OUT OF THAT, EVEN WITH THAT CUSHION OF 1.15, IT'S REALLY HARD FOR A DEVELOPER TO MAKE A PROJECT CASH FLOW, I HAD 1100 WHEN I WAS A PROPERTY MANAGER. I HAD 1100 UNITS IN MY PORTFOLIO. I HAD TEN DIFFERENT PROJECTS. ONE WAS MARKET RATE, THE OTHER NINE WERE ALL AFFORDABLE IN SOME WAY, SHAPE OR FORM, AND THE ONLY ONE THAT CASH

[00:40:04]

SO IT IS THAT 1.15 IS A VERY TIGHT NUER. CAN YOU CAN YOU SPEAK A LITTLE BIT TO THAT, HOW DOES THE DEVELOPER OF AN AFFORDABLE HOUSING DEAL MAKE MONEY? THAT'S A GREAT QUESTION.

MOST OF THE DEVELOPERS MAKE MONEY ON THE FRONT END, AND THEY MAKE IT THROUGH DEVELOPER FEE.

MAYBE THEY OWN THEIOWN CONSTRUCTION COMPANY SO THEY GET A, A FEE THROUGH THE CONSTRUCTION COMPANY. THE, MOST OF THE TIME WE WILL LOOK AT IF THERE IS AN IDENTITY OF INTEREST BETWEEN THE DEVELOPER AND THE CONSTRUCTION COMPANY. WE ARE CAPPING THINGS, LIKE THEIR PROCEEDS OR, THEIR GENERAL REQUIREMENTS, THOSE KINDS OF THINGS. LET'S MAKE IT SIMPLE, THOUGH, AND LET'S, LET'S ASSUME THE DEVELOPER DOES NOT OWN THEIR OWN RIGHT CONSTRUCTION. THEY'RE GETTING IT THROUGH THE DEVELOPER FEE. AND SO A LOT OF TIMES THEY ARE JUST DEFERRING THAT. AND THEY'RE GETTING PAID IN YEAR 5 OR 6. THEY'RE NOT REALLY MAKING MONEY ON THE FRONT END. I THINK THAT'S REALLY IMPORTANT TO UNDERSTAND. AFFORDABLE HOUSING IS NOT THE CASH COW THAT EVERYONE LIKE. THIS PERCEPTION THAT DEVELOPERS ARE JUST MAKING MONEY HAND OVER FIST. THEY ARE MAKING MONEY. I MEAN, NONE OF US, WE GO TO WORK EVERY DAY TO MAKE MONEY, RIGHT, SO THEY ARE MAKING MONEY, BUT IT'S NOT, IT'S NOT LIKE THEY'RE ROLLING IN DOUGH AND THE MAINTENANCE AND OPERATION OF PROJECTS IS EXTREMELY DIFFICULT. AND IF YOU LOOK AT ANY PROJECT, I WOULD I WOULD VENTURE TO SAY, IF YOU LOOK AT ANY PROJECT IN OUR PORTFOLIO, THE TRUST FUND OR THE CITY'S, THEIR CASH FLOWING RIGHT AROUND 1 OR 1.5, NOT VERY MUCH. SO THE MONEY IS MADE IN THE DEVELOPMENT OF THE DEAL AND THEN AT THE TIME THAT THEY WOULD SELL THE PROJECT. SO BUT IT'S NOT MADE IN THE 15 OR 30 YEARS THAT THE PROJECT IS, IS UP AND RUNNING. SO I THINK, I THINK THAT'S PRETTY IMPORTANT ABSOLUTELY HERE THAT THIS IS NOT A MAKE MONEY QUICK. JOB. IT IS NOT. YOU CAN MAKE MONEY OVER YEARS AND YEARS AND YEARS. AND LET'S TALK A LITTLE BIT ABOUT THAT DEVELOPMENT FEE. SO I, I'M NOT GOING TO TALK ABOUT I'LL LET YOU TALK ABOUT IT, BUT, TWO THINGS. I THINK THERE'S A, THERE'S A CAP ON HOW MUCH THAT DEVELOPMENT FEE IS. AND THEN IF YOU CAN EXPLAIN DEFERRING THAT FEE AND THEN HOW THAT FEE DOES OR MIGHT GET PAID OVER TIME, I THINK THAT'S HELPFUL AS WELL. SO THE INDUSTRY STANDARD FOR A DEVELOPER'S FEE IS AROUND 15% OF THE TOTAL PROJECT. THE, DEFERRING A DEVELOPER FEE AS CHRISTY SHOWED IN THE CAPITAL STACKS, ESPECIALLY FOR THIS PROJECT, ALLIED ARGENTA, THEY HAD A DEFERRED DEVELOPER FEE IN THIS CASE OF $1.1 MILLION. AND SO WHAT THEY'LL DO IN THIS CASE IS MAYBE, MAYBE THEIR DEVELOPER FEE FOR THE WHOLE PROJECT WAS TWO POINT OKAY, 2.8 MILLION. SO WHAT THEY'RE SAYING IS WE'RE GOING TO LEAVE IN ONE POINT. WE'RE GOING TO GET 1.5. AT THE TIME. WE DO THIS. THIS HAPPENED TO BE A RECAPITALIZATION, WHICH MEANT IT WAS AN EXISTING PROJECT. AND THEY'VE COME BACK AND NOW THEY'RE REFURBISHING IT TO MAKE IT A PROJECT THAT PEOPLE WILL WANT TO LIVE IN. RIGHT? I MEAN, 20 YEARS DOWN THE ROAD FROM WHEN IT GOT ITS ORIGINAL TAX CREDIT. AND I KNOW THIS BECAUSE I UNDERWROTE IT AT CGC WHEN I WORKED THERE. SO THIS IS A RECAPITALIZATION PROJECT. AND SO THEY, THEY GOT 2.8 MILLION AS A PART OF THIS DEAL, WHICH IS ABOUT ONE POINT, IT LOOKS LIKE 7. I'M NOT GOOD WITH MATH, BUT THAT LOOKS LIKE 1.7, OR SEVEN, 17. YEAH, ABOUT 17. JUST A LITTLE OVER. AND, AND SO THEY'RE GOING TO GET 1.5 AT THE TIME, THIS PROJECT CLOSES AND THEN MAYBE OVER THE NEXT, AND I DON'T KNOW, THE SPECIFICS OF THIS, BUT MAYBE OVER THE NEXT 5 OR 10 YEARS THEY WILL GET PAID OUT. THAT $1.138 MILLION IN EITHER FROM CASH FLOW. SO IT'LL BE A NOTE THAT SAYS IF YOU HAVE A CASH FLOW ABOVE A 1.2 DEBT COVERAGE RATIO, THEN THE REMAINDER OF THAT HAS TO COME BACK TO US. OR IT COULD SAY IT'S FIVE 50,000 OR $500,000 A YEAR FOR X NUMBER OF I MEAN, THE STRUCTURE OF THAT DEPENDS ON THE WAY THE DEAL IS. SO A LOT OF TIMES DEVELOPERS ARE DEFERRING THEIR DEVELOPER FEE. I'VE SEEN LOTS OF PROJECTS WHERE THEY HAVE DEFERRED THE DEVELOPER FEE, AND IT'S COMING OUT OF CASH FLOW AND THEY NEVER GET PAID THEIR DEVELOPER FEE, AND IT STAYS ON THE BOOKS UNTIL YEAR 30 OR YEAR 20 OR 40, WHENEVER THEY SELL THE PROJECT AND WHEN THEY SELL THE PROJECT, THEY MIGHT GET THAT DEFERRED DEVELOPER FEE BACK. BUT YOU GOT TO THINK ABOUT THE TIME VALUE OF MONEY THERE. THAT 1.13 IS REALLY PROBABLY 20 YEARS OR

[00:45:02]

THEY THEY DO MAKE MONEY OVER TIME. BUT ONE OF THE REASONS THAT THEY TRY TO BECOME VERTICALLY INTEGRATED, EITHER WITH CONSTRUCTION COMPANY OR WITH MANAGEMENT COMPANIES, AFFILIATED MANAGEMENT COMPANIES IN SOME STATES, I DON'T THINK, LET YOU HAVE AN AFFILIATED MANAGEMENT COMPANY, BUT ONE OF THE REASONS THEY DO THAT IS BECAUSE THAT'S A WAY TO CREATE ONGOING CASH FLOW THAT CAN HELP PAY YOUR OVERHEAD. AS A DEVELOPER, IF YOU DON'T HAVE YOUR BUSINESS VERTICALLY INTEGRATED, THEN YOU MIGHT GET PAID VERY, VERY SPORADICALLY.

AND IT'S VERY DIFFICULT TO RUN A SMALL BUSINESS WHEN YOU'RE GETTING PAID SPORADICALLY LIKE THAT. SO I WOULD LIKE TO I WOULD LIKE TO EXPLAIN WHAT DEVELOPER FEE IS, BECAUSE THAT'S REALLY IT'S NOT JUST MONEY IN THEIR POCKET, IT IS THE FEE THEY GET FOR TAKING THE RISK TO DO A DEAL. AND SO THERE ARE DEVELOPERS WHO WILL START DOWN THE ROAD AND,E THE RISK, AND THEY WILL PUT MONEY OUT, AND THEY MAY SPEND 1 OR $2 MILLION IN, IN EXPENSES. AND THE DEAL FALLS THROUGH. THEY DON'T EVER GET THE DEAL FOR ONE REASON OR ANOTHER. AND I'M NOT MAKING ANY STATEMENT AS TO WHY. IT JUST IT DOESN'T PENCIL OUT. IT DOESN'T, YOU KNOW, BUT THEY'VE SPENT MONEY AND SO THEY NEED THAT DEVELOPER FEE TO, TO COVER THAT RISK. SOMETIMES THAT RISK PAYS OFF, SOMETIMES THAT RISK DOESN'T. AND WHEN A PROJECT HAS COST OVERRUNS, A DEVELOPER USES THEIR DEVELOPER FEE TO PAY THE COST OVERRUNS. SO I CAN I COULD SIT HERE AND GIVE YOU EXAMPLE AFTER EXAMPLE FROM MY YEARS OF DOING THIS, WHERE THEY GOT A DEVELOPER FEE. THE COST OVERRUNS WERE, YOU KNOW, $1 MILLION. I HAVE A PROJECT IN TOWN WHERE IT WAS THREE PHASES. THEY GOT INTO THE THIRD PHASE. IT WAS A RECAPITALIZATION. THEY GOT INTO THE THIRD PHASE COMPLETELY EATEN UP BY TERMITES, ENDED UP COSTING AN ADDITIONAL MILLION DOLLARS. AND SO THE DEVELOPER JUST USED HIS DEVELOPER FEE TO COVER THAT. AND SO THAT'S WHAT THEY DO. SO A DEVELOPER UNDERSTANDS WHEN THEY ARE TAKING A PROJECT THAT THAT IS THE THAT IS THE FEE THEY GET FOR TAKING THE RISK. AND SOMETIMES IT PAYS OFF AND SOMETIMES IT DOESN'T. AND SO IT'S IMPORTANT TO UNDERSTAND THAT, THAT, THAT ESPECIALLY IN AFFORDABLE HOUSING DEVELOPMENT DEVELOPERS, A LOT OF DEALS NEVER GET TO THE TABLE. THERE'S NOT ENOUGH TAX CREDITS. THERE'S NOT ENOUGH BOND MONEY, THERE'S NOT ENOUGH OF THE MONEY WE NEED TO MAKE THESE HAPPEN. AND SO IF YOU TALK TO THE DEVELOPMENT COMMUNITY, BE IT A FOR PROFIT OR NONPROFIT, THEY ALL HAVE 20, 30 PROJECTS THEY'VE GOT IN MIND.

BUT WE MIGHT SEE THROUGH METRO COUNCIL 5 OR 10 OF THOSE IN THE NEXT FIVE YEARS. SO I HOPE THAT MAKES SENSE. RIGHT. AND THE OTHER THING IS, MOST DEVELOPERS, BECAUSE OF THIS, MOST LARGE DEVELOPERS DO NOT EXCLUSIVELY, CREATE AFFORDABLE HOUSING BECAUSE OF IT NOT PENCILING OUT.

THEY HAVE THOSE MARKET RATE DEVELOPMENTS OR WHAT HAVE YOU TO MINIMIZE THAT RISK AND TO BE ABLE TO HAVE CASH FLOW, YOU KNOW THAT FROM THE OTHER ONES. IT JUST GIVES THEM A PROJECT THAT'S A LITTLE LESS RISKY. WHEN WE START PUTTING, RESTRICTIONS ON PROJECTS LIKE WE'RE GOING TO GIVE YOU A HALF $1 MILLION OF TRUST FUND OR $2 MILLION OF TRUST FUND TO DO A PROJECT. WHEN WE START PUTTING THOSE RESTRICTIONS ON AND WE SAY, OKAY, WE'RE GOING TO GIVE IT TO YOU IN A LOAN, BUT YOU HAVE TO ASSIST A HOUSEHOLDS AT OR BELOW 30% OF AREA MEDIAN INCOME.

THERE'S NO MONEY COMING IN FROM THOSE HOUSEHOLDS. SO A LOT OF TIMES WHEN WE'RE LOOKING AT FURTHER RESTRICTING AND MAKING UNITS AVAILABLE TO 0 TO 30 OR 30 TO 50, THE RENTS CHRISTY SHOWED YOU ARE FOR HOUSEHOLDS UP TO 80. WHEN WE SAY WE'RE GOING TO GIVE YOU $2 MILLION OF TRUST FUND, BUT YOU HAVE TO ASSIST HOUSEHOLDS AT OR BELOW, 30% OF AREA MEDIAN INCOME. GO BACK TO 30. CHRISTY, WHEN YOU START LOOKING AT THAT 31 MORE, I THINK ONE MORE. WHEN YOU START LOOKING AT THAT 30, IT'S 20,250 IS THE THAT'S THE MAXIMUM INCOME. AND WHAT WE SAY IS TO MAKE IT AFFORDABLE, IT CAN BE NO MORE THAN THAT. 20,000 TO 50 DIVIDED BY 12 TIMES 0.3. SO YOU'RE REALLY LOOKING AT SOMEWHERE AROUND $500 A MONTH IN WHAT THAT HOUSEHOLD CAN PAY IN RENT FOR THAT UNIT TO BE AFFORDABLE AND SO WHAT WE SAY IS, OKAY, WE'LL GIVE YOU THE MONEY TO DO THE

[00:50:06]

THEY'RE ACTUALLY WRITTEN TO BE EITHER 60% OF THE UNITS RENTED TO HOUSEHOLDS AT OR BELOW 50% OF AREA MEDIAN INCOME, OR 20% BELOW 50. AND THE REST OF THEM COULD BE MARKET RATE. THAT IS NOT THE WAY DEVELOPERS PUT PROJECTS TOGETHER, BECAUSE IF THEY DO THAT, THEN THEY GET A LOWER AMOUNT OF TAX CREDITS. SO IT'S, YOU KNOW, YOU HAVE TO FIGURE OUT WHICH WAY WORKS AND DEVELOPERS HAVE FIGURED OUT THAT DOING 100% TAX CREDIT DEAL GETS THEM MORE TAX CREDITS THAT THEY CAN SELL, BUT THE IMPLICATION OF THAT ON OUR COMMUNITY IS THEN WE HAVE PROJECTS THAT ARE 100% AFFORDABLE, AND WE ARE THEN RECREATING, FOR LACK OF A BETTER WORD, THE PROJECTS. SO AS YOU CAN SEE FROM THE CAPITAL STACK AND WHAT HAVE YOU IN EVERY CASE, NO MATTER WHAT THE SCENARIO, NO MATTER WHAT THE STATE, SHE GAVE YOU SOME EXAMPLES THAT, TAX CREDIT FROM ALABAMA OR WHAT HAVE YOU GOVERNMENT IS ACTUALLY THE ONE THAT IS LOOKED UPON TO FILL THAT GAP FOR AFFORDABLE HOUSING.

THERE'S, BANKS LOOK AT IT THAT WAY. CORPORATES LOOK AT IT, STATE FINANCE AGENCIES AND THEIR QUASI GOVERNMENT. BUT THEY ARE ALL LOOKING AT GOVERNMENT TO FILL THAT GAP IN ORDER TO CREATE AFFORDABLE HOUSING. SO DO YOU HAVE ANY QUESTIONS? SORRY, I'VE HAD A ROUGH DAY. ANYWAY, PERHAPS I MISSED SOMETHING HERE, BUT I NEVER HEARD SECTION EIGHT VOUCHERS IN THIS. SO WHAT ABOUT GOVERNMENT VOUCHER MONEY? WHERE DOES THAT COME INTO THIS? SO VOUCHERS ARE HERE. SO VOUCHERS COVER. THIS IS THE AMOUNT IN LOUISVILLE KENTUCKY. FAIR MARKET RENTS THAT TOP LINE ITEM. THIS IS WHAT A VOUCHER COULD PAY FOR THE SPECIFIC BEDROOM SIZE APARTMENTS. AND THIS IS RENT PLUS UTILITIES. SO IT'S NOT JUST THE RENT BUT IT'S RENT PLUS UTILITIES. THIS IS THE FAIR MARKET. RENT BASICALLY IS THE VOUCHER AMOUNT. AND WHEN I WAS TALKING ABOUT HAVING TO DO SMALL AREA RENTS, THESE AMOUNTS WILL CHANGE BASED ON WHERE THE ACTUAL UNIT IS LOCATED. SO RIGHT NOW THAT 976 FOR AN EFFICIENCY DOES NOT MATTER IF YOU'RE IN THE WEST END OR PROSPECT OR FERN CREEK OR OKOLONA, IT DOESN'T MATTER. THAT'S THE MAXIMUM AMOUNT THEY WILL GIVE YOU FOR A UNIT, INCLUDING UTILITIES. RIGHT NOW, I WOULD SAY UTILITIES ARE SOMEWHERE JUST IN GENERAL IN THIS CITY, SOMEWHERE BETWEEN 125 AND 175, JUST AS A GENERAL STATEMENT. SO THAT MEANS IF WE SAY 175, BECAUSE I'M REALLY NOT VERY GOOD AT MATH, THAT MEANS THEY'RE GETTING $801 IN RENT WHEN THEY, SMALL AREA MARKETS OR THE SMALL AREA RENTS GO INTO EFFECT, WHICH IS AFTER OCTOBER, THAT 976 MIGHT BE 976 IN THE WEST END, MIGHT BE IN THE 9 OR 9 WEST LOUISVILLE NEIGHBORHOODS, BUT THAT EFFICIENCY AND PROSPECT MIGHT BE 1800. AND THAT EFFICIENCY IN OKOLONA MIGHT BE

[00:55:05]

RIGHT. IT'S GOING TO GIVE THEM MORE OPPORTUNITY BECAUSE GIVE SOMEBODY A VOUCHER TODAY AND SAY, GO FIND A UNIT AND PROSPECT. RIGHT. THEY CAN'T DO IT RIGHT. THEY CAN'T DO IT. SO IT IS GOING TO GIVE PEOPLE THAT OPPORTUNITY. THE OTHER THING IT'S GOING TO DO THOUGH IS YOU HAVE TO UNDERSTAND VOUCHERS ARE A NUMBER OF VOUCHERS AND A DOLLAR AMOUNT. AND SO WHAT IT'S GOING TO DO WHEN THAT 976 GOES TO 1500, THAT MEANS IT'S 400 AND SOMETHING DOLLARS OUT OF THE BANK EVERY FOR EVERY MONTH FOR THE NEXT YEAR. AND SO THAT MEANS THEY'RE GOING TO BE ABLE TO ASSIST FEWER PEOPLE WITH VOUCHERS. AND THAT'S IMPORTANT TO UNDERSTAND BECAUSE VOUCHERS ARE THE DOLLAR AMOUNT AND THE NUMBER OF VOUCHERS. AND YOU CAN'T EXCEED EVERY ONE. BUT YOU CAN BALANCE THEM IN BETWEEN, COUNCILWOMAN CHAPEL. GOOD TO CHIME IN HERE BECAUSE I'M LOOKING AROUND THE ROOM SAYING, GOSH, WE'RE AN HOUR INTO THIS. I HOPE SOMEBODY ASKS ANOTHER QUESTION AND WE CRUNCH MORE NUMBERS. OKAY COULD YOU EXPLAIN? YESTERDAY I SAW YOU AT THE IROQUOIS SENIOR LIVING FACILITIES, GROUNDBREAKING, WHICH WERE VERY, VERY EXCITED ABOUT THAT PROJECT. AND SO COULD YOU, AS SOMEONE WHO JUST ADMITTED THAT THEY'RE BAD AT MATH AND SOMEBODY WHO, YOU KNOW, I STOPPED LISTENING. WHEN YOU SAY A NUMBER, CAN YOU EXPLAIN? LOUISVILLE, AFFORDABLE HOUSING TRUST FUNDS ROLE IN THAT PROJECT? AND THEN ALSO HOW HUD AND, LOUISVILLE METRO HOUSING AUTHORITY INTERSECT. SO I THINK IT'S KIND OF A NUMBERS QUESTION, BUT I THINK IT'S ALSO JUST HOW DOES THE WHOLE PIECE OF THE PIE, HOW DOES THE WHOLE PIE FIT TOGETHER? SURE AND I'M GOING TO SPEAK OFF THE TOP OF MY HEAD. I DON'T QUITE REMEMBER THE NUMBERS FOR THAT SPECIFIC PROJECT, BUT I THINK WE'RE ABOUT HALF IN. I THINK THAT, LOUISVILLE METRO HOUSING AUTHORITY HAD IN THEIR RESERVES HALF THE MONEY. SO I'M GOING TO MAKE UP A NUMBER JUST BECAUSE I CAN'T REMEMBER. I THINK I THINK IT'S LIKE A $30 MILLION PROJECT. I THINK WE'RE IN AT TEN THROUGH THE TRUST FUND. AND I BELIEVE THAT THE LMA HAD ABOUT 13 MILLION IN THEIR RESERVES. AND THEN THERE'S A BANK LOAN TO COVER THE REST. SO JUST WHILE WE'RE TALKING AND JUST FOR EVERYONE TO KEEP UP, THE SENIOR IROQUOIS, IROQUOIS, SENIOR LIVING FACILITY PROJECT PHASE ONE, AND WHAT'S GOING TO BE A MUCH LARGER PROJECT? IT'S 40 SENIOR LIVING UNITS. THERE ARE ONE AND TWO BEDROOM, AND THE TOTAL COST FOR THAT PROJECT IS ABOUT 30 MILLION. OKAY. AND THEN YOU ALL GAVE A MONEY YOU RECEIVE FROM AARP, CORRECT. WHICH IN THE AMOUNT OF ABOUT 11 MILLION TOWARDS THE PROJECT. CORRECT? I THINK IT WAS 10 MILLION, BUT YES THAT'S CORRECT. YEAH. YEAH, IT IS 11 IS 11. OKAY. I JUST WANT TO GET EVERYONE ON THAT SAME PAGE. YES. TAKE IT FROM THERE, SO WHAT HAPPENS WITH THAT IS THAT OF COURSE, BECAUSE THIS HOUSING AUTHORITY, WE ALREADY KNOW THAT THE AFFORDABILITY PERIOD IS GOING TO BE THERE. YOU KNOW, PERPETUALLY, PERPETUALLY.

BUT, WHEN THAT PROJECT CAME BACK, IT WAS IMPORTANT WE LOOK AT NOT ONLY THE NUMBERS, BUT WE ALSO LOOK AT THE IMPORTANCE OF THE PROJECT TO THE COMMUNITY. SO AND HOW MANY UNITS IS, PROVIDING AND ALL OF THOSE THINGS. WELL, WHEN WE APPROVE THIS, WE DID NOT HAVE A MANOR ON OUR MINDS, BUT IN A WAY WE DID. OKAY BECAUSE WE, WE BEING IN THE HOUSING, YOU KIND OF KNOW PROJECTS AND WE IT'S BEEN TALKED ABOUT FOR YEARS AS SOMETHING SO TO WHEN YOU'RE HAVING AN APPLICATION PRESENTED TO YOU THAT WE WANT TO HAVE A SENIOR HOUSING REPLACEMENT, YOU KNOW, PROJECT COME UP. YOU LOOK AT THAT. THE PURPOSE IS STRONG. THE NUMBERS ARE STRONG. ALL OF THOSE THINGS ARE STRONG. THE COMMITTEE FELT VERY STRONGLY ABOUT, HEY, THIS ALL WORKS OUT. LET'S DO THIS PROJECT. CANNOT REMEMBER THE TERMS, THEY ARE SERVING 30 AND 50% AMI HOUSEHOLDS ONLY WITH THAT PROJECT, IT'S THEIRS. SO IT'S SITE BASED. SITE BASED. IT IS. SO THEY HAVE PROJECT BASED ASSISTANCE, WHICH MEANS THAT THAT VOUCHER WILL COVER WHAT IT COSTS TO OPERATE THAT PROJECT.

SO IT'S NOT LIKE WHEN YOU GET A VOUCHER AND YOU'RE A LANDLORD, YOU GET THAT $976. THAT'S IT.

EVERY YEAR THEY'LL DO AN ASSESSMENT OF WHAT IT COST TO OPERATE THAT PROJECT. AND THE VOUCHER AMOUNT CAN GO UP OR DOWN BASED ON WHAT IT COSTS TO OPERATE. WHAT DOESN'T EVER CHANGE IS THE TENANTS PORTION. THEY'RE ALWAYS PAYING 30. SO IT DOESN'T MATTER IF IT GOES UP

[01:00:01]

AND IT'S REALLY STRANGE. WELL, NOT STRANGE, BUT THE WAY HUD IS UNIQUE, THE WAY HUD INTERACTS WITH THEIR PUBLIC HOUSING AUTHORITIES, BECAUSE UNLESS IT IS A SPECIAL FUNDING ROUND OR WHAT HAVE YOU, THEY OFTEN DON'T COME TO THE TABLE WITH ADDITIONAL MONEY. SO IS THE CASE IN THIS, THIS ONE. THESE WERE RESERVES THAT LMHC HAD IN THEIR COFFERS, IN THEIR COFFERS. AND THEY'RE BUILDING THIS. BUT THEY STILL HAD THAT GAP WITH THE ADDITIONAL THEY NEEDED ADDITIONAL FUNDING TO MAKE THIS HAPPEN. AND WHO'S PAYING THE OTHER $20 MILLION ON THIS PROJECT? WHO'S A BANK LOAN? SO WE PUT IN 11 HOUSING ASSOCIATION AUTHORITY. WE PUT IN 11, LMA PUT IN ABOUT 13. SO THAT'S 24 TO $30 MILLION PROJECT. THEY HAVE A BANK LOAN OF 6 OR 7 MILLION TO COVER THE DIFFERENCE. AND THEN THEY'RE GOING TO PAY THAT BANK LOAN BACK OUT OF THE YOU KNOW, THEY'VE GOT A STANDARD TERMS WHATEVER THE INTEREST RATE IS HOWEVER MANY YEARS. THAT IS PART OF THEIR DEBT COVERAGE RATIO. THAT IS PART OF WHAT WILL BE USED TO DETERMINE WHAT THOSE RENTS ARE ON AN ANNUAL BASIS, BECAUSE THEY'VE GOT TO COVER ALL OF THEIR OPERATING. AND PART OF THAT OPERATING IS THEIR DEBT SERVICE TO THE BANK. SO IF I'M HEARING IT CORRECTLY, THAT'S 11 MILLION FROM, LA H T F DO YOU ALL HAVE A CUTE NAME FOR THAT OR. YOU DON'T? BECAUSE IT'S NOT CUTE, IS IT, SO YOU ALL ARE GIVING ABOUT 11 MILLION. THEN THERE'S THE I THINK YOU SAID 7 MILLION. PROBABLY FROM A BANK FROM THE BANK. AND THEN WHERE DOES THAT LEAVE THE WHO'S PAYING THE REST OF THAT? LOUISVILLE METRO HOUSING AUTHORITY HAD MONEY IN THEIR BANK ACCOUNT IN THE AMOUNT OF 13 MILLION THAT THEY ARE USING TO PAY THIS. YES, FROM THEIR OWN COFFERS. WELL THANK YOU. COUNCILMAN REED, THANK YOU, MR. CHAIR, AND THANK YOU FOR A GREAT PRESENTATION.

I'VE LEARNED QUITE A BIT, SO I WAS ON THE TASK FORCE, WHEN WE WERE, STUDYING AFFORDABLE HOUSING WITH REGARD TO THE ARPA FUNDS, WHEN I THINK, THE TOTAL THAT WE ALLOCATED WAS $38 MILLION. WE'RE UP TO, 30. AMI WE'RE. WHERE ARE WE WITH GETTING, THOSE UNITS BUILT? AND WHAT ARE THE IMPEDIMENTS TO GETTING THOSE UNITS BUILT? SO WE WERE AWARDED $40 MILLION. AND I THANK YOU ALL FOR THAT, THOSE FUNDS HAVE ALL BEEN ALLOCATED. THEY WERE ALL ALLOCATED AS OF NOVEMBER 2022, WE HAD ONE GROUNDBREAKING TODAY, THAT WAS THE ONE WITH, PORT SHAW. IT'S IN THE WEST. IT'S IN WEST LOUISVILLE, THE ECLIPSE WAS ANOTHER PROJECT. IT IS NEARLY COMPLETE. WELL SPRING NEIGHBORHOOD, SCATTERED HOUSING, WE HAD A RIBBON CUTTING.

ACTUALLY, THAT ONE'S THAT ONE'S IN SERVICE, ON DOUGLASS BOULEVARD. WELL SPRING, IS DEVELOPING. I BELIEVE IT'S 38 UNITS, AND THEY ARE. THEIRS IS. THEY ARE TAKING PEOPLE FROM HOMELESSNESS TO HOUSING. WE HAVE THREE OTHERS UNDER CONSTRUCTION. API GATEWAY ON BROADWAY IS ALMOST COMPLETE. ACCORDING TO THE REPORTS I'VE SEEN, WE ALSO HAVE NEW LIFE DIRECTIONS MINISTRIES IN VALLEY STATION. IT IS UNDER CONSTRUCTION, MAYBE 50. YOU DID A WALKTHROUGH.

WONDERFUL, WONDERFUL. SO THAT WAS THAT WAS THE USE OF ARPA FUNDS. WE HAVE ONE PROJECT THAT HAS NOT CLOSED YET, AND IT HAS TO CLOSE IN THE NEXT COUPLE OF WEEKS, BUT IT'S VERY LITTLE DOLLARS OF OUR MONEY, AND THAT'S A VOA PROJECT THEY'VE COME UP WITH, THEY HAVE SOME ISSUES WITH SOME THAT MONARCH. YEAH. MONARCH STATION. THERE ARE SOME. THEY HAD A GAP AND WE JUST FILLED IT THROUGH THE CARES PROGRAM. RIGHT. SO WE ARE WE SHOULD BE CLOSING THAT ONE SOON. AND AGAIN WE BROKE GROUND YESTERDAY. SO WE HAD A TOTAL OF SEVEN PROJECTS, OVER 200 UNITS AND SOME OF THEM ARE BEING LEASED TODAY. AND SOME ARE STILL UNDER CONSTRUCTION AND SOME ARE STILL IN PRE-DEVELOPMENT. ARE THEY BEING LEASED ALMOST AS SOON AS THEY GO TO MARKET. PRETTY MUCH. WELL SPRING HAS HAD NO ISSUE. LEASING THEIRS AND THEIR PROJECT HAS, HAS BEEN THE ONE TO GO THE FASTEST. SO TO SPEAK. AND I BELIEVE THE ECLIPSE MAY BE LEASING UP AS WE SPEAK AND HPI TO BOTH OF THOSE ARE PROBABLY, WORKING WITH THEIR LEASING TEAM TO WELLSPRING. IT'S AN EXCELLENT ORGANIZATION. EXACTLY. VERY IMPRESSED. VERY IMPRESSED WITH THEM. THANK YOU VERY MUCH.

YOU'RE WELCOME. THANK YOU. SHE HAD LANDING OVER ON PRESTON. IS THAT ONE OF YOUR PROJECTS? DO

[01:05:07]

IT'S A LOT. THANK YOU. YES WELL I WANT TO THANK YOU GUYS AGAIN FOR COMING. AND I KNOW SOME OF THIS CAN BE IT IS IT IS COMPLEX. I MEAN, THAT'S ONE OF THE REASONS WHY I WANTED YOU GUYS TO COME AND TALK ABOUT IT, BECAUSE THIS IS NOT SOMETHING THAT YOU JUST SNAP YOUR FINGERS AND YOU HAVE AFFORDABLE HOUSING UNITS. IT'S A COMPLEX, ISSUE. AND THE FINANCING OF IT AND THE LAYERS OF FINANCING INVOLVED IN IT ARE VERY COMPLEX AND REALLY APPRECIATE APPRECIATE YOU ALL COMING AND KIND OF WALKING US THROUGH IT, ANYBODY ELSE HAVE ANYTHING THAT THEY WANT TO DEAL WITH TODAY, NO. SO WITH NO FURTHER BUSINESS IN FRONT OF US, WE ARE ADJOURNED. THANK YOU ALL.

[Adjournment Note: Agendas are followed at the discretion of the Chair. While an item may be listed, it does not mean all items will be heard and/or acted upon by the Committee.]