HomeMy WebLinkAboutMINUTES - 08021988 - 2.2 TO: BOARD OF SUPERVISORS 1,,�tra
FROM: Harvey E. Bragdon
Director of Community Development County
DATE: July 21, 1988
SUBJECT: Proposal for Financing Homeless . Shelters
SPECIFIC REQUEST(S) OR RECOMMENDATIONS(S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
Endorse concept of developing and financing homeless shelters as
described; and
Authorize the Director of Community Development to a) circulate a
request for qualifications to potential non-profit sponsors of a
demonstration homeless shelter in Central County; and b) to
initiate actions necessary to identify sites and financing.
BACKGROUND/REASONS FOR RECOMMENDATIONS
The Homeless -Management Team, which consists of department heads
and representatives of Social Services, Housing Authority, Health
Services, Community Services, Veterans' Resources, County
Administrator, and Community Development, has been meeting
bi-weekly since last fall. The charge to the team is to better
coordinate County resources and the delivery of County services to
the homeless. Among the concepts conceived by the Homeless
Management Team is a creative means of utilizing existing and
available resources with other public and private resources to
finance the development of shelter facilities. The concept is
described in detail in Appendix A and summarized on the age
CONTINUED ON ATTACHMENT: X YES SIGNATUR
RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENI&T14M OF POA6fCOMMITTEE
APPROVE OTHER
SIGNATURE(S) :
ACTION OF BOARD ON Auaust 2. 1988 APPROVED AS RECOMMENDED x OTHER
VOTE OF SUPERVISORS
I HEREBY CERTIFY THAT THIS IS A
x UNANIMOUS (ABSENT — ) TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT ABSTAIN: MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
cc: Community Development ATTESTED /fry,
County Administrator 'PHIIebATCHELOR, CLERK OF
Social Services Director THE OARD OF SUPERVISORS
Housing Authority AND COUNTY ADMINISTRATOR
Community Services Director
Veterans Services BY DEPUTY
Jk/jb/homshlt.bos
A. Financing a Homeless Shelter - The Proposal
In its simplest form, the proposal is to develop and
finance a non-institutional homeless shelter for families
through a public/private partnership. The initial
facility would be characterized as follows:
o Non-profit owner and operator;
o Central County location due to lack of homeless
facilities in this region;
o The shelter would be an apartment building of about
20 units, with a mix of two and three bedroom units;
o The shelter could be a mix of long term affordable
rental housing and shelter for homeless families;
o Financing via a public/private partnership which
could include:
Public funds
a) Community Development Block Grant funds
(County, Concord and Walnut Creek) ;
b) McKinney Act programs;
c) Foundation funds
Private funds from lenders who would base a
- loan amount on the rents affordable to very low
income families ( $450-$500/ month) ;
o Supportive services such as money management job
seeking, housing, substance abuse counseling, child
care, etc. on site provided by:
Non-profit operator; and
Department of Social Services Case (DSS)
Management Demonstration Program (Appendix B) ;
o Supportive Services and Operations funded by:
project rental revenues including DSS
administered AFDC Homeless Assistance payment.
DSS is requesting authorization to purchase
prepaid rights of occupancy utilizing voucher
funds; and
fund raising by the non-profit owner/operator.
B. Implementation Steps
In order to move forward, the following steps need to be
taken:
o Securing a non-profit sponsor with whom to complete
additional concept development and project
implementation;
o Identification of potential project sites;
o Identification of potential public funding programs;
and
o Identification of potential private lenders
FINANCIAL IMPACT
The proposal has been structured to avoid any potential obligation
of County General funds. Further, by developing a facility in an
apartment setting, the alternative use as affordable rental housing
will provide insurance that the County will not have to dedicate
resources to bail the project out should unanticipated difficulties
occur. The capital costs will be covered by a partnership of
public funds from specific funding programs, and private lenders.
If permitted by the State, AFDC Homeless funds would be diverted to
the project in order for DSS to purchase rights of occupancy.
CONTRA COSTA COUNTY —`—
COMMUNITY DEVELOPMENT DEPARTMENT
TO: CHART DATE: June 21, 1988
FROM: Kennedy, De irector - Redevelopment
SUBJECT- A P s or Financing Permanent
Ho s Shelter Facilities
Background
One of the primary means of providing short term shelter assistance to the home-
less is through the use of motel vouchers. The Department of Social Services,
(DSS) , with its Emergency Assistance program, expended an average of
$21,400/month on motel vouchers. Under the recently initiated homeless AFDC
program an average of $26,400 has been expended per month by DSS on temporary
shelter. In addition numerous FEMA recipients are charged with operating
shelter voucher programs. Over the past three years over $120,000 in FEMA funds
have been allocated for vouchers.
The strength of the motel voucher system is its flexibility and responsiveness,
i .e. , if a homeless person needs temporary shelter a voucher can be quickly pro-
vided to get people off the streets. The weaknesses of the motel voucher ap-
proach, as conventionally administered, are numerous: First, voucher programs
are expensive; second, the benefit is very short term and not necessarily pro-
vided in an environment suitable for families; and third, opportunities for sup-
portive services are limited or non-existence. In this era of limited financial
resources there is a challenge to the public sector to channel its resources so
that the greatest number of families can be assisted in the long run. There-
fore, the GOAL OF THE COUNTY'S HOMELESS MANAGEMENT GROUP WAS TO DESIGN A MEANS
BY WHICH THE SIGNIFICANT STREAM OF PUBLIC REVENUES CURRENTLY DEVOTED TO MOTEL
VOUCHERS COULD BE CAPITALIZED TO PARTLY FINANCE PERMANENT SHELTERS FOR THE
HOMELESS.
The Concept
In its simplest form, the concept is to develop a network of non-institutional
human scale shelter facilities by effectively capitalizing funds currently going
to private motel operators, supplemented by other public funds (Community
Development Block Grant, McKinney Act programs, .etc. ) , and private funds. The
short term facility could be characterized as follows:
1) + 20 unit existing apartment building;
2) Mix of two and three bedroom units;
3) Be usable as long term rental housing in order to cope with short term
demand fluctuations and private lender concerns;
4) Non-profit ownership to keep the facility in the public domain;
5) A comprehensive package of supportive services would be provided on
site.
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6) Public/private financing partnership..
7) At least partial funding of supportive services package from revenues.
A companion of financial alternatives for a 20 unit project may be summarized as
follows:1
Public Private
Financing2 Financing3
Acquisition Costs $910,000 $910,000
Amount/Source of• Mortgage Funds
Public Funds 910,000 410,000
Private Funds -0.- 499,200
Additional Income for Support Services 71,999 50,880
1) See attached Feasibility Report for additional detail .
j 2) Assumed loan terms- 5% interest, 30-year term; debt service ratio of
1:1
3) Assumed loan terms - 10.25% interest, 30-year term; debt service
ratio of 1.1:1
Potential sources of funds for the public funding may include any or all of the
following:
o CDBG (County, Antioch, Concord, Richmond, and Walnut Creek
o McKinney Act Programs
o Foundations/Donations
An additional concept that is being explored is the purchase of "prepaid rights
of occupancy" utilizing voucher revenues. Some regulatory restrictions may
exist, particularly in the homeless AFDC program, however DSS is actively going
to pursue necessary approvals. The "prepaid rights of occupancy" amount
represents rental revenues. The primary value of the prepayment is as a
guarantee of the mortgage loans, whether public or private. This could be
extremely valuable in pursuing private funds.
Private financing would likely come through a community lending division of a '
bank or savings and loan. Any loan amount would be determined by assuming the
project would have revenue derived from the rental of the units as low income
housing, with rents around $450-500/month (2 and 3 bedrooms) . Actual revenue
from voucher payments would be higher, but because of the inability to
"guarantee" voucher holders to the facility, the loan underwriting would occur
as conventional low income ' rental housing. Revenue over and above that
necessary to debt service loans, would .be available for programming.
The Process
To implement this concept it will be necessary to identify a non-profit sponsor
with whom to do further developmental work. The proposal is to circulate a
request for qualifications (RFQ) to the non-profit community to illicit
interest.
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COMMUNITY.
NO I
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A NON PROFIT CORPORATION
FEASIBILITY OF UTILTIZING COUNTY FUNDS
TO PROVIDE PERMANENT SHELTER FACILITIES
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PREPARED FOR
JIM KENNEDY
CONTRA COSTA COUNTY PLANNING DEPARTMENT
PREPARED BY .
JANET FALK
MAY 9 , 1988.
Q���Li 'irk ( .�
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This report will examine the feasibility of utilizing Contra
' Costa County funds available to assist homeless families to
support acquisition of a long-term shelter facility.
Currently, the County, through its Department of Social
Services (DSS) , provides housing asssistance to the homeless
with housing vouchers. The vouchers are valued at $30 per
day and are used at local privatel,y owned and operated
motels to provide short-term housing assistance. However,
this significant expenditure of public funds results in no
long-term shelter facilities in the County .
This analysis examines how the voucher funds could be
invested to help finance the development and/or operation of
shelter facilities by nonprofit organizations that would
provide continuing benefit to the County . The analysis will
examine two models:
1 . Acquisition of a 40 unit apartment building to be
utilized 50% as a shelter and 50% as permanent low-
income rental housing. In discussions with shelter
providers, it was felt that mixing permanent
residents with short-term shelter residents would
provide a stabilizing atmosphere. The building
would contain a mix of two and three bedroom units
to be suitable for families.
2 . " Acquisition of a 20 unit apartment building to be
utilized completely as a shelter housing homeless
families. The building would contain two and three
bedroom units.
In both models, the facility would provide social services
to all the residents, although they would be directed
primarily to the short-term shelter residents. These
services would included job counseling and referral , help in
obtaining public assistance, money management training,
child care, etc'. The staff costs of these services are not
included in the operating costs of the project, but would be
funded separately.
Shelter residents would receive assistance of $30 per night,
equivalent to $900 per month, from the Homeless AFDC
program, County Emergency Assistance program, or Federal
Emergency Management Administration (FEMA) funds.
The rents on .the permanent housing units in the 40 unit
alternative would be affordable to households earning 50% of
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median income. Rents would be set at 30% of 504 of median
income. The two bedroom units would rent at $451 per month
(based on a 3 person household ) and the three bedroom units
would rent at $501 per month (based on a 4 person
household) .
We have assumed that the property can be acquired for
approximately $45 ,000 per unit. According to several
realtors, this should be an obtainable price in Central
County.
Two financing options were '-examined for each alternative.
The first assumes that the County will act as lender and
provide a mortgage at a 5% interest rate. The second
alternative assumes that private financing from. a
conventional lender will be obtained. In this case, the
project would have to be underwritten at the permanent
housing rents of $451-$501 per unit unless a long-term
commitment of vouchers dedicated to the project could be
obtained. To be acceptable to a private lender, a
commitment of vouchers for at least a five year period would
likely be required. This does not appear feasible at this
time. However, by underwriting the project at permanent
rents, the lender would be assured that if vouchers for the
homeless were not obtainable, the project could be rented to
low-income households and the project could afford the
monthly mortgage payment.
The results of this analysis are as follows:
40 Unit Bus ding
Under the public financing option, 50% of the rents are
assumed to be $900 per -month (utilizing vouchers ) and the
other 50% of the rents are those affordable to households at
50% of median income. With an interest rate of 5% , the
project could afford a mortgage of $2 ,754 ,800 . However, the
cost of the project is only $1 ,810 ,000 . This leaves an
additional $78 ,611 per year to fund support services for ,the
project.
With private financing, all the rents are assumed to be
those affordable to households at 50� of median income.
With an interest rate of 10 .254 , the project can support a
mortgage of $998 ,400 . This leaves a shortfall of w8111600
that would have to be raised from County funds. However,
the vouchers would provide additional income of $101 ,760 per
year. This could be used to support services in the project
or could be used to repay the County subsidy in
approximately 8 years.
2
Under a "right to occupy" concept, the County could prepay
vouchers to this project for a period of time, thereby
guaranteeing that homeless residents would have units to
occupy . The County would be paid back over the prepayment
period by State or Federal funds, as available. If the
County chose to prepay the vouchers, this would cost
$216 ,000 for one year (.900/month x 20 units x. 12) or
$648 ,000 for three years.
20 Unit Building
In this alternative, all of the units are considered
temporary shelter units with no permanent residents. With
public financing at 5� , the project could support a mortgage
of $1 ,843 ,300. However, a mortgage of $910 ,000 is all that
would be needed. This would leave approximately "'72,000 per
year in additional income to support services for the
project.
With private financing, the units would again have to be
underwritten at permanent resident rents, even though the
intent is to utilize the project as shelter only. The
project under this alternative could support a mortgage of
only $499 ,200 , while the cost is $910 ,000 . This would
require County subsidy in the amount of $410 ,800. The
vouchers would provide additional income of $50 ,880 per year
which could be used to support services or repay the County
subsidy in 8 years.
Conclusions
Both alternatives examined can be structured to create a
feasible long-term shelter facility in the County . Th-e 40
unit facility is desireable from the standpoint of providing
a mix of shelter and non-shelter units. It would , however,
require a larger outlay of County funds than a 20 unit
facility : $1 ,810 ,000 vs. $910 ,000 if the County provides
the mortgage funding, or .$811 ,600 vs. $410 ,800 in subsidy if
private financing is utilized.
All of the alternatives can generate additional income to.
support the social services in the project. These are
essential counseling and support services necessary to
assist the homeless resdients. The 40 unit mixed project
will generate $60,000 in additional income if public
financing is used , and $101 ,800 in additional income if
private financing is used . Similarly , the 20 unit all
shelter project will generate $60 ,000 with public financing
is used , and $50 , 800 with private financing.
All of the alternative are . based on the assumption that the
$30 per night vouchers will continue to be available. This
is an important assumption which currently cannot be
guaranteed. . This raises the question of what would happen
to the project if th.e voucher funds were not available and
who would be the "deep pocket" to provide the additional
subsidies.
A major advantage of utilizing an apartment building for
this .type of facility rather than a motel-type building is
that the project could always be rented' as low-income
permanent housing if the vouchers are not available. In the
case of the public financing alternatives, lack of voucher
funding would result in not being able to fully meet
payments .on the mortgage. Whatever County agency is
providing the funds for the mortgage would have to be
willing to accept. that possibility . In the case of private.
financing, the project is underwritten as low income
permanent housing and can fully support itself that way
(with the initial public subsidy) . If the vouchers were not
available, the additional income to support services would
not be generated.
Either alternative requires an outlay ofpublic funds and
internally generates additional income to support services.
Which alternative the County chooses will be based on the
type of facility it prefers to support (mixed or all
shelter) and the type of financial support it prefers to
provide. The public financing alternatives require a larger
outlay of funds, but they can be paid back over a 30 year
period at 5% interest. These alternatives also require that
the agency providing the mortgage funds assume the risk that
voucher funds may not be continuously available. The
private financing alternatives leverage private funds into
the project and require a smaller outlay of County funds.
These County funds would have to be expended as a subsidy ,
with no repayment for some period of time. However, the
risk to the County is limited to this initial outlay of
subsidy , since the project would be able to support itself
as low-income permanent housing.
In either case , the investment, of County funds will insure
that long-term housing will be available in the County . As
long. as voucher funds are available, the facility will be
able to be utilized as temporary housing for the homeless .
If vouchers are no longer available, the facility can be
utilized as permanent housing for very low income
households , also a great need in the County .
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COMPARISION OF FINANCING ALTERNATIVES
40 UNIT PROJECT - 50m SHELTER, 507 LOW Ir1COME RENTAL
PUBLIC FINA v"live r rl ft AI` Firiniv0iiv0
TOTAL ACQUISITION COSTS 1 ,310,000 1 10,400
MORTGAGE AMOUNT 1 ,810,n00 988,-100
ADDITIONAL SUBSIDY REQUIRED 0 81 1 ,600
ADDITIONAL INCOME FOR
SUPPORT SERVICES 78,61 1 101 ,760
20 UNIT PROJECT - 100% SHELTER
PUBL{C FINAIJCING PRIVATE FlNIA i4C1PJG
TOTAL ACQUISITION COSTS 910,400 910,000
MORTGAGE AMOUNT 910,000 199,200
ADDITIONAL SUBSIDY REQUIRED 0 410,800
ADDITIONAL INCOME FOR.
SUPPORT SERVICES 71 ,999
40 Units Public Financing
ASSUMPTIONS: NET 114CCME AND M0-RT3AGE
40 Unit Project Annual Gross Income 3v,2-v
Public Financing Vacancy 1010 33,024
Effective Cross income 297,116
50% of the units are shelter Less Operating Cos`' i 02,CCT
5020 of the units are low—income rental
Net Income to Project.
DS Coverage X1.0:1.0
INCOME AND EXPENSES _ Available Cqr.Mortgage 195,209
Mortgage Rate J.CO o
UNIT No- of Unit Mortgage Amount �,030,?i4
SIZE UNITS Rent Total
Shelter Units @ $30 per night ACQUISITION COSTS
2 BR 10 900 9,000
3 BR 10 900 9,000 Acquisition is $45,000/unit 1,800,000
Closing Costs 10,000.
Low Income Rental Units @ 30% of 507 median income
2 BR 10 451 4,510 Total Acquisition Costs I,Zs 10,000
3 BR 10 501 51010
Monthly Gross Income 27,520
Annual Gross income 330,240 TOTAL ACQUISITION COSTS 1,310,000
MORTGAGE AMOUNT 1,310,000
OPERATING COSTS ADDITIONAL SUBSIDY REQUIRED 0
Administrative 8,000 Total additional income per year
Payroll and Payroll Taxes 25,000. to support services 76,611
Insurance 8,000
Maintenance 15,000
Gas and Electricity .24,600
Garbage and Water 9,000
Supplies 2,500
Reserves (P 32 of gross income 9,907
Total Operating Costs 102,007
Operating Costs/Unit 2,550
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40 Units Private Financing
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ASSUMPTIONS: NET INCCMF AND MCRTG.AGE
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40 Unit Project Annual Gross Income 228,180
Private Financing Vacancy @ 5% 11,424
Effective Gross Income 217,056
50/10 of the units are shelter Less Operating Costs 98,954
50% of the units are low—income rental
Net Income to Project 1 18.102
DS Coverage 11.1:1.0
INCOME AND EXPENSES Available for Mortgage 107.365
Mortgage Rate I C.25 a
UNIT No,. of Unit Mortgage Amount 998,446
SIZE UNITS Rent Total
Shelter Units 0 $30 per night ACQUISITION COSTS
2 BR 0 900 . 0
3 BR 0 900 0 Acquisition �b $45,000/unit 1,800,000
Closing Costs 10,000
Low Income Rental Units 0 30,"o or 507o median income
2 BR 20 451 9,020 Total Acquisition Costs 1,810,000
3 BR 20 501 10,020 .
Monthly Gross Income 19,040
Annual Gross Income 228,480 TOTAL ACQUISITION COSTS 1,810,000
MORT6A6E AMOUNT 998,446:
OPERATING COSTS ADDITIONAL SUBSIDY REQUIRED 811,554
Administrative 8,000 Additional Income from Voucher
Payroll and Payroll Taxes. 25,000 10 units P $449 additional 53,E+80
Insurance 8,000 10 units 0 $399 additional 17,880
Maintenance 15.000 Total additional income oer year
Gas and Electricity 24,1500 to su000rt services i 01,766
Garbage and;'later 9.000
Supplies 2.500
Reserves a 3 0 of gross income 15.45
Total Operat,nq Costs `98.954
Operating Costs/Unit 2. 174
20 Units Private Financinq
ASSUMPTIONS:
NET ir1COr1C AND MORTGAGE
20 Unit Project Annual Gross Income 1 14,240
Private Financing Vacancy @6 5"o 5;71^
Effective Gross Income 108,528
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50% of the units are shelterLess Operating Costs 49,477
50% of the units are low—income rental
Net Income to Project 59,051
DS Coverage @1.1:1.0
INCOME AND EXPENSES Available for Mortgage 53,683
Mortgage Rate 10.25 0
UNIT No,. of Unit Mortgage Amount 499,'_•'23
SIZE UNITS Rent Total
Shelter Units $30 per night ACQUISITION COSTS
2 BR 0 900 0
.3 BR 0 900 0 Acquisition $45,000/unit 900,000
Closing Costs 10,000
Low Income Rental Units 0 307o of 50%, median income
28R , 10 451 4,510 Total Acquisition Costs_ 910,000
3 BR 10 501 5,010
Monthly Gross Income 9,520
Annual Gross Income 114,240 TOTAL ACQUISITION COSTS. 910,000
MORT6A6E AMOUNT 499,223
OPERATING COSTS ADDITIONAL SUBSIDY REQUIRED 410.777
Administrative 4,000 Additional Income from Voucher
Payroll and Payroll Taxes 12,500 5 units P $449 additional 26,940
Insurance 4,000 5 units 'o $399 additional 23,940
Maintenance 7,500 Total additional income per vear
Gas and Electricity 12',300 for support services J0,880
Garbage and Water 4,500
Supplies 1.250
Reserves @ 314 of gross income 3,427
Total Operating Costs 49,477
Operating Costs/Unit 2,474
20 Units Public Financing
ASSUMPTIONS: NET INCOME AND hMCP.TGAGE
20 Unit Project Annuai Gross Income 216,000
Public Financing Vacancy Ca 100 21,600
Effective Gross Income I y4,4UU
1001% of the units are shelter Less Operating Costs 53,780
00 of the units are low-income rental
Net Income to Project 130,620
DS Coverage @1,0:1.0
INCOME AND EXPENSES Available for Mortgage 130,620
Mortgage Rate 5.000
UNIT No,. of Unit Mortgage Amount, 2,027,675
SIZE UNITS Rent Total
Shelter Units @ $30 per night ACQUISITION COSTS
2 BR 10 900 9,000
3 BR 10 900 9,000 Acquisition �z $45,000/unit 900,000
Closing Costs 10.000
Low Income Rental Units 9 3010 of 500 median income
2131? 0 451 0 Total Acquisition Costs 910,000
3 BR 0 501 0
Monthly Gross Income 18,000
Annual Gross Income 216,000 TOTAL ACQUISITION COSTS 910,000
MORTGA6E AMOUNT 910,000
OPERATING COSTS ADDITIONAL SUBSIDY REQUIRED 0
Administrative 4,000 Additional income per year
Payroll and Payroll Taxes 12,500, to support services 71,999
Insurance - 4,000
Maintenance 7,500
Gas and Electricity 12,300
Garbage,and Water 4,500
Supplies 12.500
Reserves o 31"1 of gross income 6,480
Total Operating Costs 63,780
Operating Costs/Unit 3,169