BOARD WORK SESSION WEDNESDAY, NOVEMBER 5, 2014 5:30 – 7:00 PM COLUMBIA ROOM – 6TH FLOOR AGENDA 1. Line of Credit Renewal* Peter Beyer 2. North/Northeast Community Update* Betty Dominguez, Dena Ford-Avery, Rodger Moore *Attachment MEMORANDUM To: From: Board of Commissioners Peter Beyer, Chief Financial Officer Date: Subject: November 5, 2014 Information regarding the issuance of Revolving Line of Credit revenue notes with Columbia Bank in the amount of up to $8,000,000 At the November 2014 Board meeting, the Board of Commissioners will be requested to approve a resolution authorizing the Executive Director to enter into an agreement with Columbia Bank to issue revenue notes to provide an $8 million revolving line of credit. The line of credit will be used to provide working capital to support operating and development activities. BACKGROUND Since 2011, Home Forward has maintained an $8 million line of credit. The current line of credit, provided by Bank of America, is set to expire on December 12, 2014. The average outstanding balance on the line of credit has been $1.5 million with the outstanding balance on the line of credit as of September 30, 2014 at $1,282,526. The line of credit allows the Agency to meet future cash needs on a timely basis and optimally manage available cash reserves and general Agency liquidity. The line of credit is used for two main purposes: 1) To support the temporary financing for the acquisition, construction and/or rehabilitation of Home Forward’s housing projects, including capitalizable predevelopment costs; and 2) To provide temporary funding for Home Forward’s Rent Assistance program and related services to residents. The underlying source of funding for the line of credit is from the issuance of revenue notes. The revenue notes are pledged with general revenues of Home Forward but exclude funds already pledged or restricted by contract, law, grant agreement, resolution, etc. The revenue notes allow for both taxable and tax exempt draws and the draw type is determined by the underlying use of funds. The revenue notes require an opinion from bond counsel (performed for Home Forward by Foster Pepper). REQUEST FOR PROPOSAL In September 2014, Home Forward issued an informal request for proposal (IRFP) to continue an $8 million line of credit. Under the IRFP, Home Forward requested pricing for a three year and five year line of credit. The following five banks submitted proposals:  Bank of America  Columbia Bank  Umpqua Bank  Washington Federal Bank  Wells Fargo Based on the evaluation criteria outlined in the IRFP, Columbia Bank was selected to be the most advantageous bank to provide Home Forward with a Line of Credit. The proposal terms include: Credit Facility  $8 million revolving line of credit  Five year tenor Fees  Loan Fee (one time)  Bank Legal Fee (one time)  Unused Commitment Fee year) $1,200 $1,500 .15% on unutilized line (approximately $7,500 per Interest rate on draws The following interest rates will apply, depending on the type of draw:  Taxable Draws = LIBOR* + 1.75% (total rate currently 1.90%)  Tax-exempt Bank Qualified Draws = LIBOR* + 1.35% (total rate currently 1.50%) (NOTE: *LIBOR stands for the London Interbank Offer Rate) The borrower may select interest periods based on draws  On the first business day of any month; a rate equal to one, two or six month LIBOR.  On any other day than the first business day of the month; Daily Floating One Month LIBOR, provided that any drawings bearing interest at Daily Floating One Month LIBOR outstanding on the calendar day prior to the first day of the next month shall automatically convert to bear interest at one month LIBOR on the first business day of such month unless the Borrow has designated a period of two, three, or six months at least three business days prior to such first business day of such month. POLICY IMPLICATIONS Borrowings under this line of credit will temporarily finance Agency expenditures pending the receipt of permanent funding sources for those expenditures. Advances from this line will not be made without the identification of the permanent funding source that will repay the advance. BUDGET IMPLICATIONS AND FINANCIAL IMPACT ON HOME FORWARD Over the next five years, it is estimated that Home Forward will save $54,000 in line of credit fees. Also, by extending the line of credit to a five year time frame, Home Forward will delay, by two years, an additional $20,000 of legal costs. RISKS AND OPPORTUNITIES Risks - Maintaining the bank line of credit is predicated on Home Forward maintaining a high quality financial profile. Opportunities - Establishing this line will ensure the ongoing capacity to pay vendors and landlords on a timely basis while managing cash reserves and Agency cash flow in an efficient, cost-effective manner. CONCLUSION/RECOMMENDATION The continuation of the line of credit will provide the necessary financial liquidity to continue to manage the temporary cash flow needs of the Agency. Staff recommends approval of the line of credit authorization. ATTACHMENT Line of Credit report as of September 30, 2014 HOME FORWARD LINE OF CREDIT REPORT as of September 30, 2014 TOTAL LINE OF CREDIT= Date B-Balance 04/01/13 05/01/13 05/31/13 06/01/13 06/03/13 07/01/13 07/11/13 08/01/13 08/05/13 09/01/13 09/30/13 10/01/13 10/31/13 11/01/13 12/01/13 12/18/13 12/20/13 01/01/14 01/31/14 02/01/14 02/03/14 02/28/14 03/01/14 03/03/14 03/31/14 04/30/14 05/31/14 06/30/14 07/31/14 08/31/14 09/30/14 Total PH Capital Draws (Draw)/Repayment $0.00 Section 8 (Draw)/Repayment $0.00 Stephens Creek (Draw)/Repayment ($1,351,023.00) ($5,000,000.00) $5,000,000.00 ($2,131,849.00) $149,323.00 $1,351,023.00 $700,000.00 ($5,000,000.00) $5,000,000.00 ($2,187,375.83) $2,187,375.83 (5,000,000.00) 5,000,000.00 (5,000,000.00) 5,000,000.00 $0.00 $0.00 ($1,282,526.00) Available Balance $6,648,977.00 $6,648,977.00 $6,648,977.00 $1,648,977.00 $1,648,977.00 $4,517,128.00 $4,517,128.00 $4,666,451.00 $4,666,451.00 $6,017,474.00 $6,017,474.00 $6,717,474.00 $6,717,474.00 $1,717,474.00 $6,717,474.00 $6,717,474.00 $4,530,098.17 $6,717,474.00 $6,717,474.00 $1,717,474.00 $1,717,474.00 $6,717,474.00 $1,717,474.00 $1,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $6,717,474.00 $8,000,000.00 Outstanding Balance $1,351,023.00 $1,351,023.00 $1,351,023.00 $6,351,023.00 $6,351,023.00 $3,482,872.00 $3,482,872.00 $3,333,549.00 $3,333,549.00 $1,982,526.00 $1,982,526.00 $1,282,526.00 $1,282,526.00 $6,282,526.00 $1,282,526.00 $1,282,526.00 $3,469,901.83 $1,282,526.00 $1,282,526.00 $6,282,526.00 $6,282,526.00 $1,282,526.00 $6,282,526.00 $6,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 $1,282,526.00 MEMORANDUM To: From: Board of Commissioners Betty Dominguez, Director of Policy and Equity; Dena Ford-Avery, Director of Housing Choice Vouchers; Rodger Moore, Director of Property Management Date: Subject: November 5, 2014 Affordable Housing within Inner North/Northeast Portland This briefing is intended to update the board on community efforts to provide affordable housing within Inner N/NE Portland neighborhoods and Home Forward’s work to support and ensure housing affordability in this neighborhood. This report is for informational purposes only; no action will be required of the Board. ISSUE There is a long history of City-led investments in the Interstate Corridor area which resulted in gentrification, displacement, and marginalization of the low-income, and predominantly African-American, community that lived there. The City of Portland has launched a $20 million initiative, still in its infancy, called the N/NE Neighborhood Housing Strategy “focused in the Interstate Corridor Urban Renewal Area in response to the community’s well documented need for affordable housing and other investments in neighborhoods most impacted by displacement.” (For more information go to https://www.portlandoregon.gov/phb/65193 ) As Inner N/NE Portland neighborhoods continue to gentrify, rapidly rising rental rates are making access to this community more and more difficult for low income households. According to the October 2014 Multifamily NW Apartment Report, average rents in this neighborhood range from $864 for a studio apartment to $1,643 for a two bedroom-two bath unit. Average rent per square foot is $1.39 compared with $.93 per square foot in outer NE. Average rents have increased 5% over the past six months. Home Forward is using a combination of strategies to increase access for our own program participants in these neighborhoods. The Big Picture The history of gentrification and displacement in N/NE Portland dates back to the construction of the I-5 freeway in 1950, the Coliseum in 1955, and Emanuel Hospital in 1969. These efforts cut through the heart of the N/NE community, including its business districts, and resulted in the displacement of thousands of low-income, predominantly African-American, families from the area. Attachment 1 charts that displacement over the past forty years. Recent efforts on the part of the Portland Development Commission (PDC) to subsidize a transaction to bring Trader Joe’s to the area, citing the potential for economic development, produced a negative reaction from many whom live, or used to live, in the community. Community leaders believe that development in the Interstate Corridor Urban Renewal area should serve the needs of today’s community, particularly low-income people, people of color and immigrant communities. According to PDC figures, more than half of the families who live within a mile of the site originally slated for Trader Joe’s earn less than $35,000 a year and forty percent of households live on less than $25,000 a year. Stakeholders and activists proposed that those funds intended to subsidize the proposed development could be better spent on job training, housing, educational opportunities and otherwise helping to stabilize the community. Mayor Hales responded, meeting with community leaders to begin mapping a “path forward” for development in the Interstate Corridor Urban Renewal Area. The Mayor agreed to add $20 million to develop affordable housing in the urban renewal area on top of the urban renewal funds already allocated over the next five years to help address the community’s need for affordable housing. In September, the Portland Housing Bureau (PHB) embarked on a process to seek community input around affordable housing investments and anticipates presenting final recommendations to City Council early next year. Home Forward will continue to work with PHB staff and to track the evolution of the strategy providing advice and support as needed. 2 Home Forward’s Role in Supporting and Ensuring Housing Affordability in this Neighborhood Home Forward remains committed to helping low-income households access low-poverty neighborhoods, including inner N/NE Portland, through a variety of strategies, including establishing higher payment standards, developing and maintaining Home Forward-owned properties and further developing our community partnerships. Home Forward Owned Units (Inner N/NE Portland) Home Forward owns and operates multiple apartment communities in inner N/NE Portland. The following table describes the communities and subsidy type that maintains their affordable status. Zip Code 97211 97212 97212 97212 97212 between I-5 97217 & NE 33rd 97217 97217 97227 97227 97227 Home Forward Properties Dekum Court Grace Peck Dahlke Manor Beech Street Maple Mallory Plaza Townhomes Humboldt Gardens Bel Park Eliot Square Dawson Park Unthank Plaza subtotal Units 39 95 115 32 48 68 129 10 30 67 80 713 Built 1971 1980 1971 2014 1948 1972 2008 1945 1982 1995 1978 Subsidy Program Public Housing Section 8 Subsidy Public Housing Tac Credit & Section 8 Subsidy Public Housing Section 8 Subsidy Tax Credit, 100 Public Housing units, 30 non-public housing units Public Housing Public Housing Tax Credit 60% MFI and below Section 8 Subsidy The properties vary in size, target population, and the types of services and supports offered to residents. Many offer access to parks, grocery stores, bus lines, employers, and other amenities that are crucial for low-income households and less available in areas of the county that aren’t considered Opportunity Areas. Our Public Housing sites, many of which have resident services staff and/or community partners offering services which provide a variety of supports for residents, including:  Housing stability support, such as assistance with neighbor disputes, housekeeping issues, and challenges paying rent on time  Community building activities  Economic opportunity programs (GOALS is offered on-site at Humboldt Gardens and off-site for other Public Housing residents)  Programs and activities for youth, including during school holidays and breaks  Activities for seniors and people with disabilities  Resident services support for sites vary and include Multnomah County energy assistance outreach  Increased personal safety and security through a partnership with the Portland Police Department’s Enhanced Safety Program 3 Sites we subsidize with Project Based Section 8 that are managed by partners also offer a variety of services to residents. For example, Beech Street Apartments includes residential drug and alcohol treatment facility and operates as a “dry facility,” i.e. a supportive environment to foster a clean and sober lifestyle. LifeWorks NW provides services for the residents of Beech Street Apartments, which include many of the same types of supports offered at our Public Housing sites, including a homework club for children, site-based Alcoholics/Narcotics Anonymous meetings, family movie nights and a variety of housing stability and community building services. Expanding Affordable Housing within inner N/NE Portland through Partnerships The Rent Assistance department’s work in the inner N/NE community has focused on expanding access for Housing Choice Voucher holders by increasing payment standards in this neighborhood and ensuring the availability of Project Based Voucher (PBV) units for our most vulnerable households. Attachment 2 mapping the locations of our PBV buildings will be provided at the meeting. One of the largest owners of affordable units in the inner N/NE area is Portland Community Reinvestment, Inc. (PCRI). Home Forward has had a long history of collaborating with PCRI to make affordable housing available in inner city communities and they continue to be a valued partner in our efforts to house a large number of our tenant based voucher holders in their rental units. In addition to offering housing to tenant based voucher holders, PCRI has a PBV contract with Home Forward that consists of 27 single family homes within the N/NE Portland neighborhood. Recently, Home Forward and PCRI have been engaged in discussions around the terms of this contract and the pros and cons for making some amendments. Project based vouchers are meant to serve the most vulnerable members of our community who would be unlikely to succeed with tenant based assistance. As Home Forward works with various owners at the end of their ten year Project Based Voucher contracts we are requiring that services are available and offered, as well as a commitment to serve high needs populations. PCRI’s existing PBV contract at scattered site single family homes is not ideal for this model and both agencies believe it would be in their best interest and the best interest of those being served to amend the existing contract. After several meetings and careful analysis both agencies agree that the best option for renewal of PCRI’s existing PBV contract would be to re-assign the project based vouchers to multifamily apartment complexes. Over the coming year, we will work with PCRI to transition their existing 27-unit PBV contract for single family homes to a new 40-unit contract at three apartment communities in inner N/NE Portland. This change will provide increased access to more affordable units in the inner N/NE community while enhancing 4 our ability to house high barrier populations and include services. PCRI intends to retain a preference at their single family homes as they transition off of the PBV contract for tenant based Housing Choice Voucher holders. Applicants for single family homes owned by PCRI will be prioritized and vacancies will be marketed through Home Forward. In order to ensure the families residing in the current PBV units are not harmed as a result of this contract re-assignment, they will be issued tenant based vouchers. Families can choose to remain in place if the landlord is willing, or move to a more appropriate rental unit of their choice. Home Forward is able to provide tenant based vouchers to residents in these units due to our preference that enables us to provide assistance to a family that is currently served by another permanent housing assistance program administered by Home Forward that is unable to serve the family any longer for reasons unrelated to the families actions. Re-assigning the PBV contract currently assisting these families’ warrants as a reason to issue these households tenant based assistance. Attachment 3 shows the transition plan that will serve as the outline of the work moving forward with PCRI and which serves an ultimate goal of better alignment, access and use of PBVs in the North/Northeast community. An understanding of the history of the N/NE Portland community as it relates to gentrification, the displacement of low-income, minority families, and the current state of affordable housing is essential as Home Forward makes investments in this and other communities. Attachments 1. Migration Maps 1970-2010: Black or African American Percent of Total Population by Census Tract 2. Project Based Voucher Building Location Map (provided at the meeting) 3. PCRI Project Based Voucher Transition Plan 5 PCRI Project Based Voucher Transition Plan Contract Type Unit Types Number of Units Existing Scattered Site Project Based Voucher Contract Single family 27 Units Homes and  10‐2 bedroom Duplexes in  10‐3 bedroom neighborhoods in  6‐4 bedroom North/NE Portland Contract Start Contract End Date Dates Notes 10‐31‐2004 Single family homes/duplexes are not an ideal fit for a Project Based contract with a service requirement, because services are delivered more easily when families live in a single building. 10‐31‐2014 (Extend for twelve months and then enter into revised renewal contracts at new sites) Plan to extend contract for 12 months, through October 31, 2015. Tenants will be offered Tenant Based Vouchers (see below), and Project Based Units will be removed from contract as tenant based assistance is utilized. Project based vouchers will be reassigned in the revised contracts detailed below. At turnover, PCRI could offer a preference for tenant based voucher holders in these units. Tenant Based Vouchers To be issued to occupants of current Scatter Site Project Based Voucher contract above 27 Revised Renewal Project Based Voucher Contract Urban Plaza Building 23 units  10 studio  13‐1 bedroom 06‐01‐2015 (tentative) 5 year with option for renewals Service partners and preferences are in place. Referrals and supportive services currently come from SEI and JOIN. Revised Renewal Project Based Voucher Contract Betty Campbell Apartments 9 units Mix of 1,2 3 bedroom 09‐01‐2015 (tentative) 5 year with option for renewals Service partners and preferences are in place. Referrals and supportive services currently come from Life works and JOIN. 9 units  3 – one bedroom  5 – two bedroom 1708 NE Alberta St  1 – three bedroom 12‐01‐2015 5 year with option for renewals Discuss with PCRI any preferences to be offered, potential partner agencies, and services to be offered at property prior to the start of a renewed contract. Revised Renewal Project Based Voucher Contract 10 N Russell St. Effective date of Lease up N/A Vouchers will be issued in early 2015. Tenants will be given 120 days to search with option to use vouchers in existing scattered site units if PCRI agrees (9 tenants are over‐housed and are unlikely to be able to stay due to the rent burden of renting a unit larger than the voucher size). Home Forward is able to offer these tenants a preference for a tenant based vouchers because the program currently serving them (Project Based voucher program) will no longer be able to continue serving them when the contract expires. 3979 N Mississippi Ave Maggie Gibson Apartments (tentative) 1724 NE Alberta St Tenant Based Vouchers existing 74 PCRI owned properties Various scattered site units various various New payment standards will allow PCRI to increase rents at various units per the terms of the Lease in place. Rent that is reasonable based on market conditions will be authorized with a copy of the 60‐day written notice of the increase provided to the tenant. 25 tenants are over housed (living in units larger than they qualify for) and will likely choose to move as a result of the rent being increased.