HomeMy WebLinkAbout2011-05-03 Board of Selectmen Minutes Joint Board of Selectmen and
Reading Housing Authority Meeting
May 3, 2011
The meeting convened at 8:00 p.m. in the Selectmen's Meeting Room, 16 Lowell Street,
Reading, Massachusetts. Present were: Selectmen Chairman James Bonazoli, Vice
Chairman Camille Anthony, Secretary Richard.Schubert, Selectmen Stephen Goldy and
Ben Tafoya; Housing Authority — Diane Cohen, Kevin Mulvey, Karen Flammia and Mary
Connors; staff — Town Manager Peter Hechenbleikner, Assistant Town Manager/Finance
Director Bob LeLacheur, Lynn Whyte; Oaktree Paul Ognibene, Phil Tetras, Jeff Hirsch; and
Chuck Eisenberg, consultant to the Town from Housing Partners, Inc.
The Town Manager noted that additional information had been submitted and material was just
available this evening.
Chairman James Bonazoli apologized to the Reading Housing Authority because we did not
communicate,with the Housing Authority very well. Camille Anthony noted that Chapter 140 of
the Mass General Laws says that the Board of Selectmen can look to the CPDC or the Reading
Housing Authority for guidance.
Lynn Whyte noted that the proposed Affordable Housing Allocation Plan approved by the Board
of Selectmen to date does not allocate an adequate amount for maintenance and improvement of
existing housing stock.
Ben Tafoya noted that the Affordable Housing Allocation Plan can change from year to year.
The Town Manager noted that the Selectmen's goals are to try to expand the affordable housing
inventory.
Lyn Whyte noted that the Gazebo Circle development is hard to keep affordable. The Town
Manager noted that it is not a 40B development.
Camille Anthony indicated that in going forward, the discussions about the Affordable Housing
Allocation Plan need to be held with the Reading Housing Authority in advance of the allocation
plan.
James Bonazoli asked about the need for maintenance now. The Town Manager noted that in
the language of Chapter 140, the issue of maintenance does not mean physical maintenance of
the facility but means that the fiends could be used to continue affordable housing.
Lyn Whyte noted that a decision may need to be made in the near fixture on an affordable
housing unit in Gazebo Circle. The cost of the unit is between $188,000 and $190,000.
David Greenfield indicated a concern the Finance Committee had about giving funds to Oaktree,
Financial information needs to be put forward. • It appears to him that funding the Oaktree
Board of Selectmen Meeting—May,3, 2011 —page 2
development is not the best use of the funds. He admitted that the Finance Committee voted to
recommend an Affordable Housing Allocation Plan that uses money for the Oaktree
development by a vote of 7-1 in favor.
Camille Anthony asked if we had all the information that we needed. The Town Manager
indicated that we do not have it in writing.
The Board of Selectmen reviewed the previously approved Affordable Housing Allocation Plan
that was approved by the Board of Selectmen.
On motion by Goldy seconded by Anthony the Board voted to reconsider the vote of April
26, 2011 approving an Affordable Housing Allocation Plan by a vote of 5-0-0.
Ben Tafoya proposed the following language be substituted for the previously approved
Affordable Housing Allocation Plan: Affordable Housing Allocation Plan, May 3, 2011 pursuant
to Article 24 of the 2011 Annual Town Meeting and Affordable Housing Trust Fund Allocation
Plan and for fiscal year 2012 in accordance with the provisions of Chapter 140 of the Acts of
2001 is as follows:
Available Balance—Unrestricted Funds: $458,017.68
Available Balance—Restricted Funds: $ 0
a. Unrestricted funds shall be used for the following purposes:
99% for constructing affordable housing; including loan and grant programs, or
for repairing and improving affordability of existing housing stock or for
the purchase of existing housing stock to add it to or to maintain as part of
the existing affordable housing inventory
1% for administration of the Affordable Housing Trust Fund
b. Restricted funds received into the AHTF for designated purposes for grants, gifts,
donations or the like shall be allocated at 100%towards the state purposes.
The members of the Reading Housing Authority, on motion by Cohen seconded by Connors
voted to recommend the above language as the 2012 Affordable Housing Allocation Plan.
That motion was approved by a vote of 4-0-0.
On motion by Bonazoli seconded by Anthony the Board of Selectmen accepted the Reading
Housing Authority's recommendation for the 2012 Affordable Housing Plan by a vote of 5-
0-0.
Paul Ognibene introduced the Oaktree team. He is the project leader, Phil Tetras is the designer
and Jed Hersh is the construction manager. Mr. Ognibene gave an overview of the project: it is
the redevelopment of the Atlantic site. It will include 53 rental residential units constructed
above 20,000 square feet of retail space which is constructed above a 75 space underground
parking garage. This is the first 40R development within the downtown smart growth area.
Eleven of the housing units will be affordable and will be deemed restricted in perpetuity.
Board of Selectmen Meeting—May 3, 2011,—page 3
--= They've been working with the Town on this project for awhile.
They have been looking for financing and have established financing as follows:
® debt $13 million -
• equity partner$4 million'
® equity provided by Oaktree Partners $900,000
® needed grant $400,000
They had been looking at alternatives including tax incentives, permit fee waivers, etc. to close
this gap. They are asking for $400,000 in grant funding from the Affordable Housing Trust
Fund.
They had looked at trying to receive a state grant or grants but the timeline and uncertainty did
not work to meet the Town's and Oaktree's proposed schedule for the project.
They closed on the land in January.
They closed on the loan with their equity partner.
They plan to file for a demolition permit and foundation plan tomorrow.
Oaktree feels that an investment of a $400,000 grant is a good investment for the Town. It will
be paid back to the Town as follows:
® the State payment of$159,000 upon issuance of building permits ($3,000) per building
permit;
• the permit fees of$140,000
For the remaining grant funding that would not be reimbursed in the above manner, the Town
would get 11 affordable housing units in perpetuity and Oaktree will have the responsibility to
maintain and operate them. The Town will also receive 42 market rate units. The Town will
also see an increase of $200,000 per year in property taxes. Additionally, there are potential
benefits including rejuvenation of downtown with a restaurant, high end gourmet shop and other
tenants.
The addition of 53 housing units in the downtown, all of which would count towards the Town's
10% affordable housing requirement. The Town's investment in affordable housing is protected
through deed restrictions.
Paul Ognibene indicated that a loan does not work because Oaktree has a commitment to its
equity partners that the funding would be a grant. The Oaktree principals are responsible to
guarantee any loan.
The.Town's consultant did not have any clear picture of the financing structure when they
submitted their report.
Board of Selectmen Meeting—May 3, 2011 —page 4
James Bonazoli noted that the 40R applies to approximately half of the downtown area.
Inspection fees should not be considered as pant of the offset against the grant. In downtown
under the 40R there will be approximately 200 housing units. He asked what is the grant going
to buy. Paul Ognibene noted it will provide for 11 units that the Town does not own. He also
noted that the Town does not have the operating and maintenance responsibility for the units,
either.
Ben Tafoya noted that in the proforma it indicates that Mass Housing Partnership refinancing
might be available. If Mass Housing Partnership financing is done, then there would be less of a
gap in the financing structure. IIe asked how the Town should review its risks and what
guarantees Oaktree can give including potential repayment. The Town's finding should be
reviewed differently as an investment that would be "the last money in" and perhaps as a
deferred payment loan. Ben Tafoya asked how, if the project is converted into condos, that
would change the financing. Paul Ognibene indicated that it is Oaktree's intent to maintain the
property as rental but that it could be converted to condominiums.
Richard Schubert noted that the $400,000 is 2% of the total project. Paul Ognibene indicated
that Oaktree would be willing to consider that if the total project comes in at less than $18.3
million, they'd be happy to pay the $400,000 to the Town or not utilize the $400,000 initially.
Camille Anthony asked Chuck Eisenberg from Housing Partners Inc. about the last paragraph in
the conclusion. Mr. Eisenberg noted that their conclusion had been that finding could be done
as a loan rather than a grant, but during the Finance Committee discussion the initial information
on the Financing structure was given.
Kevin Mulvey asked if the $159,000, when received from the state, could go back to the
Affordable Housing Trust Fund and the Town Manager responded yes. He asked if the permit
fees could go back to the Affordable Housing Trust Fund and the Town Manager indicated they
could not.
Oaktree was asked whether or not they had leveraged some of the projects they own or all. Paul
Ognibene indicated that they have three projects in the works, two in Cambridge and one in
Reading, they have leveraged all of the projects that they own.
Lyn Whyte indicated that $400,000 is less than 2% of the overall project. If they have a housing
partnership commitment how much is it for (somewhere between $12 and $13 million, at this
point $12.5 million but not more than $13 million). Overall, the benefit of the Mass Housing
Partnership funding would be 1% - their current financing is 5.75% permanent financing and
Mass Housing Partnership would be between 4.38 and 4.5% which would equal 1.25%
difference times a $13 million loan equals $135,000 per year.
Jacqui Carson asked how many of the properties that Oaktree owns do they operate. Typically
Oaktree manages the condominiums that they have developed. They now have 150 units in
development that are projected to be rental units. They have been managing units for I 1 years
and manage several buildings. Mixed uses are a new trend but there are two active projects that
are mixed uses. Oaktree is very familiar with affordable housing requirements. Carson indicated
Board of Selectmen Meeting—May 3, 2011 —page 5
that the Mass Housing Partnefship financing has to exclude commercial. rents, but Oaktree
indicated that commercial rents do count towards the overall loan balance. Oaktree indicated
that if they refinance with the Mass Housing funding then there would be better marketability of
the project but that they would be willing to consider returning funding to the Town.
Steve Goldy asked what the exit strategy is. Oaktree indicated that it is likely the equity partner
who would buy Oaktree out and keep it as a rental project. With regard to the timeframe, Paul
Ognibene indicated that it is likely to take 18 months to construct, lease, and stabilize the
property and that Oaktree would probably look to sell their interest after that. Steve Goldy asked
if Enterprise, the bank that loaned the $13 million, would subordinate to the Town for $400,000.
Paul Ognibene indicated that they would not.
Dave Greenfield asked if one of the financial partners is a supplier and Paul Ognibene indicated
that their equity partner is the supplier of the modular units. This is Oaktree's first effort at an
integrated development where the architecture and construction is done in-house.
Ben Tafoya suggested that a subcommittee meet with Oaktree and see if they can work out the
details of how a project could be financed.
The Board of Selectmen and the Reading Housing Authority agreed to meet on May 10, 2011 at
6;30 p.m. before their regularly scheduled business at 7:30 p.m.
The following people volunteered to work on a subcommittee: Stephen Goldy and Ben Tafoya
from the Selectmen and Diane Cohen and Kevin Mulvey from the Reading Housing Authority.
On motion by Goldy seconded by Tafoya the Board of Selection voted to go into Executive
Session to discuss strategy with respect to labor negotiations and the Chair declares that an
open meeting may have a detrimental effect on the bargaining position of the body and not
to convene in Open Session The motion was approved on a roll call vote with all five
members of the Board of Selectmen voting in the affirmative.
Respectfully submitted,
&etar4y