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WPCNR Common Council Chronicle-Examiner By John F. Bailey. November 1, 2005: The Common Council voted unanimously at their last public meeting to give $1,175,971 in grants from the city’s Affordable Housing Assistance Fund to Lake Street Partners for development of 17 townhouses off Silver Lake and White Plains Avenue LLC & Kensico Avenue LLC for building of 42 low and moderate income rental apartments for seniors with no discussion or description of the financial details of either project to the audience watching on television.
Horton Mills by Lakeside Partners. Activity Began October 6. Photo by WPCNR News.
Kensico Terrace Began Construction October 6. Photo by WPCNR News.
When asked by WPCNR to discuss further details of the project, and to respond to written questions previously submitted, the principals of Lake Street Partners refused to make any further comments on the project other “than what was in the public record.”
Mr. John Saraceno, one of the principals of Lake Street Partners did tell WPCNR his 17 condominiums intended for workforce families earning 80% of the county median income would be sold at prices ranging from $200,000 to $218,000.
WPCNR attempted to interview Bill Brown on the project before the vote, but Mr. Brown said he was too busy that week. His partner, James Bason, says should be completed by the end of next September (2006).
Covering Shortfalls
The two city grants were to cover the shortfalls in financing experienced by two “affordable housing” developments, Horton’s Mill Village project off Lake Street, on the site of the former property owned by the Pettinichi family, and 24 South Kensico Avenue , that have been in the works for four years. A steam shovel appeared at the 24 South Kensico Avenue and started construction at 24 South Kensico the second week in October, however as of today there is just a pile of dirt on the site, no earth moving equipment on the site.
The outright grants were not requested of the city in the original proposals made 3 years years ago.
In a mid-September work session, it was learned from both organizations that the costs of the developments have been rising as the two organizations asked the city and the county to give them money to meet those rising costs. The city and county agreed to do this with no strings attached.
Lake Street Partners is building 17 town house Horton’s Mill Village at a cost of $5,528,920, an increase of $282,671 over the $5,188,920 originally estimated in October, 2003, according to the paperwork submitted with the Common Council grant ordinance passed October 7.
The $282,671 increase is based on $85,000 more in site work due to new SPDES requirements for storm water quality and management (being executed by the city). There is $197,671 more in construction costs due to “costs in the construction industry, particularly in the area of cement and steel, and cement and steel derivative products, and due to the environmentally and sensitive nature of the site and the carve out of the approximately eight (8) acre protected area,” and though “the applicant has modified the modular design and reduced the amount of concrete used in the project; however, the cost of the modular units and the “specialties and finishes” – siding, patio materials, decking, etc. – have increased after cost saving reductions, an increase of $197, 671.”
The Lake Street Partners applicant, according to the paperwork prepared for the Council, has “been able to achieve savings in other areas to control hard costs, and thus the net increase in hard costs is $254,974,” and because additional site survey work was needed to preserve eight acres of the site, an additional $72,500 was added bring total increased costs of the project to $327,474, the amount of the approved grant.
A Grant, Not a Loan
Based on a detailed laundry list of fee increases, financing cost increases, and construction softcosts, the council approved the $327,474 grant from the City’s Affordable Housing Assistance Fund to Lake Street Partners “to fund a portion of the gap in funding for the seventeen (17) workforce home ownership project.”
The grant appears to have no strings attached, and “payment of approved funds shall be made upon submission by the applicant of a standard AIA form with supporting documents.” It is an outright grant.
Two weeks before the October 7 approval, the cost of completing the Horton’s Mill Village project was estimated by the applicant to be put at $5,528,920 for the 17 two and three-bedroom townhouses. That makes a total cost per unit of $325,230 on a straight units/cost basis.
Bill Brady, Associate Planner with the Westchester County Department of Planning told WPCNR, “The (Horton’s Mill) 3 bedroom units will be sold at $214,968 and the 2-bedroom units are priced to be available to 2 income ranges (both under 80% of median): $186,338 and $198,753.”
$1,708,497 in Grants from
City and County to the Brown Project.
According to the Common Council agenda paperwork, the Council approved $848,497 from the City Affordable Housing Assistance Fund to cover a similar shortfall due to an increase in hard construction costs for the South Kensico Project. Westchester County has agreed to advance an additional $860,000 on top of the city grant to fund the cost increase suffered by that project.
Bill Brown, in a letter to the city, July 27, wrote, “The project development cost at the time of project approval was $10,312,607. This included construction costs of $6,920,004 (hard costs), construction soft costs of $1,700,320(soft costs), and bond issuance costs and developer’s fee of $1,692,283 (financing costs and fee). Subsequent to the site plan approval by the Common Council, Westchester County funded the acquisition of the project site, and, as Developers, we began the lengthy process of obtaining financing from Federal and State agencies and programs. Funding for the construction of the subject has been obtained from The New York State Housing Finance Agency through the sale of Tax Exempt Bonds, NYS Low Income Housing Tax Credit Program, NYS Housing Finance Agency (HFA) Grant, Westchester County loan, Federal Home Loan Bank and deferral of 64% ($1,083,061)of the Developers Fee ($1,692,283).
Mr. Brown, in the same letter, explained the reasons costs escalated:
“It has taken over three years to obtain financing commitments based on the original project development cost of $10,312,607. However, the commitment of the contractor to hold the hard costs expired before full project funding was obtained. It was, therefore, necessary to obtain a new construction commitment. Certain aspects of the project were redesigned to achieve cost savings before the project was rebid. Even with the cost savings achieved, the lowest responsible bid for the construction of the project (hard costs) came in at $8,650,000, or $1,729,994 more than the original hard cost commitment of $6,920,006. Soft costs (architectural and engineering fees) increased by $25,000 due to project redesign work, and financing costs decreased by $46,497, due to the elimination of SONYMA financing costs. The net result is an overall project development deficit of $1,708,497.
“In order to build this project, the first exclusively for low income households since the construction of the Section 8/202 senior project on Windsor Terrace in the late 1980s, we must find additional financing sources to meet this deficit. Westchester County has agreed to provide additional HOME Program funding for 20 units at $43,000/unit, for a total contribution of $860,000.
In the original approval of this project in October of 2001, the city was to get 42 units for seniors, that included 33 units for families with incomes at or below 60% of the median income ($99,000) or $60,000, and 9 units for families with incomes at or below 50% of median income, about $50,000. Now, under the new grant arrangement, split with Westchester County, the county will have control of 20 units, and the city, 22.
Mr. Brady of the Westchester County Planning Department explained to WPCNR what was meant by “ the county will have control of 20 units,” writing WPCNR: “ On 24 South Kensico the county will not control any units, but (24 South Kensico) must give residency preference to current residents of a consortium community (Harrison, Greenburg, etc.) to 15 of the units. Target market is anyone meeting the maximum income requirements. As 29 of these (42) units are for seniors, there is not an expectation that these will be working families.”
Brown’s letter of July 27 makes the case for city support thusly:
“We are requesting support (of the city) to fund the balance of the deficit of $848,499. This would represent $38,569/unit for the balance of 22 units. These units would be leased pursuant to the City’s priority point system in its Affordable Rental Housing Program Rules and Procedures. The units assisted by the County would be leased according to the County’s priority system,” Brown’s letter concludes.
Cost per Unit Soars.
Adding the new net development deficit cost of $1,708,497 to the original project development cost of $10,312,607, gives you a figure of $12,021,104 for the cost of the project according to the council’s own paperwork.
In the work session prior to the October 7 Common Council meeting, Mr. Brown and his partner James Bason said at this time, they were planning to rent their 2 bedroom units for $1,100 a month, and 1 bedroom units would rent for $860 a month. They said the project would cost approximately $13.2 Million.
In the same work session, John Saraceno and Daryle Hawes of Lake Street Partners indicated the cost of construction per condo unit at $280,000 a unit, up from $227,000. Families eligible for this “workforce housing” at Horton’s Mill Village would have to earn a maximum of $80,000 (80% of median income). They told WPCNR they would have no further comment on the project except what is in the public record.
Hudson Valley Bank is financing the Lake Street Partners project for $3,283,188, New York State Affordable Housing Corporation is in for $425,000; Westchester County Housing Implementation Fund $800,000 (payment for the land); CHI End Loan Grants are being received for $250,000; Westchester County Home Funds of $266,572; End Loan Downpayments of $164,160; and the White Plains Grant of $340,000 (adjusted to $327, 474 last night).
Housing advocates Support it.
Carlson Calls Grants “A giveaway.”
Councilman Larry Delgado commenting objected to Common Council candidate Glen Hockley’s suggestions for a density bonus allowing more development in return for building affordable housing, saying, to do so would be “increasing density” in the downtown. Delgado objected to Dennis Power’s comment from the gallery that the affordable housing ordinance (at 6%) should be increased to 15% of buildable units, and that the area covered by the affordable housing ordinance be extended beyond the core downtown area to be “citywide.” Delgado said, he could not support building affordable housing in the single family residential neighborhoods. At the Battle Hill debate last week, Delgado also supported building affordable housing with the city affordable housing fund dollars because he said the developers building it did not make a profit.
Rita Malmud, speaking after the vote noted that building affordable housing was very expensive, and that using the affordable housing fund money to fund it was a good use of the money. Mr. Boykin, Mr. Roach and Mr. Bernstein supported the grants, too, in their statements.
Ms Malmud is correct. Affordable Housing is expensive. Let us just see how expensive these 59 units are:
Carlson called the city grants giveaways.
John Carlson, the candidate for Common Council described the grants as “giveaways,” with no guarantees that the developers would not come back asking for more money in the future. He criticised the council for giving in grant form money approximately equal to the principals’ equity in both projects, and said instead the money should have been given in the form of loans, with performance guarantees.
Grant of $340,000, almost covers Developer Equity ($377,000) of Lake Street Partners, according to John Carlson. Photo by WPCNR News.
The grant to Kensico Terrace is more generous from the city. It exceeds the stated Developer’s Equity. Carlson made the point to the council that the combined city and county grant of $1,708,497 ($848,497 from the city, and $860,000 from the County) to Mr. Brown’s project, Kensico Terrace exceeds the Developer’s Equity in the project of $1,692,283.
The Numbers: Approximately $300,000 per unit.
The Kensico Terrace group is building 42 units of one and two-bedroom rentals to persons of 60% of median income, for not $12,021,104 but for $14,000,000, according to Tiffany Berns, Assistant Vice President of Public Relations for the New York State Housing Finance Agency, that agency is using the Mortgage bonds and tax credits to finance the building. But, let’s use the $12,021,104 figure anyway. That puts the cost of building the Kensico Terrace units at $286,216.76 per unit. If the cost escalates to $14 Million as the New York State Housing Finance Agency loan details project, the cost to build becomes $333,333 per unit.
The Lake Street Partners group, placing their costs as of the Commount Council meeting evening, is reporting the cost of their 17 Town Houses at $5,528,920. This works out to $325,230.58 per unit. The organization was given the land by Westchester County for $1.
High Cost of Affordable Housing.
Contrast these per unit costs to JPI’s Residences at Jefferson Place condominium complex priced to condominium buyers at $320,000 to the mid-600,000 range at 300 Mamaroneck, which was built for $100 million making the JPI raw unit cost $355,000 a unit.
More to the point, there is no guarantee that once city money is given once to these organizations, that the project will be built on time and on budget, and not subject to more cost overruns that they will be coming back to the city for more financing.
The deals have not been due diligenced in public. The Kensico Terrace group currently awaits closing on their financing from the state, according to Ms. Berns, who has not gotten back to us as of October 31, as to when the closing on the Kensico Terrace loan would take place.
Another matter to consider is that in the 24 South Kensico Project, the financing from the state attaches tax credits and depreciation values that are used as tax shelters worth millions to the partners that they can deduct dollar for dollar from their own personal taxes.
The Marathon Dance with the State.
According to Ms. Berns of the New York State Housing Finance Agency. “They (Kensico Terrace) originally applied July 30 of 2002. They were approved by the Board in March, 2004. The next step after a project is approved by the Board is for HFA and the projectdeveloper to sign a commitment to finance. That was signed in March of 2005. Generally speaking after the commitment to finance is signed, that’s when preparations for closing begin. The closing period actually involves the preparation of documents that can amount up to thousands and thousands of pages setting the terms for the financing. The average time it takes is about six months from Board of Approval to actual closing day. It isn’t something that happens instantaneously.”
Rising Costs Added to Loan by State Agency.
“In this case (Kensico Terrace/White Plains Avenue LLC), while we were working toward closing with the Developer (Mr. Brown and Mr. Bason), the agency decided after the Board approval as we worked towards the closing the original financing approved for the project should probably be increased in part because of industry-wide cost increases. It is not at all unusual,” Berns said.
She continued, “As far as how long they can wait to draw down (on the financing), that is something that happens after the closing. There is no statute of limitations on board approvals. However, once the project is closed, each project has its own draw-down schedule. It is prepared and negotiated during closing. There’s no way to say how that would come to be in this case, because it was during the preparation for closing that they wanted to go back and increase the request.”
“The original deal,” Berns told WPCNR, “was $5.6 Million in Mortgage Bonds and the $1.6 Million in subsidy loans, not backed by bonds (a total of 7.2 Million). That was the original math. They’ve now requested an additional $1.5 Million, in collaboration with the agency it’s been determined the project will need an additional $1.5 Million in financing and corresponding tax credits. The tax credit portion of the original deal was $414,987 annual allocation of 4% as of right, low income housing tax credits. This came about between March 2005 and now.”
Closing to Come.
Asked when Kensico Terrace, White Plains Avenue LLC would close on the financing from the New York State Housing Finance Agency, Berns told WPCNR in mid-October, “It’s my understanding we are still in discussion with the developers to find out how they are going to go about doing it. I don’t know if I can comment on a timetable. As of right now, I can’t comment.”
Berns said, “It wasn’t so much the developer was asking for it (the extra funding), it was decided in collaboration with the agency, based in part on rising costs. The numbers they are asking for (from city and county) are $848,499 from the City of White Plains and $860,000 from the county.”
Berns is getting back to WPCNR as to difference of the $12.2 cost and the agency’s $14 Million estimate on the project. (As of November 1, that information has not been given us.) Berns said the loans are generally for a term of 30 years. The interest rate on the loan is determined by the investor marketplace at the time the bonds are sold, “because the loans we’re providing are actually backed by bonds, at least a good portion of them,” Berns said. $5.6 million is bond backed, $1.6 million is in the form of a subsidy loan.
Another Perspective
Put in another perspective, for the total of $21 Million in bonding the city gave the Cappelli organization to build a garage, the city could have purchased 70 condominiums or rental apartments from JPI or Louis Cappelli or Bank Street Commons giving them units the city could rent to pay off the principle and maintain complete control of the units.
The point of this article is that building affordable housing costs the taxpayers as much as building luxury housing for profit, even when the land is given free.
There are also professional organizations that take money out of an affordable housing project. Since no list of firms executing the various services listed on the cost sheets was available, WPCNR has not been able to determine whether firms are doing the legal/design/construction/etc. work at cost or at a normal profit.
Lake Street Partners Construction Cost Increase Documentation. Photo by WPCNR News
Kensico Terrage Cost Increase Documentation. Photo by WPCNR News.
