BUDGET & ECONOMIC DEVELOPMENT COMMITTEE

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					               BUDGET & ECONOMIC DEVELOPMENT COMMITTEE


The Budget and Economic Development Committee of the City of Raleigh met in regular session
at 11:00 a.m. on Tuesday, January 10, 2012, in Room 305, Raleigh Municipal Building, Avery
C. Upchurch Government Complex, 222 West Hargett Street, Raleigh, North Carolina, with the
following present.

       Committee                                            Staff

       Mayor McFarlane, presiding                   City Manager Allen
       Mr. Crowder                                  City Attorney McCormick
       Mr. Stagner                                  Community Director Grant
       Mr. Weeks


Mayor McFarlane called the meeting to order and the following items were discussed with action
taken as shown.

Rolling RFP Recommendation – Southlight. Committee members received the following
memorandum in their agenda packet.

       What is requested:

       A. CONSIDERATION of the following affordable housing proposal that will benefit
          32 individuals earning less than 40% Area Median Income (AMI)1:

              1. SouthLight, Inc.    32 bedrooms $600,000

       Note: The project site is located in a Priority IV area, according to the City’s Scattered
       Site Policy, which recommends distribution of assisted rental units based on geographic
       priority using criteria set forth in the written policy. Assisted housing developments in
       these areas are not permitted without Council exception. The project receives an
       “Acceptable” ranking otherwise.

       Background;

       Program Description: The City advertises an open Request for Proposals as funding is
       available for financing of smaller affordable housing developments. The purpose of the
       program is to provide developers of affordable multi-family housing low interest loans in
       order to build or purchase and rehabilitate privately owned and managed rental units.
       City funds are leveraged with conventional financing and/or other public funding sources.
       This program has been operating since 1988 and has provided funding for over a
       thousand affordable units.
                                                      Budget & Economic Development
                                                                    January 10, 2012


Funding Availability: Rental Housing bond funds are available in 724-7900l0-32l0-975-
CIP04-86670000

        Family     1         2          3         4         5          6
        Size:
        40%        $22,080 $25,240 $28,400 $31,520 $34,080 $35,600

Evaluation Process: In response to an open RFP the Community Development
Department and Wake County Housing and Community Revitalization issued in FY
11/12, a proposal was submitted to the City of Raleigh requesting funds to construct a 32-
bed housing development. It was scored according to criteria listed in the Request for
Proposals.

       Evaluation Criteria
          1. Unit Design and Neighborhood Compatibility - 20 points. Unit should
             blend into the community. It should be an attractive design, sensitive to
             the natural environment and have connections to nearby amenities.
             Developer should attempt to incorporate all possible sustainability
             measures.
          2. Developer Experience - 20 points. Developer should have experience
             and a track record for developing well-built housing.
          3. Financial Feasibility, Leveraging and Market - 20 points. The project
             should be financially feasible with proposed funding sources.
          4. Cost Reasonableness - 20 points. The cost of developing the units must
             be reasonable.
          5. Supportive Services - 20 points. The developer should have an
             appropriate supportive services plan for the proposed population and
             adequate funding for implementation.

DESCRPTION OF PROJECT

1. SouthLight, Inc.: SouthLight, Inc. requests $600,000 in construction financing from
   the City of Raleigh for the construction of a 32-bed (8 unit) development for low-
   income men who are working to overcome substance abuse issues or have a mental
   illness located in the City’s Priority Area Four. The City would share a first lien
   position with Wake County and North Carolina Housing Finance Agency. The
   project would provide 8 4BR/2BA units for 32 individuals making at or below 40%
   of the area median income.

   Location: The site is located at Newcombe and Garner Road which is on the
      SouthLight campus where tenants would receive the majority of their support
      services. The site is located in a Priority IV Area based on the City’s currently
      adopted Scattered Site Map. These are minority concentrated and low-income
      areas in which new assisted housing developments are not permitted. The site
      would be located behind the SouthLight offices where their clinics and staff


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                                                               January 10, 2012


   offices are located and where supportive services would be available for the
   tenants. It is also close to a bus line.

Funding: The funding for the project is proposed as follows:

                                                                        % of
Funding                  Total           Per Unit      Per Bed       Total Costs
City of Raleigh (0%)   $ 600,000         $ 75,000      $18,750        28.57
Wake County (0%)       $ 600,000         $ 75,000      $18,750        28.57
NCHFA (0%)             $ 600,000         $ 75,000      $18,750        28.57
Private Foundation     $ 300,000         $ 37,500      $ 9,375        14.29
TOTAL COST             $2,100,000        $262,500      $65,625       100.00

Units             Number         Rents         Utilities       Affordability
1 bedroom          32            $300           $0              40% Area
                                                               Median Income

Underwriting:
Loan to Value Ratio: Combined City and County Loan to Value limited to 95%.
Debt Coverage Ratio: 1.15 (Minimum debt coverage ratio = 1.15)
Developer Experience/Financial Strength: SouthLight has been running a program
   such as that proposed for a number of years, but has been renting units from a
   private property holder to whom they paid rent. If approved, staff would
   recommend that the City require frequent monitoring at first to ensure that the
   property was managed appropriately. SouthLight proposes to have management
   staff at the development 24 hours per day.
Loan Terms: Construction to permanent loan of $600,000 at 0%, with all payments
   deferred for 30 years.
Additional Information: Tenants in the program will not be paying rent while in the
   program. Rent is covered by an annual grant previously provided by The Wake
   County Local Management Entity. With recent changes to mental health funding
   and services, this group has been required to combine with Durham County and
   other organizations. Given the need for these types of services the current LME
   anticipates that the funding for this program will be able to continue with these
   changes; however, staff is noting this as a potential concern.




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                  January 10, 2012




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Community Development Director Grant explained the work of the Community Development
Department, the RFP in conjunction with Wake County and Housing Finance Agency Process,
work that has gone on for the past 20 years and explained the different type RFP and
developments they do. She talked about the scattered site policy developed in the 70’s to make
sure that affordable housing is distributed throughout the community. She explained for priority
areas stressing the note at the beginning of the memo relative to Council being able to override
the scattered site policy at it relates to priority areas. She highlighted the memo explaining this
particular request, catching on the criteria recommendations, etc.

Ted Clodfelter and Board Chair George York were available to answer questions. Mr. Clodfelter
talked about the fact that Southlight owns the land and this would be housing for people with
addiction and/or mental illness. It would be constructed on their campus next to their existing
treatment facility. He talked about partnering with Biltmore Hills, their meetings with them and
their working together. In response to questioning from Mr. Weeks, Mr. Clodfelter pointed out
they had met with the Biltmore Hills Community several times recently and more so in the last
18 or so months. Mr. Stagner questioned if the County Commissioners will approve this with
Mr. Clodfelter pointing out he thinks so but he could not speak for the County Commissioners.

Mr. Crowder stated it gives him heartburn to look at providing this type housing in a priority 4
area but because of the location of the treatment facility in and the support of the surrounding
area, he would move approval. His motion was seconded by Mr. Weeks and put to a vote which
passed unanimously. The Mayor ruled the motion adopted.

Neighborhood Stabilization – Coleman Street Project. Committee members received the
following memorandum in their agenda packet.

       What is Requested:

       A. Council approval for Community Development staff to enter into negotiation with
          Passage Home and their development partners identified in their proposal for the
          development of affordable rental housing at 1002 Coleman Street a City-owned site
          at the corner with Martin Luther King, Jr. Blvd. The City of Raleigh will retain
          ownership of the land and lease the land for $1 a year for 99 years Passage Home will
          own and manage the apartments. At least forty percent of the units will be affordable
          to households at or below 50% of the area median income (AMI), with the balance of
          units affordable to households with incomes at or below 80% of AM!.

       B. Council approval for the Community Development Department to provide $800,000
          of NSP3 funds as a zero-interest construction loan that will convert to a zero-interest
          30-year deferred mortgage to help finance the development.

       C. Council approval for the Community Development Department to make available a
          deferred loan up to $400,000 In 110MB funds to help finance the development, if
          needed.



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                                                     Budget & Economic Development
                                                                   January 10, 2012


D. Should contract negotiations with Passage Home be unsuccessful, Community
   Development requests Council permission to enter into negotiation with CASA for
   developing the NSP3 site according to the proposal they submitted to the City.

Passage Home
The staff committee reviewing the three proposals scored the CASA proposal slightly
higher than Passage Home’s,            However, staff was not unanimous in theft
recommendation, seeing strengths and weaknesses in both proposals (details explored
below). As Community Development Director, I believe it is in the City’s interest to
pursue the two-bedroom apartment development proposed by Passage Home instead of
the one-bedroom apartment development proposed by CASA. Passage Home’s
development would be more flexible in the current housing market and more likely
provide affordable rental housing to lower-income families as opposed to being limited to
only serving one- person and married-couple households.

Background

The City of Raleigh was awarded a federal Neighborhood Stabilization Program (NSP3)
grant from the North Carolina Department of Commerce, Division of Community
Investment and Assistance (CI) totaling $950,000 approved by Council June 19, 2011 for
the development of affordable rental housing at 1002 Coleman. NSP3 has strict
deadlines for completion: 50% of all NSPS funds must be expended by January 2013;
100% of NSP3 funds must be expended and the development completed and occupied by
February 2014.

NSPI funds were used to both acquire the site and relocate the few remaining tenants to
safe, sanitary housing of their choosing. The blighted structure was demolished and new
sanitary and storm water systems will be installed on site using CDBG funds, the
property to remain in CD’s portfolio.

Future improvements on the site will be owned and managed by the developer selected
through a Request for Proposals (RFP) process. An RFP was developed. Key elements
included:

   a)      Minimum requirements
           a.    Forty percent of rental units must be affordable to households at or
                 below 50% of Area Median Income (AMI) for 30-years, the balance of
                 units to be affordable to households at or below 80% of AMI for 30
                 years.

   b)      Scoring Criteria
           a.     Financial Feasibility
           b.     Development Quality
           c.     Development and Management team
           d.     Sustainability


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             e.      Minority Participation

The RFP was published September 9, 2011. Proposals were due October 26, 2011; three
qualified proposals were received: CASA, Passage Home, and Woodland Associates.

The review process involved:

       (1)        Creation of a Review Committee of City staff from the Planning and
                  Development Enterprise from the following sections:
                  a.     Community Development Strategic Planning Division;
                  b.     Community Development Construction Division;
                  c.     Community Development Loans Division; arid
                  d.     The Urban Design Center.

       (2)        Copies of proposals were distributed to Committee members for thorough
                  review and analysis.

       (3)        All three development teams were invited separately to present their
                  proposals to the Committee and respond to Committee questions.

       (4)        Each developer’s financial information was reviewed by the Finance
                  Department and scored, except for Woodland, which was reluctant to
                  make private financial information public.

       (5)        A numerical matrix was created based on the REP criteria. Committee
                  members individually scored each proposal; scores were compiled to
                  create a composite score. These scores -were distributed among members
                  and discussed at additional meetings.

       (6)        Each member had the opportunity to revise his/her scores if they so chose
                  following these discussions. Final scores were:

                         CASA = 510; Passage Home = 498; Woodland Associates = 445

       (7)        Each proposal took a different approach to the site. The Committee
                  disagreed with Woodland Associates’ approach due, in part, to its
                  suburban characteristics and its low profile (height) considering its
                  location on an important arterial, among other reasons. The primary focus
                  of the Review Committee once this was clear was in comparing the
                  relative strengths and weaknesses of the other two proposals.

       (8)        Though the tabulated scores placed CASA first, unanimity among
                  Committee members could not be achieved:
                  a.    Of the six-person Review Committee:
                        i.      Four placed CASA first;


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                     ii.    Two placed Passage Home first.

       (9)    Both the CASA and Passage Home proposals exhibit strengths; both
              would be worthy projects. However, neither proposal is without flaws:
              modification/clarification during contract negotiations would be essential
              in either case.

Review Committee Assessment Of Top Two Proposals

The break-down of scores by category reflects the views of the majority on the Review
Committee:

        Subtotals of Scoring by RFP Category of Two Top Scorers
        Categories                           CASA Passage Home
        Financial Feasibility                120     110
        Development Quality                  125     135
        Development and Management team 144          123
        Sustainability                       78      73
        Minority Participation               43      57
        Totals                               510     498

Financial Feasibility
    Both organizations’ proposals rely on grants from other government jurisdictions,
       lowering scores on that item equally.
    But CASA scored higher on financial stability.

Development Quality
    Both organizations included quality development partners in their proposals.
    Passage Home scored higher on architectural appeal and quality of materials.
    CASA scored higher on site plan.
    On project schedule, they were within one point of each other.

Development and Management Team
    CASA scored considerably higher on both capacity/experience of management
      team and on property management.
         o This category tipped the scale in CASA’s favor.

Sustainability
    These scores were close but CASA specified Advanced Energy as the third-party
       certifier.

Minority Participation




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               Passage Home scored higher in this category largely due to their proposed builder
                who was very specific in their Section 3 outreach efforts, including apprenticeship
                and mentoring programs.
               Two of CASA’s development partners are MED contractors.

Community Development Director Grant highlighted the memo, explained the scoring and,
presented renderings of the proposals, etc. She stated one primary consideration in making the
recommendation to award this proposal is that we are talking about a family complex in this
area. We would be putting family units back into an area where family units would be removed.
She talked about the various scoring stating the proposals were fairly equal but it was tilted by
the family projects proposal.

Danny Coleman talked about how the markets have changed pointing out he thought this was a
very good proposal and a wonderful idea. He stated however it had not gone before the CAC.
He pointed out Ms. Grant had talked about the scattered site policy and he agrees with the policy
but given the economy maybe the current policy needs to be revisited. He stated in priority 4
area they need family units and may be we should revisit the scattered site policy. He stated he
feels this is a good project.

Jeanne Tedrow introduced the Passage Home team who was present and talked about their work
and desires and work with Wake County to help bring families back into the community. Mayor
McFarlane and Mr. Weeks expressed appreciation for the efforts in the area and work to bring
affordable housing to the area. Mr. Weeks moved approval. His motion was seconded by Mr.
Crowder and put to a vote which passed unanimously.

Mr. Crowder pointed out the CASL project seems to be a little more pedestrian oriented and
would encourage Passage Homes to think about that in their development.

CLOSED SESSION

Mayor McFarlane pointed out a motion is in order to enter closed session pursuant to G.S. 143-
318.11(a)(3) and (5) for the purpose of instructing city staff concerning negotiations for
properties in the following area: 1) acquisition of property on Wake Forest Road. Mayor
McFarlane moved approval. The motion was seconded by Mr. Crowder and put to a vote which
passed unanimously. The Committee went into closed session at 11:20 a.m. Copies of the
minutes of that section are covered in a separate set.


Gail G. Smith
City Clerk

jt/BED01-10-12




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