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					OREGON STATE HOUSING COUNCIL Minutes of Meeting Oregon Housing & Community Services Large Conference Room –124 A/B 725 Summer Street NE, Suite B, Salem, Oregon 97301 9:00 a.m. June 2, 2006

MEMBERS PRESENT Buz Ortiz, Chair John Epstein Maggie LaMont Stuart Liebowitz Jeana Woolley GUESTS Elizabeth Anguiano, DHS-OMHAS Gene Button, Exec. Director, Step Forward Activities Betty Tamm, Exec. Director, Umpqua CDC Colleen A. Schwarz, Capmark David Crawford, Geller Silvis & Associates Bob Jacobson, Exec. Director, Umpqua Homes for the Handicapped Jeff Puterbaugh, OMHAS Karen Litwiller, Oregon Mennonite Residential Services Rita Grady, Exec. Director, Polk County CDC

STAFF PRESENT Rick Crager, Acting Director Lynn Schoessler, Housing Finance Manager Craig Tillotson, Residential Loan Specialist Betty Markey, Housing Resources Manager Roz Barnes, Housing Development Rep. Shelly Cullin, Loan Officer Vince Chiotti, Regional Advisor to Director Darcy Strahan, Regional Advisor to Director Jack Duncan, Regional Advisor to Director Vicki Massey, Housing Resources Asst. Manager Marlys Laver, Asset & Property Management Administrator Tony Penrose, Housing Development Rep. Heather Pate, Housing Development Rep. John Czarnecki, OHCS Architect Karen Clearwater, LIHTC Rep. Mike McHam, OHCS Market Analyst & Appraiser Kim Manie-Oskoii, Regional Advisor to Director Carole Dicksa, HOME Program Manager Roberto Franco, Housing Services Rep. Carol Kowash, Housing Development Rep. Bruce Buchanan, Regional Advisor to Director Debie Zitzelberger, Loan Officer Jo Rawlins, Recorder

I. CALL TO ORDER: Chair Buz Ortiz calls the June 2, 2006 meeting to order at 9:10 a.m. and asks for roll call. Present: John Epstein, Maggie LaMont, Stuart Liebowitz, Jeana Woolley and Chair Buz Ortiz. Absent: Scott Cooper, Larry Medinger.

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APPROVAL OF MINUTES: Chair Ortiz asks if there are any corrections to the May 5 meeting minutes. Jeana Woolley points out a correction on page 9, line 13: Change ―projected‖ to ―protected.‖ MOTION: Epstein moves that the Housing Council approve the minutes of the May 5, 2006 Council meeting, as amended. VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger.


CONSENT CALENDAR: Craig Tillotson asks Council if they have any questions.

John Epstein asks if the Portland Development Commission (PDC) historically originates. Tillotson says that the way PDC is set up with OHCS, they do specifically rehab-type loans using our bond loans for the first mortgage, and then come in with the second, a sharedappreciation type of mortgage. This home needs significant repair, so we thought it was a good partnership to work with them to not only get a loan for the borrower, but also get the home rehabilitated. They have asked recently about the possibility of doing loans like any other lender, but they are still working on deciding whether or not that would be a good option for them. Maggie LaMont asks about condo #9 on page 26 and whether or not $309 per square foot is typical for that area. She says she knows it appraises out, and that there was discussion about the high cost per square foot in the last minutes. Tillotson says that they have done other loans in that same condo project and they are all about that same cost per square foot. Chair Ortiz says that on #11 (manufactured home), he is surprised by the cost per square foot of $124.63. Tillotson explains that what lenders have been telling them is that in Klamath Falls prices of homes are going up. We do see a lot of manufactured homes on land down there and it is a good-sized lot at 14,000 square feet. LaMont states that they are probably paying more for the land. Tillotson says yes, a lot of it is the land cost. MOTION: LaMont moves that the Oregon State Housing Council approve the Consent Calendar. VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger.

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V. OLD BUSINESS: Qualified Allocation Plan (QAP). Karen Clearwater, Low Income Housing Tax Credit Representative for Oregon Housing and Community Services, explains that she is presenting to Council the comments received through the public comment period of the Draft Allocation Plan. Along with those comments are the recommendations for changes that were approved at the May 23 Finance Committee. During the public comment period of April 10 through May 10, OHCS received 11 letters. She presents a summary of the items commented on the most, who provided the comments, and the department’s recommendation.  Our change to require market studies included in the CFC application, beginning with the spring round of 2007, received a lot of comments and concerns from the public. The respondents felt that the cost of doing this was an issue for them, as well as the fact that if they were not funded in that particular round, they would have to follow up, apply again, and get an updated market study. However, staff and Finance Committee feel that it is very important that we get market studies up front with our applications because once we have awarded funds, it is very difficult to take funds back. Market studies currently come in at carryover and if there is no market for the project, too much money has been spent, and we now have financed a project that is going to have a difficult time leasing up or, in some cases, will adversely impact our existing projects that are out there on the market. We are recommending that we keep this requirement in the QAP. We have developed a loan program through our Finance Division, where we can loan the money up to two years. For nonprofits it is 0% interest rate. It will have an interest rate attached for for-profits. They can borrow up to the cost of the market study and have it included, so there is a way for them to pay for that item. Woolley asks how current the market studies have to be. Clearwater says within six months of application. Woolley asks if there is any way to give people who are re-applying a longer timeframe. Clearwater says they have two years. Woolley states that it has to be updated, which means it doubles the cost and she asks if there is a way to grant a longer period of time. Clearwater explains that if the market study is more than six months old, the market could change. For instance, the Portland market in six months changes dramatically. Woolley points out that in a lot of areas of the state that probably would not be the case. LaMont says that in the rural areas it would not change much in six months. Woolley says she wonders if there could be some consideration given. Clearwater says she is sure the department could look at it. LaMont asks what the average cost of a market study is. Clearwater explains that it depends on what is done, how easy the comps are, but most of them come in at around $5,000, some higher, some lower. Mike McHam introduces himself and explains that he is the market analyst and appraiser for the Department. He says he concurs with what Karen is saying about the analyses and how important they are up front. He says he realizes there is concern about the cost. We might be able to at least consider stretching some things down the road, but the six months before application is very typical. If it comes around to a second round, the update for a full market analysis would probably cost between $1,500 and $2,000. What is happening right now is that when a project is awarded funding, it can be between a year and a year-and-a-half before the analysis comes in. Following the reservation of funds, money is starting to be spent as those funds are reserved and eventually awarded a carryover. A lot of time has gone by and a lot of money has been spent before the market is even proved, and that really is not prudent lending Page 3—Oregon State Housing Council – June 2, 2006

or prudent borrowing. He says he would like to see the analyses come in even sooner because it would give the department a little more time. Right now, coming in with the application is very valid and it is prudent business practice. For the most part we are talking about multimillion-dollar projects and spending a few thousand dollars at the front more than outweighs the risk that we may be taking down the road by delaying these things to a year, year-and-ahalf. Chair Ortiz says he agrees and says typically the revised market study usually is a lot less than the original market study. Clearwater says they just update the comps and the rents and re-survey the same people that they surveyed before, so they are not developing a whole new set of data on the projects. Chair Ortiz asks if they could come back and borrow the additional with this program. Shelly Cullin explains that right now there is a limit of $7,500 for a market study. If it would fall within that limit, they probably could. McHam says that to give some perspective to the cost, it usually would run between $5,000 to $6,000 for the initial full-market study, which includes information on the site and the improvements, as well as how they fit in the market. An update would probably be $1,500 to $2,000. Epstein suggests that when the applications are sent out, that the department state that there is no guarantee they will be funded and advise people what the update will cost. Clearwater says the department does that in the CFC application. Rick Crager asks Karen if the department could update that within the CFC application process. Clearwater says yes.  Clearwater talks about the change requiring owners to submit a final application within 120 days of the buildings being placed in service before any late charges would begin. Several comments were received from partners. They feel that there is more justification for a sixmonth time period. The rationale behind that is that it takes 75 days for the lien period to lapse; they have to cure any liens, which would also increase the basis in the project; they order the cost certification audit and they need time to review it in-house, which most of them do repetitively; and then they submit the application to the agency. We are suggesting that we make that change to give them up to six months before any late charges occur. What we wanted with this was just to give the impetus to get them in, and if they really feel they need six months to do that, and do it well and get all of their basis in line, we are totally amicable to that. This was never meant to be punitive.  The next change is the deferred-payment loans and cash-flow only loans and partnership loans. We need to have a letter provided from the cost accountant or tax attorney stating that there is a reasonable expectation that these loans can be repaid by maturity. The IRS wants to see these letters in our files. Otherwise, the loan has to either be taken out of basis or treated as a grant, which would also then take it out of basis. We received a lot of comments from our sponsors on this. They felt that it would be very difficult to get this from the professionals, and they wanted OHCS to provide a sample letter. She said she posted a question on the NCSHA Web site to see if any other states do this. There was only one reply, which said they require the letter, but they do not submit a sample because they felt it was tax advice, and that was not a good position to put the agency in. They are supposed to warrant to us, not the other way around by us giving them a sample letter. We are recommending that we leave this in the QAP and that the sponsors get this letter from their tax accountants or tax professionals.

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 Another recommended change is for application and review of requests that request additional funds after receiving awards. Respondents wanted a clarification on if the charge was for the amount of funds requested, or the amount of equity generated by a tax credit project. The recommendation is to make a clarification in the Qualified Allocation Plan to reflect that LIHTC projects will be charged this application fee on the equity generated from the project.  A change was made to the QAP about the amount of credits any one sponsor could receive in a round per Regional Advisor to the Director (RAD) region to no more than $700,000, or two applications that total no more than $700,000. Respondents wanted the word ―sponsor‖ defined, so we are recommending changing the QAP to define the word ―sponsor‖ as ―general managing partner in a limited partnership.‖  Another change is to the acquisition and rehabilitation projects that must submit compliance reports identifying low-income occupancy for each building in a project at the end of each month for the first year of the credit period. Respondents had difficulty understanding what we were meaning by this, so we are recommending changing the language to say, ―Starting at the initial lease-up, OHCS may request from owners, compliance reports identifying low-income occupancy for each building in a project.‖ The reports will reflect month-end information for each month of the first year of the credit period. The reports will identify each unit, all adult tenant names in each unit, and income levels at move-in or initial certification. They felt the initial wording was vague.  There was a change in requiring owners to report on units that were not made ready or occupied for a period of more than 30 days. Respondents wanted that to be 60 days. HPM felt very strongly that 30 days was more than enough time to turn a unit, or lease one up, and if it was not, we wanted it reported to us as such. We are recommending approval of that change as written.  Owners must now certify that no tenants have been evicted for other than good cause, due to Revenue Ruling 2004-82. Respondents wanted more specific language on what is good cause and that it applies to the extended use period. The recommendation is to approve the change as it is written. The language is very explicit in the Owner’s Certification of Continuing Program Compliance manual that they receive, and we did not want to clutter up the QAP with a lot of language that could change. We also received comments from the AG’s office that defining ―good cause‖ can get us drawn into court as well, and we probably do not want to do that. The IRS and HUD have not defined what ―good cause‖ is for the LIHTC Program.  Owners are going to be required to report on-line any compliance issues beginning in 2007. Respondents are very concerned about the amount of time, the types of information, and the HDS system compatibility to report on-line. Our recommendation is to approve this change. OHCS will begin informing owners and property managers by letter right away, and then they will have trainings in the Fall of this year for all of the property managers and owners. We want to try to make this more electronic and on-line, and we will begin to train them and inform them and address any of those issues as they come up.

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Clearwater discusses comments received on areas of the QAP where there were no changes:  They wanted to allow debt coverage ratios to go higher. We do allow that in our CFC. They have to explain it if it goes higher, and they must justify it, meaning that, if they say RD requires a higher debt coverage ratio, they need to give us some documentation that shows what their justification is. We wanted to keep the Best Practices in the QAP as it was written last time.  Two respondents wanted to see the Department use tax-exempt bonds for short-term loans for bridge financing and construction financing. That would take a lot of change in our current Bond Program, and at this time I do not believe we are looking at doing that.  One respondent wanted to develop an appeals process for projects that were not funded through the CFC. Legal Counsel feels this would leave the door open to all applicants who are not funded to appeal, creating another process to be managed by both internal staff and the RADs.  One respondent wanted to see all tax credit awards presented to Housing Council for a vote. Under Executive Order EO-87-06, the Governor has designated OHCS as administrator of the Low-Income Housing Tax Credit Program. It is not a requirement of the program to bring these all to Housing Council.  One respondent wanted to create a threshold requiring scoring factors or bonus points for projects using Green Building techniques. At this point the Department will continue to support the use of Green Building techniques in the construction of affordable housing, but we will continue to work with this respondent to see what more we can do, but not adding points and making it a scoring event.  Several respondents were very concerned about resident services and how OHCS was going to start monitoring and requiring compliance on these activities. A lot of this was probably generated from the fact that we have now started requiring some compliance and monitoring and reporting on our resident services, and they are nervous about this. We are going to be working with them to try to set them at ease and we are willing to take any reports they currently do for any of their other funders on the services side and we will continue to work on that. It was not a change in the QAP, but it is beginning to be brought forward and a lot of requirements are being put on a lot of the sponsors for reporting. Stuart Liebowitz asks about the recommendation or the suggestion about the taxpayer awards going before the Housing Council and the rationale for Housing Council hearing and approving HOME dollars but not hearing and approving taxpayer dollars. Clearwater says she believes it is in the charter to do so, as a Housing Council. Betty Markey adds that the statute actually has the Housing Council approve all loans and grants in excess of $100,000. It is also the statute that gives the Department and the Director the authorization to award the tax credits, so it would actually require a statutory change to do that. Clearwater explains that tax credits generate equity, of which we are not a party to. Markey states that it is not our money, and that someone else is investing it. If the Council wanted to pursue that further, it would require a statutory change.

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Epstein asks if anyone has actually gone out in the community and talked to some of the prominent lawyers or accountants who actually do tax credit deals to find out what the cost is to issue an opinion letter, and whether they are willing to issue them. Clearwater says no, the department was not given that option. It is an IRS mandate that says ―You will have the letter in your file or you will treat it as a grant.‖ The department does not have any options. If we do not get the letter then we will take the loan out of basis, which will be very detrimental to a project. We understand that, but we are not given an option. Epstein says he thinks we need to look at other debt transactions, because most problem deals the department is facing now are debt service coverage ratio issues. It is because expenses on projects are spiraling faster than revenue. We do not want it to get too high because that means we have to bring more equity into the deal. Clearwater said we were going to be reasonable in looking at people’s arguments on why they should have one, and I think we should be open to that, because that is usually the main thing that hits projects. He says he is making more of a statement as opposed to saying change the QFP. Clearwater says that, unfortunately, at the end of the day on tax credits, they require us to do a subsidy layering and a gaps analysis. If we have a debt coverage ratio of 1.34, the IRS says they need more debt, not more credits. If the initial lenders are requiring a higher debt coverage ratio because of the fact that the project flips in year 15 and no longer cash flows, we just need it in writing. Epstein says he thinks what it behooves everyone to do is make sure to have good, reasonable expenses going in so if somebody has an argument that they should have higher expenses on a project, we need to be careful not to keep driving their expenses down. Clearwater says they have been doing a lot of that. MOTION: Woolley moves that the Oregon State Housing Council recommend forwarding the final 2007 Qualified Allocation Plan, with the changes listed, to the Governor for signature. VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger.

NEW BUSINESS: A. Consolidated Funding Cycle – Overview. Betty Markey, Manager of the Housing Resources Section, gives an overview of the spring Consolidated Funding Cycle. Thirteen applications were received. The spring rounds are smaller rounds, more special needs projects. The larger projects are primarily preservation projects with tax credits. We had enough resources and enough high-ranking projects to provide funding for 11 of the 13 applications. We have one project that is still under consideration, and one project that was not recommended for funding. Five of the 11 projects are HOME projects. She points out that the populations eligible for funding with the HELP program were changed this round from farmworkers, victims of domestic violence, and homeless, to the chronic homeless, including families, persons in recovery, and group homes that serve developmentally disabled or chronically mentally ill. We have very limited HELP dollars, about $250,000 each round, so we wanted to target it to some of the more underserved populations.


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On the Tax Credit Program -- tax credits in the spring round are only offered to preservation projects, and we define preservation to be expiring projects such as HUD or RD that have at least 25% of the units with project-based rental assistance. We also have preservation as replacement of existing housing, such as a HOPE VI Project, as long as it has 25% projectbased assistance. We have expanded our definition of preservation to also include expiring tax credit projects because we are getting projects that are getting to year 15, the limited partner wants out, meaning the general partner has to purchase them. We are still giving preference to projects that have at least 25% of the units as project-based assistance, because if those projects flip to market and we lose that rental assistance, we cannot replace it. It is a bigger priority for the Department to fund those projects. Thirty percent of all the resources in this round were set aside for underserved populations. We used to set it aside for populations that would meet one of our strategic plan goals, but we did not have strategic plan goals outside of the Department this biennium. The populations eligible for the set asides are farmworkers, chronically mentally ill, developmentally disabled, chronically homeless and ex-offenders, and also preservation projects. Markey talks about the Department’s performance measures, which are a tool to evaluate key programs and measure progress in meeting long-term goals that link with Oregon Benchmarks. She explains that the department does its measure based on the percentage of units that serve lower income. With a goal of 40% of median income we want to see at least 13% of the units serve that population. At 30% of median income, we want to see at least 10% of the units that we fund. We far exceeded this goal this round. If you add the goal for 40% and 30%, it is 23% of the units, and we had 73% of the units funded this time, serving income levels below 40%, which is very good. Markey points out that 165 of the units funded have some type of project-based assistance, so no one will be paying more than 30% of their income into those units for their housing expenses. She says she thinks the department has funded some good projects. Epstein asks for clarification on project-based assistance and if it also refers to annual renewals and whether it matters. Markey says it does not matter because most of the annual contracts are being renewed. Nobody knows what is going to happen at the federal level, whether it is going to be cut or not, so some are longer term and some are not. For instance, one of the projects is the Maybelle Clark Macdonald Center, which does not have HUD or RD, but they do have a long-term contract with DHS for Medicaid payments that are paying for some of the housing and operating expenses. Markey distributes a handout containing pictures and floor plans of the various projects and continues with discussion on the specific projects:  Avalon House is a three-story house in Milwaukie constructed by Northwest Housing Alternatives, providing housing for homeless females in recovery from alcohol and drug issues, suffer from mental illness, or a combination of both. There are six SRO units, each with a private bathroom, and a one-bedroom apartment for a resident manager. They have only asked for $60,000 from the Department. The $700,000 project is primarily financed

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with Clackamas County HOME and HUD McKinney funds. John Czarnecki talks about the architectural design.  CSI 12th Street -- Community Services Inc. received $100,000 Trust Fund, $35,000 HELP, and $5,000 weatherization, to purchase a group home in Cornelius. The funds will also be used to remodel the home to facilitate 24-hour, seven-day-a-week support services needed by the five adults profoundly challenged with developmental disabilities who will be residing in the project. Approximately $125,000 of project cost is for the rehabilitation. John Czarnecki talks about the architectural design. Epstein says it would be helpful to include information on how long an organization has been in business. For instance, ―CSI Services has been in business since 1985, servicing this population.‖ Just one sentence to that effect so Council has a feel for who they are giving money to. Markey says they can do that. Crager adds that we will make sure to include information about the sponsor in future summaries.  Lyndon Musolf Manor is one of the first tax credit projects. It is an expiring LIHTC project located on Northwest 3rd Avenue in Portland. Innovative Housing, who is the current managing general partner, is proposing to acquire the manor from the limited partner, put a new infusion of tax credits into the project, and preserve the housing for many years to come. They are receiving $700,000 in annual tax credits, $100,000 in Trust Fund and $59,564 in Low Income Weatherization for the acquisition and rehab. The 95 studio units house a fragile population with incomes less than 30% of median income. The sponsor completed a tenant survey recently, and of the 95 residents, 46 were formerly homeless; 69 had some type of mental illness or were disabled; 27 had physical disabilities; 28 were struggling with drug or alcohol dependencies. Seventy-seven of these units do have projectbased assistance. Six have some McKinney supportive housing assistance that will be set aside for chronically homeless. This project was originally financed with the Department in 1990. It only got about $91,000 in tax credits, and the rehab that was done at that time was only $300,000. The sponsor is going to be doing substantial rehab on this project, including bringing it up to seismic standards. Czarnecki discusses the challenges in upgrading the building. Markey continues:  Maybelle Clark Macdonald Center and Residence is located on Couch Street in the Old Town/Chinatown section in Portland. It houses medically frail, elderly and disabled individuals who are homeless and have no place to go and would be at the mercy of the street. The owner has a contract with DHS for Medicaid funds; it is a long-term contract that aids in supporting the cost of operating the housing. The project was originally funded with the Department in 1999. In 2002 they started to see some really dramatic physical problems with the building, and they started in on the rehab. When they opened up the shell, they found some other really disastrous things that had not been completed to standards. Money from the Department will be used to help finish the rehab that is needed on the project, and also to pay the debt on the property. The project serves homeless people, and the amount they are receiving from DHS for Medicaid is not sufficient to cover everincreasing operating costs. Page 9—Oregon State Housing Council – June 2, 2006

Czarnecki says that the building was never planned properly to prevent moisture from entering the building. That is the main problem. He describes the photographs and explains the infrared technology that is used to pinpoint the presence of moisture, both on the exterior surfaces and on the interior. There is evidence of subsurface moisture behind the ceiling and the floors are deteriorated from the presence of moisture. It is a tremendous problem. Woolley asks if the project was built at the time it originally received the tax credits. Markey says yes, it was new construction. Woolley asks what happened. Markey explains that it is her understanding it was a design-build. Czarnecki agrees and says what happens in the process is that the owner has the architect and consultants prepare a set of drawings which go in for permit, and then rather than the construction all being coordinated from a single source, different pieces are let out separately, which is not a great way to do it, especially if the drawings are not what they should be. Woolley states that she has done design-build projects and that is not really the problem. The problem is not having some of the expertise to do the coordination. She asks what the department has in place to help and points out that the department spent a lot of money not that long ago. Markey says the department is requiring that they get a third party construction manager, approved by the Department, to make sure the rehab is done correctly. Woolley says she wants to make sure this doesn’t happen again. Markey explains that the department has a good consulting team working on it, and they are going to require a third party construction manager, and John Czarnecki will be overseeing it. Czarnecki says Wolley’s description of the proper processes is exact and perfect. The entire team has to be strong and the owner’s representative has to understand exactly what is going on. The architect and the contractor need to be able to work together as the process goes along, to resolve issues as they come up. Woolley asks who was involved in this project and did they just discover these issues as they got ready to turn the project. Markey says there was legal action taken and they ended up with a settlement agreement. It wasn’t until they started to do the rehab and actually opened up the shell that they found out there was a lot more wrong with it than what was initially perceived. Unfortunately, they had already reached settlement. Woolley asks who the architect was on the building. Markey indicates that she does not have that information and does not know. LaMont asks if there is a process in place that would ensure the department not use the same team again on another project. Markey says the department does not actually have an adopted process on that at the moment. Crager explains that there is consideration given as we have issues with architects or contractors that come forward, and that is part of the discussion, either at Finance Committee or at Housing Council, and it is factored in. Discussion continues regarding the design-build process. Epstein comments that National Equity Fund pays eighty-three cents on the dollar for the credits according to the budget, which sounds low in the current marketplace. Markey says they did look at it and thought it was very low because they are seeing higher credits, and they had called National Equity Fund. She says she cannot remember the reason, but she Page 10—Oregon State Housing Council – June 2, 2006

will find that out and get back to him. Carol Kowash states that there is going to be a requirement in the reservation letter that the sponsor go back to the equity investor and request a higher rate because we think it is too low also. Epstein asks if National Equity Fund is the original investor. Markey replies that they are not and they are not going to get all of the benefits. Kowash adds that they are taking on a problem. Markey says they will look at it as they complete their subsidy layering process. Chair Ortiz asks Markey what she sees the tax credits going for now. Markey replies that they are about 90 cents to a dollar. Epstein asks if the sponsor is getting paid any developer fee. Markey says that the owner is not taking a developer’s fee. There is $90,000 going to the two consultants who are working on the project. The ownership is also contributing $560,000 from an endowment that they have and they are doing fundraising for $118,000 to contribute to the project. Markey continues:  Raintree Apartments -- Human Solutions will purchase a 41-unit apartment complex located in the Rockwood area of Gresham. There is going to be extensive rehab, as well as a service component provided by Human Solutions, which will provide better living conditions for the tenants. Fifteen of the units will have project-based assistance. They are requesting $100,000 from the Trust Fund and some LIHTC, which will maintain the affordable rents for the current tenants. Most of the financing on this $4 million project is coming from Multnomah County, the City of Gresham, PDC, and other grants and a permanent loan. Czarnecki discusses the architectural design.  Lehigh Project -- Chamberlin House currently owns and operates the Lehigh Project, which is a five bedroom group home for developmentally disabled adults. The $100,000 Trust Fund and the $31,000-plus in HELP funds they are receiving will be used for debt reduction of the existing mortgage. The service dollars have not increased since 2001, even though expenses are increasing. By paying off the debt, there is income available to ensure that Chamberlin House can continue to provide the services that are needed for the population, and it will allow a stable financial outlook for coming years. Czarnecki discusses the architectural design. VI. NEW BUSINESS: A. Consolidated Funding Cycle – continued.

1. Homes Enabling Livability and Productivity Phase 2. Carole Dicksa, HOME Program Manager, introduces Gene Button, Executive Director of Step Forward Activities, the sponsor on the project, and Bruce Buchanan, the Regional Advisor to the Director.

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Homes Enabling Livability and Productivity consists of new construction of two group homes on a shared site. Each home is designed to house five developmentally disabled adults. Each home has five separate bedrooms and a common area containing a kitchen, a living room, and a dining room. Each home is fully accessible to individuals with mobility impairments -- meaning that hallways and doorways are wide enough for a resident to be assisted by a staff person. Bathrooms are specially designed to accommodate people with physical impairments. The project site will easily accommodate both homes and has adequate room for outdoor gardening and leisure activities. A circular driveway will serve both homes, and allow easy entrance and exit to the van that provides transportation for the residents. The site is well located near services important to this target population. The homes are financed through OHCS Grant Funds of HOME, Trust Fund, and HELP. In addition to these resources, the project sponsor, Step Forward Activities, will contribute $25,000 of agency funds toward the project. Step Forward Activities owns two existing group homes which will be sold, and the net proceeds will also be contributed to this project, bringing the total sponsor contribution to $181,400. Combining these sources of funding will ensure that the group homes will be developed debt free so that rental charges for residents are minimal, but the homes can be appropriately maintained. In terms of operation, each home will bring $914 per month total in rental income, which is evenly split between the five residents. Service income is derived through a contract with the Oregon Department of Human Services. Step Forward Activities will manage the homes as well as provide services for the residents. At least one full-time, trained staff person will be on site at all times. Services will include meals, laundry, medication management, transportation, crisis intervention, and ongoing compliance with each resident’s individual support plan. Step Forward Activities is a nonprofit corporation based in Baker City. It was founded 30 years ago with a mission to serve the severely disabled adult community of Baker County. It currently provides housing with services, vocational services, and a semi-independent living program for developmentally disabled individuals. Gene Button says he would like to extend his appreciation and that of his board of directors, to the department for their financial support and interest in helping a small, rural community continue to grow and develop its services for a very needy population. Bruce Buchanan comments that the department did fund a rehabilitation of an existing fivebed group home two years ago in the Spring CFC round, and that project is substantially complete and was well done, both by Step Forward and their contractor. Chair Ortiz comments that in the Greater Metropolitan Area there is sometimes a lot of difficulty getting the community or the neighborhood to accept this type of special needs housing and asks how it was received in this particular area, as far as community. Button says it was received very well. They talked with the neighbors in the surrounding community and the local newspaper ran an article about the project. They received no negativity whatsoever. He said they are very well received, have been in that community Page 12—Oregon State Housing Council – June 2, 2006

since 1976, and everybody knows them and they have a really good reputation in that county. MOTION: LaMont moves that the Oregon State Housing Council approve a $422,786 grant reservation of HOME funds to Step Forward Activities, Inc. for completion of Homes Enabling Livability and Productivity Phase 2, in Baker City, Oregon contingent upon meeting all HOME requirements and conditions of award. VOTE: In a roll call vote the motion passed unanimously. Members Present:, Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger.

2. Mill Spring House. Mike McHam, market analyst and appraiser with the Department, introduces Betty Tamm, Executive Director for Umpqua CDC, Bob Jacobson, Executive Director for Umpqua Homes for the Handicapped, and Darcy Strahan, Regional Advisor to the Director. Mill Spring House is a proposed single story building with seven SRO units for persons with traumatic brain injuries. Each unit has at least a half bathroom. It will be wood framed with the exterior walls wrapped with painted cement board lap siding, gable roof protected with asphalt shingles. Additional interior common areas include a living room with adjacent computer alcove, dining room, full common kitchen, laundry, storage mechanical areas and an office. Exterior amenities will include a large terrace, patio, limited green spaces and limited parking spaces. Improvements are both functional and compatible with the mix of surrounding land uses. Rents will be at both 60% and 50% maximum – three units at 60%, four at 50%. However, most of the tenants have income based on SSI, so the actual rent the tenants are going to be paying will be down in the 44% area (rent plus utilities). The bulk of funding is with HOME funds. The project requires 24/7 staffing. It includes medical services, pharmaceutical needs, diet nutrition services, support groups to regain independence, transportation, speech pathologist, physical and occupational therapy, behavioral therapy, and recreational services. Marginally recuperated individuals which warrant constant medical services are beyond this project’s scope of services and will not be part of the population. The recommended motion is that the Housing Council approve a $720,748 grant reservation of HOME funds to Umpqua CDC and Umpqua Homes for the Handicapped, for completion of the new construction of Mill Spring House in Roseburg, Oregon, contingent upon meeting all HOME requirements and conditions of award. Betty Tamm adds that this is the third project that Umpqua CDC is partnering with Umpqua Homes for the Handicapped. It has proven in the past to be a good partnership in that we have constructed and overseen the construction of numerous housing projects, but do not have the experience in dealing with developmentally disabled or people with disabilities. Umpqua Homes for the Handicapped has been in existence for approximately 20 years Page 13—Oregon State Housing Council – June 2, 2006

dealing with this population, so they are very good at providing the services. We have just entered into a long-term agreement with Umpqua Homes to help maintain compliance with HOME regulations. It is an ongoing, long-term partnership that works very well. The residents are victims of traumatic brain injuries from automobile accidents, and a large number of them are Iraqi War veterans with traumatic brain injuries. These young men need to have a place to go, and it is not appropriate for them to move into nursing homes. Having a home where they can live long-term and try to regain some behavioral and cognitive ability is crucial as we move forward in time. Bob Jacobson says that at this point in time there are inadequate services, particularly in Southern Oregon, for this population. Darcy Strahan adds that the partnership between Umpqua Homes for the Handicapped and Umpqua Community Development Corp. is very good. Czarnecki talks about the architectural design. LaMont says she is concerned that this project has a permanent loan on it of $125,000 and wonders if the department could come up with more money so they could do the project without debt. Chair Ortiz suggests that perhaps the Finance Committee could address that. Crager says that Finance certainly could address that. He thinks in this particular case they were able to demonstrate that there was a combination of public and private resources coming together to make a project work. He says he recognizes her concern, but that Finance Committee felt it would be able to substantiate the debt that was put on it at $90,000. Tamm says they were looking to see if they could sustain more, should one of the grants not come forward, but they really want to be at the $90,000, or even lower. If the construction bid comes in a little bit lower they could eliminate a little debt. Crager asks if this is more of a worst-case scenario. Tamm says yes. Dicksa explains that one of the restrictions is the subsidy limits with the HOME Program based on the size of the units. We are at the maximum amount that we can give them with our resources in terms of HOME. We do look to see if there is a way that we can maximize the grants on special needs projects and ease the gap. We are doing the most that we can do. Strahan says another point that should be mentioned is that although they applied for HELP funds, we were not able to award them any HELP funds, so even though we gave them more HOME, it did not compensate for the amount of HELP we could not fund. She says she thinks that might be part of the discrepancy in the loan, and that the loan is a little higher on the budget now to make up for the difference for what we could give in HOME and what we had to take away in HELP. She says Betty Markey is looking at other ways to fill that gap. Tamm says that they can support the debt. She says they have also looked back at the architecture to see if there is anything they can squeeze out of the common areas, and to reduce some of the complexity of the roof design, and actually reduce the cost of construction. The architect has given them a slight change that reduces 300 square feet and she believes they can reduce $40,000 from the project cost, which will eliminate that gap. Stuart Liebowitz points out that there is only $918 in weatherization and wonders if it is worth taking a second look to see if there is more money available. He says that seems low compared to other projects she has done. Tamm says they do have a lot of Business Energy Tax Credits coming in on the project and they will look for additional resources to help fill that gap. Crager says that in discussions with the Finance Committee, it was asked if there Page 14—Oregon State Housing Council – June 2, 2006

was more that could be done in terms of the weatherization to maximize that resource and that the department tried to make every effort to work with the sponsors to find out if there were opportunities to maximize resources. Epstein asks if the department’s restrictions are just to affordability, or does it actually restrict the use for traumatic brain injury. Markey says the department can always change the population. Tamm adds that the structural design would allow it to be shifted to developmentally disabled. MOTION: Liebowitz moves that the Oregon State Housing Council approve a $720,748 grant reservation of HOME funds to Umpqua CDC and Umpqua Homes for the Handicapped (Sponsor) for completing the new construction of Mill Spring House in Roseburg, Oregon, contingent upon meeting all HOME requirements and conditions of award. VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger.

3. Meadows. Heather Pate, Housing Development Representative, introduces Karen Litwiller from Oregon Mennonite Residential Services, and Vince Chiotti, Regional Advisor to the Director for the Northwest Region. Pate says the request before Council is for approval of $213,289 in HOME funds for Meadows, rather than the amount indicated on the pro forma. The Department chose to increase the HOME funds to the maximum allowed for this project, and reduce the amount of permanent loans the project would need to be financially feasible. Meadows will be located on one-half of three adjoining city lots in McMinnville. The lot lines have been redrawn to create two larger lots. One side is improved with a three-bedroom house that will be remodeled, and is the subject of this presentation. Oregon Mennonite Residential Services, the project sponsor, proposes to build a five-bedroom group home on the back of the undeveloped lot, which will be called Charles Street, and is the project we will talk about next. Rehabilitation of Meadows House will include renovating the existing three-bedroom home into a five-bedroom group home, increasing accessibility, replacing the roof, adding a wheel chair ramp to the front door, window replacement, new kitchen appliances, plumbing replacement, installation of a heat pump to provide air conditioning, interior painting and new flooring. The property is located in an older single-family residential neighborhood behind Linfield College’s athletic fields. The large lot will allow the residents the space they need, plus allow for off-street parking. Having the two homes next to each other will help facilitate cross-training and sharing of staff, combine the transportation needs of both homes, and will broaden the social interaction among the residents. The residents are developmentally disabled adults with extremely low income and very high care needs, both medical and behavioral. Meadows is to be funded by the sale of another Page 15—Oregon State Housing Council – June 2, 2006

property owned by Oregon Mennonite Residential Services, with the additional financing of a permanent loan and HOME grant. As the pro forma indicates, Meadows has a total project cost of $428,700. Cost of construction is $92 per square foot. Oregon Mennonite Residential Services is an experienced sponsor that has been in business since 1986, and has successfully completed a number of projects utilizing the Department’s grants and loan programs. Karen Litwiller adds that because of assistance from Oregon Housing and Community Services, OMRS has reduced their annual debt service by about $70,000, which is actually what has kept them in business. They are in the same boat as other DD providers in that there has been no cost of living adjustment since 2001, so their revenue has stayed flat. Minimum wage has continued to go up, which is appropriate, but obviously costs a lot of money since about 80% of their budget is benefits and wages. She says the department has really kept them in business and she very much appreciates it, as does their staff. Vince Chiotti says that he would like to respond to Councilor LaMont’s previous comment on Mill Spring House. He says the department has struggled to try to get more money to these projects and, unfortunately, the limitations strangle us. For instance, on a group home like this, even though it is five people, HUD considers it one house so the maximum HOME award is $213,000. If this were five apartments, this project would be getting $4-to-$6-to$700,000 of HOME funds, and would not have the same tight restrictions. Czarnecki discusses the architectural design. MOTION: Epstein moves that the Oregon State approve a $213,289 grant reservation of HOME Mennonite Residential Services for completion of McMinnville, contingent upon meeting all HOME conditions of award. Housing Council funds to Oregon the Meadows in requirements and

VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger. 4. Charles Street. Heather Pate, Housing Development Representative, introduces Karen Litwiller from Oregon Mennonite Residential Services, and Vince Chiotti, Regional Advisor to the Director for the Northwest Region. Pate says the request before Council is for approval of $213,289 in HOME funds for Charles Street. The Department chose to increase the HOME funds to the maximum allowed, and this would decrease the HELP funds they asked for, since HELP is a more limited resource. Charles Street will be located on one-half of the three adjoining city lots in McMinnville. The lot lines have been redrawn to create two larger lots. One is improved with a three-bedroom house that will be remodeled, and is the project called Meadows. Oregon Mennonite Residential Services, the project’s sponsor, will build a five-bedroom group home on the back of the undeveloped lot, which will be Charles Street. Page 16—Oregon State Housing Council – June 2, 2006

Charles Street will be constructed as a five-bedroom ranch-style home, fully accessible, with a fenced yard. The home will have 24-hour awake staff, plus hard-wired smoke alarms and sprinklers. The residents are developmentally disabled adults with extremely low income and high care needs, both medical and behavioral. Charles Street will be funded mostly by grants. Along with the HOME funds, the Department has granted Trust Funds in the amount of $100,000, and $42,768 in HELP funds. There is an additional financing of a small permanent loan and a private contribution. Czarnecki reviews the architectural design. Litwiller says they moved into a house in December of last year, which was the first house they built that was actually built to accommodate the needs of their residents. The bathrooms have ceramic tile, and the floors are all vinyl. There is no carpet in the house because the residents are incontinent. It has been amazing to have a house that really meets their needs and they are very excited about having another one. Woolley asks if the garage has an active use and points out that it is a large space and wonders if they could make better use of that space. Litwiller explains that the garage is used for storage. They have a lot of record retention they are required by law to keep, as well as food storage. They have requirements about how much food has to be stored on site in case of an emergency. Chiotti adds that there is another reason it is valuable. If for some reason DHS funding gets worse and this project goes away, the department could be protected because it would sell very easily as a 5 bedroom, 2-½ bath house. In that community it would be necessary to have a double car garage. But storage for this population is fairly intense. MOTION: Woolley moves that the Oregon State Housing Council approve a $213,289 grant reservation of HOME funds to Oregon Mennonite Residential Services for completion of Charles Street in McMinnville, contingent upon meeting all HOME requirements and conditions of award. VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger. 5. Hillside Villa. Roz Barnes, Housing Development Representative, introduces Rita Grady, Executive Director of Polk Community Development Corp., David Crawford, the acting consultant with Geller Silvis and Associates, and Jack Duncan, Regional Advisor to the Director for the Mid-Willamette Valley Region. Polk CDC is an experienced developer and owner of several units of affordable and special needs housing in Polk County. They are proposing to develop six new units of permanent housing for individuals with chronic mental illness (CMI). The majority of the residents are at very low income levels, with many receiving only $600 a month from Social Security Insurance. All of the residents will be placed on the local Housing Authority’s waiting list Page 17—Oregon State Housing Council – June 2, 2006

for Section 8 vouchers. The waiting period at this time for vouchers is about six months. None of the residents will pay more than 30% of their income on housing. The entire project will be alcohol and drug free, with three of the units designated for individuals with a dual diagnosis of chronic mental illness and substance abuse. These individuals will be active in a treatment program for addiction. The structure will be a two-story, wood-frame building with a community room, office, laundry room, storage, and counseling room for Supportive Services. The Units will be equipped with a full-sized range and refrigerator, living area furniture, a Murphy bed, and microwave, all purchased with a startup grant through Oregon Mental Health and Addiction Services. All of the units will have high-speed Internet connection, interior and exterior storage, and two of the units will be fully accessible. The activation of Internet service will be determined according to the residents’ abilities. The grounds will feature a covered gazebo to encourage residents to socialize or have the opportunity for outdoor counseling or personal introspection. As this population will not have automobiles, Polk CDC has incorporated into the plans secure bicycle parking in front of the community room. Next door to Hillside Villa is Fir Hill Residential Treatment Facility, which has 16 beds for persons with CMI. The current available housing for persons with CMI in the Polk County area is highly structured facilities like Fir Hill, with 24-hour licensed caregiver supervision. Many residing in residential treatment facilities do not need the intensive care provided there, and could actually live in a more independent lifestyle if the housing were available. Others who may benefit from this project will be those still living at home with aging parents. Hillside Villa will be a positive alternative to the more independent chronically mentally ill who are ready to live in a semi-independent setting. Rita Grady adds that this is the first of its kind in Polk County, and the county was turning cartwheels when they heard that it was being considered for funding. The need is very serious in Polk County. There were over 650 people identified with chronic mental illness that needed subsidized rent. Out of those, almost 250 needed more independent supported housing. We are quite fortunate to enter an already existing public-private partnership between Polk County Mental Health, the Office of Mental Health and Addictive Services, and the Fir Hill Residential Treatment Facility. We are bringing to the table Polk CDC’s experience in development, and we are also bringing with us West Valley Housing Authority, which is a very willing partner to help with subsidized rents. Chair Ortiz says that many of the projects brought before Council have Internet capabilities and asks if there is a lot of use by the residents. Grady says they have a 40-unit family development in Dallas that is fully wired with fast Internet access. Each of the units has its own access. They have a partnership with One Economy, which is providing rebuilt computers for these families. Approximately 60% of the tenants are connected to the system at this point in time. There is a computer lab in the community room, and the tenants use that all the time, as well as their children, and there are some single mothers who are doing home schooling. It is very well received and is a wonderful asset. Duncan explains that the origination of the concept for this project came from Polk County Mental Health. It is a difficult project to develop and there are a lot of technical pieces to Page 18—Oregon State Housing Council – June 2, 2006

pull together. It is well received and supported by the Polk County Mental Health Commissioners and everyone else, and they are very happy to see this being built. He says he sees it as an opportunity to show that it can and will work, and they will be developing more of this type of housing in Polk County. Czarnecki talks about the steep site in which four of the units are approached from the upper side, and the remainder of the units and the common spaces are approached from the bottom. He says it is a reasonable and ingenious use of the site and he thinks the project will work well. David Crawford thanks Council and acknowledges the work of the staff. He also acknowledges the public and private partnerships that came together to make the project work (Office of Mental Health and Addiction Services, Oregon Housing, Polk County Mental Health, Fir Hill and RTF, who generously donated the land). He said it was a tremendous coming together of everybody in the community to make this happen. Chair Ortiz asks if the land is leased. Crawford says yes, it is a thirty-year lease. Epstein asks if Polk CDC will be running the services or if the other organization will be running the services on the site for the tenants. Grady explains that Polk CDC will be doing the property management, and Polk County Mental Health and the residential treatment facility owners will be actually providing the services, as well as OMHAS and the Behavioral Care Network. She says it is genuinely a partnership and they have been operating this way with the treatment facility, so it is not new to them. It is very well coordinated. Epstein asks if the reason for the 30-year affordability is because of the ground lease. Grady says yes, and the property is owned by the residential treatment facility, so it will continue on indefinitely. LaMont asks if there is the possibility to renew after 30 years. Grady says yes, it is a possibility. LaMont asks if they have discussed renewal time. Crawford says it would be there as an option to purchase the property. MOTION: Woolley moves that the Oregon State Housing Council approve a $623,526 grant reservation of HOME funds to Polk Community Development Corporation, completing the new construction of Hillside Villa, in Dallas, Oregon, contingent upon meeting all HOME requirements and conditions of award. VOTE: In a roll call vote the motion passed unanimously. Members Present: Epstein, LaMont, Liebowitz, Woolley and Chair Ortiz. Absent: Cooper, Medinger. VII. SPECIAL REPORTS: A. Southern Oregon Regional Report. Darcy Strahan explains that she covers

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the five southern Oregon counties on the west side of the Cascades: Coos and Curry, which are coastal counties; Douglas, which has a little finger on the coast but is mostly along the I5 Corridor; and Josephine and Jackson counties. She refers to a graph she passed out and explains that she wanted to show Council that one of the major issues going on down in southern Oregon is the price of housing. The graph indicates that the housing prices have exceeded those of Deschutes County. She says you hear a lot about how high housing prices are in Deschutes County, and it is interesting to look at the graph and see that Curry County, which is a very rural coastal county, has exceeded the median home prices for Portland. Woolley asks if she has a sense of what factors are contributing to the high housing prices, other than just generally what is going on in Oregon with housing prices. Strahan says Southern Oregon is considered a desirable place to live. It is the same thing that is happening around the state. There are people coming out of California, who are selling their houses for a lot of money and then coming in and buying a nice home for half or a third of what they sold their homes for in California; especially in Jackson County, which is the Medford/White City/Central Point/Ashland area. Medical facilities have improved and it is a beautiful area. It was featured in a few national publications about being one of the best places to retire, which is causing some of the huge price increases. Last year Jackson County suffered the phenomenon of ―flipping.‖ Approximately 28% of their homes were sold to people who were going to flip them, which drove the prices up. As the market has cooled, the houses are staying on the market longer now, but the home prices keep going up. Median home prices are still increasing. That is one of the reasons we had the Workforce Housing Summit in February, which was very well attended. John Epstein was on the panel and was one of the experts in the money-side strategy. Lynn Schoessler was also one of our experts. There were over 200 people that attended. Eighty people signed up to remain involved in the process, and we are working on how to keep the momentum going. She goes on to explain that one of the panels at the Summit was an employer panel with employers from Josephine, Jackson and Curry counties talking about their issues in trying to recruit and retain employees. They all talked about how difficult it is to recruit employees in the higher management levels. They are now recruiting from the East Coast and West Coast only. People who are coming from the Midwest, where housing prices are significantly lower, are not getting enough equity when they sell their homes and so they cannot afford to purchase a home when they come to Jackson County or Curry County. One of the outcomes of the summit is to do an employer survey to help in figuring out how we can keep moving forward to work on the issue of workforce housing. They are not limiting it to affordable, subsidized housing, but are talking about workforce housing for the entire income strata. Strahan refers to the chart which indicates that median home prices, as of 2005, were just bumping up against $300,000, and now they are over that in Jackson County. Curry County, which includes Brookings and Gold Beach, is around $350,000. She says Curry County owns about 700 acres and she and Betty Tamm have been talking with Curry County about trying to get them to sell some of that land so that they can do a single-family affordable development, which would serve Coos and Curry counties. The property is located between Bandon, where all of the golf course development is going, and Port Orford and Gold Page 20—Oregon State Housing Council – June 2, 2006

Beach. Betty got some money from Northwest Area Foundation Neighbor Works, which she is very involved in, to fund a position to try to do some affordable housing development in rural areas, and she is targeting that to Curry County. She says they are going down the end of June to talk with Curry County commissioners again. Josephine County is also an interesting phenomenon. For years the county did not have a very high tax base because they relied a lot on the O&C Timber Receipts. That is changing. They have been outsourcing their social service agencies. One of the social service agencies that they have had since its inception is the CAP. Josephine County was the CAP agency for the county. A couple of years ago Umpqua Community Action Network (UCAN) began working with the CAP in Josephine County on merging, although it is not really merging because they are creating a new entity, a new board, and a new opportunity for services in both Josephine and Douglas counties. Josephine County is very excited about the merger because they feel they have more in common with Douglas County, a more rural county, as opposed to trying to merge with Jackson County, which is a much more urban community. The two boards have been meeting and working very well together. It is believed the merger will be complete as of July 1. UCAN is very interested in keeping their acronym because they have worked hard and it is name recognition for them, so they are changing the name to United Community Action Network to keep the same acronym so people can still identify with them. They are looking at improving services in Josephine County as a result of the reorganization. Strahan explains that the major problem in Douglas County is the fact that there is no land, which has to do with the fact that Roseburg has not expanded its urban growth boundary in a very long time. They are working aggressively to try and bring 1,000 acres into their UGB, which is causing all kinds of concern. They are recognizing that they are growing, that they do not have the infrastructure, and they do not have the land. They are just starting their process, and it is still a couple of years down the road before anything happens. Chair Ortiz asks what is happening to the low/minimum wage worker in those particular counties. Where are they going? Where are they living? What is happening to them? The service providers? Strahan says they are staying in their communities. In Medford they are actually living in White City and are driving in to Medford, or they are moving out to Shady Cove, out to the outlying areas. At the coast, there are no outlying areas for them to move to and there are not that many communities. They are leaving and it is an issue. County Commissioner Brown spoke at the Summit and talked about how difficult it is to get basic service employees because they cannot afford to live in Gold Beach, or they cannot afford to live in Brookings. Crager says that when you talk to the employer community it seems that it is more of an issue to be able to attract people to come to work for them because there is nowhere to live, or nowhere that they can afford to live. Strahan says there was a restaurant in Brookings, the Great American Smokehouse, that had been there forever, and the owner decided to close because he could not get reliable help because they could not afford to live in the community. Crager says he understood a couple of schools had closed because of lack of family population. Strahan says that in Ashland there were two elementary schools that closed. It is a huge issue in Ashland. Their median home price is $450,000.

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Chair Ortiz asks what their thoughts are as far as solutions. Strahan says it depends on the community. Some have been talking about land trusts, if you can find the land, and asking the cities themselves to take a more active role in trying to find the solution. Ashland has had a number of forums to talk about the solutions, but they have not moved anything forward in terms of what would be a reasonable way to try to deal with this problem. Crager asks, in terms of next steps and implementation, if there has been discussion around possible solutions and strategies and looking closely at some of the strategies. Strahan says the next step is trying to organize the 80 who said they were interested. Four of the strategy components were: 1) What can the public sector do? Some of the ideas that came out of that were inclusionary zoning. DLCD is now looking at introducing new legislation that talks about inclusionary zoning when it is attached to affordable housing, and allowing us to actually identify a certain percentage of the homes needing to be affordable. More mixeduse development, redevelopment of industrial and commercial properties, co-construction amendments. 2) What can employers do? That is why we are doing the employer survey, to try to get a better handle on what the issues are and then how to better help employers address those issues. 3) Homebuyer and financial literacy education. Getting more information out. We do have a Housing Resource Center down in Jackson County. We need to do a better job of getting the services and information out that they provide, and letting people understand that it is not just for low-income Oregonians. 4) Employer partnerships with agencies and nonprofits. How can employers partner with CDCs or with CAP agencies, or with any other agency to help get employees into home buying opportunities? What was interesting about the employer panel was that they all recognized that this was an issue, but when the moderator asked them what kinds of steps they were taking to address the issue, none of them had concrete answers. We are recognizing it is a problem and now we need to figure out what we are going to do about it. 5) What can be done on the money side? There were two ideas that came up. One was to introduce the Real Estate Transfer Tax, and increasing the recordation fee, which is part of the Housing Alliance’s agenda. 6) How to improve access and affordability? Community Land Trust came up, and enhanced visibility of existing programs. A more regional focus on infill. Some rural communities have not grasped or do not understand the concept of infills. We could do a little more educating on that, and a Comprehensive Needs Assessment for the region prior to trying to figure out what regional answers might be. There were minority and majority strategies, and these were the kinds of things that this group of 80 is going to start working on. We understand Hood River County is interested in doing a summit, and the Council of Governments, which organized this one, is going to try and duplicate a similar summit in Marion County. Epstein suggests preparing a two or three page fact sheet of how other similar communities in other states have dealt with their issues. It might help in getting the thought process started. Strahan says it is something that can be followed up on and that information handed out at the summit included Web sites or areas that had programs that were addressing the strategy or one of the components of the solutions to the strategy. Epstein says that in reality what it comes down to is the need for money. There are programs, but you have got to have dollars or nothing really happens. You can recommend that they perhaps put money in a land trust, for example, and then you ensure affordability for the Page 22—Oregon State Housing Council – June 2, 2006

next 100 years. Then you give them models of what they can use the money for, but you have to start planting the seed of what other communities are doing to make the money part happen. You cannot wait for the state for all those dollars, you have got to figure out local solutions. Chair Ortiz says it sounds like the problem is here and the solution may be years away. Jack Duncan says that San Francisco has inclusionary zoning, and at least 10% of it has to be affordable housing. If the developer does not want that, they have a formula where they can buy their way out of it, so they can pay cash not to do it, which goes into a housing-type trust fund that is used to build affordable housing in another area. Crager states that if you don’t get the affordable housing, at least you get the dollars for other affordable housing. Duncan says that one way or another, when they do redevelopment there is money coming in.  VIII. REPORTS – Report of Rick Crager, Acting Director/Chief Financial Officer. Director’s recruitment. Crager talks about the screening and interview process for the candidates. The screening committee recommended five very good candidates. The next step will be on June 12, when each of the five candidates will meet with a group of stakeholders, partners, and Housing Council members. The group is a good representation of all community action agencies, CDCs, housing authorities, and state agencies. In all its members are about 20. The stakeholder group will be facilitated by the Department of Administrative Services, and the feedback will be given to the Executive Committee, which will meet with the candidates on June 13. The Executive Committee will then recommend one or two candidates to the Governor. We have a very good, inclusive process in place. The Governor’s Office has assured me this is an open, competitive process and I think we have very good candidates. Budget Reduction Plan. We are still developing the policy option packages, which will be due July 1. Final numbers came in at about a $1.8 million deficit. We are proposing a net staffing reduction of 11 positions in 2007-09. In total, in comparison to where we started 2005-07, versus where we are projecting at the start of ’07, it is actually 15 positions because we have already reduced four in terms of balancing. Woolley asks if the department has people in those 11 positions. Crager says all except for one. This is a budgetary reduction, and we have balanced 2005-07. We essentially have 14 months to be able to work with staff to find solutions. There has been one success story where we have been able to move a position that was targeted into another alternative position that was of equal standing within the agency. His goal in the next 14 months is to have all of those 11 target positions vacant. LaMont asks if any are projected retirement. Crager says there are some and that he is working very closely with the Human Resources Section. He says he does not want to lay anybody off. It is our goal to try to find a landing place for everyone. All the people in the positions have been informed and they know that we are working to try to develop solutions. He says he will keep Council posted as they work through the process. There will also be some impacts in terms of services, but for the most part we feel like we can continue some work-arounds, and management may have to absorb some things in certain areas. We are looking at a lot of re-engineering processes right now to hopefully accommodate some of those cutbacks.


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Woolley asks if that is the net result after all of the changes were made with revenue and generating. Crager says yes. We were at about a $2.6 million deficit, so the changes probably saved five positions. Liebowitz asks what type of services might be impacted and how that might impact staff’s workload. Crager says that is one of the things the department is assessing. One of the big challenges is moving forward into future years. This is ’07-09, but we do have some bond indentures in the neighborhood of $5-to-$6million that are basically going to dry up in the next four years. The idea is to continue to build the Mortgage Revenue Bond and the multi-family area. On a positive note, we are seeing an increase in our cash flows from MRB. He says he would like to have a long-term financial plan in place, and that will be an area he and the new director will need to work through. The department is also going to ask the Legislature for the $3.8 million that was taken from the agency. If we are able to get that back there are positions that could then be added back. Another area that the department needs to focus in on is Best Practices and finding out what research we can get from other states that have done things that we can apply. We will need research support and people to gather that information and look at ways to apply it. He said the department needs to be able to develop a comprehensive research plan.  Legislative hearings and affordability. Crager gives a brief report on the House/Senate Revenue Committee meetings held in Medford and Salem and says the revenue forecast seems to be very positive. He says he will have aggressive housing agenda requests in the department’s policy option package. He would also like to do some follow-up and draft letters for the Housing Council members to send to the committee to reinforce the support. He also encouraged Council members to talk to members on that committee. Woolley asks if the Council members could have in writing some of the comments made at the Committee meetings so they can send the same message. Crager indicates he will have brief minutes prepared of John Fletcher’s presentation, and points out that there are also audio hearings available on the Web and encourages Council to listen to them, and says if they would like he will have IS send them the link. Epstein says he was trying to convey to the Committee that there are a lot of programs that get money, there is a very low default rate, and this has been a very successful program. Crager discusses a recent meeting he and other Agency Heads had with the Governor. One of the areas that came up was the idea and notion of workforce development. He says he thinks the Governor is very supportive of that, and Economic and Community Development will be pushing that hard going into the session. Crager thinks it is a good opportunity, particularly with the new director of Economic and Community Development, to try and push workforce housing as well. The Governor understands, he hears, and is very supportive. He talked to the Governor about the department’s revenue issue. They understand where we are at, and they are also very supportive of us trying to go back and get our $3.8 million. The good news is that we have a governor who is really supporting us right now and understanding our situation. Crager invites Council to attend the opening of Trenton Street at the Columbia Villa on June 6, which is a Workforce Development Center. Crager also invites Council to attend the June 20 Homelessness Summit in Salem. It is an opportunity to get city mayors and Page 24—Oregon State Housing Council – June 2, 2006



county commissioners around the table to try and get them to embrace the issue of homelessness and the idea of the 10-Year Plan within their individual communities. He talks about the National Summit he attended in Denver and says there are a lot of good things going on in Denver that can be applied in Oregon. In terms of the Ending Homelessness Advisory Council, we received a lot of applications and are hoping to establish the 24-member committee and have a meeting by August 1.   Reappointments to Housing Council. Stuart and Scott are on the agenda for June 21 as reappointments to the Housing Council. Community Incentive Fund (CIF). Crager explains that the advisory group for the Community Incentive Fund dollars lapsed because the Community Incentive Fund money went away. Through our strategy of taking money from the Housing Trust Fund and using the Community Incentive Fund to backfill, we are now getting some of those interest earnings back, and were able to go through a process of allocating Community Incentive Fund. We are now in the process of appointing a board to make recommendations to the director. Financial Notes. Crager says he wants to congratulate and recognize the department’s Financial Services Team for receiving the Excellence for Financial Reporting, awarded by the Government Financial Officers Association, for the 11th straight year. This is the highest recognition in governmental finance reporting that is offered. He says they do incredible work and he is very proud of them. He acknowledges that although his name is the one that is published, they are the ones that crunch the numbers and do all the great work. It’s a great accomplishment. Woolley asks if it would be appropriate or meaningful for the Council to send a personal letter to the group. Crager indicates that it would and that he will assist them with that. Predevelopment Program. Crager explains the $8 million line of credit with Fannie Mae and the use of Housing Finance Funds for collateral. He explains the demand has gone down due to slower production of rental affordable housing. The department has worked out a relationship with NOAH to get an additional 1.5, similar to what we have with Fannie Mae, but much more favorable terms. His proposal from a financial standpoint is to take the money that we have always posted for collateral, and some of the profits, along with the 1.5 that was received from NOAH, and use our own money for providing predevelopment. The department is terminating the agreement with Fannie Mae because the terms are not favorable. The department would be looking at rates of probably 7- to 8% in terms of predev, and if we can use our own money we can still operate at 5.75%. Woolley asks for examples of who uses that money. Crager explains it is a lot of people that come through the Consolidated Funding Cycle. The sponsors use it to secure land and to fund predevelopment costs. Woolley asks if there are limits on how much a given project can request. Crager says we have limits on our terms. For instance, it is half-a-milliondollars for a two-year term and up to 1.5 million for a six-month term. Chair Ortiz adds that it also depends on the collateral that is used for use in the pre-dev. Woolley asks if it is repayable. Crager says yes and explains that a lot of times a CFC becomes the takeout for that about 80% of the time. That is why we focus on the pre-dev on the collateral to make Page 25—Oregon State Housing Council – June 2, 2006



sure we are secured and we can actually get our money back. Chair Ortiz says he thinks it is a very useful tool. Woolley agrees.  Crager reports that things are going well with the department during the transition. He says it has been a great opportunity to meet partners and one of the things that he is learning is that our partners want more communication. They want to feel part of what we are doing. He feels he has accomplished some of that during this interim period. He is trying to get out more to the community, talk to partners, let the Housing Authorities and CDCs know what is going on and hopes to continue to do that. He has received a lot of feedback from the partners and they appreciated the open communication during the budget process. He gives credit to Council for their input on the charge increases. Chair Ortiz says he does not want to sound redundant, but he really appreciates what Crager and the staff have done during the interim period. Crager says that Jo has been there for him and she deserves as much credit as he does. Chair Ortiz says he appreciates the RAD reports and that it feels like we are starting to get up against a crisis as far as affordability for a lot of the workforce and the people that are struggling in the Service Department. Two families are not uncommon in an apartment in the East County and that is not healthy or safe. Crager says that at the Committee hearings, Dave Castricano from U.S. Bank talked about reaching a point where we have a major crisis. Almost to the point where, even if you put in $100 million, it is not going to make a difference. Senator Shields said, in terms of bringing it back, you need to think about what the social impacts are, if we don’t start dealing with this issue. Woolley says she will not be at the next Housing Council meeting and wanted to say that she appreciates the job that Crager has done and the way that he has represented the agency. She says he really made a smooth transition and kept things rolling and developing. She appreciates all his hard work, and his team’s hard work in the interim period. Chair Ortiz adjourned the meeting at 12:50 p.m.

/s/ 6/30/06 Buz Ortiz, Chair DATE Oregon State Housing Council

_/s/_________________________6/30/06_ Rick Crager, Acting Director DATE Oregon Housing & Community Services

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