From left: Ann Arbor housing commission board members Christopher Geer, Ron Woods and Marta Manildi at the AAHC Jan. 15, 2014 meeting, held at Baker Commons. Not pictured here is Tim Colenback, the newest appointment to the AAHC board. Gloria Black, who represents AAHC residents, was absent. (Photos by the writer.)

At their first meeting of the year, commissioners were briefed about the impact and aftermath of a Jan. 8 fire at Green Baxter Court, a public housing complex on Green Road next to Baxter Park on the city’s east side. They heard from Joan Doughty, executive director of Community Action Network, which operates a community center at that complex under contract with the city. CAN staff are helping AAHC provide support for families who were displaced by the fire.

At their Jan. 15 meeting, board members authorized up to $9,000 in extra funds to help pay for that emergency work. CAN is also seeking additional donations from the community.

In separate action, the board amended Chapter 14 of its housing choice voucher administrative plan to include a preference for families that have been involuntarily displaced due to a fire, natural disaster or any other reason. The vouchers would be used to subsidize rental housing, if no units are available in the city’s public housing system.

The Jan. 15 meeting also included an update from Lori Harris, vice president with Norstar Development, on a major initiative to upgrade the city’s public housing units. Specifically, she presented Norstar’s recommendation for an equity partner to purchase low-income housing tax credits awarded by the state to AAHC late last year. The board approved the recommended firm, Red Stone Equity Partners.

Investors had responded positively to Norstar’s request for proposals, Harris said, with higher-than-expected offers. “You have a very, very good story here, and it’s played very, very well in this process,” she told the board. The tax-credit transaction will provide the majority of funding for renovating five public housing complexes: Miller Manor, South Maple, Baker Commons, Hikone and Green Baxter. These properties make up the majority of public housing units in the AAHC portfolio – 248 out of a total 326 units.

However, AAHC executive director Jennifer Hall told the board that additional funding will still be required. As part of that, the AAHC is requesting $600,000 from the Ann Arbor Downtown Development Authority. Hall said she expects the DDA board to make a decision on that by March or April. The DDA previously gave the housing commission a $300,000 grant for capital improvements at Baker Commons, which is located within the DDA district. That approval came in March of 2013. And in October 2012, the DDA had provided a $260,000 grant primarily for replacing the Baker Commons roof.

In other action, the AAHC board approved a 3% cost-of-living adjustment for Hall, in line with other COLA increases given to city employees. The board also authorized changing the way its minutes are kept in order to begin using the city’s online Legistar system. The new approach will be less detailed in reporting deliberations, and will primarily provide a report on the outcome of action items. Currently, AAHC board minutes and board packets aren’t part of Legistar, but are provided on the AAHC page of the city’s website. Minutes from the AAHC board meetings are also attached to the city council agenda as an item of communication.

And near the end of the meeting, commissioner Marta Manildi reported that she is not seeking reappointment. Her term ends this spring, but she has offered to step down early. She was praised for her work in helping lead the AAHC through a difficult transition several years ago. Speaking during public commentary, Doughty said Manildi “really led the charge for a turnaround that’s been amazing to witness.”

A week later, at the Ann Arbor city council’s Jan. 21 meeting, mayor John Hieftje nominated Daniel Lee to serve out the rest of Manildi’s term. A confirmation vote is expected at the council’s Feb. 3 meeting. Hieftje described Manildi’s service on the commission as profound and beneficial.

Aftermath of Green Baxter Court Fire

Commissioners were briefed on aftermath of a fire in the early morning of Jan. 8 at Green Baxter Court, a public housing complex on Green Road next to Baxter Park. They had also received a written update in their board packet for the meeting. [.pdf of Green Baxter fire update]

Jennifer Hall, AAHC’s executive director, reported that it started around 4 a.m. in one unit and spread to all but one of the six units in that building. In some units, almost everything was completely destroyed. Even in other units where some items are salvageable, she said, everything is damaged by smoke and water.

The fire department is investigating the cause of the fire, Hall said, but they haven’t yet indicated what they’ve found. She reported that the buildings are covered by the AAHC insurance policy, and will pay for either demolition and rebuilding or rehabilitation. The city’s building inspector will make a determination about whether the structure needs to be demolished. If it does need to come down, Hall hoped to do that as soon as possible so that it’s not a safety hazard. However, emergency demolition would require approval by the U.S. Dept. of Housing & Urban Development (HUD), which provides funding for AAHC.

None of the residents were seriously injured, Hall said. Almost everyone left the building in bare feet, because it was very early morning, so a couple of people got frostbite on their feet. At least one child had some problems with smoke inhalation. Everyone who needs medical attention is getting it, she said.

Hall noted that AAHC has partnered very closely with the nonprofit Community Action Network, which runs the community center for Green Baxter Court under contract with the city. The staff of CAN have spent many hours working with residents trying to help them rebuild their lives, Hall said, including 14 children – the youngest of whom is two years old. At this point, residents are staying at an extended stay hotel while AAHC works to find more permanent homes for them. That means reaching out to landlords in the area that accept Section 8 vouchers. AAHC hopes to find housing in that same neighborhood, Hall said, but it’s one of the city’s highest-cost areas, so there are very few places that fit within the AAHC budget.

Aftermath of Green Baxter Court Fire: Update from CAN

Joan Doughty, executive director of Community Action Network, attended the AAHC board meeting and gave an update on how CAN and others are helping to deal with the aftermath of the Jan. 8 fire. She had emailed an update earlier in the day to commissioners, the media, and other members of the community, which was later posted on CAN’s website.

Joan Doughty, executive director of the nonprofit Community Action Network, gave an update to Ann Arbor housing commissioners about the response to the Green Baxter Court fire.

“Obviously this was uncharted territory,” she said. Doughty described the initial response, and how one of the first things they did was to contact the traumatic events response network (TERN). Members of that group met that same day, she said, and included the fire marshal and Liz Margolis of the Ann Arbor Public Schools. CAN staff also spent the day getting clothing and footwear for the residents, most of whom had emerged from the building barefoot and in their pajamas. CAN also put together a “what you need to know” handout that was distributed to residents on Jan. 8 – a four-page list of answers to questions.

The Red Cross paid for three days of hotel rooms at the Hampton Inn on Green Road, and the AAHC is paying for extended stay accommodations at the Microtel on Plymouth Road. For residents, getting that information about housing “settled a lot of fears almost immediately,” Doughty said. People were also very concerned about getting their children to school. It was helpful to have Margolis there to assure residents that the schools would provide transportation, Doughty said, and that no matter where they moved, the children would be able to complete the academic year at the same school they’d been attending.

People were affected by the fire to different degrees, Doughty reported, both in terms of their physical possessions, but also in their ability to cope with the situation. Two of the households had renters insurance, she noted, but they didn’t know what it covered or how to deal with making claims. So CAN is helping with that.

Doughty described several other groups that helped with the aftermath. Volunteers came to remove items from the burnt building before things were even further damaged by the elements. The Rotary Club of Ann Arbor North, which she described as a “godparent” to Green Baxter Court, is paying for storage of items that could be salvaged from the apartments. Rotary North also offered to replace one toy per child.

An interior view of the aftermath of a Jan. 8, 2014 fire at Green Baxter Court. (Photo courtesy of Joan Doughty.)

The Kiwanis Club of Ann Arbor, which runs a thrift shop, is helping families replace furniture and household items. Aaron’s Restoration has offered free cleaning for one large trash bag of clothes per household. MLive’s Warm the Children program gave $90 vouchers for every affected child to get clothing at Target, and shoes were purchased with Payless Shoes gift cards that CAN had received.

Other work in the aftermath included replacing eyeglasses, prescription drugs and dealing with other medical needs. Home-cooked meals had been served every night at the Green Baxter community center, which CAN operates. It provides a place where people can come together and support each other, Doughty said. CAN also has tried to be respectful of cultural differences, she noted. For example, one family is from Somalia and eats halal foods, so they were given gift cards to go to restaurants that serve this kind of food.

It’s been amazing to see the generosity between residents, she added, and how much they’re supporting each other. She said that one of CAN’s slogans is that their services start where the ability of the client stops. So the staff will help out based on each resident’s needs. That includes things like helping people turn off their cable TV service and other utilities, and contacting caseworkers from the Dept. of Human Services.

Now, CAN is moving into the next phase, Doughty said, which is to help residents rebuild their lives. She’s been documenting the lessons they’ve learned in this process, so that if something similar happens again, they’ll be better prepared. “Of course I hope these lessons will never have to be used,” she added.

Jennifer Hall, AAHC executive director, praised CAN as well as Beth Yaroch, AAHC residency manager, who oversees the Green Baxter Court complex. Doughty thanked Ron Woods, president of the AAHC board, for coming out to the site and taking an interest in the situation. She also thanked commissioners who had made donations to support CAN’s response to this emergency.

Ron Woods, president of the Ann Arbor housing commission board.

Woods in turn praised everyone involved in the response, including the Ann Arbor fire department, the trauma team, and CAN staff for helping people see, even in the midst of trauma, that there is some way forward. He also thanked the residents, who he said have responded with resilience, hope and support for each other.

Woods asked Hall to explain the protocol that AAHC has put in place to deal with this kind of emergency. Hall replied that there is a 24-hour on-call staff member to respond to potential emergencies. Typically the calls are for things like a water pipe or toilet breaking. There’s also 24-hour on-call maintenance, she said. AAHC pays a call center to take calls at any hour from residents, and the call center then contacts the AAHC manager who’s on call. That person then decides how to respond, Hall explained. For the Jan. 8 fire, residency manager Reggie Dalton was on call and was the first to respond for AAHC.

In the case of a fire, which is extremely unusual, Hall said, the fire department is obviously the first emergency responder. In that case, AAHC’s role is to keep people away from the building and out of harm’s way. Red Cross came out to make sure tenants had short-term housing and food, while AAHC staff and CAN staff worked through what needed to happen next.

Christopher Geer asked if there’s ever been an emergency of this magnitude at a housing commission site. Hall replied that there are constant issues and tragedies with tenants – like shootings, medical emergencies or small cooking fires – but those typically just affect one person or household. Geer said he only asked because it seemed like CAN and AAHC staff were veterans at handling this emergency. He praised their professionalism. Hall said the staff is accustomed to responding to crisis every day, but not to such a large degree all at one time.

Marta Manildi said she’d recently read that fires are more common than people think, so Doughty’s efforts to document the response is a good idea.

Aftermath of Green Baxter Court Fire: AAHC Resolution – Emergency Voucher

A resolution added to the agenda at the start of the Jan. 15 meeting was to amend Chapter 14 of the AAHC housing choice voucher administrative plan to include a preference for families who have been involuntarily displaced due to a fire, natural disaster or any other reason. It also would amend the plan to enable the AAHC executive director to suspend the waitlist preference system in cases of a federally declared disaster or other emergencies.

Because AAHC doesn’t have available units of its own for families who are displaced by the Jan. 8 fire, the commission wants to use its housing choice vouchers to find rental units for these residents. However, HUD requires amending AAHC’s voucher administrative plan in order to do that. The amendment also would allow AAHC to use the voucher program for people who aren’t in the public housing system, if there’s an emergency.

Any change to the administrative plan requires a 30-day public comment period. So the changes would take effect on Feb. 15, 2014. [.pdf of resolution]

Hall said that for tenants who find housing before Feb. 15, AAHC would pay the rent until the voucher is in place.

There was no board discussion on this item.

Outcome: Commissioners unanimously approved the amendments to the housing choice voucher administrative plan.

Aftermath of Green Baxter Court Fire: AAHDC Resolution – CAN Funding

AAHC is currently undertaking a process to convert its public housing complexes to a public/private partnership. To facilitate that process, in  2012 a separate entity was created by the housing commission, called the Ann Arbor Housing Development Corp.  The board of the AAHDC consists of the AAHC board members, plus AAHC executive director Jennifer Hall. Its meetings are held immediately after the AAHC board meetings.

Only one resolution appeared on the Jan. 15 AAHDC meeting agenda – for $9,000 in emergency funding to CAN to offset the cost of extra staff time used to deal with the Green Baxter Court fire emergency.

CAN provided a breakdown of estimated expenses:

• $1,000: Assistance with insurance claims (estimated 40 hours at $25/hour)
• $6,000: Assistance in searching for permanent housing, completion of applications, applying for security deposits, arranging for replacement furniture, moving in assistance, completing paperwork related to the move. (estimated 360 hours at $16.50/hour)
• $500: Misc. expenses, including gas for transportation of children to and from hotels to after-school programs, and for residents to new housing and other locations.
• $500: Additional administrative costs, including progress reports, billings, tracking of donations and expenses, etc.

A memo from CAN executive director Joan Doughty indicates that CAN will seek about $5,000 in community donations for “extra psycho-social support and activities to the affected children,” as well as for food and dinners served at community centers for the displaced residents, and other activities.

Before the vote, Hall gave an update on AAHDC finances. [.pdf of AAHDC financial statement] The main expense for AAHDC so far has been to pay the law firm Dykema, which is working to establish 501(c)3 status for the organization. That status will better prepare AAHDC to access funding in the future, Hall said. The application has been submitted to the IRS, she reported, but it could take several months to get approval, and might not happen until 2015.

Hall reported AAHDC has a fund balance of $50,440. She was requesting authorization from the board to pay CAN up to $9,000 for its work with Green Baxter Court tenants, to offset whatever funding isn’t received from the community.

Outcome: The AAHDC board unanimously voted to authorize up to $9,000 for CAN’s work.

Aftermath of Green Baxter Court Fire: Next Steps

An email sent on Jan. 15 by CAN executive director Joan Doughty includes a section that describes how the community can help with additional support for the families displaced by the fire. From the email:

For those who would like to help the families cope with the constraints of hotel residency, gift cards to movie theaters, Jump City, Zapzone and Jungle Java would be very welcome donations.

As the Extended Stay hotel has only microwaves, and to continue to provide a healing place for families to come together, CAN is providing full meals in its community center for the displaced families Monday through Friday evenings. Restaurants or individuals willing to help with this are encouraged to contact CAN directly – at info@canannarbor.org.

Thank you to the Rotary Club North, Kiwanis, Ann Arbor Public Schools, Clague PTSO and King PTO, Payless shoes, MLive/Ann Arbor.com Warm the Children, Ann Arbor Thrift Store, Michigan Municipal League employees, and Java Jungle who have all provided some assistance to these families, and to Frita Batidos and Zingerman’s for promising to donate a meal.

Please spread the word that if people are moved to help, they can make a donation directly on CAN’s website at canannarbor.org and CAN will use the funds to help these families rebuild their lives. Donors should write “GBC Fire” in the memo line. The AAHC and CAN do not have the capacity to store household goods or clothing, please make those types of donations to Kiwanis or the Ann Arbor Thrift Shop so families can select the items they need from organizations that specialize in managing these types of donations.

Public Housing Conversion

Lori Harris, vice president with Norstar Development, attended the Jan. 15 meeting to give an update on a major initiative to upgrade the city’s public housing units. Specifically, she presented Norstar’s recommendation for an equity partner to purchase low-income housing tax credits that the state awarded to AAHC late last year. The recommended firm is Red Stone Equity Partners. The firm is a “syndicator,” managing this kind of investment on behalf of its clients.

Lori Harris, vice president with Norstar Development.

By way of background, in 2012 the city was accepted into a new rental assistance demonstration program, known as RAD, offered by the U.S. Dept. of Housing and Urban Development (HUD). The program allows residents in selected housing units to receive rental assistance through long-term Section 8 subsidy vouchers that are tied to the buildings, rather than individuals. The RAD program also enables entities like the AAHC to partner with private-sector developers on housing projects – something the AAHC couldn’t previously do. The Ann Arbor city council gave necessary approvals in connection with the RAD program at its June 3, 2013 meeting.

The approach allows public housing entities to tap private investment for new developments or rehab of existing public housing, by converting current public housing units into units that are owned by the public/private partnership.

The main source of funding to upgrade the housing units is through low-income housing tax credits (LIHTC), awarded through the Michigan State Housing Development Authority (MSHDA). Tax credits are awarded for projects, and are in turn sold to investors who provide funding for construction or renovation. The pricing on those credits depends on market conditions and other factors, but Norstar originally expected to get roughly 83 cents on the dollar.

The AAHC board took a significant step when it selected Buffalo, N.Y.-based Norstar as a co-developer for this overhaul in January of 2013. The board was briefed on Norstar’s progress at a June 19, 2013 meeting covered by The Chronicle.

Then in August of 2013, AAHC made two applications for the low-income housing tax credits. The credits covered five public housing properties in two groupings: Maple Towers Ann Arbor LLC for one group (the complexes of Miller Manor and South Maple); and River Run Ann Arbor LLC for the other group (the Baker Commons, Hikone and Green/Baxter complexes). These properties make up the majority of public housing units in the AAHC portfolio – 248 out of a total 326 units.

At the AAHC board’s Jan. 15, 2014 meeting, Harris reported that she had “very good news” about the process. Norstar solicited proposals from seven different potential equity partners that had shown some interest in this project. Out of the seven, five proposals were made from the following firms: Great Lakes Capital Fund, Hunt Capital Partners, RBC Capital, Stratford Capital Group, and Red Stone Equity Partners.

Norstar evaluated these proposals based primarily on three factors, Harris explained. First, how much were the entities offering per credit? The offers ranged from 84 cents to 90.5 cents, Harris reported. That’s the amount that the investors would pay for every credit given to AAHC by the state, she explained. Norstar had estimated that the amount would be 83 cents, so the offers were better than expected.

It’s important that they’ll be receiving more than originally projected, Harris said, because the renovation costs are also higher than projected. [AAHC executive director Jennifer Hall had originally estimated that Ann Arbor’s public housing stock would need about $40,000 per unit in repairs and renovations over the next 15 years.]

The second factor used to evaluate these proposals is the “guarantee structure.” This is the amount that the equity partner would require from AAHC to ensure that investors are financially protected. The third factor relates to operating reserves: How much is the equity partner requiring to be set aside during the term of their investment? This would ensure that investors are paid even if operating revenues aren’t as high as projected – for example, if a property isn’t generating enough rental revenue because its units aren’t filled.

Harris provided charts to compare the various elements of the proposals from different potential equity partners. [.pdf of chart for River Run] [.pdf of chart for Maple Towers]

Based on an evaluation of the proposals, Norstar recommended choosing Red Stone Equity Partners for both projects. Red Stone is offering $9,154,455 in total equity for River Run, and $12,168,966 for Maple Towers. That amount is based on 89.5 cents on the dollar for each of the tax credits held by AAHC.

Other aspects of Red Stone’s proposal for River Run includes:

• A pay-in of 8.33% at closing, 35% at completion of the renovations, 51.67% when the properties are converted, and 5% when the IRS issues Form 8609, which finalizes the tax credit cycle.
• A tax credit price of 89.5 cents on the dollar. Harris noted that Red Stone had increased its offer to match a competitive bid. That price will bring in $803,953 more than the amount that Norstar originally estimated, which had been based on 83 cents per dollar.
• Asset management fees of $5,000 per year, increasing 3% annually.
• A requirement to keep an operating reserve of $225,000.

Red Stone’s proposal for Maple Towers includes:

• A pay-in of 7.92% at closing, 35% at completion of the renovations, 52.08% when the properties are converted, and 5% when the IRS issues Form 8609, which finalizes the tax credit cycle.
• A tax credit price of 89.5 cents on the dollar. Harris noted that Red Stone had increased its offer to match a competitive bid. That price will bring in $1,046,071 more than the amount that Norstar originally estimated, which had been based on 83 cents per dollar.
• Asset management fees of $5,000 per year, increasing 3% annually.
• A requirement to keep an operating reserve of $275,000.

Harris said that even though the pricing is great, she thought the best part of Red Stone’s proposal is the guarantee structure. Normally, investors would ask Norstar and the AAHC to provide a significant guarantee – either money set aside in a bank, or a corporate guarantee – over the 15 years of the tax credits. For each of the two projects, Red Stone asked for a $3 million net worth guarantee, which Norstar will provide. That means that Norstar must maintain a corporate net worth of at least $3 million until the project is “stabilized,” she explained, in case something goes wrong before the project is completed. In addition, Red Stone wants a $1 million liquidity requirement, which Norstar will also provide.

Jennifer Hall, executive director of the Ann Arbor housing commission.

But after the projects are completed and have shown three months of positive cash flow, the only guarantee for the remainder of the 15 years is the amount of the AAHC developer fee. That means resources will be freed up for additional projects, Harris explained. “It allows you to play another day.”

The other important aspect of the deal is the requirement for operating reserves. Norstar is putting in an operating reserve equal to four months of expenses – which is an underwriting requirement from MSHDA. Red Stone isn’t requiring additional reserves, Harris said. Other proposals asked for additional amounts.

Based on all these factors, Norstar recommended the selection of Red Stone for both the Maple Towers and River Run projects. Harris noted that Norstar closed its last deal with Red Stone about six months ago – a family housing project in Watertown, N.Y. She described Red Stone as having very skilled asset managers. “I hold them in highest regard,” she said.

If the AAHC board approves the selection of Red Stone, then Norstar will update the budgets for these projects. Red Stone would then issue a letter of interest (LOI) that would be submitted to the AAHC board for approval.

AAHC executive director Jennifer Hall reported that the proposals were reviewed by Rochelle Lento, a real estate attorney with Dykema’s Detroit office who is working on this project. Lento agreed with the recommendation, Hall said.

Public Housing Conversion: Board Discussion

Christopher Geer clarified with Harris that Norstar is guaranteeing completion of these projects. The guarantees would cover a shortfall in tax credits or a “recapture event.” He asked about the level of risk involved.

Regarding a tax credit shortfall, Harris explained that MSHDA has committed the tax credits to these projects, but won’t actually provide the tax credits until they are earned through eligible costs that are expended on the projects. A shortfall would occur if the projected eligible costs weren’t as high as anticipated, and therefore the projects didn’t get the amount of tax credits that are in the budget. “I don’t see any risk in these projects,” she told commissioners. “These are very expensive rehabs, and we’ll have plenty of eligible costs.”

Ann Arbor housing commission board member Tim Colenback.

Harris also explained the “recapture event.” For example, if a resident was thought to be at 50% area median income, but was in fact at 120% AMI, then that person would be over-income for living in these complexes. If that mistake isn’t caught, it might result in the IRS taking back some of the tax credits that were awarded. For Maple Towers, the AAHC’s guarantee requirement to cover that possibility is limited to $450,000 over 15 years. For River Run, the amount is $330,000. “It’s that limit that’s making [Red Stone's offer] so attractive,” she said.

Geer clarified that the operating reserve is what needs to be kept on the balance sheet. Harris explained that there will be two operating reserve accounts: $275,000 for Maple Towers, and $225,000 for River Run. It could be used to cover costs if, for example, federal funding is delayed. The next step, Harris said, will be to negotiate the partnership agreement that describes “all the rules we’re going to live by.” That agreement will explicitly state the conditions under which the operating reserves can be tapped.

Geer wondered if the deal with Red Stone affects the existing development agreement between AAHC and Norstar. Harris replied that this new arrangement is consistent with the existing development agreement.

“I can’t stress enough how people have responded so well to your project,” Harris told commissioners.

Outcome: Commissioners voted unanimously to approve Red Stone Equity Partners as an equity partner.

Public Housing Conversion: Next Steps

After the vote, Geer noted that the board has been briefed previously about increased cost estimates. He wondered if the higher-than-anticipated tax credit offer helped offset those costs. “Absolutely,” Hall replied.

At this point, if AAHC had more funding, “we could do more,” Hall said. “We don’t have unlimited resources to do everything we want to do.” For example, it would be great to replace the flooring and cabinetry in every building, she said, but they don’t have the budget for that. Each housing unit is being evaluated to assess what needs to be done, on a ranking of 1 to 5. “We’re trying to be more frugal in figuring out where best to put our funds,” Hall told commissioners.

Ann Arbor housing commission board member Christopher Geer.

All structural deficiencies will definitely be addressed, she said. For example, Miller Manor needs an upgrade to its electrical system. If possible, energy efficiency upgrades will be completed as well. In terms of aesthetic, “quality of life” renovations, Hall acknowledged that residents care a lot about that and as much as possible will be done.

There’s still a gap between the renovation costs and the amount of funding that AAHC will receive through the tax credit investments. Hall said they’ll continue to work with the Federal Home Loan Bank, providing as much information as possible to secure $500,000 for Maple Towers. “That’s still on the table,” she said.

Hall also reported that she’d met with the Ann Arbor Downtown Development Authority staff and the DDA board’s partnerships committee that morning to request $600,000 for the projects. She didn’t think the DDA would make a decision on that until March or April.

If all of that funding comes through, then the gaps in funding would be filled, Hall said, with an anticipated closing for these first two projects in May of 2014. She cautioned that AAHC didn’t want to tap too many community resources for this first phase, because there will be other properties to renovate or rebuild in later phases. She said discussions are happening with the city about what AAHC will need for the next phase, similar to the kind of gap financing that the DDA might do for this first phase.

Marta Manildi asked whether the AAHC properties are located within the DDA district. Baker Commons, at Packard and South Main, is within the DDA boundaries, Hall replied. Miller Manor is within a quarter-mile of the DDA district – within that area, the DDA board allows investments in affordable housing, she said.

Next month, the AAHC board will receive a new revised scope for these two first-phase projects, Hall said.

For the second-phase projects, Hall said she hopes to apply for tax credits in August of 2014. It would be beneficial to have site plan approval from the city by then, so AAHC is working with architects and engineers to get ready for that process. There will be a citizen participation meeting for that soon, likely in early February, she said.

The second phase involves two AAHC complexes: (1) North Maple Estates at 701-739 North Maple – north of Dexter Avenue, on the west side of North Maple; and (2) 3451-3457 Platt – on the east side of Platt Road, north of Belvidere.

In a follow-up phone interview with The Chronicle, Harris said the second phase will result in 71 units, including 46 at North Maple Estates. Regarding the Platt Road properties, four single-family houses on the east side of Platt will be demolished, and replaced with structures totaling 21 units in a slightly different location on that site to avoid flooding issues. There’s also a strip of vacant city-owned land on the west side of Platt, north of Verle and south of Sharon. The land runs from Platt over to Springbrook. In that location, the plan calls for building four single-family homes.

The project’s team includes architect John Mouat of the Ann Arbor firm Mitchell & Mouat, and Scott Betzoldt of Midwestern Consulting. [Mouat serves on the board of the Ann Arbor Downtown Development Authority.] Harris said there’s not yet a firm estimate on the budget for this second phase – that is currently being developed. They hope to start the city’s site plan approval process in February.

A future phase will involved the housing commission’s Broadway Terrace at 504-1506 Broadway, as well as the building along Henry Street, between South State and White Street. The addresses are 1514 and 1520 White St., 1521 S. State St., and 701-719 Henry St.

Administrative Items

Two items on the Jan. 15 agenda related to administrative issues.

Administrative Items: Cost-of-Living Adjustment

One resolution authorized a 3% cost-of-living adjustment for AAHC executive director Jennifer Hall. Labor contracts include this increase for union employees. According to Hall, city administrator Steve Powers gave the same increase to non-union employees at the start of the current fiscal year, on July 1, 2013. Hall reported that she also gave her staff the same increase, but it requires board approval for the increase to apply to her own salary.

According to the city’s human resources staff, Hall’s base salary is $88,000.

Outcome: Commissioners unanimously approved the cost-of-living adjustment for Hall.

Administrative Items: Meeting Minutes

Hall asked for feedback on changing the way AAHC board minutes are kept, in order be consistent with the way minutes of other city commissions are kept in the city’s Legistar system. The approach would be less detailed in reporting deliberations, and primarily provide a report on the outcome of action items.

Margie Teall, a Ward 4 representative on city council, attended the Jan. 15 housing commission meeting. She serves as the council’s liaison to AAHC.

Currently, AAHC minutes and board packets aren’t part of Legistar, but are provided on the AAHC page of the city’s website. Minutes are attached to the city council agenda as an item of communication. Hall said her preference would be for more of a summary approach.

Tim Colenback felt it was important that the minutes are accessible to the public. Marta Manildi said she’d defer to Hall on this issue. But as a citizen, Manildi added, she’s always hated summary minutes, “because I feel like I have no idea what really happened.” So her own personal bias would be for more detailed minutes, Manildi said. Others might have a different view, she added. “I know Leigh Greden would!” [Greden is a former city councilmember who until last year served on the AAHC board.]

Christopher Geer said he came out on the opposite end of the spectrum from Manildi. Despite all the commentary that takes place during deliberations, he said, the impact ultimately comes from the decision that’s made, so that’s what is important. It can be a very subjective process to decide what to put in more detailed minutes, he noted. “That’s why most organizations just stick to the factual stuff that occurs during the meetings.”

Ron Woods felt that more detailed minutes provide a more complete understanding, and as a reader of minutes, he finds it helpful to see how decisions were made. However, he said he’d be quite comfortable to align with the rest of the city.

Outcome: Commissioners voted unanimously to switch the approach for taking minutes to an action-item format.

Changing Commission Membership

Near the end of the Jan. 15 meeting, commissioner Marta Manildi announced that it might be her last meeting before her term ends on the housing commission. Her term is ending, and she is not seeking reappointment. [A city council resolution that appointed her in 2010 states that her term ends on April 30, 2014. The AAHC website indicates that her term ends on May 5, 2014.]

Manildi said she’s told mayor John Hieftje that she’d be willing to step down earlier if he can find someone to fill the seat. Housing commission board members are nominated by the mayor, with a confirmation vote by the full city council. [At the city council's Jan. 21 meeting, Hieftje nominated Daniel Lee to serve the remainder of Manildi's term. Hieftje also said he expects to nominate Lee after that for a full term later this year. A confirmation vote by the city council is expected on Feb. 3.]

Manildi said she wanted to say that she’s felt very privileged to serve on the board. When she joined the board, “the housing commission was in quite serious trouble,” Manildi said. Through a lot of effort by many people, as well as some amount of luck, the commission has come far and that’s wonderful to see, she added.

Marta Manildi, a local attorney and an Ann Arbor housing commissioner whose term ends this spring. She is not seeking reappointment.

The relationship with the city is much stronger now, Manildi said, and that’s better for the housing commission. She’s learned a lot from the staff, from other commissioners, from AAHC partners and residents. The fire at Green Baxter Court was a terrible thing, she noted, but it’s also shown how effective the AAHC staff and partners are in handling a crisis.

Manildi also praised the effort to renovate the AAHC properties, which she said is key to providing better, sustainable housing to low-income residents. “It’s really promising, and everybody involved deserves a tremendous amount of credit.”

She received a round of applause from staff and other commissioners. Ron Woods said they’ll miss her unique skill set and institutional knowledge. She is the longest-serving current commissioner, initially appointed in June of 2009.

Joan Doughty of the nonprofit Community Action Network also praised Manildi during public commentary. “When Marta first started, it was a very difficult place to work and it was a dark day for the housing commission,” Doughty said. “She has been very modest in not taking credit for the turnaround. At some point she was the only member standing. She was incredibly brave and passionate and compassionate in making sure that the housing commission started being much more responsive and responsible. She’s really led the charge for a turnaround that’s been amazing to witness.”

By way of background, at its May 18, 2009 meeting, the Ann Arbor city council approved $117,040 to hire the consulting firm Schumaker & Company to conduct a needs assessment of the housing commission. The outcome of that work was presented to the city council by consultant Kerry Laycock at its Jan. 11, 2010 working session. [See Chronicle coverage: "Housing Commission Reorganizes" – a .pdf file of the Schumaker report is downloadable here.]

The Schumaker report described the housing commission as “an agency that is chronically underfunded, focused on crisis management, offering poorly maintained and outdated housing, and insufficient supportive services for a population with significant life challenges.”

A confidential five-page memo to councilmembers from city administrator Roger Fraser – dated Feb. 27, 2010, and obtained by The Chronicle in response to a FOIA request – maintained that board members at the time had failed to address the commission’s chronic problems, and were mishandling the selection process of a permanent executive director. The memo did not explicitly call for the removal of board members, but it seemed clearly designed to lay the groundwork for that move.

A resolution to remove the board and appoint new members was approved by the city council council at its March 15, 2010 meeting. New members included Jayne Miller, a former senior administrator with the city, and Mark McDonald, a property manager for large multifamily residences. Only two members of the previous board were reappointed: Manildi, who is an attorney with Hooper Hathaway; and Deborah Gibson, a resident of the city’s public housing who was reappointed only to a one-month term. Gibson resigned the following day.

Soon after, the council appointed two additional board members: Ron Woods, an Eastern Michigan University professor, and Sasha Womble, a resident commissioner to replace Gibson. Woods and Manildi are the only remaining board members from 2010. Others who have been appointed but are no longer on the commission include Andy LaBarre, who resigned after winning an election for Washtenaw County commissioner in 2012, and former city councilmember Leigh Greden, who was not re-appointed when his first term on AAHC expired last year.

There has also been turnover in the executive director’s position. Betsy Lindsley retired in the summer of 2009 and was replaced by Marge Novak – first as interim director, then as the permanent replacement. However, Novak resigned in July of 2011.

Jennifer Hall has served as executive director since she was hired in the fall of 2011. Hall previously was housing manager for the Washtenaw County office of community development.

Housing commissioners present: Tim Colenback, Christopher Geer, Marta Manildi, Ron Woods (president). Also: AAHC executive director Jennifer Hall.

Absent: Gloria Black.

Next board meeting: Tuesday, Feb. 25 at 6 p.m. at Miller Manor, 727 Miller Ave, Ann Arbor.

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Lori Harris, Norstar Development senior project manager, describes a potential site plan for redeveloping the Ann Arbor housing commission’s North Maple complex. Harris and Norstar president Rick Higgins attended the AAHC board’s June 19, 2013 meeting. (Photos by the writer.)

Norstar Development president Rick Higgins and Lori Harris, the firm’s senior project manager, briefed commissioners at the board’s June 19, 2013 meeting. The board had selected Norstar as a co-developer for this overhaul in January.

Norstar’s presentation included a review of the two low-income housing tax credit applications that the AAHC plans to make in August to the state of Michigan. The applications will cover a total of five public housing properties: Miller Manor, South Maple, Baker Commons, Hikone and Green/Baxter complexes. These properties make up the bulk of public housing units in the AAHC portfolio – 248 out of a total 326 units.

If approved, the tax credits would provide a large funding source for renovating those properties. It’s part of Norstar’s effort to help AAHC convert Ann Arbor’s public housing units into public/private partnerships through a new rental assistance demonstration program, known as RAD, offered by the U.S. Dept. of Housing and Urban Development (HUD). AAHC was accepted into the program late last year. The goal is to allow AAHC to use private financing for capital improvements in its existing housing stock, which is decades-old and in need of major upgrades.

The Ann Arbor city council signed off on this process by unanimously passing a slate of resolutions at its June 3, 2013 meeting. One of the most crucial actions was approval of an ownership transfer for public housing properties – from the city of Ann Arbor to the housing commission. AAHC has managed, but does not own the properties.

As part of the tax credit application review process, Norstar representatives described the financing and legal structure to be used in renovating these first five properties. Among the challenges is the potential need for significant asbestos abatement at most of the locations, as well as major HVAC infrastructure upgrades at Miller Manor. Higgins indicated that he’s somewhat worried about the budget for these renovations, and thought it might be necessary to seek additional funding from the city and other sources.

In addition to the five initial properties that will be renovated, Norstar also is developing site plans – working with AAHC and the city’s planning staff – for four AAHC complexes that will likely be demolished and, with some exceptions, rebuilt: North Maple Estates, Platt Road, White/State/Henry, and Broadway Terrace. Redevelopment of these sites, particularly at North Maple Estates and on Platt Road, is expected to add 26 new units to the city’s low-income housing stock.

Related to this conversion process, no action was taken by the AAHC board on June 19 . Jennifer Hall, AAHC executive director, told commissioners that she plans to bring forward a voting item for them at their July 17 meeting – related to amending the city’s RAD application. The original application covered only about 80% of AAHC properties, but now the goal is to include all properties in the RAD conversion. Hall noted that because Norstar representatives were in town on the date of the June 19 board meeting, she’d asked them to brief commissioners on the redevelopment efforts so far.

Tax Credit Financing Update

Rick Higgins, Norstar’s president, began by focusing on the tax credit application that the AAHC plans to make in August. The AAHC is applying to the state’s low-income housing tax credit (LIHTC) program. “That’s key, because that will be our biggest source of funding,” he said. The federal program is administered by the Michigan State Housing Development Authority (MSHDA). Tax credits are awarded for projects, and are in turn sold to investors who provide funding for construction or renovation. Pricing for those credits varies, depending on market conditions and other factors. For this project, Norstar expects to get roughly 83 cents on the dollar.

Originally, Norstar had planned to package the city’s two mid-rise public housing projects – Miller Manor and Baker Commons – into one application, Higgins said, with a second application to include the group of Hikone, Green/Baxter and South Maple townhouse complexes. But for a variety of reasons, including the way that points are scored for the LIHTC program, Norstar decided to group the five properties in a different way. For example, an application gets more points if 10% of the units have barrier-free access. It’s not possible to reach that target with a rehab of South Maple, Higgins said. “It would cost an exorbitant amount of money to try to do that for the townhouses.” However, by combining South Maple with one of the larger mid-rise complexes, which can more easily be made barrier-free, Norstar can reach that 10% target of total barrier-free units in its application.

Rick Higgins, president of Norstar Development.

Higgins told commissioners that the LIHTC program is very competitive. He estimated that only about 30-40% of applications are actually funded. There’s no point in applying if you don’t have competitive scores, he added. “So we have to continually look at what we’re doing and how we’re doing it, so we can get those points. If we don’t get those points, we have nothing.”

Lori Harris, Norstar Development senior project manager, noted that Norstar has been trying to rearrange these five properties into ways that will yield the highest scores. The reason they had originally grouped the two mid-rises together was that those properties are very similar, she explained, and they thought it might be easier for investors to understand. But when they looked closer, they decided it made more sense from a scoring perspective to group each mid-rise with one or more townhouse complexes. “It’s really about how we’re going to package the plan,” she said. Harris noted that AAHC can only make two applications to MSHDA per round. The hope is that both applications made in August will be funded.

The two applications are: (1) for Miller Manor (103 units) and South Maple (29 units); and (2) for Baker Commons (64 units), Hikone (29 units) and Green/Baxter (23 units). That combination was most advantageous for scoring, Higgins said. These five properties also make up the bulk of public housing units in the AAHC portfolio, he noted – 248 out of the total 326 units.

Hall added that this approach doesn’t change the overall scope of work for redeveloping the AAHC properties.

Higgins reported that in addition to these five properties in the first phase, Norstar has evaluated other AAHC properties as well, including North Maple, Broadway, lower Platt, and White/State/Henry. “We think those are very difficult to rehab,” he said. The property at 504-1506 Broadway in particular was a challenge, he said. “It’s not well built, it’s terribly designed. It’s built into a hill – I don’t even know how you’d fix it.” Though they haven’t yet made a final recommendation, Higgins said they’re leaning toward tearing down the housing at all of those sites and rebuilding, rather than trying to rehab. In the case of Broadway, Higgins questioned whether anything should be rebuilt there, given the topography.

He also criticized the units at lower Platt, where there are four houses, each with five bedrooms. He said he’s been doing this kind of work for 20 years, and can walk into a building and quickly determine if it can be saved. He didn’t think the Platt property could be rehabbed.

The goal is to end up with more public housing units than the AAHC now has, Higgins said. At North Maple, for example, Norstar believes the site can be configured to get more units there. [North Maple Estates consists of 20 single-family homes with a total of 85 bedrooms. In that same complex, there are two three-bedroom duplexes, for a total of 12 bedrooms.]

Harris explained that Norstar’s presentation to the AAHC at that June 19 meeting was to assure commissioners – so that commissioners could in turn assure city councilmembers – that there would be at least as many public housing units after converting to RAD as there are now.

In response to a query from Gloria Black – the commissioner representing AAHC tenants – Higgins explained that if a property is torn down and rebuilt, during the construction phase the tenants will be temporarily relocated to other housing. It usually involves relocating to vacant units within other AAHC complexes, or giving tenants housing vouchers for rental property. When the new units are finished, the tenants previously housed there will have a “right of return,” as long as they’re in good standing with AAHC.

Norstar is focusing on the first five properties – Miller Manor, South Maple, Baker Commons, Hikone and Green/Baxter – for the funding round in August 2013. Norstar’s June 19 presentation to AAHC board members included an overview of financing for those conversions. The remainder of the AAHC properties will be handled in subsequent applications in February and August of 2014, Higgins said.

Legal Structure, Financing

Rick Higgins of Norstar briefed commissioners on the legal and financial aspects of the first phase of RAD conversion, with two applications for low-income housing tax credits and two separate ownership structures: (1) Miller Manor and South Maple; and (2) Baker Commons, Hikone and Green/Baxter.

He noted that the city of Ann Arbor, which owns the properties, has agreed to transfer ownership to AAHC. [That action was approved unanimously at the city council's June 3, 2013 meeting. However, the ownership change won't occur until the AAHC is ready to bring in investors.] By owning the properties, AAHC will be able to enter into a long-term ground lease – likely 60 years or more – with the low-income tax credit partnership.

For the Miller Manor and South Maple properties, for example, the ground lease would be held by an entity called Maple Tower Limited Dividend Housing Association. That entity would be owned by the investors Great Lakes Capital Fund Limited Partner (with a 99.99% ownership stake) and Maple Tower LLC (with an 0.01% ownership). Maple Tower LLC would be owned by the Ann Arbor Housing Development Corp., which in turn is owned by the AAHC.

Chart provided to the AAHC by Norstar showing the ownership structure for Miller Manor and South Maple public housing properties.

Higgins said he’s talked to potential investors in great detail about the ownership structure, and he believes the AAHC will be able to achieve its goal by being the sole general partner, without any ownership participation by Norstar. The investor will be a limited partner, but have 99.99% ownership of the company that will hold the ground lease with AAHC. AAHC will continue to manage the properties, under a management agreement with the partnership that holds the long-term ground lease. That agreement will outline the fees paid to AAHC for its management activities.

So ultimately, Higgins said, the ownership and management structure won’t change, though AAHC will have to account for it differently. But as a practical matter regarding day-to-day operations, “it won’t really change at all,” he said.

Norstar will be a turnkey developer on these projects. As part of that, the company offers certain guarantees, he said. The biggest one is the guarantee that the project will be built – and that’s what the banks, investors and others will be looking for from Norstar, Higgins said, because AAHC “doesn’t have the wherewithal to be able to do that.” Norstar will also run the job, with all the financing flowing through the firm. They’ll manage the books and oversee the general contractor, subject to AAHC’s approval.

Marta Manildi, board member of the Ann Arbor housing commission.

However, AAHC will be responsible for certain operating guarantees, Higgins noted. For example, AAHC will need to guarantee to cover operating deficits – possibly $300,000 or more – for these projects, in needed. AAHC will also be responsible for complying with conditions of the tax credits. It means making sure residents meet the income requirements that qualify the project for tax credits. Initially, Higgins explained, AAHC will enter into an oversight agreement with an experienced tax credit management company, which will allow AAHC to earn points with MSHDA when it evaluates the tax credit application.

Commissioner Marta Manildi asked Hall if all of these elements have already been incorporated into AAHC’s future operational plans. Who will staff the task of monitoring tax credit compliance, for example?

Hall replied that the AAHC staff won’t change. All of the staff will need to be trained on these requirements, however. MSHDA requires a certain amount of experience handling these tax credit regulations, Hall noted, and right now, AAHC staff doesn’t have that experience. That’s why a management company is needed as a partner. So instead of dealing with public housing regulations, Hall said, the AAHC staff will deal with tax credit regulations and vouchers. “The rules aren’t that different,” she added.

In response to another question from Manildi, Hall noted that the status of AAHC employees was clarified at the city council’s June 3, 2013 meeting. [The council approved a resolution stating that current employees of the housing commission are city employees and will continue to be city employees – even after the conversion of AAHC properties to project-based vouchers.]

Higgins added that none of the new ownership entities will have any employees. The employees of the AAHC will provide services to the other entities under a management agreement. The ownership entity for the tax credit financing will be primarily a legal and accounting entity only, he said.

Manildi also wanted to know what mechanism the AAHC would have for auditing or evaluating issues that Norstar is taking care of on AAHC’s behalf. Higgins replied that Norstar has to provide a “cost certification” report to AAHC, MSHDA and others involved in this process. It’s prepared by an accountant, and includes a list of all costs for developing a property. Higgins said he would also make a detailed report to the AAHC board at the end of the project.

Responding to a query from commissioner Gloria Black, Higgins said that part of the reason AAHC hired Norstar is that banks will lend to Norstar, and investors rely on Norstar for these kinds of tax credit deals. “We have the financial wherewithal to stand by our guarantees – that’s one of the reasons you brought us to the table,” he said. Norstar will continue to provide AAHC with updated financial statements throughout this process, he added.

Higgins reviewed the initial development budgets and operating budgets for a 15-year period. From a private sector point of view, he said, the expenses are very high, but from a public sector perspective, the expenses aren’t out of line. “That’s what we’re buying into – it is what it is,” he said. [.pdf of Norstar-prepared budgets]

He noted that public housing properties have a very high expense-to-income ratio – so there’s not a lot of surplus. Investors require a 15-year scenario, allowing for a 2% income increase every year and a 3% annual increase in expenses. Investors want to assess the worst-case scenario, he said, if expenses increase more than income. Unfortunately, he added, because of the high expense-to-income ratio, in the 15th year of this trending scenario, the cash flow is negative. Because of that, Higgins said he can’t borrow as much as he normally would for this kind of project.

Norstar is now estimating debt of $500,000 for the 132-unit Miller/Maple project and $1.6 million for the Baker/Green/Hikone project, with 116 units. Those debt levels are achievable, he said.

Ann Arbor housing commissioner Christopher Geer.

Given those amounts that can be borrowed, Higgins said the next step is to look at other possible funding. Luckily, he said, the city of Ann Arbor and Washtenaw County are very supportive of affordable housing. In addition, AAHC is applying for $500,000 loans for each of these two projects from the Federal Home Loan Bank. That’s also factored into the budgets that Norstar has prepared, he said. Lori Harris noted that Avalon Housing, an Ann Arbor nonprofit focused on affordable housing projects, had done a good job in helping with that FHLB application, as a consultant on the project.

Higgins then explained that the AAHC properties have been appraised, so that the value of those buildings can be transferred into the new partnership. It’s possible to obtain tax credits on the value of those buildings, he said, so it’s important for those appraisals to be as high as possible. [In the budgets, these appraisals are listed in the "structures" line item: $1.04 million for Baker/Green/Hikone, and $1.64 million for Miller Manor/South Maple.] As an example, Higgins said he could generate an additional $250,000 for the Baker/Green/Hikone project by using this strategy.

Hall observed that the value of the buildings might seem very low, but it’s not based on market rates. Harris explained that the appraisals are based on the fact that the buildings are rent-restricted, and on the assumption that they’ll be part of the RAD program.

The bottom line, Higgins said, is that Norstar can generate nearly $52,000 per unit for the Miller Manor/South Maple project, and about $37,000 per unit for the Baker/Green/Hikone project. These estimates reflect the hard costs for the work that will go into these buildings, he said.

Now, Norstar is working with a raft of contractors to look at the cost of redevelopment. [.pdf of consultants chart] One of the biggest challenges is asbestos, Higgins said. It’s likely that asbestos is in the joint compound tape of every building in the first phase of this RAD conversion, except for Baker Commons. Most of the buildings were constructed in the late 1960s and early 1970s, when asbestos was commonly used. If asbestos is determined to be in these buildings, then removing drywall and certain other construction activity would have to be handled by an asbestos removal company, to protect the construction workers. It’s possible that the asbestos removal alone could cost as much as $10,000 per unit. Higgins stressed that there’s no safety risk for residents, but the health issue concerns workers who’ll be removing materials that might contain asbestos.

The other challenge relates to Miller Manor. Higgins reported that there’s no air-conditioning in the bedrooms, which impacts quality of life. The plan is to put new windows into the bedrooms, and new HVAC units outside on the balconies, with ducts leading into the bedrooms. That’s an expensive project, he said, especially considering the asbestos issue. These renovations also must meet certain energy efficiency standards in order to be considered for funding, he said, which adds to the expense.

Another problem relates to the sewage systems in these developments, which need to be addressed. All of these things add to the cost of the redevelopment, Higgins said. So the question is how much money will be left after that.

Right now, Norstar is evaluating all the costs and all the aspects of the project that will be required. They’re still talking about other possible elements, like adding geothermal energy or solar arrays. There are many moving parts, he said.

Ron Woods, president of the Ann Arbor housing commission board.

Gloria Black asked how tenants will be affected by all this. Hall replied that the residents won’t see much change, because most of it will be happening administratively. The same AAHC staff will still be working with residents, and residents will need to meet the same income requirements that are in place now.

Christopher Geer clarified that in the Baker/Green/Hikone estimated development cost of $9.941 million, about $6 million in funding will come from the low-income housing tax credits. But that funding from investors won’t come in until after construction, so Norstar plans to take out a $5.25 million construction loan at an estimated 3.5% interest. Other sources of construction funding include possibly $300,000 from the Ann Arbor Downtown Development Authority, a $500,000 loan from the Federal Home Loan Bank, and $750,000 in equity.

For the Miller Manor/South Maple $13.293 million redevelopment, the construction funds include a $9.4 million construction loan, a $500,000 loan from the Federal Home Loan Bank, $200,000 from the Ann Arbor housing trust fund, and $950,000 in equity.

Higgins said he’s worried about the budget, but noted that Hall “keeps saying she can go with her hand out some more” to get additional funds from city sources. That might be necessary, he said.

Hall noted that if the rents weren’t restricted, it would be possible to borrow more upfront and therefore do a broader rehab. So the challenge will be in determining how much can be done with the resources available, she said.

Demolition & Redevelopment

As part of the June 19 presentation to the housing commission, Norstar’s Rick Higgins and Lori Harris also presented preliminary site plans for redevelopment of four AAHC complexes that believe should be demolished and, with some exceptions, rebuilt: North Maple, lower Platt, White/State/Henry, and Broadway Terrace.

Demolition & Redevelopment: North Maple Estates

The current AAHC complex at 701-739 North Maple – north of Dexter Avenue, on the west side of North Maple – consists of 19 single-family homes with a total of 85 bedrooms, as well as two three-bedroom duplexes with a total of 12 bedrooms.  AAHC executive director Jennifer Hall noted that it’s the busiest of AAHC’s properties.

Higgins described it as the site with the most exciting potential for improvement. The housing was built at the lowest portions of the site, he noted, while an asphalt basketball court is at the highest point. The current configuration does not make sense from the perspective of drainage and stormwater management, he said.

Harris reported that AAHC staff have met with the city’s planning staff to get a sense of what kind of development would be possible. The site plan has gone through a couple of iterations so far, she noted.

Draft site plan for redevelopment of North Maple Estates public housing complex. North Maple is the road running north to south on the east (right) side of this aerial view.

An earlier site plan had larger buildings, Harris said, but the current plan calls for smaller buildings, to be respectful of the types of housing in the surrounding neighborhood. A community center would be centrally located on the west side of the site, and parking will be located adjacent to each of the buildings.

Currently, the drive coming off of North Maple Road dead-ends in the complex, Harris noted. In addition to that entrance, the new plan calls for a drive to connect to Vine Street on the north end, with another drive to the south exiting onto Dexter Avenue. Hall noted that she has talked with city fire department officials, and current standards would not allow for a dead-end like the one that currently exists in this complex.

Ann Arbor housing commissioner Gloria Black.

Harris said there’s a great opportunity for improving the site, from a quality of life perspective for residents. New construction would improve accessibility and “visitability,” she said. Visitability means that guests with disabilities would have access to the first floor of a resident’s living area. That’s something that most AAHC properties don’t have, she noted.

All the new units would be built to be energy efficient and modern, Higgins said.

Commissioner Gloria Black described the current North Maple complex as a “hodge-podge of buildings.” She wondered if the new units would be less vulnerable to damage caused by tenants. Harris replied that some Norstar projects include “high-abuse” drywall. Those are design details that need to be worked out, she said. Harris also pointed out that if a unit has 4-5 bedrooms but only one bathroom – as is the case with the North Maple units – then “that’s a very high-abuse bathroom.” So by designing units that will better fit the needs of families, she said, those units will fare better in terms of wear and tear. Higgins added that new five-bedroom units will have 2.5 bathrooms, and four-bedroom units will have two bathrooms.

Higgins noted that the North Maple buildings have vinyl siding. He reported that in other Norstar projects, they typically use brick or other durable material for entryways or porches, which are high-traffic areas.

These site plans are more conceptual, with many of the details – including building materials and other design issues – to be worked out as the projects move forward.

The proposed redevelopment on North Maple would increase the number of units from 23 to 41. Hall noted that the two duplexes on the site won’t be torn down, but rather will be rehabbed. The duplexes were built in the early 1980s and aren’t in as bad of shape as the single-family homes, which were built in the late 1960s.

Demolition & Redevelopment: Lower Platt

The AAHC property described as lower Platt is located at 3451-3457 Platt – on the east side of Platt Road, north of Belvidere. Currently, there are four single-family houses at that site, each with five bedrooms. Three of those houses are in the floodway, Hall noted, and the water table is higher than the basements. When it rains, the properties flood. The plan is to tear down the existing buildings, and rebuild 12 new townhomes further north on the same site, on land that’s currently vacant.

Draft site plan for Ann Arbor Housing Commission’s Lower Platt redevelopment, on the east side of Platt Road, north of Belvidere.

In addition, there’s a strip of vacant city-owned land on the west side of Platt, north of Verle and south of Sharon. The land runs from Platt over to Springbrook. Norstar’s development plan calls for building four duplexes there – a total of eight units – with two duplexes accessed from Platt, and the other two accessed from Springbrook.

Draft site plan for redevelopment of city-owned vacant land between Platt Road and Springbrook, south of Sharon. In this image, Platt is the north-south road on the east (right) side.

Gloria Black asked whether these projects would address the site’s drainage issues. Higgins replied that new construction must meet city code, regarding drainage and all other code requirements.

Demolition & Redevelopment: White/State/Henry

Currently, AAHC has 28 units in a building along Henry Street, between South State and White Street. The addresses are 1514 and 1520 White St., 1521 S. State St., and 701-719 Henry St. The proposal calls for tearing down the existing building.

Draft site plan for Ann Arbor Housing Commission building on Henry Street, between South State and White streets.

This was the site that the city planning staff had the most trepidation about, Harris said. The city staff want the layout to fit better into the neighborhood’s streetscape. So Harris reported that this particular site plan is being put on the back burner for now. The goal is for the new construction to keep the same number of units (28).

Higgins called the current layout a security and maintenance nightmare. Norstar is trying to come up with a design that gives every unit its own door, to eliminate common space in the building. It helps security and makes for better quality of life for residents, he said.

Regarding parking, Harris said the site would need a parking variance from the city. Hall added that the new site plan has more parking than currently exists at that location, but she noted that for the city planning staff, parking “seemed to be the least of their concerns.” The city is moving toward alternative transportation, she said, and isn’t as car-centered. There’s a lot of on-street parking in that location, she added.

The new units would be ADA compliant, Hall noted. That’s something that could not be done by simply rehabbing the existing units.

In a follow-up phone interview with The Chronicle, Hall said another possibility for that site is to gut the existing building and do a complete internal rehab.

Demolition & Redevelopment: Broadway Terrace

The Broadway Terrace property, 20 units located at 1504-1506 Broadway, has serious challenges, according to Norstar. Higgins joked that in a few years, parts of it could simply fall down a cliff.

Draft site plan for Broadway Terrace at 1504-1506 Broadway. The street is located at the top left corner of this image.

Harris said the proposed site plan includes 14 units, but a lot more due diligence must be done to ensure that rebuilding on the site is feasible. Higgins added that the amount of earthwork that’s needed is formidable, and 20-30 foot retaining walls would probably be necessary. The cost of that might be prohibitive, he said. The current construction, with the buildings abutting the hill, “is a disaster waiting to happen.” Norstar isn’t yet ready to make a recommendation, Higgins added.

Another factor relates to cost caps that MSHDA implemented about a year ago, Harris explained. For every type of project, there’s an upper limit of total development cost per square foot. The current limit is $173 per square foot for new construction. The cap is different for rehabs or historic preservation. “It’s really been squeezing projects that are in urban locations,” Harris said.

Higgins put it this way: “There’s no way this project [on Broadway] will come in at those cost caps.” Even North Maple will be a challenge, because of the earthwork involved. The buildings that Norstar is proposing aren’t cheap, either, he said. Duplexes are more expensive than buildings with multiple units, he said. But the site plans are good, he added, so it’s Norstar’s job to figure out how to make it work for AAHC, the community and investors.

Jennifer Hall, executive director of the Ann Arbor housing commission.

Gloria Black suggested using the Broadway property as green space. Higgins replied that if Norstar recommends demolishing those units and not rebuilding, then it’s up to the AAHC and city to decide what to do with the property.

Marta Manildi asked if MSHDA could waive the development caps. Harris explained that the caps are punitive. That is, if the project goes above the cap, then MSHDA gives the project’s funding application negative points in that category. If the project is below the cap, then it’s awarded positive points.

Higgins noted that there are ways to work around it. For example, if the city contributed $500,o00 to demolish the existing buildings and regrade the site, then that amount doesn’t need to be included in the budget that’s presented to MSHDA – which makes the development costs lower, for the purpose of getting funded through MSHDA. Regardless of funding considerations, the site presents a serious challenge, he said.

Hall told commissioners that she knew it was a challenging site. But her direction to Norstar was to push it. “In the end, we can’t have less units than we started out with,” she said. “Politically, it would be extremely difficult for me to go to city council and say ‘We’re getting rid of 20 units.’”

Harris explained that Norstar is working to relocate those units at other sites. Higgins added that when Norstar gets a final estimate for redeveloping Broadway, it will be AAHC’s decision about whether to move forward.

In a related comment, Hall said that commissioners will need to look at AAHC’s entire portfolio, which is not within Norstar’s scope of work. Several properties won’t be eligible for tax-credit financing because they’re so small, she said. Those include Upper Platt, Oakwood, Malletts, Hillside, and South Seventh. The goal for this group of properties is to renovate those smaller sites with existing capital funds as well as AAHC reserves, Hall said. That work will likely be done in November 2013.

In addition, Hall said, the plan would be to sell the public housing properties at 909 Evelyn Court and 805-807 W. Washington, as well as the AAHC lease-to-own site at 2072 Garden Circle. These moves would reduce the number of AAHC units by three, and would need to be replaced at other locations.

For additional background on the Ann Arbor housing commission’s conversion process, see Chronicle coverage: “Housing Commission Eyes Major Transition” (December 2012); “Housing Commission Selects Co-Developer” (January 2013); and “Round 3 FY 2014: Housing Commission” (February 2013).

Housing commissioners present: Gloria Black, Christopher Geer, Marta Manildi, Ron Woods (president).

Absent: Leigh Greden.

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The Urban County is a consortium of Washtenaw County and 18 local municipalities that receive federal funding for low-income neighborhoods. Members include the cities of Ann Arbor, Ypsilanti and Saline, and 15 townships. “Urban County” is a designation of the U.S. Dept. of Housing and Urban Development (HUD), identifying a county with more than 200,000 people. With that designation, individual governments within the Urban County can become members, entitling them to an allotment of funding through a variety of HUD programs. The Urban County is supported by the staff of Washtenaw County’s office of community & economic development (OCED).

Two HUD programs – the Community Development Block Grant and HOME Investment Partnership – are the primary funding sources for Urban County projects.

The plans indicate that the Urban County area is expected to receive about $2.7 million annually in federal funding, which will be used for these broad goals:

1. Increasing quality, affordable homeownership opportunities

2. Increasing quality, affordable rental housing

3. Improving public facilities and infrastructure

4. Supporting homeless prevention and rapid re‐housing services

5. Promoting access to public services and resources

6. Enhancing economic development activities

A public hearing had been held at the board’s April 17, 2013 meeting.

This brief was filed from the boardroom of the county administration building, 220 N. Main in Ann Arbor. A more detailed report will follow: [link]

HUD’s Community Challenge Planning Grant grant was awarded to support the Washtenaw County Sustainable Community project, which focuses on the Washtenaw Avenue corridor spanning Ann Arbor, Ypsilanti, Pittsfield Township and Ypsilanti Township. County administrator Verna McDaniel had announced news of the grant award at a Nov. 17, 2011 working session of the county board.

According to the grant application, the project focuses on “removing barriers to create a coordinated approach to expanding existing affordable and energy efficient housing options and connecting them to job centers and healthy food through an enhanced multi-modal transportation corridor.” It’s part of the Reimagining Washtenaw project, which has been underway for several years. The joint county/city of Ann Arbor office of community & economic development, led by Mary Jo Callan, is taking the lead on the project.

In addition to the county and four other jurisdictions, partners in the project include the Ann Arbor Downtown Development Authority, Ann Arbor Transportation Authority, Arts Alliance, Community Housing Alternatives, Eastern Michigan University, Food System Economic Partnership, Growing Hope, Habitat for Humanity, SEMCOG, Ann Arbor SPARK, University of Michigan Graham Environmental Sustainability Institute, Washtenaw Area Transportation Study, Washtenaw County Public Health, and the Ypsilanti Housing Commission.

This brief was filed from the boardroom of the Washtenaw County administration building at 220 N. Main St. in Ann Arbor. A more detailed report will follow: [link]

The Urban County is a consortium of 11 local governments that receive federal funding for programs that serve low-income residents and neighborhoods.

The county is expected to receive $3,602,480 from these programs during the coming fiscal year. A $448,920 in-kind county match is required.

Final approval is expected at the board’s June 1 meeting.

This brief was filed from the boardroom of the county administration building at 220 N. Main St. in Ann Arbor. A more detailed report will follow.