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HomeMy WebLinkAbout2003/04/22-Minutes-HEDC City of Fort Worth City Council Economic & Community Development Committee Highlights of the Special Meeting Held April 22, 2003 Committee Members Present: Jeff Wentworth, Wendy Davis, Frank Moss, Clyde Picht Other Council Members and City Staff Present: Kenneth Barr, Ralph McCloud, Diane Birdwell, Brian Boerner, Donald Cager, Bette Chapman, Bea Cura, Hugh Davis, Angie Highland, Tom Higgins, Gary Jackson, Gloria Pearson, Reid Rector, Catherine Simpson, Patsy Steele, Peter Vaky, Jerome Walker, Ardina Washington, Barbara Wilson Call to Order: Chairman Jeff Wentworth called the meeting to order at 8:14 a.m. Discussion and Consideration of the Fort Worth Housing Finance Corporation as Co-Developer with Texas Housing and Economic Resources for the Planned Glen Eden Subdivision: Housing Director Jerome Walker made the presentation (attached). He explained that in June 2001, City Council had approved a pre-development loan of$273,500 for Texas Housing and Economic Resources (THER) to cover preliminary development costs associated with the proposed Glen Eden subdivision, which is located in the Rolling Hills Neighborhood Empowerment Zone (NEZ) between Riverside Drive and Campus Drive in southeast Fort Worth. He added that THER has now reached an agreement with KB Homes to purchase all 156 lots, and THER has received a loan commitment for $2,827,500 from JP Morgan Chase Bank. However, due to the relative inexperience of THER, Mr. Walker said, the commitment is predicated on the Fort Worth Housing Finance .Corporation (FWHFC) serving as a co-developer and guaranteeing completion of the site development. He then quested that the Committee recommend (1) that the Fort Worth Housing Finance Corporation (FWHFC) serve as co-developer of Glen Eden Subdivision with Texas Housing and Economic Resources; (2) that Fort Worth Housing Finance Corporation, as completion guarantor, be allowed, if required, to spend up to $100,000; and (3) that City Council allocate out of HOME Affordable Housing Development Fund (AHDF) an amount not exceeding $100,000 and authorize the City Manager to negotiate, execute and amend a contract to convey such amount to the FWHFC to provide gap financing for Glen Eden. Committee Member Frank Moss asked about the $200,000 for KB Homes Development Agreement that was shown under sources of income in the handout (attached). Mr. Walker explained that this is a contribution made by KB Homes under their agreement with the non-profit organization and that the funds become part of the development budget. It can be used to pay the developer's fee, Mr. Walker added, or it can be put toward construction. Mr. Moss asked if this was in addition to the $255,000 that KB homes had contributed in its Stand-by Commitment. Mr. Walker said that was correct and that the total contribution made by KB Homes was $455,000. Committee Member Clyde Picht requested further information regarding the $273,500. Mr. Walker explained that these funds were awarded by Council to pay for an engineering study, market study, appraisals, soil evaluations, etc. Committee Member Wendy Davis asked if this amount was to be repaid. Mr. Walker said that these funds had already been spent and were to be repaid as the lots were sold to KB Homes. Mr. Wentworth asked for more information on how this repayment was legally structured. Mr. Walker explained that the repayment was described in the legal document as "pro rata portion," which means that the $273,500 would be divided by 156 (the number of lots), for a cost of about $1753 per lot. As each lot is sold, Mr. Walker said, a portion of the proceeds would be naid to the City. Mr. Wentworth asked if this payment was stipulated in the legal agreement. Mr. Walker said that was. Ms. Davis asked if KB Homes was required to purchase all of the lots. Mr. Walker said that they were. Page 1 of 3 Mr. Wentworth then referred to the $50,000 development fee that Mr. Walker had previously said would be paid at closing and the $150,000 that was to be deferred until the end of the project, and he asked if the agreement stipulated that the $150,000 is paid before the City's $100,000 guarantee. Mr. Walker said that was correct. After expressing concern about the language that states that the City serves as co-developer and completion guarantor on Wtproject, Mr. Wentworth asked if J. P. Morgan Chase Bank had been sent official written notice that the limits he City's liability is $100,000. Mr. Walker said this had been discussed with the bank, which is going to issue a loan commitment that will stipulate the maximum exposure for the City for the Fort Worth Housing Finance Corporation. He added that there would be no acceptance of any loan commitment if the stipulation were not clear. Mr. Wentworth said he was very concerned about the statement that the City would be co-developer and completion guarantor because that usually meant unlimited liability, and he said he wanted to be sure that someone from the legal staff reviewed the document. He added that he wanted to be certain that the bank understands that the limit of the City's liability is $100,000. Mr. Walker said that, during negotiations, it was made very clear to the bank that the City's maximum exposure was $100,000. As a result, he said, the bank required the equity contribution on the part of the non-profit organization, and the developer was required to come forth with additional equity. Mr. Wentworth said he wanted to insure that this was all in writing so that there would be no question about it if the project were not completed as anticipated. Mr. Picht asked about the source of the developer's fee and to whom it would be paid. Mr. Walker said the developer's fee of $200,000 goes to Texas Housing and Economic Resources, who has been working on the project since 2000. Mr. Walker added that THER bought the land for the project, oversaw the pre-development activities, arranged the financing, and negotiated with the homebuilder for the project. Mr. Picht then asked what the developer's fee was for. Mr. Walker said that it covers all the activities that THER, a non-profit organization, has undertaken in almost three years to bring the project to fruition. Ms. Davis moved to approve the recommendation. Mr. Moss seconded the motion. r. Wentworth said that he felt this was not a good deal for the City because as co-developer, the City was AM Westing $373,500, but was not getting anything back. On the other hand, he said, the developer has put no money in the project, but they are going to receive a $200,000 fee and $258,250 in overhead and construction management plus the profit when they develop the lots and sell them to KB Homes. He said he wanted to go on record that in his judgment, the Fort Worth Housing Finance Corporation should not be involved in deals of this type. Mr. Walker said that this project was comparable to other non-profit organization deals in which the City had participated. Ms. Davis requested that in future presentations of this type, staff present a cost/benefit analysis of the City's involvement in the project, including information on what the income stream would be on the ad valorem taxes. Mr. Moss said he felt that the Glen Eden subdivision project would be a positive one for the neighborhood. Mr. Picht said that he wanted to be sure the City had the legal protection mentioned by Mr. Wentworth before the project goes forward. He then asked about the principals and the developer. Mr. Walker explained that the Reverend Nehemiah Davis is the president of THER; the general contractors for the site are L.H. Lacy Construction, the other contractors are LandCon, Engineering Company, and Gunter Construction Company, who are very reputable, and who will be handling about 15% of the work; and the homebuilder is KB homes. (Mr. Walker: I could not hear this on the tape. If you could help me out here, I would appreciate it.) Mr.Picht said that he did not want to put the City at risk on these types of projects, but he would support this project because he felt 4 h construction was needed in that area. Mr. Wentworth called for a vote on the motion and second that had been previously made. The motion carried. Page 2 of 3 Executive Session: There was no executive session. Requests for Future Agenda Items: Oere were no requests for future agenda items. Adjourn: The meeting adjourned at 8:36 a.m. The next meeting is May 13, 2003. Page 3 of 3