AGENDA # 7
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Request from First Baptist Church
DATE: September 11, 2000
The purpose of this report is to respond to a request from the First Baptist Church to provide $100,000 to help with construction costs for its HUD Section 202 Elderly Housing Project known as Manley Estates, located off Merritt Mill Road (please see Attachment 1).
The attached resolution would authorize a $100,000 grant to the project from two sources:
a) Funds reimbursed to the Housing Loan Trust Fund upon cancellation of a portion of the Town’s lien on the property to be acquired in the amount of an estimated $55,000; and
b) Program income to be budgeted in the Housing Loan Trust Fund in the amount of $45,000.
The attached ordinance would amend the Housing Loan Trust Fund to appropriate $100,000 for the HUD Section 202 Elderly Housing Project.
To date, the Town Council has contributed $45,000 from the Housing Loan Trust Fund for initial predevelopment costs of this project. Orange County has contributed $10,000. If funds are available from the Section 202 project budget, the Town will be reimbursed for these costs. Of these funds, $36,000 has been paid for land option costs.
In December 1999, the U.S. Department of Housing and Urban Development notified the First Baptist Church that it had received fund reservation in the amount of $3,261,300 for this project.
The project site is located off Merritt Mill Road near Park Road. The project will reuire six acres of approximately nine acres of land that the Pines Community Center purchased in 1995 with funds from Central Carolina Bank and the Town of Chapel Hill. In February 1995, Central Carolina Bank loaned the Pines Community Center $246,000 to acquire this site, of which the principal balance is approximately $242,000. The Town Council authorized a loan of $115,000 from the Town’s Housing Loan Trust Fund to the Pines Community Center to purchase the property. To date, the Center has repaid $5,750 of the loan amount to the Town. The outstanding balance of the Town’s loan is $109,250.
The Town’s Performance Agreement with the Pines Community Center for this property expired on February 7, 1997. At that time, the loan was due and payable to the Town.
On January 25, 1999, the Council authorized the Manager to initiate foreclosure proceedings with the Pines Community Center, Inc. for outstanding loans due to the Town for four properties. At that time, we recommended that the Council not include the Park Road property in the foreclosure proceedings because of the First Baptist Church’s HUD Section 202 Elderly Housing application.
In a Memorandum dated August 17, 2000, the First Baptist Church requested that the Town Council provide $100,000 to assist with the cost of acquiring land and constructing the project. One source of funds for this request is converting a portion of the balance of the Town’s land acquisition loan it made to the Pines Community Center to the Church for its Section 202 Elderly Housing project.
This project will provide 40 units of rental housing for very low income elderly households in Chapel Hill. Due to the high land costs in Chapel Hill (over $8,000 per unit), and high costs of construction in Chapel Hill, the amount of funds available from the U.S. Department of Housing and Urban Development will not be sufficient to construct the project. The pro forma attached to the request in Attachment 1 lists the estimated expenses and revenues for the project.
As summarized in the request, the remaining gap needed to cover development costs is $100,000. Without these additional funds from the Town to develop the project site, this project could not move forward.
We propose two sources of funding to pay for the $100,000 request:
a) Funds reimbursed from canceling a portion of the Town’s lien on the property, estimated at $55,000; and
b) $45,000 in funds to be budgeted from program income in the Housing Loan Trust Fund.
Transaction at Closing
At a closing on the property, the First Baptist Church will buy from the Pines Community Center six acres of property for $336,000. Of this amount, the Church has paid $36,000 in option payments to date, leaving a balance of $300,000. From that amount, Pines Community Center would pay off the balance of the loan from Central Carolina Bank (now estimated at $242,000), and would pay First Baptist Church for an off-site improvement of extending the sewer into the remaining property (estimated at $3,000). The balance available to pay off the Town’s lien would then be $55,000.
This reimbursement of $55,000 to the Town’s Housing Loan Trust Fund would then be available to use in the Manley Estates project. In addition, the Town would provide the balance of $45,000 from the Housing Loan Trust Fund to fund the “gap” of $100,000.
(The remaining three acres not being purchased by the Manley Estates project would continue to have a Town lien on the property of the remaining balance of the Pines Community Center loan, $54,250. This amount represents the $109,250 owed to the Town by the Pines Community Center minus the $55,000 reimbursement.)
RECOMMENDATION
We recommend that the Council adopt the attached resolution and ordinance authorizing a $100,000 grant from the Housing Loan Trust Fund to the First Baptist Church for its Section 202 Elderly Housing project.
ATTACHMENTS
1. August 17, 2000 Memorandum, as revised September 8, 2000, from L. Lane Sarver, Housing Consultant to the First Baptist Church (p. 6).
2. Letter from the U.S. Department of Housing and Urban Development to the First Baptist Church re: Notification of Selection for a Section 202 Fund Reservation (p.16).
A RESOLUTION AUTHORIZING A $100,000 GRANT FROM THE HOUSING LOAN TRUST FUND TO THE FIRST BAPTIST CHURCH FOR ITS HUD SECTION 202 ELDERLY HOUSING PROJECT (2000-09-11/R-8)
WHEREAS, on February 22, 1999, the Council provided a $25,000 grant to the First Baptist church to conduct a feasibility study of property located on Park Road for preparation of a HUD Section 202 Elderly Housing Application; and
WHEREAS, on May 10, 1999, the Council allocated an additional $10,000 to the First Baptist Church for the feasibility study and an increase in the cost of a land option; and
WHEREAS, on May 22, 2000, the Council allocated an additional $10,000 to the First Baptist Church for land option payments; and
WHEREAS, the First Baptist Church has been awarded funding from the U.S. Department of Housing and Urban Development to construct 40 units of rental housing for very low income elderly households in Chapel Hill; and
WHEREAS, the First Baptist Church has requested that the Council provide additional “gap financing” in the amount of $100,000 to help defray the high cost of land and construction costs in Chapel Hill;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes a grant of $100,000 from the Housing Loan Trust Fund to the Section 202 Elderly Housing Project, known as Manley Estates, for the specific purpose of assisting with land acquisition and construction costs, from the following sources:
a) reimbursement to the Housing Loan Trust Fund upon cancellation of a portion of the Note and Deed of Trust on the property (from the loan to the Pines Community Center on this property) in the estimated amount of $55,000;
b) an estimated $45,000 in program income to be budgeted in the Housing Loan Trust Fund.
BE IT FURTHER RESOLVED that the Town Manager is authorized to enter into a Performance Agreement with the First Baptist Church in accordance with the terms of this memorandum to Council of September 11, 2000; and to provide funds at the closing of the property up to the total amount specified in this resolution.
This the 11th day of September, 2000.
AN ORDINANCE TO AMEND “THE ORDINANCE CONCERNING APPROPRIATIONS AND THE RAISING OF REVENUE FOR THE FISCAL YEAR BEGINNING JULY 1, 2000 (2000-09-11/O-7)
BE IT ORDAINED by the Council of the Town of Chapel Hill that the Budget Ordinance entitled “An Ordinance Concerning Appropriations and the Raising of Revenue for the Fiscal Year Beginning July 1, 2000” as duly adopted on June 26, 2000, be and the same is hereby amended as follows:
ARTICLE I
Current Revised
APPROPRIATIONS Budget Increase Decrease Budget
HOUSING LOAN
TRUST FUND 205,406 100,000 305,406
HOUSING LOAN
TRUST FUND 205,406 100,000 305,406
This the 11th day of September, 2000.