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HomeMy WebLinkAboutAgenda - 02-17-1998 - 9eORANGE COUNTY BOARD OF COMMISSIONERS Action Agenda Item No. 9 - e ACTION AGENDA ITEM ABSTRACT Meeting Date: February 17, 1998 SUBJECT: Request for Funding - Orange Community Housing Corporation DEPARTMENT: Housing and Community Development PUBLIC HEARING: (Y/N) BUDGET AMENDMENT: (Y/1) ATTACHMENT(S): INFORMATION CONTACT: Memorandum from the Executive Director of Tara L. Fikes Orange Community Housing Corporation TELEPHONE NUMBERS: - - eat 2490 Hillsborough 732 -8181 Chapel Hill 968 -4501 Durham 688-7331 Mebane 227 -2031 PURPOSE: To receive a request from the Orange Community Housing Corporation for additional funding for this fiscal year. BACKGROUND: The Orange Community Housing Corporation (OCHC) reports a $42,000 deficit in their operating budget for the fiscal year ending June 30, 1998. This budget shortfall is primarily due to the fact that the anticipated revenue from the Magnolia Place development included in this year's budget will not be available to the corporation this fiscal year. Currently, OCHC receives the following administrative funding from the County and the Towns. Orange County $ 49,750 Chapel Hill $ 50,000 Carrboro $ 10,000 Total funding $109,750 OCHC is asking for additional funding this fiscal year from the County and the Towns in the following proportions. Orange County $ 19,000 Chapel Hill $ 19,000 Carrboro $ 4,000 Total funding $ 42,000 Specific information pertaining to this request is provided in the attached document. OCHC representatives will be present to provide additional information and answer questions. RECOMMENDATION(S): The Manager recommends that the Board receive this report as information. 2 Orange Community Housing (corporation Post Office Box 307 • 116B West Main Street • Carrboro, NC 27510-0307 February 9, 1998 Telephone: 919/967.1 545 FAX: 919/968 -4030 To: John M. Link, Jr., Orange County Manager From: Robert Dowling, Orange Community Housing Corporation Re: Request for additional funding Background /History A key recommendation of the 1987 Orange County Low and Moderate Income Housing Task Force was the need to establish a non - profit housing corporation. In the fall of 1989, the Chair of the Orange County Commissioners and the Mayors of Carrboro and Chapel Hill appointed a Steering Committee to develop the non - profit organization's structure including the Articles of Incorporation and Bylaws, hire staff and secure funding for administration and project activities. In July 1990, the Chair of the Orange County Commissioners, the Mayors of Carrboro and Chapel Hill, and two key Orange Community Housing Corporation founders announced the formal establishment of the organization. In this initial year, the Corporation received funding from the following sources: Z. Smith Reynolds - $20,000; Orange County - $35,000; Chapel Hill - $35,000; and Carrboro - $20,000 for a total initial year budget of $110,000. After the formal announcement of the organization, and with funding in place, the Steering Committee became the initial Board of Directors of the Corporation and they began the search for an Executive Director. In - January 1991, Donna Dyer was named as the first Executive Director and she remained in that position until September 1997. The purpose of the Orange Community Housing Corporation (OCHC) as defined in the Articles of Incorporation is to support and initiate the construction, conversion, or rehabilitation of both rental and owner - occupied housing for families and individuals with income levels at or below the median income for Orange County. More specifically, the primary target population for OCHC housing activities is persons at or below 80°x6 of the area median. Current Organizational Structure During the first two years of the corporation, while initial projects were being planned, there was close monitoring of the organization's activities by officials of the contributing local governments. However, as OCHC began to implement projects, the Corporation was allowed to operate as a independent entity, with local governments receiving status reports on activities on an annual basis. Currently, there are twelve members of the Board of Directors which governs the organization. Each local government appoints one member and the remaining members are elected at large. Board members are appointed for two year terms. The current board members are: Patsy Byrd Jim Earnhardt Joe Herzenberg Peter Langan Jim Summers (Orange Co.) Bob Ward, Vice -Chair Keith Cook, Chair (Hillsborough) Josh Gurlitz, Secretary Wayne Kuncl Stella Nickerson John Tyrell, Treasurer (Chapel Hill) Alison Weiner 3 The first Executive Director, Donna Dyer, left the organization in September 1997. In December 1997, Robert Dowling was hired as the Executive Director. Organization Activities During the first seven years of operation, OCHC has.... =:> Sponsored Homebuyer's Education classes; => Developed a 55 unit apartment complex known as Dobbins Hills; => Built two single family houses - one in Chapel Hill and one in Carrboro; => Developed the 42 unit Magnolia Place subdivision in Hillsborough; => Administered a Townhome Second Mortgage Program in the Chapel Hill / Carrboro area which enabled four (4) first time homebuyers to purchase townhomes; and Provided technical assistance to other organizations providing affordable housing such as the Hillsborough Affordable Housing Corporation and Orange- Person- Chatham Mental Health Agency. Major current activities include: ♦ Renovation of six townhouses in the Carr Court Community in Carrboro, as well as, marketing and pre -sale of homes in the Carr Court community; ♦ Preliminary planning for the Scarlette Village and Meadowmont projects in Chapel Hill; and ♦ Administration of the Orange County Urgent Repair Program. Current Financial Picture Currently, OCHC receives the following administrative funding from the County and the Towns. Orange County $ 49,750 Chapel Hill $ 50,000 Carrboro 10,000 Total funding $109,750 OCHC is asking for additional funding this fiscal year from the County and the Towns in the following proportions. Orange County $ 19,000 Chapel Hill $ 19,000 Carrboro 4,000 Total funding $ 42,000 The information on the following pages detail OCHC's financial situation. 4 Orange Community Housing $93,400.00 $76,790.00 Corporation $13,000.00 $13,000.00 Revised budget for 1997 -98 $27,000.00 $24,000.00 Subtotal Personnel Adopted Revised Jan. '98 INCOME $1,000.00 $- Chapel Hill $50,000.00 $50,000.00 Orange County $49,750.00 $49,750.00 Carrboro $10,000.00 $10,000.00 Hillsborough $- $- Magnolia Place Partners $50,000.00 $10,000.00 Carr Court $10,000.00 $- Scarlett Drive $- $- Dobbins Hill Resource Center $15,000.00 $15,000.00 Orange Cty Partnership Children $- $12,500.00 Urgent Repair Pgm $- $137,700.00 Home Buyer Program $5,000.00 $1,250.00 Sales Commissions $13,000.00 $13,000.00 Old Well Rental $4,200.00 $4,320.00 Miscellaneous $1,000.00 $1,000.00 Z. Smith Reynolds $- $12,500.00 TOTAL INCOME $207,950.00 $317,020.00 EXPENSES Salaries $93,400.00 $76,790.00 Commissions $13,000.00 $13,000.00 Employee Benefits/FICA $27,000.00 $24,000.00 Subtotal Personnel $133,400.00 $113,790.00 Equipment/Fumiture $1,000.00 $- Insurance $5,000.00 $5,000.00 Meeting Expenses $750.00 $750.00 Memberships/Publications $750.00 $750.00 Office Rent $10,800.00 $10,800.00 Maint/Repair $750.00 $350.00 Office Supplies $5,000.00 $3,500.00 Storage $- $1,020.00 Postage $1,500.00 $700.00 Printing (copier lease) $4,000.00 $2,500.00 Professional Fees $6,500.00 $12,000.00 Telephone $5,500.00 $4,000.00 Staff /Board Training $750.00 $750.00 Miscellaneous $- $500.00 Mileage Reimbursement $400.00 $160.00 Marketing $750.00 $750.00 Old Well Costs $1,500.00 $1,500.00 Dobbins Hill Resource $20,000.00 $16,000.00 Pre - development Costs $2,000.00 $18,000.00 Loss on Sale $- $3,500.00 Subtotal Operating $66,950.00 $82,530.00 Project Expenses Partnership for Children $- $12,500.00 Urgent Repair $- $137,700.00 Project Mgr. (Z. Smith) $- $12,500.00 TOTAL EXPENSES $200,350.00 $359,020.00 NET INCOME $7,600.00 $(42,000.00) Projected cash flow through June 30 1998 Orange Community Housing Corporation - February through June 1998 Cash Balance Chapel Hill Orange Cty Carrboro Dobbins Hill Old Well Total Income Expenses Salaries/FICA Rent Health Ins Phone Retire Plan Copier Insurance Attorney Accountant Engineer *' Architect `* Old Well Supplies Storage Other Expenses Predevelopment Total Expenses Jan 31 '98 $14,370.00 Net cash flow Cash Balance $14,370.00 5 Feb Mar Apr May Jun $12,500.00 $12,500.00 $12,437.00 $5,000.00 $2,500.00 $1,250.00 $1,250.00 $1,250.00 $1,250.00 $1,250.00 $360.00 $360.00 $360.00 $360.00 $360.00 $19,110.00 $1,610.00 $29,047.00 $1,610.00 $1,610.00 $(4,365.00) $(8,730.00) $(8,730.00) $(13,095.00) $(8,730.00) $(900.00) $(900.00) $(900.00) $(900.00) $(900.00) $(516.00) $(516.00) $(516.00) $(516.00) $(516.00) $(350.00) $(350.00) $(350.00) $(350.00) $(350.00) $(256.00) $(256.00) $(256.00) $(256.00) $(256.00) $(185.00) $(185.00) $(185.00) $(185.00) $(185.00) $(733.00) $(4,000.00) $(500.00) $(500.00) $(500.00) $(500.00) $(500.00) $(2,000.00) $(12,000.00) $(1,480.00) $(120.00) $(120.00) $(120.00) $(120.00) $(120.00) $(250.00) $(300.00) $(300.00) $(250.00) $(300.00) $(85.00) $(85.00) $(85.00) $(85.00) $(85.00) $(250.00) $(250.00) $(250.00) $(250.00) $(250.00) $- $(2,000.00) $(2,000.00) $(2,000.00) $(2,000.00) $(8,510.00) $(18,192.00) $(29,672.00) $(18,507.00) $(14,192.00) $10,600.00 $(16,582.00) $(625.00) $(16,897.00) $(12,582.00) $24,970.00 $8,388.00 $7,763.00 $(9,134.00) $(21,716.00) ** Expenses already incurred for Meadowmont. Other expenses consist of meeting expenses, marketing, board retreat, staff training, postage, etc. Predeve/opment expenses pertain to Scarlette Village and Meadowmont. Explanation of Present Situation 6 This unusual request for funding in the midst of a fiscal year comes as a result of OCHC relying on sources of revenue that proved to be unreliable. Specifically, OCHC budgeted $50,000 from the Magnolia Place development and $10,000 from Carr Court to support operations in the current fiscal year. Funds are not available from Magnolia Place because the contractor failed to pay some of his suppliers. As a result, liens have been placed against some homes and civil actions have been initiated involving OCHC. Further, the construction schedule for Carr Court has experienced many delays which have caused increases in construction costs. No development fees will be received from this project. In order to undertake the Magnolia Place development, OCHC formed a partnership with Development Research Corporation (DRC) which was owned in part by the builder, Jim Perry. The name of the partnership is Magnolia Place General Partnership. All profits of the partnership are split 70/30 between OCHC and DRC. Southern Heritage Homes, also owned by Jim Perry, was hired by the Partnership to build the homes. At the outset of the Magnolia Place project OCHC received legal counsel in the preparation of the partnership agreement and individual construction contracts. In the summer of 1997, when construction problems began to surface at Magnolia Place, OCHC acquired the services of attorney Robert Belo of the law firm Newsom, Graham, Hedrick & Kennon located in _Durham. Attorney Belo is continuing to provide legal counsel to OCHC to resolve all Magnolia Place legal matters. He has advised us to place in reserve any development fees earned from Magnolia Place until all legal matters are resolved. As a result of these missing revenues from Magnolia Place and Carr Court, the agency does not have sufficient cash flow to continue to pay for operations beyond May 1998. The OCHC Board of Directors has implemented cost reduction measures, however, sufficient cash flow remains a problem. We are asking our funders (Orange County, Chapel Hill, and Carrboro) to provide additional support both in the current fiscal year and in future fiscal years to cover fixed expenses. Fixed expenses, which include salaries, benefits, rent, insurance, etc. amount to approximately $154,000 annually. Current government support totals $110,000. Future Safeauards OCHC did not hire a construction manager to oversee the construction of Magnolia Place. The Executive Director and an on -site sales person provided construction oversight on behalf of OCHC. In addition, the builder hired an on -site supervisor to oversee construction. In hindsight, this level of supervision was not adequate. To avoid similar problems with future projects, OCHC proposes securing the services of a qualified construction manager to monitor future agency projects. We have learned that investing in a construction manager early in the process is less costly than correcting mistakes at the end of the project. 7 In addition, local government staff proposes that there be greater scrutiny of OCHC's operations through the following means: 1. OCHC will provide a status report to the Orange County Board of Commissioners, the Carrboro Board of Alderman, and the Chapel Hill Town Council at least twice a year. 2. OCHC will provide monthly financial information to staff regarding operations and project management. 3. Local government staff will receive monthly OCHC board meeting agendas with minutes and attend monthly meetings.