1. Big Sky Manor/Hampstead Request for Tax Increment FundingINTER OFFICE MEMORANDUM
DATE: February 2, 1999
TO: Al Thelen, Interim City Manager
FROM: Susan Moyer, PECDD
SUBJECT: February 8, 1999 Council Workshop Agenda
The attached letter is self-explanatory. The writer has been aware for quite some time of the
valiant efforts of Montana Board of Housing and numerous Human Resource agencies to save
the eight complexes across the State from coming on the open market at market rents. Many of
the 60 low income residents in Big Sky Manor have resided there since the early -years of
construction. By policy adopted last night, the City can provide the needed gap financing
through a 15 year 3% TIF loan to the new buy rs.
If you concur with placing this item on Monday night s agen I �11ntact Hampstead
Partners immediately.
C:\myfiles\TIF\Affordable House
Investment Division
January 18, 1999
Ms. Susan Moyer, Housing Manager
Department of Planning, Economic, and Community Development
City of Kalispell
P.O. Box 1997
Kalispell, MT 59903
Re: Request For City Tax Increment Funding
Big Sky Manor
Dear Ms. Moyer:
1619► 551-` 02
Fax (61g)456-0i(hi
Thank you for taking the time to speak with my partner Jay Wentz and myself about the
possibility of accessing a portion of the City of Kalispell's tax increment funds for the
purpose of filling a financial gap related to the purchase and renovation of Big Sky
Manor Apartments in Kalispell.
The Property. As you know, Big Sky Manor is a well -maintained 60-unit multifamily
property located at 110 Second Avenue West in Kalispell. It is currently HUD regulated
under Section 221(d)(3). The property is made even more affordable due to the fact that
it is covered under a project based Section 8 rental assistance payments contract. Without
this assistance, many of the project residents might not be able to afford adequate
housing. Clearly, Big Sky is a significant asset to the community and downtown
vibrancy.
Statewide Preservation Effort Hampstead Partners contemplates the purchase of Big
Sky in conjunction with the Northwest Montana Human Resources non-profit
organization as part of a larger effort to purchase and preserve the affordable status of
seven other western Montana Section 8 apartment complexes, all totaling 504 units.
For Big Sky, we plan to utilize 9% Low Income Housing Tax Credits allocated through
the Montana Board of Housing. The project -based rental assistance contract would be
maintained in place. As you can well imagine, there are many moving pieces we have to
put in place given eight projects, four sellers, and five non-profit partners.
We have been working on this for over six months and are excited about the enthusiasm
and support of the Montana Board of Housing and Montana Board of Investments for this
iP1r:1r1�, IIIC.
venture. The City's participation will leverage the significant state and federal resources
contemplated to be a part of the effort.
Future Operations. It is important to the communities involved that Big Sky Manor
Apartments and the others maintain their long-term affordability. If this property and the
others are not preserved as contemplated by this transaction, the owners are likely to
make the determination to prepay the mortgages and raise the rents to market which will
undoubtedly involve the loss of the units to the seniors who are currently residing there.
Just as importantly, these properties now exceed 20 years in age and must be
recapitalized in order to continue to operate successfully. Although well maintained,
each of the properties contains project systems in need of replacement or upgrade. Such
systems include heating, air-conditioning, flooring, kitchen cabinetry, plumbing, etc.
Unless the repairs or upgrades are completed, it will only be a matter of time before
significant problems arise.
There will be significant involvement in the future operation of the building by our non-
profit partner, especially as it relates to providing more and better services for the
residents.
Long Term Use. There will be at least 30 years of restrictions imposed on the project's
new owners, thereby guaranteeing continued affordability. Our proforma for Big Sky
contemplates keeping 50% of the units rented to residents at 50% or less of median area
income (affordable to Very Low Income residents) and 50% of the units rented to
residents at 60% or less median area income. This is a noble goal which all the parties
want to achieve. but completing the renovation and assuring that the property can
maintain operations over the long-term is financially challenging under such
circumstances. It is for this reason that we seek the City's assistance.
Request We have preliminarily determined that $1 75,000 is needed from the City of
Kalispell's tax increment funds as soft money to successfully complete the purchase and
upgrades.
I understand that we have set a tentative date of February 8* to appear before the City's
committee in Kalispell. After you have had a chance to review this letter, we would very
much like to discuss any additional information with you that may be necessary to have
in place or to be provided beforehand to make the appropriate presentation.
I have enclosed a Preliminary Improvement Schedule and Project Summary on Big Sky
for your review. We anticipate closing this transaction no later than the second quarter of
this year, so time is of the essence to move forward.
2
Thanks again for assisting us to date and considering our request. I look forward to
speaking with you further.
Sincerely,
STEAD PARTNERS
Chris Foster
President
3
Preliminary Schedule of Improvement Summary
Big Sky Manor
60 Units
Revised 1028/9�
item Work to Ge Done
Quantity
Unit Cost
Total
Comment
1 R&R Unit Carpet
60
509
$30,540
Per C.N.A. w/ only 1 Yr. remaining useful life.
2 R&R Unit Tile
60
225
$13,500
Per C.N.A. w/ only 1 Yr. remaining useful life.
3 R&R Kit. Cabinets
6 $
1,100
$6,600
10%
4 Refinish Kit. Cabinets
54 $
200
$10,800
90%
5 R&R Kit. Counters
60
12
$720
20%
6 R&R Ranges
58
400
$23,200
Per C.N.A. w/ only 1 Yr. remaining useful life.
7 R&R Range Hoods
59
80
$4,720
Per C-N.A. w/ only 1 Yr. remaining useful life.
8 R&R Refrigerators
57
430
$24,510
Per C-NA. w/ only 1 Yr. remaining useful life.
9 R&R Garbage Disposals
60
100
$6,000
Per C.NA. w/ only 1 Yr. remaining useful life.
10 R&R Windows
0
800
$0
Not Needed
11 Refinish Tubs
60
350
$21,000
Repair cost per management
12 R&R A/C Units
9
540
$4,860
15%
13 R&R Bath Fans
60
50
$3,000
14 Misc. Unit Refinishing
60
500
$30,000
15 Retop Parking Areas
WA
- 0
$0
16 Upgrade Landscaping
N/A
0
S0
17 Install Playground
WA
0
$0
18 Rework Existing Rec. Room
WA
0
$0
19 Upgrade Signage
N/A
0
$0
20 Upgrade Hallway Carpeting
609
$36,514
Carpet, paint and lighting.
Convert Units To Comply W/
21 ADA 500 $30,000
22 Upgrade Office WA 0 $0
23 Install Plug -ins For Parking Lot
WA 0
$0
24 Repaint Building Exteriors
WA 0
$0
25 Roof Replacement
200
$12,000
26 Misc.
60 300
$18,000
27
$0
28
$0
29
$0
30
$0
Subtotal
$3,865
$231,924
$0
$0
Total Cost
$3,865
$231,924
Units
bid price.
Hampstead Partners Inc.
1205 Pm-.nRrf Sf fiArm
Hampstead Partners. Inc,
Investment Division (619)456-6500
Fax (619)-456-4590
PROJECT: BIG SKY APARTMENTS
LOCATION: 110 Second Avenue West
Kalispell, Montana
AGE: Constructed 1970 in a very good downtown location.
TYPE: Section 221 (dx3) with Section 8 Assistance
DESCRIPTION • 60 unit senior apartment property subject to LMSA contract. 20
handicapped units. Property is in better than average condition.
• Low-rise four story elevator building with a recreation room and
community laundry facilities. Open parking spaces. Security entry
system.
• Electric heat. Sleeve air conditioning units. Mastered metered for
electric.
CURRENT OCCUPANCY: 990/0
AREA MEDIAN INCOME: $36,400 (effective 1/7/98 for Flathead County)
Census Tract #0010 is a Montana Designated QCT
Flathead County is not a Montana Designated DDA
UNIT MIX:
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PBE
! CMS CLWIt HUD
BASIC r
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i 4 PA&W
60%M "SIRFSr i MAXS0% MAX 60%
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I 1
28
mdme
1 415
9D
I so, i SM
no
SM 3D I S318
5382
32
ondnoe
4671
SD
j $334 i 5335
SW
SM! SD 1 5341
1 5409
0
tadaoo
So
$O ! So
So
So I $01 SD
I SD
0
d mace
SO
SD SO
9D
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So
0
be.
SD
SO So
SO
$D i So 1 SD
! So
6D
larAu)WE
X6.%41
$O
IE.220. 1 1012
517,692
$19,672 ; SD
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•• STREET F MB AS YET UNUETERMtE. PROPOSED REtM UMTED BY FMt
M m nm Proposed Reiss am capped at 90%d M wkK PC or TC lied
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2
UTILITY METERING Mastered metered for all utilities.
INFORMATION:
NUMBER OF SECTION 8 25 efficiency and 28 one bedroom units: Total 53 units of 60
UNITS: units.
1 ST MORT. INT. RATE: 8.5% (effective rate)
IST . MORT. BALANCE: $428,275 @ 7/31/98
DEBT SERV. ON 1ST.: $56,362
FINANCING: Refinance existing debt with lower loan constant. Keep existing
project based HAP contract and utilize 9% LIHTCs.
ESTIMATED REHAB. $4,000 per unit
AND IMPROVEMENT See attached Preliminary Schedule of Improvement Summary.
COSTS: —
1997 OPER. EXP. BEFORE
DEPRECIATION: $ 146,807 ($2447/u) Does not include mortgage interest or MIP
PURCHASE Purchase price is $1,315,875 ($21,93l/u)
INFORMATION:
CONTACT: Chris Foster
Hampstead Partners
(619)551-5302
f:WSERSV PartnmV)ev. PropWo PnVertiesUnvestmem Sumf\Big Sky Invest Summaty.doc