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HomeMy WebLinkAboutHousing Agency, FY 2014-15 DEPARTMENTAL BUDGET REVIEWS 4/15/2014 DEPARTMENTAL BUDGET REVIEWS 2014-15 HOUSING AGENCY April 15, 2014 Housing Agency (ss) Page 1 There being no objections, the Committee was called back to order at 11:06 a.m., and proceeded as follows: Housing Agency Honorable Tim Bynum (not present) Honorable Mason K. Chock, Sr. Honorable Gary L. Hooser Honorable JoAnn A. Yukimura Honorable Jay Furfaro, Council Chair Excused: Honorable Ross Kagawa Honorable Mel Rapozo Chair Furfaro: We are coming back from a recess for a caption break and going right into the Housing Agency. I will deliver to you folks by the end of the afternoon, we will not meet on budget items again until April 21st, which we start call-backs then. The call-backs some of them are just a specific item for a specific amount of time. Welcome Housing. KAMUELA COBB-ADAMS, Housing Director: Good morning. Chair Furfaro: Good morning. Rules are suspended you can start any time. Mr. Cobb-Adams: So we are briefly going to go over our mission: provide opportunities for safe, decent, and quality housing to promote and sustain community development for the people of Kauai. Pretty self-explanatory. Under that, we have strategic goals. Five of them. We want to preserve our tenant-based rental subsidies, maintain and expand affordable housing inventory, we want to increase the financial capacity to support our goals. Provide more efficient and consistent quality delivery of services to the public. Last, promote and sustain community development activities. So in a nutshell those are our broad strategic goals that fall under our mission. Our organizational functions, basically are made up of three Divisions, Rental Assistance Division, who is also known as section 8 or as a lot of people called HUD, the County administers that program. We also have the Housing and Community Development Division and last, the Administrative Division made up of leadership and accounting support. Since they never get to come over here we will give a picture, this is our Rental Assistance Division, Section 8 / HUD. Usually Sandy would be here and she is the first woman on left in the back, but she had to go to Honolulu for jury duty. So she lucked out... or did not luck out, however you want to do it. Chair Furfaro: What a comparison, boy. Mr. Hooser: I understand that they have not had the opportunity to come here, but we could have a special meeting. And have special questions for everybody. Mr. Cobb-Adams: Yes, I think they prefer not to go in front of everyone...they like the picture. So anyway, they basically service our low and very low- income households and basically pay a portion of the rent based on income and provide a lot of assistance to our families to get affordable rentals through subsidized rentals and also April 15, 2014 Housing Agency (ss) Page 2 coordinate our self-sufficiency program; which is an excellent program. Basically counsels people on the Section 8 program to hopefully become more independent of this government assistance. I will let Gary, the Head of our Housing and Community Development Division talk about it. GARY MACKLER, Housing Development Coordinator: Thank you, Gary Mackler for the record. The Housing and Community Development Division administers a number of housing programs and Federal grants. The oldest program that we have administered is the Community Development Block Grant program. We also have the Home Investment Partnerships program both are Federal sources of funding. We are still administering the Neighborhood Stabilization program through the creation of program income from that original grant source. One of our oldest programs and one of our most successful programs is our Home-Buyer Loan program which was initiated in 1996 and our staff ably administers that program for the County. Also we are involved in fair housing workshops and training on our staff. Fay Rapozo is our Fair Housing Officer and puts together excellent trainings for landlords and tenants each year. We also have responsibilities for the asset management of the County-owned rental projects that consist of the Kalepa and Paanau Village rental projects. Mr. Cobb-Adams: So last is our Administrative staff...the last Division is our Administrative staff that basically is myself and a couple of assistants, as well as our accounting staff. We basically set goals, develop strategies and solutions and pursue opportunities to address Kaua`i's housing needs and provide an overall supervision of the Housing staff, and we administer County workforce housing policy. Success and achievements. This is the best part. Our Rental Housing Division as I will clarify a little more, they have been under stress because of decreased funding, but still continue to do an excellent job at serving about 660 families and administering $600 million of housing vouchers. This is Federal funding money that is coming to Kaua`i through the Agency and if it was not for the staff doing their job right and keeping and making sure that the lease- ups happen we actually lose money and they have done an excellent job keeping the lease- up ratio at its maximum to ensure we have maximum funding the next year. They have done a good job of keeping our money as high as it possibly can be. We have had no findings in our single audit for the third consecutive year from Section 8. We have issued eight vouchers, 33 new participants to replace...sorry, 33 new participants have replaced out-going participants on this Section 8 program, working very closely with our VASH Coordinators, we do not administer VASH or Veteran's Funding but we do work closely with our VASH Coordinators that are in Kaua`i to help assist any of our veterans with housing assistance. Lastly, we are looking at implementing a new online application process and it is targeted to start July 2014 that is to administer our wait-list. So we are looking at some technologies as I mentioned before in our strategic goals, one of them is to increase the financial capacity, as well as provide efficient and consistent service. By going online we are thinking that will help us become more efficient and hopefully lower our costs. Family self-sufficiency as I said it is an awesome program. There are basically two staff, Kathy Kato and Bricen Moritsugu and they do a great job at administering the program and they are 100% funded by the annual grant and they actually write the grant every year that funds their position, as well as the program. In 2013, 106 households of which 70 families increased their income by an average of $4,000 a year. Seven families transitioned into non-subsidized housing and they were basically taken off Section 8 and 12 families graduated from the program. The program currently serves 81 families and that is pretty amazing because half of the year Kathy did it on her own and Bricen was a new-hire April 15, 2014 Housing Agency (ss) Page 3 based on somebody who left and we are very happy to have them. The participants can earn money in their escrow accounts by increasing their income, so there are "carrots" or incentives for the families to get off Section 8 because there is some sharing in the assets as they improve their incomes. Upon graduation...they have to graduate to get that sharing and have to basically go through the program, which is about two years. Section 8 homeownership, this is not being funded as much by HUD. It was an initiative in the past, but we still are serving 11 clients on this program. So it is kind of being phased out and that is why we are only serving 11 clients and probably will be phased out after we finish with these 11 clients. It is a big leap, but transitioning people from Section 8 to homeownership. So you go from subsidized renter to homeowner basically and that is a tremendous leap. Mr. Mackler: We have had a very busy and productive year with our HOME and CDBG grants and I will run through a few project slides to brief you. The first is the `Ele`ele Iluna Phase II, Kaua`i Habitat's subdivision. This project broke ground in January 2014 to build 48 lots to utilize for the Habitat's self-help home building program. The project is financed with $1.92 million in HOME funds, most of that is for the on-site infrastructure work, but part of that is also going to be utilized to pay for a construction supervisor to help the participants at least the first two teams of participants build housing units there. The project is approximately 25% complete and is expected to be fully completed by September of this year. Kaua`i Habitat has been very active in starting their outreach for this project. They have held six informational meetings throughout the island and basically gave out over 400 applications to those who attended those meetings. As of March, they had received 257 applications and really that is taking people off of their interest list to the serious list that they really want to achieve homeownership for themselves. So they are working very aggressively to move to the point of making family selections later this year. Another HOME-assisted project is the Rice Camp Senior Housing project. We are really pleased that this project broke ground in March of this year, and Phase I of Rice Camp will provide 60 one-bedroom and two-bedroom units for our seniors. In addition, to the land, which was purchased by the County through Council's appropriation of funding, we are providing $1.25 million in HOME funds, and the developer Vitus Development was able to successfully apply for low-income housing tax credits through the State Housing...Hawai`i Housing and Finance Development Corporation. They were awarded $14 million proximately in tax credits to sell to raise equity to finance development. This project will be substantially completed in the Spring of 2015. Another project that is getting close to groundbreaking is the Kolopua project in Princeville. Kolopua will provide 44 new affordable housing units for Kaua`i's workforce. The County of Kaua`i is making available $1 million in its HOME funds from 2013 to help finance this project. This project also applied for tax credits through the State and was awarded $14.6 million in tax credits. We are looking at groundbreaking...we do not have a date certain, but looking at May of this year for a groundbreaking. Another project we are assisting with our 2013 allocation of HOME funds is the Lihu`e Core Town Homes project. This is a rehabilitation of nine residential buildings, mainly for exterior rehabilitation, replacing siding, trim, doors, windows, exterior re-paint. In this particular...in this photo you can see buildings that mutual housing has already rehabilitated. So that is really the finished product that we are looking at in the photo and they are bidding the work at this time and we expect that they will have a contractor in place to start work in June of 2014. I want to mention that with these HOME-assisted projects the actual construction dollars that are generated by the four projects I have just described will consist of $18.7 million. So these projects are April 15, 2014 Housing Agency (ss) Page 4 going to make a substantial impact into the local economy and help to employ those who work in the construction trades. Lima Ola, another project land acquired by the County of Kaua`i. We are in pre- development mode. We are going through preliminary engineering, environmental assessment, water master plan, and other engineering studies and entitlements. The work that we are doing with our engineering consultant is 60% complete. In addition to projects we are also utilizing policy to help us pave the way for developers who develop affordable housing. In Ordinance No. 860, basically it provides us with the enabling legislation to implement policy. Those policies consist of the Affordable Housing Task Force, which was reactivated by Kamuela, late last year and this is a group of County-review Agency representatives who meet early on with developers to assist them in the initial stages of their project development. We are also at the tail-end of completing our draft of a...what we call a County 201H Exemption Policy. 201H is a Hawaii Revised Statute that allows for expediting of affordable housing projects as long as they do not comprise health and safety and preserve environmental integrity. We are also able to implement a fast-track permitting policy for workforce housing to move projects through the permitting process much more swiftly. As I mentioned earlier we have the Community Development Block Grant (CDBG), one of our oldest grant programs, which continues to serve our community well. Last year over 178 individuals received direct services from CDBG recipients. These are typically non-profit organizations that provide services throughout the community. For every dollar of CDBG funds utilized we were able to leverage $3 of non-CDBG funding to carry out activities. In 2014, the last action planning, the CDBG grant served ten organizations, and with the upcoming action plan for 2015, which I know there is a Resolution before the Council, which will be back to you later this month. We are expecting to serve nine organizations through this grant program. In the photo, you see there is a home that was purchased with CDBG assistance for a Kauai family. Last year we used part of the CDBG funding to help reroof the building purchased by the YWCA. The old KCFCU annex. One of the projects that received CDBG grant funds for accessibility modifications is the old Waimea Dispensary, a historic building in Waimea. This was a very gratifying project for all of us to see reach completion. Not only did it restore the Dispensary to its original splendor, but it was through a collaboration of the Kauai Economic Development Board, in particular Mattie Yoshioka, who worked tirelessly on this project, Easter Seals of Hawaii, and the County. This project has been realized and it is also serving our Kauai Police Department as they are renting space as well in this facility. I mentioned earlier our home- buyer loan program and our home-buyer staff was very active in 2013. They successfully processed six home-buyer loans for first time home buyers. They acquired one property for leasehold sale. That is this property that you see in the photos. It required rehabilitation work and as you can see, there is a before-and-after photo to compare. The rehabilitation is just about complete and this project will be sold leasehold as our staff will work through our home-buyer list to find an eligible home-buyer. Mr. Cobb-Adams: The fun part, challenges. Before I start into the challenges I wanted to talk about a couple other successes. Under "strategic goals" a lot of it focuses on being more efficient and leveraging our Federal resource moneys and I think we have done an excellent job as you can see on the development side. Our Development Division has done a tremendous job getting community resources out to the community and housing out to the community and maintaining existing housing. We have also become more efficient and provided much higher quality levels of service. We have implemented surveys from our Section 8. Every single person that visits our Section 8 office has the April 15, 2014 Housing Agency (ss) Page 5 opportunity to do a survey and we have gotten all excellent reviews and that has been a huge, huge...it talks hugely on how good our staff is at servicing the public. We have had our staff also evaluate us as administrators, all of our managers, as well as myself in admin, they have evaluated us and we have tried to increase our communication in multiple methods from weekly updates to monthly meetings, all-staff meetings and just improved our communications. I think those are some of the unseen things that have made our staff more efficient, a little...hopefully a little bit happier. I am sure not all of them are extremely happy, but as a whole, those are some unseen things that are hitting these goals that are shown on the screen. The biggest challenge has been budget reductions. Basically from our Federal budget as you can see in the first line item, Section 8 basically decreased by about 8% from $7 million to $6 million and that has nothing to do with our staff, they met all their goals to do lease-ups but basically sequestration, they cut moneys. We met with myself and the other housing directors throughout the State and other Counties, met with the Community Developments Programs Assistant Secretary Mark Johnson two weeks ago, April 7th and he basically said that is kind of the trend. The good news is that they think that they are stabilizing next year. But it is still a bummer, because it is not going up. At least it is targeted to hopefully stay the same and we will see what Congress does. Hopefully they got tired with fighting with each other and have come up with a budget. It is basically the message. So we are hoping to obtain about the $6 million range of money for Section 8. As a whole, overall, our HUD programs have gone down in every single category, including Section 8. But despite this, our Agency has done a great job, 13% of our Administrative budget has decreased since Fiscal Year 2012 and we have made do with that. Unfortunately, it has caused some sort of deficit because our labor costs have gone up, kind of significantly this year, next year and the following year. So we are making some hard decisions and reallocating tasks, basically, so people are doing more right now. We have a great staff that is basically, it is tough, but they are just doing it. We are going to make do with what we have basically. So we are going to be dollar-funding some positions and not rehiring for those and we will have to work with other Agencies to partner and just make due. The way we have done it in the past, as the Federal funds have gone down, generally they pay admin costs. Basically all of our Federal funding does not cover our admin costs anymore. Section 8 does not cover all of our staff. HOME funds does not cover our staff. None of the funds basically cover our staff now and we have used our Housing and Community Development Revolving Fund to make up this administration deficiencies, but unfortunately, this year is the last year that we can do that because the HCDR Fund will be almost dry. I will go through that with a little bit more detail. Some upcoming initiatives, it has been our goal to pursue opportunities to increase housing vouchers. We have met with OHA, seeing if OHA could provide money. They could not, but they did a housing study, but it did not realize any money from it. For CDBG we will implement the 2014 CDBG action plan. We are looking at adopting a 201H and we talked about that earlier. It hopefully encourages outside entities to do affordable housing on Kauai and process fast-track permitting. We talked about those but we are going to implement them. Fast track permitting is actually supposed to take effect today. Some other upcoming initiatives, finish up Rice Camp and start Rice Camp Phase II. The biggest nut to crack is available water. We are trying to work on getting more water sourced so that we can move to Phase II. Through Ordinance we are looking at acquiring land and offsite infrastructure to develop more workforce housing in Koloa and Po`ipu. Of course Lima Ola and finalizing those, preliminary engineering and we are looking at obtaining funding from developers and partners and commence on engineering. So basically this is our basic graph of our operation or our budget. 67% is Federally- funded. It used to be higher. We are funding 29% of it with our Development Fund, which April 15, 2014 Housing Agency (ss) Page 6 is a Revolving Fund. Like I said it is going to dry up this year and about 4% of our operating budget is funded by the County. So the way I look at it, the Housing Agency is a tremendous asset to the County. We leverage our County resources of just under $700,000 to obtain a tremendous amount of Federal funding, over $15 million worth of funding and then what we do, we take the $15 million and leverage outside funding and partner with developers to create even more projects. Gary alluded to that what he said the amount of construction we impact based on tax credits. So I think we have done an excellent job of leveraging. I think the County Housing Agency, whoever started it in the past is very smart because we are leveraging outside money with very little investment. Like I said, we appreciate your support. Here are some comparisons from 2014 to 2015. General Fund we are funding less from last year $690,000 from $733,000 with a decrease our funding by 6.19%. Our Revolving Fund has decreased by 43%. The Federal funds have decreased 39%. So if you look at it, we have basically decreased a lot of our funding, but have done a much better job at leveraging. The County Housing Agency has always done a tremendous job, but it is just about focusing on and being innovative and I think we have done a great job and our staff is awesome. Some more comparative graphs. 3% decrease overall administrative costs. So we are decreasing our administrative costs and some of that is because we are dollar funding positions and some is because of efficiencies. Our big one, our programs have gone down substantially, 31% and there is not a lot that the County can do about that with less Federal moneys coming in. With that, this year, I think we have balanced our budget. We are going to be fine, but the outlook is that we are preparing for the worst, which is a shortfall of funding next year. We do not know until the Federal government comes in and we will talk about that later, but we have done, as much as we can to become more and more efficient and leveraging our moneys in more innovative ways. All because our staff have worked harder and harder and I appreciate that and I hope you folks do and the public does too, because we have done a great job not just creating affordable housing and resources, but to impact other areas such as the construction industry. I am super proud of Gary and his staff and all of our staff. That is why I wanted to share the pictures. We come all the time and they do not prefer to come in front of crowds, but I would like to thank them and hopefully if you see those faces you tell them mahalo, it goes along way because they are working hard. Thank you. Chair Furfaro: So they do not like crowds? But you compared us to hearing officers like the courts, the jury? Mr. Cobb-Adams: Jury duty is a lot easier than coming up here. I would agree with them on that. Chair Furfaro: The project at Princeville, Kolopua, it sounded like you were not sure that we were going to break ground in May. Mr. Cobb-Adams: We plan to, but this project, it is construction, you have permits and other things that we are driving through and financers that we have no control over. It appears and I bet it will happen in May, but we like anything with development, you cannot be certain. There are a lot of things that we do not have control over, but I would say yes, I think it is going to go in May, but cannot give you a for certain. Because it is basically the developer and all the equity investors, as well as permitting that has to occur and it looks like it is on-track. Chair Furfaro: On a side note, do you know where the name comes from? April 15, 2014 Housing Agency (ss) Page 7 Mr. Cobb-Adams: No. Chair Furfaro: That is the name of the back of the mountain in Lumahai Valley and it was...when I used to go to St. Williams with Grandpa Henry and Aunty Kapeka Chandler they used to talk about place names, but it is a suitable name as it references a very light fragrance or sometimes it also references the early breathe of life for families getting started and so forth. So it is a very, very special name that I used to listen to Aunty Kapeka Chandler and Grandpa Henry talk about place-names on the North Shore and real chicken-skin. So I am hoping the best for Kolopua. I am sure you will alert us if there is any change. But the successes that you mentioned are just all outstanding ones. When you indicated that at the end of the year, you will be running out of money from our Revolving Fund, could you expand on that a little bit? Mr. Cobb-Adams: So our HCDR Fund, Gary can give you details and answers, but that Fund from my understanding we got a lump sum of money after Hurricane Iniki and we have used that funding to develop, as well as loans have been provided through that Fund. We have been using it for development and / or staff for over 20 years. Basically the revenue is starting...we have been using it and there is no more revenue. The revenue stream has become so small. Chair Furfaro: The revenue stream is small. I would agree on that. The history of that, I think, there is about $350,000 a year going into that account. Do we know what the balance is right now? $1,525,000. You have got about $364,000 of rents and other concession. I am not sure where that revenue stream is. Mr. Mackler: Are you looking at the Housing Development Fund? Chair Furfaro: Yes. Mr. Mackler: There are two different funds. The Housing and Community Development Revolving Fund is the fund that Kamuela was referring to. Chair Furfaro: I see it up on top. Okay. Because between the two of them there is only about $2.5 million in there. Okay. Questions? Mr. Hooser. Mr. Hooser: Nice presentation and please express my aloha and mahalo to everybody for all the work. You mention the 201H drafting. So that is the County version of the 201H HRS? Mr. Cobb-Adams: It is basically the procedures and I know you are probably very familiar with it coming from the State. It leaves a lot of questions to be answered. It is very broad. So with what we are doing putting together a process or procedure so when a developer comes here they know the processes. It is the same process to develop here on Kaua`i, except to make it linear where you have to go through the General Plan Update, etc. It is layered so you can go through entitlements, environmental studies, design approvals all at the same process. So we tried to layer it. I want to give a special mahalo to Barbara Pendragon who was our long range planner in Housing who retired and she did a great job. Her background in planning was a huge asset in developing these procedures. She did a great job. We are just refining it. It is still a pretty cumbersome process, but we are hoping by layering the process, it can be more effective. April 15, 2014 Housing Agency (ss) Page 8 Mr. Hooser: So this is procedures and policies as opposed to rule-making ordinance? Mr. Cobb-Adams: Yes, correct. Mr. Hooser: So you are not making law? Mr. Cobb-Adams: No. Mr. Hooser: Or proposing ordinance or doing rule-making. You are just trying to describe how people can best implement the State law? Mr. Mackler: We are just...the law already exists and the County derives its exemption powers under 46.15 of the HRS, which essentially gives us the same powers as the State has to utilize an expedited development process. Mr. Hooser: One more question. It is kind of a broad question. One of the initiatives coming up is acquiring land and infrastructure. So theoretically the County could acquire land and increase entitlements and density and do infrastructure so theoretically, the County could acquire agricultural land, increase density to whatever the political will would allow and do all of this with bond money. Is that correct theoretically to borrow the money to buy the land, fast-track it through the entitlement process and do a development like that. Mr. Mackler: We could certainly acquire lands with bond funds as we did the Rice Camp parcels. They had most of the entitlements already for that parcel. But yes, we can look to doing that, if there are sites available to us. That is not usually the case. Mr. Hooser: We have the power of condemnation? Mr. Cobb-Adams: Yes. Mr. Hooser: I would think that the most cost-effective way to do it certainly is to find unentitled land adjacent to existing urban areas and try to negotiate for purchase or condemn it for public use, purchase it and do the entitlements and put in the infrastructure and then have the income from the project pay the bond. Is that a model you are aware other people might be using or that you have contemplated? Mr. Cobb-Adams: The reason I pause is because the hard part is affordable housing usually generates no income and, in fact it requires subsidy to even make it work. For instance we purchased Rice Camp that was already entitled. We recovered nothing from that purchase price, because that dollar a year lease, because that was factored into it. So to recover the bond money would be very difficult unless there was a mix that allowed for affordable and non-affordable housing, which is possible, if you did like a 51% affordable housing project and the other 49% was, then there is a possibility 49% could repay some of that bond funding. Mr. Hooser: The key would be land that is not entitled so you get it at a much better price and you deal with the density. Mr. Cobb-Adams: Yes. April 15, 2014 Housing Agency (ss) Page 9 Mr. Hooser: We can have that conversation later again, but I just wanted to ask you about the possibility. Thank you. Thank you, Chair. Chair Furfaro: Other questions?JoAnn, go ahead. Ms. Yukimura: Thank you. It is a very excellent report Kamuela. Thank you. Mr. Cobb-Adams: Thank you. Ms. Yukimura: Thank you, to you and all of your team, because I know the hard work that you do. It is pretty incredible. Mr. Cobb-Adams: I did not put it together, our staff did. I just got to analyze it so it is work from many hands. Ms. Yukimura: That shows your leadership and it is clear to me that you are really are building a team. I have watched you since you have come in, how you have gained a lot of trust from your people and you have come in with a lot of respect for them. So it is your leadership. I want to say your photos are really great. Who took the photos? Mr. Cobb-Adams: Kerri Barros, our CDBG Coordinator, she is awesome. We have an awesome staff. Ms. Yukimura: This is really nice. This is by far the best Housing Agency report I have seen in years. So thank you. Just to say no findings on some of our accomplishments, no findings on the single audit and 33 new participants in Section 8. A few of them are the ones that have gone off through your Family Self-Sufficiency program apparently. Mr. Cobb-Adams: Yes. Ms. Yukimura: Online application process, that is really great. So my question, why is Section 8 homeownership being phased out? Mr. Cobb-Adams: Federal funds. You go wherever HUD takes you. If they are going away from it... Ms. Yukimura: Okay. But this is the program where renters turn into owners. Mr. Cobb-Adams: Yes. Ms. Yukimura: Okay. Of course we have seen that in our self- help housing projects, too. That is where renters turn into owners and it is really a great thing. On your Lihu`e Court Townhome rehab, it is a fabulous thing that you are helping to maintain housing stock. Mr. Mackler: As important as it is to try to bring new inventory to the island, it is as important to preserve the stock that is produced. You know, April 15, 2014 Housing Agency (ss) Page 10 we try to emphasize that affordable housing projects be built with quality materials and practice. Unfortunately the Lihu`e Court is an example of a project that was not built with the proper care, using untreated lumber and did not do things that we would normally do. But Mutual Housing Association, who is the non-profit owner of Lihu`e Court Townhomes over the years has done a tremendous job bringing that project up to a point where it is preserved. They have actually rehabbed most of the buildings. There are 23 buildings in Lihu`e Court and the nine that we are going to see rehabbed with HOME dollars will, I think that will bring them to 21 out of 23 buildings rehabbed and it will help the long-term preservation. Ms. Yukimura: I do not know how many units there are there. Mr. Mackler: There are 173 units. Ms. Yukimura: For one thing, it is an exemplary affordable housing rental project. When we did our Housing Advisory Group tour we were so impressed with what was happening there, and if it was not there, we would have a much bigger homeless and crowding problem. People need to understand how lucky we are to have that project and other projects right now. So on Lima Ola, you have no money mentioned here. So the money has already been entitled for the work or encumbered for the work that is going to be done this year? Mr. Cobb-Adams: Yes, most of the work that is ongoing was encumbered last year. Ms. Yukimura: How much is that? Mr. Cobb-Adams: Last year it was $500,000 and this year it is about $1 million. Ms. Yukimura: So $1.5 million. Mr. Cobb-Adams: We sent over a break down to Council. Ms. Yukimura: Thank you. The last thing, I just want to say you missed one thing on your Housing and Community Development Division, which is the development of affordable housing. Mr. Mackler: Sometimes you miss the most obvious things. Ms. Yukimura: It is such a major part of your work. So I just thought oh, my gosh, and Gary, you are not taking enough credit. Mr. Mackler: Thank you. Ms. Yukimura: Other than that, thank you very much. Chair Furfaro: Mr. Chock. Mr. Chock: Thank you. Kamuela and Gary, I wanted to thank you so much for the wonderful work you folks have done. It is evident by not only the results that you have created with the projects that you have shared with us, but through April 15, 2014 Housing Agency (ss) Page 11 your ability to stretch the financial resources and the resources of human capital. So my congratulations also to your staff and the work that they have done and the team that you have put together. I do not want to get into the discussion of the General Plan, but I think the question about growth is really evident. I was wondering if there is a specific mechanism that we use in order to sort of do the projection of what the need will be as we grow, or as this island grows? Which would translate into how much...how many projects per year or how many units we need to develop every year as we move forward? I think would give us a good indication of the kind of funds that we are going to need to support it. That is one question, if you can respond to it and if not, no worries. It would be a future discussion. It seems to me based on your presentation, it does not look that good. The trend is moving in a direction where we are going to need to really look at additional funding sources, which I did not really see on your plan yet. So how it is that we are creative moving forward is going to be key. But if you have some mechanism, I would love to hear more how we track that and what kind of studies that we do to address the growing population needs for affordable housing? Mr. Cobb-Adams: So we participate in a Statewide housing study. All the Counties, as well as the State all come together. In the past, 2011 they did the research and based on that study in 2011, we need about 925 units by 2016. This could be developed for families below 80% the median income. So that is why we are trying to leverage the heck out of our money and bring in outside funding and make it easier for someone who wants to do what they want them to do, like affordable housing, to develop. Because there are two things. We can leverage the limited moneys that we have or create procedures that save time, which in turn save money to help the affordable housing developers develop it. So those are the strategies that we are looking at. When it comes to raising funds, I think we are developing...we are going out and trying to partner. Had some meetings with State Agencies on trying to attract them, like Lima Ola, it is the type of project that the State is interested in. By partnering with them, hopefully we can bring State money and energy to the project. We are looking at...we talked to the USDA on rural development and financing options. Basically those are the ways, Federal funding and other government funding. If we can do a project that can attract non-profits that is where we are looking. I made a personal representation to Hauoli Mauloa who is a non-profit who has done affordable housing projects on the west side that we will have a project...they went to another island and County to develop and partner with a developer and I made a commitment when they are done with that in three years we will have a project for them. So working hard to acquire projects and I did not mention we have excellent staff, but the County Council has provided a tremendous amount of support. Kolopua, why it was such a success is that the Council here had the foresight to amend an old ordinance that needed some tweaking. We did it a little over a year ago and that realized the opportunity to provide the 44 units that will hopefully start construction next year. By just by making tweaks to ordinances we are looking to do that in other cases too. By having these developers provide us the land and infrastructure, that is huge. This is a huge burden off the County and now the County can use that resource to go leverage that resource to partner with outside entities to provide affordable housing. So those are some ways of doing it, as well as putting up money to buy things like, Rice Camp, where we just buy the land and use that leveraging power. The County invested...the Rice Camp model, we bought the land for about $2.3 million. We put another $1.2 of HOME money and we are realizing 60 units. That is a pretty good deal. In Kolopua, we did not have to put the money because there is an ordinance that required that land. So we tweaked the ordinance and it did not cost us anything and we used $1 million of HOME funds to leverage that to hopefully realize 44 units of affordable housing in Princeville. So there are creative ways to do it and it is basically going to take us working together, the State and all government April 15, 2014 Housing Agency (ss) Page 12 agencies working more hand in hand and aligning what we do agree on and moving towards those. I think that is the major focus that we need to look at. Because we do not agree on everything, but we do agree on a lot. If we focus on the things that we do agree upon, we can make a lot of progress and for cheaper. So I think that is kind of our strategic plan in a nutshell, you have got to work together. Mr. Chock: Absolutely. I like that. I like your approach. Thanks. Just one last question and I have asked this question of almost every presentation, because when I look at budgets, traditionally I always look at areas that there are gaps. So this "other services" in each of your projects shows up as an increase. I was wondering if you could provide a little more clarity in terms of what it is that is being attributed for? I can give you a page. Mr. Mackler: Rental projects? Mr. Chock: Is it 18 or 19? Yes between 18 and 19. Paanau Housing is one example of that increase. Mr. Mackler: Part of that increase for "other services," that is actually...let me go to that page. Those are management costs that we pay to have our management operate the Paanau and Kalepa projects and those increases are actually by contract. We have a multi-year contract with that service provider. There is annual escalation built into each year of the contract. With regard to that contract, we are going to be issuing out an RFP this year, because we will be reaching the end of the contract term at the end of this calendar year, so we will be procuring for management services for Kalepa and Paanau Village projects. We saw more recently with RFPs that came in for Rice Camp, there are a lot more management companies that are providing these types of management throughout the State and I am expecting and hoping a more competitive environment for this next RFP offering. That is really our largest expense to operate these projects. So we will see how it plays out later this year. Mr. Chock: Thank you. Chair Furfaro: I am going to just follow-up with a question. So gentlemen, how are you feeling about the association reserves for Paanau and for Kalepa? Mr. Mackler: We feel pretty good. When we built these projects, we established reserve study budgets for both projects to inventory all of the major building components that make up the projects to look at their useful life and establish a reserve budget accordingly. So that we would know how much to fund annually and how much to accumulate when it becomes time to do the work, replace a roof or resurface a road or just typical reserve budgeting. Chair Furfaro: So you feel comfortable about our association reserves there? Mr. Mackler: We do. Chair Furfaro: As far as the projections and the plan? Mr. Mackler: We do. April 15, 2014 Housing Agency (ss) Page 13 Chair Furfaro: Redoing the roofs. Replacing the appliances? Exterior painting? You feel good? Mr. Mackler: I think we are in a really strong position with both projects. As you can see from our budget pages we go through our annual budget every year to look at what is nearing the end of its useful life? We do site inspections to look at the project. We are looking at resealing the parking lots for Kalepa and we are remaining reactive. Chair Furfaro: Slurry or resurface? Mr. Mackler: Seal-coat it. Chair Furfaro: JoAnn. Ms. Yukimura: This is my last question because Kamuela and I have to go to the airport soon. Slide 25, showing the fiscal year operating budget. It basically shows that 90% of the operating budget...96% of the operating budget is either Federal funds, which have been declining or the Revolving Fund, which is also declining. So Kamuela has set forth a really good plan in terms of how we are going to build housing itself, but these people who are doing all the planning and negotiating and work are in jeopardy. You know? So that is why I suggested in our last legislative package that we do...instead of asking for one funding source we maybe ask for a portfolio of funding sources that have nexus to what we are trying to do. One of my suggestions is that we maybe look at capital gains or something that is tied to the real estate sales on this island. A percentage of that. If we could have the power to access that, which will take State legislation, but we could use that for operating moneys. It is not that big of a budget, right? What is your total budget, operating budget?Total funding? Mr. Cobb-Adams: You mean the operations? Ms. Yukimura: Yes. Maybe I am looking at the wrong pie chart. Chair Furfaro: I was going to say I was looking at the wrong balance sheet if it is $16 million. Mr. Cobb-Adams: Sorry, that is the total. Chair Furfaro: Just operating costs. Mr. Cobb-Adams: Total administration is actually $2.67 million. Ms. Yukimura: That is all General Fund? Mr. Cobb-Adams: No, General Fund is $675,000. Ms. Yukimura: Of$2.6 million. Mr. Cobb-Adams: $690,000 actually. Ms. Yukimura: $690,000 is General Fund. So we just need to...I mean. April 15, 2014 Housing Agency (ss) Page 14 Mr. Cobb-Adams: So $2 million comes elsewhere and $690,000 from the Council. Ms. Yukimura: That is not a lot of money to recoup from real estate taxes surcharge or a capital gains tax. We have to look at that. I have not had the time to look at the parameters, but that would help us sustain our Housing Agency. So it is really something that I think we need to look at. It is not a question, but part of a discussion for the future for future funding for this critical Housing Agency. Chair Furfaro: That is why it is a budget question because we are running out of money. Gentlemen, let me ask you the affordable income level for renters and a family of four is between $1,240 to $1,350. Family of four. That is taking into consideration about $272 for utilities. We cannot find anything on this island. Have you folks chatted about an opportunity to look at maybe an opportunity to offer people who have homeowner inventory, the ownership of older homes, second homes and so forth, to be encouraged through some tax credit? We tried this once about seven years ago, to keeping their home rentals in an affordable rental, which would help give them a cap on their property tax. Was that part of your tour, your discussion-not that we are the developers, but that we are looking at corralling people who own second and third homes on the island to give them some incentive to put a cap on the rental? Mr. Cobb-Adams: So actually, our real property does have an incentive. I could not speak to the details. Chair Furfaro: I know what it is. I was part of the Council who passed it, but it is not being used and people have dropped out left and right and it seems every time we get a swing in appraisal values, these guys start taking...they change their minds. Have you had any further discussion on how we might...I mean it is great, we get 44 units here, 61 units here and there, but we are two years away. Have you folks had any discussion that might, maybe a way that we can look at re-incentivizing people who own a second home here, that might want to be in a rental program? That fits the family of four that makes $63,300 to $70,800 a year? Mr. Cobb-Adams: Very preliminary, but it would take probably some laws, bottom line. Because basically the incentive is there, but right now the profit is more attractive than the incentive. So I think that is where people are going. Chair Furfaro: If you have that discussion, would you consider inviting me, you and the tax department, would you consider inviting me? Mr. Cobb-Adams: Sure. Chair Furfaro: I look at Habitat, I was on the Habitat Board as President for eight years when we acquired that land with La France, by the way, we are trying to name a street after her, when you put the 44 homes in, if there is an opportunity, if we are contributing to the development of the roads for those lots, it would be nice to try and honor her. It is two, two and a half years away, especially with self-help, with infrastructure, we need some help now. Go to The Garden Island, you will not find a two- bedroom home in there that is reachable by any family of four. Without putting them in more hardships. Invite me, would you? April 15, 2014 Housing Agency (ss) Page 15 Mr. Cobb-Adams: Sure. Chair Furfaro: Questions? We have no call-back for you, but I do want to say and since JoAnn was so good about our Hanapepe project we do have it on the calendar for July, so we have it tentatively penciled in for July. We are going to recess for lunch. Gentlemen, thank you. We will be back at 1:30 p.m. There being no objections, the Committee recessed at 12:10 p.m.