BROOKSVILLE — A request from developers to borrow $340,000 of public money to build low-income housing bit the dust after Brooksville City Attorney Gretchen Vose said of the loan agreement, “It didn't look like we'd get paid.”
At their July 12 meeting, Brooksville City Council members Pat Brayton, Betty Erhard and Robert Battista rejected the request on a motion by Erhard, with members Blake Bell and David Bailey dissenting.
A June 30 letter from the Brooksville Housing Authority to Mayor Brayton stated the BHA wants redevelop the Summit Villas public housing apartments at the corner of Martin Luther King Jr. Boulevard and Hale Avenue. The letter explained the authority partnered with Fortis Development last August in a public-private venture to rebuild the property; it stated the “barracks-style” units are more than 50 years old, don't comply with current building codes and have obsolete underground infrastructure.
Their financing plan is to apply to the Florida Housing Finance Corp. to fund the project through its Low-Income Housing Tax Credit (LIHTC) program for 9% tax credits. “To...receive a higher ranking for this financing plan, the (FHFC) requires local government to contribute financially to the plan development,” the letter states.
The authority is asking the city to throw in $340,000 in a grant or loan that could be repaid over 15 years. The city would have to commit to that amount by Aug. 25 and pay out the funds roughly two years from now during construction.
According to a letter from the city of Brooksville to Summit Fortis Development LLC, the money would be borrowed by Summit Villas Senior LLLP and disbursed within 90 days of completion of construction. Other terms of the loan stated simple interest of 1% will accrue during construction, “No payment will be required” and the disbursement of funds shall be up to 24 months subject to one six-month extension for construction.
The LIHTC is a vehicle that encourages private-sector investment into affordable housing. State housing agencies award tax credits to developers to create affordable rental housing. These developers offer the credits to investors who put up the capital to fund the projects, thereby reducing the mortgage on the property.
The development plan calls for demolition of the dilapidated old structure in favor of 80 new, three-story “garden style” units for seniors aged 62 and older, 64 units with one bedroom, and 16 with two. Eight of the units would be for seniors earning only 33 percent or less of the area median income and the other 72 will house seniors making 60 percent or less of that figure. Amenities would include community rooms for exercise and a library along with literacy and computer classes.
Fortis and the BHA delivered documents estimating how much sugar would sweeten the deal for Brooksville. The numbers state the construction would generate $19.48 million for the economy, spending by villa residents $11.84 million over an unspecified period, $604,117 in operating expenditures and $233,345 in repairs. Total taxes were figured at $1,366,711, with 166 jobs supported by revenue from the new facility and its construction.
“Affordable housing remains a critical need throughout Florida but especially in Central Florida, including the city of Brooksville. Existing affordable housing in the community remains at full occupancy,” the proponents reported. They stated they got more than 2,400 applicants when they opened the waiting list earlier this year.
In voting against Erhard's motion, Bailey noted the city would receive about $428,000 in impact costs and other fees the builder would pay the city while the loan was for only $340,000, “a net $88,000” for city coffers. He also pointed out the developer would pay it back in 15 years with interest: “I personally like the idea of trying to beautify South Brooksville...I would be on board.”
Councilman Bell asked what would happen with the property if the city said no. Donald Singer, executive director of both the Brooksville and Hernando County housing authorities, said officials would return to ask for money again someday and the buildings, vacant since 2012, would be demolished using public money. Singer was accompanied by Summit Fortis Development representative Joe Chambers, who said the proposal is about “putting your money where your mouth is.”
An accountant by trade, Brayton said the loan agreement stipulates six other parties were in line to be reimbursed by the developer before the city would be repaid for the loan, including debt service, the investors management fee and the operating reserve. Also, the city could only be repaid using 25% of the available cash flow as determined by the limited partnership agreement.
“The agreement says we'll pay you back if we have enough money to pay you back,” Brayton said. “That scares me.” Vose confirmed Brayton's analysis by saying math experts working for the city “crunched the numbers” pertaining to available cash flow and became “very concerned” the city wouldn't be repaid.
Brayton added he didn't understand how council members could veto funding for vital stormwater sewer drainage improvements, as they did recently, but support a private development with taxpayer dollars.
“This is a large chunk of money for us,” Councilman Robert Battista said, adding that one out of five city residents live below the poverty level. He said similar past deals allowed the city to reduce or forego impact or other fees usually charged to developers instead of paying out public money directly, adding “That was a good deal for us.”
Erhard said her opposition centered on the large number of projects the city faces that have a higher priority than this one.
Critics were also concerned that county officials were recently approached to help with three other similar projects but turned them down.
“Unfortunately, that raises the question why,” Brayton said.
Chambers said the agreement requires setting aside money for available cash flow, and the loan agreement could be changed to guarantee the city is repaid.
Singer and Blake both said they did not understand the veto. They agreed that city leaders should have renegotiated the loan agreement to meet those concerns instead of rejecting a plan that held so many benefits for everyone involved.
“We could have rewrittten the project agreement but it's always been no on these projects, not sitting down with developers and working it out,” Bell said of past council decisions.
Singer said the developers are now going to seek funding from Hernando County based on money available under partnership programs like this one. He cited multiple statistics that show there's a need for row housing (multiple unit) apartments throughout the area.
Neither Bailey or Erhard responded to requests for comment.
In other matters, officials:
• Invited eligible residents to serve on one of the Volunteer Advisory Boards that support governmental activities for the city. The four boards with current vacancies are the Cemetery Advisory Committee, four-year term; the Beautification Board, one full-time term running through Dec. 31, 2023; an alternate post on the Brooksville Housing Authority; and an alternate post on the Parks and Recreation Advisory Board ending Dec. 31, 2022. Applications are available at https://www.cityofbrooksville.us/node/19/files.
• Announced a new playground is being added to Tom Varn Park using a $150,000 grant from the Florida Recreation Development Assistance Program. The grant is handled through the Florida Department of Environmental Protection with a 75-25 split; the facility should be up and running two months or less.