DATE: October 21, 2014
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Chris Bridgewater, Director, Building and Neighborhood Services
Kathleen Sauseda, Housing Development Coordinator
SUBJECT:
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Consideration of Contract 2014-0226 Cooperation Agreement for Reddick Street Apartments, Payment in Lieu of Taxes Agreement (10/28/14 WS).
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Purpose
The purpose of this memorandum is to provide information to the Board of Mayor and Aldermen regarding an agreement with Franklin Housing Authority for Payment in Lieu of Taxes for the Reddick Street Apartments, a 64-unit multi-family apartment project being developed in partnership between Franklin Housing Authority and the Michaels Group.
Background
Under the State of Tennessee constitution and statutes, federally assisted affordable housing projects may be exempted from all real and personal property taxes and special assessments levied or imposed by any taxing body. In May of 1967, the City of Franklin and Franklin Housing Authority entered into a Cooperation Agreement for approximately 125 low-rent public housing units. Essentially, the Cooperation Agreement states the City agrees that it will not levy or impose any real or personal property taxes or special assessments upon the FHA owned and operated property and that FHA shall make annually payments in lieu of taxes and special assessment, (PILOT). In 2012 the Board of Mayor and Aldermen approved a Cooperation Agreement for the Reddick Property Senior Housing Development.
This agreement pertains to the proposed Reddick Street Apartments, a 64 unit multi-family apartment project being developed at 157 Strahl Street.
The agreement states annual Payment in Lieu of Taxes shall be an amount equal to ten percent (10%) of the Shelter Rent actually collected but in no event to exceed ten percent (10%) of the Shelter Rent charged by Franklin Housing Authority. The City is provided a certified audit by the FHA annually that documents their operating costs and payments. Over the last few years, the amount of PILOT paid to the City was as follows:
· 2011
$ 17,846.07
· 2012
$ 14,090.00
· 2013
$ 23,447.10
Mr. Derwin Jackson, the Executive Director of Franklin Housing Authority has informed the City that FHA has received Low Income Housing Tax Credits (LITHIC) to fund the proposed Reddick Street 64 unit multi-family project. Franklin Housing Authority intends to close on this development sometime in January, 2015. Mr. Jackson indicates a new Cooperation Agreement is a requirement for closing on this phase of the total Franklin Housing Authority redevelopment project. A new Cooperation Agreement will be present to BOMA for each phase of this development that will eventually replace the original 1967 dated agreement.
Financial Impact
The existing Cooperation Agreement has been in place since 1967 and future agreements will be created and considered as the Franklin Housing Authority properties are redeveloped. The reduction in PILOT paid is a direct result of the previous 40 units being torn down; however, as units are replaced, the PILOT will be subject to change based on actual rent collected.
Recommendation
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Staff recommends approval of the Cooperative Agreement.