Aug. 20--The New Bern Board of Aldermen on Tuesday approved the Housing Authority's effort to borrow $17 million in bond revenues to refurbish Craven Terrace.
Mary Ann Rusher, a lawyer from Raleigh who is the Housing Authority's bond counsel, said the bonds are different from what the city normally issues when working on major capital projects. They are "conduit bonds" that have to be issued by a government entity (the Housing Authority) to be tax exempt, she said.
The bonds would be issued to a private, for-profit entity called Craven Terrace LP which will be partly owned by Transformation Venture Capital, a nonprofit set up by the Housing Authority last year, and the contractor, Evergreen Partners of Florida. But 99 percent of the bonds would be issued to a tax credit investor (like a bank or insurance company), which would own 99 percent of Craven Terrace, she said.
In order to get the tax credits, at least 50 percent of the funding must come from tax-exempt bonds, Rusher said.
"The bond orders, when issued, are not a debt of the Housing Authority and they are not a debt of the city of New Bern," she said. "They are repayable solely on the rents that this limited partnership receives from the projects (rents supported by federal Section 8 laws)."
There are four levels of financing for the rehabilitation, Rusher said: a HUD program that guarantees the repayment of the mortgage, tax credits, historic housing tax credits, and bonds.
E.T. Mitchell, chairman of the Housing Authority Board of Commissioners, said that when rehabilitation begins and the financing comes through the Rental Assistance Demonstration Program, or RAD, the New Bern Housing Authority will still have the title to the land where Craven Terrace is, but the buildings will be owned by the lenders. Once the loans are paid off, the Housing Authority would have the option of purchasing the buildings and paying off any outstanding loans.
The Housing Authority and limited partner would co-manage the properties, she said.
The Limited Partnership would own Craven Terrace for at least 15 years before it could be sold off, Rusher said.
Mitchell said the RAD program was set up for 40 years, and Nancy Adolph, a Housing Authority Board of Commissioners member, said Craven Terrace would remain for at least 40 years.
Mitchell said 42 units at the back of Craven Terrace are in the flood plain and are slated to be demolished. Any people living in those units would be given vouchers to find other housing, she said.
Alderman Bernard White said that, for as long as he's lived in New Bern, Craven Terrace was not prone to flooding, and since drainage issues have been taken care of in the area, there is no water standing after a storm.
But Mayor Dana Outlaw pointed out the city has to rely on flood maps from the Federal Emergency Management Agency (FEMA) and if the city does not comply with those maps, it could mean a loss of federal funds.
About $3 million will be spent on upgrading the sewer system, Mitchell said. Because the Housing Authority is using federal historic housing tax credits, only the interiors of the units can be renovated.
Craven Terrace was built between 1941 and 1953 and is functionally obsolete and expensive to renovate, she said.
The Housing Authority Board of Commissioners approved a budget of $27.3 million for the rehabilitation on July 24. The $17 million in bonds that is being applied for is the hard cost of construction. The remainder, $10.3 million, is the soft cost for consultants, architects, fees and lawyers.
Julian Marsh, executive director of the New Bern Housing Authority, said Wednesday there are still hurdles to overcome before construction can begin at Craven Terrace. One of the largest hurdles is whether HUD finds the RAD project compatible with the city's $400,000 Choice Neighborhood Planning Grant that is targeting the Five Points and Duffyfield area. Craven Terrace is the largest site in the planning area, he said.
Marsh said he does not want to see the RAD project negatively affect the city's Choice Neighborhood Planning Grant from getting a multi-million dollar Implementation Grant.
The Housing Authority is finalizing the Craven Terrace plans to submit to HUD along with the loan application. Marsh said initially they were hoping to begin the renovations this fall, but now it is uncertain when work will begin.
A resolution to show approval of the New Bern Housing Authority borrowing $7 million for Phase I of the rehabilitation passed 5-1 on a motion from Pat Schaible and seconded by Johnnie Ray Kinsey. White voted against the motion. Alderman Victor Taylor was absent. A resolution approving the borrowing of $10 million for Phase II on a motion by Jeffrey Odham was seconded by Dallas Blackiston; it also passed 5-1 with White opposing.
Odham said the way the resolution is worded, it could be misconstrued because it states the board would provide approval of a multi-family housing facility know as Craven Terrace apartments.
"And I know how the public is and their listening will stop at that point," Odham said, adding the board is not there not to approve the projects, but the bond financing.
Schaible agreed and amended her motion.
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