Back to Advisory Committee Minutes
Present: Committee Members Lauter, Seelen, Asher, Cavoores, Dwyer, Eldredge, Farrell, Friedman, Innis, Johnson, Manning, Marwill, Mooradian, O’Meara
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1. Call to order
Chair Irma Lauter called the Advisory Committee meeting to order at 7:13 PM.
2. Lincoln School Apartments
a. Mike Jacobs, representing the Hingham Affordable Housing Trust, walked the Committee through the Lincoln School financial pro-forma of 9/23/2008 10:45 AM.
i. Mike indicated that the financial projection incorporated the operating expenses which Corcoran currently manages, figures from the 2007 Lincoln School Apartment, Inc. Financial Report by McGladrey & Pullen, and capital cost estimates from the 19 Aug 08 On-Site—Insight Capital Needs Assessment and Replacement Reserve Analysis prepared for MassHousing.
ii. Annual capital cost estimates were increased by 10% to reflect prevailing wage rates.
iii. There was significant discussion regarding Town discretionary use of annual Cash Flow, particularly related to possible HUD restrictions.
Most of the projected Cash Flow ($134K/year over 20 years) is due to lower borrowing costs (4.5%) enabled by the Town’s AAA bond rating.
The Committee and Chris Burns, for the HAHT, agreed that retaining any Cash Flow in a ‘debt-service fund’ or ‘unpaid dividend account’ for the first five years would provide a sufficient window both for clarification of the HUD position and for evaluation of actual operating and capital expenses against estimates.
Were this approach adopted, it was generally agreed that following the five-year period, the Board of Selectmen would recommend to Town Meeting actions to be taken with retained and future Cash Flow.
b. Following the financial walk-through, Chris Burns walked the Committee through both the Governance Structure and Transaction Structure for the proposed acquisition.
i. It was agreed that the LSA Manager, Inc. Board should include the Town Finance Director and Town Administrator or designee as ex officio members.
Successful oversight by the LSA Manager, Inc. Board would be heavily dependent upon appointment of members with relevant property-management expertise, e.g., real-estate law, accounting, contracting, etc.
Board-member terms would be two years, with re-appointments up to six years, using one-year and two-year appointments at the outset to create staggered terms.
ii. The ground lease would stipulate that all capital expenditures must be approved by the LSA Manager, Inc. and that any capital expenditures in excess of $25,000 would require Town approval.
iii. The Town would commit to conducting formal internal audits on a regular basis.
iv. The Management Contract with the Professional Management company should contain a termination provision for non-performance with respect to customer satisfaction.
c. Since maintenance of 100% affordability has been presented by the HAHT as a key objective of the proposed acquisition, the Committee decided that it would be worthwhile to hear from Corcoran directly regarding its current position, in order to evaluate the consequences of the likely alternative should the Town choose not to exercise its Right of First Refusal.
Corcoran will be invited to attend the Committee’s 30 Sep 08 meeting.
d. The following key questions were identified, answers to which need to be received by the Committee in order for it to vote on the proposed Warrant article at its 30 Sep meeting.
i. Is a mortgage to secure the CPC loan necessary? (If not, legal and recording fees could be saved and associated complexity avoided.)
ii. Has a title report been ordered?
iii. Can the CPC lend more than the appraised value of the property ($7M vs. $6.5M)?
iv. What is indicated in the 21-E (hazardous materials) report?
e. It was decided that the Committee had the obligation to summarize the pro’s and con’s of the proposed acquisition in a balanced fashion for its own deliberations as well as for subsequent presentation to Town Meeting.
Consequently, Committee members will forward their suggestions for inclusion in a matrix to be prepared by the Secretary.
3. General Business
The Committee’s next meeting is 30 Sep at 7:00PM.
4. Adjourn
The meeting was adjourned at 10:22 PM.
Respectfully submitted,
Jonathan Asher, Secretary