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CITYDEBATE.COM  - August 28,2007


Assistant City Manager Hilda Fernandez Explains The Confusion Over The Dermer CANDO Bait and Switch Game
(Involving affordable housing being done by Miami Beach CDC)
 
Dear Ms. Fernandez:

I have perused your response to my questions at some length, and I must say that I am pleased that you have cleared up what you recognize as “some confusion,” and that you have done so entirely to my satisfaction.

As I understand your response, the new CANDO zoning ordinance will discriminate in favor of the occupation class that has often been discriminated against, cultural arts workers, and to the extent that, theoretically, an artist or other cultural worker with no income whatsoever might qualify for housing.

Such reverse discrimination might not sit well with some of my fellow residents, but I like it very much, especially since Mayor Dermer’s CANDO spokesperson, A.C. Weinstein, said that I, as a writer, would qualify as a cultural arts worker because “writers are bullshit artists.” Furthermore, I am one who has often had little or no income from my preoccupation.

As an author there is something I must get off my chest in respect to the confusion of the three hotel properties, which the city purchased for development, with the CANDO project, which you have identified has having nothing to do with the hotels. Please excuse me for unloading on you.

There was more than some confusion: there was a lot of confusion, so much confusion that, after I read the documents an interested party delivered to me, I thought Miami Beach residents had been marked for a classic bait-and-switch con. In fact, you are correct: The underlying documents for the financing and purchasing of the hotel properties speak to affordable housing in general and make no mention whatsoever of CANDO or its special qualification requirements. Nevertheless, all along, the two things have been associated in the public mind, and that was obviously the doing of the Mayor’s office.

Yes, ma’am, the financing and purchasing of the hotels was trumpeted as an artistic CANDO thing all along. Now people shall discover that no art but the art of rhetoric had anything to do with the matter.

FERNANDEZ: “There is currently no CANDO-specific project under development with City funds.”

“The City of Miami Beach will pursue a $13.7 million purchase of three vintage apartment houses that are to be the linchpin of a new cultural-arts district by providing affordable housing…. ‘I am delighted and relieved,’ said Nancy Lieberman, chairwoman of the mayoral committee spearheading the creation of the Cultural Arts Neighborhood District Overlay….The Barclay and London House are currently used for low-income rental housing. The Allen is vacant.” (‘Beach moves to buy apartments for cultural-arts district,’ by Charlotte Libov, MIAMI TODAY January 25, 2007)

“Last year during his State of the City Address, Mayor David Dermer talked the talk about forming a committee to guide the creation of the cultural arts neighborhood district overlay, CANDO. This year the committee walked the walk, and not only formed the cultural arts neighborhood but tapped the Miami Beach Community Development Corporation to fund the purchase of The Barclay House at 1940 Park Avenue., The Allen at 2001 Washington Ave., and The London House at 1965-1975 Washington Ave. to be converted to affordable housing. ‘The city is taking it seriously,’ explained Jeremy Chestler, executive director of ArtCenter/South Florida, who also serves on the committee, ‘not only be supporting the idea by pulling such a diverse committee, but with its financial commitment.’” (‘What is Up with Cando? New Cultural Arts Neighborhood in Miami Beach will bring artists back.’ by Steve Mayo, MIAMI ARTS GUIDE).

FERNANDEZ: “I don’t know what forty units you are referencing, as all three buildings are being developed for affordable housing.”

I am referring to the 40 units identified during my interview with A.C. Weinstein, Mayor Dermer’s official spokesperson for CANDO, who referred to The Barclay House (65 units), The Allen (42 units), and The London House (54 units). He said that, of the 161 units, 40 units had been allocated for cultural arts workers as per the proposed CANDO Ordinance, which specifies that, “Existing units being rehabilitated in the CANDO overlay district” would be exempt from the minimum size requirement “if 25% of the units are reserved for ‘cultural arts workers as defined…” (161 X 25% = 40.25 = 40 rounded)

As you recently informed Tania Valdemoro of the Miami Herald, the definition of cultural artists specified that they must have between 51% and 120% (amended from 80%) of the HUD median income of $55,900 (this year), which can be calculated on the figures you reported to the Herald, as between $28,509 and $67,080 – you go on to state that Miami Beach’s cultural arts workers make at least $22,000, an absurd statement that raised many eyebrows and cast doubt not on you but on the Herald report of July 1, 2007. I have already pointed out at length that very few “struggling artists” whom CANDO is supposedly going to benefit earn anywhere near $28,509 on their art annually, nor would $22,000 come close to the income one of the most promising artists on Beach earns as a full-time painter.

In an interview with Commissioner Matti Bower a few days ago, she informed me, after we discussed the three buildings, that the CANDO zoning must be approved now, otherwise the money would be lost. She also said that the 51% of median income eligibility requirement for CANDO projects would not apply, and that it would be illegal to discriminate against non-cultural-arts workers. In retrospect, her statements did not make sense, and I supposed that she had been misinformed by the Mayor’s good office or subject to some confusion. That is, unless the CANDO zoning is needed to qualify the already purchased buildings, in which case the money might be “lost” but the buildings would revert to the City. Of course, Commissioner Bower may have thought she was talking about apples and oranges, and did not realize that the Mayor’s media consultant had created some confusion in the public mind.

But now, given your clarification, that CANDO has nothing to do with the three properties, of which The Allen is apparently going to be flipped to a private developer in 24 months, it is apparent that the City does in fact intend to discriminate in favor of cultural arts workers, and did intend but no longer intends, according to the revised Ordinance proposal, to require a minimum qualification of 51% of HUD.

FERNANDEZ: “Independently of this project, the CANDO committee is moving forward with recommended zoning/planning that would be available in the area designated as CANDO. Should these incentives be approved by the City Commission, they would apply for NEW projects located within the CANDO and provide specific incentives for housing that targets income eligible cultural arts workers, meeting the affordable housing income standards that set a maximum – but no minimum – on income.”

You have made it perfectly clear that CANDO has nothing to do with the three properties in question; you have also made it clear that the Commission will drop the minimum (51% of HUD) from the Ordinance, but will retain discriminatory clause in favor of cultural arts workers. I thank you very much for that clarification, and hope it will be published on the honorable Mayor’s website, to offset the misleading information thereon, a primary source of what you have diplomatically referred to as “some confusion.” I hope that that is all it was.

Sincerely,
David Arthur Walters

Below are the answers to all
of Mr. Walters’s questions to Ms. Fernandez


1. Is the deal on the three buildings closed?

The Loan Agreements between Miami Beach Community Development Corporation (MBCDC) and the Miami Beach Redevelopment Agency (RDA) - the City\u2019s Community Redevelopment Agency - were executed on April 30, 2007 (a loan agreement was executed for each of the three buildings). Subsequently, the respective restrictive covenants were recorded. The loan agreements were for the purchase of the three buildings: The Allen, the Barclay, and the London House.

2. Who are (were) the owners of those buildings?

The Miami Beach Community Development Corporation is the current owner of all three buildings. The entire transaction occurred between the MBCDC and the private owner of the property(ies). The City provided the acquisition funds as a loan to MBCDC.  Based on copies of the purchase contract between MBCDC and the sellers, the sellers are listed as 1940 Park Avenue Inc., 2001 Washington Avenue Inc., and 1975 Washington Avenue Inc.

 3. Do those owners have any ties to City Hall and related developers etc?

 As explained in #2 above, the City provided funds for MBCDC to purchase these three buildings. MBCDC is a US HUD recognized CHDO. MBCDC applies for and receives funding from State and Federal funding programs administered by the City.  All discussions relating to the purchase, negotiations, etc. were between MBCDC and the Seller.

 4. What is the purchase price? terms of payment?

 The information you are requesting is delineated in the Commission Memorandum attached. More specifically, MBCDC was allocated, via a loan,  $13,650,000 for acquisition, closing and carrying costs associated with the three properties.

 Pursuant to the loan agreements, MBCDC must provide the buildings as affordable housing for the affordability period - 30 years.  Per the Loan agreements provided that if MBCDC is \u201cin good standing, in compliance with and free from default under the terms and conditions\u201d of the agreements, and if they comply with the Declaration of Covenants and Restrictions that was executed by MBCDC in favor of the City of Miami Beach and the RDA, then MBCDC will not be required to make any payments on the principal amount during the term of the loan.

However, in consideration for this deferral of repayment during the term, satisfaction of repayment of the loan shall occur at the end of the term of the agreement (or the conclusion of the affordability period, whichever is later) through the conveyance of the property to the RDA (City), via fee simple title. In other words, the properties will revert to the City at no cost to the City.

 5. What is the estimated rehabilitation cost?

Please refer to the commission memorandum attached for specific detail. The rehabilitation costs are estimated at approximately $12.389 million.

 6. What entity will develop the 3-building property? What ties do the staff of the housing development corporation have to City Hall, the former property owners, approved vendors (usual contractors) et cetera?

As previously mentioned, MBCDC is the current owner of the three properties. Number 3 above describes the current relationship between MBCDC and the City: they are a grant recipient of State and Federal funds and a HUD-recognized CHDO. All allocations to MBCDC are approved by committees and the Commission. MBCDC contracts directly with their vendors for services and products. The City has no role in reviewing and/or approving the vendors used by MBCDC.  MBCDC is a long-time developer of affordable housing on Miami Beach; they are familiar with applicable conflict of interest standards.

 7. Under what federal matching program if any will the project fall? Has anyone spoken to the federal authorities about the rehabilitation project?

Sources of funding for rehabilitation and operation will be determined by and are the responsibility of MBCDC., and they may or may not include federal funding programs. Should Federal funding programs be used, they may include, but are not limited to: HOME, Section 202, HUD Supportive Housing Program, and other HUD program funds. Some of these federal funds are administered through the City and/or the County. In addition, State funding programs are also available, including the Low Income Housing Tax Credit program and SHIP.

 8. If moderate-income workers get 40 units, who will get the 120 remaining units, and at what price? Market?

One hundred percent (100%) of the project (all three buildings) must target households with incomes that meet the affordable housing guidelines. These households do not need to be workers; they can be seniors.

I do not know what 40 units you are referencing, as all three buildings are being developed for affordable housing. The affordable housing criteria (housing meeting the needs of households that earn UP TO 120% of area median income for State programs or UP TO 80% of area median income for HUD programs) establishes the maximum income a household can earn to qualify for this housing. They can certainly earn less than the max (depending on the program) and qualify for the housing.

 9. Is the "cultural arts workers" concept just a glamorous farce? Why? Would the project otherwise be unattractive?

 The issue/question is not related to the acquisition of the three buildings, as the project was approved by the commission to provide affordable housing to income-eligible applicants, regardless of occupation. In addition, the discussion relating to the City\u2019s funding of the project pre-dates discussions by CANDO.

The project has been and remains attractive because a large percentage of the City\u2019s workforce has an income level that would qualify them for this housing (73%). The City has been interested in providing housing opportunities for employees working in our retail, hospitality, cultural arts, and etc. industry sectors. Individuals that meet income eligibility may apply for this housing when it becomes available, that could include cultural workers.

10. Is the project still feasible given the declining market that some economists say will result in a decade long slump?

 The demand for affordable housing exists, especially for workers in the industry sectors that support our local economy. The average wage of these workers is well below the affordable housing criteria. There are currently waiting lists for every affordable housing project the City has funded.  In addition, the purchase of the three buildings assists in achieving another goal of the city - affordable housing retention. Tenants of the currently occupied buildings meet the affordable housing income eligibility criteria. If these buildings had not been purchased with the funding allocated to MBCDC, the buildings could have been purchased and converted into market rate housing, and the affordable housing lost to the community.

11. Why should the public finance the project rather than private investors and bankers?

MBCDC will, in fact, be pursuing private sources of funding for project rehabilitation. As you may be aware, affordable housing development traditionally requires public subsidy (sometimes substantial) in order to reduce debt service and make the project affordable. The lower rents that must be charged to tenants in affordable housing projects impacts the amount of income that can be generated by the properties, making it very difficult for affordable housing developers to carry any significant amount of conventional debt, let alone generate a net operating income (profit). The City Center RDA plan includes a component relating to the use of RDA funds for the retention of affordable housing.

 12.  Are the zoning inducement to the developers really that attractive?

This issue/question is not related to the purchase of these three properties; these incentives do not impact these three buildings

However, in answer to your question, the CANDO committee has developed a list of recommended incentives to generate development within the district. The CANDO committee includes local developers familiar with Miami Beach. The issue has been discussed at a public hearing at the Planning Board, with developers suggesting that incentives that have been proposed by CANDO would be attractive. The proposed incentives would have to  be approved by the full Commission; that would occur in September.

13. Is Commissioner Bower's statement true, that the funds will be forever lost if allotted before the new term that said special fund cannot be somehow transferred to the general fund to help cover next year's anticipated deficit?

RDA funds have numerous state and local restrictions, including a requirement that the funds be spent on projects in the RDA and in accordance with the approved RDA Plan. In addition, there are significant restrictions on what operating expenses can be funded. The majority of the RDA funds are allocated to capital projects. Affordable housing is an eligible capital category. These funds cannot be transferred to the general fund; that is not an option.

14. Can the funds be diverted to the more appropriate CANDO project the fine artists, who say they do not want to be cooped up in condominiums in the Mayor's district but would rather live spread out, have in mind for CANDO, which will be a major contribution to the cultural improvement of Miami Beach on the whole?

To clarify once again: MBCDC was allocated RDA funds, via a loan, to purchase three buildings located in the RDA for the development of affordable housing. The discussions relating to the purchase of the buildings pre-dated and did not include any specific requirement relating to CANDO or cultural workers. Residents must meet the income eligibility requirements for affordable housing, regardless of their occupation, trade, etc. The three buildings happen to be located in the CANDO, and income eligible cultural workers can certainly apply for residency.

In answer to your question: this is an affordable housing project. There is currently no CANDO-specific project under development with City funds. In terms of the development of affordable housing in other areas of the city, the city currently funds other affordable housing projects in other areas of the City, and income eligible individuals can apply (although waiting lists exist). However, the funds allocated for the purchase of these three buildings could not be used outside of the RDA.

15. What other questions should be asked and answered prior to proceeding with the project?

It appears that there is some confusion relating to the three buildings and the CANDO recommendations -- perhaps stemming from the location of the buildings, coincidentally, in the CANDO.  As previously stated, the City allocated funds to MBCDC for the acquisition of three buildings to retain/develop affordable housing, MBCDC has acquired the properties and is engaging in some minor renovations to assist in keeping the buildings occupied (as affordable housing) until they are able to secure rehabilitation funding. That project is proceeding.

Independently of this project, the CANDO committee is moving forward with recommended zoning/planning incentives that would be available in the area designated as CANDO. Should these incentives be approved by the City Commission, they would apply for NEW projects located within the CANDO and provide specific incentives for housing that targets income eligible cultural arts workers (meeting the affordable housing income standards that set a maximum \u2013 but no minimum \u2013 on income).

This proposed incentive package is not related to, nor does it impact, the acquisition/rehabilitation of these three particular buildings.

Thank you,

Editors Note: City Debate is great full to Assistant City Manager Hilda Fernandez for her candor and  honesty in regards to CANDO. Candor and honesty two words that the Mayor has no idea of there meaning. Affordable housing is something the entire city would get behind. The Mayor as usual only does things to get headlines. Thank goodness for Assistant City Manager Hilda Fernandez and term limits.
 
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