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HomeMy WebLinkAboutBackgroundAttachment 1 Background Falkenberg, Gilliam and Associates, Inc. (FGA) has been the property management company for the Morgan and Kimball Towers since 1995. Each year, an operating budget for each building is prepared by FGA and is reviewed and approved by the Community Development Commission, Housing Authority of the City of National City. Kimball Tower Kimball Tower is a 151 unit complex located at 1317 D Avenue owned free and clear by the Community Development Commission. Of the 151 total units, two (2) are reserved for property management staff and 149 are rented to qualified households. Of the 149 rental units, 142 units receive rental subsidies from the U.S. Department of Housing and Urban Development (HUD) through the City of National City's Section 8 program. Seven units are market (unsubsidized) rate and do not receive HUD rental subsidies. For the fiscal year ending June 30, 2014, the projected annual income is $1,094,267 and the total cost of operations total S990,743. Although this presents an income of $103,524, the property management company is required by the CDC -HA to place $84,000 in the replacement reserve account (S7,000 per month). Replacement reserves are funds that are restricted for the replacement of appliances, carpeting, or other unbudgeted building maintenance charges. As of March 31, 2013, the balance of the replacement reserve fund is $1,281,990. After funding the reserve account with the additional S84,000, the net income of the Kimball Tower is estimated to be S19,524. Attached to the operating budget is a FY 2014 capital improvement budget for Kimball Tower that includes: o Replacement of Kimball Tower boilers with a projected estimate of $205,000. ▪ Up -grade Kimball Tower hot water supply piping with a projected estimate of $35,000. • Modernize Kimball Tower elevators with a projected estimate of $225,000. • Up -grade fire suppression system at Kimball Tower with a projected estimate of S175,000 • Installation of Nutrition Center grease interceptor and renovation of employee bathroom drain system with a projected estimate of $90,000. Due to a low Morgan Tower replacement reserve balance, funds will be to be borrowed from Kimball Tower replacement reserves. • Up -grade fire suppression system at Morgan Tower including underground fire line and auxiliary pump system estimated at $200,000. Due to a low Morgan Tower replacement reserve balance, funds will be to be borrowed from Kimball Tower replacement reserves. All capital improvements will be paid from the Kimball Tower replacement reserve account. Due to overall increases in projected expenditures, FGA is recommending an increase of $12 (2%) per month/per unit from $598 to 610. Households receiving a Section 8 subsidy will not feel the impact of this rental increase, since the proposed rental increase will be covered by the rent subsidy. The seven market rate units will receive an increase to their rent payment, unless the rent increase causes their housing costs to exceed 30% of the household's monthly income. In this case, the City's Section 8 program staff may evaluate the household's eligibility to receive Section 8 rental assistance. Highlights of Kimball Tower Budget are: • Rent increase (GL#5120) of twelve ($12) dollars (2%) per month from $598 to $610. Federal rent subsidies will pick up rent increase for those families being subsidized. • Capital Improvement Budget totaling $640,000 to replace boilers, hot water supply lines, modernize elevators, and up -grade fire suppression system. In addition, $290,000 will be borrowed from Kimball Tower replacement reserves to pay for Morgan Tower fire suppression system, grease interceptor/bathroom improvements. Morgan Tower Morgan Tower is a 152-unit complex located at 1415 D Avenue. Of the 152- units, one unit is reserved for property management staff and 151 are rented to qualified households. Of the 151 rental units, 150 receive Section 231 rental assistance from HUD. One unit is market (unsubsidized) rate and does not receive a rental subsidy. For the fiscal year ending June 30, 2014, the projected annual income is $1,234,189 and total cost of operations total $946,878 which includes loan principal and interest payments of $360,737. After a HUD required deposit of $37,524 into a replacement reserve fund, the net income of Morgan Tower is estimated to be $7,962. As of June 2013, Morgan Tower has a mortgage loan balance of $1,825,268 with a mortgage maturity date of August 1, 2019. As of March 31, 2013, the balance of the replacement reserve fund is $373,854. Attached to the operating budget is a FY 2014 capital improvement budget for Morgan Tower that includes: • Replacement of the Morgan Tower roof and ventilation units with a projected estimate of $225,000. • Installation of Nutrition Center grease interceptor and renovation of employee bathroom drain system with a projected estimate of $90,000. Due to a low Morgan Tower replacement reserve balance, funds will be to be borrowed from Kimball Tower replacement reserves. • Up -grade fire suppression system at Morgan Tower including underground fire line and auxiliary pump system estimated at $200,000. Due to a low 2 Morgan Tower replacement reserve balance, funds will be to be borrowed from Kimball Tower replacement reserves. All capital improvements ($225,000), except for fire suppression system and grease interceptor/bathroom improvements, will be paid from the Morgan Tower replacement reserve account. Notable items of the Morgan Tower budget are: go Rent increase (GL#5120) of one ($1) dollar (.15%) per month from $687 to S688. Federal rent subsidies will pick up rent increase for those families being subsidized. • Capital Improvement Budget, totaling $225,000, includes the removal and replacement of roof and ventilation units to be paid from replacement reserves. Staff recommends adopting the Morgan Tower and Kimball Tower operating and capital improvement budgets for the FY 2013-2014.