Report. Honolulu City Council. The Proposed Sale of City Housing Properties

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1 Report t o m ~ t 4 rfl +r~ +kn L~J LI IC V 0 Honolulu City Council ~2c - C rn on The Proposed Sle of City Housing Properties Prepred By The Council Tsk Force to Review Utiliztion of All City Property (Tsk Force) Jnury2005 2ffl

2 Executive Summry Pursunt to proposed sle of City Housing Properties, the Honolulu City Council dopted Resolution which estblished Council Tsk Force to Review Utiliztion of All City Property (Tsk Force) nd mke recommendtions on the proposed sle of City Housing Properties. The stted objective of the sle ws to provide home ownership opportunities, reduce the City s outstnding housing nd debt service, estblish Rent-to-Own Conversion Fund nd increse the City s Specil Reserve Fund. Initilly 973 residentil units spred mongst 8 properties were selected for disposition. In their nlysis, the City hd projected to receive $173.8 million from the sle (of both initil nd subsequent properties) which could reduce the City s overll debt by $116.6 million. However, the Tsk Force expressed concerns bout the impct of displcing over 900 fmilies s well s the finite reduction of ffordble housing inventory on Ohu. Subsequent discussions rised questions bout the lck of ccountbility nd performnce mesurements, which seem to hve resulted in opertionl deficiencies prompting the proposed sle. From broder perspective, it ppered to the Tsk Force tht the City further lcked uniform stndrds nd criteri for optiml sset mngement for ll City-owned properties nd inventory. With regrds to the proposed sle of City Housing Properties, the Tsk Force supports the sle but strongly recommends tht conditions for ech sle ensure future ffordbility nd rentl inventory. The Tsk Force further recommends tht the City review the findings nd options offered from the multitude of fesibility studies nd ssessments conducted in the pst, determine optiml sset mngement strtegies nd estblish cler lines of deprtmentl ccountbility. 1

3 The Sle of City Housing Properties In Mrch of 2004, the Honolulu City Council received proposed Resolutions nd Bills from the City nd County of Honolulu to sell City Housing Properties. The stted objective of the sle ws to: Provide home ownership opportunities Reduce the City s outstnding housing nd debt service Estblish Rent-to-Own Conversion Fund Increse the City s Specil Reserve Fund Initilly, eight (8) properties were selected for disposition, which consisted of 973 residentil units nd included: Chintown Gtewy Plz 200 units Hrbor Villge 90 units Mnn Tower 236 units Mno Grdens 41 units West Loch Elderly 150 units Kuln Nni Aprtments 160 units West Lke Aprtments 96 units Foster Grdens commercil property The City lso proposed subsequent property dispositions, which included: - Bchelor s Qurters 10 units Chintown Mnor go units Kno Aprtments 14 units Puhi Hle 77 units Winston Hle 94 units The City s proposl lso included complimenting Rent-to-Own Lon Progrms to ssist existing occupnts through trnsition. In My 2004, the Honolulu City Council dopted Resolution , which estblished Council Tsk Force to Review Utiliztion of All City Property (Tsk Force) nd mke recommendtions on the proposed sle of City Housing Properties. 2

4 The Tsk Force Council members recommended vrious representtives from both public nd privte sectors to prticipte on the Tsk Force. The dministrtive, property mngement, development nd finncil bckground of the prticipnts llowed for helthy discussions nd nlysis on the proposed disposition. Members of the Tsk Force re listed in the closing segment of this report. Issues nd Concerns The initil meetings of the Tsk Force focused on developing cler understnding of the tsk t hnd set forth by the Honolulu City Council. The Tsk Force rised mny issues nd queries centering the City s proposed sle. recpture the thought process. Developing mission sttement for the Tsk Force A composite listing of issues is provided to Identifying models from other cities for disposing government properties. Identifying city property inventory - Performing n nlysis of City ssets nd fixed lnd inventory Conducting Request For Proposls to ssess nd develop recommendtions Community spect How does the City intend to fit in with the sustinble plns nd regionl plns so tht it compliments Community plns Development of public / privte prtnerships to resolve issues - Wht ws the originl purpose nd objective for the City getting into the housing projects Mximized use of City s rel estte (office spce, prking fcilities, prks, remnnt prcels) Should the City sell the portfolio of properties with the ide tht wht is sold remins ffordble? Who is ccountble for the properties in question nd who is enforcing the sustinbility? - Wht ssessment criterion is used to determine disposition? - Wht globl criteri should be included to ssure effective nd optiml sset mngement? 3

5 Should the City continue to be involved in the mngement of housing properties? Should the City re-estblish Housing Deprtment? Initil conflict of interest concerns from Tsk Force members who my be interested in the proposed sle of City Housing Properties. Mission Sttement While it ws evident for the Tsk Force to ssess the proposed sle of City Housing Properties, much delibertion ws spent on why it ws necessitted. In order to ssure tht it served in n dvisory cpcity only, the efforts of the Tsk Force were limited to developing brod recommendtions to the City Council, subject to finl considertions of both Council nd City Administrtion. Subsequent discussions led to the development of mission sttement: Provide guidelines, criteri nd suggestions to determine the best use for the City nd County of Honolulu s properties in order to optimize finncil nd or socil utiliztion. Anlysis On July 21, 2004, Mlcolm J. Tom, Mnging Director for the C&C of Honolulu, provided review of the proposed sle nd supporting strtegies. In their nlysis, the City hd projected to receive $173.8 million from the sle (of both initil nd subsequent properties) which could reduce the city s overll debt by $116.6 million. While finncilly possible, concerns of the sle were more bout the impct of displcing over 900 fmilies nd the finite reduction of ffordble housing inventory. The Tsk Force ws lso mde wre of similr disposition strtegies under considertion by the Stte s Housing nd Community Development Corportion of Hwii for its housing stock. According to the Hwii Housing Policy Study 2003 Updte prepred by SMS Reserch, 20,000 ffordble rentl units for households erning less thn 80% of the stte s medin income re needed for the period between 2003 to 2007, of which 10,000 units re for households erning less thn 50% of medin income. 13,000 ffordble sles units for households erning between 80 nd 140% of the stte s medin income re lso needed for the period between 2003 to With the possibility of both County nd Stte reducing its housing inventories, coupled with the incresing demnd for ffordble housing, the Tsk Force could not support the proposed disposition on the bsis of finncil solvency lone. With 4

6 reltion to its mission sttement, the Tsk Force believes tht the City s proposed sle flls short in ddressing the socil impct. orgniztions. A possible solution could be sle to privte nonprofit Nonprofits cn utilize tx credits, CDBG, HOME Funds nd Section 8 Rentl Assistnce, most of which government (city nd stte) is precluded from using. City owned properties with positive csh flows could generte sles revenues. The Tsk Force suggests tht t the very lest, the City should hve rentl distribution policy (e.g. set side for less thn 50%, 50 80%, %, etc) with mximum income limit for tennts. A mximum would ensure continuous supply of ffordble rentls. Since mny City properties re locted in prime downtown loctions, some residents my never vcte no miler how high their income becomes. vcte A resonble policy would llow over income residents resonble time period to Discussions further led to concerns s to how the City got to this stge of housing debt nd prompted questions bout overll ccountbility of properties in ffordble housing. Since the dissolving of the City s Housing Deprtment, it ws uncler s to who hd primry responsibility to ensure tht property mngers were being guided to mximize in order to offset opertionl increses. The Tsk Force discussed vrious housing progrms supportive of the City s housing inventories, prticulrly government subsidy progrms. The Tsk Force expressed concern bout the City s diligence in monitoring nd enforcing income reviews, nd where possible, pursuing rent increses commensurte to rises in income. In short, the Tsk Force finds tht portion of the current City s debt for housing could hve been prevented with belier progrm oversight nd ccountbility. Though it my occur lte in the oversight process, it ws suggested tht issues relting to effective nd efficient use of City properties could be left under the purview of the City Auditor, who lso reports to the City Council. The procurement process for property mngers ws lso discussed nd the Tsk Force felt tht the current low bid process nd short contrct term did not necessrily result in securing the best service nd continuity for residents. Accordingly, the Tsk Force believes the City should review this process to ensure qulity nd stble property mngement services. The inquiry on ccountbility for the mngement of housing properties led to globl discussion bout the ccountbility of overll sset mngement within the City. It ws not cler to the Tsk Force if there ws defined, single entity within the City s current dministrtive hierrchy responsible for the overll coordintion of sset mngement of City properties other thn the brod responsibilit~ of the Mnging Director or the Myor. It ppers tht property sset oversight is frgmented. Ech deprtment within the City s structure mnges their own respective property inventories in ccordnce to their mndtes nd 5

7 progrm prmeters. The Tsk Force further questioned the under-utiliztion of City office spce combined with the City s renting of office spce from the privte sector. It lso questioned the current use of City properties within prime, mrket res (i.e. BWS service vehicle prking fcility) insted of revenue-producing lterntives. The Tsk Force believes tht the City should review prior recommendtions nd options offered from the multitude of fesibility studies nd ssessments conducted in the pst, determine optiml sset mngement strtegies nd estblish cler lines of deprtmentl ccountbility. The Tsk Force solicited input on sset mngement, to include strtegies nd criteri in determining disposition. A prime considertion for the City would be to consider the development of Tcticl Pln. Such pln my include: A cler sttement of vision, mission, vlues nd objectives of the City Council nd new Administrtion. This bse will provide strtegic principles nd direction for either tsk force or deprtment to develop business model to ssess specific properties for development, sle nd property mngement. exmple, residentil, commercil nd vcnt. Lnd ssets could be ctegorized, for Business models could be developed for ech ctegory with specific weights for options dependent on mission sttements nd objectives of the Council nd/or Administrtion. A current inventory of ll lnd ssets nd resources necessry to develop or mnge these ssets. This should include in ddition to lnd sset ctegories, the current stte of people (hedcount nd skill level to determine in-source or out-source); dy to dy processes for property mngement, processes for public/privte residentil or commercil development, nd processes for sles/uctions of properties; n economic cost/benefit nlysis to include operting costs, LOST property tx revenues on City owned nd operted properties nd the libility costs of ownership of pssive prks nd wlkwys; nd n ssessment of technology currently employed to trck nd retrieve rel time dt necessry to mnge ssets on continuum. Identifiction of best municiplity prctices nd benchmrks used to ssess rel property ssets, to determine buy, sell nd hold strtegies nd to pln for sset lloctions other thn rel property to provide recurring revenue exclusive of dditionl txtion of constituents. - A defined desired future stte of city owned or operted rel property ssets. This includes business cse for chnge, definition of the desired stte with recommendtions for enhncing people, processes, economic cost/benefits nd technology. 6

8 These re but surfce recommendtions the Tsk Force discussed With reltion to its mission sttement, the Tsk Force finds the City frgmented in its OVERALL sset mngement nd lcking collective process to determine best nd optiml use. Recommendtions With reference to the proposed sle of the City s housing properties, the Tsk Force concurs tht the City should sell its supply of ffordble rentl housing but strongly recommends tht conditions for ech sle ensure future ffordbility nd rentl inventory. The Tsk Force further recommends the City consider selling to non-profit entities who could leverge dditionl finncing nd subsidies for sustinbility. The solicittion process for disposition must result in qulity nd stble property mngement services s well. Effective nd efficient oversight, of these properties fter sle could be left under the purview of the City Auditor, who lso reports to the City Council. The Tsk Force further recommends tht the City review the findings nd options offered from the multitude of fesibility studies nd ssessments conducted in the pst, determine optiml sset mngement strtegies nd estblish cler lines of deprtmentl ccountbility. With reference to overll sset mngement ctivities, the Tsk Force recommends tht the City develop Tcticl Pln tht includes: A cler sttement of vision, mission, vlues nd objectives of the City Council nd new Administrtion, A current inventory of ll lnd ssets nd resources necessry to develop or mnge these ssets Identifiction of best municiplity prctices nd benchmrks used to ssess rel property ssets, to determine buy, sell nd hold strtegies A defined desired future stte of city owned or operted rel property ssets. 7

9 Closing In closing, the members of the Tsk Force wish to thnk ech respective Councilmember sponsor of Honolulu City Council for the opportunity to serve in n dvisory cpcity to Review Utiliztion of All City Property. Snford Murt Snford Murt, Inc. Frncis Aoki Hui Kuhle Mrk Ih MediLink Tech Kevin Crney EAH, Inc. Nthn Minn The Mortgge Group Gry Furut GSF, Inc. Ken Kobyshi Hwii Pcific Helth Lind O Dy Kmehmeh Schools Ronld S. Lim former Governor s Assistnt for Housing Robert J. Hll Deprtment of Hwiin Home Lnds

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