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June 2015 Capitol Hill Housing Board Meeting Keys and Addenda
Reminder: Dinner begins at 5:45. The meeting starts promptly at 6 PM. Disclosures and recusals: Board members will review items on the agenda and make any necessary disclosures and recusals. Community Programs & External Relations Update: Michael and others will debrief on Top of the Town, luncheon and the Community Forum. In general, the events went well both in terms of the fund raising component and the community relationship building component. We had some challenges and will continue to have challenges earning trust and the process is providing us insight into our own short comings as an organization. Chris will discuss our next steps in building that trust and in partnering with CD-based organizations. Presentation and Discussion: This will be a prelude to the discussion we anticipate having at the retreat. The topics also respond to our desire to work in other communities. Executive Session: The board will enter executive session (b) To consider the selection of a site or the acquisition of real estate by lease or purchase when public knowledge regarding such consideration would cause a likelihood of increased price; and (c) To consider the minimum price at which real estate will be offered for sale or lease when public knowledge regarding such consideration would cause a likelihood of decreased price. However, final action selling or leasing public property shall be taken in a meeting open to the public. Real Estate Development Discussion: 24th and Union has been acquired and will move toward abatement and demolition as discussed at the May Board meeting. Greg will provide a brief verbal update on the project. Executive Committee: Jill and Chris will give an update on the strategic planning process including and discuss the agenda for the retreat. Finance: The finance committee presents its regular report and dashboard through April 2015. The audit is complete and is available for Board members. Asset Management and Acquisitions: Brad will go over the final terms of the mitigation at the Brewster.
Board Packet Attachments 1. Meeting Keys & Agenda 2. Consent Agenda and Attachments
a. Contracts and Expenditures (None) b. Board Minutes c. Tenant Complaint Resolution Log (None) d. Property Management Report and Minutes e. Property Management dashboard f. Memo from the CHH Foundation g. Real Estate Development Report and minutes h. Sustainability Report i. Executive Committee Minutes (To be
Distributed at Board Meeting) 3. April 2015 Finance Report and Statements and
Asset Management Report 4. 2014 Audit 5. 410 Apartments Disposition plan
Upcoming Meetings and Events
Please let Chris or Michael Know if you’d like additional information on any event or meeting. Monday, June 8
CHH Board Meeting Thursday, June 18 Board Retreat Monday, June 22
CHH Executive Committee Meeting
CAPITOL HILL HOUSING BOARD June 8, 2015
6:00 PM – 7:30 PM Regular Meeting 12th Ave Arts Pike-Pine Room
1620 12th Avenue, Seattle
AGENDA
6:00 Call to Order (Quaintance)
1. Approve consent agenda Attachment 2 2. Disclosures and recusals
6:05 Public Comment (Not to exceed 5 minutes per individual or 15 for combined speakers) 6:10 Community Programs and External Relations
1. Top of the Town and Community Forum (Seiwerath) Hand Out 2. Community Next Steps (Persons) Verbal
6:15 Presentation and Discussion
1. Structure concept Discussion 2. Beyond Cultural Competence
6:45 Items in Executive Session
1. CADA Properties 2. 410 Introduction 3. CH TOD Update 4. Real estate opportunity
7:05 Real Estate Development Discussion (Persons, Elkerton)
1. 24th and Union Power Point
7:10 Executive Committee and Board (Persons/Quaintance) 1. Strategic Planning 2015 (Fleming) Hand Out
a. Board Retreat 7:15 Finance Report (O’Donnell, Wallis)
1. Financial summary, cash management report: April 2015 Attachment 3 2. 2014 Audit
7:20 Asset Management and Acquisitions (Persons and Fleming)
1. Brewster Final Terms Power Point 7:30 Adjourn (Quaintance)
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Regular Board Meeting Pike-Pine Meeting Room 1620 12th Avenue, Seattle
May 11, 2015
Members Present: Bob Fikso, Heyward Watson, Rachel Ben-Shmuel, Cathy Hillenbrand, Jaebadiah Gardner,
Sharron O’Donnell, Drew Porter, Liz Dunn, Paige Chapel, Dana Behar, Matt Roewe, , Robert Schwartz Staff
Present: Chris Persons, Jill Fleming, Deena Wallis, Greg Elkerton, Simone Hamilton, Greg Elkerton, Kirk
McClain (taking Minutes), Melissa Blankenship Absent: Alice Quaintance, Farin Houk, Michael Malone,
Paul Breckenridge Guest Present: Maureen Kostyack
Call to Order (Cathy Hillenbrand): The May 11th regular meeting of the Capitol Hill Housing board of Directors was called to order by Chair, Alice Quaintance at 6:05 pm when a quorum was reached. Approve consent agenda. Disclosures and recusals: No disclosures or recusals were made. Public Comment No members of the public were present. Community Programs and External Relations: Top of the Town and Community Forum (Seiwerath) Chris Persons’ spoke in Michael Seiwerath’s absence regarding Top of the Town event. Top of the Town event is fully sold-out. CHH decided to join the three events together: Top of the Town, Community Forum, and Community Round-table to take advantage of the upcoming Denise Scott visit. Chris gave brief bio of Denise and her organization, Local Initiatives Support Corporation (LISC.org). This year CHH will hold its Community Forum in the Central District as a way to address issues related to gentrification in that area. Chris mentioned there was significant negative feedback regarding the Top of the Town Invitation. CHH had conversations with our community partners and addressed that and other related issues around CCH’s commitment to preserving the diversity of the Central District. Chris added that these recent events provided a great learning opportunity for CHH to practice better cultural awareness. Chris mentioned the CHH Foundation BBQ. Board members were asked via online poll to pick a date when they preferred to attend the first annual CHH Foundation Board BBQ. The event is scheduled to be held at Sherry Brown’s house on Capitol Hill. Presentation and Discussion: Maureen Kostyack, Housing Program and Development Manager with the City of Seattle Office of Housing presented: “The State of Housing Seattle and Washington.” Chris introduced Maureen to the Board. Maureen has several years of experience working in affordable housing in Seattle. Maureen discussed three main topics: Present housing affordability and livability, Seattle Housing Levy, Affordable housing Policy in Olympia (Olympia is currently in Special Session). Real Estate Development Discussion: 24th and Union project. CHH is purchasing the site on May 20th. CHH has applied for demolition permit and will start asbestos abatement process at the end of July 2015. Chris mentioned CHH is cognizant of the community feelings about the site. CHH is discussing a communications plan that will balance need to have an event commemorating the memory of the building, with the need to develop the property. Jaebadiah Gardner suggested CHH make an effort to include minority-owned
businesses of color working on the project or work with companies to hire people of color to do some of the labor. CHH is currently having a conversation with one General Contractor regarding hiring minority laborers. Strategic Planning 2015: Staff performed a visioning exercise at the last All Staff meeting with the goal of coming up with a big accomplishment for CHH ten years into the future. CHH will take the results of the exercise to the management team/leadership team retreat to work on crafting it more into a vision statement to take to Board Retreat. Another strategic planning activity was at the annual meeting. Our strategic planning consultant who led the last part of the meeting asked for stakeholder input regarding future directions for CHH. Summary of that input will be available at next board retreat. Housing Partnership Network: Jill distributed a handout for Housing Partnership Network (HPN). CHH will host a tour of 12AA building for HPN in June. Finance Report: Financial summary, cash management report: May 2015. Sharon O’Donnell reported regarding the new policy for Capital Budget projects to give the board insight to any major projects CHH does next year and for 2016. Budget was finalized and was included in the Board Packet. Overall financial position is very good. Jill also reported that the CHH Charter requires that the Board should adopt a capital budget. Thus far, board has never been presented with a capital budget. CHH executive staff is working hard on coming into compliance with all elements of the Charter. CHH is in a much better position to track CHH capital needs. Chris asked if CHH will be doing capital budget with the regular budget in the future. Jill reported it will most likely be done with the regular budget in December, or in January or February, shortly after Board adopts the operating budget next month. Board member requested the Minutes reflect that Board accepted with the understanding that we will actually do the projects that we have the financing to do. A Motion to approve Finance Report was made, seconded and passed unanimously. Asset Management and Acquisitions: Brewster Update and deal points. CHH has a meeting with Seattle City Light next week. Chris will update the board on additional developments after that meeting. Fire Station 7 update and deal points. We expect to close on July 15th. Chris reported that the City has moved beyond their ability to take over the property. CADA Properties will be discussed at next Board meeting. Meeting was adjourned at 7:55PM Attested, ____________________________________ Robert P. Schwartz, Secretary May 11, 2015
Property Management Committee Members: Rob Schwartz (Chair), Farin Houk, Heyward Watson, Mitchell Belcher, and Kristin Ryan Staff: Billie Abers, Katrina McMillian
June 2015
Property Management Committee members, Rob Schwartz (Chair),by phone, met with Billie Abers, Director of Property Management, Brad Lange, Director of Asset Management and Acquisitions, Lisa Hagen, Asset Management Analyst and Katrina McMillian, Senior Portfolio Manager, on June 2, 2015. The committee reviewed the report and discussed current property management activities. Capital Projects—current The exterior painting of the Pantages is scheduled to start on June 8th and be completed by the end of July. The Devonshire interior painting began May 11th, and will be complete early June. Carpet installation will follow.
Brewster—Brad, Jill and Chris met with City Light Management last week, we continue to discuss options and mitigation regarding the Denny Substation and its impact on the Brewster residents, operations and finances. The Fredonia roof is complete and the Park Hill roof started June 1st, and be complete by the end of June. Work has started at the Larned with Legacy Telecommunications, Inc. to install Verizon Wireless system on the roof and basement. We are in negotiations with Verizon at the Broadway Crossing. We are in the process of getting proposals for interior painting and replacement of interior flooring at the Seneca. We held a day of caring at Gale Place on June 2nd, with WNBA. They held a basketball clinic, assisted with grounds keeping, donated a basketball hoop and opening game day tickets. We are in the process of requesting proposals to upgrade the Helen V fire alarm system. Resident Services
In May Resident Services provided 48 Households with direct one-on-one services.
Distributed $1129 in rental assistance.
Held 10 community events, including the first Resident Services HUD zoo trip.
Began development of a resident voter registration pilot. Third Party Management
The remaining CADA buildings, Union/James and Harvey, are third party managed.
We will be responding to an RFP for SHA in June. The committee reviewed the Disposition plan for the 410 Apartments.
The committee reviewed the Turnover memo from Asset Management. Building Operations From the Finance report: Year to date April 30, 2015 Blended Operating Statement Vacancy loss for the portfolio was 3.6% for the first four months of 2015. Vacancy loss for 2014 and 2013 was 3.8%
and 2.7%. For budget purposes we assumed vacancy rates ranging from 3-5% depending on the building.
Capitol Hill Housing
Operating Statement
For the period ending: 4/30/2015
Benchmarks
98% Excellent
95% Good
90% Poor
98% Excellent
95% Good
90% Poor
<30 days Excellent
45 days Good
60+ days Poor
1.15 excellent
1.05 good
<1.0 concern
1.15 excellent
1.05 good
<1.0 concern
1.15 excellent
1.05 good
<1.0 concern
Frequency YTD YTD YTD YTD YTD YTD Monthly YTD M M YTD 2015 A A A
Type HUD Buildings Units Actual Inc Budget Var %Actual Exp (before debt service)Budget Var %
Op exp/unit -
YTD (Before
Res)
2015 YTD
Vac Loss
Vac
2/2014-
2/2015
YTD Vac
2015 2014 Vac
Cash Flow after
reserves and
debt service
Occupancy
Rate
Occupancy Rate
12 mth trend
Repl Res
Y or N
Op Res
Y or N
Average Unit
Turnaround Time
DCR 2013
Actual
DCR 2012
Actual
DCR
2010 Actual
Reserve Balance -
4/30/2015
Operating Reserve
Balance 4/30/2015
Cash budgeted into
CHH budgetComments
Blended HUD 18th Ave 9 39,135 38,206 2% 19,028 21,130 10% 2,114 0.1% 0.1% 0.1% 0.0% 6,924 100% 100% Y 1.14 1.02 1.03 $89,286 $865
Blended 410 Apts 6 17,907 17,334 3% 11,159 12,356 10% 1,860 0.0% 0.0% 0.0% 0.0% 3,386 100% 100% Y 2.49 3.03 1.23 $69,960 $30,662
Blended HUD 412 Apts 12 52,619 58,594 -10% 43,626 48,849 11% 3,635 12.8% 13.0% 12.8% 8.8% 5,381 92% 87% Y 167 2.30 2.38 0.89 $87,080 $0
Blended Berneva 12 35,197 34,247 3% 23,429 29,458 20% 1,952 0.3% 1.6% 0.3% 2.7% 7,433 100% 99% Y Y 65 2.18 1.22 0.69 $8,757 $5,427
Blended Boylston Howell 30 96,459 97,746 -1% 74,175 75,169 1% 2,473 3.3% 2.9% 3.3% 1.0% (40,119) 100% 97% Y Y 42 1.09 1.08 1.26 $54,117 $14,595 One time debt service payment
Blended Bremer 49 137,451 134,359 2% 83,993 86,877 3% 1,714 2.1% 1.6% 2.1% 1.6% 16,124 99% 99% Y Y 54 1.25 1.46 0.92 $103,491 $31,990 $15,000
Blended Brewster 35 94,290 93,292 1% 57,933 57,023 -2% 1,655 4.2% 3.7% 4.2% 3.4% 27,329 100% 96% Y Y 71 3.20 1.64 1.37 $492,089 $30,411 $15,000
Blended Broadway 5 19,454 19,572 -1% 12,562 12,702 1% 2,512 0.0% 12.0% 0.0% 9.1% 2,183 100% 88% Y 1.76 2.78 1.58 $17,120 $3,552
Blended Burke Gilman Gardens 15 54,042 58,126 -7% 49,110 45,818 -7% 3,274 9.8% 5.1% 9.8% 3.2% (20,815) 96% 95% Y Y 94 0.88 1.89 1.42 $102,353 $26,551 One time debt service payment
Blended Byron Wetmore 12 39,892 41,733 -4% 34,884 38,147 9% 2,907 8.5% 4.6% 8.5% 4.4% (2,892) 92% 97% Y 85 1.35 2.97 4.12 $38,787 $5,649
Blended Casa di Cinque 5 21,703 21,166 3% 10,847 16,519 34% 2,169 0.0% 0.0% 0.0% 0.0% 8,633 100% 100% Y *** $21,823 $11,842 $5,000
Blended Centennial 30 103,522 98,103 6% 48,626 56,531 14% 1,621 0.9% 1.4% 0.9% 3.1% 10,625 100% 99% Y Y 1.12 1.13 0.99 $26,644 $16,637
Blended Devonshire 62 182,551 178,243 2% 139,805 128,471 -9% 2,255 1.3% 2.5% 1.3% 2.9% (831) 98% 98% Y Y 67 4.56 7.14 $334,445 $9,934 $35,000
Blended HUD Elizabeth James 60 197,086 192,027 3% 124,671 134,519 7% 2,078 1.4% 4.2% 1.4% 6.1% 9,482 100% 95% Y 116 1.51 1.67 1.41 $90,109 $0
Blended Fleming 36 98,551 97,992 1% 65,795 65,667 0% 1,828 5.2% 8.6% 5.2% 7.7% (1,305) 92% 98% Y Y 79 1.06 1.01 0.67 $32,462 $7,801
Blended Fredonia 12 92,636 87,900 5% 64,948 53,723 -21% 5,412 3.9% NA 3.9% 0.8% 2,202 92% 98% Y Y 61 1.54 1.60 1.28 $60,353 $70,608 $30,000
Blended Gale Place 24 92,650 90,188 3% 80,547 75,302 -7% 3,356 5.1% 3.3% 5.1% 2.4% (1,552) 96% 97% Y 90 1.97 1.51 1.46 $23,293 $41,934
Blended Gilman Court 25 96,434 93,176 3% 92,191 70,659 -30% 3,688 1.6% 1.1% 1.6% 0.9% (9,959) 100% 99% Y Y 28 1.75 1.55 1.22 $55,475 $4,418 $4000 reserves in transit
Blended HUD Hazel Plaza 16 67,988 71,256 -5% 45,776 37,360 -23% 2,861 6.7% 7.5% 6.7% 7.7% 4,339 95% 94% Y 174 ** 1.04 $63,698 $0
Blended HUD Holden Vista 16 50,373 55,572 -9% 54,419 47,220 -15% 3,401 13.2% 6.6% 13.2% 5.7% (22,361) Y 0.51 1.20 3.57 $65,426 $0 3rd party management
Blended John Carney 27 68,929 68,860 0% 58,961 49,815 -18% 2,184 3.9% 5.3% 3.9% 4.9% (4,220) 100% 96% Y Y 94 1.35 2.07 1.48 $41,997 $36,008 $5,000
Blended Larned 33 80,063 82,678 -3% 77,727 75,687 -3% 2,355 4.3% 4.2% 4.3% 3.7% (147) 100% 94% Y Y 67 ** $32,204 $17,444
Blended Lincoln Court 29 87,732 88,719 -1% 63,418 51,865 -22% 2,187 2.1% 3.6% 2.1% 3.4% (12,462) 100% 96% Y Y 56 1.09 1.09 0.89 $1,208 $242 Roof expenses not reserved
Blended HUD Mary Ruth Manor 20 81,655 79,547 3% 57,465 58,481 2% 2,873 5.5% 5.9% 5.5% 4.9% 4,627 100% 95% Y 27 2.11 1.37 0.96 $140,213 $0
Blended Maxwell 4 14,118 13,716 3% 10,291 11,026 7% 2,573 0.0% 0.0% 0.0% 0.0% 1,799 100% 100% Y 2.51 2.41 1.23 $14,371 $13,001
Blended Melrose 30 73,957 77,040 -4% 64,461 63,621 -1% 2,149 9.9% 6.1% 9.9% 4.8% (3,316) 92% 94% Y Y 71 1.73 1.58 1.20 $69,013 $27,744
Blended Miller Park 12 45,156 46,115 -2% 39,841 34,341 -16% 3,320 5.0% 9.1% 5.0% 8.5% (5,635) 100% 92% Y Y 38 1.16 1.39 1.19 $173,990 $29,685
Blended Park Hill 30 120,716 120,627 0% 87,470 86,331 -1% 2,916 3.1% 2.0% 3.1% 2.1% 11,861 98% 99% Y 81 1.76 1.44 1.55 $62,949 $65,624 $25,000
Blended HUD Ponderosa 23 67,278 65,387 3% 68,808 60,345 -14% 2,992 2.2% 4.2% 2.2% 5.7% 11,627 96% 96% Y 61 *** $253,687 $0
Blended Seneca 32 107,862 105,618 2% 74,904 79,603 6% 2,341 0.0% 2.5% 0.0% 2.6% 11,685 100% 97% Y Y 2.82 2.84 1.42 $244,587 $5,609
Blended Villa 62 240,031 226,475 6% 150,773 137,160 -10% 2,432 4.5% 4.3% 4.5% 3.4% 14,135 100% 95% Y Y 111 1.24 1.22 1.27 $122,922 $11,553
2,577,438 2,553,614 1,891,643 1,821,773 34,161
Discrete 12AA 88 320,081 321,005 0% 156,439 168,808 7% 1,778 0.5% 4.7% 0.5% 3.6% 145,816 100% 32 $69,664 $435,366
Discrete Broadway Crossing 44 143,006 139,881 2% 117,598 108,472 -8% 2,673 1.1% 3.8% 1.1% 4.8% (1,179) 98% 94% Y Y 1 1.37 1.64 1.27 $151,799 $102,839
Discrete HUD El Nor 55 186,940 184,450 1% 131,410 138,064 5% 2,389 0.7% 2.3% 0.7% 2.6% 13,196 100% 98% Y 93 1.69 1.30 1.63 $509,295 $182,390
Discrete Fremont Solstice 18 63,795 67,283 -5% 58,617 47,789 -23% 3,256 3.9% 7.0% 3.9% 7.4% (15,235) 100% 94% Y Y 136 1.32 1.34 1.13 $55,215 $78,608 Audit fees and consulting
Discrete Haines (new) 30 97,056 96,585 0% 64,955 69,948 7% 2,165 2.2% 1.3% 2.2% 0.0% 30,180 100% 99% 82 $30,011
Discrete Harrison 19 111,060 108,950 2% 90,646 67,804 -34% 4,771 0.2% 2.6% 0.2% 2.9% (22,645) 100% 98% Y Y 82 1.10 1.03 0.75 $49,011 $72,688 Real estate taxes not budgeted for
Discrete HUD Helen V 38 136,595 134,987 1% 78,723 80,014 2% 2,072 0.0% 1.4% 0.0% 1.9% 15,013 100% 99% Y Y 1.41 1.39 0.75 $256,937 $107,357
Discrete Holiday 30 103,890 107,102 -3% 68,290 64,366 -6% 2,276 5.1% 6.1% 5.1% 6.2% (9,453) 87% 94% Y 103 1.00 0.94 Rehab yr $37,283 $128,080 $10,000 reserves in transit
Discrete Oleta 34 101,591 98,559 3% 60,627 62,221 3% 1,783 1.4% 7.4% 1.4% 8.2% 4,921 97% 92% Y Y 30 1.02 1.03 0.89 $137,079 $0
Discrete Pantages 49 162,307 165,789 -2% 181,773 117,723 -54% 3,710 3.5% 3.4% 3.5% 3.8% (57,867) 98% 99% Y Y 69 1.47 1.76 2.09 $490,125 $167,818 Repair and maintenance to reserve
Discrete HUD Silvian 32 118,771 120,002 -1% 106,847 81,172 -32% 3,339 3.7% 4.6% 3.7% 3.6% (28,903) 91% 89% Y 182 1.45 1.68 1.81 $286,604 $157,456 Partnership management fee
Discrete Squire Park Plaza 60 332,221 370,491 -10% 131,016 133,981 -2% 2,184 11.3% NA 11.3% 2.5% 106,940 91% 89% 79 $4,905
Discrete The Jefferson 40 162,982 161,760 1% 111,620 90,327 -24% 2,790 2.7% 1.7% 2.7% 1.0% (16,926) 95% 98% Y 47 1.02 part yr $53,486 $211,000 $12,000 reserves in transit
Discrete Unity Village 30 90,644 92,732 -2% 65,049 71,579 9% 2,168 2.9% 1.8% 2.9% 2.2% 21,224 Y ** N/A N/A 3rd party management
1340 2,130,938 2,169,576 1,423,609 1,302,268 185,082
M:\Admin\Board\PACKETS\2015 Packets\06 15\2e Property Management Dashboard 2015.xlsx
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MEMORANDUM
To: Capitol Hill Housing Board of Directors
From: Michael Seiwerath, Executive Director, Capitol Hill Housing Foundation
CC: Christopher Persons
Re: June 2015 Fundraising and Communications Update
GRANTS AND DONATIONS
CHHF received a $5,000 grant from Wells Fargo to support affordable housing. Recent grant submissions include a $10,000 request to Union Bank, and requests for support from Chase Bank (Real estate and community development), Room and Board (Resident services) Seattle Foundation (Arts District) the Seattle Department of Neighborhoods (EcoDistrict), and Transit Center (Shared Parking). A recent proposal to Enterprise Community Partners was declined.
AWARDS
12th Avenue Arts came in second place for the NDC Academy Awards, losing by a single vote. Board Chair Alice Quaintance and Senior Developer Katie Porter presented the project to a panel in Washington, DC.
12th Avenue Arts is a finalist for the ULI Global Awards for Excellence. This is a great honor – the project is one of 22 finalists from seven nations. ULI judges will be visiting the building this summer, and winners will be announced in San Francisco in October.
12th Avenue Arts is an “Urban” finalist for the Affordable Housing Finance Magazine’s Reader’s Choice Awards. The Pantages Apartments won this award in 2006.
12th Avenue unfortunately was not a finalist for the 2015 Charles L. Edson Tax Credit Excellence Award.
EVENTS
Top of the Town – May 20
Top of the Town proved to be another sold out dinner, and there was strong feedback in support of the event. The sunny weather meant the outdoor patio could be used, Denise Scott’s talk was relevant to the challenges of Seattle, and Doris Koo made a persuasive appeal.
Continuing to grow, the event grossed more than $128,000 versus a budget of $99,000, and surpassed the 2014 total of $102,000. Sponsorship played a key role, bringing in nearly $90,000. Net proceeds are up approximately 20% from 2014.
Central District: A Conversation on a Changing Community – May 21
For this year's forum, we partnered with Centerstone and the Central District Forum for Arts & Ideas, to host a community conversation on issues facing the rapidly changing neighborhood.
Following the recommendations of our partner organizations and other community leaders, we revised our approach to the event. Rather than a large public event, we facilitated a smaller, interactive conversation with more time for attendees to discuss issues. Attendees were community stakeholders were invited by the partnering organizations.
The conversation at the Langston Hughes Performing Arts Institute was a dynamic, engaging discussion about the challenges in the Central District. In the opening remarks, Andrea Caupain of Centerstone spoke about how the changes were disproportionately affecting people of color, Christopher Persons spoke about why CHH is partnering in the Central District, and Denise Scott of LISC spoke about successful relevant communities throughout the nation.
The second part of the program was small group conversations about four subjects: (1) Cultural & Community Preservation, (2) Engaging Young People of Color, (3) Affordable Housing Development, (4) Small Business and Neighborhood Economic Development. This format offered ample time for participants to discuss these themes, and voice opinions. The program ended with a call from Denise Scott for more partnerships to keep the Central District affordable and culturally vibrant.
Video from the event is here: http://www.seattlechannel.org/videos?videoid=x55256
COMMUNICATIONS & EXTERNAL RELATIONS
Capitol Hill TOD Our protest to Sound Transit regarding the affordable housing site at the future Capitol Hill light rail station continued to receive media mentions on the Capitol Hill Seattle blog and Capitol Hill Times. We have appealed Sound Transit’s initial denial of our protest and members of the media have been informed.
Sustainability The Holiday community solar program was covered by Next City and featured in a report by A Renewable America. Joel Sisolak’s latest guest post on the CHS blog talks about community resilience.
Additional media coverage has included a Seattle Weekly story on homelessness that features CHH staff member Kirk McClain and a DJC announcement of 12th Avenue Arts’ AGC Build Washington award for construction excellence.
CAPITAL CAMPAIGN
12th Avenue Arts Capital Campaign
Overall GOAL : $4.6 M
Goal Pledged
TOTAL $4,600,000 $4,737,205
Capitol Hill Housing Foundation 2015 Budget As of June 2, 2015
Unrestricted Budget
Income Source 2015 Goal 2015 Actual % to Goal
Government $ 20,000 $ - NA
Foundation $ 219,917 $ 189,786 86.3%
Corporate $ 89,250 $ 17,648 19.8%
Individual $ 118,000 $ 69,813 59.2%
Events & Sponsorships $ 143,500 $ 87,500 61.0%
TOTAL $ 590,667 $ 364,747 61.8%
Restricted Budget
Income Source 2015 Goal 2015 Actual % to Goal
Government $ - $ -
Foundation $ 100,000 $ 100,000 100.0%
Corporate $ 0 $ - 0.0%
Individual $ 25,000 $ - 0.0%
Events & Sponsorships $ 0 $ - 0.0%
TOTAL $ 125,000 $ 100,000 80.0%
Combined Budgets
(Restricted & Unrestricted)
Income Source 2015 Goal 2015 Actual % to Goal
Government $ 20,000 $ - 0.0%
Foundation $ 319,917 $ 284,786 89.0%
Corporate $ 89,250 $ 12,648 14.2%
Individual $ 143,000 $ 69,813 48.8%
Events & Sponsorships $ 143,500 $ 87,500 61.0%
TOTAL $ 715,667 $ 454,747 63.5%
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REAL ESTATE DEVELOPMENT BOARD REPORT
Property Development Committee (PDC) Members: Paul Breckenridge, Alice Quaintance, Liz Dunn, Matt
Roewe, Dana Behar, Rachel Ben-Shmuel, Bob Fikso, Andrew Brand; Staff: Greg Elkerton, Katie Porter
The Property Development Committee met on Tuesday, June 2nd at 5:30pm. PDC members in attendance
were Paul, Alice, Bob, and Andrew; CHH staff members in attendance were Greg and Katie.
June 2015
CURRENT PROJECTS
1. 12th Avenue Arts (88 units/arts/commercial/office):
Staff is tracking the TI build out for the retail tenants and the close-out of public financing.
2. Haines
Construction is complete. The building is in the three month stabilization period and will then convert
to permanent financing.
3. Union & 24th (Liberty Bank Building):
The site has been acquired. Our environmental consultant is working to start the environmental
remediation process, which will include the demolition of the existing building and additional site
characterization. Staff is working on initial programming and financing plans in anticipation of a public
funding application in September. The PDC reviewed the project’s predevelopment spending.
POTENTIAL PROJECTS
4. Sound Transit - Transit Oriented Development (TOD):
CHH is in discussions with Gerding Edlen, who must have a non-profit partner for the B-North site
acceptable to Sound Transit by late June. CHH also filed an appeal to Sound Transit’s denial of our
formal protest to not award the B-North site to a non-profit developer, as stipulated in the
Development Agreement with the City of Seattle.
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SUSTAINABILITY and PLANNING
MONTHLY REPORT TO
CAPITOL HILL HOUSING PDA BOARD
June 8, 2015
Staff: Joel Sisolak, Sustainability Director, Alex Brennan, Senior Planner, Arielle Lawson, Outreach
Coordinator
EcoDistrict Steering Committee: Neelima Shah (co-chair)*, Mike Mariano (co-chair)*, Matthew Combe*,
Julie West, Cathy Hillenbrand*, Alicia Uhlig, Charles Bowers, Clayton Smith, Erik Rundell, Erika Melroy,
Heather Burpee, Ian Siadak, Janet Shull, Joe David, Julie West, Lauren Rochholz, Leon Garnett, Liz Dunn,
Michelle Caulfield, Michelle Hippler, Chasten Fulbright, Whitney Fraser.
*Executive Committee member
PROGRAM DEVELOPMENT
Grants We have pending requests with the Department of Ecology (Public Participation Grant), the Bullitt Foundation, Department of Neighborhoods NMF, King County Metro and TransitCenter.
Sponsorship We continue to reach out to businesses to request sponsorship.
Staffing We are in the midst of a hiring process to bring on a new FTE Sustainability Manager. The Sustainability Manager will join Joel Sisolak and Alex Brennan on the Sustainability and Planning team. Arielle Lawson will be completing her 1-year commitment via the Lutheran Volunteer Corps on July 22. We currently have 2 interns working on EcoDistrict projects.
ECODISTRICT PROJECTS
Community Solar The project is FULLY SUBSCRIBED! There will be a celebration at Cal Anderson Park July 12 being organized by City Light. We are in the process of awarding a contract to a consultant for analyzing the feasibility of expanding the community solar program onto other buildings.
District Shared Parking The report from our district shared parking research is complete and posted to the EcoDistrict website projects’ page. We are working on fundraising and internal conversations to prepare for implementing the report’s recommendations.
Dumpster Removal We have partnered with the Capitol Hill Chamber to explore waste management alternatives to the current illegal placement of waste and recycling dumpsters on streets and sidewalks within the EcoDistrict. We have begun to document the problem and work with the Chamber, SPU, Recology Cleanscapes and local retailers on developing a recommendation.
Pedestrian Streets About 50 community members attended the Community Council meeting on this topic on May 28th. The project received press in the Capitol Hill Seattle Blog, the Stranger, and Seattle Transit Blog. The community engagement phase of the project is coming to a close and the planning phase for the pilots is starting. Urban Design Framework We have been in ongoing conversation with the Department of Planning and Development about a neighborhood planning process that would ramp up in 2015 and more publicly launch in early 2016. DPD is enthusiastic about the effort and the opportunity to build on work that EcoDistrict stakeholders have been doing for the past couple of years. It is unclear that DPD will have funding to appropriately staff this planning effort. Land Use Review Committee The Land Use and Development Working Group is interested in launching a LURC to serve parts of the EcoDistrict likely to see an uptick in development pressures in the coming few years. In April, this concept (as well as the UDF) were presented to the Capitol Hill Housing PDA Board and met with enthusiasm.
ECODISTRICT LEADERSHIP
Capitol Hill EcoDistrict Steering Committee The Steering Committee will meet July 10th. The Equity and Engagement Working Group will lead a discussion about bringing greater diversity to our work and applying an “equity lens” to our project prioritization processes.
Waste and Behavior Working Group The Waste and Behavior WG is focused on developing a resident engagement program, which will operate as a partnership between Capitol Hill Housing and Recology Cleanscapes. This pilot project is contingent on funding. We have a request pending with the WA State Dept of Ecology and expect to learn if that funding will be included in the Governor’s budget.
Equity and Engagement Working Group This working group also is tasked with developing an “equity lens” for prioritizing all future EcoDistrict initiatives. The WG will be “hosting” the EcoDistrict Steering Committee meeting in July 2015.
Land Use and Development Working Group This WG reviewed zoning topics that could be part of a future planning process. Future meetings will discuss building performance, right of way, and fee/incentive opportunities. EcoDistrict and DPD staff will work on 2016 project scoping.
COMMUNICATIONS & ENGAGEMENT
Website As requested, Resource Media has provided constructive criticism of the EcoDistrict website. Joel is working with the CHH Foundation team to make updates. Capitol Hill Community Council The Community Council hosted the EcoDistrict to discuss our Pike Pine Pedestrian Street project on May 28th.
OTHER COMMUNITY DEVELOPMENT WORK
South 12th Research and community engagement for this project are ongoing.
GREENING CHH
Resource Conservation We are reviewing multiple systems for monitoring the energy and water use across the CHH portfolio, and included a request for funding WegoWise (https://www.wegowise.com/) in our most recent funding proposal to Enterprise Community Partners. That proposal was declined. Green Building The City of Seattle received an in-kind grant from the US Department of Energy to do a deep audit of one of CHH’s properties to determine the potential for energy retrofits “well beyond the usual ‘low-hanging fruit,’ towards the bigger picture of what we can do now to ensure that the building can be operated efficiently and economically 20 or 30 years down the road.” The audit of the Boyleston Howell was completed on
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CAPITOL HILL HOUSING IMPROVEMENT PROGRAM
Financial Statements and Single Audit Reports
For the Years Ended December 31, 2014 and 2013
Table of Contents
Page Independent Auditor’s Report 1 ‐ 2 Management Discussion and Analysis 3 ‐ 8 Financial Statements: Balance Sheets 9 ‐ 10 Statements of Revenues, Expenses and Changes in Net Position 11 Statements of Cash Flows 12 ‐ 13 Notes to Financial Statements 14 ‐ 34 Supplementary Information: Schedule of Departmental Operations 35 Schedule of Property Operations 36 ‐ 38 Schedule of Expenditures of Federal Awards and Related Notes 39 ‐ 40 Single Audit Reports: Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 41 ‐ 42 Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance 43 ‐ 44 Schedule of Findings and Questioned Costs 45 ‐ 46 Schedule of Prior Audit Findings 47
T: 425-454-4919
T: 800-504-8747
F: 425-454-4620
10900 NE 4th St
Suite 1700
Bellevue WA
98004
clarknuber.com
Independent Auditor’s Report Board of Directors Capitol Hill Housing Improvement Program Seattle, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the business‐type activities and the aggregate discretely presented component units of Capitol Hill Housing Improvement Program (CHHIP), as of and for the years ended December 31, 2014 and 2013, and the related notes to the financial statements, which collectively comprise CHHIP’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business‐type activities and the aggregate discretely presented component units of CHHIP, as of December 31, 2014 and 2013, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America.
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Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 8 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise CHHIP’s basic financial statements. The schedules of departmental operations and property operations are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by OMB Circular A‐133 and is not a required part of the financial statements. The schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules of department operations and property operations are fairly stated, in all material respects, in relation to the basic financial statements as a whole. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 19, 2015 on our consideration of CHHIP’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering CHHIP’s internal control over financial reporting and compliance.
Certified Public Accountants May 19, 2015
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2014
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As management of Capitol Hill Housing Improvement Program (“CHHIP”), we offer readers of the CHHIP financial statements this narrative overview and analysis of the financial activities of CHHIP for the year ended December 31, 2014. Financial Highlights
- Assets exceeded liabilities (net position) at the close of 2014 by over $19 million. - Unrestricted cash and cash equivalents at December 31 totaled $2,447,564. - CHHIP properties continue to operate with extremely low vacancy rates with the portfolio averaging 3.7 percent in 2014.
- During 2014 CHHIP, as the developer, completed the 12th Avenue Arts project, a $47 million development combining affordable housing, performing arts space, community space, retail, and parking. Construction of 12th Avenue Arts was completed during the fall of 2014. The residential condo unit consisting of 88 units of affordable housing was placed in service in September and all units were leased by October 31. The commercial and garage condo units were placed in service in October. CHHIP moved its main office to the second floor of the building in October. All of the commercial spaces were under lease at December 31, 2014. The garage condo unit which provides secure below grade parking for the Seattle Police Department was occupied in November.
- The Tiltsonian was sold December 2014 for $961,000 which resulted in a gain on sale of $619,798. CHHIP provided relocation assistance to affected tenants and successfully relocated 4 of the 5 households in CHHIP units at other locations.
- During 2014 the investor limited partner transferred its limited partnership interest in Fleming Apartments Limited Partnership to CH Development Association a blended component unit of CHHIP.
- Haines Acquisition LLC, which was wholly owned by CHHIP, sold the Haines Apartments to Affordable Apartments Associates LLC on September 30, 2014. CHHIP is the managing member of Affordable Apartments Associates LLC and Raymond James Tax Credit Funds, Inc. is the investor member. Affordable Apartments Associates LLC was formed to facilitate the rehabilitation of the 30 unit apartment building using the low income housing tax credit. Rehabilitation work began immediately upon closing and was completed in April, 2015.
Overview of the Financial Statements CHHIP’s financial statements consist of three parts ‐ management’s discussion and analysis (this section), financial statements prepared in accordance with Governmental Accounting Standards Board (GASB), and supplemental schedules. CHHIP financial statements provide information about CHHIP’s overall financial position and results of operations. The financial statements report information about CHHIP as a whole using accounting methods similar to those used by private sector companies. These statements, which are presented on the accrual basis, consist of the Balance Sheet, Statement of Revenues, Expenses and Changes in Net Position, and the Statement of Cash Flows. The Balance Sheet includes all of CHHIP’s assets and liabilities. All of the current year’s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Position regardless of when cash is received or paid.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2014
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Overview of the Financial Statements (Continued) The financial statements include the activities of CHHIP and 15 related entities that are required to be combined with CHHIP. These entities are three nonprofits, Elizabeth James Senior Housing, Central City Affordable Housing and CH Development Association and twelve limited partnerships and limited liability companies, Larned Apartments Limited Partnership, Byron/Wetmore Limited Partnership, Ponderosa at Madison LLC, SOPI Village Manager LLC, Villa Apartments Limited Partnership, Gilman Court Limited Partnership, 1214 Boylston Avenue Limited Partnership, Fleming Apartments Limited Partnership, Holiday Affordable LLC, Haines Acquisition LLC, Twelfth Avenue Arts Master Tenant LLC, Twelfth Avenue Arts Development LLC, and CH Real Estate Management Services LLC. Although legally separate, the nonprofits were formed to meet the mission of CHHIP. Since CHHIP board members comprise all or a majority of the nonprofit boards' members, they are considered instrumentalities of CHHIP and are included in CHHIP's financial statements. CHHIP is the general partner and CH Development Association has replaced the investor limited partners in the six limited partnerships. CHHIP is the sole member of Ponderosa at Madison LLC, Haines Acquisition LLC, and Holiday Affordable LLC and has a majority interest in SOPI Village Manager LLC. CH Development Association is the sole member of Twelfth Avenue Arts Development LLC which is, in turn, the sole member of Twelfth Avenue Arts Master Tenant LLC. During 2014, CHHIP formed CH Real Estate Management Services LLC to provide property management services to third parties in select situations. CHHP is the sole member of the LLC. The financial statements also include as "Discrete Component Units" 13 legally separate tax credit partnerships and limited liability companies for which CHHIP is financially accountable as the sole general partner or managing member. Additionally, the Capitol Hill Housing Foundation is included as a discrete component unit as is 12th Avenue Arts Associates LLC and Twelfth Avenue Arts Association. Financial information for these affiliates is aggregated and reported in a separate column from the CHHIP financial information. Audited financial statements are available for all of the discrete component units and may be requested from CHHIP. The financial statements also include a “Notes to Financial Statements” section that provides additional information that is essential to a full understanding of the data provided in the financial statements. The supplemental schedules provide a breakdown of CHHIP property operations at the building level. The following changes should be considered in reviewing these financial statements. Fleming Apartments Limited Partnership, a Washington limited partnership, was not included in the CHHIP financial statements for 2013, but it is included in the 2014 due to the exit of the investor limited partner.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2014
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Overview of the CHHIP Blended Entity Financial Position and Operations
December 31, 2014 2013 2012Assets: Current assets 6,289,881$ 4,487,700$ 3,538,576$ Noncurrent assets‐ Capital assets, net 41,990,400 43,495,197 43,866,202 Other 20,817,657 21,936,505 21,906,827
Total Assets 69,097,938$ 69,919,402$ 69,311,605$
Liabilities:Current liabilities 5,203,120$ 2,011,560$ 2,596,346$ Noncurrent liabilities 44,890,854 50,498,341 51,373,708
Total Liabilities 50,093,974$ 52,509,901$ 53,970,054$
Net Position: Invested in capital assets, net of related debt 1,200,111$ 374,752$ 450,879$ Restricted 4,075,715 3,761,651 3,715,724 Unrestricted 13,728,138 13,273,098 11,174,948
Total Net Position 19,003,964$ 17,409,501$ 15,341,551$
The financial assets of CHHIP consist primarily of capital assets, its land, buildings and building improvements. This is consistent with CHHIP’s mission to build vibrant and engaged communities through affordable housing and community development efforts in Seattle. Capital assets are shown net of depreciation. Other assets include cash reserves for repairs and replacements and debt service as required by our lenders. The liabilities are predominantly long‐term debt that has been used to purchase, develop and rehabilitate our apartment buildings. Many of these loans, provided by governmental entities, have below market interest rates and do not require annual debt service. See Note 5 for a more complete discussion. The difference between total assets and total liabilities, net position is one indicator of financial health. Net position increased by $1,594,463 in 2014 and $2,067,950 in 2013. For 2014 $2,002,867 was due to positive operating results and $(408,404) was due to the change in component units which occurred when CH Development Association acquired the limited partner’ interest in Fleming Apartment Limited Partnership and is net of a related reduction in allowance for affiliates due to general partner. For 2013 $1,184,352 was due to the change in component units which occurred when CH Development Association acquired the limited partners’ interests in 1214 Boylston Avenue LP. The balance resulted from positive operating results and capital grants passed through for the 12th Avenue Arts project.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2014
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Overview of the CHHIP Blended Entity Financial Position and Operations (Continued) The results of operations for CHHIP are presented below:
For the Year Ended December 31, 2014 2013 2012
Operating revenues‐Tenant revenues 7,915,513$ 7,374,941$ 6,678,970$ Fees for services 782,468 788,004 603,526 Project development fees 2,279,306 1,099,245 2,337,260 Other 36,224 78,721 216,560
Nonoperating revenues‐Contributions and grants 1,047,051 1,759,991 894,125 Interest income 241,599 253,765 119,174 Net gain on 12th Avenue Arts transactions 6,504,036 (Loss) gain on sale of assets 856,903 (61,628) 575,277
Total Revenues 13,159,064 11,293,039 17,928,928
Operating expenses‐Salaries, benefits, and payroll taxes 3,902,638 3,688,293 3,281,278 Operating and maintenance 1,294,781 1,357,785 1,054,445 Other operating expenses 2,606,333 2,367,014 1,865,915 Depreciation and amortization 1,907,280 1,815,409 1,630,407
Nonoperating expenses‐Grant to the component unit 300,000 Interest expense 1,145,165 1,180,940 970,222
Total Expenses 11,156,197 10,409,441 8,802,267
Change in Net Position 2,002,867$ 883,598$ 9,126,661$
Results of Operations ‐ Operating revenues are generated principally from rental income as well as property management and other fees paid by the discrete component units. Tenant revenues increased 7 percent in 2014, 9 percent in 2013 and 6 percent in 2012. We are limited in how much we can increase tenant revenues as our rents are regulated. Vacancy loss for 2014 was 3.7 percent, which is the fourth year our annual vacancy loss has been below 4 percent. Vacancy loss for 2013 was 3.2 percent and for 2012 was 3.3 percent. We continue to work to turn and lease units faster. CHHIP earns development fees for its management role in the development of new properties. During 2014 CHHIP earned development fees for both commercial and housing components of the 12th Avenue Arts project and the redevelopment of Haines representing 18 percent of total operating revenues. During 2013 CHHIP earned development fees for both the commercial and housing components of the 12th Avenue Arts project representing 12 percent of total operating revenues. During 2012 CHHIP earned development fees for two projects, The Jefferson and 12th Avenue Arts representing 24 percent of total operating revenues. The 2012 fees earned on the 12th Avenue Arts commercial component were reinvested in the project.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2014
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Overview of the CHHIP Blended Entity Financial Position and Operations (Continued) Salaries, benefits and payroll tax expense increased 6 percent in 2014 which was driven by an 18 percent increase employee benefits. Salaries, benefits and payroll tax expense increased in 2013 by 9 percent which included increased staffing in property development, information technology, leasing and the addition of a full time manager for our EcoDistrict work. We continued to see large increases in our health insurance premiums annually. The 2012 increase of 8 percent was driven by an 18 percent increase in health insurance premiums and adding staff positions in resident services and property management. Operating and maintenance expense decreased by 5 percent in 2014, compared to 8 percent and 7 percent increases in 2013 and 2012, respectively. Some variability is to be expected as building components wear out, long term time tenants move out and our portfolio ages. As we grow our portfolio in numbers in units we expect to experience an increase in operating and maintenance costs. We continue to be proactive in maintaining our buildings. Interest expense, primarily from the long‐term financing of the properties, continues to be a significant expense. Typically each property acquired has both amortizing and nonamortizing debt from commercial and governmental sources, respectively. A portion of the interest expense, under the terms of the financing, is deferred and will eventually be forgiven as long as the properties are managed in compliance with the loan agreements. In 2014, contributions and grants include $473,000 from Capitol Hill Housing Foundation for the 12th Avenue Arts project. In 2013 grants totaling $1,187,233 were received from the Capitol Hill Housing Foundation for the 12th Avenue Arts project. These grants increase revenues without an offsetting expense. Excluding these capital grants, contributions and grants in 2014 totaled $574,051 compared to $572,757 in 2013 and $406,096 in 2012. Contributions and grants in 2012 include a grant of $442,582 from the Capitol Hill Housing Foundation for the 12th Avenue Arts project and energy efficiency funds for Hazel Plaza in the amount of $45,447. Over all 3 years we continued to receive grants from the City of Seattle Office of Economic Development and Impact Capital in support of our economic development work on 12th Avenue and Broadway. We began a new initiative around creating an EcoDistrict on Capitol Hill in 2011 which has received increased grant funding each year. Supplemental Schedule ‐ The supplemental Schedule of Departmental Operations provides additional insight into the financial operations of CHHIP. CHHIP budgets and manages financial performance based on its lines of business including its buildings (Property Operations) and organizational and off site activities (Administration and Management). Property Operations, which includes all building‐based revenues and expenses, shows revenues exceeded expenditures plus debt service and scheduled reserve deposits by $313,793. In addition to the operating expenditures, we spent an additional $67,012 on repair and maintenance funded from our building reserves.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2014
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Overview of the CHHIP Blended Entity Financial Position and Operations (Continued) Economic Factors Affecting CHHIP’s Future Significant economic factors affecting CHHIP are as follows:
- CHHIP faces risk from political and governmental decisions beyond its control such as changes to the federal and local rental subsidy programs or changes in priorities for capital subsidies to develop new properties.
- CHHIP operates and develops affordable housing in and adjacent to Seattle and is subject to the ups and downs of the local real estate market conditions.
- Availability of credit and tax credit equity partners affects our ability to develop new projects and recapitalize existing projects.
- CHHIP faces increased competition for scarce resources such as state and local funds and corporate and foundation donations.
- Local employment trends affect resident incomes and therefore the demand for housing and the rental rates CHHIP can realize.
- Inflation may cause overall operating expenses to increase faster than it is desirable or allowable to raise rents for existing unit occupants which may generate higher turnover or vacancy. Certain operating expenses such as insurance or utilities may increase due to external events outside of the control of CHHIP.
Contacting CHHIP’s Financial Management The financial report is designed to provide a general overview of CHHIP’s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to Chief Executive Officer, Capitol Hill Housing Improvement Program, 1620 12th Avenue, Suite 205, Seattle, WA 98122.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Balance Sheets ‐ Assets December 31, 2014 and 2013
See accompanying notes. ‐ 9 ‐
Discrete Discrete
Component Component
CHHIP Units CHHIP Units
Current Assets:Cash and cash equivalents 2,447,564$ 1,535,297$ 2,177,078$ 981,222$ Accounts receivable, net 3,650,598 492,442 2,091,974 20,704 Current portion of pledges receivable, net 836,227 1,121,055
Prepaid expenses and other current assets 150,729 187,531 141,946 227,161
Current portion of notes and interest receivable 40,990 40,990
Current portion of leases receivable ‐ 35,712 ‐
Total Current Assets 6,289,881 3,051,497 4,487,700 2,350,142
Restricted cash and cash equivalents 4,075,715 4,749,643 3,761,651 10,259,417 Prepaid ground lease ‐ 11,104,718 Leases receivable, net of current portion 165,924 ‐ 915,763 ‐ Notes and interest receivable 15,707,687 ‐ 16,770,106 ‐ Land, buildings and equipment, net 41,990,400 103,142,783 43,495,197 82,749,445 Investment in limited partnerships and LLCs 660,566 ‐ 316,764 ‐
Long‐term prepaid expense ‐ 141,605 Unamortized financing costs 207,765 2,510,758 172,221 2,518,317
Total Assets 69,097,938$ 113,454,681$ 69,919,402$ 109,123,644$
2014 2013
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Balance Sheets ‐ Liabilities and Net Position December 31, 2014 and 2013
See accompanying notes. ‐ 10 ‐
Discrete Discrete
Component Component
CHHIP Units CHHIP Units
Current Liabilities:Accounts payable and accrued liabilities 1,194,965$ 6,345,098$ 739,966$ 5,291,326$
Deferred income 89,003 35,933 69,717 47,643 Current portion of accrued
interest payable 170,414 148,721 118,391 120,797
Current portion of notes payable 3,748,738 14,604,208 1,083,486 294,136
Total Current Liabilities 5,203,120 21,133,960 2,011,560 5,753,902
Security deposits 414,571 284,678 391,751 213,517 Ground lease obligation ‐ 11,104,718 Long‐term deferred income 743,645 756,198
Notes payable, net of current portion 40,134,618 76,199,434 45,738,738 75,310,400 Accrued interest payable 3,598,020 1,863,469 3,611,654 1,588,090
Total Liabilities 50,093,974 99,481,541 52,509,901 93,970,627
Net Position:Restricted for building improvements 3,071,018 2,047,174 2,854,277 3,131,425 Restricted for other purposes 1,004,697 2,702,469 907,374 1,750,002
Total restricted 4,075,715 4,749,643 3,761,651 4,881,427
Invested in capital assets, net of related debt 1,200,111 12,339,141 374,752 14,102,030
Unrestricted 13,728,138 (3,115,644) 13,273,098 (3,830,440)
Total Net Position 19,003,964 13,973,140 17,409,501 15,153,017
Total Liabilities and Net Position 69,097,938$ 113,454,681$ 69,919,402$ 109,123,644$
2014 2013
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Statements of Revenues, Expenses and Changes in Net Position For the Years Ended December 31, 2014 and 2013
See accompanying notes. ‐ 11 ‐
Discrete Discrete
Component Component
CHHIP Units CHHIP Units
Operating Revenues:Gross rent potential 8,059,897$ 4,449,943$ 7,434,713$ 4,227,842$ Vacancy loss (338,379) (172,092) (233,230) (118,894) Laundry, parking, and other tenant income 193,995 153,630 173,458 127,695
Fees for services 782,468 788,004 Project development and other fees 2,279,306 1,099,245 Other operating revenue 36,224 94,256 78,721 74,314
Total Operating Revenues 11,013,511 4,525,737 9,340,911 4,310,957
Operating Expenses:Salaries, benefits, and payroll taxes 3,902,638 598,814 3,688,293 711,911 Utilities 1,015,813 465,203 942,818 601,674
Professional fees 391,343 161,452 442,022 331,365 Administrative 376,827 1,007,128 520,646 510,941 Taxes and insurance 349,770 181,910 322,439 174,036 Operating and maintenance 1,294,781 745,721 1,357,785 669,893 Bad debt expense 34,334 11,490 22,639 19,552
Grants to CHHIP and affiliates 846,200 1,542,409 Other 438,246 117,066 116,450 228,347 Depreciation and amortization 1,907,280 2,470,770 1,815,409 2,215,868
Total Operating Expenses 9,711,032 6,605,754 9,228,501 7,005,996
Operating Income (Loss) 1,302,479 (2,080,017) 112,410 (2,695,039)
Nonoperating Revenues (Expenses):Contributions and grants 1,047,051 1,328,457 1,759,991 1,170,934 Grant to the component unit (300,000)In‐kind revenue 213,541 201,526 Interest income 241,599 2,763 253,765 2,725
Warranty settlement for equipment defect ‐ 65,459 Gain (loss) on disposition of property and equipment 856,903 ‐ (61,628) ‐
In‐kind expense (213,541) (201,526)
Interest expense (1,145,165) (1,242,706) (1,180,940) (1,294,485)
Total Nonoperating Revenues (Expenses) 700,388 88,514 771,188 (55,367)
Change in Net Position 2,002,867 (1,991,503) 883,598 (2,750,406)
Net Position:Beginning of year 17,409,501 15,153,017 15,341,551 15,368,572 Change in component units (408,404) 696,899 1,184,352 (1,184,352)
Syndication costs (62,500) Capital contributions 177,227 3,719,203
End of Year 19,003,964$ 13,973,140$ 17,409,501$ 15,153,017$
2014 2013
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Statements of Cash Flows For the Years Ended December 31, 2014 and 2013
See accompanying notes. ‐ 12 ‐
Discrete Discrete
Component Component
CHHIP Units CHHIP Units
Cash Flows From Operating Activities:Receipts from tenants and customers 8,501,157$ 4,120,252$ 8,313,291$ 4,312,121$ Receipts for developer fees 1,092,326 483,684 Payments to employees and for payroll taxes and benefits (3,822,705) (598,814) (3,669,813) (711,911)
Payments to suppliers (3,978,625) (1,384,407) (3,844,517) (2,092,420)
Net Cash Provided by Operating Activities 1,792,153 2,137,031 1,282,645 1,507,790
Cash Flows From Noncapital Financing Activities:Receipts from contributions and grants 1,114,978 1,613,285 1,665,141 1,141,337 Payment of grants (300,000)
Net Cash Provided by Noncapital Financing Activities 814,978 1,613,285 1,665,141 1,141,337
Cash Flows From Capital and Related Financing Activities:
Acquisition of land, building, and equipment (2,092,916) (24,787,054) (587,517) (14,326,790) Proceeds from sale of land, building, and equipment 4,269,964 Reimbursement of predevelopment costs 877,790 Proceeds from warranty settlement ‐ 65,459 Proceeds from notes payable 1,923,728 17,607,043 159,019 6,312,439 Net line of credit activity (48,687) 148,371 Principal payments on notes payable (5,227,056) (417,117) (2,497,777) (4,050,790) Interest paid on notes payable (1,054,099) (879,045) (984,369) (994,525) Net proceeds from lease receivable ‐ 31,557 Payment of financing costs (16,745) (222,044) (31,302) Payment of syndication costs (62,500) Capital contributions 177,227 3,719,203
Net Cash Used by Capital and Related Financing Activities (2,245,811) (8,583,490) (2,852,926) (9,306,306)
Cash Flows From Investing Activities:Net change in restricted cash and cash equivalents (168,650) 5,394,357 43,178 6,754,837 Cash transfer due to change in component units 9,871 (9,871) 21,471 (21,471) Investment in LLC (300,000) Advances of notes receivable (121,320) Receipts on repayment of notes receivable 7,922 43,718 Interest receipts 360,023 2,763 253,765 2,725
Net Cash (Used) Provided by Investing Activities (90,834) 5,387,249 240,812 6,736,091
Net Change in Cash and Cash Equivalents 270,486 554,075 335,672 78,912
Cash and cash equivalents, beginning of year 2,177,078 981,222 1,841,406 902,310
Cash and Cash Equivalents, End of Year 2,447,564$ 1,535,297$ 2,177,078$ 981,222$
2014 2013
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Statements of Cash Flows (Continued) For the Years Ended December 31, 2014 and 2013
See accompanying notes. ‐ 13 ‐
Discrete Discrete
Component Component
CHHIP Units CHHIP Units
Reconciliation of Operating Loss to NetCash Provided by Operating Activities:
Operating income (loss) 1,302,479$ (2,080,017)$ 112,410$ (2,695,039)$ Adjustments to reconcile operating income (loss)
to net cash provided by operating activities‐Depreciation and amortization 1,907,280 2,470,770 1,815,409 2,215,868 Partnership income (43,802) 170 Change in allowance for accounts receivable 288,495
Changes in assets and liabilities:Accounts receivables (1,617,542) (474,418) (552,579) 4,932 Prepaid expenses and other current assets (7,657) 38,504 (10,050) 28,424 Long‐term prepaid expense 141,605 14,160
Lease receivable (16,373) Accounts payable and accrued liabilities (24,255) 1,960,164 (113,826) 1,923,661 Security deposits and deferred income 3,528 80,423 31,111 15,784
Net Cash Provided by Operating Activities 1,792,153$ 2,137,031$ 1,282,645$ 1,507,790$
Schedule of Noncash Financing and Investing Activities:
Noncash balance sheet net adjustments
relating to change in component units, increase (decrease) to balance‐
Accounts receivables, net 2,680$ (2,680)$ 285$ (285)$ Prepaid expenses and other current assets 1,126$ (1,126)$ 21,375$ (21,375)$
Restricted cash and cash equivalents 115,414$ (115,414)$ 89,105$ (89,105)$ Land, buildings, and equipment, net 1,824,901$ (1,824,901)$ 1,710,205$ (1,710,205)$ Unamortized financing costs, net 34,386$ (34,386)$ 67,013$ (67,013)$ Accounts payable and accrued liabilities 452,803$ (452,803)$ 3,610$ (3,610)$
Security deposits 19,665$ (19,665)$ 16,040$ (16,040)$ Deferred income 1,307$ (1,307)$ 1,171$ (1,171)$ Notes payable 413,147$ (413,147)$ 704,281$ (704,281)$ Change in allowance for accounts receivable 288,495$ ‐$ ‐$ ‐$
2014 2013
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 14 ‐
Note 1 ‐ Nature of Operations and Summary of Significant Accounting Policies Organization ‐ Capitol Hill Housing Improvement Program (CHHIP) is a public corporation chartered in 1975 under Washington State and municipal law as a public development authority. CHHIP has broad powers to assist residents and property owners in preserving and improving housing and the neighborhood and to undertake activities in support of those goals. These financial statements include the accounts of CHHIP and CHHIP's blended component units. The blended component units include CH Development Association, Elizabeth James Senior Housing, Central City Affordable Housing and several wholly‐owned or majority‐owned limited partnerships and LLCs. CHHIP and its blended component units include 33 apartment projects and 773 units. Blended component units, although legally separate entities, are, in substance, part of CHHIP’s operations. During 2012, Twelfth Avenue Arts Development LLC (Twelfth Avenue Arts Development) was created to act as the leveraged lender in a New Markets Tax Credit project as further described in Note 2. CH Development Association is the sole member of Twelfth Avenue Arts Development and, therefore, Twelfth Avenue Arts Development is considered a blended component unit. In addition, Twelfth Avenue Arts Development is the sole member of the Twelfth Avenue Arts Master Tenant LLC (Master Tenant) and, therefore, the Master Tenant is considered a blended component unit. In August 2014, CH Real Estate management Services LLC, a manager‐managed limited liability Company was established to manage properties a for‐profit organization in which CHHIP is the sole member. Discrete Component Units ‐ CHHIP serves as the general partner or managing member in several limited partnerships and LLCs (see Note 6). These limited partnerships and LLCs have investor limited partners or members who own majority interests in the entities. As general partner or managing member, CHHIP is financially accountable for and oversees the day‐to‐day operation of these properties. Each limited partnership and LLC is audited separately. Copies of the separately audited financial statements may be obtained by contacting CHHIP. The limited partnerships and LLCs include 13 apartment projects and 507 units. The Capitol Hill Housing Foundation (the Foundation) is incorporated in the State of Washington as a nonprofit corporation. The Foundation has received a tax exempt determination letter from the Internal Revenue Service. The Foundation operates with the intent to act primarily as a fundraising organization to supplement the resources that are available to CHHIP in support of its mission. The Foundation Board is independent of the CHHIP Board. Although CHHIP does not control the timing or amount of receipts from the Foundation, it is anticipated that the majority of the funds raised will be directed to activities of CHHIP by either the Foundation or its donors. Because of these restrictions, the Foundation is considered a discrete component unit of CHHIP. During 2014, all remaining ownership interests in Fleming Apartments LP (Fleming) were transferred to CH Development Association. As such, Fleming changed from being reported as a discrete component unit in fiscal year 2013 to a blended component unit in fiscal year 2014. During 2013, all remaining ownership interests in 1214 Boylston Avenue LP (Seneca) were transferred to CH Development Association. As such, Seneca changed from being reported as a discrete component unit in fiscal year 2012 to a blended component unit as of and for the year ended December 31, 2013. During 2012, 12th Avenue Arts Associates LLC (12th Ave Arts Associates) was formed to construct and own the commercial and parking components of the 12th Avenue Arts project (Note 2) with construction being completed and the project placed into operation during 2014. 12th Ave Arts Associates sole member is the Twelfth Avenue Arts Association (the Association). The Association was formed in 2012 as a nonprofit corporation in the State of Washington. The Association was formed with the exclusive purpose of supporting the mission of CHHIP and has a separate self‐electing Board of Directors.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 15 ‐
Note 1 ‐ Continued Basis of Accounting ‐ The financial statements of CHHIP have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) applied to governmental units. These financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Contributions and grants are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. The Governmental Accounting Standards Board (GASB) is the accepted standard‐setting body for establishing governmental accounting and financial reporting principles. Cash and Cash Equivalents ‐ CHHIP considers all highly liquid temporary investments purchased with a maturity of three months or less at the acquisition date to be cash equivalents. CHHIP’s deposits and certificates of deposit are entirely covered by the federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool (the collateral pool) administered by the Washington Public Deposit Protection Commission. The FDIC insures the first $250,000 of CHHIP’s deposits at each financial institution with remaining balances insured by the collateral pool. As of December 31, 2014 and 2013, the carrying amount of CHHIP’s demand deposits was $3,230,242 and $3,092,392, respectively, and was not materially different from the bank balances. At December 31, 2014 and 2013, CHHIP had $3,288,925 and $2,846,337, respectively, in the Washington State’s Local Government Investment Pool (LGIP). The LGIP is operated in a manner consistent with Rule 2a‐7 money market funds, as recognized by the Securities and Exchange Commission. Rule 2a‐7 funds are limited to high quality obligations with limited maximum and average maturities in order to minimize both market and credit risk. The LGIP is audited annually by the Office of the State Auditor and by an outside independent auditor. Financial reports are available at the State Treasurer’s Office. The amounts invested in the pool represent the fair value equal to the value of the pool shares held by CHHIP. Certain cash balances are restricted for building improvements and other specific uses in accordance with debt and regulatory agreements and donor imposed restrictions. At December 31, 2014 and 2013, the restricted cash balances were held in deposits with the LGIP and other separate accounts as required by the agreements and donor imposed restrictions. CHHIP has a Board Designated Operating Reserve for the purpose of strengthening CHHIP’s liquidity and financial position. The intent is to make annual deposits from operating surplus. The Board Designated Operating Reserve is held in the LGIP. The balance at December 31, 2014 and 2013, of $1,186,145 and $816,483, respectively, is included in cash and cash equivalents. Accounts Receivable ‐ Accounts receivable consist primarily of rents due from tenants, grants due from grantors and amounts due from the limited partnerships and LLCs as described in Note 6. Annually, tenant receivables are analyzed and the allowance for doubtful accounts is adjusted. Other receivable allowances are established for uncertain collectibles. Notes Receivable and Notes Payable ‐ Many of the notes carry below market interest rates and/or contain provisions for deferral or forgiveness of interest or principal. Such notes and related interest amounts are recorded in the financial statements according to the terms of the notes. No adjustment to market rates has been made due to the compliance requirements that must be met for forgiveness or deferral to occur. Forgiveness of debt and related accrued interest for notes payable will be recorded as income in accordance with terms of the various loan agreements.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 16 ‐
Note 1 ‐ Continued Land, Buildings and Equipment ‐ CHHIP capitalizes assets with a cost greater than $1,000 and an estimated useful life of one or more years. Land, buildings and equipment are recorded at cost or estimated fair value at the date of donation. Depreciation of buildings and equipment is recorded on a straight‐line basis over their estimated useful lives of five to 40 years. CHHIP reviews land, building and equipment for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. No impairment losses were recognized in 2014 or 2013. Investment in Limited Partnerships and LLCs ‐ CHHIP is the sole general partner and owns a 0.01 percent interest in five limited partnerships and is the managing member and owns a 0.01 percent interest in seven LLCs. CHHIP owns a 51 percent interest in, and is the managing member of SOPI Village Manager LLC, who is the managing member, and 0.01 percent owner of SOPI Village LLC. CHHIP is also the sole member of CHH Squire Park LLC which is a 9.65 percent owner in Squire Park Holdings LLC. Squire Park Holdings LLC owns and operates a 60 unit apartment community located in Seattle, Washington. The remaining ownership interests in these entities are owned by unrelated third parties. CHHIP records its investment in these partnerships and limited liability companies using the equity method of accounting as it is the general partner or managing member and possesses significant influence in the operating and financial policies of the investees. Revenue Recognition ‐ Gross rent potential reflects gross rental revenue at full occupancy. CHHIP deducts vacancy loss from gross rent potential to reflect actual occupancy. Rental revenue is recognized monthly as earned. Development fee revenue is recognized over the development period using the percentage‐of‐completion method. Operating Revenues and Expenses ‐ Operating revenues include fees and charges from the ongoing operations of providing and developing affordable housing. Operating revenues also include operating subsidies and grants provided by the US Department of Housing and Urban Development (HUD). The use of this classification is based on guidance from HUD, one of the users of the financial statements. Operating expenses are those expenses that are directly incurred while in the operation of providing housing. This presentation results in an operating income that is higher than a nonoperating revenue presentation by the amount of the subsidies and/or grants. Overall it does not affect the presentation of the change in net assets in the statements of revenues, expenses, and changes in net assets, or the presentation of cash and cash equivalents in the statements of cash flows. All other revenues and expenses are considered nonoperating. Restricted Net Position ‐ Net position has been reported as restricted for building improvements and other purposes due to constraints that are either externally imposed by creditors, grantors, contributors or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. CHHIP's policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 17 ‐
Note 1 ‐ Continued Federal Income Tax ‐ CHHIP has been notified by the Internal Revenue Service that it is exempt from federal income taxes as an entity described in Section 115 of the Internal Revenue Code. CH Development Association, Elizabeth James Senior Housing, the Foundation and Central City Affordable Housing have been notified by the Internal Revenue Service that they are exempt from federal income taxes as entities described in Section 501(c)(3) of the Internal Revenue Code. The Twelfth Avenue Arts Association has an application pending with the Internal Revenue Service requesting that it be exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code. CHHIP’s wholly‐owned limited partnerships and LLCs that are reported as blended component units have no provision or benefit for income taxes included in these financial statements since taxable income or loss passes through to, and is reportable by, each partner or member individually. Concentrations of Credit Risk ‐ All of CHHIP’s properties are located in Seattle, Washington except for one property included immediately outside of the Seattle city limits. As such, CHHIP’s operations are directly linked to the economic conditions in the Seattle area. Use of Estimates ‐ The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Note 2 ‐ Notes and Interest Receivable Notes and interest receivable consisted of the following amounts due primarily from affiliated limited partnerships and LLCs (Note 6) as of December 31:
2014 2013
Broadway & Pine LLC
Note receivable, interest at 5%, annual payments from available
cash flow starting June 2007 through maturity on June 1, 2057. $ 180,000 $ 180,000
Firestation Seven Associates
Note receivable, interest at 9%, monthly payments of $306 until
maturity in September 2017, secured by deed of trust. 6,688 9,610
Fleming Apartments Limited Partnership
Note receivable, interest at 1%, payments from available cash flow,
principal and accrued interest due at maturity on December 31, 436,169
Developer fee note receivable, interest at 4.67%, payments from
available cash flow, principal and accrued interest due at maturity
on June 1, 2014. 160,324
Note receivable, interest at 0%, annual payments from available
cash flow, principal due at maturity on April 8, 2043. 339,580
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 18 ‐
Note 2 ‐ Continued
2014 2013
Helen V LLC
Developer fee note receivable, interest at 1%, monthly payments
from available cash flow of $1,163 until maturity on December 31, 73,904 78,904
Holiday Apartments LP
Note receivable, interest at 3%, annual payments from available
cash flow through maturity on December 1, 2061. 354,654 354,654
Jefferson & 12th LLC
Note receivable, interest at 5%, annual payments from available
cash flow starting 2013 through maturity on May 1, 2063. 706,150 706,150
Oleta Apartments Limited Partnership
Note receivable, interest at 0%, annual payments from available
cash flow starting June 2003 through maturity on June 30, 2053. 909,000 909,000
Pantages Apartments LLC
Note receivable, interest at 6%, annual payments from available
cash flow starting February 2006 through maturity on February 1, 151,994 151,994
SOPI Village LLC
Note receivable, interest at 4%, annual payments from available
cash flow starting in 2011 through maturity on December 31, 2061. 140,000 140,000
Woodland Park Avenue LLC
Note receivable, interest at 0%, annual payments from available
cash flow starting in 2009 through maturity on August 31, 2058. 140,000 140,000
New Markets Tax Credits Loans
Note receivable from 12th Avenue Arts NMTC Investment Fund II
LLC, interest at 1.0%, quarterly interest payments beginning April
15, 2013, quarterly principal and interest payments beginning April
15, 2028 through maturity on October 1, 2052. 4,870,600 4,870,600
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 19 ‐
Note 2 ‐ Continued
2014 2013
Note receivable from 12th Avenue Arts NMTC Investment Fund II
LLC, interest at 1.409%, quarterly interest payments beginning April
15, 2013, quarterly principal and interest payments beginning April
15, 2028 through maturity on October 1, 2052.
7,926,840 7,926,840
Total principal 15,459,830 16,403,825 Accrued interest on the above notes 288,847 407,271
Total principal and interest 15,748,677 16,811,096 Less current portion of notes and interest receivable (40,990) (40,990)
Noncurrent Portion 15,707,687$ 16,770,106$
In December 2012, CHHIP entered into a New Markets Tax Credit transaction to partially finance the construction of the 12th Avenue Arts cultural and civic center. The New Markets Tax Credit Program was designed to stimulate investment and economic growth in low‐income communities by offering federal tax credit for Qualified Equity Investments (QEI) made through investment vehicles known as Community Development Entities (CDE). CDEs use capital derived from tax credits to make loans to projects in low‐income areas. As a part of the transaction, Twelfth Avenue Arts Development, LLC, a blended component unit of CHHIP, made two loans to two QEI’s totaling $12,797,440, which in turn, lent a total of $17,951,000 to two CDEs, which in turn was lent to 12th Avenue Arts Associates, LLC, a discrete component unit. To earn the tax credit the QEI must remain invested in the CDE for a seven‐year period ending in December 2019. CHHIP and Key Community Development Corporation have entered into put/call option agreements to take place at the end of the seven‐year period. Under the agreements, Key Community Development Corporation can exercise put options to sell all interest in the QEIs for $1,000 each to CHHIP. If Key Community Development Corporation does not exercise the put option within 90 days of the end of the seven‐year period, CHHIP can exercise call options to purchase the interest of the QEIs at an appraised fair market value.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 20 ‐
Note 3 ‐ Land, Buildings and Equipment Land, buildings and equipment activity consisted of the following:
January 1, Net December 31,2013 Increases Decreases Transfers 2013
Nondepreciable assets‐Land 13,576,258$ ‐$ ‐$ ‐$ 13,576,258$ Pre‐development costs 988,132 132,091 (877,790) 242,433
Depreciable assets‐ Buildings and facilities 51,006,829 403,116 3,244,005 54,653,950 Equipment and vehicles 1,765,727 52,316 64,455 1,882,498
Less accumulated depreciation (23,470,744) (1,790,943) (1,598,255) (26,859,942)
43,866,202$ (1,203,420)$ (877,790)$ 1,710,205$ 43,495,197$
January 1, Net December 31,2014 Increases Decreases Transfers 2014
Nondepreciable assets‐Land 13,576,258$ ‐$ (1,492,853)$ 551,422$ 12,634,827$ Pre‐development costs 242,433 1,047,052 (167,964) 1,121,521
Depreciable assets‐ Buildings and facilities 54,653,950 683,469 (2,234,166) 2,419,145 55,522,398 Equipment and vehicles 1,882,498 424,625 (5,557) 36,801 2,338,367
Less accumulated depreciation (26,859,942) (1,884,460) 300,155 (1,182,466) (29,626,713)
43,495,197$ 270,686$ (3,600,385)$ 1,824,902$ 41,990,400$
During 2013, the limited partner interests in the 1214 Boylston Avenue LP were transferred to CH Development Association, changing the limited partnership to a blended component unit. This transfer resulted in a net increase of $1,710,205 to land, buildings, and equipment. During 2013, pre‐development costs of $877,790 relating to the 12th Avenue Arts development were transferred to 12th Avenue Arts Associates LLC and Twelfth Avenue Arts Housing LLLP, discretely presented component units in exchange for reimbursement in the same amount. During 2014, the limited partner interests in the Fleming Apartments LP were transferred to CH Development Association, changing the limited partnership to a blended component unit. This transfer resulted in a net increase of $1,824,902 to land, buildings, and equipment.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 21 ‐
Note 3 ‐ Continued During 2014, the assets of Haines Acquisition LLC, a blended component unit, were sold to Affordable Apartment Associates, a discretely presented component unit. This sale resulted in a net decrease of $3,396,182 to land, buildings and equipment. During 2014 CHHIP sold the Tiltsonian, a 5 unit apartment project for $961,000 recognizing a gain on the property sale of $668,411. CHHIP provided relocation assistance to affected tenants and successfully relocated 4 of the 5 households in CHHIP units at other locations. Note 4 ‐ Leases Operating Leases ‐ CHHIP or an affiliate, as lessee, leases administrative office space, commercial space, garage space and housing space. CHHIP, as lessee, has entered into a master commercial lease with Jefferson & 12th LLC for the ground‐level commercial premises with annual lease payments of $100 for a period of 20 years through September, 2032. Twelfth Avenue Arts Master Tenant LLC (Master Tenant) has signed master lease agreements with 12th Avenue Arts Associates, LLC to lease the 12th Avenue Arts Associates, LLC’s commercial and garage units. Master Tenant is an entity controlled by CHH. Master Tenant subleases the commercial unit to third‐party tenants and subleases the garage unit to The City of Seattle. The master lease agreements commenced in December 2012 and have terms that end 45 years after commencement in December 2057. Rental expense under these leases totaled $148,874 and $108,947 for fiscal years 2014 and 2013, respectively. Minimum lease payments under these leases are as follows:
For the Year Ending December 31,
2015 547,224$ 2016 560,597 2017 571,662 2018 581,000 2019 595,000 Thereafter 32,160,000
35,015,483$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 22 ‐
Note 4 ‐ Continued CHHIP, as lessor, leases apartments under noncancelable terms of less than one year. Additionally CHHIP leases commercial space to other entities. Minimum future lease revenue under the leases is as follows:
For the Year Ending December 31,
2015 233,072$ 2016 292,398 2017 252,098 2018 262,184 2019 272,670 Thereafter 1,478,849
2,791,271$
Ground Lease ‐ CHHIP as lessor has entered into a ground lease with Harrison Family Housing Limited Partnership through 2074. Lease payments are $12,000 per year with a three percent annual increase. Payments are made subject to available cash flow, as defined or from proceeds of a sale or refinance. Unpaid ground lease payments totaled $165,924 and $149,551 at December 31, 2014 and 2013, respectively, and are included in lease receivable in the balance sheet. Minimum lease payments under the ground lease are as follows:
For the Year Ending December 31,
2015 20,429$ 2016 21,042 2017 21,673 2018 22,323 2019 22,993 Thereafter 3,222,561
3,331,021$
City of Seattle Ground Lease ‐ During 2012, Twelfth Avenue Arts Development, LLC, as lessee, entered into a ground lease with the City of Seattle for the parking garage land and condominium unit of the 12th Avenue Arts project (Note 2). Twelfth Avenue Arts Development, LLC assigned the lease to 12th Avenue Arts Associates, LLC in 2012 transferring all obligations under the lease other than the requirement to pay the minimum lease payments that which was retained by Twelfth Avenue Arts Development LLC. The lease term started in 2012 and extends through 2078, however the lease allows for a put option to be exercised for $1,000 with the City starting in January 2020 that would effectively terminate this ground lease if exercised. CHHIP intends to exercise this option. Lease payments begin August 2014 and are $100,000 per year with a $5,000 annual increase.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 23 ‐
Note 4 ‐ Continued Minimum lease payments under the City of Seattle ground lease are as follows:
For the Year Ending December 31,
2015 100,000$ 2016 105,000 2017 110,000 2018 115,000 2019 120,000 Thereafter 15,930,000
16,480,000$
Note 5 ‐ Notes Payable and Accrued Interest Notes payable are generally nonrecourse and secured by the respective properties and bear simple interest rates unless otherwise noted:
2014 2013
Permanent conventional loans, bearing compound interest from
5.5% to 8.63% generally with principal and interest due monthly, to
be repaid in full at various dates through 2036. Interest expense was
$762,389 and $708,186 in 2014 and 2013, respectively. $ 11,433,329 $ 10,840,762
City of Seattle loans, bearing interest from 1% to 3%. Interest is
generally deferred until maturity and in some instances may be
forgiven if certain conditions are met over the term of the loan. The
loans are to be repaid in full at various dates through 2053. Certain
loans may be forgiven in their entirety if conditions are met through
the extended maturity date. Interest expense was $194,229 and
$232,093 in 2014 and 2013 respectively. 20,422,137 20,008,990
State of Washington loans, bearing interest from 0% to 2% generally
payable annually, to be repaid in full at various dates through 2051.
In some instances annual payments are deferred to the second half
of the loan term. Interest expense was $60,326 and $61,568 in 2014
and 2013 respectively. 8,431,798 8,545,987
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 24 ‐
Note 5 ‐ Continued
2014 2013
Bridge loan for the development of Twelfth Avenue Arts, bearing
interest at 3.25%, principal and accrued interest to be repaid in full
at maturity in December, 2015 from proceeds of a Foundation
capital campaign. 2,326,855 2,899,855
Equity equivalent investment loan, interest only at 2.5% payable
quarterly, to be repaid in full December, 2018. 250,000 250,000
Tenant improvements loan bearing interest at 6%, interest only for
the first year, amortized over the next five years, due in full
February, 2019. 133,312 159,019
Interim construction loan, bearing interest at 4.75%, with interest
only due monthly beginning September, 2014 and principal and
interest due in full September, 2015, unless converted to a term
loan prior to that date. Conversion is anticipated in July, 2015. 773,728
Interim note payable to commercial bank, interest only payable
monthly at 6.25%, due March, 2014. This note replaced
conventional debt which was in the process of being refinanced at
December 31, 2013. The note was paid in full from proceeds of a
permanent conventional loan in March 2014. 682,434
Acquisition/predevelopment loans, bearing interest from 0% to 6%
generally with interest only payments due monthly, to be repaid in
full or partially converted to permanent loans through 2017.
Interest capitalized was $520 and $23,712, respectively. Interest
expense was $55,590 and $37,493 in 2013 and 2012 respectively. 3,435,177
Predevelopment line of credit with Impact Capital with a maximum
of $250,0000 available, interest at 6% with principal to be paid in
full upon maturity in October 2016. 12,197
Revolving line of credit with a commercial bank with a maximum of
$250,000 available and a variable interest rate calculated annually
currently 3.250% payable in full September 30, 2015. 100,000
Total principal 43,883,356 46,822,224 Less current portion of notes payable (3,748,738) (1,083,486)
Noncurrent Portion $ 40,134,618 $ 45,738,738
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 25 ‐
Note 5 ‐ Continued Debt service requirements to maturity on these notes are as follows:
For the Year Ending December 31, Principal Interest
2015 3,748,738$ 912,035$ 2016 591,087 766,407 2017 578,903 734,138 2018 1,265,408 702,024 2019‐2023 3,831,907 2,930,315 2024‐2028 5,325,377 1,810,497 2029‐2033 9,652,715 870,658 2034‐2038 11,068,028 366,880 2039‐2043 4,309,301 148,132 2044‐2048 1,661,799 15,104 2049‐2053 1,850,093
43,883,356$ 9,256,190$
Accrued interest payable on the above notes payable totaled $3,768,434 and $3,730,045 at December 31, 2014 and 2013, respectively and is presented separately from the above total for notes payable on the balance sheet. Interest expense on the above notes payable aggregated $1,127,038 and $1,180,940 for 2014 and 2013, respectively and included the deferred interest on certain nonamortizing loans. Substantially all notes payable are secured by deeds of trust on the related buildings. The notes payable to the City of Seattle and the State of Washington require rental of the apartment units to low or moderate income tenants at stipulated base rents with certain allowable increases, compliance with certain federal regulations as to discrimination and establishment of certain reserves for repairs and maintenance.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 26 ‐
Note 5 ‐ Continued Long‐term liability activity consisted of the following during 2013:
AccruedNotes Interest
Payable Payable
Beginning balance, December 31, 2012 48,308,330$ 3,533,474$
Increases‐ CHH 409,019 Other increases 49,391 Accrual 314,129 Transfers from a change in reporting unit:1214 Boylston 704,281
Decreases‐Payments (2,648,797) (117,558)
Ending Balance, December 31, 2013 46,822,224$ 3,730,045$
Long‐term liability activity consisted of the following during 2014:
AccruedNotes Interest
Payable Payable
Beginning balance, December 31, 2013 46,822,224$ 3,730,045$
Increases‐ CHH 100,000 Other increases 1,823,728 Accrual 269,108 Transfers from a change in reporting unit:Fleming 413,147 64,489
Decreases‐Haines Acquisition sale and dissolution (3,400,000) (113,035) Payments (1,875,743) (182,173)
Ending Balance, December 31, 2014 43,883,356$ 3,768,434$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 27 ‐
Note 6 ‐ Investments in Limited Partnerships and LLCs CHHIP is the sole general partner and owns a 0.01 percent interest in five limited partnerships and is the managing member and owns a 0.01 percent interest in eight limited liability companies. CHHIP owns a 51 percent interest in, and is the managing member of SOPI Village Manager LLC who is then the managing member and 0.01 percent owner of an eighth LLC, SOPI Village LLC. Beginning in 2014 CHHIP is also the sole member of CHH Squire Park LLC which is a 9.65 percent owner in a ninth LLC, Squire Park Holdings LLC; neither of these entities is included as a discretely presented component unit. The remaining ownership interests in these entities are owned by unrelated third parties. During 2014 and 2013, CHHIP earned property management fees of $494,650 and $503,420 respectively, and limited partnership and LLC management fees of $165,522 and $178,999, respectively, from these entities. Additionally, CHHIP earned development and other fees totaling $2,279,306 and $1,099,245 in 2014 and 2013, respectively, from these entities. The following is a summary of selected financial information as of and for the year ended December 31, 2014, from the limited partnerships and LLCs described above and also represents condensed financial information for the aggregated discretely presented component units:
Assets Liabilities Equity
Affordable Apartments Associates LLC $ 5,133,309 $ 5,027,392 $ 105,917 Broadway & Pine Apartments LLC 8,459,580 5,284,975 3,174,605 Capitol Hill Housing Foundation 1,279,990 5,823 1,274,167 El Nor Limited Partnership 3,229,645 2,077,269 1,152,376 Harrison Family Housing Limited Partnership 2,452,111 2,787,422 (335,311)Helen V Apartments LLC 3,215,911 3,471,863 (255,952)Holiday Apartments Limited Partnership 6,175,522 5,728,361 447,161 Jefferson & 12th LLC 11,381,021 8,696,236 2,684,785 Oleta Apartments Limited Partnership 1,901,402 2,551,841 (650,439)Pantages Apartments LLC 8,261,789 5,848,507 2,413,282 Silvian Apartments LLC 3,725,153 3,034,137 691,016 SOPI Village LLC 8,576,355 5,832,065 2,744,290 Woodland Park Avenue LLC 4,388,938 4,083,372 305,566 Twelfth Avenue Arts Association and subsidiary 22,865,150 22,979,690 (114,540)Twelfth Avenue Arts Housing LLLP 22,408,805 22,072,588 336,217
Discretely Presented Component Units $ 113,454,681 $ 99,481,541 $ 13,973,140
Squire Park Holdings LLC $ 11,908,396 $ 8,466,869 $ 3,441,527
December 31, 2014
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 28 ‐
Note 6 ‐ Continued
Total Net IncomeRevenues (Loss)
Affordable Apartment Associates LLC $ 74,314 $ (8,810)Broadway & Pine Apartments LLC 399,470 (362,459)Capitol Hill Housing Foundation 1,265,633 21,391 El Nor Limited Partnership 552,277 (58,312)Harrison Family Housing Limited Partnership 324,887 (84,970)Helen V Apartments LLC 401,821 (85,241)Holiday Apartments Limited Partnership 306,712 (109,178)Jefferson & 12th LLC 491,284 (334,564)Oleta Apartments Limited Partnership 284,227 (70,544)Pantages Apartments LLC 475,738 (287,876)Silvian Apartments LLC 355,738 (81,087)SOPI Village LLC 268,935 (269,295) Woodland Park Avenue LLC 195,408 (200,604)Twelfth Avenue Arts Association and Subsidiary 452,681 131,537 Twelfth Avenue Arts Housing LLLP 221,373 (191,491)
Discretely Presented Component Units $ 6,070,498 $ (1,991,503)
Squire Park Holdings LLC $ 21,170 $ (62,757)
Year Ended December 31, 2014
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 29 ‐
Note 6 ‐ Continued The following is a summary of selected financial information as of and for the year ended December 31, 2013, from the limited partnerships and LLCs described above and represents condensed financial information for the aggregated discretely presented component units:
Assets Liabilities Equity
Broadway & Pine Apartments LLC $ 8,793,029 $ 5,255,965 $ 3,537,064 Capitol Hill Housing Foundation 1,252,899 123 1,252,776 El Nor Limited Partnership 3,304,660 2,093,972 1,210,688 Fleming Apartments Limited Partnership 1,988,378 2,685,277 (696,899)Harrison Family Housing Limited Partnership 2,541,037 2,791,378 (250,341)Helen V Apartments LLC 3,339,609 3,510,320 (170,711)Holiday Apartments Limited Partnership 6,301,842 5,745,503 556,339 Jefferson & 12th LLC 11,900,694 8,881,345 3,019,349 Oleta Apartments Limited Partnership 1,997,724 2,577,619 (579,895)Pantages Apartments LLC 8,533,568 5,832,410 2,701,158 Silvian Apartments LLC 3,798,078 3,025,975 772,103 SOPI Village LLC 8,845,545 5,831,960 3,013,585 Woodland Park Avenue LLC 4,575,276 4,069,106 506,170 12th Avenue Arts Associates LLC 30,837,679 31,083,756 (246,077)Twelfth Avenue Arts Housing LLLP 11,113,626 10,585,918 527,708
Discretely Presented Component Units $ 109,123,644 $ 93,970,627 $ 15,153,017
December 31, 2013
Total Net IncomeRevenues (Loss)
Broadway & Pine Apartments LLC $ 457,459 $ (304,825)Capitol Hill Housing Foundation 1,279,842 (638,395)El Nor Limited Partnership 548,064 (45,119)Fleming Apartments Limited Partnership 397,979 44,072 Harrison Family Housing Limited Partnership 325,256 (73,397)Helen V Apartments LLC 400,034 (62,938)Holiday Apartments Limited Partnership 301,587 (125,396)Jefferson & 12th LLC 472,430 (403,496)Oleta Apartments Limited Partnership 286,998 (73,336)Pantages Apartments LLC 457,729 (306,391)Silvian Apartments LLC 354,731 (71,914)SOPI Village LLC 263,535 (273,594) Woodland Park Avenue LLC 205,957 (187,020)12th Avenue Arts Associates LLC (233,657) Twelfth Avenue Arts Housing LLLP 5,000
Discretely Presented Component Units $ 5,751,601 $ (2,750,406)
Year Ended December 31, 2013
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 30 ‐
Note 6 ‐ Continued In addition to the notes receivable described in Note 2, CHHIP has recorded accounts receivable from the limited partnerships and LLCs described above with a net balance of $3,027,659 and $1,941,118 at December 31, 2014 and 2013, respectively. The accounts receivable balance at December 31, 2014 and 2013, is reported net of an allowance for doubtful accounts totaling $581,925 and $870,420, respectively, and is included in accounts receivable in the balance sheets. CHHIP as the general partner or managing member has the option to purchase partnership property and right of first refusal at any time during the last 12 months of the initial 15‐year low‐income housing tax credit compliance period for each of the housing limited partnerships and LLCs. As a general partner or managing member, as applicable, of the above partnerships and LLCs, CHHIP is liable for recourse liabilities. The limited partnership and LLC agreements provide for various obligations of the general partner or managing member, including an obligation to provide funds for any development and operating deficits. CHHIP has guaranteed the outstanding debt and certain performance obligations of 12th Avenue Arts Associates LLC as part of the 12th Avenue Arts project (Note 2). At December 31, 2014 and 2013, CHHIP had $33,579,348 and $24,187,132 of outstanding guarantees and $210,673 and $361,106 of advances under guarantees, respectively.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 31 ‐
Note 7 ‐ Blended Component Units The following condensed combining information is presented as of and for the year ended December 31, 2014 for blended components as summarized in single column titled CHHIP in the basic financial statements. Condensed combining information for the balance sheet is presented below:
Housing Non‐Housing
Blended Blended
CHHIP Component Units Component Units Total
Assets:Current assets $ 5,534,152 $ 544,697 $ 211,032 $ 6,289,881 Noncurrent assets‐ Capital assets, net 25,603,486 16,386,914 ‐ 41,990,400 Other 6,312,923 1,390,792 13,113,942 20,817,657
Total Assets $ 37,450,561 $ 18,322,403 $ 13,324,974 $ 69,097,938
Liabilities:Current liabilities $ 4,086,639 $ 599,682 $ 516,799 $ 5,203,120 Noncurrent liabilities 26,313,063 15,939,270 2,638,521 44,890,854
Total Liabilities $ 30,399,702 $ 16,538,952 $ 3,155,320 $ 50,093,974
Net Position:Invested in capital assets, net of related debt $ 1,143,627 $ 56,484 $ ‐ $ 1,200,111
Restricted 3,133,790 941,925 ‐ 4,075,715 Unrestricted 2,773,442 785,042 10,169,654 13,728,138
Total Net Position $ 7,050,859 $ 1,783,451 $ 10,169,654 $ 19,003,964
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 32 ‐
Note 7 ‐ Continued Condensed combining information for the statement of revenues, expenses and changes in net position is presented below:
Housing Non‐Housing
Blended Blended
CHHIP Component Units Component Units Total
Operating revenues‐Tenant revenues 4,819,759$ 2,978,771$ 116,983$ 7,915,513$ Fees for services 767,718 14,750 ‐ 782,468 Project development fees 2,279,306 ‐ ‐ 2,279,306 Other 4,763 29,870 1,591 36,224
Total Operating Revenues 7,871,546 3,023,391 118,574 11,013,511
Operating expenses 5,175,315 2,412,725 215,712 7,803,752 Depreciation and amortization 1,008,962 891,556 6,762 1,907,280
Total Operating Expenses 6,184,277 3,304,281 222,474 9,711,032
Operating Income (Loss) 1,687,269 (280,890) (103,900) 1,302,479
Nonoperating revenues (expenses)‐Contributions and grants 270,684 ‐ 476,367 747,051 Interest income 64,160 15,413 162,026 241,599 Loss on disposition of property and equipment 856,903 856,903
Interest expense (783,919) (269,480) (91,766) (1,145,165)
Change in Net Position 2,095,097 (534,957) 442,727 2,002,867
Net Position:Beginning of year 4,667,267 3,015,307 9,726,927 17,409,501 Change in component units 288,495 (696,899) ‐ (408,404)
End of Year 7,050,859$ 1,783,451$ 10,169,654$ 19,003,964$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 33 ‐
Note 7 ‐ Continued Condensed combining information for the statement of cash flows is presented below:
Housing Non‐Housing
Blended Blended
CHHIP Component Units Component Units Total
Net cash provided (used) by operating activities 1,287,686$ 539,927$ (35,460)$ 1,792,153$
Net cash provided by noncapital financing activities 679,220 135,758 ‐ 814,978
Net cash (used) providedby capital and related financing activities (2,736,226) 490,415 ‐ (2,245,811)
Net cash provided (used) by investing activities 1,030,670 (1,121,504) ‐ (90,834)
Net change in cash and cash equivalents 261,350 44,596 (35,460) 270,486
Cash and cash equivalents, beginning of year 618,655 302,710 1,255,713 2,177,078
Cash and Cash Equivalents, End of Year 880,005$ 347,306$ 1,220,253$ 2,447,564$
Note 8 ‐ Employee Benefits CHHIP contributes to a Simplified Employee Pension plan (SEP), a defined contribution benefit plan, on behalf of all eligible employees. CHHIP’s contribution is discretionary. Contributions for 2014 and 2013 were 2 percent of gross wages annually and were in the amounts of $44,076 and $46,152 for the years ended December 31, 2014 and 2013, respectively.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2014 and 2013
‐ 34 ‐
Note 9 ‐ Acquisitions and Development During 2014, CHHIP was engaged in the following acquisition and development projects: Haines Apartments ‐ Haines Acquisition LLC, which was wholly owned by CHHIP, sold the Haines Apartments to Affordable Apartments Associates LLC on September 30, 2015. CHHIP is the managing member of Affordable Apartments Associates LLC which was formed to facilitate the rehabilitation of the 30 unit apartment building using the low income housing tax credit. Rehabilitation work began immediately upon closing and was completed in April 2015. 12th Avenue Arts ‐ Construction of 12th Avenue Arts was completed during the fall of 2014. The residential condo unit consisting of 88 units of affordable housing was placed in service in September and all units were leased by October 31. The commercial and garage condo units were placed in service in October. CHHIP moved its main office to the second floor of the building in October. All of the commercial spaces were under lease at December 31, 2014. The garage condo unit which provides secure below grade parking for the Seattle Police Department was occupied in November. 24th and Union ‐ During 2013, CHHIP entered into a purchase and sale agreement to purchase the site of a former bank branch for $560,000 to redevelop as affordable housing. During 2014 CHHIP continued to work with the seller to resolve title issues and engaged in a community process to incorporate the history of the site into development plans. Closing on the property is scheduled for May 20, 2015. Squire Park Plaza ‐ During 2014, CHHIP, in a joint venture with Jonathan Rose Company, acquired Squire Park Plaza, which consists of 30 affordable apartment units, 30 market rate units and 2 floors of commercial space. CHHIP’s ownership percentage is 9.65%. Note 10 ‐ Contingencies CHHIP is exposed to risks commonly associated with the ownership and rental of real properly. Risks including bodily injury, property damage by fire and forces of nature; loss of assets from theft and employee dishonesty; and liability for employees' conduct are mitigated by a combination of insurance, training and policies and procedures. Management is of the opinion that those risks are immaterial to the financial statements. In connection with various federal, state, and city grants and loan programs, CHHIP is obligated to operate in accordance with those grant and loan requirements and is subject to audit by those agencies. In cases of noncompliance, the agencies involved may require that CHHIP refund payment of program funds. The amount, if any, of expenses which may be disallowed by the agencies cannot be determined at this time, although CHHIP expects such amounts, if any, to be immaterial. Note 11 ‐ Risk Management CHHIP has obtained insurance coverage through a commercial insurance broker with the exception of workers compensation insurance and unemployment insurance which are provided by agencies of the State of Washington. Property loss coverage is on a replacement basis with a deductible of $5,000 per occurrence. Settled claims have not exceeded coverage purchased during the past three years.
SUPPLEMENTARY INFORMATION
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Departmental Operations For the Year Ended December 31, 2014
See independent auditor’s report. ‐ 35 ‐
Property Administration Operations & Management Total
Receipts:Rents 8,059,897$ ‐$ 8,059,897$ Vacancy (338,379) (338,379) Tenant fees 193,995 193,995 Development fees 2,279,306 2,279,306 Fees for services 2,219,053 2,219,053 Contributions and grants 1,012,051 1,012,051 Other income 65,058 65,058
Total Receipts 7,980,571 5,510,410 13,490,981 Expenditures:On‐site management expense 1,363,808 1,363,808 Office salaries, benefits and payroll taxes 2,756,005 2,756,005 Utilities 1,012,377 3,436 1,015,813 Professional fees 339,165 145,005 484,170 Insurance 214,225 48,187 262,412 Property management fees 954,209 954,209 Repairs, maintenance and improvements 1,591,814 24,331 1,616,145 Debt service 1,389,477 1,389,477 Office lease and NNN costs 170,650 170,650 Reserves 464,812 464,812 Other 336,890 684,812 1,021,702
Total Expenditures 7,666,778 3,832,426 11,499,204
Operating Income 313,793 1,677,984 1,991,777
Reconciliation to Statement of Income:Depreciation (1,874,412) (32,868) (1,907,280) Reserves additions 464,812 464,812 Interest income 2,977 237,775 240,752 Interest expense (1,038,116) (107,049) (1,145,165) Other income (expenses) (67,544) (67,544) Gain on disposition of property 856,903 856,903 Fixed asset additions from operations 246,147 246,147 Expenses paid from reserves (67,012) (67,012) Debt service payments 1,389,477 1,389,477 Front‐line charges 489,863 (489,863) 0Management fees 946,722 (946,722) 0
Net Income 806,707$ 1,196,160$ 2,002,867$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Property Operations For the Year Ended December 31, 2014
See independent auditor’s report. ‐ 36 ‐
Byron/Boylston/ Burke Gilman Wetmore
18th Avenue 410 11th E. Berneva Howell Bremer Brewster Broadway Gardens Apartments LP Casa Centennial
Receipts:Rents 115,866$ 51,180$ 102,319$ 272,973$ 390,745$ 278,747$ 56,476$ 170,346$ 123,158$ 58,380$ 289,611$ Vacancy (42) ‐ (2,805) (4,977) (6,259) (9,535) (8,878) (5,491) (5,473) ‐ (8,846) Tenant fees 1,093 1,865 1,567 6,942 8,960 6,064 1,374 4,149 3,108 1,134 11,659 Other income 146 32 5,753 344 1,612 ‐ 20 20 20
Total Receipts 117,063 53,077 101,081 280,691 393,790 276,888 48,972 169,024 120,813 59,514 292,444 Expenditures:On‐site management expense 15,217 8,370 28,708 49,848 53,176 52,880 6,794 21,270 17,123 6,341 50,605 Utilities 12,248 4,995 15,396 46,239 43,086 34,883 4,430 20,761 24,214 6,521 23,839 Professional fees 5,266 1,856 3,813 9,282 15,161 10,829 2,499 4,641 5,313 1,547 9,282 Insurance 2,677 1,888 3,952 9,781 10,403 7,927 1,577 4,708 3,730 909 7,393 Property management fees 5,803 4,965 7,882 39,858 64,065 44,896 8,252 24,662 22,233 8,494 22,280 Repairs, maintenance and improvements 21,962 7,246 31,875 56,740 41,977 42,923 31,759 53,880 31,198 9,201 33,346 Debt service 37,264 670 6,670 57,928 86,403 26,789 8,100 39,277 5,100 112,851 Reserves 14,496 9,000 2,750 10,000 20,730 26,400 1,500 7,500 7,000 ‐ 8,500 Other 1,379 839 1,395 3,378 9,938 3,627 3,914 7,045 1,429 7,159 3,662
Total Expenditures 116,312 39,829 102,441 283,054 344,939 251,154 68,825 183,744 117,340 40,172 271,758
Operating Income (Loss) 751 13,248 (1,360) (2,363) 48,851 25,734 (19,853) (14,720) 3,473 19,342 20,686
Reconciliation to Statement of Income:Depreciation and amortization (24,783) (8,739) (26,089) (80,543) (60,332) (65,771) (10,563) (73,483) (40,828) (299) (60,062) Reserves additions 14,496 9,000 2,750 10,000 20,730 26,400 1,500 7,500 7,000 ‐ 8,500 Interest income ‐ restricted 16 79 10 68 111 489 7 129 70 33 46 Interest and financial expenses (31,609) (2,667) 829 (43,544) (65,110) (18,774) (5,458) (9,682) 1,944 (79,594) Other income (expense) (12,915) ‐ ‐ Fixed asset additions from operations 4,733 ‐ 1,413 7,851 5,032 16,260 2,759 ‐ 3,305 Expenses paid from reserves (39) ‐ ‐ (2,449) ‐ ‐ (2,738) (6,838) ‐ ‐ Debt service payments 37,264 670 6,670 57,928 86,403 26,789 8,100 39,277 5,100 112,851 Frontline & bookkeeping charges 7,910 3,619 7,237 18,093 29,553 21,109 3,016 9,047 8,537 3,016 18,093 Management fees 5,803 4,965 7,882 39,858 64,065 44,896 8,252 24,662 22,233 8,494 22,280
Net Income (Loss) 14,542$ 20,175$ (14,986)$ (2,952)$ 125,684$ 68,723$ (12,705)$ (7,848)$ 10,288$ 30,586$ 46,105$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Property Operations (Continued) For the Year Ended December 31, 2014
See independent auditor’s report. ‐ 37 ‐
Central City Elizabeth Haines Jefferson & Larned
Affordable James Senior Gilman Acquisition Holden 12th Apartments Housing Devonshire Housing Fleming LP Fredonia Gale Place Court LP Hazel Plaza LLC Vista Commercial John Carney LP
Receipts:Rents 177,000$ 527,326$ 601,939$ 296,152$ 272,575$ 274,373$ 283,484$ 186,869$ 220,414$ 168,804$ 147,040$ 202,548$ 222,504$
Vacancy (15,579) (15,268) (36,130) (22,899) (41,208) (6,637) (2,116) (14,480) (4,722) (9,108) (13,356) (9,141) (7,211) Tenant fees 3,548 21,250 7,501 8,114 3,526 8,787 5,678 872 1,731 3,468 ‐ 5,444 7,761 Other income 1,100 ‐ 20 24 ‐ 25,020 20 (439) 229 2 20 974
Total Receipts 166,069 533,308 573,330 281,391 234,893 301,543 287,066 172,822 217,423 163,393 133,686 198,871 224,028
Expenditures:On‐site management expense 39,111 88,391 133,967 45,381 15,305 47,017 53,874 43,690 48,676 27,635 2,782 35,807 47,122
Utilities 27,069 71,069 59,483 37,068 27,098 43,122 38,690 21,986 29,909 32,203 472 25,844 36,287 Professional fees 11,236 21,710 26,464 18,739 6,248 7,519 14,027 5,070 23,691 6,741 8,234 15,695 Insurance 3,882 12,161 12,956 6,889 4,284 7,113 8,639 4,073 6,034 4,994 1,928 5,635 6,341
Property management fees 8,531 86,222 36,000 34,888 35,717 39,459 43,433 11,554 10,798 7,488 3,922 31,244 36,363 Repairs, maintenance and improvements 47,366 81,307 153,459 86,415 24,891 79,848 52,965 22,505 40,200 42,704 2 41,338 53,250
Debt service 3,019 9,080 139,367 82,227 68,196 36,000 53,070 ‐ 44,780 15,994 33,817 35,700 ‐ Reserves 14,400 101,500 30,276 13,330 6,605 4,320 10,000 18,240 7,785 6,960 3,600 5,800 9,920 Other 2,260 9,214 20,061 3,514 22,638 6,405 5,054 6,050 3,558 2,144 11,175 3,672 14,843
Total Expenditures 156,874 480,654 612,033 328,451 210,982 270,803 279,752 133,168 215,431 146,863 57,698 193,274 219,821
Operating Income (Loss) 9,195 52,654 (38,703) (47,060) 23,911 30,740 7,314 39,654 1,992 16,530 75,988 5,597 4,207
Reconciliation to Statement of Income:Depreciation and amortization (38,658) (67,086) (103,533) (100,925) (39,103) (52,764) (132,873) (34,741) (40,080) (18,965) (14,522) (45,600) (93,927) Reserves additions 14,400 101,500 30,276 13,330 6,605 4,320 10,000 18,240 7,785 6,960 3,600 5,800 9,920
Interest income ‐ restricted 98 262 111 41 147 55 126 12 22 62 2 65 63 Interest and financial expenses (46) (6,121) (97,833) (62,319) (47,825) (24,134) (22,832) 4,680 (99,682) (4,391) (8,110) (16,657) 7,881
Other income (expense) ‐ (54,629) ‐ ‐ ‐ Fixed asset additions from operations 10,006 5,497 32,448 15,295 ‐ 35,242 8,767 ‐ 4,303 6,801 Expenses paid from reserves ‐ (9,474) ‐ ‐ ‐ (5,750) ‐ (2,464) (18,068) ‐ ‐ (4,592)
Debt service payments 3,019 9,080 139,367 82,227 68,196 36,000 53,070 ‐ 44,780 15,994 33,817 35,700 Frontline and bookkeeping charges 9,067 37,393 31,789 27,652 7,237 14,035 20,745 9,650 11,921 472 16,064 21,203 Management fees 8,531 86,222 36,000 34,888 35,717 39,459 43,433 11,554 10,798 3,922 31,244 36,363
Net Income (Loss) 15,612$ 219,401$ 20,448$ (36,871)$ 54,885$ 82,953$ (18,000)$ (5,580)$ (64,928)$ (1,878)$ 95,169$ 36,516$ (12,081)$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Property Operations (Continued) For the Year Ended December 31, 2014
See independent auditor’s report. ‐ 38 ‐
Villa
Lincoln Mary Ruth Ponderosa at Twelfth AA Apartments
Court Manor Maxwell Melrose Miller Park Park Hill Madison LLC Seneca Tiltsonian Master LP Total
Receipts:
Rents 258,134$ 238,659$ 40,800$ 225,518$ 127,222$ 352,840$ 198,240$ 314,177$ 49,170$ 116,983$ 647,325$ 8,059,897$ Vacancy (8,683) (11,778) ‐ (10,827) (10,781) (7,561) (11,296) (8,199) (3,736) ‐ (15,357) (338,379)
Tenant fees 9,462 3,722 823 5,383 5,752 5,717 3,192 5,923 922 27,504 193,995 Other income 203 ‐ 13,025 20 139 85 32 16,637 65,058
Total Receipts 258,913 230,806 41,623 233,099 122,193 351,016 190,275 311,986 46,356 117,015 676,109 7,980,571
Expenditures:On‐site management expense 50,544 53,777 5,432 46,290 26,577 55,436 55,310 39,832 6,403 4,358 80,759 1,363,808
Utilities 28,756 32,073 4,429 30,406 20,409 44,941 20,828 31,303 5,977 10,988 95,355 1,012,377 Professional fees 9,543 12,502 1,238 10,999 4,403 9,382 10,500 16,007 1,647 33 28,048 339,165
Insurance 6,276 5,231 1,410 5,793 3,617 10,231 5,212 8,165 1,721 10,253 16,442 214,225 Property management fees 20,058 12,992 3,958 26,568 11,133 53,582 12,861 79,342 4,721 ‐ 89,985 954,209 Repairs, maintenance and improvements 62,484 50,445 6,892 31,091 23,798 42,910 72,938 34,624 10,983 16,438 150,857 1,591,814
Debt service 95,423 39,681 4,644 32,688 22,385 53,820 ‐ 35,420 8,400 ‐ 194,714 1,389,477 Reserves 17,400 18,000 1,440 14,010 10,461 10,000 14,484 8,669 ‐ ‐ 29,736 464,812
Other 4,455 8,748 525 4,491 2,340 3,260 5,039 4,403 1,342 140,563 7,371 336,890
Total Expenditures 294,939 233,449 29,968 202,336 125,123 283,562 197,172 257,765 41,194 182,633 693,267 7,666,778
Operating Income (Loss) (36,026) (2,643) 11,655 30,763 (2,930) 67,454 (6,897) 54,221 5,162 (65,618) (17,158) 313,793
Reconciliation to Statement of Income:
Depreciation and amortization (78,802) (39,225) (6,316) (40,363) (36,885) (38,447) (12,281) (113,884) (8,708) (265,232) (1,874,412) Reserves additions 17,400 18,000 1,440 14,010 10,461 10,000 14,484 8,669 ‐ ‐ 29,736 464,812 Interest income ‐ restricted 55 54 23 90 195 141 80 10 20 185 2,977
Interest and financial expenses (80,211) (32,964) (1,175) (15,133) (21,901) (40,810) ‐ (39,188) (18,813) (156,867) (1,038,116) Other income (expense) ‐ ‐ ‐ (67,544)
Fixed asset additions from operations 3,339 2,146 ‐ 6,894 10,318 ‐ ‐ 63,741 246,147 Expenses paid from reserves ‐ (9,316) ‐ ‐ (2,681) ‐ (2,579) (24) ‐ ‐ (67,012)
Debt service payments 95,423 39,681 4,644 32,688 22,385 53,820 ‐ 35,420 8,400 ‐ 194,714 1,389,477 Frontline and bookkeeping charges 17,490 17,577 2,412 18,093 7,237 18,093 12,185 16,954 3,016 40,348 489,863 Management fees 20,058 12,992 3,959 26,568 11,133 53,582 12,861 79,342 4,721 ‐ 89,985 946,722
Net Income (Loss) (41,274)$ 6,302$ 16,642$ 66,716$ (12,986)$ 130,727$ 28,171$ 41,520$ (6,202)$ (65,618)$ (20,548)$ 806,707$
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2014
See accompanying notes to schedule of expenditures of federal awards and independent auditor’s report. ‐ 39 ‐
Federal FederalCFDA Pass‐Through Disbursements/
Federal Grantor / Pass‐Through Grantor / Program Title Number Identifying Number Expenditures
US Department of Housing and Urban Development:Pass‐Through Program From‐Housing Authority of the City of Bremerton:
Section 8 Housing Assistance Payments Program 14.195 WA19L000022 112,091$
Section 8 Housing Assistance Payments Program 14.195 WA 19M000017 104,841 Section 8 Housing Assistance Payments Program 14.195 WA 19M000141 132,286
Total 14.195 349,218
City of Seattle:
Community Development Block Grants/Entitlement Grants‐410 Apartments* 14.218 30,100 Bremer Apartments* 14.218 102,630 Fredonia Apartments* 14.218 409,760 Gale Place Apartments* 14.218 286,400 Lincoln Court Apartments* 14.218 1,203,904
Park Hill Apartments* 14.218 282,303
Total 14.218 2,315,097
Rental Rehabilitation Program‐Gale Place Apartments* 14.230 480,000
Park Hill Apartments* 14.230 122,088
Total 14.230 602,088
State of Washington:
HOME Investment Partnership Program* 14.239 04‐40403‐004 1,000,000
Total 14.239 1,000,000
Enterprise Community Partners, Inc.:
Section 4 Capacity Building for Community Developmentand Affordable Housing 14.252 B‐11‐CB‐MD‐0001 15,000
Section 4 Capacity Building for Community Developmentand Affordable Housing 14.252 B‐13‐CB‐MD‐0001 28,714
Section 4 Capacity Building for Community Developmentand Affordable Housing 14.252 12SG2127 20,500
Local Initiatives Support Corporation:Section 4 Capacity Building for Community Developmentand Affordable Housing 14.252 PA# 40257‐0040 10,000
Total 14.252 74,214
Total US Department of Housing and Urban Development 4,340,617
U.S. Department of the Treasury:Pass‐Through Program From‐
Neighbor Works America:National Foreclosure and Mitigation Counseling Program 21.000 75,000
U.S. Department of the Treasury 75,000
US Department of Transportation:Pass‐Through Program From‐King County Metro:TDM‐Smart Growth Initiative and Incentive 20.507 40,000
Total US Department of Transportation 40,000
Total Federal Expenditures 4,455,617$
* Denotes outstanding loan
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2014
‐ 40 ‐
Note 1 ‐ Basis of Presentation The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of Capitol Hill Housing Improvement Program (CHHIP) under programs of the federal government for the year ended December 31, 2014. The information in this Schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A‐133, Audits of States, Local Government, and Non‐Profit Organizations. Because the Schedule presents only a selected portion of the operations of CHHIP, it is not intended to and does not present the financial position, changes in net assets or cash flows of CHHIP. Note 2 ‐ Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A‐87, Cost Principles for State, Local and Indian Tribal Governments, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass‐through entity identifying numbers are presented where available.
SINGLE AUDIT REPORTS
T: 425-454-4919
T: 800-504-8747
F: 425-454-4620
10900 NE 4th St
Suite 1700
Bellevue WA
98004
clarknuber.com
‐ 41 ‐
Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor’s Report To the Board of Directors Capitol Hill Housing Improvement Program Seattle, Washington We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business‐type activities and the aggregate discretely presented component units of Capitol Hill Housing Improvement Program (CHHIP), as of and for the year ended December 31, 2014, and the related notes to the financial statements, which collectively comprise CHHIP’s basic financial statements, and have issued our report thereon dated May 19, 2015. INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered CHHIP's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of CHHIP’s internal control. Accordingly, we do not express an opinion on the effectiveness of CHHIP’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
‐ 42 ‐
COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether CHHIP's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Certified Public Accountants May 19, 2015
T: 425-454-4919
T: 800-504-8747
F: 425-454-4620
10900 NE 4th St
Suite 1700
Bellevue WA
98004
clarknuber.com
‐ 43 ‐
Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Independent Auditor’s Report Board of Directors Capitol Hill Housing Improvement Program Seattle, Washington REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have audited Capitol Hill Housing Improvement Program’s (CHHIP’s) compliance with types of compliance requirements described in the OMB Circular A‐133 Compliance Supplement that could have a direct and material effect on each of CHHIP’s major federal programs for the year ended December 31, 2014. CHHIP’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. CHHIP’s financial statements include the operations of certain HUD projects and Elizabeth James Senior Housing, blended component unit of CHHIP, that in total received $3,423,481 in federal awards. Those projects are subject to U.S. Department of Housing and Urban Development (HUD) reporting requirements. Those HUD projects were audited as a separate organizational unit and Elizabeth James Senior Housing as a legally separate entity as permitted by OMB Circular A‐133, Section §__.500a and HUD. Accordingly, the federal awards of $3,423,481 are excluded from the accompanying schedule of expenditures of federal awards. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of CHHIP’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A‐133, Audits of States, Local Governments, and Non‐Profit Organizations. Those standards and OMB Circular A‐133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about CHHIP’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of CHHIP’s compliance.
‐ 44 ‐
Opinion on Each Major Federal Program In our opinion, CHHIP complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2014. REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of CHHIP is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered CHHIP’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A‐133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of CHHIP’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A‐133. Accordingly, this report is not suitable for any other purpose.
Certified Public Accountants May 19, 2015
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Findings and Questioned Costs For the Year Ended December 31, 2014
‐ 45 ‐
Section I ‐ Summary of Auditor’s Results Financial Statements
Type of auditor’s report issued: Unmodified Internal control over financial reporting:
- Material weaknesses identified? Yes No
- Significant deficiencies identified? Yes None reported.
Noncompliance material to financial statements noted? Yes No
Federal Awards
Internal control over major programs:
- Material weaknesses identified? Yes No
- Significant deficiencies identified? Yes None reported.
Type of auditor’s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A‐133? Yes No
Identification of Major Programs CFDA Numbers Name of Federal Program or Cluster 14.195 Section 8 Housing Assistance Payment Program 14.239 HOME Investment Partnership Program
Dollar threshold used to distinguish between Type A and Type B programs: $ 300,000 Auditee qualified as low‐risk auditee? Yes No
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Findings and Questioned Costs For the Year Ended December 31, 2014
‐ 46 ‐
Section II ‐ Financial Statement Findings No matters were reported. Section III ‐ Findings and Questioned Costs for Federal Awards No matters were reported.
CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Prior Audit Findings For the Year Ended December 31, 2014
‐ 47 ‐
There were no prior audit findings; therefore, no matters are reportable.
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410 Apartments Property Disposition Plan
June 1, 2015
History
410 Apartments is a six unit building built in 1901 and acquired by CHH in 1984. It appears that
the property was originally built as a single family home and was later converted into
apartments. The building is in poor physical condition and will need a new roof, windows and
siding in the near future. Additionally, the unit interiors have not been updated in a long time
and are in below average condition. The property has limited reserves and insufficient cash
flow to finance the repairs. Disposition of the 410 was discussed with the Board in 2014, but
the proposal was shelved as the City of Seattle Office of Housing (OH) staff indicated that
relaxation of the regulatory agreement was unlikely at the time. Since then, OH staff have
indicated there may be interest on the part of OH to revisit the disposition.
Community Impact
The sale of 410 Apartments will likely result in six fewer affordable apartments in the Capitol
Hill neighborhood and potential displacement of the existing residents from Capitol Hill. We
will offer the residents relocation assistance and will endeavor to find them new homes within
the CHH portfolio.
Roster of Resident Information
Attached
Rationale for Sale
The property scored 10 (portfolio average 14) on the mission aspect of the Portfolio
Assessment and landed just over the minimum income threshold placing it in the “Cash
Positive” quadrant of the Mission Income Matrix. The only reason the property is in the “Cash
Positive” category is that major capital repairs have been deferred because the property has
insufficient cash flow to address these issues. The property scored 0.25 on the Financial
Sustainability measure, the lowest possible score.
As of 12/31/14 the building had replacement reserves of $55,778 and makes annual reserve
contributions of $10,000. The projected exterior repairs are estimated to be over $358,000,
which includes asbestos mitigation for the siding. Unit interior renovations are estimated at an
additional $150,000. Zoning on the site is LR 3 which would likely not allow enough additional
density to justify demolition and redevelopment. The property could support a new loan of
approximately $67,000, which is not enough cash to address the capital needs. The property
has a city loan with a balance of $266,169 and a regulatory agreement that runs with the land.
Staff recommends exploring the sale of 410 Apartments as its capital needs substantially
exceed the reserves and the cash flow from the property is not adequate to support additional
debt to cover the cost of repairs. Additionally, proceeds from the sale will support our mission
and business strategies consistent with the CHH Policy Framework For Use of Physical Assets --
trigger2.
Time Line
(per 11/14 Process for Property Disposition)
June 2015— Discussion at PM and FAM Board committees
July 2015— Discussion at Board meeting and adoption of Feasibility Resolution Notify residents Staff meets with residents to explain relocation benefits Negotiate end of regulatory agreement with OH August 2015-- Board adopts resolution of sale Begin relocation process with residents September 2015 Continue resident relocation process List property October 2015 Continue resident relocation process Choose buyer—begin due diligence November 2015 Continue resident relocation process Due diligence continues December 2015 Complete resident relocation process
Close sale Tenant relocation payments are made
Projected Sale Price
Preliminary discussions with Dan Swanson of Kidder Mathews indicate the probable buyer
would be someone who would renovate the building and charge market rents. The most
probable sale price would be in the $1,000,000 range.
The property is encumbered with a loan from the City of Seattle in the amount of $266,169.00.
The loan has several terms that will be negotiated with the Office of Housing before taking the
property to market. These include contingent interest in the amount of approximately 62% of
the net proceeds of the loan, affordability deed restrictions that run with the land, and
restrictions on the use of the sale proceeds.
Net sale proceeds after relocation expenses, transaction costs and loan repayment are
anticipated to be approximately $636,000. Closing costs are summarized below:
Sale Price $1,000,000 Loan Balance $266,169
Sale Costs Commission $50,000 5.00% Title $2,900 0.29% Escrow $1,100 0.11% Excise Tax $17,800 1.78% Relocation $26,500 per relocation payment schedule
Total $98,300
Net to CHH $635,531
Risk and Cost analysis
The risk of the sale of 410 Apartments is the potential displacement of the existing households
from Capitol Hill. We were able to place four of the five households from the Tiltsonian in other
proximate CHH buildings—the fifth was over income for most of our units and went elsewhere.
We believe we will be able to place the majority of the residents of 410 Apartments in other
nearby CHH buildings, mitigating this risk. Another risk is negative publicity around the loss of
affordable housing. This risk can be mitigated by ensuring public understanding of the
enormous cost of maintaining these particular units and following our disposition guidelines.
Costs will be paid from sale proceeds.
Projected Future Use
It is anticipated the buyer would renovate the existing building. The L3 zoning does not allow
enough increased density to justify demolition of the existing structure.
Relocation Outline
410 Apartments Disposition – Resident Compensation Schedule
1. All residents wishing to continue residing with CHH will be offered a CHH unit that they
are qualified for when it comes available (rents are as posted at new unit, deposits equal to one
month’s rent).
2. Asia Fahie will be the assigned Leasing Associate for all residents at the 410.
3. All residents will have access to the CHH Resident Services Manager.
4. Residents will receive the following relocation compensation:
a. Studio - $4,000.00
b. One bedroom - $4,500.00
5. Relocation payments will be released to residents at the earlier of the resident moving
or the closing of the sale.
6. Deposits will be processed in accordance with Landlord tenant law.
7. In the event the building does not sell residents will not be eligible for relocation
monies.
Description of Existing Covenants
The existing loan from the City of Seattle requires that all units be affordable for very low
income households, defined as households making less than 40% of Area Median Income. The
loan also includes a contingent interest clause that amounts to the majority of the proceeds.
The regulatory agreement restrictions run with the land. Modification of these covenants will
be negotiated with OH.
In conclusion, staff recommends pursuing disposition of 410 Apartments. The process is to
commence at the July 2015 Board meeting. 410 Apartments has a regulatory agreement with
the City of Seattle which will have to be modified to allow the property to be sold.
410
ResidentUnit
#
Household
size
% Med
IncBR Sq FT
Move-in
date
Current
rent Current
income
Currently income
qualifies for
Unit size
currently
qualified for Notes Dep.
Adult
average
age Race M F
Candace Winegrad 1 1 40% 1 491 2/25/2013 $737 $19,000 40% 0 or 1 0 25 C 0 1
Craig Trolli 2 1 40% 0 378 3/23/2007 686+ $35,455 60% 0 or 1 0 39 C 1 0
Coleen Sablan 3 2 40% 1 595 7/1/2010 $737 $40,512 60% 1 or 2 1 33 O 1 1
Arturo Artorez 4 1 40% 1 595 6/1/1995 $737 $13,978 30% - subsidized 0 or 1 0 75 H 1 0
Stacey Levine 5 1 40% 1 595 2/1/2007 $737 $27,829 50% 0 or 1 0 55 C 0 1
Dickson Ardoin 6 1 40 1 595 11/1/2010 $737 $19,618 40% 0 or 1 0 53 C 1 0
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