May 062016
 

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  37 Responses to “KEY WEST: The “Trickle-Down Theory” of Affordable Housing?”

  1. A little while ago, I told Naja maybe she should have less birthdays to reduce the odds of such long prolonged labors as birthing today’s documentary :-). Naja laughed, requested a comment for her birthday present. I said “Yas boss M’am, coming right up.”

    Here is a link to the city’s video of the entire meeting:

    http://keywestcity.granicus.com/MediaPlayer.php?view_id=1&clip_id=484

    The Peary Court Plan B agenda item (31) begins at the 1:53:44 mark.

    The easiest way to get there is to scroll down the agenda index under the video to item 31 and click on it:

    *31 16-9506 Nominating the property located at 541 White Street, Commonly referred to as Peary Court, to the Monroe County Land Authority for funding for the purpose of acquiring an interest in the property in the form of Affordable Housing Deed Restriction

    The first citizen speaker is Tom Milone, followed by second citizen speaker, followed by me. I thanked Tom for his remarks, then I let them have it.

  2. NAJA, Please run for District #1 seat – we need some fresh ideas and you live in the district – Many of us do not even live in District #1 will be glad to help you.
    Just think of the real insight to the city books and the truth you could provide for the general voting public of Key West.

    This would change voting from 4 to 3 old ways to 4 to 3 new ways and add two smart ladies on the Dias….Please consider – Please

    Then all we need is someone to run for District #6 ?

  3. Happy birthday Naja!

    So keywestislandgirl is right the fix is in before meeting. We know it when Wardlow says “I know you have the 4 votes to pass this and I wil support it when it passes” and when Kaufman says “when this passes tonight”. So 1 hour and 45 of talking only to waste time!
    The only thing for perpetuity in KW is corruption!
    When will KW get this?

  4. I have never heard such bull s_ _ _ in by life. If in reality the city builds on land it owns it would in fact lower the demand for peary court properties and as a result the rents would go down not up. Legally the city is still buying something and would require the voters approval. And this so called affordable rent will still go up in time. This is just another scam like they fell for with Simonton trailer park. Take a look at it now. Nothing finished and looks nothing like the original picture. If this deal goes then you can bet some people will be seeing a huge thank you. Only in Key West could such corruption take place. Are we to worry about people that can afford $2400 might need to pay $2700 ? When will they care about the $10 workers needing 2 or 3 jobs. Fact is if KW builds some low income rentals the high prices of all rentals will go down and the illegal rental market will go away with it. This is a total misuse of the tax dollars and if misused I hope the feds investigate and send a few to prison. Tourist will sure love how you use that 5% bed tax. Think we will be finding a better party town in the future. I don’t mind paying a bed tax if it helps the low paid workers but dam sure don’t see as OK to help the well paid people. ELECTION DAY is coming.

  5. Look back at what I warned last week. The buyer is not putting up a dime.
    And sure seems that the sunshine law was broke. This deal was already agreed on without the public. Do you still want Cates ?
    This deal is nothing but greed and bribes.

    And happy birthday Naja. Please run for office or mayor. You would make this corrupt town wake up.

  6. Trickle down housing, hah! And they used THAT in their deliberations? Not allowed to see the contract either when we’re basically putting up.the down payment ? AND the city has to come up with $300,000 more from it’s general fund to make it to 12.5 million? And did I hear Cornfeld say they were only putting about 3 million of their own skin in the game, financing the rest? So they’ll be financing more than $ 40 million? Run the numbers on that , someone. Will it work unless they get a whole lot of the remaining ROGOS ? There was never an answer as to whether these units could be sold individually either. That was another dodged question.
    Looking at your next article about the ” family run business ” sure presents a different pictureof this new buyer and I wonder if anyone in the city did their own due diligence as Ms Higgins has just begun? They look like a mini Balfour Beatty and I bet they would love to rent it out to the military so it doesn’t have to build more housing for THEIR personnel, 400 more who may be stationed here with that proposed drone detachment arriving. Great planning, huh?
    I had to laugh when Billy Wardlow pointed out that this whole proposal had only been vetted for six days from announcement to presentation to the commission. Everyone looked uncomfortable swallowing the charade. These folks make White Street Partners look puny with all their companies scattered about. Big players apparently? Where’d they come from? Maybe buddies with Weekly who so compromised his integrity by validating Bob Dean’s phony residency as Housing Authority chairman? Had to do that to keep the game rolling? So no one was watching the store at the Housing Authority in the meantime as they were supposed to be ? Kinda dropped the ball on that one didn’t they? A portent?

    Regardless, this deal does nothing for the ordinarily underpaid workers. What a mess, what a millstone, what a sham.

    I

    • The Land Authority Executive Director said the $300,000 could be borrowed from future allocations to Key West’s Land Authority account [No one said it would come from the City’s general fund.]

  7. I think if Naja ever decides to run for local a city office, she should run for mayor instead of for a city commission seat. I think she’d be a good mayor and ambassador for Key West. I don’t think she is currently inclined in that direction, though. But maybe if she could be queen and call all the shots? But if she did run, and if she did get elected, or coronated, would she feel comfortable continuing to publish the blue paper? Meanwhile, I think it would be wonderful if t e blue paper started making money commensurate with the immense value of its services to Key West, the Florida Keys and humanity. Arnaud and Naja work their tails off each week, blood, sweat and tears, so to speak, to bring out each week’s edition and later breaking news updates.

  8. Happy birthday, Naja. 🙂

    What’s interesting is the City doesn’t seem to be entertaining alternative proposals. Kaufman wrote a letter to the editor outlining a sensible-sounding plan for Poinciana.

    This deal, just like the last one, has a very used-car-salesman vibe. Lots of pressure to buy now. There’s this panic that if the city doesn’t immediately throw money at this specific property then 157 existing “affordable” units will be lost. Is this a realistic and immediate fear?

    The buyer is looking for $12 million from the taxpayers. That’s quite a generous donation. He should be expected to address taxpayer questions and concerns thoroughly and transparently.

    I would argue, that he should be able to anticipate many of those questions and concerns and address them proactively. That’s what I would do if I were asking for $12 million.

  9. Has anyone ever thought to run the numbers on Peary Court’s “Plan B?” If one were to accept that the assumptions of low costs and high revenues from the previous Key West Housing Authority created pro formas were accurate, then Peary Court, under city ownership, would generate about $750k in annual profit when all of the units were being rented at the 120% AMI level, but that pro forma assumed financing with a 3% tax free mortgage interest rate, a token city tax payment and absurdly low annual set asides for administration, insurance, maintenance and repairs.

    Let’s look at the mortgage financing and taxes. The 3% KWHA pro forma rate was calculated on a specific type of tax free financing for the lending bank. That isn’t available for Plan B. Private buyers will pay the market interest rate for their financing. The 30 year mortgage rate is currently at 3.77%. The city’s annual mortgage expense for the $46m that they would finance @ 3% was right around $2,327,256. A private buyer would finance approximately $47.5m @ 3.77%. That is an annual mortgage expense of $2,646,228. That, by itself, is $318,972 more a year in mortgage expenses for a private buyer than the KWHA assumption for a city purchase. Next, the KWHA pro forma only included a token payment in lieu of city taxes of around $85k. Private owners will need to pay the full spectrum of city, county, school district, mosquito control and other property taxes. Those taxes will add over $525k in additional annual expenses. Adding just these two factors together equals over $840k in additional annual expenses that a private investor will need to cover that city ownership didn’t. By the way, with the current 157 units, that works out to $5,350 per unit/per year or $445 per unit/per month. I could go on and on about extra costs any private buyer will face, but I think we already see that even if the KWHA pro forma were accurate, the margins ware razor thin. To think that a private investor could step in and predict the same outcomes is impossible. One needs to remember with private ownership is that they are in business to make a profit. If they aren’t making at least a 10% net return on their investment, then there isn’t reward for the risk.

    I would like to see the pro forma that Cornfeld is using to justify receipt of the Land Authority $12.5m and the remaining $47.5m in other funding. What numbers are they using for mortgage payments, taxes, administration, insurance, maintenance and replacement reserves? What are the rents they will need to charge to pay for everything? It would be fiscally irresponsible for the Land Authority to hand over a single cent of assistance before being 110% reassured that the Cornfeld plan is both achievable and affordable.

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    • The affordable workforce housing ordinance in Key West will be the basis for the deed restrictions – we are told. It allows for a “moderate” basis for rents and allows for a mix of low, med, mod, middle-income. At the top level – “middle-income” – the 2016 cap for a 2-bedroom is $2709. The ordinance doesn’t say that the landlord must have a certain amount of or even one unit in each category. Just that it can be mixed amongst those categories and that the average rent roll can be at “moderate plus 10%”. Under the deed restriction the owner will not be allowed to charge $3000 per month for a 2-bedroom unit. They could, it seems, mix it up between moderate-income $2332/month [2016] and “middle-income” – $2709 [2016] and stay within the regulations. [Buyer has put forward a concept for future that includes asking for more density and possibly taking some of the existing units and splitting them into two 1-bedroom units. This would allow for a small renovation investment and would generate more revenue when combining the revenue from two 1-bedroom units that replaces the revenue for one 2-bedroom units. This would come to over $4000/month for the two 1-bedrooms] but would provide the smaller units that everyone is looking for. They would not be inexpensive – however.

  10. Did anyone else see him wiggle out of directly saying how much of his money is invested ? Told you what he will have in it after he starts building but not what he has in it now. Nothing will stop him from finding a foolish investor to take a second mortgage on the property and then he can walk away. Hope the deed restriction is very clear and in place before the closing. And watch for a sneaky first mortgage being made a few hours before closing. Don’t be too surprised if the seller is still in this deal. I smell something fishy. This passed without proof of anything including the contract for the sale. The city is basically buying part of Peary Court.

    Your fine city counsel voted yes without first even knowing what his investment was. Seems strange he got all of the property for just 5 million more. The seller has made a better deal to this buyer than they offered the city. And magically the new buyer has a willing lender (family) to offer the loan. The city needs to read that contract.

    What happens if he does not build the additional units ? What if he does no repairs or minimal and just pocket the rents until foreclosed ? And in the event it get’s foreclosed I hope the city knows all 157 tenants get eviction letters.

    If the city can’t make this deal work and get a mortgage just why is it he can ?

    YEP you been scammed again. Please demand the legality of this deal be investigated. The city will be in one hell of a mess if 157 units suddenly go away.

    Why would your elected city counsel after being told NO by the voters still do this. Guess your votes never mattered.

  11. While I think this is an awful move for the city – I explained why during my citizen comments this past Tuesday night, not included in the blue paper’s documentary, which City Commission Sam Kaufman told me in an email the next day were “spot on” – I am kinda amazed at the shock expressed in some of the reader comments here. What’s to be shocked about? This is Key West.

    I had hoped a long line of outraged citizens would be at the Tuesday night meeting, to express their outrage during citizen comments. But of the readers commenting above, only Page and I spoke against the deal. Where were the rest of you? Why didn’t you come and speak, if you were so against it? You speak of ousting the 4 elected officials who voted for the deal. But you were not there telling them not to do it. Will you be on the streets carrying signs calling or their defeat in this year’s city races? 3 of them are up for reelection: Cates, Weekley and Lopez.

    I hope there are not more gotchas in this deal than already are in plain view. But, to be honest, there is some serious gallows humor in all of this. That might become more clear, if you take the time to watch the entire discussion of item 31. Almost 2 hours worth. Here again is the link to the city’s video:

    http://keywestcity.granicus.com/MediaPlayer.php?view_id=1&clip_id=484

    Scroll down the agenda index below the video to item 31 and click on it, and you will go right to that part of the video. If it weren’t so serious, crazy and macabre, it would be hilarious. But then, that can be said of quite a few things the city government does or goes along with after the fact. It’s been that way a l-o-n-g time, and it seems from how the city elections go, a large majority of voters like it.

    • I think the lack of others attending was because they already knew it was already voted on. Anyone speaking against this was just for legality sake. They where too busy counting money to even hear you. And with out delaying this till next meeting to view and back up Cornfeld’s remarks to see if truthful they just voted for it. Hope the people know voting is 2 sided and vote the ones that voted yes out of office. Cornfeld is not investing a dime of his money. He seen some stupid easily swayed commissioners and played his scam offer.

      Wonder how many living in Peary Court understand that when their lease runs out they might be booted out for non qualified. Would love to see a copy of the lease they have now. Often it has a clause to renew with perhaps a few percent increase. That just might keep unqualified people in it. Others just don’t care because they have a place to live on the island and could care less about others. I care and do not even live in KW. Reason I care is because as a tourist we need the services of the low income people. On average we spend about 30 days a year broken into about 5 trips. How can a couple live in Peary Court on $10 an hour jobs ? They would both need to work 60 hours. After taxes that $1200 is likely less than $1000. Now out of $4000 pay $2400 plus utilities and cell phone and such. Leaves them maybe $200 a week for food and enjoyment. That does not go far in an overpriced city like KW.

      The true fix is more housing even if at $2400. The lack of housing is what causes the high rents. And now the money to build is gone unless a bank will help with using the property as down payment.

      Do thank you Sloan for trying.

  12. Thank you Colby Fisher for doing the math on this deal. Thank you Bluepaper, Sloan Bashinsky, Jimmie and others for paying attention. Yes we should all have been there to speak, even if the fix was in. Soon, if it’s not shot down by the land authority directors, it will go to the County Commissioners who have the final say.
    Uh oh… Doubt they’re going to enjoy this tar baby.

  13. So what this deal amounts to is for a payment the owner gets a devalued property.
    Now my question, did the property owners get paid when their properties got deed restrictions ? What year did this begin ? Any time the government take all or part or devalues your property it must pay.

    Why would Cornfeld want such a restriction ? If they have the finances to buy it for cash this deal would not be happening. Truth is it is the $12.5 million from KW that is the true down payment. It is called O P M. Can’t blame him we have done the same many times.

  14. Just an observation so don’t kill the messenger, but rather think of the positives in the Peary Court situation:

    1) The city will now have no long term debt to worry about.
    2) No problem making sure the property doesn’t go into the red.
    3) Only put up “tourist money,” with no property tax money involved.
    4) Doesn’t matter who is staying there – hopefully for the core workforce though.
    5) Supposedly, the property can not be sold piece-by-piece – only the whole parcel.
    6) Technically, the island gets 157 units added to its rental inventory plus an additional 3 units, then another 48 units at least (maybe even 96 units) – for a total of 208 units (or 256 units) using tourist money. I say 208 units (or 256 units) are being added because they are not going to be subtracted if a different buyer turned the property into luxury homes, and you’re getting 208 units (or 256 units) for $12.5 million. Not that bad when you consider that to build new equivalent units or to construct “housing project” type buildings you might end up with 120 units or so.
    7) In theory, we won’t have to worry about maintenance or replacing appliances, etc., and can just bow out.

    • I did not hear of any restrictions on selling the units piece by piece or all in one. They would just have the restrictions on who can live in them. A second home buyer could meet them.

      As to gaining units your math is way off. Cornfield is not required to build any. Cornfeld has plan C in the making. If the deal goes through watch and see him sell the extra land for his profit.

      Will admit it keeps the rents from going crazy but still far too high for real workers.

      And now we are trust who to oversee this job ?

      What a fine use of tourist bed tax. Give it to private owners. In a year you will see the results. Cornfeld will walk out of this mess with a nice profit. Why would an investor limit his potential for a 20% investor ? In the end you still have the same 157 units renting to the high paid workers. The property can still go in the red and you just might see 157 empty units. Then what happens ?

      Had they used the 12 million on new smaller units they would produce a profit and build even more units.

      Just maybe KW does not have the ability to be a smart landlord. Government usually screws things up.

      This will just be another flip the house deal and with none of Cornfelds money.
      He is a smart man. I too have bought properties with none of my own money. OPM is the best game.

      So tell me what KW got for 12 million.

      The deal was worked out before KW even asked what he is putting into it. I heard him admit nothing till he builds the other units. And that is a huge IF.

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