The Real Estate Jungle by Cinnaire

Great Lakes Capital Fund

Vo l u m e 16

Issue 2

2009

THE REAL ESTATE

JUNGLE Stepping Out Into an Uncertain Future

Avenues to Affordability

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. New Construction . Historical Rehabilitation . Renovations . Multi - Family . Mixed Use . General Contractors . Construction Managers . Design-Build

President’s Note.............................................5 Helping Midwest CDCs Adapt.........................6 Role of CDCs is Being Tested...........................8 Scenario Planning...........................................9 Strategic Planning Perspectives...................... 11 Model for Neighborhood Planning................ 13 Community Development............................... 14

Michigan’s Intended Use of TCAP.................. 16 Stimulus Funds in Indiana.............................. 17 Tax Credit Assistance Progam........................ 18 Illinois TCAP, Exchange & NSP Programs........20

New York’s TCAP Program............................ 21 NSP Initiatives...............................................22 State Based Community Funds.......................24 Events & Happenings....................................25

Advertiser Index...........................................27

Avenues to Affordability

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GOVERNING BOARD James M. Hammond III, Chair Indiana Association of Rehabilitation Facilities Marsha A. Kreucher, Vice Chair Community Action Agency Michael J. Taylor, Secretary/Treasurer National City CDC James S. Bernacki Comerica Bank Wendell Johns The NHP Foundation R. Wayne Koehler Fifth Third CDC William C. Perkins Wisconsin Partnership for Housing Development, Inc. Thomas Tracy Hunter Chase Paul J. Weaver Federal Home Loan Bank of Indianapolis

CORPORATE OFFICERS Mark S. McDaniel, President & CEO Christopher C. Cox, CFO James L. Logue III, COO Jennifer A. Everhart, Executive Vice President Rick Laber, Executive Vice President This magazine is published quarterly by the Great Lakes Capital Fund (GLCF) to provide readers with information on the Low Income Housing Tax Credit and other community development resources.This publication is copyrighted. The reproduction of Avenues to Affordability is prohibited by law. For additional copies, comments, concerns or to be added to the mailing list, please contact the Great Lakes Capital Fund office at 517.482.8555 or visit www.capfund.net. Editorial, Advertising and Layout/Design Mary McDaniel, CMP • Alternative Solutions, LLC 517.333.8217 • mcdaniel64@comcast.net Graphics Melissa Travis • Ink Ideas Graphic Design, LLC 517.625.0835 • jmtravis@tds.net Lansing Office 1000 S. Washington, Suite 200 Lansing, MI 48910 Phone 517.482.8555 Detroit Office 1906 25th Street Detroit, MI 48216 Phone 313.841.3751 Indianapolis Office 320 N. Meridian St., Suite 1011 Indianapolis, IN 46204 Phone 317.423.8880 Madison Office 16 N. Carroll Street, Suite 300 Madison, WI 53703-2716 Phone 608.209.7821 Willowbrook Office 7223 South Route 83, PMB 227 Willowbrook, IL 60527

PRESIDENT’S NOTE It probably goes without saying...the past two years have been a challenge for a lot of organizations. How do we survive these historic economic times? The old school MBA business model hasn’t worked for most corporations. Surviving this recession requires vision, guts, an open mind, good instincts and the ability to seize opportunities quickly. This is no time to ponder. Throw out convention and embrace innovation. This has been one of the most difficult periods in community development I have seen in 30 years. This is my third deep recession and after the first two (early ‘80s and early ‘90s) I found myself in new careers (if you get my drift). I believe to this day that if businesses back then had more vision, intuition and better business models to draw from, the results of those times would have been less painful and drastic. Doing things the same way — just because that’s the way we’ve always done them — is a death sentence in this environment. This edition of Avenues addresses strategies and visions for organizational survival in these difficult times. I hope you will find the ideas and concepts refreshing and that they open up new possibilities for you and your organization. We all need to adapt to, and work to improve our current environment because many people’s lives are touched by what we do (employees, residents, business owners, children). Great Lakes Capital Fund has been changing and adapting to the economic conditions over the past two years. Expenses have been reduced, efficiencies have been created, outsourcing, new business lines, and new partnerships have all been part of our survival strategy. Even as we have dealt with staff changes, we have done this in a very unique and innovative fashion to generate a positive result for everyone involved. We know that it is possible to survive and grow if we keep our eyes trained on the horizon, our delivery systems humming at peak efficiency, our hearts in the right place, and our minds open to all possibilities. With 2009 behind us, I sincerely wish you a prosperous 2010. Thanks for helping so many people achieve a better quality of life and the ability to live in stable, healthy communities.

Avenues to Affordability

Helping Midwest CDCs Adapt to Changing, Challenging Times by Angie Gaabo

How Bad Is It?

n late July 2009, the leadership and staff of statewide CDC trade associations from Michigan, Indiana, Ohio, and Illinois joined with the Chicago Rehab Network to discuss the health of the Great Lakes CDC industry and plot a course for our collective future. The downturn in the housing market and the decrease in private investment capital for affordable housing have made life difficult for nonprofit CDCs that have supported their critical work in low-income communities with developer fees. But just how bad is it out there for the hundreds of CDCs operating in the urban neighborhoods of Cleveland, Indianapolis, Chicago, and Detroit, not to mention the rural townships and small towns of all four states, where poverty and unemployment are deepening with the decline of manufacturing and the loss of residents? And what can we do together as a region to help CDCs survive these challenging times and build upon their success over the last four decades?

Each of the state associations that came together in July reported that its membership was under significant stress from (1) a lack of operating funds connected to the downturn in the housing market and new funder priorities; (2) rising rates of foreclosure damaging neighborhood housing stock and property values and generating overwhelming consumer need for direct counseling services; (3) significant confusion over new federal housing programs, such as the Neighborhood Stabilization Program, and how to make such funds work in very weak market communities; and (4) substantial staff burn-out, turnover, and â&#x20AC;&#x153;identity crisisâ&#x20AC;? in a changing world for CDCs. The members of these CDC statewide associations range from 100 to 300 traditionally strong CDCs and their partners. Most are primarily engaged in the development of affordable housing. At the meeting, discussion focused on the difficulty of recruiting and involving active CDC members in housing advocacy work with state legislatures. This has been particularly difficult because CDC

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members are dealing with their immediate financial crises. But a positive note was struck with discussion of innovative, adaptive activities that CDCs are undertaking that will help them, and each of our states, move to a stronger future.

Funding and CDC Operations The Community Economic Development Association of Michigan (CEDAM) surveyed its membership in early 2009 to get a better picture of CDC health. Fully 50% of respondents suggested that revenues were stagnant or declining (from loss of developer fees or charitable funds), with nearly 8% considering dissolution and 20% considering mergers. Interestingly, even with those stark numbers, few members report actual dissolutions or mergers of CDCs in their communities. Strategic partnerships, even temporary arrangements between CDCs to accomplish specific activities, are on the rise in Great Lakes statesâ&#x20AC;&#x201D;with the training to go along with it. An example of this can be found with the Executive Training program in Detroit (see sidebar). CDCs with a healthy parent corpo-

ration (like a Community Action Agency or a mental health agency) are doing the best. To date, most of Michigan’s CDCs are holding on by partnering in new ways, shoring up existing staff, and retraining them in areas where there is greater need and new opportunities for funding. In Michigan, this points to foreclosure prevention/mitigation and to housing services, and it points away from housing construction — at least in the near term.

Addressing Foreclosure, and Planning for the Future In Michigan there are over 80 nonprofit agencies certified by our housing finance agency, Michigan State Housing Development Authority (MSHDA), to provide free housing counseling services to homeowners alongside the state’s HUD-certified counselors. An increasing number of CDCs are retraining their housing staffs to provide counseling and loan modification assistance to homeowners in their communities. In most cases, households are not defaulting on CDC-initiated mortgages. With an estimated 93,000 foreclosures expected in Michigan in the next 12-18 months, there is a desperate need to stabilize threatened communities and to target assistance in neighborhoods. CDCs and their nonprofit partners are stepping up with other nonprofits to provide these services in exchange for federal counseling mitigation funds. CEDAM, through its Michigan

Foreclosure Task Force, is placing 20 AmeriCorps members with CDCs throughout the state. This “Michigan Foreclosure Corps” will expand the outreach of CDCs to more homeowners in need. In some cases it is bringing them back to their roots as community organizers, launching a renewed focus on community organizing training and new dialogues with traditional CDC funders on the permanent need for funding to support it. CDCs in many communities are actively engaged in the rehabilitation and reuse of previously foreclosed properties. In Grand Rapids, CDCs are an integral part of the city’s plans to use Neighborhood Stabilization Program (NSP) funds to acquire and rehabilitate foreclosed homes. In some cases, defaulting homeowners can participate in a lease-purchase arrangement whereby they can buy back a house after a couple years of credit repair and other counseling services. In Detroit, CDCs are on the front lines of creating plans for fewer, stronger neighborhoods after years of population loss. This type of complex work would have been unthinkable even 10 years ago. It requires CDCs to develop new skills and to be seen as relevant neighborhood representatives. It will require deep trust and the ability to engage their partners and funders in fundamentally different ways.

Embracing the Identity Crisis In the end, many CDCs have come to view the current crisis as an important opportunity to change standard practices and to set a new course for more sustainable action on many fronts. For example, most CDCs had been incorporating some “green” into their developments before (continued on page 26)

Helping CDCs Adapt through Executive Training

Detroit CDCs are getting help from their local trade association, the Community Development Advocates of Detroit, through their new Executive CDC Training program called Advance. Launched in the Spring of 2009 and free to members, the program is billed as an executive-level training “designed to help community development organizations adapt and achieve success in their neighborhood revitalization efforts in the midst of turbulent economic times.” The program offers half-day sessions each month covering a range of topics outside of the traditional brick and mortar training typically offered CDC staff. Topics include: • Determining Strategic Direction • Project Evaluation on a Shoestring Budget • The Enterprising CDC—developing a business-model approach • Adaptive Strategies for Changing Times—identifying core competencies • Strategic Partnerships The program is funded largely through the city’s CDBG technical assistance funds but also supported by financial institutions committed to helping the CDC industry survive and thrive during the housing downturn. To date over 35 Detroit CDC executives have taken advantage of the program. For more information, visit CDAD ’s web site at www.detroitcommunit yd e ve lo p ment.org. Avenues to Affordability

The Role of CDCs, Nationally, is Being Tested In 1966, New York Senator Robert F. Kennedy toured Bedford-Stuyvesant, a Brooklyn, neighborhood that suffered two decades of disinvestment and blight. Following the tour, Kennedy and neighborhood activists began a dialogue that led to the establishment the nation’s first community development corporation (CDC). Over the next four decades, the CDC industry expanded, adapting to historic shifts in the nation’s economic and political environment. Today, the number of CDCs in the U.S. is estimated at 4,600. Their main role is to anchor capital by providing hands-on community revitalization services, such as developing commercial corridors and affordable housing. CDCs are characterized by having a 501(c)(3) nonprofit, tax-exempt status; paid staff members; a volunteer board; and a mission grounded in improving the quality of life in the communities they serve. From the beginning, CDCs have sought to redevelop their communities using a “bottom-up” approach. For example, the board of directors is typically made up of community residents, especially low-income individuals. Funding sources for CDCs include foundations, governments, and private businesses. Additional funding and support is provided by community development intermediaries, such as Local Initiatives Support Corporation and NeighborWorks® America. These organizations provide grants, loans, training, and consulting services to help CDCs pursue their missions. While most CDCs are primarily concerned with creating affordable housing through construction and rehabilitation, others have

a broader focus and engage in activities such as property management, commercial and industrial development, transportation, employment assistance, health care, day care, small business development, and housing counseling. Place-based CDCs are those whose missions are closely tied to delivering services within a specific geography. Approximately

As the incidence of vacant properties increases, CDCs are on the front lines in the struggle against a new wave of neighborhood blight. 600 of the 4,600 CDCs in the nation serve a single neighborhood. More than 40 years after Senator Kennedy’s tour of Bedford-Stuyvesant, the viability of CDCs—and place-based CDCs in particular—is being tested. Some of the major challenges CDCs face today are described below. • Demographic changes. The growing number of new immigrants in cities is changing the mix of services CDCs traditionally provide. According to the U.S. Census Bureau’s American Community Survey, the share of the total U.S. population that is foreign-born increased from 7.9 percent in 1990 to 12.6 percent in 2007. Forty-seven percent of the foreign-born population live in central cities, compared to 30 percent of the native-born population. CDCs, the majority of which are located in metropolitan areas, are often taking the lead in assisting newcomers with housing, employment, health care, and other necessities.

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Training 8

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Advocacy

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• The foreclosure crisis. CDCs have worked hard to revitalize their communities, rehabilitate homes, invest in improvement projects, and increase rates of homeownership. In communities throughout the country, the foreclosure crisis is undoing much of this work. As the incidence of vacant properties increases, CDCs are on the front lines in the

Education

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Networking

struggle against a new wave of neighborhood blight. In addition, the drain that foreclosed properties have on local governments puts a strain on public funding sources, which directly affects CDCs. • Changes to a major source of federal funding. One of the biggest sources of funding for CDCs, the U.S. Department of Housing and Urban Development’s Community Development Block Grant (CDBG) program, has become less project-specific and changed its distribution model. As a result, much of the grant funding that once went directly to CDCs now goes to state and local governments. Also, since 1981, funding for CDBG formula-based grants has dropped by 59 percent when adjusted for inflation. More recently, funding fell from $4.3 billion in fiscal year 2003 to $3.6 billion in fiscal year 2008. When adjusted for inflation, this represents a 28 percent cut. • Changes in funders' expectations. Funders of community development work are increasingly looking for comprehensive impact evaluation reports from their grantees. Small CDCs are often not able to afford data tracking tools and other instruments needed to produce these reports. This article was excerpted from “Revisiting the place-based CDC model: A conversation with Brian Miller of Seward Redesign” by Michou Kokodoko. The article appeared in Issue 3, 2009, of Community Dividend, a community development periodical from the Federal Reserve Bank of Minneapolis. Reprinted with permission.

Scenario Planning: Sink or Swim? By Dione Alexander I once took one of those logic tests, the kind you find in the back the Reader’s Digest, and it posed an uncomfortable question: “If your spouse and your child are both drowning who should you help first?” The solution to this problem was actually simple – you help the person with the poorest swimming skills. Left to our own devices, we often over-think (“I’ll swim to the shore, find my cell phone, and call the Coast Guard”) or agonize (“Bob was a great husband”) our way through tough decisions when scenario planning would have led us to optimal and perhaps innovative solutions. Many nonprofits are literally swimming against the tide during the present economic recession. Faced with declines in corporate giving, devaluation of investment portfolios, delayed government payments, and cash and credit shortages, the programmatic and financial futures of nonprofits are uncertain. Scenario planning is a model for learning about the future. It forces us to examine “how do you know when you need to learn about a longterm threat or opportunity.” We all know the story of the nonprofit that expanded a program just as the funding sources dried up, or the client base shifted, or new standards were adopted. Their view of the horizon just wasn’t long enough or deep enough to provide an early warning. So what is a scenario? Peter Schwartz in “The Art of the Long View” calls scenarios stories that help us recognize and adapt to changing aspects of our present environment. We create these stories by aligning facts, what we know about our condition and situation, with forces, those issues and events that drive the enterprise. These forces can be social, political, economic, environmental, technical, educational, or even undefined. For example, we know that earned revenue is declining in three of an agency’s four programs. Conventional wisdom would suggest that we cut or eliminate less profitable programs and redirect capacity to the star program. But wait, there is quote that says the enemy of conventional wisdom is the march of events, which is

WE FIGURE OUT THE BOTTOM LINE AND ALL THE LINES HOVERING PRECARIOUSLY ABOVE IT. We’re certified public accountants. We’re also experts in affordable senior housing. And cost segregation. And historic incentives for brownfield redevelopment areas. So, no line item and no expenditure in your ledger are safe from our fine-toothed comb. Offices throughout the Great Lakes Region Robert Edwards 517.336.7460 Linda Yudasz 248.375.7247 plantemoran.com

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Scenario Planning: Sink or Swim? nice way of saying “change happens, deal with it”. In a closer examination of our example, events or forces need to be carefully analyzed with an eye toward the future. Will the profitable program continue to achieve the desired mission over time? Is the program scalable (i.e. can the delivery system accommodate significant growth or change)?. Where is the program in its life cycle (i.e. is the program already at or past its peak results)? Would additional or different investment in lesser programs that are trending upward create far better financial outcomes than the lead program? Ultimately, scenario planning should be flexible and leave the organization with varied options for reducing threats and exploiting opportunities. Planning is not as absolute as sink or swim but more like choosing the right stroke or speed. Scenario planning requires us not only to recognize change events but to assess their impact. Imagine that you run a governmentfunded education program and a consistent force is legislation that authorizes and appropriates program funding. You might consider the impact (high, medium, low) of increased or decreased funding, oversight, or reporting

on the organization as well as the certainty or likelihood of (high, medium, low) of the event occurring. If an event has high impact and high certainty, then it demands immediate attention, in fact, you may already be in a crisis or reactive mode. If an event has high impact like a student/teacher ratio but low certainty, then it’s an early indicator that the organization needs to monitor. As you begin to create your financial story and make sound long term strategic decisions through scenario planning understand that nonprofit sustainability is a balancing act. For many nonprofit professionals leadership sometimes feels like walking a tight rope without a safety net while juggling, and that’s on a good day. There is a unique and ever changing balance between mission (what you do), capacity (the resource like place, people, and programs that support mission) and capital (what you own and owe and how assets are distributed). A change in any one leg of this triangle results in a change in another. Therefore, we need to resist what students of entrepreneurship call “opportunity obsession” – the desire to explore every new possibility in our path. Scenario planning becomes increasingly

challenging when an organization is overtaxed and inappropriately capitalized. A final word on scenario planning, don’t assume that something can’t or won’t happen. Nonprofits who own a fleet were taken by surprise when gas prices skyrocketed in 2008. Likewise workforce development agencies are currently overwhelmed with new clients due to double-digit unemployment, and community development corporations are struggling with record-breaking foreclosures. Each scenario presents the organization with a different likelihood but a common promise that is to be self-determined and an active participant in their own success. Dione Alexander is the Vice President of the Midwest Region of the Nonprofit Finance Fund. For more information visit www.nonprofitfinancefund.org.  Reprinted with permission from Michigan Nonprofit Association. MNA increases the capacity of Michigan’s nonprofits to serve, strengthen and transform communities. For more information, visit www.mnaonline.org. Text may not be reproduced without written permission from MNA.

Karl L. Gotting Kenneth W. Beall Michael G. Oliva Jeﬀrey L. Green Eldonna M. Ruddock Kevin J. Roragen Richard W. Pennings Ted S. Rozeboom Tracey L. Lackman Michael G. Stefanko

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and municipalities, and with private lenders.

Strategic Planning Perspectives in Challenging Times By Eric Craymer

Times such as these shake the foundation of established plans. The drastic changes in conditions and environments ratchet up uncertainty, risk, and fear. In the nonprofit world they often bring astronomically increasing need at a time when traditional funding from grants, gifts, dues, and municipal underwriting geometrically shrinks. The good news is that we have been here before, the world still exists, and someday the situation will reverse. Even better is the fact that challenges like these force us to reconsider what is important, why we are here, and how we can best achieve our purpose, an ability that in good times we may take for granted. In addition, times of great change and transition usually present opportunity as new needs and methods are developed to address the change. Cutting back on existing plans across the board is usually a bad idea as it cuts the good with the bad and causes you to miss new promising developments. What is needed is a re-thinking of our underlying assumptions, activities, and strategic focuses. Below are several areas where new perspectives applied to your planning can often yield results.

Repurposing In good times, you are too busy getting the job done to question whether it is the right job. Now you must focus. Are we clear about why we exist? A quick exercise in defining outcomes, impacts and targeted populations will test whether or not you have the focus you need.

Consider Multiple Futures Changing times create uncertainty about the future. You need to have a flexible strategy that can succeed in several different futures. Scenario Planning is a technique which uses todayâ&#x20AC;&#x2122;s realities to create robust strategy based on a number of plausible futures.

Plant New Seeds Significant change usually offers new opportunities as new needs, markets, and methods of service are developed. Organizations that recognize these shifts and start building capacity to capitalize on them often come out ahead when the world settles on a new stable path. By conducting environmental scanning and incorporating it into your planning process you can spot these trends in

advance, weigh their potential to change your game, and invest wisely in positioning for the future.

Assess Results In times of adequate resources it is easy to focus so much on doing good works that you never stop to measure the actual results. You can tell everyone all of the things that you do but not whether or not they are having the intended result or if they are the best method to achieve them. Now, more than ever, it is important to have a thorough process for planning, assessing, and adjusting. To ensure maximum impact for resources available, it is important to do this both for the overall organization and for individual programs, services, and activities.

Test Strategic Assumptions Strategy is built on a set of assumptions. Some of them are recognized, like the demand for new homes. And some are not, like assumptions about whether or not there could be conditions under which people would walk away from their home mortgage and keep their credit cards. What assumptions have you based your key strategic and tactical decisions and plans on? Are there any of these assumptions which could be wrong? If so, what would the impact be? You may have to dig deep to figure out what the hidden assumptions are and these are often the ones offering the most dangerous surprises.

Protect the Core Focus, focus, focus. Mission creep is very common. What are your highest priorities and what is your most fundamental purpose? Are you doing things that are only partially aligned with your mission? Are you serving too big of an audience given your resources? A soul searching strategic dialog can surface the core outcomes, audiences, and impacts you need to protect at all costs, even if it means sacrificing some of the nice things you are doing that donâ&#x20AC;&#x2122;t rise to the top.

Focus on Outcomes, Not Means Strategy should never start with programs and services. You need to get beyond merely looking at what you are doing and focus first on the changes in the world you want to make. First define as broadly as possible what end results and outcomes you exist to create and in what populations Avenues to Affordability

Strategic Planning Prospectives in Challenging Times you will create them. Then you can assess programs and services in terms of whether or not they actually are aligned with those outcomes for those populations. Activities should always be designed to achieve the end results. This is a great dialog to start at the board level.

Overlap an Underlap When you have defined your outcomes, look at other organizations serving similar purposes. Looking at the whole industry in your geographic area and market space, ask yourself if there are areas where more than one organization is doing the same thing or addressing the same need? Are there areas of need that are going unserved? Answering these questions can give you insight into over-served areas that you could exit, under-served areas where you could expand, and organizations that may be a good fit for alliances or merger.

Review Strategic Decisions Chaotic change, overwhelming need, and reduced resources mean that strategic deci-

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sions need to be made quickly and with the best possible information. Review your control of decisions. Are they in the right place? Do those in the best position have the information also have the authority to make the call or do they have to pass a decision up before taking action? What decisions can you place closer to the action? Do those people making decisions have the information they need and is the strategic information getting passed up to those monitoring the larger strategic plan? An assessment of decision rights and strategic information flow can highlight existing bottlenecks and potential areas for improving organizational structure and strategic decision making. Strategic failure is as often due to poor execution as it is poor planning.

Plan as a Split Personality You need a realistic assessment of where you are at now and an appropriately designed vision of what you would like to be in the future. This future picture is built on a bet-

ter understanding of your purpose and takes into account some of the shifting needs and methods you have uncovered. Plans need to maintain the current position as well as put the wheels in motion to get you to where you want to be. It is often useful to address both as separate but integrated pieces of your planning. Eric Craymer, MBA, CMA, owns Growth Management Consulting; a firm dedicated to strategically guiding organizations through successful growth and change. To learn more about Growth Management Consulting, visit www.growthmanagementconsulting.com. Reprinted with permission from Michigan Nonprofit Association.â&#x20AC;ŻMichigan Nonprofit Association increases the capacity of Michiganâ&#x20AC;&#x2122;s nonprofits to serve, strengthen and transform communities. For more information, visit www.mnaonline.org. Text may not be reproduced without written permission from Michigan Nonprofit Association.

Model for Comprehensive Neighborhood Planning & Economic Development By Dennis Quinn

n response to the current economic crisis, Southwest Housing Solutions (SWHS) is focusing more intently on its core business strategy, while expanding into new areas of community development. Over the last ten years, SWHS has been a leader in the physical revitalization of Southwest Detroit. The agency has restored old abandoned buildings into more than 350 units of beautiful housing, eliminated blight conditions, turned vacant storefronts into thriving businesses, and invested over $65 million in the Southwest Detroit community. Core activities include, but are not limited to development and management of affordable rental housing and commercial property, minor home repair, homebuyer education, foreclosure prevention, and financial literacy, while at the same time revitalizing neighborhoods in Southwest Detroit. By working cooperatively with community residents, other community-based organizations, the local business community, and government agencies these developments and programs will act as catalysts for further development and investment in Southwest Detroit. The success SWHS has achieved is the result of a disciplined and consistent approach to community development. Real estate development will continue to be based on market-driven factors, but will also be a part of a larger long-term strategic framework driven by market-building strategies. SWHS will continue to build affordable and supportive housing for those residents most in need, while adding to that specialty a comprehensive collection of well designed and innovative mixed-use and commercial developments. These products are intended to address a number of specific high impact properties and geographies and bring an elevated sense of place to Southwest Detroit.

The addition of assets, owned and managed or managed on behalf of third parties, will evolve as a critical component in the growth of the organization. Aggressive marketing coupled with a succinct and deliberate acquisition plan will offer the organization the ability to selectively add to its management portfolio. SWHS will capitalize on what it does best — manage a good project well and, identify assets which provide a mutually beneficial arrangement. The new programs and business activities that will be developed over the next 1-3 years include educational services, financial literacy, foreclosure counseling, and lending and financial assistance will be offered to increase homeownership, stabilize neighborhoods, and build wealth for

families looking to improve their quality of life. An improved array of services, marked most notably by the inclusion of the Center for Working Families platform, strives to address critical personal and community issues around home ownership, economics, and opportunity. SWHS leadership in the establishment of a truly collaborative process which, among other things, competitively markets Southwest Detroit as a neighborhood of choice, is necessary to retain upwardly mobile residents and attract middle income households from outside the area and expand the market. Dennis Quinn is a Senior Vice President, Capital Group for Great Lakes Capital Fund. Dennis is located in GLCF’s Detroit, Michigan office.

Work With a Leader For over 50 years, the qualified professionals of Gordon Advisors have provided specialized tax, auditing and consulting services to some of the largest developers, contractors and management companies in the state. Services include business planning, cost certification and low income housing tax credit compliance. To obtain additional information on the services we provide, contact our team of professionals at (248) 952-0200. Kevin E. Klein, CPA, M.S.F. – kek@gordoncpa.com Alan S. Kristall, CPA, CFP – ask@gordoncpa.com Alan R. Steinberg, CPA – ars@gordoncpa.com Cynthia S. Sobran, CPA, M.S.T. – css@gordoncpa.com 1301 W. Long Lake Rd, Suite 200 Troy, MI 48098 t: 248.952.0200 · f: 248.952.0290 www.gordoncpa.com Avenues to Affordability

Community Development in Changing Times By Andy Fraizer The news media has been talking about “green shoots” for months now—tiny signs of recovery in the economy. Any piece of positive economic news is a sign that the worst recession in a generation is on the way to the history books. However, economists say Indiana’s recovery is still many months away. Indiana continues to see increases in foreclosures, sluggish home sales, declining housing starts, and shrinking home values. Indiana’s unemployment rate is still in drastic range at 10.4%, falling from a high of 10.6% in July 2009. Indiana-based homeless shelters have reported

across the country about the impact of the recession. Only 16% of the organizations surveyed expect to cover their operating expenses this year, and 52% anticipate the recession will have a long-term or permanent negative effect on their organizations. If these findings hold true for IACED’s membership, months, and perhaps years, of hardship remain. In July and August, the IACED staff traveled across the state to regional meetings to understand the challenges in the current economy. What IACED heard on the listening tour is irrespective of the non-profit organization’s mission—human services, emergency shelter, housing counseling, real

sions about preserving core programs, as they look to reduce costs and attempt to maintain reserves. Through contingency planning and good management, many strategies are helping members to remain faithful to mission and deliver services. Members are cutting costs to act as a tourniquet on hemorrhaging funds. Some have trimmed personnel expenses and made broad-based programmatic reductions. In the language of adaptive leadership, these strategies address the short technical challenges of keeping the operation solvent and focusing on mission. In the July 2009 issue of Rebuilding Indiana Monthly, IACED Senior Program Manager

“We don’t have lots of money, but we have big ideas and passionate neighbors dedicated to improving our little part of the city.” – Sharon Arnold increases in clients this summer. Given the slumping state of the housing market, it does not bode well for those who deliver critical emergency services. Estimates say it takes two years for Hoosier families who have lost their homes to end up in a homeless shelter. This is the amount of time it takes to exhaust unemployment and family benefits and seek cheaper housing accommodations. Only then do families seek services from shelters. The Indiana Association for Community Economic Development (IACED) is a resource for its members in these challenging economic times. IACED’s members are community-based non-profit organizations and associate members who are supporters and partners in working to build assets for Hoosier families and stronger Indiana communities. In the face of the current economic crisis, and, as the economy recovers, non-profit community-based organizations will face a lasting challenge. A recent survey by Nonprofit Finance Fund asked 986 non-profits 14

Great Lakes Capital Fund

estate development, or other workforce and economic development —members are facing a greater need for services and quickly tapping reserves as they deal with funding cuts from all sides. The current historic recession is rooted in the financial sector, which has been a strong supporter of community economic development organizations. According to the Conference Board, banks were the second-largest corporate philanthropic givers. The impact on charitable giving from banking disarray is huge. Downticks in this philanthropic support can and will have direct impacts on community-based organizations’ capacity to respond to cascading foreclosures and reversals of positive community development accomplishments. Today’s financial meltdown will hit community developers where it hurts—in the financial wherewithal to respond to the challenges they face in urban and rural communities. IACED members are making critical deci-

Lisa Archey wrote an article titled, “Adequate Nonprofit Reserves for Financial Stability? It Depends!” This article discussed the importance of maintaining reserve funds and strategies for preservation or investment in reserves. These strategies included: • Budget for a surplus or a balanced budget that include a modest annual contribution to reserves. • Build a stronger individual giving program. Contributions from individuals can be an important source of unrestricted revenue that can ultimately help build operating reserves. • Understand the true costs of each program and activity, and know which produce net revenue and which drain resources. It can be difficult to operate at a surplus and build up reserves if too many programs lose money. It’s hard to know what to cut to improve the bottom line if you don’t track income and expenses by program.

• Understand the balance sheet. Reserves are not the same as money in the bank since many groups have large amounts of restricted income. Members are also thinking creatively about strategies which produce new revenues from core programs, strengthen ties with existing funders and create projects and programs that generate additional income. An example of producing revenues from an existing program is Pathfinder Services housing counseling program. Pathfinder Services, a member based in Huntington, reported a significant increase in homebuyers seeking counseling to take advantage of the federal tax credits and the ample supply of affordable housing. Several members expressed an interest in adding foreclosure counseling as a service. During the 2009 Indiana General Assembly session, IACED was successful in lobbying for legislation to increase the foreclosure filing fee by $50 to fund foreclosure counseling. The need for this counseling outstrips current delivery capacity. During regional meetings, IACED staff heard about how members are accessing (or attempting to access) the stimulus resources from the American Recovery and Reinvestment Act (ARRA). The ARRA includes $787 billion in spending and tax provisions, such as the credit for first-time homebuyers. The 400-plus pages of the legislation describe numerous programs which benefit the work of IACED members, including housing and commercial development, energy efficiency and weatherization, education, employment and job training, homelessness, and the arts. Accessing the ARRA stimulus programs requires capacity and wherewithal. An important consideration for the community economic development industry is whether some of the ARRA resources flow to smaller community development non-profits, which are close to community assets. The alternative is stimulus funds flow only to well-heeled nonprofits-or socially minded for-profits. The ideal is a mix of investments to produce the desired stimulus and community benefit. Much of the discussion focused on the Neighborhood Stabilization Program (NSP), the Tax Credit Assistance Program (TCAP), and the Homelessness Prevention and Rapid Re-Housing Program (HPRP). Diverse

partners are coming together to improve local conditions and deliver needed services by accessing these funds. In addition to the nonprofit organization’s, IACED’s many associate members discussed challenges accessing capital for operations and to advance various types of real estate development deals. Associate members representing various layers of government talked about their frustration in receiving timely federal stimulus resources. This included approval of required plans or delayed contracts with federal agencies. In addition to technical challenges stemming from the state of the economy, IACED members are facing unprecedented factors requiring new ways of collaborating across disciplines. Looking beyond the economic recession, IACED is a resource to help members adapt to the evolving nature of the community economic development industry composed of many organizations collaborating to provide holistic solutions. Decreasing resources, increasing needs and the interrelationship of social forces require leadership which works together with new mind sets, rediscovered passions, and new skill sets. In these times of challenge, IACED members will set the stage for long lasting adaptive solutions. Examples include human service agencies adapting their work to connect services for basic needs with strategies to access employment and permanent housing for clients. It means community development corporations, understanding how they survive as more than merely non-profit housing producers. It means all communitybased agencies understanding why they must collaborate and what adaptation is required to provide a high quality of life for all. During the recession in 2001, Andy Robinson wrote an article in Shelterforce Magazine titled, “When in Doubt, Think.” This article provided the following sage advice, “Money is just a tool…What you lack in money, you can often make up for with the talent, enthusiasm and the track record of your members, supporters, board, and staff.” This sentiment points to the special nature of communitybased non-profits, they connect directly to the local talents of residents and other community institutions, which provide resources when times are tough. Sharon Arnold, Executive Director of Devington Community Development Corporation (CDC) in Indianapo-

lis said at a recent IACED regional member meeting, “We don’t have lots of money, but we have big ideas and passionate neighbors dedicated to improving our little part of the city.” The trick to surviving in these economic times is to put together the right combination of services, income streams, and other resources so the organization can sustain its capacity and remain a community asset. Andy Fraizer is the Executive Director of the Indiana Association for Community Economic Development (IACED). IACED was founded in 1986 to serve community development organizations working on behalf of disadvantaged and low-income populations in Indiana. IACED member organizations rebuild distressed communities in rural, small city, and urban areas in Indiana through housing rehabilitation and construction, employment-generating activities, real estate development, industrial and small business development, and social services. Visit IACED at www.iaced.org or call: 317-920-2300.

Avenues to Affordability

Michigan’s Intended Use of TCAP and Exchange Dollars By Tom Edmiston In a memorandum distributed August 19, 2009, the Michigan State Housing Development Authority (MSHDA) outlined its intended reallocation of resources under the Tax Credit Assistance Program (TCAP) and Grants to States for Low-Income Housing Projects in Lieu of Low-Income Housing Credits (Exchange) programs. This information is summarized in the below chart. Funding was shifted from the 9% Tax Credit programs (TCAP and Exchange) to the 4% Equity Support program tied to MSHDA’s Direct Lending (tax exempt bond) program. On August 19, 2009, Steve Lathom, Development Operations & Policy Manager for MSHDA noted, “We estimate that $25 million in TCAP funding previously set aside for the 9% Equity Support Program can reasonably be transferred to another program area.” He went on to state: “Forty nine applications were received under the 9% Tax Credit Exchange Program, representing approximately $200 million in potential Section 1602 Program funding… The initial triage review suggests that many developments are no longer economically viable given the available resources and the underwriting outlook being

applied across all ARRA funded programs…. we estimate that $40 million in Section 1602 Program funding previously set aside for the 9% Tax Credit Exchange Program can be reasonably transferred to another program area.” Lathom summarized by stating, “The Authority, therefore will re-allocate $40 million in Section 1602 Program funding from the Exchange Program and $25 million in TCAP funding from the 9% Equity Support Program to the 4% Equity Support Program. Lathom went on to note, “As a general rule, on a first-come, firstserved basis, recipients of 4% Equity Support Program awards will receive a 50/50 split between Section 1602 and TCAP funding until available Section 1602 funding is exhausted.” To be eligible for TCAP funding, Federal Law requires that a project receive a tax credit award on or before September 30, 2009. MSHDA plans to provide provisional LIHTC awards to projects that have submitted applications for both its Direct Lending and its 4% Equity Support programs by September 15, 2009. Hard equity commitments must be obtained in order to receive a binding commitment for TCAP funding.

New Program Established Earlier this year, MSHDA announced it

would exchange the maximum amount (40%) of its 2009 tax credits. These federal dollars totaling $78 million will be used for a new program to help stabilize older properties experiencing problems. The Program Notice for the Housing Reinvestment & Innovation Program was posted on August 18, 2009, with applications due by September 18, 2009. This program is designed to use 1602 Exchange funding to reposition developments that are at least eight years old with at least 15 years remaining on their affordability period. If a project isn’t already subject to an extended low-income housing commitment under the LIHTC program, it must execute such an agreement with a minimum term of 30 years. Eligible uses include rehabilitation costs, reserve deposits, and developer fees. The Program Notice cites Section 42 of the Internal Revenue Code as the basis for its design. For more information about MSHDA’s ARRA activities, visit www.michigan.gov/ mshda and click on the ARRA link. Tom Edmiston is a Senior Vice President, Capital Group for Great Lakes Capital Fund. Tom is located in GLCF’s Lansing, Michigan Headquarters office.

MSHDA – ARRA FUNDING: August 19, 2009 Program

Initial Allocation

Revised Available Funding

Presumed Funding Source

9% Equity Support

$34 million

$9 million

TCAP

9% Tax Credit Exchange

$200 million

$160 million

Section 1602

4% Equity Support

$30 million

$55 million (TCAP)

TCAP & Section 1602

$40 million (Sect 1602) $95 million Reinvestment Program 16

Great Lakes Capital Fund

$78 million

Section 1602

Implementation of Stimulus Funds in Indiana IHCHA’s Efforts to Provide Affordable Housing

By Jack Brummett The American Recovery and Reinvestment Act of 2009 (ARRA) was enacted into law on February 17, 2009. In part, it provides the affordable housing industry with the tools necessary to move forward on the construction of developments that have been stalled because of the lack of investor equity or other acceptable construction period financing. The most significant provisions of ARRA are the Tax Credit Assistance Program (TCAP) and the Grants to States for Low-Income Housing Projects in Lieu of Low-Income Hous-

The developments applying for Section 1602 funding are required to be “shovel-ready” in order to meet the goals IHCDA has set for this program to create and save jobs and increase the supply of affordable housing. IHCDA has engaged three entities, including Great Lakes Capital Fund, to act as Financial Service Agents (FSA) for developments that exchange 100% of their tax credits for Section 1602 funding. The policies and procedures manual states, “The FSA will administer the underwriting, closing, funding of all draws, and the asset management of the development during the compliance period.”

ment (HUD). To be eligible for TCAP funds, a property must have an allocation of tax credits awarded by IHCDA between October 1, 2006 and September 30, 2009. To fully utilize the benefits available to the affordable housing industry in Indiana, ARRA requires the grantee (IHCDA) to commit at least 75% of its funds by February 16, 2010, expend 75% by February 16, 2011, and expend 100% by February 16, 2012. IHCDA has been working with the development community to be aware of the process to be considered for a TCAP loan and the urgency created by the timing constraints. As of August 13, 2009,

“The exchange program can provide a quick fix to properties with allocations of tax credits outside the Midwest Disaster counties.” – Jacob Sipe ing Credits (generally referred to as the “Exchange,” or 1602 program). The staff of the Indiana Housing and Community Development Authority (IHCDA) worked openly and continuously with all the industry stakeholders to develop policies and procedures that will provide relief to the financing gaps and enhance the lowincome housing programs for the long term. IHCDA’s policies and procedures relating to the Section 1602 and TCAP programs are well documented and easily available on its web site www.in.gov/hcda in the section for Developers & Property Managers, then at the end of the information on the Qualified Allocation Plan. Jacob Sipe, multi-family manager for IHCDA, said, “The exchange program can provide a quick fix to properties with allocations of tax credits outside the Midwest Disaster counties.” The exchange funds are a grant from the Treasury Department to the state housing finance agencies based upon a portion of the states allocation of low-income housing credits otherwise available to developers. IHCDA applied for and was awarded $164K of exchange funds to assist in the financing of stalled properties.

As of August 13, 2009, IHCDA had received Section 1602 applications from 25 developments totaling $100,981,401. FSAs have been selected by the developers and approved by IHCDA on many of these applications, and award letters have been sent to the applicants on several developments. Construction should start on 10-15 developments within the next 30-60 days. The implementation of this portion of the stimulus funding is demonstrating the immediate impact IHCDA had planned. IHCDA anticipates the benefits of the TCAP portion of ARRA to be available to the state for the long term, if properly utilized. Sipe said, “The state plans to use the majority of the TCAP funds to create a revolving loan program to bridge investor financing which would enhance the return to investors and promote the public/private financing of quality affordable housing throughout Indiana. Using TCAP in this manner will allow IHCDA to recycle the funds and maximize the benefits available from this unique opportunity.” Sipe emphasized that the window of opportunity is quickly closing. The state has been awarded $38,048,333 in TCAP by the Department of Housing and Urban Develop-

IHCDA had received four applications for TCAP totaling $17,103,847. Sipe acknowledged the additional federal responsibilities placed on TCAP awards. These developments must comply with Davis-Bacon prevailing wage standards and the National Environmental Policy Act (NEPA) review. The costs associated with complying with these cross-cutting standards can be a part of the TCAP application. It is anticipated that many of the properties in need of TCAP funds have already begun or have completed the documentation required for meeting the requirements of federal grants. The Policies and Procedures manual approved by IHCDA on July 10, 2009, gives clear details of the cross-cutting federal requirements. As further evidence of the willingness of IHCDA to work with developers during this difficult time, the authority issued Multifamily Notice 09-26 to extend the deadline to submit the 10% test to June 30, 2010 from November 13, 2009. Jack Brummett is Senior Vice President, Capital Group for Great Lakes Capital Fund. Jack is located in GLCF’s Indianapolis, Indiana office. Avenues to Affordability

Tax Credit Assistance Program By Keith Broadnax The Wisconsin Housing and Economic Development Authority (WHEDA) has received funding in the amount of $35,594,904 to be used as a source of Low Income Housing Tax Credit (LIHTC) gap financing under its TCAP program. WHEDA will offer its TCAP program to developers to enhance development strength and encourage investments from investors. TCAP assistance will be subject to the same requirements as an award of LIHTC. Eligible participants are sponsors of rental housing that received an LIHTC award during the period from October 1, 2006 to September 30, 2009, and are in need of additional funding for financial feasibility. TCAP funds will be subject to the following selection criteria:

1. Meet the WHEDA eligibility requirements 2. Readiness criteria including but not limited to site control 3. Completed construction drawings 4. Completed Environmental Phase I 5. Not previously closed with an investor 6. Secured equity investment at or above $0.60 per $1.00 of tax credits 7. Ability to close within 120 days of commitment 8. Development completion by February 16, 2012. Sponsors must complete a WHEDA Loan Application that includes the following: 1. Amount requested 2. Sources and uses 3. Meet Davis Bacon requirements 4. Completed Environmental Phase I 5. Anticipated closing date

6. Anticipated construction and completion schedule 7. Letter of Intent from an investor 8. Explanation of gap caused by lower investor pricing 9. Documentation/description of Readiness Criteria. Developments must also provide an equity pay-in schedule with a minimum credit price of $0.60; a minimum of 15% of equity at construction loan closing, and no more than 20% of equity remaining due at stabilized occupancy. WHEDA will review the sponsorâ&#x20AC;&#x2122;s TCAP request and determine whether to issue a TCAP Loan Commitment with an expiration of 120 days. Reporting and compliance will include (no less than quarterly) a development completion status, an estimate of the number of jobs created and/or retained, and any other information necessary for WHEDAâ&#x20AC;&#x2122;s federal reporting requirements.

Exchange Program WHEDA exchanged 100% of its 2008 per capita credit carried forward to 2009 and 40% of the 2009 per capita credit resulting in approximately $115 million in funding availability. Exchange funds will be awarded as grants. WHEDA may use the funds to make sub-awards of the Exchange grants to finance the construction or acquisition and rehabilitation of qualified low-income buildings with or without an allocation of LIHTCs. The subawards are subject to the same requirements as LIHTCs. WHEDA is required to perform Asset Management oversight of Exchange developments that will include annual, audited financial statement reporting and quarterly occupancy reporting. WHEDA will accept requests for LIHTC Exchange funds for rental housing developments that received or will receive an award of LIHTCs in 2008 or 2009 and potentially 2010 and are unable to secure investors. Applicants for Exchange grants for unclosed 9% LIHTC Carryover applicants from 2008, meeting the eligibility requirements, will

Great Lakes Capital Fund

be given priority. The deadline for submittal was on July 15, 2009. Commitments for 2009 Exchange grants for all 9% LIHTC developments will be awarded competitively. The deadline for submittal was September 1, 2009. WHEDA expects to evaluate applications based upon the following criteria: 1. Must meet eligibility requirements 2. Readiness Criteria 3. Not previously closed with an investor 4. Close within 120 days of Commitment 5. Expend all Exchange proceeds by December 31, 2010. Sponsors must complete a WHEDA Loan Application that includes the following: 1. Amount requested 2. Sources and uses 3. Anticipated closing date 4. Copies of unexpired commitments from all funding sources 5. Anticipated construction and comple-

tion schedule 6. Explanation of inability to secure an investor 7. Statement surrendering LIHTC award 8. Current financial statements of developer/sponsor 9. Documentation/description of Readiness Criteria Grants will be sized to the lesser of the most recent credit applicant’s stated equity need, or $0.85. Exchange grants will require the execution of a Regulatory Agreement at closing. Exchange contributions will be for 15-year terms with no interest or payments. If the development remains in compliance with the applicable program requirements for the entire 15 years, the full amount of the contribution will be forgiven. The Regulatory Agreement will include a developer fee of 25% at closing, 25% at construction completion/certificate of occupancy, and 40% at permanent loan conversion.

WHEDA reserves the right to direct ten percent of the developer’s fee into a third party account to be released in the tenth year of the agreement; with 25% of cash flow directed to WHEDA held reserve, after payment of non-interest bearing deferred developer fee, sponsor operating deficit guarantees for ten years, 12-month operating/debt service reserve, residual sale restricted to 501(c)(3) entity for exit taxes plus outstanding debt, 30- year Land Use Restriction Agreement, recapture provisions, evidence and maintenance of replacement reserve, letter of credit or performance bond for development completion, development scope, commitments and certifications from most recent Credit application will apply. Keith Broadnax is Vice President, Real Estate Organization for Great Lakes Capital Fund. Keith is located in GLCF’s Madison, Wisconsin office.

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Avenues to Affordability

Illinois TCAP, Exchange, and NSP Programs By Jerome Sullivan The Illinois Housing Development Authority designated the Tax Credit Assistance Program (“TCAP”) and the Section 1602 Program (“Exchange Funds”) as the Equity Replacement Program. The first projects eligible for the ERP are those developments that received an award of either four or nine percent credits in either 2007 or 2008 and that had not yet completed construction. Of course properties must demonstrate a need for the funds by having a financing gap created primarily as a result of reduced LIHTC pricing or be stalled through an inability to attract an investor at all. Per ERP guidelines, applicants will apply for funds and IHDA will decide the mix of funds the project will receive between TCAP and Exchange Funds. As TCAP funds must be committed and expended on a specific timeframe, IHDA expects to award TCAP funds prior to exchange funds. Projects seeking ERP funding must be substantially similar in all respects to the parameters originally approved by IHDA. Deciding factors are project ownership, development team, and location. Additionally the tenant population and income targeting as well as the development and operating budgets should be close to the originally approved project. As the Exchange Funds are subject to recapture due to non-compliance at the property, it is a risk to IHDA and the other housing finance authorities. At the August 21, 2009 IHDA board meeting, IHDA staff discussed with the board the risk the program brings to IHDA and the discussions that staff have held with HUD regarding having that risk run to the developer instead of the HFA. Those discussions have not yet resulted in a policy change from HUD. Despite the risk to IHDA, they have moved forward quickly in implementing the program. The first round of applications under the ERP program was

Great Lakes Capital Fund

accepted by IHDA through July 1. The first round was for 2007 and 2008 projects only, and 31 applications were submitted. The application process is competitive with preference given to developments that are ready to proceed and expected to be placed-in-service in the near future. The first seven ERP projects were announced at the August 21 board meeting and totaled 344 units that will be able to commence or complete construction in the near future. The second ERP round starts on September 28 and ends on October 5. The second round will be for projects that received credit in either 2008 or 2009. Additionally, projects that received an award of Midwest Disaster credits in 2008 can apply for funding in the second round. The Neighborhood Stabilization Program (NSP) funds for the state of Illinois totaled $172.5 million with Chicago and 12 other local governments receiving direct allocations. Chicago received the largest portion, with $55 million coming to that city. Chicago expects to assist up to 2,500 units with the NSP money and chose one lead entity to be responsible for the program – Mercy Portfolio Services (MPS), a subsidiary of Mercy Housing Inc. Chicago expects that having a consolidated approach will allow MPS to gain economies of scale in negotiating bulk acquisitions with lending institutions. The portion that went directly to the state was $53 million. The Department of Human Services was the agency responsible for managing the funds that went to the state. At the state level, Illinois decided to set a goal of 40% of the funds going to developments that provide affordable and/or accessible homes for very low-income households and persons with disabilities. Very low-income households and persons with disabilities are considered priority populations in the state’s comprehensive housing plan. While Human Services was the lead agency for the management of the NSP funds, both IHDA and

Department of Commerce and Economic Opportunity were involved in the program in developing the strategic statewide plan and provide expertise on the Community Development Block Grant program rules that govern the NSP funding. In Aurora, the second largest city in the state, the NSP funds of $3 million were targeted to the neighborhood revitalization strategy plan originally adopted in 2000 and updated for 2008-2010. The targeted area includes the city’s downtown area. Aurora is an older city that has benefited from the population growth flowing into the area over the last 20 years. However, much of this population growth has consisted of new single-family construction in outlying subdivisions and the central area of the city has a disproportionate share of the lower income residents of the city – this is the area targeted with the NSP funds. Aurora split the NSP money with around 60% to homeownership and 30% to rental and, additionally, mandated ongoing affordability based on the amount of NSP funds given to the housing unit with a fiveyear period for $15,000 and under, ten years for assistance up to $40,000, and 15 years for over $40,000. The substantial funding sent to Illinois under ARRA has required municipal and state officials to react quickly in drafting policies to govern the funds. They rose to the occasion and have established the processes to get projects rolling. We are starting to see the dollars take effect in the communities with the first houses being purchased under NSP and rental projects commencing construction with the TCAP and LIHTC exchange funds. So while it is still an extremely challenging time to be a practitioner of community development, there are many positive signs and some projects are moving forward. Jerome Sullivan is a Senior Vice President, Capital Group for Great Lakes Capital Fund. Jerome works from GLCF’s Illinois and Wisconsin offices.

New York’s TCAP Program By Dennis Quinn The New York State Commissioner of the Division of Housing and Community Renewal (DHCR), Deborah VanAmerongen, recently commented, “The recent collapse of the credit and mortgage markets, has taken a toll on the value and effectiveness of the Low

The Commissioner’s acknowledgement of the collapse in tax credit pricing is important to syndicators and developers alike. Income Housing Tax Credit and jeopardized the ability of affordable housing developers to secure financing.” The Commissioner’s acknowledgement of the collapse in tax credit pricing is important to syndicators and developers alike. That a high-level New York State public official understands that the problems in the LIHTC market extend not just to the private sector, but also to the public sector underscores the fact that the LIHTC program has become the nation’s single most important tool in financing the development and preservation of affordable housing. In response to these challenging times, the State of New York is aggressively implementing the American Recovery and Reinvestment Act of 2009, Tax Credit Assistance Program (TCAP). TCAP is a public financing tool designed to fill the gap between the reduced amount of equity generated under the current pricing structure for LIHTCs, and the typically small amount of debt that an affordable housing develop can support. With prices falling for these credits from >$1 in 2006 and early 2007 to the current $0.60 or less, the gap continues to grow. On June 16, 2009, HUD approved a $253 million allocation of TCAP funds for the State of New York. DHCR in turn sub-allocated

$50 million to the New York State Housing Finance Agency (HFA-allocator of the 4% Credit and Housing Bond Finance Authority), and $85 million to the New York City Department of Housing Preservation and Development (HPD). The remaining $118 million will be allocated to 9% LIHTC awardees throughout the Upstate New York region. To be eligible to receive TCAP gap financing, you must have received an award of 9% or 4% LIHTCs during the period of October 1, 2006 through September 30, 2009. Priority will be given to projects that demonstrate project readiness, defined as projects that are expected to expend 75% of their TCAP award by February 16, 2011, and 100% by February 16, 2012. DHCR and HFA will also consider the following factors: 1. Funding Commitments 2. Local Approvals

3. Environmental Approvals 4. Site Control 5. Development Team Capacity 6. Status of Construction Documents In addition, HFA requires the project to pay Davis-Bacon wages, serve predominately low-income tenants, preserve “Mitchell-Lama” housing projects, creation of supportive housing, and preservation of existing affordable housing units. DHCR does not plan to use the Tax Credit Exchange Program Funding (Section 1602 Funds). Commissioner VanAmerongen has expressed strong support for a private market response to the equity crisis. Dennis Quinn is a Senior Vice President, Capital Group for Great Lakes Capital Fund. Dennis is located in GLCF’s Detroit, Michigan office.

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Avenues to Affordability

Neighborhood Stabilization Program Initiatives

By Victor Vasquez

Great Lakes Capital Fund

he issue of housing foreclosures continues to be a topic of discussion, especially in the Midwestern states where Great Lakes Capital Fund (GLCF) provides its services. There is an undeniable link between rising unemployment and the continuing increase in the number of homes being foreclosed. Unfortunately, the large number of foreclosures now negatively affects past and current successful community development and neighborhood revitalization efforts in our communities. GLCF recognized early that there was a role it could play in what many consider is the greatest housing crisis in our countryâ&#x20AC;&#x2122;s history. Through its affiliation with the Housing Partnership Network, Great Lakes participated and provided input at the national level on legislation that created the $3.94 billion Neighborhood Stabilization Program (NSP). Redevelopment of abandoned and foreclosed properties is the major program activity for the NSP, and eligible uses include housing acquisition, rehabilitation, disposition, and homebuyer down payment assistance. It quickly became apparent that the success of the

NSP was dependent on the ability of local communities to collaborate and coordinate their existing and future efforts to address the issues of foreclosed and vacant property. GLCF then applied for and received a $50,000 grant from the Citi Foundation to support NSP-related planning activities in the Detroit area. GLCF provided the funding to Community Legal Resources to coordinate a number of activities, including an NSP data collection project to support the Cityâ&#x20AC;&#x2122;s NSP planning process, and to staff initiatives such as the Vacant Property Leadership Team. When NSP allocations to communities were made public, it was evident that the initial amounts provided would not generally result in making a significant number of foreclosed houses available for homeownership. GLCF applied to the Grand Rapids Community Foundation for a Program Related Investment to create a loan program that is being used to acquire NSP eligible properties in the City of Grand Rapids/Kent County. This $2.2 million program being piloted in Grand Rapids allows the city to leverage its NSP funds and increase the number of houses it can initially make available to eligible homebuyers. Acquisition loans are repaid from housing sales proceeds. All new programs are challenging to implement, and GLCF became aware of a need for technical assistance to housing developers to apply for and develop and implement eligible NSP programs. GLCF is currently providing such assistance to Genesis Outreach, Inc., an Indiana non-profit housing developer that is implementing an NSP housing development in Fort Wayne, Indiana. In recognition of the need for NSP related assistance, GLCF is available to provide NSP related technical assistance services to other communities. During the implementation of the NSP, there were reports that participating developers were having serious challenges in acquiring NSP-eligible foreclosed proper-

ties from the national financial institutions that owned them. Through its affiliation with the Housing Partnership Network, GLCF became the first organization in Michigan to participate in the National Community Stabilization Trust’s (NCST) Real Estate Owned (REO) Acquisition Program.

process. GLCF then sells the houses to qualified housing developers. Primary benefits include offering lower sales prices, as this expedited sales process eliminates or reduces the financial institution’s holding and disposition costs. Purchased houses then don’t sit vacant for prolonged periods of time, making

pending application for funding to redevelop foreclosed multi-family housing developments under the NSP2 $2 billion allocation that is currently available. GLCF continues to monitor the implementation of the NSP for other opportunities where it can provide current and other new services that will assist

There is an undeniable link between rising unemployment and the continuing increase in the number of homes being foreclosed. Through this program, participating financial institutions in the NCST REO Acquisition Program make their REOs available to participating organizations, such as GLCF. GLCF is given the first opportunity to purchase newly foreclosed houses in its service areas before they go through the financial institution’s standard property disposition UnifiedRedTapeAd.qxd

9/25/09

them targets for vandalism or other negative influences on the surrounding neighborhood. The First Look Program is currently operating in Grand Rapids and Lansing, Michigan, and GLCF is in the process of offering the program to other communities. GLCF also collaborated with the National Housing Trust in the submission of a

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communities in addressing the issues caused by housing foreclosures in their neighborhoods. Victor Vasquez is Vice President of Capital Fund Advisory Services, which is GLCF’s consulting services division. Victor is located in GLCF’s Lansng, Michigan office.

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www. UnifiedPropertyGroup.com Avenues to Affordability

State Based Community Funds By James L. Logue III

n response to the constrained tax credit market, and to expand opportunities for investors to participate in the Low Income Housing Tax Credit (LIHTC) program, Great Lakes Capital Fund has recently established state based community funds. While any size bank can invest in the GLCF Community Funds, they are specifically attractive to community banks. Unlike most funds that require a $1 million investment, the GLCF Community Funds will accept investments as low as $250,000. This decreased investment amount has allowed smaller, local banks the opportunity to take credit for investing in affordable housing in their own backyards. In Michigan and Indiana, GLCF Community Funds are supported through our partnership with the Michigan Bankers Association (MBA) and Indiana Bankers Association (IBA), respectively. Partnership with the Bankers Associations has proven to be an effective tool in providing potential investors with an education on the benefits banks receive when investing in the LIHTC. Joe DeHaven, Executive Director of the IBA, recently commented: “Investing in the Indiana Community Fund provides IBA members with the opportunity to receive an excellent return, fulfill CRA requirements and to improve the stock of low-income housing available in their communities and through-

out the State of Indiana. The IBA board and staff are excited to join with Great Lakes Capital Fund to provide this important financing vehicle.” Larry Sauter, President and CEO of the MBA, likewise remarked: “The MBA enthusiastically supports the Michigan Community Fund because it provides a triple bottom line opportunity for our members. By investing in housing credits, banks can reduce their federal taxes, support high quality, affordably priced housing for community residents, and receive CRA credit as well.” Collaborating with state Housing Finance Agencies has also increased investor interest and enthusiasm in the GLCF Community Funds. DeShana L. Forney, Executive Director of the Illinois Housing Authority, stated: “In these challenging times, the use of federal Low Income Housing Tax Credits (LIHTC) can continue to reinvigorate the development of affordable rental homes across Illinois to serve families, seniors and persons with special needs. It is especially important in this economy that we seek creative partnerships and investment opportunities to provide muchneeded housing in our state.” Similarly, affordable housing developers have promoted the opportunity to invest in a GLCF Community Fund. Gary Gorman, CEO Gorman and Company, is pleased to see Great Lakes initiating the fund, stating: “[It] will provide local and community banks

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the opportunity to take credit for investing in affordable housing and community development throughout Wisconsin. During these uncertain times, this fund will be a resource to use in providing families, senior citizens and those with special needs access to safe, decent and affordable housing.” GLCF Community Funds have been established in Michigan, Indiana, Wisconsin, Illinois, and Upstate New York. These funds are open to all C-corporations, including banks, insurance companies, utility companies, and any other corporations that want to take credit for investing in great places to live. James L. Logue III is Chief Operating Officer for the Great Lakes Capital Fund. James is located in GLCF’s Lansing, Michigan office. If you are interested in learning more about the opportunity to invest in a fund or to participate in an educational webinar on the benefits of LIHTC investing, please contact James Logue for further details at jlogue@capfund.net.

Events and Happenings Children’s Trust Fund

On September 30th, the Children’s Trust Fund held its seventh annual Cherish the Children Signature Event fundraiser. Last year, the event raised over $400,000 in support of our child abuse prevention work throughout the state of Michigan. One of the benefits of this event is the relationships the Trust Fund has built with legislators, advocates and lobbyists, and the business community. Through the commitment of time, energy and expertise by so many the event has become hugely successful. A prime example of such a valued relationship is with the Great Lakes Capital Fund (GLCF). GLCF is a long time supporter of the event, both as an Official Sponsor, which is the highest level of sponsorship, and through the tireless efforts of GLCF President Mark McDaniel. Mark is an active member of the overall Advisory Committee to the event, and co-chairs the Sponsor Committee. The work of the Sponsor Committee has been critical to success of the event. Last year, with Mark’s leadership, over $200,000 was raised just through the work of the Sponsor Committee. The dollars we raise are combined with other sources to support critical services throughout the state. In my short tenure as the new Director of the Trust Fund, I’ve had the opportunity to visit with several of our local Councils and with organizations that provide direct services for children and families.

I can say without qualification, that there is amazing work being done by our dedicated and hard working partners throughout the state. We are truly making a difference both through efforts to educate everyone on important issues like safe sleep for newborns and in services for families where there are risk factors that if ignored, can result in poor outcomes for our most vulnerable children. I’d like to share just one example. Just last week we asked the programs around the state to share with us testimonials from families who have benefited from services funded through the 0 to 3 secondary prevention funds which is administered by the Children’s Trust Fund. We received powerful statements from families throughout the state. A particularly touching letter came from a young mom in northern Lower Michigan. She described her own childhood with an alcoholic and abusive father. “Wearing sunglasses became part of my everyday wardrobe. There were times that if my older sister hadn’t been home to call 911, my mother would probably be dead”. As a young adult she was in and out of an abusive relationship and eventually had a baby at nineteen. Through encouragement of friends she enrolled in the Family Matters Program, a service funded by our 0 to 3 secondary prevention funds. The support she has received has been immensely helpful. “I’ve learned so much about child development. It’s just amazing how smart a baby is at birth and how fast they grow and learn. I’ve learned that a child’s first 3 years of life are the most important – a child’s brain is like a sponge – they absorb everything!” She goes on to say how the program has enabled her to make better decisions about her life and relationships. Her children are thriving and she has finished her GED and is in Community College. This is just one example of the kinds of differences that high quality child abuse prevention services can make. We have countless similar examples from urban and rural settings from throughout the state. Our upcoming Cherish the Children Signature event brings funding that enables us to support this

kind of important work. The auction is an annual one-of-a-kind event that features great food, specialty drinks, lively conversation, and unique live auction items.

New Bundle of Joy On June 19, 2009, at 3:08 a.m., Conor Damian was welcomed into the world. He is the newest addition to Katie Vondra’s family. Katie is one of GLCF’s asset managers. Conor weighed 7 lbs. 11.3 oz. at birth. Congratulations to Katie and her family from all of the staff at Great Lakes Capital Fund.

Seybert Graduates from MSU Aaron Seybert, a Mortgage Specialist in GLCF’s Lansing Headquarters office, graduated from the Michigan State University College of Law on May 15, 2009. While working full time for GLCF, Aaron continued his education through the evening program offered by Michigan State University Law beginning in 2005. During that time, Aaron’s coursework focused on Taxation and Corporate Law. He was the recipient of several Juris Prudence awards as well as winning the All-School Negotiation Competition and representing MSU Law in the national ABA Negotiation Competition. In addition, Aaron served two consecutive terms as a Student Bar Association Senator and one term as the Director of Finance for the Student Bar Association. Following his graduation, Aaron sat for the Michigan bar exam in July 2009, and plans to complete the licensing requirements for the Certified Public Accountant designation in December 2009. Seybert was recognized as one of Affordable Housing Finance’s 2009 Young Leaders. He was nominated by his colleagues and chosen by the editors of the magazine. Seybert and the 11 other honorees were featured in the September issue of Affordable Housing Finance. Avenues to Affordability

Helping Midwest CDCs Adapt (continued) the economy crashed, but they have redoubled their efforts in this regard. Their staff members are becoming versed in urban agriculture and Leadership in Energy & Environmental Design (LEED) certification, and some CDCs are pursuing small scale renewable energy production with wind and solar technology. CEDAMâ&#x20AC;&#x2122;s CDC training programs this coming year will look very different than those of years past and will offer opportunities for rapid retraining of staff on these priorities and many more. CEDAMâ&#x20AC;&#x2122;s partnership with the CDC Associations of Ohio, Indiana, and Illinois will continue as we work to leverage our collective memberships to bring more resources and opportunities to the region. We have established a work plan that involves joint educational programs, sharing of best practices across the region, and increased communication between CDCs of similar focus throughout our states. We know that as associations we also need to adapt, partner, and retrain ourselves as we collectively promote the work of CDCs who are creating communities of choice throughout our Great Lakes region. Angie Gaabo is the Executive Director of the Community Economic Development Association of Michigan (CEDAM). CEDAM is a voluntary association interested in expanding community-based housing and economic development across the state of Michigan.

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You’ve got a partner. Your MSHDA. Preventing foreclosure? We help. Resurrecting Main Streets? We’re there. Fixing up the neighborhood? Call us. Helping to build affordable housing? We’re on it. We’re working to bring Michigan back, with loans, housing programs, grants, and sound advice. If you’re interested in improving your home, your neighborhood or your community, you’ve got a partner. Your MSHDA. TTY 800.382.4568 Avenues to Affordability

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