Redevelopment Authority - meeting_joint_regular

Everybody, we will call in order the regular meeting of the joint committee and redevelopment of abandoned and foreclosed homes. I'm chairman chair. We're also joined by our vice chair, alderman stamper. And let's call the roll for everybody else, please.

Here.

She's Oh. Yeah.

Here. Here. Keller.

Here.

Ken Barbo.

Here.

Mario Higgins. Here. Deisha Schrader. Here. Robert Baumer.

Here. Okay. Very good. We have a quorum. The first item is to review and approve the minutes from 04/28/2025. Is there a motion to approve the minutes?

Yes. I move to approve the minutes.

All in favor, say aye. Aye. Aye. First item, communication of the property development and the housing infrastructure preservation fund activities.

Good morning. Morning. Carrie Smith, Department of City Development Real Estate. So I submitted a memo with the update on the housing infrastructure preservation fund. Since the last meeting, we have not done any additional we have not used any additional funds.

We're in a bit of a reconfiguration in general after state statute and the new ordinance, which does not affect this program specifically, but it's we're just kind of cleaning the slate and seeing how we want to move forward, what's worked in the past, what's working what we can do differently. So we have utilized our marketing communications coordinator position to find some new ways to market historic properties, hopefully where we can find buyers a little bit earlier in the process so that if we're going to invest money, we can make sure that we're finding the right people to take those houses and bring them back to their full potential.

What's what's the financial status of the fund?

We currently have $5,413,798 and 19¢.

Okay. And that's so that'll carry over to 2026?

That's my understanding. Correct.

And there's nothing in the current executive budget to appropriate additional funds?

Correct.

Okay. Any questions or comments? Yes.

Alderman Samson. Yeah. Thank you.

Hey, miss Smith. What's the average expense per house?

I know that we can utilize up to $100,000 without additional approval if we do the contract out the work ourselves and we can grant up to $50,000 per property to a buyer to do the work to the exterior.

Sure. And how many actual neighborhoods are eligible for historic preservation?

All the neighborhoods in the city are eligible.

Yeah. But don't you have to be a certain age or historical?

It has to have a historical destination. Yes.

Yes. So I have my area. Right. Obama has one. Are there any others? Yes. So it's really just three areas we talking about.

So it could the structure itself could be designated historical. It doesn't have to be in an actual district.

Okay. Most of the redevelopment has happened in your district, COGS is in line. The majority of properties. And I think we've done a total of like 60

since

Yes. This program One has worked out pretty well because of the 60, I think 56 are back on the tax roll. Correct. And some are very substantial assessed values.

Most excellent program. The Shared Tesla building, is that part

of the That's the classic example.

That's the classic example. Yeah. Are you aware of that one?

Yes. So yes, we've talked about and getting in touch with her to rethink our model and see if there is maybe a better way to do things. We've gotten caught up with timelines not fitting together or doing some restoration work and not finding a buyer. Going be be

we're that. So, to

do

and I had presented. I don't know if you were here yet. So you just that Probably not. Part of your own thinking or did you get that high school or anything? No. We

had we've had some meetings internally between real estate and NIDC to talk about how we might make some improvements to how we're utilizing that resource.

And her model, based on her model?

Yes, something similar to that and something similar to HomesMK as well.

Okay. All right. Thank you.

Very good. No other questions or comments?

We'll move on to item. Mario

does. Yeah, mister chair.

Yes. Actually, this

is just a a shout out to Carrie. Carrie used to I don't know if anyone knows Carrie's background and I'm going to tell your business, Carrie, but Carrie used to work for HUD, and she was our actual city of Milwaukee's CPD rep. So thank you for congratulations for coming to the city, and I'm sure we'll do a lot of work together.

Appreciate it.

Thank you. I'm happy to be working today and not for a load.

So. Alright.

Well, wait a minute. Wait a minute. We gotta had a couple of red flags. Was that you? Sorry? We had a couple of red flags in the past. Was that you?

No. Nothing was

my fault.

Healthy flags? Yes. I

just tried to help you to take the red flags off.

Alright. Thank you. Alright.

Thank you. Okay. Moving on item three, communication department of city development and the lease to own program.

Oh, yeah. Lease to own.

Is this still even alive?

Is not.

It is not?

Currently, it is not. In its previous iteration, it wasn't sustainable due to the new state statute. We would like to we are thinking about how we could continue to do this program in the future. The constraint is that we have to when we acquire a property that has a tenant in it, we have to list that property to sell within thirty six months, which is a long timeline. So that gives us three years if we wanted to work with that occupant to try to purchase the home.

The

issue is that we still have to list the property for appraised value, which makes those prices trend a little bit higher than they used to So we would have to ensure that we could get that person up to a financial position where they could pay the appraised value of the property. We can determine what that is. But I have met with Axe Housing, who is our partner program and talked about whether or not we could work with them because they have access to more of the resources to help tenants become financially able to purchase the home. So what we wouldn't want to do is build somebody up to purchasing that home and have it bought out from under them by somebody who has more resources if they're not able to do that because we wouldn't want to set them up to fail. We want to make sure that we're able to prevent that.

For sure.

Yes. So to be determined.

Mister chair. Yes. Yeah. Mister, can you look into establishing a sale price and then lease to own based on the sale price established to to satisfy the the the state law?

Yeah. Because it's based on the appraised value at the time that we acquired it. Okay. So we would be able to determine what that is. It's just that those prices are much higher than what we used to sell properties for.

Right. So we can lock it in as a sale price and not sell until the thirty six month and let her lease to own it until the Correct. Expiration date.

Yes. Yeah. Okay. We could do that. Yeah.

Alright. Great. Thank you. Okay. So in essence, we still got the program if you can

do that. We would

like to

find a way to make it at

work for sure. So Moving on to item four, communication of the property development of the strong home loan program.

Good morning, Mr. Chair, community members. Mark Palczuk with Department of City Development, NIDC, Neighborhood Improvement Development Corporation, here to present on the Strong Home Loans Program. The program exists to preserve homeownership by assisting homeowners with essential home repair needs. Program provides low interest deferred payment loans and technical assistance for emergency and critical home repairs to homeowners who have not been able to access conventional financing.

The typical strong homes loan borrower owns a house built before 1939 and has owned the home for more than fifteen years. Currently year to date, we have 52 loans approved totaling $1,090,557 of city dollars obligated and we currently have 79 applications in process. This was also provided to you via memo. You should have it in the file. Happy to answer any questions.

Are we doing the underwriting now or is Associated Bank still doing the underwriting? At some point we sold that entire portfolio to associated bank? NIDC does the underwriting. Okay. So there is a block of loans that are owned by associated bank, but that deal terminated and we're back being the underwriter and the owner of loan basically?

So that was before my involvement with NIDC, I believe that those loans were sold over to Associated Bank.

Okay. But currently, we're holding the loans? Correct. Yes. And we're the processor and we deal what's delinquency our rate been running?

I don't know that. That's probably a question for our financial people. We can certainly get back to you on that.

And what's budgeted for 2026?

Dollars 1,000,000. And

how do you feel about that in terms of meeting the need?

So we feel that the program is funded adequately and our staffing is appropriately for that amount.

Are we able to cover the 79 applications in process?

So not all of those will make it to the finish line, but we anticipate we do have some additional funds for this year.

Is there carry over going into 2026 as well?

I'm not sure if there will be carry over. I think we will probably expand the funds that were allocated this year by the end of the year. But any applications could potentially carry over into 2026.

Yes, please. Is the average total of each of the loans? Know like I think it's a cap of 20 and then what would be the average that right now the projects are?

So the maximum loan is $25,000 My guess, I don't have the exact number. My guess is somewhere between 20,000 and 25,000 is the average amount per loan. You.

Mr. Chair, please, Larry. Mark, what are you still doing the sliding scale interest rate or is it sort of base?

So there are, I guess, three different types of loans that are available for Strong Homes loan depending on the qualifications. There is a deferred payment zero interest loan. There is a 0% interest loan payback loan and then there is a 3% interest payback loan. Okay.

Thank you. Those are pretty good deals.

Excellent

deals. But

Mr. Jerry? Yeah. Who who selects which payment they want? Plenty of plan they want? Do do they?

Depends on their qualifications. So, for homeowner that is 60% or less AMI. Yeah. And is elderly, 60 or above or disabled, they are eligible for the deferred payment loan. Someone that is 60% AMI but is not elderly or disabled would be eligible for the 0% payback loan and then all the other applicants would be the 3% loan.

Awesome. Awesome. And the most use is what? Roofs? What are they using the money for?

Essential repairs. Roofs are very common. Porch repairs. Porches. We don't replace windows in this program per se unless they are defective. But I would say roofs, porches, gutters, those types of repairs are And pretty then some interior work as well, some of the essential electrical plumbing, furnaces, water heaters.

Okay. Did you receive the 750,000 from the council yet regarding the floods repair?

That's not our department.

That's that's loan compliance. That that's Which

one is this? So strong loan?

Strong loan loan. This is basically a

home improvement loan. Yeah. But I thought we just put it in there. We put

it in the compliance loan.

Oh, okay. Gotcha.

Alright.

Thank you. Okay.

Can go up to fifteen years depending on we try to make the payments affordable for the for the owners, but we can go up to fifteen years.

So principal and going to to right general fund?

I believe it goes to the general fund. Interesting.

Okay. So we would have the ability to replenish this program. Due to the loan proceeds a year exceed or are they below the 1,000,000 appropriation for 2026. Definitely below. Yeah,

I don't know the answer to that. That would be a fiscal question.

How many loans are outstanding right now?

I don't know. I would have to get that number for you.

Okay. Well, we have a portfolio, I assume, that we own, and it would be curious to know how many actual loans are outstanding. And I suspect there is a good And that's good

to to to do

that. Helpful to know. Just a matter of curiosity. Because this is a great program. Is it my correct in my memory that after ten years of owner occupancy, we'll forgive 25% of the principal, is that still true?

Correct. Yep. 25% up to $5,000 because we changed the total amount, I believe a couple of years back, it used to be $20,000 now it's 25,000 So 25% up to $5,000 is forgivable for that.

Okay. And is this a standard amortization schedule where the interest is front loaded onto the payments or is this a straight line amortization?

Straight line.

Straight line.

Well, that's even more generous. So principal is paid down more quickly than in traditional bank loan. Is that correct?

Yes.

I am surprised there is not two three hundred people lined up to.

We certainly have a lot of applicants.

And how do we inform the public? I mean how do people know this even exists? The website, I get that part. But beyond that, how do people know that this program exists?

Parliamental, we do a lot of outreach to community groups, housing fairs, resource fairs. So we're out there quite often getting the word out. We also belong to Take Root Milwaukee group and the Iran Coalition. So we have some partner agencies there that we share information with as well.

Because this is so favorable, I would think. And what is this in terms of household income, is this your eligible up to 105% of AMI, is that correct?

Actually goes up to 150%.

150%

of So

that's pushing middle class homeowners at this point?

Close to that, yes.

The family of 100% AMI is about $60,000 is that correct?

Family of four is probably in the 70s. 70? Yes.

So if it's 150%, that's a household income of $105,000 more or less?

It's roughly around there, yes. I don't have the exact numbers.

Okay. I would think this would be much more popular than it appears to be.

We certainly have lots of applicants.

Okay. Yes, guess some of those numbers. I'd be real curious if our cash flow on this exceeds what we're appropriating in the budget.

All right.

Right. Very good. Any other questions? Okay. That's number four. Number five, communication from the privacy development on the status of the Holmes MKE program. Don't all rush the table at once. Anybody here on this one?

Yeah. Let's hold that for now.

Okay.

Because that's a big one actually. That's $15,000,000 that we have posted in 2021. Okay. Item six, communication of property development and the down payment assistance program.

Good morning, Mr. Chair. Morning. Committee members, Mark Pelzik, Housing Rehab Manager with NIDC. Milwaukee Home Down Payment Assistance Program offers forgivable grants up to $7,000 to help Milwaukee residents purchase their first homes. Year to date, 175 new homeowners have received the grant, dollars 1,098,100 in grants were awarded through the end of the 2025 and sixty four percent of families have purchased within the CDBG area. Happy to answer any questions.

Okay.

And what's the fund balance for this account as we stand?

Not sure what the exact balance is. I believe this for 2025 was funded at 1,500,000.0 We intend to expand that through the end of the year. I don't know how much is remaining.

No carryovers anticipated? No. And what's appropriated or what's the executive budget recommend for 2026?

$600,000

So less than half of what was appropriated in 2025?

So last year in the budget, 600,000 was allocated to this program as well. There was some carryover from the previous year that was added in with that. And then there was also some additional ARPA dollars. And then midyear, there was a closeout that did better than anticipated. So that also added additional funds to this program.

For 2025? Correct. And so you think $600,000 is what you're going to have to work with in 2026? Or are you anticipating other revenue sources such as occurred this year?

What was appropriate in the budget is what's there. We will definitely spend that money. We know that the need is greater. I'm not sure if there will be any other funding sources to help fund that for 2026. Okay.

So how many grant can you provide for $600,000 more or less? Just divide 7,000 So

those are

It's either $5,000 or $7,000 per owner depending on if they are in citywide or in the CDBG area. So it varies.

And how is that number determined? Is it based on a is it a percentage percent of the sale price? Is it 5% of the sale price?

I mean, how do we come

up with 57% versus 810% or versus 34%?

I believe it must not as well versed on this program as a strong homes loan. Well, there are

issues for a long time. Yeah, Does Larry?

Yeah. Arbitrary Larry, I just feel like we just kind

of kind of

just made it up, didn't we?

Well, I don't think it was made up. I'm just curious.

So that was what most banks are doing, $5,000. Okay. Yeah. Most of the banks are doing 5,000.

So when the program's created back in 2021, those are the numbers that we're looking at. So 5,000 citywide, as Mark mentioned, 7,000 in the block grant area. Those are numbers that are pretty consistent with other grants. Have other grants gone up? Some have some have now ceased to exist.

So we do find ourselves, I would say, probably on the slightly on the lower end for what other grants are doing, but still very competitive in terms of, if you go to a bank, some nonprofits have grants, Federal Home Loan Bank of Chicago has had grants historically. So, it's a number that is pretty consistent with what other, housing, counseling agencies, other lenders have done. And it's a number to of

And

then we're do do for example? So we

have three housing agencies that administer the program, Axe Housing, Housing Resources Inc and United Community Center on the South Side.

So we do not directly administer this one?

Correct. It's administered by those agencies.

Okay. And between your collective knowledge, is $600,000 adequate for the demand in the marketplace, do think?

Yes. I mean, it certainly is what we're matching what last year's budget amount is. As you'll recall, kind of all these conversations, we talk about what other partners are involved as well. So it is one of the only programs that we're operating where there are a number of other agencies that are putting into the larger collective pool of funds. So although it is $600,000 divided by approximately $6,000 per loan, it's about 100 buyers every year.

And again, we are one of four or organizations that are putting into the larger pool of funds that these housing counseling agencies are using. Think, Jer, back to your question about what is the balance, it is a little tricky to know exactly what the balances are at because agencies are using when they get a homebuyer in the process, when they're sitting down with a homebuyer, they're looking at those three, four, five different programs and saying, which program makes the most sense for this buyer. So it's not that they're just using our money immediately. They're using whatever dollars they have that are most appropriate

for

that buyer. So some agencies will use all the money quickly. Other agencies will have other sources of funds that they can look at, and we get quarterly reports from those agencies. So to to be able to answer what's the current balance, we might not have that exactly because it is with those agencies.

Fair enough. Understood. Any other questions? Yeah. Mister Yeah. Alderman Stanford.

Yeah. Hey there. Can it be compounded upon another grant? So

Yep.

It's not it's not independent. You can use this with another down payment assistance. That's correct. So you can have double. So that's the beauty of it. It doesn't restrict you from having more. Correct. Down payment assistance. Correct. Correct. Okay. Mister chair.

Yeah. One more. There you go.

Mark, Mark, can is this a repayment loan at all or it's forgivable? It is. Okay. Forgivable. Okay. Thank you, little Grant.

So, it starts out as a loan?

No, it's a it's a grant.

It's an outright grant. A It's

It's a It's It's a grant.

For a minimum of five years. After five years, I believe it's forgiven. Correct.

Yes, it's a prorated. It's a prorated forgivable loan.

Okay. So it is a loan. So starts out as a loan and then after five years, it's forgiven.

It's recorded on the property. Got it. For every year that they live in the house, there's

a proration.

And then it's not free

money initially, but it becomes free money

After five years of occupiers. Correct.

All right. Well, that's very good. Now we got that square away. Okay. Moving on to item seven, communication from the Department of Neighborhood Services on the compliance loan program.

Good morning.

Good morning.

Good morning.

So my name is Cassandra Tyler, and I am the current compliance loan coordinator. The compliance loan program is a zero interest deferred payment loan for homeowners. It has to be a single family or a duplex, and it's used to reduce blight in our community, excuse me, in the city of Milwaukee. So I'll just go over some of the numbers as far as the data for 2025. The total amount approved year to date is $666,443.

The total amount excuse me. The total amount of loans that we have at this point are 51. The average total amount is 19,900 excuse me. 19,099. The average homeowner is 60 years of age. The average household income is $30,996. The average years occupied are nineteen, and the average assessment of the property is a $129,399. And then were there any questions?

So these loans are originated by referral from D and S itself, correct?

So as far as the loans go, it comes through a combination of community outreach, word-of-mouth.

Yeah. And what's the criteria for this program?

So the criteria are as far as what?

Well, who's eligible?

Who's eligible? Okay. So as far as the eligibility requirements, it is so you'd have to be meeting 60% of the area median in order to qualify. You have to occupy your home, and it has to be a single family or duplex. So there are income requirements as well as it requires you to reside in the home, and we only deal with single family or duplexes.

Okay. And is there age? Homeowner age?

No. No age restrictions. We we get a vast majority of young and old. Older.

So the the one in is that have in

taxes. They also require that you are current on your mortgage. And then also you have to be current on your We Energies bill.

You check all of that?

Yes.

By definition, you have to have orders outstanding?

No. So we do get a mix of applicants who have orders on their property and also those who have either heard through word-of-mouth or through community outreach. So sometimes I have to clarify what could or could not be covered under the program. So it just depends. So CLP, the most common things that I see are applicants who are in need of roofs, siding, porches that are structurally unsound. We deal with some concrete work, broken windows, just to name a few.

Mr. Chair?

Yeah, please. Thank

you, Cassandra. You're doing great. I just wanted to clarify this compliance address exterior code violation.

Yes.

Sorry. They go two ways. One would be reported or as a complaint and an order to DNS. So, if there's an order and a violation, we do send that as a mail and offer the loan and there's also the self reported cases. People that actually community members out there that do have code violations but based on the pattern of we haven't made it through that investigation yet. So, they come to us. We verify what are the violations that we can address from an exterior perspective and then we define the scope of work. So, it all addressed code violation.

That's what I thought. Yes. But that's the whole point. It's a code compliance loan program. Correct. Alright.

And mister chair? Yeah. A big part of the program is giving them an opportunity to correct the repairs. So, yes, you're applying for the loan, but you also have to be in touch with the inspector to say, hey.

That is true.

I need some time, but I'm in the process of Yes. Repairing my home. So that's a big part because Mhmm. The application process takes some time and, you know, reoccurring inspectors do come.

That is true.

Alright. Alright. Yes.

Okay. Alright. Any other questions? Now, did that this did receive an infusion of resources for 2025, correct?

What?

Slammed. Yes.

So, through the flood relief program, we develop a CLP care which is like concentrated in emergency loan up to 7,500 for water heaters.

They do have it.

Furnaces and electrical panels. So far, we have received the first week that we opened this, we received about 100 calls. I think that's going more to ours. We have online right now what 25 application, 30. We are just looking at that. So, on a daily basis, we continue to receive calls and now we are in the application process for those.

So, in in essence, it it's a sub program within the code compliance.

Yes.

Yes.

And. Yes.

What we are right now kind of like piloting to, it's like, as an emergency, we do the relief for the flood but also we see they will be qualifying in the near future for the 25 for the exterior side of business on the.

And and and what am I correct in my memory that if they do receive FEMA funding, this this can be reimbursed?

No, the FEMA, FEMA, it's a very separate. They they have their own ways of providing the financial system to individuals. Is this is just more also like a cover of why could not cover Fema. We know that there was no covering the whole full scope of work.

Okay.

For this property. So, this is literally that refund.

So, nobody being paid twice.

Correct.

Okay. And and that was $7.50, 0 into this supplement.

$750,000 with a cap of $7,500 case by case scenario and specifically directed to furnaces, hot water, water heaters and electrical panels which are also called violations but from the interior perspective.

Okay.

And so your budget for 2025 was what?

1. 1,000,000.

Okay. And what is the recommended appropriation for 2026?

So as far as 2026 goes, I would love to be able to process more applications, but that will require at least an additional inspector and an additional coordinator.

So is there any money in the 2026 budget for the code compliance program? 1. 1,000,000. Always. Alright.

And that's adequate in your view given the $7.50 you've already?

It's question. Question. 50 is just I really focusing. Yeah.

Yeah. Okay. Understood. Two separate

findings. Okay.

Questions or

comments on this? Sure.

You all understand.

Hey. How many rejections do we do? Approximately? A lot of rejections.

I would say if I had to ballpark in maybe 30 to 40 and it's just Or As far as, like, the actual number. 30 to 40 people. Yeah.

And then we

So sometimes let me just kind of elaborate on that a little bit. As far as so there's various types of reasons why applicants might get a denial letter. So it could be that they're over income and in that case, I do refer them over to the Strong Homes loan if they are over income.

Okay.

So that helps them out a little bit. It could be that they might need more time to get their finances in order. Okay. I do try to put applicants on hold in order to give them time to get those things in order. So it just the denials is is a lot of different reasons why applicant might get denied. I've had applicants who have got denied in years past, and then they come back six months, a year later, and they're ready to go. Or in some cases, applicants, the scope of work might exceed what CLP can cover. So sometimes we do partner with other strong home and other organizations in order to help them out in order to get the repairs that they need.

Oh, that's good. So even though they're denied, they know the reason why and the possibility they could get approved.

Absolutely. Mhmm.

Okay. That's good. Thank you, mister chair.

Alright. Very good.

Okay. Thank

you. Okay. Just one more thing. And and these loans, correct me if I'm wrong, but they're structured. Are these non interest bearing loans or?

Yes. So they are zero interest deferred payment loans designed as long as they live in the house, no money is due. And then we also allow them to pass the property down to a direct descendant. So I try to make sure that they're fully aware of that. So they do once I'm once I explain that there are they are able to pass it down to a direct descendant, they are a little more open about it being alone. So yeah.

Okay. So it basically waits until the that the loan sister has a lien on the property until the property is sold to someone other than a direct relative?

Yes. It is a lien.

Okay. Oh, it carries?

It does carry over. So they are able to pass the property down to a child or a grandchild. That's often what I say. They are able to keep it in the family as long as it's being passed down to direct descendant.

On this conversation, I had did have a couple elderly lady, and I'm sure they spoke with you about them passing away and not wanting to put that loan on their grandchildren. Uh-huh. Does the loan follow the grandchildren if the Yes.

It does.

If the owner dies.

It does. Yeah. So but they do so there are no penalties for paying the loan back early. We're not set up to take payment plans. However, I do encourage those who are interested in not passing that lien down to their kids. They are able to pay it off. We just would accept one lump sum.

Okay. I guess I could use a life insurance. Right?

But when they die, they can But you don't have to pay it off. I mean, it's just the lien just stays on the property. Yeah.

I mean, I guess

Well, yeah.

Yeah. They were. When I explained the terms of the loan, lots of people are are put at ease knowing that they're they don't have to worry about making payments. I think that's the biggest significance for the CLP program. There are no loans that I'm aware of that you're able to take out and you don't have to worry about. And these are people who are on fixed income.

Okay. Because they still live there.

I got you. No, this is a very generous

program. It is.

Okay. Alright. Any other questions? Hearing none. Thank you. Okay.

Thank you. Thanks.

Have a

good day. Okay. Moving on to let's go back to item five. Communication on the apartment city development on the status of the homes MKE program.

Come on up. You.

Ed Miller with Homes MKE. Morning. Good morning. Happy to report we have completed 54 homes. 50 of those have sold to qualified buyers who will live in those homes for five or more years. We also have in the program a lease to own portion of the program and some of those buyers would actually be in the lease to own program as well. We have 32 homes under construction. We have nine homes closing within the next month and another five before the end of the year for a total of 100. We have had to adjust our goal to a total of 105 houses because of the subsidy amount being at about 122,000 per home.

100

and 122,000 per home. Much of this is due to the age of the inventory, the number of years that it has had unoccupied, forcing maybe foundation repairs and other repairs that wouldn't be necessary had these been able to be done more quickly. So we fully anticipate having our full ARPA expenditure. That is occasionally adjusted for overhead and expenses and other shifts that may occur over time.

Is the end

of this year the deadline or 2026?

2026. Okay. And that will be $13,000,000 expended on the rehab of the 105 homes. Okay. Dollars 15,000,000. Well, we're spending 13,000,000 on the rehab, some is overhead and expenses and then some had shifted to a different place unknown to me.

Hello? Hello. Okay. Run run that past me. So, we're

because you really have a slight reduction I think in our in our 15,000,000. I I don't know what that was from. I'm not.

Well, the goal was 13,000,000.

50,000,000. Yeah. 150 in

a 150 homes. That was

the goal. At that a $100.

Another another ARPA program somehow maybe got a shift of 500,000.

How'd that happen?

I don't know.

I'm paying

Beyond my paper. Are

you sure about that?

I'm pretty sure. Okay. I know what I have to work with. I have to work

with $13,000,000 So that's $2,000,000 missing.

Well, that's a significant Well, we have

already expenses too. My salary, you know, I'm way overpaid. My two associates. So

that there are administrative to get going Yeah. Did you just open a Pandora box here? So so that. Some somewhere along the line, $2,000,000 was unilaterally removed from the end use of these funds for rehab. 1,500,000.0 is administrative costs, which one could make the argument should have been absorbed by.

Well, let's make let's make clear. Budget. Larry, you're shaking your head. Is that not are we not accurate?

500,000 was just unilaterally put somewhere else without anyone telling anybody at the council level?

Well, the 1.5 administrative cost was always an anticipated cost of the program and had to be assigned to the program somehow. I mean, and I think it's fair to assume that that would have to come out of, you know, the I'm sure that was anybody's understanding. That wasn't a conversation.

Give me an example of what administration costs for this program if it's

embedded within the city. Just salaries and expenses. What are

the salaries are being charged against this?

Well, two initial three initially and now we're down to two. We've shifted one out.

So these new positions were created with the 15,000,000?

New positions were created. The temporary positions.

Oh. I don't remember that.

I think there was a discussion about

temporary Okay. Just a habit of program. Yeah. Yeah. That was a little bit. You know what? I do remember an outreach person. Is it their outreach person?

Yeah. Yeah. We have. Yeah. Yeah. Jeremy Mitchell is our outreach

person. Oh,

we have David who's our inspection person. Yes. There are three of us.

So going from 150,000 to 105,000, that's actually a big decrease. Is a big big 33% reduction in production.

It is a big decrease. I think the initial assumption was these houses would be about 75,000 each to rehab. And in the end, 120 We seems to be thought we were

getting 150 per house for the 15 meal. 100,000 house.

Well, that was I mean, that's reasonable. I mean, it it cost what it cost.

I mean,

I get that part.

It does. It looks like it's successful though.

But moving 500,000 out of the that that's I don't know how anybody had authority to do that.

I I find out sure where where that where that 500

Who whose whose decision making was that?

I I really can't speak to that because I I wasn't a part

of that. I'm I'm just simply told

you got I'm just informed of how much I had.

2,000,000 less than what you thought you had when you

took the job. Well

no. Because part of the job was his salaries.

Yeah. And I get that. So 500,000 less than what you well, we don't even know if it's mean, he he's he's not Mister 500. Yes.

Larry, you know what a 500 is?

Who does? Somebody gotta know.

Larry, let can you let us We can we can check

with our ARPA folks. I I I am not aware. Okay. Mister Shaker. Yeah.

Yeah. So I would like a breakdown of the 54 homes in which development groups attached to those

rehabs themselves. We could vary.

The development group who's doing well, basically.

Yeah. Well, why don't this is a little concerning actually. Why you provide us a spreadsheet showing the addresses of the 54 completed? Yes. The 50 sold and whether they were sold to investor owners or owner occupants.

Occupants are leased to own. No investor owners.

Those are

our investors. Well, what's the how does the lease to own work?

Lease to own is they have an option to purchase and they have sixteen or eighteen month agreement with the nonprofit or the entity that's running the program and they may purchase a home after that period of time or they may extend that.

That must It be must be nonprofit but they are still an investor.

It must be sold to an owner occupant.

That's a requirement.

Ultimately must be sold to

Like an over what period of time, five years, two year, twenty year? Mean a

five year owner occupancy period which will commence at the time that it's sold. So if it goes into a lease to own program, that five year clock does not start ticking till it goes to the end occupant.

Excellent.

Okay. So I get it turning my arm around this. A nonprofit that the nonprofit X is the owner of this property. They put someone in the lease to own program and the tenant just keeps leasing indefinitely. Is that potentially possible?

It's not the model of the organization and I don't believe it's possible for an extended period of time. Although What's the limit?

Thirty years.

I really can't speak to a specific limit on that.

Mister chair?

That's absentee owned. Yes.

Ed, could you clarify what what organization you're talking about and how like of the universe? How many are we talking about?

Because you

want the least And how many are how many properties of strong blocks are fired?

They have done they will have done a total of 12, which are all being leased. Leased to own. Yeah.

The the total amount in the program that's being leased out

of Out of the 5,412 are being our rental properties.

Our lease to own.

That's keep

saying lease to own but they are rental properties. They are being leased by an owner to a tenant who has an option to buy which option to buy may or may not be exercised ever and they continue to be tenants indefinitely.

Well, eventually that particular person who is strong blacks would have to put an owner in that property for a period of five years in order to have that deed release so that they could actually do something. So if that person decided to sell that property, they would still have to sell it to an owner occupant regardless at any point.

But if they choose not to sell it, they like the cash flow.

Well, I don't know how long you could do that. I mean, I I don't know prescriptively about the program, how long you could do that or how long somebody could actually be a part have

an answer to that issue.

So I guess I guess should we put a stipulation on the five years? Should we put a stipulation on the lease? That's the question.

We have mechanisms in place to track the performance of the lease to own partnership so that we can determine that the tenants are on a lease to own program that have an option to purchase that we review on an annual basis to ensure that those tenants are qualified and are in the in the home. So we do track that. So the lease to own should have

a balloon date for sale. That's part of the lease to own. So in the contract, you say, I own five years from now on this day, you

The problem is you can't make somebody buy a house.

Well, if it's in the contract, if they don't, then they lose the house. And then you open you

up Well, that's the hammer. Is that You

open it back up to a new homeowner, to a new opportunity.

It's clawed back by the city. The city takes sale.

Essentially, the city would have to claw back or have some recourse.

And we have a mechanism for that in place.

Well, I mean, the mechanism yes, of course. I mean, it it it's we haven't had to do that but, you know, the program

is It's still We don't you know, hopefully, these 12 people buy the house. But if it doesn't, it's in the contract that you have a certain amount of time to buy. Otherwise, lose all your money.

Or reverts back to the city.

Well, it

has to sell to an owner occupant at any point.

But it may never sell. Do they make you can't make somebody buy a house. Correct, Ed? I I can't make you buy my house. If you if I if I offered for sale and I don't find a willing buyer, I continue to own it unless there's some stipulation in my sale agreement with the city that if I don't sell it to an owner occupied within five years, it reverts back to the city. Now that's a hammer. That's an incentive to market the property. Unless That kind of incentive, they'll just keep leasing it. Thing with that.

To a different person every five years. Yeah.

That's possible. Well, know, the the period of time for the lease to own program for this particular program, believe it's fourteen or eighteen months. I don't remember right off the top of my head. So if that tenant who is the lessee, who is the potential buyer does not meet the terms of that agreement, they rewrite the agreement and they put that tenant into ownership counseling and review those. So it's an opportunity to get people into houses that typically can't purchase houses or aren't credit ready or worthy at the time that they get in to lease the home. So it's excellent program.

So, you're supposed to be why did these 12 people, they're supposed to be working on their credit, working on their ability to buy the house. You're not just doing five years and not getting around. They're supposed to be working or buying

I one. One. I

get I I

success of that.

Okay. And how many of those do we have? 12. That own the property?

Well, that are in the lease to own program.

Okay. So technically, on paper, we have we haven't had the transition from a rent to own or lease to own to actually you are now the property owner the deed is in your name.

That transition would occur between strong blocks and that lessee the tenant.

Okay. So did you map out at what point in time do we look back at this program eighteen months, two years? When is that date where we should be having that actually happen where we have someone owning the house and and the deed is in their name? That we can because to me that's the success rate like you create an opportunity for it to happen but if it actually doesn't happen then that's when you reevaluate where is it that it went wrong that now this person does not own the property.

They're reviewed annually to ensure that tenants who may buy the houses are in the houses and that particular strong box may in fact find another tenant if that person is not complying or completing. If that potential buyer is not completing, then another buyer may be found for the lease to own program. They are responsible for maintaining the property during the course of lease period.

Who monitors all this? What person? What office?

NIDC. Okay. But to that point, you monitor it. Someone might say, okay, we gave this person an opportunity. Someone else comes in because fixing being ready to own a property is a big deal.

I mean, I've been through a home buying counseling program and it's and people don't realize they think you walk in, you get a certificate, I'm ready to buy a house, and you're not. Sometimes you have to fix your credit, sometimes it takes a while. So if another person moves in because this person didn't get to the finish line, how do you rate that as either success or not success since you didn't get that person to the finish line when that was the goal with selecting this person in this property because I still need an answer to at what point in time do you look back? Is it three years from now? Is it four years from now? Is it five year? And go, okay, we need to recalibrate here. We need to think about this. This isn't putting actual properties in people's names. What's that plan look like?

What's that evaluation look like?

I don't know what that point in time is when you would do that final evaluation to determine that that StrongLux is not producing or procuring buyers for that property, I do not have that.

So right now with this annual review and putting other people in, what's that conversation look like? What does that data tell you? How is that putting you on a path to figure this out?

Well, that data tells me that they may be having to change the potential buyer for that property that the initial buyer was not successful in the program. They are homeownership counseling agencies so they can counsel the buyers and guide them to purchase the home in the process. That is the positive of the program is they go to great extents to get buyers into the program and if that particular buyer doesn't work out, they perhaps need another opportunity or maybe several opportunities to get a buyer in. I think the concern ultimately would be we don't waive the homeownership requirement. That's part of the deed.

So when that property is conveyed, it must be conveyed to a homeowner. And that agency that does the service continues to put people in who might qualify. As you know, not everybody makes it through the program. Not everybody makes through as a home I

think somebody is missing my point here. That is open ended renting.

I don't think anybody is missing the point. Think you may

have Is there a provision in the agreement with X. Strong homes or strong block whatever they are called. Is there a provision in the agreement with them that if in five years they have not found an owner occupant the property reverts back to the city?

We don't have that provision in the agreement at this time that I am aware of.

Well, that's a huge loophole. Yeah.

You are

creating a rental property program.

Mr. Scherer?

Yeah. I

just just have questions in regards to any other stipulations in regards to maintenance or repairs of the property. Think like homes and KE have done an amazing job, right? To get the properties up to like optimal conditions. Is there particular requirements or specifications for those that are not choosing to do the owner occupied process, right? The lease to own. Who is in charge then of the maintenance and the value of that property to continue to be what it was.

Entity that that controls the the lease to own program which is Strong Blocks is in charge of and responsible for maintaining those properties.

Would be DCD doing any as the same way that you do the compliance size of the tenants, right? Are you doing also like a comparison or like a checklist of the maintenance of the property as well as part of the requirements?

Upon initial transfer and completion, of course, they have to have the lead clearance and they have to have the certificate of code compliance. As far as the annual reporting of tenants and occupants and lease to own agreements and options. We don't have a mechanism that keys to that that might require some type of an inspection that might be a really nice addition to the program to allow us to ensure that the quality of the houses remains high and that they do remain actively in a program affording opportunities to lease to own tenants.

Thank you.

Mr. Chair?

Yes, I'll get Larry.

Ed, I think so let's go back to Carl and just so of the potential 12 that he'll acquire rehab and put in his program, how many has he purchased currently? How many I'm sorry. How many has he completed construction? So, you mean? Is it half?

Well, he actually did complete in the owner occupancy sale program too. So two of his properties are in that program. So he has completed about 10. Okay.

Yeah. So let's go back to him and see kind of the status of those properties. Anything going forward, we can certainly put in what's been discussed here today. You know, This is 10, so 10, I know you said 12, but 10 would consider the He has two more. This model, right? So of over 100 properties, we are talking about one buyer, a very known buyer who is considering 10 going into that program.

Right. Right.

We just want to kind of continue to put it in perspective. It's not multiple entities. It's not multiple unknown entities. It's one entity. Karl Krundell is a very known entity in the organization.

Yes. There's 32 in progress. They could all be rent to own. No.

They're committed to the owner occupancy program. The only participant

out

of the 14 active developers currently is StrongBlox.

That is it. Currently.

Are not taking any additional new RFP developers.

Know what

we are to do? Are not going a complete report on this at Z and D. Okay. And I hope we get some paperwork and some actual physical reports because all we have Oh.

All that was Mister chair, I agree with you, but please make that request ahead of time so when they show up to committee, they're completely prepared. Put out two weeks ago. But when you ask for it, just make sure that all the all the information you want is well ahead of time Yeah.

Prepared for committee. I think we wanna know where this $500,000 went. Mhmm. I think we wanna know what the agreement was regarding 1,500,000.0 worth of administrative costs which I assume would be funded by DCD out of their general operating budget and not out of the program. But why we're getting almost 30% fewer units rehab out of what we originally thought we were going to get. Now I grant part of that is a higher rehab cost, assume you're embedding the MMSD cost for sewer?

That's a grant that is separate from the dollars that I'm talking So that's $2,000,000

That's why we like reports. That's And we need a complete spreadsheet on properties completed, properties sold with their addresses, the owner occupancy status of those properties, where the 32 in progress are and you said there's a couple others that are in some stage of production.

Sure. And the developer please.

Sure. Absolutely. That's all very easily available.

And can we get a cost analysis with that? I mean, I want to know, you know, in the end, you know, we all talk about what it cost per square foot. What what is that cost? And how you calculate the amount of time it takes as part of that cost?

Mhmm. Right. Right.

Well, this

is an excellent program. I mean, we're still getting basically almost brand new houses for a fraction of the cost of new construction.

You're getting 1,800 square foot houses These as are not small houses. The average house size in my program.

That's why this was a great program which is why we're very concerned about mission creep here. That somehow 500,000 was unilaterally shifted. I don't even know how that's done without council action.

I have no idea.

And you don't know how it was done.

Nobody seems to know how it was done. Well, you'll find out.

I mean, I'm quite sure that it was within an the ARPA program, you know, from one ARPA program to another.

Yeah. But that's that I don't know if you can do that. Well, you have a point.

Well, let's can we just find out? That'll that's gonna be

the discussion. It a a was a council appropriation.

Right. Right. Right. Right.

Of $15,000,000 for this program.

I started in August '22 after, I believe.

And now we hear 1.5 was was taken off the top for administrative costs which I'm not sure we fully understood at the time. We know that would be absorbed by the department. Yeah. And then now we hear 500,000 was hit was taken off the top that went somewhere. Nobody knows where. Nobody knows how. Nobody knows when. Don't you find that a little irregular?

Well, if I get it back, I'll spend it. We'll do more houses.

Well, and so you may not

be That's the point.

So you may That's your point.

It may not be spent?

Well, I don't know if it's spent or

not.

If it's not in my control, Yeah.

Yeah. So, the the another question. So, for 2026, your plan is to continue spending down whatever you have left. Right. And then, is there any intent to continue this program using either on using basically city funds?

That would be a little outside of you know my job responsibilities.

I'm rather troubled that by some of these presentations today. So we have some well intended basically functionary administrators giving us some facts, some facts they don't know, some facts they can't recall, some facts they have to dig out. You know, we get people who make decisions coming to this body and not reporting I mean, in fact, if you don't know where $500,000 went to the pro I mean, I you may not know, and I I don't deny that, but that's well, we'll find out at the at the

Mister chair, he said that's not that's not within his realm. So he wouldn't

I know, but that's the point is you'd like to have people within whose realm it

is. Okay.