PREDATORY BORROWING?
Laying down the Greenlaw in Mammoth Lakes
Mammoth Lakes Town Council held a public hearing on a potential Community Development Block Grant (CDBG) at its Wednesday meeting. Mammoth Lakes Housing (MLH) and town staff have prepared a CDBG grant application for $3 million for the improvement of 13 units at Mammoth Mall to be rented to low income residents.
The CDBG is a federal grant provided by the Department of Housing and Urban Development to help municipalities develop affordable housing.
The Mammoth Mall is owned by a private developer, Greenlaw Partners, so this improvement would be a public-private partnership. In order to not give free money to developers, the Federal Government makes this grant act like a loan. The town and the developer decide on the loan structure and the developer eventually pays the loan back for the town to recycle into new community housing.
The prospect of 13 new affordable housing units would normally be too enticing to pass up for town council, but the developer drove a hard bargain.
Greenlaw Partners asked for a 60 year loan with 0% interest and no payments due until the end of the 60 years.
Mammoth property owner Paul Rudder said about the loan structure, “I’ll take two!”
Members of the Mammoth Lakes Housing board were in attendance at the hearing and expressed their support for the grant application.
MLH Executive Director Patricia Robertson tried to soften the council to this seemingly predatory loan. She said that the town has done loans like this for non-profits, and that this loan structure might not be unreasonable for the developer.
“As we know, construction in our area is very expensive. We haven’t seen the pro-forma or the details of the analysis.”
Mammoth Mountain Ski Area VP of Development Tom Hodges backed Robertson up. He emphasized the town’s desperate need for housing.Mammoth Lakes. He also said that, by his calculation, the profit margin for the owners would be very thin.
“They should be allowed to make a profit,” Hodges said. “Based on my analysis, I don’t disagree with what they are saying… Even at a 2.5% interest rate it didn’t work.”
Hodges asked council to apply for the loan and work out the finer details later.
MLH board member Lindsay Barksdale said that it is exciting that a private developer wants to make affordable housing.
“We have between when the applications are due and May when awards are made to really delve in and do a much stronger negotiation,” Barksdale said.
If the town is awarded the grant, it cannot be used for any other project than that which it was applied for. It can, however, be returned to the federal government if an agreement is not reached between the town and the developer. Patricia Robertson said that this return would not be a black mark on the town for future grant applications.
The Town Council did not feel as warmly about the loan terms as the MLH board did. Town Councilman Kirk Stapp, who is also on the MLH board, said that he supports the grant but not the offer from the developer.
He worried that it sets a precedent for future developers to hold the town hostage for federal grants for community housing. He also said that the property management details of the contract are not ironed our, e.g. who collects rent, who fills vacancies, and who rehabs the property?
He said that the loan terms were ridiculous. “Think of the value of money after 60 years, $3 million, I mean are we talking pocket change?”
Mayor Cleland Hoff agreed.
“The robots, I mean people who are going to be in charge of this loan 60 years down the road will appreciate us looking at this a little closer,” she said.
Mayor Pro Tem Bill Sauser brought up some deeper concerns with this loan. “Once he gets the mall rented that he can’t currently rent in this economy, it gives him the value to sell it at the profit he is looking for,” he said. Sauser is likely right about this. Greenlaw listed the property for $6 million in February, 2018, and it is still on the market. Sauser recommended that the loan terms say that the loan must be paid back in full upon sale of the property, as it is with home loans, but he thought that Greenlaw wouldn’t go for this.
“I am anxious to get our housing program off the ground,” he concluded, “but I am not anxious to put cash in the hands of a developer who paid too much for a mall that he now can’t rent.”
Councilman John Wentworth made a motion that the town apply for the grant under the conditions that town staff undertake a credible negotiation with the developer, and perform an analysis of the burden that the current loan could put on the town.
The application for the CDBG is due next week, and the town plans to submit it on Friday 2/22.
Wednesday’s Town Council Meeting saw steps made toward construction of a new Multi-Use Facility [MUF]. Council passed a motion 4 votes to 1 stating the three next steps regarding the MUF:
The council prefers Mammoth Creek Park over the School Site as a location
Town Staff should figure out what can be built with the current amount of money allocated, $9.2 million
Staff should explore alternative funding sources to fill the $3.8 million gap between current funds, $9.2, and the proposed cost, $13 million
Not much has changed since Council directed its staff in December to explore the School Site (A.K.A. the current site of the ice rink) as an option. Recreation Manager Stu Brown and Public Works Director Grady Dutton put together a report recommending that the town council choose to build the $13 million park at Mammoth Creek Park over the School Site.
The reasoning in this report for its recommendations were
The town owns Mammoth Creek Park, and would be leasing the School Site, so the former removes the burden of lease payments and also means that the town is investing capital into land it owns rather than leases
The condition of the current ice rink means that much of it must replaced in the near future, and it will be more expensive to keep up than a new facility
Location constraints around the lot size at the school site limit potential expansion of amenities and programming
Similarly to 3, MCP offers the opportunity for expansion into a community center
The greatest hangup on this issue was the lack of funds.
Here is a list of sources for the current $9.2 million allocated, General Fund $120,000, Measure R $2,600,000, Measure U $500,000, Parks Development Impact Fees $200,000, Mello-Roos $214,400, Bond Issuance $5,500,000.
The town cannot ask for bids at $13 million until it actually has the $13 million, and so much find the $3.8 million somewhere.
This prospect worried citizen Sandy Hogan, who spoke during the public comment section of council’s discussion.
“This [the MUF] may have been a priority a few years ago, but now I believe that housing is number 1,” Hogan said.
“If we have to live with the current rink for a while, even without a roof, I don’t want to see $3.8 million taken away from housing.”
Mayor Cleland Hoff was concerned that Dutton was underestimating the price of the new facility. She cited the construction of the current rink, which took place in 2007. A roof had been included in the plans but was never installed due to a “lack of funds.”
“What is so different about us now?” Hoff asked.
Bill Sauser elaborated, as he was on the recreation funding board at the time, that the roof price had been quoted at $1.3 million but was actually much more than that. It was merely an estimate that was incorrect. He pointed out that this $13 million price is the same as that 2007 price: an estimate.
Lynda Salcido felt that she had researched the issue thoroughly and was confident that the Mammoth Creek Park site is superior. She said that she believes that there are creative funding options that town staff has not explored, like soliciting funds from Mammoth Mountain.
The motion that the council passed does not guarantee the construction of the $13 million site at Mammoth Creek Park, but that is the path they are pursuing.
Once staff gets back to council with the details on a site that they could build for the $9.1 million the town currently has, and a way to get the $3.8 million, then the council will compare options and possibly make a decision.
CDBG Heebie-Jeebies
Special Events Funding Reveals Town’s Id
“When I see this
“I hope that in the future we reflect more of our core values,” she said.
MLT Director of Special events Caroline Casey led the five member board of special event funding, which included Town Manager Dan Holler, MLT Director John Urdi, Recreation Manager Stu Brown, and Chamber of Commerce Director Ken Brengle.
The board had $125,000 to allocate, and $320,900 in requests from event managers. 35 different events applied for funding this year, as compared to 16 in 2018.
The awards were made on February 7.
