In April, there were more signs that Commissioner Mary Tingerthal is reshaping the Agency at the monthly Minnesota Housing Finance Agency meeting. The board also approved a new funding source for Greater Minnesota nonprofits and revisited the issue of high housing costs.
New Board Composition
Starting in April, two new members joined the Agency’s board of directors, and one of them was appointed Chair. Ken Johnson, from St. Paul, was appointed as board Chair by Gov. Dayton . Johnson, now retired, headed both the Port Authority and the Department of Planning and Economic Development in St. Paul. Prior to his work in St. Paul, Johnson served for many years as Senior Economic Developer for the City of Duluth.
Johnson replaces long-time chair Mike Finch. Finch has submitted his resignation, but will remain on the board until a successor is appointed. (Anyone is eligible to apply, except those from the Northeast and Central development regions. The position is yet to be posted on the Secretary of State website.)
At the end of the meeting the board voted its other Johnson as Vice Chair. Joe Johnson, from Duluth and a vice president with the North Shore Bank of Commerce, received the board’s endorsement for this position.
The other new board member is Stephanie Klinzing. Klinzing, a journalist, is the former mayor of Elk River, where she still resides. Klinzing’s background also includes several terms on the board of Greater Minnesota Housing Fund, a term in the Minnesota House, and election as the first woman commissioner in Sherburne County.
Commissioner Tingerthal announced additional management changes at the Agency. She has eliminated the position of Chief Operating Officer, which had been filled by Pat Hanson, who left the agency at the end of April. With this change Tingerthal has now eliminated two positions that represented the management additions introduced by former commisioner Dan Bartholomay. In addition Tingerthal said that there had been a recent change in the organization of the multi-family staff, largely along functional lines, and that geographic region assignments for staff would still be important, but would be a “secondary orientation.”
New Program for Greater MN Non-Profits
The board approved creation of a program that provides $460,000 in federal HOME program funds as operating support to Greater Minnesota nonprofit agencies. To qualify, nonprofits need to be registered in Minnesota as Community Housing Development Organizations (or CHDOs), a designation that requires certain governance requirements to be met, such as having representation of low income community members. The CHDO also must either use HOME dollars for developing affordable housing or have an agreement with the Agency to do so within two years’ time.
Board member Barb Sanderson, from Grand Rapids and a leading advocate for this program, stated that she liked the direction the Agency was taking. She, however, did express concern that since the program effectively required that a CHDO also be awarded HOME rental funds, the program might not start in a timely way, as the guidelines for the HOME rental program have not been developed.
Commissioner Tingerthal said that she was gaining appreciation of the complexity involved in operating a rental program funded by federal HOME dollars. She said that over the next two months she wanted to step back and understand how best to employ these federal dollars, and revisit the balance between using the funds for ownership versus rental housing. In response to Sanderson’s concern, Tingerthal added that the Agency will begin right away accepting applications for the CHDO operating funds.
Housing Cost Discussed in Approval of Supportive Housing Development
The issue of cost control came up in the board’s award of $1.2 million in Challenge program funds, recently recaptured by the Agency, for a development of 101 supportive housing units by the nonprofit RS Eden. The housing, for single adults, will be located in Minneapolis near the Metrodome light rail transit stop, and will include conversion of a 1920s office and industrial building plus a major addition to be newly constructed. This adaptive reuse project, also funded with federal housing tax credits, is budgeted to cost $182,000 per unit.
In awarding the funds the board also was approving a rule waiver in that the Challenge program is normally awarded through the annual RFP. Staff asked for the exception so that the project, which they said was a high priority for the agency, could meet funding commitment deadlines and move forward.
Member Finch asked whether this was a good use of Agency funds. Finch added that 3-bedroom homes in his neighborhood cost less than the cost of the proposed efficiency apartments.
Staff responded that the project fit within the boundaries of typical project costs under the Agency's predictive cost model. Based on an analysis of past projects, the Agency has created a financial model for new apartments, with a total development cost of $110,000 for a basic apartment. It then adds cost allowances for various factors such as additional costs for rehabbing older buildings.
Finch responded that the Agency’s priority should be housing, not historic preservation. Finch was concerned that the modeling developed by the Agency, based on past costs, might have institutionalized bad behavior.
Commissioner Tingerthal said that the points raised by member Finch have also been raised nationally for tax credit projects. Since the tax credit program could be lost due to a federal budget overhaul, it was important for Minnesota and other state agencies to defend costs associated with tax credit projects. She said that starting this year, staff will conduct cost analyses of all applications for tax credits. Out of this analysis, she hopes to better understand the cost of additional social benefits, such as those associated with the RS Eden project.
The board concluded its discussion and voted in favor of funding the project on a 5 to 2 vote, with Finch and Sanderson dissenting.