Agenda Date: 02/14/2017
Subject:
Title
Discussion of the physical needs assessment report and vacancies/rent at Geneva Village Apartments
Body
|
Presented By: |
Mike Braaten, Deputy City Manager |
PURPOSE: Overview of property issues and recent needs assessment findings. Staff requests council guidance on rents as vacancies occur.
BACKGROUND:
Geneva Village is a 28-unit housing complex that has been owned by the city since 1975. The complex consists of studio, one-bedroom, and two-bedroom rental units for residents who are 55 years of age or older. The city contracts with South Metro Housing Options (SMHO) to manage the property, including screening applicants, maintaining a waiting list, turning over vacant units and re-leasing them, and ongoing general maintenance. The city manages the grounds and coordinates with SMHO on major improvements to the property.
Tenants are not “income-qualified” to be eligible to rent at Geneva Village. The only criteria that tenants must meet are 1) pass the screening criteria; and 2) be 55 years of age or older. By contrast, all tenants at other properties owned/managed by SHMO must qualify based on a percentage of area median income.
There is a wait list of 148 applicants for Geneva Village. There is little turnover, however, there is currently one vacant unit.
The rents at Geneva Village are significantly lower than fair market rents for the area; subsidized by the city. The table below shows current rents at Geneva Village and contrasts those rents at what was considered market rents in September, 2016. According to city records the rents at Geneva Village have not increased for 38 years, since 1979.
|
Bedroom Size |
Number of Units |
Current Geneva Village Rents |
Market Rent (Sept. ’16) for Littleton properties |
|
Studio |
10 |
$300 |
$990 |
|
1 Bdrm |
10 |
$390 |
$1,147 |
|
2 Bdrm |
8 |
$450 |
$1,245 |
|
Average market rent for properties constructed 1960-69 in Littleton |
$950 |
The property currently generates $126,000 per year at full occupancy. The management agreement, signed in 1975 with SMHO, allows them to invoice the city monthly for a ten percent management fee. In 2009, former city manager Jim Woods and then SMHO Director Dan Burnham agreed upon a monthly professional service fee of $2,500 payable by the city to SMHO for custodial/maintenance staff costs (that were formerly paid as professional services) for Geneva Village. The city also reimburses maintenance charges based on actual invoices, paid monthly, for maintenance performed at Geneva Village.
In 2016, in cooperation with the SMHO, a physical needs assessment was completed for Geneva Village to determine and better estimate maintenance and repair needs and costs for the aging property. Alan Brown, the city’s fleet and facilities manager, managed this process in cooperation with SMHO and has provided a review of the major findings and recommended improvements as an attachment to this document. Additionally, staff has provided both the executive summary and the entire Physical Needs Analysis Report.
STAFF ANALYSIS:
Physical Needs Assessment (PNA):
The attached summary states, “The standard useful life of [Geneva Village] is assumed to be 60 years. The complex’s actual age is 52 years. Based upon observations, in combination with known previous capital repairs, [the PNA consultant] AEI estimates the revised useful life of Geneva Village to be at least 48 additional years. This estimate assumes sound maintenance practices will continue and that recommended repairs will be completed according to the suggested timeline.”
The 20 year estimate of costs and reserves needed totals $462,000 (adjusted for inflation). That represents an average of $23,000 per year. Much of this cost is routine repairs/replacements that are addressed when units turnover, but there are some large, single cost projects.
Major repairs recently completed or underway:
|
Gas Line Replacement (2016) |
$90,000 |
|
Installation of Backflow Prevention (2016) |
$24,000 |
|
Roofing Replacement (2015) |
$163,600 |
|
Jetting of Sewer Lines (2017) |
$4,500 |
|
TOTAL |
$282,100 |
Major repairs recommended in 2017:
|
Water Line & Parking Lot Replacement$100,000 |
|
|
Upgrade Remaining Electrical Panels |
$38,000 |
|
Landscape Timber Replacement |
$7,000 |
|
TOTAL |
$145,000 |
Vacancies & Rent:
In 2014, council rejected a proposal to raise the rental rates on current tenants at Geneva Village by $50 per year per unit for three years citing concerns that some of the residents likely could not afford the increase.
As noted earlier, there is currently one unit vacant. Given that vacancies are infrequent, staff asked SMHO to hold the unit to allow for a discussion with city council pertaining to vacancies and rents.
Given the concern discussed in 2014 and assuming it remains a concern in 2017, staff has another proposal to raise rents, but only as units are vacated. This proposal does not harm those currently renting at Geneva Village, but allows the city to slowly realize a rent increase and some cost recovery.
SMHO has provided a 2017 rental comparison of similar units in Littleton. Note that all example properties are renting for considerably more than the city is charging at Geneva Village. From the information provided, Powers Circle Apartments is the closest property in age and unit offering, while South View Place Towers is a decade newer, but similar to Geneva Village in that it serves tenants 55 years of age or older.
|
Bedroom Size |
Current Geneva Village Rents |
Powers Circle Apartments Rents (LIHTC property) |
South View Place Towers Rents (Market rate, 55+) |
|
Studio |
$300 |
$618@50% AMI |
$551 |
|
1 Bdrm |
$390 |
$722@50% AMI |
$829 |
|
2 Bdrm |
$450 |
$864@50% AMI |
$1,247 |
To bring Geneva Village rents in line with other similar Littleton properties but still maintain affordability, staff recommends that Geneva Village rents be raised for new residents by $200 per month for a studio, $300 per month for a one-bedroom, and $400 per month for a two-bedroom unit. Although these increases may seem very steep, rents have not increased at Geneva Village for 38 years (since 1979) and the proposal still puts Geneva Village rents below a similar federally-subsidized tax-credit unit.
Proposed rent increase for new tenants:
|
Bedroom Size |
Current Geneva Village Rents |
Proposed Geneva Village Rents FOR NEW TENANTS ONLY |
|
Studio |
$300 |
$500 |
|
1 Bdrm |
$390 |
$690 |
|
2 Bdrm |
$450 |
$850 |
Because of the slow turn-over of units at Geneva Village, even if rents are addressed as proposed and recommended repairs are made, the city will still need to transfer additional general funds to cover Geneva Village expenses. Of note, this most recently occurred in 2016 - the council approved a transfer of $75,000 of general funds to pay for the emergency gas line replacement at Geneva Village.
FISCAL IMPACTS:
Fiscal impacts of the proposed rent increase are difficult to determine and are dependent upon vacancies for the city to realize the increase. Given the slow phase-in, it could be 20 or more years before some units would be converted to the proposed increase.
STAFF RECOMMENDATION:
In addition to the proposed rent increase, staff recommends council adopt an amendment to the management agreement formalizing the 2009 agreement allowing SMHO to charge the professional service fee in addition to the management fee.
If council approves, a resolution will be drafted based upon staff recommendations.