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HomeMy WebLinkAbout2024-02-08-AC-min 2/8/2024 AC Minutes 1 Minutes Town of Lexington Appropriation Committee (AC) February 8, 2024 Place and Time: Remote participation via a Zoom teleconferencing session that was open to the public; 7:30 p.m.–9:30 p.m. Members Present: Glenn Parker, Chair; Sanjay Padaki, Vice-Chair; Alan Levine, Secretary; Anil Ahuja; John Bartenstein; Eric Michelson; Sean Osborne; Carolyn Kosnoff, Assistant Town Man- ager, Finance (non-voting, ex officio) Members Absent: Lily Yan Other Attendees: Charles Lamb, Capital Expenditures Committee (CEC); David Kanter, CEC; Elaine Tung, Chair, Affordable Housing Trust (AHT); Linda Prosnitz, AHT; Carol Kowalski, As- sistant Town Manager for Development; Lisah Rhodes, CEC; Bob Pressman, Community Preserva- tion Committee (CPC); Margaret Heitz; Harriet Cohen (8:05) At 7:34 p.m. Mr. Parker called the meeting to order and took attendance by roll call. All votes recorded below were conducted by roll call. Announcements and Liaison Reports Mr. Michelson reported that the Town had received notification of the final value of Minuteman Regional High School’s annual assessment for FY2025, which will be $3,406,394. Ms. Kosnoff reported that the Town’s Free Cash was certified earlier in the week by the Dept of Revenue at just over $17 million. The operating budget estimate had been $16.5 million, so the ex- cess will be applied to cash capital. She then reported that the Town had sold $9.5 million in munic- ipal bonds at a rate of about 2.25%, which she affirmed was a very good result. As liaison to the School Building Committee, Mr. Levine reported that the architects had distributed a draft report of existing conditions, a large document covering a range of topics, such as a traffic study, environmental studies, wetlands, and code compliance. Article 10(i): Affordable Housing Trust Funding Ms. Tung stated that video and slide presentations on Article 10(i) were available on the Town web- site, and that she had also shared a memorandum with Mr. Parker. Mr. Parker responded that he had shared the memorandum and related documents with the Committee. Ms. Tung noted that Article 10(i) is a joint request from the Select Board and the AHT for $3.2 mil- lion from CPA funds which would fund the AHT for FY2025. She stated that LexHAB’s costs have risen significantly over the past few years, such that they would have difficulty purchasing a property now without additional funding, which the AHT was established to provide. LexHAB has applied, via a home rule petition to the state legislature, for nonprofit 501(c)(3) status which they hope to receive by the end of June, after which they will want to put the Vine St. project out to bid. Ms. Tung noted that the Lexington Housing Authority is hoping to transform 17 single-family sites into two-family sites per HUD guidance, which would also require funding from the AHT, but probably not in the coming year. 2/8/2024 AC Minutes 2 Ms. Tung stated that the first Special Residential District (SRD) application was received recently, which could provide an opportunity to buy down one or more units to make them affordable. Mr. Bartenstein asked if the dwelling units in the new properties mentioned in Ms. Tung’s memo- randum would be operated as rental units or offered for purchase by qualified people. Ms. Tung and Ms. Kowalski responded that the units on Mass Ave. and Woburn St. would be rentals. Mr. Bartenstein asked if the AHT had a long-range plan regarding the kinds of affordable housing to be created. Ms. Tung replied that the AHT is a financing entity only while operational decisions are in the hands of LexHAB. She continued that the AHT could investigate the possibility of doing buy downs in new construction done under the new MBTA Communities zoning bylaw, and could help to maintain the existing stock of affordable housing by subsidizing repairs or repurchasing af- fordable units. Mr. Parker asked for clarification of the term, “buy down”. Ms. Prosnitz stated that in SRD or MBTA zoning developments, projects will be built with 15% or 10% of the units being affordable, typically resulting in one affordable unit. A buy down by the AHT can improve the affordability of a unit by making it available to households with lower incomes, or it can convert a market-rate unit to an affordable unit. A buy-down would typically result in an affordable housing deed restriction on a unit rather than the purchase of a unit. Mr. Levine asked if a “buy down” was a one-time payment or a recurring payment. Ms. Prosnitz re- plied that it could work several ways, such as an up-front payment to the developer or as an annual rent subsidy to a tenant. While it would be subject to negotiation with the developer, she did not be- lieve it would result in an annual subsidy of the developer. Mr. Ahuja asked if agreements with developers would be in perpetuity, or at least for the life of the building. Ms. Prosnitz replied that there would be long-term deed restrictions on the affordable units, which, among other things, specify what happens if a building must be demolished, and also provide affordability protection for residents living in the units. Mr. Padaki stated his appreciation for the memorandum from Ms. Tung, which had answered some of his earlier questions. He asked about a $950,000 purchase, of which $550,000 was provided by the AHT, and he wanted to know how the remainder was funded. Ms. Tung replied that the remain- ing $400,000 came from LexHAB, which it received as pre-funding from the CPC in the prior year. Mr. Padaki asked about potential sources of revenue for the AHT other than CPA funds, such as state or federal grants, and the payments-in-lieu of taxes (PILOTs) from Brookhaven. Ms. Tung re- plied that there were no other sources besides the CPA and PILOTs at the moment, but under the SRD a developer may have the option to make a payment-in-lieu of building an affordable unit, which would flow to the AHT. There are two home-rule petitions pending in the state legislature that would impose a surcharge on large commercial property developments or residential redevelop- ments. A local option for a real estate transfer tax has been proposed that would generate fees for the AHT if Lexington adopted it. Mr. Parker asked if federal or state grants would be available. Ms. Tung replied that no federal grants were available for the AHT, but the Governor’s proposed housing bill might eventually make some funds available for affordable housing that intersect with the AHT’s work. Mr. Bartenstein asked about the amounts for the AHT in the CPC’s 5-year plan and also about the AHT’s views on how they will set such annual funding requests from the CPA in future years. The funding requests could fluctuate according to the projects in a near-term plan, or it could adopt a regular investment approach with relatively steady annual funding requests. The latter would allow 2/8/2024 AC Minutes 3 the CPC to manage its capital budget more easily. Ms. Tung emphasized that the amounts in the 5- year plan should have been listed as to-be-determined. She does not believe the AHT funding re- quests can be limited to a steady amount each year because the real estate market is too volatile. In- stead, the AHT will base funding requests on its own projection of anticipated needs in the coming year. Ms. Kosnoff commented that while the CPC maintains a 5-year capital plan, it still responds to un- expected requests every year. She encouraged entities making regular requests for CPA funds to de- velop their own 5-year plans and to share details about large CPA requests in advance. Mr. Bartenstein added that it might be frustrating to see a very large balance of funds sitting unused in the AHT. He asked how the fund balance was invested. Ms. Kosnoff replied that the funds are limited to liquid, low-risk investments and are managed by the Town Treasurer. Mr. Bartenstein questioned whether the AHT was a municipal entity. Ms. Tung emphasized that the AHT is a Town financing entity, which is very different from LexHAB, which, upon approval of the home-rule petition, will become an independent nonprofit developer that will not be a part of Town government. Mr. Bartenstein commented that once town meeting appropriates funds to the AHT, it has no further say over how those funds are used. Ms. Tung responded that before the AHT was created, LexHAB was limited in the timing of its requests by the town meeting calendar, which made it very difficult for them to acquire property. The AHT now provides the necessary flexibility to fund housing-re- lated needs in a changing real estate market, but that means town meeting cannot vote on specific AHT financing decisions. Ms. Prosnitz added that recipients of AHT grants are bound by re- strictions on how the grants may be used, but these restrictions are not based on legal constraints the Town would face if it was using the money directly. Mr. Michelson asked whether funding, including CPA funds, for all affordable housing projects, in- cluding work by LexHAB and the Lexington Housing Authority (LHA), would flow through the AHT, or, alternatively, the AHT would serve more as a reserve fund for property acquisition while funding for long-term projects of LexHAB and LHA would be routed directly to those entities. Ms. Tung replied that the AHT coordinates its requests with the CPC, LexHAB, and LHA, and she ex- pects that LexHAB and LHA will continue to request support directly from the CPC based on their capital plans, while the AHT fills in the gaps for less predictable needs. Ms. Tung added that she had found one instance of a state grant to the AHT for $10,000 from One Stop for Growth. Mr. Michelson suggested that the AHT report on its activities to each annual town meeting. Ms. Tung agreed to bring this up with the AHT board. Article 33: Authorize the Select Board to Seek Affordable Housing Mr. Parker opened the discussion on Article 33 by noting that it was a complicated issue with many political aspects, but he asked the Committee to devote some time to the financial implications for the Town. Ms. Tung began by noting that there is no development proposal for parcel 68-44 at this time. The article requests that town meeting authorize the Select Board to use the parcel for affordable hous- ing and to dispose of the land as needed for that purpose, which is a necessary condition for explor- ing an all-affordable housing development on the site. If Article 33 is approved, the Town would issue an RFP for a development and the Select Board would decide which, if any, of the proposals 2/8/2024 AC Minutes 4 were worth pursuing. The proposed project would then go through the zoning process for a “friendly 40B” development. Mr. Levine expressed discomfort with the concept because town meeting would have no formal in- volvement after Article 33 is passed, and their approval is being requested before any details of a future RFP have been presented. In addition, he feels that the process will tend to create the maxi- mum amount of housing, which preliminary analysis suggests could be as high as 50 units. The en- tire parcel is 3.1 acres, including half an acre of wetlands and around 2.5 acres of developable land. Mr. Levine would prefer to set preconditions on the scale of development in the RFP before voting on Article 33, or perhaps to have the Select Board issue an RFP in advance of seeking approval from town meeting so that town meeting can review proposals before voting. Mr. Levine raised the example of 661 Lowell St, aka Locke Village, which has 62 condominiums clustered in 3 buildings on 5 acres. If parcel 68-44 were developed to a comparable density, it would have only 30 units. Mr. Levine is concerned that responses to the RFP would all exceed this density, forcing the Town to permit a denser development. Ms. Tung said she understood Mr. Levine’s concerns and noted that this is a new process for Lex- ington, but many other towns have followed this model and been successful. She asserted that prior discussions at the AHT have not specified a 50-unit development in their criteria. The AHT’s goals are to create an all-affordable development with rental housing for residents ranging from 30% AMI to 80% AMI, with an average of 60% AMI. They want a mix of one-, two-, and three-bedroom units, and two thirds will need to be two- or three-bedroom units in order to qualify for federal and state subsidies. They want a development that is appropriate and respectful of the environment and the community. And they want to leverage CPA funds to get federal and state subsidies that would cover the bulk of the development subsidies. Ms. Prosnitz stated that the RFP would include many guidelines, including the goals listed by Ms. Tung, and that the selection process would investigate the proposed designs and financing including how much local funding would be needed. If none of the proposals meet all guidelines, the Town would not be obligated to proceed with any of them. If a proposal was close to being satisfactory, the Town could negotiate for changes to bring it to an acceptable state. Once a developer was se- lected, there would be continuing community input. Since the project will likely be requesting a 40B comprehensive permit, some state approvals will also require the Select Board to hold public hearings which provide further opportunities for feedback. After the state issues a Project Eligibility Letter, the Zoning Board of Approvals would engage in public hearings while reviewing the project. Ms. Prosnitz stated she understands that people are concerned about the possibility of a large devel- opment, but we should wait until we have real proposals to consider. She noted that there is cur- rently no significant outside support for building affordable homes for ownership as opposed to rentals. The opportunity to use town-owned land is a major factor supporting the goal of an all-af- fordable development. The local commitment to provide this land and a portion of the development costs makes this a much more competitive proposal for scarce grant funding. It may take a couple of years until all the necessary state and federal funding is available. Mr. Levine stated that he appreciated that the RFP would have some guidelines, even if the number of units was not capped at 30. He wondered why the Town would not get to vote on the final choice for using town-owned land. Ms. Kowalski responded that for an all-affordable development, which requires many steps over a period of years to bring all the resources to bear, the subsidizing agen- cies would not offer support for a project that could be rejected by town meeting at the end of all that effort. 2/8/2024 AC Minutes 5 Mr. Bartenstein asked if the Comprehensive Permit was part of a so-called friendly 40B develop- ment. Ms. Prosnitz confirmed this and stated that rather than going through the Planning Board, the Zoning Board of Appeals (ZBA) would be the agency reviewing the proposal. Mr. Bartenstein stated his concern that Article 33 will ask town meeting to relinquish the future decision-making process to the Select Board and the ZBA. In other types of planned developments, town meeting votes on the final designs. Ms. Tung replied that the standard development cycle we are familiar with works with typical de- velopers, but not with all-affordable developers. The standard cycle requires the Town to pay for the development, or to be satisfied with a small number of affordable units (often just one) as part of a larger group of market-rate units. Mr. Bartenstein noted that Article 33 does not specify an all-affordable development. Mr. Levine suggested that the AHT could perform a feasibility study before issuing an RFP. Ms. Kowalski stated that the AHT has investigated the feasibility of the site and they were satisfied that the project was viable and would be able to attract the necessary funding for an all-affordable development. Mr. Bartenstein asked if the development would count towards the MBTA zoning requirements. Ms. Tung replied that it would not. Ms. Kowalski noted that the Town would see far more benefits to its Subsidized Housing Inventory (SHI) from this project where all units would be eligible than the developments expected to fulfill MBTA zoning needs where only the few affordable units would be eligible. Mr. Levine stated that he was hoping a consultant would be able to narrow down the options before Town Meeting had to vote on Article 33. He wondered if the local developers who were consulted had any suggestions. Ms. Tung replied that she did not identify the exact parcel to the developers to avoid a potential conflict of interest in the case that they decided to respond to an RFP. The AHT did examine what the developers would expect to see from the Town, and they looked at other RFPs for affordable developments. In short, she did not believe a consultant would provide additional value. Mr. Bartenstein reiterated his concerns about the lack of accountability to town meeting. Ms. Pros- nitz responded that the accountability flows from the community engagement and the local boards that help shape the development. Mr. Bartenstein stated that he expected town meeting would want more clarity on the project before they granted permission to the Select Board. Mr. Michelson agreed that town meeting might be very hesitant to proceed with the request as presented. Mr. Osborne asked if the AHT’s review with Town staff had considered water and sewer load, and the capacity of the Fire Department to operate in a multi-story residential building. Ms. Kowalski responded that the Engineering Division had no concerns about water or sewer capacity, and the Fire Department representative saw no insurmountable issues. Mr. Michelson expressed concern about the general lack of public transportation in the area of par- cel 68-44. Ms. Kowalski stated that Lexpress serves the location, and a pending grant would in- crease service to every half hour between Waltham and Burlington, going right past the parcel. She noted that a development would increase the demand for sidewalks and transportation services in the immediate area. Mr. Parker asked the Committee to return to the financial impact on the Town. Ms. Prosnitz stated that the largest impact would be the initial funding from the AHT, after which the development would be privately owned and operated. Mr. Parker noted that developers often quantify the impact of new developments in terms of additional demands on public safety and street maintenance. Mr. 2/8/2024 AC Minutes 6 Bartenstein mentioned school enrollment. Mr. Michelson noted that Lexpress is also a town ex- pense, and he questioned how long the grants for the expanded service would last. He noted that sidewalks that are needed to connect neighborhoods to retail areas and schools are often funded by the Town. Ms. Kowalski stated that many affordable housing development corporations make PILOTs, con- tributing to the cost of services. Mr. Michelson asked to confirm the nonprofit status of the potential development. Ms. Tung stated that she had discussed this with Town Counsel, and there were pros and cons to leasing versus giving ownership to the developer. Ms. Kowalski stated that the develop- ment would be making payments to the Town, either in the form of property taxes or PILOTs. Mr. Bartenstein asked why a nonprofit funded by the Town should be expected to make payments to the Town. Ms. Tung explained, first, that most of the funding for the development would not come from the Town; next, that it is not unusual for affordable housing developments to make PI- LOTs; and, that they are careful to use appropriate sources of funding for such payments. Mr. Lev- ine asked if LexHAB would begin making payments after it converted to a nonprofit. Ms. Kowalski cited the example of the Housing Corporation of Arlington which is a nonprofit 501(c)(3) that owns many properties, and they pay PILOTs to the Town of Arlington. Mr. Levine stated that he would not see the point of taking payments from a nonprofit for a home where the AHT has done a buy down, since it would cut into the rental subsidy that the nonprofit in charge of the unit could offer. Mr. Levine stated that the primary financial impact to the Town would be the donation of the parcel, which has value, and whatever money the AHT provides to support the development. Ms. Prosnitz reiterated that the bulk of the development costs would be funded by sources other than the Town. Mr. Parker reminded the Committee that the parcel carries a deed restriction in the form of the pur- poses stated when the State gave the parcel to the Town. Mr. Osborne stated that the Town should not dismiss PILOTs out of hand. Mr. Parker agreed and suggested that we defer to the experts on affordable housing regarding this policy. Minutes of Prior Meetings Minutes from the Committee meeting on February 1 were approved by a vote of 5-0. Future Meeting Discussion Mr. Padaki suggested that the Committee should begin voting on warrant articles at its next meet- ing. Mr. Parker stated that all drafts should be completed by February 29. Adjourn The meeting was adjourned at 9:38 p.m. Respectfully submitted, Glenn P. Parker Approved: February 22, 2024 Exhibits ● Agenda, posted by Mr. Parker