1 1 HOUSING AUTHORITY OF THE CITY OF NEWARK 2 NEWARK, NEW JERSEY 3 MONDAY, APRIL 11, 2022 4 x--------------------------------x 5 IN THE MATTER OF: * 6 THE SPECIAL MEETING * TRANSCRIPT 7 OF THE HOUSING AUTHORITY * OF 8 OF THE CITY OF NEWARK * PROCEEDINGS 9 Commencing at 4:00 p.m. via Zoom * 10 x--------------------------------x 11 HOUSING AUTHORITY OF THE CITY OF NEWARK 12 500 BROAD STREET 13 NEWARK, NEW JERSEY 14 B E F O R E: 15 HOUSING AUTHORITY OF THE CITY OF NEWARK 16 NORMA GONZALEZ, President 17 EDDIE OSBORNE, Commissioner (Absent) 18 MARTINIQUE COSTA, Commissioner 19 FAUSTO BAEZ, Commissioner 20 BRIAN LOGAN, Commissioner 21 ALIF MUHAMMAD, Commissioner 22 23 24 ANTHONY HOFMANN, C.C.R. 25 LICENSE NO. XIO1854 2 1 PROFESSIONAL STAFF: 2 3 VICTOR CIRILO, Executive Director 4 KATIA OLIVEIRA, Executive Assistant 5 ELIO MENA, Counsel 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 3 1 I N D E X 2 PAGE 3 Opening Statement 4 4 5 RESOLUTIONS PAGE 6 H-1 5 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 4 1 CHAIRPERSON GONZALEZ: Good evening, 2 everyone. Today is Monday, April 11, 2022. It is 3 4:00 p.m. I would like to call the meeting of the 4 Newark Housing Authority Board meeting, a special 5 meeting of Commissioners. I would like to call the 6 meeting to order. 7 MR. CIRILO: The reading of the Open 8 Public Meetings Act, Madam Chair. As required by 9 N.J.S.A. 10:4-6 known as the Open Public Meetings 10 Act, notice of this special meeting was provided in 11 the following manner. On April 4, 2022 notice of 12 meeting specifying the date, time and location was 13 transmitted to the Star Ledger, El Especialito and 14 to the Clerk of the City of Newark. 15 CHAIRPERSON GONZALEZ: Thank you. 16 Could I have a roll call, please. 17 MR. CIRILO: Yes. 18 Commissioner Muhammad. 19 COMMISSIONER MUHAMMAD: Here. 20 MR. CIRILO: Commissioner Costa. 21 COMMISSIONER COSTA: Here. 22 MR. CIRILO: Commissioner Osborne. 23 Commissioner Osborne. 24 Commissioner Baez. 25 COMMISSIONER BAEZ: Present. 5 1 MR. CIRILO: Commissioner Logan. 2 COMMISSIONER LOGAN: Yes. 3 MR. CIRILO: Chairwoman Gonzalez. 4 CHAIRPERSON GONZALEZ: Here. 5 MR. CIRILO: Madam Chair, we have a 6 quorum. 7 CHAIRPERSON GONZALEZ: Since we have a 8 quorum, I would like to go to the next resolution. 9 Could you please read CRPT. 10 MR. CIRILO: Yes, Madam Chair, the 11 resolution reads resolution authorizing the Newark 12 Housing Authority to file an amended application 13 with the Local Finance Board for approval to enter 14 into not to exceed seventy million five hundred 15 thousand dollars in mortgage loans in connection 16 with the conversion of four public housing projects 17 described herein to project based Section 8 under 18 the Rental Assistance Demonstration program. 19 I will give some background. 20 CHAIRPERSON GONZALEZ: Please. 21 MR. CIRILO: Thank you, Madam Chair. 22 So this body has approved an energy performance 23 contract -- I'm sorry, a RAD conversion agreement in 24 the amount of about thirty million dollars 25 previously. So that was about to go before the 6 1 Local Finance Board. It passed through, well, 2 except that now we ran into a situation because we 3 have a large amount of debt attached to these 4 properties in the form of an energy performance 5 contract. Some of you may be familiar with that 6 program and I'll explain it to you in a second. 7 Needless to say, not only the bank, 8 but most importantly HUD required us to provide a 9 guarantee that that debt will be covered after we 10 convert under the Rental Assistance program. So 11 what does that mean? It means that our original 12 estimate of about thirty million dollars is now up 13 to actually seventy million, but it's not that we 14 are borrowing extra money, we are actually using an 15 actual escrow account to put the money that would 16 have been eventually been paid anyway for the energy 17 performance debt into a lockbox, into an escrow 18 account in case there is an issue. In case there is 19 default, we have a safety net to do the RAD 20 conversion process which is about a twenty year 21 process. So I actually shared with you a list of 22 all the repairs that are going to be done per site 23 and I know that Commissioner Muhammad mentioned that 24 the print is very small. It breaks down the deal of 25 the four different sites and it talks to not only a 7 1 very well put together breakdown, a very transparent 2 breakdown of all the expenses, soft expenses that 3 have been accumulating to date, but also the list of 4 repairs that were done. It is very small print, but 5 it is computerized and you are able to enlarge it 6 once you just review it in front of your computer. 7 Now, did I mention that at this point 8 we are not able to change what kind of repairs will 9 be made at these four different sites. These were 10 done by professionals. HUD requires the Housing 11 Authority to procure professional engineers and 12 perform a very in depth and significant 13 environmental assessment so that we are actually 14 performing the real work that needs to get done on 15 the site in order to expand the life span of the 16 property. So this is a very thorough breakdown of 17 everything that is going to be done for the next 18 twenty years. We are projecting right now a total 19 of about immediate rehab which is twenty-four 20 months -- eighteen months. In the next eighteen 21 months, we will be performing eight million dollars 22 of rehabilitation and for the rest of the twenty 23 years, 17.6 million dollars of total rehab. So if 24 you look at your pie, Madam Chair, I share with you 25 a graphic here. If you look in your pie -- 8 1 CHAIRPERSON GONZALEZ: This one? 2 MR. CIRILO: The blue portion 3 represents the eight million dollars in immediate 4 rehab and the 17.6 million dollars, that's the 5 long-term rehab. At Stephen Crane Village, James C. 6 White, Wynona Lipman and Grafton Avenue. So that is 7 a total rehab of about twenty-five million dollars. 8 Twenty-five million dollars out of that seventy. 9 Now, the balance is this issue of EPC debt. 10 In order for you to get a better 11 understanding away from what I can explain, we have 12 some professionals that are going to join us in a 13 second. Just to give you some background, in 2010 14 the U.S. Department of Housing and Urban Development 15 put together this energy performance contract 16 concept and under that concept the way that the 17 Housing Authority were funded for utility 18 reimbursement changed for those housing authorities 19 participating in the program. What do I mean by 20 that? Prior to that, housing authorities and 21 housing authority energy and utility expenses were 22 covered through an index. HUD would ask for three 23 years of data and they would give you the average 24 reimbursement for utility expenses on water and 25 energy. So someone at HUD came up with the idea of 9 1 capitalizing those future funds and allowing housing 2 authorities to install a significant amount of new 3 equipment and new appliances in order to lower the 4 energy expense. HUD committed to continuing to fund 5 the Housing Authority at that rate that they were 6 funding let's say in 2010 and any savings realized 7 through the new equipment, the vendor that actually 8 paid for that equipment would share in on those 9 savings as long as the Housing Authority would 10 hypothetically benefit as well as the agreement was 11 such that there was a split. As you know, reality 12 hits, expenses are higher than projected and at this 13 point we have an actual debt as Ms. Petrosky 14 mentioned to you of a hundred and thirty-five 15 million dollars still in equipment that was 16 installed. We have commitments of a hundred and 17 thirty-five million dollars that still needs to be 18 paid over time and we are trying to make sure we 19 keep a utility expenses and energy expenses low so 20 we meet those projections. If we do not meet those 21 projections, we are actually on the hook as Danny 22 found out when we started really scrutinizing the 23 books. We are on the hook to pay whatever it is 24 that we are not able to maintain in terms of 25 expenses. 10 1 So that's EPC debt. So why does this 2 RAD money increased? Because they want us to 3 securitize the debt attached to those properties and 4 that debt in this case totals forty-four million 5 eight hundred and sixteen thousand dollars and that 6 is what is going on from the original thirty million 7 to the seventy million. So at this point let me 8 take some questions before I yield to Lisa Petrosky 9 to talk a little bit about the escrow account and 10 why it was necessary or why HUD is requiring us to 11 book this into the amount of debt at those four 12 sites. 13 Any questions from the Board from what 14 I just explained or the Commissioners that are 15 joining us via virtual? 16 COMMISSIONER MUHAMMAD: So what 17 happened here, the energy money that has become debt 18 it ended up actually as a lien, it became a 19 mortgage? 20 MR. CIRILO: A mortgage, right. 21 COMMISSIONER MUHAMMAD: These four 22 properties at forty-four million dollars. Now, I 23 was telling Khalif that we had got knocked down, 24 this is why we got knocked down with RAD because we 25 had to come back with this. 11 1 MR. CIRILO: You are one hundred 2 percent correct. That's correct. 3 COMMISSIONER MUHAMMAD: So we are not 4 going to apply, we have to cover the mortgage. 5 MR. CIRILO: That's correct. A work 6 around to the limitations of that energy performance 7 contract. 8 COMMISSIONER COSTA: What is the ETA 9 on paying off this forty-four? 10 MR. CIRILO: The actual length of the 11 financing for RAD is thirty years. 12 COMMISSIONER COSTA: Not the RAD bill, 13 just the EPC. 14 MR. CIRILO: 2030. 15 COMMISSIONER COSTA: Okay. 16 MR. CIRILO: We are looking to 17 refinance that meaning that we want to be able to 18 prepay early. If we use RAD at the other sites we 19 want to have the opportunity from the RAD financing 20 to prepay that debt and not have to carry that on 21 the books. 22 COMMISSIONER MUHAMMAD: So how are we 23 paying it, how are we paying it? 24 MR. CIRILO: The program started in 25 2010. The Housing Authority did its first deal in 12 1 2015 or so. So the way it is paid is through 2 savings meaning that HUD continues to fund us at 3 that start-up amount, whenever it went into effect 4 and then whatever that gap is between the savings, 5 the expense, the actual reimbursement stays up, but 6 the expenses hypothetically in theory are supposed 7 to lower and it's that gap that used to pay for the 8 debt. 9 COMMISSIONER MUHAMMAD: In theory we 10 know that electricity went up so it is like we will 11 never catch up that way. 12 MR. CIRILO: Right, we are very close 13 to that closing, totally closing that gap. 14 CHAIRPERSON GONZALEZ: Anymore 15 questions from any Commissioners on the phone? 16 MR. CIRILO: Thank you, Madam Chair. 17 CHAIRPERSON GONZALEZ: I don't have 18 any. 19 MR. CIRILO: We do have Ms. Petrosky 20 if you want to learn a little bit more about EPC and 21 also what the options are for the Housing Authority 22 in the near future in order for us to better get 23 that commitment. 24 MS. PETROSKY: Good afternoon, 25 everyone. As the Director has been telling you 13 1 about the issue with the EPC debt. Initially, when 2 we did the RAD transaction we had included the 3 continuation of the debt payments through the RAD 4 transaction as a line expense. Through our 5 discussions with the FHA lender, they were concerned 6 because there is a lien on these like a mechanic's 7 lien on the pieces of equipment that were used for 8 the savings. As a work around on this we have 9 discussed with the current lender and with HUD that 10 they would let us build an escrow into this 11 transaction so the money is put aside so there is 12 always those payment funds and the lenders would 13 release the mechanic's lien on the toilets, the 14 windows, I believe a boiler and FHA was happy with 15 that because it gave them first position in the 16 property for the loans. In doing the calculations 17 for that, the properties that we were using for our 18 RAD transactions seem to generate more savings than 19 some of the other properties which resulted in the 20 removal of them and results in us needing to fund a 21 little bit more up front. So our initial escrow was 22 anticipated to be twenty-eight million dollars after 23 further analysis on what is outstanding, what the 24 savings is, are we making the numbers or not. That 25 has increased to thirty-nine million dollars being 14 1 funded into an escrow account to make sure that the 2 payments going forward are available for these 3 properties and all the other properties for the 4 total EPC debt. 5 As the Executive Director has 6 mentioned, we are also reviewing the current 7 documents and speaking to the current lenders with 8 the idea that after this transaction, the RAD 9 transaction we will refinance this debt. Currently 10 the debt is not prepayable except in whole. We 11 couldn't do any partial prepayments which also led 12 to the changes to the RAD transactions that we are 13 now seeing, but it is hoped that once the RAD 14 transaction is done and we are in a better position, 15 we can approach the current borrowers and lenders 16 and have the whole transaction refinanced in such a 17 way that future RAD deals or Section 18 transactions 18 will have an easier way to get completed and 19 throughout the EPC review at HUD. 20 COMMISSIONER MUHAMMAD: Who -- 21 MS. PETROSKY: Excuse me? 22 COMMISSIONER MUHAMMAD: Introduce 23 yourself. 24 MS. PETROSKY: Sorry, this is Lisa 25 Petrosky. I am with MW Financial Group. We are the 15 1 financial advisors to the Housing Authority. 2 COMMISSIONER MUHAMMAD: Okay. 3 MR. CIRILO: I do want to make mention 4 that a lot of effort has gone into this project by 5 Danny Gonzalez, Ms. Martinez, Ms. Petrosky, the law 6 firm of -- I am really proud of these folks. They 7 have done a tremendous job to see that this RAD deal 8 which would be the biggest in the State of New 9 Jersey is realized. They just received approval, 10 the energy center in Buffalo to make these changes 11 and officially take out these four properties from 12 the original deal into this actual concept. After 13 this we go before the Local Finance Board in the 14 State of New Jersey to make sure that everything is 15 in line with the legality of state law and 16 ultimately in closing with them we can start making 17 repairs on the apartments and start going to the 18 Village, et cetera, et cetera. So a lot of 19 acceptable units are being built and created through 20 this program because HUD wants us to meet the latest 21 requirements under the acceptability laws. So there 22 is a lot of positive that we will -- it goes unsaid 23 and a lot of hard work that has gone into this deal. 24 So I just want to make sure that they get the kudos 25 that they deserve and the appreciation not only from 16 1 myself. It is really hard to give compliments, but 2 from the Board and the general public and the end of 3 the day the residents are going to be better served. 4 So that is all we have for today. 5 COMMISSIONER MUHAMMAD: I'm trying to 6 understand what you are saying that to bring James 7 C. White up to par before we get the money, we are 8 going to bring these sites up to par in other words? 9 MS. GONZALEZ: All four properties 10 were evaluated by an independent engineering company 11 and then in addition to that the HUD multi-family 12 office has their engineers actually review the CNAs 13 for all of the properties and they determined what 14 would be considered a critical repair and a 15 long-term repair. So CNA, capital needs assessment, 16 so they come in. It's like when you go in and take 17 your car in and they give you a tune-up and they 18 come back with a list of all the things that are 19 wrong with your car. That is pretty much what they 20 did. 21 COMMISSIONER MUHAMMAD: They only 22 had -- 23 MS. GONZALEZ: So that is part of the 24 conversion. As they noted all these critical 25 repairs and things that needed to be corrected in 17 1 order to bring them up to state and local codes. 2 Then those became part of what we use in order to 3 create the financial proforma for each of the 4 developments. That's why each of the loans are in a 5 different amount for each of the properties based on 6 a customized, but what the property needs in order 7 to bring it up to the state and local codes. 8 COMMISSIONER MUHAMMAD: We got to get 9 the money first. 10 MS. GONZALEZ: Once we close on the 11 deal, that's part of it. Once we close, we have 12 about a two-week window to hit the ground running. 13 COMMISSIONER MUHAMMAD: Okay, no 14 problem, I understand. I didn't know we had to 15 bring it up to par before we got it. 16 MS. GONZALEZ: Yes, you are correct. 17 There are certain things that need to be done prior 18 to closing and so, for example, there were some 19 materials in Stephen Crane and we authorized for 20 those apartments to be cleaned and that is something 21 that we needed to do before closing. So you are 22 right, there are tasks prior to closing and then 23 there are tasks immediately following. 24 COMMISSIONER MUHAMMAD: Thank you. 25 MR. CIRILO: Thank you, Danny. You 18 1 know, I didn't mention the City of Newark is 2 required and there is a report for the entire of 3 James C. White and so were the others as part of 4 this rehab project. 5 COMMISSIONER MUHAMMAD: What do you 6 mean immediately. 7 MR. CIRILO: Meaning at closing. 8 COMMISSIONER MUHAMMAD: After closing, 9 okay. 10 MR. CIRILO: Two of the first projects 11 that we are required by the professionals to be 12 addressed right away. 13 CHAIRPERSON GONZALEZ: That is my 14 question. Once we approve this, I know our chief 15 CFO has to sign this, HUD has to approve it. What's 16 the amount of time that you are estimating? We keep 17 saying immediate. 18 MS. GONZALEZ: So we have prepared 19 plans for each of the properties. Those plans have 20 bids associated with each of the critical repairs 21 for each of the properties. They all have been 22 assigned and they are in the process of receiving 23 permits for the work that needs to be done. So a 24 lot of the preliminary work is being done so that 25 when we do close the turn around time is to start is 19 1 minimized. There is, of course, some leeway on 2 certain things because we are having some issues 3 with manufacturing and delivery times so we are 4 incorporating that lead time also. But HUD requires 5 that all critical repairs, electrical stuff be 6 completed within the first twelve months of closing. 7 We have an eighteen month window to comply with the 8 requirements for Stephen Crane Village ADA 9 compliance. So because we are required to relocate 10 residents out of Stephen Crane, they were kind 11 enough to give us a little bit more wiggle room of 12 an additional six months. 13 CHAIRPERSON GONZALEZ: That's eighteen 14 months. 15 MS. GONZALEZ: We are talking about 16 eighteen months, yes, that is the buildings. 17 COMMISSIONER MUHAMMAD: How many 18 apartments? 19 MS. GONZALEZ: Three hundred 20 fifty-four. So it's a five percent and then we have 21 two percent for our auditory and sensory 22 requirements. That would bring us to the 23 requirements for the ratio. 24 CHAIRPERSON GONZALEZ: Once this is 25 approved today, if approved, then our CFO will 20 1 sign-off and get together with our finance team and 2 HUD and that kicks off. 3 MR. CIRILO: For final review. 4 CHAIRPERSON GONZALEZ: You are already 5 scheduled. 6 MR. CIRILO: Yes. 7 CHAIRPERSON GONZALEZ: When is the 8 schedule? 9 MS. GONZALEZ: It is on the agenda for 10 this week, but unfortunately they required this 11 proffered resolution in order to move forward and 12 put it on their agenda so we are now postponed to 13 there May. 14 CHAIRPERSON GONZALEZ: Next month. 15 MS. GONZALEZ: Yes. 16 CHAIRPERSON GONZALEZ: Okay. I don't 17 have anymore questions. If anybody else does. If 18 not, could we take a motion. 19 COMMISSIONER COSTA: I will make a 20 motion for the resolution. 21 COMMISSIONER BAEZ: I second it. 22 CHAIRPERSON GONZALEZ: Director, I 23 think Costa and Muhammad second. 24 MR. CIRILO: Commissioner Muhammad. 25 COMMISSIONER MUHAMMAD: Yes. 21 1 MR. CIRILO: Commissioner Costa. 2 COMMISSIONER COSTA: Yes. 3 MR. CIRILO: Commissioner Osborne. 4 Commissioner Baez. 5 COMMISSIONER BAEZ: Yes. 6 MR. CIRILO: Commissioner Logan. 7 COMMISSIONER LOGAN: Yes. 8 MR. CIRILO: Chairwoman Gonzalez. 9 CHAIRPERSON GONZALEZ: Yes. 10 MR. CIRILO: Resolution passes. 11 CHAIRPERSON GONZALEZ: Now, I would 12 like to adjourn this open meeting and go into a 13 private working Executive Session. Sorry, I need a 14 motion to go into an Executive Session. 15 COMMISSIONER BAEZ: I make a motion. 16 CHAIRPERSON GONZALEZ: We have a 17 motion. 18 MR. CIRILO: Motion to go into 19 Executive Session. 20 Commissioner Muhammad. 21 COMMISSIONER MUHAMMAD: Yes. 22 MR. CIRILO: Commissioner Costa. 23 COMMISSIONER COSTA: Yes. 24 MR. CIRILO: Commissioner Baez. 25 COMMISSIONER BAEZ: Yes. 22 1 MR. CIRILO: Commissioner Logan. 2 COMMISSIONER LOGAN: Yes. 3 MR. CIRILO: Chairwoman Gonzalez. 4 CHAIRPERSON GONZALEZ: Yes. 5 MR. CIRILO: Motion passes. We are 6 going into Executive Session for a legal matter. 7 8 (Whereupon, the proceedings were 9 concluded at 4:35 p.m.) 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 23 1 C E R T I F I C A T E 2 3 I, ANTHONY HOFMANN, a Certified Court 4 Reporter, and Notary Public within and for the State 5 of New Jersey, certify that the foregoing is a true 6 and accurate transcript of the stenographic notes of 7 said witness(es)who were first duly sworn by me, on 8 the date and place hereinbefore set forth. 9 10 11 12 ___________________________ ANTHONY HOFMANN, C.C.R. 13 LICENSE NO. XIO1854 14 15 16 17 18 19 20 21 22 23 24 25