The Recovery Act’s Green Retrofit Program for Multifamily Housing HUD Webinar May 13, 2009

2 Background and Program Overview Background and Program Overview Program Discussion Program Discussion --- Intermission Intermission --- Program Discussion (continued) Program Discussion (continued) Questions and Answers Questions and Answers During this webcast, questions to: Today’s Presentation Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

3 (from HUD’s Office of Affordable Housing Preservation) Ted Toon, Deputy Assistant Secretary Jerry Anderson, Associate Deputy Assistant Secretary Harry West, Director, Chicago Preservation Office Donna Rosen, Director, Wash. Preservation Office Presenters Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

4 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Background and Program Overview Ted Toon Deputy Assistant Secretary

5 GRP Authorization The Green Retrofit Program for Multifamily Housing (GRP) was authorized by the American Recovery and Reinvestment Act of 2009, whose objectives are to: Boost the economy Boost the economy Create jobs Create jobs Restore economic growth Restore economic growth Strengthen America’s middle class Strengthen America’s middle class Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

6 GRP Guidance The program guidance is provided in Housing Notice H-xx, published on May 13, 2009, available at “… $250,000,000 shall be for grants or loans for energy retrofit and green investments …” “… $250,000,000 shall be for grants or loans for energy retrofit and green investments …” Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

7 Green Building An approach to sustainable development that is designed to result in a property that Reduces demand for energy and water Reduces demand for energy and water Costs less to operate and maintain Costs less to operate and maintain Improves the residents’ quality of life, and Improves the residents’ quality of life, and Reduces its impact on the environment. Reduces its impact on the environment. Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

8 GRP Eligible Properties Funding is available for Section 8, 202, 811, and USDA Section 515 properties with project-based assistance Funding is available for Section 8, 202, 811, and USDA Section 515 properties with project-based assistance Minimum project size as detailed in the Notice Minimum project size as detailed in the Notice Limits by project type, geography, and projects with same owner Limits by project type, geography, and projects with same owner Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

9 Funding & Eligible Purposes Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Maximum per-unit improvements of $15,000, expected to average $10,000 per unit across the portfolio Maximum per-unit improvements of $15,000, expected to average $10,000 per unit across the portfolio Green and energy retrofits only (improvements that conserve energy and water, improve indoor air quality, or benefit the environment) Green and energy retrofits only (improvements that conserve energy and water, improve indoor air quality, or benefit the environment)

10 Benefits to Residents Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 May replace old, inefficient appliances with new energy-efficient modelsMay replace old, inefficient appliances with new energy-efficient models Keeps tenants warmer in winter and cooler in summerKeeps tenants warmer in winter and cooler in summer May reduce dust, mold, and pests-- without toxic pesticidesMay reduce dust, mold, and pests-- without toxic pesticides May provide healthier homesMay provide healthier homes Preserves affordable apartmentsPreserves affordable apartments

11 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Benefits to Property Owners No cost to most owners (with some exceptions) Includes four performance-based financial incentives Adds years to property’s long-term viability Adds to property marketability and value

12 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Benefits to Property Owners (cont’d) Provides access to green materials, systems, and technologies Contributes to energy and water conservation May improve indoor air quality Benefits the environment Share in future utility savings

13 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Owner Financial Incentives Pre-Development Incentive – 1% of Green Retrofits up to $10,000, paid at closing Efficiency Incentive – 3% of Green Retrofits up to $30,000, paid upon satisfactory and timely completion of the rehab Incentive Performance Fee – 3% of collected revenue, paid annually from SC upon meeting pre-conditions Targeted Job Creation Incentive (optional) – 10% of qualified expenditures up to $25,000, for contracting with Eligible Residents or Eligible Business Concerns (or both), pursuant to HUD Section 3 guidance

14 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Benefits to HUD, Taxpayers Reduced utility costsReduced utility costs Improved indoor air quality and healthier residentsImproved indoor air quality and healthier residents Extended affordability for 15 yearsExtended affordability for 15 years Trained Green property managersTrained Green property managers Green replacementsGreen replacements Greener property operationsGreener property operations Integrated pest managementIntegrated pest management

15 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Program Discussion

16 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 The Application Stage Jerry Anderson Associate Deputy Assistant Secretary

Stages of Processing APPLICATION 1.Preparing the application 2.Submitting the application 3.Selection 4.Initial Feasibility PLAN DEVELOPMENT 5. Tenant Meeting 6. GRPCA 7. PAE’s Plan 8. Bids / Estimates 9. Discussions with PAE 10. GR O&M Plan 11. Final Feasibility Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13,

18 APPROVAL AND CLOSING 12. HUD Approval 13.Green Retrofit Plan Commitment 14. Closing POST CLOSING 15. Starting Green Retrofits Timely 16. Davis Bacon 17. Recovery Act Reporting 18. Completion of Green Retrofits 19. Final Adjustments and Close-Out Stages of Processing Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Cont’d

19 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Application Applications Must Be Complete, or Will Be Rejected. A Complete Application Includes: 14 items of Required Information 15 Owner Certifications 8 Owner Commitments

20 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Required Information Initial Feasibility Assessment (and comments, if necessary) Description of Existing Components Evidence of AuthorityUtility Releases (owner paid) Owner Preferences: Grant or Loan, Optional Green Alternatives owner wishes to pursue, other Green Retrofits of interest Utility Releases (tenant paid) Three Years’ Annual Financial Statements and Current Year’s Unaudited Financials 2530 Clearance Accounts Payable (if Negative Surplus Cash) DUNS Number Flood Insurance (if applicable) CCR (Cage) Registration

21 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Required Certifications Application materials are accurate, not misleading Not pursuing other Recovery Act funding, except as disclosed AFS current, no findingsNot pursuing any other funding, except as disclosed Project is an Eligible ProjectNo judgment lien for a debt to federal government Not debarred or suspendedNo delinquent federal debt Not subject of an LDPOwner/Affiliate consent to subordinate debt to GRP Not an Ineligible OwnerIn compliance with applicable Fair Housing and Civil Rights laws No litigation, except as disclosedExecuted Byrd Amendment and Lobbying Disclosure

22 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Required Commitments Cooperate with HUD in developing the Green Retrofit Plan Specify latest expiration date of existing use restrictions and provide documents (if requested) Execute documents to extend project affordability 15 years beyond end date of existing use restrictions Execute Legal Documents at closing Agree to early renewal of project-based contract if it expires within 18 months of application date Use best efforts to obtain tenant releases Provide bids/cost estimates within reasonable time period prescribed by PAE Make owner contribution if Partially Assisted, Large Account Balance, and/or needs non-Green rehab

23 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 How to Apply for GRP An Application Requires: (see Notice for full details) 1.Meeting threshold eligibility requirements 2. ing the EXCEL spreadsheet 3.Mailing the required documentation

24 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Selection Among Applicants Size of applicant pool – HUD to process GRPs for projects containing about 25,000 units in total Size of applicant pool – HUD to process GRPs for projects containing about 25,000 units in total Limits by four project categories Limits by four project categories Projects in multiple categories Projects in multiple categories Waiting list – transparent, public can monitor at Waiting list – transparent, public can monitor at

25 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Special Processing Early Renewal Process Projects with Section 8 contracts expiring within 18 months Mark-to-Market With GRP Add-on Projects in the M2M pipeline now, as well as those coming in with the filing of the GRP Application Projects that have closed a traditional M2M Restructuring are eligible

26 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Initial Feasibility Assessment HUD-provided template downloadable from hud.gov/recovery HUD-provided template downloadable from hud.gov/recovery ARRA requirements to pass Feasibility ARRA requirements to pass Feasibility Owner completes as required part of GRP Application Owner completes as required part of GRP Application HUD/PAE’s validation of Feasibility HUD/PAE’s validation of Feasibility Sample follows on next slide … Sample follows on next slide …

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28 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Initial Feasibility Assessment (cont’d) A project may fail the initial Feasibility, but have project-specific adjustments that would result in passing Feasibility: Notice includes examples of adjustments that could change an infeasible project into a feasible project Notice includes examples of adjustments that could change an infeasible project into a feasible project HUD review and concurrence that the adjustments make the project feasible is required for acceptance for GRP processing HUD review and concurrence that the adjustments make the project feasible is required for acceptance for GRP processing

29 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Intermission During this webcast, questions to:

30 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Development of the Green Retrofits Plan Harry West Director, Chicago Preservation Office

31 GRP Tenant Meeting Purpose: Get residents input on Green Retrofits Conducted by HUD’s PAE Coordinated with property manager Scheduled to get maximum resident participation Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

32 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Green Physical Condition Assessment Three Components: 1.Rehab and Replacements, with Green Alternatives 2.Energy Audit 3.Integrated Pest Management Inspection

33 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Required Green Alternatives 24 alternatives for early replacement-- generally if there is less than 15% remaining useful life »Products and Appliances »Heating and Cooling »Water Heaters »Building Envelope »Lighting »Ventilation and Indoor Air Quality »Other Green Features

34 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Optional Green Alternatives 12 alternatives owner must agree to pursue before including in the Green Physical Condition Assessment 1. Combined heat and power or fuel cells 5. ENERGY STAR shingles 9. Porous pavers 2. Solar or wind power6. Smooth & cleanable floors 10. Retention ponds 3. Vegetative roof7. Cementitious siding 11. Geothermal 4. Reflective metal roof 8. Compact fluorescent light fixtures 12. Gray water recycling

35 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Other GRPCA Features Cost-effectiveness (limits on additional cost for Green alternatives) Cost-effectiveness (limits on additional cost for Green alternatives) Recovery Act, Section 1604 restrictions Recovery Act, Section 1604 restrictions

36 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 PAE’s Proposed Green Retrofit Plan 1.PAE uses electronic underwriting model. 2.PAE develops the plan using Physical Condition Assessment, owner input, and comments from the tenant meeting. 3.PAE reviews its recommended Green Retrofit Plan with the owner. 4.Owner prepares Green Retrofit Operating & Maintenance Plan for HUD approval. 5.PAE runs Final Feasibility Assessment.

37 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 PAE’s Proposed Green Retrofit Plan (cont’d) 6. PAE develops recommended terms for the rehab escrow, reviews with the owner. 7. PAE submits to HUD the agreed-upon Green Retrofit Plan. 8. HUD approves or rejects Plan. GRP processing must move quickly; Owners must respond timely or risk being removed from consideration.

38 For ALL projects Green Retrofit Plan Commitment Green Retrofit Plan Commitment Green Retrofit Program REDA Green Retrofit Program REDA Green Retrofit Owner Commitments Green Retrofit Owner Commitments Green Retrofit Use Agreement Green Retrofit Use Agreement Necessary consents and org authorities Necessary consents and org authorities State-specific security documents State-specific security documents Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Legal Documents

39 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Green Retrofit Grant Eligibility Ongoing Requirements Annual Financial Statements Physical Inspections Amount of Grant Green Retrofits + Contingency Owner Incentives Rehab Administration Fee Utility Baseline Fees

40 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Green Retrofit Loan Eligibility Ongoing Requirements Annual Financial Statements Physical Inspections Loan Green Retrofits + Contingency Rehab Administration Fee Utility Baseline Fees Grant - for all Owner Incentives

41 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Green Retrofit Loan (cont’d) Payments from Surplus Cash First, to HUD, 50% of Surplus Cash, as a payment on the Green Retrofit Loan. Second, to owner, to pay any earned Incentive Performance Fee for that fiscal year. Third, any remaining Surplus is distributed in accordance with the documents governing the project.

42 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Green Retrofit Loan (cont’d) Security Interest Rate: 1% or AFR Loan Term: 15 – 35 years

43 Bids / Estimates Owners agree to get bids / cost estimates for Green Retrofits when the PAE requests Some requests will come quickly after assignment to the PAE Other requests will come after the GRPCA has been completed Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

44 Discussions With PAE Green Retrofits Rent Loss Assumptions Operating Expense Assumptions New Monthly Replacement Reserve Deposit Amount Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

45 GR Operations & Maintenance Plan Details of the owner’s plans for: Green operations Resident incentives and outreach Integrated pest management Maintaining the required Green property management certification Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

46 Final Feasibility Assessment Same financial thresholds as the Initial Feasibility Assessment But based on the PAE’s determinations Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

47 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Approval, Closing and Implementation Donna Rosen Director, Washington Preservation Office

48 HUD Approval Green Retrofit Plans go through standardized review, and committee approval, at OAHP OAHP may approve, reject, or modify the Plan Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

49 Green Retrofit Plan Commitment Template legal document Contains all material terms of the proposed Green Retrofit transaction Presented to owner for signature After owner signs, HUD signs, and reserves funding Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

50 Closing Within 30 days after GRPC execution Legal documents are signed GRP funding is wired to Rehabilitation Escrow Administrator (REA) Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

51 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Starting the Green Retrofits Timely Time to Complete the Rehab: Generally 12 months, unless there are specific logistics impediments. In no case can rehab exceed 21 months (By statute, reimbursement cannot be made after 24 months). Rehab must begin within 60 days of closing

52 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Prevailing Wage Rates ( Davis-Bacon ) Required of all retrofits under GRP May impact cost in some locations, will impact reporting in all locations Covers all workers installing GRP improvements, including owners’ employees Requires certified payrolls weekly from owner

53 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Recovery Act Reporting Section 3 compliance (if owner elects to pursue optional incentive) Quarterly Recovery Act reporting of funds received, funds spent, retrofits completed, etc.

54 Completion of Green Retrofits Owner submits documentation to Rehabilitation Escrow Administrator (REA) REA inspects the Green Retrofits REA reimburses owner Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009

55 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Final Adjustments and Close-Out Unused escrow funds will reduce the amount of Green Retrofit Grant or Loan (requires modification documents). Shortage of escrow funds requires contribution from the owner (reliable, advanced bids for work are critical to meeting budget, or owner pays).

56 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 R E C A P Ted Toon Deputy Assistant Secretary

57 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Recap of GRP Benefits Generates economic activity at local level through jobs and purchases Saves energy and water costs Improves affordable housing stock Protects the environment Improves quality of life for tenants

58 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Key Dates HUD begins accepting Applications (electronic portion) Paper portion of Applications due 7 days after electronic application June 15, 2009

59 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Resources Federal Recovery Act website HUD Recovery Act program website Green Retrofit Program website To submit questions about the Green Retrofit Program,

60 Green Retrofit Program for Multifamily Housing (GRP) HUD Webinar, May 13, 2009 Questions and andAnswers During this webcast, questions to: