committee on housing and real estate and finance, um, is
ready to begin.
And is hereby called to order. We will now take a roll call
to establish quorum.
Vice chair Conway.
Vice chair Mitchell.
Alderman laspada.
Alderman Hopkins.
Alderman Robinson.
Alderman Hall.
Alderman.
Alderman Harris.
Alderman Beal. Alderman, Lee.
Alderman, Ramirez, Alderman, Quinn, Alderman, Lopez
Alderman, Moore.
Alderman. Curtis
Alderman. OSHA Alderman Taylor.
Alderman Rodriguez.
Alderman tabaris Alderman, Scott.
Alderman Fuentes.
Alderman Bernett.
Alderman. Ervin.
Alderman. Tally Farrell.
Alderman, Cardona.
Alderman waguespack.
Alderman, Rodriguez, Sanchez.
Alderman Quezada.
Alderman. Vagus.
Alderman mitts.
Alderman specific.
Alderman Vasquez.
Alderman. Reilly
Alderman. Kuden.
Alderman clay.
Alderman. Martin.
Alderman. Manah hoppenworth
Alderman Haden.
Alderman Silverstein.
Chair seicho Lopez president, chair dolls. President we
have a quorum. We have 26 members present in the building.
Want to acknowledge 2.
Ah, Alderman, Talia Ferrell, we will count you towards
forum.
Want to acknowledge that uh Alderman mitts Alderman Lawson
Alderman, Harris and Alderman Mosley, have requested to
participate remotely today for reasons, stated under
provisions of rule. 59, can I have a motion to allow these
Alderman to participate? So moved by Alderman, h,
And all those in favor. Signify by saying I I opposed and
the opinion of the chair is the eyes, have it. And the
motion carries Alderman mitts Alderman Lawson Alderman,
Harris and Alderman Mosley. You are now in the meeting. I
want to also acknowledge Alderman, Robinson, who has joined
us and will be recorded as part of the quorum.
We will.
Now, pass this on to, uh, chairman CEO Lopez.
Thank you, uh chairwoman and uh good morning everyone. Um
we have a 1 item before the Joint Committee uh, on the
agenda. Um, the I don't know. The agenda, this afternoon is
a substitute ordinance, amending Municipal Code, chapter
2-44, but adding a new section 2-44, d160 establishing a,
not for-profit residential Investment corporation to
address housing needs by financing and acquiring owning and
operating permanently affordable.
Affordable mixed income and environmentally sustainable
housing. Substitute ordinance 2025.00 0015560. Uh there's a
a substitute ordinance as amended, which has been prepared
and sent electronically to everybody in the committee. Is
there a motion to accept the substitute ordinance as
amended to move about all the person going to happen with
all those in favor. Say I, I all those
The police say name and the opinion of the chair, the eyes
have it, the substitute ordinance. As amended is now before
the joint committee and will be explained by the
commissioner um of housing. Uh Lisa Casta commissioner
before the commissioner starts. I just want to acknowledge
all the miney who is also present with us this afternoon uh
as a non-member of The Joint Committee.
Thank you, chairwoman commissioner good afternoon. Um thank
you so much for uh, allowing us the opportunity to bring
back the ordinance with some substitutions. We really
appreciated the conversation, that began last week at the
joint committee and the work that you all have been willing
to do with us in the last several days, including over this
weekend, I'm going to turn it over to the chief of policy.
Jung Eun who will walk through the specific changes.
Thank you, commissioner.
So we have heard uh the questions for clarification and
suggestions that we have incorporated into the substitute
before you today.
The first thing I'll uh, highlight is that we have added
bylaws to the ordinance and that should be in your packet
today for review.
Uh, and we'll be included in the authorizing ordinance.
We have shortened, the board terms to 4 years. Staggered
board terms to be in part uh aligned with other similar
nonprofits that the city has established.
Next, we have ensured a balanced board representation by
adding the chief procurement officer as an Exe on the board
as well as ensuring balance with tenant representation.
Next, we have codified the uh requirement to follow the
Freedom of Information Act, open, meetings, act and ethics
requirements. Uh, being subject to cooperation with the
office of Inspector, General. And gift restrictions
and then finally, we have added additional accountability
and transparency measures including we've clarified that
city council approval, is required for a sale of a building
as well as added annual reporting requirements to the
committee on housing and real estate.
You'll see on this Slide, the total board makeup as now
proposed based on Council feedback. And uh, requests again,
the ex officio staff include the commissioner on the
Department of Housing, Commissioner of Department of
environment, Commissioner of, uh, Planning and Development,
our Chief Financial Officer, our chief procurement officer,
the chair on the committee on finance,
uh, residents from the affordable, housing green, social
housing, uh, buildings, as well as 5 to 7, appointments
based on professional expertise related to, or being an
attorney practicing in at least 1 of the following areas.
Uh, those areas have not changed since our last meeting and
again, for years staggered terms.
And next, I will pass it to um assistant commissioner. Matt
Stern to give an example of how these projects work again
being responsive to the questions from our last meeting.
Thank you, good afternoon committee uh for the record. Matt
Stern assistant commissioner at the Department of Housing.
Um, I'm going to spend the next few minutes walking. Um,
thank you.
Walking the committee through some of the examples requested
last week. Um so there's a bunch of details uh in the slide
deck that was circulated to you uh are available to you
already and and is sharing on the screen as well. Um happy
to uh respond to questions after working my way through
this.
I'd like to start by setting the stage by describing uh the
the way in which, uh, operating income and expenses for a
market rate housing building, um, are calculated and
interpreted at a high level because this is important
context for understanding the advantages of a green social
housing tool.
As you'll see on your screen.
The rents generated by a multi-unit housing. Uh,
are split between uh money that goes uh to operating
operating expenses. So it's uh, that bottom dark blue box.
Gets circulated right back in to operating. Uh, the data,
they operations of the building the remainder of funds uh
that come from rent collection. Uh, is goes into a bucket
that is called in the industry. Noi, or net, operating
income.
That net operating income has to do a couple of different
things for the owner of this building. The largest thing
that that noi will do is pay the payment on the project.
Senior debt, that's the mortgage payment.
Uh the remainder of funds uh is used to uh pay back. Any
Equity investor on that project with the uh final remainder
uh being used for developer or owner compensation. And
generally speaking, these are the 3 sources or the 3 exp
sources or the 3 exp from noi and if you, uh, are are in a
conversation where someone is thinking about a proposed
development and the question comes up. Is that development
going to pencil? What that probably means is, is this
building expected to generate sufficient, noi to pay back
the obligatory, uh, different, uh, debt and Equity
obligations that exist in the red boxes on your screen.
So if this is a standard market rate development, then the
question becomes, how does green social housing and the
model that we're presenting today? Uh modify this net
operating income context in order to allow for greater
affordability.
The first way in which this net operating income, stack is
modified. Is by the replacement of the investor equity and
the needed investor return, with the use of the revolving
Loan Fund because that revolving Loan Fund requires a much
lower rate of return, the need to have sufficient, net,
operating income, to cover that rate of return is lower.
And so,
You'll see as the savings from Equity show up. On the right
hand side of this Slide, the total need on the noi side of
the bar chart, decreases that reduction in necessary. Noi
allows for rents to be lowered. That's Step 1.
The second step is in replacing the senior mortgage on the
property with a private mortgage product, from a private
mortgage product to a preferred mortgage product such as
the kinds of mortgage products available from, uh, Ida and
the federal government. We talked about some of what those
options were last week, because those interest rates, uh,
are lower as well that creates an additional form of
credit, on the right hand side here, the savings associated
with debt which are then further lowers the need of the
building to produce nli net operating income
This allows for the building to have even more
affordability.
The next thing we talked about uh last week was the
possibility of partnering with cha to place project-based
vouchers or possibly other forms of subsidy as well into
the building as well. This does not affect net operating
income because of voucher still provides sufficient income
to the property owner in the form of rent, coming from
another store. But because that rent is not paid by the
Canon, uh, and because those vouchers are available to
low-income and mostly very low-income Chicagoans. We are
allowed to even further increase the affordability in the
building. And so these 3 elements, the debt from or the
savings from debt, the savings from equity and the
combination of the possible. Addition of Project based
vouchers are the 3 elements that compress the necessary
rent roles from a green, social housing building and enable
enable us to provide, uh, a mixed income housing
environment, where a large number of units are set aside at
affordable and deeply affordable rates.
With that context, I would like to directly address the
requests. We heard from committee last week to provide
examples of exactly what this looks like in theoretical
developments. We've prepared 2 of those examples 1 in the
new construction context and 1 in the acquisition and Rehab
context. And I want to stress that these do not represent
any specific development or specific piece of land. They
are not commitments to or extractions from any specific
proforma. They're based on the extensive market research
that we have done in partnership with our Consultants, on
this work. Um, and we believe, reflect projects that could
be done in very similar function, in today's economic
environment.
first, we'll do the new construction model, uh, as we
discussed last week, there are 3, different Pathways that
uh, we are considering uh uh seeking developments to pursue
under the green, social housing model, the stalled market
rate concept, which is uh, seeking to provide a missing
element of the capital stack for an existing entitled uh
proposal uh, that is out there. Uh, the developer is ready
to go on but for their Capital stack um maybe it's the
equity component or the debt component and we can come in
and we can help fill that hole and jumpstart that project
the other. The second pathway that we've identified is use
of city-owned um land that we would RFQ or RFP in order to
find a developer to work with us. On both of these are new
construction models. And so, for the purposes of this,
Presentation our combined into, uh, a single, uh,
descriptive.
Example.
so,
As discussed last week.
For a new construction project, there is usually 2,
distinct phases, of financing, the construction phase and
the permanent phase on the left hand side here, for the
construction phase, you can see what a standard Capital
stack would look like. If this were a market rate deal. We
are estimating um, about 65%.
% of the oh, excuse me. I will say what this is is, uh, we
are for the purposes of example. And again, there's a wide
range of possible developments different sizes and
different total development costs that could, uh, show up
here. But for the purposes of this example, we're looking
at a 200 unit, building with a per unit development, cost
of 450,000 for a total development cost of 90 million.
This is broken up for the purpose of this example into a
senior commercial mortgage that's covering 65% of total
project costs at an 8% interest rate.
And then an equity investment piece covering 25% of total
project costs expecting 20% Returns the remaining 10% is
the skin in the game from the developer um uh for the
remaining 9 million and that totals the $90 million Capital
stack.
On the right here, you will see what this would look like.
If it was a green social housing development, we've
replaced the commercial mortgage with an item mortgage and
we're seeing a decrease in the rate of that mortgage from
8% to 5% in this model. We are not showing a change in the
percentage of the total project cost at the mortgage would
cover. But 1 of the advantages that is available through
some of the preferred senior debt that we're looking at is
in addition to the lower rate. Also, the ability to cover a
larger percent of TDC,
The 25% that was coming from the equity investor is here
coming from Equity from the residential Investment
corporation. This is the revolving Loan Fund and you can
see the 20% rate of return dropped to a 2 to 5% rate of
return.
And then the uh, co-developer Equity. Again, this is the
skin in the game from the private developer who we're
working with. On this project has not changed. So we've got
the same 200 unit building in 2. Different scenarios here
with 2 different Capital stacks and 2 different rates of
return.
The same is true when it comes to permanent sources so you
can see on the left. Um, we have a commercial permanent
mortgage at 7% versus on the right. We have a Ida permanent
mortgage at 5% and then on the right hand side, you'll see
that the Ric debt has revolved out of the program and has
been replaced to the extent necessary by a mezzanine loan.
Uh, at somewhere between 3%, if an optimal situation and
something more like 10%, in more of a commercial product
situation, the need. And and the balance here is going to
be Project. Specific there are situations especially where
city-owned land is involved, where the need for this
mezzanine piece is smaller. There might even be situations
where it is not needed at all. Again, based on the ability
of that senior debt to cover a larger percentage of the
total project costs at stabilization,
But we're being conservative in this model here and holding
it at a 25% share.
What you get here? Not pictured on the slide, not written
on the slide is a 14% decrease in the total debt service
costs because of the preferred financing on the last slide
and on this slide. And so, if we're thinking back to that
chart, that infographic from the beginning, and the
shrinking need of the net operating income of the building,
what we're seeing in this model is a 14% decrease over.
What it would be in a market rate context. That 14%
decrease is what allows for the greater levels of
affordability.
We did have a question about what this looks like from an
ownership stake perspective. Generally speaking, this is
going to be obviously negotiated on a deal by deal level
but generally speaking, the ownership stake is going to be
about equivalent to the percentage breakdown between the
various Equity investors in the project. And so in this
case if we go back 1 slide, we see that the code developer
was in for 9 million and Ric was in for 22.5 million. That
is roughly a 7030 breakdown. And so the presumption is in a
deal like this, the Ric would have a approximately, a 70%
ownership stake in the building and the code developer
would have approximately a 30% ownership stake in the
building.
Okay, so
I've said that this change in the need of the net operating
income relates to the amount of affordability that could be
offered. The top bar. Here is a theoretical unit breakdown
of these 200 units into market rate versus affordable
units. And if this was a non-green social housing building,
For the model here we are. Presuming that the developer is
responsible to comply with the affordable requirements.
Ordinance and is choosing to put all 20% of their required
units on site. So the result here is 40 affordable and 160
market rate units. With those affordable units income
averaged ranging between 40% and 80% Ami.
if we look at what this would be possible with the
preferred debt through the Ric model, you can see that the
40 affordable units have increased to a 60 affordable unit.
So we've gained 24 or 20 affordable units but also we have
also pushed the affordability of these units down the
income spread. And so we are seeing 30% of affordable
units. We are seeing more 40% and more 50% affordable units
in this deal and that is without any third-party financial
support. If we are also able to bring in a source of
third-party, subsidy, for example project-based
Vouchers from the cha. We can increase this affordability
even further, without impacting the noi of the building. So
in this case, what we've modeled is the addition of 20
project-based vouchers in the building providing 30 more
30%, Ami units, as the remaining, uh, affordable units,
still are spread between Summit, 80%, Ami, and others
income, averaged around, 50% Ami.
These units spreads are not, the only possible units.
Spreads you could do more deeply affordable units and have
fewer affordable units, all in all or you could do fewer
deeply affordable units and you could have more affordable
units. All in all uh that's because the goal here is to
pencil out this project with sufficient net, operating
income to address its Financial Obligations. So the
building can remain uh financially uh comfortable, which is
what allows it to maintain its affordability and perpetuity
these numbers can also change over time. As that mezzanine
piece of the financing is paid off as uh interest rate,
environments change and the Ric is able to refinance. Uh
those are all opportunities to change. The nli, need, which
the Ric could, then convert into either taking cash out to
invest into some other project or could reinvest right into
this property by decreasing.
uh, the rent rolls even further in other words, by pushing
Amis, down, or by increasing the number of units that are
offered at an affordable rate,
the next model that I'll talk through is the acquisition
and Rehab model again. Um, we strongly believe that the
acquisition and Rehab model is a powerful addition to the
green social housing toolkit, um, and the strategy is to
opportunistically identify properties that become available
on the market, uh, to, to determine if they are good fits
for adding to the Ric portfolio. Uh, this is uh potentially
particularly valuable in the context of a financially
distressed property. That is an otherwise good condition
for perhaps. This could be uh an existing property owner
who is struggling to obtain necessary, refinancing
themselves for existing debt on the property and the Ric
would have the advantage to step in to maintain and
increase affordability through its investment.
The capital stack for a project like this fundamentally
looks different based on the kinds of loan products that
are available. So we are conservatively here. Estimating uh
a 75 year or excuse me the context here for the sake of the
model is a 75 unit building, that is an all-in, um, total
cost including acquisition and Rehab of thousand dollars
per year.
Unit, so lower, uh, than the cost of new construction.
the 2 pieces of a likely, um,
Capital stack for a project like this would include some
sort of uh, senior debt, some sort of mortgage on the
property which were estimating to be about 50% and then an
equity investment from the residential Investment
corporation, which were also estimating to be about 50%.
What does this look like when it comes to rent rolls at the
top? Would be what this building is looking like,
Prior to its acquisition and Rehabilitation by the Ric.
It's a 75 unit building. It is not uh uh uh covered by the
Aro. There are no existing um covenants associated with
affordability provision. So, all 75 of these units are
market rate units. Today, you introduce the, uh, the
acquisition and refinance by the r, and Rehabilitation by
the Ric, and what you see is, um, 23 of these units
potentially becoming affordable again. Uh, split between
80% units 80% Ami units and for the purposes of this model,
a wide variety of other affordability, averaged around, 50%
affordability. That's what you can do with no uh,
additional ongoing subsidy the bottom row. Is it with the
addition of uh, cha uh, project-based vouchers or some
other form of ongoing subsidy?
Which allows those 23 affordable units to push further down
the Ami spread. Uh, including in this case, 7 PP, uh, at
Ami with the remaining units uh income averaged around 50%
50% and 80% Ami, I'll say again that the choice about more
affordable units or deeper affordability is always going to
be a trade-off that is available for each of these
buildings and uh based on the context. With again, the goal
being to come out with a uh Financial stack that pencils,
right? Uh a a long-term financially sustainable operating
proforma where the uh, building is generating sufficient
rents to cover its operating expenses and its draws on net
operating income in the form of paying back. Its Fair, its
various um, creditors
That's the end of the walk through. So I will just end by
saying that the uh ordinance in front of you. Uh uh is to
create the Ric. It is not to uh execute any particular
development or any particular proforma or Capital stack.
All of the deals that I just or all of the nuances and the
specifics of the theoretical deals. I just walked through
would be the kinds of nuances that would come back to
council at the deal specific review opportunity that
exists.
Tested for each of these products. Once the Ric is created,
I'll stop there. Thank you.
Thank you, Matt.
with to acknowledge Alderman, Reilly Cardona, and kuden uh,
uh, have joined this as part of Quorum and Alderman, nent,
as a non-member
Any questions?
Uh, starting with Vice chair, Conway, followed by Alderman,
Rodriguez, followed by Alderman Quezada.
Thank you, Matt, thank you, commissioner for being here as
well. Um, so I I get that the savings on the debt side is
the lower interest rate of the idol loan and the savings.
And the equity side is less developer return needed. If a
lot of its us,
In that, in that case.
Are we a in this? Are we assuming that we can get the idol
loan.
Because of the affordable housing piece. Is that what?
Where that comes from?
Yes. The the the the discussions that we've had with Ida to
talk about their access to a wide variety of financial
products is is due to uh the the affordability and public
service goals of the development and and um,
okay, so that's that's why we qualify while it wouldn't
qualify that any any I mean any concern about the stability
of that program in this Administration
There's multiple potential loan products that we could
pursue. Um, it is unclear whether all of them exist
speculation but there is a range of products, uh, that that
we could pursue. Yes. Okay. So there'd be other options.
Potentially, um,
now, if maybe it's the easier, if I prefer the slide, if we
go back to
oh, whichever slide it was where the mes is being replaced
with our Equity, kind of near the end.
The new construction permanent sources. Slide, I think it's
kind of a couple from the end. Yes. So in that perfect.
Yeah. So, in this case, once the mes loan or the commercial
loan has replaced our Equity, I understand how that's how
the, the the
Um, sustainability or sustainable part of our um fund
works.
But would we still be?
Equity holders in the development at this point. Once we
did that or how does that piece work? Yes. So the Ric
remains with its ownership stake, they have just taken the
opportunity to essentially take out a new piece of debt
that allows for the repayment of the initial investment.
And so, we've essentially indebted an additional chunk of
the deal.
To make our Capital available to ourselves again, but we
haven't given up our ownership state. So when we so it
allows us to take that money off the table. Does the does
the
Co-developer get to take money off the table in that
situation too. There's a range of potential relationships
that we could have about when a co-developer seeks to exit.
There are situations where a code developer would seek to
exit at stabilization. Uh there's uh the world that we've
modeled here. The code developer is interested in staying
in at least for some period of Time 1. Common uh approach
is waiting until that mezzanine debt is substantially or
completely paid down and then there becomes additional
capital in that, noi availability uh to begin to buy out.
the the other investor, the co-investor there are worlds
where our code developer actually chooses to approach the
deal from a fee based perspective alone, and we start with
a 100% ownership. So there's a range of possible ownership
Stakes here, and opportunities for the co-developer to
remain in the deal or stay in the deal, and those are the
kinds of terms.
That would come back to Council in our deal specific. Um uh
you know future ordinances now. You you've kind of alluded
to this but if the the noi need,
changes based on based on, um,
returns, if you will, uh, do
Does that like how does that affect the other the developer
though? Why wouldn't I mean they are not going to agree to
just lower their Equity return and that's situation.
Or how am I not? What am I missing? Their ask your question
again. So if so you mentioned if
The.
um, based on the interest rates that we may get on the mezz
piece or the item mortgage, then it may affect how
affordable we can make the development. Yes. But
considering we don't own a 100% of it necessarily or how
like how does that fit together.
so, let's say that we have a
7% or let's say a 5% interest rate item, mortgage is a
senior debt. Sure. And the macroeconomic conditions, change
the FED lowers interest rates and that portion of the debt
can actually be refinanced to a 3%. Instead of a 5% product
or let's say that,
10 years have gone on and the building has established
equity and we are pursuing a refinancing opportunity that
allows us to change the nature of that senior debt. Uh,
this is the kind of thing that private developers would
pursue all the time and they would likely take the
opportunity to do nothing to their rent roles at all. Yeah,
and have additional profit. We could take that opportunity
instead and say, oh, we just changed our need to pull on
noi from and I'm rough numbers here. Yeah, sure. 1 million
dollars a month to 800,000 dollars a month. What are we
going to do with our $200,000? Well, we can take the next 3
or 4 units that come up for vacancy. And instead of renting
them at market rate we can rent them at an affordable rate
instead would would but we would, we couldn't have an
equity partner in that situation. Could we or
we we could still we would be in control of those kinds of
decisions because we were a majority ownership stake and so
we would be the decision maker the co-developer in a
situation like that would have agreed at the very, very
beginning to see a co-development relationship that would
have clarified. What prophet was available to them when
regardless of what sort of income based decisions we made
about rentals later on? If now go going to the, uh,
acquisition
Side of it. You you, uh, actually gonna go 1 more slide
so I see it says total unit 75 which are you still
anticipating acquiring developments that are that size or
are you just sort of bundling 75 different units that that
Could be, this could be either. This could be say a 75 unit
vintage Courtyard building. This could be combination of 3
smaller buildings in a similar geography. There's, you
it could look multiple ways so does the, I don't know if I
missed it in the in the ordinance but does the on the
acquisition side does the or I guess it's not in the ACT
it's is it in the ordinance that the development has to be
over a certain size? I remember there was discussion of
that but it's not know we've identified 75 to 200 units as
The Sweet Spot for the program. Uh but we're not limited in
the ordinance or in the bylaws to a particular size. If
Madam chair 1, that's all I have. Thank you so much. Thank
you Matt. Thank you Alderman Rodriguez.
Alderman. Martin has joined us for Quorum Alderman
Rodriguez. Thank you. Madam chair. Um just briefly. I just
wanted to uh I I wasn't able to chime in uh last time
around and I fully expect this to not have a, a long
discussion, next time around and hopefully get this passed
at that point. But uh definitely wanted to congratulate my
good friend and colleague Lenny. I'm going to hop in with
for walking me through this. Uh, she sold me on this a
couple of weeks ago. Uh, you you've done a great work on
this Lenny. And and, and as you're kind of first, uh, for
rain
Into champing something. I just want to congratulate you on
that, um, to all those in the Das. Um, also kudos to some
good work. The fact is I do believe there's 1 outstanding
issue that I'm very, very concerned with. Um, I know, No 1
on the Das and no 1 in this Council uh, wants to privatize
any work, uh, in the city of Chicago. Um, but the fact is I
I can't say that in the future, uh, that wouldn't be the
case. And the fact is I never thought that we'd have uh,
uh, a reoccurrence of this Federal Administration. As a
matter of fact, and here we are dealing with a ton of
craziness. So with that Federal Administration in office,
we know we've got to be more creative in the fact that we
will not be able to count on the federal government to
support us in our lofty Endeavors 1 of which is making sure
that Chicagoans can stay in our great City. That
working-class Chicagoans can stay in our great City. I want
to congratulate
Ate all of you. The folks at the Illinois, Green New Deal
coalition for highlighting this issue, the fact is we need
to create affordability. Government has a job to do when it
comes to making sure that our community can stay whole and
that people in our community can stay and people can be
attracted to our city. That's what this endeavor does. And
I'm very hopeful that we're able to get there on this last
piece this last issue which I do think um is should be
gotten to as far as making sure that we have increased, the
fact that we will not privatized any jobs, uh, that are
currently uh, or in the future will be um public serving
and and and and, and organized by our Union. So that's all
I have to say, Madam chair. Thank you so much for this
opportunity.
Thank you, Alderman, Alderman, Quezada, followed by
Alderman Moore, followed by Alderman Lee.
Thank you, uh, Madam chair. I have a quick question. Um,
just uh, to the gentleman that was I'm not sure what your
name is, but during your present, I'm part of me. Matt
Stern, Matt pleasure. Um, I have a question about whether
or not the financial, uh, modeling of the units. Also
include potential savings through the Assessor's. Um,
affordable housing property reassessment. Can you speak to
that? And, and for all of the acquisitional properties that
will be looking to to to acquire
yeah, so we are
Excuse me, we are expecting. Um, and this was in the slide
deck from last week, but uh accessing the same tiers of
available, um, preferred assessment rates that any other
building would based on the level of affordability. Uh
provided and that is included in in the models that we've
produced, okay, fantastic. And if we had a conversation
with the assessor's office, uh, about about this program at
all yet,
we because we don't view this as
Distinct from or even necessarily being deserving of
distinct from any different treatment than any other
Residential Building. In the city, we haven't specifically
engaged on this because again it would follow the same
rules that an Aro building with on-site units would provide
okay great just making sure because you know, it's a big
plan, so we want to make sure that we have a, a strong
partner through the assessor's office. Absolutely. Um, but,
you know, as a, as a freshman, uh, in this, in this body.
Um, I do want to uh also highlight and uplift, my colleague
colleague uh, alderwoman Lenny. I'm going to hop in with
for her work but also the work of the many, you know,
Community Based organizations. I also want to uplift, uh,
Palenque. Logan, Square neighborhood association has been
a, you know, a, a consistent partner and Champion, um, you
know, in fighting, uh, the economic violence, that, you
know, displacement housing displacement gentrification has
had on the northwest side of Chicago and now, you know, in
different, uh, Community Based.
Uh, our community neighborhoods, you know, uh, cross our
city and you know, as what, uh, Alderman, Mike Rodriguez.
You know just said, you know, our government has a role to
play. We have a role to play as a public entity to fill in
and, you know, meet the failures that the market has not,
uh, you know, stepped up to, uh, and addressed and we have
an affordable housing crisis. And so, this is a bold idea.
I'm glad that we're talking about this, and we're also
working to make sure that we get all the details and all
the stakeholders, you know, into this conversation, like
our partners in labor. So, thank you very much. Uh, and I
look forward to advancing this. Thank you.
Thank you Alderman, Alderman, Moore, followed by Alderman,
Lee, followed by alderman waguespack.
Yes, thank you so much, chairman. Um, I just want to say um
thank you to the administration and to our um do
commissioner. Thank you so much for um, you know, listening
and working with us to get um to
Passage of this, uh, ordinance. Um, also to Chairman Dow.
Thank you for your leadership, all around on this. And I
hope to continue, um, to work on this. Um, the changes that
I've asked, um, in addition to other conversations, we had
the changes that I've asked have been made. I think that
was just 1, um, small. Um,
Jazz error. Um but there was just overlooked um on item in
consent and and and the word consent, you don't have to go
through it and bother looking for it. We already talked um
Council and they said there are changes. So to be
consistent all the way around where it says approval, they
put approval everywhere else and then um, with the
exception, it was just an error they'll put it there um
before um Council approval and then they included, um the
will be um to the committee and not just you know um the
um the chair so to the finance committee, a quarterly
reporting. So, just want to thank you all for your efforts
and and the team, um, legislative affairs and everybody for
taking phone calls, and reaching out and working with us,
um, through this process. Thank you.
ultimately,
Thank you, Alderman, Moore. Thank you, madam chair. Um, and
thank you to everybody that I know has been trusting their
butts to get questions answered um to get this, uh,
substitute to us and some bylaws that I I know a lot of
work has gone into it. I'm remiss in not having looked at
it over the weekend, so I'm just kind of digging into it
now. So I have a couple of questions, I'll start with, does
anybody know, uh, what the audit requirements are for, uh,
for the racing specifically, where I'm going with this, um,
is the, um,
Believe last time, we talked about operating costs for the
raac, being 2.5% of the 135 million Loan Fund.
That's not going to come all at once obviously, because
things are going to have to ramp up. Um, but in the
schedule that I saw, um, there would be infusions of, I
think starting out 500,000 dollars. And that, that reaches
the threshold for um, audit requirements. I just wondered
if we could codify that some place 1, 1 of the things that
I think that we need to continue to focus on and whatever
we do is this will issue of transparency and ensuring that,
um, you know, the taxpayers understand. Um, how the money
is being spent. So, um, if that's something that could be,
you know, looked at that would be great, go ahead. Yeah, as
a 501c 3, we would fully expect it to um, be audited and
provide audits according to gaap standards and we can work
with the Department of Law to codify that, um, within the
within either the ordinance or the bylaws. Yeah, I know
that that's publicly available through the Illinois
Attorney General's office. But, you know, if we can be
proactive about that, um, that's something I think
everybody would appreciate.
um, looking at, um,
Looking at the um the funding models and thank you for
doing that because that, that was 1 of the specific
questions that I had. Um, and I think that, uh, Vice chair
Conway asked this, but I just want to make sure that I'm
clear on this. So in any of these scenarios where we're
coming in to let's say uninstall a current project and we
don't have as big a stake is it a requirement then of the
Ric that anything that we're involved with?
We're going to at some point own and operate um these units
or the development.
yes, the the model that's in front of you is a model in
which, the Ric would maintain Perpetual ownership but
that's not necess
necessarily true of every single, I'm I'm just thinking
if we're
currently stalled project, that needs another 20%, let's
say, um, we'd be coming in at 20%, obviously, wouldn't put
us at a majority but at like, what point, um, or is that
something that we're requiring as a condition of our
support is that ultimately not only is it 70% market and
30% affordable. But that the ra then um retain ownership
and management of said properties in perpetuity. Yes. And
ultimately part of it is because there is a diverse uh set
of things that could be a stalled deal. Many developers
come in literally to just do that. They want to develop a
building and they want to be able to sell it off at the
end. So part of the appeal of working with us is not
necessarily that they're looking for a stake in ownership.
Is that both we can help provide some financing to help
them get unstuck, but we can also provide, um, again a
negotiated guarantee that at the end of it, they can get
out faster. That's right.
um,
1 of the things that you showed in your um, in your
presentation, Matt was um just sort of savings from the ra.
The the fact that you know our our rates are lower, we're
going to lower the noi and pretty much every single case.
Um,
What does that look like? From a renter's perspective, I
know every Project's going to vary but if we're if we're
coming in and reducing the noi by a certain percentage just
across the board. What what would that look like in real
dollars? If I'm if I'm affordable renter in the building
Or even a regular market rate renter for that matter
because that does that should in theory lower, everybody's
rents.
So, the decreased noi uhuh.
Doesn't is not going to be visible to Any Given tenant
necessarily because their lease is what their lease is.
in a situation where if, if you walked up to a developer
and said I'm going to snap my fingers and decrease your
Debt obligations every month by 10% that developer could
do.
A bunch of different things, right? He could take a trip to
the Caribbean. He could decrease everyone's rent by 10% or
he could decrease some rent by much more than 10% while
leaving other rent fixed. So, the, the proposition here is
not to reduce the rent across the board. But is to
Believe roughly 60 to 70% of the units at Market.
And take the entirety of that noi benefit and convert that
into income restricted units at some spread between 30 and
80% Ami. And so that becomes essentially a a policy Choice
Choice as to how the Ric would go about utilizing the
savings that they experience, right? And then the, some of
that savings can be recycled into the Loan Fund,
ultimately? Yes. So as noi becomes available as debt is
paid down, um, refinancing uh, could occur in in some way
or or, you know, let's say the building is doing very well.
Um, the Ric could say, you know what, we're going to take 3
more units that were market rate and make them affordable
or the Ric could say. We're going to let the building start
to spin off some cash and we're going to take that spun off
cash and we're going to put it right back in the revolving
Loan Fund so it can be used for the next project.
Gotcha and I just want to note too in the models that we're
showing here. Um, you've got Ric investment per unit, just
based on the total number of units, I kind of look at this.
From the city's perspective is we're we're really out here,
trying to create affordable units, so if I I look at it
that way, obviously, the the price goes up or the cost per
unit, uh, for for affordable unit goes up. So I just want
to note that on the under the new construction model at 200
units at 30%. That's 60 units. That'd be 375 per affordable
unit, um, versus 112,000. Now, we know that's half of what
we've just approved in some some other, um, affordable
housing, uh, developments here. So I I think that that is
um, a massive reduction. I just want just want to keep us
all honest here. Um, that we, we definitely need to look at
this at how we're creating it more, um, more affordable
units. And I understand the model of investing in mixed
income to uh in order to arrive at the and have it
essentially subsidized the the market rate do we
Know. Um, and this is 1 of the questions I asked. Last time
time, I don't think that I got an answer to it, just in
general, like, how much time it takes to reach
stabilization at the end of the day. I'm just I'm concerned
about being able to rent the market rate, um, units. And,
you know, the market rate in Chicago is not cheap either,
cheap either, um, so where we finding the people. Um, and,
you know, at what point do we get out? So, um, the staff is
pulling up the through the chair response that we provided
for that. Um, but I will also say that as we've spoken to
our de
Development Partners. So we have 1 example um, in which a
50-50 deal. A 50% Market, 50% affordable deal. The market
rate for the first phase of the project was rented in 3
months.
um, and for the second phase of the project in 3 days,
Um and so that actually goes also to like a good developer
and good Property Management. Um and so the ways in which
we will achieve stabilization will also definitely be on
the property management company that we choose um, which
again the Ric will do, uh, because that is how we ensure
that we're getting these things. Rented very, very quickly.
Um, commissioner point of information on that, uh, example,
you just gave is that in a community where market rate is
not similar to Affordable rates when you gave that, uh,
or is it a community where market and affordable are
similar?
Um this is in Bronzeville. Um so it's a community where
market and and affordable is similar.
Agreed. Um I think the other thing that we have also done is
that um I've spoken with my team on the Aro side as well to
talk about just how long um we normally see lease uptake
through that. And I think again um with a good property
management company on there, we can absolutely make sure
that um we can reach those benchmarks in a really
appropriate manner.
I'll just add uh in the through the chair memo that we
submitted. The typical time to reach stabilization is
typically 6 to 18 months after a building is
Thank you for that, um, and appreciate the examples.
1 1 question for the, uh,
looking at the
ordinance. Um
And then I have 1 last 1 and then I'll be done.
For the record. My name is Jim McDonald. I'm managing
Deputy Corporation Council and the Law Department.
if you look at the bylaws and you look at section 1.3,
That says that the corporation this is the end of that
section shall be bound by the provisions of the ordinance.
And so I don't have power to change any of the ordinance
provisions.
Or any provisions of these bylaws consistent with the
ordinance Provisions, without the approval of the city
council.
So the thought was that the ordinance is laying out a
series of requirements. For what this Corporation is going
to do, including
Mixed income. Environmentally sustainable tenant govern.
And and we thought we wouldn't need to replicate all that
in the bylaws.
if we were,
In the bylaws, what they're doing, without the city council
approval.
Got it. Thank you. So, in essence, any changes that the
city council makes in the ordinance with uh, then the
Or I see would be subject to at any given point that we
decide to make any amendments.
To the ordinance. Okay.
Want to make sure that was clear. Um, and I'm going to just
renew my, uh, my request for there to be a separate
maintenance. Be codified someplace. I just, I'm going to
renew my request for, um, a dedicated maintenance fee, uh,
to ensure that we've got
we've got sufficient funding for um you know, upkeep of the
building and any uh any sort of uh um
Catastrophic type of things, I know there's Insurance on
all those things. I, I think that with a publicly funded,
um, the publicly funded project, or many projects like
this, we need to provide again as much transparency and
reassurance as possible, especially to the tenants um that
that there's going to be the ability to, to pay for repairs
if and when they're needed. Absolutely older woman, um,
just uh, pointing back to this image on the screen, the
dark blue box at the bottom. Operating expenses includes
both a fund for maintenance and Property Management that
will be included in any ordinance that comes back before
this body to uh, approve a building
So you will have a chance to review the financing in detail,
which you will see a set aside for maintenance when we
we bring a real project back to you. So that will be
codified or will be visible on a per project basis. Yes,
every project.
I just don't see why we can't just codified her but again,
what you're saying, thank you. I'm done, thanks. Thank you
Alderman. Lee Alderman waguespack followed by Alderman
Lopez, followed by Alderman, viegas, thanks chairman. Um,
my first question um,
is going back to the foyer and the oig I saw that it was
added in here.
Um, and maybe Jim can answer this. Mr. MacDonald. Um, are
there any penalties for anything? Like, malfeasance,
corrupt, acts unethical Behavior. Other than, uh, referring
to the
so you have we have the oig section in there, we have the
foyer but um it looks like they refer back to just any
Any issues with it would be uh, applicable only under the
state.
The ordinance and the bylaws do not contain any specific.
Uh, malfeasance penalties, okay? So if, um, if the oig
found some type of
Problem, like they have in other entities, is there any
teeth whatsoever for the oig to hold anyone accountable in
this Ric?
The oig provision. As, you know,
Is a now in.
Sub subsection t as in Thomas.
Excuse me, Mr. MacDonald, could you speak up? I I didn't
hear what you were saying.
sorry, I will try to be
clearer.
Thank you, the oig provision. That's been added is in
subsection, T of the ordinance as in Thomas.
La second to last page and the last page, it provides for
the corporation and the directors to cooperate.
and,
With any inspection or audit by the oig.
uh, it does and it says,
There are other premises and equipment.
Are going to be made available for such inspection.
It does not mandate.
Any particular penalty by the oig.
On the corporation.
okay, so if if the OG or OG recommended that somebody be
held accountable by
um, being suspended or uh, released from
The RAC as it would.
Uh, in typical situations.
they just could say,
This only applies, our bylaws dictate that we're held
accountable through.
Not through city laws like the oig would enforce.
As I see that they could audit and they could do everything
but often the the oig doesn't have much teeth and and
enforcing that. So
um, would
There's no like Board of Ethics penalties. There's no Board
of Ethics application here that
You could run a muck and you could have an oig report, but
there'd be no.
application of anything other than
501 C3 from the state. You have 2 groups of directors, you
have ex official directors, who are also city employees.
Who are subject to?
I'm Excuse me. They could they could be held and if you
look at the last sentence in Sub in subsection e,
Talks about.
I'm sorry, it's the second paragraph. The last sentence in
the second paragraph of subsection e directors, EC who are
not the ex official directors will be subject to removal
for caused by the mayor.
So, the mayor could find.
That they are, they could and the bylaws in section 1.3.
Cannot change this unless the ordinance has changed, okay?
so that the mayor could find for that there is cause and
could remove those directors as directors.
corporation, okay?
um,
Thank you, Jim. Um,
when we look at the ordinance and um, use of City staff,
getting authorization from, um, the commissioner a
designate to
Um, get approval or enter into any of these agreements.
Um, is there anything in here that
Uh, let's see would um, if there's use of City staff to
prepare manage or otherwise be utilized in any of these
deals.
is there, uh, some kind of stop Gap, where City staff would
not be doing the work of the Ric and um,
Create.
Some type of confusion, or or compromise of their um,
workload.
So speaking broadly, the Ric will perform different duties
than work. That the Department of Housing staff currently
performs Department of Housing staff currently. Um
essentially is the process through or works the process to
lend out or grant money the same way that we will do to the
Ric through these ordinances and through the
establishments. So Department of Housing staff uh cannot
and will not uh, staff out completely the Ric, um, to that
point as well, and not to speak to any specifics.
But we are um looking at um the language um and looking at
Labor, peace agreements as well.
So, would that be done before we vote on this correct?
Okay. Um,
Thank you and um, just 1 Thing, uh, well, a couple more
things. So, when we, when we look at the expenses of the
Ric, it says that they cannot be compensated. But um or
cannot they will not receive a salary for their service on
the board. It will be compensated. Only for reasonable
out-of-pocket expenses what might that include?
I'm sorry if that was asked last week, but I I don't recall
hearing it.
Um almond. This is just an edge for the record um
Department of law, legal council Division. I worked with,
um, Jim on this project as well. Um, most of my background
comes in nonprofit law prior to this. So, that's why we
worked in this. Um,
Those are defined terms of Art in both case law as well as
in the not for-profit Corporation act and it's essentially
just reimbursement gas to go to a conference. Um and out of
of pocket expense such as printing things for a board
meeting and it is extremely narrow. Okay, it just is. Meant
it, makes it clear that you are able to do that in exchange
of money. That is clearly 1 for 1 while you have a flat
clear broad prohibition on compensation, okay. Thank you
much for that. Um, and chairwoman, um, I don't know who
might be able to answer this.
But when we're looking at the new construction, construction
sources are permanent sources. And I'm, I'm looking at the
rates there and I don't know if you could go back and
go back and explain have somebody explain this but what
guarantees these lower rates and what specifically are they
based on?
The.
Am I do I have the right slide pulled up alderman?
are these, the rates you're asking about
Correct. Yes, so the rates on the left are what we
understand to be uh what the market is offering today.
And the rates on the right, obviously the ra Equity rate of
2 to 5% is a policy Choice as determined by the Ric. Um and
and the item mortgage rate is what we understand to be
available through the programs that we've been in
discussion with Ida about. I'm sorry, what was that last
part? The item mortgage rate is of 5%, is an approximate
value representing. The current rates available through
some of the programs that we are, uh, considering and, uh,
which were enumerated explicitly last week, uh, that are,
you know, there's a small handful of both Federal and
non-federal opportunities, uh, for a preferred financing
and we think 5% represents an approximate uh, average of
what's available in today's
Economic landscape. So the RAC would automatically get that
5%.
Rate based on your, the Ric's policy that will present 2 to
5%.
And who?
um, if they're so when we're looking at what you're tapping
into for um you know, for instance we have the stsc um,
that we refi. We used it on the head, we used it on other
issuances and that has a very good rating to date. However,
um,
When we look at the master and denture there and we keep
putting stress on the stsc by continuing to borrow from it
beyond what its capabilities are on an annual basis.
What what stresses or what? Um, uh possibilities could
happen with that rating to not be at 2 to 5%, or that
percentage to be um higher than that. And that that's more
of what I'm getting at. You're you're just saying we we're
going to state that it's a policy that it's 2 to 5%. But
what stresses
Um, are there on that 2 to 5% to guarantee that it will
stay there? Sure, I I can defer to the cfo's office. Um, to
answer the question about the stsc and general obligation
debt itself, but before I do, I want to be clear that
Once the City Grants funds, even if they are derived
themselves from a bond offering to the Ric that the Ric
would then have the freedom to establish the interest rate
of any loan that they offer to a development separate and
apart for whether that interest rate is greater than or
less than what is being paid on the underlying Bond
issuance by the city, uh, because the intention of the
interest rate on the construction loan product. That is
described here is not to pay back the interest on the
underlying bond from which this grant was. Derived it is
simply a policy function of the Ric in terms of
establishing the right um loan details for the given
project and investment uh because
The the the 2 of them are are distinct, but I'll, I'll hand
it to to Brendan if you'd like to. Yeah, Brandon before you
start that. So then just add, um, what the impact would be
on our stsc and Geo Bond ratings.
um,
Should there be some other type of downgrade over the next
few weeks or months? So if you can factor that into even
though they're 2 distinct different things,
How does that? How does some kind of downgrade or our
inability to deal with? Um,
Those downgrades impact this Ric.
Thank you Alderman. Uh, for the record. My name is Brendan
White. I'm an assistant, commissioner in the Department of
Finance.
Um, the the way I understand the structure of this uh
residential Investment corporation, is that it will not
carry an independent rating. Um, that would uh, it would
not sort of separately issue debt in the public markets.
Um, the uh,
the debt that will
Provide the seed funding for the residential Investment.
Corporation would be issued under the city's General
obligation credit and secured with a property tax levy, um,
which would be, um, tied to the, uh, Tiff eav that is
returning to the city. Um, uh, uh,
I guess your question about the incremental cost of uh, any
additional downgrades, um, my guess is that um, an Inc.
It's sort of hard to tell now because, uh, Global debt
markets are a little dislocated. We've seen 1 of the most
um, uh, volatile weeks in trading, because of the uh, uh,
confusion around the Tariff policy. Um, whether it's on or
off,
um, it
it seems like a, it's kind of hard to, um, quantify because
we have uh, split ratings. So we have uh,
Be Triple A from or baa3 from Moody's, who still has this
on a positive, um, Outlook. Uh, we have an A minus from
croll, they have on us on a negative outlook. Um, I think
that downgrade from Moody's, or fichter S&P would probably
cost us somewhere around 10 basis points, um, in, uh,
borrowing costs. But it's hard to say that, uh, a crawl
downgrade would affect us quite as much just because
they're the newest entrance, to the, um, rating agency
market. They have, I think the smallest market share of
those 4 rating agencies and they're already kind of an
outlier. So sort of feels like they're, uh, outlier status
is mostly already been priced in.
Okay. So if um, if that happened, um how does that translate
to the Ric then? Does it? Is it an automatic? Um hit on it?
Is it um, delayed.
Do the markets, um, or the rating agencies? Look at this,
new additional burden on our go and stsc as an additional
stress.
Um, I don't think so. I mean, the city already does a
number of housing, uh, transactions and conduit Bond
transactions, and those don't really affect the city's
General, Geo credit rating. Um, those are, uh, not direct
obligations of the city. Um, so I don't think that, um, the
development of the, or the, the RAC starting to, um, set up
these projects, would have a material impact on the city's
credit rating.
Okay. Um,
Thank you. All right, thank you. Chairwoman. Thank you
alderman waguespack.
Alderman Lopez followed by all the new vagus.
Followed by all the men.
Cuentas.
Not everybody.
On the menu, you're going to be okay. All right.
Alderman Lopez, thank you, chairman and good afternoon
members of the commit of the 2 commissary
The last slide that dealt with operational budget.
I'm sorry, the the operational budget slide. I think you're
referring to was in the deck we used last week so I don't
have those slides uh, immediately available. Okay.
Fair enough, I could read from it.
um, but before we get to that, then if I may ask um,
I've looked at the substitute.
and,
I think 1 of the questions, 1 of my colleagues was trying
to get to is, um,
are there caps for management for contract management fees
include included in this ordinance?
By contract management fees. You mean, uh,
The sorts of contracts that the Ric would itself enter into
just I'm just want to make sure I understand correctly.
Yes. So for example,
When if you and I guess this would be on last week's when
you when the Ric enters into a into an agreement with the
developer.
Or to someone who would actually manage buildings or
Properties or whatever.
are we setting caps on the amount of fees that
Some that an organization developer would have, you can
actually charge the RS Ric.
So all of those things would be negotiated on a per deal
basis. Generally in underwriting there are some standards.
For example, property management is usually going to be
about 7% and again we would be using just a generally um,
acceptable underwriting guidelines for the Ric and for each
of the deals. So,
I guess the question that I have, because the other
question also relates to Construction
Caps.
As well. Um, if you're going to use those practices, can we
incorporate that language into this? So that we are keeping
consistent and not just going on a whim as to what exactly
we're going to be spending with these.
various, uh,
Providers.
So each of those again would be brought back to city
council. Each deal will be brought back to city council for
approval before the RAC is able to move forward on it. Um,
and so each of those will have um the ability for this
Council to look at um, for those various pieces. So with
respect commissioner, I have sat in this Council,
especially the last
2 and a half 3 years under 2 different administrations and
every time someone uh, in your position comes back with a
document prepared by the Law Department. I hear. Well,
that's the language. How? It's always been and no, 1, ever
wants to change it. We've had this discussion numerous
times, so as we are starting out with something new, I'm
asking right now are, is there a way for us to codify what
the the maximum fee structures could be for these various
providers? So that we're not having to do this as 1 offs,
but that we have a, a base ceiling where we will have no
more than. So for example, you said like a management, uh,
a building management if 7% is the range, then can we
include incorporate that 7% ceiling?
into the ordinance and so on and so forth for everything
that the Ric would eventually be putting
Us indirectly on the hook for.
Part of the reason why we generally um are concerned with
caps, is that very often when folks are aware of what the
Caps are? Then they're going to want the max fee. It would
limit the Ric's ability to negotiate um, on each deal, both
with the contractors and also the underlying underwriting
of the deal with the developer or the co-developer
But that also lets them know that they can't go beyond
something as well. So that, that would kind of be my
concern because we see where especially in.
Both of these committees.
We have developers who have wildly different price points
for what they're creating.
And what concerns me is that even just today we had a price
point for a project in the 34th Ward, that was 500,000 per
unit. But 2 months ago, we had a price point for a rehab
building of nearly 950,000 per unit.
that is such a
Wild swing in costs that if you don't cap it or if you
don't provide guidance, it's it's going to eat up
everything that we're trying to do in a very unequal
unequitable, kind of way. So I think
I know that this is something that I first mentioned when
this was initially introduced, I've shared it with its
sponsor about having these kind of caps and, and, and
limits. Um,
So it's very disappointing for me personally to hear that
we're not entertaining how to incorporate language or make
that a reality in what we're discussing here today.
Understood. I think that part of what um, is different about
this model than the typical housing models that are brought
before you is that these um, these will have a certain cap
in terms of like range of what we're looking at, right? We
will have a minimum of 30% affordability and are trying to
go deeper from there. Affordable projects can vary on a
variety of levels on a variety of unit counts of places
where you're looking at here, we're already saying we're
looking at 75 to 200 units or so as being The Sweet Spot.
And so, we do not expect the ranges to be quite as wild in
general, these projects will be less expensive because they
will not be subject to Federal Regulations. They won't be
subject to some, of the regulations that, um, we, um,
internally have to look at when we are looking at public
public money for affordable housing. So we already, this is
why you will see the numbers that, um, Matt has presented
as having projected, um, already lower than the projects,
um, that are off.
The bra before this Council that are 100% affordable and
subject to Federal and like restrictions and things like
that.
And at what point are we going to be able to assess if that
was the correct decision to make? Because I I I hear what
you're saying.
I don't believe it because I don't believe that we're going
to be able to have
A, a magical decompression when we've already set the
standard for what we're willing to pay.
We've already shown the affordable housing universe.
That we are willing to go up to a million dollars for a 2
to 3, bedroom rehab, and an existing building.
How do you peel back from that without putting it in a law
or putting it in an enabling ordinance in a way that makes
sense? That starts that conversation from A New
Perspective, as opposed to 1 that's just been more of the
same and upon which we're just facilitating the same kind
of
creation.
Without a different set of parameters.
Understood. So a lot of the work that we have done here in
the numbers that have been presented have been presented a
market rate deals. We are already looking at this through a
different lens. These deals are not um based off of the
traditional litec stack which again is what is often
brought before you instead. These deals are being looked at
through a market rates stack. And so that is what, um,
you've seen in the decks and all of those pieces. This is
not modeled after litec, this is already a different
dichotomy where we're starting by looking at, um, how does
market rate work and how do the market rate deals? And if I
may ask as a follow-up to that commissioner who from the
private development side, has advised on this. Ordinance is
to what exactly
Is market rate.
Correct for market rate.
So some of it, we've looked at some internal numbers based
on what we've gotten through the affordable requirements
ordinance which are market rate deals. Um, in addition to
that, we briefed over 70 Community Partners and other
developers. Um, including many market rate developers last
week that McLaren was here with us. And we also heard, um,
from a couple of others during public comment who are all
people that we've spoken to at length about our model, can
you provide through the chair who those exactly were both
in terms of your Community Partners, as well as your market
rate partner. So that we could see, just how balanced that
conversation was. Yes, thank you. Um, back to the budget
question. Um, this ordinance says that we will, you
anticipate being self-sufficient by 2030? Is that correct
for the Ric? Correct roughly. And that's 3 and a half
million dollars for administrative costs.
Correct. So 17 and a half million dollars, uh, for 11
employees for 5 years. Um no, it is 3 and a half million
dollars over the 5 years. That's
That it would be the entirety of that.
Thank you. And then another question that I have and this
is my last 1, uh, with regards to something, uh, that I
know, uh, my colleague from the 32nd. Ward was referring
to, um,
What role does the Department of Law.
Have in dealing with the Ric.
moving forward, If This Were to become,
Law. Um as you um we have talked about before, there are
certain things that the Ric will do upon establishment and
1 of them will be hiring their own general counsel. So the
Corporation Council will not have any kind of oversight or
authority.
Or interference.
Correct. Okay. Thank you. Thank you, chairman.
Thank you. Uh, next week.
Thank you, Mr. Chairman, um,
Quick question. So on these examples per unit cost 450 for
new construction. 300 for
Acquisition.
Um, that's the average.
Cost. And what's the size of that unit?
That you've modeled out.
I'm sorry. What was the so on the new construction? Yeah,
450 450 per unit and then on the Acquisitions 300,000,
what's the size of the unit that you've modeled out to get
that number? It's a it's a mix. It's a unit mix. That would
be standard for new construction like this ranging from
from Studios to 3 bedrooms, right? So so what what, what
would be the cost for a studio up to a 3-bedroom based on
your model? Have you done that?
For the calculation of the total development costs.
You you came up with an average of 300 million per unit on
the example of 75 units. Sure what's the makeup of Studio
to 1 or 2 bedroom, 3, bedrooms, whatever it is, what's the
price per unit
When 1 is calculating a total development cost for a
project they're talking about the overall project a project
has a single price tag whether it's 90 million or 25
million or whatever it might be. And then the calculation
per square foot or per unit is, uh,
tool for the purposes of understanding that deal in
comparison with other deals. It's not like changing a unit
from a 1-bedroom to a 3-bedroom is going to increment the
total development cost by exactly the difference.
It wouldn't necessarily be possible to defy. You could
theoretically take the total cost of a billing divide it
per square foot and then take the per square footage of the
different units. And then multiply it up to get an
approximate of what a studio cost to build versus a
3-bedroom cost to build. But all of that would be uh,
extrapolation. That doesn't necessarily have a huge amount
of meaning because at the end of the day, the cost of to
the contractor to build a 30-story building,
Doesn't function there. There's so many things that aren't
units specific that that wouldn't necessarily be a useful
statistic to calculate.
So, the reason why I bring that up is I'm trying to figure
out like what is it that we're envisioning as it relates to
new construction.
The units per per.
The units per um what's the how many bedrooms per unit? Are
we anticipating? That's what I'm trying to get to.
Both of these models involve a range. Uh, I believe if I'm
not mistaken that the new market, the new construction
model, involves Studios to 3 bedrooms and the uh
Rehabilitation model involved in a combination of 1 and 2
bedrooms, okay? And then on the um chhap pbv and we also
inclusive of Vash vouchers as well.
When we would work with cha, we would approach it for all
the vouchers available, including obviously ones for
veterans, is that would be 1 of our preferences. Gotcha.
and then on the item mortgage. Um, so if we got a
commitment from the state that we're going to be like in
line, like a certain percentage of loans will be given to
us because, I mean our our private developers pursuing Ida,
um, mortgages as well.
Either funding as well.
So Ida is a Housing Finance Agency. Has the ability to do
um a great deal of lending through certain programs. So we
have spoken at length with them about um our desire to
ensure that we can work with them. Um and the raac will
likely continue to figure out how to uh, memorialize that,
um, likely through an mou of some sort. Gotcha. And then
the examples for the new construction you've talked about
the revolving,
Being able to tap into the revolving funds. Do you have, is
that exact example available on the acquisition as well?
Because I know that there was some some hesitancy around
using some of the, uh, Bond money for acquisition versus
the new construction. But, um,
Can you can you explain like how long it would take if when
we do acquisition uh to tap into that revolving fund?
the existence of a construction, period debt versus
permanent debt in the new construction phase traditionally
That's in. That's a new construction specific
differentiation because of the risks associated with
constructing a building that does not exist and therefore,
doesn't have pre-existing value. And so the transition from
a construction phase to a permanent phase doesn't
necessarily apply to acquisition and Rehab while the total
development costs for an acquisition rehab project are
lower. The expectations are that it would take longer for
those funds to revolve um exactly how long they take to
revolve will be highly deal specific and based on the
Amount of money that is needed, which itself will be
determined based on how much, uh, senior debt is going to
be available, right. Okay. Thank you. And then just to is,
are we still looking at a new construction 2 to 3 years
before they come online? Is that, that's the number that's
thrown around.
Roughly. Yes. Okay. Thank you. Thank you. Madam chair.
Thank you Alderman. Uh, commissioner you mentioned just now
that the Ida
Uh, mortgage loan commitment needed to be memorialized
right through some kind of agreement. We would expect that
the Ric would work up to memorialize that because the Ric
needs to have its own authority, right? That's why that's
the ordinance that is before us today. Um, but we have
spoken at length with Ida Ida is very excited about what
we're doing, and really eager to um to be in partnership
with us on this, and decide to have a uh, reputation or a
policy of entering into those kinds of agreements with not,
for profits, versus an agreement with a municipal
government.
Um, I'm sure we can figure out something that would be
mutually acceptable for them.
Alderman Fuentes.
Thank you, chairwoman uh, first. I I just want to
the work that has been put in uh before this committee
today. I think this is what a building good legislation
looks like. Alright we were here in the last committee
there were folks that had questions and comments and uh we
took the collaborative approach and here we are with an
ordinance that addresses many of that. And so I want I want
to thank you for being able to do that. Um, and coming
before us today. Sort of with that collaborative Spirit. Uh
I think that's what good legislation uh, ultimately can do
for for a body like ours.
I I I also want us to remember that, you know, we're facing
facing a housing crisis. I represent award that is rapidly
gentrifying. And, uh, more than half of of my ward is rent
burden. Uh, you know, I have residents every day that make
difficult decisions on, you know, if they pay their full
rent, can they do the other things like, pay a light, bill
gas bill, put groceries in the refrigerator. Um, and we
shouldn't live in a city in which that is the reality for
so many. Chicago residents, uh, the green social housing
ordinance, really allows us 1 to address the affordable
housing Gap, that we have. Uh, but more importantly, the
supply in general whether it's at market rate or whether
it's deep, seated, affordable housing. We just don't have
enough spaces for people to live in and this allows us to
be able to put units online at a much faster rate than, uh,
having developers who, uh, and I still believe in 100%
affordable housing. I want to make that clear. Um,
but,
uh, not
not all developers, get the funding in the timeline in
which they need it for communities, like mine because it's
hard.
To get tax credits. It's hard to get the ID of dollars to
sort of financial uh stack. Uh many affordable housing
developers. Call it the the financial lasagna that it
requires to get these projects from idea to realization um,
and to shovels in the ground, takes a long time, right?
Several years. So our commissioner knows as someone who who
stood with a nonprofit developer before and this particular
ordinance allows us to do, just that. But it also allows us
to address some of the, the climate issues that that we
know we are going through in many ways that the federal
government is trying to deny and pull funding from. It
doesn't take us all the way there. It does it, in a way
that's responsible. That doesn't put the burden on
residents, right? But it allows us to build, uh, housing
that has this green element and I I I want to thank The
Advocates and the organizers that really pushed this
forward, right? Uh the green New Deal coalition has put a
lot of work into this. Um
And there are a lot of uh people who have stake in this
ordinance. Um and finally I I want to thank uh all the
women letting me not happen with right. This is a big deal.
Uh this this ordinance is going to allow future residents
and residents today who may be uh will not be able to live
in a community because of the cost of rent and increase in
taxes. This this ordinance will give them a possibility to
be able to stay in place to age in place, to raise the Next
Generation in communities that they call home and that's
what we want. Ordinances like this to do, right? To be able
to provide an opportunity for people to continue to call
communities home. And so, I'm excited about the
possibility.
Of having this pass. Um, and I'm also confident that we are
going to resolve for the concerns around. Privatization,
right? We're I'm confident that we are going to work with
our labor Partners, um, and, and get everyone on board, so
that we can do what's best for the city of Chicago. I do
believe that this is 1, great tool and a huge tool box, in
which we need to get other tools in. Uh, and so I'm excited
about today. I'm excited about the work that we're going to
do in housing, in general. So thank you all for doing the
work.
Thank you chairwoman. Thank you, Alderman, Alderman.
Reilly, followed by Alderman Martin.
Thank you, madam chair. Um, and I also want to, um, thank
our colleague, uh, alderwoman Manhattan where for her.
Initiative here and I think, um, if we do this, right, it
could be a very valuable tool.
Um, and I do appreciate, uh, the department and the
administration going back after the last hearing, and
making some tweaks and changes in response to our feedback.
Um, and I think some some positive movement has occurred
there. I think there's some more work to be done especially
based on
Excuse me, comments and questions raised today.
Um,
I want to, you know, 1 of the things that came up at at the
at the last hearing was, you know, the discussion about
having guard rails in place for the new nonprofit entity.
Limiting what they can and can't change and their bylaws
and and I appreciate the additional language. You've
provided on that. Um,
I want to make sure though that, you know, once this
nonprofit is incorporated and operational because I think
it was a, it may have been a question that alderwoman Lee
had asked.
And I thought where she was going with this is that once
this Ric is up and running, and it's it's got its board and
some staff, whatever there's they're starting to process
deals.
And the city council will go back.
And amend this ordinance.
To apply and layer on additional.
Restrictions.
On governance. Um, can we further limit or alter
Bylaws that have been adopted by this nonprofit entity.
After we've created them and let them so to speak. Fly.
um, do we have the ability to pull them back in here and
make changes to this ordinance to put further restrictions
on that body once they've been Incorporated and or
operational, or do are we limited in what we can do there?
Once they're their own entity.
Does that make sense question Jim?
Saw the current draft.
Of the bylaws refers to the ordinance has passed.
If what you're asking is that section 1.3,
Be revised to provide, not simply the ordinance, I passed.
But any subsequent amendments there to
I think that would accomplish the goal you're looking for.
So okay, so if we were to make that change that would allow
us the ability to come back.
And make tweaks in the future.
Is that what you're saying?
now, again, the corporation is subject to the
non-for-profit Act,
so,
You wouldn't want to set up a conflict between the state
law that they're governed by.
And an amendment to the ordinance.
but I presume at the time, we would ensure
by open discussion that we wouldn't be creating any such
conflict.
It's a theoretical concern, but I'm just trying to be
transparent about that. So say this body after this, this
nonprofit is up and running.
Wants to make some additional changes, but that runs
contrary to the state law that governs nonprofits. I think
I know the answer.
Um, we're out of luck here, locally in the city of Chicago,
right? Because the state law,
Would supersede whatever.
Whatever interest this body may have in passing. Is that
correct?
if I may actually Alderman, um, Justin Edge Department of
Law, um, 1 of the things within the uh arrangement of the
governance with the xop positions, as well as the appointed
positions, and, um, another passage in which it defines
fiduciary duties, doesn't excellent job of something that
many organizations forget to do and which is make it clear.
which 1 of your sets of fiduciary duties is in
Into Superior position the other.
All those existio positions 6, as they are listed. Now are
all have their primary fiduciary duty to the city.
now this is a little out of uh out of a little a jar from
uh the way that the not for-profit Corporation Act is set
up, which is states. That fiduciary duties of uh directors
would first go to the interest of the organization. However
uh what the primary thrust of those is about is about
self-dealing and is about not using it as a method of
private inurement taking in gains taking in private money.
and looking after the fiduciary, the best financial
interests ultimately of the organization. So, as long as
such a conflict is not created that that board is
deadlocked. You've actually got half of the board
representing the interests of the city, first and foremost,
and the other half Duty bound to look out for the best
interests of the organization, which is Duty Bound by
unchangeable sections of its bylaws.
That state that it must abide by this ordinance.
Which attaches the bylaws as an exhibit.
So I would say it's about as locked tight as it can be,
given that you are trying to create a board that is diverse
with both sets of interests with overlapping fiduciary
duties for half.
I know that's a lot of lawyers speak so I please ask a
question if you have. I just
1 of information Alderman Lopez?
Thank you chairman. So
if I may ask with with respect to what our my colleague
just asked if we are to pass this ordinance today as
presented and make changes 2 months from now because we've
discovered some flaw or some different
Edition.
Are we able to, in fact, do that? Because what we didn't
see today we'll see in 2 months and will that be legal?
Will that be legal in terms of the not for profit? Or are
we stuck with a a a Frankenstein baby that we can no longer
control?
I would yes or no.
I want to state.
That sir, please. I, if you take what was stated by Mr. Uh,
by Mr. MacDonald. I was just say that if we make that
Amendment, so it's not. I just wanted to say that it was
not that what we're looking at right here, but if you made
the change as amended,
then I believe, then you were putting this organization in
the best possible position for the city council to be able
to make that change.
You. Thank you, you didn't answer my question. So if in 2
months we make a change is that going to be legal?
And will the the not for-profit.
Follow what our laws say or will they refer back to what
was done?
2 months, previous.
Again, Jim McDonald for the record.
I had said earlier, in response to Alderman, Riley's
question,
That the current draft of the bylaws that are in exhibit.
Only refers to the ordinance as passed on a particular
date. If we amend revise that exhibit
To say it refers to the ordinance as passed and any
amendments there too.
Then we get to the next theoretical question about whether
or not the city council has authority to tell a non
for-profit, Corporation to violate the not for-profit
Corporation Act.
so right and as a local government and a home, rule unit,
I do not believe the city council, has the authority to
tell a not to profit to violate the act under which its
Incorporated so, Mr. MacDonald as the Corporation Council
Council, you would be advising us. Correct about whether or
not the amendment that we might be thinking of
To the ordinance was legal, correct?
That would be correct. I would it would be incumbent on the
Law Department as part of our duty to represent the city
and to advise the city council.
That if an amendment is presented in the future.
that we analyze and say, there's a problem here because of
the possible because of a conflict with the not-for-profit
corporation Act,
We would recommend that that Amendment not be adopted.
thank you, so you could not get a yes or no specific to
your question, unless it was related to something specific
that we might want to amend in the existing ordinance, um,
Alderman, Reilly, please continue. Thank. Thank you, madam
chair. And, you know, 1 other thing, that, that stuck with
me in this last exchange, was that the assurance that half
of this board through the ex ex official members will be
serving in the best interest of the city?
And that's certainly would be my hope.
But let's be frank. The ex official members of this startup
nonprofit.
Will be there with a loyalty to the current Administration.
Loyalty current Administration and to the city are 2, very
different things. And the way, unfortunately, this
ordinance today stands because it wasn't addressed in the
redraft.
Is that we would be appointing these folks to 4-year terms.
I know that initially you want to go with 5 which was I
think ridiculous, I think 4 is also unacceptable. Um you're
going to have a new likely have a new Administration in 2
years. Um that may have a different view on policies
related to affordable housing and this particular entity
itself.
Um so I just want to make sure that we're clear on that um
um, who in the law department and I assume housing,
collaborated with the inspector General's office, um,
related to the ethics and jurisdictional issues that were
brought up about the ordinance at the last hearing um who's
been taking the lead on those collaborative, discussions
with the Inspector General.
We have not had a discussion with the Inspector General.
Yeah, I know the law departments, don't really talk to them
much these days, um, but I knew the answer to the question
when I asked it. The answer to my colleagues is that no 1
has collaborated with the Inspector General on this
ordinance. No 1's, even reviewed it with them.
Not the initial draft, not subsequent drafts, and not the
current 1 before us. Um, I called the Inspector General
Aster
What do you think? You know? I'm, I'm looking for guidance
here.
You all have an Engaged here at all, but we had a lengthy
discussion about ethical concerns and oig jurisdiction.
And they've not been a part of this conversation at all.
Uh, what plans do we have to engage the Inspector General
to get their opinion on this?
Can anyone speak to that?
Okay, crickets.
I'll keep going chair. Um, you don't
what has been done to address? Ask me these concerns with
the current draft of this ordinance. Um, as I understand it
ask me has some some some serious worries about this.
Um, have have they been addressed? They're the concerns
raised by our friends at asme?
Without speaking specifically to any single Union we will
say that we are speaking to labor in general. Um, to ensure
that the final draft of this is something that they are
comfortable with, okay? Well, it's really important that
it's okay with asme. I don't know which other unions you're
talking to, but
they've expressed concerns here and they seem legitimate to
me.
Um, you also mentioned having extensive conversations with
Ida regarding this ordinance. Have they supplied a letter
of support for this
um,
No, because they are a state agency.
And you claim, you still have some issues to work out with
Ida, um, and how they would interface with the new Ric.
Um, are those issues going to be worked out before you ask
us to vote to approve this ordinance.
To be clear. It's not that there's issues to work out. Um,
it is simply that right now, there is no established Ric
into which um, you know, they can continue to work with
right now. What we have done is extend
um, engage in extensive conversations with them on our model
and on what are the other sources of, um, support that they
could provide to this? Also to be clear the examples, we
provided are for item. Mortgages Ida is not the only
source, so this could also be engaged through private
sources of mortgages and debt, as Ida given a clear
indication that they would participate in this program and
partner with this new nonprofit and provide the funds that
we've been talking about.
Looks like it would be leaning on them pretty heavily for
most of these projects, have they made a formal commitment
to honor this and to support this new Mission. So we have
spoken with them extensively about this and about the role
in which they could see themselves playing in this. We feel
very confident that they will support. I'd like you to
answer. The question has Ida said, yes we will. We will
recognize this nonprofit and we will be a funding partner
with them. Have we gotten that commitment from Ida?
Ida. That's a. Yes or no that's not a. We've been in
conversations collaborate. It's a yes or no as of today as
Ida blessed. This ordinance and said we will work with this
new structure and provide this financial support Ida has
blessed this model. Yes.
I'd like to get some statement in the affirmative from Ida.
To confirm, that fact.
I do not believe we will be able to get that from them as
they are a state agency. And so the conversations that we
have engaged in with them, have been asked conversations,
I'm more than happy to speak to the executive director
regarding what they could. Well commissioner I'm not asking
and I'll back off for my request for a letter of support.
But I think the members of this body need to have some
confidence that the leadership at Ida.
Is gonna play with us in the sandbox here.
And um again you know the fact that they're a state agency,
should not prohibit them from providing.
A 2 sentence statement to this body saying we're
comfortable with this structure and this is 1. We think we
can work with on financing deals. Moving forward. Doesn't
have to say, we think this is a great ordinance or we hope
you pass it. I understand I used to work for the state too,
I get that.
But we can get an indication from them, whether or not,
they think this works and whether they're going to use it
understood. Um, and we will speak with Ida and again, to
reiterate. Ida is not the only source of Mortgage Debt that
we can work with. I understand, I understand my concern
here though, is that there are a lot of things we want to
do in this building that require interface with Springfield
or agencies in Springfield.
This particular Administration has not had a great track
record in those lines of communication. And so I just it's
in, everyone's best interest. When we do pass some version
of this model that it's going to be effective. And if a big
big chunk of this dough is going to come through Ido or, or
or entities like it
We should know whether they think this is going to be
something, they're going to want to support financially. Um
my final my final uh question Madam chair. It kind of goes
back to um this 2 to 5%.
R. I c, uh, Equity. Actually, I give the slide up there
right now, um, and I understand the explanation and
generally I get it, you know, in a semi-normal, um,
political and economic environment, which we are absolutely
not in right now. Um, you know, Trump's on his insane, push
to ignite a global trade War.
His tariffs games are insane. Um, and we see the Havoc that
that's creating on on the financial markets, and we're not
done folks. Um, buckle up we're going to be on this roller
coaster ride for a while, there'll be all sorts of
Tariffs, just kidding tariffs, just kidding. This is going
to happen for quite some time I think. And unfortunately,
that's thrown the markets into this crazy chaos.
And so trying to make predictions based on.
Baselines up until this point, I understand. But now we're
in this, this completely unknown environment.
Where every day is a wild card. Um, and my concern is, can
we, can we actually continue to depend on the assumption
that our IC can provide that 2 to 5 percent, um, and and
keep it low there, without it being a major impediment to
the the nonprofit. Um, so how I guess, are you able to
project the 2 to 5% just knowing how volatile these markets
are now? And that's because of the person occupying, the
White House.
I think, purposefully creating Havoc here.
Um, how do we?
Have you accounted for that? Because this is a really weird
time we're in.
Part of the flexibility of the Ric is that those are
policies um, that the Ric will be able to essentially look
at right. We will look at what is happening in the Market
at the moment that we're looking at a deal. This is part of
the reason why we are not underwriting a deal or bringing
forth a deal at this very moment, right? We want the Ric to
be able to go out and get real numbers for the board to do
like the work of actually getting a deal in front of them
and then we can bring back all of these things. We feel
very confident about our numbers. Um, you know, we are
saying that this is the way that um, we expect these to
work. But again, the Ric will have flexibility to adapt to
the market and the things that are happening in the market.
All right? Well uh thank you for answering my questions and
and, and Madam chair obviously. Um, it seems more work has
yet to be done here, um, to, to get this in the right place
for passage. And so, I do hope that we won't be asked to
vote on this today and some more time can be taken to uh,
to make some additional changes. And as you're con
contemplating those, I would strongly encourage you to look
at
The term that you've selected the the 4 year term.
For these, uh, would be, uh, board members. Um, I I think
it's more appropriate for that to run concurrent with
The administration. So, you know, I think a 2 or a 3 year
maybe a 3 year term is even outside my comfort zone. But
Probably live with it. Um, but the idea of 4 years, um,
just this extraordinary we don't have that kind of
relationship with most of the nonprofit entities, we deal
with. So um, that would just be a note to the team to
consider perhaps shaving that down a little bit. Thank you.
Madam chair.
Just a few.
Thank you, Alderman. Reilly um,
Because of some of the uh concerns especially from axie and
of course we want to make sure this build has a strong
support for labor. Um, we will not be taking a but will be
recessing until Wednesday. We're very close but we want to
take all those um, all those concerns seriously. And um,
also in terms of the, um, office on Inspector General, uh,
we have reached out to her office, uh, as chairs. Uh,
hopefully, we can have a briefing for the Inspector General
as well at any concerns that she may have. Um, so just just
to make sure that we are proactively on that and and there
were some other things that were brought up specifically by
Alderman, lie, that I think, um, we should take a look at
well. And if I could, uh, suggest if, if somebody either in
the administration or 1 of your respective offices, could
could forward the current draft to the
IG. She she doesn't have the, the the piece before us now.
So, if so, if that could happen today, she could at least
read it and get up to speed. Yeah, yes, I'll I'll, um, I'll
make sure I have reach out. I sent an email to the
Inspector General to talk about the briefing, we'll make
sure that she has a copy of of that and we'll make sure to
copy all the women down. Very good. Thank you. Thank you.
Uh, thank you Alderman, Vasquez, followed by vice mayor
brunette.
Followed by Alderman, Yancey thank you uh Madam chair and
chairman. Um I appreciate the conversation, I think
Kind of similar to last hearing. I don't think we're
hearing people that are against the idea or the approach or
the goal, I should say, not the approach. Um I I want to
acknowledge and give credit to the administration,
everybody working on it.
As trying their best to continue, how to figure out how to
get this done to listening to the feedback of members of
the body and continue to make adjustments because again I
don't think anyone's trying to impede it or take it but we
all have concerns based on what we're hearing and I think
um kind of to the point.
Uh that uh ottoman, Riley raised up.
if there's, if there's
Positions like the oig that are being mentioned in the
legislation and then they have not been consulted, that's a
problem, right? We want to make sure we're hearing from
those folks as far as their concerns. And so I would
definitely add plus 1 to sending it over to uh General
witzburg. So we can get some kind of response from her how
she feels and what things to improve.
um, and looking at at this, I and here in the questions,
our colleagues have, I'm trying to
30,000 foot view looking down.
It seems that there is a, a lot of things that are being
drafted in here to avoid liability or cons. There's a
concern about liability of the city would take on
Can you all articulate?
What that liability concern is.
Um, Alderman, I thank you for your question. This the, the
reason we are creating a nonprofit is, uh, you know, in
part liability but also in able, you know, to fill a gap in
the market that does not exist and in order to do that.
Well, and in order to maximize the affordability, we need
to be able to move at the speed of the market and be
responsive so just
Says, that the Department of Housing often gives grants, or
underwrites loans to nonprofit developers to build
affordable housing. It will operate in the same way. So
this will be an independent entity that has its own staff
that will operate independently from the city and the
city's interfaces on the funding side. And again on the
governance to ensure that it is following and meeting its
purpose.
Got it. So I think my my I appreciate the answer, I think
the thing that ends up being harder to Define is
independent,
Right. Um,
for example, uh,
How can 1?
defend itself from legal challenge, if
The folks on the board are department heads appointed by
the mayor.
And still be, how can you articulate that as independent?
So the board makeup is 1 of many factors that go into a
test under State case, law of what is independent or not.
Independent, it is 1 factor of many. That is why we have
proposed a board structure that balances, uh, appointed
board members, as well as X official members in order to
Uh, create enough Independence while also protecting the
city's interests in terms of its financing. Okay? And the
reason why the independent thing is it actually is a
conversation. It's come up with labor, right? Because even
It Was Written here, it becomes for lack of a better term,
a little bit murky, right? So if you look at uh Page 6
section, I write staff and financial support. The
department is authorized to provide such operating capital
and internal support to the corporation as maybe required
to accomplish its purposes and Mission subject to the
availability of appropriated funds.
That city workers doing that to support the rig. Am I
correct?
Alderman that Clause is a reference to allow the um
commissioner Deputy Commissioner and certain staff to
launch this organization um and partner with it in terms of
the, the grant agreements. But beyond that there was never
an intention that this independent entity would be staffed
by departmental staff. Just, as the department gives grants
to nonprofit affordable housing developers. We are not in
the practice of Staffing, those nonprofit housing partners
and so it is truly meant to be a uh, on-ramp to launching
and incorporating this non-for-profit. So I think I
appreciate that. I think because there's no clarity as to
an end date or when it's over with
right in its launch, it could be interpreted a number of
ways, and so I think that as well as page, uh, I think it's
Let me see where I'm at page 8, the authority to enter into
agreements with that.
L, uh, to m
Both of those to me appear to be city workers doing City
work.
On behalf of the rig.
And there's not a Clarity or distinction as to when that's
over with. And I think the reason why that
something I highlight is, when you've got our labor partner
saying,
Well, these positions that are going to be supporting the
rig should also get the same kind of benefits, as we're
talking about the same kind of work.
There's not enough Clarity there to to make that
distinction.
We are in conversation to clarify the specificity of when
we say staff support what that means and are open to
continuing that conversation in terms of authority to enter
into agreements. This Clause is about how the Ric is free
to enter into agreements as an independent entity. And, uh,
we are, you know, understand that ambiguity and certainly
not, uh, trying to undercut our labor Partners here. And we
have offered a labor piece agreement Clause to be included
in a substitute ordinance which we are happy to do. Okay. I
I appreciate that. I think, uh, I think, you know, a lot of
members of the body are going to be, uh, waiting to see the
results of what those conversations are, uh, in hopes
that there is an agreement found, I think, I think,
I'm in, I'm in support because again I think it's the right
goal.
But if someone's gonna potentially sue and say, hey, that's
the city doing it to us. I think it's gonna be a hard case
to argue when there's board members that are part of the
city appointed by mayor. And so I think the only question I
had is if that's going to happen anyway and why not just
outright say the city's doing it as opposed to maybe the
nonprofit model but I get
I get that you're trying to have some level of separation
and some level of Independence. It just seems hard to
accomplish.
Thank you. And
Just to build off of that. Again, the department, does not
currently develop own or operate any residential building
and so, this is an entirely new function that the city is
not prepared to take on. And, uh, in no way, does this
ordinance violate the collective bargaining agreement,
which does have Clauses around the Contracting out and the
parameters by which the Department of Housing must follow
that. Similarly, there is a privatization code in our
Municipal Code that this does not violate.
okay, if you could, um
Like send us through the chair. I think. Another thing to
be helpful for us is like again, looking at other City
models and figuring out the questions. They were asking how
how they address those, because I'm sure we're not. The
first people to have those concerns, that would be helpful
to us as well. Um, I will again, commend you for the work
being done. Also, for the partnership and hearing out some
of the, you know, concerns that myself, automated Vegas,
other women had, and others had brought up. Uh, we are
trying to find a way to get to maximum support on this and
so do appreciate you going on this.
Ever increasing journey to get there. Uh and also want to
thank um the lead, sponsor alderwoman will not happen with
for all her work, so thank you and thank you very much,
everyone chairman thank you Alderman Vasquez, vice mayor
brunette, it's not here.
Well, he's walking to his seat.
Alderman. Lee you did you have 1 last question?
I actually have 2 and they hopefully can be quick. Um, just
as we were listening to other people. So the first 1 is for
the, um,
For the revolving Loan Fund. Has there been any thought to
how many projects you would fund at any given time? Or is
there a floor? And I'm sorry if this question was asked
already but um, you know, there, there were examples in
the, um, through the chair request of projects that could
potentially be funded. Um, we gave some examples and you
know, at at 22 million a clip, you know you're going to run
out of
Projects, pretty fast. Uh, is there a sense of like, how
much money we want to sort of to maintain in a reserve at
any 1 time?
Yes, absolutely. So the E, excuse me. The number of deals
may be less important than the amount of funds because that
we could be, you know, smaller projects. We may feel feel
comfortable doing more deals. Uh, we have estimated that,
what we our, our goal would be,
To.
Begin to roll out projects in a way in which the first
projects are completing their stabilization cycle and
getting repaid. Um, at the point at which we have sort of
dipped to the level, at which we would be comfortable
below, which we would not feel comfortable going. And so
our thought, and again roughly speaking. But based on the
the projects project size that we are assuming we are
thinking about 1 to 3 projects per year, for the first 5
years, uh, would leave sufficient reserves God forbid.
Anything were to occur before those first projects began to
stabilize and pay back. Thank you for that answer. Um, and
that kind of Dubbs off the question. I was asking earlier
just about the, the average time to stabilization because
that to me would indicate kind of what the what the
investment clip looks like. Um and then my last question
and it was just something that um I think uh, Alderman
Vasquez, just sort of raised with the ex officio board
members um, does. And this is
A question I think for legal does ex exio board service get
treated like outside work because it's an independent
organization. I'm just wondering if we're creating a
conflict for the Commissioners that are assigned to serve
on the board.
Since the ordinance is authorizing and not simply
authorizing but mandating.
That.
uh, the ex official members are
by virtue of their office members of this not profit, they
would not be considered to be in conflict.
That's what I need your job. That's what exio is meaning,
as part of your job Duty as a city official, you now have
this additional responsibility. Okay, great. That's all I
needed to know. Thank you. That's all I've got. Thank you
Alderman, Lane, Vice chair Bernette. Thank you. Bye
Alderman. Why thank you, madam chairman. Uh, first of all,
I want to commend everyone who worked on this project. I
think is very innovative.
Very considerate and something that's going to keep the
city moving uh in these hard times and these unpredictable
times as far as economically especially from the federal
government. So so I want to commend everyone that's been
involved. Also want to commend you all for listening to all
of the questions and the concerns at the last meeting and
immediately coming up with answers and changing some of
your policy to uh be in line with the ultimate. So thank
you.
Thank you very much for all of that. Um,
I know that there were conversations with labor,
Right? You know, we all hear hearing labor right now. Um,
can you name what, what was there any offers and can you
name? What has been offered? Can you tell us what has been
offered?
Uh, speaking generally, uh, yes, we have heard from our
labor Partners. Um, we have, um, we are willing to include
a labor, peace agreement. Um, and part of the conversation
has just been clear, clarifications around things like the
RAC being an independent entity um and separate from the
Department of Housing and also that the work that the Ric
staff will do, which will only be, we're estimating, a Max
of 11 people over the course of 5 years, that that is all
work. That is not currently done within the Department of
Housing.
So when you say there's a labor there will be a labor
agreement. What does that mean? When you say that
Thank you, vice mayor. Um, there is precedent to including
labor, peace agreements, in city ordinances. Uh, This was
done in the O'Hare, concession agreements through the
certified service provider program. And so we could look
uh, language similar to that ordinance. Uh, here. So that
to ensure that the Ric staff uh, would be, um, free and
welcome,
to join a union of their choosing so that mean that they
still had to organize in order for them to be Union or
yeah.
uh, workers have to
In whether it's through an election or car check, uh, some
form, but we could affirm that the Ric would remain neutral
and have Labor peace and not Union bust as they say.
All right, fantastic. Thank you. Thank you, vice mayor. Uh,
all the many
Uh, I like to Echo my colleagues and, uh, come in to
everybody for working on this, especially my uh,
co-conspirator uh, and the Fab freshman class. Thank you,
Lenny. A couple questions. Um, and I hope I haven't missed
this part of the presentation. Can this be used for
mixed-use developments?
The nature of this is mixed use development. Yes, it is
market rate and affordable housing know. I mean retail and
housing. Oh um
yes.
Yeah, the short answer is. Yes. The long answer is I would
deal by deal basis, but yes, we could look at that, okay?
And can the developer be a CDC?
Yes, so we don't have any restrictions on who could it be
the co-developer with us on this, okay, um, thinking about
communities like Southshore, where, um, there's definitely
need for this because of the way that many of the
think over 60% or rent, burden in the 60649 zip code, but
code, but the challenge is that market rate and affordable
don't have a significant Gap in between and so could
somebody kind of give me a short answer on how this could
work, or
Excuse me, well maybe helpful because if there was data for
for market rate and affordable for a 2-bedroom apartment, I
think, right now it's somewhere around, 1800 2,000, um, for
market rate, which again affordable is very, very close to
that. So, how could this work in a situation like that?
income mix of of any building or any development proposed
through the RC would, of course, be geographically specific
and would take into account, uh, Market rents in that
geography. And the underwriting would be built around those
Market rents 1 particular. Way of addressing what you're
talking about is the inclusion of, um, a project-based
voucher or similar subsidy in order to create, uh, units
that are more deeply affordable, uh, than what the market
would bear in that Community. Okay? So, to the point around
the project-based vouchers, you know, there's been some
Conversation around how this looks a lot like cha without
the federal component of it. Can you again kind of quickly
explain how this isn't that?
So,
The.
Last Federal component is that all of the funds for this
are coming from the housing and economic development Bond,
and the allocation that was set aside for that. So normally
in a traditional affordable, housing deal you have
low-income housing tax credits, which are federal, you have
cdbg, which is federal, you have home funds, which are all
federal. And so, this does not include any sort of federal
sources when we would then go to Cha, we would be talking
about vouchers. Um, so vouchers are something, obviously
that, in many of you have seen, right? Where folks in your
communities, um, are often given vouchers to go find an
apartment in the private market. And this would be
essentially doing, um, something similar we would work with
cha to say, we want to make sure that we're getting x
amount of units, um, in this building,
Okay, I'm done. Thank you, cheer, thank you Alderman,
Nancy. Um, we've come to the end of the hearing but I
wanted to give Alderman manaha hoppenworth who is, um,
1 of the catalysts for this,
Landmark ordinance, uh to say a few words in closing.
Thank you, chairs Dell and sigil Lopez and to Commissioner
of Housing and mayor's office.
And to everyone in the Box including law.
I I commend um especially the Grassroots who have been here
working on this tirelessly for many years and also labor
who is always been at the table. You know, 1 of the reasons
why this is important to me is because I represent a ward
that is
Very similar to Alder Fuentes in that, um, you know, we're
losing population. Our vacancy is low and the rents have
spiked quite a bit in comparison to lots of different
neighborhoods.
And I love my neighborhood, Edgewater and parts of Uptown.
I was able to raise my kids here.
um, although my margins were small as a small business
owner,
um, but it's, it's becoming, it's becoming just unaffordable
and we're doing all the things that we can including
rezoning. And, uh, and right sizing parts of the war that
that can can, um, withstand more density. Um, but you know,
know, and also I want to say that this tool, um, while it's
good for, uh, an area like mine, which is rich in transit.
Where we want to build more affordable, housing, around the
Investments that we have put into our public transit system
system, is not for every single neighborhood. So, um, I
want to again commend my colleagues because at this time,
in, in our nation, when people are questioning the
authority of our institutions, this is when we need to come
together and actually question how we do things in the city
of Chicago, especially when it comes to, um, how
We are creating better quality of life for everybody.
People who want to come here because of environmental
migration or because they don't feel safe in their cities
or states because of who they are and who they love. Uh, we
are going to be the destination for many. So, how are we
going to prepare for that? And 1 way we're going to do that
is by attracting the kind of developers that we want to
work with um, with the creation.
of this, uh,
Wreck an independent nonprofit that can unlock a different
tool that we don't have right now. And so, this tool is
important, because again, as my colleague, um, um,
Alderman, Reilly was saying we don't know what the federal
government is going to do right now. And so what is it that
we can do? That? Will decrease our Reliance on those
Federal subsidies. This is 1 way to do it and we have
models that we have been looking at and I appreciate a
Montgomery County for coming on the first day and Atlanta
for also coming to give us some experience, um, that they
have they have gone through, um, because it it is
important. While this is new, this is not new in the
nation, this is not new, um, in in in in the globe, in
the globe. You know, there are other um social housing
models that we are looking at that are and have been
successful. Um and we should not be undeterred by
Things that are big or new or hard. And that's why I
welcome these conversations. This is where we're doing the
work right now. And that's the reason why it's important
that we had both finance and housing together as we're
moving through these conversations. Um, this is money that
we have already set aside. We we passed this last year, um,
in our housing and economic Bond. And so, um, it's it's
absolutely important how we
Do It. Um and and the collaboration has been there. I
believe that we are going to get there. It's not going to
happen today. No votes will happen today, but it is going
happen and I believe that if we continue on these
conversations as we have been doing that, we will be
successful in Chicago will lead on how we are going to
contribute positively and to fix our housing crisis that we
are in today. So thank you all. I appreciate you being
here. Thank you.
Chairman.
Thank you. Chairwoman Dow, and commissioner Casa, and all
your team. Um, thank you and all the members of both
committees, uh, for all your feedback and your
collaboration as. Um, all the women that happened with
mentioned, um, this is an important effort that has been in
the work for a long time and that we are really, really
close. Um, we want to make sure that we do this um with all
the feedback of the committee members and we do this as a
win for the city of Chicago. Um, knowing that we are so
close. We're going to use the time between now and when the
meeting um, of the housing real estate and and finance
committee meet on Wednesday, to finalize the details with a
and other feedback that has been provided by the committee
members. So the joint committee on housing and real estate
and the committee on finance will recess until Wednesday
April 16th of 2025 at 9:30 a.m. at this very same place.
So, without further Ado, the meeting is
On recess until, uh, Wednesday at 9:30 a.m. Thank you so
much everybody for all your collaboration. Thank you.