Affordable Housing Audits

Transcription

1 Affordable Housing Audits City of Seattle Incentive Zoning for Affordable Housing Virginia Garcia, Seattle Office of City Auditor ALGA Regional Conference, Portland, OR October 3, 2018

2 Audits can be found at: 2

3 Presentation Outline Why Audit Affordable Housing Programs? Background on Incentive Zoning for Affordable Housing Audit Objectives Audit Challenges Methodology Findings and Recommendations 3

4 Why Audit Affordable Housing Programs? 1. Programs are relatively new 2. Universe narrow fewer than 100 properties 3. Lots of documentation 4. Lots of rules and requirements 5. Minimal resources for oversight and enforcement 6. Significant impact 4

5 Incentive Zoning for Affordable Housing Background Goal: Provide incentive to create or contribute to affordable housing in exchange for additional development capacity Contribution can be a monetary contribution for affordable housing or affordable housing units (on or off-site) City must receive payment prior to permit issuance Contributions are adjusted annually based on CPI Funds are leveraged with other City, federal, private and non-profit developer funding 5

6 Audit Objectives Incentive Zoning for Affordable Housing 1. Identify and map IZ for Affordable Housing Projects 2. Determine if affordable housing contributions were accurately calculated 3. Determine when (and if) affordable housing contributions and commitments were secured 6

7 Audit Challenges Program Ordinances Changed Over Time - different rules applied depending on when the application was submitted Program rules differed based on location, type of structure Conflicting sources of information Multiple departments Departments share interests with developers Unrealistic audit expectations 7

8 Methodology Applied to Both Audits Reviewed City and State laws, Land Use Code, program rules and regulations Conducted research and reviewed audits of similar programs in other jurisdictions Accessed permit information through City s public interface permitting system to determine if developers abided by timelines Interviewed stakeholders and officials Analyzed large volumes of data, much of which was not in automated format, so we created Excel spreadsheets 8

9 Methodology Incentive Zoning Reviewed documentation and records for universe of projects Compared Office of Housing (OH) project information against Seattle Department of Construction and Inspections (SDCI) project data Verified common data elements for each property with Master Use Permits, building plans, and declaration/covenant agreements Consulted with City experts in cash handling; ethics and conflicts of interest; and the City s Land Use Code Used the Land Use Code to verify correct rates were applied to projects to get accurate affordable housing contributions. Checked the mathematical accuracy of the calculations Reviewed the building permit issue date against the payment date Verified payments in City s accounts receivable system 9

10 IZ Objectives and Findings 1. Identify and map IZ for Affordable Housing Projects Two projects that received over 200,000 square feet in extra floor area, but had not provided affordable housing contributions (as of April 2016) valued at nearly $5 million One project paid the City $3.7 million in November 2016 (including interest) and the other made a commitment in May 2016, to provide 5 on-site affordable housing units 10

11 Incentive Zoning for Affordable Housing January 2006 January Payment Projects 22 On-Site Performance Projects 2 Off-Site Performance Projects 2 Projects with no affordable housing contribution as of April 2016 Total Projects = 65 11

12 588 Bell Street Insignia Towers Paid $3.7 million for Affordable Housing on November 4,

13 IZ Objectives and Findings 2. Determine if affordable housing contributions were accurately calculated Discrepancies (between building plans, recorded documents and tracking system) Calculation errors Missing or incorrect data For many projects, we were unable to verify the accuracy between the extra floor areas gained (bonus floor area) and the affordable housing contributions provided 13

14 Examples of Payment Project Discrepancies Project Address Discrepancy related to Payment Projects Building Permit Date 815 Pine St Previously Deferred 801 5th Ave 1823 Minor Ave Currently Deferred 501 Fairview Ave. N City confirmation letter showed an extra floor area of 105,923. The permitting system showed 10,648; no declaration and building plan provided. The declaration showed an extra floor area of 254,346; the building plan showed 261,384. The declaration and permitting system showed an the extra floor area of 106,366; building plan showed 108,430. Building plan and declaration showed 71,907 extra floor area; permitting system showed 72,034. 8/3/2012 COO: 2/6/ /22/2013 2/2/ /31/ Fairview Ave N (North Tower) 300 Boren Ave N (South Tower) The building plan and declaration showed an extra floor area of 147,122; permitting system showed 149, /13/ Seneca St Calculation error in determining payment amount. 1/21/ Seneca St Previously Deferred Calculation error in determining deferred payment amount. 5/30/2013 COO: 3/24/

15 IZ Objectives and Findings 3. Determine when (and if) affordable housing contributions and commitments were secured We verified all affordable housing payments of projects reported to us by SDCI and OH 2 additional projects with bonuses had not made contributions 10 project payments should have been secured earlier in the process 15

16 IZ Findings and Recommendations 1. Program Management 2. Internal Controls 3. Oversight, Reporting, and Transparency 4. Customer Service 5. Program Fees 16

17 IZ Program Management Findings Lacks program management structure Interdepartmental collaboration could be improved; SDCI and the Office of Housing maintained separate and conflicting lists and made no efforts at reconciling them Recommendations Develop a program management framework and report a plan for implementation to the City Council Both departments should use the same system to track incentive zoning properties and regularly check for data inaccuracies 17

18 IZ Internal Controls Findings No system to ensure receipt of payment or commitment before building permit is issued lack of system raised equity issue Inconsistent documentation requirements and practices related to declarations, incentive zoning and affordable housing calculations, and vesting dates Check handling controls and controls to ensure no staff conflict of interests lacking 18

19 IZ Internal Controls Recommendations Institute a control to ensure payments are made or covenants executed before issuing applicable permits Ensure proper documentation related to agreements (declarations and covenants), bonus calculations, and vesting dates Follow City policies related to check handling, privacy, and preventing staff financial conflicts of interest 19

20 IZ Oversight, Reporting, and Transparency Findings Insufficient oversight in the permit application review process to determine the bonus calculation and housing contribution Insufficient reporting; transparency lacking; minimal program and project participation information available to the stakeholders and public Method of determining units produced with payments funds has not been formally agreed upon Recommendations Provide additional oversight to all incentive zoning projects Increase frequently of reporting and post reports on the City s website City stakeholders should examine methods for determining how many units are created with incentive zoning payments and formally agree on the methodology to be used long term 20

21 IZ Customer Service Findings Insufficient resources for project applicants SDCI does not make payment amounts and fees publicly available Recommendations Provide developers with online information and resources, including basic program information, application instructions, a customer service contact, and an affordable housing contribution plan template Publish the fee schedule for payment and other fees related to incentive zoning for affordable housing projects on SDCI s website 21

22 IZ Program Fees Findings Using CPI to annually increase the affordable housing payment fees and to assess interest on deferred payment projects does not accurately reflect changes in housing costs Recommendation Use a more relevant economic index, such as local and regional construction or building costs, to adjust affordable housing payments and to determine deferred payment fees 22

23 Questions?