CHH Board Meeting. CHH Board Meeting June Page 1

Transcription

1 CHH Board Meeting June 2017 CHH Board Meeting June 2017 Page 1

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3 SECTION 1: Meeting Keys SECTION 1 Page 3

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5 June 2017 Capitol Hill Housing Board Meeting Keys and Addenda Reminder: Dinner begins at 5:45. The meeting starts promptly at 6 PM. As noted below, we will enter into executive session twice pursuant to RCW (1)(b) [executive sessions are allowed] To consider the selection of a site or the acquisition of real estate by lease or purchase when public knowledge regarding such consideration would cause a likelihood of increased price. Consent Agenda, Disclosures and Recusals: The consent agenda will be moved for adoption. Please note that since the CPER Committee did not meet this month, their report is not included. Board members will review items on the agenda and make any necessary disclosures and recusals. Presentation and Discussion Rebranding update: Chris will share the initial feedback from stakeholder interviews. He will outline the process and timeline for making the decision whether to rebrand. Reorganization and committee structure: This spring Chris and the Executive Team have been reviewing CHH s internal reporting structure in concert with the work on board committee structure. Following up on previous conversations about board committee structure and meeting frequency, Chris will present a revised framework and schedule for board committees for approval by the Board. Chris will also share phase one of the internal restructuring. We will also be asking for a motion from the floor to establish the new Programs and Board Development Committee, which will be a formal committee of the CHH PDA Board, but will include members from the Foundation Board as well. As previously discussed, this committee will work on issues pertaining to CHH programs (work previously held by the CPER Committee); identifying and recruiting prospective board members; providing professional development opportunities in relevant areas for board members; and arranging social events and activities for board members. Finance and Asset Management Financial summary: The FAM committee presents its regular report and dashboard through April Audit presentation: The Audit committee will present the results of the 2016 CHH audit. Executive Committee and Board Board development: We have submitted the revised letter to the Mayor s Office asking for his consideration of Chasten Fulbright and Shalimar Gonzales as nominees to our Board. Partnership discussion: We will enter executive session to discuss the current partnership possibility. CHH Foundation Resolution : Capital Campaign: The Board will vote on whether to move forward with the proposed Capital Campaign in support of the development work in three communities: Central District, Capitol Hill and White Center. As currently envisioned this campaign will support the creation of three or more projects including 300 affordable units, affordable commercial space, green features and a community facility housing local nonprofits. The Foundation vote on a companion measure at its next meeting occurring the day of the joint board retreat. Page 5

6 Property Presentations 12 th Ave Arts, Centennial, Cal Anderson: Staff will be making a presentation about these apartment buildings. Please note that there are no action plans available for 12 th Ave Arts or Cal Anderson (they were acquired/built after action plans were created for all buildings). Real Estate Development Pipeline review: Jeremy will update the Board on the current schedule for LBB. Development pipeline: We will enter executive session to discuss development opportunities in the pipeline. Board Packet Sections 1. Meeting Keys, p Board Agenda, p Motion Overview: Establishing the New Programs & Upcoming Meetings and Events Please let Chris or Joel know if you d like additional information on any event or meeting. Board Development Committee, p April 2017 Finance Report and Statements and Asset June 12 Board Meeting Management Report, p June 15 Board Retreat (12-5 pm) CHH Audit Report, p June 19 LBB Groundbreaking 6. Resolution : Capital Campaign, p June 26 Executive Committee 7. Property Action Plans, p July 10 Board Meeting 8. Consent Agenda and Attachments, p a. Contracts and Expenditures, p b. Memo re: Non-Board Committee Members, p July 31 Executive Committee c. Revised & Final Board Development Letter to Mayor, p d. May 2017 Board Minutes, p e. Tenant Communications Log, p. 97 f. Property Management Report and Minutes, p g. Property Management Dashboard, p. 103 h. Memo from the CHH Foundation, p i. Property Development Report and Minutes, p. 109 j. Executive Committee Report and Minutes, p Page 6

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9 CAPITOL HILL HOUSING BOARD June 12, :00 PM 7:30 PM Regular Meeting 12 th Ave Arts Pike-Pine Room th Avenue, Seattle AGENDA 6:00 Call to Order (Hillenbrand) 1. Approve consent agenda Sec. 8, Page Disclosures and recusals 6:05 Public Comment (Not to exceed 5 minutes per individual or 15 for combined speakers) 6:10 Presentation and Discussion 1. Rebranding update (Persons) Verbal 2. Reorganization and committee structure (Persons) Presentation & Handout a. Motion from the floor: New Programs & Board Development Sec. 3, Page 13 Committee 6:30 Finance and Asset Management 1. Finance Report (Porter, Gibson) a. Financial summary, cash management report: April 2017 Sec. 4, Page Audit presentation (Gibson) Sec. 5, Page 25 6:40 Executive Committee and Board 1. Board development (Persons, Hillenbrand) Verbal 2. Partnerships (Persons) in executive session Verbal 6:50 CHH Foundation 1. Resolution : Capital Campaign (Okrent) Sec. 6, Page 77 7:00 Property Presentations th Avenue Arts, Centennial, Cal Anderson (Watson) Sec. 7, Page 81 7:10 Real Estate Development 1. Pipeline review (Wilkening) Verbal 2. Development pipeline (Wilkening) in executive session Verbal 7:30 Adjourn (Hillenbrand) Page 9

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11 SECTION 3: Motion Overview: Establishing the New Programs & Board Development Committee SECTION 3 Page 11

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13 CHH Board Action June 2017 Overview: Establish New Programs & Board Development Committee Purpose: This motion would designate the new Programs and Board Development Committee as a formal committee of the Capitol Hill Housing PDA Board of Directors. Type of Resolution/Motion: o Is this a formal resolution? Yes No o Are we requesting a motion from the floor? Yes No o Has this resolution been presented to a Board Committee?: Yes No If so, which committee or committees?: Executive Committee; and concept has been presented to full Board Charter or Rules and Regulations Modification: o Does this Resolution change the Charter or Rules and Regulations? Yes No o If yes, you need to give notice to the Board 15 days prior to the proposed change. o Changes to the Charter or Rules and Regulations must use the strike out format so change is clear to reader. General Description and Purpose: As part of the reorganization effort at the staff and Board levels, it has been proposed that the PDA Board designate a new committee to oversee the work of programs and board development. The Programs and Board Development Committee will take on the work overseeing programs previously held by the Community Programs and External Relations Committee. It will additionally hold the work of board development in the areas of: identification and recruitment of prospective board members; arrangement of professional development opportunities for board members; and planning of social events and activities for board members. It will be comprised of no fewer than three (3) PDA Board members, who will serve as voting members of the committee, and no fewer than two (2) Foundation Board members, who will serve as non-voting members of the committee. Organizational requirements of motion: The Chairs of the CHH PDA Board and Foundation Board are each authorized and directed to identify the initial members for the committee within her own Board of Directors, respectively, pursuant to the CHH PDA Board Charter and Rules & Regulations, and the CHH Foundation Articles of Incorporation and Bylaws, and are directed to convene the inaugural meeting as soon as practical. The Committee shall adopt a charter pursuant to the goals and exigencies established above. Financial cost of the motion: There is no direct cost to this motion, although the new committee will require additional staff and Board member time. Page 13

14 Pros: This committee will provide capacity for achieving goals around board composition and diversity; for providing board members with useful skills and resources for governing; and for strengthening the bonds between board members, ultimately increasing the boards efficacy. Including members from both boards provides an opportunity for greater strategic alignment between the two boards, as well as an increased sense of shared purpose that will hopefully translate into mutual support and increased energy around the mission. Cons: None forseeable. Further Board Action or Reporting: o Is further action required from the Board or a Board Committee? Yes No o Is further reporting required to the Board or a Board Committee? Yes No If yes, please describe: Like all other Board Committees, the new Programs & Board Development Committee will be required to submit monthly reports to the PDA Board. (This committee will additionally submit its report to the Foundation Board.) Furthermore, the CEO and Executive Committee will regularly review Board Committee performance and organization to ensure that they are functioning effectively. Page 14

15 SECTION 4: Finance & Asset Management Report and April 2017 Statements SECTION 4 Page 15

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17 JUNE 2017 FINANCE & ASSET MANAGEMENT BOARD REPORT AND MINUTES Finance & Asset Management Committee Members: Drew Porter, Frank Alvarado, Robert Schwartz, Winifred Mixon Staff Liaisons to the Board: Brad Lange, Jill Fleming, Greg Gibson (BOLD indicates those members in attendance) Date, time and location of meeting: TUESDAY June 6, pm Malden room Minutes: The committee discussed the change in schedule for FAMC meetings. The committee will meet once per month during Jan, Mar, May, July, Sept, Nov and Dec. The committee also discussed rescheduling the July meeting to June 30 th, 2017 as it currently falls on the 4 th of July. The committee reviewed the monthly financial reports. The rolling twelve-month cash forecast was reviewed. No change from prior month Management anticipates that the Year 15 transaction for the Oleta Apartments Limited Partnership, originally expected to occur on December 31, 2016, will occur in 2017 instead. The transaction continues to be delayed pending resolution of the state excise tax issue. Loan for the 412, Central City Housing building renovations closed in May of Construction anticipated to start immediately. The Agency discussed the newly executed contract with Imagine Housing. The contract is for CHHIP to provide asset management consulting services to Imagine Housing for a period of one year. Comments and Analysis re: April 30, 2017 CHH Blended Balance Sheet Unrestricted Cash position decreased over the prior month by $200,000. We made a $40K earnest payment on the Lake City property. Increased payments out of the CHHIP account for affiliate balances, working to reconcile and settle the due from affiliate balances back to CHHIP. Due from Affiliates has increased $260,000 from prior month. We continue to work on promptly processing payments from the affiliates. Most of the current month increase relates to a balance sheet gross up for entities in pre-development that are currently reflected in blended. There was a corresponding increase in due-to affiliates (reflected in the accounts payable and accrued liabilities line item). Until these partnerships close and are reclassified to be shown as discretely presented component units, the due/to and due/from balances both roll up into blended as part of our monthly reporting (note the amounts are eliminated in the audited financial statement balances reflected). The current month increases relate to B-North and LBB predevelopment costs see buildings discussion below. Other Assets have been reclassified against Notes Payable due to a change in accounting standards (reclassification completed in prior month). Page 17

18 Buildings, Improvements and Equipment has increased $240,000 over prior month. Increase was due to B-North design costs and the capitalization of additional Liberty Bank Building predevelopment expenses. Notes payable increased due to draws for the Liberty Bank Building and B-North project predevelopment expenses. Net Position reflects a GAAP presentation and has decreased by $512,000 year to date. Depreciation expense, which is not included in our modified cash operating statement, is $734,000. Comments and Analysis: Year to date April 30, 2017 Operating Statement Tenant Revenue is under budget as the rent increases for Mary Ruth Manor and Hazel Plaza are not reflected in the April statements as they were received in the last week. Based on the final HUD rent schedules received, the following differences from budgeted totals were noted: Mary Ruth Manor Decrease to budgeted revenue of $59,076. Revised budgeted income of $34,268 Hazel Plaza Decrease to budgeted revenue of $27,702. Revised budgeted income of $71,931 Vacancy loss for the portfolio is 2.4% for the first four months of The monthly portfolio vacancy rate is 2.0%. Vacancy loss for 2016 was 2.8%. Vacancy loss for 2015 and 2014 was 2.8% and 3.8% respectively. Payroll, Taxes and Benefits continues to be under budget due to several open positions during the first four months of the year. This positive variance is unlikely to last due to salary competition currently being experienced in the market place. Repair and Maintenance is under budget which is not unusual at this time of year. Certain work is weather dependent. Low vacancy also means lower turnover costs. Other variances in expenses for the first four months of 2017 have been reviewed and are primarily timing differences. Page 18

19 Capitol Hill Housing Blended Balance Sheet unaudited unaudited unaudited* audited** Assets Unrestricted Cash 1,666,954 1,469,627 1,549,568 1,402,774 Accounts Receivable 569, , , ,450 Prepaids & Other Current Assets 345, , , ,196 Contributions/Grants Receivable 13,000 13,000 71,138 44,520 Due from Affiliates 5,841,796 6,104,667 5,591,990 4,975,743 Board Designated Operating Reserve 1,000,000 1,000,000 1,000,000 1,000,000 Board Designated Opportunity Reserve 654, , , ,976 Restricted Cash 5,709,710 5,761,245 5,605,330 4,558,940 Notes Receivable from Affiliates 15,411,829 15,411,829 15,411,829 16,381,921 Land 14,643,757 14,643,757 14,643,757 12,634,826 Buildings, Improvements & Equipment 73,496,071 73,738,081 72,923,292 60,719,596 Accumulated Depreciation (37,643,442) (37,826,798) (37,093,003) (31,527,724) Lease Receivable 870, , , ,402 Investment in LPs/LLCs 1,534,145 1,534,145 1,534, ,472 Other Assets (4,509) (1,506) 0 187,682 Total Assets 84,108,672 84,252,078 83,531,705 73,075,774 Liabilities Notes Payable 53,131,777 53,315,448 52,278,219 43,777,452 Accrued Interest Payable 4,415,730 4,415,730 4,406,834 3,914,328 Accounts Payable & Accrued Liabilities 5,085,510 5,279,669 4,859,505 4,011,248 Tenant Security Deposit Liability 563, , , ,478 Total Liabilities 63,196,289 63,572,540 62,107,036 52,204,506 Net Position 20,912,383 20,679,538 21,424,669 20,871,268 Total Liabilities and Net Assets 84,108,672 84,252,078 83,531,705 73,075,774 *El Nor, Harrison and Union James are included in 2016 and Updated for closing entries made since previous report. **internal presentation, certain amounts netted for audit presentation 5/30/2017 4:17 PM CHH balance sheet for xlsx Page 19

20 (In Whole Numbers) Capitol Hill Housing Improvement Program Statement of Revenues and Expenditures - Unposted Transactions Included In Report From 1/1/2017 Through 4/30/2017 YTD Budget Current Year Actual YTD Budget - Original Variance - Original Variance Pct Total Budget - Original Budget Remaining Revenue Tenant Revenue 3,542,723 3,701,517 (158,794) -4.29% 11,014,194 7,471,471 Other Operating Revenue Property Management Fees 490, ,705 (7,952) -1.59% 1,496,116 1,005,363 Partnership Management Fees 110, ,567 2, % 271, ,367 Development Fees 401, ,000 41, % 913, ,209 Acctg, Leasing & Compliance Fees 273, ,993 (14,669) -5.09% 863, ,655 Other Operating Revenue 6,419 5,367 1, % 16,100 9,681 Total Other Operating Revenue 1,282,201 1,260,632 21, % 3,561,476 2,279,275 Other Revenue Grants & Donations 126, ,000 (6,253) -4.70% 868, ,753 Interest Income 43,981 40,099 3, % 162, ,642 Other Income 23,728 10,580 13, % 31,741 8,013 Total Other Revenue 194, ,679 10, % 1,062, ,408 Total Revenue 5,019,380 5,145,828 (126,448) -2.46% 15,638,534 10,619,154 Expenses Operating Expenses Accounting, Audit & Legal 179, ,622 (21,336) % 487, ,063 Administrative Expenses 122, ,375 (21,346) % 416, ,948 Bad Debt 4,089 6,361 (2,272) % 13,082 8,993 Board Expense 408 2,050 (1,642) % 8,350 7,942 CHH Occupancy Expense 101,317 96,215 5, % 305, ,128 Compliance, Taxes & License 91,538 89,066 2, % 191, ,123 Consulting 16,134 24,033 (7,899) % 75,300 59,166 Debt Service 822, ,796 (21,685) -2.57% 2,560,872 1,738,761 Insurance 104,893 87,846 17, % 263, ,644 Leasing/Compliance Expense 92,905 92, % 278, ,811 Miscellaneous Financial Expense 3, ,671 #DIV/0! 0 (3,671) Other Operating Expense 1, , % 2, Payroll, Taxes and Benefits 1,862,982 1,958,962 (95,980) -4.90% 6,026,342 4,163,360 Partnership Mgmt Fee Expense 65,561 65, % 196, ,122 Property Mgmt Fee Expense 340, , % 1,020, ,027 Repair and Maintenance 458, ,428 (64,252) % 1,609,185 1,151,009 Technology 41,834 38,705 3, % 115,015 73,181 Training, Dues, Subscriptions 51,772 37,210 14, % 126,145 74,373 Utilities 443, ,810 (4,699) -1.05% 1,344, ,975 Total Operating Expenses 4,803,809 4,997,764 (193,955) -3.88% 15,041,091 10,237,282 Total Expenses 4,803,809 4,997,764 (193,955) -3.88% 15,041,091 10,237,282 Operating Surplus (Deficit) B4 Reserves 215, ,064 67, % 597, ,873 Reserve Contributions Reserve Contributions Replacement Reserve (164,255) (164,323) % (487,600) (323,345) Operating Reserve (9,778) (9,778) % (28,084) (18,306) Other Reserve (3,475) (1,533) (1,942) % (4,600) (1,125) Total Reserve Contributions (177,508) (175,634) (1,874) 1.07% (520,284) (342,776) Total Reserve Contributions (177,508) (175,634) (1,874) 1.07% (520,284) (342,776) 0 Operating Surplus (Deficit) 38,063 (27,570) 65, % 77,159 39,097 Page 20 Date: 5/30/2017, 4:18 PM Page: 1

21 CHH CASH IN BANK FOR THE MONTH ENDING: APR 2017 Bank CHH Blended Component Unit Type Balance Chase Larned Reserves 68,612 Chase 412 Reserves 91,456 Total Chase 160,067 KeyBank Capitol Hill Housing Security Deposit 287,175 KeyBank Capitol Hill Housing - SoundFamilies Restricted Savings 41,634 KeyBank Hazel Plaza Reserves 151,553 KeyBank Hazel Plaza Security Deposit 3,494 KeyBank Larned Security Deposit 21,993 KeyBank Byron Wetmore Reserves 41,995 KeyBank Byron Wetmore Security Deposit 9,005 Key Bank 412 Security Deposit 3,770 KeyBank Holden Vista Reserves 61,358 KeyBank Holden Vista Security Deposit 3,369 KeyBank Mary Ruth Manor Reserves 230,968 KeyBank Mary Ruth Manor Security Deposit 5,790 KeyBank EJSH Security Deposit 11,772 KeyBank Fleming Apts LP Security Deposit 22,699 KeyBank Gilman Court LP Reserves 100,213 KeyBank Gilman Court LP Security Deposit 19,754 KeyBank Villa Apts LP Reserves 107,024 KeyBank Villa Apts LP Security Deposit 43,352 KeyBank El Nor LP Security Deposit 8,383 KeyBank El Nor LP Reserve 553,308 KeyBank El Nor LP Capital Reserves 183,044 KeyBank 18th Ave Apartments Security Deposit 1,915 KeyBank Harrison Security Deposit 20,071 KeyBank Ponderosa Reserves 403,900 KeyBank Ponderosa Security Deposit 3,722 KeyBank 12th Avenue Arts Master Tenant LLC Security Deposit 67,588 KeyBank 12th Avenue Arts Master Tenant LLC Reserves 1,949 Key Bank Union James Security Deposit 4,245 Key Bank Union James Reserves 42,984 Total KeyBank 2,458,028 Banner Berneva Reserves 8,505 Banner Seneca Reserves 225,290 Banner Seneca Security Deposit 21,058 Total Banner 254,853 LGIP Capitol Hill Housing Reserves 2,425,453 Total LGIP 2,425,453 Oppenheimer EJSH Escrow 4,800 Oppenheimer EJSH Reserves 114,905 Total Oppenheimer 119,705 Chase Harrison Reserves 144,403 Total Chase 144,403 US Bank 18th Ave Apartments Reserves 134,657 Total USBank 134,657 BofA Fleming Apts LP Reserves 64,079 Total BofA 64,079 Total Restricted - CHH Blended Components 5,761,245 LGIP Capitol Hill Housing Board Designated Reserves 1,655,302 Total Designated 1,655,302 UnionBank Capitol Hill Housing EQII 2,770 Total Union Bank 2,770 KeyBank Capitol Hill Housing EQII 325 Total KeyBank 325 KeyBank Capitol Hill Housing M/M Savings - KeyBank Capitol Hill Housing Payroll - KeyBank Capitol Hill Housing Operating Checking 400,411 KeyBank Capitol Hill Dev. Assoc Operating Checking 2,201 KeyBank Capitol Hill Real Estate Mgmt Services Operating Checking 20,907 KeyBank Hazel Plaza Operating Checking 15,778 KeyBank Larned Operating Checking 78,007 KeyBank Byron Wetmore Operating Checking 19,744 KeyBank 412 Operating Checking 39,749 KeyBank Holden Vista Operating Checking 19,507 KeyBank Mary Ruth Manor Operating Checking 8,181 Beneficial States Bank Mary Ruth Manor Construction Op 47 KeyBank EJSH Operating Checking 21,671 KeyBank Fleming Apts LP Operating Checking 31,921 KeyBank Gilman Court LP Operating Checking 48,317 KeyBank Villa Apts LP Operating Checking 99,175 KeyBank El Nor LP Operating Checking 118,688 KeyBank 18th Ave Apartments Operating Checking 10,303 KeyBank Harrison Operating Checking 37,790 KeyBank Ponderosa Operating Checking 17,211 KeyBank Haines Operating Checking - KeyBank 12th Ave Arts Development Operating Checking 89,909 KeyBank 12AA Master Tenant LLC Operating Checking 74,385 KeyBank Union & 24th Construction 31,286 KeyBank Union James 27,715 Total KeyBank 1,212,901 Page 21 5/30/2017 4:19 PM M:\Finance & Accounting\@Secured\Board reports\2017\apr Reports for the June 2017 Meeting\ 2017 Cash Report by Bank.xlsx APR17 Page 1 of 2

22 CHH CASH IN BANK FOR THE MONTH ENDING: APR 2017 Cash Various Petty Cash - CHHIP 100 Total Petty Cash 100 Banner Berneva Operating Checking 10,782 Banner Seneca Operating Checking 242,748 KeyBank Union & 24th Construction - Total Banner 253,531 Total Unrestricted - CHH Blended Components 1,469,627 Total All Cash - CHH Blended Components 8,886,174 Bank Discrete Component Unit Type Balance Chase Oleta Reserves 167,113 Chase Woodland Park Ave LLC Reserves 143,911 Chase AAA Security Deposit 5,736 Chase AAA Reserves 617,461 Total Chase 934,222 KeyBank Broadway & Pine Reserves 315,549 KeyBank Broadway & Pine Security Deposit 25,188 KeyBank Helen V Apts LLC Reserves 324,661 KeyBank Helen V Apts LLC Security Deposit 7,096 KeyBank Holiday Apts Security Deposit 21,969 KeyBank Jefferson & 12th Reserves 282,675 KeyBank Jefferson & 12th Security Deposit 40,691 KeyBank Oleta Security Deposit 24,556 KeyBank Pantages Apts LLC Security Deposit 28,062 KeyBank Silvian Security Deposit 7,100 KeyBank SOPI / Unity Village Reserves 192,868 KeyBank SOPI / Unity Village Security Deposit 16,400 KeyBank Woodland Park Ave LLC Security Deposit 11,328 KeyBank 12th Avenue Arts Housing Security Deposit 78,087 KeyBank 12th Avenue Arts Housing Reserves 598,544 KeyBank 12th Avenue Arts Associates LLC 12AA Key CDE Controlled Account - KeyBank 12th Avenue Arts Associates LLC 185,743 KeyBank 12th Avenue Arts Associates LLC 12AA Key Fee Reserve Account 250,443 KeyBank Squire Park Plaza Security Deposit 59,182 KeyBank Squire Park Plaza Reserves 44,145 Total KeyBank 2,470,140 Bank of NY Mellon Trust Co 12th Avenue Arts Associates LLC 12AA 108 Loan Guaranteed Loan Funds Account 20,317 Bank of NY Mellon Trust Co 12th Avenue Arts Associates LLC Escrow - Total Bank of NY Mellon Trust Co 20,317 UnionBank Holiday Reserves 185,223 Total UnionBank 185,223 US Bank Pantages Apts LLC Reserves 530,968 US Bank Silvian Reserves 480,925 Total USBank 1,011,894 Total Restricted - Discrete Components 4,621,795 Chase AAA Operating Checking 25,018 Chase AAA Construction - Total Chase 25,018 KeyBank Oleta Operating Checking 11,676 KeyBank Helen V Apts LLC Operating Checking 71,013 KeyBank Pantages Apts LLC Operating Checking 45,963 KeyBank Silvian Operating Checking 70,896 KeyBank Broadway & Pine Operating Checking 35,075 KeyBank Woodland Park Ave LLC Operating Checking 12,454 KeyBank Holiday Apts Operating Checking 33,540 KeyBank SOPI / Unity Village Operating Checking 22,290 KeyBank Jefferson & 12th Construction 241 KeyBank Jefferson & 12th Operating Checking 58,331 KeyBank Twelfth Avenue Arts Res Operating Checking 260,034 KeyBank Twelfth Avenue Arts Housing LLP 12AA Housing-Construction Checking - KeyBank 12th Avenue Arts Associates LLC 12AA Commercial-Construction Ckg - KeyBank 12th Avenue Arts Associates LLC 12AA Commercial Operating (Debt Service) 197,212 KeyBank Squire Park Plaza Operating Checking 199,875 Total KeyBank 1,018,600 Total Unrestricted - Discrete Components 1,043,618 Total All Cash - Discrete Components 5,665,413 Total All Cash - CHH Blended Components 8,886,174 Total All Cash 14,551,587 TOTALS BY BANK Key Bank $ 7,159,622 Chase $ 1,264,035 Banner $ 508,383 US Bank $ 1,146,550 Union Bank $ 187,993 Bank of America $ 64,079 Beneficial State bank $ 47 LGIP $ 4,080,755 Other and Petty $ 140,122 TOTAL CASH $ 14,551,587 Page 22 5/30/2017 4:19 PM M:\Finance & Accounting\@Secured\Board reports\2017\apr Reports for the June 2017 Meeting\ 2017 Cash Report by Bank.xlsx APR17 Page 2 of 2

23 SECTION 5: 2016 CHH Audit Report SECTION 5 Page 23

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25 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Financial Statements and Single Audit Reports For the Years Ended December 31, 2016 and 2015 Page 25

26 Table of Contents Independent Auditor s Report 1 2 Management Discussion and Analysis 3 8 Financial Statements: Balance Sheets 9 10 Statements of Revenues, Expenses and Changes in Net Position 11 Statements of Cash Flows Notes to Financial Statements Supplementary Information: Schedule of Departmental Operations 34 Schedule of Property Operations Schedule of Expenditures of Federal Awards and Related Notes Single Audit Reports: Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Schedule of Prior Audit Findings 46 Page Page 26

27 Independent Auditor s Report To the Board of Directors Capitol Hill Housing Improvement Program Seattle, Washington REPORT ON THE FINANCIAL STATEMENTS We have audited the accompanying financial statements of the business type activities and the aggregate discretely presented component units of Capitol Hill Housing Improvement Program (CHHIP), as of and for the years ended December 31, 2016 and 2015, and the related notes to the financial statements, which collectively comprise CHHIP s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. T: T: F: NE 4th St Suite 1700 Bellevue WA clarknuber.com An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business type activities and the aggregate discretely presented component units of CHHIP, as of December 31, 2016 and 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Page 27

28 Emphasis of Matter As discussed in Note 3 to the financial statements, the 2015 financial statements have been restated. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 8 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise CHHIP s basic financial statements. The schedules of departmental operations and property operations are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is not a required part of the financial statements. The schedules are the responsibility of management and were derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedules of department operations and property operations are fairly stated, in all material respects, in relation to the basic financial statements as a whole. OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING STANDARDS In accordance with Government Auditing Standards, we have also issued our report dated May 22, 2017 on our consideration of CHHIP s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering CHHIP s internal control over financial reporting and compliance. Certified Public Accountants May 22, Page 28

29 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2016 As management of Capitol Hill Housing Improvement Program ( CHHIP ), we offer readers of the CHHIP financial statements this narrative overview and analysis of the financial activities of CHHIP for the year ended December 31, Financial Highlights - Assets exceeded liabilities (net position) at the close of 2016 totaled $21,424, Unrestricted cash and cash equivalents at December 31, 2016 totaled $3,201, CHHIP properties continue to operate with extremely low vacancy rates across the portfolio (blended and discrete component units) averaging 3.0 percent in During 2016 the investor limited partners of El Nor Limited Partnership and Harrison Family Housing Limited Partnership transferred their limited partnership interests in the two entities to CH Development Association, a blended component unit of CHHIP. - During 2016, CHHIP invested $2.25 million in upgrades to Mary Ruth Manor which included a new roof, new exterior siding system, energy efficiency improvements and a new community meeting room. - During 2016 CHHIP purchased the Union James, a two building property with 24 units, from Central Area Development Association. - During 2016 CHHIP entered into a purchase and sale agreement with Sound Transit to purchase the development site at the Capitol Hill Light Rail Station known as B North. - During 2016 CHHIP was the Seattle area interim Section 4 administrator for Local Initiatives Support Corporation. Overview of the Financial Statements CHHIP s financial statements consist of three parts management s discussion and analysis (this section), financial statements prepared in accordance with Governmental Accounting Standards Board (GASB) standards, and supplemental schedules. CHHIP s financial statements provide information about CHHIP s overall financial position and results of operations. The financial statements report information about CHHIP as a whole using accounting methods similar to those used by private sector companies. These statements, which are presented on the accrual basis, consist of the Balance Sheet, Statement of Revenues, Expenses and Changes in Net Position, and the Statement of Cash Flows. The Balance Sheet includes all of CHHIP s assets and liabilities. All of the current year s revenues and expenses are accounted for in the Statement of Revenues, Expenses and Changes in Net Position regardless of when cash is received or paid. 3 Page 29

30 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2016 Overview of the Financial Statements (Continued) The financial statements include the activities of CHHIP and 21 related entities that are required to be combined with CHHIP. These entities are three nonprofits, Elizabeth James Senior Housing, Central City Affordable Housing and CH Development Association and 18 limited partnerships and limited liability companies, Union and 24 th Associates LLC, Larned Apartments Limited Partnership, Byron/Wetmore Limited Partnership, Ponderosa at Madison LLC, SOPI Village Manager LLC, Villa Apartments Limited Partnership, Gilman Court Limited Partnership, 1214 Boylston Avenue Limited Partnership, Fleming Apartments Limited Partnership, El Nor Limited Partnership, Harrison Family Housing Limited Partnership, Union James Affordable Housing LLC, CH TOD LLC, Holiday Affordable LLC, Twelfth Avenue Arts Master Tenant LLC, Twelfth Avenue Arts Development LLC, CHH Squire Park LLC, and CH Real Estate Management Services LLC. Although legally separate, the nonprofits were formed to meet the mission of CHHIP. Since CHHIP board members comprise all or a majority of the nonprofit boards' members, they are considered instrumentalities of CHHIP and are included in CHHIP's financial statements. CHHIP is the general partner and CH Development Association has replaced the investor limited partners in the eight limited partnerships. CHHIP is the sole member of CH Real Estate Management Services LLC, Ponderosa at Madison LLC, Holiday Affordable LLC, Union and 24 th Associates LLC, CHH Squire Park LLC, Union James Affordable Housing LLC and CH TOD LLC, and has a majority interest in SOPI Village Manager LLC. CH Development Association is the sole member of Twelfth Avenue Arts Development LLC which is, in turn, the sole member of Twelfth Avenue Arts Master Tenant LLC. The financial statements also include as "Discrete Component Units" 11 legally separate tax credit partnerships and limited liability companies for which CHHIP is financially accountable as the sole general partner or managing member. Additionally, the Capitol Hill Housing Foundation is included as a discrete component unit as is 12th Avenue Arts Associates LLC and Twelfth Avenue Arts Association. Financial information for these affiliates is aggregated and reported in a separate column from the CHHIP financial information. Audited financial statements are available for all of the discrete component units and may be requested from CHHIP. The financial statements also include a Notes to Financial Statements section that provides additional information that is essential to a full understanding of the data provided in the financial statements. The supplemental schedules provide a breakdown of CHHIP property operations at the building level. 4 Page 30

31 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2016 Overview of the CHHIP Blended Entity Financial Position and Operations December 31, Assets: Current assets $ 6,302,797 $ 6,282,750 $ 6,289,881 Noncurrent assets Capital assets, net 50,474,043 42,386,701 41,990,400 Other 21,966,534 21,103,404 20,817,657 Total Assets $ 78,743,374 $ 69,772,855 $ 69,097,938 Liabilities: Current liabilities $ 5,613,961 $ 2,603,367 $ 5,203,120 Noncurrent liabilities 51,704,843 46,298,220 44,890,854 Total Liabilities $ 57,318,804 $ 48,901,587 $ 50,093,974 Net Position: Invested in capital assets, net of related debt $ 22,802 $ (98,670) $ 1,200,111 Restricted 5,581,883 4,537,930 4,075,715 Unrestricted 15,819,885 16,432,008 13,728,138 Total Net Position $ 21,424,570 $ 20,871,268 $ 19,003,964 The financial assets of CHHIP consist primarily of capital assets, its land, buildings and building improvements. This is consistent with CHHIP s mission to build vibrant and engaged communities through affordable housing and community development efforts in Seattle. Capital assets are shown net of depreciation. Other assets include cash reserves for repairs and replacements and debt service as required by our lenders. The liabilities are predominantly long term debt that has been used to purchase, develop and rehabilitate our apartment buildings. Many of these loans, provided by governmental entities, have below market interest rates and do not require annual debt service. See Note 5 for a more complete discussion. The difference between total assets and total liabilities, net position, is one indicator of financial health. Net position increased by $553,302 in 2016 and $1,867,304 in For 2016, $1,110,826 was due to change in component units which occurred when CH Development Association acquired the limited partners interests in El Nor Limited Partnership and Harrison Family Housing Limited Partnership, and $(557,524) due to operations. For 2015, $1,867,304 was due to positive operating results. 5 Page 31

32 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2016 Overview of the CHHIP Blended Entity Financial Position and Operations (Continued) The results of operations for CHHIP are presented below: For the Year Ended December 31, Operating revenues Tenant revenues $ 10,254,353 $ 8,627,945 $ 7,915,513 Fees for services 956, , ,468 Project development fees 12, ,062 2,279,306 Other 117,540 16,680 36,224 Nonoperating revenues Contributions and grants 1,586,476 3,238,697 1,047,051 Interest income 254, , ,599 Net gain on 12th Avenue Arts transactions (Loss) gain on sale of assets 5, , ,903 Total Revenues 13,187,423 13,862,891 13,159,064 Operating expenses Salaries, benefits and payroll taxes 5,411,605 4,454,492 3,902,638 Operating and maintenance 1,526,832 1,540,895 1,294,781 Other operating expenses 3,471,166 2,991,834 2,606,333 Depreciation and amortization 2,154,783 1,809,296 1,907,280 Nonoperating expenses Grant to the component unit 107, , ,000 Interest expense 1,073,486 1,005,527 1,145,165 Total Expenses 13,744,947 11,995,587 11,156,197 Change in Net Position $ (557,524) $ 1,867,304 $ 2,002,867 Results of Operations Operating revenues are generated principally from rental income as well as property management and other fees paid by the discrete component units. Tenant revenues increased 18 percent in 2016, 9 percent in 2015, and 7 percent in We are limited in how much we can increase tenant revenues as our rents are regulated. Vacancy loss for 2016 was 3.2 percent which is the sixth year our annual vacancy loss has been below approximately 4 percent. Vacancy loss for 2015 was 2.6 percent and for 2014 was 4.1 percent. We continue to work to turn and lease units faster. CHHIP earns development fees for its management role in the development of new properties. During 2016 CHHIP earned only a nominal amount in development fees related to the commercial components of the 12 th Avenue Arts project. During 2015 CHHIP earned development fees of $400,062 for commercial components of the 12 th Avenue Arts project and the redevelopment fees of the Haines representing 2.9 percent of total revenues. 6 Page 32

33 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2016 Overview of the CHHIP Blended Entity Financial Position and Operations (Continued) Salaries, benefits and payroll tax expense increased by 21 percent in We added three properties to the blended entity in 2016 with their related staff accounting for 21 percent of the increase along with a 12 percent increase in health insurance premiums. We also added 4 staff positions. Salaries, benefits and payroll tax expense increased 14 percent in 2015 primarily driven by an 8 percent increase in employee benefits and an increase in staffing, approximately 8 positions. Salaries, benefits and payroll taxes increased 6 percent in 2014 which was driven by an 18 percent increase in employee benefits. Operating and maintenance expense remained constant in 2016 despite 98 more units included in the blended entity. Operating and maintenance expenses increased 19 percent in 2015 compared to a 5 percent decrease in Low vacancy rates reduce turnover costs. Some variability is to be expected as building components wear out, long term tenants move out and our portfolio ages. Interest expense, primarily from the long term financing of the properties, continues to be a significant expense. Typically each property acquired has both amortizing and nonamortizing debt from commercial and governmental sources, respectively. A portion of the interest expense, under the terms of the financing, is deferred and will eventually be forgiven as long as the properties are managed in compliance with the loan agreements. In 2016 CHHIP received $1,586,476 in contributions and grants representing 12 percent of total revenue. In 2016 this included $414,696 in grants for capital improvements at the Brewster. These grants increase revenues without an offsetting expense. Excluding these grants, CHHIP received $1,171,780 in 2016 which included awards from Local Initiatives Support Corporation, the Capitol Hill Housing Foundation, and continued support from the City Office of Economic Development. In 2015 CHHIP received $3,238,697 in contributions and grants representing 23 percent of total revenue. In 2015, contributions and grants included $2,163,050 from Capitol Hill Housing Foundation for the 12 th Avenue Arts project and $200,000 to develop affordable housing. These grants in support of CHHIP increase revenues without an offsetting expense. Excluding these capital grants, CHHIP received $875,647 in 2015 which included support for the operations and purchase of the Central Area Development Association properties, continued support from City of Seattle Office of Economic Development, and Impact Capital in support of our development work. In 2014 CHHIP received $1,047,051 in contributions and grants representing 7.9 percent of total revenues. The 2014 contributions and grants include $473,000 from Capitol Hill Housing Foundation for the 12th Avenue Arts project. These grants in support of CHHIP increase revenues without an offsetting expense. Excluding these capital grants CHHIP received $574,051 in These grants continued support from City of Seattle Office of Economic Development, Impact Capital and Neighborhood Works to support our economic development work and development of affordable housing. Supplemental Schedule The supplemental Schedule of Departmental Operations provides additional insight into the financial operations of CHHIP. CHHIP budgets and manages financial performance based on its lines of business including its buildings (Property Operations) and organizational and off site activities (Administration and Management). Property Operations, which includes all building based revenues and expenses, shows revenues exceeded expenditures plus debt service and scheduled reserve deposits by $1,076,820. In addition to the operating expenditures, we spent an additional $124,269 on repair and maintenance funded from our building reserves. 7 Page 33

34 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Management Discussion and Analysis For the Year Ended December 31, 2016 Overview of the CHHIP Blended Entity Financial Position and Operations (Continued) Economic Factors Affecting CHHIP s Future Significant economic factors affecting CHHIP are as follows: - CHHIP faces risk from political and governmental decisions beyond its control such as changes to the Internal Revenue Code affecting the Low Income Housing Tax Credit, changes to federal and local rental subsidy programs or changes in state and local priorities for capital subsidies to develop new properties. - CHHIP operates and develops affordable housing in and adjacent to Seattle and is subject to the ups and downs of the local real estate market conditions. - Availability of credit and tax credit equity partners affects our ability to develop new projects and recapitalize existing projects. - CHHIP faces increased competition for scarce resources such as state and local funds and corporate and foundation donations. - Local employment trends affect resident incomes and therefore the demand for housing and the rental rates CHHIP can realize. - Inflation may cause overall operating expenses to increase faster than it is desirable or allowable to raise rents for existing unit occupants which may generate higher turnover or vacancy. Certain operating expenses such as insurance or utilities may increase due to external events outside of the control of CHHIP. Contacting CHHIP s Financial Management The financial report is designed to provide a general overview of CHHIP s finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional information should be addressed to Chief Executive Officer, Capitol Hill Housing Improvement Program, th Avenue, Suite 205, Seattle, WA Page 34

35 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Balance Sheets Assets December 31, 2016 and Discrete Discrete Component Component CHHIP Units CHHIP Units Current Assets: Cash and cash equivalents $ 3,201,074 $ 1,613,070 $ 3,046,758 $ 2,037,158 Accounts receivable, net 2,918, ,288 3,034, ,664 Current portion of pledges receivable, net 126,492 79,160 Prepaid expenses and other current assets 141,890 28, , ,439 Current portion of notes and interest receivable 40,990 40,990 Total Current Assets 6,302,797 2,583,647 6,282,750 3,098,421 Restricted cash and cash equivalents 5,581,883 4,663,967 4,537,930 5,761,664 Leases receivable 184,074 Notes and interest receivable 14,850,506 15,740,928 Land, buildings and equipment, net 50,474,043 94,335,165 42,386, ,578,500 Investment in limited partnerships and LLCs 1,534, ,472 Capitalized costs, net 215, ,801 Total Assets $ 78,743,374 $ 101,798,764 $ 69,772,855 $ 110,644,386 See accompanying notes. 9 Page 35

36 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Balance Sheets Liabilities and Net Position December 31, 2016 and Discrete Discrete Component Component CHHIP Units CHHIP Units Current Liabilities: Accounts payable and accrued liabilities $ 1,627,736 $ 2,747,700 $ 1,643,940 $ 3,652,110 Deferred income 45,500 43, ,218 39,660 Current portion of accrued interest payable 126,534 79,023 83,199 79,801 Current portion of notes payable 3,814, , , ,930 Total Current Liabilities 5,613,961 3,315,699 2,603,367 4,354,501 Security deposits 539, , , ,879 Long term deferred income 449, ,343 Notes payable, net of current portion 46,637,050 81,558,111 41,717,361 87,044,657 Accrued interest payable 4,078,971 2,435,993 3,638,050 2,364,686 Total Liabilities 57,318,804 87,574,302 48,901,587 94,053,723 Net Position: Restricted for building improvements 3,905,125 1,712,119 3,374,533 2,238,770 Restricted for other purposes 1,676,758 2,951,848 1,163,397 3,522,894 Total restricted 5,581,883 4,663,967 4,537,930 5,761,664 Invested in capital assets, net of related debt 22,802 12,331,381 (98,670) 13,950,913 Unrestricted 15,819,885 (2,770,886) 16,432,008 (3,121,914) Total Net Position 21,424,570 14,224,462 20,871,268 16,590,663 Total Liabilities and Net Position $ 78,743,374 $ 101,798,764 $ 69,772,855 $ 110,644,386 See accompanying notes. 10 Page 36

37 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Statements of Revenues, Expenses and Changes in Net Position For the Years Ended December 31, 2016 and Discrete Discrete Component Component CHHIP Units CHHIP Units Operating Revenues: Gross rent potential $ 10,375,227 $ 5,047,646 $ 8,632,169 $ 5,878,400 Vacancy loss (332,705) (124,943) (226,179) (85,625) Laundry, parking and other tenant income 211, , , ,960 Fees for services 956, ,344 Project development and other fees 12, ,062 Other operating revenue 117,540 26,503 16,680 90,767 Total Operating Revenues 11,341,032 5,157,235 9,991,031 6,055,502 Operating Expenses: Salaries, benefits and payroll taxes 5,411, ,169 4,454, ,494 Utilities 1,275, ,509 1,065, ,196 Professional fees 501, , , ,869 Administrative 579, , ,906 1,129,036 Master lease 554, ,000 Taxes and insurance 437, , , ,452 Operating and maintenance 1,526, ,494 1,540, ,570 Bad debt expense 27,229 8, ,992 7,411 Grants to CHHIP and affiliates 720,830 2,943,571 Other 96,196 65,369 76, ,794 Depreciation and amortization 2,154,783 3,200,784 1,809,296 3,498,830 Total Operating Expenses 12,564,386 7,126,745 10,796,517 10,327,223 Operating Income (Loss) (1,223,354) (1,969,510) (805,486) (4,271,721) Nonoperating Revenues (Expenses): Contributions and grants 1,586, ,209 3,238,697 2,233,837 Grant to the component unit (107,075) (193,543) In kind revenue 284, ,988 Interest income 254,915 2, ,871 3,124 Gain (loss) on disposition of assets 5, ,292 (167,805) In kind expense (284,538) (306,988) Interest expense (1,073,486) (1,683,712) (1,005,527) (1,776,502) Total Nonoperating Revenues (Expenses) 665,830 (737,726) 2,672, ,654 Change in Net Position Before Capital Contributions and Other Changes (557,524) (2,707,236) 1,867,304 (3,979,067) Capital Contributions and Other Changes: Change in component units 1,110,826 (682,824) Syndication costs (10,000) (17,500) Capital contributions 1,033,859 6,614,090 Total Capital Contributions and Other Changes 1,110, ,035 6,596,590 Change in Net Position 553,302 (2,366,201) 1,867,304 2,617,523 Beginning of year 20,871,268 16,590,663 19,003,964 13,973,140 End of Year $ 21,424,570 $ 14,224,462 $ 20,871,268 $ 16,590,663 See accompanying notes. 11 Page 37

38 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Statements of Cash Flows For the Years Ended December 31, 2016 and Discrete Discrete Component Component CHHIP Units CHHIP Units Cash Flows From Operating Activities: Receipts from tenants and customers $ 10,985,629 $ 5,187,142 $ 9,153,729 $ 6,517,382 Receipts for developer fees 485,296 1,355,361 Payments to employees and for payroll taxes and benefits (5,281,828) (671,169) (4,721,571) (782,494) Payments to suppliers (5,037,547) (3,402,419) (4,097,030) (5,701,846) Net Cash Provided by Operating Activities 1,151,550 1,113,554 1,690,489 33,042 Cash Flows From Noncapital Financing Activities: Receipts from contributions and grants 1,505, ,877 3,324,301 2,207,319 Payment of grants (107,075) (193,543) Net Cash Provided by Noncapital Financing Activities 1,398, ,877 3,130,758 2,207,319 Cash Flows From Capital and Related Financing Activities: Acquisition of land, building and equipment (3,936,440) (554,354) (2,175,556) (5,058,439) Proceeds from sale of land, building and equipment 5, ,667 Proceeds from notes payable 3,039,690 (263,716) 1,771,882 8,702,113 Principal payments on notes payable (1,264,044) (1,183,678) (2,982,189) (9,589,737) Interest paid on notes payable (1,105,820) (1,295,176) (940,912) (1,344,205) Payment of financing costs (36,665) (35,925) Payment of syndication costs (10,000) (17,500) Capital contributions 1,033,859 6,614,090 Net Cash Used by Capital and Related Financing Activities (3,261,614) (2,309,730) (3,960,108) (729,603) Cash Flows From Investing Activities: Net change in restricted cash and cash equivalents (18,394) 76,301 (462,215) (1,012,021) Cash transfer due to change in component units 202,866 (202,866) Cash received in assumption of property ownership 65,973 Investment in limited partnership (958,000) Advances of notes receivable (15,672) Receipts on repayment of notes receivable 1,375,734 29,655 Interest receipts 197,606 2, ,287 3,124 Net Cash (Used) Provided by Investing Activities 865,785 (123,789) (261,945) (1,008,897) Net Change in Cash and Cash Equivalents 154,316 (424,088) 599, ,861 Cash and cash equivalents, beginning of year 3,046,758 2,037,158 2,447,564 1,535,297 Cash and Cash Equivalents, End of Year $ 3,201,074 $ 1,613,070 $ 3,046,758 $ 2,037,158 See accompanying notes. 12 Page 38

39 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Statements of Cash Flows (Continued) For the Years Ended December 31, 2016 and Discrete Discrete Component Component CHHIP Units CHHIP Units Reconciliation of Operating Loss to Net Cash Provided by Operating Activities: Operating income (loss) $ (1,223,354) $ (1,969,510) $ (917,286) $ (4,271,721) Adjustments to reconcile operating income (loss) to net cash provided by operating activities Depreciation and amortization 2,154,783 3,200,784 1,921,096 3,498,830 Partnership income 49,097 20,094 Changes in assets and liabilities: Receivables 89,104 33, , ,363 Prepaid expenses and other current assets 103,915 52,034 (27,618) 21,092 Accounts payable and accrued liabilities (53,468) (208,530) 56, ,550 Security deposits and deferred income 31,473 5,439 50,110 8,928 Net Cash Provided by Operating Activities $ 1,151,550 $ 1,113,554 $ 1,690,489 $ 33,042 Schedule of Noncash Financing and Investing Activities: Noncash balance sheet net adjustments relating to change in component units, increase (decrease) to balance Accounts receivables, net $ 460,963 $ (32,961) $ $ Prepaid expenses and other current assets $ 85,608 $ (85,608) $ $ Lease receivable $ 184,074 $ (184,074) $ $ Restricted cash and cash equivalents $ 1,021,396 $ (1,021,396) $ $ Land, buildings and equipment, net $ 4,231,134 $ (4,231,134) $ $ Accounts payable and accrued liabilities $ 16,331 $ (16,331) $ $ Security deposits $ 26,850 $ (26,850) $ $ Deferred income $ 326 $ (326) $ $ Accrued interest $ 318,007 $ (318,007) $ $ Notes payable $ 4,279,632 $ (4,279,632) $ $ Noncash additions to assets and liabilities from assumption of property Land and buildings $ 2,077,066 $ $ $ Mortgages payable $ 1,971,782 $ $ $ Accrued interest $ 134,908 $ $ $ Replacement reserves $ 33,111 $ $ $ Closing costs paid by member recorded as capital contribution $ 15,230 $ $ $ Operating assets $ 3,207 $ $ $ Operating liabilities $ 24,326 $ $ $ See accompanying notes. 13 Page 39

40 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 1 Nature of Operations and Summary of Significant Accounting Policies Organization Capitol Hill Housing Improvement Program (CHHIP) is a public corporation chartered in 1975 under Washington State and municipal law as a public development authority. CHHIP has broad powers to assist residents and property owners in preserving and improving housing in the neighborhood and to undertake activities in support of those goals. These financial statements include the accounts of CHHIP and CHHIP's blended component units. The blended component units include CH Development Association, Elizabeth James Senior Housing, Central City Affordable Housing and several wholly owned or majority owned limited partnerships and LLCs. CHHIP and its blended component units include 34 apartment projects and 871 units. Blended component units, although legally separate entities, are, in substance, part of CHHIP s operations. Twelfth Avenue Arts Development LLC (Twelfth Avenue Arts Development) was created in 2012 to act as the leveraged lender in a New Markets Tax Credit project as further described in Note 2. CH Development Association is the sole member of Twelfth Avenue Arts Development and, therefore, Twelfth Avenue Arts Development is considered a blended component unit. In addition, Twelfth Avenue Arts Development is the sole member of the Twelfth Avenue Arts Master Tenant LLC (Master Tenant) and, therefore, the Master Tenant is considered a blended component unit. CH Real Estate Management Services LLC, a manager managed limited liability Company was established to manage properties as a for profit organization, CHHIP is the sole member of the LLC. Discrete Component Units CHHIP serves as the general partner or managing member in several limited partnerships and LLCs (see Note 6). These limited partnerships and LLCs have investor limited partners or members who own majority interests in the entities. As general partner or managing member, CHHIP is financially accountable for and oversees the dayto day operation of these properties. Each limited partnership and LLC is audited separately. Copies of the separately audited financial statements may be obtained by contacting CHHIP. The limited partnerships and LLCs include 11 apartment projects and 433 units. In addition, CHHIP manages Squire Park Plaza, a 60 unit apartment project, in which it has a minority interest. CHHIP manages through its affiliate CH Real Estate Management Services, 2 apartment projects with 44 units owned by local nonprofit organizations. In total, CHHIP manages 1,408 units. Capitol Hill Housing Foundation (the Foundation) is incorporated in the State of Washington as a nonprofit corporation. The Foundation has received a tax exempt determination letter from the Internal Revenue Service. The Foundation operates with the intent to act primarily as a fundraising organization to supplement the resources that are available to CHHIP in support of its mission. The Foundation Board is independent of the CHHIP Board. Although CHHIP does not control the timing or amount of receipts from the Foundation, it is anticipated that the majority of the funds raised will be directed to activities of CHHIP by either the Foundation or its donors. Because of these restrictions, the Foundation is considered a discrete component unit of CHHIP. 12 th Avenue Arts Associates LLC (12 th Ave Arts Associates) was formed in 2012 to construct and own the commercial and parking components of the 12 th Avenue Arts project (Note 2) with construction being completed and the project placed into operation during th Ave Arts Associates sole member is the Twelfth Avenue Arts Association (the Association). The Association was formed in 2012 as a nonprofit corporation in the State of Washington. The Association was formed with the exclusive purpose of supporting the mission of CHHIP and has a separate self electing Board of Directors. During 2016, all remaining ownership interests in El Nor LP (El Nor) and Harrison Family Housing LP (Harrison) were transferred to CH Development Association. As such, El Nor and Harrison changed from being reported as a discrete component unit in fiscal year 2015 to a blended component unit in fiscal year Prior to 2016, CHHIP had recognized an allowance for doubtful accounts of $428,002 against the related party amounts receivable from Harrison. The allowance for doubtful accounts was eliminated in the transfer of ownership interests. 14 Page 40

41 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 1 Continued Basis of Accounting The financial statements of CHHIP have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) applied to governmental units. These financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Contributions and grants are recognized as revenues as soon as all eligibility requirements imposed by the provider have been met. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. Cash and Cash Equivalents CHHIP considers all highly liquid temporary investments purchased with a maturity of three months or less at the acquisition date to be cash equivalents. CHHIP s deposits and certificates of deposit are entirely covered by the federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool (the collateral pool) administered by the Washington Public Deposit Protection Commission. The FDIC insures the first $250,000 of CHHIP s deposits at each financial institution with remaining balances insured by the collateral pool. As of December 31, 2016 and 2015, the carrying amount of CHHIP s demand deposits was $4,768,354 and $3,627,170, respectively, and was not materially different from the bank balances. At December 31, 2016 and 2015, CHHIP had $4,038,612 and $3,957,518, respectively, in the Washington State s Local Government Investment Pool (LGIP). The LGIP is managed and operated by the Office of the State Treasurer (OST). The State Finance Committee is the administrator of the statute that created the pool and adopts appropriate rules. The State Treasurer is responsible for establishing the investment policy for the pool and reviews the policy annually. The LGIP portfolio is invested in a manner that meets the maturity, quality, diversification and liquidity requirements set forth by GASB for external investment pools that elect to measure, for financial reporting purposes, investments at amortized cost. The amounts invested in the pool are measured at the net asset value per share of the pool shares held by CHHIP. Certain cash balances are restricted for building improvements and other specific uses in accordance with debt and regulatory agreements and donor imposed restrictions. At December 31, 2016 and 2015, the restricted cash balances were held in deposits with the LGIP and other separate accounts as required by the agreements and donor imposed restrictions. CHHIP has a Board Designated Operating Reserve for the purpose of strengthening CHHIP s liquidity and financial position. The intent is to make annual deposits from operating surplus. The Board Designated Operating Reserve is held in the LGIP. The balance at December 31, 2016 and 2015, of $1,651,507 and $1,643,689, respectively, is included in cash and cash equivalents. Accounts Receivable Accounts receivable consist primarily of rents due from tenants, grants due from grantors and amounts due from the limited partnerships and LLCs as described in Note 6. Annually, tenant receivables are analyzed and the allowance for doubtful accounts is adjusted. Other receivable allowances are established for uncertain collectibles. Notes Receivable and Notes Payable Many of the notes carry below market interest rates and/or contain provisions for deferral or forgiveness of interest or principal. Such notes and related interest amounts are recorded in the financial statements according to the terms of the notes. No adjustment to market rates has been made due to the compliance requirements that must be met for forgiveness or deferral to occur. Forgiveness of debt and related accrued interest for notes payable will be recorded as income in accordance with terms of the various loan agreements. 15 Page 41

42 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 1 Continued Land, Buildings and Equipment CHHIP capitalizes assets with a cost greater than $1,000 and an estimated useful life of one or more years. Land, buildings and equipment are recorded at cost or estimated fair value at the date of donation. Depreciation of buildings and equipment is recorded on a straight line basis over their estimated useful lives of 5 to 40 years. CHHIP reviews land, building and equipment for possible impairment whenever events or circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. No impairment losses were recognized in 2016 or Financing Costs Certain blended and discrete component units are not for profit or commercial entities that follow U.S. GAAP established by the Financial Accounting Standards Board (FASB). For those entities, financing costs are recorded as a deduction to the related debt liability on the balance sheet. Financing costs are amortized over the term of the applicable debt using the straight line method. U.S. GAAP requires that the effective yield method be used to amortize financing costs; however, the effect of using the straight line method is not materially different from the results that would have been obtained under the effective yield method. Amortization of financing costs are included as a component of interest expense on the statement of revenues, expenses, and changes in net position. During 2016, CHHIP s component units implemented the requirements of the FASB s Accounting Standards Update No Interest Imputation of Interest (Subtopic ): Simplifying the Presentation of Debt Issuance Costs (ASU ). ASU changes the accounting for debt issuance costs (financing costs) by requiring that such costs be reported on the statement of net position as a direct deduction to the related debt liability. Previously, financing costs were reported as a deferred charge asset on the statement of net position. CHHIP has restated the 2015 financial statements to conform to the 2016 presentation and as a result $187,678 and $2,122,507 of unamortized financing costs for CHHIP s blended and discrete component units, respectively, were reclassified from capitalized costs to mortgages payable on the balance sheet as of December 31, Investment in Limited Partnerships and LLCs CHHIP is the sole general partner and owns a 0.01 percent interest in three limited partnerships and is the managing member and owns a 0.01 percent interest in seven LLCs. CHHIP owns a 51 percent interest in, and is the managing member of SOPI Village Manager LLC, who is the managing member, and 0.01 percent owner of SOPI Village LLC. CHHIP is also the sole member of CHH Squire Park LLC which is a 9.65 percent owner in Squire Park Holdings LLC. Squire Park Holdings LLC owns and operates a 60 unit apartment community located in Seattle, Washington. The remaining ownership interests in these entities are owned by unrelated third parties. CHHIP records its investment in these partnerships and limited liability companies using the equity method of accounting as it is the general partner or managing member and possesses significant influence in the operating and financial policies of the investees. Revenue Recognition Gross rent potential reflects gross rental revenue at full occupancy. CHHIP deducts vacancy loss from gross rent potential to reflect actual occupancy. Rental revenue is recognized monthly as earned. Development fee revenue is recognized over the development period using the percentage of completion method. 16 Page 42

43 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 1 Continued Operating Revenues and Expenses Operating revenues include fees and charges from the ongoing operations of providing and developing affordable housing. Operating revenues also include operating subsidies and grants provided by the US Department of Housing and Urban Development (HUD). The use of this classification is based on guidance from HUD, one of the users of the financial statements. Operating expenses are those expenses that are directly incurred while in the operation of providing housing. This presentation results in an operating income that is higher than a nonoperating revenue presentation by the amount of the subsidies and/or grants. Overall it does not affect the presentation of the change in net assets in the statements of revenues, expenses, and changes in net assets, or the presentation of cash and cash equivalents in the statements of cash flows. All other revenues and expenses are considered nonoperating. Restricted Net Position Net position has been reported as restricted for building improvements and other purposes due to constraints that are either externally imposed by creditors, grantors, contributors or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. CHHIP's policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position are available. Federal Income Tax CHHIP has been notified by the Internal Revenue Service that it is exempt from federal income taxes as an entity described in Section 115 of the Internal Revenue Code. CH Development Association, Elizabeth James Senior Housing, the Foundation, the Twelfth Avenue Arts Association and Central City Affordable Housing have been notified by the Internal Revenue Service that they are exempt from federal income taxes as entities described in Section 501(c)(3) of the Internal Revenue Code. CHHIP s wholly owned limited partnerships and LLCs that are reported as blended component units have no provision or benefit for income taxes included in these financial statements since taxable income or loss passes through to, and is reportable by, each partner or member individually. Concentrations of Credit Risk All of CHHIP s properties are located in Seattle, Washington except for one property included immediately outside of the Seattle city limits. As such, CHHIP s operations are directly linked to the economic conditions in the Seattle area. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Actual results could differ from these estimates. 17 Page 43

44 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 2 Notes and Interest Receivable Notes and interest receivable consisted of the following amounts due from affiliated limited partnerships and LLCs (Note 6) and other unrelated third parties as of December 31: Broadway & Pine LLC Note receivable, interest at 5%, annual payments from available cash flow starting June 2007 through maturity on June 1, $ 180,000 $ 180,000 Helen V LLC Developer fee note receivable, interest at 1%, monthly payments from available cash flow of $1,163, note matured December 31, ,904 73,904 Holiday Apartments LP Note receivable, interest at 3%, annual payments from available cash flow through maturity on December 1, , ,654 Jefferson & 12th LLC Note receivable, interest at 5%, annual payments from available cash flow starting 2013 through maturity on May 1, , ,150 Oleta Apartments Limited Partnership Note receivable, interest at 0%, annual payments from available cash flow starting June 2003 through maturity on June 30, Repaid in full during ,000 Pantages Apartments LLC Note receivable, interest at 6%, annual payments from available cash flow starting February 2006 through maturity on February 1, , ,341 SOPI Village LLC Note receivable, interest at 4%, annual payments from available cash flow starting in 2011 through maturity on December 31, , ,000 Woodland Park Avenue LLC Note receivable, interest at 0%, annual payments from available cash flow starting in 2009 through maturity on August 31, , , Page 44

45 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 2 Continued New Markets Tax Credits Loans Note receivable from 12th Avenue Arts NMTC Investment Fund II LLC, interest at 1.0%, quarterly interest payments beginning April 15, 2013, quarterly principal and interest payments beginning April 15, 2028 through maturity on October 1, ,870,600 4,870,600 Note receivable from 12th Avenue Arts NMTC Investment Fund II LLC, interest at 1.409%, quarterly interest payments beginning April 15, 2013, quarterly principal and interest payments beginning April 15, 2028 through maturity on October 1, ,926,840 7,926,840 Total principal 14,475,756 15,423,489 Accrued interest on the above notes 415, ,429 Total principal and interest 14,891,496 15,781,918 Less current portion of notes and interest receivable (40,990) (40,990) Noncurrent Portion $ 14,850,506 $ 15,740,928 In December 2012, CHHIP entered into a New Markets Tax Credit transaction to partially finance the construction of the 12 th Avenue Arts cultural and civic center. The New Markets Tax Credit Program was designed to stimulate investment and economic growth in low income communities by offering federal tax credit for Qualified Equity Investments (QEI) made through investment vehicles known as Community Development Entities (CDE). CDEs use capital derived from tax credits to make loans to projects in low income areas. As a part of the transaction, Twelfth Avenue Arts Development, LLC, a blended component unit of CHHIP, made two loans to two QEI s totaling $12,797,440, which in turn, lent a total of $17,951,000 to two CDEs, which in turn was lent to 12th Avenue Arts Associates, LLC, a discrete component unit. To earn the tax credit the QEI must remain invested in the CDE for a seven year period ending in December CHHIP and Key Community Development Corporation have entered into put/call option agreements to take place at the end of the seven year period. Under the agreements, Key Community Development Corporation can exercise put options to sell all interest in the QEIs for $1,000 each to CHHIP. If Key Community Development Corporation does not exercise the put option within 90 days of the end of the seven year period, CHHIP can exercise call options to purchase the interest of the QEIs at an appraised fair market value. 19 Page 45

46 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 3 Land, Buildings and Equipment Land, buildings and equipment activity consisted of the following: January 1, Net December 31, 2015 Increases Decreases Transfers 2015 Nondepreciable assets Land $ 12,634,827 $ 560,000 $ $ $ 13,194,827 Pre development costs 1,121,521 (159,629) (529,718) 432,174 Depreciable assets Buildings and facilities 55,522,398 1,773, ,718 57,825,254 Equipment and vehicles 2,338, ,801 2,462,168 Less accumulated depreciation (29,626,713) (1,901,009) (31,527,722) $ 41,990,400 $ 555,930 $ (159,629) $ $ 42,386,701 New Blended January 1, Component Net December 31, 2016 Increases Decreases Units Transfers 2016 Nondepreciable assets Land $ 13,194,827 $ 1,034,215 $ $ 414,715 $ $ 14,643,757 Pre development costs 432,174 3,444,640 (9,731) (2,374,344) 1,492,739 Depreciable assets Buildings and facilities 57,825,254 1,470,575 7,072,338 2,131,586 68,499,753 Equipment and vehicles 2,462,168 71,292 (10,936) 165, ,758 2,930,791 Less accumulated depreciation (31,527,722) (2,154,783) 10,936 (3,421,428) (37,092,997) $ 42,386,701 $ 3,865,939 $ (9,731) $ 4,231,134 $ $ 50,474,043 During 2016, the limited partner interests in El Nor LP were transferred to CH Development Association, changing the limited partnership to a blended component unit. This transfer resulted in a net increase of $2,104,327 to land, buildings, and equipment. During 2016, the limited partner interests in Harrison Family Housing LP were transferred to CH Development Association, changing the limited partnership to a blended component unit. This transfer resulted in a net increase of $2,126,807 to land, buildings, and equipment. During 2016, management identified a land purchase and related note payable issuance totaling $560,000 that was not reflected in the financial statements as of and for the year ended December 31, Management has restated the prior year balances of the financial statements to reflect the land and note payable addition as of and for the year ended December 31, Page 46

47 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 4 Leases Operating Leases CHHIP or an affiliate, as lessee, leases administrative office space, commercial space, garage space and housing space. CHHIP, as lessee, has entered into a master commercial lease with Jefferson & 12th LLC for the ground level commercial premises with annual lease payments of $100 for a period of 20 years through September Twelfth Avenue Arts Master Tenant LLC (Master Tenant) has signed master lease agreements with 12 th Avenue Arts Associates, LLC to lease the 12 th Avenue Arts Associates, LLC s commercial and garage units. Master Tenant is an entity controlled by CHH. Master Tenant subleases the commercial unit to third party tenants and subleases the garage unit to the City of Seattle. The master lease agreements commenced in December 2012 and have terms that end 45 years after commencement in December Rental expense under these leases totaled $554,000 and $571,000 for fiscal years 2016 and 2015, respectively. Minimum lease payments under these leases are as follows: For the Year Ending December 31, 2017 $ 567, , , , ,000 Thereafter 30,659,999 $ 33,637,999 CHHIP, as lessor, leases apartments under noncancelable terms of less than one year. Additionally CHHIP leases commercial and parking space to other entities. Substantially all property is leased to a variety of lessees under short and long term lease agreements. Minimum future lease revenue under the leases is as follows: For the Year Ending December 31, 2017 $ 1,140, ,047, , , ,560 Thereafter 10,937,163 $ 15,562, Page 47

48 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 4 Continued City of Seattle Ground Lease During 2012, Twelfth Avenue Arts Development, LLC, as lessee, entered into a ground lease with the City of Seattle for the parking garage land and condominium unit of the 12 th Avenue Arts project (Note 2). Twelfth Avenue Arts Development, LLC assigned the lease to 12 th Avenue Arts Associates, LLC in 2012 transferring all obligations under the lease other than the requirement to pay the minimum lease payments that which was retained by Twelfth Avenue Arts Development LLC. The lease term started in 2012 and extends through 2078, however the lease allows for a put option to be exercised for $1,000 with the City starting in January 2020 that would effectively terminate this ground lease if exercised. CHHIP intends to exercise this option. Lease payments began August 2014 and are $100,000 per year with a $5,000 annual increase. Minimum lease payments under the City of Seattle ground lease are as follows: For the Year Ending December 31, 2017 $ 110, , , , ,000 Thereafter 16,095,071 $ 16,695,071 Rental expense under this lease totaled $105,000 and $116,668 for fiscal years 2016 and 2015, respectively. Note 5 Notes Payable and Accrued Interest Notes payable are generally nonrecourse and secured by the respective properties and bear simple interest rates unless otherwise noted: Permanent conventional loans, bearing compound interest from 3% to 8.63% generally with principal and interest due monthly, to be repaid in full at various dates through Interest expense was $1,229,268 and $620,935 in 2016 and 2015, respectively. $ 14,542,202 $ 11,097, Page 48

49 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 5 Continued City of Seattle loans, bearing interest from 1% to 3%. Interest is generally deferred until maturity and in some instances may be forgiven if certain conditions are met over the term of the loan. The loans are to be repaid in full at various dates through Certain loans may be forgiven in their entirety if conditions are met through the extended maturity date. Interest expense was $107,183 and $93,534 in 2016 and 2015, respectively. 22,904,609 22,165,506 State of Washington loans, bearing interest from 0% to 2% generally payable annually, to be repaid in full at various dates through In some instances annual payments are deferred to the second half of the loan term. Interest expense was $61,535 and $60,196 in 2016 and 2015, respectively. 9,155,029 8,316,434 Equity equivalent investment loan, interest only at 2.5% payable quarterly, to be repaid in full December, , ,186 Tenant improvements loan bearing interest at 6%, interest only for the first year, amortized over the next five years, due in full February , ,611 Loan for purchase of land, bearing interest at 3%, principal and interest due at maturity on December , ,000 Predevelopment line of credit with Impact Capital with a maximum of $500,0000 available, interest at 6%. Principal was paid in full upon maturity in October ,795 Interim construction loan, variable rate interest (4.5% at December 31, 2016) with interest only due monthly beginning June 2016 and principal and interest due in full June, 2017 unless converted to a term loan prior to that date (or extended for up to 6 months). Conversion is anticipated June, Interest capitalized during 2016 was $19,862. 2,379,461 Bridge loans for the development of Union 24th, bearing interest between 2% and 6%. Principal and interest due by September Interest capitalized during 2016 was $20, ,095 Total principal 50,702,594 42,673,049 Less current portion of notes payable (3,814,191) (768,010) Less unamortized financing costs (251,353) (187,678) Noncurrent Portion $ 46,637,050 $ 41,717, Page 49

50 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 5 Continued Debt service requirements to maturity on these notes are as follows: For the Year Ending December 31, Principal Interest 2017 $ 3,814,191 $ 1,260, ,050,851 1,269, ,155,317 1,226, ,093 1,179, ,056 1,129, ,008,650 4,775, ,806,313 2,701, ,877,852 1,075, ,124, , ,076, , ,269,431 1, ,882,297 $ 50,702,594 $ 15,450,799 Accrued interest payable on the above notes payable totaled $4,205,505 and $3,721,249 at December 31, 2016 and 2015, respectively and is presented separately from the above total for notes payable on the balance sheet. Interest expense on the above notes payable aggregated $1,073,486 and $893,727 for fiscal years 2016 and 2015, respectively and included the deferred interest on certain nonamortizing loans. Substantially all notes payable are secured by deeds of trust on the related buildings. The notes payable to the City of Seattle and the State of Washington require rental of the apartment units to low or moderate income tenants at stipulated base rents with certain allowable increases, compliance with certain federal regulations as to discrimination and establishment of certain reserves for repairs and maintenance. 24 Page 50

51 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 5 Continued Long term liability activity consisted of the following during 2015: Notes Payable Accrued Interest Payable Beginning balance, December 31, 2014 $ 43,883,356 $ 3,768,434 Increases CHH 1,771,882 Accrual 893,727 Decreases Payments (2,982,189) (940,912) Amortization of financing costs (187,678) Ending Balance, December 31, 2015 $ 42,485,371 $ 3,721,249 Long term liability activity consisted of the following during 2016: Notes Payable Accrued Interest Payable Beginning balance, December 31, 2015 $ 42,485,371 $ 3,721,249 Increases CHH 3,105,861 Accrual 1,137,161 Decreases Payments (1,264,044) (1,105,820) Amortization of financing costs (127,361) Assumption of Union James Apartments debt in acquisition 1,971, ,908 Transfers from changes in reporting unit El Nor LP 1,900, ,500 Harrison Family Housing LP 2,378, ,507 Ending Balance, December 31, 2016 $ 50,451,241 $ 4,205, Page 51

52 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 6 Investments in Limited Partnerships and LLCs CHHIP is the sole general partner and owns a 0.01 percent interest in three limited partnerships and is the managing member and owns a 0.01 percent interest in seven limited liability companies. CHHIP owns a 51 percent interest in, and is the managing member of SOPI Village Manager LLC who is then the managing member and 0.01 percent owner of an eighth LLC, SOPI Village LLC. CHHIP is also the sole member of CHH Squire Park LLC which is a 9.65 percent owner in a ninth LLC, Squire Park Holdings LLC; neither of these entities is included as a discretely presented component unit. The remaining ownership interests in these entities are owned by unrelated third parties. During 2016 and 2015, CHHIP earned property management fees of $579,998 and $681,239 respectively, and limited partnership and LLC management fees of $106,185 and $157,975, respectively, from these entities. Additionally, CHHIP earned development and other fees totaling $12,552 and $400,062 in 2016 and 2015, respectively, from these entities. The following is a summary of selected financial information as of and for the year ended December 31, 2016, from the limited partnerships and LLCs described above and also represents condensed financial information for the aggregated discretely presented component units: December 31, 2016 Assets Liabilities Equity Affordable Apartments Associates LLC $ 7,110,945 $ 5,886,755 $ 1,224,190 Broadway & Pine Apartments LLC 7,782,338 5,236,812 2,545,526 Capitol Hill Housing Foundation 544,765 9, ,659 Helen V Apartments LLC 2,944,641 3,376,273 (431,632) Holiday Apartments Limited Partnership 5,896,640 5,566, ,034 Jefferson & 12th LLC 10,716,700 8,672,432 2,044,268 Oleta Apartments Limited Partnership 1,718,533 1,441, ,304 Pantages Apartments LLC 7,486,802 5,801,884 1,684,918 Silvian Apartments LLC 3,563,886 2,931, ,822 SOPI Village LLC 7,885,391 5,727,023 2,158,368 Woodland Park Avenue LLC 3,917,238 4,019,874 (102,636) Twelfth Avenue Arts Association and subsidiary 20,701,158 21,485,717 (784,559) Twelfth Avenue Arts Housing LLLP 21,529,727 17,419,527 4,110,200 Discretely Presented Component Units $ 101,798,764 $ 87,574,302 $ 14,224,462 Squire Park Holdings LLC $ 11,419,475 $ 8,352,863 $ 3,066, Page 52

53 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 6 Continued Year Ended December 31, 2016 Total Net Income Revenues (Loss) Affordable Apartment Associates LLC $ 311,775 $ (168,404) Broadway & Pine Apartments LLC 429,966 (328,560) Capitol Hill Housing Foundation 1,218, ,754 Helen V Apartments LLC 400,186 (113,617) Holiday Apartments Limited Partnership 343,604 (47,191) Jefferson & 12th LLC 512,587 (306,422) Oleta Apartments Limited Partnership 309,993 (12,999) Pantages Apartments LLC 491,573 (347,515) Silvian Apartments LLC 366,425 (32,458) SOPI Village LLC 277,445 (304,610) Woodland Park Avenue LLC 198,811 (198,813) Twelfth Avenue Arts Association and Subsidiary 580,195 (319,475) Twelfth Avenue Arts Housing LLLP 946,872 (630,926) Discretely Presented Component Units $ 6,387,759 $ (2,707,236) Squire Park Holdings LLC $ 1,181,659 $ 82, Page 53

54 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 6 Continued The following is a summary of selected financial information as of and for the year ended December 31, 2015, from the limited partnerships and LLCs described above and represents condensed financial information for the aggregated discretely presented component units: December 31, 2015 Assets Liabilities Equity Affordable Apartments Associates LLC $ 7,349,157 $ 6,031,884 $ 1,317,273 Broadway & Pine Apartments LLC 8,201,320 5,327,234 2,874,086 Capitol Hill Housing Foundation 431, ,905 El Nor Limited Partnership 3,179,742 2,071,323 1,108,419 Harrison Family Housing Limited Partnership 2,362,436 2,788,031 (425,595) Helen V Apartments LLC 3,139,353 3,457,368 (318,015) Holiday Apartments Limited Partnership 6,077,308 5,700, ,225 Jefferson & 12th LLC 11,121,891 8,771,201 2,350,690 Oleta Apartments Limited Partnership 1,852,751 2,520,448 (667,697) Pantages Apartments LLC 7,862,739 5,830,306 2,032,433 Silvian Apartments LLC 3,687,713 3,022, ,280 SOPI Village LLC 8,304,632 5,841,654 2,462,978 Woodland Park Avenue LLC 4,206,713 4,100, ,177 Twelfth Avenue Arts Association and subsidiary 22,463,259 22,928,343 (465,084) Twelfth Avenue Arts Housing LLLP 22,525,921 17,785,333 4,740,588 Discretely Presented Component Units $ 112,766,893 $ 96,176,230 $ 16,590,663 Squire Park Holdings LLC $ 11,994,796 $ 8,637,064 $ 3,357, Page 54

55 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 6 Continued Year Ended December 31, 2015 Total Net Income Revenues (Loss) Affordable Apartment Associates LLC $ 295,644 $ (320,862) Broadway & Pine Apartments LLC 428,732 (300,519) Capitol Hill Housing Foundation 2,540,825 (842,262) El Nor Limited Partnership 569,330 (43,957) Harrison Family Housing Limited Partnership 332,877 (90,284) Helen V Apartments LLC 404,702 (62,063) Holiday Apartments Limited Partnership 331,837 (69,936) Jefferson & 12th LLC 494,843 (334,095) Oleta Apartments Limited Partnership 302,736 (17,258) Pantages Apartments LLC 496,134 (380,849) Silvian Apartments LLC 360,515 (25,736) SOPI Village LLC 276,440 (281,312) Woodland Park Avenue LLC 198,204 (199,389) Twelfth Avenue Arts Association and Subsidiary 586,342 (350,544) Twelfth Avenue Arts Housing LLLP 980,290 (660,001) Discretely Presented Component Units $ 8,599,451 $ (3,979,067) Squire Park Holdings LLC $ 1,027,941 $ (206,519) In addition to the notes receivable described in Note 2, CHHIP has recorded accounts receivable from the limited partnerships and LLCs described above with a net balance of $2,170,679 and $2,486,900 at December 31, 2016 and 2015, respectively. The accounts receivable balance at December 31, 2016 and 2015, is reported net of an allowance for doubtful accounts totaling $168,799 and $596,801, respectively, and is included in accounts receivable in the balance sheets. CHHIP as the general partner or managing member has the option to purchase partnership property and right of first refusal at any time during the last 12 months of the initial 15 year low income housing tax credit compliance period for each of the housing limited partnerships and LLCs. As a general partner or managing member, as applicable, of the above partnerships and LLCs, CHHIP is liable for recourse liabilities. The limited partnership and LLC agreements provide for various obligations of the general partner or managing member, including an obligation to provide funds for any development and operating deficits. CHHIP has guaranteed the outstanding debt and certain performance obligations of 12th Avenue Arts Associates LLC as part of the 12th Avenue Arts project (Note 2). At December 31, 2016 and 2015, CHHIP had $28,543,600 and $28,664,973 of outstanding guarantees and $210,673 and $210,673 of advances under guarantees, respectively. During 2015, CHHIP sold its equity interest in Fire Station 7, a 5 unit apartment project for $366,667 recognizing a gain on the sale of $366, Page 55

56 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 7 Blended Component Units The following condensed combining information is presented as of and for the year ended December 31, 2016 for blended components as summarized in single column titled CHHIP in the basic financial statements. Condensed combining information for the balance sheet is presented below: Housing Non Housing Blended Blended Eliminations CHHIP Component Units Component Units in Blending Total Assets: Current assets $ 9,024,682 $ 1,106,017 $ 438,257 $ (4,266,159) $ 6,302,797 Noncurrent assets Capital assets, net 22,469,391 27,762, ,346 50,474,043 Other 6,608,513 2,591,257 18,736,177 (5,969,413) 21,966,534 Total Assets $ 38,102,586 $ 31,459,580 $ 19,416,780 $ (10,235,572) $ 78,743,374 Liabilities: Current liabilities $ 4,616,220 $ 4,495,610 $ 768,290 $ (4,266,159) $ 5,613,961 Noncurrent liabilities 25,580,559 26,056,696 67,588 51,704,843 Total Liabilities $ 30,196,779 $ 30,552,306 $ 835,878 $ (4,266,159) $ 57,318,804 Net Position: Invested in capital assets, net of related debt $ (3,685,329) $ 3,465,785 $ 242,346 $ $ 22,802 Restricted 2,720,261 2,794,026 67,596 5,581,883 Unrestricted 8,870,875 (5,352,537) 18,270,960 (5,969,413) 15,819,885 Total Net Position $ 7,905,807 $ 907,274 $ 18,580,902 $ (5,969,413) $ 21,424, Page 56

57 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 7 Continued Condensed combining information for the statement of revenues, expenses and changes in net position is presented below: Housing Non Housing Blended Blended Eliminations CHHIP Component Units Component Units in Blending Total Operating Revenues: Tenant revenues $ 4,388,255 $ 5,109,367 $ 1,042,627 $ (285,896) $ 10,254,353 Fees for services 1,909,806 30,732 (983,951) 956,587 Project development fees 12,552 12,552 Other 20,765 67,377 29, ,540 Total Operating Revenues 6,331,378 5,176,744 1,102,757 (1,269,847) 11,341,032 Operating expenses 6,940,234 3,770, ,504 (1,269,847) 10,409,603 Depreciation and amortization 857,611 1,268,751 28,421 2,154,783 Total Operating Expenses 7,797,845 5,039, ,925 (1,269,847) 12,564,386 Operating Income (Loss) (1,466,467) 137, ,832 (1,223,354) Nonoperating revenues (expenses) Contributions and grants 1,586,476 1,586,476 Grant to component unit (107,075) (107,075) Interest income 88,981 2, , ,915 Gain on disposition of assets 5,000 5,000 Interest expense (400,598) (672,888) (1,073,486) Change in Net Position Before Capital Contributions and Other Changes (293,683) (532,742) 268,901 (557,524) Capital Contributions and Other Changes: Change in component units 1,110,826 1,110,826 Total Capital Contributions and Other Changes 1,110,826 1,110,826 Change in Net Position 817,143 (532,742) 268, ,302 Net Position: Beginning of year 7,088,664 1,440,016 18,312,001 (5,969,413) 20,871,268 End of Year $ 7,905,807 $ 907,274 $ 18,580,902 $ (5,969,413) $ 21,424, Page 57

58 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 7 Continued Condensed combining information for the statement of cash flows is presented below: Housing Non Housing Blended Blended Eliminations CHHIP Component Units Component Units in Blending Total Net cash provided (used) by operating activities $ (1,886,956) $ 3,170,473 $ (131,967) $ $ 1,151,550 Net cash provided by noncapital financing activities 1,411,901 (13,306) 1,398,595 Net cash (used) provided by capital and related financing activities (672,956) (2,573,834) (14,824) (3,261,614) Net cash provided (used) by investing activities 1,091,094 (388,378) 163, ,785 Net change in cash and cash equivalents (56,917) 194,955 16, ,316 Cash and cash equivalents, beginning of year 2,211, , ,023 3,046,758 Cash and Cash Equivalents, End of Year $ 2,154,648 $ 303,125 $ 743,301 $ $ 3,201,074 Note 8 Employee Benefits CHHIP contributes to a Simplified Employee Pension plan (SEP), a defined contribution benefit plan, on behalf of all eligible employees. CHHIP s contribution is discretionary. Contributions for 2016 and 2015 were 2 percent of gross wages annually and were in the amounts of $76,670 and $61,115 for the years ended December 31, 2016 and 2015, respectively. As of December 31, 2016 and 2015, accrued pension costs, including employee deferrals, totaled $90,068 and $80,115, respectively. There were no Plan forfeitures for either years ended December 31, 2016 or Note 9 Acquisitions and Development During 2016, CHHIP was engaged in the following acquisition and development projects: Union James Apartments On February 11, 2016, Union James Affordable Housing LLC, of which CHHIP is the sole member, purchased the two apartment buildings that make up the Union James Apartments, by assuming the existing debt. Liberty Bank Building Apartments During 2016, CHHIP continued predevelopment work on a 115 unit affordable housing project. CHHIP entered into a Memorandum of Understanding with three Central Area organizations to incorporate community priorities in the development of the project. Groundbreaking is scheduled for June, 2017 and the project will be completed in Page 58

59 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Notes to Financial Statements For the Years Ended December 31, 2016 and 2015 Note 9 Continued Capitol Hill Transit Oriented Development During 2016, CHHIP entered into a purchase and sale agreement with Sound Transit to purchase the development site at the Capitol Hill Light Rail Station known as B North. Harvey Apartments CHHIP continues to explore feasible options for rehabilitation and/or redevelopment of the 20 unit apartment project owned by Central Area Development Association. White Center Community Resource Center CHHIP entered into a Letter of Intent with three White Center community organizations and King County Department of Community and Human Services to explore development of affordable housing and a community resource center on county owned property. Lake City During May 2017, CHHIP entered into a purchase and sale agreement to purchase a site in Lake City with the intent to construct an 85 unit apartment project. Other Management is evaluating the redevelopment of certain CHHIP owned properties including a surface parking lot that potentially could be developed into a 55 unit apartment project. Note 10 Contingencies CHHIP is exposed to risks commonly associated with the ownership and rental of real properly. Risks including bodily injury, property damage by fire and forces of nature; loss of assets from theft and employee dishonesty; and liability for employees' conduct are mitigated by a combination of insurance, training and policies and procedures. Management is of the opinion that those risks are immaterial to the financial statements. In connection with various federal, state, and city grants and loan programs, CHHIP is obligated to operate in accordance with those grant and loan requirements and is subject to audit by those agencies. In cases of noncompliance, the agencies involved may require that CHHIP refund payment of program funds. The amount, if any, of expenses which may be disallowed by the agencies cannot be determined at this time, although CHHIP expects such amounts, if any, to be immaterial. Note 11 Risk Management CHHIP has obtained insurance coverage through a commercial insurance broker with the exception of workers compensation insurance and unemployment insurance which are provided by agencies of the State of Washington. Property loss coverage is on a replacement basis with a deductible of $5,000 per occurrence. Settled claims have not exceeded coverage purchased during the past three years. 33 Page 59

60 SUPPLEMENTARY INFORMATION Page 60

61 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Departmental Operations For the Year Ended December 31, 2016 Property Administration Operations & Management Total Receipts: Rents $ 10,494,399 $ $ 10,494,399 Vacancy (332,705) (332,705) Tenant fees 211, ,831 Development fees 12,552 12,552 Fees for services 2,854,955 2,854,955 Contributions and grants 1,586,476 1,586,476 Other income 92,121 49, ,383 Total Receipts 10,465,646 4,503,245 14,968,891 Expenditures: On site management expense 1,617,297 1,617,297 Office salaries, benefits and payroll taxes 3,966,839 3,966,839 Utilities 1,274, ,275,452 Professional fees 417, , ,335 Insurance 266, , ,052 Property management fees 1,115,734 1,115,734 Repairs, maintenance and improvements 1,619,046 76,971 1,696,017 Debt service 2,290,577 2,290,577 Reserves 509, ,650 Other 277, ,425 1,034,227 Total Expenditures 9,388,828 5,262,352 14,651,180 Operating Income 1,076,818 (759,107) 317,711 Reconciliation to Statement of Income: Depreciation (2,091,992) (62,791) (2,154,783) Reserves additions 509, ,650 Interest income 12, , ,915 Interest expense (1,049,142) (24,345) (1,073,487) Other income (expenses) (87,721) (87,721) Gain on disposition of property 5,000 5,000 Fixed asset additions from operations 58,881 58,881 Expenses paid from reserves (124,267) (124,267) Debt service payments 1,736,577 1,736,577 Front line charges 597,888 (597,888) Management fees 1,300,480 (1,300,480) Net Income $ 1,939,850 $ (2,497,374) $ (557,524) See independent auditor s report. 34 Page 61

62 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Property Operations For the Year Ended December 31, 2016 Burke 18th Boylston Gilman Byron Casa Avenue th E. Berneva Howell Bremer Brewster Broadway Gardens Wetmore di Cinque Centennial Receipts: Rents $ 122,467 $ 52,944 $ 114,046 $ 305,511 $ 422,392 $ 301,561 $ 59,400 $ 181,312 $ 128,754 $ 73,435 $ 326,511 Vacancy (20) (1,272) (2,482) (4,126) (10,585) (25,481) (2,748) (2,473) (1,376) (9,478) Tenant fees 871 1,649 1,818 20,296 11,207 5,739 1,214 4,025 2,358 1,223 12,289 Other income 476 1,690 11, Total Receipts 123,794 53, , , , ,609 60, , ,639 73, ,527 Expenditures: On site management expense 12,335 9,073 37,907 76,733 62,716 51,631 7,645 23,177 12,331 7,267 45,144 Utilities 12,855 6,067 12,238 48,040 42,254 32,338 4,833 16,843 25,280 6,361 33,851 Professional fees 5,460 2,053 4,106 23,623 16,768 11,977 1,711 5,133 5,756 1,711 10,266 Insurance 2,465 1,513 3,524 10,664 11,286 8,498 1,246 4,762 3, ,869 Property management fees 6,034 5,265 9,194 29,424 68,338 47,086 8,643 26,078 23,860 10,684 25,768 Repairs, maintenance and improvements 23,399 14,715 20,668 40,619 60,859 31,821 7,122 39,598 33,605 7,078 32,008 Debt service 37,264 10,005 57,928 86,403 26,789 8,083 23,017 5,100 6, ,851 Reserves 14,496 10,000 3,121 10,000 22,131 26,400 6,000 7,500 7,000 8,500 Other 1,505 1,000 1,706 4,494 10,808 6,010 1,046 8,075 2, ,311 Total Expenditures 115,813 49, , , , ,550 46, , ,897 40, ,568 Operating Income (Loss) 7,981 3,635 10,913 21,846 41,451 51,059 14,285 28,406 9,742 32,958 48,959 Reconciliation to Statement of Income: Depreciation and amortization (23,412) (8,451) (24,953) (77,662) (55,271) (74,434) (10,149) (74,631) (44,357) (150) (56,920) Reserves additions 14,496 10,000 3,121 10,000 22,131 26,400 6,000 7,500 7,000 8,500 Interest income restricted , Interest and financial expenses (30,421) 2, (12,187) (61,114) 4,434 (5,069) (9,682) 1,944 (6,225) (74,122) Other income (expense) Fixed asset additions from operations 1,203 3,883 1,726 4,350 2,020 Expenses paid from reserves (6,061) (2,150) (2,404) (438) Debt service payments 37,264 10,005 57,928 86,403 26,789 8,083 23,017 5,100 6, ,851 Frontline and bookkeeping charges 5,076 3,385 6,769 16,922 27,639 19,742 2,820 8,461 6,769 2,820 16,922 Management fees 6,034 5,265 9,194 29,424 68,338 47,086 8,643 26,078 23,860 10,684 25,768 Net Income (Loss) $ 18,256 $ 16,990 $ 19,320 $ 40,577 $ 132,138 $ 100,699 $ 24,756 $ 11,683 $ 9,690 $ 46,466 $ 84,292 See independent auditor s report. 35 Page 62

63 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Property Operations (Continued) For the Year Ended December 31, 2016 Central City Elizabeth Jefferson & Larned Affordable James Senior Gilman Holden 12th Apartments Housing Devonshire El Nor Housing Fleming LP Fredonia Joe Black Court LP Harrison Hazel Plaza Vista Commercial John Carney LP Receipts: Rents $ 179,988 $ 546,723 $ 575,490 $ 611,940 $ 319,345 $ 297,107 $ 302,930 $ 302,399 $ 358,775 $ 266,318 $ 236,606 $ 125,844 $ 214,446 $ 295,647 Vacancy (11,127) (10,515) (6,876) (14,621) (4,960) (25,215) (16,328) (8,965) (2,971) (13,000) (20,031) (4,979) (57,197) Tenant fees ,135 5,361 3,191 6,526 4,326 6,356 6,294 3,809 2,273 1,263 6,712 2,502 Other income ,438 1,080 Total Receipts 169, , , , , , , , , , , , , ,032 Expenditures: On site management expense 34, , , ,770 40,031 17,420 43,886 60,964 38,686 50,804 65,599 2,423 47,433 46,281 Utilities 28,512 68,696 70,447 67,217 36,884 25,628 48,518 44,305 62,077 21,105 28,709 27,183 36,658 Professional fees 6,774 21,739 29,700 26,819 17,779 4,106 8,509 15,847 14,773 9,392 13, ,974 13,468 Insurance 4,130 13,286 15,248 20,339 7,310 4,234 7,564 9,305 9,448 4,084 4,187 1,582 5,747 5,899 Property management fees 8,792 92,328 77,881 36,000 37,739 45,620 42,569 46,856 18,914 18,359 9,984 4,059 33,317 39,587 Repairs, maintenance and improvements 55,416 93,613 93, ,833 38,495 36,087 60,418 41,952 49,385 29,572 39, ,381 31,875 Debt service 9, , ,832 82,227 68,196 36,000 50, , ,546 15,877 36,891 35,700 Reserves 14, ,500 33,000 30,348 13,300 6,920 4,320 10,000 11,044 20,658 6,960 3,600 5,800 9,920 Other 2,516 11,313 11,576 14,881 5,124 24,356 7,694 5,122 10,237 4,302 6,922 7,086 6,100 57,911 Total Expenditures 155, , , , , , , , , , ,152 56, , ,599 Operating Income (Loss) 13,785 44,285 9,416 67,933 42,326 43,651 33,488 14,713 68,467 (12,231) 26,686 69,647 20, Reconciliation to Statement of Income: Depreciation and amortization (36,790) (64,221) (140,034) (86,707) (98,439) (40,782) (53,208) (128,235) (89,300) (84,209) (16,545) (14,522) (41,955) (90,402) Reserves additions 14, ,500 33,000 30,348 13,300 6,920 4,320 10,000 11,044 20,658 6,960 3,600 5,800 9,920 Interest income restricted 208 1,286 1, Interest and financial expenses 15,124 6,225 (74,772) (67,973) (60,039) (44,706) (22,384) 560 (95,018) (77,667) (4,128) (5,478) (14,940) 8,733 Other income (expense) (192) (185,544) (161) 2,264 (17,161) (7,450) ,193 Fixed asset additions from operations 1,438 7,638 4,291 1,228 1,304 Expenses paid from reserves (2,582) (1,885) (11,685) (1,994) (9,700) (4,685) (3,135) (553) (1,895) Debt service payments 9, , ,832 82,227 68,196 36,000 50, , ,546 15,877 36,891 35,700 Frontline and bookkeeping charges 6,768 34,971 31,022 33,844 20,306 6,769 13,537 14,101 10,717 9,024 9, ,229 18,614 Management fees 8,792 92, ,376 36,000 37,739 45,620 42,569 46,856 18,914 18,359 9,984 4,059 33,317 39,587 Net Income (Loss) $ 23,725 $ 222,680 $ 46,383 $ 127,815 $ 37,451 $ 87,744 $ 44,968 $ 9,080 $ 21,271 $ (16,493) $ 46,089 $ 87,296 $ 53,673 $ 40,304 See independent auditor s report. 36 Page 63

64 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Property Operations (Continued) For the Year Ended December 31, 2016 Lincoln Court Mary Ruth Manor Maxwell Melrose Miller Park Park Hill Ponderosa Seneca Master Tenant Union James Villa Total Receipts: Rents $ 263,915 $ 247,651 $ 42,072 $ 245,446 $ 133,224 $ 404,594 $ 207,015 $ 323,530 $ 928,176 $ 308,082 $ 668,803 $ 10,494,399 Vacancy (10,784) (4,329) (5,352) (3,748) (11,638) (9,766) (4,795) (18,525) (6,942) (332,705) Tenant fees 12,239 3,855 1,233 1,353 5,598 3,606 1,947 8, ,484 35, ,831 Other income 1, ,920 3,102 92,121 Total Receipts 267, ,753 43, , , , , , , , ,620 10,465,646 Expenditures: On site management expense 53,386 60,833 6,463 65,094 26,990 56,916 41,668 46,640 11,817 27,350 76,146 1,617,297 Utilities 38,110 34,207 4,195 36,508 17,261 48,766 21,703 34,663 92,573 32, ,281 1,274,888 Professional fees 9,924 16,489 1,369 8,276 4,106 10,266 11,087 16,606 16,308 5,934 37, ,685 Insurance 6,594 4,312 1,043 6,027 3,534 11,181 5,374 8,771 24,692 6,933 19, ,149 Property management fees 21,240 13,847 4,081 29,579 11,642 62,277 13,314 73,588 12, ,310 1,115,734 Repairs, maintenance and improvements 47,914 43,744 14,220 21,983 21,523 39,737 75,257 45, ,696 90, ,898 1,619,046 Debt service 95,423 54,899 4,644 32,688 22,385 58,249 53, ,000 59, ,714 2,290,577 Reserves 17,400 24,000 1,440 5,600 10,461 1,000 14,484 8,491 8,400 31, ,650 Other 3,841 10, ,790 2,428 4,314 4,877 2,157 14,574 4,052 6, ,802 Total Expenditures 293, ,095 38, , , , , , , , ,803 9,388,828 Operating Income (Loss) (26,493) (15,342) 5,066 28,902 14, ,856 11,432 37, ,493 43,511 22,817 1,076,818 Reconciliation to Statement of Income: Depreciation and amortization (78,618) (34,493) (6,913) (37,215) (35,933) (38,832) (10,910) (112,941) (28,421) (24,173) (247,804) (2,091,992) Reserves additions 17,400 24,000 1,440 5,600 10,461 1,000 14,484 8,491 8,400 31, ,650 Interest income restricted ` ,678 Interest and financial expenses (76,804) (28,451) (951) (13,560) (15,217) (38,222) (39,909) (68,321) (141,784) (1,049,142) Other income (expense) (50,191) (25) 114,796 (15) 675 (87,721) Fixed asset additions from operations 12,401 1,204 7,844 4,244 1,371 2,736 58,881 Expenses paid from reserves (875) (16,000) (1,139) (9,197) (16,305) (31,584) (124,267) Debt service payments 95,423 54,899 4,644 32,688 22,385 58,249 53,130 59, ,714 1,736,577 Frontline and bookkeeping charges 16,357 11,281 2,256 16,922 6,768 16,922 12,973 23,545 11,281 34, ,888 Management fees 21,240 13,876 4,081 29,579 11,642 62,277 13,314 72,811 12, ,309 1,300,480 Net Income (Loss) $ (31,391) $ (12,863) $ (6,210) $ 63,348 $ 14,689 $ 157,988 $ 49,187 $ 26,398 $ 227,112 $ 44,224 $ (32,313) $ 1,939,850 See independent auditor s report. 37 Page 64

65 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2016 Federal Passed Federal CFDA Pass Through Through to Disbursements/ Federal Grantor/Pass Through Grantor/Program Title Number Identifying Number Subrecipients ** Expenditures US Department of Housing and Urban Development: Pass Through Program From Housing Authority of the City of Bremerton: Section 8 Housing Assistance Payments Program WA 19M $ $ 100,505 Section 8 Housing Assistance Payments Program WA19L ,138 Section 8 Housing Assistance Payments Program WA 19M ,415 Section 8 Housing Assistance Payments Program WA 19M ,816 Section 8 Housing Assistance Payments Program WA ,365 State of Washington: Section 8 Housing Assistance Payments Program ,590 Total ,115,829 City of Seattle: Community Development Block Grants/Entitlement Grants 410 Apartments* Unknown 30,100 Bremer Apartments* Unknown 102,630 Fredonia Apartments* Unknown 409,760 Gale Place Apartments* Unknown 286,400 Lincoln Court Apartments* Unknown 1,203,904 Park Hill Apartments* Unknown 282,303 El Nor Apartments* Unknown 493,698 Union James Apartments* Unknown 397,635 Office of Economic Development Capitol Hill Chamber of Commerce Unknown 17,500 Total ,223,930 Rental Rehabilitation Program Gale Place Apartments* Unknown 480,000 Park Hill Apartments* Unknown 122,088 Total ,088 State of Washington: HOME Investment Partnership Program* ,000,000 Total ,000,000 Enterprise Community Partners, Inc.: Section 4 Capacity Building for Community Development and Affordable Housing* B 10 CB MD ,383 Section 4 Capacity Building for Community Development and Affordable Housing* B 13 CB MD ,172 Section 4 Capacity Building for Community Development and Affordable Housing B 14 CB MD ,000 Local Initiatives Support Corporation: Section 4 Capacity Building for Community Development and Affordable Housing ,000 Section 4 Capacity Building for Community Development and Affordable Housing ,000 Section 4 Capacity Building for Community Development and Affordable Housing ,000 Section 4 Capacity Building for Community Development and Affordable Housing ,000 Total ,555 Total US Department of Housing and Urban Development 6,303,402 Total Federal Expenditures $ $ 6,303,402 * Denotes outstanding loan ** No federal assistance reported on the Schedule of Expenditures of Federal Awards was passed through to subrecipients during the year. See accompanying notes to schedule of expenditures of federal awards and independent auditor s report. 38 Page 65

66 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Expenditures of Federal Awards For the Year Ended December 31, 2016 Note 1 Basis of Presentation The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant and loan activity of Capitol Hill Housing Improvement Program (CHHIP) under programs of the federal government for the year ended December 31, The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of CHHIP, it is not intended to and does not present the financial position, changes in net assets, or cash flows of CHHIP. Note 2 Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in OMB Circular A 87, Cost Principles for State, Local and Indian Tribal Governments, and the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Organization did not utilize the de minimis indirect cost rate during the year ended December 31, Note 3 Loans Outstanding The Organization had the following loan balances outstanding at December 31, The loan balances outstanding are also included in the federal expenditures presented in the Schedule. Program Title CFDA Number Amount Outstanding Community Development Block Grants/Entitlement Grants $ 3,206,430 Rental Rehabilitation Program ,088 HOME Investment Partnership Program ,000,000 Section 4 Capacity Building for Community Development and Affordable Housing , Page 66

67 SINGLE AUDIT REPORTS Page 67

68 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor s Report To the Board of Directors Capitol Hill Housing Improvement Program Seattle, Washington We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the business type activities and the aggregate discretely presented component units of Capitol Hill Housing Improvement Program (CHHIP), as of and for the year ended December 31, 2016, and the related notes to the financial statements, which collectively comprise CHHIP s basic financial statements, and have issued our report thereon dated May 22, INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered CHHIP's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of CHHIP s internal control. Accordingly, we do not express an opinion on the effectiveness of CHHIP s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. T: T: F: Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified NE 4th St Suite 1700 Bellevue WA clarknuber.com 40 Page 68

69 COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether CHHIP's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PURPOSE OF THIS REPORT The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Certified Public Accountants May 22, Page 69

70 Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance Independent Auditor s Report To the Board of Directors Capitol Hill Housing Improvement Program Seattle, Washington REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM We have audited Capitol Hill Housing Improvement Program s (CHHIP s) compliance with types of compliance requirements described in the U.S. Office of Management and Budget s Compliance Supplement that could have a direct and material effect on each of CHHIP s major federal programs for the year ended December 31, CHHIP s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. CHHIP s financial statements include the operations of certain HUD projects and Elizabeth James Senior Housing, blended component unit of CHHIP, that in total received $3,466,278 in federal awards. Those projects are subject to U.S. Department of Housing and Urban Development (HUD) reporting requirements. Those HUD projects were audited as a separate organizational unit and Elizabeth James Senior Housing as a legally separate entity as permitted by 2 CFR (a) and HUD. Accordingly, the federal awards of $3,466,278 are excluded from the accompanying schedule of expenditures of federal awards. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility T: T: F: NE 4th St Suite 1700 Bellevue WA clarknuber.com Our responsibility is to express an opinion on compliance for each of CHHIP s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about CHHIP s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of CHHIP s compliance. 42 Page 70

71 Opinion on Each Major Federal Program In our opinion, CHHIP complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of CHHIP is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered CHHIP s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of CHHIP s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Certified Public Accountants May 22, Page 71

72 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Findings and Questioned Costs For the Year Ended December 31, 2016 Section I Summary of Auditor s Results Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: - Material weaknesses identified? Yes No - Significant deficiencies identified? Yes None reported. Noncompliance material to financial statements noted? Yes No Federal Awards Internal control over major programs: - Material weaknesses identified? Yes No - Significant deficiencies identified? Yes None reported. Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR (a)? Yes No Identification of Major Programs CFDA Numbers Name of Federal Program or Cluster HOME Investment Partnership Program Rental Rehabilitation Program Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 Auditee qualified as low risk auditee? Yes No 44 Page 72

73 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Findings and Questioned Costs For the Year Ended December 31, 2016 Section II Financial Statement Findings No matters were reported. Section III Findings and Questioned Costs for Federal Awards No matters were reported. 45 Page 73

74 CAPITOL HILL HOUSING IMPROVEMENT PROGRAM Schedule of Prior Audit Findings For the Year Ended December 31, 2016 There were no prior audit findings; therefore, no matters are reportable. 46 Page 74

75 SECTION 6: Resolution : Capital Campaign SECTION 6 Page 75

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77 ADOPTED AT A MEETING OF THE BOARD OF DIRECTORS OF THE CAPITOL HILL HOUSING IMPROVEMENT PROGRAM, A WASHINGTON PUBLIC CORPORATION RESOLUTION NO Regarding Support for a Capital Campaign to Build Great Communities in Three Seattle Neighborhoods WHEREAS, RCW provides that a city may form a public corporation in order to improve the general living conditions in the urban areas of the state ; and WHEREAS, The City of Seattle ( the City ), acting in accordance with RCW , formed the Capitol Hill Housing Improvement Program, a public corporation, for such purposes; and WHEREAS, Capitol Hill Housing Foundation ( the Foundation ) was incorporated December 16, 2009 under the provisions of the Washington Nonprofit Corporation Act (RCW Chapter 24.03) and organized exclusively for charitable, scientific or educational purposes within the meaning of section 501(c)(3) of the Internal Revenue Code including without limitation: to raise funds to enhance and augment the purposes, programs, services and facilities of Capitol Hill Housing Improvement Program; and WHEREAS, the Capitol Hill Housing Improvement Program and the Capitol Hill Housing Foundation entered into a Service Agreement on April 12, 2010 (revised May 20, 2013) wherein the Foundation agrees to provide services to support the Program and its chartered mission including conducting such capital campaigns as the Foundation and the Program deem to be necessary and feasible; and WHEREAS, the governing Board of the Capitol Hill Housing Improvement Program has authorized the necessary activities to move forward the development or exploration of the projects known as the Liberty Bank Building, Capitol Hill Broadway Transit-Oriented Development and the White Center Big Idea, as certified by the Board s adoption of the following resolutions: 1. Resolution : Authorization for Predevelopment Funds for Broadway TOD, June 10, Resolution : Liberty Bank Predevelopment Financing, July 13, Resolution : Broadway TOD: Predevelopment, Funding Applications, Development Agreement, Site Control, August 10, Resolution : Liberty Bank Building Predevelopment Financing Impact Capital, April 11, 2016 Page 77

78 5. Resolution : Broadway TOD: Accept Assignment of a Disposition and Development Agreement; Waive Feasibility Under Purchase and Sale Agreement; Predevelopment Expenditures; and Formation of Ownership Entity, August 8, Resolution : Authorization for Predevelopment Funds for White Center, March 13, Resolution : Liberty Bank Building Bond Inducement, April 10, 2017; and WHEREAS the neighborhoods of Capitol Hill, the Central District and White Center are experiencing significant displacement pressures and have strong, community-rooted organizations that share goals for greater equity and opportunity for residents and businesses; and WHEREAS a feasibility study commissioned by the Capitol Hill Housing Foundation and conducted by Sirius Advice concludes that a multi-project $8 million capital campaign led by Capitol Hill Housing, along with its partner organizations in those three neighborhoods, has a high likelihood of success; and WHEREAS that same study also concludes that there is an appetite, particularly among local institutional funders, to support efforts with far-reaching impact; NOW, THEREFORE, BE IT RESOLVED by the Board of Capitol Hill Housing Improvement Program to commit to a capital campaign with a goal of approximately $8 million to: 1. Support the construction of new or improved facilities in three neighborhoods Capitol Hill, the Central District and White Center which will provide services, improved amenities, and more than 300 homes to residents of those neighborhoods. 2. Work in tandem with our partners Centerstone, Africatown, Black Community Impact Alliance, Southwest Youth and Family Services, White Center Food Bank, and White Center Community Development Association to develop the resources necessary to build new or improved facilities and to build the fundraising and organizing capacity of those organizations. CERTIFICATION I, Robert P. Schwartz, certify that I am the Vice Chair of Capitol Hill Housing Improvement Program ( CHH ) and that the foregoing Resolution was duly adopted at a meeting of the Board of Directors of CHH held on June 12, 2017, in accordance with the Charter and Rules and Regulations of CHH upon proper notice and at which time a quorum was present. DATED the 12 th day of June, By Its Vice Chair Page 78

79 SECTION 7: Property Action Plans SECTION 7 Page 79

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81 Capitol Hill Housing Centennial Apartments PROPERTY ACTION PLAN December 26, 2013 NAME: ADDRESS: UNITS: BUILDING PROFILE Centennial Apartments 600 E. Olive Seattle, WA total 2 studio, 25 one bed 3 two bed BUILT/RENOV.: Built 1962 Renovated 1999 DATE OF ACQ.: 1/29/99 TYPE: Acq. Rehab FINANCING: Bonds, City, State Loans INCOMES SERVED:30%, 50%,80% unrestricted AVG. HOUSEHOLD INC.: $23,340 SIGNIFICANT DATE: None D C 12/31/12: 1.13 PORTFOLIO ASSESSMENT: Quad. II Heart FINANCIALS as of 12/31/12 Property Per Unit CHH Portfolio Ext. Entrance Grp Revenue: Gross Potential Residential Rent: $268,501 $8,950 $8,876 $10,017 Less Vacancy Loss & concessions -11, Total Residential Rent Revenue 256,789 8,560 8,572 9,713 Other Revenue Commercial Income Other Income 11, Total Other Revenue 11, Total Revenue 268,228 8,941 9,343 9,989 Expenses Administrative 66,268 2,209 2,788 3,011 Utilities 20, ,112 1,340 Operating and maintenance 32,880 1,096 1,613 1,716 Taxes and insurance 18, Total Operating Expense 137,547 4,585 6,170 6,814 Operating Surplus (Deficit) 130,681 4,356 3,173 3,175 Partnership Expenses and Debt Service Partnership Expenses Debt Service -112,851-3,762-1,919-1,451 Total Partnership Expenses and Debt Service -112,851-3,762-2,086-1,507 Operating Surplus (Deficit) B4 Reserves 17, ,087 1,668 Reserve Contributions Replacement Reserve -7, Operating Reserve -1, Total Reserve Contributions -8, Operating Surplus (Deficit) 9, ,139 FINANCIAL SUSTAINABILITY Year 1-2 Years 3-4 Years 5-7 Total Capital Exp. Pending None $10,000 Laundry Equip $25,000 Exterior Paint and deck coating $45,000 Replacement Reserve Balance Annual Replacement Reserve Financial Sustainability Score Centennial Apts $34,778 $7, CHH Portfolio Avg. $110,362 $14, Page 81

82 MISSION ALIGNMENT SCORE Loc. Afford. HUD or Family Comm. Indoor Comm. Outdoor Playground or P-Patch Pot. to Add Pedestrian Oriented Building Design Total Centennial Portfolio Avg TURNOVER RATE % Avg. Length of Tenancy Income Avg. Age of HH Centennial 23% 3.1 years $18, years Portfolio Avg. 18% 4.3 years $20, years RESIDENT SURVEY RESULTS: Port. Avg. Response Rate 40% 48% Avg. score for all questions: 3.76/ Mgmt. & maintenance questions: 4.09/ Satisfaction w/ apt. questions: 3.73/ Sense of community questions: 3.56/ COMMENTS: On the resident survey, Centennial received the third lowest overall score, and also had the lowest score for the group of questions related to satisfaction with apartment, including the lowest score for My apartment fits my needs, I would recommend building to a friend, and I intend to stay when my lease expires. Several of the units have difficult layouts with the bathroom only accessible from the bedroom. On the plus side, the building has a beautiful outdoor space and some of the units have west facing balconies with a view toward downtown. The property did perform better in 2013, with Net Income of $14,928. QUOTE: Heidi is an excellent manager. She tries to promote a sense of community. She is very diligent and highly involved. We are fortunate to have her after having switched managers so many times. Survey respondent ACTION PLAN: Steps to improve Financial Performance: Increase income to degree possible by maximizing rents at unrestricted units. Raised parking fees effective 1/1/14. Take decks into account when setting rents on unrestricted units. Reduce vacancy loss by reducing turnover. Strategies include increase resident satisfaction, focus on leasing, and quick unit turns. Continue to evaluate refinancing to reduce debt service. Steps to improve Mission Alignment: Continue to hold resident events to increase community. Manager to work to enhance relationships with neighboring buildings. Evaluate potential installation of heat pumps. Consider unit improvements if cash flow allows to enhance resident satisfaction. Steps to improve Financial Sustainability: Closely monitor structure and operations. Timetable and goal for improvements: Work with manager to address items brought up in survey by end of Q Page 82

83 SECTION 8: Consent Agenda and Attachments SECTION 8 Page 83

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85 CAPITOL HILL HOUSING REGULAR MEETING June 12, :00 7:30 PM Regular Meeting 12 th Ave Arts Pike Pine Meeting Room th Avenue, Seattle CONSENT ITEMS MINUTES AND REPORTS 1. May 2017 Draft Board Meeting Minutes (attached for adoption) 2. Memo re: Non-Board Committee Members (attached for acceptance) 3. Revised & Final Board Development Letter to Mayor (attached for ratification) 4. Tenant Communications Tracking (attached for review) 5. Committee Reports and Minutes (attached for acceptance) DONATIONS, TRANSACTIONS OVER $10,000 OR 1-YEAR, AGREEMENTS WITH PUBLIC ENTITIES Blended Date Bldg/entity Contract with: Amount: Purpose May 17, 2017 John Carney Morgan Mechanical $39,720 Domestic hot water boiler and storage tanks are at the end of useful life and starting to leak. Contracted work is for replacement of boiler, both tanks, check valves and minor repipe in boiler room. May 25, 2017 CHH CHH Asset Management Department & Imagine Housing $75,000 Provide asset management consulting services for Imagine Housing (SEE REVERSE FOR DISCRETE CONTRACTS) Page 85

86 GP ACTIVITIES (information only) Discrete Date Bldg/entity Contract with: Amount: Purpose May 31, 2017 Helen V Ken Hainsworth Co., Inc. $0 Lease of space for laundry equipment 2-year contract Page 86

87 June 8, 2017 Memorandum TO: CHH Board of Directors FROM: Kiley Dhatt RE: Compliance with procedures for selecting non-board members to CHH board committees In January of 2012, the CHH Board established procedures for selecting non-board members for nonvoting positions on Board Committees. These procedures were established via a memo from Chris and the Executive Committee, and the memo was updated in June Please see attached. It has come to our attention that we are not currently in compliance with these procedures with regard to all non-board members currently serving on Board Committees. This memo seeks to rectify that. For the following individuals, we have completed procedural steps 1-4 listed below: Winifred Mixon Finance and Asset Management Committee Chasten Fulbright Property Management Committee Andrew Brand Property Development Committee Liz Dunn Property Development Committee Procedural steps for approving non-board members serving on Board Committees: 1. Individual will submit resume to CHH 2. Leadership team will consider and meet with the individual as needed 3. Board Committee will consider and meet with the individual as needed 4. Executive Director will recommend the nominee to the Executive Committee 5. After approval from Executive Committee nominee will be presented for affirmation by full Board 6. Individual will be notified that they have been affirmed and given their committee assignment. Then they will be paired with a committee member and staff for a brief orientation In compliance with step 5, we are now presenting these candidates to the full Board for affirmation of their appointment to their respective committees. These individuals have the full support of their Board Committees, their Committee Chairs, the Executive Committee, and staff leadership to serve in this role. If you have any questions, concerns or objections, please raise them during the June 12 Board meeting during consideration of the consent agenda. If no concerns are raised and the consent agenda is adopted, we will consider the process for formally appointing these non-board members to committees to be complete. Page 87

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89 January 6, 2012 (Update June 8, 2015) Memorandum TO: CHH Board of Directors FROM: Chris and Executive Committee RE: Procedures for selecting non-board member to CHH board committee Context. In 2011 CHH adopted a new Charter and a new Rules and Regulations (Rules). Article III, Section 5 of the Rules provide for the board to assign non-board members into non-voting positions in board committees. The purpose of Section 5 is to allow the board to draw on broader expertise as needed and to provide a path for developing new prospective board members. This document outlines the procedures for selecting and assigning such members. Process. Individuals may come to be considered for a non-board member committee position at CHH in a variety of different ways; through Board, staff, community and self-recommendation or through the annual BOD nomination process. Once an individual is being considered, staff will ensure that they meet basic qualifications as enumerated in Section 3 of the Rules and Regulations (See below). 1. Individual will submit resume to CHH 2. Leadership team will consider and meet with the individual as needed 3. Board Committee will consider and meet with the individual as needed 4. Executive Director will recommend the nominee to the Executive Committee 5. After approval from Executive Committee nominee will be presented for affirmation by full Board 6. Individual will be notified that they have been affirmed and given their committee assignment. Then they will be paired with a committee member and staff for a brief orientation Summary. The formality of this process recognizes the seriousness of appointments into the board committees and provides for ample consideration of the qualifications of any candidate. CHH Rule and Regulations SECTION 3. Qualifications. In evaluating prospective members, the Board will be cognizant of the desirability of achieving a Board whose members reflect diversity in social, cultural, ethnic, racial, sexual orientation and economic backgrounds and perspectives. To ensure balanced responsiveness and competence, all candidates for the Board should meet the following criteria: Page 89

90 a. Background. (i) demonstrated leadership ability; and (ii) knowledge and skills from experience or training in one or more of the following areas: real estate development, property and asset management, special needs populations, community development, finance, budget, policy development, strategic planning, management/administration, capital development, corporate governance, marketing, negotiation, fundraising, grant-writing and accounting or such other skills as the Board may identify. b. Abilities and Characteristics. (i) credibility with the professional community and government entities with which the Program works; (ii) reliability, sound judgment, flexibility and creativity, (iii) ability to work effectively and cooperatively with other Board members, staff, community individuals, and groups with diverse backgrounds and philosophies; (iv) ability to make difficult decisions on behalf of the Program; and (v) ability to take a multi-cultural perspective and to support strategies that enhance a diverse, sustainable Capitol Hill Community. c. Commitment. (i) willingness to commit time and personal resources; (ii) willingness to serve on Board committees; (iii) willingness to represent the Program at community functions; and (Iv) commitment to the Program s express core purpose and values. d. Conflict of Interest Statement. All candidates will be required to disclose any information concerning activities of the candidate or his/her immediate family that present a potential Conflict of Interest as a Board member. Candidates whose employment, financial interests, and/or other activities are determined by the Board to be in conflict with the interests of the Program are ineligible for Board membership. No employee of the Program or any member of an employee s immediate family member is eligible for Board voting membership. Page 90

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93 REGULAR BOARD MEETING MINUTES Pike-Pine Room th Avenue, Seattle May 8, 2017 Members Present: Frank Alvarado, Derrick Belgarde, Rachel Ben-Shmuel, Bob Fikso, Cathy Hillenbrand, b.g. Nabors-Glass, Alice Quaintance, Rob Schwartz, Eric Snow Members Absent: Dana Behar, Paul Breckenridge, Michael Malone, Drew Porter, Selomé Teshome Staff Present: Kiley Dhatt (taking minutes), Jill Fleming, Brad Lange, Stacey McQuade, Chris Persons, Heyward Watson The meeting was called to order by Cathy Hillenbrand at 6:02 pm. Board and staff members introduced themselves. Cathy explained to the Board that the April consent agenda had accidentally been forgotten during the last Board meeting, and asked that the Board vote on both the April and May consent agendas at this meeting. A motion to approve the April 2017 Consent Agenda was made by Rachel Ben-Shmuel, seconded by b.g. Nabors-Glass, and passed unanimously. A motion to approve the May 2017 Consent Agenda, including corrections to the Property Management Committee report and the Foundation memo as reflected in the handouts, was made by Derrick Belgarde, seconded by b.g. Nabors-Glass, and passed unanimously. Disclosures and recusals: There were no disclosures or recusals. Presentation and Discussion Public Accountability Report: Kiley Dhatt gave a brief presentation on the highlights of CHH s annual public accountability report, which showcases CHH s commitment to public accountability and highlights our compliance to communication both with and from the Capitol Hill community and other members of the public, meeting and event notifications, community involvement and availability of information per RCW Real Estate Update: The Board entered into an executive session at 6:14 pm pursuant to RCW (1) (b) to consider the selection of a site or the acquisition of real estate by lease or purchase when public knowledge regarding such consideration would cause a likelihood of increased price. The Board exited the executive session at 6:42 pm. Page 93

94 Updates for Strategic Planning Retreat June CHH/F Boards Retreat Agenda: Chris Persons shared a draft agenda for the upcoming June 15 board retreat, which will include joint session with both the PDA and Foundation Boards, as well as separate sessions to address individual strategic issues. Each of these strategic issues is focused around a question of the day to be answered by the end of the session. Chris observed that the Foundation Board will be voting on the proposed Capital Campaign during the retreat, and the PDA Board will be asked to vote on it at the upcoming June Board meeting several days prior. The retreat is being facilitated by Melora Hiller with support from Kiley Dhatt and Melissa Blankenship. Chris also noted that with regard to the question of rebranding, the PDA Board will not be asked to choose a new name or even contemplate the process of doing so; instead they will be deciding whether or not to move forward with a process to explore rebranding. Case statements about pursuing rebranding and structural integration with another nonprofit will be provided in advance of the retreat for review by Board members. Partnership Discussion: The CHH Board entered into an executive session at 6:45 pm pursuant to RCW (1) (b) to consider the selection of a site or the acquisition of real estate by lease or purchase when public knowledge regarding such consideration would cause a likelihood of increased price. The Board exited the executive session at 6:47 pm. Executive Committee and Board Board Development: Cathy explained that the two vacant seats on the board currently are mayor-nominated. The Executive Committee has agreed that they would like to send a letter from Cathy Hillenbrand and Rob Schwartz as Chair and Vice Chair of the CHH Board, requesting that Mayor Murray consider Shalimar Gonzales and Chasten Fulbright to nominate to the Board. A draft of this letter is included in this month s Board packet. A motion to approve the draft letter recommending Shalimar Gonzales and Chasten Fulbright to the Mayor for nomination to Board seats was made by Rachel Ben-Shmuel, seconded by Frank Alvarado, and passed with one opposed. Eric Snow noted that the Mayor may have his own priorities and plan involved in nominating members to the CHH Board. Eric suggested that we make it clear that these names are merely suggestions and that we are eager to hear about any candidates the Mayor is excited about. It was agreed that this fits well with our intentions, and that before sending the letter consent on its final form would be obtained from Eric, Rob and Cathy. The final letter will then be included in next month s consent agenda for ratification by the Board. Capital Campaign Draft Resolution: Chris asked if there were any questions on the draft of the capital campaign resolution which was included in the Board packet. The PDA Board will not be asked to approve the capital campaign by resolution until the June Board Meeting. Rob wondered if, by listing the resolutions pertaining to projects involved in the Campaign, we are forever limiting ourselves in terms of the projects that can and cannot be supported by this campaign. Rob suggested that we give ourselves more wiggle room in case projects change. Chris agreed to revisit this and wordsmith it more carefully. Bob Fikso pointed out the ongoing problem of the messaging of this campaign, because it seems to imply that $8 million will somehow fund the creation of 300 units, which is misleading. Chris and Jill agreed that this is a problem staff are currently grappling with and continuing to work on a solution. Annual Meeting Recap: This item was skipped in the interest of time. Top of the Town Recap: This item was skipped in the interest of time. Page 94

95 Finance and Asset Management Finance and Asset Management Report: Jill Fleming explained that this finance and asset management report is not very controversial. The committee looked at a rolling cash forecast as usual. There were some fluctuations on our balance sheet. We decided not to finance our insurance premiums this year so we paid them in cash, which saves us from paying interest. Where notes payables have increased, it s because we re still drawing on our Mary Ruth Manor construction loan and we re spending predevelopment funds at Liberty Bank Building. We re still running with a very low vacancy rate for the first 3 months of the year. On the operating statement, you can see that we are ahead on our grants and donations. With the Foundation we generally expect that money later in the year and the Foundation was able to write CHH a check in February. We have a positive variance on payroll taxes and benefits due to open positions. Now that the positions are being filled we expect the positive variance to vanish and perhaps swing the other way. Regarding repair and maintenance spending, it s still early in the year and we had so much rain that some things have been delayed, causing a positive variance there as well. Repair and maintenance always picks up during the summer, so we also expect that to level out in the coming months. We re in a good place at this point; there are no big red flags. A motion to accept the May Finance and Asset Management Report was made by Frank Alvarado, seconded by Rachel Ben-Shmuel, and passed unanimously. Financial Contingency Scenario: Jill presented a worst case scenario report, explaining CHH s situation and options if the federal low income housing tax credit program were to be compromised. After sharing the report, Jill noted that we do not expect the tax credit program to be eliminated. If the price for tax credits goes down, which is a possibility, this could slow things down for us. In the worst case scenario where the tax credit program was eliminated and we were not able to develop any new projects, we would likely start by looking at our programs and functions to see what could be eliminated, and would look at other models for developing real estate. We would look at property operations. We have projects we could reposition as more market-rate units. We could freeze salaries and look for cost-saving options in healthcare. Introduce Director of Finance: Jill introduced Greg Gibson, our new Director of Finance. Today is Greg s first day on the job. Greg explained that he was previously in public accounting for seven years with Moss Adams, and expressed his excitement to be part of the CHH team. Introduce Dianne Moreland: Jill explained that we have our own real estate brokerage entity called CH Real Estate Management Services (CHREMS), which was formed so we could do third-party management for organizations whose property we may want to acquire. Right now we manage two properties under third-party management, Cal Anderson (which Lifelong Aids and Plymouth Housing own) and the Harvey (owned by CADA). We additionally have a letter of intent signed with SHA to manage their property Bayview Towers. We need licensed brokers on staff to be able to do this. Brad came in as a broker from a previous career and has been our designated broker. Since then, some of our portfolio managers have become brokers and Dianne Moreland recently completed requirements to become a managing broker, which makes her eligible to become the CHREMS designated broker. Appointing her would relieve Brad of this responsibility, freeing him up to focus on other things. A motion to install Dianne Moreland as CHREMS Designated Broker, replacing Brad Lange, was made by Bob Fikso, seconded by Rachel Ben-Shmuel, and passed unanimously. Page 95

96 Property Management Property Presentations: As part of an initiative to get Board members better acquainted with residents and the CHH portfolio, Heyward Watson presented a report on the Haines, Oleta and Pantages apartments. Introduce Resident Services Manager: Heyward introduced Ashley Thomas, who has been with CHH for about a year and a half in leasing, and was promoted into the role of Resident Services Manager at the beginning of April. Ashley has done a lot of research to figure out where the Resident Services program currently is, and where it needs to be. Ashley gave some background on herself and shared some the ideas and directions she is planning to take the department in. The meeting was adjourned by Cathy Hillenbrand at 7:28 pm. Page 96

97 Tenant Communications Tracking June 8, 2017 Building Issue Status Resolution Broadway Crossing Contesting charges for lock replacement Open: 1/23/ tenant served 10-day for balance owed for broken locks from 12/2015 ($608.95). 12/9/ Tenant indicated to HA that they would be filing a grievance with Heyward. 10/11/ Tenant served 10-day for payment of damages. Residents have not submitted a grievance for lock charges as of 3/09/2017. Letter sent offering to settle all charges for $ /3/2017. No changes / no new complaints since the May 2017 report. Page 97

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99 JUNE 2017 PROPERTY MANAGEMENT BOARD REPORT AND MINUTES Property Management Committee Members: B.G. Nabors-Glass, Chasten Fulbright, Derrick Belgarde Staff Liaisons to the Board: Heyward Watson and Dianne Moreland. (BOLD indicates those members in attendance) Date, time and location of next meeting: June 6, :00 2:00 pm Belmont Conference Room Date, time and location of next meeting: July 5, :00 2:00 pm Belmont Conference Room Date, time and location of meeting: August 1, :00 2:00 pm Belmont Conference Room Current Capital Projects in Process/Pending: Brewster Apartments; Contract signed with Cadence Construction on 8/10/16, contractor to replace all windows with U value of 0.28, replace two building entry doors & side lights, and attic insulation installed to provide R-49 value. Progress Contractor has made actual field measurements/design checks, and placed order with VPI (window manufacturer). Currently waiting for final quote, order confirm, and delivery lead-time on finish product delivery. Update: New windows are on order with VPI. Brewster has been invoiced by Cadence Construction for down payment. Cadence Construction is now setting up and beginning work. Weekly meetings on-site with contractor are scheduled for Wednesdays at 1:30 3:00. Update: New apartment window insulation is in process and completion is expected by the end December New entry door installation is expected by end of February Update: Window installation is 100% complete, entry doors are in the local warehouse, and awaiting delivery of the door locks. A small amount of exterior work remains which requires dry weather. Attic insulation is moving forward, and is tentatively scheduled for May 3 rd. Update: All work is complete with exception of entry installation, waiting for replacement parts. Latest Update: Window installation is 100% complete, entry doors are in the local warehouse, and awaiting delivery of the door locks. A small amount of exterior work remains which requires dry weather. Attic insulation is moving forward, and is tentatively scheduled for May 3 rd. John Carney Apartments: Contract is being signed with McBride Construction to assist WJE with opening exterior walls in strategic locations to inspect for any underlying problems and conditions. Update: Phase two of assessment is scheduled for November 17 & 18. Update: Exploratory work of phase 2 is completed. To be followed by report of findings and recommendations. Update: Water intrusion work is complete and Asset Management will review results and make recommendation for needed repairs with a timeline. Update: The report concludes the exterior wall system has failed and needs to be replaced. Update: The building continues to be evaluated as a candidate for syndication. Latest Update: Morgan Mechanical contracted to replace the hot water boiler and storage tanks. The work is scheduled to start on June 12 th. Villa Apartments: Contract is being signed with McBride Construction to assist WJE with opening exterior walls in strategic locations to inspect for any underlying problems and conditions. Update: Phase two of assessment was completed on September 8 and report was sent to Asset Management for further maintenance recommendation and repair work be performed in Update: Further review of the final report concluded the exterior wall system is performing as intended and recommended recoating the siding and re-caulking around all penetrations. Work is scheduled to be completed in Latest Update: Water metering for individual commercial tenets is being researched. Page 99

100 Four Twelve Apartments; Commitment letter for a $475,000 Construction to Permanent loan is signed with Banner Bank. Construction contract being negotiated with Buchanan General Contracting Company. Projected loan closing is late April with construction starting in May. Scope includes new roof, exterior siding repairs and paint, and adding a restroom for the building manager. Update: Waiting for final financing approval from the Office of Housing. Latest Update: Construction Loan closed and work will begin in early June with a ten-week construction schedule. Resident Services Resident Services Coordinators HUD Events: o 33 Events in May o 2 Events in May were coordinated by Resident Social Committees There were 13 one-on-one resident meetings that resulted in a referral to services. Portfolio Wide Events o On Friday May 26 th 50 Residents and 25 CHH Staff attended a WNBA Seattle Storm Game. Tickets were donated through Alaska Airlines Tickets for Kids. During the 2 nd quarter, our section was featured on the Jumbotron and Capitol Hill Housing was given a stadium wide shout out! CHH families and children had a wonderful time. o On May 25 th, Resident Services received a donation of 500 free tickets from Seattle Aquarium. Kelley-Ross Senior Drug Education o 1 presentation at Haines with 10 attendees. Rental Assistance o 14 residents applied for rental assistance o 7 residents attended Financial Fitness workshop o 5 residents received assistance NEAR Program o zero Mentor/Resident Meetings in May. o 3 resident referrals to the program in May. Third Party Management CHH is in continued discussions with SHA in response to their RFP for property management services for Bayview Tower. We are moving forward with transitioning the management to CHREMS with a new target date of April 1, In process of negotiating the management fee with SHA.: The target date for transitioning the property management to CHREMS is now July 1, CHH has received a draft LOI from SHA and continues to negotiate several points. Update: CHH has signed Letter of Interest with Seattle Housing Authority for management of Bayview and returned LOI to SHA for final approval. Latest Update: CHREMS and SHA have a signed LOI for management of Bayview Tower with transition tentatively set for September 1, CHREMS: Designated Broker has switched from Brad Lange, Director of Asset Management and Acquisitions, to Dianne Moreland, Senior Portfolio Manager. Brad Lange will remain a Managing Broker for CHREMS and serve as backup to the Designated Broker. Building Operations From the Finance report: Year to date April 30, 2017 Blended Operating Statement. Portfolio YTD vacancy is 2.4%. 12 month rolling vacancy is 2.4% April monthly snapshot vacancy is 2.0% Page 100

101 Leasing & Occupancy Board Report Information: Phone Calls Phone calls 510 On average calls, last 5-20 minutes, estimated time spent returning calls: Estimated Minutes per Month hours Work Days Low 5 mins High 10, Front Desk Signed in 78 Denials and Withdrawals Denials 3 Withdrawals 1 60 days or > Vacancy Non-HUD Building Average # of Units todate Reason Brewster Two denied; relisted and over-income, and construction due to water damage Centennial Tenant passed in units; hard unit turn Devonshire 74 1 Abandoned and three denials Holiday Turn required extra prep / four denials Joe Black Two denials / hold / relisted Oleta 83 1 Hard unit turn (?) Villa 65 1 One denial; relisted 60 days or > Vacancy HUD Building Average # of Units todate Reason El Nor 88 1 Name-up letters sent Helen V 70 1 Name-up letters sent ; one denial over-income Holden Vista 97 1 Name-up letters sent Mary Ruth Manor 87 1 One denial; one withdrawal/ Sent 15 name-up letters Union James 83 1 Eviction/ Sent 30 name-up letters/ three denials Page 101

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103 Capitol Hill Housing Property Management Dashboard Year to Date at April 30, 2017 YTD 2017 April April YTD 2017 Op expenses B4 Debt 2017 YTD Cash Flow Make Total 2017 Income Per Unit Cost Per Unit after debt and reserves Portfolio Ready Turn April 12 MO 2016 Blended Component Units: Manager Units Actual Budget Var % Actual Budget Var % Days Days Monthly Rolling 2017 YTD Vacancy Actual Budget Variance Comments Berneva Scott 12 3,220 2,919 10% 2,303 2,481 7% 0.0% 3.4% 3.1% 2.4% 6, ,737 Boylston Howell Scott 30 3,687 3,448 7% 2,603 2,578-1% % 0.9% 0.6% 1.4% 29,189 22,761 6,428 Bremer Valencia 49 2,955 2,847 4% 1,756 1,920 9% 0.0% 1.0% 1.0% 2.4% 22,313 9,007 13,306 Brewster Dianne 35 2,710 2,701 0% 2,081 1,996-4% % 7.6% 9.2% 4.7% 13,223 15,856 (2,633) 2 Units had extensive water damage (vacated) Broadway Valencia 5 4,248 4,138 3% 2,044 2,602 21% 0.0% 0.0% 0.0% 0.0% 6,318 2,982 3,336 Burke Gilman Gardens Dianne 15 4,108 3,959 4% 2,808 3,219 13% 0.0% 0.0% 0.0% 1.5% (6,008) (14,419) 8,411 annual debt payment Byron Wetmore Michelle 12 3,605 3,603 0% 3,035 3,180 5% % 0.2% 0.7% 1.9% (602) (2,356) 1,754 annual debt payment Casa di Cinque Dianne 5 5,241 5,118 2% 2,642 3,146 16% 0.0% 1.8% 0.0% 1.9% 10,919 7,786 3,133 Centennial Scott 30 3,687 3,828-4% 1,849 1,946 5% % 3.4% 5.2% 2.9% 14,686 16,030 (1,344) Vacancies Devonshire Scott 62 3,051 3,012 1% 2,109 2,119 0% % 1.2% 1.6% 1.9% 15,503 12,396 3,107 Eighteenth Avenue Dianne 9 4,654 4,448 5% 2,422 2,779 13% 0.0% 0.2% 0.5% 0.0% 5, ,071 El Nor Michelle 55 3,467 3,506-1% 3,054 2,717-12% % 2.2% 2.9% 1.2% (17,458) 3,192 (20,650) Vacancies and turn remodels (will reserve) Elizabeth James Scott 60 3,395 3,349 1% 2,812 2,183-29% % 1.9% 1.7% 2.4% (15,738) 19,219 (34,957) New boiler (will reserve) Fleming Michelle 36 3,034 2,976 2% 1,671 1,874 11% 0.0% 0.7% 0.4% 1.5% 15,002 5,596 9,406 Four Ten Valencia 6 2,992 2,987 0% 1,902 2,299 17% 0.0% 0.0% 0.0% 2.4% 3, ,417 Four Twelve Michelle 12 4,958 4,989-1% 3,061 3,410 10% 0.0% 4.8% 1.9% 6.2% 17,968 8,725 9,243 Fredonia Dianne 12 8,173 7,762 5% 5,044 5,215 3% % 3.1% 3.8% 3.1% 12,460 5,470 6,990 Gilman Court Valencia 25 4,172 4,047 3% 3,507 3,200-10% 0.0% 2.2% 1.5% 3.6% 13,294 17,842 (4,548) Audit fee payment Harrison at 15th Valencia 19 6,202 6,434-4% 3,799 3,885 2% 0.8% 0.2% 0.2% 1.4% (3,785) (1,017) (2,768) Commercial tenant behind on rent (notices sent) Hazel Plaza Scott 16 5,616 8,977-37% 3,114 4,248 27% 0.0% 3.2% 0.2% 4.9% (3,387) 32,251 (35,638) Waiting on HUD rent increase (backdated to 9/16) Holden Vista Michelle 16 4,716 4,795-2% 3,805 4,279 11% % 5.4% 5.0% 8.9% (3,806) (10,067) 6,261 Joe Black Apartments Michelle 24 4,239 4,257 0% 3,032 3,257 7% % 3.0% 3.5% 5.4% 15,530 10,556 4,974 John Carney Valencia 27 2,747 2,649 4% 1,914 2,004 5% 0.0% 1.7% 0.1% 2.5% 8,596 3,562 5,034 Larned Michelle 33 3,047 3,093-2% 1,884 1,921 2% 0.0% 0.8% 0.2% 1.0% 35,074 35,396 (322) Lincoln Court Valencia 29 3,148 3,065 3% 1,872 1,758-7% 0 0.0% 3.3% 2.5% 4.1% 235 1,123 (888) High utilities Mary Ruth Manor Scott 20 3,799 9,429-60% 4,145 5,147 19% % 3.7% 8.4% 1.7% (23,788) 43,025 (66,813) Waiting on HUD rent increase (backdated to 12/16 Maxwell Valencia 4 3,639 3,514 4% 2,302 2,394 4% 0.0% 0.0% 0.0% 0.0% 3,320 2, Melrose Scott 30 2,803 2,866-2% 2,031 2,064 2% % 2.3% 2.4% 2.2% 10,389 11,275 (886) High utilities Miller Park Dianne 12 3,874 3,786 2% 2,619 2,838 8% 0.0% 1.1% 1.7% 2.8% 4, ,672 Park Hill Scott 30 4,461 4,631-4% 2,713 2,919 7% % 3.4% 1.5% 2.9% 31,166 30,067 1,099 Ponderosa Dianne 23 3,093 2,936 5% 2,369 2,545 7% 0.0% 3.9% 0.0% 4.7% 11,802 4,177 7,625 Seneca Valencia 32 3,471 3,401 2% 2,714 2,628-3% 0.0% 1.5% 0.0% 1.5% 3,676 4,111 (435) Union James Michelle 24 4,548 4,672-3% 3,251 3,272 1% % 3.2% 7.9% 6.0% (5,154) (2,679) (2,475) Vacancy & Water intrusion issues Villa Valencia 62 3,803 3,868-2% 2,721 2,539-7% % 2.0% 1.9% 1.4% (8,469) 6,847 (15,316) Heavy turns & maint issues (will reserve some) 221, ,477 (81,801) Discrete Component Units: Broadway Crossing Michelle 44 3,395 3,298 3% 4,450 2,688-66% 0.0% 3.0% 1.1% 2.9% (70,915) 2,377 (73,292) Painting common & stairwell flooring (will reserve) Fremont Solstice Valencia 18 3,690 3,778-2% 3,096 2,914-6% % 1.0% 1.0% 1.3% (10,339) (5,010) (5,329) Elevator repair & garage door repairs Haines AAA Dianne 30 3,722 3,631 2% 2,529 2,806 10% % 0.0% 1.1% 3.8% 8,328 (2,689) 11,017 Helen V Scott 38 5,382 5,972-10% 2,989 2,976 0% % 4.5% 4.3% 4.4% 45,868 68,797 (22,929) Rent increase did not include January ($25,740 diff Holiday Scott 30 3,917 3,762 4% 2,135 2,361 10% % 3.6% 2.8% 2.7% 10,272 (1,168) 11,440 Jefferson Housing Michelle 40 4,196 4,153 1% 2,323 2,650 12% 0.0% 0.5% 0.0% 0.9% 8,772 (6,053) 14,825 Oleta Dianne 34 3,023 3,029 0% 1,989 1,994 0% % 3.3% 3.2% 2.7% (1,021) 944 (1,965) vacancy and turn costs Pantages Scott 49 3,428 3,348 2% 2,678 2,384-12% -2.6% 1.4% 0.6% 2.6% 2,536 13,037 (10,501) Invoices from 2016's fire paid in 2017 (will reserve) Silvian Valencia 32 3,929 3,820 3% 2,976 3,150 6% 0.0% 2.9% 1.6% 3.7% (8,917) (17,955) 9,038 Squire Park Plaza Valencia 60 6,659 6,388 4% 2,529 3,201 21% % 1.3% 4.5% 3.3% 91,218 23,455 67,763 Twelfth Avenue Arts Michelle 88 3,516 3,555-1% 1,793 1,752-2% % 2.6% 3.6% 1.7% 21,517 28,610 (7,093) Annual audit fee paid & compliance fee/vacancies Unity Village Michelle 30 3,312 3,317 0% 3,387 3,281-3% % 4.7% 1.7% 5.3% (6,615) (3,291) (3,324) Fire sprinkler & other maintenance repairs 90, ,054 (10,350) Portfolio Totals: ,221,448 5,357,368-3% 3,548,694 3,552,744 0% % 2.4% 2.4% 2.8% 312, ,531 (92,151) \\janeway\data\property Management\Board Reports\2017\April\4-17-PM Page 103 dashboard.xlsx

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105 JUNE 2017 FUNDRAISING AND COMMUNICATIONS MEMORANDUM To: Capitol Hill Housing Board of Directors CC: Christopher Persons From: Joshua Okrent Grants and Donations Recent weeks have again brought significant grant and donation activity. Activity over the last month includes: We submitted a proposal to the Satterberg Foundation, requesting $300,000 over three years in support of our Community Development work and the Capitol Hill EcoDistrict. We were invited to apply to the Bank of America Neighborhood Builders program, requesting $200,000 over two years in support of our Community Development work and our Sustainability and Planning team. We submitted a response to an RFP by Enterprise Community Partners, requesting $100,000 in HUD Section 4 funding to better incorporate community planning goals in our general real estate development strategy. Jill Fleming of the PDA and Joshua Okrent of the Capitol Hill Housing Foundation met with representative of the KeyBank Foundation in support of our request for $250,000 for the Liberty Bank Building. A final application for this funding is pending. We received a grant of $5,000 from the Windermere Foundation in support of CHH Resident Services. We received a grant of $5,000 from the Moccasin Lake Foundation in support of the Capitol Hill EcoDistrict. The Foundation is now at 76.7% of our annual unrestricted fundraising goal. Events Community Forum Capitol Hill Housing s 10th annual Community Forum, Own It!, took place on May 25th from 5 to 8 pm at the Summit Event Space (420 East Pike Street). Our presenters Wyking Garrett of Africatown, Sven Gatchev of Mercy Corps Northwest, Sam Farrazaino of Equinox Studios, and Kathleen Hosfeld of Homestead Community Land Trust focused on home ownership and building wealth in neighborhoods to lessen the widening inequality in the city. Andrea Caupain of Centerstone was the emcee. An engaged and energized audience stayed after the presentation to participate in a series of conversations about applying these wealth building strategies in their local neighborhoods. Liberty Bank Building Groundbreaking Ceremony will take place on Monday, June 19 th from 4:00-6:30 PM at the project site (2320 E Union St.). Join us and our partners for an afternoon of food, music and entertainment as we celebrate this important milestone. A program will feature Mayor Murray and other elected officials joining our partners and funders for a ceremonial first dig. RSVP at Omnivorous SAVE THE DATE! We are delighted to have locked a date and a NEW venue for Omnivorous This wonderful annual event will be held at Washington Hall in the Central District on October 12, Frank Alvarado of the PDA Board and Laura Miller of the CHH Foundation have agreed to once again serve as our event co-chairs for this event. Creating Omnivorous depends on volunteer support, and we welcome additional board participation on the committee that oversees this event. We will meet every Page 105