Loveland's Independent News Source
February 7, 2013

Loveland's City Council unanimously approved an additional $300,000 contribution for the proposed ArtSpace
project in Loveland last Tuesday bringing the city's total contribution to ArtSpace just under $1 million at
$921,000.     The city's contribution represents now around 10% of the project's total projected cost of $8.8
million.  The majority of funding is coming from state and federal sources including the use of tax credits for
investors in the project.   

         City of Loveland Contributions to ArtSpace Loveland

                                                     Seed money for the project - $550,000
                                                     Approved Tuesday night -      $300,000
                                                     Materials Use Tax Waiver-     $71,000
                                                     Total City of Loveland              $921,000

Loveland's historic feed and grain building, which is adjacent to the newly proposed apartment building, will
receive approximately $1.5 million from the $8 million ArtSpace project for rennovation and use by the
community and local artists.  
ArtSpace, the developer, has constructed similar projects in 23 other cities in the
United States.  

Can Only Artist Live There and Who Decides?

A common question we received, also raised during the council meeting Tuesday night, is who decides someone
is an artist and how do they qualify for a low-rent subsidized unit?  According to the plan submitted to the City of
Loveland, the housing authority (property managers for the project) will have the same "affordable" housing
criteria as other local government subsidized housing but specific to artist.  The explanation provided to
Loveland's Council is that occupation is not a "protected class" under Title VII so HACOL can discriminate
according to one's profession when approving applications for the subsidized housing units.

In addition, the council was told an applicant doesn't necessarily have to earn their living in the "creative sector"
to qualify for the housing subsidy.  Instead, applicants will be asked a series of questions about art in general and
Loveland's art culture to determine whether or not they qualify to live in the project.

Below is the explanation provided Loveland's Council by staff in their meeting package,

"Generally, the property shall be developed as an affordable multi-family rental with approximately 30 units
on four stories with at grade parking. The building will be developed to maximize the developable ground and
provide public courtyard space. Rental preference will be given to artists who meet affordable housing

The 30 apartment units are being described as larger than those in Lincoln Place and larger than many
apartment homes offered in McWhinney's subsidized new apartment complexes.  ArtSpace proposes a variety of
floor-plans ranging in size from generously sized 1-bedroom units to 1,500 square foot 3 bedroom units built
especially for artists.  At an average cost of $250,000 per unit, the ArtSpace apartments will likely be the most
expensive per-unit multi-family complex built in Loveland.  

Terms of City's "Loan"

Curiously, ArtSpace has avoided receiving any "grant income" for the project to avoid incurring tax liabilities for
investors.  Instead, ArtSpace prefers to use loans which begin with negative amortization for the first ten years
and result in large balloon payments after some twenty to twenty five years later.  Loveland's "loan" is similarly
constructed showing a
negative amortization for the first ten years.  In other words, the principle owed on the
loan actually increases during the first ten years as payments required from ArtSpace don't cover even the city's
very low interest rate charges of 1.75% which is likely to be less than inflation.

For example, the city's mortgage amortization table shows an initial annual repayment of the $300,000 loan
beginning in the first year at only $1,158.  By comparison, a standard $300,000 mortgage amortized over 20
years using the city's low interest rate would require monthly payments of $1,482.39 ($17,788.68 annually).   
ArtSpace is repaying the city's loan for the same interest rate and same principle at only $96 per monthly
resulting in the negative amortization.  By year seven, the loan's principle will actually increase to $308,000
instead of decreasing since the early payments will not cover the low-interest charges.  By year 10 the payments
increase significantly with most of the loan repayment coming after the first twenty years.

Ironically, the Obama Administration's regulatory agency for lending,
Consumer Financial Protection Bureau
(CFPB), has a proposed rule making that bans the private sector from using negative amortization loans.   
According to the CFPB website,

"Our new rule will protect consumers from irresponsible mortgage lending by requiring lenders to ensure
prospective buyers have the ability to repay their mortgage. The rule also protects borrowers from risky
lending practices such as “no doc” and “interest only” features that contributed to many homeowners ending
up in delinquency and foreclosure after the 2008 housing collapse."

The CFPB was created by the Dodd-Frank mortgage reform legislation by Congress following the 2008 national
housing collapse.  According to one local mortgage banker, private lenders will be unable to issue any negative
amortization loan terms (like those in the city's loan agreement with ArtSpace) following the rule making.
ArtSpace Project Receives Another
$300,000 From Cit
y - Moving Forward

Couch Surfing Councilwoman
May Have Conflict Along
With Colleague

Rumors about whether
Loveland Councilwoman Joan
Shaffer still lives in her
Council Ward (an important
qualification for representing
that Ward on Council) have
been swirling in recent

Following her separation and
later divorce from local
attorney Mark Shaffer, Joan
has been reported to have
numerous residences both
inside and outside of Council
Ward II in Loveland.

According to Loveland's
charter, council members
must reside in the ward they
represent on city council.  
Failure to maintain that
residency could result in the
seat being declared vacant.

LovelandPolitics has been
informed Shaffer has found
more permanent housing
above the
moBetta Gumba
restaurant in downtown
Loveland at 141 4th Street.

Barry Floyd, a local developer,
provided Shaffer an
apartment in the building on
4th Street, Loveland's oldest
commercial building (built in
1870's).  Floyd is also the
owner of Loveland's feed and
grain building.

The current intrigue in city
hall is whether Shaffer's
advocacy for city funding of
ArtSpace, to assist Floyd's
renovation of his feed & grain
building, constitutes a conflict
of interest she should have
disclosed to her colleagues
and perhaps refrain from
voting on the matter.

In the interest of fairness, it is
also important to point out
Councilman John Fogle, whose
wife works for the Loveland
Housing Authority, also
participated in the ArtSpace
vote even questioning his
wife's boss, Sam Betters,
about the project during the
council meeting.  Loveland's
Housing Authority is both an
investor and contractor to the
ArtSpace project.

Because the vote was
unanimous, an abstention by
both Shaffer and Fogle from
the vote would not have made
a difference in the final
outcome for the City of
Loveland's contribution.
Loveland Councilwoman
Joan Shaffer (
Ward II)