| NEWS BLOG |
LovelandPolitics
| 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
criteria."
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.
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
criteria."
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 City - 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 months. 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) |