The following are MBCDC items being tracked for compliance as of this writing:
The City continues to monitor the agency’s financial standing. On April 29, 2020, MBCDC provided the FY 20 cash flow projections for its umbrella organization. The document is provided as an attachment to this memorandum. City staff discussed the projections with MBCDC, to clarify reasons costs were not delineated for repairs and maintenance, elevator maintenance, building permits and utility costs. MBCDC staff explained that these costs are accounted for in each property’s corresponding budget.
On September 10, 2020, MBCDC provided Consolidated Financial Statements for 2019 (included as an attachment). The statements delineated a continued deficit and highlighted the subsequent events that have impacted the organization’s financial capacity and compliance with federal programs.
The report also listed a variety of current material weaknesses and significant deficiencies in connection to the agency’s internal controls, accounting processes and tenant management that have persisted for five (5) years. MBCDC provided a response that included corrective actions as part of a corrective action plan within the report. The audit included the following findings:
- Tenant Eligibility Records; Tenant Rent Overcharge; Annual Re-Certification
- Out of 13 filed tested, the audit identified seven tenants for whom an annual recertification was not performed within one year of the previous lease start date.
- A selected tenant file submitted for review was missing evidence of a current annual recertification.
- One HOME-assisted unit was found to have been charged a rental that exceeded the allowed rent limit.
Corrective Action: During fiscal year 2019, the organization transitioned its property management and affordable housing compliance to a reputable third-party management company with robust internal controls over compliance. Management does not expect to encounter these delays moving forward as all tenant files have been uploaded to the management system where internal controls are in place to ensure timeliness of reexaminations, including automated system reminders at least 60 days prior to the tenant’s annual renewal date.
City opinion: The City monitored several tenant files to ensure compliance throughout 2019, in response to tenant claims of expired leases and recertifications. One of the most critical factors of administering an affordable housing program is ensuring that all current tenants are income-eligible have a valid lease and are charged rent in compliance with federal requirements. Several tenants in the agency’s portfolio receive vouchers from subsidy programs and can be at risk of termination if their leases are not maintained compliant. After close monitoring and consistent supervision by the City, RAM was able to complete outstanding certifications. MBCDC and RAM have advised their new software will notify tenants within 60 days their recertification date and should prevent future failings.
The organization has not complied with the financial reporting covenant set forth in certain of its loan agreements.
Corrective Action: The organization will contact the lender and associated parties in order to try to reach an agreement to make audited financial statements available after nine months after the fiscal year end instead of three months as this would coincide with its regulatory reporting requirements.
City opinion: These findings are of concern, as failure to comply with loan covenants can lead to the lender seeking remedies, including taking possession of the building.
While there is a significant need for capital repairs to various properties in the agency’s portfolio, the agency’s financial standing does not demonstrate enough cashflow to cover expenses incurred by capital projects. The agency continuously expresses a desire to obtain funds from City entitlement programs such as CDBG and HOME. While the agency has reduced several expenses from previous years, its cash flow projections show that net operating income has also decreased.
The Building Department inspected the Jefferson Apartments and issued a violation on August 15, 2019 due to observation of structure deterioration on the first floor. The relocation process for all tenants on the first floor began in March 2020. Tenants have been temporarily relocated to hotels or other units within the portfolio. MBCDC retained an engineering firm for the scope of work and subsequently bid out the project and selected a contractor. The building permit was issued on May 26, 2020. Construction is scheduled to begin September 14, 2020.
Units at the Shelbourne Apartments require extensive rehabilitation. Since March 2020, 19 residents have been permanently relocated to other units within the portfolio. MBCDC is awaiting the conclusion of the analysis of the organization’s portfolio, being conducted by the National Equity Fund, to determine the next steps.
The rehabilitation of the Shelbourne and the Jefferson has resulted in a significant number of vacant units. It is important to consider the impact these vacancies will have on the organization’s financial situation.
A Notice of Violation was issued to 1551 Pennsylvania Ave. on September 15, 2020. The findings include evidence of water intrusion observed in the living room and bedroom ceilings in units 202, 203, 205, and 207.
A Notice of Violation was issued was issued to 530 Michigan Ave. on September 28, 2020 for disrepair of concrete on driveway floor. Another violation was issued on October 4, 2020 for illegal dumping and debris.
On April 16th Mr. Michael Liu, director for Miami-Dade County Public Housing and Community Development, sent a letter to MBCDC in response to a request to defer loan payments for the following properties:
*The Allen Apartments
*The Jefferson Apartments
*The Villa Maria Apartments
*1551 Pennsylvania Avenue
*The Michigan Apartments
In the letter, Mr. Liu requested the following documentation in order to process the request:
(1) formal written confirmation that MBCDC has made similar requests to its other lenders and evidence of response from them; (2) documentation to support the assertion that “residents are opting not to pay rent;” (3) a Continuity of Operations Plan (COOP) or something similar that MBCDC has implemented to manage its portfolio for at least the next six months; and (4) a recovery business plan once the disaster declaration and various orders associated with containing the spread of COVID-19 have been lifted.
On May 27th, Mr. Liu sent a follow-up letter informing MBCDC that, since a response to his questions was not received, the deferral request was not approved and mortgage payments for the above listed properties were due on May 10th. The county has confirmed that all loans with Miami-Dade are current.
MBCDC has provided the following additional updates:
- The organization will be applying for a Miami-Dade Non-Profit Support grant
- The organization will be issuing an RFP for a co-development partner in October
- The organization has begun discussion with a utility analysis company to perform a portfolio wide analysis to determine if the current utility allowances are appropriate