At its February 13, 2019 meeting, the Mayor and Commission held a discussion regarding the financial condition of Miami Beach Community Development Corporation (MBCDC) and a variety of compliance concerns noted by Miami-Dade County (county) and the city. The Mayor and Commission initially made a referral to the Neighborhoods Community Affairs Committee (NCAC) for further discussion including addressing the conditions of the agency’s properties and its progress in addressing County compliance concerns. The item was subsequently referred to the Finance and Citywide Projects Committee (FCWPC) for further discussion.

At its May 2019 meeting, FCWPC requested that an update on MBCDC and its fiscal position become a recurring reporting item to the Committee every 90 days.

Issues of Compliance

The City continues to monitor MBCDC’s financial standing and continues to triage tenant complaints referring to life safety issues including at the Jefferson Apartments, an elder housing property that has had open violations since 2019 which triggered the relocation of all tenants on the first floor. This property was assisted by the City and remains under affordability and compliance terms for the State Housing Initiatives Program (SHIP).

Business Strategy Plan

On June 4, MBCDC submitted its Business Strategy Plan (“the Plan”) which discusses the Agency’s plan to partner with Opa-Locka Community Development Corporation (OLCDC). The partnership comes after experiencing an operating loss of $92,911 in the six-month period between October 2020 and April 2021, according to MBCDC.  According to the Plan submitted, MBCDC will work with OLCDC to structure the organization’s portfolio to qualify for 501c3 bond financing within 12-18 months.

According to the Plan, the following actions are required in anticipation of pursuing 501c3 financing for the redevelopment of 187 units in the MBCDC portfolio:

1. OLCDC will invest $135,334.14 to assist in funding capital improvements to the MBCDC portfolio;
2. MBCDC will increase tenant rents at the following properties to increase operating capital (Jefferson Apartments, 530 and 532 Michigan Avenue, Crespi Apartments, Meridian Place, The Allen Apartments, Westchester Apartments, 1551 Pennsylvania Avenue); and
3. MBCDC will renovate the Shelbourne Apartments using a $2 million loan from Raza Development, Inc.

Staff reviewed the Plan submitted by MBCDC and was concerned by various issues. While the Plan calls for local government agencies to provide housing vouchers for units within the MBCDC portfolio, it simultaneously requests rent increases requiring local governments to shoulder a greater portion of the agency’s operating costs. Secondly, the proposal alludes to financial commitments from both OLCDC and Raza Development but did not include the legal instruments memorializing these commitments enabling an analysis of the fiscal impact of these partnerships. Thirdly, the Plan does not include HUD’s review and approval for the Shelbourne Apartments as required by the property’s deed restriction. Further, the Plan calls for the City to vacate its mortgages and covenants on MBCDC properties it assisted with HUD- and Redevelopment Agency funds in conflict with the City’s requirement to secure its assets through the completion of the affordability periods. More so, the Plan does not fully address how the agency can ensure ongoing operations without ongoing fiscal deficits. Finally, this plan would only address a portion of the MBCDC portfolio in need of repairs leaving 136 units still in need of renovation.

501c3 Bonds

MBCDC intends to apply to the Miami Dade County Housing Finance Authority for its 2022 application cycle which commences June 2022. The timeline indicates that the bond would be approved by January 2023. The Agency presented two scenarios once the bond is issued: 1) rental subsidies are not granted by municipalities and capital improvements will have to be funded by operational costs at $22,580.41 per unit; or 2) rental subsidies are issued and the Agency will be able to fund capital repair costs at $28,401.38 per unit.

The capital repairs would not include full repairs of cabinets and HVAC units and would only include the roof replacement of five (5) of eight (8) buildings. MBCDC repeatedly mentions its need for the City and County to issue annual subsidies and forgive existing loans for properties currently under affordability as stipulated in multiple funding agreements. The City is currently at a financial exposure of $11,788,401 in HOME, SHIP, CDBG and RDA funding and cannot provide release of liens or satisfaction of mortgage documents until the affordability periods expire. The chart below delineates the current fiscal investment of MBCDC properties remaining under affordability:

Miami-Dade County Annual Audit

The audit is currently being conducted by the Office of Public Housing and Community Development (PHCD). The City has not received a final release date for this report.

PHCD Property Inspections

On May 17, PHCD emailed the City a compilation of Real Estate Assessment Center (REAC) property inspection reports conducted by Nan McKay & Associates, a consulting firm contracted by the PHCD to audit MBCDC and its properties. The inspections follow HUD REAC protocols that address several factors to ensure that assisted housing is decent, safe, sanitary and in good repair. Letter to Commission 217-2021 dated May 20th addressed the report findings and listed the REAC scores for all properties in the MBCDC portfolio. For 7 of the 11 properties, the average score was 61.4 out of a possible 100 points. The lowest score issued was 51.0 for The Jefferson, followed closely by The Fernwood Apartment’s 55.0 score. The low REAC scores prompted the City to conduct separate inspections of those properties in which the City has a vested interest using HUD’s Housing Quality Standards as required in the City’s funding agreements.  

CMB Property Inspections

As of May 26, the City conducted property inspections at the Allen Apartments, Villa Maria, The Westchester, The Jefferson and Meridian Place. City staff visited every unit in each property and the common areas. The City witnessed a wide range of property deficiencies including elevator failures; termite and insect infestations; HVAC failures; lack of cleanliness in common areas, among others. The City contacted Code Compliance for issues related to water intrusion, termite infestation and HVAC failures. The City also encountered tenants in every building that expressed their dissatisfaction with property standards.

Supporting affordable, compatible workforce housing is a key management objective in the 2019 Strategic Plan: Through the Lens of Resilience. MBCDC is a significant provider of affordable housing in the City. However, the capacity of the organization continues to be a concern as demonstrated by the most recent financial statements, capital needs resulting in a significant number of vacancies, challenges in making loan payments and building violations. The City continues to offer guidance to MBCDC to address compliance issues and ensure that its properties remain in the City’s affordable housing portfolio.