Agenda Packet 10-17-18 Work Session

Home Browse Search

PNW Economics Page 3 Prepared for: City of Eugene Prepared by: PNW Economics Response to MUPTE Citizen Advisory Committee Questions: Obie Companies Application taxes to reflect MUPTE. Should the amounts you add back be reduced by 3% to reflect paying by the due date? Consultant Response: The Applicant could certainly modify its pro forma to reflect this discount, should they choose to do so. The reduction would increase cash flow each year, as well as cash-on-cash return for the Applicant, though modestly. Property tax calculation in the MUPTE application as well as by PNW Economics is based on the City of Eugene combined property tax rate applicable for the subject site rather than national averages. 7.Could you provide the national average individual items of expense, including property tax per unit, which you used? Did you use the Total column on page 7 of the survey you cited? Consultant Response: PNW Economics’ assumed a flat total expense figure per unit of $6,153 beginning in Year 1 excluding property taxes. We did not itemize expenses by category or detail. The $6,153 per-unit figure is based on a current $5,800 per-unit average expense per the cited National Apartment Association survey, then escalated for two years by 3% annually to the assumed project completion year timeline. 8.Should you add back the average property taxes rather than actual estimated property taxes for the MUPTE scenario since you used average and not actual property taxes as expenses? This may zero out property taxes rather than add an amount for the differential between actual estimated property taxes and the national average. From the survey, the property taxes of $1,741/ unit for 127 units is $221,107. Adding back actual estimated first year property taxes $378,635, would seem to give a bonus of $157,528 to the with MUPTE analysis in the first year. Consultant Response: National average operating expenses utilized by PNW Economics excludes the national average property tax portion. Local property tax burden is distinct in Oregon under state property tax law, as well as the specific issue of the MUPTE application. 9.Since no moderate income fee is required without MUPTE, should the moderate income fee be deducted from the without MUPTE budget, so the loan is less for the without MUPTE scenario? Consultant Response: In this case, yes the permanent financing would be reduced by the absence of the fee in the without MUPTE scenario. The assumed fee from Application Page 5, Item 4 is $378,600. This would reduce annual debt service on a 25-year loan at 6% by $2,440. 10.The applicant included budget construction contingencies of $4,355,989 ($3,163,312 for contractor contingency and $1,192,677 for owner contingency), with construction hard costs of $23,005,649. Construction contingencies were thus 18.93% of construction hard costs. There were separate contingencies for various soft construction costs. 5% of construction hard costs would be $1,150,282, and 10% would be $2,300,565. What is the appropriate percentage of construction hard costs to use for the construction contingency? Consultant Response: In PNW Economics’ experience, a 20% construction contingency is common, particularly in the case of unique, difficult, or unprecedented projects. The nature of Obie Companies October 17, 2018, Work Session – Item 2