The developers of the proposed $34 million Chalmers Mill Lofts project intend to reapply for the $18 million worth of federal low-income housing tax credits they need to build the 120-unit apartment building and banquet hall in October.
Project developers DEW Ventures and KCG Development announced in May that they'd lost out in this year's first round of funding awards from the New York State Division of Housing and Community Renewal. Bill Teator, a managing member of DEW Ventures, said the ratio of applications to winners in the low-income housing tax credit process is typically four to one. He's prepared to resubmit for the next round in October and, if need be, again for a third round in December.
"It's highly competitive, so we're anticipating having a good shot [in] the next round," he said.
To be built, the Chalmers Mill Lofts project needs a complex combination of funding streams to mitigate the relatively low income market conditions in Amsterdam and Montgomery County.
In order to raise the $34 million to construct the building on the site of the former Chalmers Knitting Mill, developers say they need $1.8 million a year in affordable housing tax credits for 10 years, about $7 million in "gap funding" loans from New York state, approximately $3 million in private equity, another conventional mortgage and a 30-year Payment in Lieu of Taxes agreement from the Montgomery County Industrial Development Agency.
While developers can trade the low income housing tax credits for investment capital, the credits come with strings attached: rent for most of the complex's 120 units will be set by the median income levels of people in the local market for the building, restricting the amount of money the developers can make. The federal tax credits require 30-year rent restrictions for the units. Rent restrictions associated with state loans are even longer, requiring up to 50-years.
The project application rejected in May included median-income controlled rents of $650 per month for a one-bedroom to $750 for a two-bedroom apartment and 26 to 31 units with "market based" rent that will float according to what the market will bear, starting at $975 per month for a one-bedroom and $1,125 per month for a two-bedroom.
Teator said the state Division of Housing and Community Renewal (HCR) provided some preliminary feedback on why the Chalmers application was rejected.
"There is some concern about the current state of the market in Amsterdam to absorb some of the upper-income rents, so that's one thing we have to look at. Are there tenants at $900 to over $1,000 rents that can be absorbed by households in Amsterdam? That's kind of a market assessment, and is there movement in the market toward households actually being able to pay those rents in Amsterdam," Teator said.
Teator said that while the Chalmers Mill Lofts developers are going to look for more market evidence to present for the rent numbers they've proposed in their next application, there could be some changes to the mix.
"That's still being evaluated. We want to look closer at the market, there may be some updated evidence of more rental units coming online in the $950 range, downtown, so we're hopeful that we can point analysts toward those updates that are renting closer to our upper-end units, so they will recognize there is progress toward that," he said. "We haven't had our formal debriefing yet, so we're still going to get more details, but one aspect that was addressed is they want to get more comfortable with our income rents."
He said some factors that may bolster Chalmers' next bid for the low income housing credits include the project having been awarded a $150,000 state grant for riverfront development in December, and the possibility that a $1 million project to construct a boardwalk and street improvements for Bridge Street may be awarded funds as part of Amsterdam's $10 million Downtown Revitalization Initiative award.
"We're hoping the state will affirm those local recommendations for funds for the Chalmers project, which will show additional evidence of external resources for the Chalmers project," he said. "We're hoping that [some other grants] including a Canal Corporation grant, will also be finalized, which will enhance our next round application."
Mayor Michael Villa said that while his administration continues to support the Chalmers project, revenue from the approximately $300,000 sale price of the Chalmers property will not be included in the city's 2019-20 budget. Last year there was debate on the city council as to whether or not to include the money as revenue, but the sale will not be finalized until the project has the funding necessary to be built.
"The project checks all the boxes. It was a cornerstone of the DRI, every taxing entity supported it, whether school district, county, city, both [the city and county] Industrial Development Agencies — it's truly the only project that is going to transform and create economic growth," said Villa. "I think after the interviews with HCR, we took away some positives and along with KCG we believe this is a successful venture on a resubmission."
In October of 2018 the city waived a $10,000 extension fee for KCG's $30,000 option to purchase the land in exchange for KCG paying the cost of soil remediation on the property. Teator said he believes the purchase option is now good through the end of 2019.