Updated, 10:50 a.m.: More information.
NORWALK, Conn. —The plan to restart construction on Wall Street Place, otherwise known as “POKO,” does indeed include 100% affordable housing.
The details matter here: one-third of the 101 apartments would be rented to households making 80% of area median income, one-third to households with 60% of area median income and one-third to households making 40% median income. Federal law regarding Low Income Housing Tax Credits (LIHTC) changed in 2018, providing different requirements per apartment size, meaning that four adults could rent a three-bedroom apartment in the development, with a maximum combined income of $115,000. Or it could be a couple with two children, the parents making a combined $115,000.
Details of the plan were divulged Wednesday to NancyOnNorwalk by knowledgeable sources, on the condition of anonymity. The plan should become public within a month, they said.
The project is planned to include 21 one-bedroom apartments, 67 two-bedroom apartments and 12 three-bedroom apartments. The rents would be up to $2,500.
Background information: Citibank ‘thought it had a deal’
Wall Street Place is the highly visible partially-built building on the corner of Isaac Street and Wall Street, sarcastically referred to as The Tyvek Temple by some as the hulking Tyvek-wrapped structure is seen as a blight upon the neighborhood.
It was planned as a mixed-use development to be built in three phases and supported by the City through the donation of two city parking lots. In return, the selected developer, POKO Partners, was obligated to provide an equivalent number of public parking spaces.
The project stemmed from the 2004 Wall Street Redevelopment Plan and a Land Disposition Agreement with POKO was signed in 2007. It was long delayed and in 2015, Mayor Harry Rilling supported extending the LDA’s deadline, giving POKO an extension on a split Common Council vote. Citibank provided funding and POKO began phase 1 construction but in mid-2016 Citibank halted the work after identifying a $9 million budget gap.
Citibank subsequently foreclosed on its $31.9 million construction loan, took possession of the phase 1 property and selected JHM Group (John and Tod McClutchy) as its potential redeveloper in the attempt to get the project going.
Negotiations were underway with the City and the Norwalk Redevelopment Agency, with the required parking spaces presenting a major complication: POKO Principal Ken Olson had gone to the Planning and Zoning Department and gotten approval to have some of the required parking off of phase 1 and onto properties slated for phase 2.
Citibank did not have control of the phase 2 properties, as they were owned by Richard Olson of POKO Partners, but felt it had struck a deal with Richard Olson to acquire the properties and move the project forward, according to the sources. Then, about a year ago, real estate broker Jason Milligan bought them instead.
Milligan and Olson are being sued by the City and Redevelopment Agency over this transaction, with the plaintiffs alleging “irreparable harm.”
In March, Corporation Counsel Mario Coppola revealed in court that Citibank and the public parties were close to a deal to restart construction. Milligan in May used a Freedom of Information Act request to obtain plans dating to February and April, showing that the restart proposal featured 100% affordable housing, drawing pushback from the public.
Norwalk already has 12% affordable housing and is one of 28 Connecticut communities exempt from state requirements to build more, Wall Street Neighborhood Association President Nancy McGuire said at the time, expressing a personal opinion, not one from the association.
New numbers
Construction is expected to take up to two years and there’s a public approval process involved. Amendments to the LDA are required, including a clarification on where the parking spaces will be, the sources said.
Milligan has argued that getting an LDA amendment will be time consuming as it involves multiple governmental bodies, and any abutter can challenge the project in court. The sources declined to comment on that.
The public parking won’t be restored until the project is completed, they said.
Local funding will stay at the same level as was approved for the previous project, the sources said.
The funding stack for the 2008-approved project included $8.64 million in 9% Low Income Housing Tax Credits and a $3.5 million Department of Housing loan. Those tax credits were cancelled in December.
“If they lose the tax credits … then Citibank {sells the project to the} highest bidder. Then they’re not going to do this type of project,” Milligan said at the time.
Citibank voluntarily returned the 9% LIHTC so that they could be redeployed to another project, the sources said Wednesday. Instead, Citi expects $25-30 million in 4% Low Income Housing Tax Credits to help fund the project through an equity investment by a limited partner, and plans to issue a $35 million construction loan.
Citibank plans to apply for a private activity bonds, described by Investopedia as “tax-exempt bonds issued by or on behalf of a local or state government for the purpose of providing special financing benefits for qualified projects. The financing is most often for projects of a private user, and the government generally does not pledge its credit.”
The funding for the bonds, referred to colloquially as a “volume cap,” come from the federal government and the 4% LIHTC are automatically awarded when the bonds are approved, the sources said, explaining that federal allocations to states have recently increased.
Tax credits are only given on the portion of a building planned to be used for affordable housing, and the “4%” number refers to a percentage of the building value, the sources said.
The previous project was approved for 36% affordable housing; thus, if this 100% affordable project were funded by 9% tax credits, that would represent more than double the $25-30 million expected from the 4% tax credits.
The income range for the 80% AMI households would be about $85,000 to $115,000, and for the 60% AMI it would be $65,000 to $85,000, the sources said, adding that the AMI is set by the United States Department of Housing and Urban Development (HUD).
Again, these figures allow for multiple people in the household. The 2018 Consolidated Appropriations Act made two changes to the LIHTC program, according to the Congressional Research Service.
“First, the act modified the so-called ‘income test,’ which determines the maximum income an LIHTC tenant may have,” the Service states. “Previously, each individual tenant was required to have an income below one of two threshold options (either 50% or 60% of area median gross income, depending on an election made by the property owner). With the modification, property owners may use a third income test option that allows them to average the income of tenants when determining whether the income restriction is satisfied. Second, the act also increased the amount of credits available to states each year by 12.5% for years 2018 through 2021.”
Area Median Income for Bridgeport-Stamford-Norwalk is $91,198, according to DataUSA. For a single person, 60% of that would be $54,718, and 40% would be $36,479.
The prior project included services for the “very” low-income residents, who might be formerly homeless or have other special needs, the sources said. Citibank would not underwrite a project with “maximum LIHTC rents” because those would be above the market for the area.
A 1,181 square foot-two bedroom apartment in The Berkeley, a new building in the Waypointe complex, is currently being advertised for $2,607 to $2,627. A 1,747 square foot-two bedroom Berkeley apartment is available for $3,600 a month.
Again, the maximum rent at Wall Street Place would be $2,500 according to the sources, who characterized it as not public housing, but “affordable.”
The “incremental” cost on finishing the project is $50 million, but that includes buying the Garden Cinemas, demolishing it and building a parking garage, making the actual cost of finishing the apartment building $30 million, they said.
The total cost of the project, when you add what’s already been spent to what is needed to complete it, will be about $80 million, the sources said.
This would make the price per apartment appear to be nearly $600,000. Some readers have questioned the wisdom of this type of investment in “affordable” housing, arguing that it would be cheaper to buy each renter an existing home.
That concept might seem like a better idea, but you would wind up with 101 homes spread out throughout the city that are being managed as one project and the speculated costs don’t include rehabilitation of the real estate, the sources argued.
Norwalk is frustrated and Citibank feels the project needs to be completed, they said. Citibank explored all the options, finding this proposal the best one; if the property were sold the new owner would also be subject to the LDA, which includes the public parking component.
City officials declined to comment.
The writer of this story lives in affordable housing.
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