Expiry of operating agreements May 2013 workshop

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New Brunswick Non-Profit Housing Association

2013 Conference

May 10th 2013

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  • Introductory remarksIntroduce .. Regional Staff Karla Skoutajan with the Cooperative Housing Federation of Canada (CHF).
  • Impact of expiry at the federal and provincial levels. Promote awareness of issues surrounding expiry.Generate discussionLast fall’s workshopsEOA Tool and importance of RR FundRR Planning Tool
  • Canadian Housing and Renewal Association (CHRA) – - national organization - 250 members - supporting sustainable housing - undertake research related to expiry - 2 assessment tools (early version and latest simplified tool600,000 units drop to 397,887 by 2020..Steeper decline from 2015 on..post’85
  • In NB, we have the NBNPHA ..- 200 members - 20 13 is 20 year anniversary - N.B. 405 agreements, 5,384 units (non-profit, co- op and Skigin) - not including 5,000 public housing and RNH units - to April 2013 – 22 agreements affecting 154 units, mostly multiple agreements managed by 1 sponsor - big jump – 2019 – 2020 (pre’86) and then 2023- 2027 (post’85)
  • Before expiry .. Agreements dictate rules of operation S. 26, 27, 95 of National Housing ActAfter expiry.. no subsidy, no mortgage payments Letters patent – non-profitBy-laws – guiding principles other obligations (rent supp, 2nd mortgages)
  • Our goal is to continue to deliver the program after expiryThis is what we are proposing..Confirmation of NP status – annual return?Annual reporting – audit or review by independent auditing firmConfirmation of rents - provided annuallySent to PNB via SDSD will advise of particulars / deadlines at expiry
  • Management needs to ensure.. - Remain as Non-profit entity- Affordable rents- Viable – sufficient reserves - Accountable – tenants, communities and lenders
  • Pre-86 doing income-testing – need to examinePost-85 – all RGI, more significant changeNo F/S & budget review as we have nowNo cyclical inspections No Project in Difficulty funding – since 2000, projects benefited from over $38 million mostly as forgivable loans
  • Full physical inspection before expiryEOA Tool can help with understanding financial capacities – knowing what no subsidy or mortgage payment means Viability – state of RR fund, need a planMgmt. capabilities – have Board in good shapePlan to review
  • All suggestions brought forward at sessions last fall..-Can’t loose sight of mandate to provide housing to low-to-moderate income New BrunswickersAlso British Colombia Non-profit Housing Association (BCNPHA) conducted case studies and bullets shown here were part of their solutions as well.
  • Assessment tool developed by Canadian Housing and Renewal Association (CHRA) in partnership with 6 non-profit housing associations across the country, including NBNPHA. Indicates ..if enough funds to meet expensesIf Replacement Reserve has enough monies to undertake replacements in the future.
  • Enter data in middle column from last year’s F/SYear of statements # of unitsTotal revenues (without subsidyTotal expenses (without mortgage payment)Balance in RRAnnual Allocation to RR Already provided : inflation rate rent revenue growthrate of refinancing
  • Test #1 Operating viability (assumes expiry this year..) – gives a NOI today and then NOI per unit per year (net operating income) – negative amount suggests unviable – if unviable today, likely unviable at expiry. Test #2 Projecting NOI to actual expiry year and then NOI per unit at expiryTest #3 Adequacy of RR – tells you how much is available to spend on capital items each year and how much per unit per year.$750 inadequate? Summary assessment: viable or not?Overall assessment matrix: which quadrant your project falls in..
  • Expiry of operating agreements May 2013 workshop

    1. 1. Expiry of Operating Agreements May 2013
    2. 2. Outline for the day Expiry of Operating Agreement - Overview of Federal and Provincial Statistics - Operating differences before and after Expiry - Discuss & determine steps to be taken - Quick Reminder of the EOA Tool - Importance of the Replacement Reserve - Demonstration of the Replacement Reserve Planning Tool
    3. 3. As cited by Steve Pomeroy, Is Emperor Nero Fiddling as Rome Burns? Assessing Risk when Federal Subsidies End (2011) On the National Level
    4. 4. On the Provincial Level 19 11 31 23 60 36 63 74 57 21 2000-2012 2013-2014 2015-2016 2017-2018 2019-2020 2021-2022 2023-2024 2025-2026 2027-2028 2029-2030 Number of Expired Agreements 130 125 451 547 971 726 663 1140 461 158 2000-2012 2013-2014 2015-2016 2017-2018 2019-2020 2021-2022 2023-2024 2025-2026 2027-2028 2029-2030 Number of units involved * Includes Non-profits, Co-ops and Skigin-Elnoog Projects only
    5. 5. What Does EXPIRY Mean? – After Expiry, Projects no longer have: - Federal & Provincial Agreements (Sections 26, 27, 95) - Subsidies - Mortgage Payments – After Expiry, Projects continue to be governed by: - Rules of Operations - Letter Patents - By Laws, Policies - Other Agreements, Obligations
    6. 6. Provincial Property Tax Exemption Our proposal.. The exemption will remain available after Expiry conditional upon projects providing the following… - Confirmation of non-profit status - Annual Financial information - Attestation of rents being charged - SD will advise at Expiry (particulars / deadlines)
    7. 7. Things to Consider Continue to: - Operate as a Non Profit – Provincial Property Tax Exemption - Be Affordable - targeting low to moderate income clients - Be Viable - ensuring sufficient revenues for maintenance & repairs (Replacement Reserve) - Be Accountable – tenants, communities, lenders
    8. 8. Challenges after Expiry - Limited ability to house Low Income Seniors / Families - Financial Expertise - Technical Support - Access to programs such as Projects in Difficulty (forgivable loans,..)
    9. 9. Financial & Technical Preparation Checklist: - Physical condition of the building - Financial capacities - Viability - Management capabilities - Review the needs of the project on a regular basis
    10. 10. Suggestions to Remain Viable • Increase rent • Less Income testing • Rent spaces – Commercial • Rethink Clients’ needs (looking at aging in place) • Amalgamate several small projects (cut operating costs) • Engage municipalities – possibility of lowering taxes or service costs • Engage Local MPs and MLAs • Evaluate the Replacement Reserve • Engage Staff and Tenants
    11. 11. Quick reminder about the importance of using the Expiry of Operating Agreement (EOA) Tool - Provides a quick and simple picture of where your project would be after Expiry - Indicates… • if your project remains viable after Expiry and • if your project has a sufficient amount in the Replacement Reserve
    12. 12. Replacement Reserve Fund – Kept in a separate interest bearing bank account – Used for replacement of Capital Items when needed – Pre-determined annual allocation – Requires Departmental pre-approval
    13. 13. Replacement Reserve Fund Eligible Capital Items (approved at commitment) include .. – Fridge / Stoves – Roof – Windows / Doors – Flooring – Counters – Siding – ….
    14. 14. Replacement Reserve Before Expiry After Expiry Current Process Capital Item Fails:  Determine Need for Replacement (Inspection)  Obtain 3 Quotes  Submit Request to PM Officer  Receive Written Approval  Purchase Item Recommended Practice Adopt Policy to maintain RR that includes: • List of items • # of quotes to obtain • Board approval / discussion Develop Replacement Reserve Plan
    15. 15. Introduction of the Replacement Reserve Tool You will need … Life Expectancy of Capital Items Remaining Life Expectancy of Capital Items in your Project
    16. 16. Where to find the Tools… Replacement Reserve Planning Tool.. http://www.nbnpha-alsblnb.ca/en/index.php/member- resources/replacement-reserve Expiry of Operating Agreements Assessment Tool… http://www.nbnpha-alsblnb.ca/en/index.php/news

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