By DENNIS GRUBAUGH
EAST ALTON — Village officials are cheering a $15.7 million effort to rebuild the housing base by way of a unique combination of funding support from government and business.
A ribbon was cut this past month on Emerald Ridge, an upscale residential neighborhood surrounding the Keasler Recreation Center. Some 80 obsolete homes in the former defense housing area were razed to make way for 46 new structures. In all, 34 one-story and 12 two-story, single-family detached homes have been built.
The new houses are already occupied or are otherwise committed, said village official Joe Silkwood. A few structures remain to be razed, but the village opted to mark the project’s completion a bit early in honor of outgoing Mayor Fred Bright, who retired at the end of April after 18 years at the helm. Silkwood, who has been treasurer, was expected to be named mayor this month by the Village Board.
The project was developed by Rise Community Development and will be managed locally by McCormack Baron. Both are based in St. Louis.
McCormack Baron has a temporary office in the recreation center where representatives have been present at least a couple of days a week, Silkwood said.
“They actually do all the maintenance on the property including mowing the grass. They are going to be able to sell those units after 15 years, and they want them to be in the best shape they can be in,” Silkwood said. “They are highly motivated to keep those looking good.”
The demolished houses were originally built for ordnance workers who produced World War II-era ammunition at nearby Olin Corp., but through the years the site fell into a state of dilapidation.
Residents who lived there at the end were given a chance, and several agreed, to rent spots in the new development.
Under terms of the low-income financing package used, the property will be rental for 15 years with a lease/purchase option available sometime after year 15. (A resident doesn’t necessarily need to live there for 15 years.)
The homes are available to people earning up to 60 percent of the area median income, with the exact income varying by family size. Nearly two-thirds (63 percent) of the population of East Alton meets the income eligibility requirement.
Monthly rent is: $575 for a two-plus bedroom home; $625 for a three-bed home; and $735 for a four-bedroom home.
The project is the conclusion of a decade of planning that included the village, Madison County, the Southwestern Illinois Development Authority and at least two state agencies.
SWIDA and Rise are the development partners on the project, with SWIDA having a 25 percent stake, a $400,000 guarantee from its general fund that the agency loses only if the project is not completed, SWIDA Executive Director Mike Lundy said.
Rise Community Development, formerly called Regional Housing and Community Development Alliance, is a nonprofit organization that has helped redevelop neighborhoods around the metropolitan area.
Rise brought in St. Louis Design Alliance and Altman-Charter Co. as architects and builders for the project.
The project is financed by:
- $11.097 million in equity provided by federal Low-Income Housing Tax Credits, obtained by PNC Multifamily Capital and administered by the Illinois Housing Development Authority;
- $131,000 in General Partner equity from an Illinois Affordable Housing Tax Credit donation made by U.S. Bank
- $1.25 million from the Illinois Housing Development Authority Capital Trust Fund;
- a $1.14 million IHDA Home Loan;
- an $8.54 million PNC Bank Bridge Loan;
- a $625,000 PNC Bank permanent loan for construction;
- a $600,000 Madison County Home Loan;
- a $550,000 Madison County Urban Development Action Grant, a repayment bridge loan;
- a $958,000 Technical Assistance Corporation Predevelopment Loan;
- a $550,000 Technical Assistance Corporation bridge loan;
- a $184,000 Department of Commerce and Community Development Green Building Grant (for energy saving features); and
- $100,000 from a village of East Alton Community Development Block Grant.
- a $685,000 Deferred Developer Fee Loan
According to Mark Stroker, the director of real estate development at Rise, the listed dollar figures total far more than the estimated project cost because some of the participants get money back as the project proceeds. The in-and-out nature of the financing is “complicated and unwieldy, but it is effective,” he said.
The actual tax credit allocation was $12,263,224. The credit price on this deal was 90.5 cents on the dollar, leaving an $11.09 million corresponding amount of credit for the “limited partner investor” (in this case PNC), which takes a 99.99 percent interest in the partnership. The credit is typically available for 10 years, Stroker said.
PNC also is serving as the construction lender and is using the bridge loan to cover costs until the equity comes back from the tax credit investment later in the process.
Rise brought in PNC for the project. For PNC, there’s no real guaranteed return. There’s projected return and there is risk. The hurdles are making sure the project gets built, making sure it operates without any deficits and making sure it is properly leased up, so that the investor qualifies for the full credit.
The bank, as a “limited partner,” gets the benefit of depreciation and it has the standard real estate benefits that go along with being the owner, Stroker said.
It will also get the benefit of any Community Reinvestment Tax credits as a federally insured lender, and it will get a return on its loan.
Such financing is increasingly attractive on these affordable housing projects, Stroker said.
“On really hot deals, believe it or not, people will pay over a $1 (for a $1 credit).They pay over the value,” he said.
Stroker said he feels there are two significant pieces to the program. One is that the housing is privately owned in a deal that goes on for 15 years and is an incentive by the investors to keep the project looking good.
The other is, the rents are fixed at closing and may not exceed 60 percent of rents for a given area. Rent will increase over time just like a conventional property. The point is, that rent is not tied to, or indexed in any way to an individual’s income.
“Once you initially qualify in terms of income, your income can go where it will. There’s no disincentive to move ahead,” Stroker said.
The rents can be made lower since the project is subsidized through the Low Income Housing Tax Credit program. Companies such as Rise and McCormack Barron have previously used such financing. Such credits are allocated by the federal government to each state, based on its population. Each state has its own criteria for deciding who gets the credits, and the Illinois Housing Development Authority has that call in Illinois. In this particular program individual investors get credit against their income taxes for the next 15 years, if the project maintains its eligibility.
Mary Kane, who is treasurer of the Illinois Housing Development Authority, said the authority has assisted low income development projects in every county of the state.
“I think without a doubt this is the finest of the projects that IDA has done,” Kane said of Emerald Ridge.
The redevelopment area includes the 300 and 400 blocks of East Drive, the 600 block of North Drive and the 300 and 400 blocks of Ohio Street. North Drive, East Drive and Ohio Street have all been resurfaced.
During a ribbon-cutting ceremony on April 20, Mayor Bright took the majority of the praise, with some calling Emerald Ridge his “legacy.”
“It took someone with vision to say a change had to be made in the housing stock in East Alton,” said Madison County Board Chairman Alan Dunstan. “Fred Bright has done that.”
Bright first ran for mayor in 1997, with a pledge of cleaning up the village, where he had started off as a police officer in 1972. Since he became mayor, 155 derelict structures were removed and a number of new homes other than the latest project were built.
Bright credits a lot of others with “helping with the vision” including past and present members of his Village Board, village employees, and former Township Supervisor Greg Kuehnel.
Silkwood said the central location coincides with the idea of improving the core of the village and watching the improvements spread.