Expiry of Operating Agreements

May 2015

Outline for the day

• Overview of Federal and Provincial Statistics • Operating differences before and after Expiry • Provincial Property Tax Exemption• Open discussion on best practices to be well prepared• Importance of the Replacement Reserve • Access to Other Housing Programs after Expiry • Role of NBNPHA• Results of the assessments to date• Reminder about the EOA Tool

As cited by Steve Pomeroy, Is Emperor Nero Fiddling as Rome Burns? Assessing Risk when Federal Subsidies End (2011)

On the National Level

On the Provincial Level

2000-2012 2013-2014 2015-2016 2017-2018 2019-2020 2021-2022 2023-2024 2025-2026 2027-2028 2029-2030

1910

3223

60

36

63

74

57

21

Number of Expired Agreements

2000-2012 2013-2014 2015-2016 2017-2018 2019-2020 2021-2022 2023-2024 2025-2026 2027-2028 2029-2030

130 110

428

547

971

726

663

1140

461

158

Number of units involved

* Includes Non-profits, Co-ops and Skigin-Elnoog Projects only

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

Things to Consider

Continue to:

- Be Affordable - Targeting low to moderate income clients

- Be Viable - Ensuring sufficient revenues for maintenance & repairs(Replacement Reserve)

- Be Accountable – Tenants, communities, lenders

- Operate as a Non Profit – Provincial Property Tax Exemption

Provincial Property Tax Exemption

$3.12 million in 2015

Non Profit Housing projects will have the option to continue benefiting from the exemption

- Confirmation of Non-Profit status- Annual Financial Statements - Attestation of rents being charged - SD will advise of particulars / deadlines by letter

Example of Exemption Benefits

Property Taxes

Project Provincial Municipal Total

20 unit in Grand Manan $7,965.24 $7,210.06 $15,176.30

1 single-dwelling in F’ton $1,891.68 $2,133.38 $4,025.06

Example of Letters Patent

Supplementary Letter Patent (Dissolution Clause)

Deleting the following:

e.g. « That in the event the Corporation should at any time be wound up or dissolved, the remaining assets after payment of all debts and liabilities, shall be distributed to another recognized charitable organization in the Province of New Brunswick, or elsewhere in Canada. »

and substituting therefore the following:

« Upon the dissolution of the corporation and after the payment of all debts and liabilities, its remaining property shall be distributed to or disposed of non-for-profit organizations having similar objectives, being bound by similar restrictions and which carryon their work solely in New Brunswick.»

Best Practices- Governance

* Renew the Board/ Engage youth * Recruit people with the right skills * Distribute the tasks * Regular Board meetings with minutes

- Finance Committee

* Replacement Reserve Planning * Increase rents yearly * Amalgamation of non profit housing projects * Avoid mismanagement and theft * Prepare budget and forecast cash flows

Best Practices (Continued)- Maintenance Committee

* Yearly inspection of the building and units * Conserve energy * Classify degree of emergency * Modernization, replacement, improvements, recycling * Extend useful life of capital items * Emergency and evacuation plans

- Tenants Committee

* Good relationships/ Dialogue * Specific criteria of selection * Bad Debts / vacancies * Damages * Importance of a lease * Inspection (move-in and move-out) * Waiting list

Best Practices (Continued)- Social Engagement

* Networking * Engage municipalities (taxes, services) * Engage local MLAs and MPs * Open houses * Fundraising * Be innovative

- After Expiry ONLY

* Less Income testing * Rent spaces-Commercial

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

AFTER EXPIRY ONLY: Rental Residential Rehabilitation Assistance

Program (Rental RRAP)

• Financial assistance to owners/landlords for mandatory repairs for:– self-contained units :

• substandard and • rented to low-income households.

• Type of Assistance – forgivable loan; – maximum assistance - $24,000 per eligible unit.

Rental RRAP Eligibility Criteria

Property owned by a non-profit corporation, or housing cooperative that is not receiving any government housing assistance.

Must contain 1 or more self-contained units, rented or intended to be rented, to low income households.

Post RRAP rents will be at or below levels established by SD & CMHC.

Eligibility - Continued Property must lack basic facilities or require major repairs

in one of the following areas:

Structural Heating Electric Plumbing Fire Safety Health Safety

For more information:http://www2.gnb.ca/content/gnb/en/services/services_renderer.8795.html

New Brunswick Non-Profit Housing Association

Member Support Program

Expiry of Operating Agreements

About

The New Brunswick Non Profit Housing Association offers individualized support to help housing groups plan for the expiry of their operating agreements.

Program Activities

• Obtain financial statement sheet(s) from your PMO at the Department of Social Development for each project under your group.

• Complete a copy of the planning for Expiry of Agreements (EOA) Tool.

• Complete a copy of the Replacement Reserve Assessment Tool.

EOA Tool

Program Activities cont…

• Ensure that your housing group has applied for both the Municipal Designation GST/HST rebate and the Provincial Property tax rebate.

• Work with housing groups to create an Action Plan based on the results from their EOA tool assessment.

• Explore multiple possible solutions.

Result Indicators

• Non-Profit and Co-operative Housing units remain affordable and are sustained in good condition.

• The NBNPHA gathers data and evidence required to develop a strong advocacy plan and policy in support of our members’ interests.

• Develop case studies to be used as templates for future groups approaching the expiry of their operating agreements.

Information Collection

• Individual member information will be stored securely and remain confidential and will only be used with permission.

• As the groups work through the expiry of their agreements, data will be aggregated to summarize the overall health of the non profit housing and co-operative housing sectors in New Brunswick.

• This data will aid in the development and of the Association’s advocacy plan.

Results

What the information tells us

We’ve completed 102 assessments to date:• 25% of those assessed will be viable without receiving subsidies and they have a sufficient reserve.

• 44% will be viable but the reserve is insufficient. It will be necessary to work on a plan for when a major capital investment/replacement is required.

• 11% will not be viable after expiry and must review their operations; their replacement reserve is adequate.

• 20% will not be viable and must review their operations. Their reserves are insufficient; it will be necessary to work on a plan for when a major capital investment / replacement is required.

Results by Region

What the information tells us…

When we meet with MLAs, MPs, municipal councillors and the members of our local communities, we’ll be able to give them facts such as:

• Of the assessments completed in the Moncton region, only 25% are viable without subsidies, assuming that they won’t need more than one capital investment at a time.

• In the Fredericton region, 52% of the assessments that have been completed indicate they will not be viable and must review their operations. Their reserves are insufficient; it will be necessary to work on a plan for when a major capital investment / replacement is required.

Results by Agreement

Year in review

• Invitations have been extended in three stages (2014-2017, 2018-2020, and 2021-2023).

• We have 72 members in the program representing 138 agreements

• We have completed 102 Assessments• We’re waiting to hear back from 57 groups on

whether they are planning to join the program or not

• We’ve been working to complete the “Options Document” which will serve as an expiry planning guide for our groups

Resources available to groups

• Staff at the New Brunswick Non Profit Housing Association (NBNPHA) – Dave Shalala dshalala@nbnpha-alsblnb.ca –

(506) 206-3795)

• Social Development• NBNPHA guide sheets (How to sheets)