Good. Good, good. Okay. So I'll call this meeting to order. Can you do roll call, please? Certainly, Mr. Chair, committee member Blaskowitz. COMMITTEE MEMBER how Halliwell many member Ogden, committee chair saglik present requirements.
Thank you very much. First order of business is Approval of the minutes from our May 25 2022 meeting. Is there a motion to approve
so moved for this?
All the favor? I would love to be opposed. So That motion passes. Glenn will turn it over to you, Mr. Leung for presentation of the DDA draft audit and I think we have probably George Johnson available by phone.
That's correct. George Johnson and company are available. On zoom call. Jennifer
if I need to the chair I just made both of you co hosts if you need to share something.
Okay. Both of us being George Johnson. Mike. Dr. Jazzy
Yeah. Do you want me to make your co host I wasn't gonna make me okay. Yeah, George Johnson and company are Cobos. So they so we did.
George Johnson and company to do the audit. We are a little bit later than the normal, but that's because there was new accounting standard board pronouncements that we had to get our we have a couple of leases and we had to get everything in order and all the presentation in order so we're a little bit delayed, but we're still on time. And I will turn it over to Michael Nicholas from George Johnson and company to take start to take it to the audit wrap up Michael
Good afternoon. Can everyone see there see the audit wrap up presentation? Yes. Okay. So, look at the SAS we have substantially completed the audit PDAs financial statements for the year ended. June 30 2022. We conducted the audit in accordance with generally accepted auditing standards as well as government auditing standards. And we do expect to issue unmodified or what are often referred to as clean opinions on the financial statements. Our objective was to obtain reasonable although not absolute assurance about whether the financial statements are free from material misstatement. And that's because in the course of doing the audit, we don't look at every transaction but we utilize risk assessment, materiality, sampling, and understanding of internal controls to focus our audit efforts. Our scope was the same as described in both our engagement letter and the audit planning summary that we provided to management before we started the audit. The records and information we request were able for us to look at and we did receive full cooperation from management. On this page, we summarize the key auditors so we did focus our efforts on site included the organization's investments, its portfolio of notes receivable, its capital assets, its revenue and related receivables and also its expenses and related payables. On the next few pages will go through certain items that were required to discuss briefly with the committee under professional standards, known as the financial statements, summarizes the accounting policies and practices used by the DDA the most sensitive estimate is the allowance for doubtful notes and interest receivable, which is based upon the DDA as loan policies. We looked at the factors and assumptions that were utilized to develop that allowance and consider that to be reasonable in relation to the financial statements taken as a whole. There were no disclosures we consider to be significantly sensitive, they affect the financial statements. As Glenn mentioned, the organization did adopt the new Gatsby lease accounting standard in statement number 87 For this year, and while the DDA didn't have any was a less ie it is a less or for a couple of, of leases that IT issues and as a result, that did mean that there were leases receivable and deferred inflows of resources that needed be recognized on the financial statements for this year. And as a result, they resulted in the recognition of about $6.6 million in leases receivable about six and a half million dollars worth of deferred inflows of resources and also resulted in a decrease in the DBAs overall net position of about $360,000 as of the beginning of the year that we're dealing with. Also the financial statements for the year ended June 30 2021. Also had to be restated to retro actively report the leases receivable and deferred inflows of resources for that year as well. There were no material misstatements that we identified in the course of the audit that we needed to bring the management's attention, and there were no one recorded misstatements. There were no disagreements that we had with management on financial reporting matters or auditing procedures that we felt might cause a modification of the financial statements, or the audit report that we expect to issue. We're not aware of any consultations that management had on accounting or auditing matters with other independent public accountants, nor are we aware of any situations where management reached out to other independent public accountants to get an opinion on how to apply journal accepted accounting principles to any particular type of transaction. There were no major issues that we discussed with management before we retained to perform the audit. There were no significant issues or difficulties that occurred during the audit. Upon approval of these draft financial statements by this committee will perform our wrap up procedures to get our audit procedures up to date in real time and get a representation letter from management before we issue our signed audit record. And there was no discussion we had with manager concerning any alternative methods of accounting for any types of unusual transactions.
With that, the next few pages we'll go through a summary of the financial results for the fiscal years ending December or excuse me, June 30 2022, and 2021. And the 2021 numbers are all restated to match to the restated 2021 financial statements as a result of Gatsby statement. 87. And to walk you through the graphs on the next few pages, I'll turn it over to our senior manager, David, Jackie.
Thank you, Mike. We will look first at the assets of the VDA. And you can see the first item here which is the cash investments 2.4 million on 155. Point 5 million is actually cash. The cash balances themselves were down at $1.3 million in 2022. Mainly because the DDA used proceeds that were held in escrow of about 1.1 million to make an additional loan for the 311 Grand River Project. The investments themselves were up from 132 point 3 million last year 253 point 1 million in 2022, mainly because of the DDA continues to accumulate the catalyst TIF revenues in the investment accounts which will eventually be used to pay down bond debt in future years. To a lesser extent as well. General TIF revenues are also being collected and those will be utilized for pending projects once projects can be identified. The capital assets balance you see is down in 2022 by about 24.4 26 point 4 million. The main driver as we've discussed in previous years is depreciation on Little Caesars arena that amounted to 26 point 6,000,020 22 And those numbers will continue to be seen in the financial statements until the stadium reaches full depreciation is scheduled to be a three to five year useful life. So that's not going to happen for quite some time. The other asset balance here of 29 million I'll take you through what that is comprised up is comprised of 1.9 million and accounts receivable. The loan portfolio which net allowances is that 10 point 9 million property held for investment of 10 point 2 million, a small amount of prepaid expenses and then the component that's new this year, the leases receivable as required by Gatsby 87 And that has a value of 5.9 million at the end of 2022. The overall increase of 4 million is largely attributable to new project loans that were made, in particular, the notes that were issued to 151 50 badly in the first quarter of 2022. Both loans have an interest rate of one and a half percent. We turn our attention now to the net position or what we would think of in the business world as the equity of the organization. The net investment in capital assets you can see has gone down considerably from 2021 mainly due to what I mentioned previously regarding the depreciation on the stadium. The balance of restricted for development has increased about 23 point 2 million from last year, mainly due to the continued growth of catalyst TIF revenues in the investment accounts and the unrestricted balances increased about $600,000 or about 8% from last year. We look at the revenue here and as you can see, there has not been substantial change in the revenue. The property tax revenue. The biggest piece of that is only down about 3% from last year. So overall the DDA is revenue continued to be very much the same as it was in 2021. And finally, we have a summary of expenses here. There are two items of interest here. One is the project costs which went from nine and a half million in 2021 to four point 6,000,020 22. That's a pretty substantial reduction of about 28% and can be explained by two significant and unusual expenditures in 2021 that run that expenditures in 2022 that included a 2.2 million subsidy or grant for the queen Lillian project, as well as a 3 million subsidy or grant made to Blue Cross Blue Shield to assist them with their relocation efforts.
The other item here that I do want to mention is the administrative and operating expenses which you can see increased about half a million dollars from last year. It's mainly due to the increases in the amounts paid for stadium maintenance Comerica Park in 2021. Because of the impacts of the pandemic and the reduced attendance, there wasn't as much need for maintenance and in fact the Tigers didn't request the same amount of reimbursements from the DDA for the expenses incurred. But as things rebounded when the pandemic situation and there was more need for maintenance, the ask for from the Tigers did increase from what it was in 2021. Just for comparative purposes. I'll give you the numbers from previous years. Were at 544,020 19 613,020 20. And then the significant drop that you saw last year, down to 407, which can be explained obviously as I mentioned by the impacts of the pandemic. The other items on this page did not change significantly from the prior year. So I've covered the two that I think are of most interest to the committee. Any questions on the previous couple of slides for me, David, back to like them.
Okay, so, on this page we discuss internal controls. The table at the bottom of the page gives the definitions under professional standards as to what constitutes a material weakness, a significant deficiency in a control deficiency, as we indicate on top because the DDA is not subject to any type of SEC reporting or oversight. It's not required for us to issue an opinion on internal control and we're not doing that. However, I am pleased to say that there were no matter if they came up in the course of doing our audit that we would consider to be either material weaknesses or significant deficiencies with regard to the DBAs internal control. And then lastly, on this page, if you the board or this committee is interested in us giving a presentation on a topic of governance interests, these are some of the topics that we've given presentations to to various clients boards and finance and audit committees over the years. If the board or this committee is interested in us making a presentation, please let us know which topic you're interested in about how much time you'd like for us to devote to the presentation and which date you'd like for us to make the presentation we'll be happy to do so. And that would be at no additional charge. And so that completes our presentation of the audit and if anyone would like us to go into any more detail, or have any or anyone has any questions by anything we've covered, we'll do our best to address your questions.
Thank you, Michael. Committee members question that.
I would just say it's somewhat difficult to go through an audit presentation hearing it for the first time cold without it in advance. I may have missed an email is my phone. Oh, what I was gonna say is I'm going to turn to Glen and ask him to highlight anything that we should know, because I haven't had a chance to read through it. So I'm relying on Glen. No, no, no offense to George Johnson, but I want to rely on Glen's interpretations.
Worries sorry about that. They were sent out via email a couple of days in advance, but I got it maybe we need to follow up. Yeah,
I got the board book. I didn't see an audit though. Okay. Well, no worries. We're looking to make her here. That's all I mean,
I agree with you. It's for you to hit it cool. So George Johnson and company are in their money this year because the Gatsby change that you know that I call it the CPA job security act right where they change the rules every few years. And so they have to, you have to change the presentation around and that kind of took a lot of work, but the the authority is in good shape. The revenues. The TIF revenues were about $53 million, which is down slightly. But we live through a pandemic right down slightly. I'll be glad to take it was 55 million the previous year. We're still recovering debt service by a mile. We're accumulating revenues in fact, that's we're accumulating revenue so well, but part B of this meeting is going to tell you what we're going to do with the accumulating revenues. 2023 is when we can start to decide what we want to do with the bonds when we when we did the bonds and 18 We had a five year moratorium where we had just left revenue stabilization funds, any excess money for the catalyst went into the revenue stabilization fund into 2023. We can start to take a look at what we can do about that paying down debt refinancing. You know, we're gonna have some decisions to make coming up. Not in this current fiscal year, which ends June 30 23. But somewhere in the fall of 23. We're all you know, again, the it was it was a fine year. We the authority is on solid financial footing. I can go into more detail. Let's dig down as deep as you want to go.
Guys, second, Steve's piece of hearing that from you is what I needed to hear.
Thank you. Yeah, I'm
in for the record. And so gay, of course did send out the statements to all committee members on the 20/24 so I just want everyone to know that you know, we did get them.
She sent them out, we're gonna find we're going to make sure that they were got, you know, maybe sometimes email is funny. So maybe what we need to do is we need to do a follow up and make sure that people have gotten we'll put a note in the file for
that. Yeah, the only thing I do just because otherwise kind of a dry meeting and topic. This you know, the Gatsby and I'm a card carrying member of the AICPA so it shouldn't be disparagingly on group, but they continue to like churn out these pronouncements and it's almost like they've turned into the fairness police on they want everything looked at consistently across all governments. And even considering you know, like we all grew up and you'll personally appreciate this because you work for a large lessor. You alright, we're all of us committee members are old enough to remember that there used to be no rules on leasing and people refer to it as off balance. sheet financing. So rather than buy something and clog up your balance sheet with an asset and the dot, like, oh, we just call it an operating lease. Then the FASB who governs the for profit world came out with faz B 13 a lot of years ago saying, Well, there's two different kinds of leases, there's operating leases and there's capital leases. And if you meet these conditions, even though the legal documents call it an operating lease, you accountants need to account for like the essence of the transaction that you really bought it and it made us put it on the books if we triggered these conditions. Were the Gatsby's now gone is to say any lease is really use of an asset. And even if it's short term or long term, why should that be just an expense? It's off the balance sheet. If you're a lessor or lessee, you've got to account for it and the practical side of it and for the city. It's like much more we're gonna meet the standard of the city to but much more difficult because we have a lot of leases. You've got to like apply it, you know, you're in this business. It's like figuring out what's the cap rate on the lease unless it's disclosed. You've got to take your constant capital present value the lease stream, figure out how much goes on the books. And so it's a great mathematical exercise for all of us card carrying CPAs. It creates a lot of work and this year, especially in cats off to both Glen and George Johnson. And now for comparability. We don't want to have the current year be different than the prior years. So they gotta go back and like redo the prior years using the standard from today. So it turns into a lot of work and in our case, as committee members, probably not a lot of benefit to us that it really made the financial statements better although we always strive to be fully compliant with you know, all the all the rules and I think more importantly, is what Glenn said and what we see in their presentation. The fact that our catalyst revenues are being captured, actually exceeding what was projected when we borrowed the money to do our large projects. We see that money coming in being accumulated one of the big benefits to all of us as committee members when the outside auditors come in and give such a glowing report is that it tells us that the monthly reports that we go through that Glenn provides and I deliver that we can rely on those what what we wouldn't want as committee members is all of our monthly numbers looks great and then the auditors came come in and say whoa, like there's a bunch of stuff like you didn't know, that's when we would have to say, oh my gosh, we're charged with governance, Glenn and staff, you need to do a better job. So in this case, it can't get any better than this. The monthly numbers that were provided, hold up the picture and I always love how the George Johnson does that slide duck, they're kind of putting financial statements into words actually makes it more interesting. All of us are used to looking at financial statements, but it kind of shows graphically. Hey, here's where your money comes from. And here's where it goes and how many organizations that we've all served on if everybody did it, there'd be a lot better governance in this world, you know, so, yeah, so I'm really happy to go on and congratulations to you and your staff and you always, not just for the DDA, but every entity of the DGC Glenn's group leads the league and being on time getting stuff done and not having material modifications that would make committee or board members feel uncomfortable.
That surprised
Yeah, that was a useful explanation. Thank you for that and I'm glad everything aligned because I'd hate to see Glen's 40 year reign come 2030
Just third, October 5, it's
3040.
Don't think we'll see him Don't talk like never knows. So it can refer to yours.
Check your investment food delivery day. Are we really accepting this today? Yeah.
So it'd be if appropriated like a motion to approve the audit. Sure. So movements check us second. Their support. All in favor? Aye. Motion passes. Thanks again, George. Johnson. Please tell them Mr. Johnson. If you see him that we said hello. And of course, you know, Anthony, when you see him
will do that. Thank you. Thank you.
Yeah, that's just great. Okay, well, now back to business like let's work on looking to the staff. That helps us spend the money on project so nothing I guess your reason the state money is to spend it guys
announced that we had money that means like real money.
Good. You gotta follow the mayor feels like when he looks at the finance staff. There's always money
up with like, what that way is right. Find some job. Yeah. So
thank you, Mr. Chair. Good afternoon. So, as you all are aware, the DA has the ability to make loans through a program called the housing of this retail development and absorption fund. The program also had the ability through the DDA to make amendments as market conditions change, you know, as different things come up so one of the things that we've been very focused on doing and we want to be very you know, we want to make a priority is to is to ensure that the housing stock within the DDA is inclusive, and it's it's more deeply affordable than the 80% that was set out under the executive orders five, six years ago. And so we want to challenge developers to do to do better and to make more units affordable within the DDA. And so what we have in front of you is we have sort of an outline of a plan. And what that plan says is, as you go into more affordability, so 50%, ami 60% ami 70% Ami, you as a developer, you can have a portion of of the hard construction costs of creating those residential units be subsidized through a loan. And some of the parameters around that loan would be a minimum of 10 affordable housing units. Some nominal interest rate something low below market one or 2%. The maximum loan amount of 200,000 per affordable units and it's 200,000 of subsidy into that affordable unit, which means that the hard costs overall of constructing those units will be over 500,000, which just puts a very high cap to ensure that that you are able to get subsidy as a developer to encourage the development of these affordable housing units. And so we also have in here a provision and this is something that we would have to define and would go further into any sort of loan that we would bring before this body under this program if it's approved, and that's something that we have written as legacy Detroiters and so if you have a legacy Detroit or occupying an affordable unit, then a part of the portion of the loan would be forgiven bonder under the loan conditions that we would put forward in front of you under this program in the future. And so that's that's what is in front of you today. It's a it's a modification or an additional loan. parameter to encourage affordable housing within the GTA.
So what again, is the definition of a legacy to traders that 30 years or something in that?
No so so the way that we would, we would look at that is there isn't an established definition for legacy Detroiter. Right. So it would be a defined period of time that we would put, when we bring a loan forward to you, we would say, based on the underwriting. There's a 1% interest rate that this project can support. This is the loan amount that we're recommending. And then we would also say, now we've come forward and we've defined what a legacy Detroit areas whether it's 24 months of residency in Detroit prior to them living in this unit, or something like that, it has to be something that is, you know, discussed and brought forward or that
can just put a little bit more color on that. In the CDBG loan that the city made to the for the United Artists building project are they included that kind of provision, which is where we took the inspiration from for this program and in that, in that loan. They defined legacy Detroit or as somebody who had lived in the city was a resident of the city at least 12 months prior to their prior to their tenancy in the United Artists building. So that's how it was defined there. We don't know that Navitas point we don't know that that would necessarily be the standard. But that's how it was. That's the precedent that we that we that we looked at.
Thank you. And that's that's why that's why I asked the question because that's a term of art has now been used in different ways in the, in the city. So for example, we use legacy legacy to traders are defined as certain residents in the marijuana ordinances in a different way. And so I'm wondering if it might be helpful to have a consistent term I know that, you know, in the in, in our deals, it's it has it has different meanings, but I love the sentiment. I'm wondering if it makes any sense to have a consistent meaning from a definition standpoint across the board as we begin to attack the issue of the lack of affordability. So
I would echo that legacy, by definition gives the impression that it's a longer than one year takes to have to move into a city to run for
office. Right. Right. Yeah. And and I think, you know, there were there was a there was a certain certain stairstep and thresholds under the marijuana ordinances, both the medical as well as adult use, and, and the number of years that you had been in the city or, you know, had shifted along there too. So,
so number one, you're saying for now, you're not they might not do that in the future. But for now, the definition would come to us when there was a specific deal to approve that use this policy.
That's right. Yeah.
And how would any, how would this new definition hold up for things that we've recently done when when Could someone look at this and say, Wow, if you would have had this like, two years ago, there wouldn't have been the loans that you made to Project X or project y is there? Is there any concern about that?
This is sort of like within the threshold of where we've given other loans. You know, I'm thinking back to the prior deals that we've recently made loans on. I think this is definitely within the range of where we've made those loans. Now, the one thing that we wouldn't have done in those cases is for those affordable units. It was affordable units 80% of their lives, at deeper levels of affordability, they wouldn't they wouldn't qualify for for this you know, forgivable nature or anything like that. So
yeah, I understand that. And I think that's good. I mean, I've watched a lot of city council meetings, and I definitely hear that that there's a lot of dialogue going on. People understand that 80% of AMI is still not affordable for a lot of people. So it does seem like there's been a lot of questions coming from counsel. So this seems proactive external. Okay, so with that said, as a committee ready to make a recommendation, what's your plan? What do you say
what's so how much do you apply these funds? An allocation from the state
you know, it's through the line item adminship plan. So this is a program this is an existing program under our TIF plan that allows for loans to housing office retail programs and then for absorption. And so this these are just additional parameters on the housing one to to provide a little more definition on how we could support deeper affordable affordability under that existing program. So it is it's a it would be TIF funded.
I guess one more question and that would Are there any projections about what difference this would make? So based on the demand that we're seeing now for housing in the downtown district, which seems to be very strong Is there any thinking about so what what would this What would this do what, you know, what empirical difference?
Yeah, I think right off the bat, the biggest difference would be developers instead of targeting an 80% Ami would be encouraged to do a 50% Ami deal, and then be able to get a loan through this program. And by doing the deeper affordability, you would have someone like a dishwasher at Shinola hotel who not only works at Shinola hotel, but lives in the DDA in one of these units. That's the goal. is to is to have maybe live work and and sort of play all within the DDA accessible to everyone.
And it opens up an additional source of funding to the developer that given our other approvals that we have to go through typically with projects will be viewed favorably by our own city council.
That's right. Yeah,
I think any developer would want to buy down that rate, right? Because the reason they don't do it now is because Mitch, this stuck at a certain numbers adults select After selection, and there's always a gap to get from 80 to 50. But if you're buying down that rate, I don't know why someone wouldn't go after that opportunity to participate
because of a financial incentive to do so. That's right.
And so I guess crack to question which was addressed and so if you apply this to the last five deals, the come before us, we would apply every one of those basically. I know it's subjective because we're not defining the five deals, but generally speaking, this could have applied to every residential deal that we've seen lately.
That would be based on developer discretion. I guess if they wanted to get into the the deeper affordability and then be eligible for the subsidy.
I guess what is a disincentive to not why would a developer decide? No, I'm not going after that money. Never anybody. I just like there's an incentive I see to participate to buy that now. I get that part but and the mayor and council are trying to drive to an affordability figure so that 80% doesn't define affordability any longer though. That's the law. of the land, but to to to get to 50. There's gonna be a lot of deep discounting necessary to get down that low. And that's what I was driving at about earlier if we, if we stopped back and funded these other deals at that deep discounted level, how many deals could be how many transactions could we do or is it limitless by our active allocation?
Well, it's definitely limited by the allocation and how much money is available. I mean, none of the none of the last, you know, four or five deals. That loans had the that this board has approved for projects that included housing had deeper affordability, to speculate to say if we had had this program available, would they have would they have gone more, you know, would they have gone deeper? You know, it's hard to say but I don't think that any of them, any of them did and that's the trend that we're hoping to reverse. I don't know why anybody wouldn't be doing.
Anyone comfortable, so moved. Support Moodle support it all in favor. Motion passes. Next now that I think one more item for us to on 1407 and 14 Thompson Randall.
That's right, Mr. Chair, so 1407 and 1427. Randolph, located in Paradise Valley, the developers I think, a couple of which are on right now. Events summit commercial, Dennis Archer Jr. also partners with Nia Parker also a part of this deal. What was agreed to by this DDA board back in April 2019 was a purchase price credit at closing of 130,000. And what ultimately transpired is we were extending the construction completion deadline out and as proof we've toured the building, we've looked at evidence of all the item is being completed under the development agreement. We do have those photos of the building that we can pull up now just to show you and so we have a fully redeveloped building. We have signed leases for the entire building. But one of the things that we didn't do in this oversight was that we didn't extend the timeline out for the terms of the credit. So the 150,000 other credit, it wasn't extended to the same time period as the completion deadline for the building. And so really, this is more administrative than than anything else, but it's just to extend the timing of the credit and not to materially change any of the terms around the credit. And so just to show you briefly, the work that was done on the building, under the development agreement, there's a new fire escape in the bottom right corner of the building that's been that's now up new windows. Which is in the bottom, in the middle, specific to hdc standards. You can see some of the office space in 1407. Randolph and the top left those first two images, as part of the DA fire suppression systems were to be put into building. That's the top right. And then there was also bathrooms that would be added to the building, sir. So you know, everything has been completed to the developers to the development agreement, standards, and so we're just asking now sort of more administratively than anything to just extend the timing under the credit, since the developers have had sort of held up their end of the bargain.
Yeah, like some of that sounds like great news that there's some committed leases now for the building as well.
That's right. Yeah. The entire buildings lease. Okay.
So questions for
committee. Members.
Truly does sound like a ministerial oversight on our part to not extend it. So I totally understand that. I'm good. The committee members feel the same way. Yeah. Okay. So is there a motion to approve? So move in their sport. All in favor? Aye. Motion passes. Thank you very much for both items. Fact. I think there's an open house coming up. So just maybe it's appropriate to ask if there's any members of the public that want to lose that next first. Is there any public comment?
Anyone on for public comment? If so, please indicate by raising your hand Let me double check here. Let's see no one on for public
comment. Due Diligence there. So a motion to approve. to adjourn. adjourn. Okay, thank you very much. Thanks, everybody. Thanks, Jeff.
They're not going to go for it. Thank you. Take you up. Second question. We put in a class