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HomeMy WebLinkAboutPTEV PUD D-5 LimitedEquityFormula draft#10Limited Equity Formula Draft #10, adopted 5/10/09 and submitted to the city with the PUD application 6/9/09. A. DEVELOPMENT, PRIOR ASSET and DWELLING COSTS 1. Development buy-in cost DEFINE: will increase at a rate set by the PTEV every year as determined by projected construction costs for ongoing development and limited to 0.5 – 1% per month (about 6 -12% per year), unless we decide there is evidence that the increase is not required to meet construction costs and/or we decide to build less. The PTEV has the option to discount any member’s buy-in cost. 2. Prior Asset purchase cost– DEFINE: is $16,000 for those who have, and $20,000 for those who have NOT paid development buy-in before 1/1/08, and will remain unchanged throughout 2009. It will increase again starting January 1, 2010 at 0.25% per month (about 3% per year) or at the CPI, which ever is greater, or at a rate set by the PTEV if it purchases the assets from the Kolffs. Of the $20,000 paid by a Member in 2009, $4000 is to be allocated to the Disco?unt Fund and does not contribute to a member’s equity as described in B2 below. 3. Dwelling cost – DEFINE: a. The PTEV will strive to keep housing relatively frugal, affordable, and efficient. Since 80% of the lifetime cost of a building arises from its operation (mainly energy costs for heating and hot water) and 20% of the cost arises from construction, frugality requires close attention to projected energy usage. b. The Buildings Team (BLT) must approve all dwelling designs and estimated costs. The BLT must also be notified if any category of the construction budget exceeds the accepted estimate by 10% or more and must be informed of plans to minimize further cost overruns. The BLT must approve any planned expenditures that are over 10% of the total construction cost estimate. c. Each member builder will present to the Buildings Team floor plans, schematic drawings of the dwelling, an estimate of energy needed to heat the dwelling, and a cost estimate from a qualified builder for the planned dwelling. The cost estimate will be based on outside labor being used for the construction. The use of systems such as photovoltaic cells, gray water systems, superinsulation, triple pane glazing, solar water heating, composting toilets, heat pumps and other energy saving features that pay for themselves over the lifetime of the building, are encouraged. d. The BLT will work with the member builder if necessary to reduce the cost of the dwelling if they decide that the criteria of frugality, affordability and efficiency are not met. e. If the BLT cannot reach agreement with the potential builder on the plan and costs of a dwelling, the issue may brought to the rest of the PTEV for resolution. B. EQUITY CALCULATIONS 1. Member equity at the PTEV will be equal to Buy-in Equity + Prior Asset Equity + Dwelling Equity minus financial obligations to the PTEV and outside lenders. Members may sell their equity for any price at or below, BUT NOT ABOVE, the limited equity accrual limits. 2. Development Buy-in Equity (DBE) – a. The DBE of those who bought in before 1/1/08 will increase at the same rate as the Development Buy-in Cost increase until 1/1/09, and will then change according to the CPI as described. b. DBE will change at a rate that will compensate for inflation during the period of membership. The inflation index shall be the United Consumer Price Index (CPI) for All Consumers (as maintained by the United States Department of Commerce). c. The DBE of any member who buys in after 1/1/08 can be calculated using the amount they paid at time of buy-in and multiplying it by the annual CPI for each calendar year of membership and by the monthly rate for each month of membership that was not part of a full calendar year. d. The DBE for those who bought in prior to 1/1/08 will increase at a rate of 0.05% per month up until 7/1/09, and then will change as described in 2c above. e. Discount fund contributions are not included in a member’s equity. f. When a member sells his/her DBE, the transaction will go through the PTEV, which will retain any positive difference in the DBE and the Buy-In Cost paid by the new member. 3. Prior Asset Equity can be calculated using the amount paid at time of buy-in and multiplying it by the annual CPI for each calendar year of membership and by the monthly rate for each month of membership that was not part of a full calendar year. 4. Dwelling Equity a. The Dwelling Equity of an existing dwelling will be equal to the estimated Dwelling Replacement Cost (DRC) as determined by two (2) local contractors approved for this purpose by the PTEV. b. Dwelling equity may not be sold for more than the estimated Dwelling Replacement Cost, except in a Market Rate Exception as explained in C below. C. MARKET RATE EXCEPTION 1. The DRC limit on Dwelling Equity may be temporarily lifted by the PTEV for any member who needs to have the limit removed in order to obtain a loan, line of credit or mortgage. The Dwelling Equity may then be placed on the open market and sold at the price a buyer is willing to pay. The DRC limit will be imposed again as soon as it can be done without jeopardizing the mortgage. 2. If the dwelling equity is sold at any time when there is no DRC limit on the value of the equity (as by a bank or other creditor in case of foreclosure), any profits that do not go to the creditor resulting from the sale price above the DRC will go to the PTEV and NOT to the member who defaulted on the loan. (Note: For example, if the Dwelling had a $100K bank mortgage, has a DRC of $150, and sells for $200K, the bank would get their $100K, the member who defaulted on the mortgage would get $50K and the PTEV would get the remainder minus any transaction costs.) D. MISCELLANEOUS 1. The PTEV will always have the first right of refusal to purchase any equity of any Member or of any Dwelling Equity Holder. The PTEV has the right to grant to an existing Member the second right of refusal to purchase Dwelling Equity if the PTEV does not exercise its right to do so in order to keep the equity ownership in house. The PTEV will also retain the right to assume any mortgage or loan payments on any dwelling if it so chooses. 2. Specific policies will be developed to further detail purchase and sale procedures, market rate exceptions, options and/or requirements regarding rentals, etc.