Walk around the 184-unit Glendale Townhome complex and you probably would not guess it needed an $11 million upgrade (that’s $59,000 per unit). The units don’t look that rundown.
The Minneapolis Public Housing Authority (MPHA) built them in 1952. Like many of the MPHA’s 1960s-era and early-1970s-era highrises, these townhomes need attention. Much of it is the kind you don’t see. Boilers, plumbing, water heaters and furnaces are nearing or past their useful life. Tack on some of the visible stuff—sidewalks, façade work and windows—and the costs add up.
A recent MPHA analysis ranked its facilities as “poor,” according to an industry standard called the Facilities Condition Index.
MPHA estimates during the next 10 years it needs $225 million in capital investment for all of its housing—highrises, townhomes and single family units. That investment would move the Facilities Condition Index needle to “fair.”
Here’s the problem. The federal government has been providing $10 million a year for capital repairs, less than half of the estimated need. And the federal government is running a big deficit.
Call this public housing’s “infrastructure gap.”
But MPHA and the federal government are pursing a new strategy, and it offers a rare upside to current rising energy prices.
The solution hinges on utility bills. Currently, the U.S. Department of Housing and Urban Development (HUD) reimburses MPHA dollar-for-dollar for its gas, water and electric bills. The goal is to make energy improvements, then tap the energy savings to pay for investment.
Specifically, MPHA would borrow $53 million for a major infusion of new furnaces, windows, and low-flow water devices. HUD would pay MPHA as if its buildings continued to be energy and water hogs. MHPA could then use the surplus federal utility payments to pay off the $53 million loan.
Honeywell has done the energy audit, crunched the numbers and would guarantee a base level of savings. MPHA will do improvements that would pay for themselves in 20 years or less.
MPHA’s $53 million energy-saving program targets nearly $24 million for new boilers, water heaters and furnaces. Other big buys include: $6 million for thermopane windows; $5 million-plus for low-flow water devices (mostly toilets); $4.3 million for energy-efficient refrigerators and nearly $3 million for lighting.
MPHA Executive Director Cora McCorvey says the deal is critical to address public housing’s capital needs. The agreement still needs to be inked.
“The negotiations have intensified,” she said. “I am confident it is going to happen.”
MPHA owns nearly 5,900 housing units, a critical piece of the city’s affordable housing. It has 41 highrises with 4,958 apartments, 736 single-family homes and 189 townhome units, mostly at Glendale.
On a summer day, ask Glendale tenants about the property’s condition and some say what the townhomes really need is central air. (Some tenants have bought their own window units.)
Tenants offered a smorgasbord of concerns. One man talked about a basement sewer back-up. A woman said she wished her unit had carpeting, not tile. A teenager said: “I’ve never seen rust in a bathroom before.”
Some people had safety concerns. They ranged from gunshots at night to skunks wandering the property.
Tim Durose, MPHA Finance Director, said Honeywell and MPHA needed to work out details on the energy conservation program. For instance, they have to agree on how to measure savings. What happens if they install energy-efficient lights and save energy, but residents add new appliances? If energy use goes up, how do you count the benefit from the new lights?
Still, working out an agreement is better than the alternative. Emelio Bettaglio, MPHA director of facilities and development, said before this program became available, MPHA thought it might need to sell property because it lacked the money to maintain everything it owned.
If energy prices continue to rise, that would help MPHA under the terms of the proposed deal. HUD continues to pay MPHA based on its historic level of energy use. Higher prices mean higher reimbursements, and more money to pay off the loans.
Better safety, less operating costs
Bettaglio walked through Lynway Manner, 2415 N. 3rd Street, a 62-unit building built in 1966, and pointed out problems. A leaking pipe was being fixed in the ceiling of a common area; the building had an old, inefficient boiler.
In a vacant apartment, he shows a hole in the wall. Workers had been installing new kitchen cabinets and found a leaking pipe from the upstairs apartment.
“There has been a lot of leaking in this building,” Bettaglio said. “It gets fixed on a reactive mode, a very expensive plumbing call.”
The better solution is to replace all aging piping at once, instead of leak-by-leak. In many buildings, MPHA would like to replace the old pipes with a flexible vinyl product, Bettaglio said. But it’s expensive.
For comparison, Bettaglio told me about the piping upgrade at 1815 Central Avenue NE, a 25-story highrise with 333 units, built in 1972. That piping fix cost a million dollars.
The pipes are symbolic of bigger problems. As the agency delays capital improvements, more things break down, and require emergency fixes. Expensive emergency fixes drive up maintenance costs.
Like the leaky pipes, not all needed investments save energy, Bettaglio said. But MPHA expects to continue to get its $10 million annual capital budget. That money could be redirected to piping, aging elevators or adding sprinkler systems, a life-safety concern.
Most MPHA buildings were not designed with sprinkler systems in the apartments, and sprinklers are a top priority. The agency estimates needing nearly $20 million just for sprinkler retrofits.
Bettaglio knows the 10-year, $225 million capital plan didn’t catch everything. One new bill is the needed retrofit for the digital TV changeover. That could cost $500,000 to $750,000.
Long term, MPHA would like to add green technologies, green roofs and solar power. “That may become another phase in the future,” Bettaglio said.
Scott Russell is a journalist. He wrote for the Southwest Journal and Skyway News (now the Downtown Journal) in Minneapolis from 1999-2005. He also wrote for The Capital Times, a Madison Wisconsin daily, from 1993-1999.