Chair Sanchez on cost drivers for carrying charge increases and balloon loan outcomes
Sanchez asks whether HPD has an accounting of how much increases are due to capital vs. operating costs. Phillips says it's almost always operating expenses, as HPD structures debt so residents don't pay principal/interest. Sanchez asks what happens to the balloon; Phillips says it's refinanced with extended affordability.
And then my final question is coming from some of our friends in advocacy is, does HPD have an accounting for how much of carrying charges increases are due to capital expenditures versus
more of the operating costs?
So you mentioned utilities, you mentioned insurance, but do you have a sense of the relative reason for the cost drivers?
So not off the top of my head, Julie.
Yeah, I was going to say it's almost always just the operating expenses.
We have the ability to structure our debt in a way where the residents don't have to pay towards our debt service payments, right?
So we'll defer and accrue principal and interest, and there's a balloon at the end.
And in that way, it mitigates the increase on maintenance and rents.
Yeah.
And one-on-one question, what happens to the balloon?
At the end?
I mean, it gets rolled out.
Usually we refinance it.
It's refinancing in exchange for affordability restrictions for longer.
Yeah, that's exactly right.
Thank you.