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HomeMy WebLinkAbout111708 Federal Neighborhood Stabilization ProgREQUEST FOR COUNCIL/ AGENCY ACTION MEETING DATE: NOVEMBER 17, 2008 krriq=l FEDERAL NEIGHBORHOOD STABILIZATION PROGRAM CLERK OF COUNCIL USE ONLY: mdh": 191un ✓e5 yV{ � /Y "h've ir APPROVED Z As Recommended 7. 0 ❑ As Amended ❑ Ordinance on 1st Reading ❑ Ordinance on 2nd Reading ❑ Implementing Resolution ❑ Set Public Hearing For CONTINUED TO C�. FILE NUMBER CITY MANAGER EXECUTIVE DIRECTOR RECOMMENDED ACTION CITY COUNCIL ACTION 1. Approve a substantial amendment to the 2008 -2009 Annual Action Plan and authorize its submittal to the U.S. Department of Housing and Urban Development. 2. Authorize the City Manager to execute a Neighborhood Stabilization Program application for grant funds in the amount of $5,795,155. 3. Approve an Appropriation Adjustment recognizing $5,795,155 in Neighborhood Stabilization Program grant funds and appropriating the same. 4. Adopt Neighborhood Stabilization Program guidelines. 5. Authorize the issuance of a Request for Proposals for program intermediaries. 6. Authorize the City Manager, or his designee, to negotiate and enter into any necessary contracts and /or agreements to implement the Downpayment Assistance Program. 7. Adopt a resolution establishing the Bank Owned Property Maintenance Program. 8 -35 Federal NSP November 17, 2008 Page 2 COMMUNITY REDEVELOPMENT AGENCY ACTION 1. Adopt Neighborhood Stabilization Program Mortgage Assistance Program. 2. Authorize the Executive Director to execute all documents relating thereto. COMMUNITY REDEVELOPMENT AND HOUSING COMMISSION RECOMMENDATION At its Regular Meeting of November 4, 2008, by a vote of 5:0 (Reyna absent), the Community Redevelopment and Housing Commission approved the following: Recommended that the City Council: 1. Approve a substantial amendment to the 2008 -2009 Annual Action Plan and authorize its submittal to the U.S. Department of Housing and Urban Development. 2. Authorize the City Manager to execute a Neighborhood Stabilization Program application for grant funds in the amount of $5,795,151. 3. Approve an Appropriation Adjustment recognizing $5,795,151 in Neighborhood Stabilization Program grant funds and appropriating the same. 4. Adopt Neighborhood Stabilization Program guidelines, including that military veterans and disabled persons, along with those who live and work in the City, be given priority; that open space be considered as a priority option under Program 5; and that the category of the number of households to be assisted by income be amended. 5. Authorize the issuance of a Request for Proposals for program intermediaries. 6. Authorize the City Manager, or his designee, to negotiate and enter into any necessary contracts and /or agreements to implement the Downpayment Assistance Program. Recommended that the Community Redevelopment Agency: 1. Adopt Neighborhood Stabilization Program Mortgage Assistance Program. 8 -36 Federal NSP November 17,`2008 Page 3 2. Authorize the Executive Director to execute all documents relating thereto. DISCUSSION The Housing and Economic Recovery Act of 2008 (HERA) appropriated $4 billion to be distributed to states and localities for the redevelopment of abandoned and foreclosed homes. The grant program funded through this appropriation is referred to as the Neighborhood Stabilization Program (NSP) . Under the terms of the funding distribution formula established by the U. S. Department of Housing and Urban Development (HUD), Santa Ana has been allocated $5,795,151. The purpose of the program is to stabilize neighborhoods that have been impacted by foreclosed or abandoned properties. Congress did not want this program to be perceived as a bank bailout; therefore, HUD is requiring that the overall portfolio of acquisitions be discounted 15 percent of the appraised value. These funds may not be used to assist homeowners to avoid foreclosure; rather, the property must have gone through a foreclosure action, or has been abandoned. HUD based its calculation for the distribution of NSP funds on the number and percent of foreclosures, subprime mortgage loans and default or delinquencies in a given area. The funds must be contractually obligated within 18 months of approval of the application. Currently, Santa Ana has approximately 1,464 foreclosed properties and 1,126 properties with a Notice of Default. The data indicates that the areas of greatest need for single- family structures are aggregated in the central core of the City (Exhibit 1). On the other hand, the areas of greatest need for condominiums are concentrated in outlying census tracts. The regulations identify five allowable programmatic uses for the purchase of foreclosed or abandoned homes. 1. Establishment of financing mechanisms such as soft seconds and shared equity loans. 2. Purchase and rehabilitation for the purpose of selling, renting or redeveloping. 3. Establishment of a land bank for the purpose of assembling, managing and ultimately disposing of vacant land in a manner that 8 -37 Federal NSP November 17, 2008 Page 4 will help stabilize neighborhoods redevelopment of urban land. 4. Demolition of blighted structures. and encourage re -use or 5. Redevelopment of demolished or vacant properties to be used for a public purpose and /or new construction. Funds may be used to benefit households with incomes up to 120 percent of area median income, but a minimum of 25 percent of these funds, or $1,448,787, must be spent on activities benefitting very low- income households (50 percent AMI). In order to receive its funds, the City must adopt a Substantial Amendment to its 2008 -2009 Consolidated Plan Annual Action Plan (Exhibit 2). The Annual Action Plan is the document whereby the City formally applies to HUD for its annual federal grant allocations (CDBG, HOME, ESG, and HOPWA) and describes how those grant funds will be used. The proposed NSP programs, budgets, target goals and locations are listed below. The program guidelines are identified in Exhibit 3. Prog. Program Budget Goal Location No. (# of Homes) 1 Downpayment Assistance Priority Program $400,000 20 Area Acquisition and 2 Rehabilitation - Priority Single Family Homes $2,015,636 40 Area Acquisition and 3 Rehabilitation - Condominiums and Historic Homes $700,000 10 Citywide Acquisition and 4 Rehabilitation - Rental Housing $1,800,000 24 Citywide CDBG 5 Eligible Redevelopment $300 000 1 census n/a Admin $579,515 n/a Tracts Total NSP Grant $5,795,151 ED� Federal NSP November 17, 2008 Page 5 Further, a Redevelopment Agency funded Mortgage Assistance Program is proposed in the form of a silent second in order to create more affordable units and provide additional incentives for the homebuyer. The guidelines of the loan program are described in Exhibit 3. The Downpayment Assistance Program (Program No. 1) is intended for those properties that are foreclosed or abandoned but do not need rehabilitation. This program will be managed by City staff who will work directly with the interested and eligible homebuyer and or realtors. The activities related to Program Nos. 2, 3 and 4 will be undertaken by either non - profit or for- profit intermediaries. The entities will be procured through a Request for Proposal (RFP) that will be distributed to a broad range of consultants, non - profits, developers, etc. The purpose of the RFP is to solicit and select intermediaries to provide the complete range of services that will be necessary for the successful implementation of Programs 2 and 3. They will be selected based on their experience, resources and financial capacity to effectively rehabilitate and sell properties to eligible homebuyers. In an effort to leverage the NSP funds, the intermediaries will be required to have a line of credit available for the acquisition component. While it is foreseeable that one entity may have all these qualifications, the City will also accept partnerships between entities to meet the required services. The intermediaries selected to implement the Rental Program (Program No. 4) will need to demonstrate their capacity and experience in the acquisition, rehabilitation and long -term management of affordable rental housing. In addition, they must have experience in leveraging existing state and federal funds for affordable housing. Those selected will be the best qualified to implement the program within the legislated timeframe. The Rental Properties Program will meet the very low - income (50 percent Area Median Income) obligation. It is anticipated that up to three intermediaries will be initially selected in order to ensure timely implementation of the program. Thresholds will be identified for funding commitments to be made within relatively short time periods (say six months) from contract execution. Should they be unable to perform, then the City will have the ability to terminate those contracts and select a new intermediary that has been pre - qualified through the RFP process. We believe this to be the most expeditious way in which to commit the program funds and achieve the best results for the neighborhog 13T the property is located. The Federal NSP November 17, 2008 Page 6 RFP will be issued shortly after City Council approval of this action, and the recommended intermediaries will be presented for consideration in early 2009 once we receive confirmation from HUD that they have approved the program application. The Redevelopment Program (Program foreclosed or abandoned properties or other open space, or for redeve with NSP and CDBG requirements. itself, a subsequent action will be Redevelopment Agency. No. 5) allows the City to acquire suitable to be redeveloped as parks lopment purposes that are consistent Should such an opportunity present presented to the City Council and /or To further stabilize neighborhoods that have been negatively impacted by foreclosed properties, the City is implementing an additional program authorized through state legislation. SB 1137, which went into effect a few months ago, is designed to help homeowners whose homes are at risk of foreclosure. One small part of SB 1137 allows cities to administratively fine a bank up to $1,000 per day for failure to maintain residential property acquired through foreclosure. SB 1137 defines "failure to maintain" as: o failure to maintain exterior of building, including but not limited to, excessive foliage growth that diminishes the value of surrounding properties, o failure to take action to prevent trespassers or squatters from remaining on the property, or o failure to take action to prevent mosquito larvae from growing in standing water or other conditions that create a public nuisance. SB 1137 requires the City to give the bank 30 days notice to correct its violations (less if the violation relates to health and safety). If the violation is not corrected, the City can fine the bank up to $1,000 per day until the violation is remedied. The bank is entitled to an administrative hearing on the amount of the fine. A public notice was published on November 1, 2008, in the Orange County Register, La Opinion and Nguoi Viet News indicating that the draft Neighborhood Stabilization Program substantial amendment is available for review for the required fifteen days. In addition, it was posted on the City's website. i � Federal NSP November 17, 2008 Page 7 FISCAL IMPACT By submitting this substantial amendment to its 2008 -2009 Annual Action Plan and grant agreement, the City of Santa Ana will be eligible to receive up to $5,795,151 in grant funds from the U.S. Department of Housing and Urban Development. Funds for the Mortgage Assistance Program are available in the Tax Increment Housing Set -Aside Fund in the amount of $1,450,000 (account no. 507 - 936 - 6951). Shelly Landry -Bayle Housing Manager Community Development Agency CJN /SLB /mlr 111708 JT CC -CRA Federal NSP APPROVED AS TO FUNDS AND ACCOUNTS: Francisco Gutierrez Executive Director Finance & Management Services Agency 8 -41 THIS PAGE LEFT INTENTIONALLY BLANK LeeM i NSP Priority Area Legend Priority Area Census Tracts Lt1.01 Te.n 7s/f1 nP.PP 4 r•IAP 741.08 / 711.:1 t 1 <L03 •P.ttXArk Y: A. TL41• 11•.81 � '9 n.n n+ JLTJ 188.81 )1401 ll 1 nP if. 1L4 • p i Y Pt ' 1.488 .g. y1 6686 IMJ! 115.1 1;.00 161.11 L L6 r4L0) )YAP a. Exhibit 1 N 8 -43 0.00 P Miles Copyright 2008. All Rights Reserved Oel. u .'F.918.99 lugs gH SSE 09 74:.fA 41.1P 4 r•IAP 741.08 / 711.:1 t 1 <L03 •P.ttXArk Y: A. TL41• 11•.81 � '9 n.n n+ JLTJ 188.81 )1401 ll 1 nP if. 1L4 • p i Y Pt ' 1.488 .g. y1 6686 IMJ! 115.1 1;.00 161.11 L L6 r4L0) )YAP a. Exhibit 1 N 8 -43 0.00 P Miles Copyright 2008. All Rights Reserved Oel. DRAFT NEIGHBORHOOD STABILIZATION PROGRAM SUBSTANTIAL AMENDMENT FY 2008 -2009 Prepared by City of Santa Ana Community Development Agency This Exhibit 2 is also part of the November 17, 2008, City Council packet and may be found at the following link: htV-://www.santa-ana.o rg /coc /documents /Agenda pdf EXHIBIT 2 A LLJ z �k _ � I � � 0 a z 0 F- N k � c 0 0 _ 0 7 § 2 (/ \\ ƒ/ m - E /) m „§ _ )2 ui ) 4 _ < < ) 4§ C § 0 _ 0 §/ ) j j/¥ ) ): / /L ; ; __ � �!`: \ { {\$ \ \-0m } }\ $ $ c c ( I I m \ m \ aj _ ƒ aj c cu t ƒ _ _ to \ \ < < ©} - - \ \ \ < < © & ) ) : a = » & : §� ° = » °° -< \ \ \ } } \ \ \ \ \ \ \ \ \ \ \ \ \ \ | \ \ \ \ \ �C \ \ / \�\,���\ \ \\ / \ \& r � ) _ \ r < < % %! � ) § §«2 `@ k k / =e!%(!22`2/ { / = {{§} \ \ \)25=]�o2 { 2 u u K { § { 2 L Ln ! , :e { {8 K : , , { §5 „ „ 2 2 0 0 ! , / \ \ L\)m \\\ \ \ \ \/ \ \ \ \ \ \< / / L Ln : . § §.. . .§. . . . . § §§ . .. ± w < << < << < << < << 00 \ \\ \ \\ \ \\ $ $ (U 0 \ \ \_ \ \_ 0 ! ` }! ` ) < < } co E } }/ ) ) - - C E E f! a a . .E i G0 c i cr J J)! \ \2 3= < < < <u7< (/ \\ ƒ/ m - E /) m „§ _ )2 ui