Council
Communication
Office of the City Manager
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Date
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March 20, 2006
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Agenda Item No. 64
Roll Call No. 06-
Communication No. 06-140
Submitted by: Larry
Hulse, Community Development Director
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AGENDA
HEADING:
Resolution
adopting new policies and procedures for administration of the HOME Investment
Partnerships Act (HOME Program)
SYNOPSIS:
The
following policies and procedures establish a sixty-month work program for HOME
funds, a budget for expenditure of the 2006 HOME funds, and an annual
allocation process for the funds. Staff was directed to establish such
procedures by Roll Call No. 05-2812 and Council Communication 05-651 on
November 21, 2005. The procedures and policies follow recommended approaches
from a recent “HOME Wellness Visit” by the U.S. Department of Housing and Urban
Development (HUD) funded consultants, particularly the policies that guide
commitment of HOME dollars for large projects using Low-Income Housing Tax
Credits.
FISCAL
IMPACT:
Amount: $1,021,591.00 (This figure is for the
calendar year 2006.)
Funding
Source: HOME
Entitlement Dollars Page 315 of Operating Budget ending June 2006.
ADDITIONAL
INFORMATION:
The
City of Des Moines has received HOME funds administered through the U.S.
Department of Housing and Urban Development (HUD) since 1992 as a part of its
Entitlement funds. Expenditure of HOME funds must be directly related to
housing construction or housing renovation, for those households or persons
below 80% of median income. Federal regulations provide for a sixty-month
expenditure period for HOME funds, because a high percentage of HOME funds are
used for housing development which can take a large amount of time to develop,
build, and occupy. The City’s past requirement for a one-year project year for
HOME funds is incongruous with the HOME regulations for a five-year expenditure
period.
In
Council Communication No. 05-651 on November 21, 2005, the City Manager’s
Office directed city staff to develop a sixty-month work program agreement to
facilitate expenditure and tracking of the HOME funds. This involves
determining an annual HOME budget for eligible activities and changing the
City’s allocation process to nonprofits and for profits. Over the past two
months, Community Development and Housing Services Staff have worked with the
Neighborhood Revitalization Board (NRB) and communicated with nonprofit housing
providers to develop a new process for allocation of HOME funds. The NRB
recommended approval of the HOME Loan Pool Procedures and Policies at its
January 11, 2006 meeting.
Five-Year
Work Program
Over
the years, the City has funded five activities with HOME dollars:
·
Owner-occupied
Rehabilitation
*In recent years, the
largest expenditures of Investor-owner dollars have been leveraged with a
Low-Income Housing Tax Credit (LIHTC) Project funded by the Iowa Finance
Authority.
This basic outline of
programs will continue. The NRB and staff do not propose beginning new types
of HOME activities as dollars are declining.
HOME 2006 Budget
Des
Moines will receive a
total of $1,021,591 HOME dollars in 2006. Determining an approximate
percentage of HOME dollars to be spent annually for different categories of
housing assistance is essential to the work program of the City of Des Moines, Community Housing Development Organizations (CHDO) and other nonprofit
organizations.
The
following is a recommendation for allocation of HOME dollars to be spent in
2006 consistent with the goals of the consolidated plan:
- 30%
Owner-occupied Rehab; (priority to households with children with
elevated lead blood levels. Funds will provide a match for requests from
HUD Lead Reduction Grant and Polk County Housing Trust Fund (PCHTF) Lead
Reduction Grant.)
- 10%
Owner-occupied New Construction; (Unexpended 2005 Investor owner HOME
funds will be transferred to this account to increase this total.
Developers must respond to a city issued Request for Proposal (RFP) to
utilize this funding))
- 40%
Investor-owner Rehab (This includes the Acquisition/rehabilitation
Program of Community Development even if the property is ultimately sold
to a Homeowner)
- 20%
Investor-owner New Construction.
- American
Down Payment Assistance: Special allocation that can be used for down payment
assistance for low-moderate income households to become a first time
homebuyer. The funding has been tied to homeownership in areas with an
adopted neighborhood revitalization plan.
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2006
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HOME
Allocation
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$1,021,591.00
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10%
City Administration
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($102,159.10)
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5%
CHDO Admininistration
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($51,079.55)
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Program
Income
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$100,000.00
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Total to be Allocated
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$968,352.35
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Owner-occupied
Rehab
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30%
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$290,505.71
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Owner-occupied
New Construction
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10%
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$96,835.24
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Investor
Owner Rehab
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40%
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$387,340.94
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Investor
Owner New Construction
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20%
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$193,670.47
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American
Down payment Assist.(ADDI)
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NA
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$22,908.00
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HOME Annual Allocation Process
Another change caused by enacting a sixty-month HOME work program is
that the nonprofit and for profit agencies will no longer present requests to
the NRB for an allocation of annual funding for projects. It is important to
agencies, however, to know the amount of HOME funding that will be available
for projects for the coming year so a process for allocation of funds needs to
be followed:
·
In early summer, Neighborhood Conservation Services (NCS) staff
will distribute a letter to outside agencies asking for projects that meet the
goals of the Consolidated Plan and providing information on the annual
percentages of HOME dollars to be expended.
·
If a project fits the goals of the Consolidated Plan, a nonprofit
or for-profit agency has performed well, and other criteria to be developed,
HOME dollars will be reserved and a “preliminary commitment of funds letter”
will be issued. Financial underwriting according to the HOME regulations will
be utilized in judging applications.
·
In order to assure quality and meet deadlines for building
seasons, the City annually issues a RFP for single family new home construction.
In circumstances that enhance neighborhood revitalization efforts, the City
will accept a developer initiated proposal after the RFP response period has
been closed if HOME funds for new construction are still available.
·
Except for single family new construction projects, a nonprofit
or for profit can make application to NCS at any time for a preliminary funding
commitment according to the allocation of funds in a category.
·
Approximately 40% of the HOME dollars received will be reserved for
LIHTC projects.
·
NCS staff will provide a periodic report to the NRB indicating
the preliminary commitment of HOME funds and status of committed funds.
·
Staff will advise the NRB on any changes to the allocation
percentages. There may be instances when mid-year corrections are necessary
because more or less funding is needed for a particular project depending on
demand for a program.
HOME
Funds and Large Projects
HUD
staff recently recommended that Des Moines work with consultants on a “HOME
Wellness” visit to ascertain the effectiveness of Des Moines commitment of HOME
dollars. The consultants recommended that the City of Des Moines institute
more strict underwriting and subsidy layering analysis prior to committing HOME
dollars to projects. Large projects funded with City and State HOME funds and
utilizing Low-Income Housing Tax Credits (LIHTC) particularly needed specific
policies to guide city investment of HOME dollars. Three general policies for
allocation of HOME dollars for LIHTC projects are proposed under the new budget
and allocation process:
1.
LIHTC projects may
receive no more than 40% of the total HOME funds, unless the amount is exceeded
because a developer is a nonprofit CHDO. That will leave some funds for new
construction and rehabilitation of rental housing other than through the tax
credit process.
2.
LIHTC projects may
receive no more than $250,000 with all the money repaid to the city at a
minimum 1% interest rate. The repayment does not have to begin immediately but
can wait until the project has sufficient debt coverage ratios.
3.
LIHTC projects must
request State HOME funds in an amount equal to or greater than the City HOME
funds requested.
Additional Requirements - Allocation of HOME funds to CHDOs
Federal regulations require that least 15% of all HOME dollars be
allocated to and spent by a CHDO. Typically Des Moines allocates more than 15%
for CHDOs. At the current time, only Community Housing Development Corporation
(CHDC), Spectrum Resources, and The Home Connection are CHDOs. Staff will
monitor the applications/expenditures to ensure the 15% amount is allocated.
Operating Funds for Community Housing Development Organizations
(CHDO)
5% of the annual allocation of HOME funds can be provided to CHDOs for
administration and/or capacity building. This amount is limited to $50,000 or
50% of the operating costs of the CHDO, which ever is greater. This funding
will be awarded to CHDOs that have met performance goals, are generally in
compliance with HOME regulations and will be using HOME project funds in 2006.
For 2006, CHDC has met these requirements and is recommended for operating
funds
PREVIOUS
COUNCIL ACTION(S):
Date: November 21, 2005
Roll
Call Number: 05-2812
Action: On proposed Second Year Action Plan
(2006) for the 2005-2009 HUD Consolidated Plan. (Council Communication No.
05-651) Moved by Hensley to adopt the City Manager’s recommendation, the
City Manager to come back after January 1 with a recommendation on the
reprogramming dollars with priority given to Demolition, CHDC and Excel.
Motion Carried 6-1. Nays: Brooks.
BOARD/COMMISSION
ACTION(S):
Date: January 11. 2006
Roll
Call Number:
Neighborhood Revitalization Board
Action: Recommend approval of HOME policies
and procedures
ANTICIPATED
ACTIONS AND FUTURE COMMITMENTS:
The
City Council will review commitments of funds for new construction projects and
any development using Low Income Housing Tax Credits.