CITY OF HALLANDALE BEACH

MEMORANDUM

DATE:                        November 6, 2008     

TO:                 D. Mike Good, City Manager

FROM:            Franklin L. Hileman, Manager of Intergovernmental Relations

SUBJECT:     Discussion of a Neighborhood Stabilization Program   CAD#014/08

Purpose:

The Commission discuss and approve an Action Plan for the City to develop programs to administer the funding the Department of Housing and Urban Development (HUD) has allocated to the City under the Neighborhood Stabilization Program which is an extension of the existing Community Development Block Grant Program.  

Background:

The United Sates Congress has appropriated over $17 Million Dollars to Broward County to be distributed to the Non-Entitlement Cities in the County for the purchase, rehabilitation, resale, land banking and redevelopment of foreclosed properties within the City.  The City has been allocated $1,780,153.00. The City must decide how to make use of those funds and must identify those properties the City intends to target with those funds. The City was required to submit the property list by November 1, 2008 and therefore, the City has already submitted a list of foreclosed properties and the bank owners name to be incorporated into the County’s Action Plan.  The City submitted the list with the proviso that it is a preliminary list and subject to change following the City Commission’s review of the Program.

Discussion:

On Monday, November 10, 2008, Bobby Robinson on behalf of Development Services, and Franklin Hileman from the City Manager’s Office attended a meeting with the County Housing Finance & Community Development Division to discuss the new Federal Neighborhood Stabilization Program. This is a new program administered by HUD to address the large number of foreclosed properties that are now in virtually every City. Unfortunately, the Program only addresses properties that have already been foreclosed upon and are bank owned. The City has the highest Risk Factor for Foreclosure or Abandonment of all of the non-entitlement cities in the County. The City has been allocated the second highest amount of funding for a total of $1,780,153.00. Of that amount, under the Program guidelines, 25% or $556,617 must be directed to a “Low Income Strategy”, which is a person below 50% of the Average Median Income. The County indicated this could include rental assistance and programs directed at persons who rent or the development of rental properties.

The County has now agreed to enter into a sub-recipient agreement with the City under which the City would administer the program. However, the County wants to retain a portion of the 10% administration funds even though the City will be overseeing the program because the County is still going to have to track and report on the City’s activities. This will be negotiated as part of the agreement.

The County will present the Action Plan to the County Commission on Thursday, November 13, 2008.  They intend to leave it in its current form and between now and when they go to contract with HUD, they will work with the City’s that opt out and submit an amended Plan incorporating the terms of a sub-recipient agreement.  It is anticipated the contract process with HUD will begin in March and the funding become available in May of 2009.

The City must choose from five eligible Program Activities and in addition, the participants must meet the following requirements:

Eligible Program Activity:

• Acquisition and rehabilitation  - Acquire, rehabilitate and sell to qualified buyer.
• Land Banking - Acquire and hold for up to ten years in an established Land Bank Must be within an established and identified area.
• Demolition – Identify and demolish “blighted “ properties and structures.
• Redevelopment – Acquire and construct affordable housing and infrastructure for affordable housing to include mixed use and commercial construction
• Financing mechanisms, i.e. down payment assistance, first time homebuyer type programs

Quoting from the HUD Guide to Neighborhood Stabilization Program (NSP) Eligible Uses

“HUD will not consider requests to allow foreclosure prevention activities, such as refinancing mortgages and paying back taxes; or to allow demolition of structures that are not blighted;  or to allow purchase of residential properties and homes that have not been abandoned or foreclosed upon as provided in HERA and defined in this notice”

Low/Moderate Benefit Recipient Requirements:

• Funds must benefit individuals at or below 120% of Area Median Income (AMI) Broward County is the benchmark not the City.
• 25%  of all funds must be used to benefit individuals at or below 50% of AMI ($556,617 from above)

Other Requirements:

· Homes must be primary residence

· Homes acquired or redeveloped must be sold at or below total cost of activities

· Properties must be purchased at a discount to appraised rate (County aiming for 5% below appraised)

The City’s CRA staff currently identifies and qualifies eligible participants based upon the Average Monthly Income as part of the First Time Homebuyers program and will simply perform the same qualifying process for the NSP. The NSP requires the City to use the Broward County Average Monthly Income figures to determine qualified participants. These qualified participants would also qualify for down payment assistance under the NSP and the City can create a component under the NSP to compliment our existing First Time Homeowner program with a down payment assistance program funded by the NSP.

Staff has already compiled a list of properties either in the foreclosure process or already foreclosed upon and owned by the bank. As part of the program, CRA and Development Services staff will review these available properties and with City Manager approval identify properties to be targeted for purchase for this program.

The City will purchase properties and perform any necessary rehabilitation and seek to place qualified buyers in these properties. In order to meet the requirement that 25% of

of the received funding must benefit persons at or below 50% of the AMI, the City will establish a Lease to Buy component within the program. The goal would be to place someone in this income bracket into a house under a Lease/Purchase Agreement and have a portion of the lease payment credited toward the purchase price and allow the balance of the purchase price be reduced to a level that the participant could qualify for a mortgage that he or she can afford and purchase the property.

Properties must be purchased at below market value, (the County is recommending 5% below appraised value). The City must sell the properties at or below the total of the cost to purchase and any cost for rehabilitation. Staff will be targeting properties that can be obtained and meet the affordable housing criteria. A Trust Fund will be created to place the proceeds of any sales by the City of the purchased properties and to continue the Program.

There is no certainty as to how much it would cost to acquire each of the properties on the list and staff is recommending the City allocate the funding like many grant programs do and apply it to the properties in the order of priority until the funds are expended. HUD is requiring that all of these funds must be expended or committed within eighteen months after execution of the grant agreement. The Program is intended to be an ongoing program with those funds received upon the resale of properties by the City to be reinvested in the program.

Recommendation:

Staff recommends that the City Commission approve an Action Plan as outlined above and authorize the City Manager to create and implement a final Action Plan and enter into negotiations with the County to establish a sub-recipient agreement to incorporate the Action Plan.

Reviewed:

_______________________________                                                          __________

D. Mike Good, City Manager                                                                           Date

_____Approved                _____Disapproved                _____Hold for Discussion