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HomeMy WebLinkAboutTransmittal - 6/1/2023ERIN MENDENHALL Mayor CITY COUNCIL TRANSMITTAL DEPARTMENT of COMMUNITY and NEIGHBORHOODS Blake Thomas Director Li (Jun 1, 202311:15 MDT) Date Received: 06/01/2023 Lisa Shaffer, Chief Administrative Officer Date sent to Council: 06/01/2023 TO: Salt Lake City Council Darin Mano, Chair DATE: June 1, 2023 FROM: Blake Thomas, Director, Department of Community and Neighborhoods SUBJECT: Recommended funding allocations and establishment of a Tenant and Homeowner Loan Fund ("THLF") utilizing unallocated program income generated by activities within the Housing Stability Division STAFF CONTACT: Tammy Hunsaker, Deputy Director, Community and Neighborhoods Department, 385-315-3315, tammy.hunsakerkslcgov.com Tony Milner, Director, Housing Stability Division, 801-535-6168, tony.milner(kslcgov.com DOCUMENT TYPE: Information only RECOMMENDATION: Briefing and policy discussion BUDGET IMPACT: N/A BACKGROUND/DISCUSSION: On February 7, 2023, the Department of Community and Neighborhoods ("CAN") and the Division of Housing Stability briefed the City Council on certain funds that are available for housing and community development activities. The February briefing not only included a summary of unallocated program income funds, but also included a summary of U.S. Department of Housing and Urban Development ("HUD") funds that have already been budgeted and are being utilized during the current fiscal year. Currently, this transmittal focuses solely on the unallocated program income, a portion of which is non -restricted and a portion of which is subject to HUD requirements and needs to be recognized through the HUD Consolidated Plan framework. Program income continues to be generated from the approximate 575 outstanding homebuyer and housing rehab loans, which currently have a balance of approximately $25 million. The cumulative program income balance has increased from $20,412,990 as of November 30, 2022 to $22,816,142 as of April 30, 2023. Beginning on July 1, 2023, with the start of the 2024 fiscal year, program income generated from HUD -restricted funds, including Community Development Block Grant ("CDBG") and Home Investment SALT LAKE CITY CORPORATION 451 SOUTH STATE STREET, ROOM 404 WWW.SLC.GOV P.O. BOX 145486, SALT LAKE CITY, UTAH 84114-5486 TEL 801.535.6230 FAX 801.535.6005 Partnerships Program ("HOME"), will be recaptured and allocated annually through the HUD funding process. Program income generated from non -restricted funds is proposed to be deposited into a revolving loan fund, as detailed below, pending annual budget allocations by the Council. I. Tenant and Homeowner Loan Fund It is the Administration's priority to utilize a portion of the non -restricted funding to capitalize a revolving loan fund that would be established through legislative action as the Salt Lake City Tenant and Homeowner Loan Fund ("THLF"). This would ensure that a portion of the program income that has been generated over decades continues to produce revenue for ongoing housing activities. As proposed, the THLF would support programs and activities that provide assistance directly to tenants and homeowners, complementing the RDA's housing funds that are targeted to developers. The THLF is proposed to be structured as follows: On an annual basis, the Council shall allocate revenue from the THLF to revolving programs and initiatives that may include the City's Community Land Trust ("CLT"), Homebuyer Program, and Home Repair Program, as well as a new program intended to support naturally occurring affordable housing ("NOAH"). This will ensure that the THLF is a self -replenishing fund that utilizes principal and interest payments to fund new housing actives that directly support tenants and homeowners. In addition to revolving programs and initiatives, the THLF could be strategically used to fund non -revolving initiatives such as the Tenant Relocation Assistance program that is proposed in the Thriving in Place ("TIP") draft plan. As program income continues to be generated from projects and activities funded with non -restricted funds, future program income shall be deposited into the THLF pending annual budget allocations by the City Council. In addition to establishing the THLF through City Council action with legislative policies, the Administration is preparing to transmit draft legislative polices for the Council's consideration for each of the programs anticipated to be funded by the THLF. II. Available Funds Since the February 2023 briefing, the unallocated program income has continued to generate new revenue with the following balances as of April 30, 2023: HUD REGULATIONS NON- RESTRICTED PROGRAM INCOME SOURCE 4/30/23 BALANCE CDBG $6,255,941 HOME $9,427,209 American Dream Downpayment Initiative (ADDI) $48,805 Renter Rehab Program $1,716,265 Miscellaneous Bank Funds $1,759,136 Riverpark $3,608,786 TOTAL $22,816,142 *Note: ADDI is a discontinued HUD initiative that was provided through the HOME program. As such, the ADDI program income is treated as HOME PI and used in accordance with HOME regulations. Program income generated as a result of activities originally funded through CDBG and HOME programs retain their federal identity in perpetuity and are subject to all federal requirements. The non -restricted program income has either been generated by activities originally funded with non- federal funds or by activities originally funded with a federal grant that was closed -out and federal restrictions severed. III. Funding Eli i� bilioy, Requirements, and Restrictions Information on eligible uses of funds, requirements, and restrictions is as follows: Non -Restricted Funds: The non -restricted program income does not have specific requirements or restrictions, HUD or otherwise. However, the Administration recommends that these funds continue to be allocated to housing activities in a revolving nature and be used in part to capitalize the THLF. HUD -Restricted Funds: Refer to Exhibit A for a summary of area median income ("AMI") restrictions and eligible uses of CDBG and HOME program income. The CDBG "Public Services" category, which is typically available to allocate up to 15% of the City's annual CDBG award to non-profit organizations, is not an eligible use. This is because the amount of historical program income generated on an annual basis is unable to be determined for the program income. As such, HUD has advised the City to allocate the funds to eligible uses other than Public Services. IV. Steps to Utilize Funds To utilize the funds, revenue and expenditures must be budgeted through the City's annual budget process. In addition, to utilize the dormant CDBG and HOME program income, HUD will require that the funds be recognized in the Consolidated Plan framework. The City's 2020 — 2024 Consolidated Plan ("Con Plan"), which covers the HUD 2020 — 2024 program years and the City's 2021 — 2025 fiscal years, estimates resources and identifies activities to address housing and community development needs over this period. The Con Plan is carried out through annual Action Plans, which provide a concise summary of the actions, activities, and the specific federal and non-federal resources that will be used each year to address the priority needs and specific goals identified by the Con Plan. The steps required to recognize the funds in the Con Plan framework are as follows: 1. The City Council shall approve funding allocations for the dormant CDBG and HOME program income, to be incorporated into the 2023-24 fiscal year along with the standard HUD allocations that have already been approved. To be consistent with how the City approves of HUD funding allocations, the Council may wish to amend Resolution 9 of 2023, the resolution adopting HUD funding allocations for the 2023-24 fiscal year, to incorporate the program income allocations. 2. The Administration shall utilize the funding allocations to prepare substantial amendments to the FY 2023 — 2024 Annual Action Plan and Con Plan. 3. Public noticing and hearing requirements shall be carried out pursuant to the 2020-2024 Citizen Participation Plan, which is Appendix C of the Con Plan. 4. The City Council shall approve substantial amendments to the FY 2023 — 2024 Action Plan and Con Plan. 5. The Administration shall submit the substantial amendments to HUD for review and approval. V. Timely Use of Funds Once the funds are recognized through the Con Plan framework, they will be subject to HUD's timeliness requirements. A summary of these requirements is as follows: 0 CDBG: If the dormant CDBG program income funds are recognized in the 2023 — 2024 Action Plan, as the Administration is proposing, they will be factored into the timeliness calculation that will occur on May 2, 2024. HUD calculates the ratio of unexpended funds to the City's annual grant award 60 days prior to the end of the fiscal year. To do this, HUD sums the amount of program income the City has on hand with the amount of funds remaining in the CDBG line of credit and divides by the amount of the annual grant award. If the ratio is less than or equal to 1.5, then the City has met the timely performance requirement. If the ratio is more than 1.5, then the City is considered untimely and future HUD funds could be at risk. HOME HOME funds must be committed to specific projects within twenty-four (24) months of the City's receipt of funds. Commitment means the City has entered into a legally binding agreement with subrecipients for the completion of an eligible HOME activity. HOME funds cannot be committed until: o All necessary financing for the project has been secured o A budget and implementation schedule have been established o Underwriting and subsidy layering analysis have been completed o Construction is scheduled to start within twelve months of the agreement date o Environmental review requirements have been met If HOME funds are not committed within 24 months or fully expended within sixty (60) months, they will be recaptured by HUD. VI. Proposed Allocations The Administration uses and timeliness proposes the following requirements of the different PROJECT/PROGRAMMPP RDANOFA funding allocations, funding sources: considering the various eligible HUD - NON- HOME/ RESTRICTED D: DD $6,476,014 RDA DEVELOPMENT 1159 West Temple (Book Cliffs) HASLC $3,000,000 ACQUISITION Strategic, Opportunity Area, or CAN, HASLC, $5,755,941 CLT Property Acquisition and/or RDA RENTAL ASSISTANCE Tenant Relocation Assistance Housing Stability $18o,000 Neighborhood Business Housing Stability $250,000 NEIGHBORHOOD Improvement Program IMPROVEMENTS Westside Sidewalk/Infrastructure Transportation/ $250,000 Improvements Engineering L Homebuyer Program Housing Stability $1,000,000 TENANT & Community Land Trust Housing Stability $1,144487 HOMEOWNER LOAN FUND Home Repair Program Housing Stability $500,000 NOAH Renter Rehab Program Housing Stability $1,200,000 First Step House, Employment $26,492 PUBLIC First Step House, Peer Support Non-profit $22,892 SERVICES SL Donated Dental organizations $5,3o8 The Inn Between $5,308 DEBT SERVICE Line of Credit Payoff n/a $3,000,000 TOTAL: $6,255,941 $9,476,014 $7,084,187 Additional information on the proposed projects and activities is as follows: 1. DEVELOPMENT RDA NOFA, $6,476,014 1159 S West Temple, up to $3, 000, 000 • RDA NOFA Funding would be allocated to specific projects via a competitive Notice of Funding Availability ("NOFA") through the RDA's Housing Development Loan Program ("HDLP"). 1159 S West Temple (Book Cliffs Lodge) Due to the inter -governmental relationship between the City and the Housing Authority of Salt Lake City ("HASLC"), the Administration inquired with HASLC on development projects that, once a funding gap is filled, are shovel - ready and would be on a development schedule that would meet HUD's timeliness requirements. The project, located at 1159 S West Temple and known as Book Cliffs Lodge, has not been able to obtain competitive 9% Low Income Housing Tax Credits and continues to have a funding gap. HASLC applied for non-competitive 4% tax credits, which are anticipated to be obtained this summer, leaving a —$3,000,000 funding gap. As such, up to $3,000,000 is proposed to be combined with the funding already allocated by the RDA to provide construction financing for the project. Funding would be allocated subject to the underwriting and lending standards outlined in the RDA's HDLP policy. The project is adjacent to City -owned property by Smith's Ballpark and will include 55 units, of which 11 will be 3-bedroom units to expand housing opportunities for families. Affordability will range from 25% to 60% of the area median income ("AMI"). 2. ACQUISITION Strategic, East Side, and/or CLT Property Acquisition, $5, 755, 941 Due to strict timeliness requirements for CDBG, the acquisition of property is the likeliest way for the City to meet spend down requirements. As such, the Administration recommends allocating the majority of CDBG program income for the acquisition of property, as follows: o A partnership between CAN, RDA, and/or the HASLC to identify and purchase property that is either located in a strategic location or in a high opportunity area for the future development of affordable housing; or o Single-family homes and/or missing middle typology housing that will be incorporated into to the City's CLT, with the City retaining ownership of the land in perpetuity and homeowners purchasing the housing units. 3. RENTAL ASSISTANCE Tenant Relocation Assistance, $180, 000 • Funding to help tenants who are directly impacted by new development to find new living arrangements they can afford and to offset the cost of relocation. This funding would be combined with $180,000 proposed through the Mayor's Recommended FY24 Budget, for a total of $360,00 to assist approximately 60 displaced households in a pilot program. 4. NEIGHBORHOOD IMPROVEMENTS Neighborhood Building Improvement Program, $250, 000 Sidewalk/Infrastructure Improvements, $250, 000 Neighborhood Business Improvement Program ("NBIP") The Council has expressed interest in committing a portion of CDBG program income to the NBIP, aka the fagade program. The Administration recommends allocating $250,000 to the NBIP, which would be combined with the $925,000 already allocated through the FY24 HUD funding process. This will bring the FY24 total to $1,175,000, which is almost double that of the previous fiscal year's budget. Housing Stability has already issued a competitive application process and will increase the number of projects awarded funded if the Council appropriates these additional funds. Sidewalk/Infrastructure Improvements The Council has expressed interest in committing a portion of CDBG program income to sidewalk and/or infrastructure improvements, with a focus on the City's west side. The Administration recommends allocating $250,000 to this initiative, to be combined with other CDBG infrastructure funds that are unexpended and continue to be factored into the CDBG timeliness ratio, including: o $322,000, FY 21-22 bus stop improvements o $92,789, FY 22-23 bus stop improvements o $550,000, FY 22-23 Ballpark TRAX pedestrian crossing 5. REVOLVING LOAN FUND PROGRAMS & ACTIVITIES Tenant and Homeowner Loan Fund ("THLF"): $3,844,187 • The Administration recommends allocating a significant portion of the non- restricted funds to the THLF, which is proposed to be a revolving resource that supports programs providing direct assistance to residents. Funding is proposed to be earmarked as follows: o Homebuyer Program, $1,000,000 Provides mortgage financing for low- and moderate -income households to further affordable homeownership. o Community Land Trust, $1,144,187 Homebuyers purchase the housing improvements and ground lease the land from the City at a below -market rate. To maximize affordability, mortgages are issued through the Homebuyer Program to CLT homebuyers. o Home Repair Program, $500,000 Provides grants and loans to low- and moderate -income homeowners to address emergency and chronic structural, plumbing, electrical, and mechanical home repair and replacement needs. o NOAH Renter Rehabilitation Program, $1,200,000 Provides loans to individuals who own naturally occurring affordable housing that is offered for rent, primarily single-family homes and small- scale multifamily buildings, and want to make the necessary repairs to maintain habitability in return for rent restrictions. 6. PUBLIC SRVICES First Step House, Salt Lake Donated Dental, The Inn Between, $60, 000 During the FY24 HUD funding allocation process, the City Council reduced the funding award for certain program from the Mayor's recommended amount. The Council expressed interest in utilizing dormant program income to bring these programs back up to the Mayor's recommended level. The "Public Services" category is not an eligible use of the dormant CDBG program income. As such, the Administration recommends funding these programs with non -restricted funds for a total of $60,000 divided as follows: o First Step House, Employment Preparation and Placement Program, provides supportive employment services to high -risk, high -need individuals caught in the cycles of relapse, mental illness, incarceration, homelessness, and underemployment, $26,492 o First Step House, Peer Support Services, salaries and administration costs to provide peer -based supportive services, delivered by certified Peer Support Specialists, $22,892 o Salt Lake Donated Dental Services, Community Dental Project, salaries, supplies, and lab to support homeless and low-income individuals with dental services, $5,308 o The Inn Between, End of Life Care and Medical Respite, provides homeless individuals who need hospice or other end of life care and temporary medical respite housing for homeless individuals experiencing a medical crisis, $5,308 7. DEBT SERVICE Line of Credit Payoff, $3, 000, 000 The Administration recommends that funds be allocated to pay off two lines of credit ("LOC") that were utilized years ago to assume shares in some of the mortgage loans issued by the Homebuyer program. The LOCs were secured by the homebuyers' properties and loan proceeds. As of May 2023, the LOCs have an outstanding balance of $1.34 million and $1.84 million, for a total of $3.18 million. PUBLIC PROCESS: A public process will be carried out pursuant to the 2020-2024 Citizen Participation Plan, which is Appendix C of the Con Plan. EXHIBITS: A. Eligible Uses of CDBG and HOME Program Income Funds EXHIBIT A: ELIGIBLE USES of CDBG & HOME PROGRAM INCOME FUNDS CDBG PI FUNDS HOUSING Rehabilitation: Single and Multi -Unit Residential YES LMI households; May rehabilitate or reconstruct or Construction of Housing (limited) YES prevent or eliminate convert structures, provide blight; meet homeownership assistance, and Direct Homeownership Assistance YES unfunded, urgent housing counseling. Includes all Housing Counseling YES local need activity costs such as applicant Public Housing Modernization YES intake, construction specs and Energy Efficiency Improvements YES procurement, and construction. All activities must result in Rehabilitation Administration YES achievement of a CDBG national Lead -Based Paint/Lead Hazard Abatement YES objective, typically by providing Code Enforcement YES housing to an LMI household. PUBLIC IMPROVEMENTS & FACILITIES Senior Centers NO LMI households; May acquire, construct, Facility for Persons with Disabilities NO prevent or eliminate reconstruct, or rehabilitate a NO blight; meet public facility or improvement. All Homeless Facilities (not operating costs) unfunded, urgent activities must result in Youth Centers/Facilities NO local need achievement of a CDBG national Neighborhood Facilities YES objective, typically by providing Parks, Recreational Facilities YES access to a facility or YES improvement to an LMI clientele Parking Facilities or to LMI persons residing in a Solid Waste Disposal Facilities NO qualified area. Flood and Drainage Facilities NO Water/Sewer Improvements NO Sidewalks YES Child Care Centers NO Fire Stations/Equipment NO Health Facilities NO Removal of Architectural Barriers NO PROPERTY ACQUISITION Acquisition of Property YES LMI persons, May buy, clean up, demolish, Disposition YES families, or area; dispose of, and relocate prevent or eliminate occupants from a property for an Clearance and Demolition YES blight; meet eligible public purpose. Clean-up of Contaminated Sites/Brownfields YES unfunded, urgent Relocation YES local need ECONOMIC DEVELOPMENT Commercial/ Industrial Building Rehabilitation YES LMI persons, May assist commercial or Commercial/Industrial Land Acquisition/ NO families, or area; industrial activities. All activities Disposition businesses must result in achievement of a providing LMI jobs CDBG national objective, Commercial/Industrial Infrastructure NO or services; prevent typically by creating or retaining Development or eliminate blight; permanent LMI jobs or serving Commercial/Industrial Building Construction NO meet unfunded, an LMI area. Project examples Micro -Enterprise Assistance NO urgent need range from working capital loans, to neighborhood store expansion. Note: Public Services and Administration/Planning activities are not listed, as they cannot be funded with the Dormant PI. Note: "LMI" is low and moderate -income, which is generally defined as 80% of the area median income ("AMP') and below. Note: CDBG funds for Housing activities must be utilized for permanent housing and not transitional or emergency shelters HOME PI FUNDS Tenant Based Rental Assistance (TBRA) New Construction- Rental & Homeownership Rehabilitation Reconstruction Program Staff - Specific to TBRA Acquisition Project Related Soft Costs Homebuyer Assistance; DPA or Acquisition YES YES YES YES YES YES YES YES Tenant -Based Rental Assistance limit 60% AMI. Development and Homebuyer assistance limit is 80% AMI<. 5 or > units: 20% of units must be at 50% AMI <. All funds must be for 80% AMI and below. Can be used on mixed income developments, number of affordable units is based on Funding amount. HOME allows multiple forms of financial assistance or subsidy: grants, loans, interest subsidies, loan guarantees, equity investments to be provided for eligible projects. Once a commitment is made with HOME PI funds, the project must be completed in a four- year timeframe. Note: Any construction, rehabilitation, soft costs, and acquisition costs are eligible as part of a complete project not as stand-alone costs. Note: Rehabilitation includes conversion to an existing structure, adaptive reuse, site improvements & infrastructure. Note: Tenant -Based Rental Assistance is referred to as "TBRA", Down -Payment Assistance is "DPA".