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HomeMy WebLinkAboutProposed Resolution - 3/3/2025SALT LAKE CITY COMMUNITY REINVESTMENT AGENCY RESOLUTION NO. _____ ACCESSORY DWELLING UNIT FINANCING PROGRAM RESOLUTION OF THE BOARD OF DIRECTORS OF SALT LAKE CITY COMMUNITY REINVESTMENT AGENCY APPROVING THE TERM SHEET FOR AN ACCESSORY DWELLING UNIT FINANCING PROGRAM TO BE MANAGED BY THE COMMUNITY DEVELOPMENT CORPORATION OF UTAH WHEREAS, the Salt Lake City Community Reinvestment Agency (CRA) was created to transact the business and exercise the powers provided for in the Utah Community Reinvestment Agency Act (the Act). WHEREAS, the Act grants the CRA powers to use funds to provide for project area development within project area boundaries. WHEREAS, on January 20, 2021, the CRA approved the Interlocal Cooperation Agreement between Salt Lake County and the Redevelopment Agency of Salt Lake City (now known as the CRA) for the 9-Line Project Area which contemplated the CRA’s creation of an accessory dwelling unit (ADU) loan or subsidy program for the 9-Line Project Area. WHEREAS, on October 12, 2021, the CRA Board adopted the amended FY 2021-2022 Budget, allocating $147,535 of Secondary Housing Fund money for an ADU program. WHEREAS, on April 12, 2022, the CRA Board adopted the Second Budget Amendment for FY 2021-2022, allocating $300,000 of 9-Line Project Area funds for an ADU program. WHEREAS, on June 14, 2022, the CRA Board adopted the FY 2022-2023 Budget, allocating $10,000 of Secondary Housing Fund money for an ADU program. WHEREAS, on June 13, 2023, the CRA Board adopted the FY 2023-2024 Budget, allocating $1,455,680 of 9-Line Project Ara funds and $1,000,000 of Housing Development Fund funds for an ADU program. WHEREAS, on July 29, 2024 the CRA released a Notice of Funding Availability (NOFA) to fund programs that finance ADU construction and received three responses. WHEREAS, Community Housing Development Corporation of Utah (CDCU) was one of the applicants to the NOFA and proposed a program that met all of the NOFA threshold requirements. WHEREAS, the CRA Finance Committee reviewed all three program proposals in a meeting on November 20, 2024 and voted to recommend the CDCU proposal to the CRA Board for approval. WHEREAS, in conjunction with the CRA Finance Committee’s recommendations, the CRA staff recommends the attached set of terms (the Term Sheet) for program funding in the amount of $2,913,215 to CDCU for the creation and operations of an ADU financing program. NOW, THEREFORE, BE IT RESOLVED by the Board that it approves the funding of the proposed CDCU ADU Financing Program as outlined in the Term Sheet attached hereto, subject to revisions that do not materially affect the rights and obligations of the CRA hereunder. The Board authorizes the Executive Director to negotiate and execute the funding agreement and any other relevant documents consistent with the Term Sheet, and incorporating such other terms and agreements as recommended by the City Attorney’s office. Passed by the Board of Directors of the Salt Lake City Community Reinvestment Agency, this day of , 2025. Darin Mano, Chair Approved as to form: Salt LakeCity Attorney’s Office Jennifer Huntsman Date: The Executive Director: does not request reconsideration requests reconsideration at the next regular Agency meeting. Erin Mendenhall, ExecutiveDirector Attest: City Recorder 2/28/2025 TERM SHEET Notice of Funding Availability Term Sheet Partnership with Community Development Corporation of Utah For Accessory Dwelling Unit Financing Program Purpose To allocate $2.9 million in funds to Community Development Corporation of Utah for the administration and delivery of an Accessory Dwelling Unit (“ADU”) financing program. Parties Community Development Corporation of Utah (“CDCU” or "Recipient") and the Salt Lake City Community Reinvestment Agency (“CRA”). Program Description CDCU shall make all reasonable efforts to disperse all loan funds by June 30, 2027 to administer an ADU financing program for Salt Lake City’s Westside. This shall be accomplished by providing homeowners with financial assistance, offering below-market rate interest rate loans and marketing and outreach. Eligible Activities CRA funds will be used for a revolving loan fund, a loan loss reserve, and program servicing for the purpose of ADU construction west of I-15 in Salt Lake City municipal boundaries. Proposed Funding Terms $2,913,215 will be allocated in two accounts based on their source of funding. x Amount: A total of $2,913,215 o 9-Line Project Area $1,913,215 o Westside (west of I-15) $1,000,000 The CRA will disburse funds to CDCU on a per-project basis. Each installment will equal the amount required to fund the project’s loan and cover eligible fees, contingent upon adherence to the requirements and conditions outlined below. This allocation and disbursement schedule may be subject to future changes as approved by the CRA Board. CRA funds contributed to the program’s revolving loan fund and loan loss reserve funds remain property of the CRA. Funds not distributed from the revolving loan fund and loan loss reserve fund will revert back to the CRA on June 30, 2027. Principal and interest payments made back into the revolving loan fund will become the property of the CRA. Affordability and Compliance Financing will be available to two types of homeowners: 1. Homeowners earning 80% of AMI or below who construct an ADU on their property. x These homeowners will not be restricted in renting the ADU; the ADU can be lived in by the homeowner or rented to anyone at any price. x These homeowners must qualify using their household income at the time of application to the program and at financial close. x Earning greater than 80% of AMI after loan closing does not disqualify the homeowner from participating in the program nor renting at market rates. 2. Homeowners earning greater than 80% of AMI who construct an ADU on their property. x These homeowners must rent either the ADU or the primary house at rents affordable to households verified as earning 80% of AMI or below. This rental restriction shall last for the term of the loan. x These homeowners must agree to the following compliance procedures: o CDCU will screen the tenants of the restricted property for income qualification upon lease application. Income verification will take place before the lease begins. o Owners will comply with an annual verification with CDCU to confirm whether the tenant remained in the unit or if a new tenant has been selected. o Owners will agree that compliance documentation submitted to CDCU may be retained for audit purposes. CDCU will conduct annual affordability compliance with a $200/year fee charged to each participating homeowner. All household income and affordability standards shall be determined by the U.S. Department of Housing and Urban Development. Loan Terms for Homeowners x Up to $200,000 per property x 30-year amortization x 5-year term with 5-year extension option x 3% fixed interest rate x $2,000 origination fee paid by homeowner to CDCU, $200 of which is payable as an application fee and the remainder may be included in the loan amount. x Interest-only payments for first 12 months, with a capitalized construction period interest reserve funded from loan proceeds. x 10% of loan balance forgiven for homeowners whose properties are rent-restricted to households earning 80% AMI or below, and who pass all annual affordability compliance inspections during the loan term. This balance will be forgiven at the end of the loan term at the balloon payment. Ownership Requirements and Participation Financing shall be made available only to homeowners who use their property as their primary residence. Homeowners shall be required to participate in the Salt Lake City Good Landlord training program (which includes obtaining a business license) and CDCU’s financial counseling programs. Homeowners earning 80% of AMI or below who construct an ADU on their property that is not subject to rental rate restrictions will agree to provide CDCU a right-of-first refusal. Payment Collection and Administrative Fee At the close-out of a loan, CDCU may collect a $1,000 administrative fee from the sum of the loan’s principal and interest payments. The remaining amount will be transferred back to the CRA. Marketing CDCU will use web, social media, in-person events, and community partnerships to engage Westside homeowners in the program. Materials and services, to the extent feasible, shall be offered in both English and Spanish. CRA will share this information on its web and social media accounts, via press releases and direct mail, and by attending in-person events as staff availability allows. Sustainability x Detached ADU projects must comply with the CRA Sustainable Development Policy, which requires all new construction projects to achieve a Designed to Earn the ENERGY STAR score of 90 or more and be designed to operate without onsite fossil fuel combustion. x Attached or internal ADU projects may be granted a waiver from sustainability requirements. Reporting and Accountability x CDCU shall provide quarterly progress reports through the administration of the program. x Quarterly reports should include, but are not limited to, the following items: o Number of loan applications o Number of loan applicants who meet threshold requirements o Number of construction loan commitments made o Number of construction loans closed o Details of each construction loan funded ƒ Location of ADU project ƒ Cost of ADU project ƒ Size or design of ADU (including whether internal, attached or detached) ƒ Requested amount ƒ Funded amount ƒ Household size ƒ Household income/AMI level o Compliance of rented affordable ADUs ƒ Percent of rented affordable ADUs in compliance ƒ Report of rented affordable ADUs not in compliance, if any Compliance and Legal Requirements Recipient is required to take the following actions to meet the CRA’s compliance and legal requirements: x Comply with all local, state, and federal regulations, including zoning, environmental, and fair housing laws. x Execute loan documents (e.g. promissory notes, loan agreements, security documents, restrictive use agreements) as requested by the CRA and its legal counsel. x Receive approval from the CRA and its legal counsel of all matters pertaining to title, legality of the loan, and the legality, sufficiency, and the form and substance of all documents that are requested by CRA for the loan transaction. x Provide evidence of insurance in such amounts and with such coverage as requested by the CRA for the property. x Use grant funds solely for the purposes outlined in this term sheet. Any deviation requires prior written approval from the CRA. x Such other terms as requested by the CRA’s legal counsel and staff. Conditions to Fund The funding is provided with the following pre-conditions that CDCU must meet to receive funding: x Provide to the CRA any additional sources of program financing, including letters of commitment for additional funding. x Provide evidence and secure CRA approval of an affordability compliance process. x Use of funds strictly for Eligible Activities related to the project. x CDCU, to the extent possible, ensures that all projects obtain required city approvals and building permits for each project. Events of Default The following occurrences will constitute an event of default: x Failure to meet program obligations or deadlines in the judgment of CRA. x Failure to monitor/maintain the affordability requirements to the satisfaction of the CRA. x Failure to provide quarterly development reports. x Failure to comply with any other City, State, or Federal requirements. x Any use or appropriation of funds not in strict compliance with this term sheet or other agreement with the CRA. x Insolvency, bankruptcy, or cessation or project activities. x Any material misrepresentation or breach of the terms of the grant agreement. Remedies Remedies if CDCU fails to cure in the event of a default may include, but are not limited to: x If CDCU does not meet the initial conditions for funding, the CRA will not distribute funds. x Any unspent or improperly used funds must be returned to the CRA. x Once funds are distributed and upon an event of default, the CRA may: o File a breach of contract claim, which may include claims for: ƒ Liquidated damages ƒ Injunctive relief, and/or ƒ Specific performance o File a direct action against CDCU to comply with their obligations. o Any other remedies available at law or equity. Indemnification CDCU will indemnify, hold harmless and defend the CRA, its agents and employees from losses, claims, demands, actions, damages or costs of any kind arising out of or related to CDCU’s administration of the financing program.