2011-27806 Reso RESOLUTION NO. 2011-27806
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA,APPROVING AND AUTHORIZING THE FOLLOWING
ACTIONS WITH REGARD TO THE CITY'S NEIGHBORHOOD STABILIZATION
PROGRAM 1 (NSP1): 1.)APPROVING AND AUTHORIZING THE MAYOR AND
CITY CLERK TO EXECUTE A CORRECTIVE AMENDMENT TO THE
SUBGRANT AGREEMENT BETWEEN THE STATE OF FLORIDA
DEPARTMENT OF COMMUNITY AFFAIRS (DCA) AND THE CITY (AS
PREVIOUSLY APPROVED IN MODIFICATION NUMBER 3 TO THE
SUBGRANT AGREEMENT, WHICH WAS APPROVED BY THE CITY ON MAY
11, 2011, PURSUANT TO RESOLUTION NO. 2011-27657), MODIFYING THE
EXPIRATION DATE OF THE SUBGRANT AGREEMENT FROM MARCH 1,2013,
TO NOVEMBER 23, 2012 (AS REQUIRED BY THE STATE); 2.) APPROVING
AND AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE
AMENDMENT NO. 7 TO THE NSP1 AGREEMENT BETWEEN THE CITY AND
MIAMI BEACH COMMUNITY DEVELOPMENT CORPORATION (MBCDC),
DATED JANUARY 2010, TO INCORPORATE THE REVISED TERM OF THE
SUBGRANT AGREEMENT, AS WELL AS INCLUDE CERTAIN NEW
PROVISIONS REQUIRED BY THE STATE; 3.) FURTHER AUTHORIZING THE
CITY MANAGER OR HIS DESIGNEE TO TAKE SUCH ACTIONS, AS MAY BE
REQUIRED,WITH REGARD TO PREPARING AND HAVING THE MAYOR AND
CITY CLERK EXECUTE MODIFICATION OF MORTGAGES FOR THE
FOLLOWING NSP1 FUNDED PROJECTS, THE MADELEINE APARTMENTS,
THE NEPTUNE APARTMENTS, AND THE LOTTIE APARTMENTS; SUCH
MODIFICATIONS REVISING THE MORTGAGE AMOUNTS TO REFLECT THE
CURRENT BUDGETED AMOUNTS FOR EACH PROJECT, BUT WHICH
MODIFICATIONS ONLY REFLECT A RE-ALLOCATION OF AMOUNTS AMONG
THE PROJECTS AND WHICH DO NOT RESULT IN ANY ADDITIONAL
ALLOCATIONS OTHER THAN THE TOTAL AMOUNT OF FUNDS THAT THE
CITY HAS ALREADY ALLOCATED TO THESE PROJECTS UNDER THE NSP1
PROGRAM ($8,672,509.78).
WHEREAS, on July 31, 2008, the United States Congress enacted the Housing and
Economic Recovery Act of 2008, thereby creating the Neighborhood Stabilization Program 1
(NSP1),which directed the Department of Housing and Urban Development(HUD)to allocate$3.93
billion to states and units of local government as emergency assistance for the purchase and
redevelopment of abandoned and foreclosed homes; and
WHEREAS, on March 18, 2009, the City approved Resolution No. 2009-27039, approving
the City's planned use of and application of NSP1 funds to purchase and rehabilitate one or more
foreclosed or abandoned multi-family buildings to be made available as rental housing properties for
income qualified households; and
WHEREAS, the City was awarded a total of $9,305,268 in NSP1 funds through several
allocations,and the State of Florida Department of Community Affairs(DCA)is the entity managing
HUD's NSP1 allocation to the City of Miami Beach; and
WHEREAS, on September 9, 2009, the City approved Resolution No. 2009-27175,
approving the Federally-funded NSP1 Subgrant Agreement between DCA and the City; said
Agreement was executed on November 24, 2009, in the amount$2,549,551,which was amended to
include the next allocations in the amounts of$4,755,717 and $2,000,000 awarded on March 24,
2010, and July 30, 2010, respectively; and
WHEREAS, the expiration date of the NSP1 Subgrant Agreement is November 23, 2011;
and
WHEREAS,the City, after conducting a competitive process,awarded$2,376,181.53 of the
initial allocation ($2,549,551 less the City's allowable $173,369.47 administration funds) to Miami
Beach Community Development Corporation (MBCDC), which was also approved by the City on
September 9, 2009, per Resolution No. 2009-27194, said Agreement was executed on January 21,
2010, in the amount of $2,376,181.53, and was amended to include the next allocations, in the
amounts of$4,432,328 and $1,864,000; executed on July 21, 2010 and July 22,2010, respectively;
and
WHEREAS, the expiration date of the MBCDC Agreement is July 20, 2011; and
WHEREAS, while 82% of the NSP1 funds allocated to MBCDC have been expended,
current economic and banking conditions have impacted MBCDC's ability to obtain construction
lines of credit and have delayed completion of the contractually required activities; and
WHEREAS, DCA/NSP1 representatives have informed City staff that the majority of its
NSP1 sub-recipients are likewise experiencing similar delays, and have also requested extensions
of time to expend funds; and
WHEREAS, per DCA staff recommendations, Resolution No. 2011-27657 was adopted by
the City Commission on May 11, 2011, approving the extension of both contracts to expire on March
1, 2013, in accordance with the four year NSP1 expenditure plan established by HUD; and
WHEREAS, following a transition of State staff from DCA to Department of Economic
Opportunity, DEO, new State staff requested that the expiration date of the Agreement between
DCA and the City, as well as the Agreement between the City and MBCDC, be shortened to
November 23, 2012, granting a one-year extension to the original expiration date of November 23,
2012; and
WHEREAS, DEO staff requested additional terms to be incorporated to the Agreement
between the City and MBCDC, as follows:
1. Determine a maximum of 16% Developer Fee on all projects.
2. Set a 10% retainage per draw.
3. Submittal of cancelled checks per draw request.
4. Incorporate new project budget allocations and schedules submitted as of 10/26/11,
attached as Exhibit"A" hereto, not resulting in any additional allocations other than the total
amount that the City has already allocated to these projects under the NSP1 Program
$8,672,509.78.
5. Establish that any payments for private financing, taxes, and/or interest shall be paid from
contingency funds.
6. Incorporate HUD's NSP Policy Alert dated July 13, 2011, attached as Exhibit "B" hereto,
regarding Program Income, defining the Developer as an"end user", as the Developer was
procured through an RFP process, therefore all Program Income is to be retained by the
Developer.
7. Determine that the corresponding ownership entity(LLC)shall procure yearly independent
audits regarding program income and shall submit such report to the City. Such report shall
be paid by the LLC from its operating expenses
WHEREAS, the new budget allocations and schedules will require corresponding
modifications to the existing recorded mortgages; and
WHEREAS, the new mortgages will only reflect a re-allocation of amounts among the
projects and which do not result in an increase or decrease of funds other than the total amount that
the City has already allocated to these projects under the NSP1 Program ($8,672,509.78); and
WHEREAS,the Administration hereby recommends and requests amending the end date of
both the NSP1 Subgrant Agreement and the MBCDC Agreement,so that they are co-terminous and
both expire on November 23, 2012, incorporating the terms noted above, and modifying the three
mortgages for the following NSP1 projects: the Madeleine Apartments, the Neptune Apartments,
and the Lottie Apartments, to reflect current budgeted amounts for each project,without increasing
the total amount that the City has already allocated to these projects under the NSP1 program.
NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION OF
THE CITY OF MIAMI BEACH, FLORIDA, that the Mayor and City Commission hereby approve
and authorize the Mayor and the City Clerk to execute the following actions with regard to the
City's Neighborhood Stabilization Program 1 (NSP1): 1.) a corrective Amendment No. 3 to the
subgrant Agreement between the State of Florida Department of Community Affairs (DCA) and
the City(as previously approved in Modification Number 3 to the subgrant Agreement,which was
approved by the City on May 11, 2011, pursuant to Resolution No. 2011-27657). Modifying the
expiration date of the subgrant Agreement from March 1, 2013, to November 23, 2012 (as
required by the State); 2.)to execute Amendment No. 7 to the NSP1 Agreement between the City
and Miami Beach Community Development Corporation (MBCDC), dated January 2010, to
incorporate the revised term of the subgrant Agreement, as well as include certain new provisions
required by the State as defined above; 3.)to further authorize the City Manager or his designee to
take such actions, as may be required, with regard to preparing and having the Mayor and City
Clerk execute modification of mortgages for the following NSP1 funded projects, The Madeleine
Apartments,The Neptune Apartments, and the Lottie Apartments;such modifications revising the
mortgage amounts to reflect the current budgeted amounts for each project, but which
modifications only reflect a re-allocation of amounts among the projects and which do not result in
any additional allocations other than the total amount that the City has already allocated to these
projects under the NSP1 Program ($8,672,509.78).
PASSED AND ADOPTED this /WA day of Deem,be r- , 2011.
ATTEST: = 1u%%B' yy,,,
d L* INCORP ORATED' 4.,% r . ►` ��
CITY CLERK °�g Z,.. ;:•',� A 0
9RcH2M'�"
APPROVED AS TO
FORM&LANGUAGE
&FOR EXECUTION
0()
lir
ity Irl•rn=a, Date
s
COMMISSION ITEM SUMMARY
Condensed Title:
A resolution authorizing the City Mayor and City Clerk to: 1)execute corrective Amendment No 3 to the Subgrant Agreement for
Neighborhood Stabilization Program(NSP1)between the City and the State of Florida Department of Community Affairs(DCA),
to modify the expiration date to November 23, 2012; 2)execute an amendment to the related Agreement between the City and
MBCDC to extend the expiration date to November 23,2012,as well as incorporate additional terms at the State's request;and
3) modify all three mortgages for all NSP1 projects to reflect current budgeted amounts for each project without increasing the
total amount that the City has already allocated to these projects under the NSP1 program.
Key Intended Outcome Supported:
Increase access to workforce or affordable housing.
Supporting Data (Surveys, Environmental Scan, etc.): Based on the 2007 Customer Satisfaction Survey, affordable
housing was a concern for 82% of those surveyed.
Issue:
Shall the City approve amendments for an extension and new terms as requested by DEO staff?
Item Summary/Recommendation:
The City of Miami Beach was awarded a total of$9,305,268 from HUD's Neighborhood Stabilization Program (NSP1)through
several allocations. The State's Department of Community Affairs (DCA) is the pass-through entity handling HUD's NSP1
allocation to the City of Miami Beach. On September 9, 2009, the City approved Resolution No. 2009-27175 approving the
Subgrant Agreement with DCA in the amount of$2,549,551,which was subsequently amended to include additional allocations
of NSP1
After conducting a duly-noticed procurement process,the City Commission awarded$2,376,181.53 of the initial NSP1 funds to
Miami Beach Community Development Corporation(MBCDC),to acquire a 16-unit building,which was also amended to allow for
the allocation of additional NSP1 funds to MBCDC which were used to acquire two more buildings,providing a total of 60 units to
be rehabilitated to assist income eligible persons, as well as stabilize neighborhoods affected by foreclosure.
Current economic and banking conditions have restricted MBCDC's ability to obtain construction lines of credit and have delayed
completion of the contractually required activities. After conferring with DCA/NSP1 representatives,City staff was informed that
the majority of the DCA's NSP1 sub-recipients are experiencing similar delays and have also requested extensions of time to
expend funds. Per State staff recommendations, Resolution No.2011-27657 was adopted by the City Commission on May 11,
2011, approving the extension of both contracts to expire on March 1, 2013. However, following a transition of State staff from
DCA to DEO, new State staff requested that the expiration date of both agreements(DCA/City and City/MBCDC)be set to expire
on November 23, 2012, instead of March 1, 2013
The request for a compressed expiration period was reiterated during DEO's recent audit on October 17-21,2011,and new DEO
staff also requested new terms to be incorporated to the existing contract with MBCDC,as follows 1)determine a maximum of
16% Developer Fee on all projects, 2) set a 10% retainage per draw, 3) submittal of cancelled checks per draw request, 4)
incorporate new project budget allocations and schedules submitted as of 10/26/11, 5)establish that any payments for private
financing,taxes,and/or interest shall be paid from contingency funds,6)incorporate HUD's NSP Policy Alert dated July 13,2011,
Exhibit"B"regarding Program Income, defining the Developer as an"end user",7)determine that the corresponding ownership
entity(LLC)shall procure yearly independent audits regarding program income and shall submit such report to the City.
The Administration recommends that the Mayor and City Commission authorize corrective amendments requested by the State
and to further authorize the City Manager to execute modifications of mortgages for all three NSP1 projects,without increasing
the total amount of funds that the City has already allocated to these projects under the NSP1 program ($8,672,509 78).
Advisory Board Recommendation:
N/A
Financial Information:
Source of Funds: Amount Account Approved
1
NSP 2
OBPI Total
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Anna Parekh
Sign-Offs:
�I� Department Director ,As •A t City Manag Ci i anager
AP 'I i r JMG
r'GENDA\2011\12-14-11\NSP1 Agreement Amendments-\S...1}AM.doc
MIAMIBEACH AGENDAITEM 67 T
INF DATE 12-'4 q-)
MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139,www.miamibeachfl.gov
COMMISSION MEMORANDUM
TO: Mayor Matti Herrera Bower and Members of the City Commission
FROM: Jorge M. Gonzalez, City Manager
DATE: December 14, 2011
I
SUBJECT: A RESOLUTION OF THE MAYOR A CITY COMMISSION OF THE CITY OF
MIAMI BEACH, FLORIDA, APPROVING AND AUTHORIZING THE
FOLLOWING ACTIONS WITH REGARD TO THE CITY'S NEIGHBORHOOD
STABILIZATION PROGRAM 1 (NSP1): 1.) APPROVING AND AUTHORIZING
THE MAYOR AND CITY CLERK TO EXECUTE A CORRECTIVE
AMENDMENT TO THE SUBGRANT AGREEMENT BETWEEN THE STATE
OF FLORIDA DEPARTMENT OF COMMUNITY AFFAIRS (DCA) AND THE
CITY (AS PREVIOUSLY APPROVED IN MODIFICATION NUMBER 3 TO THE
SUBGRANT AGREEMENT, WHICH WAS APPROVED BY THE CITY ON MAY
11, 2011, PURSUANT TO RESOLUTION NO. 2011-27657), MODIFYING THE
EXPIRATION DATE OF THE SUBGRANT AGREEMENT FROM MARCH 1,
2013, TO NOVEMBER 23, 2012 (AS REQUIRED BY THE STATE); 2.)
APPROVING AND AUTHORIZING THE MAYOR AND CITY CLERK TO
EXECUTE AMENDMENT NO. 7 TO THE NSP1 AGREEMENT BETWEEN THE
CITY AND MIAMI BEACH COMMUNITY DEVELOPMENT CORPORATION
(MBCDC), DATED JANUARY 2010, TO INCORPORATE THE REVISED TERM
OF THE SUBGRANT AGREEMENT, AS WELL AS INCLUDE CERTAIN NEW
PROVISIONS REQUIRED BY THE STATE; 3.) FURTHER AUTHORIZING THE
CITY MANAGER OR HIS DESIGNEE TO TAKE SUCH ACTIONS, AS MAY BE
REQUIRED, WITH REGARD TO PREPARING AND HAVING THE MAYOR
AND CITY CLERK EXECUTE MODIFICATION OF MORTGAGES FOR THE
FOLLOWING NSP1 FUNDED PROJECTS, THE MADELEINE APARTMENTS,
THE NEPTUNE APARTMENTS, AND THE LOTTIE APARTMENTS; SUCH
MODIFICATIONS REVISING THE MORTGAGE AMOUNTS TO REFLECT THE
CURRENT BUDGETED AMOUNTS FOR EACH PROJECT, BUT WHICH
MODIFICATIONS ONLY REFLECT A RE-ALLOCATION OF AMOUNTS
AMONG THE PROJECTS AND WHICH DO NOT RESULT IN ANY
ADDITIONAL ALLOCATIONS OTHER THAN THE TOTAL AMOUNT THAT
THE CITY HAS ALREADY ALLOCATED TO THESE PROJECTS UNDER THE
NSP1 PROGRAM ($8,672,509.78).
ADMINISTRATION RECOMMENDATION
Adopt the Resolution
NSP1 Agreement Amendments
12/14/2011
Page 2 of 2
ANALYSIS
Resolution No. 2009-27039 was adopted by the City Commission on March 18, 2009, approving
the City's application for and planned use of funds available through the United States
Department Of Housing and Urban Development's (HUD) Neighborhood Stabilization Program 1
(NSP1) funds for the purchase and rehabilitation of one or more multi-family buildings to be kept
as rental properties to benefit income qualified households in accordance with the NSP1
regulations, with an end goal of stabilizing neighborhoods impacted by foreclosures.
The City of Miami Beach was awarded a total of $9,305,268 in NSP1 funds through an initial
allocation and two subsequent allocations. The State's Department of Community Affairs (DCA),
now known as the Department of Economic Opportunity (DEO), is the pass-through entity
handling HUD's NSP1 allocation to the City of Miami Beach.
On September 9, 2009, the City approved Resolution No. 2009-27175 authorizing the execution
of the Federally-funded Subgrant Agreement with DCA. That Agreement for $2,549,551 was
subsequently amended to include the additional allocations in the amounts of $4,755,717 and
$2,000,000 (awarded on March 24, 2010, and July 30, 2010, respectively). The expiration date of
the initial Agreement is November 23, 2011.
After conducting a duly-noticed procurement process, the City Commission awarded
$2,376,181.53 of the initial NSP1 allocation to Miami Beach Community Development
Corporation (MBCDC) for the acquisition of a 16-unit building. That Agreement was subsequently
amended (with Commission approval) to allow for the allocation of additional NSP1 funds
received by the City to MBCDC (in the amount of$4,432,328 and $1,864,000 respectively), which
was used to acquire two more buildings, providing for a total of 60 units being rehabilitated to
assist income eligible persons, as well as stabilize neighborhoods affected by foreclosure. The
expiration date of the City's Agreement with MBCDC for NSP1 funds is July 20, 2011.
While 84% of the NSP1 funds allocated to MBCDC have been expended, one of the highest
expenditure rates for this program in the State, current economic and banking conditions have
impacted MBCDC's ability to obtain construction lines of credit and have delayed completion of
the contractually required rehabilitation activities. After conferring with DCA/NSP1
representatives, City staff was informed that the majority of its NSP1 sub-recipients are likewise
experiencing similar delays and have also requested extensions of time to expend funds.
Following State staff recommendations, Resolution No. 2011-27657 was adopted by the City
Commission on May 11, 2011, approving the extension of both contracts to expire on March 1,
2013, in accordance with the four year NSP1 expenditure plan established by HUD.
However, following a transition of State staff from DCA to DEO, new State staff requested that the
expiration date of both agreements (DCA/City and City/MBCDC) be modified to expire on
November 23, 2012, granting a one-year extension to the original DCA State and City Agreement
expiration date of November 23, 2011. The request for a compressed expiration period was
reiterated during DEO's recent audit on October 17-21, 2011.
Furthermore, new DEO staff requested additional required terms to be incorporated to the
Agreement between the City and MBCDC, as follows:
NSP1 Agreement Amendments
12/14/2011
Page 3 of 3
1. Developer Fee shall be capped at a maximum of 16% of construction costs;
2. City shall retain 10% of all draw or reimbursement requests from every Developer
payment request;
3. Developer shall submit copies of cancelled checks with all reimbursement requests prior
to receiving payment;
4. The Developer's revised project budget allocations and schedules, dated 10/26/11 as per
attached Exhibit "A," shall replace the original budget allocations and schedules and the
revised project budget allocation and schedules shall not result in any additional
allocations other than the total $8,672,509.78 that the City has already allocated to these
projects under the NSP1 Program;
5. Developer shall pay for any debt service, interest payments, and taxes from the projects
contingency funds;
6. City shall incorporate HUD's NSP Policy Alert dated July 13, 2011, attached as Exhibit "B"
hereto, regarding Program Income to the Agreement terms, which defines the Developer
as an "end user" who was procured through an RFP process, and therefore Developer
may retain all Program Income;
7. Incorporate a requirement that the three corresponding limited liability corporations who
have taken title to the buildings shall procure yearly independent audits regarding program
income and shall submit such report to the City, the cost of the yearly independent audits
shall be borne by the corporate owner of each project from its operating expenses.
As part of the new budget allocations and schedules, item No. 4 above, corresponding
modifications to the existing recorded mortgages will be executed. The modifications will only
reflect a re-allocation of amounts among the projects and will not result in an increase or
decrease of funds other than the total amount of funds that the City has already allocated to these
projects under the NSP1 Program ($8,672,509.78.)
CONCLUSION
The Administration recommends that the Mayor and City Commission authorize 1.) corrective
amendment No. 3 to the subgrant Agreement between the State of Florida DCA and the City
modifying the expiration date of the subgrant Agreement from March 1, 2013, to November 23,
2012 (as required by the State); 2.) authorize Amendment No. 7 to the related NSP1 Agreement
between the City and MBCDC to incorporate the revised term of the subgrant Agreement, as well
as include additional new provisions required by the State as noted above; 3.) further authorize
the City Manager or his designee to take such actions as may be required with regard to
preparing and having the Mayor and city Clerk execute modifications of mortgages for the
following NSP1 projects: The Madeleine Apartments, The Neptune Apartments, and the Lottie
Apartments, to reflect the current budgeted amounts for each project, without increasing the total
amount of funds that the City has already allocated to these projects under the NSP1 program
($8,672,509.78); and further authorize the Mayor and the City Clerk to execute any
documentation necessary to effectuate the amendments to the agreements.
p
JMG/HMF/- /rs
T.\AGENDA\2011\12-14-11\NSP1 Agreement Amendments- MEMO.docx
EXHIBIT "A"
NSP1 Projects Summary
1
A. MADELEINE APARTMENTS BUDGET MODIFICATION REV 10/26/2011
I I I
# CONCEPT I ORIGINAL BUDGET INCREASE'/DECREASE FINAL BUDGET
I I
1 AQUISITION $1,150,000.00 $0.00 $1,150,000.00
2 CONSTRUCTION COST $587,000.00 -$134,004.99 $452,995.01
3 CONSTRUCTION CONT $150,000.00 -$83,700.00 $66,300.00
4 PREDEVELOPMENT/S $153,842.00 $28,843.50 $182,685.50
5 DEVELOPERS FEE $88,440.00 $6,689.48 $95,129.48
TOTALS $2,129,282.00 -$182,172.01 $1,947,109.99
I
I I
_ B. (NEPTUNE APARTMENTS BUDGET MODIFICATION I REV 10/26/2011
1 I I I
# CONCEPT ORIGINAL BUDGET INCREASE I,DECREASE FINAL BUDGET
1 AQUISITION $5,657,850.00 $0.00 $5,657,850.00
2 CONSTRUCTION COST $175,001.00 $123,516.48 $298,517.48
3 CONSTRUCTION CONT $0.00 $55,000.00, $55,000.00
4 PREDEVELOPMENT/S $196,375.78 $12,772.22 $209,148.00
5 DEVELOPERS FEE $0.00 $68,897.47 $68,897.47
TOTALS $6,029,226.78 $260,186.17 $6,289,412.95
I
C. 1LOTTIE APARTMENTS BUDGET MODIFICATION REV 10/26/2011
I I I
# I CONCEPT ORIGINAL BUDGET !INCREASE IDECREASE FINAL BUDGET
I I
1 AQUISITION $1,185,000.00 $0.00 $1,185,000.00
I
i 2 CONSTRUCTION COST $549,100.00 -$227,588.65 $321,511.35
3 CONSTRUCTION CONT $14,172.00 $60,828.00 $75,000.00
4 PREDEVELOPMENT/S $102,746.00 $33;570.50 $136,316.50
5 DEVELOPERS FEE $25,886.00 $42',273:21 $68,159.21
TOTALS $1,876,904.00 -$90,916.94-� $1,785,987.06
I
Total three Projects: $10,022,510.00
I
Total Funds Available:
NSP1 Funds $8,672,510.00
HOME Funds 1_ $650,000.00
IFB Financing $700,000.00
1 I 1 1 $10,022,510.00
1 12/07/2011 9:48 AM
PROJECT SCHEDULE REVISED 10/20/2011
1 1 I 1 ( i -I I I I I I i
Illiti9 ilEPTUnc
1632 AIERIDIAA AYE.
m1Am1 BEACH. It 33139
20101 I I I I I I I I 2011 1 1 1 1 1 1 I I 12 1
-_, N W A in- O) J co co O " N --. IV W 4=s c.n O- �I co co 0 N - N
T it S I( O O O O -O O 0 O O O O O '' "'. 1' 1 - - N N
CONTRACT ON PROPERTY 7"' 1
rt;T•MC. hr.r
DUE DILIGENCE PERIOD ..:c,-.a
A&E CONTRACT APPROVAL is
ACQUISITION/CLOSING I
SCHEMATIC DESIGN , 0
-
DESIGN DEVELOPMENT `',1
CONSTRUCTION DOCUMENTS 7'`''
CONST.DOCS.PERMITING T
ENVIROMENTAL :*f'
PROCUREMENT(ADOPTED)
CONTRACTOR SELECTION(A)
CONSTRUCTION I I ' :a.. . , :.EU' ;:r.,kt,-:. 413:1 -?` t, "a 57 `I,
PARTIAL C.O 30 UNITS y
C.O.5 LAST UNITS
MARKETING
MOVE-IN F r`
REVISED 10/07/2011
OWNER
MIAMI BEACH COMMUNITY DEVELOPMENT CORPORATION
945 PENNSYLVANIA AVENUE I
MIAMI BEACH,FL 33139
305 538 0090
ARCHITECT
BELLINSON GOMEZ ARCHITECTS
8108 BISCAYNE BLVD#310
MIAMI FL 33172
305.559125
PROJECT SCHEDULE REVISED 10/20/2011
t� ?�rgs �i-t�'� '�. f'^W,.iuh {s'' k, a� .r 'i d ";nEfi' �u,r �rs.Y rk �r�-roj yam-,yr �t",� c
THE VACPTUAC 3 �d 4�F - � � �k s F n rY ��
` " v !-r` " a. tt
... ...- _ �.i � r, ... ......t. atc,v4.v.•fcl'cif h ky,r..y�;�r'.s. ,....,..r. ..e;'�'-� ,�' � 3°`` _
1632 MERIDIFln RYE.
mmmi BERCH. fl 33139 H—HI‘
2OI0l I I I I L I I 20111 1 1 1 1 1 1 L 121
.P. 01 -O) -I CO CO :�. .� ' N 0) -A 01 0).. v CO CO
T 8$I E o C) - o o 0 0 0 0 0 _.
CONTRACT ON PROPERTY r'
DUE DILIGENCE PERIOD (7„
�?` A
A&E CONTRACT APPROVAL
ACQUISITION/CLOSING
SCHEMATIC DESIGN Merl
DESIGN DEVELOPMENT
CONSTRUCTION DOCUMENTS 77.5
CONST.DOCS.PERMITING '
ENVIROMENTAL °P'`'`'
PROCUREMENT(ADOPTED) u'=`
CONTRACTOR SELECTION(A) _
CONSTRUCTION
PARTIAL C 0 30 UNITS j77,'
C.O.5 LAST UNITS
MARKETING
MOVE-IN a s;
REVISED 10/07/2011
OWNER
MIAMI BEACH COMMUNITY DEVELOPMENT CORPORATION
945 PENNSYLVANIA AVENUE
MIAMI BEACH,FL 33139 —
305 538 0090
ARCHITECT
BELLINSON GOMEZ ARCHITECTS
8108 BI SCAYNE BLVD#310 ——
MIAMI FL.33172
305.559125
PROJECT SCHEDULE REVISED 10/20/2011
7871 -7861 CRESPI BLVD
mmAml BEACH. fl. 33111
2009 2010 11 I I I I 12 I
, 05
..1 03 <0 N i. .- F.IV W -NI C9 Ch y O 50 O' _ N -- W -1= F ['0 O N, •
.T A ae,1_ .,A0, '',0, � }rka i p .O' O 0 O ^O 0 Q 0-10', O, .8).[8 - -
----al.-MII-IIIII-M-__---_-INIIIIIII----_M----
EMMM---
CONTRACT ONCROOD [ /11010111
A&E CONTRACT APPROVAL I
ACQUISITION!CLOSING
I
SCHEMATIC DESIGN
DESIGN DEVELOPMENT
CONSTRUCTION DOCUMENTS u.•••••••�.....aiva
CONST DOCS.PERMITING �M�E ���� ^ . �1MM� ''" ��M�IIIM�IE
:ZM::ESS
. iii, .
:::: :5E0Tb0N lit,<< ,'% <x si .-
MARKETING <;;_
I
FINAL C O I I I I ..R_• I
MOVE-IN
_.
t Y,. 11101 ,4%,r ° z om ° �
O tror
� (k tHi 1- i - k b
. • ' ,4 A 11) ' ■,,,
--- tl i j f' i , I. 0E
July 13, 2011
Community Planning and Development
fir ,
NSP Policy Alert! EXHIBIT „B„
Program Income in the Neighborhood Stabilization Program
Many NSP grantees will generate program income. While its use is largely regulated by rules from the
CDBG program, some questions have arisen about NSP situations that are less common in the Block
Grant Program. This guidance addresses some of those questions and clarifies program income policy
on the distribution of Net Operating Income in rental projects.
Three appendices include:
1. Examples of NSP program income issues (p. 7);
2. Relevant regulator/ citations (p. 10); and
3. Program income in DRGR (p. 15)
Definition and Examples
Program income is defined as gross income received by the recipient or a subrecipient directly generated
from the use of NSP or CDBG funds. The NSP Program follows the CDBG regulations on program
income, which can be found in their entirety at the end of this Policy Alert. The Department's policy since
2008 is that NSP program income must be spent on NSP-eligible activities only.
Common sources of NSP program income are:
• Payments of principal and interest on loans made with NSP funds;
• Proceeds from the sale of properties acquired and/or improved with NSP funds;
• Recapture of NSP subsidies if an assisted home is sold before the end of the affordability period;
• Interest earned on program income pending its disposition;
• Repayments of liens placed on privately owned property that was demolished using NSP money;
• Gross income from the use or rental of real property constructed or improved with NSP funds, less
the costs incidental to the generation of that income.
The following revenues are NOT program income:
• Proceeds from fundraising by subrecipients;
• Funds collected through special assessments on public improvements (unlikely in NSP);
• Subrecipient proceeds from disposition of real property five years or more after grant close-out;
• Income received in a single calendar year by the recipient and all its subrecipients (combined) if
the total amount of such income does not exceed $25,000. This is unlikely to occur in NSP;
U.S.Department of Housing and Urban Development 1
Office of Block Grant Assistance
2011-07
0` P, tP E ,. ,. 4:74,01A-'70*7 `( hFc'T
t fi .t yA z s 's my i/k u{ i4 a' reS iKvFs'" i c
• Interest earned on cash advances from the grantee or funds held in a revolving loan fund account
(except for funds in approved lump-sum drawdown accounts). Such interest must be returned to
HUD for transmittal to the Treasury.
Regulatory and Functional Requirements
The general rule in drawing NSP and CDBG funds is that funds must only be requested for immediate
cash needs. Program income works on a first-in,first-out basis. It must be used before drawing down
additional grant funds, unless the program income is in an approved revolving fund. In that case it must
be used for the specified purpose of the revolving fund before further drawdowns for that specified
activity. Program income may earn interest while being held for the next subsequent cash requirement of
the grantee; that interest is also program income. Section 570.504 defines the use of program income,
and is available for reference at the end of this policy.
Program income must be used for the immediate cash needs of the grantee, regardless of the next
activity. That is, program income may not be held, or accumulated, for a specific activity. These activities
will receive funding from available program income and grant funds at the time these funds are needed.
Example
A. Funds on hand in grantee/subrecipient account:
Program income received from sale of completed NSP home: $35,000
B. Funds currently needed for ongoing demolition and land bank projects: $85,000
Request for funds from Line of Credit(B minus A): $50,000
Note that the source of the program income was different from the activity it was used to fund. Funds on
hand from program income must always be disbursed for the next activity. Program income cannot be
reserved for a major cost in the future but must always be disbursed when next drawing down funds,
except for income in revolving loan funds.Within a revolving fund, program income must similarly be
disbursed for the next activity of the fund.When income is generated by an activity that is only partially
assisted with NSP funds, the income must be prorated to reflect the percentage of NSP funds used to
determine the portion that is program income.
Note that NSP grants are not subject to the requirement at 24 CFR 570.504(b)(2)(iii) that program
income on hand at the end of the program year that is in excess of one-twelfth of the most recent
entitlement grant be remitted to HUD.
In all three phases of NSP, program income that is obligated or expended in this way will count toward
obligation or expenditure requirements. The requirement to use program income first will not hinder the
grantee's ability to meet spending deadlines. For NSP, policies for disposition of program income
received after grant close-out have not yet been determined. Grantees should continue to follow the
current requirement to use program income only on NSP-eligible activities.
Program income retains its character as NSP funding indefinitely unless otherwise provided by HUD in
an applicable requirement. In NSP, funds may be spent and returned several times through the cycle of
acquisition, rehab, and resale. Grantees must track program income from NSP1, NSP2 or NSP3
separately and use the funds in accordance with the relevant Notices and rules. If a project meets the
U.S.Department of Housing and Urban Development 2
Office of Block Grant Assistance
2011-07
-3'5 awR p;t r"w,„, F Z7 iNnrR'F RFF rs; 'F. -t.i a. ,,'=€ `''r.4Mfi '' ';i s y�. 2 _ r Xfe
" v - - t r a S ' i� 'ss
rules of multiple programs (e.g. location, beneficiaries, uses,) then program income may be combined in
that project. Note that the initial requirement in the Housing and Economic Recovery Act (HERA) that
program income earned after July 30, 2013 be returned to the Treasury has been rescinded. As in
CDBG, program income will remain with the grantee.
Unless modified in a closeout or other agreement with HUD, all such funds must be documented when
received and expended and must be used for NSP-eligible activities. NSP program income must follow
all other cross-cutting requirements such as environmental, fair housing and labor laws and must be
used in approved target areas or areas of greatest need unless otherwise approved by HUD. The NSP
Notices allow 10% of program income to be used for administrative purposes.
In general, program income is calculated in proportion to the amount of the total cost that is paid with
NSP funds. Gross revenues of$20,000 on the sale of an NSP-assisted house that is financed with 50%
NSP funds and 50% other funds would result in NSP program income of$10,000 ($20,000 X 50%.)
Subrecipients and Developers
When subrecipients are involved, the grantee and subrecipient may negotiate the disposition of program
income in their agreement; there is substantial flexibility in its allocation, subject to the grantee's
approval. This applies to members of consortia as well. The written subrecipient agreement must specify
whether any program income received by the subrecipient is to be returned to the grantee or retained by
the subrecipient. If the latter, the agreement must describe which NSP-eligible activities such program
income will fund. Subrecipients are described at 24 CFR 570.500(c). Section 570.503 describes the rules
for subrecipient agreements. These sections are reproduced in full in Appendix 2.
The financial records of the subrecipient(as well as the grantee) must include complete information on
the receipt and expenditure of program income. At the end of the term of the Agreement, program
income on hand or subsequently received by a subrecipient must be returned to the grantee unless
otherwise specified in the subrecipient agreement. Grantees may designate a different subrecipient for
use of program income, but should specify in the first agreement that program income will be returned to
the grantee. In accordance with the first use rules, though, this program income may not be held for the
disbursement to the second subrecipient. Rather,funding of the second subrecipient will be available
from future program income or grant funds remaining in the line of credit.
Revenues received by developers are NOT considered program income. This is because developers are
treated in NSP as end users, not intermediaries like subrecipients. Households receiving financial
assistance are also considered end users and are not required to operate like grantees or subrecipients,
either. This determination derives from the CDBG regulation below; for NSP, it also applies to new
construction.
Assistance to private individuals and entities, including profit making and nonprofit organizations,
to acquire for the purpose of rehabilitation, and to rehabilitate properties, for use or resale for
residential purposes; 24 CFR 570.202(b)(1)
Although revenues received by developers are not considered program income, grantees and
subrecipients may negotiate terms for transactions which result in the return of some revenues to the
grantee or subrecipient. To avoid unduly enriching third parties such as developers, NSP funds must be
carefully underwritten. Depending on the underwriting analysis, grantees may require developers to treat
the NSP funds as a loan, or may negotiate the return of a percentage of the revenues from rents.
U.S.Department of Housing and Urban Development 3
Office of Block Grant Assistance
2011-07
q Js 5 T w ,k TF .t'R mss ,7 r'},' hfi5r7 r i4 A e ... i 3 1 a a ; f 6
Income from Rental Properties
Program income is defined as gross income less costs incidental to generation of the income. Since this
definition corresponds to the calculation of Net Operating Income (NOI)" and NOI is a commonly used
calculation, this guidance will use program income and NOI interchangeably in connection with income
generated by rental properties. In NSP, NOI is program income if it is received by grantees and
subrecipients. Net operating income received by developers is NOT program income, as noted above.
Example:
Gross Rents $100,000
Less: Vacancies ( $7,000)
Effective Gross Income $ 93,000
LESS:
Replacement Reserves ( $4,000)
Operating Expenses ($45,000) (Maintenance, insurance, utilities, management, etc.)
Net Operating Income $44,000
Net operating income from rental properties owned by grantees and subrecipients is calculated prior to
debt service payments. In the example above, the NOI of$44,000 would be program income.
•
However, in many cases, there is more than one source of funds and treatment of program income as a
proportional share of NOI could leave insufficient funds for debt service. In the case above, if NSP paid
for 50% of the project, NSP program income would be 50% of NOI, or$22,000. If debt service on the
private loan that financed the other 50%were $25,000, calculating program income prior to debt service
would leave $22,000 for debt service, not enough to keep the loan current.
In NSP, HUD allows the use of program income to be applied to debt service under the following
conditions:
1. The private loan(s)was used solely to finance the costs of the approved project and was made at
the same time as the NSP loan (i.e. was not a existing mortgage);
2. The private loan was made by an external lender(not the grantee or subrecipient);
3. Loan proceeds were used in accordance with all applicable NSP requirements (e.g.
environmental, Davis Bacon);
4. Use of the program income for debt service payments was contemplated when the project was
approved.
Typical Problems with Program Income
Improper collection or retention of program income
• Subrecipient retains program income without grantee permission, or uses it in violation of terms of
Agreement.
• Program income in a revolving fund account is not used prior to drawing down additional funds for
that activity.
U.S.Department of Housing and Urban Development 4
Office of Block Grant Assistance
2011-07
.r e'""x'°"""`� P�+"' ��t�s�n�Y "m ra'�-�r+^�ma pf q' "'n,,. 'k"`es ',w,.�' a"`' _�, `tr-�"'"�L fit' ""$" �5. .m '�- "� w v�a x�4r`�'3 s:..
Y37 y.,.,5 r,k °iec: `0 s-R ° 'ttx- + fr-x '�0:r.vi� fix'ydr c -. .z�'°i k t:w Ti
3.,tag. **' fS "' -_ �.t
1. ` rY 1 1 .i
• Subrecipient improperly disposes of property a year after purchase and fails to ensure sale at fair
market value (the amount of program income due the grantee is the current fair market value of the
property).
• When property that is only partially financed with NSP funds is rented or sold, the NSP program
does not receive its proportional share of proceeds generated.
• Program income is not returned at expiration of a subrecipient agreement.
• Grantee or subrecipient treats interest earned on cash advances or on funds in a revolving account
as program income, rather than remitting such interest income to the U.S. Treasury.
• Failure to repay NSP funds for property acquired or improved with NSP funds in excess of$25,000
when use changes and when new use is ineligible or does not meet a National Objective for the
required time period.
Improper utilization of program income
• Program income is treated by subrecipient as unrestricted funds.
• Program income is spent on an activity that is not eligible under NSP rules.
• Program income is used for an activity that the grantee has not approved via the Agreement.
• Program income is not used in compliance with all applicable regulations.
• The subrecipient draws down program funds without using program income first.
Improper recording and reporting of program income
• Subrecipient's financial records do not describe receipt and use of program income in an accurate,
complete, and timely fashion.
• Subrecipient has an inadequate system to monitor repayment or sale of loans that it has made with
NSP funds.
• Information on the status and use of program income reported to grantee by subrecipient is
inaccurate or untimely.
Useful Strategies for Avoiding Problems with Program Income
(1) Have a detailed explanation of program income requirements in a written Agreement with each
subrecipient.
(2) Provide technical assistance to subrecipients in setting up their record-keeping systems to
capture data on program income.
(3) For those subrecipients operating loan programs, provide technical assistance to ensure
adequate loan documentation and loan servicing systems.
(4) Require detailed program income information as part of regular progress reports and drawdown
requests from subrecipients, with periodic on-site"spot-checking" of records by the grantee to
confirm the reported data.
(5) Have an accurate and useful way to track program income as it is received and expended, and
ensure that program income earned by NSP1, NSP2 and NSP3 is kept separate.
U.S.Department of Housing and Urban Development 5
Office of Block Grant Assistance
2011-07
r i': �P �� arix y, rd alr Ci c i
Technical assistance with early intervention to identify problems while they are still quite small is
particularly important with respect to program income. In the event that the subrecipient has misspent
program income, a grantee may have no option other than to disallow the related expenses. A
disallowance is likely to represent a severe burden to a subrecipient and can impose a serious strain on
the grantee's relationship with the subrecipient.
Ideally, any program income issues encountered with subrecipients will be of a minor and correctable
nature. However, if the subrecipient is not responsive to directed corrective action, and/or persists in
viewing the program income as"its own money,"the grantee must act expeditiously to curtail the
subrecipient's authority to retain and use such funds.
U S.Department of Housing and Urban Development
Office of Block Grant Assistance
2011-07