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LTC 039-2009 Update on Neighborhood Housing Stabilization Programm MIAMIBEACH OFFICE OF 7HE CITY MANAGER LTC #039-2009 LETTER T© COMMISSION IQ: M o M 'Herr ra Bower an embers of the City Commission FROM: r e onzalez, City Manag DATE: February 6, 2009 SUBJECT: UPDATE ON NEIGHBORHOOD HOUSING STABILIZATION PROGRAM The purpose of this LTC is to update the Mayor and City Commission on the announcement made by the State of Florida with respect to its Neighborhood Stabilization Program (NSP) allocation from the Department of Housing and Urban Development (HUD). This LTC also represents afollow-up to the November 4, 2008 LTC which explains the basic parameters of the NSP (attached for your reference). BACKGROUND On December 1, 2008, the State of Florida, acting through its Department of Community Affairs (DCA}, published its Neighborhood Stabilization Program Substantial Amendment ("AmendmentH) pursuant to the requirements of the Housing and Economic Recovery Act, 2008 (HERA}. The State of Florida, as a direct NSP grantee of HUD, was required to provide HUD the Amendment in orderto specify how the State intends to distribute the State's $81 million direct allocation among Florida's small, sub-grantee communities such as the City of Miami Beach. The State is providing $1,841,832 to the City of Miami Beach as the City's share of the State NSP allocation which will benefit households earning between 51% - 120% of the area median income. An additional $907,799 was allocated to the City as a supplement for rental housing to meet the low- income requirements of the NSP (referred to as the "NSPLI allocation"), which will benefit households with incomes at or below 50% of the area median income. The projected start date for the NSP program is March 1, 2009. The projected end date is February 28, 2011. RULES FOR USE AND ADMINISTRATION OF THE NSP FUNDS AS OUTLINED SY DCA City staff has continued to monitor developments relating to the NSP grant, including participating in conference calls and informational sessions. Although not yet approved by HUD, the State's Amendment reiterates the activities for which grantees can use regular NSP funding. These activities may include some or all of these following strategies: Acquisition and rehabilitation of foreclosed or abandoned properties which are then resold or rented to income qualified households. A property is considered abandoned if taxes and mortgage payments have not been made in more than 90 days, the property is vacant, and foreclosure proceedings have begun; • Funding for financing mechanisms, such as down payment assistance, closing costs, and soft second mortgages with 0% interest for the purchase of foreclosed or abandoned units; • Demolitionlclearance with housing redevelopment, and; • Land banking. The separate, Low-Income Supplement (NSPLI) allocation of $907,719 must be dedicated exclusively for rental housing to meet the low-income requirements of the NSP. The State requires that the City or its NSPLI sub-grantees (sponsor) must have five years experience providing rental housing to the NSPLI target population at or below 50% of area median income (AMI}, In Miami-Dade County, the area median income is $49,200. By formula, in order to qualify as "very-low income" (at or below 50% of the AMI); the State defines an eligible tow-person household as earning up to $24,100 annually. Afour-person household may qualify if earning less than $30,150 annually. LTC Update on NSP February 6, 21109 Page 2 of 3 Notice of Intent: On January 23, 2009, grantees received notification that it would be necessary to submit a Notice of Intent to Apply for Neighborhood Stabilization Program funds to the State. Pursuant to the DCA's instructions, the City's Intent to Apply Form was due by February 5, 2009, and was prepared and submitted on February 3, 2009. Initial Citizen and Stakeholder Input: On January 23, 2009, DCA staff also notified local governments that prior to the City submitting an application to the State for NSP funding, one {1) public meeting must be held within the jurisdiction where the NSP activities will be undertaken. The public meeting is provided for the purpose of facilitating discussion and input on determining the areas of greatest need due to foreclosures and identifying possible solutions to address those needs. The public meeting should meet the following requirements. + Notice of the public meeting must be provided at least five {5) days prior to the meeting. + Documentation of the meeting must include sign-in sheets and minutes. Documentation that the needs ofnon-English speaking citizens have been met where a significant number of non-English speaking citizens can tie reasonably expected to participate. In light of the uncertainty relating to the deadlines for this program, and to ensure compliance with this requirement, the attached pubNc meeting notice was advertised in the Miami Herald on January 29, 2009, for the public hearing to be conducted on Monday, February 9, 2009 at 3:00 p. m. {conference room at 55517' Street). Time permitting, additional input meetings can and may be held. Funding Deadlines: The State's Amendment requires that funds be obligated by sub-grantees (the City) within 10 months from the execution date of their agreemenk with HUD or risk recapture of those unobligated funds. At 15 months from the Agreement date, the State will recapture 95 percent of the City's unobligated funds. NSP funds are obligated when "orders are placed, contracts are awarded, services are received and similar transactions have occurred that require payment by the state orsub-grantee during the same or future period." Both the 10 and 15 month deadlines are intended to provide an incentive for sub-grantees to obligate their allocation in advance of the HUD's obligation timeline of 18 months. The State has not executed its agreement with HUD as of the date of #his memorandum and will not likely do so until late February of 2009. Contract with the State: The City wiA execute atwo-year grant agreement {as asub-grantee) for both regular and supplemental NSPLI funds. Notwithstanding the timeline for obligation specified previously, extensions of the City's agreement may be granted if at least 50% of the funds have been spent. Extensions would be for 18 months, and a maximum of two extensions may be granted. Funds are considered expended or "spent" when invoices, accounts, and contractual agreements for NSP-funded activities have been paid in full. Incentive-Based Set-Aside: Funds recaptured by the State ftom sub-grantees are placed into aset-aside pool which may then be re-allocated to those sub-grantees which have obligated andlor spent their regular and NSPLI allocations. Reallocated set-aside funds must also be obligated within 18 months of HUD's execution of its agreement with the State. The possibility that the City may be able to access funding in addition to its two existing allocations serves as incentive to obligate NSP funds sooner rather than later. Affordability Periods for NSP Assisted Housing: The State will ensure long-term affordability of units assisted with NSP funds by requiring that all NSP-assisted housing have a Deed Restriction {if resale) or Mortgage (if recapture) recorded on the property. The periods of affordability applicable to NSP homebuyer projects are as follows: + Under $15,000: 5 years + Between $15,000 to $40,000: 10 years + Over $40,000: 15 years • New Housing Construction: 20 years Administration Funding; From its $91 million allocation, the State will retain $1.1 million for its administration of NSP. )twill provide $2 million for training and technical assistance to the State's sub-grantees and allow $fi million to be retained by LTC Update on NSP February 6, 2009 Page 3 of 3 localities for NSP administration. Therefore, approximately $168,274 or 6.6°!0 of #hese two combined allocations may be retained by the City for program administration. Sponsor flaefiead Fe+~s: It is unknown at this time what percentage of the program Rands may be retained by program sponsors as overhead fees. PROPOSED STRATEGY FOR NOFA In light of the strict deadlines for obligating funds, City staff has begun establishing the procedural infrastructure for implementing the NSP, including preparing the Notice of Funding Availability (NOFA) seeking sponsors for khe program. The NOFA will ask respondents to state their quaiiflcations and experience in providing housing to the target populations, and solicit proposals far strategies within the NSP funding parameters, in addition, we will request that for projects involving the acquisition of multi-family housing, that proposals address their strategies for addressing condominium assessments {past due and future). It is intended that the portion of the NOFA relating to the regular NSP funding will be issued in a matter that is flexible, in that respondents can apply for funding to either purchase an entire building to rehabilitate and rent to income eligible persons, or a respondent can apply to secure funds to assist in homebuyer opportunities (or a combination of both), The selected sponsor will be responsible for identifying qualifying units and/or buildings, and for identifying and quaiifyingincome-eligible participants. Funds would only be used only for the purchase of multi-family units ormulti-family buildings. Additionally, when providing homebuyer opportunities, the selected sponsor must give priority to the purchase of units in buildings most impacted by foreclosures, in an effort to help stabilize those buildings. In light of the possibility of accumulated association balances, it is expected that the selected sponsor will identify other funding sources or a lender that will assist in off-setting those casts, thus ensuring that this burden is not transferred to irxaome-limited participants. While not required, in light of the timelines for expenditure, for projects proposing the purchase-for-rental of foreclosed buildings, the City will cook for proposals that have pre-identified foreclosed buildings at the time of proposal submissions, and for respondents that have identified (or secured} other potential sources of or commitments for financing {e.g. private financing). It is recommended that asingle-owner multi-family foreclosed building be purchased with the City's NSPLI allocation to provide rental housing to low-income households. The City would competitively select a sponsor with demonstrated capacity to secure additional funds for carrying costs throughout the affordability period of this rental property. it should be noted that the NOFA is flexible enough so that a respondent can submit a proposal to combine the regular NSP and the supplemental NSPLI for the purchase-for-rental of one building for income eligible persons. As is customary, the NOFA will be advertised and apre-proposal conference will be provided for interested proposers. Once the selection process is complete, proposed contracts will be presented to the City Commission for approval. As always, please feel free to contact me should you have any questions or require additional information. ATTACHMENTS JMG/HFlAPlmb Facmgrl$ALL\tiildalReal Est, Hsng & Gomm DevlCommunity DevelopmentlLTC NSP Update 2 6 09.doc RFr^~{uF~ 1008 NO~+ -S AM I I ~ 39 MIAMI BEACH c,r~ ~~~,;,~~~ uf,~k ©FFICE OF THE CITY MANAGER LTC # zsb-zoos LETTER TC> COMMISSION Tp: Mayor Matti Herrera Bower and Members of the City Commission FROM; Jorge M. Gonzalez, City Manager DATE: November 4, 2408 susaEeT: INFORMATION REGARDING THE EIGHBORHOOD STABILIZATION PROGRAM FROM U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT The purpose of this LTC is to update the Mayor and City Commission on recent funding announced by the Department of Housing and Urban Development {USHUD} for the Neighbofiood Stabil'Qation Program {NSP), The NSP is a product of the Housing and Economic Recovery Act of 2008, which was enacted on July 31, 2008. As a result of that legislation, Congress directed USHUD to allocate $3.52 billion to states and units of local government as emergency assistance forthe purchase ar~d redevelopment of abandoned and foreclosed homes. USHUD announced its funding allacaations on September 26, 2008. Section 2301 of the Housing and Economic Recovery Act of 2008 directs that the funds be allocated to "States and units of general local government with the greatest need, as such need is determined in the discretion of the Secretary," based on: (A} the number and percentage of home foreclosures in each State yr unit of general local gavemrnent; {B) the number and percentage of homes financed by a subprime mortgage related loan in each State or unit of general local government; and {C} the number and percentage of homes in default or delinquency in each State or unit of general local government, A list of Frequently Asked Questions {FAQs) provided by the Florida Department of Community Affairs {DCA) is attached. FUNDING ALLOCATIONS tt is USHUD's intent to allocate funds to entitlement jurisdictions that receive formula funding under the Community Development Block Grant program {CDBG). There are seven entitlement jurisdictions in Miami-Dade County: Hialeah, Miami, North Miami, Miami Beach, Miami Gardens, Homestead and Miami-Dade County. However, USHUD determined that they will only provide direct allocations to entitlement jurisdictions that, based on the need-based allocation formula used, would qualify for more than $2 million on NSP funding; the allocation for~those entitlement jurisdictions that would receive less than $2 million under the allvcatian formula would be sent to their respective state, in addition to the state's own direct allocation. Based upon U$HUD's data, the State of F'iarida received an allocation of $91,141,478. Miami-Dade County was provided a direct allocation of $62,207,200 to address the County's foreclosure problem within their entitlement jurisdiction, and the other free other entitlement jurisdictions in Miami-Dade County will also receive direct allocations. The City of Miami Beach did not qualify for a direct enticement of funding which, based on USHUD's established fomnula, would be approximately $1,566,166. The DCA would administer the grant funds allocated to the State, inGusive of the LB#ef t0 GommissioR USHUD's Neighborhood S#abilrza#ion Pnagram Page 2 of 3 State's direct allocation, as well as the allocation for Florida'stwenty-six enti#lement jurisdictions that did not receive a direct allocation ftam USHUD. As the state's lead agency, DCA is working with Governor Crist's Office on the Action Plan to administer the $91 million in NSP funds awarded to the state. On October 8, 2008, staff and the Cites lobbyists attended DCA's Stakeholder Input Meeting regarding the state's NSP allocation, which includes the amounts identified by USHUD for entitlement jurisdictions not receiving a direct allocation. Under the program, the State of Florida is not obligated to `pass through' to these entitlement jurisdictions the amounts identified by USHUD. Part of the State's development of their Action Plan will include some distribution of #unds to areas with the greatest Head; however, the State's methodology to determine'need' has not yet been developed. The State's Action Plan for use of the NSP funds is due to USHUD by December 1, 2008. It is the City's understanding that the draft of the State's plan will not be released until November 14, 2008. The Administration and the City's lobbyists continue #o work toward the goal of including in the State's Action Plan that their funding formula and aUocatian strategy include, at a minimum, the full allocation #a entitlement jurisdictions {such as Miami Beach) whose lends were provided to the State by USHUD because they did not meet the $2 million threshold to n3eeive direct funding from USHUD. The Administration is also working to ensure that, in determining need, DCA takes into account not only the foreclosure rate within jurisdictional boundaries, but the additional, unique negative impacts that foreclosures create in condominium buildings, and the need to place as many foreclosed condominium units back into service as soon as possible for purposes of stabilizing the buildings and protecting other unit owners. To this end, the team has been in communication with the Governors Office of Policy and Budget, the Qepartment of Community Affairs, the Florida Housing Finance Corporation, the Department of Financial Services, and Representatives Gelber and Garcia. The team will continue to look for avenues to rein#orce the City's position. ROTENTIAL USES OF NSP FUNDS IN MIAMI BEACH In reviewing the NSP specifics and limitations, there are several options far the use of any funds that the City may receive. It is important to point out that the NSR funds Cann be used for foreclosure prevention. As developed, the program is intended to assist in stabilizing neighborhoods that have been impacted by high rates of foreclosure. Speafic informatron on eligible uses are in the attached, previously referenced FAQs. Based on the most recent foreclosure statistics complied for the City, so far in 2008 the City has had a final judgment of foreclosure recorded fora #otal of 300 units. Of those units, 202 (67°k) are worth $417,000 or less, and 81 (20°!0) are valued at less than $200,000. The vast majority of these units are in condominium buildings. In addition, a total of 1,1374 units currently have a its pendens, of which 1,261 {67%) are valued below $417,000, and 449 (24°/6) below $200,000. In looking at how we can best utilize any potential NSP funds, we have looked at haw we currently manage homebuyer programs in the City. As you are aware, the City of Miami Beach administers homebuyer tends through our State SHIP program. This program pairs qualified first-time homebuyers with available properties wMhin certain affordable housing ranges. Part of the program includes homebuyer counseling and assistance in improving the capacity of the potential homebuyer to qualify, let alone buy, housing in our community. The housing purchased with this allocation must fail within specific program guidelines (fast-#ime homebuyer, income limits, etc.). As you are aware, the City Commission recently amended our Local Mousing Assistance Program to allow us to Letter to Commission USHUD's Neighborhood Stabilizatio» Program Page 3 of 3 provide a deeper subsidy far those first-time homebuyers with incomes at 50% and below of the Area Median Income; current total assistance provided to an eligible, lower-income homebuyer is now $80,000 instead of $40,400, which makes a difference in assisting participants at the lower income levels. The SHIP program also alk>cates rehabilitation funding for the purchased housing, which is fequentay used to address code issues, or far any repairs needed for move-in. The SHIP program requires that at least 30% of the SHIP funds be used to assist eligible partkipants that eam 50°,6 or below Area Median 1nrome (AM1). Pursuant to NSP regulations, eligible participants can sam up to 120% of the AMT, but at least 23°k of the NSP funding must be used to assist persons earning at or below 50°k of the AMT. NSP funds are not limited to first-time homebuyers. It is our recommendation that, should funding tie albcated to the City from the NSP funding provided to the State, the City expand the current homebuyer program further by speafically assisting homebuyers only with the purchase of foreclosed properties. The program specifics would be as follows: + NSP only used for the acquisition of foreclosed multi-family housing; • Priority for NSP funding for acquisition to be provided to acquire foreclosed units in buildings with at least a 20% rate of foreclosed units; NSP funds can be used to leverage SHIP or other homebuyer program allocations to assist the Tower income participants in acquiring foreclosed units, but will not (combined or alone) provide 90086 of acquisition funding; lJp to $24,000 in NSP funds will be available for rehabilitation of the units (to address repairs in the foreclosed units) or to leverage non-NSP rehabilitation funding. We must wait for the State to issue their frnal program rules #o ensure that our proposed strategy is consistent with their priorities and eligible for funding, Consistent with the manner in which we currently manage our homebuyer programs, it is our recommendation to issue a competitive process to select one or more program sponsors to implement this program. Specifically, the program sponsor would: assist in the identification of eligible participants; qualify the participants; identify units eligible for acquisition under this program (including a review of current and anticipated monthty maintenance expenses); negotiate favorable acquisition terms with the mortgage-holders (NSP requinss a minimum five percent discount by the mortgage holder); assist in securing private financing, as Headed, for the eligible participant; and assist in coordinating any necessary rehabilitation of the unit. it is expected that the sponsor(s) will leverage other available resources, including SHIP and other funds to assist with the acquisition, closing costs andtor rehabilitation. it is also expected that homebuyer counseling be provided by the sponsor either directly, or through referrals to appropriate entities, (Note: we will not know how much in administrative funding will be available for the City or the project sponsor(s) until the program rules era published), ATTACH ENT: Neighborhood Stabilization Program -Frequently Asked Questions JMGi ! F:lcmprliALLWiIddaWeighborhood 5ervis~slCommunfty DevelopmenllFtNAI LTC NSP Forecbsure Funds.doc Neighborhood Stabilization Program -Community Developmstit Block Grant Program Page 1 of 2 Division of Housin+~ and community Development pivision Ho~Fior~aCommur~„ik~Dev lopment~) Community Development Slock Grant Program ,P~r gr~,rg. Home (N i h rhood Stabilization Prooram ~ ts_t~CRes~~ve^ya' . (Farms Dor~tments and Program Guidance ~ Related Links (Consolidated ~ (Contac _ Neighborhood Stabilization Program Frequently Asked Questions 1. What is the Neighborhood 5tabllizatlon Pragram9 The Neighborhood Stabilization Program provides State and local governments with a source of funding to help them respond to rising foreclosures and declining property values, 2. Now did the Neighborhood Stabl/izatfon Program come about? Qn Juiy 30, 2008, President Bush signed into law the Housing and Economic Recovery Act of 2008 to address the severe housing crisis. TitAe 111 of the Act appropriates i $3.92 billion of grant funds under the Neighborhood Stabilization Program for states and local governments to purchase and redevelop abandoned or foreclosed properties. The Housing and Economic Recovery Act of 2008 directed the U.S. Department of Housing and Urban pevelopment to target funding #o areas with the greatest needs based on the extent of foreclosures, subprime mortgages, and mortgage delinquencies and defaults. The Federal Notice, which was released on September 30th, provides information regarding method of allocation, program requirements, application procedures, and waivers granted, 3. How wens Neighborhood Stabilization Program funds al/acated? Mme than 2501ocat titles and counties received grants as well as all 50 states, including Puerfo Rico and the District of Columbia, wiih eadt stale receiving at least $19.8 mil}ion. The State of Florida has been allocated $54i million, which includes $91,141,478 being awarded to the Department of Community Affairs, under the State's Community Development Block Grant program, and approximately $450 million being allocated directly to 48 local governments, For a complete breakdown of Florida's funds, please visit the yz.~. Dpo rtm~e~f Housing and Urt>an_D v~etopmenCs webstte. 4. Now !s the money to be spent? States and local governments ~Nelghborhaod Stabilization Program grantees) may use funding to acquire and redevelop foreclosed properties that might othervvise become sources of abandonment and blight. Eligible uses for the lands Include: o Buying foreclosed homes o Buying land and property o pemolishing or rehabilitating abandoned properties o Offering downpayment and closing cost assistance to low- to moderate-income homebuyers o Creating "land banks" to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of property 5. How long does the State and local cammunlt/es have fo spend tfiis money? Congress was very clear that theta is an urgency to deal with a natignal housing crisis and has provided under the Ad that the funds be put to work quickly. Grantees have 18 months to obligate these funds, and four years to spend them. In some areas, this level of federal funding will be unprecedented, so the U.S. Department of Housing and Urban pevelopment will help these communities implement their programs. 6. What will happen if grantees don't obligate their funds within ~$ months? The U.B. Department of Housing and Urban Development will recapture the funds and return the money #o the taxpayers. What does the Aepartmant of Community Affairs have to do to campty with the Nsighbarhood Stabilization Program guidelines? In order to receive the grant allocation, the Department of Community Affairs must develop and publish a substantial amendment io their action plan and put it on the agency's intemet site for 15 calendar days. Citizens must have equal access to the information. The amendment must be submitted to the U.S. Department of Housing and Urban Development for approval no later than December 1, 2008. The Department of Community Affairs wUl utilize several methods to solicit input about the development of the Action Plan amendment and ensure that citizen participation requirements are met. http://www,dcastate.fl.usJFhctUcdbglNSP.cfin 10/31/2008 Neighborhood Stabilization Program - Conununity Development Block Grant Program Page 2 of 2 8. How will the Department of Community Affairs solicit public input? The Department of Community Affairs will. o Work dosely with stakeholders and partners to develop the action plan amendment o Host a Stakeholder Input Mee#ing an October 8, 2008 in Tallahassee o Host a Public Hearing in the near future ' v Provide additional web-based opportunities for comments and Input to be shared 9. tK1i this be ffke the Community Development Block Grant t3isaster Recovery Program? No. The Federat Register Notice emphasizes that the authority for this funding is "substaniiaily and significantly more limited from that generally provided with disaster recovery Community Development Block Grant supplemental appropriations", Therefore, the U.S. Department of Housing and Urban Development will have very little authority to waive any reQuirements. Additionalln#orrnation Community Development Grant Program Contacts Gusto i r grviee S,u[Y8V t Florida Department of Community Affairs 2555 Shumard Oak Boulevard, Tallahassee, FL 32399-2140 ~M~) {850) 488-841i6~ Toll-Free 1-877-352-3222) TDD 1-800-228329 lrttp://www.dca.state,fl.uslFhcd/cdbg/NSP.cfrn 10/31/2008 i t !~ 1 i Z ,l . . i l ,~ J ~ ~ r a 0 of rv d z a 0 - n a f W z 0 d x °~ ... m` ~': lvtIA~IIBEACH-~ Public Hearing Notice: Neighborhood Stabilization Program 7h"e Gity of Miami Beach will hold a public hearing on Mon ey„ Febr{~sfrv 9 et~00 ~-m located at S55 17th Street, Miami Beach {conference room) to discuss the Neighborhood Stabilization Program (NSP}: Tile laity of Miami $each has been allocated a total of $2,545,551 from US Housing and Urban i7evelopmant for the purpose of purchasing f{~eclosed and/or a~ndoner~ properties, including condominium units, single family houses, and/ or apartment buildings, ip Miami $each. which would - meet the greatest need in stabilizing our neighborhoods. Tve City is therefore voiding a ,public hearing seeking input from Miami Beach residents as to what constitutes "greatest need" so as to assist -in formulating the City's . priorities in implementing NSP. Please note that NSP funding activities are strict y; limited to post-foreclosure properties and cannot fund fore,ciosure-prevention or short-sales. If you have any questions, you tnay.contact Mark Bertacci, at 305-673-7000, ext. 6955 or mbQrtocci~miamihe ov 1n accordance with the Americans with Wsebirrties Act of 1990, persoirs raeeding special accommoctstbn to partJclPata in any roasting ar to review soy doccrments relative thereto, sboufd tnnlad t1~p t~ty Ckr)c no /star tlspn /our days prior to the prooesdb~g. Telephone (3D5~ 873-T411Yor atsistence; If M+P~~ tefaphone tM Fkvtda Retry Service Nermtaers (800}955-8771 (7'Pf7) or (80'0}955-$TTD (Vla'CQ. fwassislance, - t i