AGENDA #9
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TO: |
Roger L. Stancil, Town Manager |
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FROM: |
J.B. Culpepper, Planning Director Loryn Clark, Housing and Neighborhood Services Coordinator |
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SUBJECT: |
Modifications to the Revolving Acquisition Fund |
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DATE: |
March 26, 2007 |
Tonight we return to the Council with proposed modifications to the Revolving Acquisition Fund that was established by the Town Council on January 28, 2002.
The attached resolution would: (1) change the name of the fund to the Affordable Housing Fund; and (2) expand the eligible activities for the fund. We recommend that we return at a later date to modify the guidelines if the Council wishes to pursue use of this fund for operating expenses.
On February 26, 2007, we presented a memorandum to the Council proposing modifications to the Revolving Acquisition Fund to: (1) change the name of the fund to the Affordable Housing Fund; and (2) allow the Fund to be used for the renovation of properties and subsidies to reduce the cost of housing to create affordable homeownership opportunities (see Attachment 1).
At that meeting, the Council raised additional questions about use of the
Revolving Acquisition Fund, and asked the staff to respond at a later date.
At the February 26, 2007 meeting, the Council raised the following questions and issues. Our staff comments are provided below:
1. To help establish a threshold for consideration, what is the typical grant amount?
Staff Comment: To date, funds have been used by Orange Community Housing and Land Trust to purchase properties in Northside and Culbreth Park. The current guidelines allow the Manager to approve specific projects in accordance with the guidelines approved by the Council. The largest loan approved was $190,000, and the smallest was $60,000. The loan amount depends on the cost of acquiring the property.
Typically, when funds are requested, staff reviews the request with the applicant, and forwards a memorandum to the Assistant Town Manager that includes details about the proposed transaction. If the request is approved, we execute a Performance Agreement, Promissory Note and Deed of Trust that stipulates that the loan must be repaid within 180 days. We also require the non-profit to record restrictive covenants on the property to ensure that it is used for affordable housing. When the loan is repaid, the Deed of Trust is canceled and funds are returned to the Revolving Acquisition Fund.
We recommend that the Council continue to allow the Town Manager (or his designee) to approve acquisition loans. This allows us to respond to requests from non-profits quickly. If necessary, we are currently able to respond to a request for funds within a week. If we were required to obtain Council approval, this could lengthen this waiting period and the non-profit may lose an opportunity to purchase a home.
Regarding the proposal to expand the nature of the fund to allow rehabilitation grants, we recommend that if funds are requested in excess of $40,000 for rehabilitation or permanent subsidies, Council approval would be required. Typical rehabilitation expenses and homeownership assistance subsidies are between $40,000 and $50,000. We believe that it would be reasonable for the Council to review requests greater than $40,000 to determine if it is in the Town’s best interest to make such a significant investment in a project.
We have revised the attached resolution to establish a $40,000 limit for administrative approval of rehabilitation grants or homeownership assistance.
2. A Council Member suggested including language to allow the fund to be used for operating expenses for non-profit organizations.
Staff Comment: We raise the following points about using these payment-in-lieu funds for operating expenses:
If the Council chooses to use funds for operating expenses, we recommend that we develop an application form that would provide information about the organization and its activities. We believe it would be important to know an organization’s financial status, goals, and activities to determine if a grant from the Town would be an efficient use of funds. We would recommend requiring agencies to enter into a Performance Agreement with the Town. We also believe it would be important to establish a reporting and monitoring system similar to what is used for the Community Development and Human Services programs.
If the Council approves use of funds for operating expenses, we would suggest that the Council establish a maximum grant amount that an agency could receive. We would also suggest that the Council set aside a portion of the total fund for operating expenses so that the majority of the funds could be used for actual housing expenses, and that funds could be awarded annually.
If the Council chooses to use payment-in-lieu funds for operating expenses, we recommend using the same budget cycle that is used for the overall Town budget.
If the Council approves the use of funds for operating expenses, we recommend establishing a policy that an agency would be able to receive funds for a maximum of two consecutive years. We believe that the Council should also determine if operating grants could be provided from multiple Town resources (i.e. General Fund, Human Services, and this fund).
We continue to believe that the General Fund is the best source of funds to use to provide operating grants to non-profit organizations that provide affordable housing. The Town currently provides grant funding to Orange Community Housing and Land Trust and EmPOWERment for operating expenses through the General Fund. We note that other resources are available for operating expenses. Agencies could apply for Human Services funding through the Town. In addition, HOME Program funds can also be used for operating expenses related to HOME funded projects for qualifying organizations. Orange Community Housing and Land Trust receives operating support from the HOME Program.
We believe that the use of funds for operating expenses may require more Council discussion. We recommend no change at this time that would allow operating expenses as an authorized use of the fund.
That the Council adopt the attached resolution to: (1) change the name of the fund to the Affordable Housing Fund; and (2) allow the Fund to be used for the renovation of properties and to reduce the cost of housing to create affordable homeownership opportunities; (3) require Council approval prior to providing grants of over $40,000 for renovation or homeownership assistance expenses.
We recommend no change at this time to allow payment-in-lieu funds to be used for operating expenses. If the Council wishes to pursue this change, we will return at a later date to modify the guidelines as directed.