AGENDA #7

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:       Response to Petition from Affordable Rentals, Inc.

 

DATE:             January 12, 2004

 

 

The purpose of this memorandum is to respond to a request from Affordable Rentals, Inc. requesting funds from the Town for operating expenses (please see Attachment 1). 

 

The attached resolution and budget ordinance would provide $10,000 from the Council’s contingency account in the General Fund to Affordable Rentals for operating expenses for January through June 2004. 

 

BACKGROUND

 

Affordable Rentals states that it was created based on recommendations from the Orange County Commissioners Affordable Housing Task Force in 2000. According to information submitted by Affordable Rentals, the organization’s mission is to develop, rehabilitate, maintain, and manage affordable rental housing for families in Orange County whose incomes fall between 30% and 50% of the area median income.  Affordable Rentals received its 501(c)(3) non-profit status in September 2002.   

 

Since its creation, Affordable Rentals has used HOME and Orange County Affordable Housing Bond funds to acquire properties throughout Orange County. 

 

In April 2003, the Council budgeted $80,000 of 2003-2004 Community Development funds to purchase a unit in Chapel Hill for affordable rental property.  In January 2004, we will provide $74,000 of these funds to Affordable Rentals to acquire a unit in the Tyler Creek apartment complex located (off of Airport Road) that will be used for permanently affordable rental housing. 

 

Also in April 2003, the Orange County HOME Consortium budgeted $188,000 of 2003-2004 HOME Program funds to Affordable Rentals to acquire rental housing.  In November 2003, the organization purchased seven units in the Fidelity Street condominium development in Carrboro.  Also, in March 2003 Affordable Rentals used $70,000 of 2002-2003 HOME Programs funds to purchase a duplex on McMasters Street in Chapel Hill. 

 

 

 

THE REQUEST

 

On November 24, 2003, Nancy Milio, Chair of the Affordable Rentals Board, informed the Council that because it did not receive an expected operating grant from a foundation, beginning in January 2004 it will experience a shortfall of $3,350 per month.  The request also states that the agency currently has a part-time director but intends to hire a full-time director. 

 

The organization requests that the Town provide a one-time cash allocation of $20,100, “or a substantial part of it” to fill a funding gap for January through June 2004. Funds would be used for operating expenses including staff and monthly overhead.  The request submitted also states that Affordable Rentals has petitioned the Town of Carrboro for funding, and has a commitment of a partial match of public funds from a private donor.

 

DISCUSSION

 

We review below potential funding sources if the Council wishes to consider funding for this purpose: 

 

General Fund

 

The Council may choose to use the General Fund to respond to this request.   The Council currently uses the General Fund to pay a portion of operating expenses for Orange Community Housing and Land Trust.   In that case, the County, Chapel Hill, Carrboro, and Hillsborough each contribute funds for operating expenses. 

 

Housing Loan Trust Fund

 

The Town Council established the Housing Loan Trust Fund in 1973 using local funds to assist low-income families with the purchase of a new home or to renovate an existing home. The Housing Loan Trust Fund has since been used to support a variety of Community Development projects, including deferred second mortgage loans for Tandler and Culbreth Park programs and construction loans to EmPOWERment, Inc. and Habitat for Humanity. 


Current guidelines of the Housing Loan Trust Fund do not allow funds to be used for operational expenses.  However, the Council could choose to amend the guidelines to allow funds to be used in this manner. 

 

We do not recommend modifying the guidelines of the Housing Loan Trust Fund for this request.  We recommend that the Council continue to reserve the Housing Loan Trust Fund for affordable housing development so that the number of affordable units in Town is increased. 

 

Community Development Block Grant Funds

 

Federal Community Development regulations allow funds to be used for general overhead and administrative expenses for activities in Chapel Hill if the expense is part of the cost to implement a specific project.  Because Affordable Rentals is a County-wide organization, we would not be able to determine what portion of the director’s salary would be attributed to activities in Chapel Hill.  Therefore, we do not believe that this request is eligible for Community Development funds under federal regulations. 

 

HOME Program Funds

 

Federal HOME Program regulations require that a jurisdiction participating in the HOME Program must reserve at least 15% of its HOME allocation for investment only in housing to be developed, sponsored, or owned by a community housing development organization. A community housing development organization is an association or corporation organized under State or local law to engage in community housing activities primarily within an identified geographic area of operation.

 

The primary purpose of a community housing development organization is to improve the physical environment of its geographic area of operation.  One criterion for designation of a community housing development organization is that the agency must maintain at least 1/3 of its governing body’s membership for residents of low-income neighborhoods, other low-income community residents, or elected residents of low-income neighborhood resident organizations.  A second criterion is that not more than one-third of the membership of a community housing development organization’s governing body can consist of appointed or elected officials or employees of government institutions.   Up to 5% of a jurisdiction’s HOME allocation may be used for the operating expenses of community housing development organizations.

 

Currently Orange Community Housing and Land Trust and Habitat for Humanity are designated community housing development organizations under the HOME Program.  In 2003-2004, $10,000 is being provided to the Land Trust to develop the Greenways Condominiums. 

 

Operational support must be provided in connection with development of a HOME-funded project.   Though Affordable Rentals was allocated $188,000 of 2003-2004 HOME Program funds to acquire property, this transaction is already complete.  In addition, we believe that the agency is not a designated community housing development organization and would not meet the requirements.  Therefore, we do not believe that Affordable Rentals would be eligible to receive HOME Program funds during the 2003-2004 fiscal year. 

 

Evaluation of Request

 

We understand that Affordable Rentals is facing a financial crisis and providing additional funds would allow the agency to continue to operate to create affordable rental housing opportunities County-wide.  We believe that it is important to increase the affordable rental housing stock in this community and Affordable Rentals is working to provide this valuable service. 

 

If the Council chooses to fund this request, we believe that it would be consistent with statements adopted by the Council in the Comprehensive and Consolidated Plans. 

 

The Comprehensive Plan states that as an action, the Town should pursue public/private partnerships to develop affordable housing.  The Plan also states that the Town should explore methods for insuring lasting affordability of housing units.  It is the intent of Affordable Rentals that all properties remain permanently affordable. 

 

The Consolidated Plan for Affordable Housing Programs in Orange County states that one of the County-wide housing priorities is to facilitate the creation of 50 new units of rental housing affordable to very low and low-income families.  Funding this request would assist the County-wide efforts to create more affordable rental opportunities. 

 

The Council could also choose not to fund this request.  Providing this funding could create an expectation of continued funding for operating expenses.   We also note that most agencies apply for funding through the Town during the budget process.  Funding an agency outside of this process may encourage other agencies to seek funding from the Town outside of the budget process. 

 

Because this organization operates County-wide, it would be appropriate to consider funding a portion of this request.  The organization’s petition notes it is also requesting funds from the Town of Carrboro.  We suggest the organization also petition Orange County for a portion of the needed funds. 

 

MANAGER’S RECOMMENDATION

 

If the Council wishes to consider this request, we recommend appropriating funds for a portion of this request for this organization.  We envision that we would enter into a Performance Agreement with Affordable Rentals for this amount for a one-time allocation to the organization. 

 

We recommend that the Council adopt the attached resolution and enact the attached ordinance to allocate $10,000 from the Council’s contingency account in the General Fund to Affordable Rentals for administrative and overhead expenses and to authorize the Manager to enter into a Performance Agreement with Affordable Rentals for the use of these funds. 

 

ATTACHMENT

 

1.      November 24, 2003 Petition from Affordable Rentals, Inc. (p. 7).

 

 

A RESOLUTION TO PROVIDE $10,000 TO AFFORDABLE RENTALS, INCORPORATED FOR OPERATING EXPENSES (2004-01-12/R-8)

 

WHEREAS, on November 24, 2003 Affordable Rentals requested that the Council provide $20,100 to the organization to fill a funding gap; and

 

WHEREAS, Affordable Rentals is working to meet the goals of the Comprehensive Plan and the Consolidated Plan to provide housing to very low-income households;

 

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council allocates $10,000 from the Council’s contingency account in the General Fund to Affordable Rentals, Inc. for operating expenses for January through June 2004.

 

BE IT FURTHER RESOLVED that the Council authorizes the Manager to enter into a Performance Agreement with Affordable Rentals for use of these funds.

 

This the 12th day of January, 2004. 

 

AN ORDINANCE TO AMEND “THE ORDINANCE CONCERNING APPROPRIATIONS AND THE RAISING OF REVENUE FOR THE FISCAL YEAR BEGINNING JULY 1, 2003” (2004-01-12/O-8)

 

BE IT ORDAINED by the Council of the Town of Chapel Hill that the Budget Ordinance entitled “An Ordinance Concerning Appropriations and the Raising of Revenue for the Fiscal Year Beginning July 1, 2003” as duly adopted on June 9, 2003 and the same is hereby amended as follows:

 

 

 

This the 12th day of January, 2004.