AGENDA #4i
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Amendment to Performance Agreement with EmPOWERment, Inc. for Renovation of 501 Sykes Street
DATE: September 7, 2004
The purpose of this memorandum is to respond to a request submitted by EmPOWERment, Inc. requesting that the Town provide an additional $15,000 for the renovation of 501 Sykes Street (please see Attachment 1).
The attached resolution would authorize an amendment to the Town’s Performance Agreement with EmPOWERment, Inc. for the renovation of 501 Sykes Street to: (1) increase the budget to complete the renovation of the house by $15,000 from $43,600 to $58,600; (2) extend the Time of Performance to renovate the property to January 31, 2005; (3) work with Orange Community Housing and Land Trust to sell the property within ninety days of receiving a Certificate of Occupancy; and (4) increase the eligible household income from 70% to 80% of the area median income as defined by the U.S. Department of Housing and Urban Development.
BACKGROUND
In response to a request from the Police Department, on February 28, 2000, the Council authorized the acquisition of 501 Sykes Street in the Northside neighborhood. At that time, the Council stipulated that the property would be placed in the Land Trust. In November 2000, the Town purchased 501 Sykes Street using $55,000 of Community Development Neighborhood Revitalization funds.
In February 2001, the Town entered into a Performance Agreement with EmPOWERment to use an additional $30,000 of Community Development Neighborhood Revitalization funds to renovate the house. The Performance Agreement states that EmPOWERment would work with the Land Trust to renovate and sell the property to a first-time homebuyer earning less than 70% of the area median income. This Performance Agreement expired on June 30, 2001. At the time the Agreement expired, renovation of the house was not complete and a buyer had not yet been identified for this property.
On January 14, 2002, the Council adopted a resolution increasing the renovation budget from $30,000 to $43,600, and extending the June 30, 2001, deadline stipulated in the Performance Agreement to June 30, 2002 (please see Attachment 2). The Council approved use of Community Development Neighborhood Revitalization funds for this request.
On June 24, 2002, the Council authorized an amendment to the Town’s Performance Agreement with EmPOWERment for this project to extend the Time of Performance to renovate and sell the property until December 31, 2002. EmPOWERment did not meet this deadline.
In a meeting with the Town Manager on May 4, 2004, EmPOWERment requested an additional $15,000 of funds to complete renovation of this house.
DISCUSSION
Status of Project
This property has been an EmPOWERment construction project since February 2001. To date, the Town has reimbursed EmPOWERment $38,222 for renovation expenses using Community Development Neighborhood Revitalization funds. EmPOWERment attributes some of the early delays during the renovation of this property to changes in personnel. Since that time, EmPOWERment has reorganized its staff. EmPOWERment has explained recent delays occurred because the project was on hold “while EmPOWERment, Inc. determined the best way to finance the remaining work.” Town staff worked with EmPOWERment staff to develop a scope of work and cost estimate for completing this project. EmPOWERment solicited bids for this project and received two responsive base bids: $39,750 and $40,795. EmPOWERment intends to select the lowest bid of $39,750. Of this amount, the Town would contribute a total of $20,378: $5,378 remaining from the initial allocation of $43,600; and the new request of $15,000. EmPOWERment would be responsible for $19,372. The total renovation cost for this project will be approximately $77,972 of which the Town’s contribution would be $58,600, and EmPOWERment would contribute $19,372.
We continue to be concerned about the length of time it has taken EmPOWERment to complete this project and the increased cost. However, during our recent monitoring visits, we have reviewed new procedures developed by EmPOWERment’s new staff, including new procurement and contracting procedures, and are pleased that significant management changes have been implemented. We expect that the new procedures will help EmPOWERment complete this project and future projects in a timely and more efficient manner.
If the Council approves this request, we would continue to closely monitor EmPOWERment’s renovation of this property. Our Community Development monitoring procedures includes submitting monthly reports until the property is renovated and sold and on-site visits by the Town’s Inspections Department and the Community Development Program Monitor to review the renovation work. We believe EmPOWERment can complete renovations by January 31, 2005, and sell the property soon thereafter.
We propose to use 2004-2005 Community Development Neighborhood Revitalization funds for this project. On April 26, 2004, the Council approved the 2004-2005 Community Development program budget that includes $121,700 for Neighborhood Revitalization activities. According to the guidelines approved by the Council, Neighborhood Revitalization activities must benefit households earning less than 80% of the area median income by household size and must serve residents of the Northside, Pine Knolls, or public housing communities. Eligible neighborhood revitalization activities include: second mortgage assistance; property acquisition and/or renovation; code enforcement; demolition; public improvements; and community service activities. Over the past several years, funds have primarily been used in the Northside neighborhood. Use of these funds to renovate 501 Sykes Street would be an eligible Neighborhood Revitalization activity.
Loan Structure
Upon sale to a buyer, the Town would be repaid approximately $70,000 of the total amount invested of $113,600. The returned funds could be used for future Community Development projects. The difference would become the Town’s permanent investment in the project and would be converted into a grant to the Land Trust. A grant would enable the house to be more permanently affordable to lower income households in the future.
Household Eligibility
The current Performance Agreement states that the property will be sold to a household earning less than 70% of the area median income (approximately $48,800 for a family of four). We recommend amending the Performance Agreement to match the 80% of area median income requirement of the federal Community Development program (approximately $57,000 for a family of four). We believe that this change will allow more flexibility to EmPOWERment and the Land Trust when marketing this home, and may increase the pool of candidates that may want to purchase the home.
NEXT STEPS
If the Council approves this request, we would amend the Town’s Performance Agreement with EmPOWERment to extend the Time of Performance to renovate the property to January 31, 2005, and sell the property as soon thereafter as possible. We would also monitor the renovation work and continue to monitor EmPOWERment’s polices and procedures to make sure all federal guidelines are followed.
We recommend that the Council approve an amendment to the Town’s Performance Agreement with EmPOWERment, Inc. for the renovation of 501 Sykes Street to: (1) increase the budget to complete the renovation of the house by $15,000 from $43,600 to $58,600; (2) extend the Time of Performance to renovate the property to January 31, 2005; (3) work with Orange Community Housing and Land Trust to sell the property within ninety days of receiving a Certificate of Occupancy; and (4) increase the eligible household income from 70% to 80% of the area median income as defined by the U.S. Department of Housing and Urban Development.
1. August 11, 2004 Request from EmPOWERment, Inc. (p. 6).
2. January 14, 2002 Memorandum to the Mayor and Town Council (p. 8).
A RESOLUTION AUTHORIZING AN AMENDMENT TO THE TOWN’S PERFORMANCE AGREEMENT WITH EMPOWERMENT, INC. FOR THE RENOVATION OF 501 SYKES STREET (2004-09-07/R-7)
WHEREAS, the Town has an ongoing interest in community development activities in Chapel Hill; and
WHEREAS, on February 28, 2000, the Council authorized use of $55,000 of Community Development Neighborhood Revitalization Funds to purchase 501 Sykes Street for affordable housing purposes; and
WHEREAS, on February 1, 2001, the Town entered into a Performance Agreement with EmPOWERment, Inc. budgeting $30,000 of Community Development Neighborhood Revitalization funds to renovate a house located at 501 Sykes Street; and
WHEREAS, on January 14, 2002, the Council authorized an amendment to the Town’s Performance Agreement with EmPOWERment for the renovation of 501 Sykes Street to extend the Time of Performance until June 30, 2002, and to increase the renovation budget to $40,436; and
WHEREAS, on June 24, 2002, the Town entered into an amended Performance Agreement with EmPOWERment to extend the time of performance to December 31, 2002; and
WHEREAS, EmPOWERment has requested additional funds from the Town to complete renovation of 501 Sykes Street;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Town’s Performance Agreement with EmPOWERment, Inc. for renovation of a house at 501 Sykes Street is amended to: (1) increase the budget to complete the renovation of the house by $15,000 from $43,600 to $58,600; (2) extend the Time of Performance to renovate the property to January 31, 2005; (3) work with Orange Community Housing and Land Trust to sell the property within ninety days of receiving a Certificate of Occupancy; and (4) increase the eligible household income from 70% to 80% of the area median income as defined by the U.S. Department of Housing and Urban Development.
BE IT FURTHER RESOLVED that the Council authorizes the Manager to execute an amendment to the Performance Agreement with EmPOWERment to reflect the changes listed above.
This the 7th day of September, 2004.