AGENDA #5g
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Information Report: Request from the Pines Community Center, Inc.
DATE: November 13, 2000
The purpose of this report is to respond to a request from the Pines Community Center, Inc. for a $20,000 grant to pay off an obligation to a local bank (Please see attached letter, dated October 12, 2000). In its October 12 letter, the Pines Community Center states it borrowed $50,000 in 1999 from a bank to facilitate the operation of its program. The Center promised to make a balloon payment of $20,000 to the bank by July 2000. The Center has asked for a $20,000 grant from the Town to make this payment.
We recommend that the Council take no action on this request.
In March 1993, the Town Council approved a proposal of the Pines Community Center, a private, non-profit organization, to develop twenty low cost houses for lower income families.
In October 1996, the Town ceased all funding to the Pines Community Center and ordered a Performance Review of the program. The Performance Review conducted by the Town staff was presented to the Council on February 24, 1997. The review determined that while the Pines Community Center had made improvements to the community, the objective of homeownership had not been met.
On January 25, 1999, the Chapel Hill Town Council adopted a resolution that declared the Pines Community Center, Inc. in default with all of the Town’s Performance Agreements, Promissory Notes and Deeds of Trust (Please see Attachment 2).
Please see Attachment 3 for more details about the Town’s relationship with the Pines Community Center, Inc.
First Baptist Church and Manley Estates will purchase six of the Center’s nine acre Park Road tract to construct a Section 202 Elderly Housing Project. On September 11, 2000 the Council authorized a $100,000 grant to First Baptist Church and Manley Estates to help with development costs for this project. The Council approved two sources of funding for this request:
a) $55,000 in estimated funds reimbursed from canceling a portion of the Town’s lien on the property owned by the Pines Community Center; and
b) $45,000 in funds to be budgeted from program income in the Housing Loan Trust Fund.
After a closing on the property, a lien for $54,250 (the balance of the Center’s loan with the Town: $109,250 - $55,000) would remain on the remaining three acres of land not purchased by First Baptist and Manley Estates.
We have reviewed sources of funds that have historically been used to fund requests from community agencies. However, we do not believe that these funding sources are available for this general request for funds.
We do not believe that repayment of this loan is an eligible Community Development program expense. Eligible Community Development activities must meet one of the following three criteria:
1) Benefit low- and moderate-income persons; or
2) Aid in the prevention or elimination of slums and blight; or
3) Treat urgent needs posing an immediate threat to public health and welfare.
Based on these criteria, we do not believe that it is eligible to use Community Development funds to support activities for which there are no beneficiaries. In addition, it is generally not eligible to reimburse an agency for costs already incurred before authorization of an activity.
We have also reviewed the guidelines of the Housing Loan Trust Fund and do not believe that repayment of a loan is an eligible use of this fund. Please see Attachment 4 for a list of eligible activities under the Housing Loan Trust Fund.
In addition, activities funded through the Housing Loan Trust fund must benefit households earning less than 80% of the area median income. Repayment of the Center’s bank loan would not directly benefit lower and moderate-income households. We believe that use of this fund for this purpose would not be consistent with other loans and grants made with this fund.
Typically when General Funds are used, the Town enters into a Performance Agreement with an individual or agency for a specific purpose or activity with the Performance Agreement executed prior to commencement of the activity. Using this definition, we do not believe that this request would be eligible since the Center is requesting reimbursement for costs already incurred for past activities.
We do not know of a basis to lawfully make the grant that is requested.
We recommend that the Council take no action on this request. We cite the following reasons for this recommendation:
1. There is no proposed program or set of outcomes, products or beneficiaries that are associated with this requested grant.
2. We do not believe that repayment of a loan is eligible for use of Community Development funds, the Housing Loan Trust Fund or the General Fund.
ATTACHMENTS
1. October 12, 2000 Request from the Pines Community Center, Inc. (p. 4)
2. January 25, 1999 Memorandum to Mayor and Town Council (begin new page 1).
3. History of Town’s activities with the Pines Community Center (p. 13).
4. Eligible Housing Loan Trust Fund Activities (p. 16).