AGENDA #9
MEMORANDUM
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Status Report and Request from EmPOWERment, Inc. for 503 Sykes Street
DATE: November 25, 2002
This memorandum provides the Council a report on the status of renovations of 503 Sykes Street by EmPOWERment, Incorporated and outlines recommendations for proceeding with this project.
The attached resolution would:
(1) Authorize replacing the Community Development funds invested in this project with funds from the Housing Loan Trust Fund;
(2) Authorize use of Community Development Neighborhood Revitalization Funds to demolish the existing structure located at 503 Sykes Street; and
(3) Authorize an amendment to the Town’s Performance Agreement with EmPOWERment to provide for construction of a new house on the property that would be purchased by a lower income homeowner, and extend the time of performance to June 30, 2003.
SUMMARY
The Town provided $35,000 of Community Development Neighborhood funds to EmPOWERment to acquire and renovate a property at 503 Sykes Street. Due to unforeseen termite damage, EmPOWERment has requested that the Town provide funds to the organization to demolish the existing structure. Once demolished, the organization would construct a new house on the lot that would be sold to a lower income household. To release EmPOWERment from following the strict federal guidelines for rebuilding a house on this lot, we recommend replacing the Community Development funds invested in this project with funds from the local Housing Loan Trust Fund.
Since January 2001, the Town has been working with neighborhood residents, the UNC Department of City and Regional Planning, Orange Community Housing and Land Trust, and EmPOWERment to implement a strategy for revitalizing the Sykes Street area. To date, EmPOWERment has purchased three properties in the study area to be made available for homeownership: 613 Sykes Street, 503 Sykes Street and 229 North Graham Street. The Town purchased 501 Sykes Street, and EmPOWERment is finishing renovating this property.
On January 14, 2002 the Council authorized EmPOWERment to use $35,000 of Community Development Neighborhood Revitalization funds to acquire 503 Sykes Street (please see Attachment 1 for a location map). The Council also authorized conversion of the Town’s funds from a loan to a grant to the Community Land Trust in Orange County upon sale of the house to a qualified homebuyer (please see Attachment 2).
At closing on February 28, 2002, EmPOWERment executed a Promissory Note and Deed of Trust to the Town in the amount of $35,000. At that time the Town also entered into a Performance Agreement with EmPOWERment for the acquisition, renovation and sale of this property. The Performance Agreement expired on September 30, 2002.
EmPOWERment began renovation work in July and encountered more substantial termite damage beyond that anticipated in its initial review prior to purchase. Based on the discovered conditions, EmPOWERment has concluded and we concur that it is not economically feasible or advantageous to the community to rehabilitate the existing house.
In a letter dated November 1, 2002, EmPOWERment revised its previous request and asked that the Town provide Community Development funds to demolish the existing property on the site (please see Attachment 3). EmPOWERment estimates that the cost would be approximately $5,000 - $10,000. Once the house is demolished, EmPOWERment intends to rebuild a new house on this site that would be sold to a lower income household. EmPOWERment will satisfy existing loans on the property with its own funds.
DISCUSSION
Demolition of property is an eligible activity under the federal Community Development regulations, and is considered an activity to eliminate slums and blight. Demolition is also an approved activity of the Town’s Community Development Neighborhood Revitalization Program approved by the Council on April 22, 2002. EmPOWERment estimates that it would cost approximately $5,000 - $10,000 to demolish the existing structure. This range of costs is consistent with our recent experience.
The terms of the current Performance Agreement state that the property would be renovated and sold to a first time homebuyer earning less than 70% of the area median income. The Agreement also states that if the terms of the Agreement were satisfied, the Town’s funds would be converted into a grant to the Community Land Trust in Orange County and funds would not be returned to the Town. The intent is that the house remains more permanently affordable. If the Council approves this request, we would amend our Performance Agreement with EmPOWERment to extend the time of performance, include demolition of the existing structure, and construction of a new house on this property. If the Council approves an amendment to the Agreement, we would continue to recommend that the Town’s funds be converted into a grant to the Land Trust.
We offer the following recommendations for proceeding with this project:
1. Replace Community Development funds invested in this project with local funds
We recommend replacing the $35,000 of federal Community Development funds invested in this project with funds from the local Housing Loan Trust Fund budget allocation for Neighborhood Revitalization. This replacement would allow EmPOWERment to construct a new house on the property without the restrictions of the federal Community Development program.
Currently $125,000 has been allocated for this purpose in the Housing Loan Trust Fund Neighborhood Revitalization budget. Eligible uses of these funds are property acquisition and rehabilitation. Though funds are typically used for deferred second mortgage assistance, the guidelines allow funds to be converted into a grant for land trust projects. We believe that use of funds for this project would be consistent with the guidelines of the Housing Loan Trust Fund.
2. Demolition of the existing structure
We recommend that the Council authorize use of Community Development funds to demolish the property immediately. Demolition is an eligible expense under the Town’s current Community Development Neighborhood Revitalization activity. The Town’s Department of Housing and Urban Development representative has confirmed that using funds for demolition would not require federal procedures to be followed for the construction of the house. EmPOWERment would be required to follow federal procurement procedures for the demolition of this property.
We believe that it would be in the best interest of the community to demolish the building immediately. It cannot be rehabilitated in an economically feasible manner. Its continued presence is a blight on the community.
3. Require EmPOWERment to construct a house on this property
If the Council authorizes use of Community Development Neighborhood Revitalization funds to demolish the existing structure on the property, we would recommend that EmPOWERment submit construction and financing plans to the Town for approval prior to initiating construction of a new house on this property.
4. Amend the Town’s Performance Agreement
We recommend that the Town’s Performance Agreement with EmPOWERment be revised to include requirements for construction of a house. We also recommend extending the time of performance for completion of construction to June 30, 2003.
CONCLUSION
The primary goal of renovating properties in the Sykes Street area and activities with the Sykes Street Steering Committee is to improve the quality of life for the residents of the community. To date, the Town has worked with EmPOWERment to improve four properties in the Sykes Street area. We believe that demolition of the existing house and building a new house is consistent with the Town’s current Neighborhood Revitalization efforts and the goals of the Sykes Street Steering Committee. The project would also be consistent with the Town’s Comprehensive Plan goals to protect the physical and social fabric of the Town’s neighborhoods.
ATTACHMENTS
1. Location Map (p. 6).
2. January 14, 2002 Memorandum to Mayor and Town Council (p. 7).
3. November 1, 2002 Letter from EmPOWERment to the Manager (p.10).
4. Status of Town Projects with EmPOWERment (p. 11).
A RESOLUTION OUTLINING PROCEDURES FOR PROCEEDING WITH 503 SYKES STREET (2002-11-25/R-6)
WHEREAS, the Town has an ongoing interest in community development activities in Chapel Hill; and
WHEREAS, the Council has provided $35,000 of Community Development Neighborhood Revitalization funds to EmPOWERment to acquire 503 Sykes Street; and conversion of the Town’s funds into a grant to Orange Community Housing and Land Trust upon sale of the house to a qualified homebuyer;
NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes the following regarding 503 Sykes Street:
1. Replace $35,000 of Community Development funds invested in this project with funds from the Housing Loan Trust Fund Neighborhood Revitalization budget;
2. Use Community Development Neighborhood Revitalization Funds to demolish the existing structure located at 503 Sykes Street; and
3. Amend the Town’s Performance Agreement with EmPOWERment to provide for construction of a new house on the property that would be purchased by a lower income homeowner and extending the time of performance to June 30, 2003.
BE IT FURTHER RESOLVED that the Council authorizes the Manager to request EmPOWERment to submit plans for construction and financing of a new house for approval by the Town Manager prior to initiating work.
This the 25th day of November, 2002.