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CC - Item 3A - CHDO Operating Expenses• r • ROSEMEAD CITY COUNCIL STAFF REPORT TO: THE HONORABLE MAYOR AND CITY COUNCIL FROM: OLIVER CHI, CITY MANAGER Q44-G`R^- DATE: APRIL 8. 2008 SUBJECT: ALLOCATION OF HOME FUNDS FOR CHDO OPERATING EXPENSES SUMMARY On October 9, 2007, City Council enter into an Agreement with Rio Hondo Community Development Corporation (RHCDC) for the production of affordable housing using the 15% CHDO set-aside funding as required under the Home Investment Partnerships (HOME) entitlement grant. The Agreement included language relating to operating subsidies and allowing for RHCDC to be reimbursed for expenses incurred while working with the City on an affordable housing project. Under the HOME Federal Regulations, CHDOs that are certified, like RHCDC, are eligible to receive up to an additional 5% of a City HOME entitlement grant for expenses incurred as operating assistance funding. The CHDO operating assistance is based on the development of a project. These funds provide general operating support during the development of CHDO set-aside funded affordable housing projects. This funding is intended to assist organizations that can demonstrate a need for operating support. According to the HUD regulations, assistance for operating expenses in each fiscal year may not exceed $50,000, or 50 percent of the CHDO's total annual operating expenses for that year, whichever is greater. Staff Recommendation Staff recommends the City Council allocate $13,000 (2.5%) of Fiscal-Year 2007-08 HOME Investment Partnerships Program Funds to RHCDC to defray certain costs for the operation as the City's CHDO as outlined in Section 92.208(a) of Title 24 of the United States Code of Federal Regulations and approve the Operating Expense Agreement. ANALYSIS Under the HOME regulation, the City is able to allocate up to 5% of their HOME allocation to a CHDO for operating expenses. These funds are used to help offset costs associated with a CHDO's involvement with an affordable housing project. The City of Rosemead has been working with RHCDC on the acquisition of a single-family home to be used as an affordable long-term rental. RHCDC has accumulated operating expenses as a result of their work for the City. As allowed under the HUD regulations, staff is recommending that RHCDC be reimbursed up to a maximum $13,000 for expensed incurred during the FY 2007-08. APPROVED FOR CITY COUNCIL AGENDA: 0 ' • City Council Report April 8, 2008 Paqe 2 of 2 10 PUBLIC NOTICE PROCESS This item has been noticed through the regular agenda notification process. LEGAL REVIEW The attached Operating Expense Agreement has been reviewed and approved by the Commission's Attorney. Prepared bay:: 12 Michelle G. Ramirez Economic Development Administrator Submitted by: Brian Saeki Assistant Executive Director Attachment A - Operating Expenses Agreement • CITY OF ROSEMEAD OPERATING EXPENSES AGREEMENT FOR COMMUNITY HOUSING DEVELOPMENT ORGANIZATION BY AND BETWEEN THE CITY OF ROSEMEAD, A California Municipal Corporation -AND- THE RIO HONDO COMMUNITY DEVELOPMENT CORPORATION, A California Public Benefit Corporation THIS OPERATING EXPENSES AGREEMENT (hereinafter, the "Agreement") is executed and entered into on this 8`h day of April 2008, by and between the City of Rosemead, A California Municipal Corporation ("CITY") and the Rio Hondo Community Development Corporation, A California Public Benefit Corporation ("RHCDC"). CITY and RHCDC may be referred to collectively as the "Parties" or individually as a "Party." WHEREAS, CITY has determined that RHCDC is a Community Housing Development Organization ("CHDO") within the meaning of Section 92.208(a) of Title 24 of the United States Code of Federal Regulations; and WHEREAS, Under HOME regulations, the CITY is allowed to use up to five percent of its annual HOME allocation to enhance a Community Housing Development Organization's capacity by offsetting operating expenses it incurs (24 CFR § 92.208). The CITY can commit and expend $13,000 which is 2.5% of its annual HOME allocation from Fiscal-Year 2007-2008 for the payment of operating expenses of the RHCDC as a certified Community Housing Development Organization. The funds will assist the RHCDC in its continuing efforts related to ownership, development and sponsorship of affordable housing projects located within the CITY. WHEREAS, CITY has elected to allocate Fiscal-Year 2007-08 HOME Investment Partnerships Program Funds ("HOME Funds") to RHCDC to defray certain costs incident to the operation of a CHDO as outlined in Section 92.208(a) of Title 24 of the United States Code of Federal Regulations; and WHEREAS, CITY has determined that the HOME Funds to be provided to RHCDC satisfy the requirements and limitations outlined in Section 92.300(e) and (f) of Title 24 of the United States Code of Federal Regulation. NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows: SECTION 1. SCOPE OF OPERATING EXPENSE ACTIVITY (a) The above recitals are true and correct and hereby incorporated by this reference. Rio Hondo Community DevPopment Corporation • Operating Expense Agreement Page 2 of 6 (b) Level of Assistance: CITY shall provide RHCDC with the sum total of Thirteen Thousand Dollars & 00/100's ($13,000.00) (hereinafter, the "Funds") to be utilized for RHCDC's documented Eligible Operating Expenses (budget) related to the ownership, development and sponsorship of affordable housing projects located within the City of Rosemead. The Funds shall be derived from CITY's Fiscal-Year 2007-08 HOME Funds. (c) Term: This Agreement shall have a term of twelve (12) months from its effective date. For the purposes of this Agreement, the "effective date" shall be the date upon which all of the Parties have duly approved and signed this Agreement. - (d) Eligible Operating Expenses: For the purposes of this Agreement the term "Eligible Operating Expenses" as defined by Title 24 CFR Section 92.208 means reasonable and necessary costs for the operation of the RHCDC. Such costs may include: 1. Salaries / wages and other employee compensation for the following: i) Managing Director, (employee, contract employee, independent contractor or consultant); ii) Administrative support (employee, contract employee, independent contractor, consultant and/or vendor); and iii) Other employees, contract employees, independent contractors, consultant and/or vendor essential to carrying out HOME Investment Partnership Program eligible projects. 2. Board and employee education and training 3. Travel expenses associated with the development of affordable housing 4. Rent and utilities 5. Communication costs 6. Taxes, licenses and related fees 7. Insurance 8. Equipment, materials and supplies 9. Legal, accounting and audit costs 10.Any other reasonable, customary, and documented costs associated with owning, operating, developing and/or sponsoring HOME Investment Partnership Program eligible projects Rio Hondo Community DeJ2Topment Corporation • Operating Expense Agreement Page 3 of 6 SECTION 2. PLACE OF WORK The Parties understand and agree that RHCDC shall conduct its operations primarily at RHCDC's offices located 11401 Valley Boulevard, Suite. 201, El Monte, California 91731, but may, upon request to the CITY, meet with CITY representatives at the offices of CITY, or such other locations as may be designated by CITY. SECTION 3. TIME DEVOTED TO WORK RHCDC agrees to devote such time as is reasonably necessary to develop affordable housing projects in a timely manner and as requested by CITY. SECTION 4. METHOD OF PAYMENT CITY shall provide reimbursement funding to RHCDC up to a maximum payment of Thirteen Thousand Dollars & 00/100's ($13,000.00) for expenses incurred while working with the CITY on an affordable housing project. The Funds shall be utilized exclusively for Eligible Operating Expenses incurred during the FY 2007-2008 program year. Funding requests must be accompanied by a detailed expense report. SECTION 5. TERMINATION Either Party may terminate this Agreement with or without cause upon thirty (30) days prior written notice to the other Party. At such time, CITY shall be entitled to reimbursement for all unexpended Funds. To this end, RHCDC shall maintain records of all of its Eligible Operating Expenses and the draw-down of the Funds to pay for such expenses. CITY shall have a right to review all such records upon forty-eight (48) hours prior written notice to RHCDC. SECTION 6. STATUS OF RHCDC RHCDC has been certified as an eligible Community Housing Development Organization and complies with all regulations of the federal HOME Investment Partnership Program relating to CHDO status. The Parties agree that RHCDC, its officers, employees, agents and/or associates are not employees or agents of the CITY for any purposes. SECTION 7. INDEMNIFICATION RHCDC shall indemnify, defend and hold free and harmless CITY, its officers, elected officials, employees, agents and volunteers from and against any and all liability, claims, suits, actions, administrative actions or administrative enforcement proceedings, fines, penalties, damages or causes of action arising out of (a) any bodily injury, death, economic loss, or damage to property caused by RHCDC, its officers, agents, employees, contractors, subcontractors or subconsultants in the performance of its duties and/or obligations under this Agreement or in the performance of RHCDC's housing development activities; (b) the negligent or intentional failure of RHCDC, its Rio Hondo Community Devtopment Corporation • Operating Expense Agreement Page 4 of 6 officers, agents, employees, contractors, subcontractors or subconsultants to adhere to applicable laws in the performance of RHCDC's duties and/or obligations under this Agreement; (c) any claim employment related claims or suits, including claims or suits for wrongful termination, harassment and/or unpaid compensation brought by any agent, employee, volunteer, contractor, subcontractor or subconsultant of RHCDC; and (d) all other claims connected with RHCDC under this Agreement, including but not limited to RHCDC's breach of this Agreement. It is understood that the duty of RHCDC to indemnify and hold harmless includes the duty to defend as set forth in Section 2778 of the California Civil Code. In the event RHCDC fails to provide such a defense to CITY, RHCDC shall be liable to CITY for CITY's reasonable attorneys' fees and costs incurred to defend itself. Acceptance of insurance certificates and endorsements shall not relieve RHCDC from liability under this indemnification and hold harmless provision. SECTION 8. INSURANCE RHCDC shall procure and, for the duration of this Agreement, maintain the following policies of insurance: (a) General Liability Insurance in an amount of not less than One Million Dollars ($1,000,000.00) per occurrence, combined single limit; (b) Workers' Compensation Insurance as required pursuant to Section 3700 et seq. of the California Labor Code in the event RHCDC hires employees. Prior to commencing any work under this Agreement, RHCDC shall deliver to the CITY such Certificates of Insurance confirming the coverage required by this Agreement and providing to the CITY, thirty (30) days prior, with written notice of limitation of scope or coverage, cancellation or termination. The certificates shall name the CITY, its officers, employees and agents as additional insured. SECTION 9. NON-DELIGATION OF DUTIEES CITY agrees to pay for such Eligible Operating Expenses incurred by RHCDC for work, services, and costs incident to the development of HOME Fund funded affordable housing projects. Without the prior written authorization of the CITY, no person(s) or entities, other than RHCDC's officers, agents or employees shall be engaged in such development activities. The foregoing shall not apply to clerical duties and other like activities. Rio Hondo Community Development Corporation • Operating Expense Agreement Page 5 of 6 SECTION 10. NOTICES Any notice(s) from one Party to another under this Agreement that may be necessary or convenient under shall be transmitted to a parry at the applicable addresses indicated in this Section 22. Each notice shall bear a date and shall be in writing and shall be deemed received by the party on the date on which: (i) the notice is personally served on the party; or (ii) the notice is sent by FAX, and confirmed; (iii) by deposit within forty-eight (48) hours thereafter into the United States Mail for delivery by first class postage prepaid of a hard copy of such notice; or (iv) five (5) calendar days after the notice is deposited into United States Mail as certified mail, return-receipt requested and postage prepaid. For the purpose of the Agreement, the following are the mailing addresses to which notices and other correspondence for each of the Parties: TO CITY: City of Rosemead c/o Development Services Business Unit 8838 E. Valley Boulevard Rosemead, California 91770 Attn: Michelle G. Ramirez, Economic Development Administrator TO RHCDC: Rio Hondo Community Development Corporation 11401 Valley Boulevard, Suite 201 El Monte, California 91731 Attn: Donna L. Duncan, President SECTION 11. INTEGRATION PROVISION This Agreement constitutes the entire, complete, final and exclusive expression of the Parties with respect to the matters addressed herein and supersedes all other agreements or understandings, whether oral or written, or entered into by the Parties prior to the execution of the Agreement. No statements, representations or other agreements, whether oral or written, made by any Party, which are not embodied herein shall be valid or binding. No amendment to, or modification of, this Agreement shall be valid or binding unless in writing and duly signed and executed by each of the Parties. SECTION 12. WAIVERS / MODIFICATONS No waiver of any duty or obligation under this Agreement shall be valid, unless expressly waived in writing by the Party to whom the duty or obligation is owed. No alteration, amendment or modification of this Agreement shall be valid or binding, unless mutually approved by the Parties in writing. SECTION 13. GOVERNING LAW This Agreement shall be governed by the laws of the State of California. i 0 Rio Hondo Community Development Corporation Operating Expense Agreement Page 6 of 6 SECTION 14. INTERPRETATION In preparing and executing this Agreement, each of the Parties received the opportunity to consult with their respective legal counsel. Accordingly, this Agreement, shall not be in favor of one Party over the other in the event of ambiguity, but instead shall be interpreted as if both Parties prepared this Agreement together. SECTION 15. AUTHORITY TO EXECUTE AGREEMENT: RHCDC warrants, represents and agrees that it has duly approved the execution of this Agreement and that upon the execution of this Agreement, RHCDC shall provide CITY with a corporate resolution authorizing the execution of this Agreement on its behalf under the terms and conditions stated herein. RHCDC's signatory to this Agreement personally warrants, represents and agrees that he or she is duly authorized to execute this Agreement on behalf of RHCDC and thereby bind RHCDC to the terms and conditions contained herein. IN WITNESS WHEREOF, the CITY and RHCDC have executed this Agreement on this 8th Day of April 2008. CITY OF ROSEMEAD BY: John Tran MAYOR Attest: By: Gloria Molleda CITY CLERK Approved as to Form: By: Joe Montes CITY ATTORNEY RIO HONDO COMMUNITY DEVELOPMENT CORPORATION BY: Donna L. Duncan PRESIDENT