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CC - Item 4B - Final Guidelines Multi-Family Rehabilitation with Home Funds0 TO: HONORABLE MAYOR AND MEMBERS ROSE MEAD CITY COUNCIL FROM: BILL C &E, CITY MANAGER DATE: JULY 5, 2005 • SUBJECT: APPROVAL OF FINAL GUIDELINES FOR MULTI-FAMILY REHABILITATION WITH HOME FUNDS At the beginning of FY 2004-2005, the City Council approved a commitment agreement with the Rosemead Housing Development Corporation for use of HOME funds in multi- family housing in the Zapopan Target Area. Staff was authorized to complete the final guidelines and bring them back to the City and the Housing Development Corporation for adoption. Those guidelines have been finalized, along with changes to the program requested by the Council. HOME funds are federal funds restricted to the creation of affordable housing. Under this program, the City is entitled to a formula share of HOME funds. Of the total amount, 15% must be set aside for Community Development Housing Organizations (CHDO's) and 10% are available for administration and project delivery and monitoring costs. Background and Discussion In FY 2003-2004, the City created the Zapopan Park Target Area as a result of input from residents of the area. As part of the activities in the Target Area, the City began a proactive code enforcement program for residential properties within the area. Of these properties, approximately ten buildings are multi-family properties that need more rehabilitation than the owners are able to provide. The Zapopan Park Target Area is located in an eligible low-moderate income area of the City. Because of this, it is feasible to use HOME funds for a multi-family residential rehabilitation program for these properties. Staff is proposing that the City approve the final program guidelines submitted by the RHDC and allow the program to move forward. The project will provide that: C6Ut,,ID4L AG, E DA J U L 12 2005 ITEM! &±4 Approval of Multi-Family Rehabilitation Program Guidelines, page 1. That the RHDC conduct outreach to affected multi-family properties for participation; 2. That units be rented to HOME-eligible households; 3. That the rehabilitation be done as a deferred loan secured by a Deed of Trust 4. That any loan provided require maintenance and management covenants, including a covenant not to allow criminal activity on the premises; 5. That an annual inspection and income verification process be performed. At the approval of the commitment agreement with the RHDC, the City Council asked for the following changes to the basic structure of the program: 1. That the deferred loan not be forgiven after successful completion of the term; 2. That the program would be able to be extended to additional areas within the City as needed. The loan will be structured as a deferred loan with 3% simple interest. The loan will provide for acceleration of amounts due, including interest and penalties, for non-compliance with program requirements during the life of the loan. The program manual has been structured so that it can be used in any target area for multi-family rehabilitation. Staff has conducted code compliance inspections of the structures and has conducted outreach to property owners, including an on-site walk through of the largest property in the neighborhood. Attached for your review is the following: 1. Draft Multi-Family Rehabilitation Program Manual and Step by Step Procedures RECOMMENDATION: 1. That the City Council approve the final program guidelines. • • City of Rosemead Housing Development Corporation MULTI-FAMILY REHABILITATION HOME IMPROVEMENT PROGRAM 1. Guidelines 1. Program Overview The Multi-Family Rehabilitation Residential Home Improvement Program is designed to assist eligible property owners of Multi-Family properties in approved target areas to correct existing code violations and improve conditions of their property. The assistance is as follows: Low-Interest Deferred Loans are designed for properties of three (3) or more units that have been cited for health and safety or other code violations. The loan accrues 3% annual simple interest. Repayment of the principal and interest is deferred until sale, transfer, or refinance of the property or non- compliance with the program requirements. Noncompliance includes failure by the participating property owner to comply with HOME requirements as well as with maintenance and management requirements. Loans are secured by a deed of trust. A Declaration of Covenants, Conditions, & Restrictions (CC&Rs) will be recorded against the assisted property. In cases where the CC&Rs are violated, the principal, the penalty, and the applicable interest will be due and payable immediately to the City. To qualify for a loan, both the participant and the property must satisfy specific eligibility criteria. Loans are provided by the City of Rosemead ("City") and/or Rosemead Housing Development Corporation ("Agency") and are subject to the availability of Program funds from the City and Agency or other funding sources. 2. Eligible Property owners Fee Title: Participants must have fee title to eligible properties. As set forth in Section 4 "Conditions of Assistance", the Property must not be over- encumbered. Capacity Participants must be of legal age and must have the capacity to enter into binding contracts. No Conflicts. No member of the City Council/Agency Board and no employee, official, or consultant who exercises any policy decision-making function in connection with the Programs is eligible for assistance. • City of Rosemead/Rosemead Hong Development Corporation Multi-Family Rehabilitation Program Manual Page 2 of 12 3. Eligible Properties Location: The property must be located in the designated area known as "Multi-Family Rehabilitation" in the City of Rosemead. Currently that area is Zapopan Park. ■ Multi-Family: The property must be three or more units in order to qualify. 4 Conditions for Assistance General eligible improvements are listed in Exhibit "A", with more Program specific guidelines listed below. Code violations are priorities and must be addressed first. Luxury items defined by the City are not eligible for the assistance and will not be funded by the City or Agency. ■ Conditions for Deferred Loan Programs: The property must be in need of repairs to correct the following: ✓ Correct existing nonconforming local and/or state code requirements; ✓ Correct existing local and/or state code violations; ✓ Correct existing nonconforming development standards; ✓ Protect structural integrity of the property; ✓ Promote neighborhood safety; ✓ Improve energy efficiency and water conservation; ✓ Improve exterior/interior conditions; ✓ Provide home modifications for the physically disabled and elderly; ✓ Address overcrowded living condition; and/or ✓ Enhance aesthetic appeal of the property. Insurance: For loans, properties must be insured with an all-risk property insurance policy equal to the replacement value of the property. Equity: For loans, the property cannot be encumbered by more than two existing mortgages (including equity credit lines). In addition, at the time of application for assistance, the property shall have sufficient equity in the property to cover the value of the loan and total encumbrances. Including the deferred loan, the total encumbrances shall not exceed 90 percent (90%) of the property's current fair market value. Current fair market value will be determined by comparable sales data for sales within the twelve (12) months prior to the date of the application. Alternatively, the City may elect to determine fair market value by an appraisal conducted by a City approved appraiser. If assistance is approved, the cost of the appraisal may be included in the loan amount. If assistance is not approved or the owner decides to withdraw the application, the owner shall pay for the appraisal. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 ❖ (626) 569-2100 46 Fax (626) 307-9218 City of Rosemead/Rosemead Horsing Development Corporation Multi-Family Rehabilitation Program Manual Page 3 of 12 No Tax Delinquency or Recorded Liens: Property taxes and assessments must be paid current (unless the property owner is participating in the State Property Tax Postponement Program) and no property or income tax liens or mechanics liens may be recorded against the property. ■ No Criminal Activity Properties that have been the site of repeated or ongoing drug-related arrests or other criminal activity as evidenced by police records/reports will not be eligible for assistance unless and until the property owner demonstrates that such activities have been fully abated. 5. Elidible Projects Improvements must meet criteria described in Section 4. All improvements must be completed within 90 working days of issuance of Notice to Proceed, unless the scope of the project is determined in advance to require construction time in excess of this limit. A licensed state contractor must do all work over $500. All work involving multiple trades shall use a licensed general contractor. 6. Participation Priorities Funding is based on a first-come first-served basis. All complete applications will be date stamped and processed in the order received. Incomplete applications will not be processed until all requested information is submitted. Applicants who do not provide all requested information will be given a deadline to provide information. If information is not given by the deadline, the application will be closed and the applicant will be notified and given the opportunity to have the application reinstated. The City withholds the right to deny assistance at any time if any false information is found on the application. 7. Terms and Conditions A Declaration of Covenants, Conditions & Restrictions (CC&Rs) will be recorded against assisted properties, unless otherwise specified, for the life of the loan. The CC&Rs include the following covenants: Maintenance Requirements: Participants must maintain assisted properties in good repair and in a decent, safe and sanitary condition consistent with community standards. No Criminal ActivityMuisance: Participants shall not permit criminal activities to occur on the property or permit property improvements to suffer 8838 E. Valley Boulevard, Rosemead. Califomia 91770 ❖ (626) 569-2100 •y Fax (626) 307-9218 • City of Rolmead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 4 of 12 deterioration or decline, or maintain, or permit to be maintained any public or private nuisance on or about the property. Nondiscrimination: There shall be no discrimination against or segregation of any person or group of persons, on account of race, color, creed, religion, sex, marital status, national origin, ancestry, or disability in the selection of contractors to complete the rehabilitation work financed with assistance, or in the sale, transfer, use, occupancy, tenure, or enjoyment of assisted properties. Records: Participants shall keep such records as may be required with respect to the rehabilitation work financed with assistance, including work orders, invoices, receipts, and permits if applicable. Hazard Insurance: Throughout the life of the loan, participating property owners must maintain an all-risk property insurance policy, including flood insurance if the property is located in a flood zone, insuring the property in an amount equal to the full replacement value of the home. The policy must name the City of Rosemead and the Rosemead Redevelopment Agency as additional insureds/loss payees. The Covenants and Restrictions period for this item shall be in effect until full repayment of the loan and reconveyance of the Deed of Trust. 8. Lead-Based Paint and Asbestos Lead-Based Paint. All assisted properties that were built prior to January 1, 1978 must be inspected for lead-based paint, except: Property that has been found free of lead-based paint by a certified lead- based paint inspector. A copy of the lead hazard evaluation report must be submitted to the City; Property where all lead-based paint has been removed. A copy of the lead- based paint clearance report must be submitted to the City; or No painted surface in excess of the federal de minimus threshold will be disturbed during any funded improvement projects. Asbestos: Participating properties that were built prior to January 1, 1980 must be inspected for asbestos, except: Property that has been found free of asbestos by a certified asbestos professional and licensed asbestos laboratory. A copy of the asbestos evaluation report must be submitted to the City; 8838 E. Valley Boulevard, Rosemead, Califomia 91770 r (626) 569-2100 Fax (626) 307-9218 0 City of Roftead Redevelopment Agency Multi-Family Rehabilitation Home improvement Program Manual Page 5 of 12 Property where all asbestos has been removed. A copy of the asbestos clearance report must be submitted to the City; or ■ No asbestos containing materials will be disturbed during any improvement projects. Combined lead-based paint and asbestos inspections/assessments will be conducted for the areas that will be disturbed during the funded rehabilitation. Inspections will be conducted by certified professionals as designated by the City. Fees for combined risk assessmentfinspections will be paid for from loan amounts. If abatement/remediation services are needed, costs will be paid from the loan as part of rehabilitation. All work must be approved in advance. No payment will be made for work began prior to City/Agency authorization. 9. Administrative Fees Participants may be responsible for the fees incurred by the application processing should assistance be denied due to false information or failure to disclose information, or should the owner withdraw the application after fee services have been provided. 10. Loan Repayment No payments are due on loans. The entire loan, including principal and any accrued interest, is immediately due and payable in full upon the occurrence of any of the following events: ■ Sale or transfer of the property; Owner is not in compliance with HOME rent and inspection requirements for assisted units; Property is determined by the City to be in violation of the City's Municipal Code and such default has not been cured after reasonable notice and opportunity to cure; 8838 E. Valley Boulevard, Rosemead, Califomia 91770 4.6 (626) 569-2100 ❖ Fax (626) 307-9218 • City of Rosemead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 6 of 12 ■ The Participant, or renting households, is in breach of restrictive covenants, including, but not limited to Maintenance or Criminal Activity Covenants; or ■ The discovery by City of any fraud or deceit in relation to the Program by Participant. Participants may prepay the loan in whole, with penalty if applicable, or in part, at any time. 11. Some Common Reasons for Denial ■ Owner has more than two mortgages against property and/or insufficient equity. ■ Owner has unpaid property taxes and/or property tax liens. • Owner has income tax liens due to unpaid income taxes. • Owner commits fraud or submits false information during application process. ■ Owner will not commit to HOME rent and property requirements. If you have questions and wish to meet with a Multi-Family Rehabilitation Grants Specialis4 please call to make an appointment at (626) 569-211& I&. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 ❖ (626) 569-2100 4- Fax (626) 307-9218 • City of Rosemead Redevelopment Agency Mufti-Family Rehabilitation Home Improvement Program Manual Page 7 of 12 City of Rosemead Housing Development Corporation MULTI-FAMILY REHABILITATION HOME IMPROVEMENT PROGRAM II. Procedures Step 1: Application and Required Documents A complete application includes a signed application and all required documents as listed in the application. An incomplete application will not be processed nor reviewed. Step 2: Review of Application Upon receiving a complete application, the Grants Specialist will review the application and determine applicant's income eligibility. Step 3: Property Inspection Once the owner is determined income eligible, a property inspection is conducted and photographs are taken by the Grants Specialist to determine the eligibility of owner's desired improvement projects. Code violations, if any, will be addressed first. At the property inspection, property owners will be given the following documents to review, sign, and/or return: ■ Confidential Information Statement ■ "Protect Your Family From Lead In Your Home" Brochure for tenants ■ Info Checklist ■ Program Manual Any additional requests for improvements not examined during the inspection and not listed on the "work write-up" must be brought to the attention of the Grants Specialist before work write-up is complete and documents are signed. Step 4: Title Report A Policy of Insurance Specialist. The City wil property will have to be assistance. of Record Title (PIRT) report is ordered by the Grants I not take less than 3nd position on title. Any liens on the cleared before the property owner can receive financial 8838 E. Valley Boulevard, Rosemead, California 91770 (626) 569-2100 ❖ Fax (626) 307-9218 City of R• ead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 8 of 12 Step 5: Lead and Asbestos Combined Test and Risk Assessment A. Lead-Based Paint Participating properties that were built prior to January 1, 1978 must be inspected for lead-based paint, except: Property that has been found free of lead-based paint by a certified lead- based paint inspector. A copy of the lead hazard evaluation report must be submitted to the City; ■ Property where all lead-based paint has been removed. A copy of the lead-based paint clearance report must be submitted to the City; or • No painted surface in excess of the federal de minimus threshold will be disturbed during any improvement projects. B. Asbestos Participating properties that were built prior to January 1, 1980 must be inspected for asbestos, except: Property that has been found free of asbestos by a certified asbestos professional and licensed asbestos laboratory. A copy of the asbestos evaluation report must be submitted to the City; ■ Property where all asbestos has been removed. A copy of the asbestos clearance report must be submitted to the City; or No asbestos containing materials will be disturbed during any improvement projects. C. Both lead-based paint and asbestos inspections must be conducted by certified inspectors designated by the City. Appointments will be scheduled between the Participant, renters and the inspectors. D. A copy of the results will be sent to the Grants Specialist and to the Participant within 15 business days of the inspection/risk assessment. The report will include the scope of work for hazard abatement. The scope of work will be incorporated into the final work write-up as separate line items. The general contractor must provide a licensed and certified subcontractor for the abatement/remediation work as part of the bid. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 ❖ (626) 569-2100 46 Fax (626) 307-9218 • City of Rossead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 9of12 Step 6: "Work Write-Up" and Improvement Estimates A. A "work write-up" describing the eligible improvements is created by the Multi- Family Rehabilitation Grants Specialist following the initial inspection described in Step 2. The Participant reviews the work write-up with the Grants Specialist. The Participant approves the work write-up. At this point, the Participant can obtain estimates for improvement projects. ■ The Grants Specialist will work with the Participant to identify a date and time for a mandatory "walk through" for contractors wishing to bid on the project. The Grants Specialist will invite all contractors on the contractors' interest list to participate. The Participant may add additional licensed contractors to the list of invitees. Three (3) written estimates from licensed contractors for each improvement must be obtained and submitted to the Grants Specialist within 30 days. The Grants Specialist will create a line item review list for the Participant. The Participant will review the line item breakdown. If the amount of the bids exceed the amount available from the grant or loan, the Participant may remove line item improvements that are not health/safety or code violations in order to meet the funding threshold. The Participant selects the contractor who provides the lowest most responsive quote, or who is within 15% of the in-house estimate or average of all bids. B. Contractors selected by the Participant must provide the following prior to signing an Owner/Contractor Agreement and receiving a Notice to Proceed: California State Contractor's license and bond verified as "Current, Active, and in Good Standing". The information can be verified by contacting the State Contractor's Board: (800) 321-2752 or www.cslb.ca.gov. ■ Proof of insurance and Workers' Compensation insurance in required amounts. For General Liability, it is $2,000,000 aggregate limit. C. Once estimates have been provided and the application has been approved, any changes in contractors must be approved in advance and in writing by the Participant and the Grants Specialist (also known as a "change order'). D. Participants should not sign any contract with contractors for any improvement projects prior to signing the City-authorized Owner/Contractor Agreement and the Owner Participation Agreement. The City/Agency is not responsible for the work or provisions contained in non-approved contracts or in contracts signed prior to authorization for work. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 ❖ (626) 569-2100 ❖ Fax (626) 307-9218 • City of Rosemead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 10 of 12 E. Contractor's estimates must include provisions that provide for Building Department permits when needed, as well as for all finish work. Step 7: Final Approval and Sinnina of Documents Once the title report is reviewed and the entire application is approved, participation documents will be prepared. This includes deferred loan documents. All persons on the property title must be present at City Hall to sign required documents. Signatures will be notarized. All signers must bring a current and valid California Driver's License or a current DMV identification card. The selected contractor shall also be present for signing Owner/Contractor Agreement and for discussion of project. The following documents will be signed: ■ Owner Participation Agreement ■ Owner/Contractor Agreement ■ Declaration of CC&R's ■ Truth in Lending Disbursement Statement ■ Notice of Right to Cancel ■ Promissory Note ■ Deed of Trust ■ Request for Notice (2 copies) ■ Authorization for Payment(s) Participants are to be provided with a copy of the non-executed documents. For Loans: As required by law, a 3-business day cancellation period is enforced after loan documents have been executed. Participants have this period to cancel the loan without incurring additional fees. Step 8: "Notice to Proceed" A "Notice to Proceed" is issued to Contractor after receipt of all required documentation and expiration of the 3-business day cancellation period following the signing of documents. Upon receiving this notice, the Contractor shall have ten (10) days in which to begin improvements. Step 9: Lead and/or Asbestos Hazard Remediation/Abatement As required by law, only certified inspectors may monitor hazard abatement activities. Participants need to coordinate with both the hazard abatement professional and the City's designated certified inspectors (same firms as the initial lead-based and asbestos inspections) to ensure the work is done properly. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 0 (626) 569-2100 ••r Fax (626) 307-9218 • City of Rosftead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 11 of 12 After the hazard abatement activities are completed, the City's designated certified inspectors will perform a clearance test and generate a "Notice to Lead Hazard Abatement Activity" report and/or Asbestos Abatement Report, which will be provided to Participant within 15 business days, to declare the areas of the property to be disturbed free of lead and asbestos. ■ If lead and/or asbestos is found during clearance test, hazard abatement activity must be completed followed by a second clearance test. Areas of the property to be disturbed must be free of lead and asbestos. Step 11: Schedule and Disbursement of Payments Work on the project should proceed in accordance with the schedule provided by the contractor. Once a milestone for payment has been reached, the Contractor shall present a payment request, along with lien releases, to the Participant for authorization. Contractor must use a City/Agency supplied form. The signed payment request is then given to the Grants Specialist. The Multi-Family Rehabilitation Grants Specialist shall inspect the work in progress to ensure that it is completed in a journeyman-like fashion and that all permits and required inspections have been completed, including sign-off, as necessary, by the City's Building Department. Once this has been verified, payment will be processed. A 10 percent (10%) retention will be retained until project close out. Checks are issued as two-party checks payable to Contractor and Participant. Participant must sign over check to the contractor for work completed or may sign a waiver at project start. Step 12: Completion of Improvements Upon the completion of improvements, projects will be inspected and photographed by a Grants Specialist. A "Notice of Completion" document will be signed by Participants and forwarded by the Agency to the Los Angeles County Recorder's Office for recordation. After receiving final lien releases and after 35 days from recording of Notice of Completion, the final retention payment will be released to Contractor. The account is then formally closed. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 rr (626) 569-2100 Fax (626) 307-9218 • City of Ros45 emead Redevelopment Agency Multi-Family Rehabilitation Home Improvement Program Manual Page 12 of 12 Exhibit "A" Eligible Improvements include, but are not limited to the following: ■ Correction of existing or incipient health and safety and City Municipal Code violations. • Exterior work to help preserve or protect structures, such as painting, roofing, siding, and property enhancements, such as landscaping, concrete driveways, block walls and wood fences. ■ Repairs, restoration or replacement of building components and mechanical structural systems, such as heating systems, plumbing systems, septic tanks, electrical wiring and service. ■ Structural and foundation repairs and qualified building additions or alterations to increase the health, safety, and livability of existing structures, such as porches, stairways, closets, cabinets, bathrooms, kitchens and entrances. ■ Interior work such as painting, plastering, flooring and tile repair or replacement necessary to correct extremely deteriorated conditions and to improve the safety and livability of the dwelling unit. ■ Fumigation and treatment of termites and pest control. ■ Energy and water conservation improvements and devices such as solar heating, insulation, window caulking, irrigation. All items to be consistent with HOME program guidelines for energy efficiency (PATH) and with the EnergyStar program. ■ Access improvements and special safety features to aid the physically disabled and the elderly. Ineligible improvements include, without limitation, improvements that are (i) cosmetic in nature and/or accessory use improvements, including, but not limited to: greenhouses; barbecue pits and outdoor fireplaces; bathhouses, swimming pools, saunas and hot tubs; valances, cornice boards and drapes and indoor or outdoor home furnishings; freestanding appliances and (ii) any improvements not approved by Grants Specialist. 8838 E. Valley Boulevard, Rosemead, Califomia 91770 (626) 569-2100 Fax (626) 307-9218