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CC - Item 2A - Approval of Partnership with Rosemead Housing Development Corporation for use of Home fundsTO: HONORABLE MAYOR AND MEMBERS OF THE ROSEME CITY COUNCIL FROM: BILL CRO#E, CITY MANAGER DATE: JULY 20, 2004 SUBJECT: APPROVAL OF PARTNERSHIP WITH THE ROSEMEAD HOUSING DEVELOPMENT CORPORATION FOR USE OF HOME FUNDS In Fiscal Year 1996, the City of Rosemead became an entitlement jurisdiction for HOME funds. 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. The City's annual allocation is a little over $500,000 per year. Of the total amount, 15% must be set aside for Community Development Housing Organizations (CHDO's). Since 1996, the City was successful in using HOME funds in the acquisition and construction of the Garvey senior housing development. However, beginning in 1999, the City has had difficulty in finding eligible projects in which to expend the funds. HOME funds are highly restrictive and must be obligated for expenditure within twenty-four (24) months of receipt of funds or they are subject to recapture by the federal government. Background and Discussion The City has created the Mortgage Assistance Program (MAP) and the Housing Development Fund using HOME funds. Of the funds set aside for the Housing Development Fund, $500,000 must be committed by July 31, 2004 or they will be recaptured by the U.S. Department of Housing and Urban Development (HUD). CAUt4CI.L AGENDPi JUL 27 2004 ITEM No. Recognizing the. needs to expend HOME funds for projects other than the Mortgage Assistance Program, the City Council, in a public hearing on May 13, 2003, approved creation of a HOME development fund. Since that time, the City has used funds from the Development fund for development of affordable housing units by the East Los Angeles Community Corporation. 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. Since that time, the City has conducted 123 inspections of properties. 26 owners have since complied with the City's requests and made all corrections. 96 cases are still open and pending. Of those, 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 enter into a commitment agreement with the Rosemead Housing Development Corporation (RHD,C) for $500,000 in HOME funds at-risk of recapture in order to provide rehabilitation opportunities for these properties. The project will provide that: 1. The RHDC prepare final program guidelines, loan and deed documents in a form acceptable to the City; 2. That the RHDC conduct outreach to affected multi-family properties for participation; 1 That units be rented to HOME-eligible households; 4. That the rehabilitation be done as a deferred loan secured by a Deed of Trust; 5. That any loan provided require maintenance and management covenants, including a covenant not to allow criminal activity on the premises; 6. That an annual inspection and income verification process be performed; 7. That the loan be forgiven after ten (10) years if the owner complies with all requirements and covenants. Attached for your review are the following 1. Draft Commitment Agreement 2. Proposed Program Points HOME Partnership, 2 RECOMMENDATION: 1. That the City Council approve the partnership with the Rosemead Housing Development Corporation; 2. Authorize the City Attorney to finalize the commitment agreement and related documents; and 3. Authorize the City Manager or designee to execute all agreements. HOME Partnership, 3 ZAPOPAN TARGET AREA: MULTI-FAMILY REHABILITATION Program Points July 2004 INTRODUCTION: The following represents basic program points for a multi- family rehabilitation program to be provided by the Rosemead Housing Development Corporation (RHDC) using HOME funds in support of the Zapopan Park Target Area. The RHDC if awarded funding will complete program guidelines, loan documents, deed of trusts and covenants in order to provide multi-family rehabilitation to buildings with three (3) or more rental units that have been cited for health and safety and other code violations. ' PURPOSE: To improve safety and security for Rosemead residents living in multi-family housing in the Zapopan Park Target Area, with preference given to properties on Langford Place. To assist landlords/owners in correcting health and safety code violations as a result of code enforcement activities in the Zapopan Park Target Area. ELIGIBLE PROPERTIES: Multi-family housing of three (3) or more units, that have been cited for code violations in the Zapopan Target Area. The Zapopan Target Area is the residential neighborhood bounded by Hellman on the north, Walnut Grove on the east, Garvey on the south and San Gabriel on the west. Several of these owners have begin making corrections, but cannot complete them due to a lack of funds. ELIGIBLE IMPROVEMENTS: Funds must first be used to correct any potentially hazardous conditions, including structural, electrical, plumbing problems, etc. If funds remain after correcting these deficiencies, general property improvements, including interior improvements, may be performed. All items must be of medium grade. Luxury items, such as swimming pools, are not eligible. MULTI-PROPERTY INCENTIVE: In order to encourage the rehabilitation of properties in the area, an incentive will be provided when a group or consortium of owners simultaneously rehabilitate at least two (2) properties. In these cases, additional improvements can be made, including parking and street repairs (if the street is privately owned). TYPE OF ASSISTANCE: The form of rehabilitation assistance would be a deferred loan secured by a deed of trust and covenants. The maximum amount of assistance without a multi-property incentive would be $30,000 per unit (for example: six HOME units could not exceed $180,000). The maximum amount of assistance with a multi-property incentive would be $50,000 (or $300,000 for six HOME units). Total amount of loan, would be based on Zapopan Multi-family Rehabilitation, page 1 estimate to complete work, up to the maximum amount and based on equity in the property, equivalent equity of the owners or other equivalent test and based on minimum and maximum HOME per unit costs. If the project were to require additional monies and the RHDC and/or City determines that such a loan would be in the best interest of the City, the RHDC shall request a waiver of the per unit limitation from the City Council. However, the eligible per unit amount could not exceed the maximum HOME per unit investment threshold. Owners would enter into an Owner Participation Agreement (OPA) in addition to a Note, Deed of Trust and Covenants. TERMS OF ASSISTANCE: The term of the loan would be ten (10) years. Similar to our commercial loan programs, at the end of the ten (10) years, if the owners have complied with all requirements of the program, the owners could request that the loan be forgiven. Owners would also agree that 90% of HOME-assisted units be below 60% of median income and that 10% would be below 80% of median. Not all units must be HOME-assisted. This would vary based on the amount of funding provided by the owner. Rehabilitation projects of 12 or more units would be subject to Davis-Bacon prevailing wage requirements. Properties would be inspected one time per year by City staff and the owner must provide annual income verification on the HOME unit properties. COVENANTS: Owners would covenant the' property against discrimination and against allowing criminal activity on the premises. Owners would also agree to a covenant requiring regular maintenance and repair of the improvements. Covenants would give the City the right to inspect the premises at least annually and to request the owners to make required repairs. If the owner does not make the repairs, owner will covenant that the City or its agent has the right to enter the premises to effect repair and to bill the owner. If the owner does not repay the City, the owner will covenant that the City has a right to lien the property to recover repair fees. SOURCE OF FUNDING: The source of funding for the program would come from federal HOME funds, administered by the Rosemead Housing Development Corporation (RHDC). Zapopan Multi-family Rehabilitation, page 2 CITY OF ROSEMEAD HOME Program Commitment Agreement THIS AGREEMENT made and entered into this July 27, 2004, by and between Rosemead Housing Development Corporation, (hereinafter "AGENCY") and the City of Rosemead, a municipal corporation (hereinafter "CITY"). WITNESSETH WHEREAS, AGENCY is a non-profit organization that provides affordable housing opportunities within the City of Rosemead; WHEREAS, CITY is the administrator of federal funds which may be used to provide assistance to non-profit organizations that will benefit low-to-moderate income residents. WHEREAS, AGENCY desires to provide multi-family rehabilitation opportunities within the City's Zapopan Park Target Area. Said area is bounded by Garvey on the south, Hellman on the north, Walnut Grove Avenue on the east and San Gabriel Boulevard on the west; NOW, THEREFORE, for and in consideration of their mutual promises, the AGENCY and the CITY hereby agree as follows: 1. CITY shall make available to AGENCY the amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) for rehabilitation of rental properties of over three (3) units in the Zapopan Park Target Area that have health/safety and other code violations. Such rehabilitation assistance shall be in the form of a deferred loan to the owners of said property. The loan documentation shall be in a from approved by the CITY, including, without limitation, the Note and Deed of Trust, including provisions enforcing HOME affordability requirements, maintenance and management covenants and regarding assignment of rents and profits and assignment of AGENCY'S interest in all governmental permits and construction contracts obtained for development of the improvements. 2. FINANCING: AGENCY agrees to use the grant proceeds only for paying the cost of rehabilitation construction and to finance any additional costs and expenses using other funds. CITY's commitment to disburse funds is subject to the following: a. AGENCY securing agreements to participate from owners, environmental clearances and permits necessary for rehabilitation of properties; Commitment Agreement, page I b. Evidence that units will be rented by eligible low income residents in conformance with HOME requirements and that annual tracking of resident incomes. is performed in accordance with HOME requirements; c. Evidence that adequate equity funds are available to fund any portion of the development costs that are not funded by the rehabilitation loan; d. In the performance of this Agreement, the AGENCY shall cause CITY to be named as an additional insured under any and all liability policies secured with respect to any rehabilitation project. AGENCY shall provide CITY with evidence of insurance to the satisfaction of CITY. 3. HOME REQUIREMENTS: The provisions of the HOME regulations are incorporated into this Agreement by reference and AGENCY agrees to comply with all such terms. The CITY and AGENCY in the performance of this Agreement shall take all actions necessary to assure compliance with the provisions of the National Environmental Policy Act of 1969, Title VI of the Civil Rights Act of 1964, Title VII of Civil Rights Act of 1968, Section 3 of the Housing and Urban Development Act of 1968, as amended, The Fair Housing Act, the Act, and all other applicable laws and regulations. 5. MARKETING: AGENCY shall ensure that the project is open to applicants from the CITY of Rosemead jurisdiction. CITY shall be responsible for disseminating any marketing materials for the project within its own jurisdiction. AGENCY shall ensure that, in accordance with HOME requirements, that AGENCY has an affirmative marketing plan that meets federal requirements. 6. INDEMNIFICATION: AGENCY shall indemnify, defend and hold harmless, the CITY its officers, agents, or employees from and against any loss, liability, or expense from defense costs, legal fees, and claims for damages that may arise or result from the wrongful acts or omissions or the allegedly wrongful or negligent acts or omissions of the AGENCY, its officers, agents or employees. 7. FAIR HOUSING: The CITY and AGENCY agree that HOME Program funding for any activities in or in support of any cooperating CITY that does not affirmatively further fair housing within its own jurisdiction, or that impedes CITY action to comply with its fair housing certification, is prohibited. 8. EMPLOYMENT DISCRIMINATION: AGENCY shall not discriminate against any employee or application for employment because of race, color, religion, sex, national origin, age, familial status or handicap. AGENCY shall take affirmative Commitment Agreement, page? . action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color religion, sex, national origin, age, familial status or handicap. Such action shall include, but not be limited to, the following: employment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rate of pay or other forms of compensation and selection for training including apprenticeship. AGENCY agrees that contractors for any rehabilitation will post in conspicuous place available to employees and applicants for employment, notices setting forth the provisions of this non-discrimination clause. AGENCY shall, in all solicitations or advertisements for employees placed by or on behalf of AGENCY, state that all qualified applicants will receive consideration foremployment without regard to race, color, religion, sex, national origin, age, familial status or handicap 10. INSPECTION OF RECORDS: CITY and the United States Government and/or their representatives shall have access for purpose of monitoring, auditing, and examining AGENCY'S activities and performance, to books, documents and papers, and the right to examine records of AGENCY'S sub-contractors, bookkeepers and accountants, employees in regard to said loan. CITY and the United States Government and/or their representative shall also schedule on-site monitoring at their discretion. Monitoring activities may also include, but are not limited to, questioning employees and entering any premises or any site in which any activity funded hereunder are conducted or in which any of the records of AGENCY are kept. Nothing herein shall be construed to require access to any privileged or confidential information as set forth in Federal or State law. In the event AGENCY does not make the above-referenced documents available to the City of Rosemead, California, AGENCY agrees to pay all necessary and reasonable expenses incurred by CITY in conducting any audit at the location where said records and books of account are maintained. 11. ASSIGNABILITY. AGENCY shall not assign or transfer any interest in this AGREEMENT, whether by assignment, delegation or novation, without the prior written consent of CITY. 12. AGREEMENT: This Agreement supersedes any and all other agreements, either oral or in writing, between the parties hereto and contains all the covenants and agreements between the parties with respect to the conditions of said services and funding in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement or amendment hereto shall be effective unless executed in writing and signed by both CITY and AGENCY. Commitment Agreement, page 3 IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first set forth hereinabove. BY: CITY OF ROSEMEAD ROSEMEAD HOUSING DEVELOPMENT CORPORATION APPROVED BY CITY ATTORNEY: Commitment Agreement, page 4 ZAPOPAN TARGET AREA: MULTI-FAMILY REHABILITATION Program Points July 200 INTRODUCTION: The following represents basic program points for a multi- family rehabilitation program to be provided by the Rosemead Housing Development Corporation (RHDC) using HOME funds in support of the Zapopan Park Target Area. The RHDC, if awarded funding will complete program guidelines, loan documents, deed of trusts and covenants in order to provide multi-family rehabilitation to buildings with.three (3) or more rental units that have been cited for health and safety and other code violations. PURPOSE: To improve safety and security for Rosemead residents living in multi-family housing in the Zapopan Park Target Area, with preference given to properties on Langford Place. To assist landlords/owners in correcting health and safety code violations as a result of code enforcement activities in.the Zapopan Park Target Area. ELIGIBLE PROPERTIES: Multi-family housing of three (3) or more units, that have been cited for code violations in the Zapopan Target Area. The Zapopan Target Area is the residential neighborhood bounded by Hellman on the north, Walnut Grove on the east, Garvey on the south and San Gabriel on the west. Several of these owners have begin making corrections, but cannot complete them due to a lack of funds. ELIGIBLE IMPROVEMENTS: Funds must first be used to correct any potentially hazardous conditions, including structural, electrical, plumbing problems, etc. If funds remain after correcting these deficiencies, general property improvements, including interior improvements, may be performed. All items must be of medium grade. Luxury items, such as swimming pools, are not eligible. MULTI-PROPERTY INCENTIVE: In order to encourage the rehabilitation of properties in the area, an incentive will be provided when a group or consortium of owners simultaneously rehabilitate at least two (2) properties. In these cases, additional improvements can be made, including parking and street repairs (if the street is privately owned). TYPE OF ASSISTANCE: The form of rehabilitation assistance would be a deferred loan secured by a deed of trust and covenants. The maximum amount of assistance without a multi-property incentive would be $30,000 per unit (for example: six HOME units could not exceed $180,000). The maximum amount of assistance with a multi-property incentive would be $50,000 (or $300,000 for six HOME units). Total amount of loan would be based on Zapopan Multi-family Rehabilitation, page 1 estimate to complete work, up to the maximum. amount and based on equity in the property, equivalent equity of the owners or other equivalent test and based on minimum and maximum HOME per unit costs. If the project were to require additional monies and the RHDC and/or City determines that such a loan would be in the best interest of the City, the RHDC shall request a waiver of the per unit limitation from the City Council. However, the eligible per unit amount could not exceed the maximum HOME per unit investment threshold. Owners would enter into an Owner Participation Agreement (OPA) in addition to a Note, Deed of Trust and Covenants. TERMS OF ASSISTANCE: The term of the loan would be ten (10) years. Similar to our commercial loan programs, at the end of the ten (10) years, if the owners have complied with all requirements of the program, the owners could request that the loan be forgiven. Owners would also agree that 90% of HOME-assisted units be below 60% of median income and that 10% would be below 80% of median. Not all units must be HOME-assisted. This would vary based on the amount of funding provided by the owner. Rehabilitation projects of 12 or more units would be subject to Davis-Bacon prevailing wage requirements. Properties would be inspected one time per year by City staff and the owner must provide annual income verification on the HOME unit properties. COVENANTS: Owners would covenant the property against discrimination and against allowing criminal activity on the premises. Owners would also agree to a covenant requiring regular maintenance and repair of the improvements. Covenants would give the City the right to inspect the premises at least annually and to request the owners to make required repairs. If the owner does not make the repairs, owner will covenant that the City or its agent has the right to enter the premises to effect repair and to bill the owner. If the owner does not repay the City, the owner will covenant that the City has a right to lien the property to recover repair fees. SOURCE OF FUNDING: The source of funding for the program would come from federal HOME funds, administered by the Rosemead Housing Development Corporation (RHDC). Zapopan Multi-family Rehabilitation, page 2 CITY OF ROSEMEAD HOME Program Commitment Agreement THIS AGREEMENT made and entered into this July 27, 2004, by and between Rosemead Housing Development Corporation, (hereinafter "AGENCY") and the City of Rosemead, a municipal corporation (hereinafter "CITY"). WITNESSETH WHEREAS, AGENCY is a non-profit organization that provides affordable housing opportunities within the City of Rosemead; WHEREAS. CITY is the administrator of federal funds which may be used to provide assistance to non-profit organizations that will benefit low-to-moderate income residents. WHEREAS, AGENCY desires to provide multi-family rehabilitation opportunities within the City's Zapopan Park Target Area. Said area is bounded by Garvey on the south, Hellman on the north, Walnut Grove Avenue on the east and San Gabriel Boulevard on the west, NOW, THEREFORE, for and in consideration of their mutual promises, the AGENCY and the CITY hereby agree as follows: 1. CITY shall make available to AGENCY the amount of FIVE HUNDRED THOUSAND DOLLARS ($500,000) for rehabilitation of rental properties of over three (3) units in the Zapopan Park Target Area that have health/safety and other code violations. Such rehabilitation assistance shall be in the form of a deferred loan to the owners of said property. The loan documentation shall be in a from approved by the CITY, including, without limitation, the Note and Deed of Trust, including provisions enforcing HOME affordability requirements, maintenance and management covenants and regarding assignment of rents and profits and assignment of AGENCY'S interest in all governmental permits and construction contracts obtained for development of the improvements. 2. FINANCING: AGENCY agrees to use the grant proceeds only for paying the cost of rehabilitation construction and to finance any additional costs and expenses using other funds. CITY's commitment to disburse funds is subject to the following: a. AGENCY securing agreements to participate from owners, environmental clearances and permits necessary for rehabilitation of properties; Commitment Agreement, page I b. Evidence that units will be rented by eligible low income residents in conformance with HOME requirements and that annual tracking of resident incomes is performed in accordance with HOME requirements; c. Evidence that adequate equity funds are available to fund any portion of the development costs that are not funded by the rehabilitation loan; d. In the performance of this Agreement, the AGENCY shall cause CITY to be named as an additional insured under any and all liability policies secured with respect to any rehabilitation project. AGENCY shall provide CITY with evidence of insurance to the satisfaction of CITY. 3. HOME REQUIREMENTS: The provisions of the HOME regulations are incorporated into this Agreement by reference and AGENCY agrees to comply with all such terms. The CITY and AGENCY in the performance of this Agreement shall take all actions necessary to assure compliance with the provisions of the National Environmental Policy Act of 1969, Title VI of the Civil Rights Act of 1964, Title VII of Civil Rights Act of 1968, Section 3 of the Housing and Urban Development Act of 1968, as amended, The Fair Housing Act, the Act, and all other applicable laws and regulations. 5. MARKETING: AGENCY shall ensure that the project is open to applicants from the CITY of Rosemead jurisdiction. CITY shall be responsible for disseminating any marketing materials for the project within its own jurisdiction. AGENCY shall ensure that, in accordance with HOME requirements, that AGENCY has an affirmative marketing plan that meets federal requirements. 6. INDEMNIFICATION: AGENCY shall indemnify, defend and hold harmless, the CITY its officers, agents, or employees from and against any loss, liability, or expense from defense costs, legal fees, and claims for damages that may arise or result from the wrongful acts or omissions or the allegedly wrongful or negligent acts or omissions of the AGENCY, its officers, agents or employees. 7. FAIR HOUSING: The CITY and AGENCY agree that HOME Program funding for any activities in or in support of any cooperating CITY that does not affirmatively further fair housing within its own jurisdiction, or that impedes CITY action to comply with its fair housing certification, is prohibited. 8. EMPLOYMENT DISCRIMINATION: AGENCY shall not discriminate against any employee or application for employment because of race, color, religion, sex, national origin, age, familial status or handicap. AGENCY shall take affirmative Commitment Agreement, page 2 action to ensure that applicants are employed, and that employees are treated during employment, without regard to their race, color religion, sex, national origin, age, familial status or handicap. Such action shall include, but not be limited to, the following: employment, upgrading, demotion or transfer, recruitment or recruitment advertising, layoff or termination, rate of pay or other forms of compensation and selection for training including apprenticeship. ' i AGENCY agrees that contractors for any rehabilitation will post in conspicuous place available to employees and applicants for 'employment, notices setting forth the provisions of this non-discrimination clause. AGENCY shall, in all solicitations or advertisements for employees placed by or on behalf of AGENCY, state that all qualified applicants will receive consideration for employment without regard to race, color, religion, sex, national origin, age, familial status or handicap 10. INSPECTION OF RECORDS: CITY and the United States Government and/or their representatives shall have access for purpose of monitoring, auditing, and examining AGENCY'S activities and performance, to books, documents and papers, and the right to examine records of AGENCY'S sub-contractors, bookkeepers and accountants, employees in regard to said loan. CITY and the United States Government and/or their representative shall also schedule on-site monitoring at their discretion. Monitoring activities may also include, but are not limited to, questioning employees and entering any premises or any site in which any activity funded hereunder are conducted or in which any of the records of AGENCY are kept. Nothing herein shall be construed to require access to any privileged or confidential information as set forth in Federal or State law. In the event AGENCY does not make the above-referenced documents available to the City of Rosemead, California, AGENCY agrees to pay all necessary and reasonable expenses incurred by CITY in conducting any audit at the location where said records and books of account are maintained. 11. ASSIGNABILITY. AGENCY shall not assign or transfer any interest in this AGREEMENT, whether by assignment, delegation or novation, without the prior written consent of CITY. 12. AGREEMENT: This Agreement supersedes any and all other agreements, either oral-or in writing, between the parties hereto and contains all the covenants and agreements between the parties with respect to the conditions of said services and funding in any manner whatsoever. Each party to this Agreement acknowledges that no representations, inducements, promises or agreements, orally or otherwise, have been made by any party, or anyone acting on behalf of any party, which are not embodied herein, and that no other agreement or amendment hereto shall be effective unless executed in writing and signed by both CITY and AGENCY. Commitment Agreement, page 3 f. . IN WITNESS WHEREOF, the parties hereto have executed this agreement as of the day and year first set forth hereinabove. BY: 45w~~ CITY OF ROSEMEAD ROSEM AD HOUSING DEVELOPMENT CORPORATION Commitment Agreement, page 4