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2.0 HRSR 12-15-2008.ver MEMORANDUM TO: Housing & Redevelopment Authority FROM: Jeff Gongoll, Community Development Director Cathy Mehelich, HRA Executive Director DATE: December 15, 2008 SUBJECT: Discuss HRA Application to Neighborhood Stabilization Program (NSP) Purpose: 1. Review the eligible activities for application to the Neighborhood Stabilization Program (NSP). 2. Identify and establish the target neighborhoods for use of the funds. 3. Authorize staff to enter into a contract with SEH to complete and submit the NSP grant application. Background The HRA reviewed the basics of this federal program at the December 1, 2008 meeting. Since then, staff recently participated in another "working group" meeting with the other communities that have been identified as eligible to receive the NSP monies. At the last HRA meeting staff reviewed the following eligible/ineligible uses of the funds: Eligible Activities: a. .Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties. b. Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed, in order to sell, rent, or redevelop such homes and properties. c. Establish land banks for homes that have been foreclosed. d. Demolish blighted structures. e. Redevelop demolished or vacant properties. Ineligible Activities: a. Foreclosure prevention. b. Demolition of non-blighted structures. c. Purchase of properties not abandoned or foreclosed upon. d. Redevelopment for commercial purposes. At~nlication Criteria The attached press release from the League of Minnesota Cities provides a good outline of the formula that Minnesota Housing Finance Agency (NIHFA) used to determine the distribution of the federal funds. The allocations are distributed to zip codes -not cities specifically. In our case, the 55330 zip code is eligible to receive $715,446 in NSP funds. Therefore, Elk River's portion of the allocation will likely be less, depending on the foreclosure situation in Otsego that lies within the 55330 zip code. And, as noted in the attached Neighborhood Stabilization Program Application Update, "5) If your dip code ~yosses multiple jurisdictions, you will need to demonstrate in your application bozoyou are coordinating with the otherjurisdictions." We are coordinating these discussions with Otsego. Further, an integral part of the application requires us to identify "target" neighborhoods where the funds will be used; i.e., we cannot establish a down payment assistance program for the entire city. Elk River Situation Since the last HRA meeting, staff has been gathering the following data in order to assess Elk River's foreclosure situation and impacts: a. List of foreclosures obtained from Sherburne County since January 2008. b. Map of affected neighborhoods. - # of foreclosures in each subdivision. - % of foreclosures/number of housing lots. c. Photos of vacant, foreclosed, blighted properties. An overview of these findings will be presented at the HRA meeting. Internally, a strategy meeting was held which included Police Chief Jeff Beahen, Code Enforcement Officer Dave Hetrick, and Community Development staff to discuss the data and identify neighborhoods which appear to have the greatest foreclosure impacts (identified on the attached map): - The Bluffs - Windsor Oaks of Elk River - Park Pointe - Trott Brook Proposed Use of NSP Funds Based on the HRA's previous discussions and with the available data, a logical use of funds may be to provide down payment assistance to stimulate home buying activity and decrease the number of vacated foreclosed single-family homes in these hardest-hit neighborhoods. It will also fulfill the criteria of helping to stabilize the neighborhood and stimulate the market. In addition to the down payment assistance program, staff recommends that we keep our options open in order to address vacant or abandoned properties as we continue to evaluate the various neighborhoods and their impacts. Additional information is identified on the attached Foreclosure Recovery Strategies table which offers a list of model programs. Technical Assistance Recently, Cathy Mehelich, Annie Deckert and I met with a representative from SEH, Heidi Peper, to discuss their potential role in assisting with the formulation of Elk River's Neighborhood Stabilization Plan and completing the formal application. From our discussion, SEH will be able to provide assistance at a NTE cost of $5,000. If it is determined that Elk River and Otsego formulate an application together, Ms. Peper would also be able to assist in the application at a NTE cost of $7,500 which would be split on a pro-rata basis between the cities. Although the application date has been extended to January 28, 2009, it remains a relatively short time to gather background data, hold public meetings and respond with a thorough application submittal. Next Stets 1. Discuss potential uses of funds to address Elk River's foreclosure issues. 2. Discuss and confirm target neighborhoods. 3. Engage SEH, and Heidi Peper to assist in the preparation of Elk River's plan and application submission for NSP funds. Attachments ^ Neighborhood Stabilization Program Update, dated December 8, 2008. ^ Foreclosure Recovery Priorities ^ Income Targeting ^ Foreclosure Recovery Strategies ^ League of Minnesota Cities Bulletin ^ List of Elk River Foreclosures ^ Map of Neighborhoods Neighborhood Stabilization Program Application Update December 8, 2008 Summary Since we last met, Minnesota Housing submitted its final plan to HUD and published the application for the Neighborhood Stabilization Program. An application guide/FAQ document should be available on the Minnesota Housing website (www.mnhousint?. ov) this week. Minnesota Housing will be holding a technical assistance session on December 16~' in St. Paul from 1-3:30 P1V1 and possibly on December 18~' in the collar counties (AMtime--waiting for confirmation from MH) for all interested applicants. Some important things for you to know: 1) The funding allocations to the High Need ZIP codes remained the same as in the draft plan. Ip000~e Clmary COmmUnltle5 Maximun7 Proposed Distribution from Minnesota Housing (non- competitive funds) 55309 Big Lake $940,576 55330 EIk River, Otse o, St. Francis $715,44'6' 553.71 Princeton $796,254' .553'98 Zimmerman $631,8T9 55040 Isa~ti ` ~ $552,855 55318 _ Buffalo; St. Michael _ $543,883 _ 55362 Monficello~, Ofsego $523,923 ~ -- -- $4,.704,856 2) The due date for the application has been changed to January 28, 2008. 3) Miruiesota Housing will award all funds in late February rather than having another funding pool (from unawarded funds) that would have been available at a future date. In other words, this is your onl~pportunity to apply for funding. 4) Cities are still required to complete a Neighborhood Stabilization Plan, but it does not need to be submitted by the January 28~' deadline. 5) If your ZIP code crosses multiple jurisdictions, you will need to demonstrate in your application how you are coordinating with the other jurisdictions. Funding Availability There are three funding pools available to eligible applicants in greater Minnesota. 1) Hirsh Need ZIP code pool. All cities represented at this meeting have a high need ZIP code in their community. Funding of at least $500,000 is set aside for neighborhood stabilization work in each of these ZIP codes if the communities can submit feasible applications. 2) High Need County pool. These funds.are available to cities in 24 counties that have been identified as high need counties. If your city includes a High Need ZIP, you cannot apply for funds for that same ZIP code from the High Need County pool. However, if your city also includes a ZIP code not listed on the High Need ZIPS, you can apply for funding for that part of the community from the High Need County pool. There is more than $6 million available in the High Need County pool. 3) Supplemental pool. Minnesota Housing has approximately $38 million in funding to award by late February. If there are not enough feasible applications to award all of the funds through the High Need ,ZIP or High Need County pools, funds will be made available through a supplemental pool. There is some brief additional information to complete on the application if your city wants to be considered for the supplemental pool. This pool is your only opportunity to apply for additional funds beyond what has been set aside for your ZIP code. Application Basics 1) The application is quite detailed but seems fairly straightforward to complete. It is a fellable document that you can download from the MH website. 2) These are some of the most important things you will need to consider as you are designing your program and completing your application: a. Administration of NSP funds. For applications to be considered feasible, MH is looking for cities that are experienced in administering CDBG funds or that will contract with another government or nonprofit organization that has that experience. Identifying your CDBG administrator soon is important. b. Program design: How do you plan to use the funds, including: i. What is the target neighborhood and what activities/programs are you planning to help stabilize it and address the problems created by foreclosures? What are the characteristics of the target neighborhood (boundaries, number/age of housing stock, average income levels, ete)? ii. Which organizations/partners will directly complete the activities funded by the grant (e.g., acq/rehab, administering homebuyer programs, etc)? What is their experience and how did/will you choose them? iii. What will be the impact of your proposed program on the target neighborhood? How many units/horrieowners/renters will you assist? When will the planned outcomes be completed (at 6, 9, 12, 18 months)? iv. What other efforts/initiatives are underway in the target neighborhood (not using NSP funds) that will help stabilize it (e.g., economic development, safety improvements, new parks/rec, transit,. etc)? v. How will the program make funds available to households with a range of incomes (25% of households at 50% AMI, rental, etc)? vi. What is the program budget and what funds will be used to implement it? What other funds have been committed to support the program? 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A , a ~ O i, V/ > ~, c a i ~ V L a~ v O =p ~ ti ~ /~ ~ a.+ L U in ~ C O ~ ids ~ ~ a~0 ~ i X ~ O ~ •C t Ld I- O~ ~ (n ~ = _ L L O ^ ^ ^ ^ ~ d C Q O ~ C a+ C V CC V ~ ~ C ~ 0 • Q ~ ~ C - a•~' ~ v ~_ v t ~ u ~ ~ w > • a+ • ~ O u a .n c -v ~ a~ ~ o ~ o ~ :~ • ~ ~ ~ ~ N C ~ ~ ~ ~ ° o Q o ~ ~ ~ at a V Minnesota Housing releases Neighborhood Stabilization Program fund eligibility Page 1 of 3 ..:~-= ~.: ~, _r IYk _ (;ll~lt~ ONLINE EoirIf7N Minnesota Housing releases Neighborhood Stabilization Program fund eligibility Issue 31 BY ~r~t-cstl Published: December 10, 2008 Local governments will soon be able to apply for the Neif;hl~orhoi~d Stabililatic~n 1'rot;t~a_ (NSP) funds made available to the Mil~t~esota Housing Finance Agency (MHFA). MHFA will receive $38.8 million as part of the federal 1_I ;..„ ~, xa 1.c~>r~omic l~ocov~ry_,-pct of 20(~~ (HERA) to assist local governments acquire and redevelop foreclosed properties. In order to receive the funds, MHFA submitted a substantial amendment to its annual Community Development Block Grants (CDBG) action plan. The amendment includes MHFA's distribution plan, eligible applicants, application requirements, eligible uses and activities, funding cycles, and performance evaluation for NSP funds. Timeline Information and funding applications are available on the MHFA ~veb site. The application deadline is Jan. 28. Awards for the first round of funding will be awarded in February. Recipients of the funds are expected to make sufficient progress in using the awarded funds. If MHFA determines that sufficient progress is not being made, the funds will be recaptured and awarded in future funding rounds. Eligibility and distribution plan MHFA will sub-grant NSP funds to eligible local units of government. Local units of government experienced in administering CDBG funding and operating in zip codes or counties identified as high need are eligible applicants. Local units of government include cities, housing and redevelopment authorities, economic development authorities, community development authorities, public housing authorities, and counties. To determine what communities are eligible for the NSP funds, MHFA had to establish a formula for areas of greatest need to assign initial maximum distribution around the state. In determining greatest need, MHFA looked at the 120 zip codes with the highest foreclosure, real-estate- owned (REO), subprime, and delinquency rates in the state. The 120 highest-need zip codes each have a concentration of loans either in foreclosure or delinquent that is at least 25 percent higher than the statewide concentration. These zip codes account for 57 percent of the state's loans in foreclosure or REO. After further analysis, MHFA identified 37 of the 120 zip codes that will receive direct aid. The 37 zip codes represent 45 percent of the state's loans in foreclosure or REO. The 87 zip codes that will not receive direct aid are located in 23 counties in the state. The determination of initial distribution of NSP funds was made based on four categories of areas of greatest need: http://web.lmc.org/bulletin/story.cfm?id=2160&title_id=1 12/10/2008 Minnesota Housing releases Neighborhood Stabilization Program fund eligibility Page 2 of 3 . NSP entitlement areas (Anoka and Hennepin Counties and the cities of Minneapolis and St. Paul), which will receive a maximum distribution in addition to the allocation they will receive directly from Housing and Urban Development (HUD). . High-need zip codes outside the NSP entitlement areas. . Communities in one of Minnesota's 23 high-need counties. . High-need areas for which maximum distributions are assigned for Community Revitalization projects. The first funding round has four set-asides, one non-competitive pool, and three competitive pools. The one non-competitive pool is for the NSP-designated entitlement areas. The first competitive pool is for high-need zip codes outside the NSP entitlement areas. The other two competitive pools are for the high-need counties with one pool for the Twin Cities Metro Area and the other for greater Minnesota. Download ..a..._l~tit of_c(igible communtt~es and...p....ool fu...n:d am...ounts (pdt), Eligible uses and activities HERA established five eligible uses for NSP funds, including: . Financing mechanism for purchase and redevelopment of foreclosed homes; . Purchase and rehabilitation of properties abandoned or foreclosed upon; . Land banking; . Demolition of blighted structures; . Redevelopment of demolished or vacant properties. The funds must be used within 18 months of receipt and to assist individuals and families with incomes not exceeding 120 percent of area median income. Improvements to increase energy efficiency or conservation or to provide a renewable energy source or sources for the homes or properties are also eligible. Some activities are ineligible for NSP funds. Generally, if an activity is ineligible under CDBG, it is ineligible under NSP. Foreclosure prevention, demolition ofnon-blighted structures, purchase of properties not abandoned or foreclosed upon, and redevelopment for commercial purposes are all ineligible for NSP funding. Application requirements Local governments must provide sufficient detail for MHFA to evaluate the application. Applicants must identify how foreclosures and subprime lending has adversely affected their community and how the requested funding will address the problems. Aline-item budget detailing the cost of the activity should be included. The applications should also identify: . Targeted neighborhoods or blocks; . Activities to be undertaken and anticipated outcomes; . Neighborhood improvement efforts; . Partnerships; . Feasibility and degree of readiness; . Income targeting; . Continued affordability; . Timeframes. Funds will be awarded based on how applicants can demonstrate that the funding is part of a comprehensive plan; whether the funds can be used in the 18-month timeline required by HERA; how applicants will leverage other resources; and whether the identified outcomes are achievable. http://web.lmc.org/bulletin/story.cfin?id=2160&title_id=1 12/10/2008 Minnesota Housing releases Neighborhood Stabilization Program fund eligibility Page 3 of 3 Assistance to applicants A document with frequently asked questions will soon be available on the MHFA web site. MHFA will also offer two sessions to help local governments with the application. The first will be held on Dec. 16 from 1 p.m. to 3:30 p.m. at the MHFA building in St. Paul. A second session will be held in Monticello from 9:30 a.m. to noon. For those unable to make it to the Monticello meeting, a webinar will also be made available. More details on the exact location are still to be worked out. The League of Minnesota Cities (LMC) will provide more information on the sessions as they become available. Cities with questions on the application process can contact Ruth Simmons at ' ~,~i~ c~imx>> = r; ~t:~~e.~nn.us or (651) 297-5146, or Katy Lindblad at ~aty.l,indbla~ u'statc.n7r-~._als or (651) 296-3617. Or contact MHFA directly. For more information, contact Hue Nguyen, LMC, at hngt~~-~en~a-Imc.org or (651) 281-1260. L13C; I31}ari 1. ~,,r; I)si~nLr: ° ~ ., `~i_cttc~r; of Directors C;lau{ii I f'>ffacl~4r 3aon Little ~~~.n itililler __ Copyright ©2008 Leta ue n :blinnerot~x Cities 145 University Ave. West, St. Paul, MN 55103 Phone: 651-281-1200 ~ Toll Free: 1-800-925-1122 Fax: 651-281-1299 ~ TDD: 651-281-1290 Return to 1lot~te http://web.lmc.orglbulletin/story.cfm?id=2160&title_id=1 12/10/2008 C ~+ d C ~ _ d O~ O - o \° ° c \ o o \° o \ o ~ o o \ \ ° o o ° \° \ o e e \° \° e c \° o e 0 ~ o O, e O d O) N O N r O ~ ~ 0 N 0 N M CO o C a K) ~ CO h M M o N o a0 ~ r O N o N e- ~ -- o M M r O o O O d ~ O ~ M r r > - m iL ~- ` ~ ; ~ ~ ~ d , ~ O _ L V r N M r ~ ~ N r O N N N , r r r 'p r ~ ~ M O ~ ~ O LL ` .c .~ v e ?' 0 ~ ~ o~ m ~n .o r~ w o 0 00 n rn M M ao ~,.~ o M M o o ~ ~ ~o n O ,. m rn u~ >., CO .- ~N. .47 r N O) t0 M M ~ r ~ r r 'N +O r N, ~ N i0 I~ N M M M GO ~ M ~ o x m a p ~ V ' m a~ ~. .U C ~ N :D N ~. ~ U N C N ~ L O d O ~ 17 y ~ • O U O ~ `~ `~ ~. w i - ~~: ~' :a _Q 7 m 7 m. 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