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HomeMy WebLinkAbout3011 RESOLUTION NO. 30 II A RESOLUTION of the City Council of the City of Bremerton, Washington, adopting the Housing Rehabilitation Loan Program. WHEREAS, the City of Bremerton recognizes that improvement of the quality and integrity of its housing stock is important to the long term livability and development of the City; and WHEREAS, the City of Bremerton recognizes that rehabilitation of its low income owner occupied units is a good public investment in community development and revitalization; and WHEREAS, the City of Bremerton's Housing Rehabilitation Loan Program was last updated in 1989 with Resolution #2246 and has now operated for over 25 years, and the City recognizes the need to make changes to the program to ensure it continues to respond to the needs of the City; and WHEREAS, the City of Bremerton wishes to target assistance to low and very income home-owners of owner-occupied housing through a loan program that is affordable due to low interest rates and provides incentives for loan recipients to remain in their homes for at least 5 years; and WHEREAS, the City of Bremerton wishes to ensure continuing program integrity by updating the program's description and administrative guidelines and by leveraging third- party professional construction management consulting services to work with the Community Development Department in implementing the program; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF BREMERTON, WASHINGTON, DOES HEREBY RESOL VE AS FOLLOWS: SECTION 1. The recitals and findings of fact set forth in this resolution are hereby incorporated as if fully set forth herein. SECTION 2. The Housing Rehabilitation Loan Program set forth in Exhibit A attached hereto is hereby adopted as the City of Bremerton's Housing Rehabilitation Loan Program. SECTION 3. Severability. If anyone or more sections, subsections, or sentences of this Resolution are held to be unconstitutional or invalid, such decision shall not affect the validity of the remaining portion of this Resolution and the same shall remain in full force and effect. 1 Housing Rehabilitation Loan Program SECTION 4. Effective Date. This Resolution shall take effect and be in force immediately upon its passage. PASSED by the City Council of the City of Bremerton, Washington this ~ day of ~~~ ,2006. ~ CECIL M~~Sident APPROVED AS TO FORM: lI{ It;}? l- ROGER A.ILUBOVICH, City Attorney R:\Legal\Legal\Resolutions\Community Development-Housing Rehabilitation Loan Program. doc 2 Housing Rehabilitation Loan Program EXHIBIT A Housing Rehabilitation Loan Program October 4, 2006 PROGRAM DESCRIPTION I. Pro!:lram Summary To use CDBG funds, and HOME funds where appropriate, to make low-interest, easy-term loans to low or very-low income residents of the City of Bremerton for making essential home repairs; ensuring preservation and improvement of existing housing stock, enabling long-term residents to live comfortably and safely in their own homes, and enhancing the livability of our neighborhoods. II. Housin!:l Qoals: Exerpted from City of Bremerton Comprehensive Plan, HS11-HS12, adopted December 2004 1. (H1A) Promote private and public efforts to preserve the existing housing stock by maintaining sound units, rehabilitating substandard units, and replacing severely deteriorated units · Promote maintenance of housing that is now in standard condition to prevent its deterioration to substandard condition · Promote the rehabilitation of substandard structures when the cost of rehabilitation is less than the cost of replacement housing. This cost factor does not apply to housing designated as having historical/architectural significance. 2. (H1 B) Promote private and public efforts to provide adequate capital for private and public rehabilitation housing projects at competitive or favorable costs. · Facilitate rehabilitation of owner-occupied housing based on the credit-worthiness of the dwelling rather than the credit-worthiness of the homeowner 3. (H1D) Promote efforts to identify, rehabilitate and preserve homes having historical/architectural significance. Give priority to such homes in City rehabilitation programs. 4. (H2A) Work toward residential conditions which comply with building codes, with special focus on weatherization 5. (H2B) Promote private commitments to improvement of the housing stock by using public resources to remove or abate blighting influences within or near residential area. · Promote financial assistance for essential repairs to substandard structure that provide housing for low and moderate income persons. Support private sector low-interest loan programs for such repairs, combined with public resources when available. III. ProQram Obiectives 1. Provide rehabilitation assistance for homeowner-occupied single-family residences. 2. Use CDBG funds to assist low and very-low income owners of single-family residences. 3. Target housing program marketing to lowest income census tracts and blight zones 4. Target housing program marketing to certain demographic (seniors) 5. Encourage homeowners to pursue other sources for State funded Weatherization programs. IV. ProQram Elements: 1. Program Administrator: City of Bremerton Department of Community Development CDBG/HOME Programs ("City CDBG") 2. Use of Funds Page 1 . Qualified Rehabilitation Activities (see Rehabilitation for details, below) . Associated development costs, if applicable (financing fees, appraisal costs, closing costs, past due real estate taxes, relocation) . May NOT be used for construction of new housing units 3. Eligible Projects . Existing structures . Owner-occupied . Single-family residence . Within Bremerton city limits . Targeted neighborhoods preferred . Owner occupied duplex, property with MIL or accessory unit may be approved for rehabilitation on a case by case basis · Total units must not exceed (2), including owner occupied unit · Owner/landlord must be at 50% or below area median income based on most recent Department of Housing and Urban Development (HUD) Area Median Income determination · Rental income will be included in income calculation to determine program eligibility · Rental unit rehabilitation will focus on Health and Safety improvements only · Tenant must be at 80% or below area median income 4. Eligible Owners and Tenants . Owner-occupants of single-family residence if at 80% or below area median income as determined by HUD . Owner/landlord of owner occupied duplex or owner occupied property with one (1) MIL or accessory unit if owner at 50% or below area median income as determined' by HUD . Must be in fee-simple ownership . Rental unit eligible only as noted above in "Eligible Projects" . Tenant of qualifying owner-occupied property must be at 80% or below area median income as determined by HUD 5. Target Areas for Assistance . All areas within Bremerton are eligible for assistance under the Program . Marketing initiatives will target the following high-need areas · Lowest income census tracts within the City of Bremerton (803, 805, 810, 812) · Anderson Cove designated Blight Zone Page 2 6. Loan Conditions · Owner-occupied max principal: $20,000 CDBG funding . Term: 15 years . Simple interest for low income (80% of area median as determined by HUD): 5% annually, deferred . Simple interest for very-low income (50% of area median as determined by HUD): 3% annually, deferred · Principal and interest payments optional; interest will accrue during life of loan . Annual Statements · Reminder about loan status, terms and conditions · Interest accrual information · Information about how/why to make an optional payment · Pre-payment penalty if property sold or transferred less than 61 months after loan origination . HUD protects a 5 year Period of Affordability for structures improved with CDBG funds Penalty will be an Equity Recapture, proportional to real estate market growth, up to cap of 12% APR, based on Washington State Usury Rates (RCW 19.52) Pre-Payment Penalty will never be less than $0 Example #1 P - ropertv va ue Increases Assessed value of home at time of loan $ 150,000.00 Assessed value of home at time of sale $ 215,000.00 Difference $ 65,000.00 Percent increase 43.33% Housing rehabilitation loan amount $ 15,000.00 House sold at 24 months from loan date Recapture before cap or minimum applied ($15,000 x 43.33%) $ 6,500.00 Recapture with cap and minimum applied ($15,000 x .01) x 24 $ 3,600.00 . . . #2 P d - ropertv va ue ecreases Assessed value of home at time of loan $ 150,000.00 Assessed value of home at time of sale $ 125,000.00 Difference $ 25,000.00 Percent increase/decrease -16.67% Housing rehabilitation loan amount $ 15,000.00 House sold at 24 months from loan date Recapture before cap or minimums applied ($15,000 x -16.67%) $ (2500.50) Recapture with cap and minimum applied (-$2,500.50 < $0) $ 0.00 Page 3 · Loans will be secured through Deed of Trust with City in second or third position behind a secured first mortgage · Fee-simple ownership through a mortgage preferred; other arrangements will be reviewed on a case by case basis · Borrower pre-rehabilitation indebtedness must not exceed 100% of most recent Kitsap County assessment · Loan due in full upon sale, transfer or payoff · Subordination ./ City will consider subordination upon refinance of first mortgage if new loan conforms to City of Bremerton Underwriting Standards ./ If new loan does not conform to City standards, refinance will trigger payoff of loan . Default: · Loans not paid in full after the 15 year term will be considered in default. · City of Bremerton will send notices to property owners informing of default status. · AII/oans must be paid in full at sale, transfer or refinance of property. · Truth in Lending: Program and program staff will abide by TILA guidelines and practices in administration and development of program (12 CFR 226) · City of Bremerton will provide borrower with required TILA disclosures 7. Rehabilitation · Rehabilitation Activity Priorities (in order) · Health and Safety improvements and repairs · Major Housing Systems to ensure long-term viable housing ./ Heating, Electrical, Plumbing, Structural (including roofing) · Exterior cosmetic improvements ./ If an exterior blighting condition exists, up to 10% of total project budget should be set aside for long-lasting, cost-effective and easy-to-maintain exterior cosmetic improvements · All qualified repairs should seek to improve energy efficiency in a cost effective manner wherever possible · Modernization: not more than 25% of loan may be used for modernization only if funds available AND use is restricted to improvements necessary for livability, ie: creating more bedrooms in overcrowded homes. · Work must be expected to last 20 years · All repairs must be occupant appropriate Page 4 · Ineligible Rehabilitation Activities · Program funds may not be used to purchase moveable fixtures, furniture, etc, that are not an integral part of the housing structure or major housing systems · Program funds may not be used for non-essential luxury upgrades or unnecessary cosmetic/decorative improvements which increase the project's materials or labor costs. · Program funds may not be used to purchase, repair or maintain non-essential appliances or housing systems · Program funds may not be used to purchase construction equipment or tools. · Program funds may not be used for new housing construction. · Additions not allowable unless needed to alleviate overcrowding. 8. Contracting Policies · Preferred use of only one contractor for all work (ensure completion, timeliness, and cost contai n ment) . Two or more competitive bids required . Contractor must be registered, licensed, insured, bonded . Self-contracting not allowed under the Program . All work will be monitored and must be accepted by City of Bremerton Community Development or its agent prior to payment of all construction draws. . Work must be completed within 4 months of Notice to Proceed unless otherwise specified in contract · Minority and women-owned contracting businesses encouraged to participate . City will consider, on a case by case basis: · Use of specialty contractor, such as a finish contractor, carpenter, plumber, HV AC contractor, roofer, etc. ./ Must have prior City or agent review and approval ./ Must obtain two or more competitive bids ./ Contractor must be able to complete all miscellaneous work-not just specialty work ./ Must provide detailed work list including specifications ./ Work must be completed w/in 4 months of Notice to Proceed unless otherwise specified in contract 9. Tenant Relocation · Relocation costs are an eligible rehabilitation cost, and must be established as part of overall project budget · It is expected that most projects will not require relocation · If relocation is required, City will comply with Federal law 10. Non-Discrimination Policy · Program will not discriminate on basis of homeowner's race, color, religion, sex, sexual preference, or national origin when selecting eligible projects Page 5 Page 6 11. Marketing of program . Prepare flyer with basic program and contact information . Post information on City of Bremerton Community Development webpage . Advertise Program to City and County code enforcement departments; receive referrals from City code-enforcement officers . Advertise Program to local agencies providing similar services; receive referrals from local agencies . With homeowner's permission, locate sign at project site indicating project financing through City Housing Rehabilitation Program with website for more information . Mail flyers with program information to target neighborhood homeowner-residents . Press releases, public notices and advertisements . Provide information to neighborhood associations . Provide program information to Senior-oriented services PROGRAM ADMINISTRATION I. Application . Application of Interest shall be provided by City CDBG; program information and application guidance will be available from City CDBG . Application of Interest shall be submitted to City CDBG for preliminary review . Preliminary review criteria includes but is not limited to: · Complete application; incomplete applications will be denied · Verify home is located within Bremerton city limits based on Kitsap County Assessor's data · Rehabilitation request meets guidelines described in Program Description · Income information meets eligibility guidelines described in Program Description (subject to verification) · Conforms with intent of Program to ensure basic housing needs of low and very-low income City residents . City CDBG will notify applicant if project is eligible for a property inspection based on preliminary review. · If application does not pass preliminary review, City CDBG will notify applicant in writing . Applications passing preliminary review will be assigned a project number and referred to City contracted Construction Manager ("CM") · CM will schedule property inspection with homeowner . All applications will be entered into Program database with application status noted. Denied applications will be closed out II. Property Inspection 1. Initial property inspection/assessment by CM . Creation of work write-up · Include "before" photos to show condition and demonstrate need · Include list of needed repairs · Include line-item cost estimates · Include proposed/preferred solution, with specifications and drawings · Include rough time and cost estimate to assist City CDBG staff assess scope of work and fit with program capacity · Include scope estimate of abatement issues present (asbestos or lead) · Include estimate of homeowner displacement, if any · Work write-up will be completed in City CDBG approved format . CM and City CDBG will jointly review inspection · Ensure compliance with all applicable regulations · Ensure consistency with funding availability and borrower's approved loan amount 2. City CDBG will approve/deny application based on preliminary review, CM assessment and established criteria, which shall include but is not limited to the following: Page 7 · Whether structure condition warrants rehabilitation · Does scope of project fits Program funding capacity · Are requested repairs are necessary and eligible · Conforms with intent of Program to ensure basic housing needs of low and very-low income City residents 3. Upon approval, CM will seek contractor services for project III. Solicit and Select Contractor Bids 1. Bid Solicitation · Bids will be solicited via advertisement in area newspaper(s), and on the City of Bremerton website · At least 2 competitive bids required · Small Works Roster may be used as a resource . Bid must: · Conform to City CDBG approved bid format · Be complete · Address the following as per bid guidelines ./ Summary of Firm ./ Summary of Project Experience ./ Technical Approach ./ Fee Schedule . Eligible contractor criteria · Contractor must not be on the Federal Excluded Parties List System · Contractor must be lead safe certified, where appropriate · Contractor must be licensed, insured and bonded ./ Contractor must be licensed with the State of Washington and with the City of Bremerton, as required ./ Must provide proof of insurance with application in order to be considered. Proof of insurance will by provided to City of Bremerton Risk Manager ./ Must meet minimum insurance limits per guidelines outlined in City of Bremerton Public Works Bid Procedures 2. Bid Selection · The City of Bremerton reserves the right to reject any and all proposals based on guidelines outlined in City of Bremerton Public Works Bid Procedures · Finalize Contractor Plans · Finalize plans based on CM recommendations, submit to City CDBG · Finalize cost estimate; submit to City CDBG · Plan review by City CDBG and CM; approval to proceed · Finalize contract terms and conditions with contractor; sign contract Page 8 II. Construction 1. Contractor responsible for obtaining all necessary permits and licenses 2. Notice to Proceed issued by City CDBG. Project must be completed within 4 months of issuance of Notice to Proceed, unless otherwise specified in contract 3. Monitoring and acceptance of work by City CDBG and CM on a periodic basis (specify?) . Change orders · will be reviewed and approved or denied by City CDBG and CM · Only changes that fit into program eligibility requirement and affect the project budget by no more than 10% will be considered . 4. Draw inspection and payment . All draws will be reviewed by City CDBG with CM . Approval by City of Bremerton Community Development prior to payment of all construction draws. . City CDBG staff will coordinate payment and maintain record of funds drawn toward project . 5% retainage withheld until final inspection and sign off on Completion Affidavit 5. Certify completion . Walk-through by City CDBG with City contracted construction manager · Make punch-list · CM will take "after" photos to demonstrate work completion and satisfactory results · CM writes-up project report attesting to completion and prepares Completion Affidavit . All permits finalized . Punch list must be completed to the satisfaction of all parties . Completion Affidavit signed by borrower, City CDBG, and CM Page 9