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09-715Council File # Green Sheet # 30 � RESOLUTION g OF SAINT PAUL, MINNESOTA Presented by 1 SUBMISSION OF APPLICATION TO UNITED STATES DEPARTMENT OF 2 HOUSING AND URBAN DEVELOPMENT FOR GRANT FUNDS THROUGH THE 3 NEIGHBORHOOD STABILIZATION PROGRAM 2 UNDER THE AMERICAN 4 RECOVERY APID REIWVESTMENT ACT OF 2009 5 6 WHEREAS, the Neighborhood Stabilization Program 2 is an allocation of funds provided 7 under the American Recovery and Reinvestment Act of 2009 for additional activities under 8 Division B, Title III of the Housing and Economic Recovery Act of 2008, as amended, for the 9 purpose of assisting in the redevelopment of abandoned and foreclosed homes; and 10 i l WHEREAS, the City Council did approve submission of an application for funding through 12 the first Neighborhood Stabilization Program on November 19, 2008; and 13 14 WHEREAS, activities funded by the first Neighborhood Stabilization Program are currently 15 underway; and 16 17 WIiEREAS, the appropriate public comment process regarding the proposed use of 18 Neighborhood Stabilization Program 2 funds was conducted in accordance with the requirements 19 of the United States Department of Housing and Urban Development, including a public hearing 20 on June 25, 2009. 21 22 NOW, THEREFORE, BE IT RESOLVED, that Mayor Chris Coleman, as Chief Executive 23 Officer of the City of Saint Paul or his designated representatives, is hereby authorized and 24 directed to submit the Neighborhood Stabilization Program 2 application to the United States 25 Department of Housing and Urban Development in such form as prescribed by regulations of 26 said Department; and 27 28 BE IT FURTHER RESOLVED, that the Mayor or his designated representatives are 29 further authorized to submit to the United States Department of Housing and Urban Development 30 any assurances, certifications, technical changes or additional information that may be required 31 by said Department during their review of the City's Neighborhood Stabilization Program 2 32 application; and 33 34 BE IT FURTHER RESOLVED, that upon notification of approval of the City of Saint Paul's 35 Neighborhood Stabilization Program 2 funding, the City Council does hereby authorize the 36 proper City officials to execute grant agreements and contracts between the United States 37 Department of Housing and Urban Development and the City of Saint Paul; and 38 39 BE IT FURTHER RESOLVED, that the proposed activities include acquisitions, 40 rehabilitations, demolitions, redevelopment, land-banking, providing financial incentives, and 41 program administration; and 09-715 42 43 BE IT FINALLY RESOLVED, that the City will request approximately $45,860,000 to carry 44 out the proposed activities over three years. Requeste by Department of: Planytln & Ec omi D lopment BY i .- Form Sy: Attorney Adopted by Council: Date �� �/j�`'�/ Adoption Certified by Counc�l Secretary By _____C/� i� �i << Approve y a r: Date �[ L- � B Forzn Approved by Mayor for Submission to Counci] BY� �tC� ,c ,e`/ 9F1 AR.t.,.f.-._.o �.�. -.� �-►' . ` - • � . //.I � /II I . . r - j � Green Sheet Green Sheet 09 Green Sheet Green Sheet Green Sheet Green Sheet � oe,���,��,�ou��,�. o�e��,ua�d_ Green Sheet NO: 3071920 PE _Planning & Economic 2$-,JUN-09 Developme�t Contact Person & Ph e:— Department Sent To Person InitiaUDate Tom Sanch � 0 laonin & Economic Develo me 0 6-6617 I lannin & Economic Develo me De artmeni Director �9 2 ' Attarne Pete McCall � Must Be on Coun '1 Agenda by (Date): Number 3 uancial Services Director 08-JUL-09 For � Routing 4 avor's Office MavodASSistant Doc. Type: RESOLUTION Order 5 ouncil 0 6 i Cterk Citv Clerk E-Document Required: Y Document Contact: Contact Phone: ToWI # of Signature Pages (Ciip Ail Locations for Signature) Action Requested: Signature for City Council Resolution authorizing the submittal of an application to the U. S. Department of Housing and Urban Development for approximately $45 million in Neighborhood Stabilization Program 2 grant funds to undertake eligible activities to impact the effect of foreclosed and vacant housing in eligible neighborhoods. � Recommendations: Approve (A) or Reject (R): Personal Service Contracts Must Answer the Following Questions: Planning Commission 1. Has this personlfrm ever worked under a conVact for this department? CIB Committee Yes No Civil Service Commission 2. Has this person/frm ever been a city employee? � S'rA„F�' Yes Na 3. Does this person/firm possess a skill not normally possessed by any current city employee? Yes No Explain all yes answers on separate sheet and attach to green sheet. Initiating Probiem, Issues, Opportuniry (Who, What, When, Where, Why): The Ciry has a foreclosure and vacant housing crisis estimated at over 4000 properties. The federal government has made available, on a competitive basis, funds to underhake acrivities to stabilize the affected neighborhoods by controlling and improving the vacant housing stock for resale to eligible buyers. Advantages If Approved: The City, if successful in receiving NSP 2 funds, may affect approximately 700 foreclosed or vacant properties. Disadvantages If Approved: None, all prograzn acfivities are covered by the federal grant. Disadvantages If Not Approvetl: The opportunity to access federal funds to impact approximately 700 vacant properties may not present itself in the future. Totai Amount of Transaction: CosURevenue Budgeted: Funding Source: /(� r/k,.� ���� �� Activity Number. �,� Financiallnformation: G�„p� (Explain) !J � June 25, 2009 2:56 PM Page 1 09-715 June 16, 2009 City of Saint Paul Neighborhood Stabilization Program 2 (NSP2) American Recovery and Reimbursement Act of 2009 NSP2: Pronosed Uses of Funds and Target Geographv 09-715 The City of Saint Paul (City) intends to apply for grant funds through the Neighborhood Stabilization Program 2(NSP2) under the American Recovery and Reimbursement Act of 2009. This smnmary statement includes information regazding the proposed target geography, the proposed budget, and the proposed uses of the funds. Tlus document has also been posted on the City's website at www.stpaul.gov/nsp. Copies of ttris document are available by calling 651-266-6658. Persons with questions about this document may call Joe Musolf at 651-266-6594 or Tom Sanchez at 651-266-6617 for additional informauon. The City will accept comments concerning this proposed NSP2 plan snmmary from 17 June 2009 through 29 June 2009. Written comments may be mailed to Joe Musolf, 1200 City Hall Annex, 25 West Fourth Street, Saint Paul, MN 55102 ar emailed to joe.musolf@ci.stpaul.mn.us.ln addition, the City will accept comments in person at a public hearing scheduled for Thursday 25 June 2009 from 3:00 to 5:00 pm in Room 1307 of the Ciry Hall Annex. The City will submit the application for NSP2 funding to the United_States Department of Housing and Urban Development (AUD) on July 17, 2009. L Background on NSPZ NSP2 is an allocation of funds provided under the American Reinvestment and Recovery Act of 2009 (Public Law 111-005) (Recovery Act) for additional activities under Division B, Tifle III of the Housing and Economic Recovery Act of 2008 (Public Law 110-289) (HERA), as amended, for the purpose of assisting in the redevelopment of abandoned and foreclosed homes. Recipients will use funds awarded under this program to stabilize neighborhoods whose viability has been and continues to be damaged by the economic effects of properties that have been foreclosed upon or abandoned. Applicants will compete for up to $1.93 billion of NSP2 funds to carry out neighborhood stabilization progrTms. HUD will select NSP2 programs that integrate the following principles: retain Community Development Block Grant distinctive requirements; target and reconnect neighborhoods with the economy, housing mazket and social network of the community; rapidly arrest decline; assure compliance with NSP "deep tazgeting" requirement that no less than 25% of the funds be used to benefit individuals and families at or beIow 50% of t[ie azea median income; ensure Iongest feasible continued affordability; support projects that optimize economic activity and number of jobs created or retained or that will provide other long-term economic benefits; coordinate planning and resources; leverage resources and remove destabilizing influences; set aggressive, but achievable goals;and ensure accountability. II. Pronosed Target Geo�ranhv Figure 1 defines the census tracts wluch will be defined as "target geography" in the Saint Paul NSP2 program. The tazget geography is tfie specific geography where the NSP2 program activities will be carried out. The Saint Paul target geography selected both (1) masimizes the average HUD "need score" to assure a competirive applicarion, 09-715 and (2) holistically builds upon and leverages the success of recent and current neighborhood stabilizauon efforts undertaken by the City and its Housing and Redevelopment Authority (HRA). A more detailed explanation of these two points follows: (1) HLTD has provided two foreclosure related "need scores" atthe census tract level, one that is based on the estimated number and percentage of foreclosures and another that combines estimated foreclosure rate with vacancy rate. Both scores rank need from 1 to 20, with 20 being census tracts with the HUD-estimated greatest need. At a minimum, the proposed target geography must score an average of 18 using the higher of the two indices for each census tract in the program. The census tracts in the proposed Saint Paul target geography, as illustrated in Figure 1, have an average needs score of 19.4. Only those census tracts that scored either 19 ar 20 on either index were chosen. (2) Figure 2 illustrates the overlaps between the proposed NSP2 target geography and two significant recent and current neighborhood stabilization efforts undertaken by the City and its HRA: (a) the Invest Saint Paui (ISP) Iniriative, and (b) an eazlier round of HUD-funded Neighborhood Stabilization Program (NSPl) acriviries. These overlaps are significant because the establishment of the two previous program areas was based upon similar demonstrated geographic need indicators (see Figure 3), and because this overlap will allow the City to continue to cany out and build upon these ongoing activiries. A more detailed explanation of these two efforts follows: a. Through strategic revitalizarion strategies, the ISP Initiative will leverage an estimated $66,990,000 of public and private resources to four lazger neighborhoods and four more concentrated focus areas (see Figure 2) which aze disproportionately affected by recent economic and social downturns and persistent disinvestment. This work includes: organizational support and community outreach; rehabilitation; mortgage financing and incentives; strategic property acquisition; neighborhood commercial corridor revitalization; and some lazge redevelopment projects. For more informarion see www.stpaul.gov/isp. b. Current NSPl activities underway aze funded by a direct awazd of $4.3 million from HUD and an additional awazd of $4.5 million through the Minnesota riousing Finance Agency. Figure 2 iiiustrates the overlap between the proposed NSP2 tazget geography and a subset of the NSPl acrivity azea. This sub-geography (defined in NSPl as "market destabilizaflon" and "market collapse" azeas) is currenfly the focus of such acrivities as: acquisition; rehabilitation; demolirion; de- conversion of housing back to singie-family; land-banking; financial incentive tools; and a strong marketing partnership with lenders and realtors. For more information see www.stpaul.gov/nsp. 09-715 III. Prouosed NSP2 Activities and Budeet Within the Saint T'aul target geography, the City proposes to use NSP2 funds to rapidly arrest the decline, then stabilize these neighborhoods and posirion them for a sustainable role in a revitalized community. Measurable short term program outcomes will include, but noY be &miYed Yo: airesting decline in home values based on average saies price in targeted neighborhoods; and reducing or eliminating vacant and abandoned residential properly in targete�neighborhoods. The long term outcomes may include, but aze not limited to: increased sales of residential property in targeted neighborhoods; and increased median mazket values of real estate in targeted neighborhoods. The City will undertake the following activities in the following approximate quantities during the first three yeazs of NSP2: (i) Acquisition: 400 homes (2) Rehabilitation: 300 homes (3) Demolition of blighted siruciiues: 100 homes (4) Land-bank vacant lots for future re-use: 100 pazceLs (5) Provide financial incenrives to buyers: for 300 buyers It is anticipated that program income will be generated via sales of rehabilitated homes and developable lots. Therefore, a portion of NSP2 funds will be available for reuse in future years. The above quantities of activity are for the first three years of the proposed program. The full application will ontline projected total acrivity quantiues (re-use of program income) including future years. A summary of each activity and funding need follows: (1) Acquisition . 400 homes C� $40,000 average =$16,000,000 The City will acquire approximately 400 abandoned or foreclosed upon homes during the first three years of NSP2. Approumately 300 homes will be determined as feasible for rehabilitation. The remainder (appmximately 100) will be acquired for demolition and land-banldng. NSP2 guidelines require that any acquisition be at a discount off the current mazket appraised value. The City will acquire properties either via bulk purchase (through continued participation in the Nalional Community Stabilization Tmst's "First Look" process) or via other direct negotiations with property-owners. (2) Rehabilitation . 300 homes C$100,000 average =$30,000,000 The City will designate approximately 300 of the above acquired homes as feasible ior reuabilitation wituin the above-stated budget constraints within the first three yeazs of NSP2. Rehabilitation activity will be cazried out primarily by Community Development Corporations and other non- and for-profit development partners in the community. The City will deternune a sensible financial structure to minimize the risk and capital requirements of our development parhiers in ozder to expedite this activity. Rehabilitation activities will comply with all NSP and City requirements including the Interim Saint Paul PED/HRA Sustainability Initiative. (3) Demolition . 100 homes @ $15,000 average = $1,500,000 The City will designate approicimately 100 of the above acquired homes as blighted and will remove these destaUilizing influences via demolition. 09-715 (4) Land-Banking Activities .$600,000 for land-bank operations and for holding costs The 100 vacant parcels ihat aze cleazed by NSP2 demolition acrivity will be held in land-bank status for future re-use. The City will partner with the Twin Cities Community Land Bank to carry out this activity. NSP2 funds will be used to fund the establishment of the land-bank enrity and will be used to cover the ongoing cazrying costs and maintenance of land-banked property. (5) Financial Incentives . for 300 buyers C� $15,000 average The City will establish financing mechanisms for purchase and redevelopment of foreclosed upon homes and residential properties, including such mechanisms as soft- seconds, contracts-for-deed, and shared-equity loans for low- and moderate-income homebuyers. These products will be available for buyers of either NSP2 funded properties or other addirional eligible foreclosed or abandoned properties. In addirion to the acrivities summarized above, the City will also use NSP2 funds for administrative costs. It is anticipated that approximately 120 rehabilitated homes will be sold during the first three years of NSP2 at an average sales price of $100,000, resulting in program income of $12,000,000. This is reflected in the summazy budget below: Summary budget statement NSP2 ac5vities, including acquisirions, rehabilitafion and demoli6on will conanue beyond the initial three-yeaz period. Sales of rehabilitated homes and developable lots will continue to generate program income which wili be recycled to fund ongoing future NSP2 activities. IV. Focused Areas of Concentrated NSP2 Activitv Within the lazger Saint Paul NSP2 tazget geography, activity will be concentrated within approxunately ten small concentrated opportunity areas. Within each azea, NSP2 will fund approximately 40 acquisitions, 30 for rehabilitation and 10 for demolition and longer term land-bavking. These azeas of concentrated activity will be defined as two- or three- or four-square block sizes. This concentrated acrivity will be market-changing in these areas and the speciflc properties addressed in each area will more easily reinforce 09-715 and build upon each other and will provide for a more concise, focused marketing approach. These azeas will be defined through a comprehensive analysis wluch will consider at Ieast the foIlowing facYors: (i) results of ISP-funded community outceach reseazch (2) concentrated acquisition opporlunities (3) e�sting ueighborhood amenities (4) pattems of recent reinvestment (5) concentration of foreclosures and vacant buildings V. Other NSP2 Considerations (1) Affordability targeting - All NSP2 funds must provide benefit to persons whose income does not exceed 120% of azea median income. Also, 25% of each grant must be used for the purchase and redevelopment of abandoned or foreclosed upon homes or residenfial pmperties that will be used to house individuals or fauulies whose incomes do not exceed 50% of area median income. (2) Timeline — NSP2 funds must be expended at a zate of 50% within the first two yeazs of the pmgram and 100% within three years. The applications aze due to HL7D by July 17, 2009. HUD will make funding selec6ons by December 1, 2009. Funding could be under coniract by around January 1, 2010. 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