A LITTLE ABOUT YOU INTRODUCTIONS BASICALLY CDBG FOR NSP2 GRANTEES. Basically CDBG Slides - NSP2 Training Years of experience with CDBG?

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1 BASICALLY CDBG FOR NSP2 GRANTEES HUD - Office of Block Grant Assistance Communit mmunity Planning & Developm lopment A LITTLE ABOUT YOU Years of experience with CDBG? <1 yr 1-5 yr 6-10 yr 10+ yr Level of CDBG expertise Beginner (what s Part 570?) Some experience I can cite Part 570 in my sleep HUD, Office of Block Grant Assistance Slide 2 INTRODUCTIONS Name Community Organization & NSP2 Role CDBG activities carried out NSP2 eligible uses to be carried out HUD, Office of Block Grant Assistance Slide 3

2 COURSE STRUCTURE Agenda Exercises Training manual Training manual appendices Overheads Primarily CDBG: NSP adaptations shown in Green HUD, Office of Block Grant Assistance Slide 4 RULES Ask questions Keep side conversations to minimum Parking lot messages Please turn cell phones, etc. to silent mode Training - Amnesty for all HUD, Office of Block Grant Assistance Slide 5 LOGISTICS Timing of breaks and lunch Restrooms Hey, where s the coffee?? HUD, Office of Block Grant Assistance Slide 6

3 OVERVIEW BASICALLY CDBG CDBG HISTORY Authorized under Title I of the Housing and Community Development Act of 1974 OPEN SPACE LAND NEIGHBORHOOD DEVELOPMENT WATER AND SEWER URBAN RENEWAL GRANTS CDBG NEIGHBORHOOD FACILITIES REHABILITATION MODEL AND PUBLIC FACILITIES CITIES HISTORIC LOANS GRANTS PRESERVATION HUD, Office of Block Grant Assistance Slide 8 CDBG PRIMARY OBJECTIVES Development of viable urban communities, principally for low/mod persons, through: Decent housing Suitable living environment Expanded economic opportunity HUD, Office of Block Grant Assistance Slide 9

4 CDBG REGULATIONS Found at 24 CFR Part 570 Recent Rule changes due to: Statutory changes Increased flexibility & Faith-Based Organizations Brownfields Cleanup & Anti-Pirating Public Benefit Stds. for Econ. Dev. projects Major rule revisions: January & November 1995 April 1996 November 2000 September 2003 December 2005 May 2006 HUD, Office of Block Grant Assistance Slide 10 KEY DEFINITIONS Entitlement Program State CDBG Program CDBG Recipient/Grantee Consolidated Plan (Con Plan) Low and Moderate Income Person (LMI) Household v. Family HUD, Office of Block Grant Assistance Slide 11 TOP 10 CDBG Entitlement Grantees NEW YORK CITY $195,203,459 CHICAGO $90,582,706 LOS ANGELES $77,983,283 PHILADELPHIA $55,325,903 DETROIT $40,142,357 HOUSTON $32,769,402 LOS ANGELES COUNTY $32,219,273 CLEVELAND $25,908,893 BALTIMORE $25,179,425 SAN FRANCISCO $22,267,380 HUD, Office of Block Grant Assistance Slide 12

5 CDBG ROLES HUD s key partners in CDBG programs include: Entitlements Communities (cities and urban counties) States & Units of General Local Government (UGLGs) Subrecipients, CBDOs & CDFIs (will discuss in the next module) Contractors Beneficiaries HUD, Office of Block Grant Assistance Slide 13 NSP2 ROLES Single Entity Grantees Units of General Local Government (UGLG), State governments, Non-profit organizations Consortia Grantees Combinations of UGLGs, States, Non-profits Some include For-profit Partners Developers Contractors Beneficiaries HUD, Office of Block Grant Assistance Slide 14 NSP2 ROLES DEFINED Direct Grantee Consortium Member Developer Contractor Treated as recipient of grant? Compensation Administrative costs Procurement Must follow OMB Process YES YES NO (considered beneficiary or end user) Administrative costs Must follow OMB Process Fee No process specified NO Fee Selected BY procurement process Records Full NSP/CDBG Full NSP/CDBG Limited Limited HUD, Office of Block Grant Assistance Slide 15

6 CDBG MONEY FLOW Entitlement communities partners HUD Entitlement Subrecipients, CBDOs, CDFIs Contractors Beneficiaries States must award funds to UGLGs HUD, Office of Block Grant Assistance Slide 16 CDBG IMPLEMENTATION STEPS SUBMIT Consolidated Plan & Determine Program Delivery Method SELECT Eligible Activities: Meet a National Objective COMPLY with Other Federal Requirements ADDRESS Administrative & Financial Requirements IDIS Set Up & Fund Activity REPORTS MONITOR & Report Progress IDIS ENTER Accomplishments into IDIS HUD, Office of Block Grant Assistance Slide 17 ELIGIBLE ACTIVITIES Acquisition of real property Relocation and demolition Rehabilitation of residential and non-residential structures Construction of public facilities and improvements, such as water and sewer facilities, streets, neighborhood centers, and the conversion of school buildings for eligible purposes Public services, within certain limits Activities relating to energy conservation and renewable energy resources Provision of assistance to profit-motivated businesses to carry out economic development and job creation/retention activities Clearance and remediation including maintenance and environmental remediation Homeownership Assistance including principal and interest reduction, downpayment assistance, and closing costs HUD, Office of Block Grant Assistance Slide 18

7 NATIONAL OBJECTIVES Reg cite , All CDBG activities must result in one of the following: Benefit low/mod income persons Prevent or eliminate slums and blight OR Meet an urgent need HUD, Office of Block Grant Assistance Slide 19 INELIGIBLE ACTIVITIES Regulations expressly prohibit: Buildings for conduct of government For example, city hall improvements Exception for community service centers General government expenses For example, normal trash pick-up or operating the city s tax collection department Political activities Includes any cost related to political campaigns, including get out the vote drives HUD, Office of Block Grant Assistance Slide 20 INELIGIBLE ACTIVITIES (cont.) The following are generally not allowed, except under specific circumstances: New housing construction Income payments Purchase of equipment Operating and maintenance expenses We will cover the exceptions during the activity modules HUD, Office of Block Grant Assistance Slide 21

8 OTHER FEDERAL REQUIREMENTS CDBG activities must also meet other federal laws, regulations & requirements, including: Environmental review & compliance Davis-Bacon and related Acts (Labor) Uniform Relocation Act (URA) OMB Circulars (administrative, financial, audits) Fair Housing Handicapped accessibility Lead-based paint hazard reduction Chapters at end of the training manual summarize these requirements HUD, Office of Block Grant Assistance Slide 22 KEY QUESTIONS TO CONSIDER FOR CDBG IMPLEMENTATION What are our community development needs, especially for LMI persons? How can CDBG be used to address these needs? Do we have effective procedures for CDBG grant administration & oversight? Do we have a process for timely collection and reporting of outcome and eligibility data in IDIS? How will we evaluate and improve our program results and processes? HUD, Office of Block Grant Assistance Slide 23 CONSOLIDATED PLAN AND IMPLEMEN ENTATIONTION BASICALLY CDBG

9 THE CONSOLIDATED PLAN Needs determine activities and organizations to fund Components: Lead agency description Housing and homeless needs assessment Housing market analysis Strategic plan One-year action plan HUD, Office of Block Grant Assistance Slide 25 FALL /2008 CAPER must be submitted in IDIS no later than this Sept. 28, 2008 date (90 days after the end of the PY) July 1, Start 2008/2009 PY End of the 2007 Program Year June 30, Annual Action Plan Submitted to HUD Field Office (45 days before the start of the PY) HUD Reviews and Approves 2008 Action Plan May 16, 2008 Conduct Public Hearings and Present 2008 Action Plan Implement 2007 Program Activities for required 30-day public comment period Citizen Participation, input, consultations, and revise previous Consolidated Plan/Action Plan. Solicit RFPs for proposed activities Sept. 28, /2007 CAPER due to HUD (90 days after the end of the PY) FALL 2007 Complete 2006 Program Activities July 1, Start 2007/2008 PY June 30, 2007 End of 2006 Program Year HUD Reviews and Approves Consolidated Plan/2007 Action Plan May 16, PY Annual Action Plan Submitted to HUD Field Office (45 days before the start of the PY) Conduct Public Hearings and Present Consolidated/Action Plan for required 30-day public comment period Implement 2006 Program Activities Citizen Participation, input, consultations, and revise previous Consolidated/Action Plan FALL 2006 Solicit RFPs for proposed activities Sept. 28, /2006 CAPER due to HUD (90 days after the end of the PY) HUD, Office of Block Grant Assistance Slide 26 CON PLAN & CPMP CPMP = Consolidated Plan Management Process Optional tool to assist grantees in meeting the requirements of Con Plan Comprised of 19 different documents Allows grantees to submit Con Plan materials to HUD almost entirely in e-format HELP LINE Grantee may submit Con Plan, Action Plan & CAPER in format that they have used in the past May also combine parts of the CPMP with formats currently used by grantees HUD, Office of Block Grant Assistance Slide 27

10 THE CONSOLIDATED PLAN (cont.) Requires Citizen participation HUD Reviews and Approves Con Plan Submitted to local field office at least 45 days prior to start of program year August 16 is annual DEADLINE for submission Amendments can be made Annual performance reporting measured against Con Plan goals and activities HUD, Office of Block Grant Assistance Slide 28 WHO WILL MANAGE & IMPLEMENT ACTIVITIES? Grantees Options: Grantee staff Subrecipients Community-Based Development Organizations (CBDOs) Community-Development Finance Institutions (CDFIs) Faith-Based Organizations Contractors HUD, Office of Block Grant Assistance Slide 29 SUBRECIPIENT DEFINED A Public or Private nonprofit organization/ agency receiving CDBG funds from grantee for eligible activities A for-profit agency assisting microenterprises may also be a subrecipient Institutions of higher learning may be subrecipients Who is not a subrecipient? CBDOs are not automatically subrecipients Procured contractors are not subrecipients Beneficiaries of assistance are not subrecipients HUD, Office of Block Grant Assistance Slide 30

11 SUBRECIPIENT AGREEMENTS A written agreement MUST be executed before funds are disbursed Minimal required elements: Statement of work Records and reports Program income Uniform administrative & other federal requirements Suspension/termination & reversion of assets Conditions for religious organizations HUD, Office of Block Grant Assistance Slide 31 COMMUNITY BASED DEVELOPMENT ORGANIZATIONS Reg cite CBDOs may carry out only certain types of projects: Neighborhood revitalization Community economic development Energy conservation All activities undertaken by a CBDO must fall into 1 of these 3 categories HUD, Office of Block Grant Assistance Slide 32 CBDO ACTIVITIES Possible activities include (but are not limited to): New housing construction (can only be carried out by a CBDO) in CDBG Job training not subject to public service cap Neighborhood Revitalization Strategy Area (NRSA) public services not subject to the public service cap Other economic development activities HUD, Office of Block Grant Assistance Slide 33

12 CBDO REQUIREMENTS Organization must: Be organized under state/local law for specific community development activities Operate in specific geographic area within grantee s jurisdiction Have as its primary focus the improvement of economic/ physical/social aspect of service area, particularly for low/mod persons Have a governing body of at least 51% low/mod rep s HUD, Office of Block Grant Assistance Slide 34 COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS A community-based lending institution CDFI fund is managed by the Department of Treasury beginning in 1994 CDFIs have these characteristics: Promote community development Serve an investment area or targeted population Provide loans or development investments and development services Maintain accountability to residents Are not an agency of government HUD, Office of Block Grant Assistance Slide 35 CDFI FLEXIBILITIES Special consideration for CDFI activities under CDBG regulations Flexibilities apply regardless of whether CDFI funded by Treasury program or not For any CDFI, may aggregate jobs created/retained by all businesses for determining low/mod benefit HUD, Office of Block Grant Assistance Slide 36

13 CDFI FLEXIBILITIES (cont.) When CDFI charter limited to a 51% LMI investment area: Job activities qualified as meeting area benefit Scattered-site housing may be considered a single structure ED activities may be exempt from aggregate standards HUD, Office of Block Grant Assistance Slide 37 FAITH-BASED ORGANIZATIONS Rule changed in 2003 No longer need to set up separate nonprofit Can undertake all CDBG eligible activities but cannot: Support inherently religious activities Discriminate in employment on basis of religion for staff working on CDBG programs Discriminate in serving eligible beneficiaries HUD, Office of Block Grant Assistance Slide 38 CONTRACT ADMINISTRATORS Not a CBDO or subrecipient Must be competitively procured under Part 85 A state may use part 85, or its own procurement rules Use when activity: Is discrete Has a defined beginning and end date Is for a specific project HUD, Office of Block Grant Assistance Slide 39

14 ACTIVITY SELECTION PROCESS Subrecipients, CBDOs and CDFIs may be picked by the grantee in any manner Four typical models: Formal application process (or RFP) Limited application process RFQ process Open door (unsolicited) process Most grantees use a combination Helpful information on application contents & evaluation in the training manual HUD, Office of Block Grant Assistance Slide 40 NATIONA TIONAL OBJECTIVES BASICALLY CDBG NATIONAL OBJECTIVES Reg cite , All CDBG activities must result in one of the following: Benefit low/mod income persons Prevent or eliminate slums and blight Meet an urgent need HUD, Office of Block Grant Assistance Slide 42

15 LMI AREA BENEFIT NATIONAL OBJECTIVES LOW/MOD SLUM/BLIGHT URGENT NEED Area Benefit Limited Clientele Area Basis Spot Basis Housing Jobs Urban Renewal Urban renewal objective not allowed in state program HUD, Office of Block Grant Assistance Slide 43 LOW/MOD BENEFIT AREA BENEFIT Activities that benefit all residents of an area Typical activities: water/sewer, parks, community centers Must determine service area of activity Based on reasonable assumptions as to who would access the facility, service, etc. Area must be primarily residential HUD, Office of Block Grant Assistance Slide 44 LOW/MOD BENEFIT AREA BENEFIT (cont.) Area must be at least 51% LMI persons Typically use annual Census data (July 1) Some entitlement grantees are exception communities (these grantees are allowed to go below 51%) Can conduct survey using HUD approved methodology See guidance at Notice CPD HUD, Office of Block Grant Assistance Slide 45

16 LMI LIMITED CLIENTELE NATIONAL OBJECTIVES LOW/MOD SLUM/BLIGHT URGENT NEED Area Benefit Limited Clientele Area Basis Spot Basis Housing Jobs Urban Renewal Urban renewal objective not allowed in state program HUD, Office of Block Grant Assistance Slide 46 LOW/MOD BENEFIT LIMITED CLIENTELE Activities that benefit specific populations (e.g., services for seniors; homeless shelters; micro loan programs) Options for meeting limited clientele: 51% of participants are documented as LMI Participation limited to LMI only Presumed clientele Activity must exclusively serve: elderly, severely disabled adults, homeless persons, illiterate adults, migrant farm workers, abused children, persons with AIDS or battered spouses Nature and location indicate low/mod benefit HUD, Office of Block Grant Assistance Slide 47 LIMITED CLIENTELE (cont.) Some specific activities are unique Removal of architectural barriers (some activities); or Microenterprise activities with LMI owners; or Certain types of job training efforts HUD, Office of Block Grant Assistance Slide 48

17 LMI HOUSING NATIONAL OBJECTIVES LOW/MOD SLUM/BLIGHT URGENT NEED Area Benefit Limited Clientele Area Basis Spot Basis Housing Jobs Urban Renewal Urban renewal objective not allowed in state program HUD, Office of Block Grant Assistance Slide 49 LOW/MOD BENEFIT HOUSING This is the only L/M national objective for housing activities To meet the housing national objective, structures must be occupied by low/mod households Typical activities: homeowner unit rehab, rental acquisition and rehab, homebuyer assistance Documented based on unit occupancy: One unit structures occupied by LMI One unit of duplex occupied by LMI 51% of 3+ units LMI occupied by LMI HUD, Office of Block Grant Assistance Slide 50 LOW/MOD BENEFIT HOUSING (cont.) May have less than 51% LMI occupancy only under certain circumstances Assist the development cost of multi-family nonelderly new construction AND At least 20% of the units LMI occupied AND Portion of CDBG cost is no greater than LMI occupancy Aggregation allowed in some instances CDFI NRSA HUD, Office of Block Grant Assistance Slide 51

18 LMI JOBS NATIONAL OBJECTIVES LOW/MOD SLUM/BLIGHT URGENT NEED Area Benefit Limited Clientele Area Basis Spot Basis Housing Jobs Urban Renewal Urban renewal objective not allowed in state program HUD, Office of Block Grant Assistance Slide 52 JOB CREATION & RETENTION Activities related to economic opportunity Typical activities: business loans, commercial rehabilitation, infrastructure to a business In order to meet this criteria, activities must create or retain permanent jobs AND 51% of the jobs created/retained must be available to or held by LMI persons Jobs counted on full time equivalent (FTE) basis HUD, Office of Block Grant Assistance Slide 53 SLUM & BLIGHT NATIONAL OBJECTIVES LOW/MOD SLUM/BLIGHT URGENT NEED Area Benefit Limited Clientele Area Basis Spot Basis Housing Jobs Urban Renewal Urban renewal objective not allowed in state program HUD, Office of Block Grant Assistance Slide 54

19 SLUM AND BLIGHT AREA BASIS Activities designed to address dilapidated physical environment Not based on income of residents Typical activities: code enforcement, infrastructure, commercial rehabilitation Must be defined area & meet definition of slum/blighted area under state/local law AND HUD, Office of Block Grant Assistance Slide 55 SLUM AND BLIGHT AREA BASIS (cont.) Meet either (A) or (B) below: (A) The public improvements in the area are in a general state of deterioration (B) At least 25% of properties throughout the area experience 1 or more of the following conditions: Physical deterioration of buildings or improvements Abandonment of properties; Chronic high occupancy turnover rates or chronic high vacancy rates in commercial/industrial buildings; Significant declines in property values or abnormally low property values relative to other areas in community; or Known or suspected environmental contamination. HUD, Office of Block Grant Assistance Slide 56 URGENT NEED NATIONAL OBJECTIVES LOW/MOD SLUM/BLIGHT URGENT NEED Area Benefit Limited Clientele Area Basis Spot Basis Housing Jobs Urban Renewal Urban renewal objective not allowed in state program HUD, Office of Block Grant Assistance Slide 57

20 URGENT NEED NATIONAL OBJECTIVE Used to address emergency situations Typical activities: infrastructure, interim assistance, rehab of community facilities To meet the urgent need test: Existing conditions pose serious & immediate threat to health/welfare of community Existing conditions are recent or recently became urgent Generally 18 months Recipient cannot finance on its own Other funding sources not available HUD, Office of Block Grant Assistance Slide 58 NSP National Objectives vs. CDBG National Objectives CDBG National Objectives Benefit low/mod income persons (LMI) Prevent or eliminate slums and blight (SBA) Meet an urgent need NSP National Objectives ONLY ONE: Benefit low/mod/middle income persons (LMMI) Low/mod/middle Housing (LMMH) Low/Mod/Middle Area Benefit (LMMA) *Note that although NSP changes the low and moderate income requirement level of the CDBG program, the remaining requirements of 24 CFR (a) and (b) regarding area benefit, housing, and limited clientele benefit remain unchanged. HUD, Office of Block Grant Assistance Slide 59 Low Income Housing 25% Set-Aside LH 25 National Objective At a minimum 25% of NSP funds must create housing for low-income residents (50% of Area Median Income) 25% of total NSP2 funds, not beneficiaries; not applied to each activity ONLY abandoned or foreclosed residential properties Must provide Permanent Housing No group homes or shelters ***Grantees are encouraged to go above the 25% minimum HUD, Office of Block Grant Assistance Slide 60

21 LMI INCOME DOCUMENTATION Annual income definitions, options: Section 8 Annual Income (24 CFR Part 5) Census Long Form IRS 1040 Series (Long Form) Same definition must be used within programs or activities Income is that of all family or household members for upcoming 12-month period HUD, Office of Block Grant Assistance Slide 61 LMI INCOME DOCUMENTATION (cont.) Several options for documentation: Full 3 rd party documentation (e.g., an employer) Evidence of qualification under another program at least as restrictive as CDBG (e.g., public housing, etc ) Evidence that assisted person is homeless Verifiable self-certification from assisted person WARNING on using this method: If self-certification determined to be incorrect or fraudulent, project may be ineligible Referral from state, county or local employment agency or other entity that agrees to determine income and maintain documentation for grantee HUD, Office of Block Grant Assistance Slide 62 HOUSI USING AND D RELATED R D ACTIA TIVITIES BASICALLY CDBG

22 APPROACHES TO HOMEOWNER REHABILITATION Many rehabilitation program options Assistance can be in form of grants, loans, loan guarantees, interest subsidies Minor, moderate & substantial rehab possible; Grantee: May/may not involve bringing all items up to code May/may not adopt property or housing standards May include improvements to enhance livability of unit HUD, Office of Block Grant Assistance Slide 64 APPROACHES to HOMEOWNER REHABILITATION (cont.) Reconstruction: CDBG allows as rehab activity [24 CFR ] Same lot -- not necessarily standing at time of project commitment Manufactured housing is allowed, if part of the community s permanent housing stock HUD, Office of Block Grant Assistance Slide 65 APPROACHES TO HOMEOWNER REHABILITATION (cont.) Special purpose programs OK Energy efficiency and weatherization Emergency repair Handicapped accessibility CDBG entitlement regulations allows refinancing if part of rehab and makes that rehab affordable No refinancing only! HUD, Office of Block Grant Assistance Slide 66

23 HOMEOWNER REHAB ELIGIBLE COSTS Costs of labor and materials eligible Related eligible costs: Initial homeowner warranty premium Hazard insurance premium (except with grant) Flood insurance premium Lead-based paint testing & abatement Purchase of construction equipment not eligible Tool lending programs are OK (sweat equity approach) Be sure to follow CDBG rules on eligible rehab costs (States follow HCDA) PLUS A-87 cost reasonableness HUD, Office of Block Grant Assistance Slide 67 HOME PURCHASE ELIGIBLE ACTIVITIES Two ways to approach home purchase activities: Assistance to homebuyers Development assistance Eligible activities for assistance to homebuyers: As direct homeownership assistance -- now a separate & permanently eligible activity As a public service activity (subject to cap) HUD, Office of Block Grant Assistance Slide 68 HOME PURCHASE ELIGIBLE ACTIVITIES (cont.) Direct homeownership assistance means: Up to 50% of required downpayment Payment of reasonable closing costs Principal write-down Acquisition financing Acquisition of mortgages guarantees & PMI As public service, downpayment assistance only is eligible Individual Development Acct s (IDAs) Dedicated savings accounts Use program funds as match to owner s contribution Can deposit funds in IDA if family eligible HUD, Office of Block Grant Assistance Slide 69

24 HOME PURCHASE ELIGIBLE ACTIVITIES (cont.) Assistance for homeownership Acquisition with rehabilitation Activities in support of home ownership: Acquisition (if nonprofit/public developer) Infrastructure (if public ownership) Clearance and demolition New housing construction only by CBDOs as part of eligible CBDO project in CDBG In NSP, new construction is an eligible activity for any grantee not just CBDOs HUD, Office of Block Grant Assistance Slide 70 APPROACHES TO RENTAL HOUSING Many possible approaches: Acquisition Rehabilitation New construction Acquisition: Grantees subsidize the purchase In return units are rented to LMI persons at affordable rent Must be public or nonprofit purchaser HUD, Office of Block Grant Assistance Slide 71 APPROACHES TO RENTAL HOUSING (cont.) Rehabilitation Can be combined with acquisition CDBG mandates no standard Can do historic preservation Conversion = changing something into affordable housing Reconstruction = re-building same size structure on same site HUD, Office of Block Grant Assistance Slide 72

25 ELIGIBLE RENTAL PROJECTS Project ownership can be public or private Mixed-use buildings are allowed Can pay for both commercial and residential Mixed-income units are also possible Special needs projects are allowed SRO & transitional housing Can develop facilities but these are not housing Not subject to new construction ban Must be owned by public agency or nonprofit HUD, Office of Block Grant Assistance Slide 73 RENTAL HOUSING ELIGIBLE COSTS Expenditures may include: Labor & materials Refinancing (if necessary & appropriate) Energy efficiency improvements Utility connections Lead-based paint activities Rehabilitation services (loan processing, specs, etc.) Handicapped accessibility improvements HUD, Office of Block Grant Assistance Slide 74 NEW HOUSING CONSTRUCTION CDBG cannot generally be used to construct rental housing Exception for housing of last resort under URA Exception for CBDOs ( 105(a)(15) for states) Exception for special needs facilities (considered public facilities) CDBG can be used to support new construction Acquisition and disposition Site clearance and assemblage Site improvements HUD, Office of Block Grant Assistance Slide 75

26 HOUSING SERVICES Housing services may be eligible as: Public service activity subject to 15% Cap Part of other CDBG activity (program delivery) OR As separate activity when activities linked to HOME Program activities (HOME income limits apply) As public service, housing services may fit under Area Benefit or Limited Clientele of Low/Mod National Objective As part of CDBG or HOME housing activity, housing services must qualify under the Low/Mod Housing National Objective HUD, Office of Block Grant Assistance Slide 76 INELIGIBLE HOUSING ACTIVITIES New construction, unless by CBDO Direct mortgage guarantees Purchase of construction equipment Mortgage or utility payments, except when: As an emergency, can provide up to 3 consecutive months, with payments made to service provider When provided as a loan When provided by CBDO as part of CBDO project HUD, Office of Block Grant Assistance Slide 77 HOUSING NATIONAL OBJECTIVES Most common national objective is LMI housing Only L/M national objective that can be used To meet the housing national objective, structures must be occupied by low/mod households One unit structures occupied by LMI One of two duplex units occupied by LMI More than two units require 51% units occupied by LMI HUD, Office of Block Grant Assistance Slide 78

27 HOUSING NATIONAL OBJECTIVES Multi-family housing: 51% of units in each structure occupied by LMI households, AND Rents must be affordable; grantee determines affordable and makes public If carried out by CDFI within target area or in NRSA, may aggregate buildings to meet 51% HUD, Office of Block Grant Assistance Slide 79 HOUSING NATIONAL OBJECTIVES Some activities may qualify under Slum/ Blight Area Basis or Spot Basis If Slum/Blight Area Basis: Area must meet requirements & rehab must address deterioration Building must be substandard & all deficiencies must be addressed before less critical work done If Spot Basis, rehab limited to elimination of public health/safety issues HUD, Office of Block Grant Assistance Slide 80 NSP USES AND ACTIVITIES HERA defines five uses of funds Generally, uses of HERA funds must be CDBG eligible Some exceptions HUD has cross referenced HERA uses to CDBG activities HUD permission needed if CDBG activity not on list Need to understand key terms for types of eligible properties to understand uses HUD, Office of Block Grant Assistance Slide 81

28 NEW DEFINITION OF ABANDONED Abandoned A home or residential property is abandoned if either: a) mortgage, tribal leasehold, or tax payments are at least 90 days delinquent, or b) a code enforcement inspection has determined property is not habitable and owner has taken no corrective actions within 90 days of notice, or c) property is subject to court-ordered receivership or nuisance abatement related to abandonment pursuant to state or local law or otherwise meets a state definition of an abandoned home or residential property. HUD, Office of Block Grant Assistance Slide 82 NEW DEFINITION OF FORECLOSED Foreclosed: A home or residential property has been foreclosed upon if any one of the following conditions apply: a) the property s current delinquency status is at least 60 days delinquent, or b) property owner is 90 days or more delinquent on tax payments, or c) under state, local, or tribal law, foreclosure proceedings have been initiated or completed, or d) foreclosure proceedings complete and title transferred to intermediary aggregator or servicer that is not an NSP grantee, subrecipient, contractor, developer, or end user. HUD, Office of Block Grant Assistance Slide 83 DISCOUNT/APPRAISAL REQUIREMENTS When tax payments are 90 days delinquent, a property could be defined as either foreclosed and abandoned However, if the property meets both the definitions, the property should be considered foreclosed and the NSP discount and appraisal requirements would apply. HUD, Office of Block Grant Assistance Slide 84

29 ELIGIBLE USE A Eligible Use CDBG Eligible Activities A. Financing mechanisms Activity delivery cost for an eligible for purchase & activity (designing & setting it up) redevelopment of The financing of an NSP eligible foreclosed upon homes & activity such as soft second loans, residential properties loan loss reserve, equity sharing Housing counseling for program participants Other activities in Uses B-D HUD, Office of Block Grant Assistance Slide 85 Common Questions: Eligible Use A When is this activity used? Must it be used whenever financing is provided directly to homebuyer or developer? Can this activity be related to redevelopment into commercial property? HUD, Office of Block Grant Assistance Slide 86 ELIGIBLE USE B Eligible Use CDBG Eligible Activities B. Purchase and Acquisition rehabilitate homes and Disposition residential properties that have been Relocation abandoned or Direct homeownership assistance foreclosed upon, in Eligible rehabilitation and order to sell, rent, or preservation activities for homes redevelop such homes and other residential properties and properties Housing counseling for program participants HUD, Office of Block Grant Assistance Slide 87

30 Common Questions: Eligible Use B Does a unit count as foreclosed if it is purchased prior to completion of legal action? Can NSP funds be used to acquire a foreclosed property if the bank that foreclosed on the home has designated an asset manager as the seller? Can rehabilitation be done on units purchased by buyers out of foreclosure (without NSP assistance)? HUD, Office of Block Grant Assistance Slide 88 Common Questions: Eligible Use B (cont.) What criteria must be met for NSP funds to be used for rehabilitation of a private purchase? If vacant, abandoned, blighted property owes back taxes to grantee, can NSP funds be used to forgive tax liens as part of acquisition process? HUD, Office of Block Grant Assistance Slide 89 ELIGIBLE USE C Eligible Use C. Land banks for homes and residential properties that have been foreclosed upon CDBG Eligible Activities Acquisition Disposition (includes maintenance) Housing counseling for program participants Land Bank = government or non-government entity temporarily assembles, manages, disposes of homes Must operate in specific defined area 10 year reuse plan HUD, Office of Block Grant Assistance Slide 90

31 Common Questions: Eligible Use C Can land banked properties be rented and used while still held in land bank? What rules apply to re-use of land banked properties? What is national objective for land bank? HUD, Office of Block Grant Assistance Slide 91 ELIGIBLE USE D Eligible Use D. Demolish blighted structures CDBG Eligible Activities Clearance, for blighted structures only Must be blighted, defined in Action Plan Can be any type of unit or property Residential, commercial, industrial Must meet a national objective Some projects based on demo itself, most on re-use of site HUD, Office of Block Grant Assistance Slide 92 Common Questions: Eligible Use D How to determine the right national objective? Does change of use apply? Can a grantee do demolition of public housing? Can subrecipient purchase home, demolish it, and build new home in its place and sell it to eligible homebuyer? HUD, Office of Block Grant Assistance Slide 93

32 ELIGIBLE USE E Eligible Use E. Redevelop demolished or vacant properties CDBG Eligible Activities Acquisition Disposition Public facilities and improvements Housing counseling public services (limited to purchasers or tenants of redeveloped properties) Relocation New housing construction Direct homeownership assistance activities by CBDOs Rehabilitation Housing counseling for program participants Any property or unit type HUD, Office of Block Grant Assistance Slide 94 Common Questions: Eligible Use E Must new construction be done by CBDO? Can commercial properties be developed under this use? Can activities done under Eligible use E count towards the 25% set-aside? Can NSP funds be used for infrastructure charges such as roads, water, sewer lines, power lines, etc? HUD, Office of Block Grant Assistance Slide 95 INELIGIBLE USES If ineligible under CDBG, usually ineligible under NSP New construction is exception, CBDO not needed Ineligible under NSP: Foreclosure prevention Demolition of non-blighted structures Acquisition of property or structures that are not abandoned, foreclosed or vacant (eligible use E) HUD, Office of Block Grant Assistance Slide 96

33 INELIGIBLE USES (cont.) Need to be careful when addressing tax or other foreclosed properties owned by grantee Cannot use NSP funds to reimburse grantee for its tax-foreclosed units Can only pay for reasonable title transfer costs Can pay for back taxes as part of acquisition cost when foreclosed unit owned by private lender HUD, Office of Block Grant Assistance Slide 97 OTHER REAL PROPER OPERTY ACTI TIVITIESTIES BASICALLY CDBG OTHER REAL PROPERTY ACTIVITIES Acquisition possible when undertaken by public agency or nonprofit Must meet national objective based on end use Disposition involves selling property assisted with CDBG Can pay for transfer costs such as legal docs or preparation of legal documents Clearance is site clean-up or demolition Often is combined with other eligible activities HUD, Office of Block Grant Assistance Slide 99

34 TAX FORECLOSED (IN REM) HOUSING Covers eligible costs for properties acquired through tax foreclosure ( In Rem is Latin for power against the thing [a court s power to take property]) Not yet in regulations in statute Can do: Essential repair of units Operating expenses to maintain habitability Used to prevent abandonment and deterioration in LMI areas National objective is usually LMI area benefit Slum blight may be possible HUD, Office of Block Grant Assistance Slide 100 CODE ENFORCEMENT ACTIVITIES Costs for code enforcement eligible if: Enforcement takes place in a deteriorated or deteriorating area AND the enforcement is accompanied by public or private improvements or services Eligible costs include: Inspection (e.g., salaries and overhead) Enforcement (e.g., salaries and legal costs) Costs of correcting violations is not eligible as code enforcement, but may be eligible as rehab HUD, Office of Block Grant Assistance Slide 101 CODE ENFORCEMENT (cont.) Typically use Low/Mod Area Benefit Area must contain 51% low/mod persons and Area must be primarily residential in nature May also use Slum/Blight Area Basis Area must meet qualifying requirements Activity must address slum/blight conditions HUD, Office of Block Grant Assistance Slide 102

35 ELIGIBLE LEAD-BASED PAINT ACTIVITIES Costs for evaluation and reduction of lead hazards in housing Inspection Testing of surfaces Interim Controls or Abatement Relocation Lead paint evaluation and reduction is eligible as an independent activity even when buildings are not scheduled for rehab HUD, Office of Block Grant Assistance Slide 103 LEAD-BASED PAINT ACTIVITIES (cont.) Typically use LMI Housing national objective (LMH) One unit structures occupied by LMH One of two duplex units occupied by LMH More than two units require 51% units occupied by LMH Slum/Blight Area Basis also possible Area must meet requirements Activity must address slum/blight conditions HUD, Office of Block Grant Assistance Slide 104 HISTORIC PRESERVATION ACTIVITIES Funds may be used for preservation, rehabilitation, or restoration of historic properties public or private Historic properties include those: Listed or eligible to be listed in the National Register of Historic Places Listed in a State or local inventory of historic places Designated as a State or local landmark or historic district by appropriate law or ordinance HUD, Office of Block Grant Assistance Slide 105

36 HISTORIC PRESERVATION ACTIVITIES (cont.) Range of national objectives possible: Low/Mod Housing criteria, if residential Low/Mod Area Benefit, Limited Clientele, or Job Creation/Retention if non-residential Slum/Blight Area Basis, Spot Basis, or Urban Renewal (possible for entitlements only) HUD, Office of Block Grant Assistance Slide 106 RENOVATION OF CLOSED BUILDINGS CDBG can be used to transform obsolete buildings into new uses, such as: Housing Note: Renovation is not considered new construction Economic development projects Public facilities National objective depends upon the end use of the building HUD, Office of Block Grant Assistance Slide 107 HANDICAPPED ACCESS Carry handicapped accessibility improvements by removing barriers Eligible under rehab activity if carried out on existing residential, commercial, or industrial property Otherwise, must be carried out as part of another eligible activity (e.g., public facility) National objective depends upon activity Typically low mod limited clientele HUD, Office of Block Grant Assistance Slide 108

37 ENERGY EFFICIENCY Wide range of activities possible: Weatherize home or apartment building Install solar and wind equipment Finance energy-efficient rehabilitation Establish energy standards, including recognition of the use of energy star for appliances and buildings Provide audits and home energy ratings Develop energy facilities Eligible activity category depends on type Must meet a national objective Will depend on type of energy efficiency activity HUD, Office of Block Grant Assistance Slide 109 GREEN BUILDING INVESTMENTS Alternative materials Recycled materials Low VOC paint Formaldehyde-free cabinets Solar panels Green roofing HUD, Office of Block Grant Assistance Slide 110 BROWNFIELDS REMEDIATION & DEVELOPMENT Brownfields are vacant or underused industrial sites with environmental contamination CDBG use for: Acquisition Remediation (under clearance) Redevelopment for economic development Other eligible activities as applicable National objective based on type of activity funded New flexibility in spot slum blight national objective for brownfields Brownfields Economic Development Initiative Grants (BEDI) may be available HUD, Office of Block Grant Assistance Slide 111

38 PUBLIC FACILITIES BASICALLY CDBG ELIGIBLE PUBLIC FACILITIES ACTIVITIES Infrastructure Streets, sidewalks Water, sewer Neighborhood facilities Parks, playgrounds Recreational facilities Facilities for special needs populations Homeless shelters Group homes HUD, Office of Block Grant Assistance Slide 113 PUBLIC FACILITIES AND NSP2 Public facilities ONLY allowed under Redevelopment (Use E) NSP2 Redevelopment ONLY for Housing (No parks, gardens, homeless shelters) HUD, Office of Block Grant Assistance Slide 114

39 PUBLIC FACILITIES AND NSP2 (cont.) Examples of acceptable NSP2 public facilities: Water lines in public street for affordable housing project Public sidewalks adjacent to redeveloped apartment complex Public streets in redeveloped NSP subdivision CAN DO PUBLIC IMP S, THEN TRANSFER TITLE HUD, Office of Block Grant Assistance Slide 115 INELIGIBLE PUBLIC FACILITIES ACTIVITIES Maintenance and repair of public facilities Exception for handicapped accessibility Operating costs Exception for costs related to operating a CDBG public service activity Buildings for general conduct of government (e.g., city hall) Some exceptions HUD, Office of Block Grant Assistance Slide 116 PUBLIC FACILITIES NATIONAL OBJECTIVES Infrastructure improvements will typically qualify under: Low/Mod Area Benefit Surveys common for small service areas within Census Tracts (must have HUD approved survey methodology) Low/Mod Limited Clientele (facilities for persons with special needs) LMI Housing national objective used IF public improvements are for purpose of providing Low/Mod Housing HUD, Office of Block Grant Assistance Slide 117

40 PUBLIC SERVICES BASICALLY CDBG ELIGIBLE PUBLIC SERVICE ACTIVITIES Wide range of public services possible Includes services related to: Employment Job training Crime prevention/public safety Child care Health Health services Substance abuse services HUD, Office of Block Grant Assistance Slide 119 PUBLIC SERVICE ACTIVITIES (cont.) In CDBG, annual obligations for public service activities may not exceed: 15% of annual entitlement grant PLUS 15% of last year s program income In NSP, the only eligible public service activity is homebuyer counseling (though this can also be an activity delivery cost) HUD, Office of Block Grant Assistance Slide 120

41 ECON ONOMICOMIC DEVELOP LOPMENT AND SECTION 108 BASICALLY CDBG ELIGIBLE ECONOMIC DEVELOPMENT ACTIVITIES Special economic development activities Community-based development organizations Technical assistance to businesses Microenterprise activities Commercial rehabilitation Infrastructure to assist businesses Job training HUD, Office of Block Grant Assistance Slide 122 SPECIAL ECONOMIC DEVELOPMENT ACTIVITIES Acquire, construct, rehabilitate, reconstruct or install commercial/industrial buildings or equipment By recipient or subrecipient only Assistance to for-profit businesses Economic development services in connection with special economic development activities HUD, Office of Block Grant Assistance Slide 123

42 SPECIAL ECONOMIC DEVELOPMENT (cont.) Special economic development has flexibility in types of assistance to businesses Grants Loans Guarantees Technical assistance & support services May meet several different national objectives; depends on business & location Triggers the requirement for public benefit standards HUD, Office of Block Grant Assistance Slide 124 TECHNICAL ASSISTANCE TO BUSINESSES Helps reduce risk of business failure Often focused on business plan development or legal and accounting issues Often offered in conjunction with financial assistance Critical to programs directed to start-ups DUNS # not required for TA HUD, Office of Block Grant Assistance Slide 125 MICRO ENTERPRISE ASSISTANCE CDBG can fund micro enterprise assistance Micro enterprise defined as: Owners or persons who work toward developing, expanding or stabilizing a business Commercial enterprise with employees (including owner) Note: This definition differs from SBA HUD, Office of Block Grant Assistance Slide 126

43 COMMERCIAL REHABILITATION Rehabilitation of commercial or industrial structures (a)(3) If private, for-profit owner: Rehabilitation limited to exterior of building and correction of code violations Other improvements must be carried out under the special economic development category Not subject to public benefit standards if carried out under (a)(3) HUD, Office of Block Grant Assistance Slide 127 SECTION 108 Loan Guarantees Method of expanding CDBG funds by using future CDBG grant as collateral to borrow funds Section 108 process basics: 1. Community applies to HUD 2. Based on community s pledge, HUD issues promissory notes 3. $$$ from sale of notes used for Section 108 eligible project 4. Notes are repaid HUD, Office of Block Grant Assistance Slide 128 OTHER ELIGIBLE ACTIV TIVITIESTIES BASICALLY CDBG

44 OTHER ELIGIBLE ACTIVITIES Many other CDBG eligible activity options not discussed in detail in these webcast sessions, including: Interim assistance Relocation Loss of rental income Technical assistance Assistance to institutions of higher learning Payment of non-federal share Urban renewal completion HUD, Office of Block Grant Assistance Slide 130 RELOCATION Must comply with the URA and 104(d) May pay for: Temporary relocation Permanent relocation May be related to CDBG-assisted project or other activity HUD, Office of Block Grant Assistance Slide 131 RELOCATION (cont.) National objective depends on whether relocation is voluntary or required If required under URA: Meets a LMI national objective if the associated CDBG project meets national objective If voluntary: Can qualify based on re-use of the property OR Income of assisted recipients Activity itself does not need to meet national objective HUD, Office of Block Grant Assistance Slide 132

45 LOSS OF RENTAL INCOME Used to compensate owners for loss of rental income due to CDBG activities Used while holding units pending relocation of displaced households Not used to simply cover on-going rental losses National objective based on objective for original CDBG activity HUD, Office of Block Grant Assistance Slide 133 REVITA TALIZATION STRATEGIES BASICALLY CDBG LOCAL REVITALIZATION AREAS CDBG grantees are allowed to designate geographic target areas May offer funding or certain types of programs in only those areas No HUD requirements on how to designate, criteria for selection of target areas State or local law may apply Indicate the designation of such areas in Con Plan/Action Plan IDIS project set-ups HUD, Office of Block Grant Assistance Slide 135

46 NEIGHBORHOOD REVITALIZATION STRATEGY AREAS Multi-faceted approach to address needs in neighborhoods Targets resources and efforts Approved strategies offer flexibility in using CDBG Done as a part of or amendment to Consolidated Plan HUD is developing new notice HUD, Office of Block Grant Assistance Slide 136 FINA NANCIAL L MANAGM NAGEMENTNT BASICALLY CDBG GENERAL ADMIN VS. ACTIVITY DELIVERY Direct cost of carrying out activity is considered activity /program delivery cost Example: cost of running a rehab program (taking applications, writing specs, inspections, etc.) Other = general administration General administration is capped at 20% for CDBG This cap is set at 10% for NSP HUD, Office of Block Grant Assistance Slide 138

47 GENERAL ADMIN AND PLANNING COSTS General management, oversight & coordination Two options for charging salaries: Entire amount Pro rata share Direct v. indirect Must maintain supporting documentation by timesheets or indirect cost allocation plan HUD, Office of Block Grant Assistance Slide 139 ADMINISTRATIVE AND PLANNING COSTS (cont.) Other eligible admin/planning functions include: Public information Fair Housing Preparation of Consolidated Plan Submission of applications for Federal programs Admin expenses to facilitate housing Overall program management of: EZ/ECs HOME program Planning, policy work, and studies HUD, Office of Block Grant Assistance Slide 140 ACTIVITY DELIVERY COSTS (ADC) Some costs related to administering programs may be charged to the activity Activity delivery costs for staff & subrecipients Rehabilitation delivery costs HOME project delivery costs Housing counseling Energy auditing Work specifications Loan processing Inspections Tenant selection Management of TBRA None of these project delivery costs count against the CDBG admin cap HUD, Office of Block Grant Assistance Slide 141

48 ADMIN VS. ADC Ex. RESIDENTIAL REHAB PROGRAM Phases of CDBG Grantee Tasks Activity Delivery General Administration Development Managing comprehensive project design issues, site acquisition, and relocation Analyze sub-market where project is proposed for need, rent levels, costs, etc. Analyze overall market conditions and develop financial guidelines. Pre- Development Promoting municipal CDBG funded programs and activities Create and produce brochure for specific project. Present project to housing developers and notify them of upcoming request for proposals (general community promotion is ineligible). Design and oversee overall marketing plan. Announce marketing plan to elected officials and chief executive. HUD, Office of Block Grant Assistance Slide 142 ADMIN VS. ADC Ex. RESIDENTIAL REHAB PROGRAM Phases of Development CDBG Grantee Tasks Writing and processing loan agreements Activity Delivery Negotiate specific loan terms and conditions for approved project; negotiate and close loan agreement for specific project. General Administration Negotiate with lenders community-wide to solicit participation in housing projects; develop standards and requirements for all loan agreements. Development Soliciting, reviewing and writing responses to request for approvals (RFP) Write and issue RFP, accept and process proposals. Manage staff development for selection process and provide necessary resources. HUD, Office of Block Grant Assistance Slide 143 ADMIN VS. ADC Ex. RESIDENTIAL REHAB PROGRAM Phases of Development Post- Development CDBG Grantee Tasks Writing and responding to correspondence related to construction issues Relocation activities Evaluation Activity Delivery Collect detailed data on individual projects and gather input from IDIS staff. Relocating existing residents in order to rehabilitate a specific housing project. Provide detailed analysis of individual projects for review by upper management. General Administration Meet with HUD officials, develop staff capacity for DRGR and other systems, provide reports to Mayor and Council. Budget setting, staff reviews Assess overall progress of all individual projects for timeliness, quality housing, and compliance; visit sites for ceremonial activities such as ground breaking or grand opening. HUD, Office of Block Grant Assistance Slide 144

49 ADMINISTRATIVE CAP Obligations for planning and administration may not exceed the amount of: 20% of annual entitlement grant and the estimated program income for the current Program Year 10% of NSP grant and 10% of Program Income Cap is imposed through annual appropriations legislation, not regs. HUD, Office of Block Grant Assistance Slide 145 CALCULATING ADMIN CAP Total entitlement grant amount $1,000,000 Surplus from Urban Renewal - Program income received by grantee and its subrecipients $50,000 Total: the basis for calculating the cap $1,050,000 Multiplied by 20 percent x 0.20 Maximum dollar level that may obligated and charged to Planning and $210,000 Capacity Building and Program Administration HUD, Office of Block Grant Assistance Slide 146 DETERMINING COMPLIANCE WITH THE ADMIN CAP Total costs under Planning and Administration for the program year $150,000 Add unliquidated obligations for planning and administration activities, $35,000 as of the end of the program year Subtract unliquidated obligations for planning and administration ($20,000) activities, as of the end of the preceeding program year Net obligations for planning and administration during the program $165,000 year Compare to maximum dollar level calculated above to determine $210,000 planning and administrative cost cap HUD, Office of Block Grant Assistance Slide 147

50 PRE-AWARD COST RULES Costs incurred prior to effective date of grant agreement Grant agreement effective date is latter of: Program year start date, OR Date Con Plan received by HUD Activity must meet applicable rules & requirements and must be in the Action Plan Total must not exceed $300,000 or 25% of grant amount, whichever is greater Pre-award rules for states are at the UGLG level HUD, Office of Block Grant Assistance Slide 148 REVOLVING FUND A separate fund/account for specific activities that generate repayments for reuse with similar activities (hence revolving funds) Must be in an interest bearing account Interest earned on fund remitted to HUD Interest paid by borrowers & loan repayments are program income HUD, Office of Block Grant Assistance Slide 149 LUMP-SUM DRAWDOWNS Lump-sum drawdowns may be used to establish a rehabilitation loan fund with a private financial institution If States wish to do lump sum, they ll use entitlement regulations Subject to certain limitations: Cannot exceed the grant amount for specific program Cannot be used solely for investment Rehabilitation administrative costs not eligible HUD, Office of Block Grant Assistance Slide 150

51 LUMP SUM DRAWDOWNS (cont.) Grantee must execute a written agreement with a lending institution First funds must be committed within 45 days of deposit Disbursements must begin within 180 days Financial institution must provide specific considerations in exchange for deposit Account must earn interest Interest is considered program income HUD, Office of Block Grant Assistance Slide 151 ESCROW ACCOUNTS Escrow account is a trust account held in a borrower's name to pay certain obligations Escrow accounts provide an excellent way to pay contractors on an owner s behalf CDBG rules on escrow accounts: Used for loans and grants for primarily residential structures Require an executed contract with homeowner authorizing escrow account HUD, Office of Block Grant Assistance Slide 152 ESCROW ACCOUNTS (cont.) Funds deposited in account must be used within 10 working days Limited to paying actual rehab costs Account must be interest bearing & interest must be paid to HUD quarterly Above requirements are for entitlements & are safe harbor for state programs HUD, Office of Block Grant Assistance Slide 153

52 PROGRAM INCOME What is PI? Money that comes back to the grantee or subrecipient that is generated by a CDBG activity: Proceeds from sale or lease of real property acquired and/or improved with CDBG Proceeds from lease of equipment purchased with CDBG Gross income from use/rental of real or personal property acquired, constructed, improved (less costs incidental to generation of income) HUD, Office of Block Grant Assistance Slide 154 PROGRAM INCOME (cont.) What is program income: Payments of principal & interest on loans made with CDBG Proceeds from the sale of loans or obligations secured by loans made with CDBG Interest earned on program income pending its disposition Funds collected through special assessments on properties not owned/occupied by LMI persons HUD, Office of Block Grant Assistance Slide 155 PROGRAM INCOME (cont.) What is not program income? Income received in a single year not exceeding $25,000 Income generated by some Section 108 activities Proceeds of subrecipient fundraising Funds collected through special assessment Subrecipients proceeds from disposition of property five years or more after grant close-out HUD, Office of Block Grant Assistance Slide 156

53 USE OF PROGRAM INCOME Program income Use for eligible CDBG activities Subject to all CDBG rules and regulations Examples: Procurement, labor standards, environmental, etc. Miscellaneous revenue is not subject to these rules Can expend up to 20% of total program income for administration for CDBG Can expend up to10% of program income on admin for NSP HUD, Office of Block Grant Assistance Slide 157 FIRST IN FIRST OUT Must use program income prior to drawing new CDBG funds from line of credit at HUD Program income cannot be held for specific projects Program income cannot be banked Exception: Revolving loan fund balances HUD, Office of Block Grant Assistance Slide 158 PROGRAM INCOME REMITTANCE Reg cite (b)(2)(iii) Grantee must determine at end of program year whether it has excess program income Excess must be returned to HUD s Fort Worth CFO for deposit into a separate grantee account HUD, Office of Block Grant Assistance Slide 159

54 CALCULATING EXCESS PROGRAM INCOME (1) Determine aggregate amount of program income held by grantee and subrecipients (2) Subtract immediate cash needs, revolving fund loan balances, lump sum drawdown balances, and cash used as security for Section 108 (3) Anything in excess of 1/12 of recent entitlement must be remitted HUD, Office of Block Grant Assistance Slide 160 SAMPLE CALCULATION Program income: $250,000 Less: Immediate cash needs ($ 20,000) Revolving loan fund balance ($180,000) Lump sum draw down ($0) Cash held for 108 ($0) Balance: $ 50,000 Annual CDBG entitlement: $1,920,000 1/12 annual entitlement: $ 160,000 Amount to be remitted: ($0) HUD, Office of Block Grant Assistance Slide 161 MISCELLANEOUS REVENUE Total amount of funds earned in a single year that is less than $25,000 not program income Funds earned from certain types of activities carried out by certain nonprofits not program income CBDOs Nonprofits serving local development needs (state program only) HUD, Office of Block Grant Assistance Slide 162

55 TIMELINESS Timeliness refers to how quickly the grantee is able to commit and expend CDBG funds Entitlement not allowed to have more than 1.5 times their annual allocation sitting in line of credit at U.S. Treasury If the grantee chronically has more than 1.5 times their allocation in their line of credit, HUD can withhold future grants until the grantee effectively spends their existing resources States do not have same requirement HUD, Office of Block Grant Assistance Slide 163 TIMELINESS FOR NSP2 Expenditure Deadlines: NSP2 recipients must expend 50 percent of their NSP2 funds within 2 years and 100 percent within 3 years These expenditure requirements refer to your original NSP2 allocation. Any program income expended would not count towards these expenditure deadlines. HUD, Office of Block Grant Assistance Slide 164 UNIFORM ADMINISTRATIVE REQUIREMENTS CDBG recipients must comply with federal admin guidelines & financial management requirements: Governmental entities/public agencies OMB Circular A CFR Part 85 (except states, which may adopt their own standard) Nonprofit subrecipients OMB Circular A CFR Part 84 (not applicable in state programs if part 85 is not used) HUD, Office of Block Grant Assistance Slide 165

56 OMB A-87/122 Establishes cost principles Grantee is responsible for efficient and effective administration Administer consistent with program rules and agreements All costs must be reasonable, allowable, and allocable HUD, Office of Block Grant Assistance Slide 166 ALLOWABLE COSTS A-87/A-122 Identifies allowable and unallowable costs Some costs are never allowed Examples of unallowable costs: entertainment, alcohol, bad debts Some costs are allowed but with certain conditions Some costs depend on the federal funding source HUD, Office of Block Grant Assistance Slide 167 ALLOWABLE COSTS (cont.) Criteria for allowability Must be reasonable Must conform to limitations Must be in accordance with GAAP Must not be included under another federally funded program Must be adequately documented HUD, Office of Block Grant Assistance Slide 168

57 COST REASONABLENESS Cost is reasonable when it does not exceed what a prudent person would incur under similar circumstances Consideration should be given to: Is cost necessary and ordinary? Market prices for comparable goods and services Individuals acted with prudence Deviations from set policy HUD, Office of Block Grant Assistance Slide 169 SOURCE DOCUMENTS Records must be supported by source documents Explain basis of costs incurred Actual dates of expenditure Examples include cancelled checks, paid bills, payroll, etc. HUD, Office of Block Grant Assistance Slide 170 COST ALLOCABILITY Determine where to charge costs Process known as cost allocation methods And a cost allocation plan (re: direct & indirect costs [see beginning of FM]) GAAP provides guidance HUD, Office of Block Grant Assistance Slide 171

58 PART 85/84 Part 85/84 covers two key topics: Effective financial management systems Procurement Also covers: Pre-award Property & equipment Records Close-out HUD, Office of Block Grant Assistance Slide 172 EFFECTIVE FINANCIAL MANAGEMENT SYSTEMS Under Part 85, effective financial management systems must: Record all financial transactions Relate expenditures to activities Ensure compliance with laws and regulations HUD, Office of Block Grant Assistance Slide 173 ACCOUNTING RECORDS Records should sufficiently identify source and application of funds Minimally, a records system must have: Internal Controls Chart of Accounts Transactions Identify & Track HUD, Office of Block Grant Assistance Slide 174

59 CIRCULAR A-133 If expend $500,000 or more in federal awards, get single or program audit Program audit allowed only if that agency expended funds under only one Federal program If less than $500,000, exempt from audit requirements for that year HUD, Office of Block Grant Assistance Slide 175 AUDIT REQUIREMENTS Audits due to federal clearinghouse no later than nine months after end of fiscal year Clearinghouse is supposed to send to HUD Recipients must resolve audit findings CPA mandatory HUD, Office of Block Grant Assistance Slide 176 CHANGE IN USE Applies to real property under a subrecipient s control acquired or improved with $25K or more of CDBG If changed, property must: Meet a national objective for five years after expiration of Subrecipient Agreement, OR Must return $ at current market value and treat as CDBG program income See 24 CFR HUD, Office of Block Grant Assistance Slide 177

60 CHANGE IN USE Applies to real property under the grantee s control acquired or improved with $25K or more of CDBG Must notify citizens and receive comments on change, & If changed, property use must: Meet a national objective for five years after close-out of the grant agreement, or Must return $ at current fair market value and treat as CDBG program income See 24 CFR Note: State CDBG rule is based on $100k of CDBG assistance HUD, Office of Block Grant Assistance Slide 178 PERFORMANCE MEASUREMENT, RECORDKEEPING AND MONITORING BASICALLY CDBG HUD CPD OUTCOME FRAMEWORK Outcome 1: Availability/Accessibility Outcome 2: Affordability Outcome 3: Sustainability Objective #1 Suitable Living Environment Accessibility for the purpose of creating Suitable Living Environments Affordability for the purpose of creating Suitable Living Environments Sustainability for the purpose of creating Suitable Living Environments Objective #2 Decent Housing Objective #3 Economic Opportunity Accessibility for the purpose of providing Decent Housing Accessibility for the purpose of creating Economic Opportunities Affordability for the purpose of providing Decent Housing Affordability for the purpose of creating Economic Opportunities Sustainability for the purpose of providing Decent Housing Sustainability for the purpose of creating Economic Opportunities Outcome Statements HUD, Office of Block Grant Assistance Sli de 180

61 RECORDKEEPING REQUIREMENTS Appropriate documentation necessary to ensure compliance Major categories of records to be kept: General administrative Financial Project/activity specific documents National objective compliance Subrecipients, CBDOs, CDFIs Other Federal requirements Have a strong and comprehensive filing system Use checklists, logs and cross indexing HUD, Office of Block Grant Assistance Slide 181 RECORD RETENTION Record retention Entitlements maintain records for four years following end of program year activity funded States and UGLGs maintain records for three years following closeout Consistent with Consolidated Plan requirements Public access to records Citizens must have reasonable access Citizens must be provided timely information HUD, Comptroller General have access HUD, Office of Block Grant Assistance Slide 182 MONITORING PURPOSE Monitoring fosters: Production/accountability Compliance with requirements Responsiveness to community needs Effective use of resources Good organizational performance HUD, Office of Block Grant Assistance Slide 183

62 MONITORING BASICS Everyone in the process gets monitored: HUD monitoring of grantee Grantee monitoring of: Grantee s own files Public agency partners Subrecipients For profit contractors and beneficiaries CBDOs Monitoring includes: Desk reviews (reports, documentation) On-site visits (review of files, staff interviews, etc.) HUD, Office of Block Grant Assistance Slide 184 HUD MONITORING OF GRANTEE PROGRAMS HUD and in-house grantee monitors should have access to all records on CDBG programs and projects Files should be accessible and in order If another entity is administering the project, grantee must have records to demonstrate compliance HUD s monitoring checklists are good way to prepare for visit Make sure all questions can be answered, documents can be found for each area HUD, Office of Block Grant Assistance Slide 185 HUD MONITORING OF NSP2 GRANTEES HUD has added specific monitoring checklists for the NSP1 and NSP2 Programs Go through the checklists. Make sure all questions can be answered, documents can be found for each area These checklists are referred to as Exhibits and can be found on HUDClips website: dh/6509.2/index.cfm NSP specific exhibits include 8-10 to 8-17 HUD, Office of Block Grant Assistance Slide 186

63 MONITORING TASKS Typical steps in the process: Develop an annual monitoring plan Consider doing risk assessments Conduct periodic desk reviews Conduct on-site assessments: Entrance meeting Review of files/other documents Exit meeting/interview Review letter & follow-up actions HUD, Office of Block Grant Assistance Slide 187 WHAT SHOULD BE MONITORED? Program benefit, including eligible activities and national objective Environmental Financial Procurement Labor Relocation & acquisition FHEO/504/section 3 Citizen participation/certifications Program management Program progress & reporting HUD, Office of Block Grant Assistance Slide 188 MORE INFORMATION ON CDBG For more information on CDBG, go to: HUD Field Offices HUD CDBG website ent/programs/index.cfm CDBG laws and regulations ent/programs/index.cfm HUD, Office of Block Grant Assistance Slide 189

64 MORE INFORMATION (cont.) For more information on CDBG, go to: Guide to Eligible Activities and National Objectives for Entitlements ent/library/deskguid.cfm Guide to Eligible Activities and National Objectives for States ent/library/stateguide/ HUD, Office of Block Grant Assistance Slide 190 OTHER FEDERAL L REQUIRE IREMENTS BASICALLY CDBG OTHER FEDERAL REQUIREMENTS Wide range are triggered by expenditure of CDBG funds: Procurement Environmental review Uniform Relocation Act and 104(d) Davis Bacon and Other Labor Standards Lead Based Paint Fair Housing and Equal Opportunity OMB Circulars (covered in the financial module) HUD, Office of Block Grant Assistance Slide 192

65 PROCUREMENT When a grantee elects to hire a contractor, whether to administer a program, complete a task or do construction, those contractors must be procured competitively. Both grantees and subrecipients must follow federal procurement rules when purchasing services, supplies, materials, or equipment. State and local governments and Indian tribes 24 CFR Part 85 Nonprofits, institutions of higher education and hospitals OMB Circular A-110, as implemented through 24 CFR Part 84. HUD, Office of Block Grant Assistance Slide 193 PROCUREMENT (cont.) In addition to federal regulations, most states and many local governments have laws and regulations regarding procurement. Each entity receiving CDBG funds (or NSP funds) should be aware of state and/or local laws that may affect procurement policies. Keep in mind if federal regulations differ from state or local laws, grantees should always follow the stricter requirement. In general, awards should always be made to the lowest responsive and responsible source. HUD, Office of Block Grant Assistance Slide 194 PROCUREMENT (cont.) Small purchase procedures allow recipients to acquire goods and services totaling no more than $100,000, without publishing a formal request for proposals or invitation for bids. Under the small purchases method, grantees send a request for quotes to potential vendors with a detailed description of the goods or services needed. In return, they receive competitive written quotations from an adequate number of qualified sources. HUD, Office of Block Grant Assistance Slide 195

66 PROCUREMENT (cont.) For contracts and goods over $100,000 you must use one of the following procurement procedures: Competitive proposals The grantee must publish a written request for submissions and then review these submissions based on established selection criteria. Two methods: RFP that includes qualifications and cost, OR an RFQ that focuses on expertise/experience and not cost (but still subject to a negotiation of fair and reasonable compensation). HUD, Office of Block Grant Assistance Slide 196 PROCUREMENT (cont.) Competitive sealed bidding Sealed bids require publicly solicited, sealed bids and a firm-fixed-price lump sum or unit price contract. It is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is lowest in price. HUD, Office of Block Grant Assistance Slide 197 PROCUREMENT (cont.) Non-competitive procurement may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids, or competitive proposals and one of the following circumstances applies: Where the item is available only from a single source; Where a public emergency or urgent situation is such that the urgency will not permit a delay beyond the time needed to employ one or the other procurement methods; or Where after solicitation of a number of sources, competition is determined inadequate. HUD, Office of Block Grant Assistance Slide 198

67 PROCUREMENT (cont.) For additional information on procurement please see: 24 CFR PART 85/84 Chapter 14 in your Notebook HUD, Office of Block Grant Assistance Slide 199 ENVIRONMENTAL L REQUIREM EMENTS BASICALLY CDBG ENVIRONMENTAL REVIEW Environmental review of CDBG projects required before any funds obligated Environmental review refers to process of looking at project for impact on environment and notifying the public of findings Resources: 24 CFR Part 58 & various other laws HUD, Office of Block Grant Assistance Slide 201

68 ENVIRONMENTAL REVIEW ENTITIES Responsible Entity (RE) Certifying Official Environmental Officer HUD, Office of Block Grant Assistance Slide 202 ENVIRONMENTAL REVIEW RECORD Written record of compliance with all applicable environmental requirements Legal challenges can be won or lost based on the completeness of the ERR ERR should contain all documentation: Project descriptions, maps, pictures, etc. Forms & checklists Most current HUD recommended formats are available from HUD Field Offices Notices Correspondence and relevant documents Public comments HUD, Office of Block Grant Assistance Slide 203 LIMITS ON ACTIVITIES PRIOR TO CLEARANCE No participant may commit or expend HUD funds prior to receiving state (or HUD) approval IF the activity would have an adverse environmental impact or limit the choice of reasonable alternatives Participant includes public or private nonprofit or for-profit entities or their contractors Activities that are exempt or categorically excluded not subject to 58.5 may proceed HUD, Office of Block Grant Assistance Slide 204

69 LIMITS ON ACTIVITIES PRIOR TO CLEARANCE Must ensure actions are not taken prior to receiving HUD approval It is OK to make: A statement of conditional funding or A non-legally binding agreement HUD, Office of Block Grant Assistance Slide 205 LIMITS ON ACTIVITIES PRIOR TO CLEARANCE For land acquisition projects, an option agreement (to purchase land) is allowable prior to HUD approval only when: It is subject to a HUD determination of environmental desirability, and It is of a nominal amount. HUD, Office of Block Grant Assistance Slide 206 PROJECT AGGREGATION Must group together & evaluate as a single project all individual activities which are related or are logical parts of a composite of contemplated actions Functional Aggregation Geographic Aggregation HUD, Office of Block Grant Assistance Slide 207

70 CLASSIFYING THE ACTIVITY Next, determine the classification of the activity Exempt Categorically Excluded ( Subject To or Not Subject To ) Requires Environmental Assessment Requires Environmental Impact Statement If more than one activity or classification, go with most stringent HUD, Office of Block Grant Assistance Slide 208 EXEMPT ACTIVITIES Activity is exempt when there is no effect on the environment Studies, plans and admin costs Public service activities with no physical impact What steps do you take? Document that the activity is exempt by completing proper forms Move forward with the activity HUD, Office of Block Grant Assistance Slide 209 CATEGORICALLY EXCLUDED ACTIVITIES Categorically Excluded means excluded from NEPA requirements Some activities still subject to other Federal Requirements Such as Historical Preservation, Floodplain impact, etc HUD, Office of Block Grant Assistance Slide 210

71 CATEGORICALLY EXCLUDED NOT SUBJECT TO ACTIVITIES NOT subject to activities include: Operating costs or supportive services Direct assistance to homebuyers for existing housing or housing under construction Predevelopment costs with no physical impact Steps for activities NOT subject to 58.5: Make sure activities not in Runway Clear Zone or on Coastal Barrier Island Complete & submit proper forms Proceed with the activity HUD, Office of Block Grant Assistance Slide 211 CATEGORICALLY EXCLUDED SUBJECT TO ACTIVITIES Acquisition, improvement, or rehabilitation of public facilities other than buildings Removal of material and architectural barriers Rehab & improvement of single family (1 to 4 unit) dwellings Rehab & improvement of multifamily dwellings provided the unit density isn t increased more than 20%, does not change to non-residential use & the est. cost of rehab is less than 75% of replacement cost HUD, Office of Block Grant Assistance Slide 212 CATEGORICALLY EXCLUDED SUBJECT TO ACTIVITIES An individual action on 1 to 4 dwelling units where there is a max of 4 units on any 1 site An individual action on 5 or more housing units developed on scattered sites when sites are more than 2,000 feet apart & there are no more than 4 units on any 1 site Acquisition (incl. leasing) or disposition of an existing structure provided its for the same use HUD, Office of Block Grant Assistance Slide 213

72 CATEGORICALLY EXCLUDED SUBJECT TO ACTIVITIES Steps to take for those activities Subject To 58.5: Prepare project description & map Prepare & submit Section 106 Review Form to SHPO Send project info. to relevant entities and request written determinations Begin to prepare the Statutory Worksheet HUD, Office of Block Grant Assistance Slide 214 CATEGORICALLY EXCLUDED SUBJECT TO ACTIVITIES Determine if in or impact on floodplains or wetlands If yes, apply Eight Step Process and publish notices Complete the Statutory Worksheet If determination is that project will NOT affect resources, converts to exempt -- sign form and file If project will affect resources, show mitigation, publish Notice of Intent to Request Release of Funds and submit required information to state Place all documentation in ERR Proceed with activity only after receipt of NOREC from state HUD, Office of Block Grant Assistance Slide 215 ENVIRONMENTAL ASSESSMENTS If project not Exempt or Categorically Excluded, an Assessment is required Steps to follow: Complete the first part of the Format II, incl. project description & map Prepare & submit Section 106 Review Form Send project info. to various agencies & request written determinations Complete the Modified Format II HUD, Office of Block Grant Assistance Slide 216

73 ENVIRONMENTAL ASSESSMENTS (cont.) Steps (cont.) Determine whether project will or will not have significant impact on environment If no significant impact: Publish Combined Notice of FONSI/Notice of Request for Release of Funds Put documentation in ERR Submit required information to state Proceed with project only after receipt of NOREC received from the state HUD, Office of Block Grant Assistance Slide 217 ENVIRONMENTAL NOTICES Publish notices in newspaper of general circulation or post in prominent public places NOTE: Floodplains/wetlands notices must be published - no posting allowed Send copies of notices to EPA, Corps, SHPO & other agencies & interested persons HUD, Office of Block Grant Assistance Slide 218 TIMING OF ENVIRONMENTAL NOTICES Notice Method Timing FONSI Published 15 days FONSI Posted 18 days NOI/RROF Published 7 days + 15 days for state NOI/RROF Posted 10 days + 15 days for state Combined FONSI & NOI/RROF Published 15 days for comment 15 days for objections Floodplain Notice of Early Public Review Floodplain Statement of Findings & Public Explanation Published (required) Published (required) 15 days 7 days HUD, Office of Block Grant Assistance Slide 219

74 LABOR STANDARDS BASICALLY CDBG LABOR STANDARDS DAVIS-BACON Davis-Bacon applies to all construction contracts over $2,000 involving CDBG funds Davis-Bacon is also triggered when an NSP-assisted property contains 8 or more units. A property is defined as 1 or more buildings on an undivided lot or on contiguous lots or parcels, which are commonlyowned and operated as 1 rental, cooperative or condominium project. Requires workers be paid at least minimum wages provided by Dept of Labor Acquisition, Demolition, and soft costs do not trigger Davis-Bacon HUD, Office of Block Grant Assistance Slide 221 DAVIS-BACON IMPLEMENTATION All bids & contracts subject to Davis-Bacon must contain standard clauses on requirements Hold a preconstruction conference to review requirements with contractor Prime or general contractor is responsible for full compliance, including lower tier subs Contract administrator enforces requirements and provides information to contractor HUD, Office of Block Grant Assistance Slide 222

75 DAVIS-BACON WAGE DECISIONS Decisions are needed to determine prevailing wages by worker classification Recipients get wage decisions through state or online Types: Building, Residential, Highway, Heavy Prime contractors must post wage decision All contractors need to use the right type of classification for each job or request additional classifications HUD guide provides definitions of key terms such as: Employee, apprentice, prevailing wage, trade HUD, Office of Block Grant Assistance Slide 223 WEEKLY PAYROLLS Prime contractors and subcontractors must submit certified weekly payrolls in timely fashion Content of the payroll form: Project information Employee information Work classification Hours Rate of pay Wages Deductions Net pay Statement of compliance HUD, Office of Block Grant Assistance Slide 224 PAYROLL REVIEW Recipient will conduct on-site review of employment on the project (HUD 11) Contractor must make employees available for interviews Prime contractor and recipient should review all payrolls Compare to wage decision & interviews Make sure calculations OK and deductions are documented Contractors must keep copies of payroll records HUD, Office of Block Grant Assistance Slide 225

76 RESTITUTION If underpayments, contractor will make restitution Steps include: Recipient notifies the prime contractor Computation of restitution & payment to worker Contractor submits correct payroll Recipient review of corrected payroll If workers not found, will escrow restitution and recipient will look for 3 years After 3 years, amount is credited to HUD HUD, Office of Block Grant Assistance Slide 226 OTHER LABOR LAWS Contract Work Hours & Safety Standards Act Workers shall not work more than 40 hours/week unless they get overtime & projects must comply with safety standards Copeland Anti-Kickback Act Requires payment once a week & only permissible payroll deductions Fair Labor Standards Act Federal minimum wage & overtime requirements HUD, Office of Block Grant Assistance Slide 227 DAVIS-BACON (cont.) The above apartment building contains more than 8 units and any rehab above $2k would trigger Davis Bacon HUD, Office of Block Grant Assistance Slide 228

77 DAVIS-BACON (cont.) In the same building, if windows were being installed in only three units for under $2,000 then Davis Bacon would not triggered. HUD, Office of Block Grant Assistance Slide 229 DAVIS-BACON (cont.) This four unit apartment would not trigger Davis Bacon HUD, Office of Block Grant Assistance Slide 230 DAVIS-BACON (cont.) In most cases, single family homes will not trigger Davis Bacon because they are single residential structures, the exception is explained in the following slides. HUD, Office of Block Grant Assistance Slide 231

78 DAVIS-BACON (cont.) Davis Bacon would not apply to the house, highlighted to the left above, because it s a single residential structure that is owner occupied, as is the house next to it. HUD, Office of Block Grant Assistance Slide 232 However, Davis Bacon would apply if all 8 single-family properties, highlighted in red, were owned and operated by the same person. Even though they are separate residential structures, if they are commonly owned and operated they would trigger Davis-Bacon. HUD, Office of Block Grant Assistance Slide 233 DAVIS-BACON (cont.) The above example shows contiguous residential townhouse structures, but these are individually owned properties, so they would not trigger Davis-Bacon. HUD, Office of Block Grant Assistance Slide 234

79 LEAD-BASED PAINT BASICALLY CDBG LEAD BASED PAINT REQUIREMENTS Lead rules generally apply to properties built prior to 1978 Certain types of rehab work exempt Properties tested & found not to have lead Properties where lead has been removed Rehab won t disturb paint surfaces Lead evaluation and treatment depends on level of assistance which is the lower of: Per unit rehabilitation hard costs (all funds) OR Per unit federal assistance HUD, Office of Block Grant Assistance Slide 236 LEAD PAINT REQUIREMENTS (cont.) Evaluation activity depends on level of assistance: Less than $5,000 = Paint testing $5,000 to $25,000 = Risk assessment More than $25,000 = Risk assessment Notification: Notice of Lead Hazard Evaluation to homeowner within 15 days of inspection Alternatively, can presume presence of lead & provide Notice of Presumption HUD, Office of Block Grant Assistance Slide 237

80 LEAD PAINT REQUIREMENTS (cont.) How to address lead depends upon amount of assistance: <$5k = repair surfaces to be disturbed using safe work practices $5k - $25k = interim controls using safe work practices & trained workers >$25k = abatement using safe work practices & certified supervisor & workers HUD, Office of Block Grant Assistance Slide 238 LEAD PAINT REQUIREMENTS (cont.) Clearance must also be performed Do NOT pay final payment to contractor before unit has passed clearance Provide Notice of Lead Hazard Reduction to property owner within 15 days of clearance test HUD, Office of Block Grant Assistance Slide 239 LEAD-BASED PAINT (NEW RULE) On April 22, 2008 EPA issued a new rule Beginning in April 2010, contractors performing renovation, repair and painting (RRP) projects that disturb lead-based paint in homes, child care facilities, and schools built before 1978 must be certified and must follow specific work practices to prevent lead contamination. There are some differences between the EPA RRP Rule and the HUD Lead Safe Housing Rule (LSHR). A major difference is that the LSHR requires clearance examinations. All housing receiving federal assistance must still comply with the LSHR. HUD, Office of Block Grant Assistance Slide 240

81 RELOCATION AND D TENANTT NT PROTE OTECTIONSTIONS BASICALLY CDBG WHEN IS THE URA TRIGGERED? Uniform Act When real property is acquired or persons displaced as a direct result of acquisition, demolition, and rehabilitation for a Federally funded project Applies to government agencies, private organizations and others Note: URA may be triggered if federal assistance is in any phase of project URA requirements apply to: Virtually all Federal programs, including CDBG/Section 108 loan guarantees Grants, loans, other contributions HUD, Office of Block Grant Assistance Slide 242 RELOCATION BASICS: WHO IS A DISPLACED PERSON? Family Individual Business, Farm, or Nonprofit Who Moves: Permanently as a direct result of a Federally-assisted project HUD, Office of Block Grant Assistance Slide 243

82 RELOCATION BASICS: RESIDENTIAL Residential displaced persons are eligible to receive: Advisory services & notices Minimum 90 Day notice to vacate (based on availability of comparable replacement dwelling) Replacement housing payments Possibly housing of last resort Moving expense payments HUD, Office of Block Grant Assistance Slide 244 RELOCATION BASICS: NONRESIDENTIAL Nonresidential displaced persons are eligible to receive: Advisory services & notices Minimum 90 Day notice to vacate Reestablishment expense payments (for small businesses) and moving expense payments OR Fixed payment HUD, Office of Block Grant Assistance Slide 245 RELOCATION BASICS: TEMPORARY RELOCATION Families who do not need to move permanently are entitled to: Advisory services, including notices Temporary relocation assistance (if applicable). Not to exceed 1 year Remain in DSS, suitable, affordable unit If no rent increase, unit is deemed affordable HUD, Office of Block Grant Assistance Slide 246

83 URA AND ACQUISITION Applies to wide range of types of purchases: Fee simple title Permanent easements Temporary easements necessary for the project Life estate Long term lease (50 years or more) HUD, Office of Block Grant Assistance Slide 247 PURCHASERS URA covers purchases by: Grantee Nonprofits with federal assistance For profits with federal assistance Agent or consultant acting on grantee behalf Homebuyers with federal downpayment assistance HUD, Office of Block Grant Assistance Slide 248 VOLUNTARY ACQUISITIONS Three possible: Grantee has eminent domain powers but won t use Grantee doesn t have eminent domain powers Purchases from government agency where buyer does not have eminent domain powers over that agency HUD, Office of Block Grant Assistance Slide 249

84 GRANTEE WILL NOT USE EMINENT DOMAIN Grantee must not intend to use its eminent domain powers if sale cannot be negotiated Property cannot be: Specifically required Part of a planned or designated area in which all or substantially all property in area will be purchased Private developer acting as agent of grantee is treated as grantee HUD, Office of Block Grant Assistance Slide 250 GRANTEE WILL NOT USE EMINENT DOMAIN (cont.) Must notify the seller: Grantee will not use the power of eminent domain Seller not eligible to receive relocation assistance Estimate of fair market value Appraisal not required, but determination made by someone with knowledge of real estate market HUD, Office of Block Grant Assistance Slide 251 DONATIONS Owners may voluntarily donate but Must be fully informed of rights Must acknowledge his or her decision to voluntarily relinquish payments due under URA Get it in writing! Keep in project file! HUD, Office of Block Grant Assistance Slide 252

85 INVOLUNTARY ACQUISITION Grantees must: Provide notices to the owner Need proof of delivery Provide URA notices and assistance to occupants Offer market value for the property Complete the purchase expeditiously New rule: with fy06 funds, eminent domain cannot be used for any acquisition not benefiting the public Generally applies to economic development and related activities Check before proceeding on eminent domain if not for housing or infrastructure related to public use HUD, Office of Block Grant Assistance Slide 253 PROCESS FOR INVOLUNTARY ACQUISITION General process: 1. Notify owner of the agency s interest in acquiring the property and their protections under the URA 2. Appraise the property and invite the owner to accompany the appraiser or prepare waiver valuation 3. Review the appraisal 4. Establish just compensation for the property 5. Provide owner with written offer and summary statement for property to be acquired HUD, Office of Block Grant Assistance Slide 254 PROCESS FOR INVOLUNTARY ACQUISITION General process (cont.) 6. Negotiate with owner for the purchase of property If negotiations are successful, complete the sale If negotiations are unsuccessful, consider an administrative settlement to complete the sale If negotiations are still unsuccessful, the agency should acquire the property through use of eminent domain HUD, Office of Block Grant Assistance Slide 255

86 SECTION 104(d) Some projects also subject to 104(d) Triggered only when CDBG or HOME funds are used for the project and there is: Demolition or conversion of units 104(d) addresses: People: Relocation assistance is provided for LOW- INCOME residents Units: One-for-one replacement is required when the stock of low/moderate housing is decreased HUD, Office of Block Grant Assistance Slide 256 TENANT PROTECTIONS Statute includes noticing requirements for bona fide tenants in occupancy when unit acquired by initial successor in interest through foreclosure (usually lender) Bona fide tenant: Not former mortgagor Lease is arms length transaction Lease requires rent that is not substantially less than fair market rent for property Effective for acquisitions by successor in interest (lender) after 2/17/09 ( & note PTFA 5/20/09) HUD, Office of Block Grant Assistance Slide 257 TENANT PROTECTIONS (cont.) Lender must provide 90 day notice to vacate to bona fide tenant occupants NSP funds cannot be used in any property unless lender followed notice rule, OR Grantee assumes NSP tenant protection obligations May trigger relocation assistance to displaced persons under URA HUD, Office of Block Grant Assistance Slide 258

87 TENANT PROTECTIONS (cont.) Grantee must document lender compliance If tenant in property, must have 90 day notice If not occupied, lender must certify either that property was not occupied by bona fide tenant at time of foreclosure or that tenant received 90 day notice If tenant has Section 8 assistance, lender must agree to continue lease & HAP contract Protecting Tenants At Foreclosure Act HUD, Office of Block Grant Assistance Slide 259 FAIR HOUSING, ACCESSIB CESSIBILITY,, AND EQUA UAL L EMPLOYMENT BASICALLY CDBG FAIR HOUSING LAWS Use of CDBG requires compliance with certain Fair Housing and accessibility laws Key Fair Housing laws: Title VIII of Civil Rights Act of 1968 The Fair Housing Act Title VI of the Civil Rights Act of 1964 Executive Orders and Age Discrimination Act Section 109 of HCDA Applicable state laws No discrimination in housing on basis of race, ethnicity, color, religion, sex, national origin, familial status or disability HUD, Office of Block Grant Assistance Slide 261

88 COMPLIANCE WITH FAIR HOUSING LAWS Recipient must not discriminate and must affirmatively further Fair Housing in the community Conduct affirmative marketing Rules apply to locality as a whole, not just with CDBG $: Maximize housing choice Lessen racial, ethnic, and economic concentrations of housing Facilitate desegregation and racially inclusive patterns of occupancy/public facilities HUD, Office of Block Grant Assistance Slide 262 COMPLIANCE WITH FAIR HOUSING LAWS (cont.) Analysis of impediments to fair housing No official regulations guidebook See Con Plan guidance Analyze current situation and describe actions Certify to compliance but not required to submit documentation HUD, Office of Block Grant Assistance Slide 263 ACCESSIBILITY GENERAL Adhere to laws and regulations: Architectural Barriers Act Americans with Disabilities Act Section 504 Fair Housing Act HUD, Office of Block Grant Assistance Slide 264

89 SECTION 504 Section 504 makes it unlawful to discriminate based on disability in HUDfunded housing programs Covered disabilities include: mobility, visual, hearing, cognitive HUD, Office of Block Grant Assistance Slide 265 SECTION 504 (cont.) Recipient must take steps to ensure accessibility of communication Prohibitions against employment discrimination make reasonable accommodations Ensure program accessibility: Housing Non housing HUD, Office of Block Grant Assistance Slide 266 APPLICATION OF 504 TO HOUSING New construction and substantial rehab of MF rental w/15+ units Substantial rehab: rehab costs = more than 75% replacement cost 5% of units accessible for persons with mobility impairments Additional 2% of units accessible for persons with hearing/vision impairments HUD, Office of Block Grant Assistance Slide 267

90 SECTION 504 AND FACILITIES Facility can be: Approached Entered Used by persons with physical handicaps Several options for improving program access HUD, Office of Block Grant Assistance Slide 268 SPECIAL 504 REQUIREMENTS FOR RECIPIENTS WITH 15+ EMPLOYEES If 15 or more full or part-time employees: Designation of responsible employee and adoption of grievance procedures Notification to participants, beneficiaries, and employees of nondiscrimination policy HUD, Office of Block Grant Assistance Slide 269 EQUAL OPPORTUNITY Various Federal laws & authorities Title VI of Civil Rights Act of 1964 Title VIII of Civil Rights Act of 1968, as amended Section 109 of HUD Act of 1974 Section 3 of HUD Act of 1968 (amended 1992) Age Discrimination Act of 1975 Section 504 of the Rehab Act of 1973 E.O & HUD, Office of Block Grant Assistance Slide 270

91 COMPLIANCE WITH EQUAL OPPORTUNITY LAWS Provide equal opportunity in: Provision of services, facilities & improvements (program benefit) CDBG-related employment Procurement & contracts Keep records on beneficiaries to document compliance HUD, Office of Block Grant Assistance Slide 271 SECTION 3 Section 3 of the Housing and Urban Development Act of 1968 recognizes that the normal expenditure of certain HUD funds typically results in new jobs, contracts, and other economic opportunities When these opportunities are created, lowand very lowincome persons residing in the community in which the funds are spent (regardless of race and gender), and the businesses that substantially employ them, shall receive priority consideration. HUD, Office of Block Grant Assistance Slide 272 SECTION 3 (cont.) Develop a Section 3 Action Plan Make good faith efforts to meet this plan Outreach Advertisements HUD, Office of Block Grant Assistance Slide 273

92 SECTION 3 for NSP2 Section 3 for NSP A grantee s combined investment in excess of $200,000 of NSP funding into projects arising in connection with housing construction, demolition, rehab, or other public construction makes the requirements of Section 3 applicable to all individual properties that receive services with these funds regardless of the actual amount that is spent on each individual unit/property. HUD, Office of Block Grant Assistance Slide 274 ANY QUESTIONS?