SECTION 3 TRAINING Economic Opportunities for Low Income Persons North Carolina Community Development Association Spring Training Conference May 26th, 2011 Presentation by: David C. Youngblood, Director U.S. Dept. of Housing and Urban Development Office of Fair Housing and Equal Opportunity Greensboro Field Office, Knoxville Field Office (Acting) 1
Forget the term: Section 3 2
Local Jobs Initiative HUD wants HUD money to benefit the local residents of communities where those funds are expended to the greatest extent feasible. 3
1968- Housing and Urban Development Act (12 USC 1701u- Section 3) 1992- Housing and Urban Development Act Amendments- Strengthened and Clarified Section 3. 1994- Interim Rule issued at 24 CFR 135 (Implementing Regulations) 4
HUD allocates substantial funding for projects and activities that produce significant employment and other economic opportunities. Recipients of housing assistance and low income individuals often have restricted access to employment and other economic opportunities. HUD funding can offer an effective means of empowering low income individuals. Prior efforts in directing HUD funding to low income individuals have been unsuccessful and should be intensified. 5
To ensure that economic opportunities generated from HUD funded projects will, to the greatest extent feasible, be directed to low and very low income persons- particularly those receiving assistance for housing. 6
Hurricane Katrina Economic Crisis Urgency of Job Creation 7
Renewed emphasis on enforcement of Section 3. Previous discussions largely involved how to avoid the intent of the law. New discussion- How to creatively implement the spirit of the law to get results. 8
1. There are very few minorities in our area. 2. Our state has laws against affirmative action. 3. Just another entitlement program. 4. Law is too ambiguous - Greatest extent feasible, goals, best efforts. 5. Must create new positions to comply. 6. Law disregards workmanship or job skills. 9
Eligibility based on two things: 1. Proximity to where funds expended. 2. Income Level of potential Section 3 resident. (Race and Gender neutral!) 10
Public and Indian Housing (PHAs). 1. Development (construction) 2. Operations 3. Modernization ***NO Contracting or Funding Thresholds for PHAs (vs. other programs) 11
Community Planning and Development. 1. Nearly all construction (development) funds - Housing Construction - Housing Modification - Other Public Construction 2. Examples Include: CDBG, HOME, HOWPA, ESG, NSP, etc. (Multifamily projects such as 202/811s covered during development phase). 12
Entitlement Community Recipients (and States): Amount exceeds $200,000 for community development program assistance in the aggregate from all applicable grant sources. Contractors and Subcontractors: Section 3 project(s) amount is over $200,000, and any single contract or subcontract exceeds $100,000. Individual contracts are not aggregated. ***Section 3 requirements apply to the entire project where Section 3 covered funds are expended, regardless of whether the project is fully or partially funded with Section 3 covered funds. 13
For Section 3 Covered Funds: 1. When covered contracts are awarded. 2. Necessary New Hires for contractors to complete the Section 3 project (or when the PHA hires for any position). 3. Subcontracting related to the expenditure of Section 3 covered funds. ***** (No hiring or subcontracting is ever required unless it is necessary to complete the project). 14
1. Employment (and training) Opportunities 2. Section 3 Resident 3. Low and Very Low Income Household 4. Section 3 Business Concern 15
For PHAs All positions are included (up to and including the Executive Director). For covered projects (PHAs or CPD):With regards to contractors and subcontractors, All positions are considered, including professional services such as architects, engineers and managers. 16
A Public Housing Resident or A resident of the Metro Statistical Area (MSA) or non-metro county in which Section 3 covered assistance is expended and who qualifies as a low income or very low income person. 17
Low Income- Less than 80% of the median (40% of the whole) MSA or non-metro county household income (Info at www.hud.gov/section3). Very Low Income- Less than 50% of the median MSA or non-metro county income. Public Housing residents always qualify! 18
51% or more owned by Section 3 resident(s), or 30% of employed staff are Section 3 residents, or 25% of Subcontracts (dollar amount) committed to Section 3 businesses. 19
Who should move toward the top of the list when new hiring takes place or when contracts are awarded? Always think inside-out. Those low income residents that live closest to where the covered funds are expended should receive the most preference and opportunities that flow from the project. Preferences are awarded in two areas: 1. Employment & Training Opportunities 2. Contracting Opportunities 20
In Employment and Training (PHAs): 1 st : Residents of housing development where funds are expended. 2 nd : Residents of other housing developments managed by the HA (including Section 8 voucher holders). 3 rd : Participants in HUD Youthbuild. 4 th : Other Section 3 Residents. 21
In Employment and Training: 1 st : Section 3 Residents residing in the service area or neighborhood where the covered project is located. 2 nd : Participants in HUD Youthbuild. 3 rd : Other Section 3 Residents (which always include persons living in public housing or receiving housing assistance). 22
In Employment and Training: The homeless in the service area or neighborhood should always get first priority in employment and training opportunities whenever projects are funded by the Stewart B. McKinney Homelessness Assistance Act (42 U.S.C. 11301) (construction related activities). Supportive Housing Shelter Plus Care 23
For Section 3 Business Concerns: 1 st : Business Concerns that are 51% or more owned by residents of the housing development or whose permanent full-time work force includes 30% or more of these individuals. 2 nd : Same as above except for residents of other housing developments or developments managed by the HA. 3 rd : HUD Youthbuild Programs in the MSA. 4 th : Any other Section 3 Business Concern (see slide #19). 24
For Section 3 Business Concerns: 1 st : Section 3 business concerns that provide economic opportunities for Section 3 residents in the service area or neighborhood where the covered project is located. 2 nd : HUD Youthbuild Programs (in the MSA). 3 rd : Any other Section 3 Business Concern (see slide #19). 25
In Employment: -30% of New Hires annually (Both at the PHA itself and for new positions created because of contracting). In Awarding Contracts (% of Total $ Amount Expended): -10% of Building Trades work (including maintenance, repair, modernization and development). - 3% Professional Services *** Safe Harbor Provisions (compliance presumed). 26
In Employment: -30% of New Hires annually (New hires needed to complete the Section 3 covered project). In Awarding Contracts (% of Total $ Amount Expended): -10% of Section 3 covered project(s) (Construction). - 3% of service contracts ancillary to construction. *** Safe Harbor Provisions (compliance presumed). 27
HUD proscribes very little regarding specific program requirements. Flexibility is the overriding concept (Paw Paw, MI vs. Detroit, MI). If, after reasonable efforts, HUD Recipients are frustrated or not securing results, the program is likely being implemented incorrectly. A major obstacle to success is often the desire for PHAs and Entitlement Communities to implement onerous and burdensome procedural obstacles not required by HUD. HUD Goals are 30%, 10% & 3%- NOT 100%, 100% & 100%! HUD Recipients decides how to achieve compliance. Front-End recruitment efforts and Back-End preferences and bid allowances are at the near total discretion of the Recipient. Meet your goals! 28
Key Points: 1. Based on Section 3 Resident income, not assets 2. Look at income over previous 12 months (Guidance). 3. Based on family or household income (not individual). 4. Section 3 is geared toward full-time positions. 5. Section 3 resident must meet the qualifications of the position to be filled (but can offer training programs). 6. Section 3 business concern must have the ability and capacity to perform. 29
Key Points (Continued): 7. Section 3 is not to be confused with MBE/WBE or any other government program. 8. Rehires are still considered New Hires and need to meet the Section 3 Resident Definition in order to be counted as a Section 3 new hire. Businesses cannot claim to have no new hires because in practice they recall the same employees when they have work. 9. Compliance with HUD requirements and goals should be viewed as the minimum, not necessarily the ideal. 30
Procurement procedures must still be conducted in a competitive manner consistent with the requirements of 24 CFR Section 85.36. This section does specifically authorize and encourage a geographic preference when possible. Remember, the Lowest Responsive Bid is the one that complies with all federal regulations, including Section 3. Bid allowances are authorized. Also Remember, Section 3 is not applicable to simple acquisition costs (such as for land). 31
Section 3 does not trump any of the federal labor standards, prevailing wage requirements or apprentice/training guidelines from HUD or the Dept. of Labor. Careful consideration should be given to partnering with union and labor organizations to provide employment and training opportunities. 32
Notification to Section 3 Residents and Business Concerns. Include Section 3 Clause in all business solicitations ( 135.38). Develop a Section 3 plan (examples in Appendix of Regulations at 24 C.F.R 135). Ensure compliance from contractors and subcontractors. Keep record of actions and results. 33
Found at: www.hud.gov/section3 - Section 3 Resident Certification - Section 3 Business Certification **Self Certification is the HUD standard** 34
Submit HUD Form 60002 Annually Timing of Report: Submit contemporaneously with annual funding report (CAPER for Entitlement Communities), or, if no annual funding report is required (PHAs), by January 10 th or within 10 days of project completion (202s/811s), whichever occurs earlier. Separate Report for each grant based on yearly expenditures. Must be submitted online at www.hud.gov/section3 35
Use the Narrative Box! HUD has provided a narrative box at the end of the current reporting form (and more on drafts of a proposed new form). USE IT! This is the place to describe your Section 3 efforts beyond the numbers. For example, employment goals only count fulltime employees, but affirmative efforts to recruit Section 3 residents for part-time positions still shows a commitment to the spirit of the program. Don t just report zeros across the board with no explanation. Explain why if you failed to meet your goals. 36
Direct Recipients of HUD covered funds are ultimately responsible for program implementation and reporting responsibilities. This means that States, Urban Counties and other consortiums that receive covered funding, must ensure compliance from sub-recipients. Complaints may be filed against direct recipients and eligible contractors for at least 180 days. 37
Network/Collaborate with local agencies. Participate in Regional Consortium. Adopt and execute a Section 3 plan. Designate a Section 3 coordinator. Establish certification procedures. Develop and maintain lists of Section 3 residents. Develop and maintain lists of Section 3 businesses 38
Establish procedures for notifying Section 3 Residents and businesses of contracting opportunities and Section 3 covered projects. Sponsor a Section 3 workshop. Develop appropriate penalties/incentives for noncompliance or good performance. Help developers advertise vacancies. Develop a Section 3 record keeping system. 39
Meeting with Local Contractors: Entitlement Communities and PHAs must meet and coordinate with local contractors, especially the ones that routinely bid on government construction projects. They receive the contracts (10% Goal), and they hire for the new positions created (30% Goal). Getting businesses certified (once done, good for 3 years) and explaining the hiring requirements and reporting expectations is the key to a successful program. 40
Like the success of most initiatives, but perhaps even more than most, the attitude toward Section 3 will dictate program success or failure. Though enforcement has historically been limited, there are enough successful Section 3 programs throughout the United States, that the ability to achieve results is clear. No program is without its share of challenges, but it can and does work. Recipients often miss the enormous public relations potential for Section 3. Especially in this climate, who would not want to tout the success of a jobs initiative for local residents? 41
U.S Dept. of HUD Economic Opportunity Division Phone: 202-708-3633 Fax: 202-708-1286 Email: section3@hud.gov Website: www.hud.gov/section3 (Everything you need is on this page including printable brochures for distribution!) David Youngblood, Director Greensboro Field Office Office of Fair Housing and Equal Opportunity david.c.youngblood@hud.gov 336-547-4000 X2038 42