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ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
REQUEST FOR COMMISSION/COUNCIL ACTION
FROM: RONALD E.WINKLER SUBJECT: HUD-HOMEOWNERSHIP
Development Director APPLICATION
DATE: September 12, 1996
Synopsis of Previous Commission/Council/Committee Action( )•
On September 12, 1996,the Redevelopment Commmittee approved and authorized staff to forward application to
Mayor and Common Council.
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Recommended Motion
(Mayor and Common Council)
MOTION : That the Mayor and Comtnon Council approve and authorize staff to proceed with
the application of the HUD-Homeownership Application.
Administrator RONAL .WINKLER
Development Director
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Contact Person(s): Ronald Winkler/Adam Eliason Phone: 5081
Project Area(s): N/A Ward(s): City-Wide
Supporting Data Attached: Staff Report.application
FUNDING REQUIREMENTS: Amount: N/A Source:
Budget Authority:
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Commission/Council Notes:
REW:ABE:homeapp.hud(adw) COMMISSION MEETING AGENDA
MEETING DATE: 09/16/1996
Agenda Item No. `�
ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
STAFF REPORT
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HUD-HOMEOWNERSHIP APPLICATION
The Economic Development Agency is applying for a HUD Section 108 loan and HUD Economic
Development Initiative(EDI)grant. The following descriptions summarizes the application package that will
be sent to HUD Washington D.C. in the first week of October 1996.
GRANT REQUEST
The City is requesting an Economic Development Initiative Grant(EDI) in the amount of$1,000,000 in order
to provide down payment and closing costs assistance to first time homeowners of the Acquisition Resale
Rehabilitation program. This will effectively make the program affordable for 285 first time homeowners
and allow a family the ability to obtain homeownership.
LOAN REQUEST
The City will be requesting a Section 108 Guaranteed Loan in the amount of$1,000,000 at prevailing
Section 108 interest rates amortized over a term of 20 years. These funds will be used to finance the short
term rehabilitation costs in the form of a construction loan. A participating lending institution will process
construction financing for rehabilitation work and leverage Section 108 financing with additional private
dol'_ars. The combination of down payment assistance and construction financing is necessary to make this
program reach the levels that will address the number of HUD properties in standing inventory.
PROGRAM INCOME/REPAYMENT OF THE SECTION "108" LOAN
The Section 108 loan will provide short term(45-90 days)construction financing. Each house that will be
rehabilitated will stand on its own for construction financing and will be structured to meet or exceed the
annual debt service on this loan. This will minimize any long term exposure of grouping properties to
selected contractors. Any potential problems will be resolved before moving on to acquire additional
properties.
Based on the foregoing,staff recommends that the Mayor and Common Council approve this action and
authorize staff to proceed with the application of this program.
RONALD IK WINKLER,Development Director
Development Department
REW:ABE:homeapp.hud(adw) COMMISSION MEETING AGENDA
MEETING DATE: 09/16/1996
Agenda Item No.
Application for Federal
,Assistance OMB Approves Ao.0348-004:
2.Date Submitted Applicant Identifier
September 13, 1996 21st Program Year
�.Type of Submission: 3.Date Received by State State Application Identifier
Application Preapplicatlon - -
Eg Construction Construc0on 4.Date Received by Federal Agency Federal Identifier
E] Non-Construction Non-Construction
5.Applicant Information
Legal Name Organizational Unit
City of San Bernardino Economic Development Agency
Address (give city,county.State,and zip code): Name,telephone number,and facsimile number of the person to be contacted on manet:
Involving this application(give area codes)
201 North "E" Street, Third Floor A
San Bernardino, CA 92401-1507 dam Eliason, Project Manager
(909) 384-5081
6.Employer Identification Number(Elf): 7.Type of Applicant:(enter appropriate iettar in box)
=—I 6 0 0 0 7 7 2 A. State H. Independent School Dist.
B. County I. State Controlled Institution of Higher Learning
e.Type of Application: C. Municipal J. Private University
® New Continuation El Revision D. Township K. Indian Tribe
E. Interstate L Individual
If Revision,enter appropriate letters)in box(es): 0 7 F. Intermunicipal M. Profit Organization
G. Special District N. Other(Specify):
A.Increase Award B.Decrease Award C.Increase Duration
D.Decrease Duration Other(specify):
9.Name of Federal Agency:
Department of Housing and Urban Development
10.catalog of Federal Domestic Assistance Number. 11.Descriptive Title of Applicant's Project:
1 4 — 2 118 Ec no is evelopment Initiative Grant
Tine: Community Development oc ran XppTica ion
Acquisition-Rehab-Resale (ARR) Program
12.Ares Affected by Project(cities,counties,States.etc.):
City of San Bernardino
13.Proposed Project: 14.congressional Districts of:
Stan Date Ending Date a.Applicant b.Project
11/1/96 6/1/97 Thirty-six (36th) Thirty-six (36th)
15.EsUmated Funding: 16.is Application Subject to Review by State Executive Order 12372 Process?
a. Yes This preapplicatiorvapplication was made available to the
a.Federal $ 1,000,000 •00 State Executive Order 12372 Process for review on:
b.Applicant $ .00 Date.
b. No E] Program is not covered by E.O.12372
c.State $ .00 or 0 Program has not been selected by State for review.
17.Is the Applicant Delinquent on Any Federal Debt?
d.Local $ .00 E] Yes If'Yes,'explain below or attach an explanation No
e.Other $ .00
f. Program income $ .00
g.Total $ 1,000,000 .00
18.To the best of my knowledge and belief,all data in this applicatioNpreapplication are true and correct,the document has been duly authorizer
,y the governing body of the applicant and the applicant will comply with the attached assurances If the assistance is awarded.
Typed Name of Authorized Representative b.Title c.Telephone Number
Tom Minor Mayor (909) 384-5133
d.Signature of Authorized Representative e.Dale Signed
Previous Editions Not Usable form SF-424(4/92)
Authorized for Local Reproduction Prescribed by OMB Circular A-102
r
CERTIFICATION REGARDING LOBBYING
Certification for Contracts, Grants, Loans and Cooperative Agreements
The undersigned certifies, to the best of his or her knowledge and belief, that:
1. No Federal appropriated funds have been paid or will be paid, by or on behalf of
the undersigned, to any person for influencing or attempting to influence an officer
or employee of an agency, a Member of Congress, an officer or employee of
Congress, or an employee of a Member of Congress in connection with the
awarding of any Federal contract, the making of any Federal grant, the making of
any Federal loan, the entering into of any cooperative agreement, and the
extension, continuation, renewal, amendment, or modification of any Federal
contract, grant, loan, or cooperative agreement.
2. If any funds other than Federal appropriated funds have been paid or will be paid
to any person for influencing or attempting to influence an officer or employee of
any agency, a Member of Congress, an officer or employee of Congress, or an
employee of a Member of Congress in connection with this Federal contract, grant,
loan, or cooperative agreement, the undersigned shall complete and submit
Standard Form-LLL, "Disclosure Form to Report Lobbying", in accordance with
its instructions.
3. The undersigned shall require that the language of this certification be included in
the award documents for all subawards at all tiers(including subcontracts,
subgrants, and contracts under grants, loans, and cooperative agreements) and that
all subrecipients shall certify and disclose accordingly.
This certification is a material representation of fact upon which reliance was placed when this
transaction was made or entered into. Submission of this certification is a prerequisite for making
or entering into this transaction imposed by section 1352, title 31, U.S. Code. Any person who
fails to file the required certification shall be subject to a civil penalty of not less than $10,000 and
not more than $100,000 for each such failure.
TOM MINOR, Mayor Date
City of San Bernardino
09-9"31TR
DESCRIPTION OF THE SECTION 108 LOAN APPLICATION
The EDI application is accompanied by a description of a pending request for loan guarantee
assistance under Section 108 as per(B) (2)of the EDI Submission Requirements. A full Section 108
application will be submitted within 30 - 60 days of a notice of EDI selection.
APPLICANT/ENTITLEMENT PUBLIC ENTITY
City of San Bernardino
Economic Development Agency
201 North "E" Street,Third Flr
San Bernardino, CA 92401-1507
PROJECT ACTIVITY/LOCATION
Program: Acquisition-Rehab-Resale Program
Location: Identified Homeownership Zones (see attached map)
San Bernardino, California
PROJECT DESCRIPTION
The Department of Housing and Urban Development (H.U.D.) owns over 350 foreclosed properties
within the City of San Bernardino and is taking back approximately 35-45 properties per month
within the City. The City desires to expand the highly successful Acquisition-Rehab-Resale(A.R.R.)
program. The City has partnered with H.U.D. Santa Ana office and local successful contractors to
take blighted properties and totally rehabilitate them into energy efficient affordable homes for first
time homeowners.
GRANT REQUEST
The City is requesting an Economic Development Initiative Grant (EDI) in the amount of$1,000,000
in order to provide down payment and closing costs assistance to first time homeowners of the
A.R.R.program. This will effectively make the program affordable for 285 first time homeowners
and allow a family the ability to obtain homeownership.
LOAN REQUEST
The City will be requesting a Section 108 Guaranteed Loan in the amount of$1,000,000 at prevailing
Section 108 interest rates amortized over a term of 20 years. These funds will be used to finance the
short tern rehabilitation costs in the fonn of a construction loan. A participating lending institution
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will process construction financing for rehabilitation work and leverage Section 108 financing with
additional private dollars. The combination of down payment assistance and construction financing
is necessary to make this program reach the levels that will address the number of HUD properties
in standing inventory.
MEETING THE COMMUNITY DEVELOPMENT OBJECTIVE
The Acquisition-Rehab-Resale Program is located in a low income block group (Census Tract ?).
This activity benefits low and moderate income persons pursuant to Section 570.208 (a)(4) in that
it will provide homeownership assistance to 285 families in the low to moderate income categories.
ELIGIBLE ACTIVITIES
Pursuant to Section 570.202 (b) (2,4,5,6,7,9), this project qualifies under the CDBG eligible
activities.
PROGRAM INCOME/REPAYMENT OF THE SECTION "108" LOAN
The Section 108 loan will provide short term (45-90 days) construction financing. Each house that
will be rehabilitated will stand on its own for construction financing and will be structured to meet
or exceed the annual debt service on this loan. This will minimize any long term exposure of
grouping properties to selected contractors. Any potential problems will be resolved before moving
on to acquire additional properties.
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ECONOMIC DEVELOPMENT INITIATIVE
CITY OF SAN BERNARDINO
NARRATIVE
Literal blight is a disease that causes plants to wither and die. Blights are caused by bacteria, fungi,
and viruses that destroy the tissues of the plant. In the figurative sense,blight is anything that withers
hopes or causes destruction or ruin.
Revitalization is the complete opposite of blight. It is the antidote that restores vitality and brings
new life.
The City of San Bernardino has a virus that is afflicting our community. The City of San Bernardino,
HUD Santa Ana Office, several approved contractors, and lending institutions, have formed a unique
partnership to revitalize blighted properties and provide decent, safe,high quality affordable housing
opportunities to families who are first time home buyers. Families are the most important component
of our mission statement. It is the family that will live and hopefully stay in the house we provide.
This application is for rehabilitation of existing housing, not new construction. However, as this
application will demonstrate, the City has an abundant supply of HUD (approx. 350 homes and
another 25-45 homes a month adding to that supply) and Bank REO properties (approx. 300),
boarded up and causing blight and other problems within our community. In addition,the magnitude
of rehabilitation these homes are subjected to, brings them almost to a new construction level. The
City has an excess supply of affordable housing and a proven program to address the HUD and Bank
REO property problem.
Our true partnership views every blighted and boarded up property in our City as an potential asset
opportunity. It is an opportunity to recapture a piece of our neighborhood and not allow the property
to go the way of public auction and investor property.
DISTRESS
San Bernardino is one of the most distressed cities in the United States. It has one of the highest
violent crime rates of any city in excess of 100,000 population in California and the entire country.
Based upon 1990 census data,the median family income for a family of four within the City of San
Bernardino is $28,843. This figure is 28 percent less than the median income within San Bernardino
County which is $36,977. Twenty-two percent of the City's population is at or below the poverty
status.
The City of San Bernardino is one of racial and ethnic diversity. Based upon 1990 U.S. Census
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statistics, Whites are the largest racial group within the City, representing 45.6 percent of the
population. Hispanics represent the next largest ethnic grouping, 35 percent of the population, a rise
from only 25 percent in 1980. Blacks comprise just over 15 percent of the population, increasing by
47 percent from 1980.
Historically,low-income concentrations, and/or areas of high unemployment,tend to coincide with
areas of racial/ethnic concentrations. Data on low-income concentrations within the City of San
Bernardino confirm this tendency. The census tracts within which the median income is less than 80
percent of the area median income generally overlays where there is an ethnic/racial concentration
of 50 percent or more.
Almost 37 percent of the City's households are paying more than 30 percent of their income towards
housing. Cost burden is defined as households paying more than 30 percent of their income for
housing.
As these figures show, San Bernardino has higher unemployment than the region, state and nation.
The change from 1990 to 1993 reflects the economic recession that still plagues California and
Southern California in particular.
COMPARABLE UNEMPLOYMENT RATES
1990 1993
City of San Bernardino 11.0% 12.1%
San Bernardino County 7.6% 11.7%
State of California 5.6% 9.8%
United States 5.5% 6.8%
EXTENT OF NEED FOR ASSISTANCE
According to the housing element of the City's General Plan, 11 percent of the City's housing stock
is substandard in condition,with 3 percent of the units in such poor condition as to be unsuitable for
rehabilitation.
A lack of homeownership is an additional housing problem within the City. Fifty-two percent of the
City's housing units are owner-occupied, while 48 percent are renter-occupied. An additional 8%
of the housing stock is either vacant or boarded up. Despite this, 60 percent of the City's housing
units are single family dwellings.
Economic opportunity is affected by overall appearance. Many properties suffer maintenance issues,
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resulting in inconsistent, physical conditions and appearance. In general the current property and
structural conditions of these properties do not meet existing building codes and zoning standards.
This tends to discourage property maintenance and may impact purchase or homeowners staying
within the community. Upgrading and fixing deficient properties adds excessive costs that would
be necessary to meet minimum standards. This physical condition makes it more difficult for private
persons to obtain financing to purchase and/or rehabilitate property within these deteriorating areas.
The City's population is expected to grow at an annual rate of 3.5 percent over the next five years,
an increase of 6,500 new residents per year. New construction is not expected to keep pace, the
preservation/rehabilitation of the City's existing housing stock will therefore ensure the largest
number of affordable, adequate housing units. It is for these reasons that the "Preservation and
Rehabilitation of the "Affordable" Housing Stock, Emphasizing Single Family Units for Large
Families" becomes the High Priority#1 in the City of San Bernardino's Housing and Community
Development Strategic Plan and High Priority#2 is to"Assist Low-Income First Tune Hoinebuyers
with the Purchase of Affordable Permanent Housing."
LEVERAGE OF NON-FEDERAL SOURCES
Private local lending institutions have indicated their commitment to this program by committing
more and more dollars to the construction financing. The requested 108 loan will provide
construction financing and will be matched by the lending institutions.
A key element of the partnership agreement is a five hundred thousand dollar ($500,000) loan
guarantee, provided by the City of San Bernardino,that enables lower financing costs. Before the
municipal loan guarantee contractors were paying an average of 8 to 10 origination points and 15%
to 16% interest. With the loan guarantee contractors can expect to pay between 3% to 5%
origination points and 10% to 12% interest.
The City of San Bernardino provides $1,000,000 annually for the first time homebuyer mortgage
assistance program utilizing tax set aside funds. This amount provides homeownership for
approximately 135 new homebuyers every year. However,the need for downpayinent assistance is
so great that the money is depleted within four to six months.
QUALITY OF THE PLAN
The goal under this program is to tear the house down to the framing and completely restore it to as
close to new as possible including new electrical and plumbing, dual paine windows for energy
efficiency,new paint,roofs,fixtures, and doors. The future homeowner has their choice in kitchen
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cabinets, carpeting and exterior house colors. Front yard landscaping with automatic sprinkler
systems and rear yard/perimeter fencing are standard.
The average cost to do the total rehab is $35,000 to $40,000. The benefactor is the new homebuyer
family who will live in a beautiful home that is energy efficient at no extra cost to them. The
homebuyer also benefits from the fact the home is practically new and does not require huge amounts
of discretionary income to maintain and fix up the house. This in turn also leaves more time for the
family to be together.
Another component of this program is the partnership we have with a local non-profit, "Los
Padrinos." Los Padrinos was officially charted in June 1973, with a mission objective to provide
programs and services to meet the needs of high risk troubled youth in our community. In 1992 they
initiated a program called Youth Gang Intervention Program. It has been very successful in
redirecting the lives of hardcore youth gang members.
The Agency has partnered with Los Padrinos to perform work and job training on many of the houses
that are rehabilitated under our program. Youth are learning skills in plumbing, framing, flooring
roofing,painting, electrical, etc.
Marketing plans include infomercials, open house parties, referral bonuses, and the enclosed video
presentation to be run on local city sponsored television channel. Homeownership seminars for local
residents are performed at least quarterly and utilize the expertise of Neighborhood Housing Services
(NHS) to provide on going counseling and assistance through the home buying process.
Our pilot program has rendered significant success and therefore would simply be expanded to
include a waiting list of approved contractors who could take on the additional work immediately.
Utilizing only one contractor the program has successfully acquired rehabilitated and sold over 16
properties since May 1996.
CAPACITY TO CARRY OUT THE PLAN
The City of San Bernardino has shown a tremendous capacity to conceive, finance and implement
community development,economic development and redevelopment projects since the early 1950's.
The Redevelopment Agency of the City of San Bernardino was created in 1960 and was one of the
first redevelopment agencies established in the State of California. The Agency operates a budget
of approximately 55 million dollars annually. Activities routinely administered by the Agency include
acquisition, relocation, demolition, disposition, and development of residential, commercial and
industrial economic and community development projects.
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In addition, the Agency, on behalf of the City, currently administers the following HUD funded
programs for 1996-97: Community Development Block Grant Program (CDBG) $4,050,000,
Emergency Shelter Grant (ESG) $119,000, HOME Investment Partnerships (HOME) $1,460,000
and three (3) Section 108 Loans totaling $9,895,000
COMPREHENSIVE AND COORDINATED APPROACH
The City of San Bernardino's ARR program is successful because it is comprehensive. The program
starts with the end in mind,the family who will buy and live in the house we have acquired,rehabed
and sold to them. There can only be a true pride of ownership when the family owns a high quality
affordable house. You can not fight blight with more blight.
The City of San Bernardino's Economic Development Agency acts as lead in the coordinated efforts
to successfully implement the ARR program. Despite the fact several partners to this program are
involved at various stages throughout the process,the City's efforts are from beginning of acquisition
to the time the homeowner is handed the keys.
INNOVATION AND CREATIVITY
Although new construction is welcome in the City of San Bernardino,there is an increasing concern
regarding the amount of HUD, Bank, and Savings & Loan, REO properties. The costs to each of
these institutions for board up,property management and the significant maintenance needs amounts
to over$6,500 a year per property. The City of San Bernardino proposes to significantly reduce or
possibly eliminate that number. This could be accomplished by notifying the City of properties
immediately available for the ARR program, therefore eliminating the above stated process of a
typical REO property. These institutions can attest to the fact that some of these properties are
coming back into the REO portfolio two, three and sometimes four times thereby adding significant
dollars into the process. The ARR program stops that cycle by rehabilitating the properties to a
maintenance, energy efficient level. New families that take part of this program are better off
financially,than renting, or purchasing "band aid"type rehab house. The ARR program is setting the
standard for quality rehab within the City of San Bernardino and turning the corner on re-capturing
properties and placing quality families in"new life" homes..
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