ACTION REQUESTED:
Title
Communication from the City Manager and Director of Community Development requesting the following:
A. ADOPT an ORDINANCE Amending the City of Peoria CAPITAL FUND Budget for the Fiscal Year 2014 to PROVIDE A LOAN to the SOUTH SIDE OFFICE OF CONCERN for Project Gap Financing in Conjunction with the GLENDALE COMMONS PROJECT.
B. APPROVE a LOAN AGREEMENT with SOUTH SIDE OFFICE OF CONCERN (SSOC), in the Amount not to Exceed $26,000.00, for Project Gap Financing in Conjunction with the GLENDALE COMMONS PROJECT.
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BACKGROUND:
Glendale Commons is a 28-unit supportive housing project focusing on low-income households and on those at-risk for homelessness or suffering from serious and persistent mental illness and/or developmental disabilities. The project will be located at the corner of the 700 block of Wayne, 800 block of NE Glendale and the 700 block of Morgan (the existing Glen Perry/Glen Mor Development Site; previously operated by the YWCA of Peoria) - see attached map for site location.
The project includes the acquisition of the sites, demolition of the existing units, and the construction of 16 new units, in an apartment building (14 units) and a 2-unit duplex. There are six existing duplexes that will be renovated as well as one new duplex and a 14-unit three-story elevator building that will be newly constructed. Six of the units will be set aside for IHDA's State Referral Network Program. The apartment building will include one, two and three bedroom units, a community room and laundry facilities, as well as offices for on-site supportive services administered by SSOC. The Glendale Commons project was approved by the Planning/Zoning Commission on June 5, 2014 and will be sent to City Council in August 2014.
SSOC took over the property management of the existing buildings in October 2012, when the YWCA of Peoria had financial difficulties and ceased operations. Since that time, the existing properties have gone / are going through the foreclosure process and the two foreclosing banks have/ are taking possession of the properties which will result in the rehabilitation of 12 units (6 duplexes). It is anticipated that the final foreclosure proceedings will occur by late July and the property ownership will no longer be held by the YWCA.
The total project funding is $4,530,392. See below for sources of funds:
Federal HOME Loan Bank Grant $504,000
IHDA Permanent Supportive Housing Grant $3,876,000
DCEO Energy Grant $46,089
Deferred Developer Fee for SSOC $104,303
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TOTAL $4,530,392
There is a project financing gap of $26,000 for the remaining property acquisition of the 3 private properties (812 Glendale and 717/719 Morgan).
In 2003 and 2004, during the construction and rehabilitation of the Glen Perry/Glen Mor Development, City Council approved the allocation of federal HUD HOME funds to the YWCA in the total amount of $647,248. Per federal regulations, the investment of HOME funds to the project imposes a 20 year affordability period - expiring in December 2028. To comply with the HOME Affordability Period requirements for the Glen Perry/Glen Mor Development, City staff certifies tenant's income annually, reviews tenant lease agreements and conducts property inspections every other year.
HOME regulations state that non-compliance of a project's affordability period could result in repayment of funds back to HUD. The amount of repayment would be equal to the total of HOME fund investment and would have to come from local revenue sources. In the case of Glen Perry/Glen Mor, a total of $647,248 could be due back to HUD if the affordability period ceases compliance.
The continued compliance with the affordability period was compromised when the YWCA ceased operations. Upon assuming the Glen Perry/Glen Mor project from the YWCA, SSOC partnered with the City to protect its HOME investment. SSOC has adhered to the provisions of the HOME affordability period originally imposed on the property by the YWCA grant award. There is no direct benefit to SSOC for adhering to the HOME affordability requirements. In fact, agreeing to the requirements, increases SSOC monitoring and compliance requirements for the project. However, SSOC has agreed to continue to adhere to the HOME affordability period provisions until its expiration or until such time that SSOC is no longer responsible for development operations, tenant selection and property maintenance.
The City proposes to provide project gap financing in an amount not to exceed $26,000 to SSOC for the remaining property acquisition of the 3 private properties (812 Glendale and 717/719 Morgan). In the project financing sources, funds have been allocated for construction costs and acquisition for SSOC to purchase properties from the holding financial institutions once foreclosure proceedings are finalized. However, the current financing sources are not enough for the private property acquisition held by independent property owners.
If approved, an amount not to exceed $26,000 would be provided to SSOC in the form of a payable loan - 0% interest rate, amortized over the remaining HOME affordability for Glen Perry/Glen Mor (expiring December 1, 2028). Loan commencement date could be structured as either 1) monthly payments at time of loan agreement execution or 2) deferred monthly payments during the construction of Glendale Commons with a balloon payment due on December 1, 2028; both options would contain a 'no prepayment penalty'. If this gap financing is provided by the City, it would be the only payable loan in the total project development, all other project financing are grants with required provisions on property use for a determined period of time.
City HUD funds (CDBG, HOME or ESG) could not be used as a source of funds for the loan. Staff proposes to use funds from IHDA administration money ($38,700). These funds were collected as administrative fees by the City for the IHDA Down Payment Assistance program during the program year 2011 and 2012. There funds are unrestricted by IHDA and can be used for a source that could benefit affordable housing options in our community.
FINANCIAL IMPACT: A payable loan in an amount not to exceed $26,000 at a 0% interest rate, amortize monthly until December 1, 2028 would be provided to SSOC from the current source of City funds collected through an IHDA Administration Fee (project# -IHDAAD; project balance of $38,700).
NEIGHBORHOOD CONCERNS: While no direct comments have been received by City regarding the gap financing loan, the preservation of the Glen Perry/Glen Mor Development and the families served by the program was a common goal for many community members (i.e. - Heart of Illinois Homeless Continuum of Care), the City and surrounding neighbors. Two other buildings, located at 801 & 803 Perry have been concerns for some neighborhood residents for some time. These two buildings would not be impacted by this loan, or the potential development of the associated housing.
IMPACT IF APPROVED: A payable loan in an amount not to exceed $26,000 at a 0% interest rate, amortize monthly until December 1, 2028 would be provided to SSOC for gap financing for the Glendale Commons project.
IMPACT IF DENIED: A payable loan in an amount not to exceed $26,000 at a 0% interest rate, amortize monthly until December 1, 2028 would not be provided to SSOC, gap financing would still remain for the Glendale Commons project and SSOC would have to investigate additional sources which could delay project development and other funding sources grant appropriations.
ALTERNATIVES: N/A
EEO CERTIFICATION NUMBER: South Side Office of Concern: 00706-150630
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL'S 2014 - 2029 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Attractive Neighborhoods with Character: Safe and Livable
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Reinvest in neighborhoods.
DEPARTMENT: Community Development