ACTION REQUESTED:
Title
Communication from the City Manager and the Community Development Director with a Request to Approve the Allocation of $225,000 of HOME FUNDS to WALLICK-HENDY DEVELOPMENT COMPANY, LLC, for the Rehabilitation of Schlarman House Located at 707 NE Madison Ave (Tax ID# 18-03-351-001) (Council District 1).
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BACKGROUND:
The City of Peoria is considered an entitlement jurisdiction by the US Department of Housing and Urban Development (HUD). As such, funds from the Federal government, through HUD are allocated to Peoria on an annual basis. The City of Peoria receives three (3) grants - Community Development Block Grant (CDBG), HOME Investment Partnership Program and the Emergency Solutions Grant (ESG).
The HOME Investment Partnership Program grant is used to create and preserve affordable housing for low-income individuals in the community. In 2012, the City Council budgeted $212,304 of HOME funds for the creation of a Rental Incentive Program. The purpose of the program was to encourage owners of existing rental units to rehab their properties to foster and maintain decent and affordable housing for low-income individuals while improving the aesthetics of their building.
Since the reservation of HOME funds in 2012, Community Development staff has investigated best practice options for the creation of the Rental Incentive Program. Specifically, staff was interested in a program design that would:
· Serve a special population (i.e.- very low to extremely low income individuals, disabled individuals or the elderly),
· Properties that contained 10 or more units,
· Grant funds used as gap financing for the rehab and required 50% to 100% match contribution by the owner,
· Rehabilitation to increase a unit's energy efficiency for lower utility costs for the tenants, and
· Program design that would meet the new eligibility requirements for rental housing projects under the Final HOME Rule/Regulations published in July 2013.
During the time of program development, Wallick-Hendy Development Company, LLC, applied to the State of Illinois for the Preservation Now Tax Exempt Bonds Program for their Peoria properties. Wallick-Hendy has four existing properties - Hurlburt House (818 W. Hurlburt), Parkview Estates (2401 N Gale), Reservoir Estates (3336 W Kiva) and Schlarman House (707 NE Madison). This property portfolio consists of 478 rental units of affordable housing; 51 units are two bedroom family units and 427 units are one bedroom units for seniors.
In October 2013, the Illinois Housing Development Authority (IHDA) that administers the Preservation Now Program on behalf of the State approved approximately $30 million in financing to rehabilitate the 478 units in the Wallick-Hendy Peoria portfolio. An estimated 400 construction and post-construction jobs will be created.
Upon announcement of the Preservation Now financing, Wallick-Hendy contacted the Community Development Department to inquire about additional funding to leverage the IHDA investment. Staff reviewed the project and identified Schlarman House as a likely candidate for the proposed Rental Incentive Program with HOME funds.
Schlarman House is a 3-story congregate facility and features 75 one bedroom units for low-income seniors. Residents have access to on-site amenities such as a community room/game center, picnic area, kitchen and dining room, laundry facilities and service coordinators who oversee the general well being of residents and refer individuals to other local services. Additionally, public transportation is readily available to residents, with a public bus stop located within the immediate vicinity.
Wallick-Hendy will replace the roof, windows, siding and exterior doors at Schlarman House. Green and Energy Star upgrades include windows, doors, appliances, low-flow water devices, lights and flooring. Site improvements will provide new paving and striping, landscaping upgrades, upgraded recreational spaces and fencing repairs. The planned scope of work will dramatically upgrade the development, preserving these affordable housing units and their vital rental subsidy.
Schlarman House is located in the East Village Growth Cell Tax Increment Financing (TIF) District. Schlarman House is privately owned by Wallick-Hendy and has a 2013 assessed valuation of approximately $1.5 million. The total construction cost at Schlarman House is approximately $2.8 million. With this investment of construction, tax increment could be generated for the TIF which could assist with future initiatives.
In 2013, the City Council budgeted $277,925 of HOME funds for a Focus Housing Leverage Program. This program was created to provide gap financing for initiatives that preserved or developed affordable housing while leverage other resources. During the review of the Schlarman House project, staff determined that an increased grant award from $212,304 (the available funds in the Rental Incentive Program) to $225,000 would allow for a more even distribution of HOME funds in the units assisted in the project. Staff identified $12,696 from the available program balance of the Focus Housing Leverage Program as an additional source of grant funding.
Schlarman House's location within the East Village Growth Cell TIF, the amount of other committed financing sources leveraging the total project costs and its current use as affordable housing rental units for low-income seniors makes it an ideal project for both the Rental Incentive Program and the Focus Housing Leverage Program.
FINANCIAL IMPACT: A total of $225,000 ($212,304 from Rental Incentive Program and $12,696 from Focus Housing Leverage Program) of HOME funds would be awarded to Wallick-Hendy for the Schlarman House development. A total of 9 units would be designated as HOME units with approximately $26,335 invested per unit for hard construction costs.
NEIGHBORHOOD CONCERNS: None.
IMPACT IF APPROVED: A total of $225,000 ($212,304 from Rental Incentive Program and $12,696 from Focus Housing Leverage Program) of HOME funds would be awarded to Wallick-Hendy for the Schlarman House development. City administration will execute a subgrantee agreement with Wallick-Hendy Development Company, LLC. Project construction is anticipated to begin in the late summer of 2014.
IMPACT IF DENIED: A total of $225,000 ($212,304 from Rental Incentive Program and $12,696 from Focus Housing Leverage Program) of HOME funds would not be awarded to Wallick-Hendy for the Schlarman House development. Community Development staff would continue with program creation and implementation for the Rental Incentive Program.
ALTERNATIVES: None.
EEO CERTIFICATION NUMBER: 03274-150331
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