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HomeMy WebLinkAboutItem 04- Springfield Land Acquisition Program AGENDA ITEM SUMMARY Meeting Date: 4/15/2024 Meeting Type: Work Session Staff Contact/Dept.: Katie Carroll / DPW Erin Fifield / DPW Staff Phone No: 541-726-3660 Estimated Time: 20 Minutes S P R I N G F I E L D C I T Y C O U N C I L Council Goals: Promote and Enhance our Hometown Feel while Focusing on Livability and Environmental Quality ITEM TITLE: SPRINGFIELD LAND ACQUISITION PROGRAM ACTION REQUESTED: Give staff direction on the proposed Springfield Land Acquisition Program, which would award funding to developers to acquire land to be developed with income- qualified housing. ISSUE STATEMENT: As part of its Housing Strategy, City Council has directed staff to identify and acquire land suitable for the development of income-qualified housing. The City has taken ownership of three properties so far for this purpose. Springfield has received $1.5 million in one-time American Rescue Plan Act (ARPA) funding from Lane County to purchase land for the development of income-qualified housing which must be spent by December 2025. The City has approximately $900,000 in funding remaining. City staff are proposing to make this funding available to developers to purchase land to be developed with income- qualified housing while the City continues to search for land to purchase. ATTACHMENTS: 1. Council Briefing Memo 2. Springfield Land Acquisition Program – Draft Program Guidelines 3. Springfield Land Acquisition Program – Slides DISCUSSION/ FINANCIAL IMPACT: The City could create a program to make remaining ARPA funds from Lane County available to developers to purchase land for the development of income- qualified housing while continuing the City’s land acquisition efforts. The program proposed by staff is modeled off the existing State Land Acquisition Revolving Loan Program and would provide forgivable loans to qualifying developers building at least four units of income-qualified housing and meeting other requirements as outlined in the memo (Attachment 1) and draft program guidelines (Attachment 2). This program would allow City staff to focus time on the development of the three properties already acquired, while also making funds available for acquisition of land for income-qualified housing. There would be minimal financial impact to the City from this program. Funding awards to developers would be available on a first-come-first serve basis until County ARPA funds are fully expended through the program and/or by the City to acquire land. The City can charge staff time for administration to the ARPA grant up to $75,000. M E M O R A N D U M City of Springfield Date: 4/15/2024 To: Nancy Newton COUNCIL From: Katie Carroll, Housing Analyst Erin Fifield, Community Development Analyst Jeff Paschall, Community Development Director BRIEFING Subject: Springfield Land Acquisition Program MEMORANDUM ISSUE: As part of its Housing Strategy, City Council has directed staff to identify and acquire land suitable for the development of income-qualified housing. The City has taken ownership of three properties so far for this purpose. Springfield has received $1.5 million in one-time American Rescue Plan Act (ARPA) funding from Lane County to purchase land for the development of income-qualified housing which must be spent by December 2025. The City has approximately $900,000 in funding remaining. City staff are proposing to make this funding available to developers to purchase land to be developed with income-qualified housing while the City continues to search for land to purchase. COUNCIL GOALS/ MANDATE: Promote and Enhance our Hometown Feel While Focusing on Livability and Environmental Quality BACKGROUND City Council has directed staff to identify and acquire land for income-qualified housing as part of the City’s Housing Strategy, first developed in 2017. The Council has previously allocated federal Community Development Block Grant (CDBG) funds toward this effort. There are currently no CDBG funds allocated to land acquisition. More recently, the City received $1.5 million in federal American Rescue Plan Act (ARPA) funds through an intergovernmental agreement with Lane County. The funds must be used to acquire land that will be developed with income-qualified housing affordable to households with low incomes (at or below 80% of the area median income). The County funds must be spent by December 2025. The City has been working with a broker for approximately one year on this effort and has been primarily focused on identifying off-market land that is suitable for development with income- qualified housing. The City has successfully acquired three properties so far˗ two tax-foreclosed properties from Lane County and one property from a private owner. The City has approximately $900,000 in ARPA funding remaining for land acquisition. SPRINGFIELD LAND ACQUISITION PROGRAM City staff recommend implementing a program to make the remaining ARPA funds available to developers to purchase land for the development of income-qualified housing while continuing the City’s acquisition efforts. Staff recommends implementing this program for several reasons: • Capacity: Staff will continue to look for land to acquire for income-qualified housing; however, given limited capacity, staff is focused on making the three properties the City already owns available to developers. Opening funding through this program would allow the City to support more projects to move forward. Attachment 1 Page 1 of 4 MEMORANDUM 4/10/2024 Page 2 • Flexibility: City staff have prioritized looking for land that is likely to be competitive for state level funding (1+ acres zoned to allow medium to high density residential). Allowing developers to apply for funding to purchase land will make it more feasible for the City to support other types of income-qualified housing projects, including smaller infill projects. • Precedent: The proposed program is modeled after the State’s Land Acquisition Revolving Loan Program, which was created in 2017 to help eligible organizations purchase land for income-qualified housing development. Program Details Using the State’s land acquisition program as a basis, and with input from the City Attorney’s Office, staff have designed a temporary program to provide forgivable loans to qualifying applicants to purchase land to be developed with income-qualified housing. Funding would be available on a first-come-first-served basis until the remaining ARPA funds are spent, either through awards to developers or by the City in its land acquisition efforts. Additional details of the proposed program are summarized below, and a full copy of the draft program guidelines is available in Attachment 2. • The program would be open to public agencies, non-profits, and private developers. Given the risk the City would take on in providing these loans, applicants would need to have prior experience developing and/or managing income-qualified housing. • To apply for funding, an applicant would need to have site control (i.e. a binding contract such as a purchase and sale agreement or option agreement). • The City would limit awards to a 90% loan to appraised value ratio to ensure applicants are also financially invested in the project and to further limit the City’s risk. • Prior to awarding funding, the City would review due diligence materials from the applicant including an appraisal, phase one environmental review, and preliminary title report to confirm the award amount and identify any concerns with awarding funds. • Applicants awarded funding would be required to build income-qualified housing that would remain affordable for at least 20 years. This affordability period aligns with the requirements of the City’s federal HOME funds. Applicants proposing to build income- qualified housing for rental or homeownership could qualify for funding. • Awardees would need to build at least four new dwelling units reserved for households with low incomes to remain eligible for funding. • Awardees would have eight years to build housing and place it into service. Loans would then be forgiven upon completion of the required affordability period. Awardees not meeting program terms or deadlines would be required to repay funding. If Council implements this program, staff will advertise the availability of funds in several different ways. The program guidelines and the application will be added to the City’s webpage. Staff could also advertise the availability of funds on social media, through the Housing Newsletter, and to other contacts staff has collected through prior outreach efforts (including private and non-profit developers and service providers). Application Review and Approval Attachment 2 – Draft Program Guidelines outline the eligibility, submission, evaluation and performance requirements of this program. Staff recommends a two-part review of applications. First, staff would screen applications for conformance with the Minimum Eligibility Criteria found in Section II of Attachment 2. Second, a committee of City staff would review and score applications meeting minimum eligibility using the Application Evaluation Criteria outlined in Section V. To be found eligible for funding an application would need to achieve a score of three out of five in all evaluation categories upon averaging all committee members’ scores. Attachment 1 Page 2 of 4 MEMORANDUM 4/10/2024 Page 3 Given the timing in the development process, applicants may not have a detailed development plan for the site at application for funding. To account for this risk, the Application Evaluation Criteria in Section V are focused on assessing the capability of the applicant to develop and/or manage an income-qualified housing project based on prior experience, and to ensure the project concept is well-thought out and that the applicant has sufficiently evaluated the site. Prior to finalizing a funding award, the City would require the awardee to obtain an appraisal, preliminary title report, and phase one environmental report for the City to review. These would be used to determine the maximum award amount and identify any concerns with awarding funding. Final contract approval would be delegated to the City Manager or their designee. Compliance and Securing Affordability Awardees would be required to provide a semiannual progress update to the City on the project. Additionally, to show timely progress toward building income-qualified housing, awardees would need to present a detailed, updated development plan for the site within three years of award to remain eligible. Projects awarded funding would then need to put housing into service within eight years of being awarded funding. Failure to meet these terms, the required affordability period, or other program requirements could result in the awardee being required to repay funds to the City. Forgivable loans would be secured against the property in a manner acceptable to the City Attorney’s Office. QUESTIONS FOR COUNCIL If Council is interested in implementing this program, staff is seeking direction on the following questions: 1. Should funding be available for mixed-income projects or only for income-qualified projects serving households with low incomes? • Per funding requirements, land purchased with these funds must be used to build income-qualified housing for households with low incomes as the primary purpose. However, the City could allow funding recipients to also build market units on the land where it is part of a mixed-income project. Staff have included language in the Draft Program Guidelines highlighted in blue for Council consideration which would allow mixed income projects to be eligible for the program while still meeting the primary purpose of the funds. 2. Should funding for low-income homeownership projects be limited to singular underlying ownership (such as Community Land Trust or Manufactured Home Park)? • Recommendation: Staff recommends funding only homeownership projects with a singular underlying ownership. There is a 20-year affordability period for these funds. As ownership may change multiple times within that time period, the administrative burden for tracking income levels for each new potential owner, the risk for noncompliance, and the potential burden to the owner for repaying the loan is high. Singular underlying ownership places the primary responsibility for compliance on a singular organization rather than the City or individual homeowners. NEXT STEPS If Council is interested in moving forward with creating this program, staff will make any changes to the draft program guidelines as directed, consult with the Finance Department on loan repayment terms for the program, and return to Council during a regular session with a resolution to consider adoption of the program. If adopted, staff will report back to Council periodically on the progress of the program. Attachment 1 Page 3 of 4 MEMORANDUM 4/10/2024 Page 4 RECOMMENDED ACTION: Give staff direction on the proposed Springfield Land Acquisition Program, including direction on the following questions: 1. Should funding be available for mixed-income projects or only for income-qualified projects serving households with low incomes? 2. Should funding for low-income homeownership projects be limited to singular underlying ownership (such as Community Land Trust or Manufactured Home Park)? Attachment 1 Page 4 of 4 1 SPRINGFIELD LAND ACQUISITION PROGRAM DRAFT Program Guidelines I. Purpose As part of the City of Springfield’s Housing Strategy, City Council has directed staff to acquire land and help developers acquire land suitable for development as income-qualified housing for households with low incomes. In support of that effort, the City has received one-time American Rescue Plan Act (ARPA) funds from Lane County for land acquisition in Springfield for the development of housing to serve low- income households and/or people currently experiencing homelessness. The funds were originally awarded to Lane County by the Oregon Legislature and Senator Beyer in 2021. In addition to looking for land to purchase with the funds, the City is making funding available to qualified applicants to purchase land in Springfield suited for the development of income-qualified housing development. The City has approximately $900,000 available. Funds will be awarded as a forgivable loan, forgivable upon completion of a 20-year affordability period. To be eligible for an award of funds, applications must meet several eligibility criteria. This forgivable loan program is intended to assist with site acquisition for use as income-qualified housing for low-income and/or homeless households; it is not a short-term acquisition bridge financing program. Application does not guarantee funding. Funds are only available for purchasing property and may not be used for due diligence or design feasibility. Property purchased with these funds may be used for the development of income-qualified rental or homeownership housing. The City requests applications from public agencies, non-profit organizations, and private developers to address housing needs in the community. This program will be available beginning [DATE] and may close at any time once available funds have been allocated. II. Minimum Eligibility Criteria The following minimum criteria must be met to be considered for funding: • Site must be located within the City of Springfield city limits or be capable of being annexed into the City upon purchase. • Applicant must have a binding contract for the property (option agreement or purchase and sale agreement). • Award amounts shall not exceed a 90% loan to appraised value ratio. The City will accept option or sales agreements supported by tax assessment documentation or broker opinions as preliminary land value proof at time of application. An appraisal will be required prior to closing on the loan award and may impact the award amount. • Funds are only available for the cost of acquiring the real property, including closing costs. • The site must be used to construct housing for which the primary purpose is serving households with low incomes (defined as less than or equal to 80% of the HUD area median income for Eugene-Springfield). For this program, “primary purpose” means that at least 60% of units will be reserved for households with low incomes for the duration of the required affordability period. • Income-qualified housing constructed on the property must remain affordable for 20 years. The affordability restrictions must be documented in a form acceptable to the City of Springfield City Attorney’s Office, including but not limited to, restrictive covenants, recorded at the applicant’s expense against the property receiving funding. Attachment 2 Page 1 of 7 2 • At least four new dwelling units reserved for households with low incomes must be built on the property. Housing must be developed on the property and placed into service within eight years of closing as outlined in these guidelines. • Applicant must have previous experience developing or managing income-qualified housing. III. Submission and Review Process 1. Staff will accept applications on a rolling basis until funds are fully allocated. Prospective applicants are encouraged to check on funding availability with staff before applying. 2. Staff will review each proposal for completeness and compliance with minimum eligibility criteria. Applications will be considered for funding in the order they are received and determined to be complete. 3. A committee of staff will review complete applications. Reviewers will use evaluation criteria to score applications. These scores will be averaged to determine whether an application is qualified for funding. 4. Staff will work with approved applicants on awarding funding and follow-up monitoring to ensure awardees remain compliant with program requirements. IV. Application Submission Requirements Applications for funding must include the following information. Applications will not be considered complete until all information is received. Applicants are expected to provide the requested information in the order presented below. Applications will be evaluated based on the detail and clarity of the information provided. • Application Summary Form • Applicant Description- Please provide a 2-page maximum (excluding project list) narrative of: o History and Mission: Discuss the history and mission of your organization and any project partners. o Development Experience: Describe your previous experience in the development and/or management of income-qualified/affordable housing. Include a list of income-qualified housing projects with which you have been involved. Please include completed and current or on-going projects. The project list should illustrate your experience with projects similar in scope and size to the project proposed in this application and demonstrate your track record with financing development and/or operating costs of income-qualified housing projects. For each project include the name, location, applicant’s role in the project, project description (type, size, scope, affordability level, sources of financing, project status). o Financial Capacity: Describe your organization’s financial stability as it pertains to the capacity to successfully complete the project. o Project Team: Description of the project team, including relevant experience of any key team members. o Other: Include any other relevant information you would like considered which demonstrates your capacity to carry out the proposed project. Attachment 2 Page 2 of 7 3 • Project Proposal- The City understands that applicants’ development plans are in a concept phase and may be subject to change. Although not required, applicants are strongly encouraged to schedule a Development Initiation Meeting (DIM) prior to applying. Include a narrative of the following: o Site Description: Please describe the site including any existing improvements o Site Suitability: Describe the features of the site that make it suitable for the proposed purpose, including: ▪ Access to transportation ▪ Proximity to amenities and services ▪ Availability of infrastructure ▪ Natural hazard considerations ▪ Description of any steps needed to make the site eligible for the intended purpose (such as annexation, zone change, etc.) ▪ Description of any barriers to development of the site and plans to address those barriers o Proposed Development Plan: Describe your preliminary plans including: ▪ Housing type, number of units ▪ Tenure and affordability levels for units ▪ Affordability period and plan for ensuring affordability ▪ Preliminary designs and site plans (as available) ▪ Description of and plan for serving target population (if applicable/known) ▪ Timeline for development including estimated completion date and any foreseeable issues that may disrupt the timeline o Financing: Please describe plans for financing of the project (for both construction and operations), including both private and public funding sources the applicant has secured and/or plans to pursue and a timeline for securing funding. • Proof of site control documented by an option to purchase or purchase and sale agreement. • Preliminary supporting documentation for funding amount requested. This may be a broker opinion letter or tax assessment documentation. A third-party appraisal will be required before closing. Please submit one (1) copy of application materials to [EMAIL]. Questions can be directed to [CONTACT]. V. Application Evaluation Criteria Applications will be evaluated in five (5) areas using a five-point scoring system for each category. To be eligible for funding, an application must demonstrate compliance with all minimum eligibility criteria (see Section II) and must achieve a score of 3 or above in each category upon the averaging of all reviewer’s scores. 5 points = Exceptional 4 points = Very Good 3 points = Acceptable Attachment 2 Page 3 of 7 4 2 points = Needs Improvement 1 point = Unacceptable Category Evaluation Criteria Project Concept • Applicant’s plans for the site are clearly defined, realistic in scope, location, need, and meet the objective of this program to create housing to serve low- income/homeless households, including demonstration of an effective plan for ensuring affordability for at least 20 years. Plan demonstrates an effective use of the site to maximize impact on housing need (this may be balanced with special needs of a target population as identified and explained). Project Financing • Applicant demonstrates a feasible plan for financing the remainder of the project (construction and operation), including identification of secured sources of funding and funding applicant plans to pursue in the future and timeline of those applications. Site Suitability • Applicant demonstrates strong understanding of the strengths and constraints of the project site • Applicant has addressed how it plans to mitigate any site-specific barriers to development of income-qualified housing • Proposal appears feasible on proposed site under the City’s code requirements (allowed use, density, etc.) Capacity to Complete • Applicant has track record of developing and/or managing income-qualified housing projects. Reviewers will look for: o Experience developing and/or managing projects in Oregon o Experience developing and/or managing the type of housing proposed o Experiencing serving a target population (if identified) o Experience with financing development and/or operation of income- qualified housing projects • Applicant demonstrates financial capacity to complete the project • Applicant demonstrates staff capability and capacity to successfully implement the project Project Readiness • Applicant has a clear and realistic project timeline that demonstrates readiness to implement a project in a timely manner upon funding award • Demonstrates ability to complete project within required period for this funding (8 years) VI. Other Requirements Purchase and Sale Agreements: Property already purchased or donated does not qualify for funding under this program. Any property with a cost reimbursement agreement is not eligible for financing. The City will not approve any applications with option agreements or purchase sale agreements signed longer than 12 months prior to the application date. Arm’s Length Transactions: Loans will not exceed actual buyer costs and all transactions must be arm’s length. Transactions involving any “identity of interest” are not eligible for program funding. Identity of Attachment 2 Page 4 of 7 5 interest is defined as any relationship where the purchaser and seller are related, connected and/or affiliated through a business, personal, or financial relationship. Use of Purchased Property: Funds are only available to purchase property where the primary purpose will be to provide income-qualified housing for low-income and/or homeless households. Program funding will be limited to acquisition for the purpose of new construction. Application Deadlines: Funds are available until allocated or until the program is closed. Applications will be considered for funding based upon the availability of funds. Partial awards may be considered. The intent of the program is to respond quickly to the potential needs of applicants to secure sites as they become available given the urgent need for affordable housing and competition for limited developable land. Loan to Value: There is no maximum award amount on forgivable loans subject to fund availability, but forgivable loans will not exceed 90% loan to appraised value. Applicants are required to submit an option or sales agreement supported by tax assessment documentation or a broker opinion with the application to indicate preliminary loan to value compliance. If awarded funds, applicant will be required to obtain an appraisal at the applicant’s cost. Awards may be revised based on the findings of the appraisal. Other Due Diligence: Applications awarded conditional funding approval will be required to obtain a preliminary title report, and phase one environmental report for the City to review prior to receiving the funds (at the applicant’s expense). The City reserves the right to revise or rescind funding awards or require additional due diligence documentation based on the findings of these reports. Forgivable Loan Terms: Funds will be awarded as a forgivable loan, forgivable upon completion of a 20- year affordability period which begins at certificate of occupancy. Housing must be developed on the property and placed into service within eight years of closing on a purchase or funds become immediately and fully repayable subject to [TBD in consultation with Finance Dept]% interest rate. Housing that does not remain affordable for a full 20-year affordability period will be subject to loan repayment on [TBD in consultation with Finance Dept.] terms. Required Reporting: Award recipients are required to provide a semiannual update on project progress utilizing the City-provided form. Completed forms are due by February 1 and August 1 each year. Program default procedures may be commenced on recipients that do not submit timely progress forms. Updated Project Plan: Within three years of receiving an award, a recipient must present the City with an updated development plan, including a proposed development design, committed and anticipated additional financial resources to be dedicated to the development and an estimated development schedule that indicates completion of the development within eight years of closing on the property. Program default procedures may be commenced on recipients that do not submit updated project information within the three-year period. Transfer of Property: Program recipients may not sell, lease (except residential leases consistent with program requirements), or otherwise transfer property acquired under this program without written consent of the City; award recipients must notify the City of any planned lease, sale, or transfer reasonably in advance. Upon transfer, all property will remain subject to program requirements. Failure to Meet Terms: The following events will constitute a default under the SLAP program: • The recipient does not obtain certificates of occupancy and lease or sell all housing units within the eight years of the closing date; Attachment 2 Page 5 of 7 6 • The recipient fails to use the property in a way consistent with the funding requirements; or • The recipient does not abide by any terms of their agreement or these program guidelines. Upon an event of default, the City will provide the recipient with a written warning and opportunity to cure the default within 30 days. If the recipient does not cure the default, then the recipient will be required to repay the City the principal of the award plus [TBD in consultation with Finance Dept.]. This provision does not limit any remedies or claims the City may have against the recipient for default of the agreement or program guidelines. Loan Security Position: All funding provided under this program must be secured by the purchased property. The City’s lien or other security shall take priority over all other liens and loans applicable to the purchased property. The City may allow subordination of its lien in favor of temporary construction funding, if the City determines in its sole discretion that subordination of the City’s lien is in the overall public interest. VII. Disclaimer/Decision Not To Fund The City has developed this program and funding application with the intent of gathering information that is adequate to serve as a sound basis for decisions about funding. As an application is reviewed it may become apparent that additional information is needed from a project applicant. The City may follow up with an applicant to clarify information contained in their application, or to gather additional information. Applications deemed incomplete will be returned to the applicant and will not be further reviewed by the City. The City reserves the right to allocate resources to any, all, or none of the applications received under this program. The City also reserves the right to provide funds with different financing terms to any projects funded. The City may decide to not allocate all available resources. VIII. Confidentiality Information considered confidential under Oregon law, such as trade secrets or proprietary information, may be separated for confidential handling, if marked “confidential” and delivered at the same time as the rest of the submittal. To the extent allowed under the Oregon Public Records Law, the City will attempt to maintain all confidential information as exempt from public disclosure. IX. Other Springfield Resources In addition to funding for land acquisition through this program, the City has other assistance available for income-qualified housing development through separate applications. For questions about specific resources, contact Katie Carroll at kcarroll@springfield-or.gov or 541-726-3660 or Erin Fifield at efifield@springfield-or.gov or 541-726-2302. • HOME funds – HOME resources may be used for acquisition, new construction, and soft costs, including the costs of tenant relocation, but not rehabilitation costs. Limited to housing for rent. • Low-Income Rental Housing Property Tax Exemption – The City of Springfield offers a 20-year property tax exemption for new low-income rental housing. This exemption, enabled under state statute, requires approval by the Springfield City Council. • Systems Development Charges Assistance in Urban Renewal Areas – For projects in the Glenwood or Downtown Urban Renewal Districts, contact the City’s Economic Development Manager about special considerations for SDCs. Attachment 2 Page 6 of 7 7 • System Development Charges Waiver for Homeownership – For housing that will be sold to low- income buyers for an affordable price for a period of at least five years. • Land-Use Application Fee Waivers – The City of Springfield currently waives land-use application fees for income-qualified housing providers. Application for the fee waiver should be submitted prior to land-use application. Attachment 2 Page 7 of 7 SPRINGFIELD LAND ACQUISITION PROGRAM Attachment 3 Page 1 of 5 BACKGROUND •$1.5 million one-time ARPA funding through IGA with County o 3 properties acquired o Approximately $900,000 remains o December 2025 deadline •Funds must be used to acquire land that will be developed with income- qualified housing for households with low incomes (80% AMI limit) •Program allows for increased capacity, more flexibility Attachment 3 Page 2 of 5 PROGRAM HIGHLIGHTS •Modeled on State program •First-come-first-served •Open to public agencies, non- profits, private developers with prior experience •Need site control •Must build at least 4 units •90% LTV maximum •20-year affordability period •Rental or ownership •8 years to build Attachment 3 Page 3 of 5 QUESTION #1 Should funding be available for mixed-income projects or only for income-qualified projects serving households with low incomes? If mixed-income: •Income-qualified housing for low-income households must be primary purpose •Primary Purpose: “At least 60% of units will be reserved for households with low incomes for the duration of the required affordability period” Attachment 3 Page 4 of 5 QUESTION #2 Should funding for low-income homeownership projects be limited to singular underlying ownership (such as Community Land Trust or Manufactured Home Park)? •Staff recommend YES o Administrative burden to track o Risk for non-compliance o Potential loan burden on individual homeowners Attachment 3 Page 5 of 5