City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 25
EXHIBIT 1
MINIMUM PROPERTY STANDARDS BY ACTIVITY TYPE
ACTIVITY MINIMUM PROPERTY STANDARD TO BE MET
Acquisition of Existing Housing
(no rehabilitation or
construction)
Applicable state or local housing quality standards and code requirements.
If no local standards/codes apply, Section 8 HQS.
Rehabilitation of Housing Local written rehabilitation standards.
AND
State and local code requirements.
If no local codes apply, one of the following national model codes:
Uniform Building Code (ICBO)
National Building Code (BOCA)
Standard Building Code (SBCCI)
OR
Council of America Building Official one- or two-family code (CABO)
OR
Minimum Property Standards at 24 CFR 200.925 or 200.926 (FHA)
AND
Handicapped accessibility requirements, where applicable
New Construction of Housing State and local code requirements.
If no state and local codes apply, on the of the following national model codes:
Uniform Building Code (ICBO)
National Building Code (BOCA)
Standard Building Code (SBCCI)
OR
Council of America Building Official one- or two-family code (CABO)
OR
Minimum Property Standards (FHS) at 24 CFR 200.925 (for multi-family) or 200.926 (for one- and two-unite dwellings) AND
Handicapped accessibility requirements, where applicable.
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HOME Investment Partnerships Program
Policies and Procedures Manual Page 26
New construction of rental housing must meet site and
neighborhood standards at 24 CFR 893.6(b)
Note: The City of Montebello using MPS may rely on inspections performed by a qualified person.
Applicants and Beneficiaries
The HOME Program is designed to provide affordable housing to low-income and very-low-income families and individuals. Therefore, the program has rules about targeting program resources and establishing applicant eligibility.
1. Program Targeting:
The City of Montebello will use 100 percent of its HOME funds to assist families with incomes below 80 percent of the area median income.
2. Rental Housing or TBRA:
If the City elects to use HOME funds for rental housing or for TBRA, additional targeting requirements apply:
a. For each annual HOME allocation, the City of Montebello will require that 90 percent of the occupants of HOME-assisted rental units and households assisted with HOME-funded TBRA must have incomes that are 60 percent or less of the area median.
b. 20 percent of the units in each rental housing project containing five or more units must be occupied by tenant families with incomes at or below 50 percent of median income.
c. Owners must adopt written tenant selection policies and procedures.
3. Applicant Income Eligibility
a. Income eligibility: Beneficiaries of HOME funds (homebuyers, homeowners, or tenants) must be low-income or very-low-income. Their income eligibility is determined based on their annual income. The income limits are published by HUD each year. All homeowners must certify that they meet the household income eligibility requirements and have their household income documented. The income limits in place at the time of approval will apply when determining applicant income eligibility. Income documentation must
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HOME Investment Partnerships Program
Policies and Procedures Manual Page 27
be the most recent available and at least within six months of the approval date.
b. Annual income: Annual income is the gross amount of income anticipated by all adult household members during the 12 months following the effective date of the determination.
NOTE: Annual income is sometimes referred to as gross income or annual (gross) income.
Definition of Annual Income
In accordance with 2013 HOME Final Rule, the City of Montebello has selected a single definition of income for each of its HOME-assisted programs (e.g. 0% Deferred Loan, Homebuyer Assistance Program, etc.) administered by the City.
Annual income will be determined by examining at least 2 months of source documents evidencing annual income (e.g., wage statement, interest statement, unemployment compensation statement) for the family. Furthermore, when determining whether a family is income-eligible, the City will use the following definition of “annual income”:
(1) Annual income as defined at 24 CFR 5.609 will be utilized while applying exclusions from income established at 24 CFR 5.611 as further required by the 2013 HOME Final Rule.
The City will calculate the annual income of the family by projecting the prevailing rate of income of the family at the time that the City determines that the family is income eligible. Annual income will include income from all persons in the household and income or asset enhancement derived from the HOME-assisted project will not be considered in the calculation.
The City will not re -examine the family’s income at the time the HOME assistance is provided, unless more than six months has elapsed since the City determined that the family qualified as income-eligible.
Note: The definition listed above provide s guidance on what items to include in annual income calculation (for example, wages, salaries, tips, etc.). They do not affect the method in which income is verified (discussed under “Income Verifications” below).
Income Verification
1. Initial Verification : To determine if program applicants are income -eligible, Recipients must verify their income using source documentation such as wage statements, interest statements, and unemployment compensation statements.
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HOME Investment Partnerships Program
Policies and Procedures Manual Page 28
a. Income eligibility is based on anticipated income . When collecting income verification documentation, also consider any likely changes in income.
Note: A last year’s tax return does not establish anticipated income; nor is it adequate source documentation.
b. Once initial income verification is completed, a Recipient is not required to re-examine the applicant’s income unless six months has elapsed before assistance is provided.
2. Annual Re-examinations: For rental programs, annual re -certifications of income are required. While the HOME Program regulations require that income must be verified with source documentation every five years, the City of Montebello requires income be verified with source documentation annually.
Long-Term Affordability
To ensure that HOME investments yield affordable housing over the long term, HOME imposes rent and occupancy requirements over the length of an affordability period.
Affordability Periods
For homebuyer and rental projects, the length of the affordability period depends on the amount of the HOME investment in the property and the nature of the activity funded. Exhibit 2 below provides the affordability periods.
EXHIBIT 2
HOME INVESTMENT PER UNIT LENGTH OF THE
AFFORDABILITY PERIOD
LESS THAN $15,000 5 YEARS
$15,000 - $40,000 10 YEARS
MORE THAN $40,000 15 YEARS
NEW CONSTRUCTION OF RENTAL HOUSING 20 YEARS
REFINANCING OF RENTAL HOUSING 15 YEARS
Occupancy
Throughout the affordability period, the HOME -assisted housing must be occupied by income - eligible households.
1. Rental housing: When units become vacant during the affordability period, subsequent tenants must be income -eligible and must be charged the applicable HOME rent. (See Chapter 6 for more information.)
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Policies and Procedures Manual Page 29
2. Homebuyer assistance: If a home purchased with HOME assistance is sold during the affordability period, resale or recapture provisions apply to ensure the continued provision of affordable homeownership.
Property and Occupancy Eligibility Requirements
1. Property must be a single -family home, condominium (interior only), and townhome (interior only).
2. Property must be owner-occupied.
3. Property must have a fee simple title (clear title) or a 99-year leasehold interest.
4. There must be sufficient equity in the property to ensure compliance with the loan-to-value requirements.
5. Property must be located within City boundaries.
6. Property must contain a legal residential structure intended for continued residential occupancy.
7. The after-rehabilitation value of the property cannot exceed the HOME Homeownership Value Limits, or those established by a local market survey conducted by the City and approved by HUD (applies to HOME program).
8. All taxes and assessments currently due or in arrears on the real estate must be paid before a project can be considered eligible
9. Property cannot be located in a 100 -year storm flood hazard area as identified on the effective Flood Insurance Rate Map (FIRM) in accordance with 43 CFR 6030. If property is located in AO flood zone, then flood zone insurance will be required.
Homeownership Exceptions
Homeownership means ownership in fee simple title in a one - to four -unit dwelling or in a condominium unit or 99-year leasehold interest except:
1. Housing located in insular areas must have a ground lease for at least 40 years.
2. Housing located on land owned by a community land trust for at least 50 years.
Ownership interest must be in good, marketable title, subject to only certain restrictions. The following situations also meet the ownership definition subject to only certain conditions:
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Policies and Procedures Manual Page 30
1. Inherited property with multiple owners. This provision is for housing for which title has passed, by inheritance, to several heirs, not all of whom reside in the housing.
This most often occurs when siblings inherit a family home that is occupied by one sibling. Rehabilitation assistance will be provided to the owner -occupant when he/she: (a) is low- income, (b) occupies the housing as his or her principal residence, and (c) pays all the costs associated with ownership and maintenance of the housing (e.g., mortgage, taxes, insurance, utilities).
2. Life Estate. Under a life estate, the occupant of the property has the right to live in the housing for the remainder of his or her life and does not pay rent. This might be a situation where a disabled adult occupies a dwelling owned by another family member under a life estate, or in which a deceased spouse leaves a property to the children of a previous marriage but permits the other spouse to occupy the property for the remainder of his or her life. Rehabilitation assistance may be provided to the person holding the life estate, provided the person is low- income and occupies the housing as his or her principal residence.
3. Inter vivos trust, also known as living trust. A living trust is created when the owner of property conveys his or her property to a trust for his or her own benefit or for that of a third party (the beneficiaries). The trust holds legal title and the beneficiary holds equitable title. The trustee is under a fiduciary responsibility to hold and manage the trust assets for the beneficiary. This is a common estate planning tool.
Rehabilitation assistance may be provided to a property if all beneficiaries o f the trust qualify as a low - income family and occupy the property as their principal residence. The contingent beneficiaries, who receive no benefit from the trust and have no control over the trust assets until the beneficiary is deceased, need not be low-income. The trust must be valid and enforceable and must ensure that each beneficiary has the legal right to occupy the property for the remainder of his or her life.
4. Beneficiary Deed. A beneficiary deed conveys an interest in real property, including any debt secured by a lien on real property, to a grantee beneficiary designated by the owner and that expressly states that the deed is effective on the death of the owner. Upon the death of the owner, the grantee beneficiary receives ownership in the property, subject to all conveyances, assignments, contracts, mortgages, deeds of trust, liens, security pledges, and other encumbrances made by the owner or to which the owner was subject during the owner’s lifetime. Rehabilitation assistance may be provided to the owner if he or she qualifies as low-income and occupies the property as his or her principal residence.
PART 2: COST ALLOCATION AND SUBSIDY LAYERING
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HOME Investment Partnerships Program
Policies and Procedures Manual Page 31
The City of Montebello performs a cost allocation and subsidy layering review of HOME projects to determine the appropriate subsidy amount to the project. The actual HOME Investment in a project depends on:
1. The proportion of the total project cost that is HOME -eligible -- some planned project costs may not be eligible expenses under the HOME Program.
2. How many of the units in the project are HOME-assisted -- Projects may have a mix of HOME- and non-HOME-assisted units.
3. The financial needs of the project -- HOME projects may not receive more subsidy than is required to make them financially feasible.
4. Cost allocation and subsidy layering are impacted by any changes in the proportion of the HOME-assisted unit to total units in the project, development cost, or financing sources.
5. Because of these requirements, CHDOs, developers or sub -recipients must contact the City of Montebello as soon as there are any changes in project size, scope, cost, or financing sources at any point during the development of the project.
Cost Allocation
The HOME Program distinguishes between the units in a project that have been assisted with HOME funds and those that have not resulting in the term HOME -assisted unit. The distinction between HOME-assisted and unassisted units allows HOME funds to be spent on mixed- income projects while still targeting HOME dollars only to income-eligible households.
Determining a HOME Assisted Unit
HOME rules create a floor (minimum) for the number of HOME-assisted units a project must-have.
This floor is based on the proportional share of total eligible costs to be paid with HOME funds.
1. Before determining the allowable HOME subsidy amount, the City will establish the total HOME-eligible cost for the project.
2. Once the total HOME -eligible costs are established for the project, the City must allocate costs across units.
3. If both the assisted and non- assisted units are comparable in size, features, and number of bedrooms, the HOME-eligible costs can be pro-rated across units. (Since floating units, by definition, must be comparable, costs should always be pro-rated.)
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Policies and Procedures Manual Page 32
4. If the assisted and non-assisted units are not comparable, the actual costs must be determined and allocated unit -by-unit. The specific units identified to “receive” HOME funds must be fixed -- that is, designated as HOME-assisted.
Subsidy Layering
HUD establishes limits on the amount of HOME funds that may be invested in affordable housing on a per-unit basis for specific areas as specified below:
1. Before committing funds to a project that combines the use of any other local, State or Federal assistance, the City of Montebello will evaluate the project in accordance with guidelines that it has adopted, to ensure that the City does not invest any more HOME funds than are necessary to provide affordable housing.
2. The City of Montebello will conduct a subsidy layering review in accordance with the guidelines presented in HUD Notice CPD- 98-01. These guidelines include review of the following project documents:
c. Sources/Uses of F unds - This statement should reflect the project development budget and should list:
i. All proposed sources (both private and public) of funds and the dollar amounts for each respective source; and
ii. All uses of funds (including acquisition costs, rehabilitation and/or construction costs, financing costs, and professional fees) associated with the project.
The City of Montebello will identify the types of documentation necessary to verify the sources and uses of funds indicated in the statement. This listing of documentation will be provided to any CHDO/Developer/Subrecipient so that the documentation can be submitted along with the Sources/Uses of Funds Statement in their application for HOME funds.
d. Sources of Funds - The City of Montebello will request the following documentation:
i. Commitment letters with all terms and conditions for all mortgages, grants, subordination agreements, bridge (interim) loans and investment tax credits (historical, low-income, if applicable); and ii. A copy of the partnership agreement, if applicable, which will indicate the case contributions by the general partner(s) and/or limited partners.
e. Uses of Funds - The City of Montebello will request the following documentation:
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Policies and Procedures Manual Page 33
i. Earnest money agreement, option or closing statement for land and/or building(s);
ii. Construction cost estimate;
iii. Construction contract or preliminary bid(s);
iv. Agreements governing the various reserves which are capitalized at closing (to verify that the reserves cannot be withdrawn later as fees or distributions);
v. Appraisal (to substantiate the value of the land and the value of the property after rehabilitation or the structure being built); and vi. If low -income housing tax credits are utilized, documentation on the syndication costs (legal, accounting, tax opinion, etc.) from the organization/individual who will syndicate and sell the offering to ensure that the project can support the fees necessar y to syndicate/fund the project.
f. CHDOs/Developers/Subrecipients are required to provide the City of Montebello a Sources/Uses of Funds statement for a proposed project with supportive documentation.
g. Certification of governmental assistance: CHDOs/Developers/Subrecipients must provide a formal certification as to whether or not additional governmental assistance will be provided to the project, and if so, what kind of assistance.
h. Project development budget: CHDOs/Developers/Subrecipients must provide the City of Montebello the project development budget so that the City can determine whether the development costs are necessary and reasonable. The budget should include all costs associated with the development of the project, regardless of the funding sources.
i. “Reasonableness” of costs will be based on all of the following three factors:
i. Costs of comparable projects in the same geographical area; ii. Qualifications of the cost estimators that developed the various budget line items; and
iii. Comparable costs published by recognized industry cost index services.
j. Proforma: The City of Montebello will determine the reasonableness of the rate of return on an equity investment by looking at the CHDOs/Developers/Subrecipients proforma (project income and expense statement).
i. The proforma should include achievable operating expenses.
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Policies and Procedures Manual Page 34
ii. It should also specify the consequences of tax benefits, if any, and any other assumptions used in calculating the project cash flow. iii. The proforma should represent, at a minimum, the term of the HOME affordability requirements, or longer if other funding sources require longer affordability terms.
Underwriting
Underwriting involves the analysis of project assumptions and risks to determine if the public investment is reasonable and the project can be expected to meet all applicable program requirements during the period of affordability. As discussed in the section above, Subsidy layering is a component of project underwriting. The following policies and procedures must be followed regarding underwriting and subsidy layering:
• An examination of the sources and uses of funds for the proposed project and a determination that all project costs are reasonable;
• An assessment of the current market demand in the area where the project will be located; • An assessment of the experience and the financial capacity of the developer or rental project owner; and,
• An assessment of the firm written financial commitments for the project.
City Staff is required to evaluate a project using its underwriting and subsidy layering guidelines before committing HOME funds and is responsible ensuring that underwriting is revised in response to any changes that may occur in the project budget. The City must demonstrate it has independently evaluated the project budget, financing and development schedule. To confirm that this has occurred, the City is required to certify in HUD’s Integrated Disbursement and Information System (IDIS) that it has followed its underwriting and subsidy layering standards before making a commitment of HOME funds. It is important for city staff to recheck and update or revise the project underwriting at:
• Initial Closing or construction start, since construction costs at the time of project application typically are estimates instead of firm bids and contracts; Before HOME funds, in addition to the original commitment, are awarded to the project during development (e.g. in response to a change order or other changes in project costs).
• Construction completion or final draw, when final sources and uses can be verified; While a PJ is ultimately responsible for the project underwriting, it may permit a subrecipient, State recipient or contractor working for the PJ to perform underwriting functions or services. However, the PJ must retain full review authority and must certify in IDIS to the use of its underwriting standards. The use of subrecipients, State recipients, or contractors does not relieve the PJ of its responsibility to provide for proper levels and types of investment with HOME funds.
For further guidance regarding underwriting, staff can refer to the following link:
Requirements for the Development and Implementation of HOME Underwriting and Subsidy Layering Guidelines (hud.gov)
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Other Requirements
1. Property owners must submit an application and obtain approval prior to beginning repairs.
Costs of repairs completed prior to assistance approval are not eligible for reimbursement.
2. 100% of financial assistance must be used to rehabilitate the home. No cash is provided to homeowner.
3. The loan is to be recorded as a trust deed on the property and cannot be lower than 2nd position. Open lines of credit must be closed prior to loan approval.
4. There is a maximum of $100,000 asset limitation in order to apply for the program. The value of homeowner’s permanent residence not to be included as part of assets. Income derived from assets must be included in the income calculation.
5. Fire insurance: The homeowner must maintain fire insurance on the property for the duration of the program loan(s). This insurance must be an amount adequate to cover all encumbrances on the property. The insurer must identify the City as Loss Payee for the amount of the program loan(s). A binder must be provided to the City and maintained in the project master file.
6. Flood insurance: For homes in a 100-year flood zone, the homeowner must maintain flood insurance in an amount adequate to secure the Program loan and all other encumbrances.
This policy must designate the City as Loss Payee and a binder must be provided to the City and maintained in the project master file.
Termination or Denial of Program Assistance
Applicants may be terminated from Program or denied assistance for the following reasons.
This is not a complete list. It only includes those areas for which the applicant has direct control.
1. Terminated from a federal, state, or local program, such as Section 8.
2. If applicant owes any money to the City or any housing authority under any program. If there is a repayment agreement, applicant can be terminated for not honoring the terms of the agreement.
3. False or withholding information.
4. Lack of proper paperwork.
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5. The value of cash and investments exceeds $100,000, except under the following circumstances:
a. The account is a qualified retirement account (IRA, annuity, deferred compensation)
b. The account is used for regular retirement income as shown over a 2 -year history, and
c. Balance in the account does not exceed $300,000, and
d. The monthly disbursement is the largest source of monthly income
6. If any member of the family commits fraud, bribery or other corrupt or criminal act in connection with any federal, state or local housing and assistance programs.
7. Not following procedures.
8. Un-permitted structures that are not eligible improvements and will not be addressed as part of the project.
9. Lack of maintenance of previously program funded improvements.
10. If applicant participated in the Program in the past, cannot reapply within seven years after the case close date for the grant and or loan program.
11. If any member of the family engages in or threatened abusive or violent behavior toward City staff.
12. If any member refuses to sign or submit any forms.
Termination Procedures:
a. Notify applicant in writing
b. Informal hearing meeting with Economic Development Director
c. If applicant wishes to appeal the termination, the case will be submitted to the Loan Committee for further review and final decision.
Additional Funds
Loans—Due to unforeseen expenses during construction, which exceed the allocated contingency fund, it may be necessary to lend additional monies to complete the project. This is possible as long as the additional funds will not cause the loan to exceed the maxim um loan amount, and the
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maximum LTV. The homeowner must execute a new Deed of Trust and Promissory Note prior to receiving additional funds.
Grants—Any funds that will not be covered by the program and will be the homeowner’s responsibility, must be paid directly to the contractor in a form of a cashier’s check or money order made out to the contractor. The proof of payment is to be submitted to the City at the completion of the project.
Death of Applicant
1. If an applicant passes away during the process of the application and no other persons are on the title, and no work has started, assistance will be terminated
2. If other person(s) are on title and reside in the property, assistance will continue so long as household remains income eligible.
3. Additional titleholders that do not reside in the property and property is not occupied; assistance will be terminated.
4. If work has started and applicant passes away and no one else is on title or resides at the property:
a. Continue with assistance, Executor to repay the program from trust
b. Continue with assistance, establish a repayment plan
5. If work has started and other person(s) are on title, but do not reside in the property:
a. Continue with assistance, property to be occupied by additional title holder as specified in the agreement and will be considered owner-occupied.
b. Continue with assistance, if the property is not owner -occupied, assistance is to be repaid based on repayment plan.
Repayment
Loans and grants are to be paid in full if the property is not maintained. All loans must be repaid according to terms.
All loans are subject to the following acceleration clause:
The City loan plus all accrued interest becomes due and immediately payable if any of the following occurs:
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1. Sale or transfer of the property, including lease, exchange or other disposition of the property, whether voluntary or involuntary.
2. The refinancing of existing first deed of trust for a loan amount in excess of the then- current loan balance. Refer to Subordination Requirements.
3. When the borrower is in default of any other obligation under the Loan Agreement.
4. When the borrower no longer occupies the property as the principal residence.
5. Death of borrower. The loan is due and payable within three (3) months of the date of death.
6. Lack of maintenance on the property.
The City will be the receiver of loan payments and must maintain a financial record-keeping system to record payments and file statements on payment status. Payments must be deposited and accounted for in the City’s appropriate Program Income Account, as required by HUD. The City will accept loan payments from borrowers prepaying deferred loans, and from borrowers making payments in full upon sale or transfer of the property. The City may at its discretion, enter into an agreement with a third party to collect and distribute payments and/or complete all loan servicing aspects of the Program.
Assumption
Loans are not assumable, in whole or in part. In the event that a homeowner sells, transfers title, or discontinues residence in the rehabilitated property for any reason, the loan becomes due and payable. Original borrowers can be deleted from title, but no additional persons can be added.
Subordination
A subordination request may be approved, at the City’s sole discretion, only if it meets the following terms and conditions:
1. Property to become part of a Trust under original borrower(s).
2. Refinancing
a. The new loan must reduce the overall housing expenses. b. No cash-out is permitted, which means that new loan proceeds must be used only to pay off the existing senior debt and reasonable closing costs. Cash-out for debt consolidation, vacations, etc. is not allowed.
c. The total LTV ratio cannot exceed 80% of the property-appraised value. d. The new loan must have a lower fixed interest from the current. e. The new loan shall include an impound account for property taxes and insurance. f. The new loan must be amortized over at least 15 years. g. The City loan’s position must not be diminished from its original position ; for example, if the City loan is a second trust deed, the City will not subordinate to a third position.
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h. No lender prepayment penalties are allowed.
i. A complete subordination package must be submitted to the City for review of compliance, and recommendation. The subordination package must include:
i. Letter of explanation for the subordination request
ii. Copy of new loan application
iii. Copy of new lender approval
iv. Copy of underwriting and transmittal summary
v. Copy of certified escrow instructions
vi. Copy of estimated closing statement (estimated HUD-1) vii. Copy of preliminary title report
viii. Copy of current property appraisal (no older than 6 months) ix. Copy of most recent mortgage statement
Monitoring
Continued residency will be monitored each year for the term of the loan. For loans, the homeowner must submit an annual certification that the property continues to be their principal place of residence, and attach appropriate verification of residency, such as utility bill and insurance renewal that evidences owner-occupancy.
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CHAPTER 3: CHDO REQUIREMENTS AND ACTIVITIES
Part I of this chapter details the CHDO set-aside requirements, the qualifications of a CHDO, CHDO set-aside roles, and the types of assistance the City of Montebello may provide CHDOs while Part II of this chapter covers the City's CHDO selection process.
PART 1: HOME PROGRAM REQUIREMENTS
A Community Housing Development Organization (CHDO) is a private nonprofit, community - based service organization that has obtained or intends to obtain staff with the capacity to develop affordable housing for the community it serves.
The City of Montebello is committed to support City -approved certified Community Housing Development Organizations (CHDOs) that have the appropriate capacity and consent to develop quality affordable housing throughout the City of Montebello . Therefore, the City of Montebello continues to encourage qualified nonprofit organizations to apply for certification as a CHDO.
CHDO Set-Aside Requirement
Reservation of Set-Aside of Funds for CHDOs:
1. The City of Montebello has up to 24 months from after the last day of the month in which HUD signs the HOME Investment Partnerships Agreement transmittal letter to identify and designate the CHDOs they plan to work with, and to reserve funds for the CHDOs’ use.
2. The City of Montebello may set aside 15 percent of their funds for housing owned, developed, or sponsored by CHDOs.
3. CHDOs may engage in other HOME -eligible activities in which they are not the owners, developers, or sponsors of the housing . However, the HOME funds committed to those activities will not count toward the set-aside.
4. The CHDO reservation of funds can be made by the City before specific projects are identified.
CHDO Qualifying Criteria
The City of Montebello will certify a nonprofit agency as a CHDO to qualify for the CHDO set-aside.
As such, the City of Montebello will accept applications for certification on a continuous basis and the certification is valid for one (1) year.
A CHDO is a specific type of private nonprofit entity . CHDOs must meet certain requirements pertaining to their:
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1. Legal status;
2. Organizational structure; and
3. Capacity and experience.
(HUD Notice CPD 97-11 details these requirements).
1. Legal Status
a. Organized under State/local law: CHDOs must be organized under State and local law.
b. Purpose of organization : Provision of decent housing that is affordable to low- and moderate -income persons must be among the purposes of the organization. This commitment must be evidenced in the CHDO's:
i. Charter;
ii. Articles of incorporation;
iii. By-laws; or
iv. A resolution of the CHDO's board of directors.
c. No individual benefit: No part of the CHDO’s earnings (profits) may benefit any members, founders, contributors, or individuals.
d. Clearly defined service area : A CHDO should have a clearly defined geographic service area.
i. CHDOs do not need to represent a single neighborhood. ii. For urban areas, a CHDO may include in its service area a neighborhood or neighborhoods, city, county, or metropolitan area. iii. For rural areas, a CHDO may include in its service area a neighborhood or neighborhoods, town, village, county or multi - county area (but not the entire State.)
iv. Nonprofits serving special populations must also define the geographic boundaries of their service areas in order to qualify as CHDOs.
e. Nonprofit status
i. A CHDO must have received a tax -exempt ruling from the IRS under Section 501(c)(3) of the Internal Revenue Code of 1986 in order to be designated by the PJ as a CHDO.
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ii. There are many incorporation options under Section 501(c), depending on the type and purpose of the organization seeking the designation for tax-exemption.
f. The 501(c) designation status:
The 501(c) designation status permissible under HOME is:
i. 9 501(c)(3) -- a charitable, nonprofit corporation;
ii. 9 501(c)(4) -- a community or civic organization;
iii. 9 Section 905 -- a subordinate organization of a 501(c) organization.
g. IRS standards for granting a 501(c)(3):
i. Designation for housing development organizations are narrowly applied, lengthening the time it can take to receive a 501(c)(3) designations.
ii. Designation can take 9 to 24 months.
iii. The timeframe varies by IRS region.
h. Conditional designation:
i. The IRS will usually grant new applicants a conditional designation of 501(c) status, valid for a specified period of time (usually three years.)
ii. During that period of time, the organizations may operate legally as 501(c) organizations, with all benefits pursuant to that designation, while the IRS monitors their operations.
i. Final designation:
Assuming the CHDO operates in compliance with applicable regulations during this period, the IRS will grant them final 501(c) designation.
NOTE: The City of Montebello requirement for a 501(c) designation can only be fulfilled by having a final designation from the IRS.
NOTE: Pending 501(c) Status Documentation that the CHDO has an application for 501(c) status pending at the IRS will not suffice to fulfill the nonprofit status requirement.
2. Organizational Structure
The City's requirement for a CHDOs organization structure is:
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a. The structure of the board of directors of a CHDO is viewed as the main indicator of community control over the CHDO. With that, a CHDOs Board of Directors must be composed of the following:
i. At least one -third must be representatives of the low -income community.
ii. No more than one -third may be public officials or employees of the City.
iii. The balance is unrestricted and may include people such as human and social service providers, lenders, individuals with access to philanthropic resources, or others willing to contribute their professional expertise.
iv. There are also maximum limits on representation and control by a for-profit entity when the CHDO is sponsored by a for-profit entity.
b. Low-income community representation: As noted above, a minimum of one- third of the board must consist of representatives of the low -income community. There are three ways to meet this requirement:
i. Residents of low-income neighborhoods in the community.
Low-income neighborhoods are defined as neighborhoods where 51 percent or more of the residents are low-income.
Residents of low-income neighborhoods on CHDO boards do not have to be low income themselves.
and/or
ii. Low-income residents of the community.
In urban areas, "community" is not necessarily limited to a single neighborhood, but may include several neighborhoods, the city, county or metropolitan area.
In rural areas, "community" may also cover a multi- county area (but not the whole state). The board need not include low - income residents from each county in the multi-county area. Low-income residents of low- income neighborhoods in the community do not need to submit proof of their income.
If low-income residents of the community who do not live in low- income neighborhoods are necessary to meet this threshold, the
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CHDO must obtain a certification from the resident that the resident does qualify as low-income.
and/or
iii. Elected representatives of low-income neighborhood organizations.
A low -income neighborhood organization is an organization composed primarily of residents of a low-income neighborhood. The primary purpose of the organization must be to serve the interests of the neighborhood residents.
Block groups, town watch organizations, civic associations, neighborhood church groups, and NeighborWorks organizations can be examples of low-income neighborhood organizations. The governing body of the low- income neighborhood
organization may elect the representative(s) to serve on the CHDO board.
c. Low-income input: Input from the low-income community is not met solely by having low -income representation on the board. The CHDO must meet the requirements as follows:
i. The CHDO must also provide a formal process for low -income program beneficiaries to advise the CHDO on design, location of sites, development, and management of the organization's by -laws or a board resolution.
ii. This requirement is especially important for CHDOs serving a large geographic area, where it may not be possible for a CHDO to have low-income board representation from every neighborhood in which the CHDO will develop, own, or sponsor housing.
iii. CHDOs should establish systems for community involvement in parts of their service areas where housing will be developed, but which are not represented on their boards. Such systems might include special committees of neighbors of a proposed development site, neighborhood advisory councils, or open town meetings.
d. Public-sector limits: A maximum of one -third of the governing board may consist of representatives of the public sector.
e. This limitation is intended to ensure that separation exists between the City and CHDOs, and that CHDOs are indeed community -based and community- controlled organizations.
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i. A member of the governing board of a CHDO would be considered a representative of the public sector if he or she is a public official, including:
ii. Elected officials of the City of Montebello - council members, aldermen, commissioners, state legislators, members of a school board, etc.
iii. Appointed public officials - members of a board or State commission or of any other regulatory and/or advisory boards or commissions that are appointed by the State.
iv. Public employees of the City - all employees of public agencies (including the schools) or departments of the local government (e.g., a clerk in the water and sewer department, a public facility janitor or a secretary in the tax assessment office); or
v. Appointed by a City official - any individual who is not necessarily a public official, but who has been appointed by a City official to serve on the CHDO board
vi. Members of the board appointed by public officials cannot select other members of the board.
f. If the public official is low -income: Public officials and/or appointees who themselves are either low -income community residents or residents of a low-income neighborhood count against the one -third maximum limit of public sector representatives. However, they do not count toward the one - third minimum requirement of community representatives.
g. Cities, public bodies, or instrumentalities: Cities, public bodies or instrumentalities of public bodies cannot be considered CHDOs. Examples of instrumentalities of public bodies include public housing authorities (PHAs), urban renewal agencies, redevelopment authorities, and downtown development authorities.
i. The limits on public -sector representation on CHDO boards only serve to define CHDOs . There are other (not specific to HOME) restrictions on the participation of public officials on the boards of nonprofit organizations seeking public funds. The City should observe their conflict-of-interest guidelines in this regard as well.
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h. Sponsored CHDOs: Nonprofits that have been sponsored by other nonprofits, charities, religious organizations, local or state government, public agencies, or for-profit corporations may qualify as CHDOs, but certain additional requirements and board limitations can apply.
i. Nonprofit and charity sponsors:
i. There are no limits on the proportion of the board that may be appointed by nonprofit or charity sponsors, as long as the minimum one-third community representation is met and the maximum one - third public representation is not exceeded.
ii. A one -year minimum history of service to the community by the sponsoring nonprofit or charity may help a new nonprofit to qualify as a CHDO.
j. Religious organization sponsors:
i. Organizations that are religious or faith -based are eligible, on the same basis as any other organization, to participate in the HOME Program. Government entities are not to discriminate against an organization on the basis of the organization’s religious character or affiliation.
ii. However, organizations directly funded under HOME may not engage in inherently religious activities. If the organization conducts such activities, they must be offered separately and participation must be voluntary for the beneficiaries of the assistance provided.
Additional guidance regarding religious or faith- based organizations is provided in 24 CFR
92.2.57 of the HOME final rule.
k. Local, state government and public agency sponsors:
i. A local or state government and/or a public agency cannot qualify as a CHDO but may sponsor the creation of CHDOs.
ii. Government officials and appointees of the government cannot exceed one-third of the members of the board.
iii. All other CHDO rules and requirements also apply.
l. For-profit corporate sponsors:
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i. A CHDO cannot be controlled by, nor be under the direction of, for - profit entities or individuals seeking profit from the organization.
ii. CHDOs may be sponsored or organized by a for-profit if:
The primary purpose of the for -profit sponsor is not the development or management of housing (that is, a builder, developer or real estate management firm may not spin off a CHDO);
The for -profit appoints no more than one -third of the CHDO’s governing board and the board members appointed by the for - profit do not appoint the remaining members of the board; and The CHDO is free to contract for goods and services from any vendors it selects.
3. Experience and Capacity
a. CHDO experience: A CHDO must demonstrate that it has at least one year of experience serving the community where it intends to develop the HOME - assisted housing.
i. Newly created organizations wishing to become CHDOs can meet this requirement if the parent (or sponsoring) organization is a nonprofit and has provided services to the community for at least one year.
ii. The year of service does not have to be directly related to housing.
iii. Prior service to the community cannot consist of a for -profit organization’s work in that community.
b. CHDO capacity: A CHDO must demonstrate the capacity of their key staff to carry out the HOME -assisted activities they are planning . This means that CHDOs must have:
i. Experienced key staff who have successfully completed projects similar to those proposed by the CHDO; or
ii. Key staff with limited or no experience, and who will use experienced consultants for the planning and development activities, as long as there is a plan in place for the consultant to train the key staff.
c. Differences in required experience and capacity: There are significant differences in the type of experience and capacity that is required to carry out the variety of housing development activities eligible under the HOME
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program. Therefore, "experience in having completed similar projects" is different for development/management of rental housing and development/sale of housing for homebuyers.
i. Because the purpose of the CHDO capacity requirement is to build staff expertise, CHDOs must have their own professional staffs . This means that the key staff required to demonstrate CHDO capacity cannot be:
Municipal, county or state employees; or
Consultants (paid or volunteer) not planning to train the CHDO's key staff.
4. Financial and Accounting Systems
a. Financial standards : CHDOs must have financial accountability standards that conform to 24 CFR 84.21, "Standards for Financial Management Systems."
i. If a CHDO or nonprofit is in the role of a subrecipient, it must comply with certain provisions or 24 CFR Part 84 and OMB Circular A- 122 “Cost Principals for Non-Profit Organizations.” Both publications are included are in the appendices.
ii. If a CHDO is acting as an owner, sponsor, or developer of HUD HOME assisted housing, the requirements at 24 CFR 84.21, “Standards for Financial Management Systems” apply . This means the CHDO must relate financial data to performance data and develop unit cost information.
The systems include the following:
Accurate, current, and complete financial results;
Records that identify the sources and uses of the funds; Control over and accountability of all funds and assets; Comparison of actual expenditures against budgets;
Written procedures to minimize time between the transfer of funds in and the payment of funds out;
Written procedures for determining reasonableness, allocability, and allowability of costs; and
Accounting records including cost accounting records supported by sources documents.
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b. Accounting systems: CHDOs/Nonprofits should establish accounting systems that include at a minimum the following reporting reports:
i. A chart of accounts that includes
The categories of accounts;
The name of the account;
The number of the account;
ii. Cash receipts journal that includes
The date the funds were received listed in chronological order; The amount received;
The source of the funds;
The purpose of the funds;
iii. Cash disbursements journal that includes
The date funds were paid out listed in chronological order; The date the expense was incurred;
The purpose of the expense;
The amount paid;
To whom it was paid;
iv. Payroll journal that includes
A listing of employees;
Amounts paid to the employees;
Benefit expenses paid;
v. General ledger that includes
A summary of all account activities listed in chronological order; and
The financial status of all the accounts of the organization.
c. Source documentation: Costs charged against the HOME program must be supported by source documentation that shows that the costs were:
i. Incurred during the effective period of the agreement; ii. Actually paid out;
iii. Expended on eligible items and activities; and
iv. Approved by the appropriate officials of the organization.
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CHDOs Set-Aside Roles: Owner, Developer, and Sponsor
The City of Montebello provides CHDO set-aside funds to CHDOs acting as owners, developers, and sponsors of projects that create new units of affordable housing in their communities . To qualify for the set-aside funds, the CHDO must have effective decision-making authority.
CHDO set-aside funds may be used by CHDOs for those HOME activities where the CHDO acts as the owner, developer, or sponsor of the housing.
1. Owner: The CHDO is an “owner” when it holds valid legal title to or has a long-term (99-year minimum) leasehold interest in a rental property . The CHDO may be an owner with one or more individuals, corporations, partnerships or other legal entities.
a. The CHDO may be the owner and developer of its own project.
b. The CHDO may own a property in partnership with either a majority or minority interest. However, the CHDO -- in partnership with a wholly owned for-profit or nonprofit subsidiary -- must be the managing general partner with effective control.
2. Developer: A CHDO is a “developer” when it either owns a property and develops a project, or has a contractual obligation to a property owner to develop a project.
a. If the CHDO owns the property, it must obtain financing and rehabilitate or construct the project.
i. For HOME-assisted rental housing: At project completion, the CHDO may maintain ownership and manage the project over the long-term, or it may transfer the project to another entity for long -term ownership and management.
ii. For HOME-assisted homebuyer project: The CHDO transfers title of the property and the HOME obligations to an eligible homebuyer within a specified timeframe of project completion.
b. If the CHDO does not own the property, it must be under a contractual obligation with the owner to obtain financing and rehabilitate or construct the project. Under this scenario, the CHDO assumes all of the risks and rewards associated with being the most detail the CHDO’s specific obligations.
iii. For HOME -assisted rental housing: The CHDO may, at project completion, manage the project for the owner.
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iv. For homebuyer housing: The owner must transfer title of the property and the HOME obligations to eligible homebuyers within a specified timeframe of project completion.
c. If the CHDO develops the property for an owner pursuant to a written or other agreement with the City, the CHDO is acting in the capacity of a subrecipient.
3. Sponsor: A CHDO is a “sponsor” for HOME -assisted rental or homebuyer housing according to the circumstances outlined below.
a. For HOME-assisted rental housing: The CHDO develops a project that it solely or partially owns and agrees to convey ownership to a second nonprofit organization at a predetermined time. The conveyance may take place prior to, during, or upon completion of the development phase.
b. The HOME funds are invested in the project owned by the CHDO sponsor.
c. The CHDO sponsor identifies the particular nonprofit organization that will obtain ownership of the property prior to commitment of HOME funds.
d. The other nonprofit will assume from the CHDO at a specified time all HOME obligations (including repayment of loans and tenant and rent requirements) for the project. If the property is not transferred to the nonprofit organization, the CHDO sponsor will remain liable for the HOME obligations.
e. The other nonprofit organization must be financially and legally separate from the CHDO sponsor. (The second nonprofit may have been created by the CHDO; nevertheless, it is a separate entity from the CHDO.)
f. The CHDO sponsor must provide sufficient resources to the nonprofit organization to ensure the completion of development and long -term operation of the project.
4. Similar roles: The developer and sponsor roles are similar in many ways.
a. In both the developer and sponsor roles, the CHDO carries out some or all of the principal project development activities -- such as acquisition, financing, construction management and putting together a capable development team -- to bring project from conception to completion.
b. However, as developer, the CHDO need not own the property.
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c. As sponsor, the CHDO must own the property and shift the responsibility from the CHDO to another specific nonprofit at some specified time in the development process. Transfer could occur, for example, at:
i. Initiation of the construction;
ii. Completion of the construction; or
iii. Issuance of the certificate of occupancy.
The HOME long-term affordability requirements for the project are the responsibility of the owner or subsequent owners of the property.
5. CHDOs vs. Subrecipients
A community -based nonprofit organization may meet all of the regulatory requirements to be designated as a CHDO. However, in order for CHDO activities to count toward the CHDO set-aside, the CHDO must be the developer, sponsor and/or owner of the HOME-assisted housing.
6. CHDO as a Subrecipient:
CHDOs may play the role of a "subrecipient" undertaking all other HOME -eligible activities, even if these activities do not count toward the CHDO set-aside.
a. A HOME subrecipient is an entity selected by the City to administer aspects of a HOME program (that is, screen projects, market activities, review and certify tenant income, counsel potential homebuyers) or an entire HOME activity (review requests for HOME funds for the rental housing production set-aside.).
i. Restrictions: When a CHDO is acting in the capacity of a HOME subrecipient, it may not also receive HOME funds to develop, sponsor or own housing funded through the subrecipient activity the CHDO administers. Doing so would constitute a conflict- of-interest for the CHDO.
CHDO Eligible Uses
With the City of Montebello approval, CHDOs may use HOME funds for all eligible HOME activities.
However, only certain types of activities count toward the minimum 15 percent set-aside.
1. Eligible Uses:
Eligible set-aside activities include the following when carried out by a CHDO acting as an owner, developer or sponser:
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a. Acquisition and/or rehabilitation of rental housing;
b. New construction of rental housing;
c. Acquisition and/or rehabilitation of homebuyer properties;
d. New construction of homebuyer properties; and
e. Direct financial assistance to purchasers of HOME -assisted housing sponsored or developed by a CHDO with HOME funds.
2. Ineligible Uses:
The following activities are ineligible set -aside activities, but may be carried out by the CHDO as a subrecipient:
a. Tenant-based rental assistance;
b. Homeowner rehabilitation; and
c. Brokering or other real estate transaction.
CHDO Special Assistance
The City of Montebello may use HOME funds to provide special assistance to CHDOs that include:
1. Project pre-development loans;
2. Use of HOME project proceeds; and
3. Capacity-building assistance.
NOTE: In contrast to the 15 percent set-aside, which is mandated, the City has total discretion over whether to provide these special forms of assistance.
1. Project Pre-development: The City of Montebello may set-aside a portion of CHDO set-aside funds to be provided to the CHDO for project -specific pre-development assistance (see Part II: Program and Design).
a. The project specific pre -development assistance is intended to assure that CHDOs have access to funds for up-front, eligible project expenditures. This assistance provides a form of project feasibility "line of credit" that many nonprofit developers need, but often have difficulty obtaining from private sources.
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b. All costs must be related to a specific project which, if deemed feasible, would receive HOME funds for development.
c. Project pre-development costs may not exceed customary and reasonable project preparation costs.
2. Types of pre -development assistance: The two primary types of project pre - development assistance are:
1. Technical assistance and site control loans, and
2. Seed money loans.
PART 2: PROGRAM DESIGN AND IMPLEMENTATION
This section discusses the City's CHDO program design and implementation procedures.
PROCEDURES (General)
1. City of Montebello CHDO applicants must request a specific amount in the Project Application.
2. All pre-development loans must be repaid or rolled over into the permanent subsidy at on construction close.
Operating Assistance
3. The City of Montebello permits CHDO proceeds and pre -development loans but does not provide CHDO operating expenses.
4. Applicants requesting pre -development loans must complete both the CHDO Pre - Application and the Project Application as defined below before a loan can be considered or authorized.
Eligibility Determination
1. Once the CHDO candidates are identified, the City of Montebello will determine whether organizations meet the CHDO qualifications outlined in the HOME regulations.
a. Eligible Applicant
The only eligible applicant for the city's HOME CHDO Program is a Community Housing Development Organization ("CHDO") as defined by the HOME Investment Partnerships Act and the regulations adopted by the US Department of Housing and Urban Development (HUD") is a private
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nonprofit, community -based organization that meets the definition at 24 CFR 92.2. The governing law and regulations may be found at 24 CFR 92.2 and 92.300-303, and in CPD Notice 97 -11, CPD Notice 97- 09, and HUD CPD Notice 96-09.
To assist the City of Montebello in determining the qualifications and capacity of a CHDO organization the City designed a CHDO Determination Worksheet (see Exhibit 3) . The worksheet is designed to assist the City in processing a CHDO application in the minimum time necessary. Each section is a table which can be filled out and the table will adjust to the length of the CHDO’s response.
CHDO Capability
1. Once an organization has been determined eligible as a CHDO, the City of Montebello will establish whether the CHDO is actually capable of carrying out the responsibilities of a CHDO by assessing the CHDOs capacity. Determining the CHDOs capacity assists the City to determine which organization(s) are qualified and capable of carrying out CHDO -eligible activities, and which ones need to make changes or build capacity to quality.
Types of Projects
1. The City permits CHDOs to bring any type of project which is an eligible CHDO activity as follows:
a. Acquisition and/or rehabilitation of rental housing; b. New construction of rental housing;
c. Acquisition and rehabilitation of homebuyer properties for resale to eligible, qualified buyers;
d. New construction of homebuyer properties for sale to eligible, qualified buyers; and
e. Direct financial assistance to purchasers of HOME -assisted housing sponsored or developed by a CHDO with HOME funds.
2. The City permits CHDO proceeds and pre-development loans, but does not provide CHDO operation expenses . Applicants requesting a pre -development loan must complete both the CHDO Pre -Application and the Project Application as defined below before a loan can be considered or authorized.
Application Period
1. The City of Montebello welcomes applicants for CHDO status at any time during the calendar year.
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Pre-Application for CHDO Status
1. The City of Montebello pre-application process procedures require the applicant to meet ALL of the requirements of being a CHDO as defined by the “CHDO Determination Worksheet” provided by the City.
2. All documentation necessary for meeting the requirements contained in the CHDO Determination Worksheet must accompany the pre -application form. The documents necessary for determination include:
a. The CHDO Determination Worksheet;
b. A copy of the Articles of Incorporation;
c. A copy of the By-Laws;
d. A copy of the Conflict of Interest Policy;
e. Any applicable signed Board Minutes or resolutions required by the CHDO Determination Worksheet;
f. A Board Form for each Board member, signed and dated by the Board member
g. A current financial statement and the most recent annual audit; and h. A statement of the applicant’s capacity to undertake a project of the scope and size proposed;
i. Including staff resumes
3. The City will review the application for compliance, completeness, and capacity.
4. The Pre-Application Process results in Pre -Qualification letter from the City HOME Program Administrator to the CHDO advising the CHDO to submit a qualifying CHDO project within 180 days of the date of the Pre-Qualification letter.
5. The City certifies CHDO’s only at the point where the CHDO has an approved City CHDO project.
6. Completion of the pre -application process for CHDO status does not guarantee funding by the City.
7. In the event any of the items contained in the CHDO Determination Worksheet change between the time of the Pre -Qualification letter and the submission of a CHDO project, the CHDO must notify the City in writing of the change (at the time of project application) and provide the documentation necessary to assess whether or not the CHDO remains compliant with the CHDO requirements.
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8. Changes in the Board of Directors require the CHDO submit the Board Form for any new Board member and identify any Board members who have left the CHDO at the time of project application and again at the HOME closing.
RECAPTURED AND RESALE FUNDS
As discussed in the City's Annual Action Plan, the following requirements relate to CHDOs only.
This is not required for rental or homebuyer programs.
RECAPTURED FUNDS (24 CFR 92.254(a)(5)(ii)(A)(4))
Recapture is defined as the recovery of HOME funds upon the sale or transfer, rental or lease, refinancing, or the Borrower(s) no longer being a physical occupant of the property.
GENERAL PROVISIONS
a. Any amount repaid as a result of a homebuyer property being sold within the affordability period.
b. The recaptured provisions must be stated in written agreements between Recipients and the income of any eligible homebuyers.
c. Recaptured funds are a return of the original HOME investment and are technically not program income.
d. Therefore, unlike program income, 10 percent of recaptured funds cannot be used for planning and administrative costs and must be returned to the City.
PROCEDURE
a. The City of Montebello will impose HOME recapture provisions on any property sold by a Community Housing Development Organization (CHDO) to a homebuyer when the City provides a direct subsidy for down payment and or closing costs to the homebuyer.
b. The balance of the loan shall be due and payable upon sale or transfer, rental or lease, refinancing, or the Borrower(s) no longer being a physical occupant of the property.
c. This recapture provision shall remain in force from the date the legal documents are executed at loan closing until the expiration of the affordability period.
d. Net Proceeds from Sale for the purpose of Recapture are defined as follows:
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i. Sales Price
ii. Less Seller’s Closing Costs
iii. Less First Mortgage Balance
iv. Less documented Capital Improvements in excess of $500 v. Less Down payment and closing costs paid from the Homebuyer’s cash at purchase
vi. Equals Net Proceeds from Sale
e. The City shall recapture from the net proceeds from sale, the remaining Development, and/or Homebuyer direct subsidy and return the recaptured funds to the HOME Investment Trust.
f. Funds remaining after Recapture shall accrue to the Homebuyer.
g. If there are no Net Proceeds from Sale, then the City shall forgive the remaining balance of the loan.
RESALE PROVISIONS [24 CFR 92.254(a)(5)(ii)(5)]
PROCEDURE
a. The City of Montebello will impose HOME resale provisions on any property sold by a Community Housing Development Organization (CHDO) or any other entity receiving a HOME development subsidy from the City, to a homebuyer when the City does not provide a direct subsidy for down payment and or closing costs to the homebuyer.
b. Resale is defined as the recovery of HOME funds upon the sale or transfer, rental or lease, refinancing, or the homebuyer(s) no longer being a physical occupant(s) of the property:
i) In instances where the home has been rented or leased, refinanced, or the Borrower(s) are no longer are physical occupant(s) of the property the total outstanding balance of the HOME loan shall be immediately due and payable to the City;
ii) In instances where the Homebuyer’s home is sold to a qualified low- income buyer at an affordable price, the HOME loan balance shall be transferred to the subsequent qualified buyer and the affordability period shall remain in force;
a. The resale provision shall remain in force from the date the legal documents are executed at loan closing until the expiration of the affordability period defined in the Written Agreement between the City and the homebuyer(s).
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b. Resale requires the homeowner to sell the home to a low-income family and at an affordable price as defined below:
i) A low-income family is defined as a family whose income at the time of purchase from the homebuyer is no greater than 80% of the area median income as defined by HUD under the Part V income definition.
(1) The contract for sale of the home must include a provision requiring the family acquiring the home to be qualified by the City prior to acquiring the property.
ii) The affordable sales price of the HOME assisted property shall be determined as follows:
(1) The City shall determine 80% of area median income (AMI) for:
(a) A family of two (2) if the unit is a one (1) bedroom unit (b) A family of three (3) if the unit is a two (2) bedroom unit (c) A family of four (4) if the unit is a three (3) bedroom unit (d) A family of six (6) if the unit is a four (4) bedroom unit
(2) The applicable AMI shall be multiplied by twenty -five percent (25%) to determine the annual housing expense (“HE”) and divided by twelve (12) to determine the monthly HE.
(3) The mortgage interest rate shall be the average fixed rate, thirty (30) year mortgage interest rate as published by the Federal Housing Administration (FHA) at the time of determination.
(4) The term shall be thirty (30) years.
(5) The present value of an affordable mortgage shall be calculated utilizing the monthly HE, the determined interest rate, and the term.
(6) The present value shall be divided by 95 and multiplied by 100 . The result shall be the affordable sales price.
iii) The homeowner must list the property at or below the City determined affordable price.
1. Fair Return and Appreciated Value [24 CFR 92.254(a)(5)(i)]
a) Determination of Fair Return
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i) Fair Return shall be the sum of:
(1) Down payment and closing costs paid from the buyer’s cash at purchase.
(2) Seller’s (homeowner’s) closing costs at sale.
(3) Principal payments only made by the buyer in excess of the amount required by the loan.
(4) Documented capital improvements in excess of $500.
b) Fair Return is paid to the buyer at sale once first mortgage debt is paid and all other conditions of this agreement are met.
i) In the event there are no funds for fair return, then fair return does not exist.
ii) In the event there are partial funds for fair return, then fair return shall remain in force.
c) Appreciated value is:
i) The Affordable Sales Price
ii) Less first mortgage debt
iii) Less Fair Return
iv) Equals appreciated value.
(1) If appreciated value is zero, or less than zero, then no appreciated value exists.
d) Appreciated Value is shared with the homebuyer based on the City’s initial investment of HOME funds as follows:
i) The homeowner’s initial investment of down payment and closing costs divided by the City of HOME investment equals the percentage of appreciated value that shall be paid to the homeowner. ii) The balance of appreciated value shall be paid to the City.
CHDO Determination Worksheet
The CHDO Determination Worksheet is designed to assist the City in processing your CHDO application in the minimum time necessary . Each section is a table which can be filled out and will adjust to the length of the CHDOS response . Please remember to save this document as (Acronym of the CHDO) CHDO Application.
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EXHIBIT 3
CHDO DETERMINATION WORKSHEET
APPLICANT INFORMATION
Applicant Name
Applicant Address
City State Zip
Contact Person Office
Phone
Cell Phone E-mail
BOARD OF DIRECTORS LIST
CHAIR Name
Home Address
City/State Zip
Telephone E-mail
PRESIDENT Name
Home Address
City/State Zip
Telephone E-mail
VICE-PRESIDENT Name
Home Address
City/State Zip
Telephone E-mail
TREASURER Name
Home Address
City/State Zip
Telephone E-mail
SECRETARY Name
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 62
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
Home Address
City/State Zip
Telephone E-mail
BOARD MEMBER Name
Home Address
City/State Zip
Telephone E-mail
CHDO Checklist
The information contained in the CHDO Checklist refers to the definition of Community Housing Development Organizations (CHDOs) in Subpart A, 92.2 of the HOME Rule.
9. The City of Montebello requires the CHDO to fill the Checklist out completely stating where the response to each requirement may be found in the accompanying documentation.
I. LEGAL STATUS
A. The nonprofit organization is organized under State or local laws, as evidenced by either Charter (Articles of Incorporation) or By - Laws
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B. No part of its net earnings inures to the benefit of any member, founder, contributor, or individual, as evidenced by:
C. Has a tax exemption ruling from the Internal Revenue Service (IRS) under Section 501(c)(3) or (4) of the Internal Revenue Code of 1986, as evidenced by a 501(c)(3) or (4) Certificate from the IRS. OR Is classified as a subordinate of a central organizat ion non-profit under section 905 of the Internal Revenue code, as evidenced by a group exemption letter from the IRS that includes the CHDO.
D. Has among its purposes the provision of decent housing that is affordable to low- and moderate -income people, as evidenced by a n organization statement:
II. CAPACITY
A. Conforms to the financial accountability standards of 24 CFR 84.21, "Standards for Financial Management Systems", as evidenced by a notarized statement by either the president or chief financial officer of the organization; OR a certification from a Certified Public Accountant, OR a HUD approved audit summary.
B. Has a demonstrated capacity for carrying out activities assisted with HOME funds, as evidenced by either resumes and/or statements that describe the experience of key staff members who have successfully completed projects similar to those to be assisted with HOME funds, OR contract(s) with consultant firms or individuals who have housing experience similar to projects to be assisted with HOME funds, to train appropriate key staff of the organization.
C. Has a history of serving the community within which housing to be assisted with HOME funds is to be located, as evidenced by either a statement that documents at least one year of experience in serving the community, OR for newly created organizations f ormed by local churches, service or community organizations, a statement that documents that its parent organization has at least one year of experience in serving the community. The CHDO or its parent organization must be able to show one year of serving the community prior to the date the participating jurisdiction provides HOME funds to the organization. In the statement, the organization must describe its history (or its parent organization's history) of serving the community by describing activities wh ich it provided (or its parent organization provided), such as, developing new housing, rehabilitating existing stock
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Policies and Procedures Manual Page 64
and managing housing stock, or delivering non -housing services that have had lasting benefits for the community, such as counseling, food relief, or childcare facilities. The statement must be signed by the president or other official of the organization.
D. A defined service area which includes or overlaps the City of Montebello as evidenced by: A resolution of the Board of Directors; the Charter, or the By-Laws
E. A current financial statement of the CHDO
III. ORGANIZATIONAL STRUCTURE
A. Maintains at least one -third of its governing board's membership for residents of low -income neighborhoods, other low-income community residents, or elected representatives of low- income neighborhood organizations as evidenced by the Organization’s By -Laws, Charter, OR Articles of Incorporation.
B. Provides a formal process for low -income, program beneficiaries to advise the organization in all of its decisions regarding the design, siting, development, and management of affordable housing projects, as evidenced by: the organization's By -laws, a resolution of the Board of Directors, OR a written statement of operating procedures approved by the governing body.
C. A CHDO may be chartered by a State or local government, but the following restrictions apply: (1) the State or local government may not appoint more than one -third of the membership of the organization's governing body; (2) the board members appointed by the State or local government may not, in turn, appoint the remaining two -thirds of the board members; and (3) no more than one-third of the governing board members are public officials (including any employees of the PJ), as evidenced by the organization's: By -laws, Charter, OR Articles of Incorporation.
LOCAL REQUIREMENT: A Board Information Form must be submitted for each Board member
D. If the CHDO is sponsored or created by a for -profit entity , the for - profit entity may not appoint more than one-third of the membership of the CHDO's governing body, and the board members appointed by the for-profit entity may not, in turn, appoint the remaining two -thirds of the board members, as evidenced by the CHDO's: By-laws, Charter, OR Articles of Incorporation.
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IV. RELATIONSHIP WITH FOR-PROFIT ENTITIES
A. The CHDO is not controlled, nor receives directions from individuals, or entities seeking profit from the organization, as evidenced by the organization's By-laws, OR a Memorandum of Understanding (MOU).
B. A Community Housing Development Organization may be sponsored or created by a for- profit entity, however: (1) the for -profit entity's primary purpose does not include the development or management of housing, as evidenced in the for-profit organization's By-laws
(2) the CHDO is free to contract for goods and services from vendor(s) of its own choosing, as evidenced in the CHDO's By -laws, Charter, OR Articles of Incorporation
V. OTHER FEDERAL REQUIREMENTS
(1) Has a conflict of interest policy for Board of Directors and Staff that meets the requirements of 24 CFR Part 92.356 of the HOME Regulations
Project Application
10. Once the City has provided the CHDO with a Pre -Qualification letter, the CHDO applicant must submit a viable, compliant CHDO project to the City within 180 days.
Projects
The following describes the required submissions for various types' projects allowed by the City:
Single Family
Single Family program applicants are required to submit a complete program description that Defines:
1. The buyer(s) to be served;
a. By family size and household income
2. The type of program activity:
b. Acquisition/Rehabilitation/Sale
c. New Construction
d. Other
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3. The project timeframe and timeline
4. The total project costs
a. Including all Sources and Uses
5. The total subsidy per buyer
a. The City does not offer a separate down payment and closing costs assistance program. The applicant must define what portion of the funds requested will be a development subsidy and what portion of the subsidy will be down payment and closing cost assistance to the buyer.
Multifamily
Multifamily program applicants are required to submit a site-specific project, including:
1. A development and operating pro forma.
2. The type of program activity:
a. Acquisition/Operation
b. Acquisition/Rehabilitation/Operation
c. New Construction
d. Special Needs
3. The project timeframe and timeline.
4. The total project cost:
a. Including all Sources and Uses for the development.
b. The total HOME subsidy requested.
5. An operating pro forma showing all income and expenses for the entire HOME required compliance period:
a. Rents must be compliant with the HUD allowable rents for the Los Angeles MSA.
b. Escalation rates must be 5 percent for expenses and 3 percent for income. c. The project must have a positive cash flow for the entire HOME compliance period.
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Policies and Procedures Manual Page 67
CHDO Proceeds
CHDO Proceeds result from the sale of a single family or multifamily property financed by the City through the HOME program . Proceeds include both HOME funds and any other funds from any source which are realized by the sale of property assisted in any form or fashion with HOME funds.
1. In single family sales, the total HOME funds provided by the City to the CHDO for any specific project under the HOME contract, less the actual expenses for the project, the buyer’s down payment, the buyer’s contribution, and any non-HOME or non-CDBG mortgages are defined as CHDO Proceeds, or Proceeds.
2. In multifamily sales, the total HOME funds provided by the City to the CHDO for any specific project under the HOME contract, less the actual expenses of the project, the buyer’s down payment, the buyer’s contribution, and any non -HOME or non- CDBG mortgages are defined as CHDO Proceeds, or Proceeds.
3. Allowable Uses of CHDO Proceeds:
An eligible activity defined by either the HOME program regulations or this agreement that directly supports the creation of affordable housing in our community shall be collectively known as an “allowable use .” Allowable uses are further defined and limited by this agreement as follows:
a. Any eligible use of HOME funds, as defined in 24 CFR Parts 91 and 92 of the Final HOME Rule shall be an allowable use under this contract, so long as the allowable use results in or supports the creation of new units of affordable single-family housing for purchase by HOME qualified buyers or for rent by HOME qualified tenants
4. Prohibited Uses
a. Proceeds may not be used to fund, finance or pay for a loan counseling, debt counseling or homebuyer counseling programs or efforts as long as the City provides funding to any other organization or entity to provide these services.
b. Proceeds may not be used to fund any operating reserves of the CHDO. c. Proceeds may not be utilized to make repairs, reconstruct, or rebuild any unit previously financed with HOME funds without the express written permission of the City.
5. Governing Law and Regulation
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HOME Investment Partnerships Program
Policies and Procedures Manual Page 68
a. Final HOME Rule: 24 CFR Parts 91 and 92;
b. CPD Notice 97-9; and
c. The City’s Contract with the CHDO
6. Accounting for Proceeds
a. The CHDO shall retain proceeds in a separate bank account and shall provide an accounting of the use of proceeds to the City on a quarterly basis. b. The accounting shall designate the project and show the flow of funds into and out of the project account until all funds in the account are expended in accordance with the CHDO Contract and the CHDO Proceeds Addendum c. To facilitate proper accounting for the proceeds, the CHDO shall utilize the spreadsheet designated by the City and included here by reference. d. The auditor of the CHDO shall, at each annual audit, review the CHDO proceeds account of the CHDO and shall include in the annual audit specific language stating whether or not the CHDO has complied with the terms of the CHDO Proceeds Addendum to the Contr act between the City and the CHDO.
7. Allocation and Use of Proceeds
a. Under the CHDO’s contract with the City, the City provides the CHDO with a development subsidy to assist in the development of either multifamily or single-family housing within the City;
b. The development subsidy is expended by the CHDO;
c. Proceeds are realized upon the sale of the completed property to a qualified buyer as defined by the City’s contract with the CHDO.
d. Proceeds are realized on the date of the close of the property to the end owner.
e. At the close of each project which yields proceeds to the CHDO, the CHDO shall allocate proceeds as follows:
i. If proceeds are less than $5,000, then all proceeds from the associated property account shall be allocated by the CHDO to the general administration (salaries, benefits and/or administrative costs) of the CHDO for the support of the development of affordable housing.
ii. If proceeds are more than $5,000, then:
1. Ten percent (10 percent) of proceeds shall be immediately allocated to the general administration (salaries, benefits and/or administrative costs) of the CHDO for the support of the development of affordable housing;
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2. Ninety percent (90 percent) of proceeds shall be allocated to land acquisition, site development, and/or construction financing.
3. Each subsequent return of proceeds shall follow the same methodology until the proceeds are less than $5,000, at which time the proceeds account for the project shall be closed.
iii. To facilitate the quick rollover and expenditure of proceeds, the CHDO will invest proceeds in the next available project as soon as the proceeds are realized, and before a request for additional funds for development activity from the City.
8. Draw Requests
a. Requests to the City for disbursement of funds for land acquisition, site development and/or construction financing on any subsequent project under this contract, shall include the following:
i. The full amount of the requested disbursement;
ii. The amount drawn from proceeds
iii. Including the project name or names, the amount is drawn from. iv. The net amount of the requested disbursement.
9. CHDO proceeds must be specifically requested in the CHDO’s Project Application.
10. The City of Montebello will not assign staff to a CHDO on either a full or a part-time basis in order to fulfill the CHDOs capacity requirement.
11. Allow CHDOs pay the City of Montebello for any technical assistance and/or training that the City provides.
CHDO Certification
CHDO Certification/Recertification Requirements:
Certified CHDOs or organizations that wish to be certified as a City of Montebello CHDO must use the City's application to apply for certification . Certified CHDOs must be re - certified on an annual basis, providing all documentation required for initial certification is up to date and accurate . Agencies meeting the CHDO certification requirements as indicated in the CHDO section of these operating procedures will be recommended by the City of Montebello staff for certification.
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Policies and Procedures Manual Page 70
A City of Montebello CHDO seeking recertification or an agency seeking certification as a City of Montebello CHDO must currently demonstrate capacity to carry out HOME assisted activities either with:
a. Experienced staff who have successfully completed similar projects, that draws a distinction between development, management of rental housing and development, sale of housing for first-time homebuyers, OR
b. Key staff with limited or no experience who will utilize experienced consultants (if consultants are in charge of development, there must be a written plan submitted yearly to the City of Montebello indicating how the consultant will train key staff during that funded year).
Monitoring of CHDO by City Staff
The City of Montebello will monitor the performance of the CHDO to assist the City to identify:
Strengths and weaknesses in CHDO operations and the support systems necessary for CHDOs to operate and for the HOME program to succeed. Identifying what needs to be changed, and for securing the appropriate technical assistance and training needed to do so.
Determining the level, type, and areas of need will vary from CHDO to CHDO, and, within CHDOs, from year to year.
Monitoring CHDO performance will include a review of the following factors:
1. Compliance with HOME requirements;
2. A risk assessment of the CHDO;
3. Completion of funded projects;
4. Completion of income eligibility documentation (CHDO will be required to obtain final approval by City Staff regarding these documents prior to receiving funds);
5. Timeliness and ability to complete projects within established budget parameters;
6. Human resources;
7. Adequate financial resources;
8. Ability to leverage other resources;
9. Adequate financial systems;
10. Board operations;
11. Strategic plans;
12. Organizational work plans;
13. Record-keeping;
14. Compliance with HOME targeting requirements;
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15. Board composition and operations; and
16. Hard Copies of each file that include income eligibility documentation have been provided to and maintained by the City.
PROCEDURE:
1. The City will issue a letter ninety (90) days in advance of monitoring specifying a set of files, policies, procedures, and accounts the City will require the CHDO deliver to the City on a date certain;
a. Each year, within 120 days of the close of the CHDO’s fiscal year, the CHDO shall deliver an audit by a certified public accountant to the City;
i. The audit shall contain the CHDO Proceeds provision noted under accounting, if applicable;
2. After the CHDO has submitted the required documents the City will conduct a desk review to insure compliance with the HOME and local requirements;
3. Upon completion of the desk review the City will establish a mutually acceptable date for the on-site monitoring;
4. The City will specify, at its’ sole discretion, the items the City will review on-site.
5. The City will conduct on the on-site monitoring.
6. Within thirty (30) days of the on -site monitoring, the City will issue a Monitoring Report delineating any deficiencies found;
7. The CHDO shall have thirty (30) days to address or correct those deficiencies identified in the monitoring report.
Default
Any of the following conditions shall result in default by the CHDO:
1. Failure by the CHDO to deliver the audit within the prescribed period;
2. Failure by the CHDO to submit the required quarterly reports;
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3. Failure by the CHDO to segregate the CHDO Proceeds in a separate account, or to properly account for the Proceeds to the standard provided by this agreement (if applicable);
4. Failure by the CHDO to meet the development or program benchmarks contained in the City’s Contract with the CHDO.
5. Any action of the staff or Board of Directors which violates the laws and regulations of the United States; the laws and regulations of the State of California; and/or the laws and regulations of the City.
NOTE: If the CHDO defaults as defined herein, the City, may, at the City’s sole discretion, end or suspend the Contract between the City and the CHDO.
Income Eligibility Documentation
The HOME income determination and recordkeeping requirements are important and necessary to ensure that HOME funds are invested in dwelling units that are occupied by households that qualify as low-income families.
City staff will ensure proper controls to review and provide final approval for income eligibility documentation, particularly if a HOME assisted project is managed by a third party such as a subrecipient or a Community Development Housing Development Organization (CHDO).
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Policies and Procedures Manual Page 73
CHAPTER 4: HOMEOWNER REHABILITATION ACTIVITIES
This chapter describes how HOME funds may be used to assist owners in the rehabilitation of owner-occupied housing. Eligible activities, forms of assistance and property types are covered in this chapter.
This chapter is divided into two parts: General HOME Program requirements, and the City of Montebello program design and implementation procedures focusing on how to determine 95 percent of median value, as well as subsidy type, and selection.
PART 1: HOME PROGRAM REQUIREMENTS (GENERAL)
General HOME Program requirements include : eligible Homeowner Rehabilitation Activities , applicant eligibility requirements, forms of financial assistance, and property standards and value.
A summary of the key homeowner rehabilitation rules and how to document compliance with these rules is provided as Exhibit 4.
Eligible Activities
HOME funds may be used to assist existing homeowners with the repair, rehabilitation, or reconstruction of owner-occupied units.
Whenever HOME funds are used for rehabilitation, the work must be performed according to the City's written rehabilitation standards and the unit(s) must be brought up to the applicable state or local code. If a state or local code does not exist, the unit may be brought up to the standards of the national model codes.
This means that the City may not undertake some forms of special purpose homeowner repair programs, such as:
1. Weatherization programs;
2. Emergency repair programs; or
3. Handicapped accessibility programs.
However, these types of programs may be undertaken, if the property meets or will be brought up to the applicable HOME property standards.
1. The City's HOME funds will be used to assist existing homeowners with the repair, rehabilitation, or reconstruction of owner-occupied units.
2. HOME funds that are used for rehabilitation must be performed according to the City's written rehabilitation standards and the unit must be brought up to the applicable state or local code.
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Forms of Finance Assistance
The City of Montebello may structure HOME assistance for owner- occupied rehabilitation using any of the following forms of assistance:
1. Grants;
2. Deferred-payment loans;
3. Non-interest-bearing loans; and
4. Interest-bearing loans.
There are several other less common forms of financial assistance that may be used in homeowner rehabilitation programs. These forms include interest subsidies and loan guarantees. Both methods enable the City to use small amounts of HOME funds to leverage private money for rehabilitation. They include:
5. Interest subsidies: Interest subsidies, also referred to as interest reduction grants or interest rate buy downs , are similar to principal reduction grants or loans except that the HOME funds are used to “buy down” the interest rate to an affordable level.
In this case, the HOME subsidy is paid directly to the lender and not provided to the homeowner.
6. Loan guarantees: Loan guarantees are another way to leverage HOME funds for homeowner rehabilitation. A loan guarantee could be used as a credit enhancement when a borrower otherwise eligible for a private loan is denied because of a real or perceived risk factor. In these cases, the City could provide a loan guarantee that would ensure payment, thus making an otherwise risky loan acceptable to a private lender.
Subsidy Limits
1. Minimum HOME investment: The minimum amount of HOME funds is an average of $1,000, multiplied by the number of HOME-assisted units in the project.
a. The minimum only relates to the HOME funds, and not to any other funds that might be used for project costs.
2. Maximum HOME investment: The standard maximum loan amount is $50,000.
The Loan Committee has the authority to approve projects that exceed the standard maximum loan amount, when the standard maximum loan limit is not sufficient to bring the unit into code compliance and/or a health and safety standard conditions.
These special approvals are to be recommended on an “as needed” basis, and are subject to the maximum subsidy limits for the HOME Program.
Costs in excess of the Program amounts may be supplemented with personal funds.
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In all instances, the loan amount must be in accordance with the loan-to-value ratios
3. The maximum per- unit HOME subsidy limit varies by PJ. HUD determines the maximum amounts, which are based on the City's Section 221(d)(3) program limits for the metropolitan area, each year. An economist in a local HUD field office can provide these limits.
The maximum per- unit subsidy limit is $50,000. This amount is the standard maximum loan amount.
Eligible Costs
Under HOME, both the actual cost of rehabilitating the housing and related soft costs are eligible. Exhibit 4 lays out the specific eligible HOME costs under a homeowner rehabilitation program.
EXHIBIT 4
HOME-ELIGIBLE HOMEOWNER REHABILITATION COSTS
HARD COSTS
Meeting the rehabilitation standards
Meeting applicable codes, standards and
ordinances
Essential improvements
Energy-related improvements
Lead-based paint hazard reduction*
Accessibility for disabled persons
Repair or replacement of major housing
systems
Incipient repairs and general property
improvements of a non-luxury nature
Site improvements and utility connections
*Note: Lead hazard reduction costs are not
counted as hard costs for the purposes of
determining the level of assistance under 24
CFR Part 35 (the Lead Safe Housing Rule).
SOFT COSTS
Financing fees
Credit reports
Title binders and insurance
Recordation fees, transaction taxes
Legal and accounting fees
Appraisals
Architectural/engineering fees, including
specifications and job progress inspections
Project costs incurred by the PJ that are
directly related to a specific project
Refinancing of secured existing debt if the
housing is owner-occupied and refinancing
allows the overall costs of borrower to be
reduced and the housing is made more
affordable
The Property
Eligible Property Types
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1. To be eligible for HOME assistance, a property must be:
a. Occupied by an income-eligible homeowner; and
b. The owner’s principal residence.
2. The following property types may be included under the program:
a. Traditional single -family housing that is owned fee simple ( current policy allows only one dwelling unit);
b. A townhouse unit;
c. A condominium unit;
d. A cooperative unit or unit in a mutual housing project (if state law recognizes these as forms of homeownership); or
e. A manufactured home, including mobile home (program currently inactive).
3. If HOME funds are used to assist the rental units in a two - to-four-unit residence, the HOME rental requirements apply --including provisions regarding tenant occupancy, initial rent levels, and long-term affordability.
4. If HOME funds are used to rehabilitate only the owner -occupied unit in a two -to- four-unit residence, the rental housing rules do not apply.
Maximum Property Value
To use HOME funds, the value of the HOME assisted property after rehabilitation must not exceed 95 percent of the median purchase price for the area, as published by HUD, or, in accordance with the Final Rule, as determined locally through market analysis.
1. Determining after -rehabilitation value : To establish project eligibility, after - rehabilitation value must be established prior to any work being performed. The after-rehabilitation value may be established by one or more of the following methods:
a. Estimates of value : Estimates of value by the City or subrecipient may be used. Project files must contain the estimate of value and document the basis for the value estimates.
b. Appraisals: Appraisals, whether prepared by a licensed fee appraiser or by a staff appraiser of the City, may be used. Project files must document the appraised value and the appraisal approach used.
2. Tax assessments: Tax assessments for a comparable property located in the same neighborhood may be used to establish the after -rehabilitation value if the assessment is current and accurately reflects market value after rehabilitation.
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Determining the 95 Percent of Median Purchase Price Limit
The Final Rule offers the City two options for determining the 95 percent of median purchase price limit for owner-occupied single-family housing.
The City may either perform a:
1. A local market survey, or
2. Use the figures published by FHA for its 203(b) program . (The national cap established by the 203(b) program does not apply.)
Property Standards
As with all HOME -assisted properties, properties that are rehabilitated with HOME funds must meet certain standards.
The City is required to have written rehabilitation standards describing the methods and materials to be used when performing rehabilitation. All HOME-assisted rehabilitation projects must meet the City's written rehabilitation standards.
The Applicant/Beneficiary
Principal residence
Loan documents or other forms of written agreement between the purchaser and the City must incorporate this requirement. This includes:
1. Owning or having a membership in a cooperative or mutual housing project that constitutes homeownership under state law; or
2. Maintaining an equivalent form of ownership approved by HUD.
3. Life estates and land contracts/contracts for deeds are not approved by HUD as eligible forms of ownership.
Other Federal Requirements
Exhibit 5 identifies the other federal requirements that must be followed when HOME is used for rehabilitation of homeowner properties, while Exhibit 6 identifies rules on how to documents a homeowner rehabilitation program. These exhibits are meant to serve as checklists only.
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EXHIBIT 5
OTHER FEDERAL REQUIREMENTS
Other Federal
Requirements
Apply to
Homeowner
Rehabilitation?
Special/Issues/
Considerations
Regulatory Citations and
References
Non-Discrimination and Equal Access Rules
Fair Housing and
Equal
Opportunity
Yes. Must
affirmatively
further Fair
Housing.
92.202 and 92.250
Title VI of Civil Rights Act
of 1964 (42 U.S.C. 2000d
et. seq.)
Fair Housing Act (42 U.S.C.
3601-3620)
Executive Order 11063
(amended by Executive
Order 12259)
Age Discrimination Act of
1975, as amended (42
U.S.C. 6101)
24 CFR 5.105(a)
Affirmative
Marketing
No 92.251
Handicapped
Accessibility
No. (Note:
Accessibility
improvements are
eligible costs.)
Section 504 of the
Rehabilitation Act of 1973
(implemented at 24 CFR
Part 8)
For multi-family buildings
only, 24 CFR 100.205
(implements the Fair
Housing Act)
Employment and Contracting Rules
Equal
Opportunity
Employment
Yes Small projects offer
opportunities for
minority and resident-
contractors.
Executive Order 11246
(implemented at 41 CFR
Part 60)
Section 3
Economic
Opportunity
Yes, if amount of
assistance exceeds
$200,000 OR
contract or
subcontract
exceeds $100,000.
Include Section 3
clause in contracts
and subcontracts.
Section 3 of the Housing
and Urban Development
Act of 1968 (implemented
at 24 CFR Part 135)
Minority/Women
Employment
Yes Must develop
procedures and
Executive Orders 11625,
12432 and 12138
24 CFR 85.36(e)
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Policies and Procedures Manual Page 79
include in contracts
and subcontracts.
Davis-Bacon No 92.354
Davis-Bacon Act (40 U.S.C.
276 276a-5)
24 CFR Part 70
(volunteers)
Copeland Anti-Kickback
Act (40 U.S.C. 276c)
Conflict of
Interest
Yes 92.356
24 CFR 85.36
24 CFR 84.42
Debarred
Contractors
Yes Check HUD’s list of
debarred contractors.
24 CFR Part 5
Other Federal Requirements
Environmental
Reviews
Yes Neighborhood
reviews may
facilitate targeted
programs, but
individual checklist
still required for
each project site
Special attention
should be paid to
flood insurance
and historic
requirements.
92.352
24 CFR Part 58.35 a(4)
National Environmental
Policy Act (NEPA) of 1969
Flood Insurance Yes for PJs that are
cities/counties. No
for state
programs.
Must obtain flood
insurance if located in
a FEMA designated
100-year flood plain.
Community must be
participating in
FEMA’s flood
insurance program.
Section 202 of the Flood
Disaster Protection Act of
1973 (42 U.S.C. 4106)
Site and
Neighborhood
Standards
No. 24 CFR 893.6(b) Site and Neighborhood
Standards
Lead-Based Paint Yes for pre-1978
units.
Notices to owners.
Paint testing of
surfaces to be
disturbed.
92.355
Lead Based Paint
Poisoning Prevention Act
of 1971 (42 U.S.C. 4821
et.seq.)
24 CFR Part 35
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Risk assessment, if
applicable, based
on level of
rehabilitation
assistance.
Safe work
practices and
clearance.
Provisions
included in all
contracts and
subcontracts.
982.401 (j) [except
paragraph 982.401
(j)(1)(i)]
Relocation Yes Relocation is required
if tenants are living in
the other units.
Relocation is not
required for owner-
occupied units.
92.353
Uniform Relocation
Assistance and Real
Property Acquisition
Policies Act of 1970 (URA)
(42 U.S.C. 4201-4655)
49 CFR Part 24
24 CFR Part 42 (subpart B)
Section 104(d) “Barney
Frank Amendments”
EXHIBIT 6
SUMMARY OF HOMEOWNER REHABILITATION RULES AND HOW TO DOCUMENT Key HOME Requirement Documentation
Eligible Participants
Owner Income Gross income <80 percent of
median income based on the
upcoming 12 months.
Income is defined by one of
three options: Section 8 annual
income; annual income under
Census long form; or adjusted
gross income under IRS Form
1040.
Completed application in the
project file.
Source documentation (wage
statements, interest
statements) in the project file.
Owner Occupancy Applicant must occupy unit as
his/her principal residence.
Client must sign a clause on the
application form certifying that
the property is the principal
residence.
Ownership of Applicant must have ownership
of the property through:
free simple title,
Title check documentation in
project file.
Copy of deed or other
ownership document in the
project file.
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99-year leasehold interest (50
years on trust or restricted
Indian lands), or
ownership/membership in a
cooperative or mutual housing
project.
Homeowner’s
Insurance
Endorsement
Applicant must have evidence of
homeowner’s insurance
Homeowner’s Insurance
Endorsement
Eligible Property
Property Type Eligible property types include:
one-to-four-unit property;
condominium unit;
cooperative or mutual housing
unit, if recognized by state law;
or
manufactured or mobile home.
If two-to-four units, indicate
status of non-owner-occupied
units in the application.
If non-owner units were
assisted with HOME funds,
provide agreement with
homeowner regarding rental
requirements and reference to
the property's rental
monitoring file.
Property Location Property must be located within
geographic area of the PJ.
Application should include
address in PJ’s geographic area.
HOME Minimum A minimum of $1,000 in HOME
funds must be invested in each
assisted unit.
The maximum per-unit subsidy
limit is determined by HUD.
Maintain records in project file
demonstrating that the per-unit
HOME investment exceeded
$1,000.
Maintain records in the project
file indicated total HOME
subsidy did not exceed
maximums provided by HUD.
Property Value After-rehabilitation value must
not exceed 95 percent of the
area median purchase price.
Use 203(b) limits; OR
Establish local limits and obtain
HUD approval
If using local value limits,
document data used to
determine limits as well as
evidence of HUD approval in
the program file.
Document method for
determining value in the
project file.
Copy of value estimate held in
project file.
Property Standards Property must meet PJ’s written
rehabilitation standards.
Property must meet applicable
codes (state or local
Document local code or model
code used in program files
Maintain written rehabilitation
standards in program files.
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codes/standards or one of three
nationally accepted
codes/standards).
Include inspection report or
certification by inspector in
project file.
Keep inspection checklist and
work write-up in project file.
Eligible Activities Rehabilitation, reconstruction. Document all expenditures.
PART 2: PROGRAM DESIGN AND IMPLEMENTATION
Objectives
The City of Montebello receives an annual allocation of HOME funds from the U.S. Department of Housing and Urban Development (HUD) . HOME funds are designed to provide or preserve affordable housing for families at or below eighty (80 percent) percent of the Area Median Income (“AMI”). The City is included in the Los Angeles Metropolitan Statistical Area (“LA MSA”).
Under the HOME Program, the City of Montebello has elected to design and implement a homeowner rehabilitation program referred to as the HOME HOMEOWNER REHABILITATION ACTIVITIES. This program is designed to meet the following objectives:
1. Implement a City-wide program designed to serve very -low and low-income households,
2. Provide a valuable service to qualified homeowners and residents,
3. Preserve existing single-family homes, either detached, or attached, within the City limits.
GOALS
The City's Homeowner Rehabilitation Activities goals include:
1. Utilizing project selection criteria to establish criteria for determining which projects are chosen (i.e., the level of needed repair or ability of the owner to leverage other funds).
2. Assertively marketing the Homeowner Rehabilitation Activities to ensure the program information is widely and fairly distributed.
ADMINISTRATIVE PLAN
Under the supervision of the Planning and Community Development Director, t he City's Housing Manager and HOME program Consultant will implement the Homeowner Rehabilitation Activities tasks including:
1. Implementing the methods and criteria for selecting applicants;
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2. Administrating and tracking the waiting list (how it will be administered);
3. Utilizing and updating the appropriate forms for assistance and criteria in determining
HOME Rehabilitation Grant Program (HRGP) Description
1. The HRGP provides up to $50,000 for the rehabilitation of owner -occupied single- family homes or condominiums to the City’s residential code (“Code”) and the City’s Rehabilitation Standards (“Standards”). Rehabilitation of the Code and Standards are required.
2. Rehabilitation of a condominium unit for an owner(s) is limited to the unit itself, and may not include common areas, or areas that are the responsibly of the Homeowners’ Association (“HOA”);
3. Should areas which are common areas or areas that are the responsibility of the HOA not meet code, then the condominium unit shall be ineligible for rehabilitation unless the common area or items of HOA responsibility are corrected prior to or during rehabilitation funded by HOME funds;
4. Rehabilitation of a single-family unit is limited to the unit itself and does not include outbuildings. Outbuildings which do not meet code must be rehabilitated by the owner at the owner’s expense prior to or during rehabilitation funded by HOME or be demolished by the City;
5. Non-conforming additions or structures must be demolished during rehabilitation with HOME funds. If permitted by local codes, the non -conforming structure or addition may be rebuilt using HOME funds.
Form of Assistance
The City has carefully designed the HRGP to both meet community needs and the program goals.
1. HRGP provides a grant that will not require repayment with affordability period requirements secured by a promissory note and Deed of Trust.
2. The Grant will not require repayment; however, an Owner Occupancy “Affordability Period” provision will be required for assisted properties through a legal Deed of Trust, Affordability Covenant or similar recordable mechanism.
3. The entire grant is due and payable to the City if any of the following conditions occur within the affordability period applicable to the grant amount:
a. The property is sold;
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b. The property is foreclosed on;
c. The property is refinanced;
d. The property is leased;
e. The applicant(s) fail(s) to occupy the property as their primary residence;
f. In the event that one of the Joint Tenants listed in the Deed of Trust dies, ownership as stipulated by California Real Estate Law, transfers to the surviving individual. This procedure is not a transfer of title . Consequently, the remaining joint tenant will assume the grant pursuant to the original terms of the grant.
GRANT CONDITIONS
Both the City and the Applicant adhere to certain grant conditions as follows:
The City
1. The City will comply with the Fair Credit Reporting Act that stipulates and guarantees the applicant's privacy and right to have all information regarding the grant transaction kept in a confidential manner;
2. The City shall not discriminate upon the basis of sex, age, race, creed, color, class, national origin, or ancestry in the awarding of financial assistance;
The Applicant(s)
1. The Applicant shall use the grant to pay for the cost of rehabilitation as detailed on the work write-up or scope of work submitted by the program inspector;
2. The Applicant shall permit City inspections of the property to be renovated for compliance with all Federal, State, and City building standards;
3. The Applicant shall not award any contract for rehabilitation work to be paid in whole or in part with the proceeds of the grant to any general contractor who, at the time, is not on the City’s approved contractors’ list;
4. The Applicant shall allow no member of the City who exercises any function of responsibility in connection with the administration of the HOME funds to have any interest, direct or indirect, in the proceeds of the loan, or in any contract entered
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into by the applicant for the performance of work financed, in whole or in part, with the proceeds of the grant;
5. The Applicant shall not pay any bonus, commission or fee for the purpose of obtaining approval of the grant application;
6. The Applicant shall occupy and maintain the housing unit for the term of grant affordability period;
NOTE: The Applicant shall maintain fire, liability, and hazard insurance coverage on the housing unit in an amount that is at least the value of the after rehabilitation appraised value of the property.
7. The Applicant shall cause the City to be named a co -insured party on the fire, liability, and hazard insurance coverage.
8. The Applicant shall keep property taxes current for the term of the grant;
9. The Applicant shall not discriminate upon the basis of sex, age, race, creed, color, class, national origin, or ancestry in the awarding of the construction contract; and
10. The Applicant shall utilize funds within sixty (60) days of loan closing unless granted a written time extension by the City.
DEFAULT
In the event that the Applicant fails to adhere to the conditions and restrictions contained within the Written Agreement between the Applicant and the City, the City reserves the right to terminate the individual's participation in the HOME Program and/or demand full repayment of the grant.
Eligible Applicant
The HRGP is open to all applicants who meet the eligible household requirements provided above.
The City, in recognition of the high proportion of elderly and special needs families that reside in substandard housing within the City, will provide a priority to owner occupants that are elderly and/or disabled.
An Applicant(s) owns and occupies the property where proof of ownership is established through a legal Deed of Trust. Assistance from the City shall be available only to Applicants who:
1. Have the capacity and authority to competently enter into financial and contractual agreements;
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2. Whose household income that does not exceed 80% of the area median income adjusted by family size (See Qualifying Households);
3. Whose monthly housing costs are not and will not be more than 30% of income
4. Agree to comply with any and all applicable permits, codes, and/or other City regulations;
5. Agree to sign and abide by the Written Agreement and Promissory Note between the City and the Applicant(s); and
6. Agree to vacate the property during the rehabilitation period at their own expense
NOTE: Elderly is defined as being above 55 years of age. Disabled is defined as having a recognized disability under the Americans Disabilities Act.
Qualifying Households
1. The HRGP is targeted at owner -occupant households who have resided in their home for at least two (2) years, and
2. That are at or below 80 percent of the LA MSA AMI
The income limits for the grant are:
Family Size One Person Two Person Three
Person
Four
Person
Five Person Six Person
Maximum
Income to
Qualify
$77,700 $88,800 $99,900 $110,950 $119,850 $128,750
NOTE: Income limits are adjusted annually.
1. Owner-Occupants are all persons listed on the deed.
2. A household includes all persons living in the unit at the time of application, except persons who are paid caregivers of elderly or handicapped individuals.
3. All members of the Household must be U.S. Citizens or Resident Aliens.
4. Each member of the household must provide a social security number at the time of application.
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Application Intake/Screening/Determination of Household Adjusted Gross Income
The City utilizes the Part V definition of Adjusted Gross Income as defined in the Technical Guide to Determining Income and Allowances for the HOME Program (Third Edition, January 2005).
In calculating adjusted gross income, the applicant’s income and that of all other household members at the time of application shall be considered. The income of household members under eighteen (18) years of age will be excluded. The income of any persons who are paid caregivers of elderly or handicapped individuals will be excluded.
A household member is any person residing in the household at the time of application.
Income is defined as follows:
1. The full amount before any payroll deductions of wages and salaries, overtime pay, commissions, fees, tips, bonuses, and other compensation for personal services;
2. The net income from an operation of a business or profession, as calculated by averaging the net income as reported in their Federal Income Taxes for the past three years;
3. Interest, dividends, and other net income of any type from the real or personal property (where the family assets are in excess of $50,000, excluding property, adjusted gross income shall include the greater of the actual income derived from all assets or percentage of such assets based on the current passbook savings rate);
4. The full amount of periodic payments received from social security, annuities, insurance policies, retirements funds, pensions, disability or death benefits, and other similar types of periodic receipts, including a lump -sum payment for the delayed start of a periodic payment;
5. Payment in lieu of earnings, such as unemployment, workers' compensation, severance pay, welfare assistance (NOTE: Such payments may be excluded by the lending institutions providing the first mortgage for purposes of underwriting, but shall be included in eligibility determinations for this Program);
6. Periodic and determinable allowances, such as alimony and child support payment, and regular contributions or gifts received from persons not residing in the dwelling to the extent that such payments are reasonably expected to continue;
7. All regular pay, special pay, and allowances of a member of the Armed Forces (whether or not living in the dwelling) who is the head of the family, spouse, or other person whose dependents are residing in the unit;
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8. Any earned income tax credit to the extent it exceeds income tax liability;
9. Any other income that must be reported for Federal and State income tax purposes; and,
10. Gross Self-Employed income as reported on Schedule C, IRS 1040, will be adjusted to reflect deductions for necessary and reasonable business expense.
Qualifying Properties
In order to qualify for the HRGP, properties must be:
1. Located within the City limits;
2. Be held in fee simple by the applicant(s) as defined herein; a. Properties held in a life estate, cooperative units or properties that include residential or commercial rental property are not eligible for the grant.
3. The property shall be free of negative encumbrances on title. a. All trustees must sign all the appropriate documentation required by the City.
4. Property taxes must be current on the property;
5. The property must have a rehabilitation cost that does not exceed seventy -five percent (75%) of the after rehabilitation value of the property as determined by the City;
6. Total debt on the property, including the HRGP grant, may not exceed 100% of the after rehabilitation appraised value of the property.
Eligible Costs
The HOME Grant funds are available for the cost of improvements that are physically attached and permanent in nature within the following scope of work:
1. Appropriate remediation of Lead Based Paint, as required;
2. The correction of all code violations to the City Code;
3. The correction of any deficiencies to meet the City’s Rehabilitation Standard;
4. The correction of incipient code violations;
a. An incipient code violation is defined as a condition that is likely to occur within the first ten years of the loan term. For example, a fifteen (15) year old roof will
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need to be replaced in year five (5) of the grant term, and is therefore an incipient code violation.
5. The addition of disability features to a property currently occupied by a disabled person or persons; and
6. Improvements to the overall energy efficiency of the property.
INELIGIBLE COSTS
1. The repair, purchase or installation of appliances that are designed and manufactured to be freestanding;
2. The repair, purchase or installation of recreational items such as barbecues, bathhouses, greenhouses, swimming pools, saunas, television antennae, tennis courts;
3. The repair, purchase or installation of luxury items such as burglar alarms, burglar protection bars, dumbwaiters, kennels, murals, ceiling fans, flower boxes, awnings, patios, decks and storage sheds/workshops;
4. The repair, purchase, or installation of other items deemed ineligible by the Director of Economic Development or his designated representative; and
5. The relocation of family members during rehabilitation of the property.
Staffing Plan
It is the intention of the City to administer the majority of the HRG P though it’s consultant.
However, to the extent necessary the City may utilize staff or other agencies including, consultants, and private lenders.
City of Montebello Organization Roles and Responsibilities For questions concerning the HOME Program, individuals may contact the Housing Division staff directly by telephone, or e-mail. The mailing address is:
Housing Division
1600 West Beverly Boulevard,
Montebello, CA 90640-3932.
Exhibit 7, on the following page summarizes the City of Montebello staff roles and responsibilities in administrating the City's HOME Program.
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City of Montebello Staffing Plan
Staff Members Name, Title
Program Responsibilities
Phone Number E-Mail Address
Raul Alvarez, City Manager
Overall Program Management
Oversight
323-887-1200 [email protected]
Michael Solarzo, Finance Director
Overall Financial Management
Oversight
323-887-1200 [email protected]
Joseph Palombi, Planning &
Community Development Director
CDBG and HOME Program
Administrative Oversight
323-887-1200 [email protected]
Kevin Saycocie, Deputy Finance
Director Oversees Program
Financial Operations
323-887-1200 [email protected]
Rosemary Perich, Housing Manager
CDBG and HOME Program
Manager
323-887-1200 [email protected]
Lissette Montoya, CDBG and HOME
Program Consultant
(909) 979-6587
City Manager – Responsible for overall program management and evaluation of the operation of the program, facilitate the adoption of program policies and procedures and assign the necessary staff resources to carry out the program. As the City of Montebello’s certifying officer, signs CDBG and HOME Program certifications, grant documents, loan agreements, and wiring requests.
Finance Director – Key City staff member responsible for overall financial operations of the City and serving to evaluate and make recommendations on program financial operations such as the City's HOME Program.
Planning & Community Development Director – Responsible for the CDBG and HOME program administrative oversight, including managing program consultants to ensure programs are being carried out in compliance with CDBG and HOME program requirements. Oversees and assists with the preparation of required reports and IDIS voucher preparation. Assists with the implementation of housing and community development programs including the implementation of CDBG and HOME projects. Working with program consultants, is re sponsible for selection of program applicants, monitoring of the programs for regulatory compliance, program marketing/outreach.
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Deputy Finance Director – Responsible for approving IDIS drawdowns, evaluating/approving financial requisitions and supporting documentation, works with the City Manager, Finance Director, Planning & Community Development Director, Housing Manager and consulting staff to implement financial operations related to the CDBG and HOME program and works with auditors for the completion of City audits.
Housing Manager - Responsible for the CDBG and HOME program administrative oversight, including managing program consultants to ensure programs are being carried out in compliance with program requirements. Oversees and assists with the preparation of required reports and IDIS voucher preparation. Assists with the implementation of housing and community development programs including the implementation of projects. Working with the CDBG and HOME Program Consultant, the Housing Manager is responsible for selection of program applicants, monitoring of the programs for regulatory compliance, and program marketing/ outreach.
CDBG and HOME Program Consultants - Responsible for ensuring the administration and implementation of the CDBG and HOME programs is being carried out in compliance with program requirements. Assists, as assigned, with the preparation of required reports. Sets up activities in IDIS and pre pares vouchers. Reviews the program to ensure compliance with CDBG and HOME regulatory commitment and expenditure requirements; ensures file documentation is maintained.
Assists with the implementation of CDBG and HOME activities.
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City of
Montebello -
CDBG Program
City Manager
Community
Development
Director
Housing
Manager
CDBG-HOME
Consultants
Finance Director
Deputy Finance
Director
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HOME REHABILITATION GRANT PROGRAM PROCEDURES
The Housing Manager with assistance from the CDBG and HOME Program Consultant will complete the following procedures:
1. Provide the Applicant with the HOME Rehabilitation Grant Program (HRGP) application and other forms required by the Guidelines for participation in the Program.
a. The HRGP Application Form shall be completed by everyone who lives in the home to be rehabilitated (single family).
b. The application for multifamily shall include rental property household member information forms and appropriate release of information forms.
2. Complete a title search to identify all persons on title.
3. Verify of Income of every member of the household above the age of 18 (unles s enrolled full time in school) who earns any income.
4. Verify benefits and employment and make sure the forms are signed by the borrower(s).
5. Obtain t he borrower’s signatures on the grant application and all other appropriate application forms.
6. Review the borrower's most recent property tax information and identifying parcel number.
7. Verify borrower signature on Fair Lending Notice.
8. Verify borrower signature on Statement of Understanding (if applicable).
9. Obtain a credit report for all persons on the title.
10. Obtain a Limited Coverage policy of title insurance prior to closing any Program grant from a title insurance company doing business in Los Angeles County for all HOME grants/loans.
11. Obtain a standard CLTA Lender Guarantee policy of title insurance from such title company for all Owner-Investor grants/loans.
12. Prior to closing a Program loan, the Housing Manager or Program Consultant shall review the condition of title and, based on that review, close the loan only if the title exception(s) disclosed do not materially affect the collateral given to secure the loan.
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13. The Program Consultant shall prepare an Environmental Review in the form approved by the City. Said Review shall describe any adverse environmental effects of the grant-funded improvements that are likely to occur.
14. The completed Environmental Review will be submitted to the City’s Planning and Community Development Director for its review and approval prior to obtaining the grant.
a. The Housing Manager or Program Consultant will not approve any proposed loan if the loan funded improvements are likely to have a significant adverse impact on the environmental, as defined by the National Environmental Policy Act (NEPA).
APPLICATION REVIEW
1. The Housing Manager or Consultant will review all loan application documents and based on the documents shall make a determination of eligibility consistent with the HRGP Guidelines.
2. If additional information or documentation is required to evaluate the proposed loan, the Housing Manager or Consultant shall request additional information from the borrower.
3. The Housing Manager will maintain confidentiality with respect to all financial information received from the borrower to the maximum extent permitted by law.
4. Once the application package is complete, and provided the borrower, the property and the proposed improvements meet all the eligibility requirements set forth in the HRGP Guidelines, the Housing Manager will prepare a summary analysis of the loan request and make a recommendation to the Planning and Community Development Director.
5. These recommendations will be reviewed by the Director of Planning and Community Development based on the following criteria:
a. Priority will be determined:
i. according to the City's HRGP waiting list;
ii. “first come, first serve” basis;
iii. immediate need;
iv. project readiness basis;
b. The borrower, property, and proposed improvements meet all eligibility requirements contained in Section 3 of these Guidelines. c. The proposed loan meets the Loan Criteria contained in the HOME Guidelines. d. The proposed loan meets all HOME loan underwriting conditions. e. The proposed improvements comply with all local, state, and federal regulations, including but not limited to:
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i. Land Use Zoning;
ii. Design Review;
iii. Building Permits;
iv. California Environmental Quality Act (CEQA];
v. National Environmental Policy Act [NEPA];
vi. Davis Bacon Prevailing Wage; and
vii. Other regulations which may be applicable.
f. No borrower shall be excluded or discriminated against because of race, color, religion, ancestry, sex, age, national origin, physical handicap, or any other legally prohibited basis.
EXCEPTION/SPECIAL CIRCUMSTANCES
The following procedures shall be used when considering any action which would depart from policy and procedures developed in the HOME Guidelines:
1. Consideration of exceptional/special circumstances may be initiated by either the borrower, Housing Manager, or the Director of Planning and Community Development.
2. A report will be prepared by the Housing Manager or Director of Community Planning and Development that will be included in the borrower’s loan application file, along with all other loan documents.
a. This report will contain a narrative, including relevant information provided by the borrower and the recommended course of action.
3. The City’s Director of Planning and Community Development or his/her designated representative will review the report and make a determination regarding the exception/special circumstances.
4. The recommendation shall consider use of, HOME Program HRGP funds, Community Development Block Grant (CDBG), or other potential funding sources which may be used to address the exception/special circumstances.
APPEAL
1. A borrower may appeal in writing the decision of the City with respect to the approval or denial of a HRGP loan to the City Manager within 30 days of the decision.
2. The City Manager will review the matter and decide the appeal which shall be the final decision of the City and there shall be no further appeal from that decision.
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CHAPTER 5: PROCESSING PROCEDURES
PART 1: APPLICATION PROCESS
During the application process the program staff or Consultant must:
1. Certify income eligibility.
2. Verify property ownership.
3. Verify property is in the City of Montebello.
4. Verify that property is owner-occupied.
5. Verify that mortgage, property taxes, and insurance are paid up-to-date.
6. Re-calculate the LTV.
7. Verify the type of mortgage is held in first positions.
8. Create a file for each application, organized in the order provided in the File Checklist form. The file must be properly labeled.
9. Log application database.
All forms must be fully completed and signed accordingly. All supporting documentation must be current (no older than 3 months). The following is a list of the required supporting documentation:
1. Verification of dependent children living at home.
2. Proof of full-time student status for dependents 18+ of age.
3. Complete bank statements for the last two (2) months
4. Asset/investment statements for the last two months.
5. Complete federal and state income tax returns (including W-2’s, 1099’s etc.). For loans and self-employed the most recent 2 years.
6. If self-employed, most recent certified quarterly financial report.
7. Documentation evidencing eligibility of other program requirements, such as ownership, occupancy, and property location.
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8. EDD Notice for adult household members who do not receive income.
9. When available, a copy of current appraisal report (dated within 3 months).
PART 2: APPLICATION INTAKE
The purpose of the intake is to establish eligibility of the applicant. The Director of Planning and Community Development or designee conducts the intake. The intake is completed by the applicant submitting a complete application with supporting documentation. Non -complete applications will be returned to applicant with list of necessary items to process application.
It is crucial for the Program staff or consultant to estimate household income, LTV, the property preliminary after rehabilitation value, and the types of encumbrances on the property to determine eligibility. The income and LTV analysis completed during the intake process is not verified until further documentation is obtained to validate. Calculations are based on the review of proper documentation. LTV only applies to loans.
Verification of Property Ownership and Status
In addition to income documentation, Program s taff or Consultant must obtain supporting documentation to determine eligibility for other program requirements.
Eligibility Requirement Must verify with at least one of the following:
Verification of ownership:
The property must be owned by the applicants
• Copy of grant deed or, quitclaim deed,
• Title report or insurance issued within the
last year, which verifies the vesting to be
the applicants’ name(s)
Verification that property is owner-occupied:
The property must be the owner’s principal
place of residence.
• Copy of current property tax bill that shows
homeowner’s exemption and the subject
property as the mailing address
Verification that mortgage payment is current:
Assistance cannot be provided if payment is
not current.
• Copy of most recent mortgage statement
that shows payment is current
• Mortgage history printout
Verification of type of first mortgage: No
reverse mortgages, negative amortizations for
loans. Reverse mortgages, negative
amortizations are acceptable for grants only.
• Copy of most current mortgage statement
• Copy of note specifying terms of repayment
and interest rate
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Verification that property taxes are up- to-
date:
Assistance cannot be provided if taxes are not
current.
• Printout from the Los Angeles County Tax
Collector’s website that shows the tax as
current. Website at
http://ttax.co.la.ca.us/
• Receipt of payment (if payment has been
recently made and website has not been
updated)
• Copy of payment arrangements from tax
collector for delinquent tax
Verification that insurance is up-to- date. • Copy of current evidence of insurance or policy. It must show the expiration date, or
specify that it is continuous
Verification of Loan-to-Value (LTV) (loan
program)
• Copy of most current mortgage
statement(s)
• Copy of note(s) specifying loan amount
Property encumbrances: The Program Staff or Consultant must verify the types of loans of the existing debt. Fixed rate loans are preferred. However, variable rates, and interest -only loans are acceptable. Properties with reverse mortgages, and negatively amortized loans are not eligible for loans, but are acceptable for grants.
Income Calculation
The Program utilizes the annual income definition as defined in 24 CFR 5.609 (Part 5 annual income) to determine household income eligibility. Households must have income at or below 80% AMI, adjusted for family size, to be eligible for the program. The latest published income limits provided by HUD will be used.
During the Intake, the Program Staff or Consultant must calculate household income earnings of all adult household members based on the requirements.
The preliminary income calculation must include income derived from:
a. Employment (wages, salary, overtime, tips, bonuses, etc.) b. Self-employment / Business income
c. Social security benefits
d. Child and/or family support, alimony
e. Rents
f. Public assistance
g. Income from assets or investment (interest, dividends, royalties, annuities, etc.) h. Pensions
i. Unemployment, disability, or worker’s compensation
j. Union benefits
k. Other sources of income not specified above
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Income may be certified based on information obtained from third party verifications and the review of documents provided at the time of application. The income certification is valid for a period of six months (validation period). It will not be required to re -certify income unless six months have lapsed from the time of certification and no expenditures have been incurred for the project. Funds must be expended or committed to project prior to the expiration of the validation period.
The Program Staff or Consultant is responsible for obtaining all the required income documentation for all the sources of income. The sources of income can be determined by:
1. The Income, Asset and Employment Disclosure portion of the application.
2. Tax returns may sometimes reveal relevant income sources, such as interest income, capital gains, dividends, etc., which may not have been disclosed in the loan forms that may require additional documentation.
Eligibility can be established by examining documentation on the different sources of income for the household. Applicants must supply at least 2 months of source documentation (e.g., wage statements, interest statements, or unemployment compensation). The following is a list of income sources, and examples of acceptable documentation:
Type of Income Documentation Source – not older than 3 months Gross employment income:
• Wages
• Salary
• Overtime
• Tips
• Commissions
• Bonuses
• Employment verification from employer
• Paycheck stubs (copies of the most recent 2
months of paycheck stubs)
• Certified copies of tax returns and W -2’s if within
the first quarter of the new calendar year, requires
a signed 4506 form
• Copy of employment contract, which must specify
the earnings amount and expiration date
Net self-employment or business
income
• Certified copies of tax returns, with signed 4506
form for the previous 2 years (including all
attachments, specifically Schedule “C”)
• Audited financial statement
• Latest quarterly financial statement
Social security benefits
• Including SSI payments
• Including anticipated Cost of Living
Adjustments (COLAs)
• Written verification from the Social
Security Administration
• Copy of award letter stipulating the benefit
amount
• Copy of bank statement verifying the direct
deposit of the benefit amount
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Periodic determinable allowances:
• Child support
• Alimony
• Copy of court decree that establishes amount of
support
• 2 months of statements from State office that
verifies the amount of support
• Affidavit of support with supporting documents
(subject to proof that the foregoing methods of
documents are not available).
• If absent parent is incarcerated, provide proof of
incarceration
Regular contributions received from
organizations or persons not residing in
the dwelling
• Notarized affidavit of support and amount shown
on bank deposits.
Net rental income • Tax returns, including schedule “E” • Copies of rental agreements/leases, along with a
breakdown of monthly expenses to determine net
income including mortgage statement
C i f t t t h k l ith
Welfare assistance:
• Payments under CalWORKs
• Welfare or General relief
• Benefit award letter specifying the amount of the
cash aid and/or food stamps
• Verification from case worker stating the benefit
amount
• Copy of checks
Income from assets:
• Savings account(s)
• Checking account(s)
• Investments
• Bank statements showing the last 3 months of
interest
• Savings passbook
• Verification of deposit
• Most recent income tax returns showing the
interest earned
• Investment statements showing the dividends
earned and/or anticipated earnings
Gross amount of payments in lieu of
earnings:
• Unemployment
• Disability compensation
• Worker’s compensation
• Benefit award letter showing monthly benefit
• Copy of checks (2 months)
Gross amount of periodic payment:
• Annuities
• Pensions/Retirement
• Disability benefits
• Death benefits
• Statement of benefits
• Benefit award letter
• Verification from awarding agency/entity
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Other sources of income:
• Union benefits
• Adoption Assistance
• Other income not specified above
• Statement of benefit award that evidences
benefit amount
• Documentation to support declaration of other
income
• Check stubs (2 months)
No income: • EDD Notice of Benefits
• Verification of previous employment
• Verification from IRS
• Statement of Non-Earnings form
No tax returns: • Affidavit pertaining to household income
Assets of an Absent Spouse will be taken into consideration, the value to be determined.
Income Exclusions
The list of sources of income that should not be included in the income calculation is specified in 24 CFR Part 5.
Assessing Information and Computing Income
The Program Staff or Consultant must calculate the household income based on the documentation obtained, and complete an Anticipated Income Determination form for each household.
When assessing the documentation, it is important to determine:
a. The basis on which employees are paid, such as hourly, weekly, monthly, with or without overtime, etc.
b. In the case of overtime, it is crucial to determine whether the overtime is irregular or a predictable part of the person’s income.
c. If the household member will continue to earn overtime pay on a regular basis, then the Program Staff or Consultant must calculate the average amount of overtime pay earned over the period used to calculate income eligibility, and the average amount of overtime earnings must be included in the income projection for the household. d. If overtime work is not constant and will not be constant in the next 12 months, the Program Staff must request detailed overtime information from the employer in the Verification of Employment, and use the information supplied by the employer to determine how overtime is to be calculated.
Formulas used to determine annual income:
Frequency Formula
Weekly Multiply gross income by 52 weeks
Biweekly Multiply gross income by 26 weeks
Twice-a-month Multiply gross income by 24 weeks
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Monthly Multiply gross income by 12 months
Refer to the Technical Guide for Determining Income and Allowances for the HOME Program for household members who have variations in pay.
If the Program staff or Consultant has verification that the household member has been employed by the same employer from the beginning of the calendar year, then the monthly income can be calculated by dividing the year-to-date (YTD) annual earnings by the number of paychecks received.
For example, if the paycheck stub indicates that the individual is paid bi -weekly and the pay date was June 28, 2016, and the YTD is $18,500, then you divide $18,500 by 13 paychecks, and annualize the calculated monthly earnings by multiplying the result by 26.
$18,500 ÷ 13 = $1,423.08 per pay period
$1,423.08 x 26 = $37,000.08 per year
The above method will only work if staff has verified that the household member has worked for that same employer since the beginning of the calendar year, and if the paycheck stub reflects the year-to-date earnings that include all overtime, bonuses, etc.
Special Circumstances
If income cannot be calculated by using the documentation described above, then the income calculation must be handled on a case-by-case basis, as appropriate for the situation. For example:
If the income is derived from the sale of recyclable materials, it will be necessary to provide enough documentation (i.e. sales receipts) to reasonably determine annual income. The documentation must be in a form acceptable to the Program staff. Self-certifications of income are not allowed.
Income shall be re -examined for eligibility if more than six (6) months have lapsed between the date the family was last qualified as income eligible and the first expenditure.
Household Size
Since income limits are adjusted by household size, it is crucial to accurately determine the size of the applicant’s household.
For income purposes, all household members’ income is to be counted regardless of relationship.
This includes tenants, borders, permanent live -in caretakers, and non -eligible occupants. Foster children are not to be included as part of the total household members when determining the eligibility for the addition of bedrooms and bathrooms.
Undocumented (i.e. illegal residents) household members are not counted in determining household size unless they can provide a valid foreign government issued ID with sufficient proof of address.
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A child who is subject to shared -custody may be counted as part of the household if the child resides with the household at least 50% of the time. Program Staff or Consultant must obtain verification of dependent children living at home, such as copy of birth certificate, court order awarding child custody, school records, or other documentation that will verify the dependent of part of the household.
Unborn children are not considered part of the household.
The Program Staff or Consultant must review the “breakdown of household members” portion of the application, which is where the borrower discloses all the members of the household. The Program Staff or Consultant must also look for “red flags” that indicate discrepancies in the household size disclosed by the applicant. For example, if the applicant claims that he has 3 dependent children, but the tax returns only show 2 children. In this case, the Program Staff must obtain more information and additional documentation to support the 3rd dependent child, such as a copy of the birth certificate for a newborn, a court order that grants custody of the child, or school records for the additional dependent.
For household members of 18 years of age and older who are full-time students, the Program Staff or Consultant must obtain verification of full -time student status, such as school records, registration, or other documentation that will evidence student status.
Verification of Dependents • Copy of birth certificate(s) • Copy of school records
• Court order warding custody
• Adoption documents
• Proof of full-time student status for dependents 18+ years of age
Comparing Household Income to Income Limits
Once the household size and anticipated household income has been determined, the information must be compared to the Income Limits issued by HUD to verify eligibility. The Program Staff or Consultant must make sure to use the most recent income limits chart.
Households must have incomes at or below 80% AMI, adjusted for family size, to be eligible for the Program.
Monthly Housing Costs
Monthly housing costs should not be more than 30% of household income.
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The Housing Affordability Data System (HADS) developed by HUD provides consistent measures of affordability over a long period of time. The HADS system analyzes the affordability of housing from several perspectives, including the fraction of income that a household spends on housing each month. HADS uses the standard assumption that a unit is affordable if the household spends no more than 30% of its income on housing. In this context, “housing” includes utility payments and, for owner-occupied housing, re al estate taxes, hazard insurance, and fees such as condo fees or homeowner’s association fees. More information here:
https://www.huduser.gov/portal/publications/pdf/Trends_hsg_costs_85-2005.pdf
In addition, the American Housing Survey (AHS) released by HUD and the US Census Bureau every two years determines monthly housing costs by “summing, when applicable, utility costs, real estate taxes, cost of homeowner insurance, condominium/homeowner’s association fee, land/site rent, other mortgage charges, other required mortgage fees, mortgage payments, routine maintenance costs, and rent payments”. More information here:
https://www.census.gov/content/dam/Census/programs-surveys/ahs/tech- documentation/AHS_Codebook.pdf
Title Report
California Title Association or a third-party contractor will order a title investigation report through a Policy of Insurance of Record Title (PIRT) for loans. This report must be ordered on each loan application within five (5) business days from the time eligibility has been established. The PIRT will identify all deeds, liens, covenants, and other documents recorded against the subject property.
Credit Reports
All occupants 18 and older are to complete the Authorization for Release of Information form.
Credit reports will be ordered for all adult members of the household. Upon receipt of credit reports, they are to be reviewed to insure they coincide with reported income.
Lead-Based Paint Assessment
Order lead testing assessment (when applicable) to comply with HUD’s Lead Safe Housing Rule, a certified Environmental Company must perform a lead inspection to test surfaces to be disturbed during rehabilitation activities on properties built prior to 197 8. A post lead clearance is also required. Refer to Appendix C: Lead- Based Paint Hazard Reduction Requirements.
Preliminary Loan to Value (LTV)
The Program Staff or Consultant must verify the LTV in order to remain in compliance of maximum LTV requirements. The LTV is calculated by adding all of the indebtedness against the subject property, and the proposed Program loan. The total is then divided by the estimated value of the property. Total LTV not to exceed 80%.
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Example/Scenario of LTV calculation:
$125,000 1st mortgage
$ 35,000 Proposed Program loan
------------------
$155,000 Total indebtedness
$425,000 Estimated property value
$155,000 ÷ $425,000 = 36%
Preliminary After Rehabilitation Value
The U.S. Department of Housing and Urban Development (HUD) requires documentation of the after-rehabilitation value (ARV) to show such housing is within Section 203(b) program limits.
In accordance with 24 CFR 92.254(b), housing currently owned by a family (i.e., owner - occupied housing) only qualifies as affordable housing under the HOME Program if the estimated value of the property, after rehabilitation, does not exceed 95 percent of the median purchase price for the area (as established by HUD). The City must maintain files showing how ARV was determined and found to be within the applicable program limits. Property value must be determined prior to the provision of HRGP assistance. The value will be established by appraisals prepared by a licensed fee appraiser. Project files must document the post rehabilitation appraised value and clearly indicate it in the appraisal report. This requires the City to provide the appraiser the written work write-up that includes the proposed rehabilitation for the subject property. An estimate of value also reflects the value of a standard property; this corresponds to the estimated post-rehabilitation value of the subject property, based on the proposed rehabilitation. The form called 95% Property Value Limit must be completed for each project.
Application – Follow-up
As needed, request all required third party verifications, such as verifications of mortgage, employment, benefits, or deposit.
Upon receipt and review of documentation (income, property information, and credit report) the Program Staff or Consultant will notify the applicants of their eligibility or request additional documents for clarification. The homeowner will be notified in writing of the additional documentation and will be given (30) days to submit.
If the homeowner does not respond within the (30) calendar day deadline specified in the correspondence, the Program Staff or Consultant will cancel the file. If the file is canceled, the
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homeowner will not be eligible to re-apply for the program until a year from the closing of the file.
The City will only permit a file to be re -instated due to illness, hospitalization or death in the immediate family
Request for the re-instatement has to be done in writing within 30 calendar days of the cancellation of the file.
The Program Staff or Consultant must keep a calendar for timely follow-up after the initial intake.
Denial of Application
If during the application intake the Program Staff or Consultant determines that the applicant does not qualify for the Program, a denial letter must be mailed, indicating the reason for denial. The applicant will be given a 30-day period to appeal the denial.
Approval of Application
After the applicant’s eligibility is established, the Program Staff or Consultant will notify applicant in writing of their eligibility for the program and indicate the assistance to be provided.
Initial Property Inspection
Program staff will schedule an initial property inspection with the property owner. The initial inspection will allow the property to be evaluated and determine which repair items will be addressed. In addition, after the inspection a determination will be made as to whether or not lead- based paint stabilization or abatement will be required. To facilitate the inspection the following steps should be taken:
1. Coordinate inspection with Building and Safety Inspector (if necessary).
2. In conducting the inspection, schedule a time with the property owner to conduct the formal property inspection. At the time of the inspection, the Program Staff should:
a. Review the property
b. Obtain a list of general property improvements desired by the homeowner c. Check the dwelling for structural deficiencies. Physically walk through the dwelling identifying every substandard feature that may be observed and note all improvements necessary to bring the dwelling up to Code. (Un-permitted structures that do not meet program guidelines must be permitted before assistance can continue).
d. Inform the homeowner of deficiencies identified
e. Obtain homeowner preferences regarding options for correcting deficiencies.
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f. Take thorough pre -construction photos of each area in which rehabilitation or repairs will occur. Additionally, if necessary for historical purposes, take photos of the subject property, property to the right and left and across the street.
3. When reviewing inspection notes the Program Staff or Consultant shall take into account the following:
a. Overcrowded conditions. If it’s determined that overcrowded conditions exist and there is a request for the construction of an additional bedroom/bathroom an explanation will be included in the file. Such report shall include the number of occupants in household, the age and gender of occupants in household, the age and gender of occupants in household, and the existing number of size of sleeping quarters.
b. Rehabilitation Feasibility. Program Staff shall make a determination on the rehabilitation feasibility of the property with the following factors taken into account:
i. Location of structure
ii. Excessive rehabilitation costs
iii. Type of improvements
iv. Type of structure
v. Condition of structure
vi. Homeowner’s needs
4. Order termite inspection reports for all loans. Program Staff or Consultant must request at least three (3) qualified termite companie s and keep the confirmation in the loan master file.
If the property has been inspected and treated for termites within the last 12 months, a new termite report is not required. In which case, the Program Staff or Consultant must request a copy of the Notice of Work Completed from the homeowners.
Copies of Lead report/assessment and termite report must be provided to the homeowner. The Program Staff must also take into consideration the reports when preparing the work write-up.
Historic Preservation
Historic preservation requirements apply to properties that are 50 years old or older. Historic properties are residential properties listed in or eligible to be listed in the National Register of Historic Places, state or local inventory of historic place s, designated as a historic landmark, or designated as contributing to a historic district by local law or ordinance. Refer to Appendix G – Historic Preservation Forms. The Program Staff or Consultant must determine if the property is subject to historic preservation requirements, as follows:
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1. Verify the age of the property with a property profile. If the property is not 50 years old or older, then no further historic process is required.
2. If the subject property is 50 years old or older and the rehabilitation work will involve exterior work, the Program Staff or Consultant must submit a Historic Eligibility Determination to State Historic Preservation Office (SHPO) via regular mail. This consultation with SHPO is only for projects that will include exterior work. SHPO clearance is not needed for projects that will only addr ess interior rehabilitation, or for properties that are not 50 years old or older. The consultation letter must include:
a. Photographs of the property as required by the State. b. A list of the proposed rehabilitation.
c. Relevant information regarding the historic significance of the property.
3. SHPO must respond within 30 days. If no response is received, then rehabilitation work may proceed.
4. Complete of Historic and Architectural Assessment Form.
a. If the proposed rehabilitation involves only interior work or if the subject property is less than 50 years old, only Part A of the Historic and Architectural Assessment Form is necessary.
b. If the proposed rehabilitation involves exterior work to a property that is 50 years old or older, verify that proper consultation was submitted to SHPO. If no response is received from SHPO within 30 days, then project is able to proceed. c. Complete Part B of the Historic and Architectural Assessment Form for projects that involve exterior rehabilitation of properties 50 years old and older.
Environmental Requirements
An Environmental Assessment to be completed for all properties. The Program Staff or Consultant must complete the Environmental Finding Report during the property inspection; it must be signed by the Planning and Community Development Director or his/her designee.
Relocation
In accordance with the Uniform Relocation Act, i f the project will prevent the homeowner from accessing heat, bathroom facilities , or the kitchen, then the homeowner may request relocation assistance. The City will provide up to $500 to assist in covering the costs of relocation advisory services to displaced tenants and owner occupants, moving expenses, and temporary living arrangements. Relocation costs incurred by the City are eligible for reimbursement through HUD.
Written notice must be provided to the tenant or owner occupant a minimum of 90 days prior to the required date of the move.
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Work Write-up
The Program Staff or Consultant must prepare the Work Write-up, which is the set of instructions specifying the proposed rehabilitation work and will also serve as part of the contract. The Work Write-Up must describe and address any code violations, health and safety deficiencies, and l ead hazards in a manner that is sufficiently detailed to serve as the basis for obtaining bids from contractors.
PART 3: PROCUREMENT
This section provides an overview of the HUD standards for Federal procurement requirements 24 CFR Part 85.36, 24 CFR Part 84.40-48.
The City of Montebello needs to ensure that all applicable Federal requirements are followed throughout the process. While the City has its own procurement and contracting requirements, the use of Federal funding requires compliance with Federal regulatio ns at a minimum. The primary purpose of the procurement procedure is to assure free and open competition is achieved.
The City of Montebello and its Recipients must follow procurement procedures as they pertain to the HOME Program:
1. OMB Standards - Materials shall be procured in accordance with the requirements of 24 CFR 84.40-48 and the procurement standards set forth in OMB Circular A -110, and shall subsequently follow the property standards, covering utilization and disposal of property, set forth in OMB Circular A-110.
2. Use and Reversion of Assets - The use and disposition of real property and equipment must be in compliance with the requirements of 24 CFR Part 84 and CFR 570.502, 570.503, 570.504, and HERA as applicable, which include but are not limited to the following:
3. Any HOME Program funds on hand and any accounts receivable attributable to the use of funds shall be transferred to the City of Montebello at the time of expiration, cancellation, or termination of the Agreement.
Real property under the "Recipients" control that was acquired or improved, in whole or in part, with funds under the Agreement shall be used to meet one of the HOME Program Activities.
PROCUREMENT TYPES
1st Procurement Method: Competitive Sealed Bids (formal Advertising)
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The sealed bid method is required for procuring all construction contracts or for goods costing more than $100,000. The only exceptions to this rule are single family housing rehabilitation projects where the total cost does not exceed $100,000. These projects may be conducted under the Small Purchases Method. During this process, bids are publicly solicited and a firm fixed-price contract is awarded to the responsible bidder whose bid, conforming to all the material terms and conditions of the invitation for bids, is the lowest in price.
In order for sealed bidding to be feasible, the following conditions should be present:
1. A complete, adequate, and realistic specification or purchase description is available;
2. Two or more responsible bidders are willing and able to compete effectively for the business; and
3. The procurement lends itself to a firm- fixed-price contract and the selection of the successful bidder can be made principally on the basis of price.
When sealed bids are used, the following requirements apply:
1. Publication Period: The invitation for bids will be publicly advertised and bids shall be solicited from an adequate number of known suppliers, providing them sufficient time prior to the date set for opening the bids;
2. Federal Funding Advertised: The advertisement should indicate that the project is being funded with HOME funds and that federal requirements will apply to the contracts.
2. Clear Definition: The invitation of bids, which will include any specifications and pertinent attachments, shall define the items or services in order for the bidder to properly respond;
3. Itemized Costs: Bids must show the quantity and cost of each line item. Lump sum bids and/or bid items that are not specifically identified or are generally grouped as miscellaneous or contingency are not allowed.
4. Public Opening: All bids will be publicly opened at the time and place prescribed in the invitation for bids;
5. Selection and Contracting: A firm fixed -price contract award will be made in writing to the lowest responsive and responsible bidder; and
6. Rejection of all Bids: Any or all bids may be rejected if there is a sound documented reason.
Negotiations after Unsuccessful Competitive Sealed Bidding : Negotiations are permitted within the following guidelines, which consider that time or other circumstances will not permit a re-solicitation of competitive sealed bids.
Bids Over Construction Budget by 10 percent or Less: When bids are received and the low bid exceeds available funds and it is determined in writing from the procuring agency that time or other circumstances will not permit the delay required to re -solicit competitive sealed bids, a contract may be negotiated with the lowest responsive and responsible bidder, provided that the lowest base bid does not exceed available funds by an amount greater than five percent of the construction budget established for that portion of work. The procuring agency may change
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the scope of the work (with prior approval from the Authority) to reduce the cost to be within the established construction budget.
Bids Over Construction Budget by more than 10 Percent: When bids are received and the low bid exceeds available funds by more than 10 percent of the construction budget and it is determined in writing from the procuring agency that time or other circumstances will not permit the delay required to re -solicit competitive sealed bids, a contract may be negotiated provided that:
a. Each responsible bidder who submitted a bid under the original solicitation is notified of the determination and is given reasonable opportunity to negotiate. b. The negotiated price is lower than the lowest rejected bid by any responsible and responsive bidder under the original solicitation.
c. The negotiated price is the lowest negotiated price offered by any reasonable and responsible offeror.
d. If the scope of services originally addressed has been significantly changed, prior Authority approval is required and a project amendment may be necessary.
2nd Procurement Method: Competitive Sealed Proposals (RFPs/RFQs)
Competitive sealed proposals are used in two instances:
1. The acquisition of any engineering or architecture services, or
2. The purchase of other professional services where the total cost will exceed $100,000.
Under this procurement method, the Recipient must publish a written request for submissions and then review these submissions based on established selection criteria. This method of procurement differs from the small purchases method in that the solicitation must be published and cannot be restricted to a smaller or limited number of bidders. Under this approach, there are two possible methods of soliciting proposals:
1. A Request for Proposals asks that officers submit both qualifications and cost information.
2. A Request for Qualifications only asks for information on the offeror’s expertise/experience and not on cost.
When acquiring any service that is not architecture or engineering, the full RFP process must be used. For example, if the City were to hire a for -profit HOME Program contract administrator and that contract exceeded $100,000, an RFP would be required.
When acquiring architectural or engineering services, either a RFP or a RFQ may be used. The City recommends the use of an RFP process when feasible or practical, since it provides the recipient additional information.
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Request for Proposals (RFP): When a RFP process is required, the City must develop a written document outlining the scope of the services and the selection criteria. The scope must be sufficiently detailed so that potential bidders are able to develop effective pricing proposals and submit appropriate qualifications.
Request for Qualifications (RFQ): The RFQ process may only be used in two instances:
1. For complicated architectural or engineering services, or
2. When the RFQ is used to narrow a pool of potential bidders and a formal RFP will follow. In any other competitive proposal instance, the RFP must be used. The RFQ process does not request cost information at the time of solicitation.
3rd Procurement Method: Small Purchase Procedures
The Small Purchase Procedures Method allows acquiring goods and services totaling no more than $100,000, without publishing a formal request for proposals or invitation for bids. This method of procurement is typically used to purchase commodities such as equipment or other materials. In the highly unlikely event materials are purchased that will exceed $100, 000, they must use the Sealed Competitive Bid Method.
The Small Purchases Method can also be used to acquire eligible types of services, such as professional consulting, environmental review, or planning. This method cannot be used if the services contract will exceed $100,000 in value. If the services contract will exceed $100,000, an RFP must be issued under the competitive proposals approach. Note that engineering architectural and construction services cannot be procured using the small purchase method and must always be acquired using the competitive proposal approach . These acquisitions must occur under the competitive sealed bid method. In general, the small purchase procedure should not be used to acquire construction contractors. The only exception to this is when the City is contracting for single family rehabilitation, where the total cost of the rehabilitation will not exceed $100,000.
4th Procurement Method: Noncompetitive Proposals
Procurement by noncompetitive proposals is procurement through solicitations of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate.
Procurement by noncompetitive proposals may be used only when the award of a contract is infeasible under small purchase procedures, sealed bids, or competitive proposals and one of the following circumstances applies:
a. The item is available only from a single source;
b. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation;
c. The City authorizes noncompetitive proposals; or
d. After solicitation of a number of sources, competition is determined inadequate.
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OTHER CONSIDERATIONS
Aside from selecting the method of procurement, there are several other considerations the City of Montebello adhere to when procuring goods or services with Federal funds including:
Conflict of Interest
1. A written code of conduct must be maintained to help prevent conflicts of interest in procurement.
2. The written code of conduct must apply to all employees, officers, agents of the City or its Recipient, and members of their immediate family, and partners.
3. The code shall prevent financial interest or other benefits earned for any of these persons due to a HOME Program -related procurement action. These persons also cannot solicit or accept gratuities, favors or other items of monetary value from contractors.
4. The City of Montebello adheres to its Conflict of Interest Federal guidelines which identify that Employees , officers, board members, or agents of the City of Montebello are prohibited from participating in the selection, award, or administration of contracts or sub- agreements supported by federal funds if a real or apparent conflict of interest exists. City employees are required to disclose any potential conflicts of interest and adhere to the Conflict of Interest Guidelines.
Excluded Parties
1. The City must adhere to the prohibitions in 2 CFR Part 2424 on the use of debarred, suspended, or ineligible contractors. A person who is debarred or suspended shall be excluded from Federal financial and non -financial assistance and benefits under Federal programs and activities.
2. Federal funds may not be used to directly or indirectly employ, award contracts to, or otherwise engage the services of any contractor during any period of debarment, suspension, or placement on ineligibility status.
3. The City should regularly check all contractors, subcontractors, and lower- tier contractors against the Federal publication that lists debarred, suspended, and ineligible contractors.
4. In addition, the City should check this list before signing any contract with contractors or subcontractors.
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5. Information on parties excluded from Federal procurement and non- procurement programs is available at www.sam.gov.
Minority/Woman Business Enterprises (MBE/WBE)
1. The City of Montebello is required by Federal law to ensure that minority and women - owned business have information about and the opportunity to bid on federally funded competitive contracts.
2. The City is required by law to use minority and women’s businesses whenever possible.
Disadvantaged Business Enterprises (DBE)
1. The City of Montebello complies with Federal regulations concerning Disadvan taged Business Enterprise (DBE). Disadvantaged Business Enterprise (DBE) and Small Business Enterprise (SBE) firms are strongly encouraged to participate in the City of Montebello’s contract opportunities.
2. City projects funded in whole or in part with federal funding sources are subject to DBE requirements set forth in Title 49 of the Code of Federal Regulations (CFR), Part 26, and the State of California Department of Transportation DBE Program Plan, as well as other Caltrans guidelines. For these projects, specific DBE requirements and project goals are detailed in the project's bid specifications.
3. To search for certified DBEs, staff may visit the following website California Unified Certification Program (dbesystem.com)
Solid Waste Disposal Act (200.322)
1. The City of Montebello adheres to the Federal Regulations of the Solid Waste Disposal Act (Sec. 6002).
2. In accordance with Section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, the Contractor shall procure items designated in guidelines of the Environmental Protection Agency (EPA) at 40 CFR Part 247 that cont ain the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition. The Contractor shall procure items designated in the EPA guidelines that contain the highest percentage of recovered materials practicable.
3. For transactions that exceed $10,000 or for contract where the value of items purchased in the prior fiscal year exceeded $10,000, staff or consultant will review the requirements to utilize recovered materials at the highest percentage possible while maintaining a satisfactory level of competition.
4. Staff or consultant will also procure solid waste management services in a manner that maximizes energy and resource recovery.
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5. Staff or consultant will review these requirements for goods that are typically procured as recycled (paper), for other goods that can be normally procured as recycled, or for recycling/waste service.
Construction Management
In order to ensure HOME Program compliance and the overall success of projects, there are a wide number of critical tasks that the City must undertake to properly manage HOME -funded construction, including tasks such as formulating effective standards, managing inspections for quality, and the proper approaches to change orders, contingency funding, and periodic reporting by partners.
Part I of this section covers the applicable standards and codes while Part II addresses the City's HOME requirements related to the construction process and the procedures that the City has developed to effectively manage construction activities.
Part I: STANDARDS AND CODES RELATED TO CONSTRUCTION
PROPERTY STANDARDS (24 CFR 92.251)
Property standards are required in the HOME Program to achieve two major purposes:
1. Set a minimum standard for habitability/functionality, for purposes of inspecting and specifying necessary improvements listed in the scope of work; and
2. Establish materials, methods, and standards for any work to be performed.
The property standards that are applicable to the City's HOME Program are described briefly below.
Housing Codes/Standards
1. Housing codes/standards specify the basic living and structural conditions for existing properties. They are used to determine if an existing residence is habitable and identify health and safety conditions.
2. Housing codes/standards are used as the basis for initial inspections of existing properties to identify needed repairs and appropriate improvements. Their purpose is to ensure that existing housing is not occupied unless it is decent, safe, and sanitary.
3. Waivers can be requested for rehabilitation developments if structural constraints prohibit adherence to the minimum design standards. Waiver requirements are detailed as part of the City's Minimum Design Standards.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 116
Building Codes
1. Building codes are a series of requirements that specify how new construction or rehabilitation work is to be carried out. They inform contractors about how to do the work and are used by inspectors to check completed work.
a. The City of Montebello building codes are mandatory citywide. The City requires that, owners, and developers comply with the building codes adopted in the City's jurisdiction.
2. A number of related codes, such as the fire code and plumbing code, are incorporated into the City building codes.
3. Most work governed by building codes requires that licensed contractors obtain permits prior to starting the work.
4. A building permit alerts building officials and inspectors to the fact that certain types of construction are about to begin and completed work must be inspected to determine if it meets requirements.
Rehabilitation Codes
1. Rehabilitation codes provide specific guidance about applying building codes to guide repair, remodeling, and rehabilitation of existing structures. Appendix J of the International Residential Code provides the minimum requirements for existing structures being rehabilitated.
2. They serve the same purpose as building codes but are moderated to be reasonable approaches to existing conditions because it would be very expensive (perhaps impossible) to renovate an existing older building to meet the same standards for new constructed buildings.
Rehabilitation Standards
1. A rehabilitation standard defines the quality of materials and workmanship that must be used when a particular repair is made. Rehabilitation standards (sometimes called construction standards) speak to the quality, durability, and aesthetics of the end product.
2. They define what methods and materials are eligible for HOME payment.
3. The City of Montebello has adopted written rehabilitation standards for rehabilitation of owner-occupied units, single -family and multi -family, whether the work is done by contractors, or nonprofits.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 117
EXHIBIT 8 – City of Montebello Rehabilitation Standards
SECTION I: SITE IMPROVEMENTS
NOTE: All work requires review by the Building Division regarding need for plans/permits.
SITE IMPROVEMENTS – OUTBUILDINGS
REHABILITATION STANDARD: 75% or more salvageable
Minimum Life: 5 Years
Unsafe, illegal or unapproved structures, including outbuildings, additions and patio covers will be removed if it is not financially feasible (up to $5,000) to complete rehabilitation required to make them structurally sound, leak free and building and zoning code legal.
REPLACEMENT STANDARD: No outbuilding shall be provided.
SITE IMPROVEMENTS – PAVING AND WALKS
NOTE: Any work may require a permit from the Engineering Division.
REHABILITATION STANDARD:
Minimum Life: 15 Years
Badly deteriorated, essential paving, such as front sidewalks, will be replaced to match.
Deteriorated paving may be removed or replaced.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Essential walks and drives shall be replaced with 4” thick, 4% air entrained, and 3000 PSI concrete with metal reinforcement.
SITE IMPROVEMENTS – LANDSCAPING
REHABILITATION STANDARD:
Site shall be graded to direct water to run away from foundation. Trees that are too close to the structure shall be removed.
REPLACEMENT STANDARD:
Only for-sale homes’ front yards may be landscaped with a $500 maximum allowance.
SITE IMPROVEMENTS – FENCING/GATES
REHABILITATION STANDARD:
Minimum Life: 5 Years
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 118
Fencing shall be rehabilitated to meet the local code.
REPLACEMENT STANDARD:
When funding is sufficient for nonessential improvement, additional wood or wrought iron fencing may be installed to create defensible space in conformance with neighborhood/homeownership association requirements.
SITE IMPROVEMENTS – SWIMMING POOLS/HOT TUBS
REHABILITATION STANDARD:
Minimum Life: 3 Years
Beyond scope of federal financing. Pools may be filled.
REPLACEMENT STANDARD: N/A
SECTION II: EXTERIOR SURFACES
NOTE: All work requires review by the Building Division regarding need for plans/permits.
EXTERIOR SURFACES – EXTERIOR CLADDING
REHABILITATION STANDARD:
Minimum Life: 10 Years
Siding and trim will be intact and weatherproof. All exterior wood components will have a minimum of one continuous coat of paint, and no exterior painted surface will have any deteriorated paint.
REPLACEMENT STANDARD:
Minimum Life: 25 Years
Historically sensitive vinyl siding with 45-year material warranty.
EXTERIOR SURFACES – EXTERIOR PORCHES/BALCONIES
REHABILITATION STANDARD:
Minimum Life: 10 Years
Unsafe or unsightly porches and balconies will be rehabilitated to conform closely with porches in the neighborhood. Porch rehabilitation will be structurally sound, with smooth and even decking surfaces.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Deteriorated porches and balconies shall be replaced with preservative treated structural lumber and tongue and groove pine or synthetic deck material. Replace with concrete if economically possible.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 119
EXTERIOR SURFACES – EXTERIOR RAILINGS
REHABILITATION STANDARD: None
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Railings that do not meet the current code shall be removed and replaced with wrought iron or synthetic wood.
EXTERIOR SURFACES – EXTERIOR STEPS AND PATIOS
REHABILITATION STANDARD:
Minimum Life: 10 Years
Steps, stairs and decks shall, be structurally upgraded to adopted building code; free from all significant deterioration.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Any replacement patio, deck or stoop shall be of a minimum functional size, design and construction.
SECTION III: FOUNDATIONS & STRUCTURE
NOTE: All work requires review by the Building Division regarding need for plans/permits.
FOUNDATIONS & STRUCTURE – FIREWALLS
REHABILITATION STANDARD:
Minimum Life: 15 Years
Party walls and garage ceilings shall be maintained without cracks and plaster deterioration and upgraded with 5/8" type X gypsum, glued and screwed to structure.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
All party walls shall conform to the 2010 edition of the California Building Code’s new construction requirements for fire separation at both walls and roofs.
FOUNDATIONS AND STRUCTURE – FOUNDATIONS
REHABILITATION STANDARD:
Minimum Life: 20 Years
Foundations shall be rehabilitated to be sound and water resistant if financially feasible.
REPLACEMENT STANDARD:
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 120
Foundation replacements above 25% are beyond the scope of the program and usually indicate an infeasible project.
FOUNDATIONS & STRUCTURE – STRUCTURAL WALLS
REHABILITATION STANDARD:
Minimum Life: 20 Years
All structural members shall be free from deterioration, rot and termite damage and be sized in conformance to building code. Any member not in conformance with code shall be re -supported as determined by a structural engineer.
REPLACEMENT STANDARD:
Minimum Life: 40 Years
Walls shall be 2" x 4", 16" on center with at least R -19 insulation and solid sheathing to match existing.
SECTION IV: WINDOWS AND DOORS
WINDOWS AND DOORS – INTERIOR DOORS PLACEMENT
REHABILITATION STANDARD:
Minimum Life: 10 Years
All bedrooms, baths and closets shall have operating doors. Privacy locksets on bath and master bedroom. All other doors shall have passage locks. Recycle doors when possible.
REPLACEMENT STANDARD:
Minimum Life: 15 Years
Doors may be solid core or composite in paint grade jambs.
WINDOWS AND DOORS – EXTERIOR DOORS
REHABILITATION STANDARD:
Minimum Life: 10 Years
Exterior doors shall be 1 ¾ inch thick, solid core, insulated to minimum R -6, weather stripped, operate smoothly, including a peep site, a dead bolt, and an entrance lock set. Rod iron installations require review by the Building Division.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
All replacement doors at the front of the property will be neighborhood sensitive, Energy Star, steel or fiberglass solid core doors with peep sight and deadbolt. Garage/house doors shall be 20-minute fire rated with self-closing hinges. Energy Star, solid core doors with peep sight, dead bolt, and entrance locksets shall be installed at entrances not visible from the front street. Garage doors shall be R-5, embossed metal with a lockable assembly.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 121
WINDOWS AND DOORS – WINDOW PLACEMENT
REHABILITATION/REPLACEMENT STANDARD: Bedrooms shall have all operable windows with a screen and meet egress requirements (one per room) per California Building Code.
WINDOWS AND DOORS – WINDOWS & SLIDING GLASS DOORS
REHABILITATION STANDARD:
Minimum Life: 10 Years
All windows and sliding glass doors shall be weather tight, include a locking device, and where required for egress, be fully functioning/operational.
REPLACEMENT STANDARD: Energy Star
Minimum Life: 20 Years
Double glazed, PVC or fiberglass, a minimum R-value of 2.8 (U=.33), SHGC of 0.30 and DP of 45.
SECTION V: ROOFING
ROOFING – FLAT AND LOW SLOPE ROOFING
REHABILITATION STANDARD:
Minimum Life: 10 Years
Rehabilitate roofing when cost is less than 30% of total replacement cost.
Built-up roofing, flashing and accessories shall be rehabilitated per California Building Code 2010 wherever a 5-year leak free warranty is available from a certified roofing company.
REPLACEMENT STANDARD:
Minimum Life: 15 Years
The most cost effective Energy Star certified roof of: 3 ply hot built- up, T.P.O. or EPDM per California Building Code 2010.
ROOFING – PITCHED ROOFS
REHABILITATION STANDARD:
Minimum Life: 10 years with warranty
Rehabilitate when cost is less than or equal to 5% of total replacement cost.
Missing and leaking shingles and flashing shall be rehabilitated on otherwise functional roofs per California Building Code 2010. Concrete, metal and tile roofs shall be rehabilitated when at all possible. Antennae and communication disks shall be permanently removed.
REPLACEMENT STANDARD:
Moderate: Minimum Life: 30 Years
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 122
Fiberglass, asphalt, 3 tab, class a shingle weighing at least 235 and up to 270 lbs. , architectural grade, 30-year warranty with ridge ventilation system per California Building Code 2010.
SECTION VI: INSULATION AND VENTILATION
INSULATION AND VENTILATION – ATTIC VENTILATION
NOTE: All new work requires permits from the Building Division.
REHABILITATION STANDARD:
Minimum Life: 5-Year
Any pre-installed ventilation shall be maintained or if powered and not functioning, replaced.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Attics will be ventilated with a minimum of one (1) square foot of free vent for each 150 square feet of roof area or be redesigned for integration with new insulation system. Solar powered roof vents may be used when possible.
INSULATION AND VENTILATION – BATH VENTILATION
REHABILITATION STANDARD: None
REPLACEMENT STANDARD:
Minimum Life: 10 Years
Energy Star, exterior ducted, 70 CFM, max 20 sones and separate switch or humidistat in all full and three quarter baths.
INSULATION AND VENTILATION – INFILTRATION
REHABILITATION/REPLACEMENT STANDARD:
Minimum Life: 5 Years
All exterior doors and attic hatches shall be weather stripped. All visible cracks shall be caulked.
INSULATION AND VENTILATION – INSULATION
REHABILITATION STANDARD: Not Applicable
REPLACEMENT STANDARD:
Minimum Life: 15 Years
Attic insulation goal is R-30, crawls spaces R19. New walls will be insulated to capacity with blown cellulose, fiberglass or closed cell foam to cavity capacity. Attic access panel must be insulated to R-30 with rigid foam.
INSULATION AND VENTILATION – KITCHEN VENTILATION
City of Montebello
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Policies and Procedures Manual Page 123
REHABILITATION STANDARD: N/A
REPLACEMENT STANDARD:
Minimum Life: 5 Years
Energy Star, exterior ducted range hoods or exhaust fans with less than 10 sones, at least 120 CFM and capped with a functional back draft.
SECTION VII: INTERIOR STANDARDS
INTERIOR STANDARDS – INTERIOR RAILINGS
REHABILITATION STANDARD:
Minimum Life: 10 Years
Handrails will be present on one side of all interior steps or stairways with more than two risers and around platforms over 30" above floor level with adequate structural attachment, in compliance with the California Building Code 2010.
REPLACEMENT STANDARD:
Minimum Life: 15 Years
Hand and guardrails shall be replaced with universal design standard material and construction in compliance with the California Building Code 2010.
INTERIOR STANDARDS – INTERIOR WALLS AND CEILINGS
REHABILITATION STANDARD:
Minimum Life: 5 Years
Walls shall be stripped of wallpaper, holes, cracks and deteriorated surfaces. All visual surfaces shall be patched and sanded as to create a smooth surface and recoated using premium, low VOC, vinyl acrylic paint.
REPLACEMENT STANDARD:
Minimum Life: 10 Years
Walls shall be plumb, ceiling level with a smooth finish on at least 1/2" gypsum with water resistant board in wet areas. 5/8” Type X over 16” on center studs installed per the American Gypsum Association. Kitchen tile backsplashes and wainscot in ceramic tile baths.
INTERIOR STANDARDS – HAZMAT TESTING AND TREATMENT
REHABILITATION STANDARD:
SAFE PRACTICES
Low: Minimum Life: 3 Months
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Policies and Procedures Manual Page 124
Asbestos and lead paint hazards, when previously identified, shall be addressed in conformance with applicable local, state, and federal laws. Rehabilitated properties shall be cleaned to pass a Lead Dust clearance test to the levels prescribed by HUD regulations.
Moderate: Minimum Life: 1 Year
All properties shall be visually inspected for asbestos and lead suspect materials. No friable asbestos and all interior and exterior lead suspect surfaces shall be repainted using premium acrylic latex. Properties shall pass HUD lead dust clearance standards prior to occupancy.
High: Minimum Life: 1 Year
All properties shall undergo visual "Risk Evaluations" by rehab supervisors and be treated with the most affordable interior, exterior and site clean-up to clearance standards.
REPLACEMENT STANDARD: IN PLACE MANAGEMENT & ABATEMENT
High: Minimum Life: 20 Years
After an inspection by an EPA Certified Inspector, all hazardous material shall be removed from all moving parts, floors and mouthable surfaces. Encapsulates and enclosures may be used.
INTERIOR STANDARDS – CLOSETS
REHABILITATION STANDARD:
Minimum Life: 10 Years
Existing closets will be maintained.
REPLACEMENT STANDARD:
Minimum Life: 10 Years
All bedrooms shall have a closet with a door, clothes rod, and shelf. Baths must include linen storage and coat hooks must be near the front door.
INTERIOR STANDARDS – FLOORING
REHABILITATION STANDARD:
Minimum Life: 10 Years
Ceramic tile flooring may be rehabilitated and wood floors sanded and refinished. Salvageable carpet may be cleaned. Minimum life for carpet is 5 years.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Stone, tile or vinyl flooring may be installed over reinforced cement underlayment in baths. Wood or laminate flooring may be installed in living and dining rooms and halls. Kitchen and utility to be ceramic tile. FHA approved carpet over 6 lb. rebound underlayment is allowed in bedrooms when economically feasible.
INTERIOR STANDARDS – APPLIANCES
Assessment of existing appliances shall be made to determine if replacement is necessary.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 125
REPLACEMENT STANDARD: Energy Star and Water Sense. The following appliances are eligible to be installed only when funding allows:
• Dishwasher: Energy Star rated;
• Washing Machine: Energy Star rated (required);
• Dryer: 7 CF with sensor dry system;
• Refrigerator: Energy Star rated (required);
• Range – Gas or electric, 4 burner;
• Garbage disposal – 1/2 hp, with minimum 3 year warranty; • Microwave/Hood combination (if replacing current equipment); and • Built-in Oven (to match) Energy Star rated.
INTERIOR STANDARDS – MINIMUM KITCHEN DESIGN
REHABILITATION/REPLACEMENT STANDARD:
Cabinet Storage: 2 bedroom – 8’ minimum; 3 bedroom – 10’ minimum; 4 bedroom – 12’ minimum.
SECTION VIII: ELECTRIC
NOTE: All electrical work requires permits from the Building Division.
ELECTRIC – SPECIALIZED CIRCUITS
REHABILITATION STANDARD: Rehabilitate existing devices to operate.
REPLACEMENT STANDARD:
Minimum Life: 15 Years
Kitchen receptacles within 6 feet of a sink, all bath receptacles and at least one exterior receptacle shall be protected by a GFCI. Arc fault receptacles shall be installed in all bedrooms, family, dinning, and living rooms, closets, hall walls, and recreation rooms per National Electric Code 2008.
ELECTRIC – KITCHEN ELECTRIC DISTRIBUTION
REHABILITATION STANDARD:
Minimum Life: 15 Years
Electric service may be supplied to trash compactors, microwave ovens, double ovens, range grills, and any appliance proposed for installation.
REPLACEMENT STANDARD:
Minimum Life: 15 Years
Permanently installed or proposed stoves, refrigerators, freezers, dishwashers and disposals, washer and dryers shall have separate circuits sized to N.E.C. Two separate 20 amp counter circuits are required with each kitchen area.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 126
ELECTRIC – FIXTURES
REHABILITATION STANDARD: None
REPLACEMENT STANDARD:
Minimum Life: 20 Years
All halls, rooms necessary to cross to other rooms and stairways must be well lighted and controlled by a 3 -way switch using concealed wiring. Attics must have utility fixtures. All fixtures shall be Energy Star. Replace all incandescent bulbs with fluores cent or LED bulbs. Exterior door lighting shall provide 100 lumens at ground level (motion detectors allowed). Garage doors shall be equipped with electric openers with laser safety devices. Bedrooms and living areas may receive Energy Star ceiling fans.
ELECTRIC – ALARMS
REHABILITATION STANDARD:
Minimum Life: 5 Year
Existing fire and smoke, CO shall be rehabilitated to operating condition. Security system may be rehabilitated as needed. Exterior doors shall be alarmed when pools are present.
REPLACEMENT STANDARD:
Minimum Life: 15 Years
Directly wired, battery back -up smoke detectors are required on each dwelling floor.
Interconnected smoke detectors are required for special needs and wheelchair users’ homes. CO detectors are required with all fuel burning furnaces. Security systems may be installed at 1st floor doors and windows when economically feasible.
ELECTRIC – INTERIOR DISTRIBUTION
REHABILITATION STANDARD: None
REPLACEMENT STANDARD:
Minimum Life: 20 Years
All rooms shall be rewired to the 2008 Edition of the National Electric Code using affordable fixture allowances and Energy Star fixtures. Minimum of one 20-amp circuit per room.
ELECTRIC – SERVICE AND PANEL
REHABILITATION STANDARD:
Minimum Life: 15 Years
Distribution panels shall have a main disconnect, at least 10 circuit breaker protected circuits, a 100-amp minimum capacity and be adequate to safely supply existing and proposed devices.
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 127
Electrical panel shall be replaced if not properly grounded, to local codes. All panel upgrades require approval by Southern California Edison.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Single Family: 200 -amp service with a 24 -circuit panel is allowed for homes of up to 1,800 SF.
Homes larger than 1,800 SF or all electric require 200 amp service with a main disconnect panel containing at least 30 circuit breaker positions.
Two-Four Family: 100 -150-amp service to each unit with a main disconnect panel containing at least 20-24 circuit breaker positions. All panel upgrades require approval by Southern California Edison.
SECTION IX: PLUMBING SYSTEM
NOTE: All plumbing work requires permits from the Building Division.
PLUMBING SYSTEM – DRAIN, WASTE, VENT LINES
REPLACEMENT STANDARD:
Minimum Life: 20 Years
ABS replacement lines shall be installed in accordance with the most recently approved version of the State of Illinois plumbing code.
PLUMBING SYSTEM – PLUMBING FIXTURES
REHABILITATION STANDARD:
Minimum Life: 5 Years
All fixtures and faucets when replaced will be retrofitted with low flow aerators: kitchen faucets with a maximum flow rate of 2.0 gal/min; bath faucets with a maximum flow rate of 1.5 gal/min.
Tub and shower valves shall have thermostatic or pressure balance valves.
REPLACEMENT STANDARD: California Water Sense
Minimum Life: 20 Years
Single lever, low flow, 2.0 gal/min kitchen and 1.6 gal/min bath, metal faucets and 2.5 gal/min maximum shower diverters with lifetime drip-free warranty. White ceramic, 1.1 GPF ultra low flow toilets, double bowl stainless steel or porcelain kitchen sinks , fiberglass tubs and surrounds and steel or porcelain enameled 5' tubs. Tub and shower valves shall have thermostatic or pressure balance valves.
PLUMBING SYSTEM – PLUMBING MINIMUM EQUIPMENT
REHABILITATION STANDARD: None
REPLACEMENT STANDARD:
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 128
Minimum Life: 10 Years
Every dwelling shall contain a double or single bowl kitchen sink, and a 3-piece bath.
PLUMBING SYSTEM – FIRE SPRINKLERS
REHABILITATION STANDARD: Rehabilitate all.
REPLACEMENT STANDARD: Required in homes for wheelchair bound populations when economically feasible.
PLUMBING SYSTEM – WATER HEATERS
REHABILITATION STANDARD:
Minimum Life: 5 Years
The minimum capacity for units with two bedrooms or less shall be 30 gallons, larger units shall have a minimum capacity of 40 gallons. Water heaters shall have pressure relief valves with drip legs that extend to within one foot of the exterior ground, in copper pipe. All water heaters shall have seismic strapping.
REPLACEMENT STANDARD:
Minimum Life: 12 Years
Energy Star, high efficiency, pilotless, Energy Star, gas fired or dual element electric (0.97) water heaters with at least R -7 insulation and a 12 -year replacement warranty. 40 gallons electric for 1 and 2-bedroom units and 40 gallons gas or 52 gallons el ectric for 3- and 4-bedroom units. Install heat pump water heaters when feasible. All water heaters shall have seismic strapping.
PLUMBING SYSTEM – WATER SUPPLY
NOTE: No pipe, plumbing, fixture, fitting, or faucet intended to convey drinking or cooking water shall contain no more than .25 percent lead (AB 1953).
REHABILITATION STANDARD: 10 Years
Minimum Life:
All homes shall be tested to identify and eliminate all leaks. All fixtures must be supplied with 2 gallons per minute water flow and shut off valves must operate. Lead and galvanized pipe shall be replaced with copper, PVC or PEX, if local code allowed. All accessible hot water lines shall be insulated; maximum static pressure is 60 psi.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
All fixtures shall have brass shut off valves. Exterior hose bibs with air gap are required.
SECTION X: HVAC
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 129
NOTE: All work requires permits from the Building Division.
HVAC – CHIMNEY/FIREPLACE REHABILITATION
REHABILITATION STANDARD:
Minimum Life: 20 Years
Unsound chimneys shall be rehabilitated or removed. When chimneys must be used for combustion ventilation, they shall be replaced.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
Replacement furnace flues when required shall be metal double or triple walled as recommended by the equipment manufacturer.
If the service life of the chimney is comparable to service life of heating plant, then no replacement is necessary. If the chimney needs replacing or a new liner, the chimney will be eliminated and replaced with a high efficiency, power vented unit.
HVAC – DISTRIBUTION/VENTILATION SYSTEM
REHABILITATION STANDARD:
Minimum Life: 5 Year
Central air conditioning shall be inspected, serviced and refurbished per diagnostic testing of unit and distribution system – per (BPI) technical standards for air conditioning and heat pump specialist as described in Chapter 6 of the Saturn Mechanical Sy stems Field Guide, 2006. Must meet 2008 Title-24 Standards.
REPLACEMENT STANDARD:
Minimum Life: 20 Years
All ductwork shall be insulated to R -4, seams sealed with Mastic and run in conditioned space within the building envelope. Air leakage and ventilation may be brought into conformance to Chapter 4 of HPSWC. Must meet Title-24 Standards.
HVAC – CENTRAL EQUIPMENT
REHABILITATION STANDARD:
Minimum Life: 5 Years
Heating plants that are less than 5 years old and rated 65 AFUE efficiency or better shall be tested and tuned-upper BPI. Energy Star setback thermostats are required.
REPLACEMENT STANDARD:
Minimum Life: 20 years
Condensing gas furnaces rated over 86 AFUE and heat pumps over 13.5 SEER with 10-year warranty on parts and 5 years labor. Air to air heat exchangers are eligible for this program. HVAC system shall be sized to maintain 68ºF measured 36" off the floor when the outside temperature is 84ºF
City of Montebello
HOME Investment Partnerships Program
Policies and Procedures Manual Page 130
(the average yearly maximum), in all habitable and essential rooms. Interior design temperature used for heating and cooling load calculations per Title-24.
SECTION XI: SPECIAL CONSTRUCTION
SPECIAL CONSTRUCTION – ACCESSIBILITY FOR SPECIAL NEEDS CLIENTS
One of the following levels of accessibility shall be met dependent upon the clients’ physical needs and financial resources:
Accessibility:
1. No-Step Entry;
2. Adequate Doorways; and
3. Usable Bathroom.
Usable Home: If requested by a physically disabled tenant, home shall meet this level of accessibility when funding is available:
1. Accessible Route into and through the Dwelling Unit;
2. Accessible Switches, Outlets & Controls;
3. Reinforced Walls for Grab Bar Installation;
4. Usable Kitchens; and
5. Ground Floor Bedroom.
Full Accessibility:
1. Wheelchair turning space in kitchen, bath and hall areas;
2. Doors – maximize space and lever hardware throughout;
3. Kitchen – accessible to wheelchair bound;
4. Bathroom fixtures per universal design standard;
5. Accessible controls in all areas; and
6. Communication devices in bath and at front and rear door.
SPECIAL CONSTRUCTION – LEAD SAFE REGULATIONS
REHABILITATION STANDARD / REPLACEMENT STANDARD
In all federally -funded projects, the City shall follow the requirements listed on the attached “Summary of Lead-Based Paint Requirements.
International Energy Conservation Code
1. All new construction work must also conform to the International Energy Conservation Code (IECC) and applicable state or local energy conservation codes.
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HOME Investment Partnerships Program
Policies and Procedures Manual Page 131
2. Additionally, the City requires that all new building construction complies with the State of California Energy Code.
Section 504 and Fair Housing
1. Section 504 and Fair Housing rules impact the design of your project by setting standards for the appropriate number and characteristics of accessible units in your project. The applicability of these standards depends on the size and type of the project.
CONSTRUCTION PROCESS REQUIREMENTS
In addition to the requirements related to property standards discussed in Part I above, the City of Montebello HOME program has requirements that relate to the following aspects of the construction process itself:
1. Inspection protocols;
2. Screening contractors;
3. Construction Scheduling;
4. Pre-construction conferences: who is included, what is covered;
5. Processing and tracking payments;
6. Change order management and payment processes; and
7. Monitoring reports from partner organizations
INSPECTIONS AND SPECIFICATIONS
The City shall follow inspection procedures as described below to ensure that all work is being completed on time and within stated quality guidelines.
1. Initial inspections : establish scope of work and must be allotted sufficient time for interviewing the owner or others, delving into the properties functional characteristics, and to develop thorough, articulate scopes specific to the job inspected.
a. The specifications must include detailed drawings and reference material as needed to fully explain all aspects of the scope, especially special conditions requiring unusual steps in the repair.
2. Final approval of plans and specifications : The City requires that plans and specifications are submitted for final review and approval. The following must be addressed prior to approval:
a. The final plans and specifications must be consistent with the scope of work defined in the Recipient’s agreement with the City.
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Policies and Procedures Manual Page 132
b. Note that advertisements for construction contract bids may not be published until plans and specifications for such contract have been unconditionally approved by the City.
c. Final construction cost estimates, including deductive alternatives, must be provided.
Estimates for line item bids must include estimated quantities, unit costs, and total costs.
3. Progress inspections:
a. The City and HUD requires that inspections be documented and include the signature of the inspector and the date.
b. An inspection will determine if work completed corresponds to the work write -up, the construction contract, and the schedule before payment is made to the contractor; c. It may address a need for a change order and intervene in owner/contractor disputes in a rehabilitation project;
d. It ensures that safety and security measures are being taken and that all necessary code inspections have occurred;
e. It allows the inspector to view the project at key construction points.
4. Timing of inspections: The construction schedule will determine the expected times for progress inspections.
a. Key points in the construction process would include inspections by qualified persons before work is concealed to determine that it is satisfactory and meets the work specifications and contract.
b. An inspection should occur when reinforcing bars are installed; wiring, plumbing, and insulation are in place.
c. An unscheduled inspection may reveal a great deal about work quality and progress, as well as answer concerns a property owner may have.
d. It may be necessary when a dispute arises between the parties involved.
5. Final inspection: A final inspection must be made by the appropriate professional and work must pass this inspection before the retainage is released to the contractor.
6. Logistics: Upon substantial completion of the project, the City must confirm that a final inspection is requested.
a. The City will schedule a final inspection to be attended by the owner, project administrator/consultant, contractor, and the City of Montebello Housing Inspector. b. Notice of this inspection must be scheduled with the City at least 3 -5 days prior to the scheduled date.
c. The final inspection shall consist of a field inspection to confirm that the project has been completed.
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The following documents must be available at the final inspection:
a. Punch List(s);
b. Certificate(s) of Final Inspection; and
c. Release of Lien Form for each contractor
d. General items of discussion at the final inspection include e. Acceptance of work by all parties;
f. Transfer of insurance coverage to the owner;
g. Utility considerations;
h. Establishment of warranty period; and
i. Final payment (Disbursed by the City of Montebello 30 days from a successfully completed Final Inspection.)
7. Punch list and close out: Although a few punch list items may be pending at the time of the final inspection, all major problems should be resolved and a Certificate of Final Inspection should be issued at this time.
a. The City requires that the project inspector and architect, if applicable, conduct a pre - final inspection to ensure that a comprehensive punch list is developed and that the project will be substantially complete at the time of the City's Final Inspection. b. A schedule for completing these items should be negotiated with the contractor, and a corresponding percentage of the cost, plus retainage, should be held back until the punch list items are completed.
c. If an architect was used, he or she will issue a notice of substantial completion. d. This notice verifies that the structure may be used for its intended purpose. e. The notice of substantial completion may be issued either before or after punch list items are completed, depending on the situation and the extent of remaining items. In all cases, the Certificate of Final Inspection must be signed by the City prior to re lease of final retainage payment.
f. Even when an architect signs off on work, the city will conduct its own inspection to verify that work is complete and complies with programmatic and other federal requirements.
g. The final inspection must be performed by the City of Montebello Economic Development staff.
h. After completion of the punch list items, and (if appropriate) the architect’s notice, the City should see that the contractor provides:
i. Cost certifications;
ii. Warranties of work performed;
iii. Operations manuals (for furnaces and other systems); iv. Guarantees from manufacturers of materials and systems installed; and v. Release of liens by suppliers, all subcontractors, and the general contractor. i. No final payment will be made until all documents are received and lien releases are verified.
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j. An IDIS completion report must be completed to close out the project.
8. Warranty inspection: A one -year warranty period must be instituted for each contract completed to ensure that the workmanship and materials of the contractor(s) and subcontractor(s) have been sufficient. Copies of warranties or a certification from the contractor that no warranties were issued for the project are to be kept in project files.
a. A final warranty inspection must be conducted by the City of Montebello staff eleven months after the initiation of the warranty period to finalize any adjustments needed to correct covered deficiencies.
b. Any such deficiencies shall be noted by the City or architect, if applicable, and provided to the contractor in writing and corrected.
EXHIBIT 9 – Timing and Purpose of Property Inspections
When to Inspect: Purpose
Preliminary –
before work begins
Check existing conditions against drawings (for new
construction) or against work write up/approve
specification;
Review applicable codes and standards
During Construction Determine adequacy of work completed; Assess compliance with approved drawings or
specifications;
Assess completed work against construction schedule;
Determine completed work that is eligible for payment; Resolve any disputes among parties.
Final Go over items in “punch list” to determine completion; Document compliance with codes and standards.
Warranty Inspection Assess workmanship and materials used; Document deficiencies
SCREENING CONTRACTORS: BIDDING AND CONTRACT AWARD PROCESS
The City of Montebello is expected pre- screen contractors and to use applications, bidding documents, agreements, and pre -bid/preconstruction conferences for screening contractors. In general, performance standards and consequences to meet them must be part of every construction program and must be covered in sufficient detail in bidding documents and the pre - construction conference. The City's specific requirements for the bidding and contract award process are detailed below:
Debarment and Suspension Policy (24 CFR 85.35).
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The City of Montebello complies by the debarment and suspension policy pursuant to 24 CFR, 85.35 Part 5.
PROCEDURE
1. The City will verify that they and any or all persons, contractors, consultants, businesses, sub-recipients, etc., that are conducting business with the City are not presently debarred, proposed for debarment, suspended, declared ineligible, or voluntarily excluded from participation in the covered transaction or in any proposal submitted in connection with the covered transaction.
2. The City will check the Excluded Parties Listing System, print and maintain evidence of the search results. In the event that the search results indicate, a prior or current debarment or suspension of the contractor, the City will include the printout in the application.
3. The City will certify that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible or voluntarily excluded from any entity from a federally funded transaction. Any contractor that remains in a debarred o r suspended condition will be prohibited from participation in the City of Montebello HOME Program as long as they are classified in this manner.
4. The City will not award any HOME Program funds to applicants that are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from the covered transaction.
The City takes the following steps to assure a contractor is qualified to work based on the California State Labor Board (CSLB) and the HUD debarment List:
1. If the contractor is NOT on the debarment list, the City makes a copy of the Debarment List and encloses the list in the contractor package.
2. If the contractor IS found on the debarment list, the contractor is disqualified further consideration.
1. Advertisements for construction contract bids . The City of Montebello policy requires publication of advertisement for bids in a newspaper of citywide circulation one time in at least one newspaper of greatest general circulation in the City of Montebello (Montebello Comet) or posting by electronic media.
PROCEDURE
a. The date of publication of the notice shall not be less than five (5) days nor more than 30 days before the date established for the receipt of bids.
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b. In addition to citywide newspaper advertisement, the City may directly solicit prospective bidders and advertise in construction industry trade journals. c. Note that advertisements may not be published until plans and specifications for such contract have been unconditionally approved by applicable agencies. d. Additionally, wage determinations, if applicable, must be included as part of the contract documents for the project. The City requires to be contacted 10 days prior to the bid opening date.
2. Interpretations of plans and specifications . All questions regarding interpretation of the plans, specifications, drawings, and other contract documents should be addressed only to the design architect. Questions specific to the content of the Sample Bid Package for City of Montebello funded projects should also be addressed to:
City of Montebello
Attn: Planning & Community Development
Home & CDBG Division
1600 W. Beverly Blvd., Montebello CA, 90640
a. Any inquiry or other action requiring written interpretation or instruction from the architect that will modify the plans and specifications and affect bidders (e.g., modified wage determination, redesigns, etc.) must be done so by addendum.
NOTE: An addendum is written instruction issued prior to the opening of construction bids that modifies or interprets contract documents, drawings, and specifications by additions, deletions, clarifications, or corrections. All addenda must be approved by the City prior to issuance.
b. An Addendum must be issued by certified mail at least five days prior to the date of bid opening. Failure to attain approval may result in disallowance of affected costs.
3. Receipt of all sealed bids will be documented by date and time of receipt and the name of the submitting contractor. Bids received after the established deadline shall not be accepted.
4. Bids in excess of project budget. If the lowest base bid exceeds the amount of funds appropriated for project budget, then the application of deductive alternatives in numerical order will commence until the bid is within the appropriated amount.
5. Apparent low bidder. Once the apparent low bidder is identified, the City will determine if he/she is responsible.
NOTE: All prime contractors are responsible for ensuring that the subcontractors they employ are not debarred or suspended.
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6. Notification of bid award. Once the apparent lowest responsive, responsible bidder(s) for each contract(s) is determined, the City will notify all bidders whether or not they were successful.
a. Successful bidders must be notified of acceptance of their bid within the time frame specified in the contract documents.
b. Such notification shall be made through issuance of a Notice of Award which requests the contractor to provide acceptable payment and performance bond(s) and certificates of insurance within 10 calendar days.
c. Upon reception of these documents, the City must determine if:
7. The contractor has sufficient bonding and insurance . The insured amounts must be consistent with requirements of state law as specified in the contract documents, e.g., 100 percent payment and 100 percent performance bond(s) coverage and sufficient liability coverage amounts.
d. Contracts must be awarded within the time frame specified in the contract documents. e. If the contract has not been awarded within 90 days of bid opening, the Recipient must notify the City's Planning and Development Department to determine if the wage determination (if applicable) is still valid. Any applicable modified or superseded wage determinations will apply to the project.
Note: Licensing and underwriting limitations of insurance companies in the State of California can be checked by referencing U.S. Department of the Treasury, Circular 570 Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds a nd as Acceptable Reinsuring Companies as updated in the Federal Register.
8. Post award requirements. After all contract documents have been executed and sufficient bonding and insurance is confirmed, a fully executed set of contract documents must be submitted by the City of Montebello.
Pre-construction Conferences
A pre-construction conference can be valuable in providing direction to the parties involved and prevent potential misunderstandings.
PROCEDURE
1. The HOME Program Consultant or Housing Manager shall coordinate scheduling the preconstruction conference with all applicable parties.
2. At a minimum, the City shall give 10 days’ notice to persons who must attend the preconstruction conference, including:
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a. City representative, if applicable
b. Executive Director of nonprofit entity, if applicable; c. Developer/Owner,
d. Prime Contractors;
e. If applicable, the architect (especially the person representing the firm and the resident observer);
3. The preconstruction conference will be conducted in accordance with a Preconstruction Agenda and Report.
4. Signed copies of the report, with an attached attendance list, must be distributed to each of the parties identified above within five calendar days of the conference.
5. Location of the conference:
Working with Contractors
PROCEDURE
The HOME Program Consultant or Housing Manager will:
1. Retain a qualified person in charge of the work who understands the business and the constraints faced by those in the building trades.
2. Clearly inform contractors about work expectations, program requirements as they impact the project, about the payment process, and seek their feedback after project completion. a. Timing of a pre-construction conference will take place after an Environmental Review and Release of Funds (ROF) have been completed, and
3. Distribute communicate of the project to all team members on his or her role and responsibilities;
4. Identify deadlines and critical phases of the work;
5. Review the scope of work and schedule to prevent future problems;
6. Explain basic operating procedures, including reports, meetings and other communications required and expected during construction;
7. Review applicable programmatic and federal requirements, such as Davis -Bacon, labor standards, and Lead Safe Housing Rules;
8. Review procedures for:
a. Inspections – when they must occur and who initiates them; b. Warranties – copies of warranties or a certification from the contractor that no warranties were issued for the project shall be kept in project files; c. Payment requests – when they should be submitted, who receives them, what they must include, when payment will be made if satisfactory; d. Change orders – the process for requesting one; what would/ would not be considered in weighing the request;
e. Lien releases – the process and who is involved;
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f. Monitoring of progress and reporting;
g. Dispute resolution; and
h. Closing out the project.
9. Review the construction contract and ensure all parties have read, understood, and signed it;
10. Confirm that subcontractors’ names, addresses, and phone numbers are accurately listed;
11. For occupied structures:
a. Discuss the handling of service shut-offs and restricting access to bathrooms, kitchens, etc. during lead-paint work as well as other relevant rehabilitation work; b. Define moving and relocation roles and schedules; and c. Review/discuss safety and security measures during construction.
12. At the conclusion of the pre-construction conference and after the contractor has executed the construction contract, the City will issue a notice to proceed with work.
13. Construction should commence no later than 10 days after receipt of this Notice.
Construction Schedule
PROCEDURES
The HOME Program Consultant and/or the Housing Manager will:
1. Maintain access to many information sources and have an understanding of construction methods, trades involved, and the sequence of tasks that must occur;
2. Retain knowledge of:
a. The building materials required for the project, ordering and delivery methods and protocols;
b. The various applicable building codes and standards. c. Anticipate the key points at which an inspection is required; d. Determine how weather variations can impact construction progress; e. Understand each development team member’s roles and responsibilities; and f. Understand the development budget;
g. costs can be paid from each source;
h. When funds are available;
i. How to request payment (including the form that will be used to request payments and the documentation to be provided.);
j. Document each step in the process and list them sequentially, recognizing that some steps must occur simultaneously.
Timeliness and the Construction Schedule
PROCEDURE
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1. Assure that construction will starts within twelve months from the date of property or land acquisition;
2. Assure that project is completed within the required four-year timeframe of the allocation;
3. Maintain a construction schedule that is realistic – and enforceable.
4. If a project is behind schedule, the City may attempt one of the following options:
a. Eliminate or redesign the critical path activities (which may reduce the scope of the project);
b. Rearrange critical path activities so that some are performed simultaneously; or c. Reduce the duration of critical activities (if the critical path is shortened, other activity paths through the network may become critical.)
d. If none of these options can be accomplished, the project completion date must be adjusted; this will most likely have cost or timeliness ramifications and is highly undesirable.
5. Comply with timelines in the construction schedule to avoid severe consequences to the project:
6. Ensure that timelines are met, or that there is ample recourse to pursue if they are not, schedules must be enforceable including:
a. Reference the schedule in the written agreement between the City and the developer; b. Reference the schedule in the contract with the general contractor and all subcontracts; c. Reference it in the architect’s contract.
7. Cover the schedule and stress its importance during the pre-construction conference.
Change Orders
PROCEDURE
1. Any changes to construction documents must be reviewed and approved by the City.
2. Contractors must submit change orders when there is:
a. A change to the project design or work specification; b. An alteration, addition, or deletion to the approved scope of work; c. An addition or change to the work schedule; or
d. A change in cost for any reason.
3. Change orders must be written and address its completeness and appropriateness and its effect on budget, timeframe to the City.
4. The City requires that a Written Change Order is submitted any time that contract documents are changed, including additions, deletions, modifications, and time extensions after bid opening.
5. In addition, all change orders must be reviewed and approved by the City prior to issuance.
6. Changes that have no cost implications (or reductions in costs) require a change order.
7. Change orders will be evaluated for their impact on the project cost, schedule, and scope of work before they are approved by the City.
Managing Payments
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PROCEDURE
1. Payments will be reviewed by:
a. The City, the property owner and the contractor prior to signing a rehabilitation contract;
b. The developer and contractor for smaller, uncomplicated new construction projects at the pre-construction conference; or
c. The entire development team for larger new construction projects at the pre - construction conference.
2. For all projects, a portion of all payments will be retained at 10 - 15 percent until 30 days after completion of the work or satisfactory completion of the final punch list items.
3. The draw schedule will include in the overall construction schedule to establish clear expectations for when the contractor may request and can expect payments.
4. Payment requests for housing rehabilitation projects will be submitted to the City by the general contractor at the completion of each stage of the schedule.
5. Payment requests will be provided to the City's Program Staff or Program Consultant, and the property owner.
6. The property owner will sign off on the request before the City processes it.
7. For new construction projects, the developer assembles the draw requests for both hard and soft costs from the general contractor and other professionals involved in the project.
The invoice should include:
a. Total budget obligated;
b. Amount of previous payments received to date;
c. Cost for materials stored;
d. Costs incurred during the particular pay period;
e. Total costs incurred to date (includes previous and current expenses); f. Percentage of work completed to date:
g. Remaining budget; and
h. Amount of payment retained until project completion. i. No payment should be made when there have been changes to the original contract or scope of work without approval of a relevant change order.
8. All payment request documentation will be logged in as soon as it is received and recorded as soon as it is released.
9. The City's Planning and Community Development Director and Finance Department will review payment requests and approve them.
10. The documentation that must accompany a payment request, includes:
a. For all projects, an inspection report that supports satisfactory completion of work according to the work write-up, specifications, and/or construction schedule; b. Lien waivers as appropriate;
c. If needed, approved change orders;
d. For projects subject to Davis -Bacon requirements, signed certifications that demonstrate compliance.
e. Once a payment request has been approved by the City, it should be paid promptly in accordance with the agreed-upon schedule.
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f. If payment delays occur from participating in public programs and if payment is delayed according to the construction schedule (through no fault of the contractor), the contractor is allowed to stop work.
11. Final payment and release of retainage less any liquidated damages shall be made to the contractor after:
a. Final inspection is completed;
b. A Certificate of Final Inspection is signed;
c. Certificate of Plumbing, Certificate of Electrical, Certificate of HVAC are signed; d. Release of Liens are received, if applicable;
e. Receipt of copies of warranties or a certification from the contractor that no warranties were issued for the project;
f. All punch list items are resolved; and
g. Final payrolls and equal employment opportunity data are accepted by the City, if applicable.
12. Contingency funds may be set aside for a project for which there is no known specific use at the beginning for unforeseen problems that may require funds. a. These funds may not be drawn or expended unless an appropriate written change order is executed.
b. Funding must be established at the beginning or project for unforeseen circumstances. c. Set up is allowed but only work performed and documented through written change orders is paid.
Periodic Reporting
PROCEDURE
1. During the construction period, the City's HOME Program Consultant or Housing Manager will require periodic status reports from partners such as contractors, private developers, and property owners.
2. The City will maintain a reporting system to track progress of meeting larger program goals, as well as tracking progress for individual projects.
a. The City's reporting system includes:
b. milestones that need to be measured in the construction process and the draws against the contract;
c. When the milestones need to be measured (e.g., the critical points in a housing rehabilitation or development project); and
d. Measure and review the milestones.
3. Request essential information to track including:
a. Performance milestones in the construction schedule or written agreement; or b. Required documentation for IDIS or the CAPER reporting.
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c. Provide clear, detailed report forms and instructions to those responsible for initiating the report.
4. Take immediate action if reports are late, inaccurate, or incomplete.
5. Inform partners that the information provided in reports is useful for:
a. Preparing reports for City of Montebello;
b. Identify performance and timeliness issues early;
c. Plan on-site monitoring visits;
d. Making future funding decisions; and
e. Developing descriptions of projects for elected officials and citizens.
6. Measure progress in individual projects; or
7. Compare progress in similar projects to identify slower performers and take further action.
8. Examine funding requests to evaluate the fiscal aspects of performance against the construction schedule or written agreement.
9. Identify any missed milestones and which projects have or may put the City at risk of failing to meet timeliness requirements in the HOME program.
Exhibit 10
Rehabilitation of Owner-Occupied Progress Reporting
What to Track How Often to
report
How to Analyze information
Date of application At application Look for demand (or lack) by targeted population
Date of requested income
verifications; date received
When requested Check for follow up activity if not
received
Date of proof of ownership
established
At time of proof Check for determination of eligibility for assistance
Date of initial inspection At time of
initial inspection
Look for "fail" items and LBP
Date, name of contractor selected At time of
selection
Check for compliance with City's
approved system
Date of Pre-construction conference At time of
conference
Look for subjects covered, who were
present, notes taken
Date of Proceed Order At time of order Check against approved procedures Date of initial progress Inspection At time of
inspection
Note items passed or failed
Pass/fail items in inspection Same as above Note for payment requests or change orders
Date of initial payment request;
subsequent payments requested
Date of requests Check for adequate documentation to
support request
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Grievances Between Participants and Construction Contractor
Contracts signed by the contractor and the participant include the following clause, which provides a procedure for resolution of grievances:
Any controversy arising out of or relating to this Contract, or breach thereof, shall be submitted to binding arbitration in accordance with the provisions of the California Arbitration Law, Code of Civil Procedure 1280 et seq., and the Rules of the Americ an Arbitration Association. The arbitrator shall have the final authority to order work performed, to order the payment from one party to another, and to order who shall bear the costs of arbitration. Costs to initiate arbitration shall be paid by the part y seeking arbitration.
Notwithstanding, the party prevailing in any arbitration proceeding shall be entitled to recover from the other all attorney’s fees and costs of arbitration.
Environmental Requirements and Procedures
OVERVIEW
The purpose of this chapter is to provide guidance on the environmental review process required under federal HOME regulations. These regulations (24 CFR §92.352) require a formal assessment of possible environmental effects for each activity carried out w ith HOME funds. This assessment must be done according to requirements found in 24 CFR Part 58. This chapter provides current rule requirements and clarifies review responsibilities of the City of Montebello, and Community Housing Development Organizations (CHDOs), with regard to the environmental review process.
The U.S. Department of Housing & Urban Development (HUD) places restrictions on project activities in accordance with 24 CFR §58.22, Limitations on activities pending clearance. Completion of the environmental review process is mandatory before taking physical action on a site or making a commitment or expenditure of HOME or non-HOME funds for property acquisition (purchase), rehabilitation, conversion, lease, repair, or construction activities. “Non -HOME funds” means any Federal, state, local, private, or other funds.
Date payments made Date payments
made
Check for time elapsed; is it late or on
time
Date of final inspection Date of
inspection
Check against inspector’s report of
satisfactory work
Punch list items completed Date of punch
list
Check for completed work
Final release of liens received Release date Look for presence of all releases Final payment Date of payment Check for timing; adequate documentation
Project closed Date of close-out Check for completion report and Interim reports in IDIS
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Since funds for a project will not be released until the environmental review has been completed and approved, the City will begin the environmental review process at the earliest possible time so that potential conflicts between program procedures and env ironmental requirements are identified at an early stage.
The Environmental Checklist in the Uniform Application submitted, as part of a competitive HOME grant application does not meet HUD requirements for an environmental review. The purpose of the checklist is to assist the City to initially evaluate environmental circumstances that may affect the proposed project and to raise awareness of possible problems if the grant is awarded.
This chapter details the HUD environmental review rules and related Federal laws and authorities that are applicable to all projects and activities receiving HOME assistance. It describes:
1. The roles and responsibilities of the City of Montebello and its Recipients, who have the primary responsibility for conducting environmental reviews;
2. The role of CHDO’s and nonprofit organizations as project partners in the environmental review process;
3. The primary procedures and operating principles that guide the environmental review process; and
4. The categories of environmental review that are required for various HOME funded activities and projects.
Roles and Responsibilities of City of Montebello
As outlined in 24 CFR Part 58, units of local government are required to assume Federal environmental review responsibilities for compliance with the National Environmental Policy Act (NEPA), and related Federal laws and authorities. HUD’s environmental review regulations identify states and units of general local government as the “responsible entity” (RE) ---those entities having legal authority to assume this role because they exercise control over planning, permitting, and supplying infrastructure to su pport HUD -assisted projects for their jurisdictions. For the HOME Program, the City receives a formula allocation of HOME funds directly from HUD. In addition, through a written agreement with the City of Montebello, assumes responsibility for compliance with NEPA and Part 58.
In cases where the City of Montebello does not have the technical capacity or administrative capability (§ 58.12) to assume the role of RE or an applicant (e.g., CHDO, or nonprofit or for profit organization) has applied directly to the City for HOME grant assistance, then the City of Montebello will take on this role of RE. In most cases the City of Montebello assumes the RE role.
In the role of responsible entity (RE), the City not only assumes the responsibility for environmental review, decision -making, documentation, and mitigation (if necessary), but also the legal
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responsibility for compliance with NEPA and all other applicable laws, regulations, and authorizations.
Whenever Recipients have assumed the role of RE, then the City is responsible for overseeing compliance with HUD’s environmental review procedures, as well as providing assistance to those Recipients in meeting their compliance responsibilities under Part 58. The City's role in this capacity is to conduct post -review monitoring of the Recipient’s Environmental Review Records (ERR); enforcing violations of Part 58; receiving certifications of compliance from the Recipients; accepting objections from the publ ic or other agencies; and other responsibilities related to the release of funds process (§ 58.18 and Subpart H).
When the City assumes the role of RE, then HUD performs the oversight responsibilities described in the paragraph above (24 CFR 58, Subpart H).
A. Environmental Review Process
The City must ensure that activities or projects that are funded by HOME assistance, in total or in part, are in compliance with NEPA and Part 58 requirements. This means creating a written environmental review record (ERR) for every activity and project regardless of the level of review (§ 58.38). Later in this chapter, more details will be provided as to the appropriate levels of environmental review for every type of HOME assisted activity or project.
The ERR is a type of “environmental diary” that the City uses to substantiate its decisions and conclusions concerning protection and enhancement of the environment as a result of approving the project. Keeping good records and having complete documentatio n is necessary to fulfill the City's environmental review obligations. This is a public record. Legal challenges to a project’s environmental compliance may be won or lost over how complete or incomplete the City's ERR documentation is; therefore, this adm inistrative record is important.
The City of Montebello will periodically monitor the content of the environmental records to determine whether corrective actions or sanctions are necessary. In addition, the HUD Field Office will conduct a monitoring review of the City's project ERRs.
The City is required to maintain technical capacity and administrative capability to ensure compliance with NEPA and Part 58 is achieved (§ 58.12). With regard to technical capacity, the City staff needs to have sufficient knowledge of the Federal laws and authorities, as well as an understanding of Part 58 requirements in order to make informed decisions about whether:
1. The appropriate level of review has been completed;
2. Compliance with NEPA and Federal laws and authorities has been achieved;
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3. The public notification requirements have been met (if required); and
4. When HUD approval is necessary.
This is true whether environmental reviews are completed by City staff, prepared by program partners, or a consultant is hired to perform the review. The City is still responsible for the content of the ERR and must make an independent evaluation of the environmental issues, take responsibility for scope and content of the compliance findings, and make the final environmental decision concerning project approval.
With regard to administrative capability, City staff should have sufficient knowledge about the Part 58 procedures to understand when funds may be committed and spent, the time periods for the public notification and release of funds process, and the minim um content of the ERR.
B. Environmental Decision-Making
For purposes of compliance with NEPA and Part 58, the chief executive officer of the City, or its formal designee, is the certifying officer (CO) (§ 288 of the Act). The certifying officer is recognized as the “responsible Federal official under NEPA” (§ 5 8.13, 40 CFR 1508.12) and, therefore, the decision-maker as to whether a project is approved or rejected on the basis of the environmental review findings. This is a Federal legal responsibility. As such, if someone other than the chief executive officer for the City is designated to fulfill this role, HUD requires there be a formal designation by the governing body identifying this officer.
The CO represents the City in Federal court if there is legal challenge to the content of the environmental review record and the City's decision based upon that record [§ 58.13(a)].
The CO is also the only person with the legal authority to sign the Request for Release of Funds and Certification (HUD form 7015.15.).
Other responsibilities required of the certifying officer are:
1. To ensure that the City reviews and comments on all EIS document prepared for Federal projects that may have an impact on the City of Montebello HOME program [§ 58.13(b)];
2. Making health and safety decisions related to whether or not to approve residential construction projects that are exposed to high levels or noise from major roadways, railroads, and/or military or civilian airports [HUD regulation on Noise Abatement and C ontrol, 24 CFR 51.104(a)(2) and (b)(2)]; and
3. Making health and safety decisions related to the construction, rehabilitation, or conversion of buildings exposed to blast overpressure or thermal radiation from aboveground storage tanks within line -of-site
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of the project (HUD regulation on placement of HUD- assisted projects in the vicinity of explosive or flammable operations, 24 CFR 51.206.).
C. Environmental Action
The City of Montebello is also responsible for ensuring that any environmental conditions or safeguards resulting from completion and approval of the environmental review document are implemented. With that, the City has developed a monitoring plan to ensure conditions that are identified as necessary for protecting and enhancing environmental quality or minimizing adverse environmental impacts are included in agreements or other relevant documents, and implemented during completion of the project.
In addition, the City must re-evaluate its environmental findings and decision if:
1. Substantial changes in the nature, magnitude, or extent of the project are proposed by the project proponent (e.g., new activities not anticipated in the original project scope);
2. New circumstances and environmental conditions arise that were not previously considered or evaluated for effect (e. g, conditions discovered during implementation of the project, such as archeological resources, asbestos containing materials, endangered s pecies, underground storage tanks, dry wells, etc.); or
3. The project proponent proposes selection of an alternative not previously considered.
Upon re-evaluating its original findings and conclusions, the City must decide whether or not its original determination is still valid, or that a new environmental review document must be prepared instead. If the original findings are still valid, document this in the ERR in writing.
Role of CHDO’s and Nonprofit Organizations as Project Partners
Any other individuals and entities that utilize HOME program assistance fall into the category of project participants with regard to compliance with Part 58 (§ 58.22). This includes CHDOs, public or private nonprofit or for-profit entities, contractors, and individual borrowers receiving HOME grants and loans.
These partners must:
1. Not acquire, repair, rehabilitate, convert, demolish, or lease properties or undertaking construction prior to receiving approval from the City of Montebello;
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2. Not commit non- HUD funds to project activities that would have an adverse environmental impact or limit the choice of project alternatives;
3. Carry out any mitigation and/or conditions associated with approval of the project;
4. Provide the City with information about the project.
The City may require by executed agreement that CHDOs or developers supply available, relevant information necessary for the City to perform the environmental compliance review. This could mean:
1. The CHDO or developer submits certain types of information to the City, or
2. The CHDO or developer prepares the environmental compliance review for submission to the City for its review and adoption, or
3. The CHDO or developer may decide to hire a consultant to prepare the environmental review for the City's review and adoption.
D. Environmental Review Procedures
Actions Triggering the Requirements of Part 58
Once a project participant (i.e., CHDO’s, developers, owners, sponsors of housing, and third- party contractors) has submitted an application for HOME funds to the City or the City has designated funds for a specific project in its Consolidated Plan or Annual Action Plan ("AAP"), Part 58 requirements are applicable to the project. At this point, the City must request the participant to:
1. Cease all project activity until the environmental review (ER) has been completed. Part 58 prohibits further project activities and actions from being undertaken prior to completion of the ER and the determination of environmental clearance. Projects in violation of this prohibition risk the denial of HOME funds.
Where a project participant has begun a project in good faith as a private project, the City is not precluded from considering a later application for Federal assistance for the project, but must request the third-party applicant to:
2. Cease further actions on the project until the environmental review process is completed. Project participants may proceed with the project upon receiving approval from the City, after the environmental review process has been completed for the project.
There are certain kinds of activities that may be undertaken without risking a violation of requirements of Part 58. For example, the act of either hiring a consultant to prepare a Phase I Environmental Site Assessment (an investigative
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study for environmental hazards) or hiring a consultant to complete an engineering design study or plan, or a study of soil and geological conditions.
Activities that have physical impacts or which limit the choice of alternatives cannot be undertaken, even with the project participant’s own funds, prior to obtaining environmental clearance to use HUD funds. This process may include public notification a nd approval from HUD. If prohibited activities are undertaken prior to receiving approval from the City, the applicant is at risk for the denial of HOME assistance. Such actions include:
1. Purchasing real estate;
2. Demolishing structures or buildings;
3. Excavating or dredging soils;
4. Placing fill dirt on the site;
5. Rehabilitation or converting a new building; and
6. New construction.
NOTE: Undertaking any of these actions interfere with the City's ability to comply with NEPA and Part 58. If prohibited actions are taken prior to environmental clearance, then environmental impacts may have occurred in violation of the Federal laws and au thorities and the standard review procedures that ensure compliance. Below is further discussion of issue under the heading, “Limitations Pending Environmental Clearance.”
Limitations Pending Environmental Clearance
According to the NEPA (40 CFR 1500 -1508) and Part 58, the City is required to ensure that environmental information is available before decisions are made and before actions are taken. The City may not commit or expend resources, either public or private funds (HUD, other Federal, or non -Federal funds), or execute a legally binding agreement for property acquisition, rehabilitation, conversion, repair or construction pertaining to a specific site until environmental clearance has been achieved. In other words, the City must avoid any and all actions that would preclude the selection of alternative choices before a final decision is made ---that decision being based upon an understanding of the environmental consequences, and actions that can protect, restore, and enhance the human environment (i.e., the natural, physical, social, and economic environment.)
In order to achieve this objective, Part 58 prohibits the commitment of HOME funds by the City of Montebello until the environmental review process has been completed by the City and HUD approves the release of funds.
NOTE: until the City has completed the environmental review process (including receipt of HUD approval), neither the City nor project participant may commit non -HUD funds or
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undertake an activity if that action would have an adverse environmental impact or limit the choice of reasonable alternatives.
For the purposes of the environmental review process, “commitment of funds” includes:
1. Execution of a legally binding agreement;
2. Expenditure of HOME funds;
3. Use of non- HUD funds on actions that would have an adverse impact - e.g., demolition, dredging, filling, excavating; and
4. Use of non -HUD funds on actions that would be “choice limiting” -e.g., acquisition of real property; leasing property; rehabilitation, demolition, construction of buildings or structures; relocating buildings or structures, conversion of land or buildings/structures.
NOTE: The standard for what constitutes a commitment of HOME funds for compliance with Part 58 is different from the HOME funds commitment and the CHDO reservation deadlines applicable under the HOME Program regulations in 24 CFR Part 92.
Prior to completion of the environmental review process and receiving HUD approval, the City may enter into a non-binding agreement to conditionally commit HOME funds- --i.e., a contractual agreement between the City and project participant to use a specific amount of HOME funds to produce affordable housing, or an executed written agreement reserving a specific amount of funds to a CHDO. The conditional commitment must incorporate language that will ensure the project participant does not have a legal claim to any amount of HOME funds to be used for the specific project or site until the environmental review process is satisfactorily completed. In addition, the agreement must explicitly state that the agreement to provide funds to the project is conditioned on the City's determination to proceed with, modify, or cancel the project based on the results of a subsequent environmental review. (See CPD Notice 01 -11, page 10 for suggested agreement language.)
Other types of actions that are not considered a commitment of funds for purposes of Part 58 compliance are statements of funding reservation, e.g., approval of Consolidated Plan or Annual Action Plan or planning for and reserving non -HUD funds, including tax credits for the project for HUD funding.
If the City is considering an application from a prospective participant and is aware that the participant is about to take an action within the jurisdiction that is prohibited by Part 58, then the City must take appropriate action to ensure that its objec tives and procedures of NEPA and Part 58 are achieved [§ 58.22(c)].
The City of Montebello has established internal controls to enforce compliance with NEPA and Part 58.
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“CONTEMPLATE” AND “COMMITMENT" DEFINITION FOR THE ENVIRONMENTAL REVIEW
Once the City contemplates assisting a project or activity with HUD funds, (§ 58.32), neither HUD funds nor non -HUD funds may be committed (§ 58.22) until compliance with Part 58 has been achieved and documented. The following guidance is provided to clarify the meaning of the terms contemplate and commitment as these apply to the environmental review process.
Contemplated HUD assisted action:
1. The City is considering an application from a prospective owner or beneficiary.
2. The City has identified a specific activity or project in its application.
Commitment of funds:
1. Execution of a legally binding agreement—e.g., awarding construction contracts, entering into project agreements with developer, etc.
2. Expenditure of HUD funds—e.g., purchase of materials by a force account crew, hiring a consultant to prepare a Phase I Environmental Site Assessment, etc.
3. Use of HUD funds or non-HUD funds on “choice limiting actions”:
a. Actions having an adverse impact -e.g., demolition, dredging, filling, excavation.
b. Actions limiting the choice of reasonable alternatives ---e.g., real property acquisition, leasing, rehabilitation, demolition, related site improvements, relocating buildings or structures, conversion of land or buildings/structures.
A commitment of funds is not:
1. Statements of funding reservation ---e.g., approval of an application, CHDO reservations, planning for and reservation of non -HUD funds (including tax credits for the project for HUD funding.)
2. Non -legally binding agreements ---e.g. An agreement with language such as, “Notwithstanding any provision of this Agreement, the parties hereto agree and acknowledge that this Agreement does not constitute a commitment of funds or site approval, and that such commitment of funds or approval may occur only upon satisfactory completion of environmental review and receipt by Recipient’s determination to proceed with, modify or cancel the project based on the results of a subsequent environmental review.
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AGGREGATION OF PROJECT ACTIVITIES
To determine the appropriate level of environmental review for a project, the City must group together (aggregate) all related project activities, whether or not the project is funded entirely by HOME funds, or only certain portions of the project will be funded by HOME funds. An environmental review must evaluate all activities that are geographically or functionally related, or part of a multi- year project. The appropriate level of environmental review for an aggregated project will be determined by which ever activity or activities being undertaken by the City or its partners will have the greatest environmental impact. For example, real property acquisition will have less of a physical impact on the human environment than newly constructing 30 units of affordable housing.
Geographically related project activities, for example, might include a proposal to acquire four units for rehabilitation and resale to first time homebuyers. All the related activities are occurring on a single site. In aggregation, all these activities must be evaluated in a single review, regardless of the fact that HOME funds may only be used for rehabilitation. One activity cannot occur without the others, and therefore all the associated environmental impacts must be evaluated together. The environmen tal review for the acquisition of the properties cannot be separated from the environmental review for the rehabilitation of the properties.
Multi-year aggregation is a process that addresses phased project activities. For instance, consider a three-year project, during which, real property will be acquired in the first year, infrastructure improvements will be installed in years two and three, along with several phases of affordable housing construction. Again, a single environmental review must be completed for all phases of the project before any of the activities may be undertaken. Only one request for release of funds (covering all project phases) needs to be submitted to HUD for approval. After HUD approval is received, no other approval or environmental action is required, unless circumstances arise that require the City to re -evaluate its original environmental findings.
SOURCE DOCUMENTATION FOR ENVIRONMENTAL REVIEWS
FIELD OBSERVATION – A visit to the project site to make observations of the general site conditions.
1. There should be written documentation of the conditions observed.
2. Include the name and title of the observer and the date of the site visit.
PERSONAL CONTACT – Personal contacts are useful only when the individual contacted is an accepted authority on the subject or subjects. Documentation should include:
1. The name and title of the person contacted,
2. The date of the conversation, and brief notes of the key points.
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3. Whenever the person that was contacted cites reports, records, or other document, the title, date, and source of the report should be noted.
4. Contacts can include staff experienced in a particular area (e.g., engineer, planner, historian, etc.).
PRINTED MATERIALS – Printed materials that are useful sources of detailed information may include:
1. Comprehensive land use plans, maps, statistical surveys, and studies are useful sources of detailed information.
2. The material must be current and reflect accepted methodologies.
3. Complete citations for all material must be included.
REVIEWER’S EXPERIENCE – Professional judgment by City staff is acceptable if their expertise is relevant to the compliance issue. For example, a reviewer's knowledge may include:
1. Reviewing previous projects in the same area.
2. Professional finding of the reviewer in subjects where he or she has the background to make judgments about a specific factor, or
3. Reviewers that have the expertise to evaluate soil conditions, while others will need to consult an engineer or other specialist.
SPECIAL STUDY – This is a study conducted for a particular project performed by qualified personnel using accepted methodologies. Some tests are relatively simple to perform but others may require elaborate equipment or personnel with additional expertise. The reviewer is responsible for obtaining assistance from others in order to have the appropriate tests or studies conducted. Examples of tests and/or studies include:
1. Archeological reconnaissance surveys,
2. biological assessment concerning threatened and endangered species, or
3. Phase I Site Assessments to determine site contamination.
Sources of Compliance Documentation
There are several types of resources necessary to demonstrating compliance with NEPA and the Federal laws and authorities. These resources provide written documentation in the environmental review record that is credible, traceable, and supportive of the c onclusions reached by the RE.
E. Categories of Environmental Review
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One of the primary purposes that the environmental review process serves is to require the City to include environmental impacts as part of the overall deliberation process surrounding proposed projects.
The HUD environmental review requirements at Part 58 were written so as to best strike a balance between the imposition of reasonable requirements upon the City (i.e., expediting the decision process for activities that clearly have no physical impact and requiring sufficient analysis for those that will alter environmental conditions), while ensuring that project decisions are well-documented.
Therefore, the environmental review requirements are divided on the basis of the level of impact that a proposed project might be anticipated.
There are four (4) levels of environmental review identified in Part 58. The criteria for these levels span the range of possible impacts, from none whatsoever to significant physical impact. The levels under Part 58 include:
1. Exempt (§ 58.34);
2. A. Categorically Excluded subject to (§ 58.35);
B. Categorically Excluded not subject to § 58.5
3. Environmental Assessment (§ 58.36 and Subpart E); and
4. Environmental Impact Statement (§ 58.37 and Subparts F and G).
NEPA and the implementing regulations at 40 CFR 1500 -1508 establish direction for these review levels. The bases for these review levels, and categorizing various HOME -funded activities into the review levels is to determine if there is potential to cause significant impact on the human environment (i.e., natural resources, ecosystems, aesthetic, historic, cultural, social, economic, health, etc.).
1. Exempt
HUD has determined that exempt activities will have neither a physical impact, nor potential for altering any environmental conditions. Therefore, these actions are exempt from compliance with NEPA and the Federal laws and authorities cited at § 58.5.
According to 24 CFR 58.34, the following types of activities have been categorized as exempt from NEPA and other environmental laws and authorities:
a. Environmental and other studies, resource identification, and the development of plans and strategies;
b. Information and financial services;
c. Administrative and management activities;
d. Public services that will not have a physical impact or result in any physical changes, including but not limited to services concerned with employment,
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crime prevention, child care, health, drug abuse, education, counseling, energy conservation, and welfare or recreation needs;
e. Inspections and testing of properties for hazards or defects; f. Purchase of insurance;
g. Engineering or design costs;
h. Assistance for temporary or permanent improvements that do not alter environmental conditions and are limited to protection, repair, or restoration activities necessary only to control or arrest the effects from disasters or imminent threat to public safet y including those resulting from physical deterioration; and
i. Any of the categorical exclusions listed in § 58.35(a) provided there are no circumstances that require compliance with any other Federal laws and authorities cited in § 58.5.
NOTE: Under HOME program rules, 24 CFR 92, in order to qualify as project costs, these activities must be associated with a specific project. Otherwise, they are considered administrative costs.
Content of ERR – Exempt Activities
1. The City must document in writing its determination that an activity meets the conditions for exemption. The City does not have to issue a public notice or request release of funds (RROF) [§ 58.34(b)].
2. In addition to making a written determination of exemption, the City must also determine whether the activity triggers any of the other requirements at 24 CFR
58.6, which are the Flood Disaster Protection Act; the Coastal Barriers Resources Act; and HUD’s requirement for disclosure of properties located in airport runway clear zones.
2. Categorical Exclusions
This term refers to a category of actions that do not individually or cumulatively have potential for significant effect on the human environment (40 CFR 1508.4). Therefore, neither an environmental assessment (EA) nor environmental impact statement (EIS) is required to comply with NEPA.
Although these actions are categorically excluded under NEPA, a determination must still be made as to whether they would alter any environmental conditions that would require a review or compliance determination under the Federal laws and authorities cited in § 58.5.
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The laws and authorities cited in § 58.5 are freestanding from NEPA, such as the National Historic Preservation Act of 1966, the Executive Orders on Floodplain Management and Wetlands Protection, and several regulations specific to HUD concerning the health and safety of project occupants, to name a few.
The City must certify that it has complied with the requirements under these laws and consider the criteria, standards, policies, and regulations of these laws and authorities.
The section on “Compliance with NEPA and Related Federal Laws and Authorities” provides guidance on this.
However, HUD has determined that certain kinds of categorical exclusions, because of the nature of the actions, would never alter any environmental conditions to create circumstances requiring compliance with these laws and authorities. Therefore, §58.35 identify two types of categorical exclusions:
1. Categorical exclusions subject to §58.5, and
2. Categorical exclusions not subject to § 58.5.
3. Categorical Exclusions subject to §58.5.
Categorical exclusions subject to §58.5 are excluded from compliance with NEPA, but must comply with the other related Federal laws and authorities cited in §58.5. It is generally evident from the nature and magnitude of such activities they do not have potential to have a significant impact on the human environment however, these types of activities are physical in nature and will alter environmental conditions that could, for example, affect historic properties, floodplains, wetland areas, and endangered species.
Actions in this category include:
1. Acquisition, repair, improvement, reconstruction, or rehabilitation of public facilities (other than buildings)-e.g., replacement of water or sewer lines where the capacity is not changed more than 20 percent, reconstruction of curbs and sidewalks, and repaving of streets;
2. Removal of material and architectural barriers restricting the mobility of and accessibility to elderly and disabled persons;
3. Rehabilitation and improvement of single family (one -to-four unit) dwellings provided:
a. The unit density is not increased beyond four units, b. The land use is not changed, and the footprint of the building is not increased in a floodplain or wetland;
4. Rehabilitation and improvement of multifamily dwellings provided:
a. the unit density is not increased more than 20 percent, b. it does not change residential use to non-residential use,
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c. and the estimated cost of rehabilitation is less than 75 percent of the replacement cost;
5. An individual action on one to four dwelling units where there is a maximum of four units on any one site. The term “individual action” refers to new construction, development, demolition, acquisition, disposition, or refinancing;
6. An individual action on five or more housing units developed on scattered sites when the sites are more than 2,000 feet apart and there are not more than four units on any one site;
7. Acquisition (including leasing) or disposition of, or equity loans on, an existing structure provided the structure acquired, financed, or disposed of will be retained for the same use; and
8. Any combinations of the above activities.
Content of ERR – Categorical exclusions subject to § 58.5
The City of Montebello will complete the Certification of Categorically Exclusion (subject to 58.5) and the Statutory Checklist forms to document its environmental findings. Such documentation must support the City's determinations related to compliance with the Federal laws and authorities cited in § 58.5. (Guidance on compliance is provided below in “Compliance with NEPA and Related Federal Laws and Authorities”.)
Upon completion of the checklist, the City will make one of three environmental findings in writing:
1. The project converts to exempt and does not require public notification or approval from the City [§ 58.34(a)(12)];
2. The project invokes compliance with one or more of the laws and/or authorities and, therefore, requires public notification and approval from the City before funds are committed or spent; or
3. The unusual circumstances of the project may result in a significant environmental impact and, therefore, compliance with NEPA is required.
Therefore, an environmental assessment (EA) must be completed.
The ERR must also contain:
4. Supporting documentation used to prepare the review (See Source Documentation for Environmental Reviews).
5. If the project did not convert to exempt, a copy of public Notice of Intent to Request Release of Funds that was issued.
6. Copy of the Request for Release of Funds and Certification (HUD form 7015.15); and
7. Copy of Authority to Use Grant Funds (HUD form 7015.16), issued by the City of Montebello (or HUD).
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In addition to making a written determination of categorical exclusion, subject to § 58.5, the City must also determine whether the activity triggers any of the other requirements at 24 CFR 58.6, which are the Flood Disaster Protection Act; the Coastal Barriers Resources Act; and HUD’s requirement for disclosure of properties located in airport runway clear zones. [See Compliance Documentation Checklist (58.6) form and discussion in “Other Requirements (§ 58.)6].
4. Categorical Exclusions not subject to § 58.5.
The activities that are categorically excluded not subject to § 58.5 have been determined by HUD not to have potential for altering any environmental conditions where a review or determination of compliance with the Federal laws and authorities would be required. Actions in this category include:
1. Tenant-based rental assistance;
2. Activities to assist homebuyers to purchase existing dwelling units or dwelling units under construction---e.g., closing costs, down payment assistance, interest buy downs, and similar activities that result in the transfer of title;
3. Affordable housing pre-development costs with no physical impact--- e.g., legal consulting, developer and other costs related to obtaining site options, project financing, administrative costs and fees for loan commitments, zoning approvals, and other related activities which do not have a physical impact; and
4. Approval of supplemental assistance (including insurance or guarantee) to a project previously approved under Part 58, if the approval is made by the same RE that conducted the environmental review on the original project and re - evaluation of the environmental findings is not required under § 58.47.
Content of ERR – Categorical exclusion not subject to § 58.5
The City will document in writing its determination that an activity meets the conditions for categorical exclusion not subject to § 58.5, and complete the Certification of Categorical Exclusion (not subject to 58.5) form to document designation of a HOME project or activity in this category. The City does not have to issue a public notice or request release of funds (RROF) [§ 58.34(b)].
In addition to making a written determination of categorical exclusion, subject to § 58.5, the City must also determine whether the activity triggers any of the other requirements at 24 CFR 58.6, which are the Flood Disaster Protection Act; the Coastal Barriers Resources Act; and HUD’s requirement for disclosure of properties located in airport runway clear zones. [See Certification of Categorical Exclusion (not subject to 58.5) form and discussion in “Other Requirements (§ 58.6]
5. Environmental Assessment.