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HomeMy WebLinkAboutX-C-02 Approve Dakota County CDA to Administer LAHA Funds City Council Memorandum To: Mayor Fasbender and City Councilmembers From: John Hinzman, Community Development Director Alex Menke, Economic Development Coordinator Date: October 21, 2024 Item: Approve Dakota County CDA to Administer LAHA Funds Action Requested: Review and act on the attached resolution, committing the City of Hastings’ Local Affordable Housing Aid (LAHA) funding to be administered by the Dakota County CDA for a period of three years and designating the minimum funding percentages for the two proposed programs. A simple majority is necessary for actions. LAHA: LAHA was adopted by the 2023 the State Legislature increasing the sales tax revenue within the seven-county metropolitan area and directing funds towards individual cities to foster affordable housing development and preservation. In July, representatives from the Dakota County Community Development Agency (CDA) spoke to a joint group of Hastings City Council members and HEDRA Commissioners to discuss LAHA funds and potential collaboration opportunities. In 2024, the City will receive $114,387.44 in LAHA funding, which must be committed within three years. The CDA is offering to collaborate with the City to use its LAHA funding to support two programs, the Home Improvement Loan Program and the Radon Mitigation Grant Program. The Home Improvement Loan Program provides up to $35,000 in a 0% deferred loan to single- family homeowners earning no more than 80% of the Area Median Income (AMI). The Radon Mitigation Grant Program would provide free radon testing to clients of the Home Improvement Loan Program and would provide grant funding for radon mitigation to those homeowners with incomes at or below 80% AMI. The CDA is asking for a minimum funding commitment of three years and for direction of how the funding will be split between the two programs. Staff proposes a minimum percentage based split committing 50% towards the Home Improvement Loan Program and 25% toward the Radon Mitigation Grant Program. Any remaining funding percentage that is uncommitted to X-C-02 either program will be placed in a flexible account that can be spent on either of the two programs or on additional gap financing for affordable housing projects. HEDRA Review: At the October 10, 2024 meeting the Hastings Economic Development and Redevelopment Authority (HEDRA) voted 7-0 to recommended approval for the CDA to administer LAHA funding as proposed to the City Council. Attachments: • Resolution – Approve Dakota County CDA to Administer LAHA Funds • LAHA Collaboration Memo • 2024 Expanded Home Improvement Loan Program • 2024 Radon Mitigation program X-C-02 HASTINGS CITY COUNCIL RESOLUTION NO. ________ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HASTINGS APPROVING THE DAKOTA COUNTY COMMUNITY DEVELOPMENT AGENCY TO ADMINISTER CITY LOCAL AFFORDABLE HOUSING AID FUNDS WHEREAS, the City of Hastings is a recipient of newly created sales taxed-funded Local Affordable Housing Aid (LAHA) dollars from the State of Minnesota; and WHEREAS, the purpose of LAHA is to develop and preserve affordable housing and help persons experience homelessness find housing; and WHEREAS, the City’s first annual allocation of LAHA funds were received in 2024; and WHEREAS, the City has three years to commit the funding (no later than December 31 of the third year) and must spend the funds by December 31st of the fourth year; and WHEREAS, if the City’s LAHA funds are not committed or spent the in the required timeframe, funds will be returned to Minnesota Housing Finance Agency for statewide housing needs; and WHEREAS, the Dakota County Community Development Agency (CDA) is the housing and economic development authority for the County that has well established, successful housing programs that are LAHA eligible; and WHEREAS, the CDA has formally requested to partner with the City (and other Dakota County communities) on the administration of LAHA funds for two CDA programs: 1) the Home Improvement Loan Program, and 2) the Radon Mitigation Grant Program (together “the Programs”); and WHEREAS, the CDA has requested a formal response from the City by December 2, 2024, on whether the City agrees to partner with the CDA on the administration of the City’s LAHA funds and the allocation of those funds on the Programs. NOW THEREFORE BE IT RESOLVED by HEDRA hereby approves the following: 1. The Dakota County CDA is designated as the entity to carry out certain administrative duties related to the local Affordable Housing Aid (LAHA) program on behalf of the City of Hastings, subject to a future joint power agreement to be executed between the two parties 2. The City wishes to commit its entire LAHA funds for an initial period of three years, ending December 31, 2027 3. The City wishes to allocate its LAHA funds to two CDA programs in the minimum percentages listed below: i. Home Improvement Loan Program, 50% ii. Radon Mitigation Grant Program, 25% 4. HEDRA is authorized to execute the joint powers agreement related to partnership with the Dakota County CDA ADOPTED BY THE HASTINGS CITY COUNCIL THIS 21ST DAY OF OCTOBER 2024 X-C-02 _____________________________________ Mary Fasbender, Mayor _____________________________ Kelly Murtaugh, City Clerk X-C-02 To: City of Hastings From: Dakota County Community Development Agency Date: September 30, 2024 Re: Local Affordable Housing Aid (LAHA) Collaboration Opportunity Dakota County Community Development Agency (CDA) staff were invited to nine Dakota County cities from June – September 2024 to discuss the Local Affordable Housing Aid (LAHA) funds and potential collaboration opportunities. CDA staff appreciated learning more about the housing needs within your communities and how we can work together to make a difference with this new funding source exclusively for affordable housing. The first portion of 2024 LAHA funds have been distributed to the metro cities and counties. LAHA recipients have three years to commit the funds and another year to fully spend the funds. If the funds are not spent within those four years, the funds will be returned to the State. Annual reporting will begin December 1, 2025, with the reporting instrument yet to be developed by the Minnesota Housing Finance Agency (MHFA). Based upon the well-received LAHA conversations, the CDA is formally requesting to collaborate with the cities to administer two programs: 1) an expansion of the CDA’s existing Home Improvement Loan Program (rehab program); and 2) a new radon mitigation grant program that will be paired with the rehab program. The CDA will continue to have conversations with cities about utilizing LAHA funds for preservation and new construction gap financing, but we are not requesting cities commit to participating in that program at this time. We are only asking for a decision to collaborate on the rehab program and radon mitigation program so that we can add staff capacity to effectively deploy city LAHA funds. LAHA funds cannot currently be used to pay for administrative expenses. At its September 25 meeting, the CDA Board of Commissioners approved the use of CDA levy funds to pay for a full-time home improvement advisor to administer and deploy city LAHA funds. The use of LAHA for administration dollars will be tracked, evaluated, and advocated for at the State to be an eligible use. If statutory authority ever allows LAHA to be used for administrative expenses, the CDA will determine a formula and will amend agreements with cities. With the additional staff capacity, we estimate that we could deploy approximately $1.2 million of LAHA on the expanded rehab program and the new radon mitigation grant program. We are asking for cities to commit a minimum amount to the programs for a three-year term. Those X-C-02 cities that choose not to participate in 2024 may, of course, decide to collaborate with the CDA in the future. As an administrator of LAHA funds on behalf of the city partners, the CDA will be responsible for: administering the programs; appropriately allocating and expending LAHA funds on eligible uses; hiring and supervising staff; providing regular updates to city staff; and completing reporting requirements for the LAHA funds administered by the CDA. See the attached CDA/City LAHA Partnership Proposed Term Sheet for additional information. The CDA is requesting a formal response from cities no later than Monday, December 2, 2024, stating if the city will collaborate with the CDA on the two programs offered for the 2024 LAHA funds. A formal response must be taken by the city elected officials in the form of a resolution. A sample resolution is attached for your consideration. After responses are received, CDA staff will work with city staff to draft joint powers agreements (JPA). Approving a resolution in support of collaborating does not mean a city must sign the JPA if the CDA and the city cannot agree upon the terms. We look forward to working with your community on this important resource to improve existing housing stock in Dakota County. Please contact Lisa Alfson at lalfson@dakotacda.org or 651- 675-4467 if you have any questions. Best regards, Tony Schertler Executive Director X-C-02 Dakota County CDA-City Local Affordable Housing Aid (LAHA) Partnership PROPOSED Term Sheet The Dakota County CDA (CDA) provides housing and economic development assistance to residents and cities in Dakota County. As a leader in affordable housing and community development, the CDA seeks to partner with interested Dakota County municipalities to use their LAHA funds for three programs that are considered qualifying projects as defined in Minnesota Statutes 477A.35. The CDA will enter into Joint Powers Agreements (JPAs) with each city for the administration of the LAHA funds. Here are the proposed terms for the partnership between the cities and CDA for the administration of the LAHA dollars. The CDA is open to discussing these proposed terms and how they can be improved to best serve the needs of the cities and the CDA. 1. Expanded Home Improvement Loan Program (Rehab Program): LAHA funds will be administered in accordance with the Home Improvement Loan Program policy and procedures handbook. Households at or below the 80% Area Median Income (AMI) will be prioritized. If/when there are no priority households on the waiting list to be served, the CDA will then consider serving households above 80% AMI to the maximum LAHA income limit of 115% AMI. See attached program summary for details. 2. Radon Mitigation Grant Program: This newly created grant program will pay for the radon testing and installation of a mitigation system, if needed. At this time, this program will only be for clients of the Rehab Program. See attached program summary for details. 3. Timeframe: The CDA is requesting to enter into a multi-year agreement (3-5 years) on agreed terms. Each city will decide annually whether it wants to continue providing its LAHA funds to the CDA for the proposed programs. Each city’s annual allocation for the proposed programs will be an addendum to the agreement. Previous years’ funds will remain with the CDA under the terms of the agreement. 4. Reporting: The CDA will provide data and will complete reporting forms for city partners that the cities will need to submit to the Minnesota Housing Finance Agency (MHFA). Because the CDA is not a direct recipient of LAHA funds, we do not believe we can submit the forms to MHFA. However, we will provide all requested information related to the CDA-administered programs in whatever form is required by MHFA. The CDA will provide quarterly reports to the cities regarding project pipeline, project start and completion dates, amount spent on project, and other information as requested. Identifying data for individual clients for the Rehab and Radon programs will be aggregated by city. X-C-02 5. Funding Commitment: If your community chooses to allocate funds to the Rehab and Radon mitigation programs, the CDA respectfully requests cities commit the same amount of funding or more each year for a minimum of three years. Having a baseline funding amount and a funding commitment creates stability for the programs and allows rehab staff to work through waiting lists for the programs. Additionally, a stable funding source gives the CDA the confidence to hire additional staff to administer the cities’ LAHA funds. 6. Program Income: As loans from the Rehab program are paid back, the CDA could retain these funds in individual city accounts and reuse the funds for other affordable housing projects. The CDA anticipates recycling Rehab loan payoffs for future single-family home loans. 7. Administrative Costs: Because the legislation does not allow LAHA to be used for administrative costs, the CDA Board has committed CDA levy funds to support an additional home improvement advisor to assist with the deployment of the cities’ LAHA funds. However, if/when there is a change in the LAHA legislation to allow these funds to be used for administrative costs, the CDA will request that a portion of the LAHA funds be used for administrative costs rather than the CDA’s levy. 8. Withdrawal: Either the city or the CDA may withdraw from the JPA at the end of the term of the agreement or when committed LAHA funds have been expended on qualifying projects. Neither the city nor the CDA may withdrawal from the agreement until the end of the term unless mutually agreed upon. 9. Finances: The CDA is proposing to hold and track CDA-administered LAHA funds on behalf of the cities. X-C-02 Project Proposal: Expanded Single-Family Home Improvement Loan Program Project Purpose: Expand the existing CDA-administered Home Improvement Loan Program to include Local Affordable Housing Aid (LAHA) funding. The expanded Home Improvement Loan Program would be available to residents earning no more than 80% of Area Median Income (AMI). Those homeowners who earn between 81-115% AMI in cities that contribute to the expanded Home Improvement Loan Program will be placed on a waitlist and will be eligible for the program only if there are no homeowners below 80% AMI on the waitlist. Project Objectives: • Continue to improve the housing stock of Dakota County. • Expand existing program with proven results to more income-eligible residents of County. • Provide cities with a way to use LAHA for an existing housing program. • Diversify funding resources for an existing CDA program. Project Outcomes: • Increase number of homes improved from 60-70 per year to 115-120 per year after Year 2 of infusion of cities’ LAHA funds. Project Details: • Provide deferred 0% loans of up to $35,000 for home improvement projects. • Home improvement projects prioritize health, safety, and structural integrity issues. o Common improvements include new roofs, siding, HVAC systems, windows, building foundation or other structural updates, accessibility improvements, kitchens and bathrooms(accessibility). o Other improvements would be considered if they address health and safety issues or otherwise improve the value of the home. Common improvements are repairs or replacement of detached garages, kitchens and bathrooms (non-accessibility), driveway replacement/repair • Homeowners must be income eligible and meet other CDA program requirements, e.g. own and reside in home, meet credit standards, be current on property taxes, properties must be at least 15 years old, etc. o CDBG funds require 80% AMI cap o LAHA requires 115% AMI cap • Eligible homeowners with incomes at or below 80% AMI could use either countywide and city CDBG and cities’ LAHA funds. • Eligible homeowners with incomes between 81-115% AMI would use only available city LAHA funds and only if there are no homeowners with incomes at or below 80% in that city. • Program income generated from LAHA would be used for future home improvement loans, similar to the CDBG program. The CDA would track program income and deposit into individual city accounts. X-C-02 Project Funding: • Current CDBG entitlement funding totals $1,193,635 for FY 2023, which includes cities and Dakota County CDBG allocated to the CDA’s existing Home Improvement Loan Program. • CDA spends approximately $1,900,000 to rehab 70 homes in a fiscal year, on average. These loans are currently financed primarily with federal Community Development Block Grant (CDBG) funds, though there are some CDA levy dollars included. o Takes about 18 months to fully expend a year’s worth of CDBG and program income. o Funds are replenished annually, provided Congress funds the CDBG program. • Future LAHA – CDA estimates it could successfully deploy an additional approximately $1,400,000 to rehabilitate an additional 55 loans per year after first full year of additional funds. • Individual cities contributing their LAHA funds to the expanded Home Improvement Loan Program would have separate subaccounts that will be tracked by CDA staff. Project Staff: • Existing staff: o 1 FT Rehab Coordinator o 1 FT Rehab Advisor o 1 FT PSA o 2 Rehab Advisor contractors – each takes 5-7 files per year, total of 15 • One additional FT Rehab Advisor will be needed to deploy city LAHA funds. The CDA Board of Commissioners has committed to funding this position with CDA levy until the Local Affordable Housing Aid legislation is changed to allow LAHA funds to be used for administrative costs. At that time, the CDA will work with cities to use a portion of the LAHA funds for the Rehab Advisor position. Project Reporting: The CDA would provide annual reports to participating cities and Dakota County. The annual report would include the following: o Community’s contribution to program that fiscal year o Number of loans using LAHA o LAHA funds expended o Program income generated X-C-02 Proposed Project: Dakota County Homeowner Radon Testing and Mitigation Grant Program Project Purpose: The average radon level in Minnesota is more than three times higher than the U.S. radon level. This is due to our geology and how our homes operate. Minnesota homes are closed up or heated most of the year, which can result in higher levels of radon. In Minnesota, more than two in five homes have radon levels that pose a significant health risk. Exposure to radon over a prolonged period can lead to lung cancer. Minnesota Department of Health website The Environmental Protection Agency (EPA) has set the action level at 4 pCi/L (picocuries of radon per liter of air). The Minnesota Department of Health recommends installing a radon mitigation system when the radon level is at 4 pCi/L or higher. Between 2 and 4 pCi/L, a radon mitigation system should be considered to lower the level as much as possible. The average indoor radon level in Dakota County is 3.6 pCi/L as determined by radon test results from AirChek, an at-home radon testing company. There is no safe level of radon in a home. The proposed Homeowner Radon Testing and Mitigation Grant program would provide free testing services to clients of the Home Improvement Loan Program and would provide free mitigation services for those residents whose homes have radon levels greater than 2.6 pCi/L. A lower radon level was chosen as the benchmark in order to reduce radon levels in existing homes as much as possible. The Radon Grant Program will be paired with the CDA’s Home Improvement Loan Program. Homeowners in the Home Improvement Loan Program have incomes at or below 80% of Area Median Income. By pairing a Radon grant with a Home Improvement Loan, homeowners can stretch their loans to cover more items that need improvement. Project Objectives: • Continue to improve the housing stock of Dakota County. • Reduce potential future risk of lung cancers in Dakota County residents. • Provide cities with a way to use Local Affordable Housing Aid (LAHA). Project Outcomes: • Test at least 50 homes in Dakota County for radon per year. The homes will be those of clients in the Home Improvement Loan Program. • Install radon mitigation systems in all homes assessed for radon with levels greater than 2.6 pCi/L per year, subject to available funding. • Reduce the number of homes with high radon levels. Mitigation systems would be required to reduce radon to < 2.0 pCi/L. Project Details: • Provide grants to clients of the Home Improvement Loan Program to test for and mitigate radon when levels are 2.6 pCi/L or greater. X-C-02 • Homeowners must own and reside in home, be current on property taxes, and be income eligible. o CDBG funds require 80% AMI cap o Sales tax funds require 115% AMI cap • Homeowners would need to sign a grant agreement if they are recipients. • Homeowners will solicit bids from two licensed mitigators; CDA will evaluate bids for cost reasonableness. • CDA will pay mitigators upon completion of project and satisfactory clearance test numbers (< 2.0). Project Funding: • Funding exclusively through LAHA funds. • Estimate program would need $200,000 per year to assess for and install radon mitigation systems in at least 50 homes per year. • LAHA funds would be placed in individual city accounts at the CDA and will be spent within the four-year spending deadline. • The individual city accounts will be tracked by the CDA. Project Staff: • The Radon Mitigation Grant program would use existing Home Improvement Loan Program staff and the additional Home Improvement Loan Program staff that will be hired to deploy LAHA funds. Project Reporting: The CDA would provide annual reports to participating cities and Dakota County. The annual report would include the following: o Community’s contribution to program that fiscal year. o Number of grants using LAHA funds. o Amount spent per year. X-C-02