California Department of Housing and Community Development Deputy Director Chris Westlake - Division of Financial Assist

1. Neighborhood Stabilization Program—Stakeholder Meeting November 3, 2008 California Department of Housing and Community Development Deputy Director Chris Westlake - Division of Financial Assistance

2. Agenda • Overview of the NSP • Determining the State’s Greatest Need • Survey of Jurisdictional Readiness and Capacity • An Overview of the State’s Implementation Plan • The Recommended Steps for Potential Applicants • Responses to Questions • Open Forum

3. Neighborhood Stabilization Program—Overview

4. Allocations • HERA Provides $3.92 Billion to assist States and localities in redevelopment efforts • Considered a Special Allocation of 2008 CDBG Funds • Amounts determined by formula established by HUD using criteria specified by HERA

5. Criteria for Local Distribution • NSP grantees must target funds to give priority emphasis and consideration to areas with greatest need, including those: • With the greatest percentage of home foreclosures; • With the highest percentage of homes financed by a subprime mortgage related loan; and • Identified as likely to face a significant rise in the rate of home foreclosures.

6. Period to Use Funds • NSP grantees must use funds to purchase and redevelop abandoned and foreclosed homes and residential properties no later than 18 months after execution of the grant agreement • Use=obligate for a specific project

7. HERA established minimum 0.5% grant allocation for each state Effective state minimum allocation is $19,600,000 Information for States

8. Information for States • Role of States • Fund nonentitlement local governments • Fund CDBG or NSP entitlement grantees • Fund private or public nonprofits, Tribes, quasi-governmental entities • Directly carry out activities • Use contractors or developers • But must distribute funds to areas of greatest need, including jurisdictions receivingNSP

9. National Objective Issues • HERA preempts regular CDBG national objectives • Directs that all funds be used to benefit individuals at or below 120% of area median income • Slum/blight and urgent need national objectives not applicable to NSP

10. National Objective Issues • CDBG 70% overall low-mod income benefit test not encompass NSP funds • Additional HERA requirement - Not less than 25% of funds available to each grantee must be used for housing activities that benefit individuals whose incomes do not exceed 50% of area median income

11. Eligible Use Eligible Activities • As an activity delivery cost for an eligible activity (designing & setting it up) • Financing of an NSP eligible activity, to carry out that activity, is eligible as part of that activity • 1. Establish financing mechanisms for purchase & redevelopment of foreclosed upon homes & residential properties…

12. Eligible Use Eligible Activities • Acquisition • Disposition • Relocation • Direct homeownership assistance • Eligible rehabilitation and preservation activities for homes and other residential properties • Housing counseling for those seeking to take part in the activity 2. Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon, in order to sell, rent, or redevelop such homes and properties

13. Eligible Use Eligible Activities • Acquisition • Disposition (includes maintenance) 3. Establish land banks for homes that have been foreclosed upon

14. Eligible Use Eligible Activities Clearance, for blighted structures only 4. Demolish blighted structures

15. Eligible Use Eligible Activities • Acquisition • Disposition • Public facilities and improvements • Housing Counseling Public Services (limited to prospective purchasers or tenants of redeveloped properties) • Relocation 5. Redevelop demolished or vacant properties

16. Eligible Use Eligible Activities • New housing construction • Direct homeownership assistance • 570.204 activities by Community Based Development Organizations 5. Redevelop demolished or vacant properties (continued)

17. Eligible Uses Summary • All grant funds must be used for an eligible activity according to HERA • Each activity must also be CDBG eligible and meet a LM national objective • HUD must grant written approval for any CDBG activities not listed for that eligible use • CDBG regulatory definitions of eligible activities apply to NSP except where specifically modified • New housing construction is eligible as redevelopment

18. Ineligible Activities • Ineligible Activities: • Generally, if an activity is ineligible under CDBG, it is ineligible under NSP • Not eligible under HERA: • Foreclosure prevention • Demolition of non-blighted structures • Purchase of properties not abandoned or foreclosed upon

19. Rehabilitation Standards • Any purchase of a foreclosed upon home or residential property under this section should be at a discount from the current market appraised value of the home or property. • Current condition must be taken into account

20. Sale of Homes • The sale of an abandoned or foreclosed upon home or residential property to an individual as a primary residence must be in an amount equal to or less than the cost to acquire and redevelop or rehabilitate such home or property up to a decent, safe, and habitable condition.

21. Determining the State’s Greatest Need

22. Del Norte Modoc Siskiyou Shasta Lassen Trinity Humboldt Tehama Plumas Mendocino Butte Glenn Sierra Nevada Colusa Yuba Placer Lake Sutter El Dorado Yolo Sonoma Alpine Napa Amador Sacramento Solano Calaveras Mono Marin Tuolumne San Joaquin Contra Costa San Francisco Alameda Mariposa Stanislaus San Mateo Merced Santa Clara Madera Santa Cruz Fresno Inyo San Benito Monterey Tulare Kings San Luis Obispo Kern San Bernardino Santa Barbara Los Angeles $2,126,927 to $10,000,000 Ventura $10,000,001 to $20,000,000 $20,000,001 to $30,000,000 Riverside Orange $30,000,001 to $40,000,000 $40,000,001 to $50,000,000 San Diego Imperial $50,000,001 to $60,000,000 $60,000,001 to $70,000,000 $70,000,001 to $80,000,000 State administered funds* HUD’s NSP Allocations by County *All jurisdictions statewide are eligible to apply for NSP funds with the State 

23. HUD’s Allocations by Region Source: HUD Methodology

24. State Allocation Priorities: • Highest percentage of foreclosures • Highest percentage of subprime loans • Significant rise in foreclosure rate Abandonment Risk: • = vacancy rate/ foreclosure rate • Available by Census Tract athttp://www.huduser.org/publications/commdevl/nsp/nsp_a-f.html

25. Survey of Jurisdictional Readiness and Capacity

26. Survey Overview Entities Surveyed • Cities 35 • Counties 12 • Nonprofit organizations 4 51 Focus • Capacity • Need • Eligible Activities • Others

27. Results - Capacity Experienced In-House Staff and/or Expertise? • 12% Yes • 88% No Example: Monterey County • Established an inter-jurisdictional agreement between the County and South County cities to address foreclosure crisis; • Adopted ordinance requiring notification of foreclosures within each jurisdiction.

28. Results - Needs Maintain an Inventory of REOs? • 5% Yes • 95% No Most used: • Real Quest • Realty Track • Title company • Treasurer • Tax Collector • multiple listing service • Notice of Default (NOD) Example: West Sacramento Realty Track data cross-referenced by Code Enforcement surveying condition of housing, NODs, title companies.

29. Eligible Activity – Financing Mechanisms Mechanisms in place? • 79% None • 14% Soft-Seconds • 6% Shared Equity • 1% Loan-Loss Reserves Habitat for Humanity – Shared Equity depending on length of term > 45 years, 0% < 45 years, up to 3%

30. Eligible Activity – Acquisition/Rehabilitation Acquisition/Rehab Programs in place? • 9% Yes • 91% No Example: Self-Help Designed acquisition/rehab program guidelines for HOME Program

31. Eligible Activity – Land Banking Land Banks?Land Trusts? • 2% Yes 4% Yes • 4% Pending 4% Pending • 94% No 92% No LISC –land banking: http://www.lisc.org/content/publications/detail/793/ Oakland -Urban Strategies –land trust: http://www.urbanstrategies.org/foreclosure/Community_Land_Trust/

32. Eligible Activity – Demolish and Redevelop Have experience and/or plans to demolish and redevelop? • 15% Yes • 85% No

33. Eligible Activity – Others Working with lenders to identify foreclosed properties? • 2% Yes • 98% No Established outreach program for potential buyers? • 18% Yes • 82% No Example: Dinuba Outreach through local newspapers, water bill, posters and flyers posted in government and public buildings throughout the City

34. Eligible Activity – Others Targeting lower income families for homeownership? • 8% Successful Example: Clearlake Signed MOU with Habitat for Humanity to provide assistance in targeting lower-income families for homeownership

35. Want to share your best practice? Please contact the State’s NSP staff at: (916) 552-9398 cdbg@hcd.ca.gov

36. The State’s Implementation Plan—Overview

37. Implementation Timeline (Tentative) • 11/15/08 Post Substantial Amendment • 11/21/08 Public Hearing on Amendment • 12/01/08 Submit Amendment • 1/09 Disseminate Application • 2/09 Application Deadline • 3/09 Award Grants • 5/09 Execute Contracts

38. Allocation Methodology—Status Report • Consulting with multiple sources • HUD • Other states • Jurisdictions • Analyzing multiple data sets • Assessing results of various factors • Rankings by numbers and percentages

39. Funding Factors • Greatest Need. State to determine the areas of greatest need based on HUD data. • Capacity. Applicants considered for NSP funding must demonstrate previous and current capacity to carry out the proposed NSP activities. • Eligibility. The proposed activity(ies) must be eligible per the Housing the Economic Recovery Act of 2008.

40. Funding Factors • LMMI Benefit. The proposed activity(ies) must clearly demonstrate compliance with the national objective of low-, moderate-, middle-income (LMMI) benefit. Note: For NSP, LMMI benefit includes households whose incomes are 120% or less of area median income. • Readiness. All applicants must clearly demonstrate readiness to begin implementing the proposed activity(ies).

41. Other Considerations • Property Rehabilitation. If the proposed activity(ies) involve rehabilitation of property while the city/county holds title, State and federal prevailing wages may be applicable. • 25% Targeted Funding. Not less than 25% of the State’s total NSP Allocation must be used to house individuals or families whose incomes do not exceed 50% of area median income.

42. Recommended Steps for Potential Applicants

43. Recommended Steps Pre-Award Costs Grantees may incur pre-award costs necessary to develop an application, conduct environmental reviews, and adhere to citizen participation procedures prior to the State’s award. Note: Reimbursements can only be made after final contract execution.

44. Recommended Steps • Joint Applications • Contiguous cities/counties may submit joint requests resulting in a single combined NSP Application to the State. • The NSP Application must be submitted by the identified lead agency. • The lead agency and participating cities/counties must enter into a Memorandum of Understanding or a Joint Powers Agreement prior to application submittal.

45. Recommended Steps • Citizen Participation • Potential applicants should initiate the citizen participation requirements by noticing and conducting the “Program Design Phase” public hearing. • Joint applicants must include citizen participation in all participating cities/counties. • Public hearing notices must be available in the appropriate languages for persons with limited English proficiency.

46. Recommended Steps • Citizen Participation (continued) • Prior to NSP Application submittal, applicants must notice and conduct the “Application Submittal” public hearing before the governing board. • Public notice must include all activities included in the application, dollar amount requested, and the anticipated low-, moderate-, and middle-income benefit. • Public notice in the appropriate languages for persons with limited English proficiency.

47. Recommended Steps • National Environmental Policy Act (NEPA) & • CA Environmental Quality Act (CEQA) • Applicants are highly encouraged to begin compliance with State and federal environmental requirements. • The State will only monitor for compliance with NEPA. • NEPA documentation/compliance must be cleared by the State, in writing, prior to commencing any program/project.

48. Recommended Steps • NEPA Compliance • Begin the process now. • For guidance, refer to CDBG Grant Management Manual, Chapter 3, at www.hcd.ca.gov/fa/cdbg/manual/ • If required, conduct any environmental public noticing (e.g., Finding of No Significant Impact/Notice of Intent to Request Release of Funds (FONSI/NOI RROF))

49. Questions and Answers

50. Open Forum