MSHDA HUD Section 3 Training

1. MSHDA HUD Section 3 Training To increase the capacity of nonprofit organizations and local units of government to fulfill the HUD Section 3 compliance obligations.

2. Welcome! Guy Stockard MSHDA Statewide Section 3 Coordinator 517-373-6725 stockardg@michigan.gov

3. Morning Agenda • Historical Background • What is Section 3? • Recipient Responsibilities • Recommendations Practical Tips and Best Practices • Implementing Section 3 for Successful Compliance • Reporting Results

4. Historical Background

5. Section 3 History • Civil Unrest 1960’s • Kerner Commission Report • Los Angeles Riots • Hurricane Katrina • Current Economic Crisis • Economic Stimulus Act

6. A Changing Discussion • Renewed emphasis on enforcement of Section 3. • Previous discussions largely involved “how to avoid the intent of the law. • New discussion “how to implement creatively the spirit of the law to get results.”

7. What is Section 3? • Section 3 of the Housing and Urban Development Act of 1968 • Implementing regulations at: 24 CFR Part 135 • Statute: 12 U.S.C. 1701u • Purpose/Intent

8. Section 3 To ensure that economic opportunities generated by certain HUD funded projects shall, to the greatest extent feasible, and consistent with existing Federal and State laws, be directed to low- and very low-income persons (particularly those receiving assistance for housing), and to the businesses that provide economic opportunities to these persons.

9. To the Greatest Extent Feasible …what does this mean???

10. Simply Stated…. • HUD funds are one of the largest sources of federal dollars • Typically result in new contracts, employment or training opportunities • If economic opportunities are created…Section 3 residents and businesses receive preference

11. Failure to Comply with Section 3 HUD holds direct recipients of covered funding accountable for their own compliance, and the compliance of their sub-recipients and contractors

12. Penalties for Noncompliance • Debarment • Suspension • Limited Denial of Participation in HUD Programs

13. Applicability • Public Housing • Development • Operation • Modernization • Housing and Community Development • Housing rehabilitation • Housing construction • Other public construction

14. Covered Recipient Agencies • PHAs • Entitlement Communities • HOME Participating Jurisdictions • State, County, or Local Units of Government • Non-Profit Organizations • Developers • Property Managers • CHDOs • Private Agency or Institution

15. Covered Funding Examples • HOME • CDBG • NSP/Economic Stimulus Funds • HOPE VI Funding • PHA Operating Funds • PHA Development Funds • PHA Modernization/Rehab Funds

16. Funding Thresholds • The requirements for Section 3 apply to recipients of HUD Housing Community Development funding exceeding $200,000. • Contractors or subcontractors that receive contracts in excess of $100,000 are required to comply with Section 3 in the same manner as the recipients.

17. Funding Thresholds • There are no thresholds for Public Housing Funds. Section 3 applies to all activities regardless of the dollar amount • The requirements also apply to all contractors regardless of the dollar amount of the contract

18. Applicability to Entire Project Section 3 requirements apply to the entire project or activity regardless if the project is fully or partially funded with covered financial assistance.

19. What Section 3 is NOT… • A Racial Quota Program • An Entitlement for Eligible Individuals and Businesses • Only applicable to Direct Recipients • Optional—It’s the law!

20. Section 3 Economic Opportunities Section 3 regulations do not require hiring/contracting unless it is necessary to complete the project. ** Only triggered when covered projects require “new” hires or contracting opportunities

21. Section 3 Economic Opportunities • Not limited to low-wage construction jobs • Prospective Section 3 eligible employees or businesses must demonstrate that they are qualified

22. Section 3 Residents • Residents of Public Housing; or • Low- and very low-income persons residing in the metropolitan area or non-metropolitan county

23. Section 3 & Minorities • Section 3 of the HUD Act is race-neutral. • The preferences provided by this federal act are based on income and location.

24. Additional Potential Section 3 Residents • Persons receiving unemployment benefits or other government subsidies • Returning Veterans • Recent College or Vocational School Graduates • Women in non-traditional careers • YouthBuild participants

25. Section 3 Business Concerns • Owned (51%) by Section 3 residents; • Substantially employs Section 3 residents (30% or more); or • Can provide evidence of commitment to subcontract 25% of work to another Section 3 Business

26. Recipient Responsibilities, Recommendations & Practical Tips

27. Responsibility #1 Implementing procedures designed to comply with the requirements of Section 3

28. Practical Tips: • Develop and Publish official policies—Section 3 Plan • Strategic Planning • Internal/External Meetings

29. Practical Tips: • Identify long and short term projects/activities • Consider applicable State, Federal and local laws

30. Section 3 Plans • Strategies to target Section 3 residents and businesses • Certification/Selection criteria • Process for informing contractor’s about responsibilities and assessing hiring/subcontracting needs

31. Section 3 Plans • Penalties for noncompliance • Incentives for good performers • Reporting Requirements • Recordkeeping • Section 3 Coordinator

32. Responsibility #2 Notify Section 3 residents about training and employment opportunities and Section 3 businesses about contracting opportunities

33. Practical Tips: • Establish certification procedures • Maintain lists of certified Section 3 residents & businesses • Personally notify certified residents and businesses • Post Notices Door-to-Door

34. Practical Tips: • Community Job Fairs • Online Job Search Vehicles • Community Partnerships • Section 3 Coordinator

35. Responsibility #3 Notify covered contractors about the requirements of Section 3

36. Practical Tips: • Mandatory Pre-Bid Hearings/ Meetings • Section 3 Workshops • Provide copies of your agency’s Section 3 Plan and have contractors certify receipt

37. Practical Tips: • Include compliance with Section 3 as a rating factor when selecting “responsible bidders” • Assess bidders on their ability to meet the requirements of Section 3

38. Responsibility #4 Incorporate the Section 3 clause into covered solicitations and contracts

39. Practical Tips: • Section 3 references in bid packages, RFPs, etc. • Review clause with developer and have them certify compliance

40. Responsibility #5 Facilitate training and employment of Section 3 residents and award contracts to Section 3 businesses, as appropriate to reach the minimum numerical goals

41. Practical Tips: • Assess needs of developers at time of contract award • Match potential employees or subcontractors with developers • Ensure that developers advertise vacancies in accordance with the agency’s policies

42. Practical Tips: • Conduct local career/business development trainings • Sponsor Job-Fairs • Develop Partnerships with local Michigan Works office • YouthBuild/Apprenticeship Programs

43. Practical Tips: • Provide guidance for determining Section 3 eligibility • Develop strategies for recruiting new hires

44. Responsibility #6 Minimum Numerical Goals: • 30% of new hires annually • 10% of the total dollar amount of covered construction contracts • 3% of the total dollar amount of covered non-construction contracts

45. Minimum Numerical Goals • Numerical Targets (may and should be exceeded) • Safe Harbor Compliance • Other Efforts Taken to Achieve Compliance

46. Practical Tips: • Identify short- and long-term projects, job vacancies, training opportunities, contracts, etc. • Implement strategies to target Section 3 residents and businesses • Review Appendix to Regulation

47. Practical Tips: • Consider all hiring and subcontracting needs of developers and contractors • Maintain evidence of efforts taken to achieve compliance • Describe efforts taken on Section 3 annual report

48. Responsibility #7 Assisting and actively cooperating with HUD in obtaining the compliance of contractors

49. Practical Tips: • Section 3 Enforcement Actions • Hold developers/contractors accountable • Develop appropriate penalties and apply them fairly and consistently • Withhold Final Payments for “Section 3 Training/Implementation Fund”

50. Responsibility #8 Refrain from entering into contracts with contractors that fail to comply