TO: Mayor Thomas J. Weisner
FROM: Daniel Barreiro, Chief Community Services Officer
DATE: August 27, 2013
SUBJECT: title
A Resolution Approving a Developer Agreement between the City of Aurora and Joseph Corporation Regarding the Neighborhood Stabilization Program (NSP)
body
PURPOSE:
This report will request approval for a Disposition and Development Agreement with Joseph Corporation to dispose of three remaining NSP homes owned by the City. Separate request for approval staff reports for the Ordinances required to sell the properties contemplated in this report are offered as companion reports to this item. Because of the complex nature of this report, it is presented as one staff report for the Project's master agreement, and three separate transmittals for the required property dispositions. The dispositions for the Downer, Union, and Lincoln properties will all be covered under the Project master agreement. The package of property dispositions contained in this report will effectively close-out the homebuyer portion of NSP program.
BACKGROUND:
In 2008 the City of Aurora was allocated $3,086,586 under the American Recovery and Reinvestment Act (ARRA) for the NSP federal stimulus program which was used to purchase vacant/abandoned/foreclosed properties for the purpose of rehab or demolition and new construction. Overall, the Program had the dual purpose to rehabilitate the "hardest to tackle" homes in neighborhoods severely impacted by the housing foreclosure crisis (those homes which the market would not touch and which might become safety hazards) and to support local construction trades.
NSP properties are for sale or rental to purchasers whose household income was at or below 120% of the Area Median Income (or $88,320 for a family of four in 2013). For rental properties, residents must be at 50% of the Area Median Income or below (or $36,800 for a family of four in 2013). Overall, the NSP Program has spent over $3 million in Aurora neighborhoods and employed approximately 110 local contractors.
To date, the Program has sold four homes and created another four long term rentals in partnership with Community Housing Advocacy and Development. One Property has been sold and an additional property is awaiting reconstruction with Fox Valley Habitat for Humanity.
DISCUSSION:
City staff has been working with Aurora's not for profit housing partners (Fox Valley Habitat, Community Housing Advocacy and Development, Joseph Corporation, and the Association for Individual Development) to obtain proposals for its three remaining NSP homes. Staff analyzed past NSP expenditures and focused present negotiations on limiting further funding commitments for the remaining homes while insuring a high quality of development. The Proposal obtained from Joseph Corporation was deemed to be most responsive in meeting NSP goals in program closeout and cost containment while receiving quality renovations by a responsible developer. The Joseph Corporation proposal allows for the disposition of three NSP properties with little to no additional public investment.
Under this proposal, the City of Aurora will deed 458 S. Union Avenue and 590 East Downer Place to Joseph Corporation for no cost for the purposes of resale to families earning at-or-below 120% of the Area Median Income. NSP rules only allow the City to donate properties to developers. These homes will carry resale covenants for affordability and resale restrictions for a period of 15 years. If the owner sells or rents NSP homes during the years covered by legal covenants, the City will be able to recapture a pro-rata portion of its investment in the properties. The Downer Place and Union Avenue properties are fully rehabilitated and ready for sale and have a combined fair market resale value (based on a Zillow.com 8/27/13 estimate) of approximately $178,000.
Joseph Corporation will downsize and substantially rehabilitate 329 South Lincoln at its own costs, converting the house from a four unit to a single family house. Renovations on the Lincoln Avenue property are estimated at $160,000-$175,000. Renovation costs for Lincoln Avenue will be completely financed by Joseph Corporation, however the City will provide a $50,000 construction contingency for project costs over $180,000 which may, or may not, be utilized. Joseph Corporation will also receive $20,800 as a developer fee to cover overhead, which is estimated at 13% of low-end renovation costs, and tied to a rate set by the Illinois Housing Development Authority. Both units will carry resale covenants for affordability and resale restrictions at 80% of the Area Median Income for a period of 15 years and will be resold by Joseph Corporation.
There will be approximately $200,000 NSP funds left in accounts after this development package that can potentially be reprogrammed into future investments to stabilize the foreclosed housing stock in Aurora pursuant to NSP program rules. Any reinvestment proposals would be brought before the City Council at a future date.
IMPACT STATEMENT:
Essentially this "package" deal accomplishes NSP objectives; producing three units of 120% AMI housing with 15 year covenants that will be accomplished by an experienced housing developer. The City will be creating homeownership while finally bringing Aurora's active participation in the NSP program to an end.
RECOMMENDATIONS:
1. Approve a Resolution that authorizes the Mayor to execute a Development Agreement with Joseph Corporation for the sale of 458 South Union Avenue and 590 East Downer Place and the substantial renovation/transfer of 329 South Lincoln Avenue utilizing NSP program funds for contingency and a developer fee for overhead costs for the Lincoln Avenue property only;
2. Authorize the expenditure of no more than $50,000 for a project contingency for the reconstruction of 329 South Lincoln Avenue from account 214-1330-801-77-37.
cc: Alderman O'Connor, Chairman
Alderman Schuler
Alderman Mervine
Alderman Peters, Alternate