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TO: Mayor Richard C. Irvin
FROM: Chris Ragona, Community Development Manager, Community Development Division
DATE: August 8, 2023
SUBJECT:
A Resolution Authorizing Modification #1 to Development Agreement HOME-2021-02 that Allows for the Continued Development of the Todd School (100 Oak Avenue) and the Lincoln School (631 South Lake Street) by Setting Forth Amended Terms Regarding The Redevelopment as Affordable Housing.
PURPOSE:
The purpose of this proposed modification is to clarify the language in the development’s executed agreement to further comply with the regulations set forth in the current federal HOME Investment Partnerships Program (HOME) Rule, 24 CFR Part 92 funded through the Department of Housing and Urban Development (HUD). Over the past few months, City staff, in consultation with the developer and its HUD partners from the Chicago HUD Field Office and HUD Headquarters in Washington DC received guidance on a modification that will not negatively impact the development of both sites or disrupt the project’s construction timeframe.
BACKGROUND:
Development Agreement HOME-2021-02 was approved by City Council on January 5, 2022, R22-017 and R22-018 to construct a mix of studio, one, two- and three-bedroom units, totaling forty-seven (47) units in three buildings, and approximately 5,000 square feet for the construction of a public health facility which will provide community benefits in the form of free and subsidized care, and community based initiatives for the exclusive use of residents of the District with school-age children. HOME funding provided by the City was included as gap financing as a source for related construction and soft costs associated with the affordable housing component of the development.
In April 2023, during the construction phase of the development, City staff requested technical assistance from HUD to set up the required long-term compliance and reporting tables to track accomplishments, data on clients served, and to draw down on HOME funds. In reviewing the agreement, HUD staff requested a technical modification to the structure of the agreement so that HOME funds are being directly provided to the property owner entity, rather than to the developer for the use and benefit of the property owner. The current structure is a tri-partner agreement with the City, the entity of Visionary Ventures NFP Corp (developer), and the entity of Fox Valley Apartments LP (property owner). If approved by City Council, this item will remove the developer from the flow of funds documentation so that the funds are shown as being provided by the City directly to the property owner. HUD has requested this action from the parties to the agreement to bring the agreement into strict compliance with HUD’s recent interpretation of HOME regulations.
City staff along with representatives from the developer and HUD staff have identified a simple solution to this matter so that the HOME funding documents show the funds flowing directly from the City to the property owner. The modification takes the developer out of the flow of funds, as requested by HUD and is simply a loan documentation issue that will not pose a negative impact to the development of either site (which includes the healthcare center at the Todd site), or disrupt the timeframe of construction. HOME funds are just one of eleven sources that has been utilized for this development and modifications to the approximately 30+ other non-HOME fund executed documents is not required.
This modification to the Redevelopment Agreement will not change the following terms set forth in the original agreement:
-HOME funding provided to this development will remain unchanged.
-Rent limits and utility allowances based on income limits and bedroom size will remain unchanged.
-The affordability term of 30 years from the date of full lease up will remain unchanged.
-The ability of the City to enforce the requirements of the HOME Program and the ability to monitor assisted tenants over the next 30 years will remain unchanged.
DISCUSSION:
HOME Program General Information
Todd School was built in 1934, located northwest of downtown Aurora and sits on 1.12 acres. The school is currently being redeveloped to accommodate 11 units on two stories.
Lincoln School was built in 1892 on the southwest side of Aurora and sits on 2.69 acres. The property will house 36 units including 14 in the existing building and 22 in a newly constructed building.
The HOME Program provides grants to states and localities that communities use, often in partnership with local for-profit and non-profit groups, to fund a wide range of activities including building, buying, and/or rehabilitating affordable housing for rental units, homeownership, or providing direct rental assistance to low-income households. HOME is the largest federal block grant to state and local governments designed exclusively to create affordable housing for low-income households. HOME funds are awarded annually as formula grants to participating jurisdictions including Aurora and surrounding counties. The program’s flexibility allows states and local governments to use HOME funds for grants, direct loans, loan guarantees, and other activities.
Affordability is defined by HUD in terms of the percentage of the “median family income” (MFI) within a defined geographic area; Aurora is included in the Chicagoland region to determine affordable rent and income limits.
In general about 30% of the units (17) to be delivered will be reserved for individuals or families that earn 30% of the median family income ($33,100 for a family of 4) and about 70% of the units will be rented to individuals or families that earn 60% ($66,180 for a family of 4) of the area median family income. Qualified tenants will earn in the range of $15,900-$63,000 annually.
The range of rents is from about $423 per month to $1,284 per month with the average rent being about $968 per month. The rental population will come primarily from existing Aurora residents with five units designated for tenants that come from the Statewide Referral Network (SRN). SRN units are targeted for households earning at or below thirty percent (30%) of the median income.
IMPACT STATEMENT:
The development of 47 additional affordable units and construction of a local public health facility will help the administration reach its goals of providing new or redeveloped affordable housing units in a neighborhood that offers a wide range of City services for the City's underserved population.
RECOMMENDATIONS:
Staff recommends a resolution authorizing Modification #1 to Development Agreement HOME-2021-02 that allows for the continued development of the Todd School (100 Oak Avenue) and the Lincoln School (631 South Lake Street) and modifies terms regarding the redevelopment of these schools with affordable housing.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution Authorizing a First Omnibus Amendment, Assignment and Termination to HOME-2021-02 that Allows for the Continued Development of the Todd School (100 Oak Avenue) and the Lincoln School (631 South Lake Street) by Setting Forth Amended Terms Regarding The Redevelopment as Affordable Housing.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, WHEREAS the City has the authority to make all contracts and do all other acts in relation to the property and concerns of the City; and
WHEREAS, the United States government has appropriated funds to create affordable housing for low-income households under the Cranston-Gonzalez National Affordable Housing Act (Public Law 101-625, enacted November 28, 1990), as amended (“HOME”), to be administered through the United States Department of Housing and Urban Development (“HUD”); and
WHEREAS, the City applied to HUD for said HOME funds to be used for the creation of affordable housing for low-income households within the City; and
WHEREAS, HUD then granted to the City certain HOME funds, Catalog of Federal Domestic Assistance Number (CFDA)14.239, Grant Numbers M-16-MC-17-0221, and M-17-MC-17-0221, M-18-MC-17-0221, M-19-MC-17-0221. M-20-MC-17-0221 and M21-MC-17-0221 which the City has committed to use to further the availability of affordable rental housing for low-income households within the City; and
WHEREAS, Visionary Ventures NFP (“Sponsor”), Fox Valley Apartments, L.P. (“Owner”) and the City are parties to that certain Development Agreement among the City, Sponsor, Owner and the West Aurora School District (“School District”) dated as of June 1, 2022 (the “Development Agreement”) pursuant to which the City has made a loan under the HOME Investment Partnerships Act in the amount of Two Million Nine Hundred Thousand Dollars ($2,900,000) to the Sponsor (“Original HOME Loan”), evidenced by that certain Note made by Sponsor for the benefit of City in the amount of Two Million Nine Hundred Thousand Dollars ($2,900,000) dated June 9, 2022 (“Original HOME Note”) for the purpose of rehabilitating and constructing an affordable housing development at the properties located at 100 Oak Avenue and 631 South Lake Street and more particularly described on Exhibit A attached hereto (the “Property”); and
WHEREAS, Sponsor and City entered into that certain Collateral Assignment of Note and Mortgage (HOME) dated June 9, 2022, and recorded at Doc No. 2022K031039 (“Collateral Assignment”, and collectively with the Sponsor Note, Sponsor Mortgage, HOME Regulatory Agreement, Development Agreement, and Original HOME Note, the “Documents”), pursuant to which Sponsor collaterally assigned to the City all of Sponsor’s interest in the Sponsor Note and Sponsor Mortgage to secure the Sponsor’s and Owner’s obligations, as applicable, under the Original HOME Note, the HOME Regulatory Agreement and the Development Agreement; and
WHEREAS, at the request of HUD, the parties have agreed to make certain changes to the structure of the Documents so that the proceeds of the Original HOME Loan will be a direct loan from City to Owner and Sponsor’s obligations under the Documents will be terminated as set forth herein; and
WHEREAS, the City has previously approved the Documents pursuant to R22-017 and R22-018 to facilitate the acquisition, development, and rehabilitation of the two (2) former District properties into affordable rental housing for low income residents; and
WHEREAS, the First Omnibus Amendment, Assignment And Termination (the “First Amendment”) makes the amendments to the Documents as requested by HUD. A true and accurate copy of the First Amendment is attached as Exhibit A and made a part hereof; and
WHEREAS, the City and the Developer enter into the First Amendment pursuant to their respective powers to enter into such agreements, as those powers are defined in the Illinois Constitution and applicable statutes; and
WHEREAS, the Mayor or such City employee designated in writing by the Mayor, acting on behalf of the City, is authorized to execute any contracts, extensions, amendments, or other documents relating to the terms contained herein so long as any such documents are consistent with the scope of service contained herein and in accordance with HUD statutes, regulations, guidelines or any other applicable provisions; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows:
SECTION 1: That the preambles set forth above shall be and are hereby incorporated in Section 1 as if fully set forth herein.
SECTION 2: That the First Amendment attached hereto as Exhibit A is hereby approved in substance and the Mayor and Clerk, or their designees, are authorized to execute on behalf of the City the First Amendment substantially in the form set forth in Exhibit A.
SECTION 3: This Resolution shall take effect from and after its adoption and approval as required by law.