S T A F F R E P O R T

DATE June 11, 2012

TO: Judy Gilleland, City Manager

Les Landen, Acting City Manager

FROM: Doug Adkins, Director, Community Revitalization

Moving Ohio Forward Grant Program

To authorize participation by the City of Middletown in the Moving Ohio Forward Grant program and to commit to the matching fund requirements of the Grant.

PURPOSE

BACKGROUND AND FINDINGS

The City continues to rebalance its housing stock and remove blighted, abandoned and obsolete housing from the City. As of the 2010 census, there were 3,058 vacant houses in the City of Middletown. That vacancy count does not include houses that have gone through foreclosure since the census count that currently are in foreclosure, or those homes that are behind on their mortgage but yet go to foreclosure in the future.

The Ohio Attorney General’s Office participated in the nationwide settlement with the largest mortgage servicers over foreclosure abuses, fraud and unacceptable mortgage practices. As part of that settlement, the Attorney General has made $75 million in funding available to Ohio communities for residential demolition.

Of the total $75 million, $2,679,701 has been allocated to Butler County. To date, the City of Middletown and the City of Hamilton have expressed interest in utilizing the grant funding available in Butler County. The discussions to date have, therefore, been of the nature that Butler County, operating through the land bank, will be the lead entity applying for Butler County’s portion of the grant. Under the existing plan, grant funds will be split 50% to the City of Hamilton and 50% to the City of Middletown. If other cities in Butler County wish to participate and can provide the required matching funds, the 50/50 split would be amended to incorporate other communities. These funds can only be used for residential demolition. No commercial or industrial property is eligible in this grant.

There are no matching dollars required for the first $500,000 in demolition grant funds. Assuming the 50/50 split, therefore, the City of Middletown would need to supply a dollar for dollar match for ½ of the remaining grant funds.

Doing the math, $2,679.701 (total grant) - $500,000 (no match requirement) = 2,179,701 requiring a match. $2,179,701 divided evenly between Hamilton and Middletown = $1,089,850.50 in matching funds required from the City of Middletown to receive the maximum grant funds.

By supplying the maximum matching funds, the City would be in control of over $2 million in residential demolition funding. This would permit demolition of about 300 abandoned homes in Middletown.

Federal funds cannot be directly used as a match under this grant. City Council as part of the 2012 budget has appropriated $275,000 for demolition using CDBG funds. We will start work shortly on the 2013 budget.

The City has a CDBG Revolving Loan Fund that has been in existence for over two decades. Over the past 20 years, the city has performed over $9 million in residential renovations using the revolving loan fund. There were several problems with this program.

1) Scope – the program was originally designed for low income people who could perform routine maintenance items, but lacked the ability to make the large repairs, such as HVAC replacement or a roof. This was an affordable way to get the major repair done so the homeowner could continue maintenance of the rest of the structure. Over time, homeowners often deferred maintenance until they needed well over half the value of their home just to return the property to code compliance. The jobs became huge renovations instead of targeted repairs.

2) In many cases, the homeowners quit doing maintenance, and the repairs and renovations made by the City were often the last repairs made on the house. After 10 years, you would never have known that major remodeling had been done. At the neighborhood level, you would never know that we had performed over 600 renovations (from 1981-2007) of low income houses.

3) As the projects got larger, homeowners required so much renovation that they couldn’t pay back even a 0% loan on the work done. In some cases, we set people up for failure by

renovating their house and ultimately foreclosing on them due to nonpayment.

In 2009, when I became Community Revitalization Director, we saw that the program was not working and we raised loan application standards to where you had to demonstrate the financial ability to repay the cost of renovations being made. After a year, no one qualified under the new standards, so we shut the program down completely. Homeowners who received prior loans continue to pay their monthly loan payment into the fund, and at this time, there is close to $800K in the fund.

As budgets have gotten tight, many communities converted their revolving loan fund to general CDBG dollars and then spent them on projects. I held our fund open to find the best use of the funds for the City. One possible source of funding for the demolition program is to convert a portion of the revolving loan fund and ultimately use the converted balance to assist with matching funds for demolition of vacant abandoned housing.

Using the 2012 CDBG budget ($275K demo budget), the 2013 CDBG budget ($300K), and a revolving loan fund partial conversion ($500K), we have the entire match requirement funding needed to meet the grant obligations.

Because federal funds cannot be directly used to meet the grant requirements, the City would need to move federal HUD funds to CDBG-eligible general fund projects, and then reallocate the general fund money to provide the matching grant requirements. There are several possibilities for this conversion. The easiest to accomplish would be to take 2013 CDBG-eligible capital expenditures such as a fire truck, budget CDBG funds to purchase the fire truck under federal HUD guidelines, and then use the capital funds to meet the AG match requirements. Another option would be to use CDBG funds to pay for 2013 street paving projects and then use the paving funds as the match.

1) Do not commit to providing all $1.1 Million in matching funds but commit to only a portion of the total available. We would receive grant funding equal to our match.

ALTERNATIVES

2) Do not commit to providing matching funds. The City would not participate in the Moving Ohio Forward Grant Program.

Commits approximately $600K total in CDBG funds over two years and liquidates $500K in Revolving Loan funds to receive $1.1 Million in demolition grant funds.

FINANCIAL IMPACTS

Conforms to City Policy

CONFORMITY TO CITY POLICY

Staff recommends committing to provide required matching funds to receive the most demolition funding available through the Moving Ohio Forward Grant Program.

RECOMMENDATION

This is an Emergency item. The Moving Ohio Forward Grant Program application is due June 30, 2012 and this Ordinance must be included with the application.

Revolving Loan Fund

It was Skip Batten, for Housing Rehabilitation Specialist who advised me of John Lyons and Marty Kohler having written off $400,000+ in non-performing rehab loans in 2003.  In the fall of 2006, it was Skip and Pam Banks, Finance Department who wrote off another $300,000+ in non-performing rehab loans.

I worked for the City of Middletown from January 4, 2007 until my "resignation" effective January 20, 2009.  Working with my staff and our (now abolished) Community Development Advisory Committee, we were the ones who developed and implemented housing rehab loan servicing and collection policies/procedures in 2007.

When I first learned of the deplorable state of the Housing Rehabilitation Revolving Loan Fund in 2007, there were still 25+ plus non-performing loans on the books.  Four of these were 30+ months delinqent in payments!

During this time six or seven delinquent housing rehab loan files were eventually shown to me by Skip Batten.  In each of these instances participating homeowners were originally allowed to consolidate non-housing indebtedness with the cost of rehab.  I remember one by the name of,
(vcm: I have removed the name) who had $28,000 of personal debt refinanced through a low-interest City loan.  This loan was non-performing resulting in the demolition of said residence several months following my departure.  The cost of City demolition was in excess of $8,000.

Regarding the above personal debt consolidation feature of the rehab loans, I was told that this was included in Housing Rehab Guidelines from the 1990's when Marty Kohler was in charge of this activity.  Despite numerous requests during my employment, nobody in the Planning Department had a copy of same.  In the spring of 2008 a copy was finally given to me by Mr. Kohler.  After examining a document dated 1995, I worked with my staff and the Community Development Advisory Committee to prepare written policies and procedures.  At one of the earliest meetings of the City Council Housing Sub-Committee in June 2008, copies were given to the City Manager, Law Director, plus City Council members.  Following the meeting I was chastized and reprimanded by Ginger Smith.  She stated that it was not necessary to bring this matter before senior city staff or elected officials.

I never heard of any HUD recipient like the City of Middletown using housing rehab funds to consolidate personal debt.  Paul Renwick, Walter Leap, Chris Amburgey, Rosa Lean Lindsey, Bert Grimes and other Community Development Advisory Committee members were made aware of this action by Skip Batten six or seven years prior to my arrival.  Those are the facts.  And, under what guidelines did (vcm: I have removed the name)  and five or six other homeowners receive this assistance. Again, prior to my arrival. 

I reviewed the loan files personally after Skip dug them out of the storage closet.  I couldn't believe what I saw.  I have administered a number of HUD-funded Housing Rehabilitation Programs going back to the 1970's.  I surely wasn't a novice at this.

I thought you might enjoy these little "behind the scenes" glimpses of how local government does (doesn't) work.

Nelson R. Self

Greygoose

1.  The guidelines for the Moving Ohio Forward Grant Program clearly state that
     HUD funds can not be used as matching funds.
2.  Mr. Adkins has not filed an Amendment to the HUD 2012 Annual Action Plan
     stating this substantial change in the use of HUD funds and requesting HUD
     approval.
3.  This major amendment concerning HUD funds has not been before the public for

greygoose wrote: Well, now that we've found over a MILLION DOLLARS in CDBG funds laying around going unused, instead of doing a dubious double-shuffle, why not put the money to a LEGITIMATE CBDG use, and repave a few of our crumbling streets OUTSIDE of downtown and the Historic districts??? Mike, I agree that that our roads need work, but we will get a bigger "bang for the buck" using matching funds. Its no secret that I think that we should "tear 'em down". GG

GG:

Sorry, but I disagree!!!

The first purposes of municipal government are INFRASTRUCTURE and PUBLIC SAFETY.  The current gang at City Hall seems intent on ignoring both, while concentrating on things that much further down the list.

More importantly, when will someone on council DEMAND ACCOUNTABILITY for hoarded funds???

For years we have been being told that we are flat broke, that everything has been cut to the bone, that more taxes are an absolute necessity.  Yet, time after time when backed into a corner, or when money is needed for a PET PROJECT, the same thing happens:  VOILA…a big wad of dough miraculously appears…and not one councilperson ever questions how this can happen.

This time it is over a MILLION BUCKS that was “held” by one person until HE decided how the funds could “best be used”!!!  He sat on this while everyone else is crying that there is no money for public safety, for infrastructure, or for anything else!!!  The entire council should be asking for his head!!!

The entire council should also be asking for two other things:

1.       Why wasn’t the City Manager aware of this big wad of dough, and why didn’t she make council aware of it when council was looking for money for, say, Councilman Laubach’s street repair fund?

2.       How much MORE such money is lying around, “tucked away” in one fund or another?  Council should DEMAND that all other such money be purged and brought into the open BEFORE any taxes are continued or increased, and before the next budget discussions begin.

This practice has gone on for far too long.  It MUST end, and NOW is the time!!!

Give me a break, Greygoose.

Didn’t you pay any attention to the budget discussions last year???  Weren’t you listening to any of the discussions when Councilman Laubach was trying to scrape up even a couple of hundred thousand to start a street paving fund???  Don’t you recall Councilman Smith’s desperate attempts to find money to save a firefighter or two’s job???

All we heard was "woe-is-us" poor-mouthing about how broke we were…how we had cut to the bone…how the ONLY thing left was to dip into our reserves, etc.

NOTHING was mentioned by anyone about a million bucks in CBDG money that could be double-shuffled into the general fund!!!

You are losing all credibility if you are trying to say that we all should have been aware of this.  Either that, or you are trying to cover for someone.

Acclaro:

All we need to make Middletown a booming success is a renewed downtown, and that is a fact.  And all that will take is this:

1.       Give all of the property owners downtown a grant of $5,000 per frontage foot (or so) to rebuild all of the storefronts in olde tyme fashion.  (The money for this is available in the General Fund on the third Tuesday of any month, IF you can pick the correct shell after "The Wizard" shuffles them.)

2.       Fill all of the downtown properties along Central Avenue and Main Street with artsy-type stuff, including olde tyme crafts, and antique shoppes.

3.       Do accurate historic interior restorations of all of the old buildings downtown (using tax money of course).  Put special emphasis on the opera house and other performing arts venues.  (Hire Sammie to be in charge of this, at a six figure salary, of course.)

4.       Hire a maestro or two, a couple of museum curators, and some Shakespeare-in-the-Park type theatre producers, all on the city payroll, to start performing arts programs in our grand downtown venues.

5.       Hire Knight Goodman to throw out the first pitch at opening day of our “new” olde tyme baseball team, the “Middletowne Rusty-red Stocklings”.

6.       Find Professor Harold Hill to start a boys’ band.

Everyone knows that this is the ONLY approach that will work, and that it is the ONLY thing that we should try…

…again…and again…and again…and again…

Step right up, ladies and gentlemen, and watch the next trick!!!

You were just amazed when 1.1 MILLION DOLLARS appeared out of thin air, went into our city’s General Fund, was laundered, and now sits there in our GENERAL FUND available to be used however general fund dollars may be used.  (Or at least for any pet project that the right people want it used for.)

Councilman Laubach said the magic word “NO”!!!

So now we have $1,100,000 in UNAPROPRIATED FUNDS in the General Fund that we didn’t have before, available for General Fund uses (such as street paving), right???

Well, watch closely…the pea--I mean the money--goes under the middle shell, the shells get shuffled around…his hands never leave his arms…abra-ka-dabra…the money vanishes, and we will once again be BROKE, with no money available for anything until the next pet project comes along!!!  (Then the pea--I mean the money--will once again magically re-appear under the nut shell on the left!!!)

Middletown passes on funds to raze blighted homes

Super majority vote needed; Vice Mayor Picard was absent from the meeting.

By http://www.middletownjournal.com/services/staff/1317913.html - Michael D. Pitman , Staff Writer Updated 10:27 PM Tuesday, June 19, 2012

    MIDDLETOWN — The city of Middletown will not receive more than $1 million in state funds to raze blighted homes, nor will it join the county land bank in order to make abandon property productive.
    City Council needed a super majority in order to approve a resolution that would allow the city to apply for $1.1 million in aid from the Ohio Attorney General’s Moving Ohio Forward http://www.middletownjournal.com/news/middletown-news/middletown-passes-on-funds-to-raze-blighted-homes-1393754.html## - Grant Program money the state received from a multibillion dollar mortgage provider
settlement shared with all states.
    Also, because of the lack of a super majority vote, the city has pulled out of being a part of
the county’s land bank. Last month, Butler County commissioners approved forming the land
bank, called County Land Reutlization Corp., a quasi-public nonprofit organization that can
acquire vacant, abandoned, tax-foreclosed or other real property for rehabilitation or reuse.
    The land bank would clear property of all http://www.middletownjournal.com/news/middletown-news/middletown-passes-on-funds-to-raze-blighted-homes-1393754.html## - liens , including http://www.middletownjournal.com/news/middletown-news/middletown-passes-on-funds-to-raze-blighted-homes-1393754.html## - delinquent property taxes.
    Council voted 5-1, with Councilman Josh Laubach voting against both issues.
Vice Mayor Dan Picard was not at Tuesday’s meeting.
    The county’s share of the Moving Ohio Forward Grant is up to $2.7 million, but the
participating cities — which until Tuesday night was to be Hamilton and Middletown — were to
split the match, which would have been a total of $2.2 million. The grant would have allowed
Middletown to demolish upwards of 300 vacant and abandoned properties in the city, about
10 percent of its total vacant and abandoned properties.
    The city currently demolishes about 40 to 50 homes a year.
    “We’re going to get a hold of these properties, which no doubt have issues, and they’re going
to require further money to demo them, redevelop them, maintain them,” said Laubach. “The
list will go on and on and on, and it will be this black hole that we’ll never get out of.
    “I don’t think it’s in the best interest in the city,” he added. “I think the only control we have
as a city is to what we can do, and that’s really basic things.”
    Laubach said he believes the market will take care of these properties. However, Community
Revitalization Director Doug Adkins, who was presenting both pieces of legislation, did not. He
said the homes will “just continue to deteriorate, and your neighborhoods will continue to
deteriorate.
    “We have a balanced book, but we haven’t taken care of our issues,” Adkins said. “The market
will not take care of these... There’s not a commercially viable reason for people to get involved
in them.”
    Law Director and acting City Manager Les Landen said staff supported the grant program and
legislation, and understood Laubach’s  concerns. However, he said potential residents and
business owners who see 3,00 blighted homes will not come to the city.
    “We have some very significant problems and if we don’t address those problems, we’re not
going to get the economic development,” Landen said.
    Mayor Larry Mulligan said this would have accelerated the city’s current demolition program
and aided in economic development. He said removing 10 percent of the city’s blighted property
can make a big difference.
    “This is a singular opportunity to really see some additional money to leverage what we’ve got,
” the mayor said. “My concern is if we don’t take care of this opportunity this year, it will be a lost
opportunity and forever be missing out clearing blight from 300 potential sites.”
    The deadline to apply for the grant, which is being applied through the land bank, is June 30.
Adkins said money the county does not apply for would likely be redistributed to the state’s other
counties.
    Adkins said with the city not pursing the grant money, that allows the city of Hamilton — which
he said has expressed interest in the grant — could potentially apply for the entire grant amount.
    Councilman A.J. Smith was leaning against the grant and the land bank, but ended up supporting
it. After the council meeting, he said he felt he needed to put the city “above my own self interests.”
    He said he wished the dollar amount was lower, but said it would have helped the city.
    Contact this reporter at (513) 820-2175 or mailto:michael.pitman@coxinc.com - michael.pitman@coxinc.com .
Follow at twitter.com/mdpitman.

oooor...maybe City Hall should have been more frugal over the past five years and they would have had the needed million dollars of matching funds in the General Fund.