LAND BANKING

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.

"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." ...Doug Adkins, Director, Community Revitalization

Did you ever drive around the city (outside of downtown and the Historic districts), Mr. Adkins??? 

Aren't you aware of the condition of the majority of our street, Mr. Adkins???

Didn't it ever occur to you that repairing our streets might be the "best use of the funds", Mr. Adkins???

Hmmm....I thought Chapter 13 restructuring accomplished this, not the use of federal housing funds for debt consolidation. Is qui tam ever a concern downtown....Bueller?

Death, taxes, and LMAO's misspellings.

Revolving Loan Fund

HUD 2012 Annual Action Plan
Page 35
C.  Revolving Loan Fund      
       Since the late 1970’s the City has operated a HUD funded rehabilitation revolving
      loan fund to provide low interest and deferred loans to low income property owners to
      rehabilitate their residences. The loan currently has outstanding payable loans in the
      amount of $793,764. As of the end of April 2011, the revolving loan fund has an
      available balance of $685,472.
http://www.cityofmiddletown.org/docs/commsvc/py2012aapdraft.pdf
 

Tear em down. Of course, the micro-economic theory with less supply, price point rises, and availability is lowered, increasing demand. But, there would be no demand if 50% of Middletown was torn to hell. And goose, what would MMF have to spend their $83,000 on laying around somewhere, if Middletown tore down everything they were to buy? 

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

This also PROVES that something is WRONG with our city's accounting system.  Time after time, BIG wads of dough are magically "found" in our allegedly "bare bones" budgets.  This happens year after year, and everyone acts as if they were unaware of this money.If they are "unaware" then the system is too complicated and MUST be simplified.  If they actually were aware, and just chose to "sit" on the money, waiting for a "pet project", then they must be FIRED!!!

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!!!

And you left out part of the quote!! You forgot the part about how he kept the money in a "CBDG Revolving Loan Fund" --which was NOT where either laymen or council persons would look for GENERAL FUND money--and he kept it there until HE "could find the best use of funds"!!!

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.

But while we are on the subject, how much MORE money is "tucked away" that you think we should all somehow be aware of???  Because I took the City Manager at her word when she said that we had nothing more to spare, except what was in the reserve, and that we would HAVE to start spending that!!!

goose

goose
an issue being that you act as if these situations and methods of operation are new.
maybe to you they are, or have just been realized. I don't know.
To most of us here, we have followed this zig-zagging pattern of mis-statements, confusion and contradiction for approx.20 years. We have seen it before, repeatedly and consistently.
I don't remember it ever being worse than it is now though.

Spider,

You are “spot on” with your analysis. These situations are new to me. I’ve made no secret that my history with our city government has been with the administrative side and have had no dealings with city council. Until my recent retirement, my interest in local government was minimal. With that said, all that I was trying to point out was that this fund was no secret to those involved. It had been around for 20 years and funded $9M in renovations. Another sign was there was no reaction from the City Manager or the Council members. Think about it…. $800,000 was discovered and there was no reaction. Common sense tells me that it was no secret to them. If it is proved otherwise, I will agree that our leadership has serious deficiencies.

I was not expecting the reaction that my post got. Obviously, those that follow local government closely (as MikeP does) found this information to be quite disturbing. For the record, I understand and agree with MikeP’s position concerning the poor-mouthing. It would appear that the only possible explanation could be that this fund “is” the reserve that they reference. I hope that someone asks this question of them; the public has a right to know. I also have no problem with Mr. Adkins’ statement about him, personally, deciding the best use of the funds. That is what he was hired to do. In fact, he was the one that put an end to the wasteful program that was the origin of these funds.

Finally, Ms. Viv states that I “just don’t get it”. I’m not real sure what it is that I am supposed to get. These funds aren’t targeted for the downtown or Main Street. If you are implying that all of our city’s leadership “has it in for us”, you are right, “I don’t get it”. Irrespective of the source of the money, I see this decision as a smart way to leverage what money we do have available to us. I like the idea of the city ridding itself of 300 blighted homes……… a smart, long term, decision.

While this is “off topic”, my research has led me to conclude that Mr. Kohler has done a lot of damage to this city. He was responsible for the, above referenced, wasteful program and was a leading influence in the Section 8 debacle that we have today.

GG

GG...Having lived in Middletown for 25 years, I know few if any city leadership cares at all about ROI for its citizens. They care about ROI on investments and FTE's, including escalation of span of control, and the second, and third dip after retirement. If I understand your point, perhaps it is totally acceptable to move funds from grants into the General Fund, as long s the accountability is there within the GF as to how much of the funds came from th fed source. I assume unless the city wants to unravel a qui tam claim, there is an audit trail.

Basing a strategy upon how much money you can gain from matching funds shows weakness in the city's economic development engine. That is Middletown's biggest problem, it relied TOO MUCH on state and federal subsidies, grants, and its recruitment efforts, as it has limited success or commercial development and retention. I see no benefit of an ROI on MOF, other than the city leveraging hand-outs that progressive cities pass. As this council is so stack ranked with the MMF agenda, undoubtedly the Main Street focus will pass.

As you do research, would you be able to provide a number as to how many streets were paved by the residents voting 60% to pass a vote to have the city pay for it? I understand the capital equipment is terribly underutilized and no street by vote, has been paved since the city began the process. I disagree with your assessment this has been a "clean up" council, other than HUD funds and deploying in targeted captive "markets."    

Bill, the city created a diabetic, too much sugar and starch.