DIAMOND SQUARE REDEVELOPMENT AGENCY AGENDA ITEM
Memo Date: February 15, 2024
Agenda Date: March 11, 2024
Prepared By: Charlene Neuterman, Community Services Director
Through: Stockton Whitten, City Manager
Requested Action:
title
Request Agency approval of an Interlocal Agreement (ILA) for Affordable Housing construction and related costs, up to $800,000, in the Michael C. Blake Subdivision between the Diamond Square CRA and the City of Cocoa. Request Agency approval of a Resolution Amending the FY 2024 Budget, BAF #24-066-IF1, in the amount of $800,000, transferring this amount to the City’s General Fund to complete the construction of the five affordable homes.End
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BACKGROUND:
In 2023, Staff requested approval from the Diamond Square CRA (DSCRA) for the purposes of constructing new homes in the Michael C. Blake Subdivision. The Agency approved the City Manager to negotiate with Community Housing Initiative (CHI) to build up to five new homes. The DSCRA budgeted $475,000 in FY 2024 towards the construction of the homes and $150,000 towards homebuyer assistance. Additionally, the City Council authorized the City Manager to negotiate an agreement with CHI to construct the homes. On June 6, 2023, the City executed an agreement with CHI to build the homes for $750,000. A groundbreaking ceremony was held on November 1, 2023 and construction began shortly thereafter.
As part of the DSCRA Plan Update of 2014, one of their goals is to create partnerships with local developers to promote affordable housing within the Diamond Square community. This partnership with CHI will create new affordable housing in Diamond Square that will improve the housing inventory.
CONSTRUCTION OF FIVE (5) AFFORDABLE HOMES IN THE MICHAEL C. BLAKE SUBDIVISION. The average construction cost for the new homes is $275,496, with an additional $55,730 for closing costs, developer fee and other associated fees on each home. With a starting budget of $1,225,000, ($475,000 DSCRA + $750,000 City funds) there is a deficit of $441,804 to complete the homes. Additional funding will be obtained from HOME CHDO funds, reduction of impact fees and other General Fund contributions.
Staff is requesting the DSCRA allocate an additional amount up to $325,000 for the construction and related costs of the five homes. Since the exact total of construction and other related costs for constructing and selling the homes is estimated at this time, a transfer from the DSCRA to the General Fund will be the total contribution amount of $800,000. Any unspent funding will be returned proportionally to the DSCRA upon sale of the homes. Any funds remaining after the final sales are complete will be placed in an account for future affordable housing in Diamond Square CRA upon approval by the DSCRA. See the Attachment A to this agenda item for the cost breakdown.
DOWN PAYMENT ASSISTANCE
The $150,000 budgeted in FY 2024 for Down Payment Assistance will remain in the DSCRA budget to assist potential homeowners. The new homes being constructed have an appraised value of $310,000 to $320,000. Since the appraised value of the homes exceeds the defined amount for an affordable home per Housing and Urban Development (HUD) parameters, the City will use HOME and CDBG funds to assist the homebuyers through the first-time homebuyers’ program and being able to qualify for a mortgage. Because HUD funding will be used in these transactions, each home will sell at $269,000, which is the maximum sale price allowed by HUD. The City will be absorbing a Development Subsidy (the difference between construction costs and related costs and appraisal value) to bring the cost of each home down to $269,000, the amount allowed by HUD. This Development Subsidy will be an additional mortgage on the home that will be forgiven after ten (10) years if the homeowner resides in the home the entire time. If at any time the homeowner decides to sell the home, the City will recapture the funds in a prorated, forgivable amount, depending on the year of the sale.
Staff is requesting the DSCRA approve entering into an Interlocal Agreement (ILA) with the City of Cocoa and agree to transfer the funds allocated to the Michael C. Blake Subdivision to the City’s General Fund for costs related to the five (5) homes in the Michael C. Blake subdivision. A complete report of the costs for construction and sale of the five (5) homes will be provided when all of the homes are sold.
BUDGETARY IMPACT:
Budgeted Yes
If not budgeted, is amendment/transfer attached? Yes
Budget Amendment #24-066-IF1
Amount Requested $325,000
Account Number 111-0000-389.99-50
Account Name Diamond Square CRA Fund Balance
Amount Requested $325,000
Account Number 111-3230-581.91-01
Account Name Interfund Transfer to General Fund
Amount Requested ($475,000)
Account Number 111-3230-559.31-00
Account Name Professional Services
Amount Requested $475,000
Account Number 111-3230-581.91-01
Account Name Interfund Transfer to General Fund
Total $800,000
This BAF is one of two which will complete the interfund transfer. BAF# 24-066-IF2 will go to City Council on March 26th, with the final budget placed into Account No. 001-3200-515.62-00 CS21MB.
PREVIOUS ACTION:
The City of Cocoa authorized the City Manager to negotiate and execute an agreement with CHI on October 25, 2022 (Agenda 22-641).
The City of Cocoa entered into an agreement with CHI on June 6, 2023 to construct five (5) affordable homes in the Michael C. Blake subdivision.
The DSCRA authorized the City Manager to negotiate and execute an agreement with CHI on May 15, 2023. No agreement has been negotiated to date.
RECOMMENDED MOTION:
Recommendation
Request Agency approval of an Interlocal Agreement (ILA) for Affordable Housing construction and related costs, up to $800,000, in the Michael C. Blake Subdivision between the Diamond Square CRA and the City of Cocoa. Request Agency approval of a Resolution Amending the FY 2024 Budget, BAF #24-066-IF1, in the amount of $800,000, transferring this amount to the City’s General Fund to complete the construction of the five affordable homes..