ORDINANCE NO. __________



The city of Duluth does ordain:

     Section 1. That Duluth City Code, 1959, as amended, be amended by adding to Chapter 2 thereof (administration) a new Article XXXII titled Housing investment fund program to read as follows:

Article XXXII. Housing Investment Fund Program.

Sec. 2-167.Fund - duration.

     This Article governs the administration of the fund of money created by City Council Resolution Number 05-0269, hereinafter the fund, and this Article shall terminate, cease having effect and repeal at the time the fund is completely spent, or on December 31, 2011, whichever occurs earlier. Any money in the fund at the time of termination shall be returned to the community investment trust fund.

Sec. 2-168.Source.

     The fund shall consist only of money transferred to it, pursuant to Resolution Number 05-0269, from the community investment trust fund, created by Section 54(E) of the Charter, or its successor.

Sec. 2-169.Program - allowed expenditures; limit.

     (a)  The expenditure program created by this Article shall be managed and monitored by the city’s community development division, or its successor. Each expenditure from the fund must be approved by the city council by resolution. The Duluth housing commission has the right to make written recommendation to the council about any expenditure from the fund, any proposed contract for the use of money from the fund, or any application for an expenditure from the fund. Each recipient of money from the fund, and each applicant, and each contractor must make a report, in a form acceptable to the city, at least annually, on its activities and expenditures, and account for project costs and revenue, and any other relevant information. The program shall be known as the Housing Investment Fund program (HIF);

           (1)  The purpose of the program, and the only allowed purpose of an expenditure from the fund, is the improvement or creation of owner-occupied homes and of rental residential units within the city of Duluth. The allowed uses of expenditures from the fund are:

                 (A)  Eligible housing projects or programs with funding that is insufficient;

                 (B)  New construction of homeowner or rental residential housing, including supportive housing for homeless households and individuals;

                 (C)  Housing rehabilitation, which can include improvements to existing homes and rental units, preservation of historically significant residential buildings, or the creation of additional housing through the adaptive remodeling and alteration of non-residential buildings;

                 (D)  Acquisition of buildings and land for housing development and for conversion of rental residential property to occupant ownership;

                 (E)  Demolition or deconstruction of condemned or blighted vacant properties, and the construction of new housing on the cleared site; and

                 (F)  Residential accessibility and visitability improvement programs;

           (2)  The following are examples of uses that are not eligible for program expenditures:

                 (A)  Pre-development activities, studies, promotions, evaluations;

                 (B)  An applicant’s general operating costs such as salaries, benefits, supplies, utilities, insurance;

                 (C)  Administrative or other overhead costs;

                 (D)  Furnishings, equipment, appliances, non-architectural decorations;

                 (E)  Soft costs, including legal, architectural, engineering, market assessment, appraisal or other services;

                 (F)  Landscaping;

                 (G)  Cleanup of vacant lots (such as removal of appliances, cars, miscellaneous garbage);

                 (H)  Demolition and clearance of blighted properties for any purpose other than new housing development;

                 (I)  Public infrastructure such as streets, sidewalks, lights, sewers, utilities that do not directly serve the project property;

     (b)  For each five years of the fund’s operation, and for the operation of the fund over its entire term of operation, at least 50 percent of the total expenditures out of the fund must be for projects and activities that directly assist in creating and improving the physical existence of residential housing which is affordable to a household with a total income equal to or less than 60 percent of the area median income as calculated by the federal government.

Sec. 2-170.Solicitation of proposals.

     At least once each calendar year, the city of Duluth, through any procedures required by law, shall publicly issue a request for proposal (RFP) to carry out the purpose of the HIF program. A fair effort shall be made to inform government housing agencies and private developers of the RFP. Procedures for solicitation of proposals or bids must conform to applicable state or city of Duluth laws.

Sec. 2-171.Eligible applicants.

     (a)  The following entities are eligible to apply for funds, loans, or contracts under the HIF program:

           (1)  A non-profit corporation duly certified by the federal government as qualified under Section 501(c)3;

           (2)  A public corporation or authority created by state or local law;

           (3)  A privately-owned business that has existed for at least two years and has completed at least one housing development project;

           (4)  A partnership or joint venture of two or more of the above;

     (b)  Any applicant that is a nonprofit corporation must submit its most recent federal form 990 report to the city. Any applicant must be responsible and qualified under the standards of the state and city purchasing regulations and procedures.

Sec. 2-172.Award regulations.

     (a)  For each dollar expended from the fund for a contract or project, the recipient must demonstrate, achieve and guarantee in an enforceable agreement, secured at the option of the city, that at least five dollars of funds from sources other than funds which come, directly or indirectly, from local Duluth tax revenues, including those local revenues from the city or its subsidiaries, authorities, or commissions, shall be spent on costs of the project, which costs would qualify for HIF funding under this ordinance;

     (b)  The following regulations apply to awards for projects to create new or improved residential housing structures:

           (1)  Funding awards shall be in the form of loans, which may be interest bearing or deferred. Projects providing long-term (over 30 years) affordability may be considered for forgivable loans. The decision to forgive shall not occur before one year prior to the end of the loan period;

           (2)  The maximum award shall be of $150,000 per housing project, unless the housing project includes an on-site American Indian Center supported by the Duluth American Indian commission, in which case the maximum amount of funds for the American Indian housing project/program shall not exceed 20 percent of total housing investment fund revenues;

           (3)  The project must be completed within 24 months of funding availability;

           (4)  The project must demonstrate a funding gap indicating the need for housing investment funds and 70 percent of total funding must be secured or likely to be secured within six months of the time of application. Housing investment funds are not intended to fund projects in the early stages of development, but to help complete project financing;

           (5)  The applicant must own or have a purchase agreement on any property to be rehabilitated;

           (6)  The applicant must own, have a purchase agreement, or for tax forfeit property have a commitment from a public entity to make available for transfer to the applicant the land needed for new housing construction;

     (c)  The following regulations apply to awards for housing programs:

           (1)  Funds for housing programs shall be recycled into additional housing units, or used to ensure long-term affordability of assisted units, or be repaid to the housing investment fund;

           (2)  Housing programs are allowed to initially apply for up to $150,000, and thereafter may apply for additional funds for multiple years. Requests for multi-year funding will be considered on a case-by-case basis;

           (3)  Housing investment funds shall be used to leverage new resources, i.e., create a revolving loan fund or larger program.

Sec. 2-173.Program objectives; fund distribution.

     The city intends to use the available money in the fund to assist projects and programs in all of the following categories:

     (a)  Housing projects with funding gaps (i.e., the American Indian Center affordable housing project, HOPE VI and At Home in Duluth initiatives);

     (b)  Affordability and value gap funding for the production of new housing units to meet the housing 1000 goal by 2010;

     (c)  Preservation of existing housing stock, including historic preservation of residential buildings and residential rental rehabilitation loan fund;

     (d)  Supportive housing for people who are homeless and at risk of being homeless;

     (e)  Housing for veterans;

     (f)  Housing for American Indian households;

     (g)  Loan fund to revert current rental units back into home occupant ownership;

     (h)  Blight removal and rebuilding on existing housing sites;

     (i)  Accessibility and visitability improvements for existing single-family homes.

Sec. 2-174.Proposal selection.

     (a)  The city staff may utilize the Duluth housing commission, or other qualified source, to assist in selecting proposals for the HIF program. Selection shall be done in conformance with any applicable law. Selection shall be done by way of a fair process that includes a method that quantifies, by scoring, the application of criteria to each qualified proposal or application for funds. In addition to criteria required by law, the following criteria must be met for consideration for funding:

           (1)  Need for the activity: as demonstrated in the city’s consolidated plan, or other policy or plan that has been adopted by the city council;

           (2)  Project readiness: funds must be spent within 24 months of award;

           (3)  Applicant capacity: applicant must have sufficient demonstrated capacity to carry out the activity;

           (4)  Leverage: HIF funding must be leveraged at a minimum of a 5:1 ratio;

           (5)  Accessibility/visitability: activities must provide for accessibility/visitability or provide sufficient rationale why doing so is not feasible;

           (6)  Long-term affordability/recycling of funds: activities must either provide for long-term affordability of the housing or have the ability to recapture and recycle the funds via a deferred or interest-bearing loan;

     (b)  In addition, the following criteria can be utilized to the extent applicable to a proposal:

           (1)  Neighborhood revitalization impact: the extent to which activity will contribute to investment and positive change in core Duluth neighborhoods that have experienced disinvestment and are in need of revitalization;

           (2)  City-wide/neighborhood economic integration impact: the extent to which activity enhances equalization of home owner and rental housing, affordable and market rate housing across the city;

           (3)  Households earning 60 percent or less of the Duluth median income are served;

           (4)  Provisions of new units: the extent to which the activity will fund new units including: adaptive reuse, bringing condemned buildings or buildings not used previously for housing on-line;

           (5)  Preservation of existing housing: the extent to which the housing preserves existing units;

           (6)  Demonstrated economic impact: the extent to which the housing has demonstrated economic impact on the community where it is located and/or the people it serves.

     When city staff has made a selection, it shall inform the applicant chosen and present the applicant with any contract or other instrument to be used to carry out the proposal. When the applicant accepts the documents, the proposal shall be recommended to the city council for approval, subject to any other procedures that may be required by law.

     Section 2. That this ordinance shall take effect 30 days after its passage and publication and shall terminate as set out therein.

STATEMENT OF PURPOSE:  This ordinance implements the housing investment fund program created by the city council in Resolution 05-0269. The ordinance establishes how the fund will be administered, including the application process, selection criteria, approval process, eligible and ineligible expenditures, and the housing project and housing program requirements.