HomeMy WebLinkAbout10 AIS for BOCC Housing 4-11-17v2 AGENDA ITEM SUMMARY
WORKSESSION MEETING DATE: April 11, 2017
AGENDA ITEM TITLE: Employee Home Ownership Programs
STAFF RESPONSIBLE: Rich Englehart; Kara Silbernagel
ISSUE STATEMENT
The high cost of living and shortage of deed-restricted housing is hindering the County's ability to
successfully recruit and retain high-quality employees.
BACKGROUND:
The current housing stock, both free market and deed-restricted, is unable to keep up with demand,
and simultaneously, housing prices continue to escalate throughout the Roaring Fork Valley.
Employers throughout the area are feeling the pinch in the recruitment and retention of employees
and Pitkin County is no different. Without sustainable housing and shortened commutes, Pitkin
County is vulnerable to losing its employees.
At the retreat in March, the BOCC reaffirmed that affordable housing is a top priority as an
identified initiative contained in the Strategic Plan. The County has made strides towards developing
additional housing, but just like our employees, is limited in the availability and affordability of units
and land.
To address the housing shortfall, the County is developing a continuum of housing options available
to help recruit and retain high achieving employees. Staff presented an overview of two employee
housing programs in January as a follow-up to the 2017 budget. One is a newly revised down
payment assistance program and the other is a deed restricted program. Staff is before the Board
today to review the programs in more detail, address questions during the January meeting and seek
final approval to begin implement the Pitkin County Employee Home Ownership Programs, subject
to final legal review.
EMPLOYEE HOME OWNERSHIP PROGRAM® -DOWN PAYMENT (EHOP-DP)
In 2008 the Board of County Commissioners appropriated$300,000 to implement an Employee
Home Ownership Program (EHOP®) for Down Payment Assistance. Under the program,
eligible full-time employees may qualify for 10% or up to $20,000 to assist with the purchase of
a primary residence. In 2016, the County suspended the program due changes in federal
mortgage lending housing regulations and a depletion of the original $300,000 appropriation.
Given the success of the program, staff are seeking to implement a new iteration of Down
Payment EHOP that addresses the new federal regulations as well as retention and recruitment of
employees by assisting with home ownership. The table below details the previous program and
an overview of proposed changes for the new program. The program was administered by a third
party, Funding Partners. Staff is recommending to continue having Funding Partners administer.
Original Proposed
EHOP®Down Payment EHOP®Down Payment
Loan Type Implied interest Amortized Loan
15 year term 15 year term amortized over 30 year period
No payment until employee leaves Employee pays Funding Partners monthly over the
employment,sells the residence,the course of the loan with remaining amount(balloon)due
residence is no longer a primary residence, at 15 years.
or at 15 years. Interest rate is not locked in Employee retains loan regardless of status with County.
until repayment. Repayment at 15 years,or sells/refinances the home.
Amount 10% or$20,000; whichever is less 15% or$50,000; whichever is less
Interest Rate CSAFE+1% 110% of Affective Federal Rate
Geographic RFTA Service Area RFTA Service Area
Boundary (Aspen— Silt)
Discussion: Does the BOCC want it expanded
to include Frying Pan to Meredith and Crystal
River to Marble
Forgiveness None. After 5 yrs of loan—5% or 10%
After 10 yrs of loan—5% or 10%
After 15 yrs of loan— 10% or 20%
Total forgiveness=20% or 40% of original
loan amount at completion of 15 years.
Discussion: Does the BOCC support a
forgiveness component? If so, at what amount?
Funding Source One-time $300,000 appropriation $300,000 grant appropriation from general
from general fund fund; Future appropriation based on demand
Original Down Payment Program Impact
Number of Loans issued (2009-2016) 20 loans
Average Loan price $323,855
(Median Loan price) ($305,000)
$20,000
Median Loan $ (65%of all loans were at maximum
$20,000)
Median Tenure at time of Application 3.2 years
Median Tenure of employees still in program** 9.2 years
Upper Valley—3
Location of Borrowers Mid Valley— 12
Lower Valley& 1-70 -5
**Six employees that received EHOP (30%)left the County.Median tenureship=5.7 years
At the March 22, 2017 Regular Meeting, the BOCC approved the first reading of the supplemental
request for$300,000 for the EHOP program. Final approval is dependent on public hearing and
second reading at the April 12 Regular Meeting.
Key Discussion Points for EHOP®-DP:
• Full lump sum payment of$300,000 as a grant with terms and conditions for Funding
Partners to administering the program.
• Interest income derived from the contract activity shall be split equally between general
operating requirements of FP and the fund for subsequent deployment.
• Increase award amount to 15% of total mortgage or$50,000 (previously 10% or$20,000).
• Amortized loan structure. 30 year due in 15.
• Geographic boundary to include RFTA Corridor(Aspen to Rifle) including the Frying Pan
(to Meredith) and Crystal River(to Marble)valleys.
• Interest Rate set to applicable federal rate+ 1%.
• Loan(principal only) Forgiveness. (This is taxable benefit to the employee)
o 10% at 5 years or 5% at 5 years
o 10% at 10 years or 5% at 10 years
o 20% at 15 years or 10% at 15 years
Forgiveness Considerations
Loan Amount: $50,000
Interest Rate: 3.10% (April 2017)
Based on 110%of Applicable Federal Tax Rate (AFR)
ORIGINAL WITH FORGIVENESS
Loan Period 30 due in 15 30 due in 15 30 due in 15
Forgiveness Terms N/A 5/5/10% 10/10/20%
(%based on Original Principle)
Employee Costs
Monthly Payment $213.51 $213.51 $213.51
Total Interest Paid $19,134 $17,910 $16,571
Total Principle Paid 19,164 $19,993 $21,279
(15-year)
Balloon Payment $30,916 $20,331 $8,993
Net Reduction $10,587 $21,257
County Costs
Original Loan $50,000 $50,000 $50,000
Forgiveness Amount N/A $10,000 $20,000
Interest Collected
(split with FP) $9,542 $8,955 $8,285
Total Return to County $59,542 $48,955 $38,285
EMPLOYEE HOME OWNERSHIP PROGRAM-DEED RESTRICTED
(EHOP-DR)
The Deed Restricted Program provides an opportunity to recruit and retain employees,by
simultaneously addressing the housing shortfall and under-utilized housing funds.
Program Summary
Based on the January 17th, 2017 BOCC work session, the EHOP®-DR has been adjusted in order to
address a few concerns raised at that time. The basics of the program remain in place and those
consist of:
• It is an employee-based housing ownership program in which the County and employee
partner for the purchase of a free-market home.
• The County owns a portion of the asset,up to 40% of the purchase price or$300,000,
whichever is less.
• The employee and County will record a covenant on the property which stipulates the details
of the agreement and disposition of the property.
• The free-market property must be the employee's primary residence.
• Properties must be free market and located between Aspen and Carbondale along the
Highway 82 corridor. Deed-restricted or properties located outside of this area are not
eligible for the program. The program will be available to all employees on a first come, first
serve basis.
Since the January work session a number of conditions for the program were altered based on BOCC
comments, input and review from the County Attorney, review with procurement, discussions with
Funding Partners and employee input. The items to be discuss in the work session are:
• The staff is recommending that the properties be located within Pitkin, Eagle or Garfield
counties between Aspen and Carbondale and within close proximity of RFTA services.
• The qualifying criteria of 30% of household income was increased to 35%. Based on BOCC
and employee input, the increase will allow a greater range of employees initially qualifying
for the preliminary approval. The back side ratio as managed by the lending agencies will
not change (45%) in order to be approved for financing. This was a no risk action.
• The BOCC was presented the three options within the covenant when the time comes for the
property to change hands. Two of those options were removed due to limitations with the
funding source,per the Attorney's office recommendation. When an employee leaves Pitkin
County, the County will purchase employee's portion of the property, plus a restricted
appreciation cap, for rental or resale.
• Staff has reached out to secured two lending institutions that have reviewed the preliminary
agreements and have given approval for funding the program. One offers adjustable rate
mortgages of both five (5) and seven (7) years with caps on future adjustments, all based
thirty-year amortization. The other lender is able to provide long-term fifteen and thirty-year
fix rates through their Fannie Mae program. Once the program is adopted we will seek other
lenders to add to a list that will be maintained by Funding Partners as they begin to work with
our employees.
• Staff has developed a check list in order to track the progress for each applicant.
• A fillable ordinance form has been developed to be presented to the BOCC for each
transaction.
• A more defined and structured capital improvement program was developed base on BOCC
input.
LINK TO STRATEGIC PLAN:
Livable and Supportive Communities— Sustainable and diverse housing options
Prosperous Economy—High performing county employees
KEY DISCUSSION ITEMS:
• Seeking final BOCC review and support for the programs as outlined in the attached
documents.
• Staff will present and available to answer questions the BOCC may have.
BUDGETARY IMPACT:
• Based on final approval the BOCC will appropriated$300,000 from the General Fund in
2017 for the EHOP II Program
• The BOCC appropriated $1M from the Housing Fund and$1M from the Airport fund
during the 2017 budget for the Shared Equity program;
• Another$1M in 2018 based on the success of the Shared Equity program.;
RECOMMENDED BOCC ACTION: Board gives final approval for Administration to put in
place the contracts and guidelines in order to implement the programs.
ATTACHMENTS:
PowerPoint
EHOP®Deed Restriction Capital Improvement Policy
Em p lo ye e Ho m e O wn e rship Pro g ra m s
i
De e d Restricted
AND
Down Pa ym e nt
Pre se nta tio n to BO C C
April 1 l '^, 2017
Employee Housing
Pro b le m Id e ntific a do n
The high cost ofliving , shortage ofdeed -restricted housing , high turn overrates and no
employee is hindering the County's ability to successfully recruit and retain high-qua lity
employees.
ENIPJ6 YEE HO ME OWNERSHIP PRO G RAM® — DO WN PAYMENT (EHO P-DP)
Looking back
In 2008 the Board of County Commissioners appropriated $300,000.
m Eligible full-time employe e s c o u ld qualify for 10% o f p u rc ha se price or up to $2 0,0 0 0 to assist
with the purchase ofa primary residence .
w Suspended the program in 2016 due in part to changes in federalmortgage lending housing
regulations and a depletion ofthe original $300,000 appropriation.
m Program administered by Funding Partners (a certified Community Development Financial
Institution (CFDI).
Looking Back — DownPaymentAssistance
OriginalProgram Impact
Number ofLoans issued
(2009-2016) 20 loans
Average Loan price $323,855
(Median Lo a n price ) ($305,000)
Me d is n Lo a n $ $20,000
(65% ofallloanswere atmaximum
$20,000)
3 .2 years
9.2 years
Median Tenure at time of
Application
Median Tenure ofemployees still
in program "
UpperValley — 3
Location ofBorrowers Mid Valley — 12
LowerValley & I70 -5
Lo o king Fo rw a rd — EHO P -DP
w Staff is looking to implement a n e w it ra don o f EHO P.
w Current gap for employee homeownership assistance with
D - e d Re stric to d Program .
Funding is contingent on second reading of supplemental
appropriations of $300,000 on April 12 (tomorrow).
w Seeking direction on a numberofpolicy items.
Comparison — Previous / Proposed
Original Proposed
EHOP® Down Pa ment EHOP® Down Pa ment
Loan Type Implied interest Amortized Loan
15 yearterm 15 yeartenn amortized over30 yearperiod
No payment untilemployee leavesemployment, Employee pays Funding Partnersmonthlyoverthe course of the
longer loan with remaining amount (balloon)due at 15 years.
primaryresidence, orat 15 years. Interest rate is Employee retains loan regardless of status with County.
not locked in untilrepayment. Repayment at 15 years, orsells/refinances the home.
Amount 10% or$20,000; whichever is less 15%or $50,000; whichever is less
InterestRate CSAFE+1% 110%ofAffective Federa1Rate
Geographic RFTA Service Area RFTA Se rvic e Are a
Boundary (Asp e n — Silt)
Discussion: Does the BOCC want it expanded to inc lude
Frying Pan to Meredith and Crysta 1 Rive r to Marble
Forgiveness None . Afters yrs ofloan- 5%or 10%
After 10 yrs of loan — 5%or 10%
After15 yrsofloan - 10%or20%
Total forgive ne ss = 20%or 40%of orig ina 1 lo a n amount at
completion of 15 years.
Discussion: Does the BOCC support a forgiveness
component? If so, at what amount?
Funding Source One-time $300,000 appropriation from $300,000 grant appropriation from genera1 fund; Future
genera1fund appropriation based on demand
Ke y Disc ussio n Po ints for EHOP®-DP
m Program Guidelines:
• Fullpayment of $300,000 as a grant with terms and conditions for Funding Partners
to administering the program .
• Interest income derived from the contract activity shallbe split equallybetween
generaloperating requirements ofFP and the fund forsubsequent deployment.
• Amortized loan structure . 30 yeardue in 15.
• e o g ra p h is boundary to include RFTA C o rrid o r (Asp en to Rifle ) in c lu d in g the Frying
Pan (to Meredith) and CrystalRiver (to Marble ) valleys.
• Interest Rate set to 110% ofthe monthly published applicable federalrate (AF'R) +
1%.
m Po lic y Dire c don:
• Increase award amount to 15% ofpurchase price or $50,000? (previously 10% or
$20,000)
• Loan (principalonly) Forgiveness. (This is taxable benefit to the employee )
o 5% at 5 years or 10% at 5 years
o 5% at 10 years or 10% at 10 years
o 10% at 15 years or 20% at 15 years
BudgetlmpactswithForgiveness
ORIGINAL WTIH FORGIVENESS
Loan Amount $50,000 $50,000 $50,000
Inte re st Rate
Based on 110%ofApplicable FederalTax 3.10% 3.10% 3.10%
Rate (AFR)
Loan Period 30 due in 15 30 due in 15 30 due in 15
Forgiveness Terms N/A 5/5/10% 10/10/20%
(%based on OriginalPrinciple)
Employee Costs
Monthly Payment $213.51 $213.51 $213.51
TotalInterest Paid $19,134 $17,910 $16,571
TotalPrinciple Paid (15-year) 19,164 $19,993 $21,279
Balloon Payment $30,916 $20,331 $8,993
Net Reduction $10,587 $21,257
County Costs
O rig ina 1 Lo a n $50,000 $50,000 $50,000
Forgiveness Amount N/A $10,000 $20,000
County % oflnterest Collected $9,542 $8,955 $8,285
Tota l Re turn to County $59,542 $48,955 $38,285
Employee Home Ownership Program ® — Deed Restricted
(EHOP-DP)
Looking back
m : • CC approved $ 1M in GeneralFund & $ 1M in Airport Fund (2017); An
additional $ 1M in GeneralFund for2018 wasrecommended .
m County willown a portion ofthe asset based on the purchase price .
m Program administered by Funding Partners
\ m Program was introduced to the BOCC in January with comments from meeting
rolled into the proposed program .
LookingForward — DeedRestriction
Properties maybe located within Pitkin , Eagle orGarfield countiesbetween
Aspen and Carbondale and within close proximity ofRFTA services.
e qualifying criteria of30% ofhousehold income was increased to 35%.
Allows fora g re a to r ra n g e of e m p to ye e 's in itia lly qualifying forthe in itia 1
approval. The backside ratio remains.
The three options exit strategies forthe County and employee have been
revised to a single option due to restrictions with the funding source .
Countywillpurchase the property based on the appreciation cap outlined in the covenant.
(Similarto APCHA)
thokingForward — DeedRestriction
Staffidentified two lending institutions that willparticipate in the program .
Once approved staffwillworkwith Funding Partners to identify more
options.
Staffdeveloped a checklist in orderto trackthe progressofeach
applicant.
w Afillable ordinance form hasbeen developed to be presented to the
BOCC foreach transaction .
w Amore defined and structured capitalimprovementprogram was
developed base on BOCC input.
Sh a re d at u ity Purc ha se Pro g ra m
i
ZA#
15 % to 40 % _ % 85 to 60 %
County Ownership Employee Ownership
Que stions ?
piCKIN
COUNTS Pitkin County
EHOP®-Deed Restricted Program
HOMEOWNERSHIP CAPITAL IMPROVEMENTS,
CAPITAL UPDATES AND MAINTENANCE POLICY
Homeownership improvements will be considered as part of the effort to maintain livable homes under
the EHOP®-Deed Restricted Program.This policy describes the criteria for eligible Capital Improvements
and Capital Updates for approved purchased properties.The policy also describes requirements for
homeowners to maintain their homes.
The maximum credit the Owner may receive for Capital Improvements may not exceed 10% of the
original purchase price. Capital Improvements or Capital Updates will not be considered without proof
of receipts, affidavit as to validity of receipts, and building permit from the applicable governing body's
Building Department.
Eligible Capital Improvements:
1. Energy efficiency improvement of added insulation.
2. Improvements that increase habitable space. Finished basements must have at least one egress
window and all improvements must conform to current building code requirements.
3. Cooling systems including: whole house fans, ceiling fans, non-portable evaporative coolers or if
evaporative coolers are not allowed by the HOA, central air conditioning.
4. Flooring: replace carpet at least 10 years old with hardwood (including cork and bamboo, but not
laminate).
5. Solar Photovoltaic Systems and Solar Thermal Systems. Credit will be given for 80% of the eligible
system and installation out-of-pocket expenses up to a maximum of$3,000.The credit amount will
be depreciated over 20 years; with 75%depreciated in 10 equal amounts annually for the first 10
years, and the remaining 25%will be depreciated in 10 equal amounts annually for the remaining
10 years.
6. Radon gas mitigation cost (Radon testing costs are not eligible only mitigation cost as necessary to
remedy); if Radon level is above the EPA established threshold the cost to mitigate using a qualified
contractor is eligible.
Eligible Capital Updates:
1. Renovation of kitchens and bathrooms that are at least 10 years old.
2. Replacement of single pane windows that are at least 10 years old.
3. Replacement of a furnace that is at least 10 years old with a high efficiency furnace with an AFUE
greater than or equal to 90%, plus sealed combustion. If home design precludes direct venting,an
upgrade to a minimum 80%AFUE is eligible.
Effective January 1, 2017 1 of 4
iTKIN
COUNTli Pitkin County
EHOP®-Deed Restricted Program
4. Capital Update for replacement of a hot water heater that is at least 10 years old with a high
efficiency hot water heater with an energy factor of 0.62 or higher (Energy Star Listed), R-16
tank insulation;Anti-Siphon valves; and hot water pipe insulation of at least 6 feet.
Improvements and updates considered to be non-permanent or cosmetic are not eligible. Luxury and
high-end items chosen over standard grades will only be eligible for credit at the cost of standard grade
items.The credit for an improvement or update will depreciate over 20 years; with 75%of the Capital
Update cost depreciated in 10 equal amounts annually for the first 10 years, and the remaining 25%
will be depreciated in 10 equal amounts annually for the remaining 10 years.
In order to qualify as an eligible Capital Update, it is mandatory that each proposed expenditure be
approved in advance by the County. The process for receiving credit is listed below.
In order to qualify as an eligible Capital Improvement, it is mandatory that each proposed expenditure
be approved in advance by the County. The process for receiving credit is listed in the "How to receive
Credit" section below.
How to receive Credit for Capital Improvements and Capital Updates
To ensure the full allowed credit for eligible Capital Improvements or Capital Updates, it is mandatory
that each proposed expenditure be approved by the County prior to commencement ofanywork.Any
completed eligible Capital Improvements and/or Capital Updates that are submitted for credit without
having obtained pre-approval are allowed credit for only 50%of the pertaining eligible cost.The
process for requesting prior approval to ensure credit is:
1. Using the Capital Improvement/Capital Update form,submit a written request for approval of the
proposed Capital Improvement or Update.
2. Include detailed plans and an itemized estimate of cost. Capital improvements or updates
estimated to cost more than$2,500,whether the work is to be done by the Homeowner or a
contractor,require the Homeowner to submit bids from two licensed contractors.If the work is not
being done by a contractor,the Homeowner shall submit an itemized list of materials and the
estimated costs. If using a contractor and ora supplier provide:name(s),address(es) and, phone
number(s) on the estimate(s). (Do not send originals, only copies.).
3. After pre-approval of a capital improvement or update,if the scope of the pre-approved work
changes or if there are increases in costs,to ensure credit for the additional work and/or cost the
homeowner must request a modification of the pre-approval before starting the work and/or
incurring the costs.The request should include the revised detailed plans and/or itemized cost
estimate.
4. The County will review the proposal and approve eligible Capital Improvements or Updates within
14 days of receipt of a complete request.
5. Capital Improvements or Updates that have been approved must be completed within 12 months
of approval or a new request for pre-approval will be required.
Effective January 1, 2017 2 of 4
iTKIN
COUNTS Pitkin County
EHOP®-Deed Restricted Program
6. After an Eligible Capital Improvement or Update has been completed,within four weeks of
completion of the work,the Homeowner must submit to the County an itemized receipt or bill of
sale, complete with the contractor or supplier's name, address and phone number.The
Homeowner must submit a copy of the final inspection approval and building permit if one was
required. (Do not send original documents, only copies.)
7. Within 14 days of receipt of the final Capital Improvement or Update request the County will notify
the Homeowner in writing of the final amount of the credit.
8. All approved credits will be added to the maximum resale price immediately.
Capital Improvements shall be validated by production of original receipts for costs (actual cost) with
no allocation for Owner's "sweat equity". If the Homeowner uses a professional contractor to
complete the improvement or update, the Homeowner will be credited the amount paid for eligible
work and materials (up to the maximum allowable credit).
If a homeowner has obtained an Energy Smart loan to finance eligible updates or improvements and a
balance remains on the loan and is selling the property,the homeowner must either pay theloan
balance in full at closing to transfer ownership to a subsequent owner, or the credit given to the
owner,which will be added to the maximum resale price for the updates or improvements will be
reduced by the amount still owed on the loan.
Remember that it may be necessary to obtain a permit for the work you intend to do.
The County shall have the right to inspect the Property at times that are mutually convenient to the
County and the Homeowner to confirm the Eligible Capital Improvements or Updates have been
completed in a workmanlike manner and the reasonable value of the improvement.If the County,in its
reasonable discretion, is unsatisfied with the documentation provided by the Homeowner, it may base
its determination of the value of the Improvements upon an estimation provided by an objective third
party professional who is knowledgeable about local construction costs and practices. At the
conclusion of this process the County will send a written statement of approved Capital Improvement or
Update credit to the Homeowner.
Maintenance of your home
Homeowners are required to maintain their homes in "good, safe and habitable condition" by the
covenant they have accepted.To ensure adequate maintenance has been carried out,the following
process will take place at time of resale.
1. Buyers will be required to have a professional inspection carried out by a Nationally Certified
Inspector of their choice.
2. Homeowners must rectify inspection deficiencies except those considered to be minor
cosmetic items, or reduce the resale price by the cost of repair.
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tiCKIN
COUNTS Pitkin County
EHOP®-Deed Restricted Program
3. The Division of Housing will determine in the case of dispute whether deficiencies are
considered minor cosmetic items.
4. If the Homeowner refuses to correct inspection deficiencies and the County determines they
are items that need to be corrected by the Homeowner, the cost of repairs will be deducted
from the resale price. The County may also apply an administration fee to ensure needed
repairs are made.
Home Owners Association Dues
Home Owners Association (HOA) dues may be applicable towards a credit for capital improvements.
Proof that the dues held by the association are used specifically for the capital upgrades will be needed
in order for the HOA dues to be an eligible capital improvement.
Effective January 1, 2017 4 of 4