OFFICE OF THE CITY ADMINISTRATIVE OFFICER

Transcription

1 REPORT FROM OFFICE OF THE CITY ADMINISTRATIVE OFFICER Date: June 16, 2010 To: From: The Mayor The Council Miguel A. Santana, City Administrative Offic~ CAO File No Council File No Council District: All Reference: Los Angeles Housing Department Transmittal dated April14, 2010; Received by the City Administrative Officer on April 22, 2010; Additional information received through June11,2010 Subject STATUS REPORT ON THE NEIGHBORHOOD STABILIZATION PROGRAM I, ADDITIONAL RECOMMENDATIONS, APPROVAL OF MEMORANDUM OF UNDERSTANDING WITH THE HOUSING AUTHORITY OF THE CITY OF LOS ANGELES AND RELATED ACTIONS FOR CONTINUED IMPLEMENTATION OF PROGRAM ACTIVITIES SUMMARY The Los Angeles Housing Department (LAHD) submitted a status transmittal dated April14, 2010 (Transmittal) (C.F S8) relative to the Neighborhood Stabilization Program (NSP 1). In February 2009, the Council and Mayor authorized LAHD to receive and disburse $32,860,870 in NSP I grant funds from the U.S. Department of Housing and Urban Development (HUD) through the Housing and Economic Recovery Act of 2008 (C.F S8). The Council and Mayor also approved a program design and expenditure plan for acquisition, rehabilitation andre-occupancy of foreclosed and vacant residential properties in identified targeted areas most impacted by foreclosures (C.F S 1 0). The City's NSP I target areas, identified in Attachment One of the LAHD Transmittal, were selected because they are geographic areas with: 1) the highest percentage of home foreclosures; 2) the greatest levels of homes financed with subprime mortgages; and 3) the greatest likelihood to experience a significant rise in the rate of foreclosures. Pursuant to HUD regulations, NSP I grant funds must be obligated by August 26, and expended within four years of HUD's approval, by February 26, As the City's designated administrator of NSP I, LAHD is required to report back annually to Council in order to obtain program implementation and funding appropriation authority (C.F S8). The LAHD requests and our recommendations are summarized below. 1. Authority to reprogram $8.2 million in previously approved NSP I funds, transferring funds from the LAHD-operated Walk-In Program (WIP) to the Acquisition and Disposition of Foreclosed Properties (ADFP) Program and authority to execute the necessary amendment to the contract with Restore Neighborhoods Los Angeles (RNLA) (Contract No. C ) to reflect the increased funding allocation. The LAHD has recently reduced the request amount to $8.2 million due to the addition of new WIP commitments after the release of the Transmittal. The revised amendment to the RNLA contract will be increased by $8.2 million, from $21.8 million to $30.0 million. The RNLA operates the ADFP Program and is a nonprofit holding and development corporation that was created for the specific purposes of acquiring,

2 CAO File No. PAGE rehabilitating and selling foreclosed and abandoned single family and multi-unit properties through NSP I for resale to qualified owners. This amendment is requested in response to the greater demand within the ADFP and also the short timeframe in which NSP I funds must be committed. It is recommended that these requested (and Department-amended) adjustments be approved. 2. Authority to execute agreements between LAHD, RNLA and the Housing Authority of the City of Los Angeles (HAC LA) to establish terms and conditions by which RNLA may sell rehabilitated foreclosed properties to HAC LA as replacement public housing in the community of Watts, in close proximity to the Jordan Downs public housing development. The original request has been modified by LAHD and HACLA. The changes are summarized in the Findings Section of this report. It is recommended that these requests (and amendments) be approved. 3. Authority for employment authorities for two exempt Accountant II positions for the purpose of providing accounting support as opposed to contracting the work. The annual cost of the two positions is $124,486 for direct salaries plus $56,018 for related costs. The Department plans to fill these positions as soon as the employment authorities and exemptions are granted. These employment authorities would be continued through June 30, It is recommended that these new employment authorities and exemptions be approved. 4. Authority to appropriate and expend a total of $479,262 to cover LAHD's administrative expenditures such as staff costs, mandatory travel, contractual services and other administrative items. The original LAHD requests have been revised to reflect current needs. The LAHD added two requests for contract extensions totaling $200,000. While this report includes Controller language to transfer these funds into the Department's Fund 100 Contractual Services Accounts, the amendments will be evaluated separately. Subsequent to the release of the Transmittal, LAHD also submitted requests for additional revisions to the agreement between RNLA and LAHD. These amendments are considered technical in nature and are meant to comply with HUD requirements. They are summarized in Attachment A of this report. It is recommended that these requests be approved. The Findings Section of this report provides an analysis to address the requested approvals. Attachment F of this report includes a revised NSP I Budget Summary which includes budget adjustments, and a summary of expenditures and commitments. The recommendations contained in this report are in compliance with the City's Financial Policies in that the continuation of the NSP I grant activities are contingent on the continuation of federal funding. RECOMMENDATIONS That the Council, subject to the approval of the Mayor: 1. Approve the transfer of $8,167,931 in Neighborhood Stabilization Program (NSP I) funds to augment funding available to the Acquisition and Disposition of Foreclosed Properties Program, operated by Restore Neighborhoods Los Angeles (RNLA), from the Walk-In Program; 2. Authorize the General Manager, Los Angeles Housing Department (LAHD), or designee, to: A. Execute an amendment to the Professional Services and Rehabilitation Agreement with

3 CAO File No. PAGE RNLA (Contract No. C ) to: a) increase the funding available for the Acquisition and Disposition of Foreclosed Properties Program by $8,167,931, revising the total contract amount from $21,828,963 to $29,996,894; b) include the technical changes included as Attachment A of this report; and, c) include provisions to increase the aggregate of the contract amount in accordance with any receipts of future program income consistent with the Housing and Economic Recovery Act of 2008 and U. S. Department of Housing and Urban Development (HUD) guidelines, for depo5it and appropriation into the City's NSP I Grant Fund 50T, Department 43, in conformance with Mayor and Council action on this item (C.F S8), subject to the review and approval of the City Attorney as to form and legality; B. Authorize the General Manager, LAHD, or designee, to negotiate and execute a Memorandum of Understanding (MOU) with the Housing Authority of the City of Los Angeles (HACLA), in substantial conformance with Attachment B of this report, subject to the review and approval of the City Attorney as to form and legality, for the purpose of setting forth terms and conditions by which RNLA, a nonprofit holding and development corporation, will sell rehabilitated NSP I properties to HAC LA as replacement public housing in the community of Watts, in close proximity to the Jordan Downs public housing development; C. Authorize the General Manager, LAHD, or designee, to negotiate and execute a Three-Party Master Purchase and Sale Agreement as a sub-agreement to the HACLA MOU, between RNLA as seller, HACLA as buyer and LAHD as administrator of NSP I funds, for the purposes of: 1) establishing comprehensive property sales agreement terms for the sale of NSP!-funded properties located in the community of Watts, in close proximity to the Jordan Downs public housing development, by RNLA to HACLA; and, 2) authorizing the execution of Individual Property Purchase Agreements between RNLA and HACLA for each sale, in substantial conformance with Attachment Three of the LAHD transmittal dated April 14, 2010 (C.F S8) and as amended to reflect the final executed MOU with HAC LA on this matter, and subject to the execution of the HACLA MOU as described in Recommendation 28 above and the Master Purchase and Sale Agreement and approval from the HUD Public and Indian Housing Program Office, if necessary; and, the review and approval of the City Attorney as to form; 3. Authorize the City Controller to: A. Transfer funds within Fund No. 50T, Department 43, NSP I Grant, and expend additional funds to reflect the changes in the budget as follows: Account Account Name Amount From: E820 NSP - Program Administration $696,192 E143 Housing 20,336 Total $ 716,528 To: F304 NSP - Administrative Reserve $698,528 F143 Housing 18,000 Total $ 716,528 B. Expend additional funds upon proper written demand by the General Manager, LAHD, or designee, from administrative Account No. F143, Housing, for an amount up to $18,000;

4 CAO File No. PAGE Authorize Resolution employment authority for two exempt Accountant II positions, Class Code , in the LAHD for the NSP I grant from July 1, through June 30, 2011, subject to the review and approval by the Civil Service Commission as to Civil Service classification and exemption in accordance with Charter Section 1001 (d) (4), based on the temporary grant funded nature of the program. Instruct the City Clerk to place on the Council Calendar on July or soon thereafter the following recommendations: 5. Authorize the Controller to: A Transfer funds within Fund No. 50T, NSP Grant, Department 43, as follows: Account Account Name Amount From: F304 NSP 1 -Administrative Reserve $563,456 To: G143 Administration- HousinQ $479,262 G299 Related Costs 84,194 Total $ B. Authorize the Controller to expend funds upon proper written demand by the General Manager, LAHD, or designee, within Fund No. 50T, Department 43, NSP Grant, Account No. G143, Administration- Housing, and Account No. G299, Related Costs, in the amount of $84, 194; C. Authorize the Controller to appropriate funds in General Fund 1 00, Department 43, in the following accounts: Account Account Name Amount 1010 Salaries General $193, Travel 10, Contractual Services 200, Office and Administrative 75,451 Total $ D. Expend funds from Fund No.1 00, Department43, LAHD, in the accounts identified above, upon proper written demand by the General Manager, LAHD, or designee; E. Periodically appropriate funds in the Fund No. 50T, NSP I Grant, Department 43, upon receipts of future program income from loan repayment and other sources, in the NSP I Program Operation Account and the NSP Program Administration Account. The ratio for the appropriation of the two accounts will be 90/10, respectively; and, 6. Authorize the General Manager, LAHD, or designee to prepare Controller instructions and/or make any technical adjustments that may be required and are consistent with these actions, subject to the approval of the City Administrative Officer, and instruct the Controller to implement these instructions.

5 CAO File No. PAGE FISCAL IMPACT STATEMENT There is no General Fund impact The recommendations contained in this report contain actions needed to continue implementation and expenditure of $32.9 million in Neighborhood Stabilization Program (NSP I) funds awarded to the City by the U.S. Department of Housing and Urban Development (HUD) through the Housing and Economic Recovery Act of Approval of these recommendations will authorize the Los Angeles Housing Department (LAHD) to: a) reprogram $8.5 million to the Acquisition and Disposition of Foreclosed Properties Program from another program activity; b) negotiate and execute a contract amendment to authorize Restore Neighborhoods. Los Angeles (RNLA), a nonprofit corporation that operates the Acquisition and Disposition of Foreclosed Properties Program, to expend the additional funds ($8.2 million) and other administrative adjustments; and, c) negotiate and execute agreements between LAHD, RNLA and the Housing Authority of the City of Los Angeles (HAC LA) to establish terms and conditions by which RNLA may sell NSP I rehabilitated foreclosed properties to HACLA. In addition, two new exempt employment authorities will be approved for the duration of the NSP I grant. These recommendations are in compliance with the City's Financial Policies in that the continuation of the NSP I grant activities are contingent on the continuation of federal funding. Attachments

6 CAO File No. PAGE FINDINGS 1. Background The Los Angeles Housing Department (LAHD) submitted a transmittal dated April 14, 2010 (Transmittal) to the Mayor and Council to provide a status on the implementation of the Neighborhood Stabilization Program (NSP 1), representing an allocation of $32,860,870 in funds issued by the U.S. Department of Housing and Urban Development (HUD) through the Housing and Economic Recovery Act of 2008 (C.F S8). The LAHD also requests various approvals needed to implement NSP I through The City Administrative Officer was instructed to review the requests and to make recommendations on these items. 2. Status of NSP I Implementation The NSP I funds must assist moderate income persons or households (81 to 120 percent ofthe area median income [AMI]) or serve areas in which at least 51 percent of residents are moderate income. In addition, 25 percent of the NSP I Program funds (at least $8.2 million of the $32.9 million) must be used for housing for low-income households (at or below 50 percent AMI). The table below provides a summary of eligible AMI income levels Maximum Household Income Limits based on Area Median Income (AM~L_~~~- Househ~ld Size II Jl 2 II 3 II 4 II 5 II 6 II 7 IC~-~--~ Very Lowlf!~~~lncome I $29,000!I $33,150 II $37,300 II $41,400 II $44,750 II $48,050 II $51,350 II $54,650 I Low {8~~~t~come ~~~~~~~~ 00!Elt=~~.~~~c:~~.Jt~::.~::JBBBB Source: LA Housing Department Attachment F of this report includes a revised NSP I Budget Summary, and also includes a status of expenditures and commitments as reported by the LAHD. The program and budget design adjustment requests are discussed later in this report. Funding commitments totaling $16.9 million are reported as of June 3, This represents 51 percent of the total NSP I award of $32.9 million. The greatest funding commitment, $10.5 million, occurred in the Single-Family Homeownership Program (SFHP) that is operated by RNLA. Also, as of May 30, 2010, the actual funds expended totaled $11.7 million, representing 36 percent of the total NSP I award. Of these expenditures, $0.68 million were administrative expenditures and $11.1 million were program expenditures. The greatest expenditures, $9.6 million, occurred in the SFHP. As reported earlier, all NSP I grant funds must be obligated (committed) by August 26, 2010 and expended within four years of HUD's approval, by February 26, As of June 3, 2010, the remaining NSP I funds that must be committed is approximately $16 million, or 49 percent of the award. The LAHD is required to provide status reports to HUD on an annual basis, based on the Disaster Recovery Grant Reporting system developed by HUD's Office of Community Planning and Development for the Disaster Recovery CDBG program. The detailed reports may be viewed at LAHD's website at Based on the last submitted report to HUD, which covers performance from January through March 31, 2010, LAHD reports the following accomplishments:

7 CAD File No. PAGE Approved 16 Walk-In Purchase Assistance Program (WIP) Program loans for homebuyer purchases. Although over 60 reservations were received, less than one-third resulted in purchases; RNLA screened 393 properties; RNLA acquired 28 properties (with 35 units); and, RNLA initiated rehabilitation work at seven RNLA-owned properties. These figures have changed significantly since this last report. For instance, there are now three properties that are listed for sale on RNLA's website ( The RNLA provided a summary of activities as of April?, 2010 by Council District There are approximately 58 "active" projects, with many in different stages of completion. This summary is included as Attachment E of this report. The Department experienced several delays in starting up the NSP I Program. Some of the reasons include: a) the creation of RNLA for the NSP I grant, which was established in January 2009 but took many months to become operational even though the majority of the NSP I funds were allocated for RNLA-administered activities; b) the hiring of one Project Assistant who is responsible for performing various duties required to implement NSP I, which could not be filled until February due to the City's Hiring Freeze; and, c) challenges experienced in making funding commitments through the LAHD-administered WIP Program. Most of these delays were addressed or were resolved, and so the Department expects to expend the majority of the NSP I grant funds by the August 2010 deadline. For instance, LAHD reports that the majority of the commitments were made beginning in December 2009, once LAHD and RNLA had established policies and procedures by which to implement the NSP I program. It should be noted that the HUD Los Angeles Office of Community Planning and Development (HUD-LA) recently completed a capacity review of the NSP I program. The objective of this review was to determine whether the City had sufficient capacity and the necessary controls to manage and administer the NSP I funds (and also the NSP II). On March 17, 2010, HUD-LA issued a letter with the determination that the City had the capacity to adequately administer its NSP I (and NSP II) funding. No evidence was found to the contrary. One of the reasons cited for this favorable evaluation is the fact that LAHD proposed a new strategy of shifting more funding to the NSP-administered activities, in order to ensure the timely expenditure of funds. 3. Administrative and Program Adjustments The City's NSP I budget of$32.9 million includes $3.3 million to cover administrative costs and $29.6 million allocated for program delivery activities. The NSP I Budget Summary is provided in Attachment F of this report. A Administrative Adjustments. The LAHD requests certain adjustments to be made within the existing budget for purposes of improving implementation activities and to expedite expenditure of funds. For instance, proposed decreases in RNLA's administrative budget ($0.9 million), contracted accounting support ($0.2 million) and appraisal services ($0.2 million) will make available additional funds for two new positions for accounting support

8 CAO File No. PAGE ($0.6 million) and the extension of two contracts for technical assistance services ($0.7 million). These requests are summarized below. 1. Two New Positions. The LAHD requests Council and Mayor approval of resolution employment authority and exemption of two new Accountant II positions. One position is requested to perform Grant Management duties, including: encumbering funds and immediately processing payments for NSP!-funded projects; working with the Controller to set up vendor codes in the City's Financial Management Information System (FMIS); entering funding commitment information into the in-house Housing Information Management System (HIMS) to ensure that commitment data matches FMIS entries; analyzing and processing disbursement requests and ensuring that submitted supporting documents are complete and accurate; ensuring that payment requests for work related to rehabilitation construction is accompanied by all necessary documentation; and, performing other duties as needed. The second position is requested to perform Cash Managements duties, including: researching, reconciling and making data adjustments in FMIS, HIMS and HUD's system; reviewing in-house Cash Receipt Correction reports, performing daily and monthly reconciliation of cash balances and reports check disbursement of NSP expenditures; performing draw down for NSP I funds in HUD's system; and, performing other duties as needed. Position descriptions are included as Attachments C and D in this report. The cost of these positions is $180,505 (Salary: $62,243 each or $124,486 for both; Related cost: $28,009 each or $56,018 for both). Pursuant to Charter Section (d) (4), grant-funded positions may be approved for a term of no more than two years and may be extended for one additional year for a maximum exemption of three years. ii. Contract Amendments. The LAHD inadvertently omitted two amendment requests from the Transmittal and requests consideration ofthese additional approvals. Both are for amendments to increase funding and extend service terms. However, these amendments were not contemplated as part of the originally approved NSP I budget. Therefore, this Office recommends that these items be deferred for thorough evaluation through the Mayor's Executive Directive Three process. However, it is recommended that the funds for these activities be placed into the Department's Contractual Services Account within the Adopted Budget. This report includes the Controller instructions needed to implement this transfer of funds. Both contractors will be expected to consider taking a 10 percent reduction on the proposed compensation amount, if it has not already been taken under the existing agreement. Technical Services. The LAHD requests approval of a Second Amendment to Contract No. C with Ann Bauman, A.l.C.P. (Ann Bauman) to add $100,000, revising the contract award from $200,000 to $300,000, and to extend the time of performance by one year from June 30, 2010 through June 30, Under NSP I, Ann Bauman was contracted to provide certain services to help with the start-up of NSP I and to ensure that the City and RNLA maintain compliance with NSP policies and procedures (C.F S8). The Second Amendment is requested to provide continuity of these specialized services.

9 CAO File No. PAGE Systems Support. The LAH D requests authority to execute a Second Amendment to Contract No. C with 3Dl, Inc. by adding $100,000, augmenting the existing contract to $154,400 and to extend the performance term by three years, effective from July 1, 2010 through June 30, Under the terms of the original contract, 3DI, Inc. agreed to perform applications development, data management and other information technology services. The LAHD will continue to absorb additional administrative costs to implement the NSP I through the use of existing administrative, homeownership and housing rehabilitation staff to maintain program administration and oversight. This support will be provided through the work of staff paid for with CDBG funds provided for these activities in the Consolidated Plan. In February 2009, the Department received approval of one new Project Assistant position, which was filled in February Employment authority for this position will be continued through the Personnel Authority Resolution. B. Program Adjustments. The LAHD has relied on a collaboration with its partner, Restore Neighborhoods Los Angeles (RNLA) to implement the majority of the NSP I activities. The Department requests funding adjustments to direct additional funds to the program areas of highest demand. The NSP I program activities, funding and recommended adjustments are described below. i. WIP Program- $1.8 million. This activity is operated by LAHD staff and is designed to support the acquisition and rehabilitation of foreclosed single family properties for affordable homeowners hip opportunities. A detailed program description and requirements are included in Pages Five through Seven of the Transmittal. Approximately $10 million was originally set aside for this activity. However, due to tow performance activities, LAHD proposes to reduce the allocation by $8.2 million (instead of the $8.5 million proposed in the Transmittal). One of the reasons cited for the low performance is that the rehabilitation. needs of foreclosed properties exceeded the loan amounts for which borrowers could qualify. Also, numerous reservations were cancelled because purchase prices exceeded the appraised values of the properties or borrowers were not able to secure the first mortgage loan from a lender. Such reprogramming adjustments are permitted per the executed Sub-Recipient Agreement between LAHD and RNLA. ii. Acquisition and Disposition of Foreclosed Properties (ADFP) Program- $27.7 million. This category includes the SFHP and the Multi-Family Rental Units Program (MFRUP). Both activities are operated by RNLA, which in turn has worked with the National Community Stabilization Trust (NCST), whose mission is to facilitate the transfer of foreclosed and abandoned properties from financial institutions to local housing organizations to promote productive property reuse and neighborhood stability. The program descriptions are provided in Pages Seven through Nine of the Transmittal. The original amount set aside for these activities was $5.6 million and $14.0 million, respectively. Due to expectations that these two activities will use most of the funding, and in an effort to maintain maximum flexibility, the combined funding available for both activities will be $27.8 million, which includes the $8.2 million reprogrammed from the WIP Program. Pursuant to HUD regulations, RNLA must acquire properties at a maximum value of 99 percent of the appraised market value of the property, rehabilitate these properties, if

10 CAO File No. PAGE needed, and sell them directly to eligible homebuyers. Once rehabilitation work is completed, homes are sold to qualified homebuyers at a price no greater than the total cost of acquisition, maintenance and rehabilitation and other costs allowed by the NSP I regulations. The City's role with respect to the RNLA programs is that the City is the stated beneficiary on promissory notes and deeds of trust in all financing agreements executed between RNLA and developers. Under MFRUP, RNLA has acquired and worked to rehabilitate foreclosed multi-family residential properties for affordable rental housing opportunities. The RNLA purchases foreclosed multi-family properties "in bulk" at an average discount of 15 percent. Properties are rehabilitated for occupancy by families with incomes at or below 120 percent of AMI. The RNLA will identify qualified developers, through a competitive selection process, to rehabilitate and maintain these properties as affordable housing. In addition to meeting AMI level requirements, eligible buyers must also: a) not have an ownership interest in any other property at the time that they make an offer; b) attend an eight hour Homebuyer Education class; and, c) submit a complete purchase offer. The additional requirements are detailed in Attachment Five of the TransmittaL The policy by which competing offers will be evaluated is also detailed in Attachment Five of the Transmittal. Attachment Five of the LAHD Transmittal includes additional eligibility information. Additional information can also be found at RNLA's website at www. restoreneighborhoodsla.org. In consideration of the City's Rent Stabilization Ordinance (RSO), which protects tenants from eviction due to foreclosures, RNLA plans to take precautions to ensure that the RSO is observed. In the event that an RNLA-purchased property has tenants living in the units, RNLA will work with existing tenants to minimize disruption during the rehabilitation period and will provide temporary relocation if needed. C. Program Income. To date, no NSP I program income has been collected. Revenue received by the City or its subrecipient that is directly generated from NSP I funds and is received prior to July 30, 2013, must be returned to the grantor and may be returned to the City. However, any program income received after July 30, 2013 is not required to be returned to HUD and may continue to be used for NSP-eligible activities. 4. Proposed Agreements with Housing Authority with the City of Los Angeles (HACLA) On January 26, 2010, the HAC LA Board of Commissioners (HAC LA Board) approved a Resolution authorizing the President and Chief Executive Officer to enter into a Memorandum of Understanding (MOU) between HACLA and LAHD. The purpose of the MOU is to negotiate with LAHD for opportunities to acquire foreclosed and vacant properties in Watts in close proximity to the Jordan Downs public housing development. As proposed, HAC LA, LAHD and RNLA will eventually enter into a Master Purchase Contract to establish the specific transaction terms. Each property sale would be made through individual Purchase Agreements. The proposed source of funds for HACLA's purchases will be Replacement Housing Factor Funds (RHFF) which are to be used for the purchase of units that replace or create additional public housing units. Final approval of the Master Purchase Contracts and the use of RHFF funds will be considered at a future date.

11 CAO File No. PAGE Attachment B of this report includes a revised MOU, as of June 11, 2010, to reflect changes to the original version included in the Transmittal. The revised MOU reflects changes based on ongoing negotiations between HACLA, LAHD and RNLA. The most significant changes are summarized below. Very low income households. This is an additional section stating that at least 25 percent of the properties purchased by HAC LA will be occupied by and made affordable to households whose incomes are at or below 50 percent of AMI (Article 1: General Terms, Section 1.4). Households above 50 percent AMI. This is an additional section stating that no more than 75 percent of the properties purchased by HAC LA will be occupied by and made affordable to households whose incomes are between 51 percent and 120 percent AMI (Article 1: General Terms, Section 1.5). Property acquisition and sales processes. Additional language was added to provide RNLA the discretion to select properties from the RNLA inventory, which will limit HAC LA's access to all of RNLA's inventory (Article II: Procedures for Program Implementation, Section 2.2). HUD Requirements and Approval. Language is added to acknowledge that a 40 year HUD Declaration of Trust Annual Contributions Contract (DOT-ACC) will be recorded on each property purchased by HAC LA with RHF Funds and that these properties will be used solely for public housing. The DOT-ACC places restrictions on tenant occupancy and rents. Therefore, this document serves as the Regulatory Agreement (Article IV: General Conditions, Section 4.8). 5. Report Back on Line of Credit The Councll had directed LAHD to report back on the status of a line of credit that was anticipated to be created for NSP I. On Page 10 of the Department's Transmittal, there is discussion relative to a proposed $20 million Line of Credit from the National Community Stabilization Trust/REO Capital Fund. Due to the anticipated increase in work resulting from the NSP II grant award of $100 million, LAHD has put this Line of Credit on hold in order to focus on expeditiously obligating all NSP I funds. Also, the LAHD reports that RNLA obtained approval for a $600,000 Line of Credit from the Enterprise Community Loan Fund, Inc. (Enterprise), with assistance from LAHD. The Term Sheet is currently being revised to reflect recent negotiations between RNLA and Enterprise. This Line of Credit will be used to bridge reimbursement of NSP I funds payable to RNLA to fund costs in connection with the purchase, rehabilitation and sale of properties acquired under the NSP I (and II) Program and will provide funds for Borrower's operating expenses, provided that they are grant eligible expenses. 6. Additional NSP II Funding In July 2009, the Council and Mayor authorized LAHD to submit an application requesting $1 00 million in Neighborhood Stabilization Program II (NSP II) grant funds provided by HU D through the American Recovery and Reinvestment Act. Similar in scope to NSP I, NSP II funds may be used to provide additional funding for the acquisition, restoration, rehabilitation, and sale of foreclosed properties (C. F ). The LAHDwas instructed to report to Council,

12 GAO File No. PAGE upon notification of grant award from HUD, with an NSP II program budget and other actions necessary to implement the program. On January 14, 2010, the City received a grant award for the full amount requested at $100 million. These funds must be expended within three years, by February 10, Under a separate cover, the Department submitted a request to the Mayor and Council for authority to accept the NSP II grant award and for other implementation approvals (C. F ). This request was referred to the Ad Hoc on Economic Recovery and Reinvestment Committee and is pending review and consideration. 7. Looking forward - NSP Ill On May 18, 2010, HUD announced that the Obama Adm inistration (Administration) would work with Congress to provide additional fund ing for a third round of NSP and foreclosure prevention counseling. The Administration also plans to reallocate uncommitted NSP I funds to cities and counties with greatest needs, based on foreclosure and delinquency rates, vacancy problems and unemployment. The Adm inistration will work with Congress on new foreclosure counseling efforts to help homeowners facing foreclosure stay in their homes. In addition, steps will be taken to provide funds to help homeowners avoid foreclosure. The HUD has estimated that 70 percent of the $3.9 billion in NSP I funds would be obligated by the 18-month deadline th is fall, in September and October 2010, for a recapture of approximately $1 billion. Following a 30 day review period, funds that grantees have not yet committed to specific projects will be reallocated either to new grantees or as additional funds for first round grantees. Angelica amayoa Senior Administrative Analyst II MAS:AHS: c

13 Attachment A Los Angeles Housing Department (LAHD) Professional Services ad Rehabilitation Agreement with Restore Neighborhoods Los Angeles (RNLA) Requested Changes and Corrections to Existing Agreement Contract No. C AUTHORIZE the General Manager, LAHD, or designee, to execute the following amendments as a Second Amendment to the Professional Services and Rehabilitation Agreement (PSA) with RNLA (Contract No. C-11S683) to include the following provisions, subject to the review and approval of the City Attorney as to form: i. Include provisions to restrict Contract No. C-11S683 for implementation of NSP 1 funds from the City's NSP Grant Fund SOT, Department 43 but allow for collaboration with NSP 2 activities to be recorded under a separate agreement; ii. Increase the total contract authority amount by $8,213,7S1, from $22,078,963 to $30,282,714 to reflect: a. An increase to the "Acquisition and Disposition of Foreclosed Properties Program" by $7,742,714, from $20,000,000 as described in the PSA to $27,742,714 to carry out the City's reprogramming of NSP1 funds from the "Walk-In Program;" and, b. An increase to the contract authority for the amount of compensation to RNLA by $471,037, from $2,2S4,180 to $2,300,000 as described in the terms of the PSA; iii. iv. Extend the contract term for an additional period of two years and six months, which includes two one-year renewal periods, to expire on March 31, 2013; Amend Exhibit A, entitled "Indemnification and Insurance Requirements," to conform to City insurance requirements established by Charter, ordinance or policies; v. Amend Exhibit F, entitled "Applicable Census Tracts and Block Groups," to include variance in NSP 1 eligible areas consistent with HERA and HUD guidelines; vi. vii. viii. ix. Amend Exhibit G, entitled "Timeline and Performance Measures," to include variance in number of single family units and total units consistent with a proportionate ratio of NSP1 funds reallocated from the "Walk-In Program" to the "Acquisition and Disposition of Foreclosed Properties Program;" Amend Exhibit H, entitled "Administrative Budget," to modify the fiscal year for budgeting purposes to begin July 1 to June 30, and to amend the administrative budget amounts for each respective fiscal year; Include provisions to amend "Compensation and Method of Payment" to be consistent with current NSP Procedures and HUD guidelines; and, Include provisions to increase the aggregate of the contract amount in accordance with any receipts of future program income consistent with HERA and HUD guidelines, for deposit and appropriation into the City's NSP Grant Fund SOT, Department 43, as directed by the Mayor and Council in C.F S8.

14 Description Limit Agreement to NSP 1 Funds only Increase to Contract Amount Contract Term Extension Exhibit A "Indemnification Requirements" and Explanation Current agreement language does not restrict source of funds from the City's NSP Grant Fund 50T, Department 43 Increase the total contract authority amount by $8,213,751, from $22,078,963 to $30,282,714 to reflect: a. An increase to the "Acquisition and Disposition of Foreclosed Properties Program" by $7,742,714, from $20,000,000 as described in the PSA to $27,742,714 to carry out the City's reprogramming of NSP1 funds from the "Walk-In Program;" and, b. An increase to the contract authority for the amount of compensation to RNLA by $471,037, from $2,254,180 to $2,300,000 as described in the terms of the PSA. Contract term will be extended to expire within one month of the expiration date of the City's Grant Agreement with HUD (additional period of two years and six months, which includes two one-year renewal periods, to expire on March 31, 2013).Existing agreement allows for 45 days after expiration for close out activities. RNLA will add Workers Compensation and Insurance Professional Liability coverage to be consistent with City insurance requirements Exhibit F Variances allowed for NSP 1 eligible areas "Applicable Census Tracts and Block that are consistent with HERA and HUD Groups" guidelines will be added to the Agreement (For example, properties that are located across the street from an eligible area are also NSP eligible) Exhibit G "Timeline and Performance Measures" The number of single family units and total units that are purchased by RNLA will be increased because additional NSP1 funds will be allocated to the "Acquisition and Disposition of Foreclosed Properties Program" 2

15 Descri l;!tion Exhibit H "Administrative Budget" ExQianation RNLA will amend its fiscal year to begin July 1 to June 30. Its administrative and program operations budget amounts will be increased because of additional NSP1 funds for the "Acquisition and Disposition of Foreclosed Properties Program" Section 301 Current agreement language is not "Compensation and Method of Payment" consistent with current NSP Procedures and HUD guidelines and will require a technical amendment. Provision for Program Income Current agreement language does not allow for future receipts of program income by RNLA, which will be transferred to LAHD for deposit and appropriation into the City's NSP Grant Fund 50T, Department 43, as directed by the Mayor and Council in C.F

16 Draft Copy- 6/11/10 ATTACHMENT B MEMORANDUM OF UNDERSTANDING By and Between THE HOUSING AUTHORITY OF THE CITY OF LOS ANGELES AND THE LOS ANGELES HOUSING DEPARTMENT This Memorandum of Understanding ("MOU") is made and entered into on, by and between the City of Los Angeles ("City") through the Los Angeles Housing Department ("LAHD") and the Housing Authority of the City of Los Angeles, California, ("HACLA"). RECITALS WHEREAS, HACLA is a public body, corporate and politic, duly created, established and authorized on June 2, 1938 to transact business and exercise powers under and pursuant to the provisions of the Housing Authorities Law, consisting of Chapter 1 of Part 2 of Division 24 ofthe California Health and Safety Code; and WHEREAS, HACLA was established for the purpose of providing safe and sanitary dwelling accommodations for persons of low income throughout the City; and WHEREAS, LAHD was established by the Los Angeles City Council by Ordinance No. 166,009 on December 21, 1990 for the purpose of providing safe and livable neighborhoods through the promotion, development and preservation of safe and affordable housing; and WHEREAS, HACLA must spend approximately $ 6. 7] million in certain Replacement Housing Factor Funds ("RHF Funds") received from the federal Department of Housing and Urban Development ("HUD") for public housing units by a date certain or it may be required to return such funds to HUD; and WHEREAS, HACLA desires to spend the RHF Funds and potentially additional discretionary funds to increase the number of such public housing units in the general Watts area ofthe City (as further defmed and identified herein); and 1

17 Draft Copy- 6/11/10 ATTACHMENT B WHEREAS, on March 9, 2009, the Mayor and Los Angeles City Council approved the City's Neighborhood Stabilization Program ("NSP") (Council Files S8 and SlO) for the purpose of stabilizing communities that have suffered from foreclosures and abandonment; and WHEREAS, Restore Neighborhoods LA, Inc. ("RNLA"), the City's NSP sub-recipient, acquires, performs any work necessary to insure habitability, and resells properties in NSP target areas that include properties located in the general Watts area of the City; and WHEREAS, RNLA is responsible for implementing the City's NSP requirement that not less than 25% of the NSP funds provided to the City shall be used for the purchase and rehabilitation of abandoned or foreclosed homes or residential properties that will be used to house individuals or families whose incomes do not exceed 50% of area median income ("AMI") and that the remaining 75% of acquired properties are occupied by households having incomes at or below 120% of AMI; and WHEREAS, HACLA desires to purchase certain properties in the general Watts area of the City (the ''Properties") from RNLA to provide housing for families who are current residents of the Jordan Downs Public Housing Development; and WHEREAS, RNLA desires to sell these properties to HACLA; and WHEREAS, HACLA and LAHD are the Parties to this MOU, outlining the agreements between the parties; and WHEREAS, RNLA and HACLA are the Parties to a Master Purchase Agreement under which properties will be acquired by HACLA from RNLA at the habitability standard defined in Section 3.2 of this MOU. WHEREAS, HACLA agrees to enter into this MOU identifying the roles and responsibilities of LAHD, RNLA and HACLA in the sale of the Properties by RNLA to HACLA under the Master Purchase Agreement and to cooperate with LAHD for the purpose of setting forth the terms and conditions under which HACLA will purchase the Properties from RNLA; and WHEREAS, LAHD and HACLA agree to enter into an agreement to collaborate in the use of Neighborhood Stabilization Program 2 ("NSP2") funds received by LAHD, the terms of which are yet to be determined; and 2

18 Draft Copy- 6/11/10 ATTACHMENT B WHEREAS, HAC LA and LAHD will use a portion of the NSP2 funds for the purpose of furthering its efforts to revitalize and stabilize the Watts community. NOW THEREFORE, IN CONSIDERATION of the mutual agreements, obligations, and representations, LAHD and the HACLA hereby agree as follows: ARTICLE 1: GENERAL TERMS 1.1 TERM OF THIS AGREEMENT. The term ofthis MOU shall commence on the execution date of this agreement and continue for 12 months, with the option for two 1-year extensions, by mutual written agreement of the Parties. 1.2 MASTER PURCHASE AGREEMENT. There will be a Master Purchase Agreement between RNLA and HACLA that sets forth in detail the terms under which HACLA shall purchase the eligible Properties. The Master Purchase Agreement shall be subject to approval by HUD's Office of Public and Indian Housing, if required. Each individual Property shall be sold and purchased utilizing a separate Purchase Agreement under the Master Purchase Agreement. All such agreements will be subject to any applicable HUD approvals. 1.3 SUB-AGREEMENTS. Any sub-agreement for the purpose of implementing this MOU (e.g., the Master Purchase Agreement) between HACLA and RNLA are incorporated herein by reference and will be subject to the approval of both LAHD and HAC LA. 1.4 VERY LOW INCOME HOUSEHOLDS. At least 25% of the properties purchased by HACLA will be occupied by and affordable to households whose incomes are at or below 50% of AMI. HACLA will prioritize properties purchased such that the first of each four properties purchased will be restricted to incomes at or below 50% of AMI. 1.5 HOUSEHOLDS ABOVE 50% OF AMI. No more than 75% of the properties purchased by HACLA will be occupied by and affordable to households whose incomes are between 51% and 120% of AMI. ARTICLE II: PROCEDURES FOR PROGRAM IMPLEMENTATION 2.1 GENERAL. A single point of contact will be provided by HACLA and by LAHD to coordinate the pilot program efforts of both Parties covered by this MOU. 3

19 Draft Copy- 6/11/10 ATTACHMENT B HACLA's contact will be Dhiraj Narayan and LARD's contact will be Doug Swoger. Upon signing this MOU, LAHD and HACLA will provide each other with a written list of LAHD, RNLA, and HACLA key personnel working under this MOU, their addresses, telephone numbers and fax numbers. Within five (5) business days of any changes in key personnel, each agency will be notified by HACLA, LAHD, RNLA PROPERTY ACQUISITION AND SALES PROCESSES So long as HACLA has available RHF Funds for this purpose, subject to any applicable HUD approval, HACLA agrees to purchase any property, that: is acquired by RNLA within the HACLA geographic area as set forth in Section3.1 herein (identified in the map attached hereto as Exhibit A), and fits the eligible property criteria outlined in Section 3.2 herein, provided that HACLA has 4 business days to evaluate the property to be purchased and notify RNLA of its acceptance of the property, prior to purchase by RNLA. However, nothing shall prevent RNLA from choosing not to sell HACLA properties that it acquires in the HACLA geographic area should it chose to do so HACLA ACCEPTANCE OF PROPERTY PROCESS RNLA will send HACLA an that: identifies the due date and time by which HACLA must property acceptance; lists the property address; describes how the property fits the criteria outlined in Sections 3.1 and 3.2 ofthis MOU; and contains at least four photos of the property and two photos of the neighborhood. If HACLA does not notify RNLA of its acceptance of the property by the acceptance date and time by or fax, then RNLA will not purchase the property under the Master Purchase Agreement. However, nothing shall prevent HACLA from later directing RNLA to move a property, purchased on RNLA's own account, to the Master Purchase Agreement or purchase a property under the Master Purchase Agreement, if that property qualifies in all respects for HACLA purchase PROPERTY SALES TO HACLA Sales to HACLA under the Master Purchase Agreement: 4

20 Draft Copy- 6/11/10 ATTACHMENT B HACLA will provide RNLA with a signed real estate purchase agreement ("Purchase Agreement") for each property, as soon as the property has been purchased by RNLA. "As soon as" shall be defined as no later than five (5) business days from RNLA's purchase of the property. The Purchase Agreement will be subject to specific contingencies contained in the Master Purchase Agreement described below. HACLA agrees to purchase such Properties only as long as it has eligible RHF Funds designated for the purchase of these Properties, subject to any applicable HUD approval In the Master Purchase Agreement and each Purchase Agreement, HACLA will include the following terms: a. Inspection contingency-- not to exceed five (5) business days from notification from RNLA b. Financing Contingency ~ none c. Close of Escrow - not to exceed 40 days from acceptance of receipt by Purchaser of written notification by seller of the final ("Final Sales Price") by fax, E mail or US. Mail. The Closing Period ("Closing Period") includes the 5 business day inspection period and 35 days to receive HUD approval with 10 business days thereafter to execute the close and wire closing funds. The Final Sales Price is defined as the maximum purchase price under Section 3.3 below. d. Title and Escrow Services- seller's choice Subject to the Maximum Purchase Price limitations m Section 3.3, LAHD will ensure that RNLA signs or counters each Purchase Agreement within 10 business days of receipt. Counters by RNLA to the purchase price offered by HACLA must be based upon current market appraisal or a change in HUD's TDC Limits HACLA will close escrow in accordance with the timeframe agreed upon in the Master Purchase Agreement and each Purchase Agreement. All properties must meet the requirements of ARTICLE III of this MOU prior to close of escrow Pursuant to its NSP subrecipient contract with RNLA, LARD represents that RNLA has full power and authority to sell the Properties to HACLA under NSP Guidelines, to enter into the Master Purchase Agreement with HACLA, to enter into each individual Purchase Agreement and to perform all ofrnla's obligations thereunder under NSP Guidelines LAHD will monitor RNLA's purchase and sale activities related to the Properties and will confirm that the Properties are unoccupied and completely habitable which is defined as meeting the physical condition standards under NSP Guidelines and having standards which comply with the City of Los Angeles Building and Safety Code and zoning 5