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August 26, 2014
<br />Ayes: Cherry, Edmonds, Moody, Randall, Wright
<br />Nays: None
<br />Abstain: Meeks (Abstained due to a financial interest in this project)
<br />- City Manager's Report -
<br />14 - 309 -Adoption of an ordinance transferring the sum of $250,487 from the FY
<br />2014-15 Unassigned Fund Balance to the FY 2014-15 General Fund and
<br />appropriating said funds in the FY 2014-15 General Fund for repayment to the
<br />United States Department of Housing and Urban Development of Community
<br />Development Block Grant Program Funds. Vision Principles: Quality of Life and
<br />Lifelong Learning Community.
<br />Background:
<br />• Annually, the City of Portsmouth receives an allocation of Community
<br />Development Block Grant (CDBG) program funds from the United States Department of
<br />Housing and Urban Development (HUD).
<br />• From 2006 to 2012 the City granted the Portsmouth Redevelopment and
<br />Housing Authority (PRHA) $1,019,620.26 of CDBG funds to carry out the Cradock
<br />redevelopment project. The Cradock project consists of the acquisition of blighted
<br />structures, relocation of residents, and demolition of those structures. The objective
<br />was to sell the assembled site at 12, 13, 16, 17, 20, 21, 24, 25, 29, 41, 46, 50 Cushing
<br />St. for development of housing to be sold to low income households.
<br />• The City also granted PRHA $70,487.67 of CDBG funds to pay for their
<br />expenses toward disposing of the assembled Cushing St. site.
<br />• By letter dated April 3, 2014, HUD made a finding that use of the CDBG funds for
<br />the Cradock project was ineligible because the City had not met the national objective
<br />by providing housing for low income households. Also because the assembled site was
<br />not disposed of, HUD found that the CDBG funds toward disposition were not used for
<br />an eligible activity. The City agreed that it was not likely to provide housing for low
<br />income households on a timely basis or dispose of the property.
<br />• By letter dated June 24, 2014, HUD agreed to allow the City per the regulations
<br />to change the use of its Cradock project and not meet any CDBG national objective.
<br />• Because the City will not meet a national objective for use of the $1,019,620.26
<br />of CDBG funds, HUD requires that the City pay back the current fair market value of the
<br />Cushing St. lots. HUD also requires that the City pay back the $70,487.67 used for
<br />disposition because the property was not disposed of.
<br />• An appraisal dated June 25, 2014 of the Cushing St. lots finds that current fair
<br />market value is $15,000 per lot or $180,000 for the 12. lots.
<br />• Through an advertisement published on July 20, 2014 in the Virginian Pilot -
<br />Currents, the City notified the public of its intention to no longer meet a national
<br />objective as a result of using CDBG funds for the Cradock project. The notice provided
<br />fora 30-day comment period. No comments were received.
<br />Discussion:
<br />• The City granted PRHA $1,019,620.26 of CDBG funds to assemble a site on
<br />Cushing St. in the Cradock neighborhood for low income housing. The housing was not
<br />constructed and as such HUD finds that the City is not in compliance with the
<br />regulations. HUD further finds that because the property was not disposed of, the
<br />$70,487.67 of CDBG used by PRHA for disposition is not eligible.
<br />• HUD requires that the City repay the current fair market value of the assembled
<br />site, which has been determined to be $180,000 and the $70,487.67 expended toward
<br />disposition for a total of $250,487.67.
<br />Financial Impact:
<br />• The appropriation of $250,487.67 will reduce the General Fund balance. The
<br />funds will, however, be returned to the City's CDBG line of credit for use for CDBG
<br />eligible activities.
<br />Recommended Action:
<br />• Adoption of the ordinance. Vision Principles: Quality of Life and Lifelong
<br />Learning Community.
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