Strategies for Meeting Expenditure Deadlines

Transcription

1 U.S. Department of Housing and Urban Development NSP Webinar Strategies for Meeting Expenditure Deadlines October 16 th, :00 P.M. EDT Community Planning and Development

2 Presenters Mary Paumen, TDA Stan Fitterman, TDA HUD NSP Staff John Laswick David Noguera Hunter Kurtz Webinar Host Kathy Kaminski, TDA Moderators 2

3 Webinar Objectives Update Grantees on NSP expenditure Deadlines Determining if you are On Track to Meet your Deadlines Changes Needed if you Aren t on Track 3

4 Expenditure Deadlines NSP 1 100% expended within 4 years of when HUD signed your agreement for most communities February-March 2013 NSP 2 100% by February 11, 2013 NSP 3 At least 50% of allocated funds expended within 2 years of the date funds become available to the recipient for obligation (February-March 2013 for most NSP3 grantees); and 100% of funds within 3 years of funding availability date. HUD CANNOT waive these legislated requirements! 4

5 Current Expenditures NSP 1 As of October 15, 2012, 97.04% drawn, 32 of 307 grantees have drawn less than 80% NSP 2 As of October 15, 2012, 79.4% drawn, 24 of 56 grantees have drawn less than 80% NSP 3 As of October 15, 2012, 21.78% drawn, 162 of 271 grantees have drawn less than 20% 5

6 The Details 1. Keeping DRGR Current with Program Activities 2. Maintaining a Timeline for Project Completion 3. When Do I Change Course? 5. What Are My other Expenditure Options? 6

7 Update DRGR - Draws and QPRs Why is it important to keep DRGR current and have a tracking system? DRGR is a critical way to demonstrate program accomplishments Drawing funds and reporting expenditures in your QPR will provide HUD with your current financial data. Tracking will inform whether a change in program design is necessary 7

8 Is DRGR Current with Program Activities? (cont.) If it isn t in DRGR, then it s not being done!! Are there staffing limitations? (# or capacity) Do you have a performance tracking system that requires you to constantly enter information into DRGR? (see example on next slide) Request NSP TA for any assistance needed: 8

9 Is DRGR Current with Program Activities? (cont.) Examples of Tracking System(s): Cash Flow Statement Shows when units will start construction, when construction will be completed and ultimately sold/rented Construction and sales schedule in the cash flow statement should be based on your market analysis Units must be sold / leased to a beneficiary in order to meet a national objective If the market changes you must adjust to meet the market conditions AND the program goals Tracks expected expenditures and drawdowns Tracks development subsidy per unit 9

10 Expenditures vs. Draws in DRGR Drawn means funds were drawn down from US Treasury to the grantee bank accounts. - QPR: Data is calculated from the drawdown module and automatically updated in each QPR. Expended means the grantee paid for goods and services. - QPR: Enter expenditures manually each quarter. 10

11 Expenditures in QPRs 11

12 Expenditures in QPRs (Cont d) Haven t entered expenditures in QPRs to date? HUD will not be opening previous QPRs to enter quarterly amounts. Enter the CUMULATIVE amount in the most current QPR. Then enter details in the activity narrative section accounting for past expenditures. Then continue entering the IN QUARTER amounts going forward. 12

13 Timelines Do you have a timeline that demonstrates that you will meet the expenditure deadlines? Does it contain spending milestones? Are you comparing reality to your timeline on a routine basis?

14 Expenditure Rates How much money I have left The # of weeks to spend it = The amount you need to expend per week

15 Translating Balances to Monthly Expenditures Balance Months Expenditures needed per month $1,200,000 4 $300,000 $2,000,000 4 $500,000

16 Translating Expenditures into Units Acquisition Rehab Resale Average Acquisition Price = $50,000 Average Rehab Amount = $120,000 Average Total Development costs = $170,000 Balance Months Expenditures needed per month Avg TDC Units completed per month $1,200,000 4 $300,000 $170, $2,000,000 4 $500,000 $170,

17 Translating Expenditures into Units Multi-Family Deals (Cont d) Balance to be spent Total Development Costs Est'd % of TDC per draw Est'd amt per Draw # of Draws Needed to Spend Balance $1,200,000 $3,500,000 25% $875,000 2

18 Speeding up Expenditures Acquisition Use NSP to pay 100% of the acquisition cost Use NSP Funds Early in the Development Make sure NSP funds are drawn before any other sources. If you haven t been doing this start now NSP funds can be used for 100% of predevelopment cost Remember: Predevelopment is often the riskiest part of development. Make sure all other sources are committed. 18

19 Speeding up Expenditures (Cont d) If you have committed money to a LIHTC Credit that is waiting on the state HFA process or the syndication process, you can use NSP as bridge financing. When money from the syndicators arrives, it can be used to repay the NSP funds. The repayment counts as program income. 19

20 Speeding up Expenditures (Cont d) Pursue the possibility of working with other Grantees either state or another local program with an overlapping target area. Is there an REO seller that is willing to make a bulk deal? (Don t forget the 1% discount requirement) If you have several sites or properties that have been acquired, consider putting them out to bid as one deal. Consider manufactured or modular housing. Often requires 50% paid at time of contract & 50% upon delivery. It can be faster than site built. 20

21 More Speed Bulk purchase and store materials needed for specific projects Use materials in a reasonable timeframe Can be purchased by grantee or developer Must be secure & insured cannot pay twice for same materials. Any storage charges must be reasonable Must be tracked as NSP and use accounted for 21

22 Knowing When to Punt You are counting on a multi-family deal to meet your 25% LH Requirement Acquisition hasn t occurred Determine what is the latest the building can be acquired and still meet the expenditure deadlines.

23 Knowing When to Punt (Cont d) Things to consider: Once option is signed, how long is needed to conduct due diligence? How long to get to closing on the acquisition? How long to pull permits? How long is the construction period and when are the anticipated draws?

24 Punting? Look to your other strategies are there ones that are designed to spend money more quickly? To meet the LH 25% requirement, does selffinancing make sense? Several communities are basically using NSP as the permanent financing for ownership deals usually at a 0% interest rate. Written underwriting policies are a must. Some have entered into a contract with Habitat for Humanity to service the loans. You may be willing to accept lower credit scores than other lenders.

25 Program Development Procedures Streamline procedures Environmental Reviews Early use of environmental reviews Coordinate with other public environmental processes Know the regulations! Is it exempt? Tiered reviews? Procurement Broad solicitation of contractors Small Purchases (under $100,0000) - Procurement regulations do not require bids. They do require a process to guarantee cost reasonableness. 25

26 Program Development Acquisition Grantees have difficulty acquiring properties Cannot move fast enough Appraisals impact on purchase price (higher or lower) Prices too high due to investor activity Don t get early enough access to properties Tips for acquisition Acquisition Team prepared to move quickly Work write-up & budgets, appraisals, environmental review, etc. Initial Property Assessment of $25,000 or less does not require official appraisal Consider modifying NSP3 Target Area Work with National First Look programs 26

27 Are Internal Policies Getting in the Way? Does your program have regulations over and above the HUD rules that are hindering implementation, such as: Limits on acquisition price that reduce the number of eligible units Limits on rehab costs that prevent you from acquiring units or from doing all the rehab that is needed 27

28 Program Development: Amendments NSP1 and 3 Action Plan Amendments Discuss program changes early with the field office to determine whether the change constitutes a substantial amendment to the approved plan. Don t forget that all NSP 1 and 3 amendments require a 15-Calendar day public comment period. 28

29 Utilize Local Resources Real estate Agents Access Information Insider knowledge of the community For-profit & Non-profit Developer Partners Expand their roles & responsibilities 29

30 Utilize National Resources National Community Stabilization Trust As an NSP grantee you will have access to major lending institutions REO listings Pre-approved expedited acquisition process Fannie Mae HomePath Listings Freddie Mac HomeSteps Listings 30

31 Land Bank & Demolition Activities Acquisition & Demolition Activities Lower barriers to acquisition Grantee may have already identified blighted and/or abandoned properties within the target areas Quicker expenditure rates without having to dispose of the property in the near term to meet national objective NSP Land Banking Tool Kit: 31

32 Short Sale Challenges Implications of the National Mortgage Settlement Banks encouraged to provide for principal reduction and/or other loan modifications Banks required to provide funding for refinancing existing mortgages Banks NOT encouraged to approve short sales Thus purchase offers submitted for current short sale listings are likely to garner little response from lenders. Timeline for closing on a short sale likely to be even longer than previously expected. 32

33 Other Factors to Consider Homebuyer Pool Challenges Limited pool of eligible homebuyers Meeting Market Demand Financing Structure not consistent with the needs of the market Rental Demand vs. Buyer Demand 33

34 Other Factors to Consider (cont.) Marketing Constantly re-evaluate the market and adjust to meet needs of NSP eligible homebuyers. Identify neighborhoods and eligible census tracts of interest in the marketplace. Ask why the homebuyers want to live in this neighborhood or this house? In the end, homebuyers are the market for the NSP Program, and they have options. 34

35 Other Factors to Consider (cont.) National Objectives Be sure that your actions today, such as purchasing property, can be completed in the future, with rehab and disposition. Every activity must meet a national objective or funds will have to be repaid. Ensure that the existing budget, including program income, can complete the job. 35

36 NSP Help / Resources HUD NSP Resource Exchange: Learning Center: 36