The Community Development Division is required by Federal Regulation to allocate a minimum of 15 percent of the City's HOME allocation to a Community Housing Development Organization (CHDO) for affordable housing development activities to meet the housing needs of low income households in our community. homeWORD is currently the only CHDO certified with the City of Billings and is interested in pursuing a local affordable housing project. The City is allowed to use up to 10 percent of its CHDO reserve funds for a project pre-development loan which will assist homeWORD in successfully getting a project in place and ensure the City is in compliance with the U.S. Department of Housing and Urban Development (HUD) regulations for meeting expenditure and commitment deadlines. The City must allocate a minimum of $23,393.35 in CHDO funding by June 30, 2010 in order to maintain this funding for utilization in Billings. This loan agreement will commit $25,000 HOME funding to be utilized for pre-development activities including engineering, environmental review, soils reports, property survey, etc. In addition, the Community Development Board has also recommended allocating an additional $434,000.00 in HOME funds to be CHDO reserve funding for the project. $191,000.00 of the funding is allocated in the City's Fiscal Year 2009-2010 budget and the remaining $243,000.00 is allocated in the City's Fiscal Year 2010-2011 budget. This funding allocation will be secured via Development Agreement and brought to the City Council at a future date, following identification of a specific project site. Allocating a total of $459,000 for a CHDO affordable housing development project will satisfy the City's estimated CHDO allocation requirements until June 30, 2014.

(1) To approve the $25,000 Pre-Development Loan Agreement with homeWORD to facilitate an affordable housing project; (2) To not approve the $25,000 Pre-Development Loan Agreement with homeWORD and return $23,393.35 to HUD.

Project pre-development assistance may only be provided to CHDOs in the form of a loan from HOME funds. The loan agreement stipulates full repayment of the $25,000. The City may waive repayment of the loan in part or in whole if there are impediments to project development that the City believes are reasonable beyond the control of homeWORD, or if the project is deemed to be not feasible.

Staff recommends that Council approve the $25,000 CHDO Pre-Development Loan agreement with homeWORD to facilitate pre-development activities which will result in an affordable housing project in Billings.