Consideration and Possible Adoption of Ordinance No.  2012-15 and approval of Amendment Two to the Homebuyer Services Agreement with BOTHANDS, INC: 
i.    An ordinance authorizing the City of Flagstaff to sell the almost completed improvements to real property located at 2374, 2366, 2358 and 2350 North Izabel Street to qualified homebuyers and to execute 99 year leases for the use of the land. 
ii.  Approval of Amendment Two to the existing Homebuyer Services Agreement with BOTHANDS, INC for marketing and technical services associated with the sale of the units.

• Authorize the City of Flagstaff to enter into agreements for the sale of the improvements to real property located at 2374, 2366, 2350 and 2358 Izabel Street and execute 99-year leases for the use of the land.
• Read Ordinance No. 2012-15 for the first time by title only.
• Read Ordinance No. 2012-15 for the final time by title only.  (This requires a unanimous vote of the Councilmembers present.  Charter, Art. VII, Sec. 6)
• Adopt Ordinance No. 2012-15.
• Authorize the City Manager or designated staff to sign all documents necessary to carry out the provisions of Ordinance No. 2012-15.
• Approve Amendment Two to the existing Agreement for Homebuyer Services with BOTHANDS, INC.

Approval of Ordinance No. 2012-15 authorizes the City to sell four homes currently near completion in the Izabel Homes subdivision to low-income homebuyers and to execute ground leases to permanently preserve the affordability.  Approving Amendment 2 to the Homebuyer Services Agreement with BOTHANDS, INC. continues the successful use of a local non-profit for technical and marketing services related to the sales.  A qualified household (family of five) is ready to submit an offer to purchase 2374 Izabel.  The use of the ability to read twice and adopt in the same meeting will facilitate the sale which results in earlier fund recapture, earlier benefit, and reduced costs to the City. 

Subsidiary Decision Points: The four units were authorized for construction by approval of the Construction Manager at Risk Contract with Loven Contracting on June 5, 2012. Previous decisions to use Community Development Block Grant (CDBG) funds for purchase and improvements limit alternative uses and require low and moderate income benefit.  Council previously requested the use of external resources where possible for potential efficiencies and to generate an external face for the program which led to the successful arrangement with BOTHANDS, INC. 

Ordinance 2012-15: Execution of the sale and lease for each phase will result in the recapture of the majority of the construction costs for use in developing future phases of the Izabel Homes or for other affordable housing opportunities.  Additionally, a $30-per-month lease fee will be collected per home to offset any costs incurred administering the long term affordability.  Lease fees of approximately this amount are customary in land trust programs nationwide and are designed to support the program's costs without burdening the homebuyers.

Amendment Two:  The total agreement for Homebuyer Services for Phase 3 is $15,540 in direct fee for service, and 5% of proceeds from successful sales of the Izabel Homes units.  This is a reduced cost per house than the previous phases.  The successful sale of the homes results in recapture of the City funds used for the construction of the units and in timely community and homeowner benefit.

Livability through good neighborhoods, affordable housing and varied recreational activities.

Ordinance 2012-15:

• April 20, 2010 - Original Construction Manager At Risk (CMAR) contract executed for 16 homes - first phase of three homes.
• June 7, 2011  - Authorization of second phase of three homes.
• June 5, 2012  - Third phase of four homes authorized for construction and site work remaining six lots.
• Previous decisions to use CDBG funds for the purchase of the land and improvements limit alternative uses and require low and moderate income benefit.

Amendment Two:

• December 15, 2009 - The original agreement with BOTHANDS for Homebuyer Services for all 16 Izabel Homes was approved and included the sale of the first three homes.
• June 21, 2011 - The Agreement was amended (Amendment One) to authorize the sale of the three units in Phase 2. 

Ordinance 2012-X15Approve the sale of the improvements and execution of the ground lease.  This will result in homeowner benefit and funding recapture.

• Not approve the sale of the improvements and direct staff to change the eligibility determination process or specific eligibility criteria.  This will delay homeowner benefit and funding recapture and leave the homes vacant which will result in additional expenses.
• Not approve the sale and direct staff to explore other uses for the homes that could serve the eligible population.  This will delay benefit and recapture, and it is unclear what other effects this action would have without additional detail about Council direction.

Amendment Two

• Approve Amendment Two to the Agreement as presented.  This will result in the continuation of the successful partnership.
• Modify Amendment Two.  This may delay the sale of the homes which will cost the City money and delay the benefit to the community. 
• Not approve Amendment Two and provide the service through other methods. This option would require increased City staff participation, could reduce the external face promoting broader marketing and public knowledge of the program and potentially result in the delay of the sales which would increase costs to the City.

Ordinance 2012-15:  Izabel Homes is an affordable housing development including 16 single family detached residences in Flagstaff's Sunnyside neighborhood. The project began with City efforts to address slum and blight by purchasing the land and removing hazardous buildings where nuisance crimes were occurring near a school and recreation center.  It continues as a project providing permanently affordable homeownership opportunities to working Flagstaff households.  The subdivision uses the land trust model where the City retains ownership of the land and the improvements are sold to low-income households.  Three homes were completed and sold to low-income homeowners in the Spring of 2011.  Three more homes were built and sold to qualified homeowners in the Spring and Summer of 2012.  Council approved a CMAR contract for the current phase of four homes and earthwork on the six remaining lots on June 5, 2012.  An eligible household (family of 5) is ready to submit a contract for 2374 Izabel and is currently waiting for approval of this ordinance to execute the transaction, move into the home and return the expended funds to the City.  The model has proven successful and uses City funds numerous times with ongoing benefit to the community's affordable housing inventory and to the construction trades and local economy.    The remainder of the homes will be built in subsequent phases pending City Council approval.

Amendment Two:  This amendment is the continuation of a successful relationship with BOTHANDS that has already been in place for the first two phases (6 units) of a sixteen unit agreement.  Council provided direction, prior to the construction of Izabel Homes, to partner with community resources where available both for efficiencies and to provide an external face for the program.  The agreement’s first two phases were successful.  BOTHANDS, with support from City staff, provided homebuyer identification, community and industry stakeholder education, homebuyer eligibility determination, homebuyer counseling, direct marketing and other broker services for sale of the six homes in the previous phases.  Components of the agreement that require a license from the Arizona Department of Real Estate will be performed by Flagstaff Neighborhood Realty or referred to a licensed broker.  BOTHANDS remains responsible for performance.  BOTHANDS was the successful respondent to the RSOQ for Homebuyer Services, which includes Long Term Permanent Afforability Administration, for the sixteen units.  This amendment extends the agreement into the third phase of the Izabel Homes which consists of four, single family detached homes currently under construction and scheduled for completion in November.  BOTHANDS has already identified a qualified household from earlier phases.  After significant support and preparation the household is prepared to submit a purchase contract for one of the new homes.  BOTHANDS is also working with other interested clients.

Ordinance 2012-15:  Homes will be sold for fixed prices balancing cost recapture with affordability to the eligible population.  Prices are currently anticipated to be $166,900 for each of the three bedroom units and $180,500 for the four bedroom unit.  Available assistance can bring down the mortgage to $1,049 for a brand new energy efficient home.  The lease preserves the affordability while providing equity to the homeowners as part of the Community Land Trust Program.  Previous use of CDBG funds requires that the homes benefit a majority of households with incomes below 80% of the Area Median Income (AMI).  The amount is adjusted annually and is currently $50,350 for a family of four.  Homes stay affordable through the land trust's appreciation restriction which allows the price of the home to increase 25% of the market growth that has occurred based on appraisals.  This preserves the affordability without additional government subsidy while providing a return on the homeowner's investment.  At initial sale of a home, the majority of the funds return to the City and are used for further affordable housing purposes.

Amendment Two:  The Agreement for Services follows Council direction to use community expertise where possible.  The original agreement is for homebuyer/owner services for 16 homes.  Prior to each phase of construction, costs and responsibilities are renegotiated and an amendment executed, based on the number of units in the phase and the experiences from the previous phases.  Changes from the second to the third phase include a reduction in the cost per house for services, a different billing process, and the ability for Flagstaff Neighborhood Realty to self-perform or to refer sales to an alternative licensed broker.  BOTHANDS will remain responsible for performance  This amendment brings the total number of homes managed in this way to ten.  The process of marketing land trust homes, verifying the income eligibility and other criteria of potential homebuyers, providing homebuyer counseling, assisting with credit counseling, and working with the buyers from beginning to end of the transaction is one which requires significant time and knowledge.  BOTHANDS has been successful in the previous phases.

Ordinance 2012-15 The highest community benefit in this arrangement is the provision of permanently affordable housing.  The use of private contractors for construction and marketing ensures that existing community strengths and capacity are utilized where appropriate and provide private sector jobs that help support the local economy.  Also, building permanently affordable inventory during a time when construction costs are lower provides efficient use of resources.  Previous community benefit included the removal of hazardous structures where nuisance activities occurred within proximity of a school and recreation facility.

Amendment Two: Permanent affordability provides the ongoing community benefit of affordable homeownership.  The agreement with BOTHANDS uses existing community resources, provides the external face for the program that City Council directed, and helps build capacity and cooperation around permanent affordability in the community.

Ordinance 2012-15:  Involve
Amendment Two:  Consult

Ordinance 2012-15

• Approve the sale of the improvements and execution of the ground lease.  This will result in homeowner benefit and funding recapture.
• Not approve the sale of the improvements and direct staff to change the eligibility determination process or specific eligibility criteria.  This will delay homeowner benefit and funding recapture and leave the homes vacant which will result in additional expenses.
• Not approve the sale and direct staff to explore other uses for the homes that could serve the eligible population.  This will delay benefit and recapture, and it is unclear what other effects this action would have without additional detail about Council direction.

Amendment Two

• Approve Amendment Two to the Agreement as presented.  Approval of Amendment Two continues the successful partnership and helps maintain current service levels for a lower fee per house than the previous phases.  It is anticipated this will provide faster and easier sales than other options which returns the City's resources and provides the benefit to the homeowners as efficiently as possible.
• Modify Amendment Two.  Modification could delay the sale of the homes which would increase City costs and slow the process of recapturing the resources involved in the construction. 
• Not approve Amendment Two and provide the service through other methods.  This option would require a new procurement process or significantly increased involvement of City staff. It would delay the sale of the homes resulting in increased City costs and slow recapture of resources and homeowner benefit.  It could also change the previous direction of ensuring an external face, or marketing avenue, to the program and to use community resources where available and appropriate. 

10/02/2012 - EAB