“Urban County” Allocates Housing Funds

At their March 23 meeting, members of the Washtenaw Urban County – a consortium of 11 local municipalities that handles federal grants for low-income housing and other projects – approved over $2.6 million in allocations for the Ann Arbor/Ypsilanti area.

The group also had a frank discussion about problems with struggling Gateway Apartments in Ypsilanti Township – the complex is operating at a loss and is putting strains on the nonprofit Avalon Housing, which took over management from the nearly-defunct Washtenaw Affordable Housing Corp.

In addition, Urban County members reallocated federal funds that had previously been earmarked to support a county land bank. The county’s board of commissioners voted to dissolve the land bank earlier this month.

Also approved during Tuesday’s meeting was the draft of an annual plan for July 1, 2010 through June 30, 2011. The plan outlines projects and a nearly $4 million budget from two federal programs for low-income neighborhoods. Avalon Housing’s Near North apartment complex, the Delonis Center homeless shelter, and an owner-occupied housing rehab program are among the projects being funded.

Staff of the Office of Community Development, a joint county/city of Ann Arbor department which among other things manages the Urban County projects, also reported on efforts to recruit more local governments to join the Urban County. OCD director Mary Jo Callan joked that there were two perception problems in marketing the Urban County: urban and county.

Background: What’s an Urban County?

It’s unlikely the group will change its name. “Urban County” is a designation of the U.S. Dept. of Housing and Urban Development, identifying a county with more than 200,000 people. With that designation, individual governments within the Urban County can become members, making them entitled to an allotment of funding through a variety of HUD programs, including the Community Development Block Grant (CDBG) and HOME Investment Partnerships. Those two programs provide funding for projects to benefit low- and moderate-income residents, focused on housing, human services and other community development efforts.

Washtenaw County and the townships of Ann Arbor, Ypsilanti, Pittsfield, Superior, Northfield, Salem, and Bridgewater got the Urban County designation in 2002. Later, the city of Ypsilanti and Scio Township joined, and just last year the city of Ann Arbor – which previously received HUD funding directly – joined as well, roughly doubling the amount of money available in the Urban County’s funding pool.

The funding comes with certain restrictions, and can only be used in certain low-income neighborhoods – as specified by HUD – or for residents who fall below a certain income level. Funds are allocated to specific projects by an Urban County executive committee, which meets monthly, with voting members from each participating local government. The group acts on recommendations made by the Office of Community Development, a joint county/city of Ann Arbor department.

The projects tend to be focused in the county’s urban areas, which have the largest clusters of low-income residents. But Leah Gunn, chair of Urban County executive committee and a county commissioner representing Ann Arbor, notes that since the group formed, all votes have been unanimous, gaining support from communities that don’t necessarily see direct benefit from the majority of allocations.

Gateway Apartments

At Tuesday’s meeting, the group was briefed by Jennifer L. Hall, housing manager for the Office of Community Development, about the situation at Gateway Apartments, a complex on West Michigan Avenue in Ypsilanti Township. It was the first and largest rental project undertaken by the Urban County, which allocated $310,000 in 2002-03 to the Washtenaw Affordable Housing Corp. WAHC, which owns Gateway Apartments, had used the Urban County money to rehab the 43-unit property.

WAHC had taken out a $1 million loan to buy the property, but now the nonprofit is “essentially out of business,” Hall told the Urban County executive committee. Avalon Housing, an Ann Arbor nonprofit, has taken over WAHC’s operations, including management of Gateway. WAHC’s board will be deciding how to dispose of its properties, Hall said. And if Avalon isn’t interested in buying Gateway or continuing to manage it, another buyer or property manager will need to be found.

The loan to WAHC is held by three banks: National City, Michigan Commerce Bank and the Bank of Ann Arbor. If a sale is made, the bank loan would be paid first. And if the sale to a party other than Avalon isn’t sufficient to cover the remaining loan balance plus the $310,000 Urban County grant, then the county would be on the hook for repaying that amount to HUD.

Why would HUD need to be repaid? Because the HUD funding stipulates that all of the apartments must be offered at affordable housing rates through December 2012. If not, the Urban County would be considered out of compliance, and would have repay the entire $310,000 to HUD, according to Hall.

Avalon estimated that it would need roughly $3 million to buy, rehab and operate the complex with supportive services, Hall told the executive committee. To achieve that, OCD staff had originally recommended putting another $740,000 of HUD funds – from its Neighborhood Stabilization Program (NSP) – into the complex, which would trigger an additional five-year HUD-mandated affordability period.

Avalon had planned to kick in another $430,000 from the Federal Home Loan Bank, Hall said. But that left roughly $2 million to find from other sources. When they first got involved with the project, it seemed likely that the Michigan State Housing Development Authority (MSHDA) would contribute the remaining funds. But given the economic downturn, MSHDA has prioritized investments for properties in which it already has a stake – and that doesn’t include Gateway.

Another possibility had been to seek funds from the second phase of grants with the federal Neighborhood Stabilization Program. The county applied, but didn’t receive an NSP2 award, Hall said.

For these reasons, Hall said they were withdrawing OCD’s $740,000 funding recommendation, not wanting to make a long-term commitment to what has become an even more problematic property that might soon face foreclosure.

There are several issues that make the property problematic. The buildings are in bad condition, Hall said, and Avalon – which provides supportive services to residents – isn’t generating enough revenue on it in rent to cover their expenses.

OCD director Mary Jo Callan said the current economy has added to Gateway’s problems – though not necessarily in a bad way for low-income residents. Rents in the local housing market are lower, in general, because of the economic downtown, which gives low-income renters more options, she said. In that context, Gateway is a less desirable option than others in the market, she said.

One factor making it less desirable are the many security problems at the complex, Hall said. The front building runs parallel to Michigan Avenue and shields a courtyard behind it, creating a security risk. Ideally there would be sufficient on-site staff to help avert crime, but the rents won’t support that expense.

Hall outlined several options for the executive committee to consider. One option is to find a new property manager who’ll take on the complex for the next 18-20 months, until the HUD-mandated affordability period ends. At that point, the property could be sold and the county wouldn’t be obligated to repay the HUD funds. OCD staff is talking with a potential property manager who might be able to minimize losses, while keeping rents in the affordable-housing range.

Mike Moran, Ann Arbor Township supervisor and an Urban County executive committee member, asked why Avalon Housing couldn’t just agree to manage the complex without offering supportive services.

Callan said that Gateway is one of three major properties that Avalon took over from WAHC, and all are problematic. [The other two major WAHC properties now managed by Avalon are in Ann Arbor, at 1500 Pauline and 701 Miller.]

Callan described Avalon’s approach as property management “with a social work touch.” For Avalon, she added, the Gateway property has become a drain on their day-to-day operations, as well as creating stress about their own identity. Avalon’s mission as a nonprofit supports extremely low-income residents by offering a range of services, such as help in managing substance abuse or mental health issues. Avalon doesn’t feel they can do that at Gateway in a financially viable way, and that’s why the nonprofit isn’t interested in taking on the property long-term.

If no solution can be found and the HUD funds need to be repaid, Hall said it would come out of the county’s general fund. But Leah Gunn, a county commissioner, noted that the county isn’t really in a position to provide those dollars, given its own budget challenges.

Moran later questioned why the $300,000 previously set aside for the land bank couldn’t be used to repay HUD for Gateway. [For details on the land bank, see Chronicle coverage: "A Night of Transitions at County Board."] Hall said those land bank funds, from a Phase 1 NSP award, must be used for revitalization projects – and they can’t use funds from one HUD program to pay back another HUD-funded program.

Karen Lovejoy Roe, Ypsilanti Township’s supervisor, said township officials have approached a few landlords, including McKinley, about taking over the property. There’s also the possibility that the township would condemn it, she said.

While the OCD staff and Avalon continue to work toward a solution, Hall said they were asking that the Urban County executive committee reallocate the $740,000 in Phase 1 NSP funds that had originally been earmarked for Gateway. Of that total, $640,000 would go to Habitat for Humanity of Huron Valley for housing purchases and rehabilitation, and $100,000 would be awarded to the Ypsilanti Housing Commission for Parkview Apartments, a 144-unit complex.

Later in the meeting, as part of its larger housing allocation vote, the executive committee unanimously approved the reallocation of Gateway funds as recommended by OCD staff. The vote also reallocated $300,000 previously set aside for the county land bank, directing $180,000 to Community Housing Alternatives for down-payment assistance and housing rehab. Another $10,000 will be allocated to Habitat for Humanity, and the remaining $110,000 will be split between Ypsilanti and Ypsilanti Township to pay for the demolition of blighted properties.

Also, $50,000 previously earmarked for the demolition of a house in Superior Township will now be used for demolition of property in Ypsilanti and Ypsilanti Township. Bill McFarlane, Superior Township supervisor, joked that it looked like his township, in this case, would be a “donor” – it’s a term that York Township supervisor Joe Zurawski has previously used, referring to members of the Urban County who have few projects in their jurisdictions that are eligible for Urban County funding.

Funding of CDBG and HOME Projects

Jennifer L. Hall, housing manager for the Office of Community Development, also presented funding recommendations for six affordable housing projects eligible for money from two federal programs: HOME Investment Partnerships and the Community Development Block Grant (CDBG). Both are administered through the U.S. Dept. of Housing and Urban Development (HUD).

Hall explained that the OCD staff had issued a request for proposals (RFP) in January and had received about a dozen responses. [.pdf file of the affordable housing RFP] A review committee had rated the applications on a range of criteria, including access to other reliable funding sources, a feasible timeline for the project, and evidence of collaboration with other agencies. Projects also needed to serve a certain number of low-income households within the jurisdictions of Urban County members, and compare favorably with other bidders based on cost per unit or level of services.

At Tuesday’s meeting, Hall reviewed the results of the review committee ratings. Funding was recommended for these projects:

• Habitat for Humanity of Huron Valley: $650,000 for acquisition and rehab of 13 units within the Urban County area. (Using $640,000 in funds reallocated from Gateway Apartments and $10,000 formerly earmarked for the land bank.)
• Community Housing Alternatives: $420,000 for homebuyer purchase and rehab of 15 units in the Urban County area. (Including $180,000 formerly allocated to the land bank.)
• Avalon Housing: $695,467 for refinancing and rehab of existing properties in Ann Arbor, totaling 46 units on Stimson, Ashley, Summit, Huron and Allen streets.
• Avalon Housing: $500,000 for construction of the Near North project on North Main in Ann Arbor.
• Arrowwood Hills Cooperative: $60,000 for down-payment assistance.
• Ypsilanti Housing Commission: $300,000 for acquisition and rehab of Parkview Apartments at 596 S. Hamilton in Ypsilanti, totaling 144 units. (Includes $100,000 formerly allocated to Gateway.)

Darrell Fecho, manager of Scio Township, raised concerns about the viability of the Near North project, given what the executive committee had just discussed regarding problems at Gateway Apartments. Damon Thompson, OCD operations manager, said that the $500,000 to Avalon Housing for its Near North project is contingent on results of a market study.

Fecho asked who would choose the firm to do the market study. Hall reported that the Michigan State Housing Development Authority (MSHDA) would make that decision, because it is also investing in the Near North project. Hall said Near North was very different from Gateway, in part because of its location in Ann Arbor. But if the market study doesn’t support the project, they won’t invest in it, she said.

Annual Project Plan

Damon Thompson, operations manager for the Office of Community Development, gave an overview of proposed projects for the coming fiscal year, beginning July 1, 2010, for the HOME Investment Partnerships and the Community Development Block Grant (CDBG) programs. The estimated allocation is $2,220,241 from CDBG grants and $1,685,812 from HOME.

Thompson cautioned that this was just a draft, and would likely be modified depending on actual allocations from these federal programs. The plan includes some of the projects that were awarded funding earlier in the meeting.

Proposed CDBG projects include:

• $673,494 for owner-occupied housing rehab provided by the OCD throughout the Urban County area.
• $333,036 for human services grants to the Ozone House (for transitional housing), SOS Community Services (for housing crisis services), Northfield Township‘s human services (for transportation) and the Shelter Association of Washtenaw County (for its Delonis Center night shelter).
• $401,600 for public improvement projects in Ann Arbor, Ypsilanti, Pittsfield Township, Ypsilanti Township, Superior Township and Northfield Township.
• $78,063 to Avalon Housing for multi-family housing acquisition and rehab.
• $20,000 to Ypsilanti for a neighborhood assessment of the Harriet Street corridor.
• $30,000 for demolition of three blighted residential properties in Ypsilanti.
• $180,000 for revitalization projects in Arbor Oaks, Arrowwood, Near North and the Maple corridor neighborhoods of Ann Arbor.
• $60,000 for rental code enforcement in several Ypsilanti Township neighborhoods, including West Willow, Grove Road, West Michigan and Ecorse Road.

Proposed HOME projects are:

• $60,000 in down-payment assistance in the Arrowwood Hills Cooperative of Ann Arbor.
• $200,000 in rental assistance for the Parkview Apartments in Ypsilanti, administered by the Ypsilanti Housing Commission.
• $19,674 to the Community Housing Alternatives of Ypsilanti for operating expenses.
• $50,000 to Avalon Housing of Ann Arbor for operating expenses.
• $14,616 to Michigan Ability Partners of Ann Arbor for operating expenses.
• $240,000 to Community Housing Alternatives for home-ownership assistance.
• $617,404 to Avalon Housing for rental rehab projects in Ann Arbor.
• $315,536 to Avalon Housing for construction of the Near North housing complex.

Barb Fuller, deputy supervisor of Pittsfield Township, asked about the administrative fees included in the budget. Of the estimated funding, 20% of the $2.2 million from CDBG and 10% of the $1.68 million from HOME – $444,048 and $168,581 respectively – will be allocated to the Office of Community Development for administrative costs.

Fuller asked what portion of OCD’s administrative budget this represented. Callan said she’d report back with exact numbers at a later date, adding that administrative costs for the office are roughly $1 million, or about 10% of their total budget.

Expanding Urban County Membership

Staff from the Office of Community Development are recruiting other municipalities in Washtenaw County to join the group, which currently consists of 11 units of government. Leah Gunn, who chairs the Urban County executive committee, reported that the Webster Township board has voted to join. When she added that their membership won’t take effect until July 1, 2012, Ann Arbor Township supervisor Mike Moran quipped, “Well, I guess it’s a little early to celebrate.”

Damon Thompson, OCD’s operations manager, clarified that they’re recruiting now in order to have all the documentation required by the U.S. Dept. of Housing and Urban Development done by June of 2011. HUD will process those documents, allowing new members to join the Washtenaw Urban County at the start of the following fiscal year: July 1, 2012. He reported that Augusta Township has said they’re interested, too.

Other eligible municipalities that aren’t yet members include Chelsea, Dexter, Saline, Manchester and Milan, and the townships of Dexter, Freedom, Lima, Lodi, Lyndon, Manchester, Saline, Sharon and Sylvan. Mike Moran asked, jokingly, whether there really was a Saline Township – he’d never seen officials show up at any of the meetings he attends. Saline Township does exist, Gunn confirmed – someone from the township had attended a county board of commissioners meeting last year to urge them to pass a millage supporting the MSU Extension program.

Thompson said the OCD sent out letters to all officials in non-participating governments about two weeks ago. They planned to follow up in the coming weeks, he said. Gunn urged other members to help recruit. “Talk it up among your fellow supervisors,” she said. “Tell them what a great group we are!”

OCD director Mary Jo Callan said that in large part, it’s a marketing issue. When people understand what the Urban County is, they are overwhelmingly positive, she said. “So it’s really a matter of perception – that’s why we’re starting two years in advance.”

Barb Fuller, Pittsfield Township’s deputy supervisor, suggested that OCD staff attend one of the monthly meetings of the county’s township supervisors, known as the CEO group. The next meeting is on April 1 at Scio Township Hall.

Gunn said it was clear that there was confusion over what the Urban County does, adding that her fellow commissioner, Jessica Ping, had asked how much it costs to join. [The interaction took place at the county board of commissioners March 17, 2010 meeting, where it was clarified that there is no cost to join.]

Hall noted that when a municipality joins, they get an automatic allocation of funds from the HOME Investment Partnerships and the Community Development Block Grant (CDBG) programs. All funds awarded to Urban County members are pooled, then allocated to specific projects by the executive committee, based on OCD staff recommendations. The disadvantage of joining, Hall noted, is that members can’t apply directly to the state for larger projects that use the same HUD funding sources – Chelsea has cited this as a reason for not joining.