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AG 13-099RETURN TO: Brook Lindquist EXT: x2401 CITY OF FEDERAL WAY LAW DEPARTMENT ROUTING FORM l. ORIGINATING DEPT./DIV 2. ORIGINATING STAFF PERSON CED/COMMUNITY SERVICES Bxoox L�rrDQuisT EXT: _�401_ 3. DATE REQ. BY: 4. TYPE OF DOCUMENT (CHECK ONE): ❑ CONTRACTOR SELECTION DOCUMENT (E.G., RFB, RFP, RFQ) ❑ PUBLIC WORKS CONTRACT ❑ SMALL OR LIMITED PUBLIC WORKS CONTRACT ❑ PROFESSIONAL SERVICE AGREEMENT ❑ MAINTENANCE AGREEMENT ❑ GOODS AND SERVICE AGREEMENT X HUMAN SERVICES / CDBG ❑ REAL ESTATE DOCUMENT ❑ SECURITY DOCUMENT �E.G. BONDRELATEDDOCUMENTS) ❑ ORDINANCE ❑ RESOLUTION � CONTRACTAMENDMENT(AG#): ❑ OTHER ❑ INTERLOCAL S. PROJECTNAME: NSP1 CLOSEOUTAGREEMENT WA�++�10�'�t� Si�� 6. NAME OF CONTRACTOR: DEPatYI`Iv1ENT OF C;OMMERCE ADDRESS: 1011 PLUM STxEET NE/P.O. BoX 42525, OLYMPIA, WA 98504-2525 TELEPHONE _360-725-3093_ E-MAIL: GENNY.MATTESON�Q,COMMERCE.WA.GOV FAX: 360-586-8440 SIGNATURE NAME: KaxEN LAxxnv TITLE ASSISTANT DIRECTOR 7. EXHIBITS AND ATTACHMENTS: ❑ SCOPE, WORK OR SERVICES ❑ COMPENSATION ❑ INSURANCE REQUIREMENTS/CERTIFICATE X ALL OTHER REFERENCED EXHIBITS � PROOF OF AUTHORITY TO SIGN ❑ REQUIRED LICENSES ❑ PRIOR CONTRACT/AMENDMENTS 8. TERM: COMMENCEMENTDATE: 2/1/2013 COMPLETIONDATE: 02/O1/2026 9. TOTAL COMPENSATION $ N/A (INCLUDE EXPENSES AND SALES TAX, IF ANY) (IF CALCULATED ON HOURLY LABOR CHARGE - ATTACH SCHEDULES OF EMPLOYEES TITLES AND HOLIDAY RATES) REIMBURSABLE EXPENSE: ��S ❑ No �F YES, MAXIMUM DOLLAR AMOUNT: $ IS SALES TAX OWED ❑ YES ❑ NO IF YES, $ PAID BY: ❑ CONTRACTOR ❑ CITY ❑ PURCHASING: PLEASE CHARGE TO: N/A _ 10. DOCUMENT/CONTRACT REVIEW ❑ PROJECT MANAGER ❑ DIRECTOR o RISK MANAGEMENT (IF.arri,tcaBLE) ❑ LAW INITIAL / DATE REVIEWED �!�i�.'��� INITIAL / DATE APPROVED 11. COUNCIL APPROVAL (IF APPLICABLE) COMMITTEE APPROVAL DATE: COUNCIL APPROVAL DATE: 12. CONTRACT SIGNATURE ROUTING � SENT TO VENDOR/CONTRACTOR DATE SENT: DATE REC'D: O ATTACH: SIGNATURE AUTHORITY, INSURANCE CERTIFICATE, LICENSES, EXHIBITS ❑ LAW DEPARTMENT ❑ SIGNATORY (MAYOR OR DIRECTOR) ❑ CITY CLERK � ASSIGNED AG# ❑ SIGNED COPY RETURNED COMMENTS: INITIAL / DATE SIGNED � AG# DATE SENT: �j• 1 • 1'S 11l9 CLOSEOUT AGREEMENT FACE SHEET Agreement Number: 08-F56401-OOSCA NEIGHBORHOOD STABILIZATION PROGRAM 1(NSP1) Washington State Department of Commerce 1. Contractor 2. Contractor poing Business As (optional) City of Federal Way N/A 33325 8�` Ave. S. Federal Way, WA 98003 3. Contractor Representative (only if updated) 4. COMMERCE Representative (only if updated) Brook Lindquist Genny Matteson 1011 Plum St. SE Program Manager PO Box 42525 Phone: (360) 725-3093 Olympia, WA 98504-2525 Fax: (360) 586-8440 enn .matteson commerce.wa. ov 5. Original Grant Amount 6. Final Grant Amount 7. DeObligation $651,688 $344,657 $307,031 8. Agreement Funding Source 9. Agreement Start Date 10. Agreement End Date Federal: Q State: ❑ Other:❑ N/A:❑ 2/1/2013 2/1/2026 11. Federa► FuQds (as applicable) Federal Agency CFDA Number � U.S. Deparnnent of Housing and Urban 14.228 Develo ment 12. Agreement Purpose The purpose of this Closeout Agreement is to certify the project completion and to close-out the Neighborhood Stabilizarion Program 1(NSP1) Agreement Number 0&F56401-005. This Closeout Agreement shall set out the conditions that the Contractor needs to meet be ond the close-out of the NSP 1 A eement Number 0&F56401-005. COD�IMERCE, defined as the Department of Commerce, and the Contractor acknowledge and accept the terms of this Closeout Agreement and its Attachments as an amendment to the Agreement Number 08-F56401-005. They executed this Closeout Agreement on the date of the last signature below to start as of the date referenced above. The rights and obligations of both parties to this Closeout Agreement are govemed by this Closeout Agreement and the following other documents incorporated by reference: Attachment A— NSP 1 Closeout Report and Attachment B— Program Income Reuse Plan. A copy of this Closeout Agreement shall be attached to and made a part of the original Agreement Number 08-F56401-005 between COMIVIERCE and the Contractor. FOR THE CONTRACTOR FOR COMMERCE r � Signature n Larkin, s' �r r Skip Priest ? �L7 /ZD ! � Print Name Date Mayor of Federal Way Title APPROVED AS TO FORM ONLY ��(� I� 3 This 7te Dav of June. 2012 Date Si�ature on File Sandra Adix, Assistant Attorney General Department of Commerce Page 1 Closeout Amendment Neighborhood Stabilization Program 1 0&F56401-005 CLOSEOUT AGREEMENT TERMS AND CONDITIONS Agreement Number: 08-F56401-005X NEIGHBORHOOD STABILIZATION PROGRAM 1(NSPI) Washington State Department of Commerce The purpose of this Closeout Agreement is to acknowledge that the project has been certified complete and the final grant amount for the Neighborhood Stabilization Program 1(NSP1) Agreement Number 08-F56401-005 has been adjusted, if necessary, as reflected on the Closeout Agreement Face Sheet. Washington State Department of Commerce (hereinafter referred to as "COMMERCE"), and the City of Federal Way (hereinafter referred to as the "Contractor") agree to close-out NSP 1 Agreement Number 08-F56401-005 and agree to the following: 1. PROJECT COMPLETE. All activities identified in the Statement of Work of NSP1 Agreement Number 08-F56401-005 are complete. 2. FINAL GRANT AMOITNT. Any NSPl funds not disbursed before the date this Closeout Agreement is executed shall be returned to COMMERCE. The final amount of the NSPl grant shall be $344,657. 3. NSPl CLOSEOUT REPORT. The Contractor submitted to COMMERCE, to COMMERCE's satisfaction, an NSP1 Closeout Report accounting for a11 the NSP1 activities and beneficiaries resulting from the NSP1 project, herein included as Attachment A to this Closeout Agreement. 4. FINAL PUBLIC HEARING. On 4/16/2012 the Contractor held a public hearing to solicit public comments and review the performance of the completed NSPI project, in accordance with 24 CFR 570.486. 5. SINGLE AUDITS. If the Contractor expended or accrued $500,000 or more in federal funds in a fiscal year duri�g the term of NSP 1 Agreement Number 08-F56401-005, the Contractor submitted to COMMERCE singie aud}ts conducted in accordance with OMB Circular 133 for each applicable year. If any of the Con`%ctor's NSPl"'suti-rec��ients expended or accrued $500,000 or more in federal funds in a fiscal year during the term of NSP1 Agreement Number 08-F56401-005, the Contractor has revieweii to the�Contractor's satisfac�ion the single audits of such sub-recipient(s), which were conducted in accordance with OMB Circular 133 for each applicable year. 6. CONTINUED AFFORDABILITY. The Contractor will ensure the continued affordability of all the properties assisted with NSP1 funds, in accordance with the requirements of 24 CFR 92.252 for rental units and 24 CFR 92.254 for owner-occupied units, and in accordance with NSP 1 Agreement Number 08-F56401-005. 7. ADDITIONAL DATA AND REPORTING. Should the U.S. Department of Housing and Urban Development (HUD) or COMMERCE request additional information or data about the NSPl project and/or use of NSP1 funds, the Contractor agrees to provide such information or data within 30 Department of Commerce Page 2 Closeout Amendment Neighborhood Stabilization Program 1 08-F56401-005 calendar days from the date the Contractor receives the request. If required, the Contractor agrees to submit to HUD or COMMERCE periodic reports and financial data related to program income and/or revolving loan funds generated from the use of the NSP1 funds, as applicable. 8. RECORDS RETENTION. As described in NSP1 Agreement Number 08-F56401-005, the Contractor will retain all records related to the NSP1 project for a period of six (6) years frorn the date this Closeout Agreement is executed. This includes but is not limited to financial reports, property acquisition documents, rehabilitation or construction related documents. If any litigation, claim or audit is started before the expiration of the six (6) year period, the records shall be retained until all litigation, claims or audit findings involving the records have been resolved. 9. PROGRAM INCOME REUSE PLAN. The Contractor submitted to COMMERCE a Program Income Reuse Plan, which was approved by COMMERCE, and which is included as Attachment B to this Closeout Agreement. The Contractor agrees to comply with all applicable federal regulations and requirements for the administration and use of program income, as defined in 24 CFR 570.500(a) and as stipulated in 24 CFR 570.504. All program income received by the Contractor shall be solely used for NSPl eligible activities, as described in the Statement of Work of NSP1 Agreement Num�er 08-F56401-005 and in the attached Program Income Reuse Plan. T'he Contractor agrees that no more than ten percent (10%) of program income received can be used to pay for administrative costs. The xequirements of this section shall survive the termination of this Closeout Agreement. In the event that the Contractor fails to comply with the requirements for the administration and use of program income contained in this Closeout Agreement (including but not limited to the attached Program Income Reuse Plan), in the applicable federal regulations, or in the NSP 1 Agreement Number 08-F56401-005, COMMERCE reserves the right to recapture funds in the amount of the non-compliance in addition to any other remedies available at law or in equity. 10. SURVIVAL. The terms, conditions, and warranties contained in this Closeout Agreement that by their sense and context are intended to survive the termination of this Closeout Agreement sha11 so survive. Department of Commerce Page 3 Closeout Amendment Neighbofiood Stabilization Program 1 08-F56401-005 ATTACHMENT B: PROGRAM INCOME REUSE PLAN Agreement Number: 08-F56401-005 NEIGHBORHOOD STABILIZATION PROGRAM 1 (NSPl) Washington State Department of Commerce Department of Commerce Page 4 Closeout Amendment Neighborhood Stabilization Program 1 08-F56401-005 Grantee Name Grantee Address Grantee Telephone # Closeout Agreement # Attachment B NEIGHBORHOOD STABILIZATION PROGRAM PROGRAM INCOME REUSE PLAN City of FEDERAL WAY 33325 8th Avenue S., Federal Way, WA 98003 (253) 835-2401 08-F56401-005CA This Program Income Reuse Plan establishes guidelines regarding policies and procedures to administer and use Program Income received through activities funded by the Neighborhood Stabilization Program (NSP). In this Plan, the City of Federal Way or "Grantee" will detail to the Washington State Department of Commerce or "Commerce" how it plans to reuse any Program Income that it earns. Need for Plan Governing Reuse of NSP Program Income NSP is authorized under Title III of Division B of the Housing and Economic Recovery Act of 2008 (HERA). It falls under the heading of the Emergency Assistance for Redevelopment of Abandoned and Foreclosed Homes. HERA states that grants funded by NSP are considered Community Development Block Grant (CDBG) funds. This Program Income Reuse Plan is intended to satisfy the requirements specified in federal statute and regulation at Section 104(j) of the Housing and Community Development Act ("the Act"), as amended in 1992 and 24 Code of Federal Regulations (CFR) 570.489 (e)(3) and of Title III of Division B of HERA. These statutory and regulatory sections permit the Grantee to retain for reuse, NSP Program Income generated by eligible NSP activities pursuant to HERA.. The eligible NSP activities shall benefit low-, moderate-, or middle-income (LMMI) individua.ls and families, and be limited to the following activities: • Establish financing mechanisms for purchase and redevelopment of foreclosed-upon homes and residential properties, including such mechanisms as soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate-income homebuyers. • Purchase and rehabilitate abandoned or foreclosed residential properties in order to sell, rent, or redevelop such homes and properties. • Demolish blighted structures. • Redevelop demolished or vacant properties. � Program Income Reuse Plan Page 2 Program Income Defined Federal regulation 24 CFR 570.500(a) defines NSP Program Income. It states Program Income is the gross income directly generated from the use of NSP funds. Examples of Program Income include: • payments of principal and interest on loans made using NSP funds, • income (net of costs that are incidental to the generation of the income) from the sale or rental of real property that has been acquired, constructed or improved with NSP funds and that is owned (in whole or in part) by the participating jurisdiction or subrecipient. General Administration (GA) Cost Limitation The Grantee may use up to ten percent (10%) administrative costs. of NSP Program Income received for general Cash Management The accounting and financial management system used to manage Program Income must comply with generally accepted accounting principles. Accounting procedures must demonstrate that the Grantee used NSP Program Income solely for NSP eligible activities. The annua.l financial statements must present the fnancial position of the Program Income Account and the results of its operations. Note: Program Income account balances must be held in an interest bearing account and any interest earned must to remitted back to HUD. RenortinE The Grantee will send Commerce an annual Program Income Report that will be due by January 15th of the following year (unless otherwise directed by Commerce). This Report will detail Program Income revenues and expenditures. Commerce will incorporate this Program Income information into the State's Annual Program Income report. Federal Overlav Compliance The Grantee must ensure that the use of NSP Program Income complies with all federal overlay requirements including, but not limited to: • citizen participation • Section 3 employment • acquisition and relocation • environmental review • lead-based paint • procurement • maintenance of adequate accounting & recordkeeping systems equal opportunity labor standards contmued affordabilrty Program Income Reuse Plan Page 3 Grantee and Subrecipient Agreements If the Grantee allows any of its NSP sub-recipients to retain use of Program Income, the Grantee must ensure that the sub-recipients follow all NSP requirements. On October 29, 2009, the Grantee signed a subrecipient agreement with the Washington State Housing Finance Commission (HFC). HFC used the NSP funds to provide down payment assistance, or "second mortgage loans" to eligible homebuyers. These 0% interest loans will be "forgiven" if the homebuyer stays in the house for 15 years. If the homebuyer sell the home prior to this date, any loan repayments will be considered Program Income. The subrecipient agreement titled "Agreement Regarding Downpayment Assistance: House Key Federal Way Program" details how the HFC will administer any Program Income earned and HFC's reporting requirements. In particular, HFC agreed to: • Establish a"City's Loan Receipts Account" (or PI Account) for Federal Way's share of any loan proceeds coming back in. This account will be interest bearing. (Note: Any interest earned on account balances must be remitted back to HUD – This is not stated in Subrecipient Agreement) • Federal Way's proportionate share of any loan's proceeds is Program Income (PI) and must be deposited in the PI Account. • HFC will report quarterly to Federal Way on the balance of the PI Account. • Unless directed otherwise by the city, HFC will continue to use PI to fund additional Downpayment Assistance pursuant to the provisions of the Subrecipient Agreement. • Upon termination of the Subrecipient Agreement, HFC will transfer any funds in the PI Account to Federal Way. At that time, Federal Way can either set up their own Downpayment Assistance program or remit the PI funds back to Commerce. In addition, the Grantee must ensure that the sub-reeipient reports a.nnually on Program Income to the Grantee, in order that the Grantee can report to Commerce by January 15th of the following year. Revising This Plan The Grantee has the authority to revise this document with a properly noticed CouncilBoazd public hearing, boaxd resolution, and acceptance by Commerce. The Grantee must send any proposed revisions to their Program Income Reuse Plan to Commerce for review and approval. Then Grantee's governing board must approve the revised plan. They will need to conduct a public hearing prior to adopting it. Proof of publishing a public hearing notice, along with a copy of the resolution or ordinance showing the adoption of the revised plan, must be submitted to Commerce. NAME OF CERTIFYING OFFICIAL: r �' � TITLE OF CERTIFYING OFFICIAL: rn (Chief Administrative Executive—enter exact tit of person signing) Accepted and Ce 'fied: � 3' �..L� Si Date Dep ent o omme ` Department of Commerce ` Innova#ian is in our na#ure. Neighborhood Stabilization Program (NSP) Guidelines for Program Income and Revolving Loan Funds Edition Date: January, 2013 Many of Washington's NSP Subrecipients generate Program Income. With just a few exceptions, these Subrecipients will retain their NSP Program Income, even after their grant agreements with the Washington State Department of Commerce are closed out. The use of this Program Income must comply with NSP and CDBG regulations. These guidelines document and address some unique issues or questions pertaining to NSP Program Income. The guidelines include: 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Definition of Key Terms ........................................................................................ l HUD Guidance on Program Income ...................................................................... 2 Continued Affordability Requirements .................................................................. 2 Program Income Prior to Grant Closeout .............................................................. 2 Program Income After Grant Closeout .................................................................. 2 Examples of NSP Program Income ....................................................................... 3 Rental Income from NSP Properties .................................................................:.... 3 Using NSP to Make Loan Payments ...................................................................... 4 The NSP Closeout Agreement ...............................................................................4 Reversion of Assets ................................................................................................ 5 Program Income Reuse Plan .................................................................................. 5 Revolving Loan Fund (RLF) Administration Plan ................................................ 6 Non-Subrecipient Administration of RLFs ............................................................ 7 Accounting Standards and Financial Statements ................................................... 8 Revisions................................................................................................................ 8 Reporting to Cammerce and/or HiJD .................................................................... 8 1. Definition of Key Terms Commerce: State of Washington's Department of Commerce, which is the direct recipient of the NSP grant from HUD. NSP Subrecipient or Subrecipient: Local jurisdictions awarded an NSP grant from Commerce. NSP Guidelines for Program Income & Revolving Loan Funds Page 1 January 2013 Responsible Or�anizations: Non-profit organizations who received NSP funds from NSP Subrecipients to help them implement their NSP programs. Developers: An entity receiving NSP assistance, through a"developer's agreement", to acquire and rehabilitate/redevelop properties for resale or rentals. The developer must demonstrate ownership or control of the property Program Income: Income received by the Subrecipient or Responsible Organization directly generated from the use of NSP funds. 2. HUD Guidance on Program Income HUD issued an NSP Policy Alert on Program Income on July 13, 2011. Other relevant regulatory citations include: • 24 CFR 570.500: Definitions. • 24 CFR 570.504: Program Income. • 24 CFR 570.504(c): Disposition of Program Income Received by Subrecipients. • 24 CFR 570.509: Grant Closeout Procedures. • 24 CFR Part 570: Administrative Rule changes dates April 16, 2012. 3. Continued Affordability Requirements Subrecipients must ensure the continued affordability of all the properties assisted with NSP funds or with Program Income generated by NSP funds, in accordance with the requirements of 24 CFR 92.252 for rental units and 24 CFR 92.254 for owner-occupied units. 4. Program Income Prior to Grant Closeout During the term of their NSP grant agreement, Subrecipients use Program Income for NSP eligible activities. T'hey must follow all NSP/CDBG requirements such as environmental, fair housing, affordability, labor laws, NSP purchase price discounts, appraisals, and homeownership counseling. Subrecipients must document the receipt and use of Program Income. Unless they deposit the funds into a revolving loan fund (RLF) approved by Commerce, Subrecipients must spend Program Income first before drawing down any more NSP grant funds. At least 25 percent of any Program Income received after October 18, 2010, MUST be used to benefit persons with incomes at or below 50 percent of the median household income (see HUD's NSP Policy Alert dated September 1, 2011). 5. Program Income After Grant Closeout Upon the completion and closeout of their NSP grant agreement, Subrecipients must document any Program Income generated by their NSP activities. They will treat it like NSP/CDBG funds subject to all applicable state and federal requirements governing the use of NSP and CDBG funds. NSP Guidelines for Program Income & Revolving Loan Funds Page 2 January 2013 A written NSP Closeout Agreement between Commerce and the Subrecipient will specify how the Subrecipient will use its Program Income after the grant closeout (see Section 11 and 12 below). This NSP Closeout Agreement will close their existing NSP grant agreement. Subrecipients may use up to 10% of Program Income received for eligible NSP administrative purposes. HUD issued Federal Guidance on NSP Closeout. This guidance requires that if a Subrecipient earns over $250,000 annually in Program Income, then 25% MUST be used to benefit persons with incomes at or below 50 percent of the median household income (see HUD's Federal Register, Vol. 77, No. 228, dated November 27, 2012). 6. Examples of NSP Program Income Common sources of NSP Program Income are: • Proceeds from the sale of properties acquired and/or improved with NSP funds. • Gross income from the use or rental of real property constructed or improved with NSP funds, less the costs incidental to the generation of that income. • Payments of principal and/or interest on loans made with NSP funds (including Habitat for Humanity loans and recovery of deferred loans). • Recapture of NSP subsidies if an assisted home is sold before the end of the affordability period. • Interest earned on loan� made with NSP funds. • Repayments of liens placed on privately owned property when blighted buildings were demolished and cleaned up using NSP funds. T'he following revenues are NOT Program Income: • Funds collected through special assessments on public improvements (e.g., local improvement districts created to fund infrastructure improvements in subdivisions purchased with NSP funds). • Program Income (NSP & CDBG) received in a single calendar year by the Subrecipient and all its Responsible Organizations (combined) if the total amount of such income does not exceed $25,000. • Interest earned on cash advances from Commerce or funds held in a Program Income or RLF account (except for funds in approved lump-sum drawdown accounts). These interest earnings must be remitted to HUD for transmittal to the U.S. Treasury. • Revenues earned by "developers" of NSP-assisted properties. Subrecipients must implement mechanisms that prevent undue enrichment of their Responsible Organizations. �. Program Income from NSP Rental Properties Some NSP Subrecipients and their Responsible Organizations used their NSP funds to purchase and rehabilitate rental properties. Program Income includes rental income from properties acquired using NSP funds. NSP Guidelines for Program Income & Revolving Loan Funds Page 3 January 2013 Program Income from rental properties refers to rental receipts less costs necessary to generate that income. In other words, Program Income for rental properties corresponds to the calculation of net operating income (NOI). NOI for rental properties is the difference between the total rent collected and the operational costs such as maintenance, insurance, utilities, management fees, etc. Calculation of Program Income should include all rental properties. If a Subrecipient, or their Responsible Organizations, has more than one rental property, then the calculation of program income must include the combined total of all the properties. (In addition, the Subrecipient must add this combined total of Program Income to the any other Program Income earned from CDBG funded projects.) 8. Using NSP Program Income to Make Loan Payments The calculation of rental income is calculated prior to debt service payments. HUD allows the use of Program Income to be applied to debt service under the following conditions: • Private loans were used solely to finance the costs of the approved NSP project and were made at the same time as the NSP loan (i.e., was not an existing mortgage). • The private loan was made by an external lender (not the Subrecipient). • Loan proceeds were used in accordance with all applicable NSP requirements (e.g., environmental review, labor standards, price discounts, appraisals, homeownership counseling, etc.). • iJse of the Program Income for debt service payments was contemplated (as evidenced in a written budget) when the NSP project was approved by Commerce. 9. NSP Closeout Agreement At the end of the NSP program, the Subrecipient and Commerce will execute an NSP Closeout Agreement. The NSP Closeout Agreement, which closes the original NSP Agreement, will include provisions addressing each of the following: • Identification of any closeout costs or contingent liabilities subject to payment with NSP funds after grant closeout. • Identification of any unused grant funds that revert to Commerce. • Identification of any Program Income at the time of the NSP Closeout Agreement. • Description of the Subrecipients' responsibility after closeout for: - Compliance with all program requirements, certifications and assurances in using Program Income and in using any other remaining NSP funds available for closeout costs and contingent liabilities; - Use of real property assisted with NSP funds in accordance with the principles described in 24 CFR 570.505; - Compliance with the affordability requirement stipulated in 24 CFR 92.252 for rental housing units or 24 CFR 92.254 for owner-occupied housing units; - Compliance with requirements governing Program Income received subsequent to grant closeout, as described in 24 CFR 570.504(b)(4) and (5); and NSP Guidelines for Program Income & Revolving Loan Funds � Page 4 January 2013 . - Ensuring that flood insurance coverage for affected property owners is maintained for the mandatory period. • Federal Financial Report / Settlement Statement: Grantees must submit a Federal Financial Report using a Standard Form 425 (SF-425). This report reflects the cumulative actual federal monies and unliquidated obligations incurred, local matching contributions, and the unobligated balance of federal funds. 10. Reversion of Assets Real property acquired or improved, in whole or in part, with NSP funds must meet one of the CDBG national objectives for ten (10) years after the NSP grant closeout. Any exceptions need to be addressed and approved in the NSP Closeout Agreement. The sale of real property acquired or improved, in whole or part, with NSP funds must comply with the requirements of Public Law 110-289, Housing and Recovery Act of 2008 (HERA), section 2301, which includes but is not limited to: • Section 2301(d)(1) current market appraisal requirements to determine the statutory purchase discount and to ensure purchasers are paying below-market value for the home or property. • Section 2302(d)(3) sale amount restrictions for any abandoned or foreclosed upon home or residential property purchased, redeveloped, or otherwise sold to an individual as a primary residence to an amount equal to or less than the cost to acquire and redevelop or rehabilitate such home or property up to a decent, safe, and habitable condition. • Section 2301(fl(3) affordability requirements as stipulated in 24 CFR 92.252 for rental housing units or 24 CFR 92.254 for owner-occupied housing units or for a longer period of time if practicable. • Environmental review according to 24 CFR 58. 11. Program Income Reuse Plan A Program Income Reuse Plan governs the Subrecipient's continuing use of Program Income. It identifies all proposed uses of Program Income. The Program Income Reuse Plan needs to indicate the Subrecipient's compliance with all applicable NSP program requirements. These include but are not limited to the following: environmental requirements; procurement; Section 3 employment; prevailing wage rates and labor standards; acquisition and relocation requirements; housing quality standards; NSP national objective requirements; continued affordability; citizen participation; equal employment opportunity, financial audits, and annual reporting. The Program Income Reuse Plan will become part of the NSP Closeout Agreement. Commerce closes the original NSP grant upon satisfactory completion of the terms and conditions of the grant agreement. However, federal statute requires Commerce to track Program Income after the grant closeout. To that end, the Program Income Reuse Plan satisfies the federal requirement that Subrecipients obtain Commerce's advance approval of a local plan administering and reusing Program Income. NSP Guidelines for Prograxn Income & Revolving Loan Funds Page 5 January 2013 12. Revolving Loan Fund (RLF) Administration Plan If the Subrecipient plans to create and operate an RLF, an RLF Administration Plan will become part of the NSP Closeout Agreement. This RLF Administration Plan authorizes the Subrecipient to establish and operate the RLF. In accordance with 24 CFR 570.500(b), the RLF refers to a separate fund from any other NSP funds. It has its own set of accounts that are independent of other program accounts. The Subrecipient's audited financial statement will present the RLF account separately from other funds. Once approved by Commerce, the RLF Administration Plan needs to have a specific term — typically five years. During this time, the Subrecipient must demonstrate it has the capacity to administer and implement the RLF activities. Otherwise, the Program Income generated by NSP-funded activities may revert back to Commerce. The Subrecipient's RLF must carry out specific revenue-generating activities. It is initially capitalized with Program Income received.from the use of NSP grant funds, e.g., the sale of property. The RLF is a fund from which moneys are continuously expended, replenished, and again expended for the same activity. RLF Administration Plan Contents To assist NSP Subrecipients, Commerce has identified the primary elements which generally make up an RLF Administration Plan. These elements provide only a general framework to help the Subrecipient develop the RLF Administration Plan. The Subrecipient is encouraged to add their own information and details about how the RLF will be used and managed. However, the following topics must be included, at a minimum: A. Goals and Obiectives: Develop a clear set of goals and objectives, which articulate in quantifiable terms, the purpose of the RLF and how Program Income will be reused. The purpose of the RLF would reflect the economic conditions and opportunities in the community that the RLF will address. B. Compliance with applicable NSP and CDBG RecLuirements. Indicate compliance with all the applicable NSP and CDBG provisions of the statutes, rules, regulations, and guidelines. These include but are not limited to the following: environmental requirements; procurement; Section 3 employment; prevailing wage rates and labor standards; acquisition and relocation requirements; housing quality standards; national objective requirements; continued affordability; citizen participation; and equal employment opportunity. C. Eligible Activities: Describe the specific eligible activities that the RLF will fund. Show how they relate to the community's problems or needs AND to the goals and objectives of the RLF. Ensure that the eligible activities meet all NSP and CDBG requirements. D. Eli�ble Applicants: Establish criteria for eligibility of applicants for the RLF. Limited RLF resources may necessitate the targeting of loans. Targeting of loans might include a specific area of need; geographic area of discrimination in lending; existing businesses versus start-up businesses; addressing specific industries affected by lending patterns; addressing discrimination against women and minorities in lending; etc. NSP Guidelines for Program Income & Revolving Loan Funds Page 6 January 2013 E. Eli 'b� le Types of Financial Assistance: Establish what types of financial assistance (loans) are to be funded, e.g., amortized loans, deferred loans, 100% financing versus public or private partnerships, etc. F. Financing Policies: Establish any minimum or maximum dollar amount of financial assistance. Include terms and rates of interest for the repayment. Include policies for restructuring loans or modifying terms, along with any other financing policies required. Quantify acceptable levels of risk. G. Loan Review, Selection, and Approval (if applicablel: Create a process for "advertising" the RLF to the public. Establish criteria and procedures for review and approval of loan applications. Establish a loan review committee whose purpose is to make recommendations to the governing body. Ideally, its membership would include private sector finance professionals. H. Loan Securitv (if applicable): Secure each amortized real property loan by trust indenture, and secure each deferred real property loan that provides a contingency for repayment, by lien. Require each borrower, where appropriate, to protect the NSP Subrecipient against insurable risks. A copy of each policy underwritten should be filed with the RLF administrator. I. Loan Servicin�(if applicablel: Establish policies and procedures for loan repayments, loan delinquencies, loan defaults, and loan monitoring, and designate who will be responsible for carrying out each of these functions. J. Recapitalization Strategy: If needed, develop a recapitalization strategy and identify which other financial resources might be used to recapitalize or supplement the RLF. K. Internal Control: Identify the internal control system which will be put in place to ensure that the RLF is managed according to the RLF Administration Plan. The objectives of internal control should be to provide the RLF administrator (and the NSP Subrecipient) with reasonable assurance that the RLF assets are safeguarded against loss and that all RLF transactions are executed in accordance with the approved RLF Administration Plan. L. Public Participation and Information: Identify the RLF's program reporting and public participation process. For CDBG entitlement jurisdictions, this process must comply with the "Public Participation Plan" stipulated in the jurisdiction's CDBG Consolidated Plan. 13. Non-Subrecipient Administration of Program Income or RLFs The Subrecipient may contract with a non-profit organization (the responsible organization that administered the NSP project for instance) or a financial institution to administer any Program Income or RLFs, subject to Commerce's approval. However, the ownership of and ultimate responsibility for the Program Income or RLF must remain with the Subrecipient. A written agreement must exist between the Subrecipient and non-profit organization. This Agreement must remain in effect during any period that the Program Income or RLF administrator has responsibility for Program Income or RLF program activity. Minimum provisions in this Agreement are: 1. Statement of work to be performed including a timeline; 2. Records and reports to be maintained; 3. Requirements for how Program Income and the RLF are to be managed; NSP Guidelines for Program Income & Revolving Loan Funds Page 7 January 2013 4. Applicability of Federal Circulars and other such requirements; 5. Provision for termination of the agreement; and 6. A policy on reversion of assets at termination. The NSP Subrecipient must maintain accounting oversight, including an annual audit of the RLF. Copies of such audit(s) and any reports must be submitted to Commerce. Regardless of who is administering the Program Income or RLF, a written Administration Plan needs to be approved by Commerce and incorporated in the NSP Closeout Agreement. 14. Accounting Standards and Financial Statements The accounting and financial management system used to manage Program Income and RLFs must comply with generally accepted accounting principles. Subrecipients must be able to demonstrate that Program Income or funds received into the RLF are used solely for NSP eligible activities. The financial position of all Program Income or RLF proceeds must be included in the Subrecipients' annual audit (unless the RLF is managed by another organization on behalf of the Subrecipient). The annual financial statements must present the financial position of Program Income or the RLF and results of their operations. Any Program Income or the cash balance of the RLF must held in an interest-bearing account. And any interest earned on these cash balances must be remitted at least annually to HUD. 15. Revisions Subrecipients must send any revisions of either their Program Income Reuse Plans or RLF Administration Plan to Commerce for review and approval. The jurisdictions' governing board must approve the revised plan(s). They must to conduct a public hearing prior to adopting it if the proposed changes could directly affect the potential beneficiaries. A copy of the resolution or ordinance showing the adoption of the revised plan must be submitted to Commerce. 16. Reporting to Commerce andlor HUD Because Commerce has ultimate responsibility for any Program Income retained and used, it must ensure that Program Income is used in a manner consistent with federal requirements (24 CFR 570.504 and 24 CFR 570.500(b)). Subrecipients must submit to Commerce an annual Pro�ram Income Report which details program income or RLF's (for the calendar year) by January 15 of the following year (unless otherwise directed by Commerce). Report forms are provided in Commerce's CDBG Management Handbook (or www.commerce.wa.gov). Commerce will report this information on Program Income annually to HUD. In addition, the Subrecipient must provide details of any ea�isting NSP properties that have been sold or additional properties purchased over that year and how continuing affordability requirements have been met. NSP Guidelines for Program Income & Revolving Loan Funds Page 8 January 2013