Neighborhood Stabilization Program II (NSP2)

Grant Application

The Springfield Massachusetts Consortium-NSP2 Grant Application

Response to Written NSP Questions

Questions Received by the Office of Housing April 15, 2009

1. Capitalizing operating reserves: Will the City allow NSP funding to be used to capitalize an operating reserve for property rehabbed with NSP funds and then rented by the applicant?

Answer: Yes, NSP funds can be used for operating reserves.  The grantee must demonstrate that such a requirement is consistent with industry practices and the dollar amount of the required reserves is consistent with local industry standards.

 2. Combining NSLF and NSP subsidies in rehab of the same unit-  Will the City allow an applicant to combine MHIC / DHCD Neighborhood Stabilization Loan Fund (NSLF) / subsidy funding with City NSP funding for the rehab of units?  If so, does the City have any cap on the amount of NSP funding that can be combined with the NSLF funding for a given unit?

Answer: Yes, applicants are encouraged to use other public and private funding in combination with Springfield NSP funding allocation.  The City has set no cap on the amount of NSP funds per project.  Subsidy request will be reviewed as part of the project review as the individual properties are presented for review and approval.

 3. Minimum sales price?  Will the City mandate a minimum price for sales to homebuyers for properties rehabbed with NSP funds, if the applicant developer wants to reduce the price sufficiently to clear the property from its inventory in a prompt fashion?

Answer: Maximum homeownership assistance payments based on NSP affordability requirements and “reasonable costs” are determined by OMB Circular A-87.  If the NSP grantee subsidizes the home in excess of the required rehabilitation as compared to the completed value and affordability, an explanation of the reasons to provide excess subsidy would be needed to satisfy OMB A-87.  

4. Fidelity Bond amount- With respect to the City’s requirement for Fidelity Bond / Crime Insurance at 100% of contract (RFQ, p. 15), if the applicant hopes to do a series of rehabs using NSP funds, does the 100% amount refer to the amount outstanding on NSP funding at any one time, or will the city require the 100% amount to equal the total of NSP funding requested by the applicant in the aggregate over the entire period of NSP activity?  (If the latter, that could potentially be a fairly large amount of such insurance to obtain.)

Answer: The City envisions that developers will use private construction financing and that NSP funds will be provided to projects as expenses are incurred or as reimbursement for eligible costs.  Fidelity Bond/Crime Insurance will not be required unless another method of providing NSP funds to an applicant is approved. 

 5. Performance Bond threshold -The state NSLF program is not requiring construction bonding for construction contracts less than $1,000,000.  It is, however, undertaking a credit analysis of the contractors, encompassing a current credit report, 3 years of tax returns and bank and client reference checks.  The City’s current plan to require a Performance Bond for all construction (apparently without regard to contract amount) will likely have the effect of excluding some of the smaller, area contractors, and perhaps some MBE/WBE contractors from being awarded construction work using NSP funds.  Is there any chance the City could align its Performance Bond requirement more closely with the NSLF program, by not requiring a Performance Bond unless the aggregate construction contract amount for a given contractor is over some number, say $500,000 or $1 million?

Answer: The Cityy wishes to encourage as much participation by local and MBE/WBE contractors as possible.  The City will review alternatives to performance bonds such as a letter of credit or other options for projects of moderate costs. 

 6. Letter of credit as alternative to Performance Bond-  Would the City consider a letter of credit as an alternative to a performance bond?  We believe this may be easier to arrange for some of the smaller, area contractors, and perhaps some MBE/WBE contractors, than a performance bond, and give a comparable level of security.

Answer: Please see response to number 5.

7.  More specifics on the environmental review- What will be the process and timeline for the environmental review process referred to in the RFQ?

Answer: The Environmental Review has been started.  The NOI/FONSI/RROF was advertised as of April 14, 2009. The 15-day review period ends April 30, 2009. On that date the full RROF will be submitted to HUD. Full review should be completed on or about May 15^th depending on HUD response. Subsequent reviews will be required for each site as they are identified.

 8. Tiering the environmental review-  Will the City tier the environmental review under 24 CFR 58.15 so the whole target area will be assessed early in the process in order to lessen the time needed to complete the site specific project reviews?   If so, when will that broader initial review be completed?  What site-specific review standards or issues have emerged from that broader review?  Did the environmental review in the original 2008-2009 Action Plan approved by HUD last summer cover any of the activities contemplated in the NSP RFQ?

Answer: Yes, we have reviewed the entire project under a tiered review. A review for each individual property will be required once sites are selected.

No site specific standards have emerged from this broader review. Again, further review will be needed once sites are selected.

Acquisition, rehab and construction of single and multi-family homes were reviewed under the FY 09 Action Plan. 

 9. Environmental review for rehab of 1-4 unit buildings-  Our understanding is that under 24 CFR 58.34(a)(3), rehabilitation of 1- to 4-unit buildings, without increasing the density over 4 units, and with no change in land use (and no increase of building footprint in floodplain or wetland) will only require a 24 CFR 58.5 statutory checklist review, provided no statutory checklist thresholds are crossed (and no 24 CFR 58.6 issues are present), and that this will not require public notice or a review period.  Is that the City’s understanding for the rehab of 1- to 4-unit buildings?  That is, will only the statutory checklist be required for such rehab, with no public notice and comment period (assuming no §58.5 or 58.6 issues are present)?

Answer: 24 CFR 58.34(a)(3) covers exempt activities. 24 CFR 58.35(a)(3) refers to activities determined to be Categorically Excluded. Statutory Checklists will be completed for each individual site as they are selected. If no thresholds are exceeded the projects can be converted to exempt actives and no further review will be required. However, if thresholds are triggered an additional NOI/RROF may be required.

Generally, rehabilitation, acquisition and disposition actions are categorically excluded from the National Environmental Policy Act (NEPA) and, absent extraordinary circumstances (see §58.2(a)(3) for definition of extraordinary circumstances), an Environmental Assessment is not required. 

Rehabilitation of residential buildings (with one to four units) is categorically excluded from NEPA, but is subject to review under the federal environmental laws and authorities at §58.5 when the density is not increased beyond four units, the land use is not changed, and the footprint of the building is not increased in a floodplain or wetland.  (See 24 CFR 58.35(a)(3)).  Acquisition or disposition of an existing structure is also categorically excluded from NEPA, but subject to review under the federal environmental laws and authorities at §58.5 provided that the structure will be retained for the same use.  (See 24 CFR 58.35(a)(5)).  In accordance with 24 CFR 58.35(a)(6), combinations of categorical exclusions listed in §58.35(a) may be combined, allowing for the acquisition, rehabilitation and disposition of an existing single family house to be categorically excluded from NEPA. 

 10. Timing of Environmental Review for properties acquired with non-NSP funds-  If properties are being acquired with non-NSP funds, but developed with NSP funds, does the City Environmental Review have to be completed before acquisition?

Answer: Yes, if NSP funds are proposed to be used as part of the overall “project” then an Environmental Review would be required prior to acquisition.

 11.Turn-around time for City Environmental Review-  To be competitive in MLS-listed foreclosed property acquisition, closings have to occur relatively rapidly, and with few contingencies.  Similarly, to acquire foreclosed properties through the National Community Stabilization Trust, commitment to purchase and closings have to occur relatively rapidly – closing within 30 days.  What will be the turn-around time for City Environmental Review for rehab of 1- to 4-unit buildings, if no 24 CFR 58.5 statutory checklist thresholds are triggered. What will be the turn-around time in other cases?? 

Answer: An initial review of the project can be turned around in 5 days.  If projects can be converted to exempt activities, and no thresholds are triggered, then no further review will be required.  If thresholds are triggered, then required time periods must be followed as per 24 CFR Part 58.

12. Early request for Environmental Review-  Is it possible for the City to conduct an environmental review on a proposed property or properties prior to its decision on the RFQ?

Answer: The city will conduct the environmental review on proposed sites prior to its decision on the RFQ provided the applicant has secured other NSP funds (MHIC/DHCD NSLF) for acquisition and rehabilitation of the proposed project.

 13. Other eligible soft costs-  The RFQ notes various eligible soft costs, but the list did not include:

• property taxes during development,
• utilities
• surveys and plot plans
• permits
• marketing / rent up
• security & maintenance during development

Will any of the above also be eligible soft costs?

Answer: The list of soft costs in the RFR was not meant to limit but merely provide examples of eligible soft costs.  Applicants can expect that reasonable and usual soft costs may be eligible and should delineate such as individual projects are submitted for review.

14. Developer using separate ownership entity-  The NSLF program is requiring developers to set up a separate entity to own the foreclosed properties being developed and serve as the NSLF borrower for their development.  The developer will develop the property for this separate owner under a developer services agreement.  Is such an arrangement acceptable to the City for the NSP-funded work?

Answer: Provided the applicant exercises control over the separate entity or is proposing a joint venture with another entity, such arrangement is acceptable.

15. Channel for accessing homebuyer assistance funding-  Will the City itself administer any programs for direct assistance to homebuyers for acquisition and rehabilitation of foreclosed properties?  Or will it run all such homebuyer assistance programs through one or more nonprofits or other entities?  If the latter, do these nonprofits or other entities have to submit a response to the NSP RFQ in order to offer the NSP homebuyer assistance funds? 

Answer: The City has reserved a decision on running direct assistance programs until after review of the Request for Qualifications.  It is anticipated that entities wishing to operate direct assistance programs will submit a response to the RFQ indicating interest to administer such a program by the deadline.