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HomeMy WebLinkAbout182-25 RESOLUTION113 West Mountain Street Fayetteville, AR 72701 (479) 575-8323 Resolution: 182-25 File Number: 2025-1420 A RESOLUTION TO AUTHORIZE MAYOR RAWN TO SIGN A LOW-INCOME HOUSING IMPROVEMENT AGREEMENT WITH THE HOUSING AUTHORITY OF THE CITY OF FAYETTEVILLE TO PROVIDE THE AMOUNT OF $200,000.00, AND TO APPROVE A BUDGET ADJUSTMENT WHEREAS, state law has repeatedly been found constitutional by Arkansas Supreme Court decisions which state that housing authorities may provide "safe and sanitary dwelling accommodations for persons of low income (which) are exclusively public uses and purposes for which public money may be spent..." A.C.A. § 14-169-202 (3); and WHEREAS, state law authorizes a city "to lend or donate money to (its housing) authority..." A.C.A. § 14-169-229 (b)(1); and WHEREAS, the most clear and safe legal way for Fayetteville to assist its low-income citizens to obtain safe and affordable public housing is to work through the Fayetteville Housing Authority; and WHEREAS, the previous Board of the Fayetteville Housing Authority mistakenly created a nonprofit corporation which purchased housing and used its HUD paid employees to rehabilitate or maintain this housing in violation of HUD regulations and thereby incurred a debt to HUD of $60,961.45 which must be repaid to the U.S. Department of the Treasury with non-federal funds in order for FHA to become eligible for potential federal grants for maintenance, rehabilitation or creation of low-income housing; and WHEREAS, the new Executive Director and Board of the FHA have finally received a clean audit and are prepared to work hard and legally to serve our low-income citizens with affordable public housing; and WHEREAS, the Fayetteville Housing Authority is incapable of paying its $60,961.45 debt to HUD without funding by Fayetteville, and it is in the best interests of Fayetteville's citizens to donate sufficient funds to the Fayetteville Housing Authority for payment of this debt so that FHA will then be allowed to seek federal low-income housing grants; and WHEREAS, FHA Development, Inc. also caused a loss to the Fayetteville Housing Authority's budget in the amount of $123,758.00 which needs to be replaced so that the Fayetteville Housing Authority can become fully able to receive housing grants from HUD; and WHEREAS, once the City of Fayetteville has donated $200,000.00 to the Fayetteville Housing Authority through this agreement, the Fayetteville Housing Authority will not only pay off the debts created by FHA Development, Inc. to become eligible for HUD grants, but it can initiate a testing and mitigation program for its housing units to ensure that asbestos and lead paint will not endanger its tenants and determine whether existing, but unoccupied, public housing units can be economically rehabilitated for low-income citizens. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Page 1 Resolution: 182-25 File Number: 2025-1420 Section 1: That the City Council of the City of Fayetteville, Arkansas hereby authorizes Mayor Rawn to sign a Low - Income Housing Improvement Agreement with the Housing Authority of the City of Fayetteville in the amount of $200,000.00 to repay funds owed to the U.S. Department of the Treasury and replace losses to the Housing Authority caused by the past improper actions of the Housing Authority Board of Commissioners and FHA Development, Inc., and to implement an environmental testing and mitigation program for its housing units to ensure that asbestos and lead paint will not endanger its tenants and determine whether existing, but unoccupied, public housing units can be economically rehabilitated for low-income residents. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby approves a budget adjustment, a copy of which is attached to this Resolution. PASSED and APPROVED on August 5, 2025 Approved: Molly Rawn, Mayor Attest: Kara Paxton, City Clerk Treasurer Page 2 CITY OF FAYETTEVILLE ARKANSAS MEETING OF AUGUST 5, 2025 TO: Mayor Rawn and City Council THRU: CITY COUNCIL MEMO 2025-1420 FROM: Molly Rawn, Mayor SUBJECT: Low -Income Housing Improvement Agreement with the Fayetteville Housing Authority RECOMMENDATION: Mayor Molly Rawn recommends that the City Council authorize a Low -Income Housing Assistance Agreement with the Fayetteville Housing Authority (FHA) to provide $200,000.00 in funding and approve a budget adjustment. The funding will be used to repay $60,961.45 to the U.S. Department of the Treasury and to restore FHA's financial capacity, enabling it to apply for HUD housing grants. It will also support necessary asbestos, lead, and other safety testing to ensure that FHA properties are safe for occupancy and suitable for repair or rehabilitation. Additionally, the funds will be used to repair and rehabilitate as many dwelling units as possible and to support development and redevelopment efforts that increase the availability of safe, sanitary, and affordable housing for low-income residents in Fayetteville. BACKGROUND: In December 2024, the City received a letter from Anthony Landecker, Director of the Office of Public Housing for the US Department of Housing and Urban Development, advising that the FHA had been instructed to repay a total of $202,287.45 using nonfederal funds because the previous Board of the Fayetteville Housing Authority mistakenly created a nonprofit corporation which purchased housing and used its HUD paid employees to rehabilitate or maintain this housing in violation of HUD regulations. Breakdown of the Balance • $123,326.00 — Original receivable balance from FHA-D per FHA's general ledger (10/31 /2021). • $40,961.45— Reinstated deductions determined to be unallowable: o $24,098.45 from 2017 Emergency Grant funds used to prepare FHA-D units for rent (not an eligible expense). o $16,863.00 in rental income from the ATT Tower that was loaned to FHA-D (HUD determined this to be an unallowable use of PH funds). . $432.00 — Unallowable disbursements due to lack of supporting documentation. • $38,000.00 — Additional Emergency Grant funds used for ineligible expenses, identified during the 2020 audit. These components brought the total amount owed to $202,719.45. FHA-D made a single repayment of $18,000 using nonfederal funds on November 15, 2023, bringing the current outstanding balance to $184,719.45. Of the remaining balance: Mailing address: 113 W. Mountain Street www.fayetteville-ar.gov Fayetteville, AR 72701 $60,961.45 must be repaid directly to the U.S. Department of the Treasury due to the closure of the 2017 Emergency Grant. $123,758.00 must be returned to FHA's Public Housing program using nonfederal funds. DISCUSSION: Until this matter is fully resolved and the unallowable uses are repaid, FHA remains restricted in its ability to apply for certain HUD funding. This includes opportunities that require compliance with prior enforcement actions. State law has repeatedly been found constitutional by Arkansas Supreme Court decisions which state that housing authorities may provide "safe and sanitary dwelling accommodations for persons of low income (which) are exclusively public uses and purposes for which public money may be spent..." , pursuant to A.C.A. § 14-169-202, and authorizes a city "to lend or donate money to (its housing) authority..." pursuant to A.C.A. § 14-169-229 (b)(1). The new Executive Director, Chonda Tapley, and Board of the FHA have finally received a clean audit and are prepared to work hard and legally to serve our low-income citizens with affordable public housing. The FHA is incapable of paying its $60,961.45 debt to the federal government without funding by Fayetteville, and it is in the best interests of Fayetteville's citizens to donate sufficient funds to the Fayetteville Housing Authority for payment of this debt so that FHA will then be allowed to seek federal low-income housing grants. Once the City of Fayetteville has donated $200,000.00 to the Fayetteville Housing Authority through this agreement, the Fayetteville Housing Authority will not only pay off the debts created by FHA Development, Inc. to become eligible for HUD grants, but it can initiate a testing and mitigation program for its housing units to ensure that asbestos and lead paint will not endanger its tenants and determine whether existing, but unoccupied, public housing units can be economically rehabilitated for low-income citizens. BUDGET/STAFF IMPACT: On July 15, 2025, the City Council approved Resolution 165-25 expressing its intent to appropriate up to $450,000 from the General Fund balance for initiatives addressing homelessness in Fayetteville. This agreement will utilize $200,000 of that amount. ATTACHMENTS: 3. Staff Review Form, 4. Budget Adjustment, 5. Low -Income Housing Improvement Agreement Mailing address: 113 W. Mountain Street www.fayetteville-ar.gov Fayetteville, AR 72701 == City of Fayetteville, Arkansas y 113 West Mountain Street Fayetteville, AR 72701 (479)575-8323 - Legislation Text File #: 2025-1420 A RESOLUTION TO AUTHORIZE MAYOR RAWN TO SIGN A LOW-INCOME HOUSING IMPROVEMENT AGREEMENT WITH THE HOUSING AUTHORITY OF THE CITY OF FAYETTEVILLE TO PROVIDE THE AMOUNT OF $200,000.00, AND TO APPROVE A BUDGET ADJUSTMENT WHEREAS, state law has repeatedly been found constitutional by Arkansas Supreme Court decisions which state that housing authorities may provide "safe and sanitary dwelling accommodations for persons of low income (which) are exclusively public uses and purposes for which public money may be spent..." A.C.A. § 14-169-202 (3); and WHEREAS, state law authorizes a city "to lend or donate money to (its housing) authority..." A.C.A. 14-169-229 (b)(1); and WHEREAS, the most clear and safe legal way for Fayetteville to assist its low-income citizens to obtain safe and affordable public housing is to work through the Fayetteville Housing Authority; and WHEREAS, the previous Board of the Fayetteville Housing Authority mistakenly created a nonprofit corporation which purchased housing and used its HUD paid employees to rehabilitate or maintain this housing in violation of HUD regulations and thereby incurred a debt to HUD of $60,961.45 which must be repaid to the U.S. Department of the Treasury with non-federal funds in order for FHA to become eligible for potential federal grants for maintenance, rehabilitation or creation of low-income housing; and WHEREAS, the new Executive Director and Board of the FHA have finally received a clean audit and are prepared to work hard and legally to serve our low-income citizens with affordable public housing; and WHEREAS, the Fayetteville Housing Authority is incapable of paying its $60,961.45 debt to HUD without funding by Fayetteville, and it is in the best interests of Fayetteville's citizens to donate sufficient funds to the Fayetteville Housing Authority for payment of this debt so that FHA will then be allowed to seek federal low-income housing grants; and WHEREAS, FHA Development, Inc. also caused a loss to the Fayetteville Housing Authority's budget in the amount of $123,758.00 which needs to be replaced so that the Fayetteville Housing Authority can become fully able to receive housing grants from HUD; and WHEREAS, once the City of Fayetteville has donated $200,000.00 to the Fayetteville Housing Authority through this agreement, the Fayetteville Housing Authority will not only pay off the debts created by FHA Development, Inc. to become eligible for HUD grants, but it can initiate a testing and Page 1 Resolution: 182-25 File Number: 2025-1420 mitigation program for its housing units to ensure that asbestos and lead paint will not endanger its tenants and determine whether existing, but unoccupied, public housing units can be economically rehabilitated for low-income citizens. NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF FAYETTEVILLE, ARKANSAS: Section 1: That the City Council of the City of Fayetteville, Arkansas hereby authorizes Mayor Rawn to sign a Low -Income Housing Improvement Agreement with the Housing Authority of the City of Fayetteville in the amount of $200,000.00 to repay funds owed to the U.S. Department of the Treasury and replace losses to the Housing Authority caused by the past improper actions of the Housing Authority Board of Commissioners and FHA Development, Inc., and to implement an environmental testing and mitigation program for its housing units to ensure that asbestos and lead paint will not endanger its tenants and determine whether existing, but unoccupied, public housing units can be economically rehabilitated for low-income residents. Section 2: That the City Council of the City of Fayetteville, Arkansas hereby approves a budget adjustment, a copy of which is attached to this Resolution. Page 2 Mayor Molly Rawn Submitted By City of Fayetteville Staff Review Form 2025-1420 Item ID 8/5/2025 City Council Meeting Date - Agenda Item Only N/A for Non -Agenda Item 8/1/2025 Submitted Date Action Recommendation: MAYORS ADMIN (015) Division / Department Mayor Molly Rawn recommends that the City Council authorize a Low -Income Housing Assistance Agreement with the Fayetteville Housing Authority (FHA) to provide $200,000.00 in funding. The funding will be used to repay $60,961.45 to the U.S. Department of the Treasury and to restore FHA's financial capacity, enabling it to apply for HUD housing grants, and provide fudning for repair and rehabilitation for as many dwelling units as possible and to support development and redevelopment efforts that increase the availability of safe, sanitary, and affordable housing for low-income residents in Fayetteville. Budget Impact: 1010.090.6600-5718.02 General Account Number Fund Project Number Project Title Budgeted Item? No Total Amended Budget $ - Expenses (Actual+Encum) Available Budget $ Does item have a direct cost? Yes Item Cost $ 200,000.00 Is a Budget Adjustment attached? Yes Budget Adjustment $ 200,000.00 Remaining Budget t V20221130 Purchase Order Number: Previous Ordinance or Resolution # Change Order Number: Approval Date: Original Contract Number: Comments: City of Fayetteville, Arkansas - Budget Adjustment (Agenda) Budget Year Division Adjustment Number /Org2 BUDGET & INFORMATION MGMT (133) 2025 Requestor: Kevin Springer BUDGET ADJUSTMENT DESCRIPTION / JUSTIFICATION: $200,000 is requested to allocate to the Fayetteville Housing Authority. COUNCIL DATE: 8/5/2025 ITEM ID#: 2025-1420 Kevin Springer 713012025 4:OE P/VI RESOLUTION/ORDINANCE Budget Division Date TYPE: D - (City Council) JOURNAL#: GLDATE: CHKD/POSTED: TOTAL Account Number 200,000 200,000 Increase / (Decrease) Expense Revenue Project.Sub# Project Sub.Detl AT v.2025721 Account Name 1010.090.6600-5718.02 200,000 - EX Transfer to - Fayetteville Housing Authority 1010.001.0001-4999.99 - 200,000 RE Use Fund Balance - Current I of 1 LOW-INCOME HOUSING IMPROVEMENT AGREEMENT This Low Income Housing Improvement Agreement is entered into between the City of Fayetteville, Arkansas (hereinafter "Fayetteville" or "City") and the Housing Authority of the City of Fayetteville, Arkansas (hereinafter "Fayetteville Housing Authority" or "FHA") to be effective upon the approval of both the Fayetteville City Council and signature of Mayor Molly Rawn and the approval of the FHA Board of Directors and signature of FHA Executive Director Chonda Tapley. WHEREAS, state law has repeatedly been found constitutional by Arkansas Supreme Court decisions which state that housing authorities may provide safe and sanitary dwelling accommodations for persons of low income (which) are exclusively public uses and purposes for which public money may be spent..." A.C.A. § 14-169-202 (3); and WHEREAS, state law authorizes a city "to lend or donate money to (its housing) authority..." A.C.A. § 14-169-229 (b)(1); and WHEREAS, the most clear and safe legal way for Fayetteville to assist its low- income citizens to obtain safe and affordable public housing is to work through the Fayetteville Housing Authority; and WHEREAS, the previous Board of the Fayetteville Housing Authority mistakenly created a nonprofit corporation which purchased housing and used its HUD paid employees to rehabilitate or maintain this housing in violation of HUD regulations and thereby incurred a debt to HUD of $60,961.45 which must be repaid to U.S. Department of the Treasury with non-federal funds in order for FHA to become eligible for potential federal grants for maintenance, rehabilitation or creation of low-income housing; and WHEREAS, the new Executive Director and Board of the FHA have finally received a clean audit and are prepared to work hard and legally to serve our low- income citizens with affordable public housing; and WHEREAS, the Fayetteville Housing Authority is incapable of paying its $60,961.45 to the U.S. Department of Treasury for a debt to HUD without funding by Fayetteville, and it is in the best interests of Fayetteville's citizens to donate sufficient funds to the Fayetteville Housing Authority for payment of this debt so that FHA will then be allowed to seek federal low-income housing grants; and WHEREAS, FHA Development, Inc. also caused a loss to the Fayetteville Housing Authority's budget in the amount of $123,758.00 which needs to be replaced so that the Fayetteville Housing Authority can become fully able to receive housing grants from HUD; and 1 WHEREAS, once the City of Fayetteville has donated $200,000.00 to the Fayetteville Housing Authority through this agreement, the Fayetteville Housing Authority will not only pay off the debts created by FHA Development, Inc. to become eligible for HUD grants, but it can initiate a testing and mitigation program for its housing units to ensure that asbestos and lead paint will not endanger its tenants and determine whether existing, but unoccupied, public housing units can be economically rehabilitated for low-income citizens. NOW, THEREFORE, the City of Fayetteville, Arkansas and the Housing Authority of the City of Fayetteville, Arkansas hereby agree as follows: 1. The City agrees to furnish to the Fayetteville Housing Authority the sum of Two Hundred Thousand Dollars ($200,000.00) to: A. Assist the Fayetteville Housing Authority in paying its debt of Sixty Thousand Nine Hundred Sixty One Dollars and forty five cents ($60,961.45) to the U.S. Department of Treasury for a debt to HUD; B. Furnish to the Fayetteville Housing Authority One Hundred Twenty Three Thousand Seven Hundred Fifty Eight Dollars ($123,758.00) caused by improper usage by the FHA Development, Inc. to replenish the Fayetteville Housing Authority's budget; C. Pay another Fifteen Thousand Two Hundred Eighty Dollars and fifty five cents ($15,280.55) to the FHA for increased testing and public housing rehabilitation. 2. This Two Hundred Thousand Dollars ($200,000.00) may only be used by Fayetteville Housing Authority to fully pay its debt to HUD, to replenish its finances so that it is allowed to apply for HUD housing grants, to supply funding for necessary asbestos, lead, and other testing to ensure that its dwelling are safe for occupancy and/or economical for needed repair and rehabilitation, to repair and rehabilitate as many of its dwelling units as possible, and for development and redevelopment to supply Fayetteville low-income citizens with as many safe and sanitary dwellings as possible. 3. The Housing Authority of the City of Fayetteville, Arkansas hereby agrees and covenants to use the funds supplied by the City of Fayetteville to: A. Fully and promptly pay its entire debt of Sixty Thousand Nine Hundred Sixty One Dollars and forty five cents ($60,961.45) to the U.S. Department of Treasury for a debt to HUD and to furnish proof of this payment and HUD's acknowledgment that FHA's debt has been satisfied to the City. B. Replenish its budget as required by HUD in the amount of One Hundred Twenty Three Thousand Seven Hundred Fifty Eight Dollars ($123,758.00) and then use as much as allowed by federal law to finance the testing of its public housing dwellings for asbestos, lead, and other dangerous substances, remediation of such contaminants if economically feasible, and the repair and rehabilitation or development of as many as possible safe and sanitary dwellings for affordable housing for low- income Fayetteville residents. FHA shall provide acknowledgement by HUD that this issue has been resolved. C. Use the remaining Fifteen Thousand Two Hundred Eighty Dollars and fifty five cents ($15,280.55) promptly for any needed testing and continued needed rehabilitation and repair or development of safe and sanitary dwellings for low-income Fayetteville citizens. D. Provide a written report to the City of Fayetteville by October 15, 2025 regarding its utilization of these funds and plans for future utilization of any remaining funds. Provide quarterly reports to the City thereafter until all such remaining funds have been expended. Attend a City Council meeting, if requested by the City Council, to explain its reports. E. Work and coordinate with Fayetteville City Staff for possible grant applications, other financing and projects that would efficiently create or improve affordable housing for Fayetteville's low-income citizens. F. Provide a copy of all of its future official audits and allow the City to audit its financial records concerning its expenditures of this Two Hundred Thousand Dollars ($200,000.00). 4. This Agreement shall be governed by Arkansas and Federal laws with venue for any litigation in the Washington County Circuit Court. In full agreement with all terms, conditions, promises, and covenants stated above, and after the City Council of the City of Fayetteville, Arkansas has approved this Low -Income Housing Improvement Agreement by Resolution and authorized Mayor Molly Rawn to execute this Agreement and after the Board of Directors of the Housing Authority of the City of Fayetteville, Arkansas has expressly approved this Agreement and authorized Executive Director Chonda Tapley to execute this Agreement, we sign our name below to signify our full agreement with this Low -Income Housing Improvement Agreement. CITY OF FAYETTEVILLE, ARKANSAS B v: Molly Rawn, Mayor ATTEST: fJ � '� FAYEnEviLLLrry 9H�?KFNSP`;�A` ��.NG� ON c�. J• Bv. Kara Paxton, City Clerk -Treasurer Date: 8/5/2025 HOUSING AUTHORITY OF THE CITY OF FAYETTEVILLE By: Chonda Tapley, E cuti Director WITNESS: Byc��Llnn Name:�a"�. Date: