12-20-1994 - CDBG Loan Payoff AllocationCity of West Covina
° Memoraundum
TO:
FROM:
SUBJECT:
SUMMARY:
City Council and City Manager
Redevelopment Agency Staff
CDBG LOAN PAYOFF ALLOCATION.
BACKGROUND
AGENDA
ITEM NO. G=1b
December 20, 1994
DATE
The CDBG-funded Home Improvement Loan Program is. financed in part
from repayment of previous loans. Demand for home improvement loans
has exceeded current year allocations. The City Council will' consider
appropriation of loan payback funds to the current year's program.
Since 1975, the City of West Covina has received Community Development Block Grant monies
from the. Department of Housing and Urban Development. The Home Improvement l Deferred
(no -interest) Loan Program is one of the programs funded annually with this Federal Grant.' Its
aim is to help rehabilitate and maintain the owner -occupied housing stock within the city by
making available no -interest deferred loans to lower -income homeowners. Owners previously.
could qualify for loans to a maximum amount of $7,500. In 1994, the maximum loan amount
was increased to $15,000.
Since the program's inception the program has assisted 781 residents, and loans totalling over
$3.9 million have been funded. To date, paybacks total $1,573,756. Examples of
improvements which qualify under the program include replacing roofs, exterior and interior
painting, replacement of furnaces, upgrading the electrical boxes outside of the homes, etc.
In 1994, the administration of the program was transferred to the Redevelopment Agency, and
was supplemented with Redevelopment Agency set -aside funds. The Redevelopment Agency
began offering to moderate -income homeowners $15,000 loans with a one-time 596, interest
charge.
DISCUSSION
Loans are paid back to the City (1) when the home is sold; (2) when the title is transferred; (3)
upon death of the homeowner(s); or (4) in advance of these dates at the homeowner's, election.
In the past, when the City received payback of loans the funds were deposited into an account
which was not used to reimburse the loan account, but used for other eligible programs;
therefore, when the loan account was depleted, no more loans could be made. Last year, the.
Human Services Commission gave its approval to allocate the loan payback account into the
CDBG Home Improvement loan account. This year, the Redevelopment Agency is requesting
that the Human Services Commission again consider the use of the payback account for this
purpose. There is currently $100,000 which has been paid back and could be applied to the
Home Improvement Program.
By the year 2000, 61 percent of the housing stock will be 30 years old or older (the age!1 at which
housing typically needs major repair/rehabilitation).. A 1989 housing condition survey found that
6.03 percent of the City's housing stock needed minor repairs, and another 0.24 percent needed
major repairs. The success of the Home Improvement Program has kept the numbers from
rising, with the City maintaining beautiful neighborhoods.
In the current program year, a total of 71 loans have been made. Of that number, 33 are set -
aside and 38 are CDBG. There are 70 applications pending, with over half being CDBG. There
are 53 homeowners; on a waiting list for applications. As the figures indicate, there is a high
volume of interest in the program, and the funds were quickly depleted. For Fiscal Year 1994-
95, the CDBG allocation was $500,000, and the set -aside allocation was $350,000; as of this
date, both allocations have been completely expended.
•
City Council and
City Manager
-2- December 20, 1994
Staff has begun to formulate some steps to manage the demand encountered after raising the
income level and the loan amount. Suggestions include lowering the loan amount and/or limiting
the number of improvements allowed. Next year's program may require some changes in order
to meet, the growing demand for the loan program.
On December 13, 1994, the Human Services Commission reviewed the loan payback funds and
voted to recommend that the City Council allocate the loan payback funds in the amount of
$100,000 to supplement the Home Improvement Program for fiscal year 1994-95.
RECOMMENDATION
It is recommended that the City Council allocate the loan payback funds in the amount of
$100,000 to supplement the Home Improvement Program for fiscal year 1994-95.
APPROVED:
Steven W. Wylie
Assistant Executive for
HM121BB