Rapid City may give one last chance to a large proposed affordable housing project before recalling nearly $200,000 in federal funding for the plan.
At Wednesday's Legal and Finance Committee meeting, council members approved three hard deadlines for the proposed Freeland Ranch Community development that if not met by Kent Hagg — president of the nonprofit organization set up for the development — will cause the city to revoke two Community Development Block Grants (CDBG) of $120,000 in 2015 and $75,000 in 2017.
By Oct. 1, an irrevocable letter of credit for the $120,000 grant must be extended by Bank West and Hagg to the city so that if the project does not meet U.S. Department of Housing and Urban Development (HUD) requirements, which administers the funds, Hagg and the nonprofit, not the city, will be on the hook for any HUD recall of the federal funds. The current letter of credit expires in February 2019.
Per HUD requirements, at least 51 percent of the development's constructed units must be occupied by low-income individuals/families by July 2020 or $195,000 in CDBG funds will be recalled. Further complicating the matter, if the July 2020 deadline is missed, HUD will deduct $195,000 from future CDBG awards to the city, which received about $430,000 from HUD in 2017 and 2018.
If Hagg meets the Oct. 1 deadline, the next city-stipulated deadline arrives March 1, 2019, when the city would demand the development be completed with platting, rezoning and planned development processes, which require staff and, at times, planning commission and city council approval.
Two months later, on May 1, funding for the project would need to be secured.
The entire city council will consider the deadlines on Monday.
At Wednesday’s meeting, the city’s CDBG program manager, Barb Garcia, said the timeline was tight but possible.
“The timeline he has put forward, I believe, is doable,” she said. “But it is extremely aggressive, and it doesn’t leave much room for any kind of problems that would come up.”
City Planning Manager Vicki Fisher, who will oversee the development’s progression through the platting, rezoning and planned development process, agreed with Garcia, noting that any contractor delays, disagreements between the city and the project’s engineer, or even inclement weather, could derail the project’s timeline. Fisher added her own deadline, saying she’d expect to see construction plans and infrastructure improvement plans by Jan. 15.
Completing and occupying units on the 128-acre unplatted lot by July 2020 is unfeasible, Hagg and Garcia have made clear. But in a past interview, Hagg has said that a one-acre lot along East Mall Drive with existing utility lines running adjacent would serve as a “beta” development. The “beta” plan is to construct 24 units in two separate buildings and have at least 12 units occupied by July 2020 to meet HUD requirements. Additionally, per HUD rules, at least 51 percent, or seven housing units, must be occupied by low-income individuals/families by July 2020.
In a Journal interview, Garcia clarified what constituted low-income — an oft-repeated but rarely defined term in City Hall — in this situation. Per HUD definitions, low-income means an individual makes below 80 percent of the area’s median income. For 2018 in Rapid City that equates to $39,300 for an individual and $56,100 for a four-person household. Rapid City’s median family income is $70,100.
Of the 24 proposed units, eight are expected to be studio apartments between $375 and $450 per month, eight one-bedroom apartments between $525 and $595, and eight two-bedroom apartments between $695 and $795. Garcia said she has asked Hagg to target the unit prices toward residents making between 50 and 70 percent of the area median income.
“If I could get one 12-unit (building) with at least seven of them as affordable units, that would meet our requirement for the grant,” Garcia said at Wednesday’s meeting.
If any deadline is missed, though, Garcia said she would pull her support for the project. Alderman Steve Laurenti and Alderwoman Laura Armstrong echoed that sentiment.
“My support will end Oct. 1 if we don’t have that first step taken care of,” Laurenti said.
In the past, Garcia has said that if the project fails to move forward, her office needs at least one year to recall the funds, find another suitable community project, allocate the funds, and have the funds expended and the work completed to meet the July 2020 deadline, and avoid the $195,000 recall and future annual grant reduction by HUD.
Later in the meeting, the committee delayed any discussion or decision on whether the city will take the consumer price index property tax increase of 1.7 percent, or $285,379 for the 2019 budget. It did the same with the 2019 final budget document, which includes $203,000 in recommended cuts by Mayor Steve Allender after the council rejected the mayor's proposed building permit fee hike.
The committee's actions will be considered at the next Rapid City Council meeting at 6:30 p.m. on Monday, Sept. 17, in City Hall.