Open Forum Q&A with HUD Staff Webinar. Enterprise Community Partners

Transcription

1 Page 1 Open Forum Q&A with HUD Staff Webinar June 24, pm EDT [HUD OPEN FORUM]03:05:03 So let's move on to the reason we're here today, and that's to ask NSP questions in this open forum. First we'll be treated to clarifications about Davis-Bacon requirements. And with us today, uh, we've got a number of people we have David Noguera, John Laswick, and Jade Banks, all from HUD. And also Surabhi Dabir with. And welcome each of you. And let's get started with, uh, Surabhi Dabir, and, there you go, Surabhi. [HUD OPEN FORUM]03:05:47 SURABHI DABIR Okay, thank you Ken. Um, good afternoon and welcome to HUD's NSP TA Open Forum Webinar. We are looking forward to answering your questions and hope you will all use this opportunity to share your expertise and experience with each other. We're going to cover a few recent FAQ's, or frequently asked questions, to get you started. [HUD OPEN FORUM]03:06:11 SURABHI DABIR (CONTINUED) One common theme of issues that has recently emerged is questions on the Davis-Bacon Act, and it's applicability to NSP projects. Jade Banks, who is the HUD expert on Davis-Bacon is on this webinar with us today, so right after we conclude some introductory slides on Davis-Bacon, I encourage you all to ask your questions related to Davis-Bacon so that Jade can provide some clarification. [HUD OPEN FORUM]03:06:39 SURABHI DABIR (CONTINUED) She won't be with us through the entire webinar, so definitely make use of this opportunity. After Davis- Bacon, we will, uh, move on to some FAQs on short sales. And, uh, open it up then to questions on any of the topics that are of concern to you right now. So with that, um, let me get started. And, um, here we go. [HUD OPEN FORUM]03:07:12 SURABHI DABIR (CONTINUED) Um, some, some of the questions that we've recently been, uh, seeing coming through the FAQs on Davis-Bacon include what is the applicability of Davis-Bacon for single families construction activities? When does Davis-Bacon apply with regards to the number of units on a property, and with regards to the number of units actually funded by NSP dollars? [HUD OPEN FORUM]03:07:36 SURABHI DABIR (CONTINUED) Do Davis-Bacon labor standards apply when conducting demolition activities under eligible use D? Do Davis-Bacon requirements apply when NSP1 funds are used solely for down payment or closing assistance? Closing costs assistance. Davis-Bacon applies to all construction contracts over two thousand dollars involving CDBG funds. It requires workers be paid prevailing wages and fringe benefits a determined by the Secretary Of Labor.

2 Page 2 [HUD OPEN FORUM]03:08:10 SURABHI DABIR (CONTINUED) Acquisition, demolition, and soft costs do not trigger Davis-Bacon. Do note that Davis-Bacon is triggered when an NSP assisted property contains eight or more units. A property is defined as one or more buildings on an undivided lot, or on contiguous lots or parcels which are commonly owned and operated as one rental, cooperative or condominium project. [HUD OPEN FORUM]03:08:37 SURABHI DABIR (CONTINUED) So there's cost thresholds and the unit thresholds to consider when determining applicability of Davis- Bacon. Some implementation aspects are highlighted on this slide, but these are suggested practices. The first steps taken to comply with Davis-Bacon is to become familiar with the resources available to you. [HUD OPEN FORUM]03:09:01 SURABHI DABIR (CONTINUED) There are resources available to you in your local government and communities that will be able to assist you. Your local CDBG administrator and HUD labor relations task will be able to assist you in gaining familiarity with Davis-Bacon requirements. HUD has labor relations specialist in each region to assist you. [HUD OPEN FORUM]03:09:23 SURABHI DABIR (CONTINUED) Compliance materials can also be found on HUD's website, by going to the URL dot, uh, displayed here, the hud.gov/offices/olr, which is a library, uh, on the office of labor relations, and have a number of resources, checklists, policy letters and other links that you would find useful in complying with Davis- Bacon. [HUD OPEN FORUM]03:09:54 SURABHI DABIR (CONTINUED) So here are some examples to illustrate when Davis-Bacon is triggered. This apartment building contains more than eight units, and any rehab above two thousand dollars would trigger Davis-Bacon. In the same building, if windows are being installed in only three units for under two thousand dollars, then Davis-Bacon would not be triggered. [HUD OPEN FORUM]03:10:25 SURABHI DABIR (CONTINUED) This four unit apartment would not trigger Davis-Bacon. In most cases, single family homes will not trigger Davis-Bacon because they are single residential structures. The exception is explained in the following slides. Davis-Bacon would not apply to the house highlighted in red to the left above, because it is a single residential structure that is owner occupied, as is the house next to it. [HUD OPEN FORUM]03:11:02 SURABHI DABIR (CONTINUED) However, Davis-Bacon would apply if all eight single family properties highlighted in red, were owned and operated by the same person. Even though they are separate residential structures, if they are commonly owned and operated they would trigger Davis-Bacon. In this example, the contiguous residential townhouse structures would not trigger Davis-Bacon because they're individually owned. [HUD OPEN FORUM]03:11:36 SURABHI DABIR (CONTINUED) I'm going to go back one slide before we get to short sales. And with that, I'm going to start off the questions for Jade Banks and David Noguera to help, uh, respond to with what is the applicability date of Davis-Bacon for single family construction activities? [HUD OPEN FORUM]03:12:00 That's a very good question. And, uh, good afternoon everyone. Um, Davis-Bacon applies, well first of all, NSP is treated in exactly the same fashion as we treat CDBG, there is no difference at all as far as Davis-Bacon is concerned. So Davis-Bacon requirements are applicable when construction work is

3 Page 3 financed in whole or in part using block grant dollars, and for residential property there must be at least eight units in the property for Davis-Bacon to apply. [HUD OPEN FORUM]03:12:31 (CONTINUED) One point of clarification on demolition. Demolition is covered by Davis-Bacon if it will be followed by covered construction work. So for example, if there were a 12 unit apartment building and your demolishing that apartment building, and you're going to put a 10 unit apartment building back there, with CDBG money, because the construction of the 10 unit building will be covered by Davis-Bacon, then the demolition that precedes it is also covered. [HUD OPEN FORUM]03:13:04 (CONTINUED) So in a sense there are three factors for CDBG and NSP. Number one, CDBG money must be financing construction work. Which is why acquisition for example, and certain professional fees would not trigger Davis-Bacon if you use NSP money to pay for those. Two, the construction work, the value of the total project must be over two thousand dollars, which for a lot of us means nothing anymore, because we don't do something for less than two thousand dollars. And then third, if it's a residential property, the property must have at least eight units for Davis-Bacon to be triggered. [HUD OPEN FORUM]03:13:48 SURABHI DABIR Thank you, Jade. Ken, do I see some questions? Do you want to take over? a [HUD OPEN FORUM]03:13:55 Uh, yeah, let's see. Um, although it doesn't look like we have any, uh... [HUD OPEN FORUM]03:14:05 Perhaps a raised hand for Davis-Bacon? SURABHI DABIR [HUD OPEN FORUM]03:14:07 Perhaps a raised hand, let's try that. Um, and we'll go to, uh, Joe in Phoenix. Are you there, Joe? No. Okay, let's try, let's try Ann. Hello Ann. [HUD OPEN FORUM]03:14:30 Hi, um, this is Ann Casmir from the city of Miami. I had a question on, uh, property taxes, and it's not on Davis-Bacon. Should I wait for a minute or not? [HUD OPEN FORUM]03:14:42 SURABHI DABIR Let's go ahead and take a few questions and, and then we'll keep going and cover the short sales. But let's go ahead and take the question. [HUD OPEN FORUM]03:14:54 Okay, so you would like me to go forward with the question I have? [HUD OPEN FORUM]03:14:54 Yes. Please. [HUD OPEN FORUM]03:14:57 Okay. Um, the city who's the grantee for NSP One, we purchased foreclosed single family properties. At closing, the city received a credit for the year to date taxes on the property from the seller. So that reduced the city's cash to close. Now I want to pay the taxes to the county that the seller had origianlly, as a credit on the closing statement. And I wondered how this might be viewed by HUD with regard to paying taxes with NSP money.

4 Page 4 [HUD OPEN FORUM]03:15:38 Right, so, so, um, so the, so in, in this case you, Miami, are not the taxing entity, it's the country, right? [HUD OPEN FORUM]03:15:50 Correct. [HUD OPEN FORUM]03:15:50 Yeah. [HUD OPEN FORUM]03:15:51 But, but we received some of the taxes that are, uh, in that payment. You know, as, but the tax collecting agency is the county. [HUD OPEN FORUM]03:16:01 Right. [HUD OPEN FORUM]03:16:03 So if you pay a hundred dollars worth of taxes on that, get 10 dollars worth. [HUD OPEN FORUM]03:16:05 Right, right, right. Yeah, so those, those fees would, would just be, uh, part of your, um, project delivery costs for, uh, for acquisition. [HUD OPEN FORUM]03:16:17 But there was, so in the case where I now pay the county, and it would show in my records I'm making a check payable to Miami Dade County Tax Collector, um, if I showed the closing statement, which shows a credit... [HUD OPEN FORUM]03:16:30 Right. [HUD OPEN FORUM]03:16:32 And I showed what I was paying the county with their bill, per se, that should be sufficient to show that it's just a pass through, and... [HUD OPEN FORUM]03:16:42 Yeah, so, I guess it could be, it could be done two ways. On one hand it could be done as a, as part of your closing costs (ALL TALKING AT ONCE) [HUD OPEN FORUM]03:16:54 (CONTINUED)...project delivery cost. Um, on the other hand, let's, let's say for example you, you buy this property and, um, it takes you longer than expected to, uh, to sell it, right? So you end up sitting on it for another tax period. So you end up having to pay additional taxes on it next year, right? Um, in that case those, those expenses would just be considered disposition costs. [HUD OPEN FORUM]03:17:17 Okay, in this case the city is, um, exempt from property, all I'm doing is trying to pay the bank's property taxes that were due on the property at time of closing.

5 Page 5 [HUD OPEN FORUM]03:17:31 Oh, okay. So, so why didn't the bank pay its taxes? Or, or actually you said, you said they gave you a credit for them. [HUD OPEN FORUM]03:17:40 Right, because it's not due yet. We do not have our tax bills out until September. [HUD OPEN FORUM]03:17:46 Gotcha, gotcha. So then you're not using NSP money to, to, to pay that, you're using, um, the fee, the proceeds from that credit, right? [HUD OPEN FORUM]03:17:56 Proceeds from the credit, right. But my actual bill, when they look at it, will show, my payment will say Miami Dade County Tax Collector. [HUD OPEN FORUM]03:18:07 Right, but it's not in... [HUD OPEN FORUM]03:18:06 So it looks like I'm paying [HUD OPEN FORUM]03:18:08 It's not NSP funds that you use, though. [HUD OPEN FORUM]03:18:09 Right. Not really, it's just a credit at that. But it's not as clean as if I just pay them at closing and kept them in an escrow account? [HUD OPEN FORUM]03:18:21 Right. [HUD OPEN FORUM]03:18:21 Which I didn't do. [HUD OPEN FORUM]03:18:22 Yeah, I, I don't, I don't, I don't see an alternative for you. Uh, because, um, that, that wasn't done at that time, you know? But, um, I'm not sure where the... [HUD OPEN FORUM]03:18:34 So if I put in the, um, closing statements in my files, I put in the payment, um, to the tax collector there, and there are letters saying how much is due... [HUD OPEN FORUM]03:18:46 Right. [HUD OPEN FORUM]03:18:48...to show that it truly is a pass through. [HUD OPEN FORUM]03:18:49 Right.

6 Page 6 [HUD OPEN FORUM]03:18:50 And I should have paid more at acquisition than I did, do you think that would be sufficient to document my file? [HUD OPEN FORUM]03:18:59 Well, well, if, do you want to say something Surabhi? [HUD OPEN FORUM]03:19:01 SURABHI DABIR I was just going to say it sounds like, um, they're paying, they're paying the taxes that was initially given as a credit. [HUD OPEN FORUM]03:19:10 Yeah, yeah, so it was never your, your bill, all you're doing is passing on the, the seller's portion of the, of the tax bill. [HUD OPEN FORUM]03:19:20 Correct. [HUD OPEN FORUM]03:19:22 Yeah, so it isn't an NSP issue. [HUD OPEN FORUM]03:19:26 Well the using NSP dollars, it should have been used for the full acquisition price to actually, instead of paying the seller I'm now paying the tax collector. [HUD OPEN FORUM]03:19:40 Are you concerned about the, the prohibition against purchasing property fro yourself or something like that? Or, I m not sure. [HUD OPEN FORUM]03:19:45 Oh, I'm more concerned about paying property taxes to, uh, under CDBG regs. I've been told, again, I'm just verifying that it's okay to pay current taxes with NSP funds. [HUD OPEN FORUM]03:20:01 We've said that you can do that as, under disposition, as, as David mentioned, if your, if you've got properties in the land bank, you, you know, it's a cost of maintaining the property. [HUD OPEN FORUM]03:20:12 Okay, so that should, uh, paying property taxes that are current should not be a problem? [HUD OPEN FORUM]03:20:19 I don't think so. Do you, David? [HUD OPEN FORUM]03:20:21 Yeah, I, I'm, I'm not seeing how, how it's an issue not paying to yourself. [HUD OPEN FORUM]03:20:27 Yeah, I mean, you can pay taxes, what, what's your alternative? I mean... [HUD OPEN FORUM]03:20:31 Well I don't have an alternative.

7 Page 7 [HUD OPEN FORUM]03:20:32 Right. (ALL TALKING AT ONCE) [HUD OPEN FORUM]03:20:37...you're going to cut the grass and you're going to, you know, patch the roof, and you're going to pay the taxes, and that's what it takes, you know. [HUD OPEN FORUM]03:20:44 Okay, good. That's, uh, that's... [HUD OPEN FORUM]03:20:46 Thank you for your question, Ann, and, uh, I remind you to please, uh, click your lower hand button now that you've asked that question. And, um, let's see, while we have our Davis-Bacon experts with us, Jade Banks, there are a number of people who have their hands up. Um, but I have no way of telling if, uh, if your question might relate to Davis-Bacon. [HUD OPEN FORUM]03:21:11 (CONTINUED) So, um, I would ask you just to temporarily, if your hand is up to, to lower it if it's not related to Davis- Bacon. Keep your hand raised if it is related to Davis-Bacon. A number of hands still up. Um, so good, let me try, uh, Eric Larson. Are you there, and where are you calling from? [HUD OPEN FORUM]03:21:32 TIM VEBAL Uh, it's actually, uh, Tim Vebal with Eric. Um, we, we do have an issue with the, um, the condominium Davis-Bacon, uh, interpretation. I don't know if this is new, we haven't really seen this kind of interpretation before. Um, in, in Connecticut a condominium is real property, it stands on its own. And I guess our, our other concern, beyond applying Davis-Bacon is, if HUD is looking at a condominium complex, as including all the units in the, in the building, even if you're only assisting one unit. [HUD OPEN FORUM]03:22:12 TIM VEBAL (CONTINUED) Then the logical extension of that is HUD would be, be wanting 51 percent of all the occupants in that entire complex to be low income. (ALL TALKING AT ONCE) [HUD OPEN FORUM]03:22:28 so we'll let Jade talk about the condominium issue, though. [HUD OPEN FORUM]03:22:31 In, in terms of the condominium issue, it's not new, um, I, I think that the concept there is that, uh, in most places, and I, I don't pretend to be an expert on holding property in ownership, I, I'm not. Um, I do own a condo, however, and I know that I own the paint in. I don't own exteriors, I don't own my balcony. [HUD OPEN FORUM]03:22:53 (CONTINUED) Um, there are common areas, and the association pays to maintain them. So I believe that's the concept behind viewing a condominium, not as, for example, um, 20 properties with one unit each, but one property with 20 units, for example. If there is something particular going on in Connecticut that doesn't fit that, that view, we can certainly look at that separately. [HUD OPEN FORUM]03:23:20 (CONTINUED) Um, and certainly more closely so we could figure out what might be going on as far as that goes. Um, it is correct that if a condo property has 20 units, and you're only going into work on two, because the property has eight or more units, that would be covered if it's over two thousand dollars, and if NSP money is being used to pay for the construction work.

8 Page 8 [HUD OPEN FORUM]03:23:49 I'll just, let me just respond, this is John Laswick, to, briefly to the, to the other point, which is that the, the program, uh, the national objective, um, are, uh, really, uh, work on a considerably separate set of laws, and so, uh, I mean, I, I understand your point about, you know, one, one federal requirement seeming to trigger another. But it, it just, it's just not connected. So, um, the, the, the eight units or more is something that's specific to Davis-Bacon, and has nothing to do with it. [HUD OPEN FORUM]03:24:28 I hope that helps, Eric, and, um, if you could, uh, lower your hand that would be helpful. And, uh, let's see, let's go to, uh, Lois here, and, Lois, where are you? What's your question? [HUD OPEN FORUM]03:24:44 LOIS Hi, this is Lois, I'm calling from New Orleans Redevelopment Authority. I actually had two, and I wrote one of them in. So if you're going to read, read those, I'll wait to ask that one when you'll see it. Uh, but the other question I have is a little bit of clarification on demo, a quick authority of Davis-Bacon on demo when it follows construction. Can you just clarify, does that mean if the demolition is part of that builder's contract, to, to, to demo and construct, that's when it applies? [HUD OPEN FORUM]03:25:16 LOIS (CONTINUED) What if we, versus, what if we're demolishing, you know, this year with short term plans to build later, but don't have that, you know, scheduled yet? I mean, what do you do in that case? Is it, does it apply? I mean, I think all of these properties that we're working on with NSP Two, the intent is to, you know, put residential on them eventually, but some of them may not be right away. [HUD OPEN FORUM]03:25:43 Right, uh, well the first thing, the first thing I want you to know is that at the website, where you got the URL for it, if you go to the library, we have a series of policy letters. They're called Labor Relations Letters. And we've recently put one out about demolition. So you have something in writing that you can refer to. Uh... [HUD OPEN FORUM]03:26:02 Okay. LOIS [HUD OPEN FORUM]03:26:03...demolition is covered only when it is followed by covered, um, construction work. So Davis-Bacon has to apply to the construction work that follows, and when, and when that is the circumstance, the demolition is covered because it's like a site prep. Um, so that... [HUD OPEN FORUM]03:26:22 LOIS Okay, so when it's part of the same contract as the construction? [HUD OPEN FORUM]03:26:23 Well it doesn't even have to be part of the same contract. [HUD OPEN FORUM]03:26:28 Okay. LOIS [HUD OPEN FORUM]03:26:28 You, you could have a demolition contractor come in, and they're going to do the, they're demolishing the property. But you know and you've awarded a contract that you know is going to be covered, and

9 Page 9 someone's going to come in and, and build something else on that site. So if you know it's going to be followed by covered construction, then the demolition is covered. [HUD OPEN FORUM]03:26:47 (CONTINUED) If you don't know, right now all you do, you've got dilapidated buildings, you need to get them out of there. And so you're not really sure what's going to go on, um, then we wouldn't cover the demolition because you don't know what's going to be following it. And you don't know if what's going to be following it will be Davis-Bacon, anyway. So... [HUD OPEN FORUM]03:27:05 LOIS I, I would, like, so it would be disingenuous to say I don't know at all. I know I want to put something on there, and we're going to build some sort of residential. But you're right, we don t know if it'll necessarily be combing the lots and making eight, one unit single family. That makes sense. [HUD OPEN FORUM]03:27:23 Right. [HUD OPEN FORUM]03:27:24 Thank you. [HUD OPEN FORUM]03:27:26 You're welcome. LOIS [HUD OPEN FORUM]03:27:27 LOIS Did you want me to ask my written question? Or do you have it up there already? [HUD OPEN FORUM]03:27:28 Yeah, go ahead and ask it since it's also related to Davis Bacon. [HUD OPEN FORUM]03:27:33 LOIS Yeah, it is. Um, do you see it? Because now I forget it. [HUD OPEN FORUM]03:27:37 Uh, sure, I'll, I'll read it. So the question is, can you clarify the commonly owned and operated slide for single family properties? Does it imply that a developer building eight contiguous lots to sell to individual owners at the end, is the developer a common owner and operator during construction, and thus have, having to follow Davis-Bacon? [HUD OPEN FORUM]03:28:04 Very good question. Um, because those units are intended for single family homeownership, Davis- Bacon will not apply. It doesn't matter that the developer at, at the outset will own all the properties and then will be selling them off. That doesn't matter, we don't, we don't consider that to be one property. [HUD OPEN FORUM]03:28:22 LOIS Okay, that's completely different than what I thought. I'm glad I asked, okay. [HUD OPEN FORUM]03:28:27 Right, so, you know, if it comes right down to it, you could have 200 single family homeowner properties, You put them all into one contract, and you're rehabbing every single one of those 200 units, Davis-Bacon does not apply because you have...

10 Page 10 [HUD OPEN FORUM]03:28:40 Okay. [HUD OPEN FORUM]03:28: properties with one unit each. [HUD OPEN FORUM]03:28:45 Great, thank you so much, Jade. [HUD OPEN FORUM]03:28:46 You're welcome. LOIS LOIS [HUD OPEN FORUM]03:28:47 So this would be mostly rentals, then, right Jade? Is that kind of the concept here? [HUD OPEN FORUM]03:28:52 If in terms of when Davis-Bacon is applicable? [HUD OPEN FORUM]03:28:52 Well, when it's owned and operated by the same front. [HUD OPEN FORUM]03:28:56 Oh, yeah, you're, you're, you're pretty much looking at apartments. [HUD OPEN FORUM]03:28:59 Right, okay. [HUD OPEN FORUM]03:28:59 Um, you know, and of course we dealing with condos and co-ops, um, but, yeah, you're looking at multifamily property. [HUD OPEN FORUM]03:29:06 Right. [HUD OPEN FORUM]03:29:10 Very good. I see no more hands up. Um, which would imply that the, um, the verbal questions for Davis- Bacon have been asked. Here's, here's one that just came in from Jose. Uh, in California a condominium is a separate parcel by condo-map. If you want to make repairs to the interior, does Davis-Bacon apply? [HUD OPEN FORUM]03:29:37 I' not sure I understand the question. I, I don't understand condo-map. Um, so I, I, I don't understand the question. [HUD OPEN FORUM]03:29:49 Let me, let me un-mute Jose. Jose, are you there? [HUD OPEN FORUM]03:29:51 Yes. Can you hear me? [HUD OPEN FORUM]03:29:54 Um, can you clarify? JOSE

11 Page 11 [HUD OPEN FORUM]03:29:55 JOSE Yes, in, in California, so each individual condominium is privately owned, and with its, its own, um, parcel number. And then each owner pays a condo association fee for the common areas, and exterior portion of, of the building. So if, whatever is, is contained, whatever, how many units in, in the project, it's, we go in and make repairs to the interior, does Davis-Bacon apply? Or do we have go by that? [HUD OPEN FORUM]03:30:30 Um, my... [HUD OPEN FORUM]03:30:30 You know, more? JOSE [HUD OPEN FORUM]03:30:34 My, well here, here's what I normally start with. I assume coverage and then look for reasons why not. That's always the safest way to start. I would say in that case that there will be coverage, and it's because of the common areas that are also, that are part of that property. That is... [HUD OPEN FORUM]03:30:49 JOSE But we're not making repairs to the common areas. [HUD OPEN FORUM]03:30:52 I, I understand that. I understand that. Um, I think that, for example, like, perhaps with you and with Connecticut, we would have to look at those as, as separate issues, just look specifically at what's going on there. Um, and I would want to meet with our counsel to, to take up, to get their take on it as well. So my assumption is, probably covered. Um, but I will be happy to take that question, um, and discuss it with our counsel. [HUD OPEN FORUM]03:31:21 JOSE I was just confused by that slide where it says contiguous residential town home structure versus a condominium that's contiguous, how does that, you know, that's where the confusion is, is on that slide where, we're trying to get a more conservative approach with the eight or more, but now what that means, with this slide it, you know. We just wanted to spend more, more money than we what we have, and then we have to, you know, say to a property where Davis-Bacon applies because we have a, you know, trying to maximize our funds. [HUD OPEN FORUM]03:31:54 Okay, I, I'm not sure how this part works, but would it be okay for you to send me an with your question? [HUD OPEN FORUM]03:32:00 What's your name again? JOSE [HUD OPEN FORUM]03:32:02 It's Jade, J-A-D-E, this, this is address. Jade dot M as in Mary, dot Banks, B-A-N-K-S, at HUD.gov. And then when I get the answer I'll get it back to CPD, uh to David or John so that that information can be shared. [HUD OPEN FORUM]03:32:23 Thank you very much. JOSE

12 Page 12 [HUD OPEN FORUM]03:32:25 You're welcome, thank you. [HUD OPEN FORUM]03:32:29 SURABHI DABIR Sorry, I was trying to find Jade's, uh, address on the slides. But it didn't seem to be there. [HUD OPEN FORUM]03:32:36 Uh, I can, I can add it, and I'll put it in the, in the cap in a minute. Um, let's see, uh, Mary asks if we purchase one or two condo units in a large condo complex, and we only pay for acquisition, would Davis- Bacon be triggered then? [HUD OPEN FORUM]03:32:53 Good question. Davis-Bacon would not be triggered. Because you have to have the three factors, again. One, NSP is paying for construction work, that's not what you're doing. So you're not, you're not meeting the first test. So Davis-Bacon would not apply because you're only using the NSP money for acquisition costs. [HUD OPEN FORUM]03:33:15 Very good. Um, let's see. [HUD OPEN FORUM]03:33:25 Let me just say on the, on the townhouse example, and maybe that was confusing for people, but, you know, normally the, the way we're looking at those things is that they're, there's a, there's a common wall, but there isn't a common, um, structure, uh, there isn't a common association, um... [HUD OPEN FORUM]03:33:39 No common areas, right. [HUD OPEN FORUM]03:33:39 Right, there aren't, there aren't common areas. You know, each, each unit occupies a certain amount of, of, of real estate, and, um, and, you know, they own it from there up. But it's not, you know, they don't share anything else. [HUD OPEN FORUM]03:33:52 Mm hmm. [HUD OPEN FORUM]03:33:55 Yeah. [HUD OPEN FORUM]03:33:58 And let's see, oh, let's see, um, Ann has her hand up again. Let's see if this is a Davis-Bacon question. Ann? [HUD OPEN FORUM]03:34:05 Yes it is a Davis-Bacon question now. I have been, um, I'm a city, I have been approached by the county, Miami Dade County, to demolish some public housing units that they have. I will not be, they will not be using HUD funds to rebuild that, um, and they, and I will not be using NSP funds, um, in that rebuilding of those units. Does Davis-Bacon apply to my demolition costs only?

13 Page 13 [HUD OPEN FORUM]03:34:44 Good question, in public housing there's a wrinkling, because now you have a whole different labor standards clause under the U.S. Housing Act. Um, your, the, the demolition is of current public housing units, or they, they are public housing units now, and they're going to be demolished. [HUD OPEN FORUM]03:35:04 Correct. [HUD OPEN FORUM]03:35:06 What are, are the replacement units going to be public housing also? [HUD OPEN FORUM]03:35:12 Um, the replacement units are going, hold on a sec. [HUD OPEN FORUM]03:35:19 Sure. [HUD OPEN FORUM]03:35:19 How about if you go to the next question, let me just read what that answer is. I, I have a feeling part of them will be, but I want to make sure my answer is correct. [HUD OPEN FORUM]03:35:29 Well I'll, I'll (ALL TALKING AT ONCE) [HUD OPEN FORUM]03:35:33 Okay. (CONTINUED) [HUD OPEN FORUM]03:35:33 So it ll just taking a minute, so if you want to go to the next question, we can come back to that. [HUD OPEN FORUM]03:35:37 Sure. [HUD OPEN FORUM]03:35:38 Thank you. [HUD OPEN FORUM]03:35:41 Scanning for Davis-Bacon questions, and I'm not seeing any others. But wait, a hand is up. Sarah. Sarah Flacks, where is... [HUD OPEN FORUM]03:35:53 SARAH FLACKS I'm calling from Evanston, Illinois. And I do have a Davis-Bacon question. And it's actually in a case where if we are using NSP for acquisition, uh, and I'm going to back to the condo, uh, question. If we're using NSP for acquisition, but then we use home funds to do the rehab, home Davis-Bacon rules are different from... [HUD OPEN FORUM]03:36:16 That's correct.

14 Page 14 [HUD OPEN FORUM]03:36:17 SARAH FLACKS And so does that, does that, do then I go to a 12 unit, um, for the, um, rehab, do I then, the, follow the home rules? [HUD OPEN FORUM]03:36:27 Yes. [HUD OPEN FORUM]03:36:29 Or do I follow, so... SARAH FLACKS [HUD OPEN FORUM]03:36:31 Well you're, you're going to follow, what, whatever the threshold is, if, if you have multiple thresholds, like home, is it 12 units, at home... [HUD OPEN FORUM]03:36:40 SARAH FLACKS Right, but it doesn't matter where you send the money. You, you... [HUD OPEN FORUM]03:36:42...uh, help with acquisitions, Davis-Bacon will be triggered if you have 12 or more home units in a contract for construction. So in the example that, that you stated, um, if you use NSP money to acquire units, and then you, Davis-Bacon isn't triggered there. But if you come in with home, and if you've got at least 12 home units in a contract for construction, Davis-Bacon will be triggered. [HUD OPEN FORUM]03:37:09 SARAH FLACKS Okay, so if I did a single condo with home, in an eight unit building, then it wouldn't be triggered? [HUD OPEN FORUM]03:37:18 That's correct. [HUD OPEN FORUM]03:37:18 Correct? [HUD OPEN FORUM]03:37:19 That is correct. [HUD OPEN FORUM]03:37:20 Okay. Thank you. [HUD OPEN FORUM]03:37:23 Very good. SARAH FLACKS SARAH FLACKS [HUD OPEN FORUM]03:37:28 Thank you, Sarah. And, uh, let's see, Ann, have you had a chance to review your documents? [HUD OPEN FORUM]03:37:37 Yes I have. Um, the, um, they will, there will be replacement public housing put onto the property, but they will not be funded by HUD money. They will be funded by a general obligation bond. [HUD OPEN FORUM]03:37:54 Okay. Here's where public housing is different. With public housing, it's always covered. It doesn't matter what money you use. Somebody could die and leave, leave a bajillion dollars to a housing authority to

15 Page 15 build new public housing. It doesn't matter, Davis-Bacon will apply because it's public housing. Um, so in that case, because you know it's going to be followed by Davis-Bacon construction, it would be covered also. [HUD OPEN FORUM]03:38:24 Thank you. [HUD OPEN FORUM]03:38:25 You're welcome. [HUD OPEN FORUM]03:38:32 Thanks Ann. And, uh, scanning again. Okay, that, uh, that's exhausted our Davis-Bacon questions. It looks like. So, uh, Surabhi why don't you go on to short sales. [HUD OPEN FORUM]03:38:51 I will, uh, say good day to all of you, and please feel free to contact me if I can do anything more. [HUD OPEN FORUM]03:38:58 Thank you. [HUD OPEN FORUM]03:38:58 You're welcome. Bye-bye. [HUD OPEN FORUM]03:39:00 SURABHI DABIR Thank you, Jade. Okay, I think, um, it looks like we have a lot of, uh, questions already in the written queue. We could just open it up and come back to the FAQs on short sales after people have their questions answered, if that's okay with John. [HUD OPEN FORUM]03:39:19 Sure. [HUD OPEN FORUM]03:39:23 Okay, let's see. Let's go to, uh, Emily who asks, when dealing with the voluntary acquisitions, what are the requirements for the appraisal used to determine the property's market value? Specifically for how long is an appraised, an appraisal valid for use? [HUD OPEN FORUM]03:39:46 Well, um, we, we have some guidance of our acquisition people put out on appraisals, on the, uh, resource exchange. But, but, uh, the bottom line is that it's a, it has to meet uniform act requirements. And, and they're fairly standard type of, you know, appraisal standards. And, and, well standard standards, huh? But, you know, they're not anything, you know, especially governmental. [HUD OPEN FORUM]03:40:11 (CONTINUED) Um, and in the, uh, NSP program we have said that the appraisal has to be done within 60 days of the final offer on, uh, you're not able to, uh, make that schedule, you would probably want to go out and get an update to that appraisal. Um, you can usually get one from the same firm that, the, the first one, it's not that complicated. [HUD OPEN FORUM]03:40:38 Very good. And, um, Joe has been waiting patiently, down in Phoenix. Joe, go ahead.

16 Page 16 [HUD OPEN FORUM]03:40:46 AARON KIMBERLAND Uh, this is Aaron Kimberland, Joe's sitting right next to me. Um, I have a question about eligible use E in redevelopment. Um, it states that HUD expects that unlike landbanks, properties acquired and approved under Eligible Use E must proceed expeditiously to construction. Um, can you give a clear definition of what proceed expeditiously to construction means? [HUD OPEN FORUM]03:41:09 Well, uh, yeah, I think we just answered that in writing. I don't know if it's gotten back to you. Uh, but, um, the, the, what we're saying is that we don't want properties to, um, to languish, uh, you know, more than say a year or two years at the most. Um, otherwise they're really properties that should be in land bank. [HUD OPEN FORUM]03:41:29 (CONTINUED) Um, we haven't set a, you know, sort of a day when, um, uh, or month, you know, number of months, but, uh, the idea is that, um, redevelopment is redevelopment, and so, uh, if the redevelopment never occurs, then, uh, it doesn't meet the definition of Eligible Use E, um, but, um, so, what, you know, we're, it's a little bit loose, but, you know, informally we've said, uh, you know a year, uh, with, with the ideal, uh, within a year. [HUD OPEN FORUM]03:42:02 (CONTINUED) You know, especially if you really get beyond two years you, you really ought to be thinking about moving that property into a, a land bank and treating it differently. [HUD OPEN FORUM]03:42:10 Okay, thank you. [HUD OPEN FORUM]03:42:11 Sure. AARON KIMBERLAND [HUD OPEN FORUM]03:42:14 Um, Lisa asks, our, our organization incurred legal expenses prior to our NSP project that is being undertaken with NSP, too. Are any of these costs recoverable under NSP, since they are pre-work? [HUD OPEN FORUM]03:42:33 Um, I don't know, David, I would say that if you're talking about NSP One, then let's assume you submitted your, uh, action plan on December 1st of 2008, which was the deadline, uh, unless you'd received a specific, uh, uh, permission to use, to, to, to do pre-award costs for anything more than, uh, administrative work, then, uh, that would be the date, um, before which you could not charge. [HUD OPEN FORUM]03:43:03 Yeah, typically the fee award costs that are eligible are the, the time and money spent repairing your NSP Two application. Right? Um, you, you wouldn't start carrying out activities or, or charging any attorney fees that are related to your, to implementing your, your NSP Two program until you were notified that you're going to receive an award. [HUD OPEN FORUM]03:43:32 Now we did, you know, you can request pre-award costs, but you have to, you have to request it, you know, at, at the time. So, uh, if you, if you didn't do that, whether it's NSP One or NSP Two, uh, you're usually looking at the date that you submitted your application, as the, as the trigger date for eligibility of costs.

17 Page 17 [HUD OPEN FORUM]03:43:55 AARON KIMBERLAND So that would imply that the preparation of the NSP One application can't be paid for out of NSP One advent dollars? [HUD OPEN FORUM]03:44:04 No it can't. Well, NSP One, um... [HUD OPEN FORUM]03:44:08 On, on one hand you have, you, you have the administration, like getting the application together. That's what we call program advent. On the other hand you have carrying out your program, right? So you have program activities. Because of... [HUD OPEN FORUM]03:44:23 I think, I think both notices, uh, allow you to use NSP funds for, uh, application preparation. Um... [HUD OPEN FORUM]03:44:30 Yeah. [HUD OPEN FORUM]03:44:32 In NSP Two it's, you know, it, it's, you know, a pretty long gap between those. But, and, and for the most part they're limited to those kinds of costs. Not, not program project, uh, costs. [HUD OPEN FORUM]03:44:47 Good. Let's move to, uh, Mike Quanta, are you there, Mike? [HUD OPEN FORUM]03:44:56 Hello? [HUD OPEN FORUM]03:44:55 Hi, Mike, we can hear you. Where are you from? MIKE [HUD OPEN FORUM]03:44:57 MIKE Okay. Uh, this is Mike Quanta Development Agency in Nashville. Uh, we're, we're, we're a little concerned or confused by an answer we got on Q&A about, uh, obligating future staff administration costs, um, or, or in house staff to work on the program. [HUD OPEN FORUM]03:45:20 What as the situation? [HUD OPEN FORUM]03:45:23 MIKE Well basically we need, when we raised the, uh, answer we got back about, uh, admin staff costs for future, you know, the term of the grant, after the obligation deadline, how do we actually justify, we're not contract employees, we're obviously employees of the state. How do we obligate before the deadline our own future staff costs? [HUD OPEN FORUM]03:45:45 Well, uh, just for the general operation of the program? Um, well, you know, either way, I mean, you, you either have general administration, which would be, uh, you know, sort of direction of your agency. And then you'd have activity delivery cost type administration, which would be, uh, the people that are putting the projects together, and inspecting the houses, and that sort of thing.

18 Page 18 [HUD OPEN FORUM]03:46:04 (CONTINUED) In, in either case you would, um, in the case of the general administrative costs, you, you would use, you know, your history to date as an indication of the costs that you're going to be incurring over the next two and a half years. Um, and we understand that as a grantee with a contract, and, and accepting these responsibilities that you've, you've committed yourself to do this. [HUD OPEN FORUM]03:46:27 (CONTINUED) Obviously you got a 10 percent limit on those. As far as the activity delivery costs, um, we think that you could probably, you know, average, uh, the cost that you've had to date for, let's say, inspections, appraisals, work write-ups, uh, you know, those kinds of things working with the, the client, uh, qualifying the, the homeowners, all those sort of things. [HUD OPEN FORUM]03:46:50 (CONTINUED) Hopefully you've got enough of a track record that you could say, well, it's typically taking us, uh, you know, eight hours of staff time to do this particular task for each house, and, uh, at, uh, you know, 25 dollars an hour, or whatever it is. You know that you'd have 200 dollars for that cost. And, and just basically, you know, for, you know, project it out for, for the number of units that you would have. Does that make sense? [HUD OPEN FORUM]03:47:17 MIKE Yeah, that's fine, 'cause we already have an existing cost allocation plan for the program anyway, so we'll just utilize that. We were just a little confused that that was the way to do it, so, that answers the question. [HUD OPEN FORUM]03:47:27 Okay. [HUD OPEN FORUM]03:47:29 Thank you. [HUD OPEN FORUM]03:47:31 Sure. MIKE [HUD OPEN FORUM]03:47:34 Thank you, Mike. Uh, let's see, um, here, uh, a David-Bacon question came in, let's see if we can answer it. In spite of the fact that Jade is gone, uh, Pam asks, um, we are a nonprofit grant fee, are we expected to collect and review the weekly payrolls from our contractors for, for compliance with Davis-Bacon. [HUD OPEN FORUM]03:48:04 If you're the lead member of the consortium, or if you're a consortium member, yes. That's what you take on as the, uh, responsibility of, uh, you know, being a consortium member, or a lead member of the consortium, is that you accept all of these administrative, uh, requirements, and, uh, we recognize that there are, uh, many nonprofits that haven't, haven't played that role before. [HUD OPEN FORUM]03:48:28 (CONTINUED) So we've been trying to provide extra training and, and support. But, um, if you get into these situations, you would be the one that would have to monitor the, the payrolls and, and do that sort of thing. So there's really two issues with Davis-Bacon. One is the cost and one is the, the administrative effort to, uh, insure that the, the right wages would be paid.

19 Page 19 [HUD OPEN FORUM]03:48:56 Let's see. Um, Lois asks, um, all foreclosed properties need a URA compliance appraisal. Does this apply to properties that are granted or transferred at very low cost in a, in a situation when no eminent domain authority exists? [HUD OPEN FORUM]03:49:20 Um, the appraisal requirement applies to foreclosed properties only. Um, that are being acquired with, with NSP funds, and the appraisal is there to establish the value of the property so that you can establish that a, uh, that the legislative, legislatively required discount is being paid. So, um, you know, and it's, in the case that Lois is describing, it's, you know, if they're foreclosed then technically it would. [HUD OPEN FORUM]03:49:55 (CONTINUED) If, if they're under 25 thousand dollars in value, then there's a, you can just get a, a, you know, something like a broker's price opinion, or an expert opinion. Um, but if they're not really, they're not being acquired as foreclosed properties then, then that, it's not required. So, um... [HUD OPEN FORUM]03:50:14 LOIS John, can I just add one thing about your, to clarify the answer. It's a HUD foreclosed multi-family property. And they're giving it away, giving it away dirt cheap. The value, though, is going to be probably more than 25 thousand, but the price is less than the value. So do you mean if the price is less than 25 thousand, we can just do an estimate of the value? [HUD OPEN FORUM]03:50:38 Um... [HUD OPEN FORUM]03:50:38 That, that's what the, uh, the, uh, bridge note says. It, it's not the value of the property it, it's the, um, sales price. [HUD OPEN FORUM]03:50:48 Okay, okay. [HUD OPEN FORUM]03:50:50 Uh, thanks David. [HUD OPEN FORUM]03:50:50 Thank you. LOIS LOIS [HUD OPEN FORUM]03:50:53 Lois, you have the craziest questions down there. Now you're not allowed to ask any more. [HUD OPEN FORUM]03:51:00 Okay, what else do we have here? These are, uh, a good variety of questions. We've got one from, um, uh, a very broad question here from Jose, asking how do we maximize the use of home and NSP funds for home ownership opportunities? [HUD OPEN FORUM]03:51:19 That's a pretty vague question.

20 Page 20 [HUD OPEN FORUM]03:51:20 What you have to keep in mind is that when you're combining the programs, um, and, and you're kind of doing things, you know, sort of blended funding, then you, you're going to end up needing to meet those more stringent set of requirements. Which, for example, in the case of, uh, income limits, it's going to be the home income limits versus the NSP income limits. [HUD OPEN FORUM]03:51:44 (CONTINUED) Uh, but with that said, I think, you know, it's just, it's a smart move to try to, uh, leverage, uh, funds and to try to, uh, take advantage of, uh, maybe NSP funds to acquire property and, and home funds to, to renovate them or, uh, you know, it's just, uh, you know, it, you, you do stretch your, your funds, um, farther when you combine them. [HUD OPEN FORUM]03:52:08 (CONTINUED) But I, I don't know that there's any kind of special techniques that I've heard of that really, you know, are, are sort of unlock some great amount of leverage there. Um, it, it's, you know, because you've got private funding that you can be using for leverage here, too. So you, know, you might have really three different sources of funds. [HUD OPEN FORUM]03:52:33 (CONTINUED) And, um, uh, maximizing them, uh, you know, using, using NSP to acquire, uh, the properties, uh, that were, uh, using the funds in a way that you, you're not triggering additional costs, like Davis-Bacon. Um, uh, um, you know, it does get a little more confusing as well, because you got these dual sets of, uh, requirements going on. [HUD OPEN FORUM]03:52:59 (CONTINUED) There, there is a, a training program that HUD's put together with ICF, and I'm, I'm 99.9 percent sure the slides are on the resource exchange. Um, that goes into how to use these programs together. And, um, and David and I worked on that, uh, I think it's a pretty comprehensive, uh, uh, way to think about those, uh, using those programs together. [HUD OPEN FORUM]03:53:32 Melissa asks, uh, we're providing NSP funds for the acquisition of abandoned land. Other funds will be used for construction. Will providing NSP funds for acquisition trigger Davis-Bacon when the project begins construction? There will be more than eight units. [HUD OPEN FORUM]03:53:52 No. Remember what Jade said, you have to have the, the construction that's being funded by NSP, so, um, using CDBG or NSP for acquisition only, uh, as a development project has been, uh, uh, used for a long time as a way to get some federal funds into the project without triggering Davis-Bacon. [HUD OPEN FORUM]03:54:15 Very good. Let me go back up here to, uh, Tamara, who's been waiting patiently, uh, to ask if there, if there were no plans to rebuild, and later, say in five years, there was CDBG funds infused in the project, would this trigger or require retainment of the NSP funds? [HUD OPEN FORUM]03:54:43 Um, well, I guess it depends on how you justified the use of the NSP funds, and what, what they were, uh, you know, you have to, need a, you have to have a eligible use, uh, and activities for those funds. And you also have to meet a national objective. So, um, depending on what you said the national objective was, which let's say that you decided this was going to be a park for the neighborhood.

21 Page 21 [HUD OPEN FORUM]03:55:07 (CONTINUED) Or a, or a, uh, community garden space. And it worked as a community garden for a couple of years, and then it was, so it was a public facility. Um, and then when you changed the use, then potentially invoke the change of use, uh, rules from the CDBG program, and, uh, potentially, um, if the project, if the, if the subsequent project doesn't meet a national objective, you may have to reimburse the program, um, for, uh, the current value of the, of the site. [HUD OPEN FORUM]03:55:37 (CONTINUED) But if you were going from, you know, a lower income area benefit project to a lower income housing project, then you'd still be meeting a national objective. And you, you'd probably be okay. [HUD OPEN FORUM]03:55:54 Thank you for that question Tamara. [HUD OPEN FORUM]03:55:55 I, I, I wanted to clarify one thing, I just got an from Joan. The, for the previous question about, um, the need for the appraisal, um, the bridge notice does state it's based on the value of the property, not the, uh, purchase price. So in order to, um, to determine the value, um, of the property, you, you, you would need to have a, uh, an appraisal, um, um, and I, I'm trying to remember what the, what the, what the question was. Was, did you. (ALL TALKING AT ONCE) [HUD OPEN FORUM]03:56:34 It was a HUD home, right? (CONTINUED) [HUD OPEN FORUM]03:56:37 Right, it was HUD, HUD, housing, uh, development. So I mean, chances are, you know, you still got to make a couple thousand dollars worth of appraisal costs for a piece of property that's going to be worth much more than that. So it's probably still worth doing. [HUD OPEN FORUM]03:56:59 Alright, an obligation question from Sherry Miles. If we obligate the rehab monies based on a signed rehab contract, can we obligate all activities related, uh, to that home's rehab? For example, rehab specialist fees and, um, and... [HUD OPEN FORUM]03:57:15 Yes. Yeah, those are the kinds of things that you, uh, would have to estimate based on your, your previous experience with the, the cost of those tasks. But those are activity delivery costs, and the obligations guide that, that Paul wrote a couple of months ago, uh, shows that you can, um, charge any, uh, anticipated activity delivery costs at the same time that you obligate, uh, the rehab when you sign a contract. Because we know you can't do those things without, you can't carry out those activities without the staff time and, uh, and budget to do it, so. [HUD OPEN FORUM]03:57:58 There's a DRGR question, uh, Lisa Ahern asks about, uh, HUD, and does it have a preference that we draw our acquisition costs from DRGR prior to closing? Or is it also acceptable to advance the funds and then draw from the DRGR for reimbursement? [HUD OPEN FORUM]03:58:22 I think the, uh, the focus is on, um, the three days. It, it's typically, um, you draw down the funds as you have a need for them. So if you're anticipating closing on a property within the next 72 hours, then that's