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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 03/02/2010 - FIRST READING OF ORDINANCE NO. 024, 2010, APPROPRI DATE: March 2, 2010 A A STAFF: Darin Atteberry _ Tess Heffernan First Reading of Ordinance No. 024, 2010, Appropriating $350,000 from Prior Year Reserves, Committed to Police, in the Capital Expansion Fund for Crossroads Safehouse EXECUTIVE SUMMARY In the fall of 2009, Crossroads Safehouse requested assistance from the City in funding the renovation of its new, expanded domestic violence shelter. Council directed staff to investigate options for funding Crossroads. Following further scrutiny of HUD regulations, a professional appraisal of the existing shelter (which is owned by the City), a review of Crossroads' financials and business plan for its new facility, and an evaluation of the City's capital improvement expansion fees the following is recommended: 1. That the City Council appropriate $350,000 from Police Capital Improvement Expansion Fees for the renovation and construction of Crossroads' new facility; and 2. That the sale of the existing Safehouse facility be deferred until at least 2014, at which time existing obligations to HUD will be fulfilled, the City will own the building free and clear, and Council can formally consider the option of selling the building and using a portion of the revenues to repay the Police Capital Expansion Fund. BACKGROUND/ DISCUSSION In the fall of 2009, Crossroads Safehouse requested $500,000 in City funding to be used for the renovation of Crossroads' new regional facility. City Council discussed this request at length during the 2010/2011 City budget hearings and directed the City Manager to investigate funding options and bring forward a recommendation at the earliest date possible. Since that time, staff has analyzed information and looked at the feasibility of various funding options. The City owns the existing Safehouse facility and leases it to Crossroads for $1/year. At the time of Crossroads' initial funding request, the suggestion was made that the City sell the facility and use the proceeds for the new regional facility. However, the purchase and upgrade of that building has been funded by Community Development Block Grants (CDBG)and,as a result,the use and sale of the facility fall under a number of Housing and Urban Development(HUD) regulations. Much effort has gone into discerning which HUD regulations would apply, were the City to pursue this option, and just what, if any, equity the City might have in the existing facility. In addition to analysis of the HUD regulations, staff has: • completed a review of Crossroads' financial status, including past audits, projections for the new expanded facility, and capital campaign contributions and pledges to date • toured the new facility and analyzed the renovation plans and budget • hired a professional real estate appraiser to assess the value of the existing City-owned facility currently occupied by Crossroads. March 2, 2010 -2- ITEM 26 The following summarizes the findings from the analysis: 1. Crossroads currently has sufficient funding and has planned for ongoing funding of the expanded facility, including increased operational expenses. 2. The renovation plans and budget for the expanded facility are well founded, thorough, and based on sound practices. 3. The real estate appraisal of the existing facility indicates the market value of the property ranges from $556,000 for a"quick sale"to$1.16 million. This value is based on the market for private group homes and includes analysis of comparable sales both locally arid along the entire Front Range. Most contracts would probably be contingent upon approval of a proposed new use through the City's land use requirements. 4. CDBG monies are expected to be invested in real property for at least five years, after which time the CDBG investment is considered to have served its use and the activity is "closed out." In the case of the current Crossroads facility, the closeout of the activity will occur in 2014. This means that: a. If the property is sold prior to 2014,the entire value of the property(minus a small amount the City put into it for rehabilitation) must be returned to the CDBG program. b. If the property is sold after 2014, the entire proceeds from the sale of the property would go to the City. 5. The question was raised as to whether equity in the existing facility can be transferred to the new facility. The short answer is that this is not possible without first selling the existing facility. If the building is sold prior to 2014, the proceeds from the sale would be returned to the CDBG program and then distributed through the CDBG open competitive process for"eligible activities." Crossroads could apply for funds through the CDBG competitive process. Staff also explored whether the City could lend Crossroads money for the renovation of the new facility and then use proceeds from the sale of the existing building to pay the City back. However, CDBG funds are prohibited from being used to pay off existing loans; this is not an option if the building is sold before 2014. 6. In the case of Crossroads Safehouse, there is a clear nexus between the Council's goals for a safe community, the services provided by Crossroads, the need for a larger facility for those services, and the mission of Police Services. Based on the above findings, staff is recommends the following: First,that$350,000 be appropriated for the construction and renovation of the new Crossroads facility using funds from the Police Capital Expansion Fee balance. Crossroads initially requested$500,000 from the City; however, the new facility will draw clients from across the state. This recommendation takes into consideration the percentage of Fort Collins residents that will be served. This contribution of$350,000 would be contingent on Crossroads raising 90% of the total needed for the capital campaign prior to beginning construction. Secondly, staff recommends that the marketing and sale of the existing Safehouse facility be deferred until 2014 and reevaluated at that time. There are several reasons for this: • By late 2014 the community will have received its benefit from CDBG program funds and thus the entire equity of the building will be available to the City. • The economic climate and real estate market is expected to improve in the coming years; the City will likely be able to sell the building at a higher price than possible in today's market. • It will be very difficult to market the property while Crossroads occupies it due to security concerns. The address of the Safehouse is confidential and cannot be advertised to potential buyers using conventional marketing techniques. March 2, 2010 -3- ITEM 26 • If the building is marketed now, there is the risk of having a contract on the building and nowhere for Crossroads to move in the event its capital campaign does not progress on the planned timeline. Crossroads does not have funds to pay rent to a new owner. • The community's needs will continue to evolve in the coming four years and so will the Council's policies around meeting those needs. As the fall of 2014 nears, Council can assess options and decide what course of action to take. It may make sense to sell the building at that time and use a portion of the revenue to repay the Police Capital Expansion Fund. Another option might be to utilize the building for some other City or community need. In the meantime, staff will explore alternatives for interim use of the building once Crossroads has vacated it. Staff believes this is a good solution for the City and the community. FINANCIAL IMPACT The December 31, 2009 balance in the Capital Expansion Fund reserve for Police is estimated at$1,803,000. These funds are collected when new development occurs and are used to help pay debt service on the new Police building. Should Council wish to appropriate$350,000 in one-time funds for Crossroads' new facility, staff recommends it be taken from this funding source. SUSTAINABILITY: ECONOMIC, ENVIRONMENTAL AND SOCIAL IMPACTS From an economic standpoint, these recommendations strengthen the partnership that the City and Crossroads Safehouse have had for over 30 years. The move to the new facility will also open up a number of options for use or sale of the existing facility. The plans for the new Safehouse have received national recognition for innovative environmental design; itwill be the first"green"domestic violence shelter in United States. The public purpose served by this expenditure is clear. In 2009, 436 women and children were sheltered at the Crossroads Safehouse for a total of 8,553 nights of housing. An additional 138 individuals were turned away because the shelter was full. The expanded facility will enable Crossroads to serve all those in need. It will serve not only Fort Collins residents but others from the region and across the state. STAFF RECOMMENDATION Staff recommends adoption of the Ordinance on First Reading. BOARD / COMMISSION RECOMMENDATION At the Council Finance Committee on Monday, February 22nd, the City Manager updated the Committee on the Crossroads Safehouse appropriation item. ORDINANCE NO. 024, 2010 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROPRIATING PRIOR YEAR RESERVES IN THE CAPITAL EXPANSION FUND FOR THE RENOVATION OF THE NEW REGIONAL CROSSROADS SAFEHOUSE WHEREAS, Crossroads Safehouse is a private, non-profit corporation in the City that provides services which promote a safer community, thereby serving a valuable public purpose; and WHEREAS, in the fall of 2009, Crossroads requested assistance from the City in funding the renovation of its new, expanded domestic violence shelter; and WHEREAS, City Council discussed this request during the 2010-2011 City budget process and directed the City Manager to investigate funding options and make a recommendation; and WHEREAS, the present Crossroads facility was purchased by the City in 1979 for a purchase price of$90,000, which purchase was wholly funded with CDBG funds; and WHEREAS, additional CDBG funds in the approximate amount of $6,300 were expended in 1979 for repairs to the building and, from the years 1984 through 2007, CDBG funds in the approximate amount of $570,000 were expended toward the making of improvements to the building; and WHEREAS, the Department of Housing and Urban Development ("HUD") regulations provide that any real property under the City's control that was acquired with CDBG funds in excess of $25,000 must either be used to meet national objectives until five years after the expiration of the most recent grant agreement, or if not used to meet national objectives, then the City must pay the City's CDBG fund as program income the amount equal to the current value of the property; and WHEREAS, under the HUD regulations, there is no payment required to be made from the City into the City's CDBG fund after the five year period following expiration of the most recent grant agreement; and WHEREAS, the City has conducted an appraisal of the Crossroads property which appraisal has determined that the property presently would only generate a purchase price of approximately $556,000; and WHEREAS, the appraiser anticipates that, by 2014, the property may be valued at as much as $1,160,000; and WHEREAS, the most recent CDBG grant agreement was closed out in 2009 and, by September 2014, five years will have elapsed since the most recent grant agreement so that, in 2014, the City would likely be able to realize a significant beneficial gain in value; and WHEREAS, for the foregoing reasons, it wold not be in the best interests of the City to immediately offer the Crossroads facility for sale; and WHEREAS, staff therefore recommends that $350,000 be appropriated from other sources for the renovation of the new regional Crossroads facility, pending the eventual sale of the present Crossroads facility; and WHEREAS, $350,000 could be made available in the Capital Improvement Expansion Fee fund prior year reserve that are presently committed to Police Services, and the expenditure of such funds for the proposed Crossroads facility would be consistent with the mission of Police Services; and WHEREAS, the Colorado Supreme Court in the case of Barber v. State, has determined that funds raised for special purposes by governmental entities in Colorado may be used for purposes other than those originally intended if such use of the funds is determined to be necessary by the legislative body by reason of a revenue shortfall; and WHEREAS, in recent years, the City has, in fact, experienced severe revenue shortfalls that have necessitated reductions in the City work force and required the elimination or paring back of various City services; and WHEREAS, accordingly, under this ruling of the Colorado Supreme Court, the City's Capital Improvement Expansion Fee funds can be used to support the valid public purpose served by Crossroads as a component of the City's interest in promoting a safe community; and WHEREAS, the City's contribution of $350,000 would be contingent on Crossroads raising 90% of the total funding needed for the capital renovation of the Crossroads facility prior to beginning the construction; and WHEREAS, Article V, Section 9 of the City Charter .permits the City Council to appropriate by ordinance at any time during the fiscal year such funds for expenditure as may be available from reserves accumulated in prior years, notwithstanding that such reserves were not previously appropriated; and NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the City Council hereby finds that the appropriation of funds as authorized by this Ordinance serves an important public purpose and is in the best interests of the health, safety and welfare of the residents of the City. Section 2. That there is hereby appropriated for expenditure from prior year reserves in the Capital Expansion Fund the sum of THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000) for the renovation of the new regional Crossroads Safehouse. -2- Section 3. That this appropriation from prior year reserves in the Capital Improvement Expansion Fund is hereby determined by the City Council to promote a valid public purpose in that it helps to establish a safer community by providing facilities for those persons who are victims of relationship abuse, all of which serves the mission of Fort Collins Police Services and protects the public health, safety and welfare. Introduced, considered favorably on first reading, and ordered published this 2nd day of March, A.D. 2010, and to be presented for final passage on the 16th day of March, A.D. 2010. Mayor ATTEST: City Clerk Passed and adopted on final reading on the 16th day of March, A.D. 2010. Mayor ATTEST: City Clerk -3-