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APPROVE RESIDENTIAL NEIGHBORHOOD REINVESTMENT PROGRAM
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RECOMMENDATION
It is recommended that the City Council adopt a Resolution to:
1. Approve the Residential Neighborhood Reinvestment Program Guidelines;
2. Authorize the City Manager to execute Residential Neighborhood Reinvestment Agreements in accordance with the terms of the Residential Neighborhood Reinvestment Program Guidelines; and
3. Authorize the City Manager to take necessary and appropriate actions to carry out the purpose and intent of the resolution.
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Summary
The City Council adopted the Economic Development Strategic Plan in February 2015, which identified neighborhood revitalization as a key goal for the City. Staff is recommending that the City Council approve a new Residential Neighborhood Reinvestment Program, an incentive program to promote investment, improvements, and/or blight abatement to blighted residential properties within the City of Stockton. The proposed Residential Neighborhood Reinvestment Program would forgive certain code enforcement fines, fees, penalties, and liens previously imposed by the City which have hindered property rehabilitation efforts due to the exceptional financial penalties. The program is only eligible to new property owners or potential purchasers of eligible single-family residential property who were not the cause of the code violations.
DISCUSSION
Background
The City commonly imposes fines on residential properties in instances where property owners are in non-compliance with municipal codes. In most cases, the fines are minimal, and the violation is corrected by the property owner. However, in some instances those deficiencies are ignored or re-occur on a regular basis, and the property owner either fails to correct the problem and/or does not pay the fines and additional penalties accrued to the property. These additional charges can quickly accumulate, to the point where they become a barrier to reinvestment in the property, preventing potential buyers or new property owners from being able to revitalize the property. Often, these properties become blighted, vacant, and underutilized.
The Economic Development Strategic Plan identified neighborhood revitalization as a need in other Stockton neighborhoods beyond the downtown core. The recommended neighborhood revitalization initiative focuses on utilizing existing City resources and implementing policy tools to incentivize private reinvestment in these areas. Action Item G.5 in the Strategic Plan recommends the use of lien forgiveness incentive programs (both Residential and Commercial) as an appropriate tool to reduce barriers to revitalization. While the City already has a Commercial Lien Forgiveness Program in place, this proposed Residential Neighborhood Revitalization Program implements the residential portion of that action item.
Present Situation
The proposed Residential Neighborhood Reinvestment Program would benefit many properties within the City. There are close to a hundred properties in various neighborhoods throughout the City with code enforcement liens of $15,000 or more. Offering this program will help place these properties back into the housing stock and potentially create affordable housing opportunities for lower income families. Many of these homes are in affordable areas of the City and could potentially prevent homelessness by bringing additional cost residential options back to the market.
The proposed Program Guidelines are included as Exhibit 1 to the resolution and are summarized as follows:
• Eligible Properties
To be considered for participation in this program, a property must meet certain criteria. The property must be a single-family residence with a minimum current outstanding code violation fee penalty amount of $15,000. Only soft costs such as fines, fees, interest, and late fees may be forgiven. Hard costs such as abatement costs, recording fees, inspection fees, or any actual expenditure of City funds may not be forgiven unless approved by the City Council. Prior violation payments made are not eligible for reimbursement.
• Eligible Program Applicants
No person is eligible for this program who has caused, maintained, or allowed the violations, fines, penalties, or liens at the subject property OR on any other property within the City boundaries. The applicant must be able to show that the successful rehabilitation of the property is being prevented due to exceptional financial penalties, and provide documentation verifying the financial need of the project. The applicant must demonstrate the ability to undertake and complete improvements within 12 months from the time of City approval, or other schedule as agreed upon in an executed agreement.
• Application and Review Process
A completed application and all required documents must be submitted for the application to be reviewed. City Economic Development Department staff will review and process the application and complete its due diligence in a timely fashion. The City’s review will include consultation and coordination with the Neighborhood Services/Code Enforcement division of the Police Department. The Economic Development Director will make a determination of eligibility to either approve or deny the application. If approved, staff will begin drafting terms of an Agreement with the applicant. The City Manager will review the Agreement and may accept or reject the proposal and/or impose additional stipulations. City Council approval is required for forgiveness of certain fines, penalties, and lien totals exceeding the current City Manager expenditure limit.
• Required Improvements, Agreement, and Final Inspection
Improvements or blight abatement of the property must bring the property into compliance with all applicable codes and remove all code violations. The investment, improvements, and/or blight abatement of the property will have a significant positive effect on the surrounding neighborhood and have a strong potential to encourage additional investment and improvements in the surrounding area. The Agreement will include a project completion schedule, description of the improvements to be made, and the amount requested to be forgiven. A final inspection is required before the City will remove applicable fines, penalties, or liens from the property. If the property is not successfully improved within the project schedule approved in the Agreement, the City will not forgive the fines, penalties, or liens imposed upon the property. If the final inspection finds that the property is successfully invested in, and all code violations corrected, the City will remove the applicable fines, penalties, or liens from the property.
While each application may need to have variation in deal points, the intent of the Residential Neighborhood Reinvestment Program Guidelines is to guide the process for improving these properties and revitalizing neighborhoods. This program will become effective thirty days from the date of approval and remain in effect for five years, unless extended by the City Council.
FINANCIAL SUMMARY
Although the City may forgo payment of certain code violation fines, fees, penalties and liens, the intent of the program is to alleviate the burden on properties with excessive fines, fees, penalties, interest, and/or liens which will in turn facilitate reinvestment, improvements, and/or blight abatement on eligible properties and allow improvement of these properties in a more efficient and timely manner. There are no other negative financial impacts to the City by establishing the Residential Neighborhood Reinvestment Program.