U.S. Department of Housing and Urban Development g Program Income: Basics and Closeout Requirements February 10, 2015 Community Planning and Development
Moderators and Host • Moderator – Paul Patterson, Dept. of Housing and Urban Development – Njeri Santana, Dept. of Housing and Urban Development – Hunter Kurtz, Dept. of Housing and Urban Development – Larry Reyes, Dept. of Housing and Urban Development • Host – Jennifer Alpha, TDA – George Martin, TDA U.S. Department of Housing and Urban Development • Community Planning and Development 2
Today’s Topics • Program Income Resources • Basic Requirements – Regulations – Waiver for NSP 2 Grantees • Closeout Reminders • Uses of Post-closeout Program Income • Exceptions • Using PI for Revolving Loan Funds U.S. Department of Housing and Urban Development • Community Planning and Development 3
Program Income Resources • NSP combined program notice dated 10/19/10 • Policy Alert on Program Income dated 7/13/11 • Policy Alert on RLF dated 8/20/12 • Closeout & Recapture notice dated 11/27/12 • Waiver for NSP 2 Grantees dated 1/28/15 • CDBG regulations at 24 CFR 570.500(a) & 570.504 U.S. Department of Housing and Urban Development • Community Planning and Development 4
More Program Income Resources • Search NSP Webinars (onecpd.info) – Program Income, Activity Delivery, and General Administration (7/1/10) – Greatest Hits of Program Income (8/23/11) – DRGR Updates NSP Webinar (12/6/11) – Effective Use of NSP2 PI (9/18/12) – Program Income & NSP Administration Strategies Post Closeout (11/5/13) • FAQs (search onecpd.info for program income) U.S. Department of Housing and Urban Development • Community Planning and Development 5
Program Income Basics Program Income = Gross income received by a grantee or subrecipient from the use of program funds Examples: • Proceeds from sale/lease of property acquired, rehabbed, or redeveloped with NSP funds • Proceeds from the sale of equipment purchased with NSP funds • Gross rental income from property acquired, rehabbed, or redeveloped with NSP funds • Principal and interest on NSP loans U.S. Department of Housing and Urban Development • Community Planning and Development 6
Program Income Basics (cont.) Program Income is NOT: • Income earned and retained by a developer • Review developer agreement to ensure that nonprofit developer: – Was not designated a subrecipient – Is not required to return income to the grantee/subrecipient U.S. Department of Housing and Urban Development • Community Planning and Development 7
Program Income Basics (cont.) • NSP1 and NSP3: Program income must be spent before Line of Credit Funds for NSP1 and NSP3 grants • New waiver allows NSP2 grantees to spend program income in advance of Line of Credit funds – Assists grantees in meeting September 30, 2015 spending deadline – Applies ONLY to 42 NSP2 grantees – DRGR instructions available www.hudexchange.info/resources/documents/DRGR-Guidance-NSP2- Grantees-Receiving-Waiver-Program-Income-Expenditures.pdf U.S. Department of Housing and Urban Development • Community Planning and Development 8
Closeout Reminders Regarding Program Income • Grantee retains any Program Income on hand at closeout and generated following closeout • If 25% Set-Aside Requirement is not met for Program Income at the time of closeout, then grantee has three (3) years to meet the requirement • Program Income is earned in perpetuity- Income that comes back after closeout is still PI. Note: Exception for grantees with NO open CDGB grant. • Program Income will be reported annually. U.S. Department of Housing and Urban Development • Community Planning and Development 9
Uses of Post-Closeout PI Generally, for NSP admin & eligible activities: • NSP eligible use • Eligible activity (not limited to target areas) • National objective • 25% Set-aside Requirement Exceptions: • Special requirements depending on grantee type and program • Grantee PI below annual thresholds U.S. Department of Housing and Urban Development • Community Planning and Development 10
Post Closeout Requirements by Grantee Type Category 1: – NSP1 and NSP3 state and entitlement grantees – NSP2 state and entitlement grantees who are members of an NSP2 Consortium subject to a consortium funding agreement – NSP3 Non-entitlement with OPEN CDBG grants U.S. Department of Housing and Urban Development • Community Planning and Development 11
Post Closeout Requirements by Grantee Type (cont.) Category 1 PI Rules: • Income generated for the duration of the NSP program is must be used for NSP-eligible activities that meet a national objective. • If PI does not exceed $25,000 per year- use funds for administration or include in a CDBG activity. • If the program income generated exceeds $250,000 per year – 25% Set-aside Requirement applies. U.S. Department of Housing and Urban Development • Community Planning and Development 12
Post Closeout Requirements by Grantee Type (cont.) Category 2: – NSP3 Non-entitlement Grantees with NO CDBG grant open at closeout – NSP2 Consortium Non-Profit Lead Agencies or Members and NSP2 Non-Profit Direct Grantees U.S. Department of Housing and Urban Development • Community Planning and Development 13
Post Closeout Requirements by Grantee Type (cont.) Category 2 PI Rules: • Income received prior to closeout must meet all NSP requirements. • Income received during the first five years following closeout: – must be used for NSP- eligible activities that meet a national objective. – Other cross-cutting federal requirements do not apply, including environmental and Davis- Bacon, for example. U.S. Department of Housing and Urban Development • Community Planning and Development 14
Post Closeout Requirements by Grantee Type (cont.) Category 2 PI Rules (cont.): • Income received five years or more from the date of the closeout agreement will be considered “miscellaneous revenue.” • Funds are not subject to ongoing NSP or CDBG program requirements, but HUD encourages nonprofit grantees to use the funds in the same manner. Figure 6 of the Closeout Guide summarizes all PI requirements. U.S. Department of Housing and Urban Development • Community Planning and Development 15
Post-Closeout Requirements- State Grantee Considerations • Program Income policies will be set by State to show how State will allocate future PI • Program Income is aggregated at State level (even if retained by subrecipients) and follows $25,000 rule • States must report and are responsible for Program Income U.S. Department of Housing and Urban Development • Community Planning and Development 16
Post Closeout Provisions U.S. Department of Housing and Urban Development • Community Planning and Development 17
Revolving Loan Funds Basics: • Tool for managing the flow of Program Income • May be operated by grantee or subrecipients • Funded with Program Income • Funds tracked separately from LOC and other PI. • Funds disbursed, replenished, and again disbursed in perpetuity U.S. Department of Housing and Urban Development • Community Planning and Development 18
Revolving Loan Funds (cont.) Uses: Each RLF must be for an NSP-eligible, income-generating activity meeting an NSP national objective. Examples: • Loans to purchase and redevelop foreclosed homes and residential properties (including first and second mortgages) • Funding a loan loss reserve • Shared-equity loans for low- and moderate income homebuyers U.S. Department of Housing and Urban Development • Community Planning and Development 19
Revolving Loan Funds (cont.) Key Requirements: • Plan Amendment – RLF must be for a specific activity • Capitalize RLF from PI* • Separate Accounts for each RLF • Funds held in interest bearing account • Comply with NSP1, NSP2, or NSP3 requirements, as applicable • Repayment to the RLF is treated as PI (*Exception under the limited CDBG rules related to lump sum draw downs for rehabilitation only activities, as provided for in 24 CFR 570.513.) U.S. Department of Housing and Urban Development • Community Planning and Development 20
Revolving Loan Funds (cont.) Considerations: • Select activities that are appropriate for the size and scope of the program to ensure that funds will revolve • Consider administrative maintenance • Policies and procedures and a monitoring plan are recommended • Establishing a revolving fund does not constitute meeting a national objective and is not inherently an eligible activity • Consult DRGR resources for set up U.S. Department of Housing and Urban Development • Community Planning and Development 21
Questions? U.S. Department of Housing and Urban Development • Community Planning and Development 22
Q and A Instructions To Ask Question By Phone: – Press *1 on your telephone keypad and you will be added to the queue. – If your question is answered before your turn in the queue, press *2 to be removed from the queue. To Ask Written Questions: – Use the “Q&A” tool in Webex – On the lower right hand side of your screen – Please ask your question to all panelists U.S. Department of Housing and Urban Development • Community Planning and Development 23
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