WHAT ARE THE COSTS TO THE CITY?

The operation of the Community Stabilization Program is nearly self-sustaining and should not require large expenditures of city funds. While the properties are under the area management contract, you will be reimbursed for renovations and other services. When you sign the master lease, permitting you to sublease the units, rental income will cover the bulk of your costs, such as maintenance, insurance, utilities, staff salaries, neighborhood service programs, and lease payments to HUD.

Your direct cost is the time spent by city staff on the project, such as the person assigned to supervise and assist the project authority on behalf of the city (your "project officer") plus any additional service costs such as special police for the subdivision.

HOW CAN A COMMUNITY STABILIZATION
PROGRAM BE INITIATED?

If it appears that a Community Stabilization Program might provide an effective remedy to the housing problems of your jurisdiction, you should discuss with the HUD field or regional office the next steps to be taken. These are described in Chapter II.

II. IMPLEMENTATION

OF COMMUNITY STABILIZATION PROGRAM

If you feel the Community Stabilization Program can help a neighborhood in your city, you will need to follow the steps described in this chapter. References are given to model documents and sample plans and procedures which may aid you and HUD to develop a stabilization program that is suited to your locality. These documents, plans, and procedures were developed as Taylor's program progressed and will not be perfectly suited for every program. They should be modified as your situation dictates.

STEP 1: IDENTIFY AND DESCRIBE THE PROBLEM

The first step is to document the location scope, and magnitude of the housing problem in the affected neighborhood or subdivision. Either your city or HUD, through its regional or field office may make the assessment. Either may initiate the process and negotiations.

This assessment should be the basis for determining whether a Community Stabilization Program is the appropriate remedy for the housing default and acquisition problem among HUD-insured properties in your city. The program is specially designed to address the socioeconomic problems of the distressed subdivision as well as property disposal. Therefore, your assessment must show clearly that this comprehensive approach is necessary in your particular case and that it requires public services that a private contractor cannot offer. With this fact established HUD can avoid the competitive bidding procedures which would normally be required and treat your program as a sole source contract (see the discussion of this issue and the sample cooperation agreement in Appendix A).

The following topics should be covered in your evaluation:

number of properties with HUD-insured mortgages in de-
fault, foreclosure, or acquired by HUD;

number of properties in the neighborhood with outstanding
HUD/FHA-insured mortgages;

location of properties;

problems affecting the community, such as vandalism,
neighborhood blight, and community tensions; and

prospects for renting or selling the HUD properties once
they are rehabilitated.

You and HUD will use this information in deciding whether to implement a Community Stabilization Program. The decision should be based on yours and HUD's assessment of the severity of these problems. A rule of thumb may be the presence of as few as 25 vacant homes if they are concentrated in one area. If, on the other hand, the properties are widely dispersed, 90 to 100 or more should be required for implementing the program. The total number of properties should include both on-hand vacant houses and those in the HUD pipeline.

STEP 2: CONDUCT PRELIMINARY PLANNING

If a stabilization program appears to be the solution, you and HUD should discuss the anticipated roles and responsibilities of all parties likely to be involved. You should be prepared to discuss the characteristics of the affected subdivision, the structure of your government, and other matters that will be useful in negotiating your cooperation agreement with HUD.

STEP 3: DRAFT A COOPERATION AGREEMENT

The cooperation agreement will formalize the discussions between you and HUD. It sets forth the general obligations of the parties under the stabilization program. An important objective of the agreement is the determination that your local government is the only party capable of providing the comprehensive services necessary to stabilize the affected neighborhood.

The cooperation agreement establishes your obligations to: (1) become the project manager under the area management contract, (2) enter into a master lease agreement with HUD for the purpose of subleasing the properties, after rehabilitation, to qualified families, and (3) attempt to improve the socioeconomic conditions of the area. As part of the latter, you are required to give special emphasis to the performance of municipal functions and security programs. You will also agree to encourage municipal employees to live in the subdivi

sion.

HUD's obligations under the cooperation agreement, as owner of the properties, include financing and contracting for the repairs necessary to rehabilitate the properties.

STEP 4: TERMINATE EXISTING AREA MANAGEMENT CONTRACT

Under standard property disposition programs, HUD contracts with a private firm (usually a real estate agent or broker) to act as a property manager. The Community Stabilization Program, however, encompasses many services and programs that can only be provided by a governmental entity. Therefore, before HUD enters into a new management contract with your city, it must terminate any existing contract it has in force in the affected subdivision.

STEP 5: ENTER INTO AREA MANAGEMENT CONTRACT

The area management contract is designed to permit you to begin stabilizing and improving the area while the properties are being rehabilitated. Unlike HUD's standard contract, the contract used in this program requires your city to perform the area manager's duties itself, rather than subcontract the work to third parties for the following reasons:

The magnitude of the problem warrants a comprehensive
approach requiring the authority and resources of a gov-
ernmental entity.

By acting as area manager, your city establishes a strong,
visible presence in the distressed subdivision that is
evidence of your concern and commitment.

You can exercise greater control and supervision over the
quality of the work performed.

As area manager, you must develop an organizational and administrative strategy for implementing the management contract. To do this, you must determine:

who will be responsible for administering and coordinat

ing property management activities;

which city departments will participate;

239-555 O-77-2

what manpower and time requirements are anticipated;
and

what the appropriate financial accounting procedures are.

HUD will develop a compensation schedule based on a flat fee for initial and ongoing tasks as defined in the management contract. There are two major work phases in this contract. The first is the securing and maintaining of acquired properties. The second phase involves the joint determination by you and HUD of the nature and extent of repairs needed for each property. HUD then contracts and pays for repair work. You are responsible for inspecting the ongoing and completed work to ensure that it complies with your local codes and with agreements reached with the HUD office.

These activities are described below. A model area management contract is presented in Appendix B, together with brief comments on certain legal aspects.

The City Secures and Maintains HUD-Acquired Units

The tasks you must carry out for securing and maintaining HUDacquired properties are of two types, one-time only and regularly recurring. One time only tasks include:

The area management contract should spell out the requirements for proper execution of these tasks. Guidelines for acceptable procedures, materials, frequency of tasks, and your city's compensation should be written into the contract.