A county entity is helping the City of Brazil sell new homes built through the Neighborhood Stabilization Program (NSP).
During Monday's meeting of the Clay County Council, an ordinance was passed establishing a non-reverting fund for income funding collected through the NSP.
Clay County Redevelopment Commission Attorney Lou Britton told the council due to differences in how state law and federal grant regulations state how the homes may be sold, the Redevelopment Commission will have to act as a broker of sorts.
"There is no provision in state law that allows a governmental entity to sell a house for less than its appraised value, which is what the NSP calls for," Britton said. "Fortunately, the Redevelopment Commission has a lot more flexibility to sell than the City of Brazil."
Through the program, which targets low- to moderate-income families, the potential buyer has to acquire a mortgage for whatever amount they can afford, then the difference between the amount and the total cost of the house becomes a soft second mortgage that must only be repaid should the buyer move or sell the house within 10 years of the closing date.
"The second mortgage is similar to an abatement in that if the buyer leaves the home after two years, a lien would be placed on the property at 80 percent of the subsidized amount," Britton said. "In order to sell the homes, the city plans to transfer the properties to the Redevelopment Commission."
Included in the ordinance is a subrecipient agreement between the city, commission and Indiana Housing and Community Authority, which allows the commission to take the proceeds from the sales and place them into the non-reverting fund.
"The money in this fund will have to be expended from the fund in accordance to the requirements of the grant program," Britton said.
Kenna Consulting and Management Group, Inc. (Indianapolis), Vice President Angie Pappano, said there have been seven new homes constructed thus far, with an eighth rehabilitated.
"Two of the homes have been transferred to the Brazil Housing Authority for rent, and the other six homes will be sold through this process," she said. "So far, we have four families qualified and ready to purchase homes, while we are working with two others to get them qualified as well."
Council President Mike McCullough asked if the county would bear any liability should one of the homeowners default on their initial mortgage, or leaves prior to the end of the 10-year term on the second mortgage.
"In this situation, the Redevelopment Commission is acting in the same capacity as they do for the county, but only for the city," Britton responded. "There will be no liability on the county or commission as liens would be placed on the property in a default situation."
With the information provided, the council voted unanimously to suspend the rules and pass the ordinance on first reading to establish the fund. Any monies left in the fund at the end of the grant program period, which is in a couple years, will revert back to the state.
Meanwhile, the council approved a pair of transfers out of the Rainy Day Fund to bridge the financial gap until the end of Spring 2011 property tax collection.
In separate motions, $400,000 was transferred to the General Fund, and $40,000 to the Health Fund, to help cover typical budget expenses through June 30.
"At the beginning of the year, all the health insurance funds were placed in a health reserve, and CAGIT being the only significant revenue stream until tax collection, things were starting to get a little tight," Clay County Auditor Mary Jo Alumbaugh said. "Once Spring tax settlement is complete, the money that was transferred will go right back in to Rainy Day."
Alumbaugh told The Brazil Times separate transfers had to be made because the Health Fund is not part of the General Fund, and the moves act as a sort of tax anticipation loan, but no interest will have to be paid as the county is simply transferring from one account to another rather than taking out a loan from a bank.
In other business during Monday's meeting, the Clay County Council:
* Approved a modification to the IVC Industrial Coatings, Inc., Tax Abatement Calculation Agreement. Britton explained IVC is transferring the title of its real estate at 1825 E. National Ave., to a newly formed entity (I.V.C. Clay County Realty, LLC) and the modification was needed to reflect the change. He added this does not restart or change the current tax abatements in place and IVC is still going to be conducting operations at the location, and only the official owner of the property is being changed, and
* Approved additional appropriations in the Emergency Management Fund ($1,250 for mileage), Cumulative Capital Development Fund ($12,000 for the purchase of a new chiller coil) and the E-911 Fund ($27,000 for the salary of an Assistant 911 Supervisor position).
The next meeting of the Clay County Council will be 6 p.m., Monday, June 6, in the Commissioners' Courtroom at the Clay County Courthouse.