HomeMy WebLinkAboutR-87-0657J-87-641
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RESOLUTION No.
A RESOLUTION APPROVING REVISED PROGRAM
GUIDELINES, ATTACHED HERETO AND INCORPORATED
BY REFERENCE, FOR THE MULTIFAMILY HOUSING
REHABILITATION LOAN PROGRAM FUNDED THROUGH
THE COMMUNITY DEVELOPMENT BLOCK GRANT, AND
AUTHORIZING THE CITY MANAGER TO IMPLEMENT THE
PROGRAM IN ACCORDANCE HEREWITH.
WHEREAS, in recognition of the continued need to provide safe
and sanitary rental housing units affordable to low and moderate
income families in Community Development Target Areas, the amount
of $2,150,000 has been allocated from the Thirteenth Year CDBG
Program to the Multifamily Housing Rehabilitation Loan Program;
and
WHEREAS, on September 9, 1982 through Resolution No. 82-825,
the City Commission adopted guidelines for the Community
Development Rehabilitation Loan Program; and
WHEREAS, certain revisions to the Program's implementation
guidelines are necessary to comply with recent trends in federal
program policy to maximize public funds by leveraging private
monies,
NOW, THEREFORE; BE IT RESOLVED BY THE COMMISSION OF THE CITY
OF MIAMI, FLORIDA:
Section I. The revised Multifamily Housing Rehabilitation
Loan Program guidelines, attached hereto and incorporated by
reference, are hereby approved.
Section 2. The City Manager is hereby authorized to
implement the Program in accordance with said guidelines.
PASSED AND ADOPTED this 9th day of July,,— y�87.
ATTESST
MAIM HIRAI, CITY CLERK
PREPARED AND APPROVED BY:
. ff;� iG
VIER L. SUA jZ,
APPROVE,, AS/TO FORM AND CORRECTNESS:
ROBERT F. CLARK DOUG RTY
CHIEF DEPUTY CITY ATT R F,1��„^ CITY�A TORN
C17i'Y COI�41J ISSION
MELTING OF
JUL 9 1987 r_1
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RESOLUTION No.
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CITY OF MIAMI
HOUSING CONSERVATION AND DEVELOPMENT AGENCY
COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG)
MULTIFAMILY HOUSING REHABILITATION LOAN PROGRAM
GUIDELINES
PROGRAM PURPOSE AND OBJECTIVES
The Multifamily Housing Rehabilitation Loan Program is designed
to provide owners of substandard rental housing with below market
rate loans to finance the cost of rehabilitation. The low
interest, long term financing further allows the after
rehabilitation rents to be maintained at levels affordable to low
and moderate income residents.
The Program is funded through the Community Development Block
Grant provided to the City of Miami by the U.S. Department of
Housing and Urban Development. The City Housing Conservation and
Development Agency is responsible for the administration a0d
implementation of the Program. The Agency will implement the
Program in the City's Community Development Target Areas to
accomplish the following objectives:
To conserve the existing housing stock and increase the
inventory of standard rental housing;
To provide standard affordable housing to low and
moderate income residents;
To spur reinvestment of private capital in older
residential neighborhoods, and;
To complement other public neighborhood revitalization
efforts.
DEFINITIONS
Appraisal - An estimate of the fair market value of a property
prepared by a professionally certified appraiser.
City Rehabilitation Loan - Funds provided to the property owner
in the form of a loan -- -or the purpose of improving the property.
All such funds are secured by a mortgage instrument and the
borrower(s) personal guarantee.
Dwelling Unit - A residential space containing at a minimum, a
at room, kitchen or kitchenette and a living area/bedroom.
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uit - The current market value of the property i.e. , assessed
va ue OR appraisal value (if available) OR purchase price (if
purchases within the past 12 months), Mess all indebtedness
secured by subject property, i.e., mortgages, liens, etc. A
minimum equity of 10� is required for all projects.
Multifamily Dwell - A residential property containing five (5)
or -more dwelling it —nits OR five (5) dr more Single Room Occupancy
units -
Owner - The individual or group holding valid legal title to the
property.
Private Financing - Funds provided by the owner for the
refiabiltat on project. Monies may be obtained from a private
lending institution, owner's capital or other sources. Minimum
participation for the property owner is 20% of the total
rehabilitation cost.
Proverty Rehabilitation Standards (PRS) - The minimum standards
required or rehabilitation
are the
City of Miami Minimum Housing
Code, the South Florida
Building Code, and the Housing
Conservation
and
Development
Agency's habilitation
Specifications.
Rehabilitation
Cost -
The total cost
of a rehabilitation project
to include the
actual
construction
cost, a 10% contingency and
allowable soft
costs,
e.g., closing
costs, architect, engineering
and legal fees.
Rent Regulatory Agreement - A written and recorded document
m t ng the borrower's rate of return on investment and
establishing rent levels by unit size for a specified period of
time.
Return on Investment - The percentage of net income returned from
the rehabilitation investment in relation to the owner's equity
in the property and the owner's cash investment in the
rehabilitation project.
Single Room Occu anc (SRO) Unit - any room forming a single
a itable unit, used tor living and sleeping but not for cooking
or eating purposes.
Specifications and Cost Estimate - A property inspection report
itemizing all rehabilitation work to be done on a property,
including an estimate of the cost to repair/correct each item.
Target Area - An administratively designated geographic section
'St the City of Miami in which Community Development activities
are implemented and which contains slum and/or blighting
conditions and/or the majority of the residents are low income.
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PROGRAM DESIGN
Within Community Development Target Areas, financial assistance
will be made available to owners of multifamily structures in
order to bring their property up to the Property Rehabilitation
Standards. Upon completion of rehabilitation, rent levels shall
be subject to a duly recorded Rent Regulatory Agreement for a
specified period of time, except in the case where other Federal
programs, such as Section 8 requirements, prevail.
PROGRAM ELIGIBILITY
Eligible Pro erties - To be eligible under the program, proposals
must meet all the following criteria:
1. Multifamily residential dwellings, Single Room Occupancy
units, cooperatives or condominiums
2. Structures in substandard condition (not meeting P.R.S)
3. Structures located within Community Development Target
Areas
Eligible Applicants - Investor/owner (individual, not -for -profit
corporation, private corporation, partnership).
Eligible Improvements - Owners are required to make repairs to
meet the City of M ami Minimum Housing Code, the South Florida
Building Code, and the Agency's Rehabilitation Specifications.
General property improvements (non -code required) may be
undertaken to the extent feasible, up to a maximum of 40% of the
total cost of rehabilitation.
All applicable Federal, State and local Fair Housing, Labor,
Environmental and City-wide Historic Preservation regulations
shall be a program requirement.
Eligible Costs - The following items are eligible to be included
m e reha i itation loan:
1. The actual cost of rehabilitation necessary to bring the
property in compliance with the South Florida Building
Code, the City of Miami Minimum Housing Code and the
Agency's Rehabilitation Specifications. This is the
mandatory minimum work required for any loan.
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2. The cost of rehabilitation to correct or remove
incipient code violations, including all physical
conditions of the property which, if not repaired, would
deteriorate into actual violation of the P.R.S. within
two years.
3. The cost of general property improvements (G.P.I.).
Such improvements shall not be the major focus of the
loan, and will have a maximum limit of forty (40%)
percent of the cost of rehabilitation. G.P.I.'s may be
included only if the minimum improvements required are
satisfied and the project's financial feasibility can
accommodate such improvements.
4. The cost of rehabilitation to convert a property, i.e.,
increase or decrease the number of units, is allowed
provided such conversion is in accordance with the City
of Miami zoning classification for that property.
5. The cost of building permits, related fees, (including
architect's, engineering and legal fees), and other soft
costs including loan clos'ng costs, accruals for taxes,
insurance, etc., requ4.:-ed to carry out the proposed
rehabilitation work.
6. A contingency reserve not to exceed 10% of the cost of
rehabilitation.
FINANCING
Community Development Block Grant funds will be used to provide
direct low interest loans to owners of multifamily rental
property in conjunction with the private financing secured and/or
provided by the owner for the rehabilitation of multifamily
structures.
City Rehabilitation Loan Interest - Direct loans will be made
available to finance a gi a rehabilitation costs. Loan
interest will be computed on a sliding scale between three (3%)
percent and eight (8%) percent. The rate of interest will be
based upon the amount of direct financing provided by the owner
through private and/or other governmental (non -City) sources.
Other factors considered shall include the rate of return on
investment; the proposed rent schedule; and the per unit
rehabilitation cost. Interest rates will be determined as
follows:
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Interest Rate Schedule
Private Funds Interest Rate
(as a percentage of total
rehabilitation cost)
> 20% < 30% 8%
> 30% < 40% 7%
> 40% <
50%
6%
> 50% <
60%
5%
> 60% <
70%
4%
> 70% <
80%
3%
Repayment Period - The loan repayment term shall be up to a
maximum of fifteen (15) years. There is no penalty for
prepayment of the loan balance.
Refinancing - The refinancing of existing mortgages may only be
considered as part of the total loan amount in applications
submitted by not -for -profit housing development corporations.
Disbursement of City Loan Proceeds - The City, at time of
closing, will reserve the tunds necessary for project completion.
1. Disbursements will be made for the following purposes:
a) To make progress and final payments to the
contractor;
b) To pay expenses incidental to closing, and;
i c) To close out the account by appropriate disbursing
c of unutilized funds remaining in the account.
2. Progress Payments to contractor - Upon receipt of a
contractor's invoice for a progress payment, the City
shall determine if the work has been performed
satisfactorily, and draw payment from the account. The
City's payment shall coincide with the owner's approval
of the work and the owner's payment to the contractor of
the private.share of the authorized payment.
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3. Final Payments to contrractor - When all work is found to
be satisfactorily completed in accordance with the
specifications and upon receipt of all release of liens,
warranties, etc., the City will draw payment for its
portion of the final payment. As with progress
payments, the owner's approval of work and payment to
contractor must coincide with the City's.
In the event of a dispute between the property owner and the
contractor with respect to rehabilitation work, the City shall
take appropriate action in accordance with the provisions of the
rehabilitation contract.
Such appropriate action shall include mediation to assure the
protection of both the property owner and the contractor.
Mediation will be provided by the City who.will inspect the work
and determine if it has been performed in accordance with the
contract and in a workmanlike manner. If the work has not been
completed properly, the contractor will be ordered to make the
necessary corrections before receiving final payment. If the
contractor does make corrections as requested and the work is
deemed satisfactory by the City and the property owner, final
payment by both parties shall be authorized to be disbursed to
the contractor. If, on the other hand, the contractor fails to
make the necessary corrections prior to the expiration of his
contract, the City shall assist the property owner in obtaining
another contractor to make the corrections. Once corrections are
made to the satisfaction of the City and the owner, the
contractor that failed to perform shall be paid the balance of
the funds earned by him or her remaining in the project account
after the new contractor has been paid for the corrective work.
Such payment shall be made upon receipt of the appropriate
release of liens documents.
PROPERTY MANAGEMENT
Management Plan - Applicants shall submit a management plan. At
a m n mum this plan will include:
1. Name and qualifications of the management entity;
2. Experience with other properties;
3. Method for handling routine, preventive and emergency
maintenance;
4. -List of tenant related services such as rent collection,
tenant selection policy, evictions, etc.;
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S. Schedule of maintenance services such as garbage
collection, equipment servicing and replacement,
painting, etc.;
6. Actual and/or proposed form of lease, and;
7. Certification of no evictions without cause for a six
(6) month period prior to the date of application.
Rent Regulatory Agreement - A Rent Regulatory Agreement shall be
executed at time of loan settlement in order to limit the rate of
return to the borrower through increased rents caused by the
rehabilitation of the property. The maximum allowable rate of
return on investment will be twenty (20%) percent. The Agreement
will be in effect over the first four years of the loan,
commencing upon completion of rehabilitation. The rent schedule
shall be based on the following criteria:
1. Rents shall be established at levels commensurate with
prevailing rents for comparable units in the
neighborhood.
2. Total net income shall represent a reasonable return on
investment not to exceed twenty (20%) percent.
REHABILITATION CRITERIA AND EVALUATION
Proposals shall be accepted during the advertised submission
period. Submitted applications shall be processed in the order
in which they are received. All proposals which are determined
feasible will be preferenced by the Housing Conservation and
Development Agency based upon the following factors:
1. Amount of code required rehabilitation work - preference
for greater amount of work.
2. Private funds provided for rehabilitation financing -
preference for greater percentage of project cost
provided by owner.
3. Number of bedrooms - preference for projects consisting
of units containing more than one (1) bedroom.
4. Temporary tenant relocation - preference for proposals
requiring no temporary relocation of tenants to carry
out rehabilitation work.
5. Owner's track record -
sponsored by owners who have
complete required work in a
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preference for proposals
demonstrated the ability to
competent and timely manner.
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6. Owner's equity - preference for greater percentage of
equity in project.
7. Non -for -Profit housing development corporations
preference for proposals sponsored by non-profit groups.
PROCESSING PROCEDURES
Listed below are the step-by-step procedures to be followed for
each application:
Phase I - Preliminary Application
1. Interested applicants will answer the RFP (placed in
newspapers of general circulation) by making an
appointment with Agency staff.
2. Agency staff will interview interested applicants and
explain program requirements. Applicants will be
provided with program guidelines and preliminary
application.
3. Owners will complete application form and return it to
this Agency along with the following:
a) The non-refundable application fee in the amount of
$20 per unit with a minimum fee of $300 (whichever
is greater)
b) Evidence of site control - Warranty deed, purchase
contract, etc.
c) Most recent property tax bill.
d) Certified rent roll
e)
Certified statement of expenses
for
the previous
twelve months (utilities, maintenance,
management,
etc.)
f)
Verification of all mortgages on the
property to
include amount, term, interest
rate
and monthly
payments
g)
Letter of intent/commitment
letter
specifying
source, amount and term of
private
share of
rehabilitation financing .
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h) 'Three (3) letters from realtors indicating average
rents for comparable size units in the neighborhood
Application forms submitted without items (a)-(h) will
be considered as incomplete and will not become official
applications until all items are provided.
4. Owner/applicant shall arrange for the Agency inspectors'
access to the subject property.
S. Agency staff will conduct a preliminary inspection of
the subject property and provide the applicant with a
preliminary cost estimate for the amount of the
rehabilitation work.
6. Agency staff will prepare a preliminary financial
feasibility to determine the project's feasibility.
Phase II - Final Application
1. Owner(s) will pay a non-refundable final application fee
in the amount of one-half (1/2) point calculated on the
preliminary City loan amount which is based on the
Agency's preliminary rehabilitation cost estimate. This
fee must be received by the Agency prior to the
continuation of processing of the final application.
2. Agency staff will conduct a detailed inspection of the
subject property and prepare a detailed rehabilitation
work write-up to include the rehabilitation cost
estimate.
3. Owner(s) will provide the following documentation
required to complete the loan application package:
a) For legal entity: (corporation, partnership, etc.)
articles of incorporation
corporate resolution specifying officer(s)
authorized to borrow funds
b) Personal financial statement for individual as
applicant OR corporate officer(s) authorized to
borrow funds
c)
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Personal guarantee from individual as applicant OR
corporate officer(s) authorized to borrower funds
Engineer's report and plans, if necessary
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e) If commercial use exists as part of. the property:
evidence that commercial space meets minimum co6e OR
proof of financing available for necessary
rehabilitation work to correct code violations of
commercial space
f) For structures constructed prior to 1940 -
photographs of the exterior and interior of the
building must be provided for the Florida Department
of State to assess the property's historic
significance
g) Upon receipt of rehabilitation work bidding packages
prepared by the Agency staff, owner will obtain a
minimum of three (3) bids from licensed general
.contractors
4. Agency staff will prepare the final project financial
feasibility.
5. Agency staff will calculate interest rate and percentage
of the rehabilitation cost to be financed through the
Program.
6. Upon application approval, Agency staff shall issue loan
commitment letter to owner(s).
Phase III - Loan Commitment
1. Owner(s), upon receipt of City's loan commitment letter,
shall have seven (7) days to accept said commitment and
pay a non-refundable fee in the amount of one-half (1/2)
point calculated on the final loan amount. This amount
may be adjusted to insure that the combined total of the
two fees - the final application and the loan commitment
fees - equals one (1) point based on the actual loan
amount.
2. Owner will provide the final documentation required to
settle the loan:
a) Property insurance (with the City of Miami as
additional insured).
b) Title insurance (with the City of Miami as
beneficiary).
c) Evidence of firm private financing commitment to
include dollar amount, interest rate and term for
private share of rehabilitation cost.
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Phase IV - Loan Closing
Loan closing shall occur within forty-five (45) days of the
property owner's acceptance of the City's loan commitment.
z : ; Phase V - Construction
The Agency staff will conduct inspections of the project
during rehabilitation to ensure the timely progress and
completion of the work. Inspections will also be conducted
to approve progress and final payment draws. The City's
payments shall coincide with the owner's approval of work;
and the owner's payment to the contractor of the private
share of the authorized payment.
OTHER PROGRAM POLICIES
Property Reinspection
Rehabilitated str !tures shall be subject to an annual
reinspection to insure continuing compliance with minimum housing
codes. This inspection will be initiated one year after the date
of completion of the rehabilitation work and will occur annually
thereafter for the duration of the loan term. A fee of $10 per
unit with a minimum fee of $150 per project will be assessed for
each reinspection. If any violations are found, the property
owner will be given a reasonable amount of time to correct any
and all violations. Violations not corrected within the
specified period of time will result in the City's recall of its
loan.
Loan Cancellation
In the case of a loan which has already been closed, but monies
have not been disbursed for construction, and cancellation of the
transaction is requested by the owner, the following fees are to
be levied by the City to defray the costs associated with the
City's issuance of the satisfaction of note and mortgage.
1. Owner shall pay a fee equivalent to one (1) point
calculated on the City's loan amount.
2. Owner shall repay to the City any monies already drawn
down from the loan proceeds, e.g., closing costs,
recordation fees, etc.
3. Owner shall pay the maximum interest allowed by law on
any monies previously drawn down on the loan amount,
e.g., closing costs, recordation fees, etc.
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Monitoring of Rent Regulatory Agreement
The City shall monitor the Rent Regulatory Agreement on an annual
basis to insure that the property owner is complying with the
terms and conditions contained therein. Monitoring will commence
one year after the effective date of the Agreement and will occur
annually thereafter for the duration of the Agreement. A fee of
$10 per unit with a minimum fee of $150 per project will be
assessed at the time of the monitoring. Non-compliance will
result in a $1,000 fine and the property owner will be expected
to refund any overpayment of rent with interest (maximum allowed
by law) to his/her tenants within 45 days. If the non-compliance
is not remedied within the 45 day period, the owner will be in
default of the City's loan and is subject to the City's recall of
the loan.
In addition, the City shall also respond to and investigate at
any time any and all complaints received from tenants as they
arise.
Subordination
After the City's rehabilitation loan has been settled and the
City's mortgage recorded, the Agency upon the owner's request
will consider subordinating the City's housing rehabilitation
loan mortgage to a new mortgage under the following conditions:
1. The purpose of the new financing is to provide private
rehabilitation funds to complement the City's
rehabilitation loan.
a) The amount of this loan has been pre -approved by the
Agency during the loan application process and the
Agency has closed its loan subject to this private
financing.
b) The request for subordination is made during the
rehabilitation construction period.
c) There will be no charge assessed by the Agency for
this transaction.
2. The amount of the new loan does not exceed the
outstanding principal balance(s) of the existing loan(s)
secured by the property and senior to the City's
Mortgage.
a) A $500 subordination issuance fee will be assessed
by the Agency in advance to cover staff's and
attorney's costs.
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3. The amount of the new financing exceeds the outstanding
principal balances) of the existing loan(s) secured by
mortgages senior to the City's mortgage.
a) The amount of the new loan, in addition to all
outstanding loans secured by the property (including
the City loan), will not exceed 80% of the market
value of the property.
b) The market value of the property will be determined
by an appraisal procured by the Agency. The owner
will deposit with the Agency, the amount necessary
to cover the cost of the appraisal.
c) A payment of 25% of any amount realized by the owner
after satisfying the existing senior mortgages, in
excess of 10% of the new financing, will be required
.to be applied towards reducing the principal balance
of the City loan.
d) A fee of 1/2 point of the outstanding principal
balance of the City loan will be charged in advance
by the Agency to process this type of subordination.
4. The purpose of the new loan is to finance improvements
to the property, after the City sponsored rehabilitation
has been completed.
a) The nature and cost of the improvements will require
the approval of the City.
b) An advance subordination issuance fee of 1/2 point
of the principal balance of the City loan will be
assessed by the Agency.
In addition to the policies stated herein, the following
will apply to all subordination requests:
a) All mortgage subordination requests must be
presented to the City Housing Conservation and
Development Agency.
b) A minimum of 60 days is required for processing.
c) Complete disclosure of the new financing terms and
conditions is required to determine project
feasibility.
d) A maximum of two (2) mortgage subordinations will be
granted during the life of the City Loan.
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VA1VHRg
The Director of the Housing Conservation and Development Agency
shall have the authority to wive any program requirement to
further the purposes and objectives of the City's Comprehensive
Housing Policy.
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CITY OF MIAMI. FLORIbA
INT0440FFICE MEMORANDUM
to. Honorable Mayor and
MembLrs of the City Commission
FROM: Cesar H. Odio
City Manager
RECOMMENDATION:
DATEJ 11 N 3 0 1987 "M
suiuECt: Adoption of Multifamily
Housing Rehabilitation
Uan Program guidelines
REFERENCES: City Commission Agenda
July 9, 1987
ENCLOSURES:
It is respectfully recommended that the City Commission approve
the program guidelines in connection with the City of Miami
Community Development Block Grant funded Multifamily Housing
Rehabilitation Loan Program.
BACKGROUND:
The Housing Conservation and D��elopment Agency recommends that
the City Commission approve -he attached program guidelines for
implementation of the City of Miami Multifamily Housing
Rehabilitation Loan Program funded through the Community
Development Block Grant.
On September 9, 1982, through Resolution No. 82-825, the City
Commission adopted guidelines to implement the Multifamily
Housing Rehabilitation Loan Program. Below market rate financing
provided through the Program has made possible the rehabilitation
of over 900 rental apartment units since the inception of the
Program in 1981. The expenditure of approximately $p6,350,000 in
Community Development Block Grant dollars has significantly
increased the number of affordable, code violation free
apartments available to low and moderate income households
residing in Miami's oldest neighborhoods as well as stimulated
the reinvestment of private capital, over $3,000,000, within
these neighborhoods.
The Multifamily Housing Rehabilitation Loan Program guidelines,
as presented for approval, have been revised to accommodate and
accomplish the following:
(1) Address the gradual reduction in federal assistance
available for housing programs aimed at providing
affordable housing opportunities for low and moderate
income households by increasing the threshold for private
financial participation.
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Honorable Mayor and
Members of the City Commission
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(2) Clarify program requirements, including procedures and
operations for prospective participants.
(3) Increase the dollar amount and number of program fees
assessed the participant in an effort to generate funds to
defray program administrative costs and maintain program
competitiveness with local financial market conditions.
Therefore, it is recommended that the City Commission adopt said
program guidelines and fee structure.
Attachments:
Proposed Resolution
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