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TC Res. No. 2008-36 Approving Revisions to the TOA Downpayment assistance programTOWN OF AVON RESOLUTION NO. 08-36 Series of 2008 A Resolution Approving Revisions To The Town Of Avon Downpayment Assistance Program WHEREAS, the Town of Avon Down Payment Assistance program is established to attract and retain Town employees and to encourage home ownership within a reasonable commuting distance of the Town; and WHEREAS, the program will provide a second mortgage loan to certain employees in order to purchase new and existing single family homes, duplexes, condominiums or town homes in a way that reduces the costs associated with a first mortgage, provided those employees reside in the home as their primary residence. Avon: NOW, THEREFORE, BE IT RESOLVED by the Town Council of the Town of 1. The Town of Avon Down Payment Assistance ("DPA") program is approved. 2. The Town Manager is authorized to establish guidelines for the DPA program and to make loans to qualified employees of the Town consistent with those guidelines and the funds appropriated by the Town Council for implementation of the program. PASSED AND ADOPTED the 28th day of ~~~N OFq(/~~L :S EA L ATTEST: ~OlORAO~ Jg,cc c Patt(!~Kentj~rn Clerk 2008. C, A C. Wolfe, Mayor (REVISED,) EXHIBIT TO RESOLUTION No. 08-36 GUIDELINES FOR DOWN-PAYMENT ASSISTANCE PROGRAM The Town of Avon Down-Payment Assistance (DPA) program is established to attract and retain Town employees, and to encourage home ownership within a reasonable commuting distance of the Town. The program provides a second mortgage loan to an employee in order to purchase new and existing single family homes, duplexes, condominiums or townhomes in a way that reduces the costs associated with a first mortgage. Employees must reside in the home as their primary residence. A DPA mortgage may be taken as either a conventional fixed rate second mortgage or a shared appreciation second mortgage, as described below. The DPA available for each program differs. The percentage awarded may take into consideration the employee's other financial means; if an employee has other assets that are available for down-payment, the DPA may be reduced. The final loan award will be at the discretion of the Town Manager. The DPA program is subject to available funds and may be suspended at any time by the Town Manager. Funding for all DPA mortgages must be approved by the Town Manager. Employee eligibility for these programs is outlined below. CONVENTIONAL FIXED RATE SECOND MORTGAGE • All full time employees with the Town of Avon who meet the qualifications of this policy may elect a Conventional Fixed Rate Second Mortgage. • Maximum amount available is 15% of the home purchase price, excluding closing costs. • Financing for the first five years is at 0% with no principal payments required. Repayment will commence upon the fifth anniversary of closing. An amortization schedule will be prepared by the Town's Director of Finance amortizing the second mortgage at an interest rate equal to the prime rate of the Town's depository bank at the time of closing and a term not to exceed 15 years. • The second mortgage payments will be deducted from the employee's paycheck on a bi- monthly basis. • Employees may repay the outstanding principal amount due at any time without penalty. • Repayment of the outstanding principal amount due is required in full immediately upon the sale or transfer of the home, if the first mortgage is refinanced, if the home is no longer occupied by the employee, or within 9 months after the employee leaves the employment of the Town. SHARED APPRECIATION SECOND MORTGAGE • Department head employees, who meet the qualifications of this policy, may elect a Shared Appreciation Second Mortgage. • The maximum amount available is up to 20% of the home purchase price, excluding closing costs. • Financing is at 0% and no monthly payments are required. • Repayment of the principal balance of the mortgage plus the Town's share of net appreciation on the home is required when the home is sold or transferred, if the first mortgage is refinanced, if the home is no longer occupied by the employee, within 9 months after the employee leaves the employment of the Town, or, if not paid sooner, will be subject to amortization commencing 30 years after the date of closing. The Town reserves the right to require an appraisal upon refinancing or a transfer to a related party. • Net appreciation is defined as the sales price of the home, less real estate commissions and the original cost of the home. The net appreciation of the home will include any increase in the value of the home, including increases due to capital improvements to the home, additions, remodels, etc. • The portion of the net appreciation to be shared with the Town shall be based upon the original amount of DPA as a ratio of the original purchase price of the home. • An employee who elects the Shared Appreciation Second Mortgage may, at any time, elect to convert to a conventional fixed rate second mortgage. An appraisal of the home provided for by the employee and acceptable to the Town shall be required to determine the net appreciation up to the conversion date. The original DPA plus the Town's share of the net appreciation as of the conversion date shall be the principal amount of the fixed rate second mortgage. Repayment of the second mortgage shall commence on the conversion date and shall be based on an amortization schedule prepared by the Town's Director of Finance, based on a repayment, term not to exceed 15 years after the date of the conversion and interest to accrue at the prime rate of the Town's depository bank on the date of conversion. Down Payment Assistance Program - Revised 08 Page 2 of 2 MEMO. To: HONORABLE MAYOR, AND TOWN COUNCIL THRU:' LARRY BROOKS, TOWN MANAGER FROM: PATTY MCKENNY, DIRECTOR ADMINISTRATIVE SERVICES' DATE: OCTOBER 23, 2008 ; RE: RESOLUTION No. 08-36 APPROVING REVISIONS, TO THE TOWN OF AVON DOWN-PAYMENT,. ASSISTANCE PROGRAM SUMMARY: Theattached Resolution 'and Exhibit address revisions to the Town's Down-payment Assistance Program and are presented for Council's consideration. PREVIOUS COUNCIL ACTION: The Town Council approved this program in November 2007. BACKGROUND: Recruiting and retention., of employees continues to be of concern for Avon's organization as reviewed in the budget retreat a couple of weeks ago. This program was implemented one year ago in an effort to assist- the town in attracting key personnel. Finding a permanent home can be very expensive in the Vail Valley and often times discourages people from accepting positions with the Town. This program was adopted in hopes of helping key employees obtain housing in and around Avon and offers assistance through two types of loans. The assistance was offered to police personnel and department directors. To date only one employee has been in a position to utilize this program. Feedback on the program .was received from police department personnel Who outlined reasons why they were unable to use the program. One primary reason noted was that the • inventory within the 7 miles radius did not include price points that were affordable based on an employees mid range salary and the need to stay within the acceptable mortgage to income ratio. DISCUSSION: In light of the less than nominal participation in the program, staff compiled information from area agencies about what types of housing programs were being offered. Information was gathered from Breckenridge, Eagle County, Eagle, Glenwood Springs, Eagle River Water and Sanitation District and Vail. Programs offered.by these governments varied greatly and reviewing them helped frame staff's recommendations for changes to Avon's program as follows: o Revise 7 mile restriction to broader area with language as follows: 'within a reasonable commuting distance of the Town" (language used in resolution and exhibit). Conventional Fixed Rate Second Mortgage Assistance o Allow all full time employees to participate. ♦ Reduce assistance amount to 15% of the home purchase price, excluding closing costs; this is suggested to ensure that the employee already has capital to put forth towards this investment. o Extend - pay-back timeframe from three years to five years to allow the employee an opportunity to absorb the costs of homeownership over a longer period of time Shared Appreciation Second Mortgage Assistance ♦ Revisions were made to clarify language related to appraisals, repayment, and term of loan. We in human resources hope to create a more competitive recruiting venue by offering this. program along with Avon's competitive compensation package. Home - ownership leads to a greater commitment to the valley and by offering this program, to all employees; we may keep people employed longer with Avon as well. FINANCIAL IMPLICATIONS: • The down-payment assistance program is currently funded from the Affordable Housing Fund. The 2009 budget reflects a Fund Balance in 08 as $751, 000. Council approved funding for the Eagle County Down-payment Assistance Program at $1,700 and the Valley Home Store at $5,000; these monies will be budgeted in this fund for 2009. The balances in our Affordable Housing Fund are from affordable housing extractions negotiated with the developers for the Gates project and the Riverfront PUD. TOWN MANAGER COMMENTS ATTACHMENTS ♦ Resolution No. 08-36 & Exhibit outlining Guidelines for Down-Payment Assistant Program • 0