REPORT TO COUNCIL
SUBJECT
Title
Action to Approve a Housing Division Write-Off Policy and Reconcile the City’s Neighborhood Conservation & Improvement Program (NCIP) Loan Portfolio
Report
COUNCIL PILLAR
Promote and Enhance Economic, Housing and Transportation Development
BACKGROUND
The City of Santa Clara’s NCIP program offers technical and financial assistance to low-income residents for the repair and rehabilitation of owner-occupied single-family homes. The program offers grants for accessibility improvements, emergency situations/urgent repair needs, and low interest deferred loans for more significant projects. NCIP offers affordable interest rates and deferred payments to low-income homeowners that ensure affordability of homeowner rehabilitation.
The NCIP is a partnership between the City of Santa Clara and individual homeowners. The goals of the partnership are to identify rehabilitation needs, select a contractor and design team, and to provide financial and technical assistance in managing the construction process.
Since 1976 the City has assisted more than 1,650 homeowners to rehabilitate their homes, address health and safety issues and ensure compliance with the current Building Code through the NCIP. While budget reconciliation and overall portfolio management processes of the program have occasionally been updated and modified, it has been over 25 years since the NCIP portfolio of old loans have been thoroughly evaluated regarding loan balancing and compliance with current policies and procedures. The addition of specialized staff in recent years has allowed staff to engage and complete this assessment and it was found that there were multiple opportunities to increase efficiency or adopt best practices to provide better risk management and monitoring of the program portfolio. Over a four-year period, these efforts included the review and reconciliation of over 250 program loan files, review of the NCIP Procedure Manual and the creation of a Housing Division Write-Off Policy.
DISCUSSION
The purpose of the Housing Division Write-Off Policy is to establish standard guidelines for City staff for the internal control, collection, and write-off of accounts receivable related to Housing and Community Services Division Programs and specifically the NCIP program. It is the policy of the City of Santa Clara (City) to actively pursue collection of past-due accounts receivable, regularly review the status of past-due accounts, and write-off amounts determined to be uncollectible. A write-off of uncollectible accounts receivable from the City’s accounting records does not constitute forgiveness of the debt or gift of public funds. All accounts referred for write-off are reviewed and approved by the department prior to submission to the Director of Finance for final write-off approval.
As per the proposed Housing Division Write-Off Policy, at least annually, the Department will identify any accounts receivable for which it is responsible that meet the criteria for designation as an uncollectible account. A request for write-off of accounts receivable will be prepared by department staff and submitted to the Director of Finance. The request for write-off of accounts receivable must include an itemized list of the uncollectible accounts to be written off. Upon receipt of a request for write-off of accounts receivable by the Director of Finance, Finance Department staff will review the request to ensure that it is complete and that all necessary due diligence documentation has been attached. Once the Finance Department staff has completed its review of a request, the write-off and any necessary budget amendment will be presented to the City Council for approval.
The Housing Division worked closely with the Finance Department as part of its loan reconciliation initiative and the City Attorney’s Office provided guidance in the determination of criteria and creation of the Write-Off Policy. Other programmatic changes have included an updated Procedure Manual, updated loan and program document templates, implementation of annual self-certifications of all loan borrowers, implementation of new loan monitoring software, and the creation of a standardized Housing Write-off Policy.
The City’s current NCIP loan portfolio includes 82 loans, totaling $3.5 million. Considering that it has been over 25 years since the NCIP portfolio of old loans have been thoroughly evaluated and reconciled, an accumulated number of loans and loan balances have become uncollectible for a variety of reasons. In total, staff have identified 11 of the over 250 program loan files (less than 5%) with a total balance of $115,884.79 as uncollectible debt that meets one or more of the following criteria:
• The debt is disputed and/or the City has insufficient documentation to pursue collection efforts;
• The debtor cannot be located, nor any of the debtor’s assets; and/or
• The debtor is deceased and there is no known estate or guarantor.
Approval of the Housing Division Write-Off Policy and the reconciliation of the City’s Neighborhood Conservation & Improvement Program (NCIP) Loan Portfolio will help the City more accurately account for its NCIP loan portfolio and also provide framework to ensure annual processes and procedures for portfolio management.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes in the environment.
FISCAL IMPACT
The City’s NCIP loan program does not require regular scheduled loan repayments. Borrowers are required to pay off loans in full if a title transfer takes place. Loan terms are 3% simple interest per annum. Due to the unpredictability of loan repayments, loan repayment revenue has been estimated based on historical averages and therefore the loan write-offs would not affect current or past revenue estimates and fund balances, so a budget amendment is not required. The amount of $115,884.79 is only roughly 3% of the total outstanding portfolio and would not hinder the program’s ability to provide assistance in future years.
Funding from the NCIP loan program is derived from the Housing and Urban Development Department (HUD) Community Development Block Grant and HOME Investment Partnership Grant and has no impact to the City’s General Fund. HUD allows each participating jurisdiction to develop and implement its own policy regarding loan write-offs.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov.
RECOMMENDATION
Recommendation
Approve the Housing Division Write-Off Policy and the reconciliation of the City’s Neighborhood Conservation & Improvement Program (NCIP) Loan Portfolio with a recommended write-off in the amount of $115,884.79.
Staff
Reviewed by: Andrew Crabtree, Director of Community Development
Approved by: Deanna J. Santana, City Manager
ATTACHMENTS
1. Housing Division Write-Off Policy