The Annual Action Plan Substantial Amendment - City of Pontiac

THE CITY OF PONTIAC 

NEIGHBORHOOD STABILIZATION 

PROGRAM SUBSTANTIAL AMENDMENT TO 

THE 2005-2009 CONSOLIDATED PLAN AND 

FISCAL YEAR 2010 ANNUAL PLAN 

Jurisdiction(s): _City of Pontiac, Michigan 

Jurisdiction Web Address: 

• www.pontiac.mi.us 

NSP Contact Person: Patricia Lile 

Address: 47450 Woodward Ave. 

Pontiac, MI 48342 

Telephone: 248-758-3780 

Fax: 248-758-3775 

Email: plile@pontiac.mi.us 

EXECUTIVE SUMMARY 

The Neighborhood Stabilization Program III (NSP3) was created as a third one-time 

$907,000,000 appropriation, inclusion in the Dodd-Frank Financial Reform Act and was 

built on the frame work of NSP 1 and NSP 2, which were created under the Economic 

Recovery Act (HERRA) of 2008 and the American Recovery and Reinvestment Act 

(ARRA) of 2009, respectively. The purpose of NSP 3 is to 

• Mitigate the negative impact of the nation’s decline and housing market collapse. 

• Stabilize and revitalize communities/areas hit the hardest by economic decline 

and housing market collapse. 

• Assist in the redevelopment of abandoned and foreclosed homes under this 

emergency assistance for redevelopment of abandoned and foreclosed homes. 

• Benefit low, moderate, and middle income persons (LMMI) or 120% AMI and 

below. 

The grants are to be considered Community Development Block Grant (CDBG) 

funds. Exceptions are described in the Department of Housing and Urban 

Development Docket No. FR5255-N-01, statutory and regulatory provisions 

governing the CDBG program, including those at 24 CFR 570 Subpart I for States, 

for CDBG entitlement communities, including those at 24 CFR Part 570 Subparts A, 

C, D, J, K, and O as appropriate, shall apply to use of these funds. 

HUD is treating a grantee’s use of its NSP 3 grant to be a substantial amendment to its 

current approved consolidated plan and annual action plan.

AREAS OF GREATEST NEED 

This Section provides the summary needs data identifying the geographic areas of 

greatest need in Pontiac’s jurisdiction. 

Note: An NSP substantial amendment must include the needs of the entire jurisdiction(s) 

covered by the program; states must include the needs of communities receiving their 

own NSP allocation. To include the needs of an entitlement community, the State may 

either incorporate an entitlement jurisdiction’s consolidated plan and NSP needs by 

reference and hyperlink on the Internet, or state the needs for that jurisdiction in the 

State’s own plan. The lead entity for a joint program may likewise incorporate the 

consolidated plan and needs of other participating entitlement jurisdictions’ consolidated 

plans by reference and hyperlink or state the needs for each jurisdiction in the lead 

entity’s own plan. 

HUD has developed a foreclosure and abandonment risk score to assist grantees in 

targeting the areas of greatest need within their jurisdictions. As a Grantee, Pontiac 

Federal Programs sought the use of available data, in developing this section of the 

Substantial Amendment. 

Background 

Based on the 2000 Census Data, the City of Pontiac has over 63% households which 

qualify under 80% or below of Area Median Income. The City has consistently had a 

much higher rate of unemployment than surrounding communities and a lower housing 

value. In June 2010, the unemployment rate in the City was 29.5% and the housing 

values had declined by approximately 31% from the previous HUD review. In 2000, the 

median household income in Pontiac was $31,207 while the State of Michigan’s per 

capita income was $44,467 and Oakland County’s was $61,907. At $15,842, the per 

capita income is 48% of the per capita income of Oakland County. 

Using data from the Mortgage Bankers Association National Delinquency Survey as of 

June 2010, HUD has calculated the approximate number of foreclosure starts for all of 

2009 and the first six months of 2010. In Pontiac, this number is estimated at 1,678 

giving Pontiac a foreclosure rate of 21% based on HUD provided mortgage data. In 

reviewing the foreclosure and abandonment risk score, of which 1 is the lowest and 20 is 

the highest, there are ten (10) Block Groups in the City that have a risk score of 19. These 

are clustered on the north side of the City in Census Tracts 1410 and 1411 and one other 

Census Tract 1426 which is located on the west side of the City. The remaining 60 Block 

Groups in the City have a risk score of 20, the highest and these cover the entire 

community. In addition, over 50% of persons who have a mortgage have what is 

considered to be a high-cost, high-risk sub prime mortgage. This represents over 4,000 

potential foreclosures due to the nature of these mortgages. In addition, there are over 

2,400 vacant housing units currently in the City and these are also located throughout the 

City. 

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Target Area 

In focusing on the idea of stabilization, the target area for some of the NSP-funded 

activities would actually be different from those revitalization neighborhoods. Using the 

concept of stabilization, the City has identified the following target area for the 

expenditure of the NSP3 funding. 

Under the NSP 3 activity for the ACQUISITION-REHABILITATION-RESALE or 

RENTAL of tax foreclosed or foreclosed bank owned properties, the City has identified 

one target area for the purpose of focusing on the stabilization of blocks in the 

neighborhoods just east of Telegraph and south of Elizabeth Lake Road down to just west 

of Crystal Lake. The target area was also the focus of the NSP 1 program and is being 

targeted again because of the large number of foreclosures that continues to destabilize 

blocks in the Seminole Hills, Ottawa Hills, Indian Village and Washington Park 

neighborhoods. Currently there are eight (8) tax and bank foreclosed homes that will 

undergo renovations this spring. The rationale for selecting this area was to continue to 

concentrate in neighborhoods where homes are being renovated via NSP1 funds to, in 

combination, enhance the marketing of those properties and the thirteen (13) homes to be 

renovated with NSP3 funds by a developer yet to be selected. NSP 3 places emphasis on 

the marketability of the properties selected for rehabilitation. To stabilize neighborhoods 

there must be focused investments. 

A map to the target area is posted on the Pontiac Web Site for review. The Map was 

done via a “mapping tool” available on a HUD web site at 

www.huduser.org/portal/datasets/NSP.html. The southern and western boundaries of the 

target area do not follow a street pattern. That is why the Map was made available for 

review. The boundaries of the target area are as follows: 

Target Area Boundaries 

West Border: Johnson Avenue from Huron Street (M-59) in a line south to Telegraph. 

South Border: Includes Washington Park down to Telegraph just west of Crystal Lake. 

East Border: Telegraph north to Voorheis Rd., east along Voorheis Street back to 

Telegraph and north on Telegraph to Elizabeth Lake Rd. 

North Border: Elizabeth Lake Rd. from Telegraph to Murphy Street, south to M -59 

(East Huron Street) east along M-59 to Johnson Avenue. 

NSP 3 Score & Area Demographics 

This area is in comprised of Census Tracts 1420 and 1426. The NSP 3 Score requires a 

minimum score of 17 which is the State minimum threshold score. The target area score 

is 19.14 and has a total of 2677 dwelling units. This means that the target area scores 

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etween the 19 th and 20 th percentile of the most needy census tracts in the State of 

Michigan. USPS 2010 data indicates a vacancy rate of 10%. Of the 1226 mortgages 

made between 2004 and 2007, over 37% or approximately 460 were considered to be 

high cost and high leverage mortgages by the Home Mortgage Disclosure Act (HMDA 

data) and over 20% or approximately 250 of these homeowners were severely delinquent 

or were in foreclosure as of June 2010. From July of 2009 to June of 2010, it is estimated 

that another 127 homes started the foreclosure process and another 108 had completed 

the foreclosure process. 

The data source estimates that the number of dwelling units that must be renovated to 

make an impact would be 24. The percentage of persons whose income is at and below 

120% of the Area Median Income in the target area is estimated to be 72.11. The 

percentage of persons at and below 80% of AMI is 49.66. The unemployment rate in 

June 2010 was 29.5. The drop in housing values in June 2010 was 31.1 %. A map from 

Oakland County provides a color representation the location of foreclosures occurring 

from January through December of 2010. There the reader can see concentrations of 

foreclosed properties, showing that during 2010, a total of 619 Sheriff Deeds were 

recorded in the City and 101 or 16% of these were in the targeted area. The map shows 

that the foreclosures are still continuing in our target neighborhood. 

Market Analysis 

An effective NSP 3 program responds to and reflects the local market conditions. The 

following were those factors taken into account while analyzing the target areas market 

conditions: 

• Analyze market supply conditions as they relate to foreclosed and abandoned 

home in the target neighborhoods. 

• Understand demand characteristics, trends and what are the appropriate responses 

• Comprehend the interplay of supply and demand to design a successful project. 

There are several factors or conditions at work in the target area contributing to the 

conclusion about the current marketplace for affordable rental and homes for sale. 

1. The target community has persistent high unemployment. Therefore, serious 

consideration will be given to a lease with option to buy strategy in the marketing 

of the thirteen (13) homes. 

2. Those of us who have lived in southeast Michigan have seen several spikes in 

unemployment due to the struggling auto industry and those dependent upon that 

industry. This has undoubtedly contributed to the increase in foreclosures and 

falling housing values. However, there is a relatively low vacancy rate, which is 

at 10% in comparison to other areas of Pontiac. Therefore, our strategy of 

providing a lease with an option to buy and down payment assistance to the 

buyers when they buy should be a viable program. 

3. As mentioned, the vacancy rate continues to be low. It is believed, that the low 

vacancy rate is due to investors buying up foreclosed Bank REO’s and turning 

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them into low end rental houses. The selected neighborhoods have some of the 

most desirable properties in Pontiac, selling at “bargain-basement prices”. This 

creates a market where housing is already affordable. 

4. The fact that most of the neighborhoods in the target area have traditionally been 

stable has establish a base from which to stop the decline in housing values with 

strategic interventions to eliminate a build up of blighting influences. 

Stabilization through home renovations for new buyers could succeed in the 

current market. 

5. The current market could be characterized as having moderate demand and a 

moderate supply of housing that is not as yet considered substandard, requiring 

substantial renovations to make them marketable properties. Such a market in the 

more up scale sections of the target area could attract buyers whose income is 

between 80% and 120 % of AMI. When renovated the selected properties on 

those blocks will have more appeal especially if buyer subsidies are offered. 

The City will be focusing its efforts on stabilizing the selected neighborhoods areas by 

purchasing foreclosed upon homes and investing funds to bring the homes up to current 

codes including energy efficiency to bring up the overall quality of the housing stock in 

these areas, and to get a family into the home to keep the population of these areas up and 

to stop the constant turnover in some of these homes by keeping the family in the home 

for the period of affordability. 

DEFINITIONS & DESCRIPTIONS 

As with HERRA, there are certain terms that are used for NSP3 that are not used in the 

regular CDBG program, or the terms are used differently in NSP3 and the Housing and 

Community Development Act. 

The following terms are defined as such under NSP3: 

Abandoned: A home is abandoned when mortgage or tax foreclosure proceedings have 

been initiated for that property, no mortgage or tax payments have been made by the 

property owner for at least 90 days, AND the property has been vacant for at least 90 

days. 

Blighted structure: A structure is blighted when it exhibits objectively determinable 

signs of deterioration sufficient to constitute a threat to human health, safety, and public 

welfare. 

A blighted property is a blighted/abandoned/uninhabitable property that meets any of the 

following criteria: 

• Declared a public nuisance in accordance with local housing, building, plumbing, 

fire or other related code or ordinance. 

• Attractive nuisance because of physical condition or use. 

• Fire hazard or is otherwise dangerous to the safety of persons or property. 

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• Has had utilities, plumbing, heating, or sewerage disconnected, destroyed, 

removed or rendered ineffective for a period of 1 year or more so that the property 

is unfit for its intended use. 

Current Market Appraised Value: The current market appraised value means the value 

of a foreclosed upon home or residential property that is established through an appraisal 

made in the conformity with the appraisal requirements of the URA at 49 CFR 24.103 

and completed within 60 days prior to an offer made for the property by a grantee, subrecipient, 

developer, or individual homebuyer. 

Foreclosed: A property “has been foreclosed upon” at the point that, under state or local 

law, the mortgage or tax foreclosure is complete. HUD generally will not consider a 

foreclosure to be complete until after the title for the property has been transferred from 

the former homeowner under some type of foreclosure proceeding to transfer in lieu of 

foreclosure, in accordance with state or local law. 

Affordable Rents: Definition of “affordable rents.” Note: Grantees may use the 

definition they have adopted for their CDBG program but should review their existing 

definition to ensure compliance with NSP program –specific requirements such as 

continued affordability. 

The City will use the HOME definition of “affordable rents” at 24 CFR 92.252 (a), (c) 

and (f). 

For those families at 66 to 120% of area median income, the City will use the recently 

issued final FY2009 Fair Market Rents for the Detroit-Warren-Livonia, MI HUD Metro 

FMR Area of which includes the City of Pontiac (24 CFR 92.252 (a) 1). 

For those families at 65% or below for area median income, the City will target rents that 

do not exceed 30% of the income eligible households adjusted income to insure 

affordability. 

Revenue for the purpose of Section 2301 (d) (4): Revenue has the same meaning as 

program income, as defined at 24 CFR 570.500(a) with the modifications in this notice. 

Ensuring Continued Affordability: Continued affordability shall be at minimum 

adherence to the HOME program standards as defined at 24 CRF 92.252 (a), (c), (e), and 

(f), and 92.254. Home program standards can be used as “safe harbor”, but if an 

alternative standard is applied, it must be equal to or exceed the HOME standard. 

The purpose of the NSP program is to help communities to stabilize their neighborhoods 

that have been negatively impacted by the high number of foreclosures. One of the ways 

to help stabilize the neighborhoods in Pontiac is to stop the constant turnover that these 

foreclosures create in our neighborhoods. Data from the Mortgage Bankers Association 

National Delinquency Survey as of June 2010 showed that there were over 1,678 

foreclosures in Pontiac in an 18-month period. In just reviewing the number in total, this 

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had a huge impact on the City overall. But if you review the actual addresses that have 

been foreclosed on, many of the neighborhoods are being more severely undermined 

because many of the homes have been foreclosed on more than one occasion since 2004 - 

some up to four times. 

The City will feel a bigger impact from our homebuyer activities by creating a stable 

homebuyer population who will remain in their homes longer and help to stabilize their 

neighborhoods. The homes will be developed and sold at an affordable rate insuring an 

affordable first mortgage on the property. The City will provide a zero-interest deferred 

mortgage that reflects the amount of the owner’s equity that is unencumbered by an 

affordable mortgage. The deferred second mortgage will be in effect for a period of 15 

years. During this timeframe, the homebuyer will be subject to the City of Pontiac’s 

Subordination Policy and they will not be allowed to take out any equity on the home 

until after the period of affordability and the City’s lien has been discharged. This will 

help to prevent or stop many of the refinancing activities that created our current housing 

and foreclosure crisis. The City will also require within the terms of the deferred lien that 

the homeowner must maintain their home in good condition and keep their property taxes 

paid to current and maintain adequate homeowner’s insurance on their property 

throughout the 15-year affordability period. 

Applicable Housing Rehabilitation Standards: The City of Pontiac recently completed 

its Rehabilitation Standards Manual. The standards that will apply for the NSP 3 

rehabilitation activities are referenced in the Manual. The principle standards are: 

• Current Michigan Residential Building Code (single and two-family dwellings 

• Current Michigan Rehabilitation Code of Existing Buildings 

• Current Michigan Property Maintenance Code 

• Current City Zoning Ordinance 

• HUD minimum Housing Quality Standards 

• All applicable City of Pontiac codes and ordinances 

• Current State and Federal Lead-based Paint Laws and Regulations 

LOW- INCOME TARGETING 

The estimated amount of funds appropriated or otherwise made available under the NSP 

to be used to purchase and redevelop abandoned or foreclosed upon homes or residential 

properties for housing individuals or families whose incomes do not exceed 50 percent of 

area median income will be $352,656.00. 

Note: At least 25% of funds must be used for housing individuals and families whose 

incomes do not exceed 50 percent of area median income. 

Of the available $1,410,621 Neighborhood Stabilization Program III funds available to 

the City of Pontiac, the City has set aside $352,656 for the development of housing 

opportunities for persons with incomes not exceeding 50% of area median income 

(AMI). In the City of Pontiac, a four-person household can earn up to $34,900 to be at 

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50% of AMI. The City is proposing to provide both new rental and homeowner 

opportunities for these income targeted households. Selected developers will purchase 

vacant, tax or bank foreclosed homes to renovate. The City will create, at a minimum, 

three (3) units of renovated affordable housing units targeted at persons at 50% or below 

of median income. The City will also work with supportive housing agencies to identify 

potential special needs households who need handicapped accessible housing when 

purchasing and rehabilitating the housing. 

ACQUISITION & RELOCATION 

Developers will be instructed not to purchase homes where there are squatters or renters. 

We therefore don’t anticipate having any relocation issues. However, as was the case 

with NSP1, the Development agreements will have the appropriate federal language 

relating to the rights of tenants and all URA considerations that must be complied with. 

PUBLIC COMMENT 

As part of the City’s Citizen’s Participation Plan, the Federal Programs Division consults 

with the members of the Coordinating Council on all matters which pertain to the Federal 

Programs including the Community Development Block Grant (CDBG) program and 

HOME Investment Partnership program. The Coordinating Council is a 28 member body 

consisting of four (4) citizens from each of the seven (7) Citizen District Councils which 

represent the seven (7) City Council Districts. Information on the NSP3 application is 

provided to the members of the Coordinating Council for their review. The City 

published a notice in the newspaper of local circulation – The Oakland Press – that the 

City was applying to HUD for NSP3 funding. The notice was published on Saturday, 

February 12 th and February 13 th notifying citizens of this funding opportunity and 

requested that they access the City’s website at www.pontiac.mi.us for information on the 

application, public hearing and where to submit their written comments. 

The NSP3 Substantial Amendment was published on the City’s website also during this 

time. 

Staff also held a public hearing on the proposed use of NSP 3 funds on February 24, 2011 

at 6:00 PM in Council Chambers. The City scheduled a special meeting for the public 

hearing. Staff made a presentation to the City Council members, Mayor and citizens of 

the community on the proposed activities of the NSP3 program. This meeting is televised 

by the City’s local cable system so that it will be shown 3 times a day until after the 

submission of this document. During the public hearing, there were questions asked about 

the program. The first question was about how the program would be advertised in the 

Oakland Press. The citizen was concerned that any advertisements for the NSP3 program 

for either contractors or homebuyers would be in a large enough format for Pontiac 

residents to notice and respond to. Mr. Hinton let the citizen know that the City would do 

everything possible to keep the citizens informed about any contracting opportunities or 

homeownership opportunities. The Federal Programs Division staff always tries to get the 

biggest format ads that it can possibly get within the budget. Mr. Hinton explained that 

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the Federal Programs Division would continue to do our best to get the information out to 

the citizens in the community. 

There was also a question about what type of assistance would be provided to persons or 

families who would like to apply for these houses. Mr. Hinton stated that all potential 

homebuyers or renters would be provided with free counseling services by experienced 

nonprofit housing agencies. Also, that any developer who was working with the City 

would provide any assistance required by the potential homebuyer to complete their 

application to purchase a home. 

The last question asked at the public hearing involved the hiring of a Contract 

Compliance person to oversee the contracts signed under this program. Mr. Hinton stated 

that all contract compliance responsibilities would be handled by staff in house. Once the 

Federal Programs Division was fully staffed, there would be one person who would be 

responsible contract compliance. 

NSP 3 Program Design & Description 

To receive NSP3 funding, each CDBG grantee must submit an action plan / substantial 

amendment to HUD in accordance with the notice by March 1, 2011. The NSP3 funds 

are being treated as a “special allocation” of fiscal year 2010-2011 CDBG funding. Each 

grantee must expend 50% of the NSP3 funds within two (2) years and be 100% expended 

within three (3) years. Each grantee must publish the proposed amendment on the 

Internet for no less than 15 days of public comment. The final action plan / substantial 

amendment must be submitted to HUD by March 1, 2011. The earliest that funds would 

be available to the City to expend would be approximately June 2011. 

Due to the large number of foreclosures in the City and other influencing economic 

issues, the City of Pontiac is considering two activities under the Neighborhood 

Stabilization III program: Acquisition/Rehabilitation/Resale and Program Administration. 

The size of the Pontiac allocation of $1,410,621 will only fund the acquisition and 

renovation of approximately thirteen (13) homes and cover the costs to administer the 

Project by the Federal Programs Division. 

The program activities will fall inside the goals as defined by the City’s Consolidated 

Plan 2005-2009. The Five Year Strategy was developed from the information gathered 

from the public forums, 2000 Census information, data provided by HUD and 

information from service provider organizations. 

The City identified the following five goals: 

Increase and Improve Homeownership Opportunities: Including education for firsttime 

homebuyers, credit counseling, information for protection against predatory lenders, 

credit repair for first time homebuyers, construction of new affordable housing, new infill 

housing in older neighborhoods, downpayment assistance for first-time homebuyers, 

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acquisition of deteriorated, vacant housing for rehabilitation and resale. 

Remove Barriers to Affordable Housing: Including downpayment assistance, increase 

supply of decent, safe and affordable rental housing, provide foreclosure prevention 

activities, reduction of lead-based paint hazards in the existing housing stock, provide 

permanent housing opportunities for persons moving out of transitional housing, and 

increase energy efficiency of existing housing and new construction 

Create Suitable Living Environments: Including improve quality of life in our 

neighborhoods, reduce crime, increase public safety including fire and police protection, 

increase recreational opportunities for residents, reduce blight in our neighborhoods, 

eliminate abandoned homes unfit for rehabilitation, increased code enforcement activity, 

improve deteriorated infrastructure in our neighborhoods, promote neighborhood 

stability, increase homeownership, help existing homeowners stay in their homes, and 

encourage income diversity in our neighborhoods 

Assist in the Plan to End Homelessness: Including continued participation in the 

Oakland County Taskforce on Homelessness, encourage collaboration between service 

providers, and participate in the Super NOFA for Targeted Homeless Assistance funds to 

address homeless persons and provide permanent housing opportunities. 

Empowerment and self-sufficiency for low-income persons to reduce generational 

poverty: Including provide appropriate and structured activities for youth, increase 

educational opportunities for youth, improve family literacy and self-sufficiency, provide 

services to seniors living in poverty in our community, and provide services to persons 

living in poverty to assist them in moving out of poverty. 

For the FY2010 Annual Plan, the City identified the need to continue the demolition of 

blighting properties in our communities and funded this activity with CDBG funding. 

The Annual Plan also identified: the City’s commitment to the resurfacing of local 

streets; Local Street Signs refurbishing: installation of new Street Lights, Planting new 

trees; the renovation of Rotary Park; Youth recreational services; and, Foreclosure 

Prevention & home ownership counseling services by Lighthouse of Oakland County. 

Pontiac is also committed, through the housing renovation project, to the greening of our 

community by supporting the development of energy efficient, LEED Certified 

affordable housing in our community to further the affordability and sustainability of our 

housing stock. The Annual Plan also identified a home owner repair program and down 

payment assistance for home buyers. The additional NSP program dollars will allow the 

City to expand on some of these projects and target the large number of vacant, 

foreclosed upon homes in our communities. 

The Goals of Pontiac’s NSP 3 Program Activities 

The Goals of the following Pontiac NSP 3 program activities are as follows: 

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1. Stabilize property values in the target neighborhoods. 

2. Decrease the number of vacant, abandoned and dilapidated residential structures 

on Blocks that have reached the obvious “tipping point”. 

3. Increase the level of home ownership 

4. increase the availability of quality rental housing 

5. Enhance the availability of structurally sound affordable housing units. 

6. Increase the taxable values through stabilization strategies that will increase 

income to the City of Pontiac. 

PROGRAM PARAMETERS 

Homebuyer Eligibility: The homebuyer must meet the targeted income limits for their 

household size and the targeted housing unit, WHICH IS UP TO 120% AMI and for a 

family of four persons that would be $83,800. Homebuyers do not need to be first time 

homebuyers but cannot currently own a home or have owned a home in the previous 

twelve months at the time of application to the City. Priority will be given to first time 

homebuyers in the case that more than one household is interested in purchasing a 

particular home. All homebuyers must be credit worthy enough to obtain a conventional, 

fixed rate mortgage, 20 to 30 years, from a conventional lender. No sub prime, high cost, 

adjustable rate mortgages will be allowed. All program participants must complete eight 

(8) hours of homebuyer counseling prior to closing on the purchase of their home. 

Overall the proposed activities would assist a minimum of thirteen (13) households with 

new housing opportunities. This includes both rental and homeownership opportunities. 

The program will focus on bringing these housing units up to current building codes and 

to Energy Star standards to promote long term affordability and sustainability to help 

stabilize our neighborhoods. 

DISTRIBUTION AND USES OF FUNDS 

In reviewing the eligible activities of the Neighborhood Stabilization Program, the City 

went back to the Goals of the City’s Consolidated Plan 2005-2009 and looked at how 

these eligible activities fit into the City’s Plan. Based on the needs identified in the City’s 

Consolidated Plan and FY2010 Annual Plan, the City has identified the following budget 

for the allocation of NSP funds. 

Neighborhood Stabilization Program Allocation $1,410,621.00 

NSP Activity 

Budget Amount 

Administration $141,062.10 

25% set aside for 50% AMI & below $352,656.90 

(B) Purchase and Rehabilitate homes and residential 

properties that have been abandoned or foreclosed 

upon, in order to sell, rent or develop such homes and 

properties $916,902.00 

Total $1,410,621.00 

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The City will use the allowable 10% of the NSP funds for the administration of the NSP 

program and activities. The City will hire additional staffing for the duration of the NSP 

program. These positions will be contract/temporary positions including construction 

management, applicant intake and clerical assistance. The City will publish Request for 

Proposals for Professional Services in the following areas including but not limited to 

Appraisal Services, Property Title Services, Real Estate and property management. 

The City is hoping that these actions will stabilize the neighborhoods and bring 

homeowners back into our housing. Getting families back into the homes will also help to 

stop the deterioration of our housing stock and prevent further demolition and loss of our 

housing stock. 

Vicinity Hiring - Section 3 

Pontiac Federal Programs launched a local contractor and laborers participation plan in 

the spring of 2010 as a component of the NSP1 programs activity for the 

Acquisition/Rehabilitation/Resale or Rental of nineteen (19) homes. A special session 

was held in City Council Chambers to explain the NSP program and gather information 

form local contractor, women & minority owned firms and local potential laborers. That 

information was passed on to one of Pontiac’s two NSP1 developers for recruiting and 

soliciting the participation of firms and individuals as the developer geared up to start the 

renovation process. When we are given permission to start rehabilitation activities 

Federal Programs will closely monitor the Section 3 compliance results. 

Pontiac will implement a similar approach with NSP3 to facilitate local hiring practices. 

After the selection of a developer to acquire, renovate and sale the proposed thirteen (13) 

properties, a special recruitment event will be again staged in Council Chambers to sign 

up interested parties. Hopefully, at that point in 2011, there will be enough experience 

during the NSP1 hiring process to refine our approach and make it more effective, if 

required. Pontiac federal Programs has already determined that if the event is well 

publicized and held in a familiar public place, the response of firms and persons wanting 

to participate is better. Therefore, we will not just rely upon newspaper ads and list 

compiled in the past, but also the local government access cable channel will be utilized 

along with avenues for word-of- mouth and the City’s website will get the message out 

about the NSP3 program and the recruiting event . At the event information on existing 

ordinances and their requirements for local hiring. 

NSP INFORMATION BY ACTIVITY (COMPLETE FOR EACH ACTIVITY) 

The City is proposing to address the issue of vacant, blighting foreclosed upon properties 

in the City of Pontiac with the following activities: 

(1) Activity Name: Acquisition, Rehabilitation and Resale/Rental of Vacant, Foreclosed 

Properties – Low Income Set Aside – 25% 

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(2) Activity Type: NSP Activity (B) Purchase and rehabilitate homes and residential 

properties that have been abandoned or foreclosed upon, in order to sell, rent or redevelop 

such homes and properties 

CDBG Activity 24 CFR 570.201 (a) Acquisition, (b) Disposition, 

(i) Relocation and (n) Direct homeownership assistance (as modified below); 570.202 

eligible rehabilitation and preservation activities for homes and other residential 

structures (Note that rehabilitation may includes counseling for those seeking to take part 

in the activity) 

(ii) NSP Activity (B) purchase and rehabilitate three properties that have been abandoned 

or foreclosed upon, in order to rent or leased with an option to buy to persons or families 

at and below 50% of AMI. These homes will be renovated to be primarily leased with 

an option to purchase or, at least, that is the goal. It is anticipated that Pontiac Federal 

Programs will seek the cooperation of area counseling agencies and the Pontiac PHA to 

give lease purchase opportunities to persons graduating from their social support 

programs who are ready financially to assume the responsibilities of home ownership. 

Mortgages for these individuals will probably be in the range of $45,000 to $55,000. To 

develop these properties for the 50% and below buyers/renters will probably require 

deeper development subsidies from the $352,656.90, which is the 25% set aside program 

activity budget. 

(3) National Objective: (Must be a national objective benefiting low, moderate and 

middle income persons, as defined in the NSP Notice—i.e., ≤ 120% of area median 

income). 

Households with income equal to or less than 50% of area median income. This 

activity will meet the 25% set aside with $352,655 allocated to this activity. 

(4) Activity Description: 

Include a narrative describing the area of greatest need that the activity addresses; the 

expected benefit to income-qualified persons; and whether funds used for this activity 

will be used to meet the low income housing requirement for those below 50% of area 

median income. 

City of Pontiac Consolidated Plan 2005-2009 – Goal #2 Remove Barriers to 

Affordable Housing 

The City will purchase vacant, foreclosed upon bank-owned properties at a discount 

(minimum 1% as amended by the Bridge Notice dated June 19, 2009) of appraised value. 

The City will complete a team inspection and energy audit on each home and make 

necessary repairs to bring up to code and improve energy efficiency including appliances 

with Energy Star ratings. The homes will then be made available for rent/sale or leasepurchase 

to income eligible households up to 50% of Area Median Income for the 

amount of NSP assistance invested in the home (required by regulations). A lien will be 

placed on the home for the difference between the sales price and the after rehab 

13

appraised value to protect the affordability of the unit for a period of 15 years (HOME 

Final Rule standards). At the end of the affordability period, the lien will be released by 

the City. If the home is sold prior to the end of the affordability period, a prorated amount 

must be repaid to the City. 

In some instances the homes will be rented or leased with an option to purchase the 

home, pursuant to counseling and credit repairs. The City will lien the properties for the 

after rehab appraised value and to ensure a 20 year affordability period. The City will 

work with each for profit or nonprofit developer to adapt to changes in the housing 

market. 

For this acquisition/rehab/resale program, the City is targeting three (3) properties. The 

units will be rental units (if an income eligible purchaser cannot be found) for persons at 

50% of AMI or below. The City will solicit the participation of our nonprofit partners to 

provide home buyer counseling to our renter households on a lease purchase path, if 

feasible for the renter household. Any program income generated from the production of 

the first three (3) homes will be used to complete additional units following the NSP 

guidelines. 

(5) Location Description: (Description may include specific addresses, blocks or 

neighborhoods to the extent known.) 

The City has identified one target area for the purpose of focusing on the stabilization of 

blocks in the neighborhoods just east of Telegraph and south of Elizabeth Lake Road 

down to just west of Crystal Lake. The target area was also the focus of the NSP 1 

program and is being targeted again because of the large number of foreclosures that 

continues to destabilize blocks in the Seminole Hills, Ottawa Hills, Indian Village and 

Washington Park neighborhoods. Currently there are eight (8) tax and bank foreclosed 

homes that will undergo renovations this spring. The rationale for selecting this area was 

to continue to concentrate in neighborhoods where homes are being renovated via NSP1 

funds to, in combination, enhance the marketing of those properties and the thirteen (13) 

homes (three under this activity) to be renovated with NSP3 funds by a developer yet to 

be selected. NSP 3 places emphasis on the marketability of the properties selected for 

rehabilitation. To stabilize neighborhoods there must be focused investments. 

The boundaries of the target area are as follows: 






14



(6) Performance Measures (e.g., units of housing to be acquired, rehabilitated, or 

demolished for the income levels of households that are 50 percent of area median 

income and below, 51-80 percent, and 81-120 percent). 

Total Units Acquired/Rehabilitated: 13 single family homes 

Total Units – 50% or below 

3 single family units 

Total Units – 51% to 120)% 


(7) Total Budget: (Include public and private components) 

25% Set Aside – Acquisition/Rehab $352,656.90 

3 rental units for households up to 50% of area median income 

Matching funds will be private mortgage financing for households who purchase 

NSP homes after the completion of the rehabilitation work. 

(8) Responsible Organization: (Describe the responsible organization that will 

implement the NSP activity, including its name, location, and administrator contact 

information) 

City of Pontiac Federal Programs Division 

47450 Woodward Avenue 


Patricia Lile, Block Grant Administrator 

248-758-3780, Fax # 248-758-3775 

E-mail: plile@pontiac.mi.us 

(9) Projected Start Date: June 1, 2011 

(10) Projected End Date: May 31, 2014 

(11) Specific Activity Requirements: 

For acquisition activities, include: 

• discount rate 

The City or its selected developer(s) will purchase vacant, foreclosed upon bankowned 

properties at a discount (minimum 1% as amended by the Bridge Notice dated 

June 19, 2009) of appraised value. 

For financing activities, include: 

• range of interest rates 

15

For housing related activities, include: 

• duration or term of assistance; 

• tenure of beneficiaries--rental or homeownership; 

• a description of how the design of the activity will ensure continued affordability 

For those homes that are sold, a lien will be placed on the home for the difference 

between the sales price and the after rehab appraised value to protect the affordability of 

the unit for a period of 15 years (HOME Final Rule standards). At the end of the 

affordability period, the lien will be released by the City. If the home is sold prior to the 

end of the affordability period, a prorated amount must be repaid to the City. The 

deferred loan will have a zero percent interest rate. 

Because these homes will be targeted to families with incomes at 50% or below of area 

median income, these units will most likely be rental units and/or lease purchase units. 

Units that remain as either rental units or lease/purchase units will have liens to protect 

their affordability and managed by a local nonprofit housing organization to insure 

compliance. 


(1) Activity Name: Acquisition, Rehabilitation and Resale/Rental of Vacant, Foreclosed 

Properties – LMMI 

(2) Activity Type: NSP Activity (B) Purchase and rehabilitate homes and residential 

properties that have been abandoned or foreclosed upon, in order to sell, rent or redevelop 

such homes and properties 

CDBG Activity 24 CFR 570.201 (a) Acquisition, (b) Disposition, 

(i) Relocation and (n) Direct homeownership assistance (as modified below); 570.202 

eligible rehabilitation and preservation activities for homes and other residential 

structures (Note that rehabilitation may includes counseling for those seeking to take part 

in the activity) 

(ii) NSP Activity (B) purchase and rehabilitate ten (10) residential properties that have 

been abandoned or foreclosed upon, in order to sale to persons or families from 51% 

AMI to 120% AMI. These homes will be renovated to be marketed primarily as sales or 

leased with option to purchase to persons or families in these income ranges. The budget 

for this specific activity will be $917,902.000 with an averaged Total Development Cost 

of $97,000. It is anticipated that persons from 80% to 120% will be the most likely 

candidates for mortgages from $60,000 to $80,000. From 51% to 70% of AMI the most 

likely candidates for those properties will probably require a longer lease/purchase period 

will becoming mortgage ready through effective financial counseling. 



income). 

16

Households with income equal to or less than 120% of area median income. 






City of Pontiac Consolidated Plan 2005-2009 – Goal #2 Remove Barriers to 

Affordable Housing 

The City will purchase vacant, foreclosed upon bank-owned properties at a discount 

(minimum 1% as amended by the Bridge Notice dated June 19, 2009) of appraised value. 

The City will complete a team inspection and energy audit on each home and make 

necessary repairs to bring up to code and improve energy efficiency including appliances 

with Energy Star ratings. The homes will then be made available for sale to income 

eligible households up to 120% of Area Median Income for the amount of NSP assistance 

invested in the home (required by regulations). A lien will be placed on the home for the 

difference between the sales price and the after rehab appraised value to protect the 

affordability of the unit for a period of 15 years (HOME Final Rule standards). At the end 

of the affordability period, the lien will be released by the City. If the home is sold prior 

to the end of the affordability period, a prorated amount must be repaid to the City. In 

some instances the homes will be rented or leased with an option to purchase the home, 

pursuant to counseling and credit repairs. The City will lien the properties for the after 

rehab appraised value and to ensure a 20 year affordability period. The City will work 

with each for profit or nonprofit developer to adapt to changes in the housing market. 

For acquisition/rehab/resale program, the City is targeting ten (10) properties. These units 

will be for sale to persons up to 120% of AMI. The City will solicit the participation of 

our nonprofit partners to provide home buyer counseling to our renter households on a 

lease purchase path, if feasible for the renter household. Any program income generated 

from the production of the these ten (10) homes will be used to complete additional units 

following the NSP guidelines. 



The City has identified one target area for the purpose of focusing on the stabilization of 

blocks in the neighborhoods just east of Telegraph and south of Elizabeth Lake Road 

down to just west of Crystal Lake. The target area was also the focus of the NSP 1 

program and is being targeted again because of the large number of foreclosures that 

continues to destabilize blocks in the Seminole Hills, Ottawa Hills, Indian Village and 

Washington Park neighborhoods. Currently there are eight (8) tax and bank foreclosed 

17

homes that will undergo renovations this spring. The rationale for selecting this area was 

to continue to concentrate in neighborhoods where homes are being renovated via NSP1 

funds to, in combination, enhance the marketing of those properties and the thirteen (13) 

homes to be renovated with NSP3 funds by a developer yet to be selected. NSP 3 places 

emphasis on the marketability of the properties selected for rehabilitation. To stabilize 

neighborhoods there must be focused investments. 

The boundaries of the target area are as follows: 











Total Units Acquired/Rehabilitated: 13 single family homes 

Total Units – 50% or below 


Total Units – 51% to 120)% 



Acquisition/Rehab $916,902.00 

10 for sale units for households up to 120% of area median income 

Matching funds will be private mortgage financing for households who purchase 

NSP homes after the completion of the rehabilitation work. 



information) 





18

248-758-3780, Fax # 248-758-3775 







The City or its selected developer(s) will purchase vacant, foreclosed upon bankowned 

properties at a discount (minimum 1% as amended by the Bridge Notice dated 

June 19, 2009) of appraised value. 







A lien will be placed on the home for the difference between the sales price and the after 

rehab appraised value to protect the affordability of the unit for a period of 15 years 

(HOME Final Rule standards). At the end of the affordability period, the lien will be 

released by the City. If the home is sold prior to the end of the affordability period, a 

prorated amount must be repaid to the City. The deferred loan will have a zero percent 

interest rate. 

The 10 proposed homes will be marketed to families with incomes up to 120% of area 

median income as for sale units. Units that remain as either rental units or lease/purchase 

units will have liens to protect their affordability and managed by a local nonprofit 

housing organization to insure compliance. 


(1) Activity Name: NSP3 Program Administration 

(2) Activity Type: Up to 10% of the Neighborhood Stabilization Program funds can 

be used for the administration of this program 

administration 

Eligible under CDBG program at 570.200(g) program 

19



income). 

Not applicable to Planning Administration 






The City will utilize the allowable 10% of the NSP3 funds for the administration of the 

NSP3 program. The funds will be used for the normal operating expenses of 

administering and monitoring a federal program including staffing, fringes, supplies and 

appropriate services. The City may hire additional staff to oversee the activities of the 

program. 



The administration of the program will be located at Pontiac City Hall, 47450 Woodward 

Avenue, Pontiac, MI 48342. 




Not applicable to program administration 


Program Administration 

$141,062 NSP funds 



information) 





248-758-3780, Fax # 248-758-3775 


20












These issues are not applicable to program administration. 

21

The Annual Action Plan Substantial Amendment - City of Pontiac

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