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HomeMy WebLinkAbout2011.03.14 Council Workshop Packet AGENDA PASCO CITY COUNCIL Workshop Meeting 7:00 p.m. March l4,2011 1. CALL TO ORDER 2. ROLL CALL: (a) Pledge of Allegiance. 3. VERBAL REPORTS FROM COUNCILMEMBERS: 4. ITEMS FOR DISCUSSION: (a) Program Manager for Administration of Community Housing Improvement Program: 1. Agenda Report from Angela R. Pitman,Block Grant Administrator dated March 8,2011. 2. Kiemle&Hagood Company Statement of Qualifications. 3. Map of Target Neighborhoods. 4. Map of Target Census Tracts. 5. HOME Consortium Agreement. (b) Water System Intertie: 1. Agenda Report from Gary Crutchfield, City Manager dated March 11,2011. 2. Memorandum from Public Works Director to City Manager dated March 10. (c) Quasi Judicial Hearing Procedures: 1. Agenda Report from Rick White, Community & Economic Development Director dated March 9,2011. 2. Proposed Ordinance. (d) Audit Finding: 1. Agenda Report from Gary Crutchfield, City Manager dated March 11,2011. 2. Memo from Finance Manager to City Manager. 5. OTHER ITEMS FOR DISCUSSION: (a) (b) (c) 6. EXECUTIVE SESSION: (a) (b) (c) 7. ADJOURNMENT REMINDERS: 1. 12:00 p.m., Monday, March 14, Pasco Red Lion — Pasco Chamber of Commerce Membership Luncheon. ("Human Resource Essentials — What You Need to Know" presented by Sarah Perry, Attorney at Law). 2. 4:00 p.m., Monday, March 14, Benton Franklin Council of Governments office — Hanford Area Economic Investment Fund Committee Special Meeting. (COUNCILMEMBER AL YENNEY, Rep.; SAUL MARTINEZ,Alt.) 3. 11:00 a.m., Tuesday, March 15, Holiday Inn Express, Pasco — TRIDEC 48`h Annual Meeting and Awards Luncheon. (COUNCILMEMBER MIKE GARRISON) 4. 2:00 p.m., Wednesday, March 16, 3035 Rickenbacher Drive — Farmer's National Company, Open House and Ribbon Cutting Ceremony. (COUNCILMEMBER BOB HOFFMANN) 5. 11:30 a.m., Friday, March 18, Sandberg Event Center — Benton-Franklin Council of Governments Board Meeting. (COUNCILMEMBER AL YENNEY, Rep.;REBECCA FRANCIK,Alt.) AGENDA REPORT FOR: City Council '1r March 8, 2011 TO: Gary Crutchfic t anager Workshop Mtg.: 03/14/11 Rick White, RegularMtg.: 03/21/11 Community& 1#conomic Development Director F44 FROM: Angela R. Pitman, Block Grant Administrator SUBJECT: Prog.rar.n Manager for Adinix.istration of Communit!�Housing,Improvexnent Program for Neighborhood Revitalization Programs BGCA2011-004 I. REFERENCE(S): A. Kiemle&Hagood Company Statement of Qualifications B. Map of Target Neighborhoods C. Map of Target Census Tracts D. HOME Consortium Agreement 11. ACTION REQUESTED OF COUNCIL /STAFF RECOMMENDATIONS: 03/14/11: DISCUSSION 03/21111: MOTION: I move to approve the HOME Consortium Contract with Kiemle & Hagood Company to administer the City's CHIP program in an amount not to exceed $184,768 and authorize the City Manager to sign the Agreement. Ill. FISCAL IMPACT: $184,768 Federal HOME funds. IV. HISTORY AND FACTS BRIEF: A. Pasco entered into a HOME Consortium Agreement with Richland and Kennewick in 1995 making the City eligible for Federal HOME funds. In September, 2011, this Agreement was extended to 2013. This consortium allows the City to be eligible for federal HOME funds. The past two years the City has received approximately$433,000 through the HOME Program. B. Pasco's Community Housing Improvement Program (CHIP) affordable housing components include down payment assistance, homeowner rehabilitation, rental rehabilitation, and infill foreclosed property rehabilitation and new construction. C. Affordable housing accomplishments under the last contract include new construction and sale of three infill homes, down payment assistance for 23 first time homebuyers, and four owner occupied homes rehabilitated for a total of 30 households assisted, exceeding the 25 housing units estimated. D. As of today, the City has $743,766 available in HOME funds and program income from 2008, 2009 and 2010. Under Federal regulations $410,845 of these funds need to be under contract with a third party by April 1, 2011. E. The administration of housing rehabilitation and down payment assistance programs is staff intensive and complex requiring experienced housing rehabilitation specialists, loan processors, compliance specialists, and administrative staff to meet existing and emergent needs of the Pasco affordable housing programs. Duties include: 4(a) 1) Development of program regulations in accordance with Federal requirements; 2) Marketing the program to homeowners, contractors and lending institutions; 3) Certifying the incomes of program participants; 4) Inspecting properties, preparing plans and specifications for bid documents, bidding out the jobs, and inspection of the work. F. To assist the Block Grant Administrator, staff advertised for the assistance of a qualified consultant to administer this program issuing a Request for Qualifications on January 23, 2011 with a response deadline of February 77 2011. [II. DISCUSSION; A. Two formal corporate responses were received and evaluated for experience establishing and administering housing acquisition, relocation, rehabilitation, and infill construction programs, administering down payment assistance loan programs, and knowledge of federal grant regulations and requirements for CDBG, HOME and NSP funding sources. Kiemle & Hagood Company, the current program manager, was deemed most qualified and invited to submit a proposal. B. The City contracted for HOME Program services with Kiemle & Hagood Company in 2008, with a one year extension for work in process. In that time, new programs have been established for down payment assistance, rental rehabilitation and foreclosure mitigation. The attached contract was revised to cover a three year period of performance. C. Staff believes that Kiemle & Hagood Company is well qualified to perform this work and would recommend that a contract for Program Administration of the Community Housing Improvement Program (CHIP) affordable housing programs be entered into for continued revitalization of the target neighborhoods and low- income census tracts. KIENEE & Reference "A" HAGOOD Community Building _� C O M P A N Y Creating New Visions of Home & Neighborhood RECEIVED FE9 u ? 201? CMMUN"'&CCONO M1C OEVECOf-IVtEIVT February 4, 2011 Pick White City of Pasco Community& Economic Development Director 525 North Third Avenue, Pasco,Washington 99301 Dear Rick, Kiemle & Hagood Company is very interested in providing program management sere*ices for the City of Pasco's Community Housing Improvement Program. As the current program manager, we have enjoyed working with you and your staff to create viable, efficient and effective affordable housing opportunities for the residents of Pasco. Kiemle & Hagood Company has fourteen years of total experience in managing federally funded housing rehabilitation programs. We have an excellent team that implements our programs with great humanity, efficiency and effectiveness. Attached please find our statement of qualifications for managing Pasco's Community Housing Improvement Program. We are looking forward to continuing our relationship with you. in providing new and innovative program practices to facilitate the improvement of Pasco's neighborhoods. Please let us know if we can provide any additional information. Sincerely, D HAG COMPANY Shannon Meagher Program Director Professional Real Estate Services Washington Mutual Financial Center ■ 601 West Main Aven.ie, Suite 400 ■ Spokane,Washington 99201-0674 s {509) 838-6541 Fax(509)458.4014 Kiemle & Hagood Company 601 West Main Avenue, Suite 400 Spokane, WA 99201 (509) 8386541 (509) 458-4014 (FAX) www.khco.corn RESPONSE TO THE CITY OF PASCO COMMUNITY HOUSING IMPROVEMENT PROGRAM REQUEST FOR QUALIFICATIONS FOR PROGRAM MANAGER DUE; 2/7/2011 KiejnIt!&Ha good Company Proposal Response to Pasco Request for Qualifications for Program Manager Page I of 5 Kiemle & Hagood Company is pleased to provide this response to the City of Pasco's request for a Summary of Qualifications as Program Manager of the Community Housing Improvement Program. Kiemle & Hagood Company is known primarily as a commercial real estate company based in Spokane, WA. Kiemle & Hagood Company manages and develops both commercial and residential properties, and provides leasing, sales, acquisition, and consulting services for a wide variety of clientele. Kiemle & Hagood Company is the current Program Manager of Pasco's HOME funded Community Housing Improvement Program (CHIP) and Neighborhood Stabilization Program (NSP) as well as several City of Spokane federally funded housing programs: the Single Family Housing Rehabilitation Program, the Roofs Only Repair and Replacement Program, the Rental Rehabilitation Program and the Lead Safe Spokane Program. We are as proud of our accomplishments and depth of experience in managing these programs as we are of our more traditional real estate endeavors. CORPQRATE ERQEU Kiernie & Hagood Company is managed as a cohesive whole: this philosophy of management is important as this management style includes the Community Building Division, which would be responsible for implementing the City of Pasco's CHIP. The Community Building Division currently manages the City of Pasco's CHIP and Spokane's programs, including the Single Family Housing Rehabilitation Program, the Roofs Only Repair and Replacement Program, the Lead Safe Spokane Program, and the Rental Improvemcnt Program. Our Management Team (under the ultimate guidance of our Owners, Tom Quigley, Larry Soehren, and Gordon Hester) consists of the Directors of each of our key departments — Community Building, Multi-Family, Accounting, Marketing as well as our Chief Financial Officer (CFO) and Human Resources Director (HR). The Management Team meets regularly to ensure the commonality of our corporate purposes, support and conduct. The Management Team sets the policies and directions for the company. Our Management Team as a whole brings this Proposal to you. We believe firmly in our ability to add value, and to assure the continued success of the Programs. Tom Quigley,President and CEO Tom is not only the President and CEO of Kiemle & Hagood Company,but he is also the Director of the Brokerage Division for Spokane's largest property management and commercial real estate company. Larry Soehren,Vice President and COO Larry provides the ownership oversight and management to the Community Building Division, orchestrating the Division's talented staff within the other divisions of Kiemle & Hagood Company. Larry also oversees the Management Services Division of the company, including commercial property and facilities management, multi-family housing management, Friendly Parking Services, and community association management. Gordon Hester,Secretary/Treasurer Gordon is the Director of Commercial Property Management and Leasing for Kiemle & Hagood Company. Gordon oversees the regulatory compliance, safety planning, and general operational issues in the Commercial Property Management Division, including the Coeur d'Alene Branch in addition to the wholly owned Kiemle & Hagood subsidiary, K&H Facility Services. Kiemle&Hagood Con7pany Proposal Response to Pasco Request for Qualirications for Program M eager Page 2 of Shannon Meagher,Program Director Shannon is the Program Director of the Community Building Division, which .manages over $3 million dollars annually in housing loans and construction management for Tow and moderate income property owners through federally funded, locality- sponsored programs. She is responsible for the overall day-to-day management of the Division as well as housing development and consulting at Kiemle & Hagood Company. Shannon has more than 22 years experience in affordable housing development and management. Rebecca Greene,CFO/Controller Rebecca is a CPA with in-depth accounting experience in the areas of cost accounting, corporate consolidations, public accounting and auditing. Rebecca has a strong grasp of the technical and specific requirements of property management accounting and compliance. Rebecca's understanding and integration of the Community Building Division's accounting and audit requirements has greatly facilitated the smooth financial flow of both contractor payments and administrative billings to our clients. Ellen Flanigan,Director of Human Resources and Office Manager Ellen is our Director of Human Resources and her talents impact the entire breadth of Kiennle &Hagood Company. Ellen is responsible for developing and maintaining a wide variety of policies and procedures including personnel, training programs, safety, hiring and administrative management. Ellen is also responsible for all of Kiemle & Hagood Company's insurance administration and for the oversight of all support staff. PROGRAM MANAGEMENT The Community Building Division is extremely well-versed in the management of federally funded housing rehabilitation programs including HOME, CDBG and NSP. We are both familiar and comfortable with juggling the complexities of dealing with low and moderate income homeowners, identifying construction needs, managing construction activities and contractors, and administering federal funds within federal guidelines and regulations. This expertise will be brought to bear on the City of Pasco's proposed programs. The Community Building Division within Kiemle &Hagood consists of the following: Division Director, Shannon Meagher As the Director, Shannon is responsible for the implementation and oversight of all Division activities including the City of Pasco's CHIP, the City of Spokane's Single Family Housing Rehabilitation Program, the City of Spokane's Roofs Only Repair and Replacement Program as well as the Lead Safe Spokane Program. She serves as the primary liaison with the City of Pasco's Community and Economic Development Department and the HOME Consortium. She tracks program loan expenditures and applicants by neighborhood allocations, and establishes targets and monitoring performance against key program steps. She also coordinates the design, implementation, and review of program policies in compliance with HUD and local guidelines. Additionally she fosters, monitors and reviews contractor participation, as well as directs marketing efforts, reporting compliance, and facilitates resolution of customer service issues. Shannon also underwrites the vast majority of the loans processed in the Community Building Division. Kieliale&Hagood Company Proposal Response to Pasco Request for Qualifications for hvgram Manager Page 3 of 5 Loan Coordinators Kiemle &Hagood Company has two Loan Coordinators who determine applicant eligibility by evaluating their eligibility year income, their stable monthly income and household member and other qualifying facts. Additionally, they prepare all the loans for closing, including all document preparation and coordination with the attorney's office. The Loan Coordinators regularly communicate with a wide variety of people, from the owners to the title companies and with a myriad of other agencies to verify information. Our Loan Coordinators are Kim Floyd and Tiffany Capiral — together they have over 19 years experience in determining program eligibility for federally funded housing programs. Field Agents Kiemle & Hagood Company's Community Building Division currently has three Field Agents with identical core duties. The Field Agents are primarily responsible for facilitating the rehabilitation process for housing rehabilitation participants from initial survey to project close-out. Essentially, the Field Agent is a project or construction manager. In the course of their work, the Field Agents: • Perform home inspections and initial work surveys, • Generate Work Orders and cost estimates, • Coordinate with the lead testing agency and explain lead-based paint safety hazards, • Coordinate and complete contract signings, Establish project timeframes and monitor for performance within the timeframes, Approve progress payments, Prepare and authorize change orders,and Close-out projects in accordance with program policies and procedures. Field Agents, in addition to the duties outlined above, must communicate very effectively, including mediating the conflicts that can arise whenever a contractor is present and working in someone's home. The Field Agents are constantly reviewing the construction management systems, including: Program construction and material standards, inspection procedures, work specifications, cost estimating, contractor recruitment and qualifying, bidding, contract awards, construction monitoring, dispute resolution, compliance procedures and others. Our three Field Agents are Lori Troyer, Todd Clark and Charles Williams who have a combined affordable housing experience of more than IS years. Administration and Compliance The department also has a Compliance Specialist, Nicole Wittwer, with 1l years of affordable housing regulatory compliance experience. With the assistance of our departmental Administrative Assistant, Marnie Taylor, we are able to ensure excellent reporting and record-keeping. EXPERIENCE WITH MANAGING FEDERALLY FUNDED PROGRAMS Kiemle & Hagood Company is the current Program Manager of the City of Pasco's Community Housing Improvement Program (CI-IIF) and :Neighborhood Stabilization Program (NSP) and Spokane's Single Family Housing Rehabilitation Program, the Roofs Only Repair and Replacement Program, Rental Improvement Program, and the Lead Safe Spokane Program. We have fourteen (14) years experience,in managing federally-funded, owner-occupied housing rehabilitation programs. We are particularly proud of our role in implementing these Community Development programs. We see ourselves as true partners of the cities we work with. Klemle&Hagood Company Proposal Response to Pasco Request for Qualifications for Program Manager Page 4 of Spokane Experience By the end of our 136, program year of Program Manager experience (September 30, 2010) for the City of Spokane, Kiemle & Hagood Company will have processed, contracted and closed out over $26,500,000 in CDBG and HOME funded rehabilitation loans for over 1400 families. At the end of each program year, we provide a program audit for the City of Spokane. Through all of this, Kiemle & Hagood Company has had clean audits and monitorings in full compliance with all applicable federal requirements of the City of • Spokane's housing rehabilitation programs. Pasco Experience Our experience with the City of Pasco has already been quite varied. We have completed 96 down paymentassistance loans to first-time homebuyers in the City of Pasco, including down payment assistance to the three homebuyers purchasing the three in-fill new constructions built in the 51h & Ainsworth neighborhood. The Down Payment Assistance portion of CHIP was a new learning experience for both Kiemlc & Hagood Company and the City of Pasco and has evolved into an effective program. Kiemle & Hagood Company also provided the project management for the three in-fig new constructions in the 5", & Ainsworth Neighborhood, and have completed two owner-- occupied rehabilitations under CHIP as well. We have also created a new contractor pool of 4 qualified contractors for the CHIP program, prepared program procedures for a rental rehabilitation program within CHIP, prepared bid packages and cost estimates for three NSPrehabilitadons,and two homes to be moved and riehabilitated as well. Our original proposal and contract with the Tri-Cities Consortium covered the expenditure of an anticipated $455,000 with a management fee not to exceed $104,347, thus far we have expended over $650,000 in HOME funds (404,191.87 in in-fill new construction, 189,452 in down payment assistance and 64,500 in closed out rehabs) for a program management fee of 87,800 to date. We have not yet had an audit of Pasco's CHIP. Kiemle &Hagood Company is constantly striving to improve our delivery of services within federal regulations and program guidelines. We have never rested quietly, accepting that "things have always been done that way." Program staff is continually looking for ways to improve the programs we administer in areas such as protecting the .City's position, _ providing better quality services,and improving contractor and homeowner relations. Kiemle & Hagood Company has had as a core business line, for over 30 years, the management of HUD subsidized housing for the elderly, families, and those with special needs. We devote considerable resources and staff to the creation, development and management of multi-family and special needs housing funded by various federal, state and local grants and programs. The management of these properties also allows Kiemle & Hagood Company to actively follow our mission to provide service to the community. We manage approximately 900 units which operate specifically under HUD Sections 202, 236, 221(d)3, Section 8 and 811 Assistance Programs as well as several tax credit properties. In summary, Kiemle & Hagood Company has successfully managed federally funded housing programs for over 30 years. This experience in managing housing rehabilitation programs for 14 years, in addition to the other federally funded housing programs (for over 30 years) demonstrates the organization's qualifications and capability to manage federally funded programs. Kiemle&Hagood Company Proposal Response to Pasco Request for Qualifications for Program Manager Page 5 of i , 2011 Proposal for Pasco CHIP t i DIRECT PROGRAM COSTS: Employee Costs 66,377 Supplies, Postage&Other 6,500 Marketing&Advertising 4,000 Printing 4,000 j Professional/Other Vendors 13,000 I Communication/Auto 17,000 Lead Testing 20,125 B&O Tax 2,700 ' Closing Costs 19,800 Total Direct Program Costs 145,502 INDIRECT PROGRAM COSTS(OVERHEAD): Rent 3,118 Accounting Dept 2,046 General Depreciation 943 Supplies 1,397 Insurance 1,416 Human Resources 1,992 Telephone 311 Property Tax 44 Total Indirect Costs 11,267 MANAGEMENTFEE Closed Loan Fee 28,000 Total Fee _—T 28,000 TOTAL PROGRAM COSTS; 1 4,766 111■■i 111111 1 I "�` •: �� � �c �—'�—•3 �-ate���i �i■ful n11111 n == -= =;:■ ■ . -�;�mR�3r►�.1 �■ 1111 11■ -- �= —�=� =— � =� � :I� 1 Inulfy 111 IIIfl111 ,a �/1 ■ IBM filar]111 ■�/� 111..11 nlll■ = ��� C ■ , -� On 'r1 r. mural iil fll 111 � 1n1 11■■fll 11llllr Illl ,. _ .: C■ � � i � ,� fl NI fill 11111111 I - ■ Infl IH�II 11■ Illlfl . 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Recitals WHEREAS, the Federal Government has made funds available to Consortium pursuant to the HOME Program to increase the number of families, especially low income families, served with decent, safe, sanitary and affordable housing and to expand the long term supply of affordable housing; and WHEREAS, the Consortium seeks the maximum use of such funds consistent with the HOME Program CFDA 14.239, the objectives of which are to provide incentives to develop and support affordable rental housing and home ownership affordability through the acquisition, reconstruction, moderate or substantial rehabilitation or new construction of affordable housing; and WHEREAS, the HOME Program authorizes contracts with community housing development organizations, (CHDO), private developers, non-profit organizations, and public agencies to carry out the objectives identified above; and WHEREAS, in the case of CHDO the HOME Program also authorizes the use of program funds to provide technical assistance and site control loans in the early stages of project development, to provide loans to cover pre-construction project costs that Consortium determines to be customary and reasonable, and to provide education and organizational support. NOW, THEREFORE, the parties, for and in consideration of the promises and mutual obligations set forth below, agree as provided for in this agreement. Section 1 — Definitions HOME f=unds — the total amount of HOME Program dollars being provided by the Consortium to the Recipient under this Agreement. HOME Assisted — Those units in the Project, which were partially or totally rehabilitated, constructed, or otherwise, assisted with the use of HOME Funds. Project — the activity and result for which HOME Funds are being provided under this Agreement. 1 Regulations — the requirements in 24 CFR Part 92 which govern the HOME Program and the use of HOME Funds, and all related and applicable OMB Circulars, Codes, Regulations and requirements. Section 2 — The Project HOME Funds are being made available by the Consortium to the Recipient for the purpose of promoting affordable housing to very low, low and moderate-income families, through the acquisition, construction and or rehabilitation of non-luxury housing with suitable amenities, including site improvements, conversion, demolition, and other expenses such as financing costs, hereinafter called the "Project". Section 3 -- Sources and Uses of Funds The total amount of HOME Program dollars, hereinafter called "HOME Funds", to be allocated for City of Pasco CHIP Program Management is not to exceed $184,768 based on direct and indirect grogram management and administrative actual approved costs including 5 percent (5%) of HOME program loans for the CHIP Program closet out during the length of this agreement. Administrative costs are limited to a maximum of $30,000 and usage in full of administration funds will not relieve the Recipient of completing all projects as described herein. HOME Funds to be allocated are consortium Fiscal Year (Jan-Dec) 2008 through 2012 funds. The limit of financial exposure for the Consortium is specifically $184,768. Project Description: Recipient will provide CHIP Program oversight ppdd management to assure the rehabilitation of an estimated 9 owner occupied housing and 3 rental units per project specifications and HOME program regulations, assistance to first time homebuvers to purchase 28 housing units, and acquisition/rehabilitation or new construction of 6 infill units for a combined total of 46 housing units. All wow is to be completed in accordance with 24 CFR Part 92 which govern the HOME Investment Partnership Program, and the City of Pasco CHIP Program manual. Program Benchmarks: December 31, 2011 Project closeout on 16 Units December 31, 2012 Project closeout on 14 Units December 31, 2013 Project closeout on 14 Units March 31, 2014 Project closeout on 2 Units Program Year Rehab Rental Infill DPA 2011 1 1 2 12 2012 4 1 2 7 2013 4 1 2 7 2014 2 Totals 9 3 6 28 2 The Agreement will be effective upon signing by all parties, and authorization of environmental review and clearance, and all project work will be completed no later than March 31, 2014, Failure to complete the project as agreed upon or comply with HOME Program and other applicable local, state or federal requirements can result in a breach of this agreement and cause any HOME funds drawn or incurred to become immediately due and repayable to the City of Richland, lead entity for the Tri-Cities HOME Consortium. Scope of Work: The Recipient will act as project coordinator, and will market the homes in accordance with applicable HOME rules and regulations to households whose gross annual household income is at or below 80 percent of median under Income guidelines established annually by the U.S. Department of Housing and Urban Development (HUD) for the Tri-Cities area, Income documentation will be in a form consistent with HOME requirements as stated in the HUD handbook "Technical Guide for Determining Income and Allowances under the HOME Program" using Part 5 determinations for eligibility. Income verification of the household must be re- examined to determine continued eligibility for the HOME Program if the closing of the property or recordation of the Deed occurs later than six (6) months from initial income verification. Recipient will be responsible for ensuring projects are completed per specifications, and The Recipient will lend funds to individuals in an amount sufficient to make the homes affordable. The City of Pasco, as a participating jurisdiction of the Tri-Cities HOME Consortium, will be named as mortgagee on the properties secured by a recorded Deed and Note as required by 24 CFR 92.254 for a period not less than the period of affordability for homebuyer activities or as identified in the Pasco CHIP Manual for rehabilitation activities, The HOME funds shall be no lower in priority than second position on the property unless prior written authorization is granted by the participating jurisdiction or the Consortium. The property must be used as the household's primary residence during the term of the HOME Program loan for both homebuyer and homeowner rehabilitation projects. Project beneficiary information pertaining to household size, income levels, racial/ethnic characteristics, disability status, household composition, Female Head of Household composition, and any other information required by HUD or as determined beneficial information to the participating jurisdiction, will be collected and documented in an individual and cumulative manner. Homeownership projects must meet the minimum per-unit subsidy amount at 92.205(c), and the maximum per unit subsidy amount of 92.250(a). The sources and uses of all other funds that might be contemplated for a project must be reported to the Consortium prior to the commitment of funds and the commencement of work so that a subsidy layering review per 92.250(b) can be completed. Upon completion of the project, all files will be delivered to the City of Pasco. The participating jurisdiction and the Consortium will monitor each housing unit for principal 3 residency as provided at 24 CFR 92.254(a)(3) upon completion of the project and during the applicable period of affordability. Section 4— Displacement/Relocation Requirement Any project that might displace a person, family, business, non-profit organization, or farm must be approved by the participating jurisdiction (City) and the Consortium prior to any final commitment of HOME funds for the project, or of entering into any type of agreement, whether verbal or written with another party. Failure to receive prior approval may cause the forfeiture of any and all sums under this agreement by the Recipient. Section 5— Environmental Review The effects of each activity related to the Project must be assessed in accordance with the provisions of the National Environmental Policy Act of 1969 and the related authorities in 24 CFR Parts 50 and 58, and as detailed in 24 CFR Part 92, § 92.352. The Recipient must, prior to undertaking any choice limiting or physical activity with respect to the Project, regardless of whether such activity is to be funded by the HOME Funds, comply to the extent applicable, with the regulations found at 24 CFR Part 58. All applicable environmental review and clearance requirements as provided in 24 CFR 58.5 must be completed by the lead consortium member and approved by the U.S. Department of Housing and Urban Development prior to any commitment by the Recipient of HOME dollars. The Recipient will abide by any special conditions, procedures and requirements of the environmental review and will advise the lead entity of any proposed change in the scope of the project or any change in environmental conditions in accordance with 24 CFR 58.71(b). The Recipient may not use any of the HOME Funds for acquisition or construction in identified special flood hazard areas unless the Project is subject to the mandatory purchase of flood insurance as required by Section 102(x) of the Flood Disaster Protection Act of 1973. Failure to comply with this provision will cause an immediate cancellation of this Agreement and forfeiture of the HOME funds. Section 6 — Disbursement of Funds The Recipient may request funds under this Agreement only when they are needed for payment of specific allowable costs described herein, and only in amounts needed to pay such costs. The Recipient shall be reimbursed for eligible project costs after review and approval by the participating jurisdiction of invoices, statements, and other billings, progress reports, and property inspection if applicable. Upon prior approval, the Consortium may pay a vendor or contractor directly. Pay requests that are incomplete will be returned for further documentation. Upon receipt of the completed pay request with appropriate documentation, payments will be issued within 45 days. Payments not made within 45 days after receipt of a complete pay request will be subject to a 12% per annum late fee. In the event of a dispute regarding a pay request interest shall not accrue until final resolution of the dispute pursuant to Section 40. 4 Section 7 - Relationship The relationship of the Recipient to the Consortium shall be that of an independent agency. Nothing herein shall be deemed to create the relationship of employer/employee or principal/agent between the parties. Section 8 - Modifications and Amendments This agreement can only be amended in writing signed by the Consortium, the participating jurisdiction and the Recipient. All modifications and amendments shall not take effect until specifically approved by the Consortium in writing. Section 9 - Waivers No conditions or provisions of this agreement can be waived unless approved by the Consortium in writing. Section 10 — Assignment The Recipient shall not assign any interest in this Agreement and shall not transfer any interest in this Agreement to any party (whether by assignment or novation) without prior written consent of the Consortium. Section 11 - Severability If any provision of this Agreement, or portion thereof is held invalid by any court of rightful jurisdiction, the remainder of this Agreement shall not be affected providing the remainder continues to conform to applicable Federal and State law(s) and regulations and can be given effect without the invalid provision. Section 12 - Insurance and Bonds The Recipient and its employees, volunteers, contractors or consultants shall carry throughout the life of this Agreement and shall document same for all parties, General Liability Insurance, Comprehensive Automobile Liability Insurance and other such coverage as may be appropriate or required by State or Federal law, for the services to be performed. This insurance shall include the following: A. Professional Legal Liability: Recipient shall maintain Professional Legal Liability or Professional Errors and Omissions coverage appropriate to the Recipient's profession and shall be written subject to limits of not less than $1 million per claim and $1 million policy aggregate limit. The coverage shall apply to liability for a professional error, act or omission arising out of the scope of the work for this agreement. Coverage shall not exclude bodily injury, hazards, or property damage related to the work in this agreement, including testing, monitoring, measuring operations, or laboratory analysis where such services are rendered as part of the agreement, B. Worker's Compensation (Industrial Insurance): Workers' compensation insurance as required by Title 51 RCW shall be maintained and Recipient shall provide evidence of coverage if so required. 5 C. Commercial General Liability: Commercial General Liability coverage shall be written on ISO occurrence form CG 00 01 and shall cover liability arising from premises, operations, independent contractors, personal injury and advertising injury. The insurance shall include the Consortium, its members, officers, officials, employees and agents with respect to performance of services, and shall contain no special limitations on the scope of protection afforded as an additional insured. If the liability coverage is written as a claims made policy, then evidence of an extended reporting period or "tail" coverage for a three-year period after project completion must be purchased, or otherwise maintained for the three-year period. If this agreement is over $50,000 then Employers Liability Coverage shall also be maintained. Coverage shall include limits of not less than $1 million per occurrence, and $2 million aggregate. D. Automobile Liability: Business Automobile Liability insurance with a minimum combined limit no less than $1 million per accident for bodily injury and property damage shall be maintained. Coverage shall include owned, hired, leased, and non-owned automobiles. Coverage shall be written on Insurance Services Office (ISO) form CA 00 01 or a substitute form providing equivalent liability coverage. If deemed necessary, the policy shall be endorsed to provide contractual liability coverage. Insurance is to be placed with insurers with a current A.M. best rating of not less than ANIL Recipient shall furnish the Consortium with original certificates and a copy of the amendatory endorsements, including but not necessarily limited to the additional insured endorsement, evidencing the insurance requirements prior to the commencement of the work. The insurance policies are to contain, or be endorsed to contain, the following provisions for Automobile Liability, Professional Liability and Commercial General Liability insurance: The insurance coverage shall be primary as respect to any insurance or self- insurance covering the Consortium, its members, elected and appointed officers, officials, employees and agents. Any insurance, self-insurance, or insurance pool coverage maintained by the Consortium and its members shall be excess of the Recipient's insurance and shall not contribute with it. The insurance shall not be cancelled by any party, except after 30 days prior written notice by certified mail, return receipt requested, has been given to the Consortium. Properties improved, acquired or rehabilitated with HOME funds will be insured until such time that the final disposition of the property occurs. Copies of such documents will be forwarded to the lead entity of the Consortium prior to the start of work for the project. Bonds — If the HOME project is for construction and the cost exceeds $100,000, the Recipient shall verify Performance and Payment Bond as security for the faithful performance and payment of all contractor obligations. The Bond shall be in amounts 6 at least equal to the Contract Price, and on such forms and with such Sureties as are licensed to conduct business in the State of Washington and are named in the current list of "Surety Companies Acceptable of Federal Bonds" as published in the Federal Register by the Audit Staff Bureau of Accounts, U.S. Treasury Department. The performance bond shall be held by the Consortium for one year from the date of completion. If the surety on any Bonds furnished is adjudged, bankrupt, or becomes insolvent or its right to do business is terminated, the Recipient shall, within 5 days thereafter, substitute another Bond which shall be acceptable to the Consortium and participating jurisdiction. Section 13 — Procurement Standards The Recipient will establish procurement procedures to ensure that materials and services are obtained in a cost-effective manner. When procuring for services to be provided under this agreement, the Recipient shall comply at a minimum with the nonprofit procurement standards at 24 CFR 84.40-48. In addition, it is understood that any Recipient that can be considered to be a religious organization shall abide by all portions of 24 CFR 92.257. Section 14 — HOME Program Requirements HOME Funds are made available to Consortium and subsequently to Recipient as authorized by 24 CFR Part 92, referenced and other applicable documentation, hereinafter called the "Regulations". Recipient agrees to comply with all requirements of the Regulations. Should anything in this Agreement be construed to conflict with Regulations, it is the Regulations, which shall prevail. Section 15 — Match Requirement The HOME program requires a non-federally funded 25 percent match. The Recipient and/or participating jurisdiction is required to document sources of match, both cash and in kind and submit this information to the lead entity of the Consortium. The Recipient ❑ will ® will not provide the 25 percent match. The Recipient will provide 0% match and total match is due at project completion. While this provision is not required, the Recipient is encouraged to consider and identify to the participating jurisdiction all HOME match possibilities that may become available. Section 16 — Period of Compliance/Period of Affordability The HOME-assisted housing must meet the affordability requirements established at 24 CFR 92.254(4) for owner occupied units, for a period not less than specified in the following table: Homeownership Assistance Minimum Period of Affordability HOME amount per unit In Years Under $15,000 5 $15,000 to $40,000 10 Over $40,000 or rehabilitation 15 involving refinancing Rehabilitation without acquisition Must qualify as affordable housing at time 7 of assistance and after rehab value cannot exceed 95% of median area purchase price, must be principal residence, and ownership must be fee simple. New construction or acquisition of 20 years newly constructed rental housing This period of compliance is called the Period of Affordability for the Project, beginning after the Project is completed and occupied by a very low, low or moderate-income household, and without regard to the term of the loan or the transfer of ownership, except as noted below. The terms of affordability must be conveyed to the owner. Section 17 — Termination of Period of Affordability The applicability of the Regulations may be terminated upon foreclosure or transfer in lieu of foreclosure. The applicability of the Regulations shall be revived according to the original terms if during the original Period of Affordability, the owner of record before the foreclosure, or deed in lieu of foreclosure, or any entity that includes the former owner or those with whom the former owner has or had family or business ties, obtains an ownership interest in the project or property. Section 18 — Recapture Requirements To ensure affordability, the project(s) will adhere to recapture requirements and Recipient must impose recapture requirements with a sharing of net proceeds to comply with the standards set forth in 24 CFR Part 92, § 92.254(a)(5)(ii)(A)(3) for acquisition projects, or § 92.254(b)(2) for owner occupied rehabilitation, or 92.252(e) for rental housing. Language ensuring the funds during the period of affordability for recapture requirements with a sharing of net proceeds must be included in all contract documents and in a separate written agreement (not limited to legal documents such as deeds and promissory notes) with the household. Recapture requirements shall be structured to be the entire amount of original HOME assistance subject to a sharing of net proceeds from the subsequent sale of the property. Funds that are returned by the Recipient and/or the participating jurisdiction from the sale or transfer of title of the property by the homeowner, or if the property is no longer used as their primary residence during the period of affordability as required by 24 CFR 92.254(a)(4)-(5) must be immediately returned to the Consortium Repayment includes any HOME investment that reduced the initial purchase price from fair market value to an affordable price (Direct Subsidy), principal and interest balance (but excludes the amount between the initial cost of producing the unit and the market value of the property). Upon sale or transfer of the HOME assisted property, or if the home is not used as the primary residence, the Consortium will recoup principal, interest, and if applicable contingent interest on a pro-rata basis as shared net proceeds. The amount recaptured will not exceed the total net proceeds available. Contingent interest will be reduced according to the amount of time the homeowner has owned and occupied the subject property, as measured against the specific contract terms of the loan, and the period of affordability. If there are not sufficient net proceeds 8 to recover the total amount of the HOME investment or a reduced amount, plus enable the owner to recover the amount of closing costs and any approved structural/permanent equipment improvements made to the property, the net proceeds will be divided proportionally between the owner and the Consortium as set forth in the following mathematical formula: HOME investment X Net Proceeds = HOME amount to be recaptured HOME investment + homeowner investment Homeowner investment X Net Proceeds = amount to homeowner HOME investment+ homeowner investment Section 19 — Property Standards Upon completion, the housing assisted with HOME Funds must meet the City of Pasco HOME Program Standards per the CHIP Manual, and as described in 24 CFR Part 92, §92.251(x)(1) for rehabilitation, and §92.251(a)(2) for acquisition; accessibility standards at 24 CFR 92.251(a)(3), and lead based paint requirements as found in 24 CFR 92.355 and 24 CFR Part 35. The housing must also meet all State of Washington and local standards, zoning, and ordinances. Newly constructed housing must meet the current edition of the Model Energy Code published by the Council of American Building Officials. Section 20 — Non-Discrimination and Equal Opportunity The Recipient agrees that they will utilize and make available the HOME Funds in conformity with the non-discrimination and equal opportunity requirements set out in the HUD regulations in the National Housing Affordability Act. These regulations include: 1. The requirements of the Fair Housing Act, 42 U.S.C. 3601-20, and implementing regulations at 24 CFR Part 100; Executive Order 11063 (Equal Opportunity in Housing) as amended by Executive Order 12259 and implementing regulations at 24 CFR 107; and Title VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d, and implementing regulations at 24 CFR Part 1 (Nondiscrimination in Federally Assisted Programs); 2. The prohibitions against discrimination on the basis of age under the Age Discrimination Act of 1975 (42 U.S.C. 6101-07) and the regulations at 24 CFR 146; 3. The prohibitions against discrimination on the basis of handicap under Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations at 24 CFR, Part 8; 4. The requirements of the Executive Order 11246 (Equal Employment Opportunity) and the regulations issued under the Order at 41 CFR Chapter 60; 9 5. The requirements of Section 3 of the Housing and Urban Development Act of 1968, 12 U.S.C. 1702u (Employment Opportunities for Business and Lower Income Persons in Connection with Assisted Projects); and 6. The requirements of Executive Orders 11625 and 12432 regarding Minority Business Enterprise, and 12138 regarding women's Business Enterprise, and regulations S.85.36(e) of Section 281 of the National Housing Affordability Act. 7. The requirements of Washington State Law as found at RCW 49.60. Section 21 — Affirmative Marketing, MBEfWBE Records and Reports Affirmative marketing steps will be taken to provide information and otherwise attract eligible persons in the housing market area to the available housing without regard to race, color, national origin, sex, religion, familial status or disability. Affirmative marketing procedures must include requirements detailed in 24 CFR Part 92, §92.351. A detailed affirmative marketing plan must be submitted to the lead entity of the Tri- Cities HOME Consortium at the start of the project. The Recipient will document and provide data on the outreach steps taken to assure that minority business (MBE) and women's business enterprises (WBE) have an equal opportunity to obtain or compete for contracts and subcontracts as sources of supplies, equipment, construction, and services. Recipient will report to the lead entity of the Consortium the affirmative actions taken and the contracts or subcontracts awarded to MBE and WBE and Section 3 businesses for the project. Reports will be provided in accordance with 92.508(3) that give a description of each project assisted, including the location, form and term of assistance Section 22 — Labor Standards — Prevailing Wage Determination The Recipient will ensure that Federal Labor Standards Provisions under the Davis Bacon Act and/or State Prevailing Wage Rates will be included and implemented in all contract and sub-contract construction documents, if applicable, and the Recipient will be responsible for and carry out all duties as established. The Recipient agrees to comply with the decision regarding applicability of Labor Standards as determined by the State of Washington Department of Labor and/or the U.S. Department of Housing and Urban Development Labor Division. ® It has been determined by the U.S. Department of Housing and Urban Development, Office of Labor Relations that there ❑ will ® will not be applicability of Davis-Bacon requirements to this project for the Recipient. ® It has been determined by the State of Washington Department of Labor that there ❑ will ® will not be applicability of State Prevailing Wage Requirements to this project for the Recipient. Section 23— Lead Based Paint 10 The Recipient must comply with the U.S. Department of Housing and Urban Development Lead Based Paint Regulations (24 CFR Part 35) issued pursuant to the Lead Based Paint Poisoning Prevention Act (42 U.S.C. Sections 4821, et.seq.) requiring prohibition of the use of lead based paint whenever HOME funds are used directly or indirectly for construction, rehabilitation, or modernization of residential structures; elimination of immediate lead based paint hazards in residential structures; and notification of the hazards of lead based paint poisoning to purchasers; tenants, and/or owners of residential structures constructed prior to 1978. The Recipient will be responsible for hiring an independent Environmental Protection Agency (EPA) or State of Washington certified Lead Based Paint risk assessor, inspector or clearance examiner for rehabilitation work. The Recipient will assure that contractors and sub- contractors comply with all applicable guidelines and regulations for the elimination of lead based paint hazards as established under OSHA Lead in Construction Industry Standard, 29 CFR 1926.62; EPA Lead Standard 40 CFR 745; and Title X of the 1992 Housing and Community Development Act, as amended, and established by HUD, 24 CFR 35, and 24 CFR 92.355. Section 24 — Conflict of Interest Generally, no employee, agent, member, consultant, officer or elected or appointed official of the members in the Consortium or Recipient who exercises or has exercised any functions or responsibilities with respect to any activities that are in any way connected with the decision to provide the HOME Funds may obtain a financial interest, reside in, or benefit from those activities, or have an interest in any contract, subcontract or agreement with respect thereto, or the proceeds thereunder, either for themselves or those with whom they have family or business ties, during their tenure or for one year thereafter as stated in 24 CFR 92,356, and the Recipient must take appropriate steps to assure compliance. Section 25 — Records Records must be kept by the Recipient and be made available to the Consortium that demonstrates compliance with this Agreement. Records must be maintained for at least five years after the project completion date, except for documents imposing recapturefresale restrictions which must be retained for five years after the Period of Affordability, specified in Section 6 above, has expired, or as any of the following apply: 1) Records that are the subject of audit findings must be retained for three years after such findings have been resolved, 2) Records for non-expendable property (as defined in OMB Circular A-110 for non- profit organizations) shall be retained for three years after its final disposition. Project pre-construction, construction, and project management records must be kept which demonstrates compliance with this Agreement and related regulations. Financial management records must be kept and identify the source and application of funds for the Project, in accordance with 24 CFR Part 85 and OMB Circulars A-110 and A-133 for non-profit agencies. 11 The Recipient agrees to provide any and all information as may be requested by the Consortium or participating jurisdiction to document compliance with the HOME Program and related laws, rules, regulations and policies. The Recipient understands that the participating jurisdictions are subject to public records disclosure pursuant to RCW 42.56 and agrees to timely provide documents to a jurisdiction as required by law. The Recipient shall indemnify, defend and keep harmless a participating jurisdiction for any liability arising out of the Recipients failure to produce public records to the jurisdiction. Section 26 — Monitoring At least annually, or more often if deemed necessary, the Consortium will monitor the performance of the Recipient to assure compliance with the requirements of this Agreement. The review may include on-site inspections and review of all records to determine compliance with this Agreement through the contract period. The Recipient agrees to provide any and all information to the Consortium to assist in meeting administrative and monitoring requirements. Any duly authorized representative of the U.S. Department of Housing and Urban Development, authorized federal or state agent, or the Consortium shall at all reasonable times have access to and the right to inspect, copy, audit, and examine all books, records and other documents relating directly to the Recipient's receipt and disbursement of the HOME Funds, as well as access to the project site(s) and all project records. Section 27 — Financial Responsibility The Recipient agrees that it is financially responsible (liable) for any audit exception which occurs due to its negligence or failure to comply with the terms of this Agreement. Section 28 — Timeliness of Expenditures Time is of the essence in this agreement. HOME funds unspent as of the 31st day of March. 2014 will be recaptured by the Tri-Cities HOME Consortium for redistribution by the representative city to another qualified applicant, unless written extension approval prior to the date of expiration is made between all signatory members of this agreement. Section 29 — Status Reports The recipient will be required to provide status reports to the City of Richland, lead entity for the Tri-Cities HOME Consortium, on the project or program being funded. The reports shall be submitted within 15 days of the end of each calendar year quarter (by April 15, July 15, October 15 and January 15) and shall continue until the project or program has been completed. The status reports shall include a description of the activities undertaken during the prior quarter, reporting on the goals achieved, the assistance provided to clients in the program, the number of homes constructed, and the number of families assisted. At the completion of the project a final report shall be provided indicating the accomplishments realized, the strengths and weaknesses of the project, total number of houses built, purchased, or rehabilitated, total number of 12 persons assisted, etc. Final record retention shall be the property of the participating jurisdiction and shall be delivered to same. Section 30 — Indemnification The Recipient will save and keep harmless, indemnify, and defend the Consortium and its individual representative members against any and all liability, claims and costs of whatsoever kind and nature for injury to or death of any person or persons and for loss or damage to any property occurring in connection with or in any way incident to or arising out of activities undertaken under this agreement. Section 31 — Corrective and Remedial Action Recipient will immediately correct or cause to be immediately corrected, any and all actions or performance deficiencies in the project as may be determined by the participating jurisdiction, the lead entity for the Tri-Cities HOME Consortium, or the U.S. Department of Housing and Urban Development (HUD). Failure to correct such actions or performance deficiencies within 30 days from written notification may result in suspending HOME funds for the above described project, the cancellation of this contract, and the reprogramming of HOME funds to other eligible activities. Section 32 — Attorney's Fees-Costs In the event of a lawsuit between the parties to this agreement, the prevailing party shall be entitled to recover judgment against the other party for reasonable attorney's fees and other costs either at trial or on appeal. If either party exercises any non-judicial right or remedy to enforce such party's rights hereunder, it shall be a condition for the cure of the default that the defaulting party will pay the non-defaulting party's reasonable attorney's fees incurred and all reasonable costs. Failure to pay such costs and reasonable attorney's fees shall constitute an event of default under this agreement. Section 33 —Venue and Law Venue for any action under this contract shall be in Franklin County, Washington. This agreement shall be governed by the laws of the State of Washington. Section 34-- Cancellation of Agreement This agreement may be cancelled for cause or not for cause by providing written 30 days notice by certified mail, return receipt requested, to the other signatory members of this agreement. HOME funds not committed to specific projects as of the cancellation date will be relinquished to the Consortium for redistribution to other qualified projects. Section 35 —Written Agreement In accordance with the provisions of 24 CFR 92.504(a)(5) when assistance is provided to a homebuyer, homeowner, or a tenant receiving tenant-based rental or security deposit assistance, a written agreement separate from deeds, promissory notes, or other security instruments must be entered into that includes at a minimum: 13 For homebuyers the agreement must conform to the requirements in 92.254(a), the value of the property, principal residence, lease-purchase, if applicable, and the recapture provisions of sharing net proceeds. The agreement must specify the amount of HOME funds, the term and form of assistance whether forgiveable grant or loan, the use of the funds for down payment, closing costs, rehabilitation, etc. and the date by which the housing must be acquired. For homeowners, the written agreement must conform to the requirements in 92.254(b) and specify the amount, term, and form of HOME assistance, rehabilitation work to be undertaken, roles and responsibilities, date for completion, and property standards to be met. For tenants, the rental assistance contract or the security deposit must conform to the requirements at 92.209 and 92.253_ Section 36 - Modifications and Amendments All modifications and amendments to this Agreement, shall be in writing; such modification or amendment shall not take effect until specifically approved by the Consortium in writing and signed by all parties to this agreement. Section 37 - Debarment and Suspension The Recipient may not award or permit an award of a contract to any party which is debarred, suspended or ineligible to participate in a Federal program. The Recipient certifies that it is not debarred, suspended or ineligible to participate in a Federal program. The Recipient will submit to the City, the names of contractors and any subcontractors prior to signing contracts, to ensure compliance with 24 CFR Part 24, "Debarment and Suspension". The Recipient will also assure that language pertaining to debarred, suspended or ineligibility to participate is inserted in all contract agreements. If during the time of this agreement the Recipient is debarred, suspended or ineligible to participate in a Federal program, the Consortium may terminate this agreement for cause. Section 38 — Financial Management and Audits The Recipient agrees to adhere to the generally accepted accounting principles and procedures issued by the American Institute of Certified Public Accountants, and utilize adequate internal controls and maintain necessary source documentation for all costs incurred. The Recipient will also comply with auditing standards issued by the Comptroller General of the United States. All recipients, whether a direct recipient of this agreement, or a sub-recipient receiving federal funds through a pass-through entity, that expend $500,000 or more in a year in Federal awards shall have a single audit conducted for that year in accordance with the provision of OMB A-133, Subpart B. When a Recipient expends Federal awards under only one Federal program, excluding Research and Development performed by a non-federal entity, and the program's laws, regulations, or grant agreements do not require a financial statement audit, the recipient 14 may elect to have a program-specific audit conducted in accordance with Subpart B, Section 235. A program-specific audit may not be elected for Research and Development unless all of the Federal awards expended were received from the same Federal agency, or the same Federal agency and the same pass-through entity, and that Federal agency, or pass-through entity approves in advance a program-specific audit. The audit must be conducted within 60 days of completion of this agreement. Non-Federal entities that expend less than $500,000 a year in Federal awards are exempt from Federal audit requirements for that year, except this does not limit the authorlty of Federal agencies, including HUD, Inspectors General, or General Accounting Office to conduct or arrange for additional audits. All records will be made available for review or audit by appropriate local, state and federal entities. Section 39 — Title Insurance Title Insurance shall be purchased on each activity in an amount equal to the anticipated HOME assistance and will name the City of Pasco as a beneficiary. Section 40 -- Dispute Resolution The Consortium, participating jurisdiction and the Recipient agree to negotiate in good faith for a period of 30 days from the date of notice of all disputes between them prior to exercising their rights under this agreement or under law. All disputes not resolved by negotiation between the parties may be arbitrated only by mutual agreement of the parties. If not mutually agreed to resolve the claim by arbitration, the claim will be resolved by legal action. Arbitration of all claims will be in accordance with the RCW 7.04A and the mandatory rules of arbitration with venue being placed in Pasco, Washington. Arbitration shall include an award to the prevailing party of its reasonable attorney fees and costs against the other 15 RECIPIENT: CONSORTIUM: Kiemle & Hagood Company, Inc. Tri-Cities HOME Consortium 601 W Main Avenue, Suite 400 P.O. Box 190, MS 19 Spokane, WA 99201-0674 Richland, WA 99352 Larry Soehren, Vice President/COO Cynthia D. Johnson, City Manager Kiemle & Hagood Company, Inc. City of Richland Date Date PARTICIPATING JURISDICTION: APPROVED AS TO FORM: Gary Crutchfield, City Manager Leland B Kerr, City Attorney City of Pasco City of Pasco Date APPROVED AS TO FORM: Thomas O. Lampson, City Attorney City of Richland 16 AGENDA REPORT TO: City Council March 11, 2011 FROM: Gary Crutchfi y Manager Workshop Mtg.: 3/14/11 SUBJECT: Water System intertie I. REFERENCE(S): 1. Memorandum from Public Works Director to City Manager dated March 10 II. ACTION REQUESTED OF COUNCIL/ STAFF RECOMMENDATIONS: 3/14: Direction I11. FISCAL. IMPACT: IV. HISTORY AND FAC'T'S BRIEF: A) The City has spent the past 18 months preparing a comprehensive water system plan as required by the state of Washington, to be able to operate a public water system. A part of that plan includes a list of potential projects intended to improve the water supply system. One of the projects included in the proposed plan was the often- discussed "intertie" with Kennewick (a pipe across the Cable bridge connecting the two systems which would allow either side of the river to get water from the other side in the event of an emergency). The cost of the intertie presented significant concern to Council and staff was directed to double-check the need and value of such a project. In addition, staff was asked to evaluate an option such as using a 16" fire hose in lieu of a permanent pipe installation. B) The Public Works Director has provided pertinent information for Council consideration in reviewing this matter again, in the memorandum attached as reference #1. V. DISCUSSION: A) While the potential need for an intertie with Kennewick (or Richland, for that matter) is not high, the city should evaluate the potential with the idea in mind that the intertie is "an insurance policy" in effect. Some insurance policies simply are not worth their cost, while many others are. B) Sonic prior discussion suggested that if a shutdown of the Pasco water plant occurred during the summer months (when use is highest), the city could simply turn off water to the food processors (which use nearly 20% of production during peak summer use). While the city has some general protection from lawsuits for failure to provide water, that protection assumes the city takes reasonable and equitable actions to manage its water system; cutting off one group of users to preserve higher use to others would likely be frowned upon by the court. Generally, rationing of water would need to be done on a reasonable and equitable basis. C) The notion of using a 16" fire hose in lieu of a 16" pipe may seem logical on the surface, but as outlined in the Public Works Director's memorandum, it is simply not feasible. That conclusion is both from a practical standpoint (based on all of the physical considerations one would need to address in trying to use such an option) and from a legal/public health standpoint (the health department clearly would deny the city's ability to use this option, as it would jeopardize public health). D) Given the significance of cost for the intertie project but the potential for Future inclusion, stafl'suggests the intertie project be moved to the "future" phase of capital projects (not to be planned for in the next five years). That would keep the idea in the context of the comprehensive system plan, without indicating any near-term commitment or inclination to undertake the project. This also provides another comprehensive water system plan review (five years from now) to further consider the idea of the intertie. The option, of course, is to remove it from the plan now and depend on reintroduction of that question in the next system plan review in about five years. in order to prepare the final document, one option or the other needs to be selected by Council. 4(b) CITY P OR MEMORANDUM Public Works Department Administration To: Gary Crutchfield, City Manager From: Ahmad Qayoumi, P.E., Public Works Director Date: March 10,2011 Re: City Council Questions about Cable Bridge Intertie At the February 7 City Council meeting, during the Water Master Plan public hearing, the Council asked questions on justification and reasons behind the recommended water supply connection with the City of Kennewick through the Cable Bridge. This memorandum will attempt to respond to Councilmember's questions and suggested option, based on staff findings and feasibility. • System Description: There are two water treatment plants and three water storage tanks: o Water Treatment Plants: ■ The Butterfield Water Treatment Plant (WTP) with a maximum capacity of producing 25 Million Gallons per Day(MGD). The plant was built in 1937 and is an older plant that produces majority of the City's water needs ■ The West Pasco WTP has a maximum capacity of producing 6 MGD at this time. There are plans for future expansion of that Plant to 18 MGD. Expansion of this plant will be several years away because a new and larger water intake is required to reed the larger plant. o There are three water storage reservoirs in the water system. • The Riverview Heights Reservoir has a capacity of 10.0 Million Gallons (MG). • The Broadmoor Boulevard Reservoir has a capacity of 1.0 MG. • The Road 68 composite Tank has a capacity of 2.5 MG. (There is the old Road 68 Tank that serves the Irrigation System now and has a total capacity of 2.7 MG, but only the top third of the tank was usable when it was part of the Water System or about 1.0 MG.) • The Power Grid. The Butterfield WTP has the ability of being served by two ditferent substations. It would require a manual switch from the existing substation to the second substation. I talked to Bob Wyatt of the Franklin PUD about the electrical system. Infonnation he sent to me shows that the"average service availability index" for the PUD is 99.9897%. In 2010, the "average length of an outage" lasted was 127 minutes. • Food Processors: They utilize approximately 5 MGD, based on City's 2010 data. Collectively, they produce approximately$2.5 to $3.5 Million of product daily, • Possible situations that would cause a shutdown of the water treatment plants. This is not an all inclusive list, but examples of what may happen. • Power failure is always a possibility for either plant. Another possible shutdown situation would be fire at the plants. • Fire at multiple power substations. • An animal shorting out multiple power substations. • A fuel spill in the Columbia River upstream of the intakes to the plants (neither plant could be used). o The plants are vulnerable to terrorism acts. An example would be throwing material over the fence into the Butterfield Water Treatment Plant. o The plant is old and subject to structural failure due to a natural disaster. The repair of the water plant could take several weeks or months • the City of Kennewick has two sources of water for their domestic water system. o The primary source is from two Ranney Wells, near the Columbia River, with a capacity of 15 MGD. o The other source is from the Columbia River through their water treatment plant with a capacity of 15 MGD. • The Water Comprehensive System Plan does State, "In the event of an outage City wide, the City staff would restrict water use and the system storage reservoirs would allow minimum required water use." The Plan also identifies that the "Vulnerability Assessment" and "Emergency Response Plan" will be on file at both treatment plants. "Both of these documents are not considered as Public Documents due to the sensitive nature of the document contents as they affect security and operations of the Water Utility," • It was sul;gested that in an emergency event the City could utilize a 16-inch lire hose across the bridge. T7ie folloMng are staff findings on availability, feasibility and needed logistics of a 16- inch fire hose to supply the City of Pasco water from Kennewick • Based on staff research, the largest fire hose available in the market is five-inches in diameter. Fire hoses are not intended for domestic water use. • However, if lire hoses are used to supply water to the Pasco system the following steps, permits and logistics are required: ■ ']here needs to be 5 to 8 (depending on available water flow and pressure), 5-inch fire hoses to provide the water supply that is equivalent to the 16-inch water main. The water supply needed will be 10 Million Gallons/Day. This will require one lane of traffic closure on the bridge. ■ In order to setup the fire hose and pumping apparatus will require. • All available reserve fire pumper trucks from all of the Tri-Cities fire departments. • All available reserve fire hoses frorn all of the 'Fri-Cities fire departments. • This task will require a full tune mechanic on duty to make sure the pumpers are working properly. Other logistics such as fuel and number of pump operators. • After all of the efforts, according to the Fire Chief, only 24 hours of the water supply in this manner can be sustained and operated. Keep in mind to setup the fire hose system can take three to four days • To accommodate the 5 to 8 fire Dose connections there need to be 5 to 8 receiving fire hydrants at the City Pasco, Further engineering analysis needs to be done on location and other hydraulic challenges with this type of connection. There will be a need for road closure wherever, the connections are made, • Similarly on the City of Kennewick side we need to have 5 to 8 fire hydrant connections. Further engineering analysis needs to be done on location and other hydraulic challenges with this type of connection. There will be a need for road closure wherever, the connections are made. • Based an our conversation with the Department of Health on March 8,2011, under no circumstance would the), allow fire hoses to be used to transport water for potable water(will not meet health standards). AGENDA REPORT FOR: City Counc' ? March 9, 2011 F TO: Gary Crutch f' '1 Cit Manager Workshop Mtg.: 3/14/11 FROM: Rick White, Community& Economic Development Director v SUBJECT: Quasi Judicial Hearing procedures 1. REFERENCE(S): 1. Proposed Ordinance 11. ACTION REQUESTED OF COUNCIL/STAFF RECOMNIENDAT1ONS: 3/14: DISCUSSION: Ill. FISCAL IMPACT: NOTE IN". HISTORY AND FACTS BRIEF: A. The rules governing the quasi-judicial hearing process for consideration of rezones, subdivisions, special permits, etc., largely emanate from state court cases over the past 30 years and have generally grown more restrictive (more "judicial"). The fundamental notion is that the hearing body (Planning Commission or City Council) must be free of inappropriate influence in forming its decision, just as a judge or jury would be. One fundamental rule is that the City Council, when conducting a"closed record hearing" can consider only the evidence contained in the"record"of the Planning Commission hearing and recommendation. B. Previous Council discussion indicates that use of the video recordings of the Planning Commission hearing would augment Council's understanding of the"record." It has also been suggested that Planning Commissioners and City Council members be permitted to view the site of an application(rezone, subdivision or special permit). C. At the February 28, 2011 Council Workshop, there was consensus to provide for a photographic exhibit of the site of an application for inclusion in the record, and to add a provision for a City controlled video recording of the hearing to be included in the record for those applications heard by Council in a closed record appeal. However, one of the original reasons for examining this issue was to explore the ability for Council to view the Planning Commission hearings as broadcast on the City's cable channel. D. The proposed ordinance reflects the discussion that occurred at the February 28, 2011 Workshop, which provides for a video recording to Council of hearings only upon appeal, and does not provide for at-will viewing of broadcast hearings. A photographic exhibit of each site will also be contained in each report on land use issues. Staff wishes to confirm this direction. V. DISCUSSION: A. A photographic exhibit of the site and surroundings will insure that decision makers are getting the same information about a site and avoid the probability of "ex pane" communications. B, If Council were permitted to view broadcasts on the City's cable channel, it is probable that individual Council cnembers would view some land use cases in their entirety and some would not—thereby providing a different record for Council as a whole. C. The majority of recommendations forwarded to Council through the Planning Commission do not involve an appeal and very few actions that are not appealed result in a closed record hearing by Council. in those cases that involve an appeal, Council would benefit from the ability to review the entire video record of the hearing. Staff will also develop a standard method of referencing the video in the record so there is no conflict/failure on that point. D. After confirming Council direction on this issue, staff will bring forward the appropriately worded ordinance for Council action. 4(c) ORDINANCE NO. AN ORDINANCE of the City of Pasco, Washington, Amending Section 4.02.030 "Definitions" and Section 4.02.100 "Permit Procedures" Permitting Video Record of Proceedings WHEREAS, as a service to the public, the City has initiated the unedited video recording and broadcast of City meetings, including meetings of the City of Pasco Planning Commission and the City of Pasco Code Enforcement Board; and WHEREAS, the video recordings of these proceedings are broadcasted to the public and retained as an accurate public record of the proceedings; and WHEREAS, the City Council, from time to time, sits in a quasi-judicial capacity of hearing closed record appeals of hearings held before both the City of Pasco Planning; Commission and the City of Pasco Code Enforcement Board; and WHEREAS, the City Council recognizes that such technology provides an accurate and more engaging method of preserving the record, including the ability to view and judge the demeanor of the witnesses, thereby providing the Council a better opportunity to accurately perceive the proceedings; and WHEREAS, the use of a record, supplemented by video recording of the proceedings benefits the citizens who have matters pending in such. proceedings by providing a better record, and therefore, contributing to a better result; and WHEREAS, with the introduction of the video record as a part of the official record of proceedings, negates the video record from constituting an ex parte communication, NOW, THEREFORE, THE CITY COLTCIL OF THE CITY OF PASCO, WASHINGTON, DO ORDAIN AS FOLLOWS: Section 1. That Section 4.02.030 entitled "Definitions" of the Pasco Municipal Code, shall be and hereby is amended and shall read as follow: 4,02.030 DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this Title. (1) "Closed record appeal" means an administrative appeal on the record following an open record hearing on a project permit application when the appeal is on the record with no or limited new evidence or information allowed to be submitted and only appeal argument allowed. (2) "Director" means the Director of Community and Economic Development unless another department or agency is in charge of the project permit in which case it refers to the chief administrative officer of that department or agency. (3) "Open record hearing" means a hearing, conducted by a single hearing body or officer that creates the record through testimony and submission of evidence and information. An open record hearing may be held prior to a decision on a project permit to be known as an "open record predecision hearing." An open record hearing may be held on an appeal, to be known as an "open appeal hearing," if no open record predecision has been held on the project permit. (4) "Project pen-nit" or "project permit application" means any land use or environmental permit or license required from the City for a project action, including but not limited to subdivisions, planned unit developments, conditional uses, shoreline substantial development permits, permits or approvals required by critical area ordinances, site-specific rezones authorized by a comprehensive plan or subarea, plan, but excluding the adoption of amendment of a comprehensive plan, subarea plan, or development regulations except as otherwise specifically included in this subsection. (5) "Public meeting" means an informal meeting, hearing, workshop, or other public gathering of people to obtain comments from the public or other agencies on a proposed project permit prior to a decision. A public meeting may include, but is not limited to, a design review of architectural control board meeting, a special review district or community council meeting, or a scoping meeting on a draft environmental impact statement. A public meeting does not include an open record hearing. The proceedings at a public meeting may be recorded and a report or recomltnendation may be included in the local government's project permit application file. (6) "Record" means the memorialization of testimony, evidence and other communication submitted or created during a hearing and obtained through unedited audio, video or other lawful means of recordation. (Ord. 3151 Sec. 1, 1996). Section 2. That Section 4.02.100 entitled "Permit Procedures" of the Pasco Municipal Code shall be and hereby is amended and shall read as follows: 4.02.100 PERMIT PROCEDURES. (1) All project pern-tits and project permit applications, except zone changes, plats, street vacations, and other legislative decisions, shall be processed and reviewed in the following manner, upon receipt of a completed application: (a) For an application requiring legislative action or which is illegal, the application shall be denied or processed in accord with subsection(2). Ordinance Amending Sections 4.02.030 and 4.02.100 Page 2 (b) For applications which involve more than one permit, the City will prepare a temporary schedule for review by all interested agencies, departments, and the applicant. The schedule will be prepared during the application completion determination in accord with Section 4.02.060. (c) Depending upon the scope of the project, the City will schedule necessary public meetings to coordinate the permit process and gather information following appropriate notification as provided in 4.02.090. (d) Unless otherwise required, no open record hearing will be held unless there is a bona fide objection to some portion of the permit or from some determination made during the course of the permit processing. When required, only one open record hearing will be held. The open record hearing will be before the officer or body having jurisdiction over the matter in dispute or over the matter requiring the open record hearing. Tf the matter disputed or for which an open record hearing is required falls within the jurisdiction of more than one department or agency, a joint hearing will be held if practical. (e) A decision or joint decision if possible, shall be issued and notice given thereof, including the time for appeal and the person or body to whom the appeal must be made, Unless another time is provided, an appeal must be filed within ten days of the decision. The longest appeal period following a joint hearing controls if there are multiple appeal periods. (f) The body or bodies with appellant jurisdiction shall hold a joint closed record appeal. An open record appeal may be held for matters for which no open record hearing has previously been held. The decision of the person or bodies hearing the appeal may be joint or separate, Every effort shall be made in the event of separate decisions to ensure that they are issued simultaneously. Any review of the decision or decisions must be made to the superior court within 21 days. (g) In the event that no appellant body is designated for a matter, the platter shall be heard by the Hearing Examiner. (2) In the event any hearing, quasi-Judicial hearing, or apl)eal that is conducted before the Pasco City Council and the Council member is not able to attend the hearing or r appeal, said Council member may still vote on the matter so Iony, as the Council member affirms on the record that they have had adequate opportunity to review the record, including an unedited video record of the proceeding, and having reviewed the entire record, believes he or she may vote on the matter with the same level of confidence and understanding as if he or she had in fact been in attendance at the quasi-judicial hearing or appeal. A Council inember mgy view the video record of the proceeding which is subiect to a closed record appeal if the video record is viewed in its entirety, and is placed in the record that the video record was unedited. Ordinance Amending Sections 4.02.030 and 4,02.100 Page 3 (23) if the decision on an application must be made by the Pasco City Council, the application will norinally be denied until legislative approval has been obtained. Except for comprehensive plan amendments which may never be processed other than as part of the annual review, an applicant may request combined processing in accord with subsection (1) of this section. (34) The actual costs of any hearing or appeal not otherwise required will be borne by the person requesting the review or objecting to a decision. Security for the costs must be posted prior to the setting or notice of hearing or appeal. The failure to post security is a waiver of any objection. Section 3. This Ordinance shall take full force and effect five (5) days after its approval, passage and publication as required by law. PASSED by the City Council of the City of Pasco, Washington, and approved as provided by law this day of , 2011, Matt Watkins, Mayor ATTEST: APPROVED AS TO FORM; Debbie Clark, City Clerk Leland B. Kerr, City Attorney Ordinance Amending Sections 4.02.030 and 4.02.100 Page 4 AGENDA REPORT TO: City Council March 11, 2011 FROM: Gary Crutch ti � Manager Workshop Mtg.: 3/14/11 SUBJECT: Audit Finding 1. REFE1tENCE(S): I. Memo from Finance Manager to City Manager II. ACTION REQUESTED OF COUNCIL/ STAFF RECOMMENDATIONS: 3/14: Direction Ill. FISCAL IMPACT: See below IV. HISTORY AND FACTS BRIEF: A) In 2007, staff presented to City Council the fact that the stormwater fund was in a deficit position and offered two solutions. One solution was to raise the stormwater rate to cover the full cost; the other solution was to require a contribution from the sewer fund approximating the annual shortfall, as the sewer fund revenues were growing faster than necessary to cover its costs, the utilities (water, sewer, stormwater, etc) are a "combined utility" and the objective of both the sewer and stormwater funds were to clean up water before it enters the environment. On the basis of staff recommendations, City Council determined to require the annual contribution from the sewer fund to the stormwater fund, thus solving the cash flow problem in the stormwater fund without requiring an increase in the monthly stormwater rate, 13) In the 2009 audit (completed in January 2011), the state auditor's office determined that the city could not require the contribution from the sewer fund without sufficient demonstration of equal benefit to the sewer fund in exchange for the annual contribution. Staff concluded that the general benefit cannot be demonstrated sufficiently to satisfy the auditor's office; thus, the commitment was made to restore the subject funds to the sewer fiend from the stormwater fund. C) The shortfall in the stormwater account approximates $300,000 annually (the amount of annual sewer contribution); to offset that with new stormwater revenue will require a rate increase of $1,20/month (the current rate of$1.80/month would increase to $3.00/month). To repay the past sewer contributions would require another rate adjustment of at least SO-cents/month (assuming a 10-year repayment term) or larger amount for a faster payback period. V. DISCUSSION: A) Elimination of the sewer contribution to the stormwater account will not only require an increase in the stormwater rate, it will also permit an offsetting reduction of the sewer rate. If enacted simultaneously, most residential rate payers would realize a zero net change on their combined utility bill. The exception will be those customers paying a stormwater fee but not connected to sewer. B) The Finance Manager intends to complete a formal rate analysis this summer and make formal recommendation of rate adjustments for effect January 2012. The formal process would allow a more comprehensive evaluation of rate needs (capital projects, operations, etc.) while folding in the stormwater repayment to sewer required to follow through on the auditor's directive. C) Staff recommends Council implement a $1.20/month increase in stormwater rate and $1,20/month decrease in sewer rate, effective April 1. Staff will then follow through with the rate analysis necessary to make final adjustments for effect in 2012. 4(d) i Finance Department �IiLr w,,� 525 N. 3'.d Avenue, Pasco, WA 99301 TO: Gary Crutchfield, City Manager FROM: Dunyele Mason, Financial Services Manager rw�� CC: Rick Terway, A&CS Director RE: 2009 Compliance Audit Finding—Sewer subsidy of storm water costs Per your request 1 am sending a memo to you with a copy to Rick regarding the 2009 Compliance Audit finding. A copy of the finding issued by the State Auditor's Office is attached for your reference. The city's audit response was that we will come up with a financial plan to repay the subsidy along with interest to the sewer customers. Please note, based on preliminary discussion with the auditors, the 2010 transfer listed in the audit finding was cancelled so the total principal repayment is $1,178,000. This summer Finance can analyze the financial conditions of the storm water utility and provide rate recommendation options for council using the assumption that new rates would go into effect January 1, 2012. This information could then be used in the 2012 budget process. Background Essentially,the finding indicates that sever utility customers are different than storm water customers and that one customer base is not allowed to support a different customer base. Rates for different customer classes are calculated and assessed based on raising enough revenue to cover the cost of delivering a specific set.of services to the customer. Thus a customer paying for sewer service cannot be charged costs related to providing storm water services. The sewer customers subsidized the storm water customers in 2007, 2008 and 2009. The total amount of subsidy was$1,178,000. The city's audit response was that we will come up with a financial plan to repay the subsidy along with interest to the sewer customers. The city is not required to repay the total in one year as long as the storm water customers pay interest on the unpaid amount owing. The interest rate is set based on the city's cost of borrowing. The storm water customers will experience a two-fold impact: 1) the cost of repaying the past subsidy and 2) the loss of the future scheduled subsidies which was used in calculating their current monthly storm water rate, These two factors will require a rate increase in order for storm water customers to provide sufficient revenues to cover their cost of service. The continued implementation of storm water regulations along with storm water capital expansion needs (to keep up with city growth)are two more factors to consider in determining an updated storm water rate. All of these factors will be considered in Finance's rate models developed later this year. Schedule of Audit Findings and Responses City of Pasco Franklin County January 10,.2091 9. 'The City is subsidizing stormwater operations with transfers from the Sewer Fund. Background We found the City transferred money from the Sewer Fund to the Stormwater Fund. State law requires cities to deposit sewer fees in a sewer fund and restricts their use to sewer-related activities. Cities may not use them to subsidize stormwater operations. In July 2008, the City contracted with a consulting firm to do a utility rate study. The contractor's report recommended the City increase stormwater utility rates to keep that fund operating in the black. The City did not do this. During the audit, City staff stated because the stormwater utility assists the sewer utility in avoiding water contamination, the sewer utility should pay to support the stormwater utility. The City could not provide documentation to support how it reached this conclusion. Description of Condition The City transferred $650,000 to the Stormwater Fund from the Sewer Fund on December 31, 2007, It said this amount covered eight years of activities that benefitted the Sewer Utility. The City transferred $264,000 in both 2008 and 2009. By the end of 2010, it will have transferred $284,000 from the Sewer Fund to the Stormwater Fund, Total transfers were: 2007 Funds transferred $650,000 2008 Funds transferred $264,000 1 2009 Funds transferred $264,0017. 2010 Finds transferred $284WQ No Total $1,462,000 . Cause of Condition The City believed the Stormwater Fund was providing a benefit to the Sewer Fund, In addition, the City believec since it classified its utility system as a "combined utility" for legal and financing purposes, funds generated by the water or sewer accounts could be used interchangeably. Washington State Auditor's Office 5 Effect of Condition Public resources restricted for sewer operations are subsidizing stormwater operations, totaling $1,462,QOC to date, Although the City uses all utility revenue to support utility operations utility rates may not be representative of cost of operations. Recommendation We recommend the City follow state law governing the use of restricted resources and ensure future transactions document the purpose and value one fund is providing another before the transfers occur. We further recommend the City repay the Sewer Water Fund $1,462,000 in unsupported transfers made to date, plus interest. City's Response The city accepts the Auditors recommendation and will create a financial plan for the storm water business segment to repay the sewer business segment for the identified transfers, The financial plan will be presented to the city council for its approval in early 2011. Auditor's Remarks We appreciate the City's commitment to resolve this finding and thank the City for its cooperation and assistance during the audit. We will review the corrective action taken during our next regular audit. Applicable Laws and Regulations RCW 43.09.200, Local government accounting — Uniform system of accounting, states: The state auditor shat! formulate, prescribe, and install a system of accounting and reporting for all local governments, which shall be uniform for every public institution, and every public office, and every public account of the same class. The system shall exhibit true accounts and detailed statements of funds collected, received, and expended for account of the public for any purpose whatever, and by all public officers, employees, or other persons. The accounts shall show the receipt, use, and disposition of all public property, and the income, if any, derived therefrom; all sources of public income, and the amounts due and received from each source; all receipts, vouchers, and other documents kept, or required to be kept, necessary to isolate and prove the validity of every transaction; all statements and reports made or required to be made, for the internal administration of the office to which they pertain; and all reports published or required to be published, for the information of the people regarding any and all details of the financial administration of public affairs. Washingfon State Auditor's Office 6 RCW 43.09,210, Local government accounting — Separate accounts for each fund or activity— Exemption for agency surplus personal property, states: Separate accounts shall be kept for every appropriation or fund of a taxing or legislative body showing date and manner of each payment made therefrom, the name, address, and vocation of each person, organization, corporation, or association to whom paid, and for what purpose paid. Separate accounts shall be kept for each department,' public improvement, undertaking, institution, and public service industry under the jurisdiction of every taxing body, All service rendered by, or property transferred from, one department, ' public improvement, undertaking, institution; or public service industry to another, shall be paid for at its true and full value by the department, public improvement, undertaking, institution, or public service industry receiving the same, and no department, public improvement, undertaking, institution, or public service industry shall benefit in any financial manner whatever by an appropriation or fund made for the support of another. All unexpended balances of appropriations shall be transferred to the fund from which appropriated, whenever the account with an appropriation is closed. Washington state Auditor's office 7