Work Session

Mayor and Council Executive Session and Work Session December 10, 2019 Agenda "The City of Hagerstown will promote a diverse, business-friendly, and sustainable community with clean, safe, and strong neighborhoods." "The City of Hagerstown shall be the model provider of the most efficient and highest quality customer services to be known as the municipal location of choice for all" “We must use time wisely and forever realize that the time is always ripe to do right.” - Nelson Mandela EXECUTIVE SESSION 3:00 PM 1. Executive Session 4:00 PM WORK SESSION 1. Proclamation: Historic Houses of Worship Tour – Pat Kelley, Representative of Hagerstown Religious Council 4:05 PM 2. Preliminary Agenda Review 4:15 PM 3. FY19 Comprehensive Annual Financial Report (CAFR) – Michelle Hepburn, Director of Finance 4:35 PM 4. Proposed Community Development Block Grant (CDBG) Action Plan Amendment for Reallocation of FY20 CDBG Funds – Jonathan Kerns, Community Development Manager, and Rodney Tissue, City Engineer 4:45 PM 5. Update and Next Steps for Vacant/Abandoned/Cyclical Tax Sale Properties Initiative – Jonathan Kerns, Community Development Manager CITY ADMINISTRATOR'S COMMENTS MAYOR AND COUNCIL COMMENTS ADJOURN  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Executive Session Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates:  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Proclamation: Historic Houses of Worship Tour – Pat Kelley, Representative of Hagerstown Religious Council Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates:  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Preliminary Agenda Review Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates:  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: FY19 Comprehensive Annual Financial Report (CAFR) – Michelle Hepburn, Director of Finance Mayor and City Council Action Required: Discussion: Financial Impact: Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description Memo_for_FY_19_CAFR_Presentation.docx.pdf FY19 Memo for CAFR and Audit FY19_City_of_Hagerstown_Audit_Presentation.pdf FY19 Audit Presentation Knowledge · Quality · C l i e n t S e rv i c e Presentation to the City Council December 10, 2019  AGENDA Introductions Executive Summary Audit Approach Audit Results Required Communications Meeting Your Expectations K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 2  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Introductions  INTRODUCTIONS SB & Company, LLC  William Seymour, Client Service Partner  Chris Lehman, Engagement Partner K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 4  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Executive Summary  SCOPE OF SERVICES  Audit of the June 30, 2019, financial statements  Performance of Uniform Guidance Single Audit  Review of Uniform Financial Report  Review of Data Collection form  Available for year-round consultation K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 6  SUMMARY OF THE RESULTS 2019 2018 2017 Changes in Net Position $ 4,794,879 $ 4,462,180 $ 1,637,942 Net Position $ 199,634,199 $ 194,839,320 $ 221,243,515 K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 7  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Audit Approach K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 9  ASSESSMENT OF CONTROL ENVIRONMENT Area Points to Consider Our Assessment  Key executive integrity, ethical, and behavior  Control consciousness and operating style Control  Commitment to competence Effective Environment  Board’s participation in governance and oversight  Organizational structure, responsibility, and authority  HR policies and procedures Risk  Mechanisms to anticipate, identify, and react to significant events Effective Assessment  Processes and procedures to identify changes in GAAP, business practices, and internal control  Adequate performance reports produced from information systems  Information systems are connected with business strategy Information &  Commitment of HR and finance to develop, test, and monitor IT systems and programs Effective Communication  Business continuity and disaster recovery for IT  Established communication channels for employees to fulfill responsibilities  Adequate communication across organization  Existence of necessary policies and procedures  Clear financial objectives with active monitoring Control  Logical segregation of duties Effective Activities  Periodic comparisons of book-to-actual and physical count-to-books  Adequate safeguards of documents, records, and assets  Assess controls in place  Periodic evaluations of internal controls Monitoring  Implementation of improvement recommendations Effective K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 10  EVALUATION OF KEY PROCESSES Process Function A B C D Our Assessment • Cash Management • Investment Accounting • Investment Monitoring • Investment Valuation Treasury     Effective • Investment Policy • Reconciliation • Methodology Estimation • Information    Effective • Calculation • Accounting Principles and • General Ledger and Journal Disclosure Entry Processing Financial • Closing the Books • Verification and Review of    Effective Reporting • Report Preparation Results • Purchasing • Receiving Expenditures     Effective • Accounts Payable and Cash Disbursement A Understand the Process B What Can Go Wrong? C Walk-through D Test of Controls/Substantive K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 11  EVALUATION OF KEY PROCESSES (CONTINUED) Process Function A B C D Our Assessment • Attendance Reporting • Payroll Accounting and Processing Payroll     Effective • Payroll Disbursements • Billing • Cash Receipts Revenue • Revenue Recognition     Effective • Cutoff • Physical Custody • Asset and Construction in Process Accounting Fixed Assets     Effective • Report Preparation A Understand the Process B What Can Go Wrong? C Walk-through D Test of Controls/Substantive K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 12  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Audit Results  FINANCIAL STATEMENT HIGHLIGHTS Governmental Activities Business-type Activities 2019 2018 2017 2019 2018 2017 Current and other assets $ 36,100,964 $ 30,416,839 $ 31,813,088 $ 44,549,690 $ 44,889,474 $ 43,055,246 Capital assets 84,100,043 84,153,136 85,329,222 201,017,529 196,221,106 199,299,441 Total assets 120,201,007 114,569,975 117,142,310 245,567,219 241,110,580 242,354,687 Deferred outflows 5,439,875 4,631,507 3,330,318 1,944,490 1,640,604 2,243,526 Long-term liabilities outstanding 82,329,480 81,162,201 61,457,472 60,975,530 62,588,442 60,740,922 Other liabilities 11,012,353 8,658,162 8,206,723 16,068,554 12,463,024 12,924,575 Total liabilities 93,341,833 89,820,363 69,664,195 77,044,084 75,051,466 73,665,497 Deferred inflows 2,423,082 1,370,807 269,540 709,393 870,710 228,094 Net position Net investment in capital assets 66,784,135 66,650,974 66,954,557 154,076,731 146,353,536 145,943,803 Restricted 11,549,646 9,650,397 9,737,523 - - - Unrestricted (48,457,814) (48,291,059) (26,153,187) 15,681,501 20,475,472 24,760,819 Total Net Position $ 29,875,967 $ 28,010,312 $ 50,538,893 $ 169,758,232 $ 166,829,008 $ 170,704,622 K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 14  FINANCIAL STATEMENT HIGHLIGHTS (CONTINUED) Governmental Activities Business-type Activities 2019 2018 2017 2019 2018 2017 REVENUES Charges for current services $ 9,038,555 $ 8,760,431 $ 8,083,947 $ 52,589,568 $ 51,159,561 $ 49,083,641 Operating grants and contributions 3,061,406 1,554,570 1,783,552 750,196 5,616 44,502 Capital grants and contributions 845,126 1,236,493 1,315,570 2,568,732 1,449,023 2,136,516 Property taxes 32,047,754 29,674,582 28,882,713 - - - Income and other taxes 5,735,651 5,057,155 5,317,337 - - - Miscellaneous 932,282 426,095 348,555 409,075 265,658 201,269 Total Revenues $ 51,660,774 $ 46,709,326 $ 45,731,674 $ 56,317,571 $ 52,879,858 $ 51,465,928 EXPENSES General government $ 10,613,252 $ 8,627,247 $ 9,562,623 $ - $ - $ - Public safety 24,243,025 25,773,111 24,950,023 - - - Highways and streets 3,258,426 2,791,282 2,650,626 - - - Waste, collection and disposal 2,562,226 2,293,396 2,021,510 - - - Culture and recreation 3,090,190 3,005,649 2,948,143 - - - Economic and community development 4,757,014 3,204,744 3,393,612 - - - Interest on long-term debt 615,223 622,454 628,301 - - - Utilities and other proprietary funds - - - 54,044,110 48,809,122 49,404,822 Total Expenses $ 49,139,356 $ 46,317,883 $ 46,154,838 $ 54,044,110 $ 48,809,122 $ 49,404,822 K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 15  SINGLE AUDIT RESULTS Major Program Expenditures Community Development Block Grant (CFDA #14.218) $ 1,369,308 Total Expenditures of all Federal Awards $ 1,665,312 Percentage of Coverage of Audited Federal Grants 82% No Single Audit findings The Single Audit, which encompasses both financial and compliance components, is required for entities that expend $750,000 or more of federal assistance received for its operations. It provides assurance to the US Federal government as to the management and use of such assistance. K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 16  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Required Communications  REQUIRED COMMUNICATIONS Auditor’s Responsibilities Under The financial statements are the responsibility of management. Our Generally Accepted Auditing audit was designed in accordance with auditing standards generally Standards (GAAS) accepted in the United States of America, and provide for reasonable, rather than absolute, assurance that the financial statements are free of material misstatement. We were engaged to perform our audit in accordance with the standards of the accounting principles generally accepted in the United States of America. Significant Accounting Policies Management has the responsibility for the selection and use of appropriate accounting policies. In accordance with the terms of our engagement letter, we will advise management about the appropriateness of accounting policies and their application. The significant accounting policies used by management are described in the notes to the financial statements. Auditor’s Judgments About the We discuss our judgments about the quality, not just the acceptability, We have reviewed the significant Quality of Accounting of accounting principles selected by management, the consistency of accounting policies adopted by the Principles their application, and the clarity and completeness of the financial City and have determined that these statements, which include related disclosures. policies are acceptable accounting policies. Audit Adjustments We are required to inform the City’s oversight body about There were no recorded or adjustments arising from the audit (whether recorded or not) that unadjusted audit adjustments for could in our judgment either individually or in the aggregate have a the City’s audit. significant effect on the entity’s financial reporting process. We also are required to inform the City’s oversight body about unadjusted audit differences that were determined by management to be individually and in the aggregate, immaterial. K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 18  REQUIRED COMMUNICATIONS (CONTINUED) Fraud and Illegal Acts We are required to report to the City’s oversight body any Our procedures identified no fraud and illegal acts involving senior management and fraud instances of fraud or illegal and illegal acts (whether caused by senior management or other acts. employees) that cause a material misstatement of the financial statements. Material Weaknesses in We are required to communicate all significant deficiencies in We have not identified any Internal Control the City’s systems of internal controls, whether or not they are material weaknesses in internal also material weaknesses. controls. Other Information in None. Documents Containing Audited Financial Statements Disagreements with None. Management on Financial Accounting and Reporting Matters K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 19  REQUIRED COMMUNICATIONS (CONTINUED) Serious Difficulties Encountered in Performing the None. Audit Major Issues Discussed with Management Prior to None. Acceptance Management Representations We received certain written representations from management as part of the completion of the audit. Consultation with Other Accountants To our knowledge, there were no consultations with other accountants since our appointment as the City’s independent public accountants. Independence As part of our client acceptance process, we go through a process to ensure we are independent of the City. We are independent of the City. K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 20  REQUIRED COMMUNICATIONS (CONTINUED) Our Responsibility Related to Fraud • Comply and perform the audit to obtain reasonable assurance that there is no material misstatement caused by error or fraud; • Comply with GAAS AU-C 240 “Consideration of Fraud in a Financial Statement Audit”; • Approach all audits with an understanding that fraud could occur in any entity, at any time, by anyone; and • Perform mandatory procedures required by GAAS and our firm policies. Examples of Procedures Performed • Discuss thoughts and ideas in areas where the financial statements might be susceptible to material misstatement due to fraud; • Understand pressures on the financial statement results; • Understand the tone and culture of the organization; • Look for unusual or unexpected transactions, relationships, or procedures; • Discussions with individuals outside of finance; • Evaluate key processes and controls; and • Consider information gathered throughout the audit. K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 21  RESPONSIBILITY FOR MITIGATING FRAUD Management:  CFO/Controller: controls to deter and detect fraud Financial Misconduct by Fraudulent  General Counsel/Compliance: Member(s) of Financial Sr. Management Reporting monitoring of the Board Costs & External Auditor: Expenses Misappropriation Avoided by of Assets  Evaluate management programs and Fraud controls to deter and detect fraud for Revenue & Expenditures & Audit Committee: Liabilities Assets identified risks Obtained by for an Improper  Evaluate management Purpose Fraud  Reasonable assurance that financial identification of fraud risk statements are free of material  Evaluate implementation of fraud misstatement due to fraudulent financial controls reporting or misappropriation of assets  Reinforce “tone at the top”  Compliance with fraud standard (SAS 99)  Conduct special investigations  Conversations with finance and operations personnel  Disaggregated analytics  Surprise audit procedures  Journal entry testing K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 22  REQUIRED COMMUNICATIONS – FRAUD • Generally provided through weaknesses in internal control Opportunity • Tone at the top is important • We assess controls and tone at the top • Pressure can be imposed due to economic troubles, personal vices and Pressure unrealistic deadlines and performance goals • There are increased pressures due to economy and minimal salary increases • Individuals develop a justification for their fraudulent activities Rationalization • Increased rationalization due to minimal salary increases and less personnel K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 23  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Meeting Your Expectations  SBC’S SERVICE PLEDGE TO YOU We will consistently deliver a Quality Product and Quality Service so that we have the opportunity to establish a Quality Relationship with you, allowing us to provide you with Quality Knowledge for your continual success. Only after we have provided you with the knowledge that enables your business to grow and prosper, we have hit the bullseye! Our commitment to you is the execution of our Bullseye Philosophy. We execute this philosophy for every client, on every engagement, every time. K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 25  ENGAGEMENT TEAM CONTACT INFORMATION William Seymour Chris Lehman Client Service Partner Engagement Partner Office: (410) 584‐1404 Office: (410) 584‐2201 Mobile: (443) 220‐4401 Mobile: (301) 785‐7408 wseymour@sbandcompany.com clehman@sbandcompany.com Executive Assistant: Executive Assistant: Susan Teneza Susan Teneza Office: (410) 584‐9303 Office: (410) 584‐9303 Email: steneza@sbandcompany.com Email: steneza@sbandcompany.com K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e 26  K n ow l e d g e · Q u a l i t y · C l i e n t S e rv i c e Baltimore Office: Washington, DC Office: Philadelphia Office: Richmond Office: South Florida Office: 10200 Grand Central Avenue 1299 Pennsylvania Ave., NW 1500 Market Street 6802 Paragon Place 4000 Hollywood Suite 250 Suite 1120 12th Floor, East Tower Suite 410 Suite 555‐S Owings Mills, MD 21117 Washington, DC 20004 Philadelphia, PA 19102 Richmond, VA 23230 Hollywood, FL 33021 410.584.0060 202.803.2335 215.665.5749 804.441.6000 954.843.3477  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Proposed Community Development Block Grant (CDBG) Action Plan Amendment for Reallocation of FY20 CDBG Funds – Jonathan Kerns, Community Development Manager, and Rodney Tissue, City Engineer Mayor and City Council Action Required: Staff request Mayor & City Council approval to amend the Community Development Block Grant (CDBG) FY20 Action Plan. The amendment is required for recommended reallocation of available CDBG funding budgeted for current fiscal year projects that remain in the conceptual phase and/or current fiscal year projects that will not move forward. The proposed amendment will reallocate CDBG funding to three projects: Medal of Honor Triangle Improvements, City Park Upper Parking Lot Reconstruction, and Mitchell Avenue Underpass Improvements. Discussion: Due to CDBG regulatory requirements related to timely expenditure of CDBG funds, staff perform periodic reviews of the CDBG budget each fiscal year to determine if funding from existing CDBG activities should be reallocated. This often occurs when a CDBG project or activity has been underutilized, completed under budget, and/or delayed within the planning phase. If funds are available from such activities, CDBG regulations typically require an amendment to reallocate the remaining CDBG funds to different activities. After a recent review of the CDBG budget, it is recommended that a total of $300,000 in FY20 CDBG funding be reallocated to different CDBG projects. $200,000 of CDBG funding is available from the Neighborhood Parks line item due to the proposed Splash Pad project timeline being shifted into the next fiscal year. $100,000 of CDBG funding is available from the Public Facilities Loan line item as it is now projected that no eligible public facility loans will occur in the current fiscal year. Next Steps Amending the CDBG Action Plan involves routine processes typically handled by staff. The amendment for this current case will also require Mayor & City Council approval since multiple activities are receiving reallocated funding in excess of $25,000. The CDBG amendment for these reallocations is scheduled for Mayor & City Council approval during the December 17th Regular Session. Staff will be available to answer any questions or concerns on recommended reallocations described above. Financial Impact: Proposed Reallocation of FY2020 CDBG Funding A breakdown of the available Neighborhood Parks funding and Public Facilities Loan funding, along with proposed uses of reallocated funding, is shown below. CDBG Neighborhood Parks Currently Available Budget - $355,000 This funding was allocated for the following projects: · $30,000 for ADA compliant walking paths in Hager Park – Project on schedule for early 2020 · $125,000 for City Park upper lot reconstruction/accessibility improvements – Project on schedule for early 2020 · $200,000 for a Splash Pad Park – Project remains in planning phase and projected timeline for location, concept design, and groundbreaking has shifted to next fiscal year 2021 CDBG Public Facility Loans Currently Available Budget - $100,000 Funding was allocated for potential loans to be made available for non-profit organizations needing construction and/or rehabilitation funding. No eligible public facility loans are expected this fiscal year. Recommended Reallocation of $300,000 CDBG Funds · Reallocate $125,000 of CDBG funding to an existing CDBG funded project - City Park upper lot reconstruction/accessibility improvements. This will result in a fully CDBG-funded project budget of $250,000 to construct a 44-space paved, striped, landscaped and lit parking area. This reallocation will also allow $125,000 of State Aid funding (originally allocated to the City Park Parking lot project) to be shifted to the Wesel Blvd expansion/widening project. · Reallocate $150,000 of CDBG funding to a new CDBG funded project– Mitchell Avenue underpass signal and improvements. This will result in a total CDBG project budget of $150,000 to install a traffic signal at each side of this railroad overpass to eliminate the need to “sound horn” when entering the overpass. The work would also include lighting upgrades and possibly painting the overpass walls. This improvement was requested by area residents during previous meetings of the West End Neighborhoods 1st group. · Reallocate an additional $25,000 of CDBG funding to an existing CDBG funded project – Medal of Honor Triangle improvements. This will result in a total CDBG project budget of $95,000 to relocate and upgrade plaques and signs, provide small seating bench, provide small plaza area, and update and improve the landscaping and add seasonal color. All three of these projects are expected to break ground in spring or early summer of 2020. Recommendation: Motion: Action Dates: ATTACHMENTS: File Name Description 121019_CDBG_Reallocation_FY20.pdf Memo CDBG Reallocation  REQUIRED MOTION MAYOR AND CITY COUNCIL HAGERSTOWN, MARYLAND Topic: Update and Next Steps for Vacant/Abandoned/Cyclical Tax Sale Properties Initiative – Jonathan Kerns, Community Development Manager Mayor and City Council Action Required: Discussion: Staff request an opportunity to meet with the Mayor & City Council to provide an update on the proposed initiative to reduce the number of abandoned tax sale properties in the City of Hagerstown. This subject was initially discussed with the Mayor & City Council during a previous work session and also discussed during multiple joint meetings with the Board of County Commissioners. Proposed Next Steps The Mayor & City Council have directed City staff to move forward with officially creating a program to repurpose vacant and abandoned cyclical tax sale properties within the City of Hagerstown. City staff have worked closely with legal counsel on this initiative and per Jen Keefer, City Attorney, two legislative actions will be required for implementation of a Tax Sale Property Repurpose Program: · Amendment to City Code – Adding a chapter in City Code to provide framework for the program · Adopting an Ordinance- Establishing detailed program policy and procedures At this time, staff and legal counsel have two working draft documents that require Mayor & Council review and feedback. The first document is the City Code amendment language to create the program framework and the second document is the program policy/procedural details for program execution. Both documents are attached to this memorandum. The currently active Dorchester County Tax Lien Property Repurpose Program was used as a model for creating these draft documents. A clear distinction with the proposed program for the City of Hagerstown is the process of seeking a new property owner or property end user prior to city acquisition of a subject delinquent tax sale property. Highlights of the proposed process include the following: · City Staff will identify targeted cyclical tax sale property or properties that are vacant/abandoned and subject to multiple tax sales without transfer of ownership · City Staff and legal counsel will work to ensure targeted properties are not in the process of a sale or foreclosure · Properties will be categorized as a buildable vacant lot, unbuildable vacant lot, lot with structure that requires demolition, or lot with structure that can be rehabilitated · Mayor & City Council will be consulted prior to end user selection process · City seeks adjacent property owners for unbuildable vacant lots · City seeks housing based non-profit organizations for buildable lots or lots with structures requiring rehabilitation or demolition · If no housing based non-profit organizations are identified, an RFP process will be utilized to seek developers for buildable lots or lots with structures requiring rehabilitation or demolition · After identifying an end user that is approved by Mayor & City Council, City forecloses on a subject property and takes necessary steps to resell property to selected end user · If demolition is required, the City demolishes property immediately while under City ownership and then transfers ownership to selected end user · Delinquent City Tax amounts would likely need to be reduced or forgiven to make resale/reuse feasible and would be determined on a case-by-case basis · Washington County taxes to also be reduced or forgiven to assist with program feasibility · Previous property owner of record would remain liable for uncollected tax amounts and judgment is entered for any remaining delinquent taxes After obtaining Mayor & City Council feedback on the proposed code amendment language and the proposed policy/procedure language, all necessary documents will be finalized to introduce and approve required legislation during a January Special Session and January Regular Session respectively. Once the legislation is finalized and approved by the Mayor & City Council, Staff would begin program implementation after the legislation becomes effective. Financial Impact: Recommendation: As previously discussed, staff are recommending the program begin on a pilot basis. This would target a small number of vacant/abandoned cyclical tax sale properties with a high probability of successful resale and reuse. Staff will be available during the December 10th work session to discuss these items in greater detail. Motion: Action Dates: ATTACHMENTS: File Name Description 121019_Tax_Sale_Memo.pdf Memo 121019_Tax_Sale_packet.pdf Program Guidelines 121019_Tax_Sale_Draft_Ordinance.pdf Draft Ordinance  CITY OF HAGERSTOWN, MARYLAND Department of Community and Economic Development To: Scott Nicewarner, City Administrator From: Jonathan Kerns, Community Development Manager Date: December 5, 2019 RE: Update and Next Steps for Vacant/Abandoned/Cyclical Tax Sale Properties Initiative Staff request an opportunity to meet with the Mayor & City Council to provide an update on the proposed initiative to reduce the number of abandoned tax sale properties in the City of Hagerstown. This subject was initially discussed with the Mayor & City Council during a previous work session and also discussed during multiple joint meetings with the Board of County Commissioners. Proposed Next Steps The Mayor & City Council have directed City staff to move forward with officially creating a program to repurpose vacant and abandoned cyclical tax sale properties within the City of Hagerstown. City staff have worked closely with legal counsel on this initiative and per Jen Keefer, City Attorney, two legislative actions will be required for implementation of a Tax Sale Property Repurpose Program:  Amendment to City Code – Adding a chapter in City Code to provide framework for the program  Adopting an Ordinance- Establishing detailed program policy and procedures At this time, staff and legal counsel have two working draft documents that require Mayor & Council review and feedback. The first document is the City Code amendment language to create the program framework and the second document is the program policy/procedural details for program execution. Both documents are attached to this memorandum. The currently active Dorchester County Tax Lien Property Repurpose Program was used as a model for creating these draft documents. A clear distinction with the proposed program for the City of Hagerstown is the process of seeking a new property owner or property end user prior to city acquisition of a subject delinquent tax sale property. Highlights of the proposed process include the following:  City Staff will identify targeted cyclical tax sale property or properties that are vacant/abandoned and subject to multiple tax sales without transfer of ownership  City Staff and legal counsel will work to ensure targeted properties are not in the process of a sale or foreclosure  Properties will be categorized as a buildable vacant lot, unbuildable vacant lot, lot with structure that requires demolition, or lot with structure that can be rehabilitated  Mayor & City Council will be consulted prior to end user selection process  City seeks adjacent property owners for unbuildable vacant lots ______________________________________________________________________________ 14 N. Potomac Street, Suite 200A Hagerstown, MD 21740 (301) 739-8577 Ext. 111   City seeks housing based non-profit organizations for buildable lots or lots with structures requiring rehabilitation or demolition  If no housing based non-profit organizations are identified, an RFP process will be utilized to seek developers for buildable lots or lots with structures requiring rehabilitation or demolition  After identifying an end user that is approved by Mayor & City Council, City forecloses on a subject property and takes necessary steps to resell property to selected end user  If demolition is required, the City demolishes property immediately while under City ownership and then transfers ownership to selected end user  Delinquent City Tax amounts would likely need to be reduced or forgiven to make resale/reuse feasible and would be determined on a case-by-case basis  Washington County taxes to also be reduced or forgiven to assist with program feasibility  Previous property owner of record would remain liable for uncollected tax amounts and judgment is entered for any remaining delinquent taxes After obtaining Mayor & City Council feedback on the proposed code amendment language and the proposed policy/procedure language, all necessary documents will be finalized to introduce and approve required legislation during a January Special Session and January Regular Session respectively. Once the legislation is finalized and approved by the Mayor & City Council, Staff would begin program implementation after the legislation becomes effective. As previously discussed, staff are recommending the program begin on a pilot basis. This would target a small number of vacant/abandoned cyclical tax sale properties with a high probability of successful resale and reuse. Staff will be available during the December 10th work session to discuss these items in greater detail. Attachments: Draft Code Amendment for Tax Sale Program Draft Policy and Procedures for Tax Sale Program c. Jill Thompson, Director of Community and Economic Development Michelle Hepburn, Director of Finance Paul Fulk, Neighborhood Services Manager Jen Keefer, City Attorney  City of Hagerstown Chapter xxx Formatted: Font: (Default) Times New Roman, 12 pt, Bold Tax Sale Property Repurpose Program for Vacant and Abandoned Properties xxx-1. Purpose. To facilitate the repurposing and revitalization of vacant, abandoned tax sale properties located within the City of Hagerstown. The program will initially be implemented on a pilot basis in order to determine feasibility, cost, and impact of repurposing tax sale properties. xxx-2. Definitions. As used in this chapter, the following terms shall have the meanings indicated: Vacant End User The individual, individuals, or entity that is a party to a Contract of Sale (contingent upon City acquisition of subject property) for a specific property and to whom, pursuant to the terms and conditions of the Contract of Sale, the City intends to convey that specific property if and when the City obtains clear title through the tax sale foreclosure process. Formatted: Font: Not Bold Qualified Non-profit organization A 501(c)(3) organization with a mission or purpose that is focused on providing affordable housing options. Vacant TBD xxx-3. Program Eligibility for Subject Properties A property shall be eligible for the subject program when it meets the following criteria: A. Subject property must be a vacant structure, a vacant blighted structure, or an abandoned structure as defined by the City Code. B. Subject property is tax delinquent and has been included in the Washington County Tax Sale process for at least two tax sale cycles with no transfer of ownership. C. Subject property is not in the process of foreclosure or at risk of foreclosure by a lien holder or tax sale certificate holder. xxx-4. Categorization of Subject Properties A. With assistance from the Planning and Code Administration Department (“PCAD”), Community and Economic Development (“DCED”) staff will categorize eligible properties for repurposing as: (1) Vacant and undevelopable: vacant parcel not suitable for building construction or development per the City Code; 14 N. Potomac Street, Suite 200A l Hagerstown, MD 21740 Tel: 301.739.8577 Ext. 111 l Fax: 301.739.3117 Email: dced@hagerstownmd.org www.hagerstownmd.org  (2) Vacant and developable: vacant parcel suitable for building construction or development; (3) Structure in need of rehabilitation: parcel with vacant structure suitable for rehabilitation; or (4) Structure requiring demolition: parcel with vacant structure beyond repair and requiring demolition. xxx-5. Vacant and undevelopable end user selection process A. The City will seek interest from owners of contiguous property offering a potential transfer of property for the sale price of $1. Disclaimer – transfer of subject property to end user is contingent upon City acquisition of subject property. B. Notification to contiguous property owners will be made via certified letters mailed to address listed on the State Department of Assessments and Taxation (SDAT) website. The mailing will include a Property Acquisition Interest Form for potential end users to complete. C. Interested property owners must complete the form and return it to the DCED within 30 days from the date of the letter. D. If all contiguous property owners decline the property offer and/or fail to respond, the above process will be repeated for property owners located within the same street block as Formatted: Not Highlight the subject property. E. End users will be ranked in order of receipt of successfully completed Property Acquisition Interest form. If multiple Property Acquisition Interest Forms are received at the same time, the DCED review committee will rank and prioritize forms based upon proximity to the subject property. F. The City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with the first owner to successfully complete and return the Property Acquisition Interest form. G. After execution of Contract of Sale (Contingent upon City acquisition of subject property) with successful applicant, City will begin tax sale foreclosure process on subject property and once under City ownership, property will be transferred to end user per agreed upon terms in contract. H. If no interested owners seek ownership of subject lot, the City will review possibility of use for green space, storm water management, or other needs. Formatted: Not Highlight Formatted: Font: (Default) Times New xxx-6. Vacant and developable end user selection process. Roman, 12 pt, Bold, Not Highlight 1. First Option - Sale/Donation to Qualified Non-Profit Organizations for Affordable Formatted: Numbered + Level: 1 + Numbering Style: A, B, C, … + Start at: 1 + Housing Opportunities Alignment: Left + Aligned at: 0.25" + Indent A. at: 0.5" Formatted: Not Highlight 2 2.1.The City shall solicit interest from qualifiedhousing based non-profit organizations based on a policy developed and maintained by the DCED. 3.2. Notification to qualified non-profit housing organizations meeting criteria set forth in City policy shall be made via certified letters. 4.3.Interested organizations shall submit the completed form to the DCED within 45 days from the date of the letter. 5.4.If Property Acquisition Interest Forms are received from multiple qualified non-profit organizations during the 45-day application period, the City’s DCED review committee will review and rank project proposals based on criteria set forth in City policy. 6.5.The DCED review committee will present recommended proposal to the Mayor & City Council for approval. If approved by M & C, City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with selected organization. 7.6.After execution of Contract of Sale (Contingent upon City acquisition of subject property) with the selected organization, the City will begin tax sale foreclosure process on subject property and once under City ownership, property will be transferred to end user per agreed upon terms in contract. 8.7.If no organization seeks ownership of subject property or properties, the City would utilize an RFP open to all interested developers and/or will review possibility of use for green space, storm water management, or other needs. A.B. Second Option - RFP to All Interested Developers Formatted: Font: (Default) Times New Roman, 12 pt, Bold 1. The City shall solicit interest from all potential developers through a formal RFP process. Formatted: Numbered + Level: 1 + The opportunity to acquire the property for redevelopment will be advertised on the City Numbering Style: A, B, C, … + Start at: 1 + website and in a newspaper with local distribution. Alignment: Left + Aligned at: 0.25" + Indent at: 0.5" 2. The RFP process shall solicit proposals for redevelopment of subject property or properties Formatted: Font: (Default) Times New subject to criteria set forth in a policy developed and maintained by the DCED. Roman, 12 pt 3. All RFPs appropriately completed and timely received shall be reviewed by the DCED review committee. 4. If multiple RFPs are received, the DCED review committee shall review and rank the proposals based on criteria set forth in the City policy. 5. The DCED review committee will present recommended proposal to the Mayor & City Formatted: Font color: Auto Council for approval. If approved by M & C, City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with selected developer. 6. After execution of Contract of Sale (Contingent upon City acquisition of subject property) with the selected developer, the City will begin tax sale foreclosure process on subject property and once under City ownership, property will be transferred to end user per agreed upon terms in contract. 7. If no proposals are received for a subject property, City to review possibility of use for green space, storm water management, or other needs. 3 xxx-7. Structure in need of rehabilitation end user selection process. A. First Option–Direct outreach to Qualified Non-Profit Organizations with the Formatted: Not Highlight understanding the Qualified Non-Profit Organization would agree to rehabilitate the structure. 1. The City shall solicit interest from housing basedqualified non-profit organizations based on a policy developed and maintained by the DCED. 2. Notification to qualifiedarea non-profit housing organizations meeting criteria set forth in City policy shall be made via certified letters. 3. Interested organizations shall submit the completed form and return it to the City’s DCED within 45 days from the date of the letter. 4. If Property Acquisition Interest Forms are received from multiple qualified non-profit organizations during the 45-day application period, the City’s DCED review committee will review and rank project proposals based on criteria set forth in City policy. 5. The DCED review committee will present recommended proposal to the Mayor & City Council for approval. If approved by M & C, City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with selected organization. 6. After execution of Contract of Sale (Contingent upon City acquisition of subject property) with the selected organization, the City will begin tax sale foreclosure process on subject property and once under City ownership, the City will commence with demolition of the existing structure. 7. After demolition of the structure, the property will be transferred to end user per agreed upon terms in contract. 8. If no organization seeks ownership of subject property or properties, the City would utilize an RFP open to all interested developers and/or will review possibility of use for green space, storm water management, or other needs. B. Second Option–RFP to all interested developers with the understanding that Developer would agree to rehabilitate the structure. 1. The City shall seek interest from all potential developers through a formal RFP process. The opportunity to acquire the property for new construction development will be advertised on the city website and local newspaper. 2. The RFP process shall solicit proposals for new building construction on the subject property or properties subject to criteria set forth in a policy developed and maintained by the DCED. 3. All RFPs appropriately completed and timely received shall be reviewed by the DCED review committee. 4. If multiple RFPs are received, the DCED review committee shall review and rank the proposals based on criteria set forth in the City policy. 4  5. The DCED review committee will present recommended proposal to the Mayor & City Formatted: Font color: Auto Council for approval. If approved by M & C, City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with selected developer. 6. After execution of Contract of Sale (Contingent upon City acquisition of subject property) with the selected developer, the City will begin tax sale foreclosure process on subject property and once under City ownership, property will be transferred to end user per agreed upon terms in contract. 7. If no proposals are received for a subject property, City to review possibility of use for green space, storm water management, or other needs. xxx-8. Structure in need of demolition end user selection process. A. First Option–Direct outreach to Qualified Non-Profit Organizations with the understanding the City would undertake demolition of existing structure prior to transfer of ownership. Qualified Non-Profit Organization would agree to acquire a vacant, buildable lot. 1. The City shall solicit interest from housing basedqualified non-profit organizations based on a policy developed and maintained by the DCED. 2. Notification to qualifiedarea non-profit housing organizations meeting criteria set forth in City policy shall be made via certified letters. 3. Interested organizations shall submit the completed form and return it to the City’s DCED within 45 days from the date of the letter. 4. If Property Acquisition Interest Forms are received from multiple qualified non-profit organizations during the 45-day application period, the City’s DCED review committee will review and rank project proposals based on criteria set forth in City policy. 5. The DCED review committee will present recommended proposal to the Mayor & City Council for approval. If approved by M & C, City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with selectedwinning organization. 6. After execution of a Contract of Sale (Contingent upon City acquisition of subject property) with the selected organization, the City will begin tax sale foreclosure process on subject property and once under City ownership, the City will commence with demolition of the existing structure. 7. After demolition of the structure, the property will be transferred to end user per agreed upon terms in contract. 8. If no organization seeks ownership of subject property or properties, the City would utilize an RFP open to all interested developers and/or will review possibility of use for green space, storm water management, or other needs. B. Second Option–RFP to all interested developers with the understanding the City would undertake demolition of existing structure prior to transfer of ownership. Developer would agree to acquire a vacant, buildable lot. 5  1. The City shall seek interest from all potential developers through a formal RFP process. The opportunity to acquire the property for new construction development will be advertised on the city website and local newspaper. 2. The RFP process shall solicit proposals for new building construction on the subject property or properties subject to criteria set forth in a policy developed and maintained by the DCED. 3. All RFPs appropriately completed and timely received shall be reviewed by the DCED review committee. 4. If multiple RFPs are received, the DCED review committee shall review and rank the proposals based on criteria set forth in the City policy. 5. The DCED review committee will present recommended proposal to the Mayor & City Formatted: Font color: Auto Council for approval. If approved by M & C, City will enter into a Contract of Sale (Contingent upon City acquisition of subject property) with selected developer. 6. After execution of Contract of Sale (Contingent upon City acquisition of subject property) with the selected developer, the City will begin tax sale foreclosure process on subject property and once under City ownership, property will be transferred to end user per agreed upon terms in contract. 7. After demolition of the structure, the property will be transferred to end user per agreed upon terms in the contract. 8. If no proposals are received for a subject property, City to review possibility of use for green space, storm water management, or other needs. xxx-9. – Tax sale foreclosure process and delinquent tax litigation. 1. All property sale contracts are contingent upon City foreclosure and acquisition of the subject property. 2. The City shall begin the tax sale foreclosure process once an end user is identified and a property sale contractContract of Sale (contingent upon City acquisition of subject property) has been executed. 3. The City will take all necessary legal steps to execute tax sale foreclosure of subject property or properties. 4. The City will pursue necessary legal steps to obtain a judgment against the property owner who is responsible for all delinquent taxes. xxx-10. End user eligibility. Notwithstanding other eligibility requirements contained within this chapter or within City policy, no individual or entity shall be eligible for participation in this program if that individual or entity is the record owner of any tax delinquent property, or if that individual or entity is subject to a 6 judgment for delinquent taxes, or if that individual or entity is otherwise not in good standing with the City of Hagerstown regarding City taxes, City utilities, or City Licensing Programs. Formatted: Font color: Auto [vs. 120.0511.2019] 7