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ANALYSIS - One of the goals of the county's local housing assistance plan is to increase home ownership for very low and low income households. In many cases, an eligible household can afford a mortgage payment, but cannot save money for a down payment and closing costs. With a combination of HOME program funds and SHIP program funds, eligible households may have the opportunity to acquire a housing unit which is affordable. While implementing the county's local housing assistance plan, the county must ensure that all state requirements and local requirements are met. One state requirement is that all funds for a state fiscal year must be encumbered within 12 months after the end of the fiscal year and must be expended within 24 months after the end of the fiscal year. With the county's SHIP program income increasing every year, that requirement may become difficult to meet in future years. Since establishment of the county's affordable housing trust fund, the amount of SHIP funds deposited in the SHIP trust fund has increased due to two principal factors. First, the SHIP allocation amount that the county receives from the state has increased. In the first 3 years of the program, the county's allocation was $250,000.00 per year; for FY 1998-1999, the county received $903,723.00. Second there are more and more applicants who are paying back their loans, with the loan repayment amounts added to the SHIP trust fund. In FY 1998-99, the trust fund's other program income totaled $79,185.15. So far, all SHIP funds have been expended in a timely manner, mainly due to the large demand existing in the community and the efforts made by local financial institutions to utilize SHIP funds for their eligible clients. Staff, however, believes that, with the increased funding in the future, it may become more difficult to utilize SHIP funds through only individual applications. At this point, it seems feasible to set aside up to $150,000 of the county's annual SHIP allocation for use by eligible clients of an affordable housing developer. Currently, the County's local housing assistance program provides for impact fee loans to very low and low income persons. If authorized by the Board, the County will advertise the attached RFP for a set aside of up to $150,000 of the county's SHIP allocation per fiscal year for the next three fiscal years. This set aside amount of SHIP funds will be available for the exclusive use of the selected developer's clients as a local match for HOME funds. As a requirement of this set aside, the selected developer will assist his clients in obtaining first mortgages from a bank and second mortgages for down payment and closing costs from the HOME program. The County will then provide a SHIP loan to the developer's clients for appropriate impact fees. By setting aside a certain amount of SHIP funds and thereby assuring a developer that his qualifying, eligible clients will receive SHIP loans, the county will benefit in several ways. First, the set aside will increase the probability that a local development project will receive state HOME funds. Second, the set aside will ensure that a certain amount of the annual SHIP allocation will be encumbered. Third, the set aside will make distribution of a portion of the annual allocation more efficient. Finally, the set aside will enhance the county's economy by increasing the amount of new construction. Through the developer selection (RFP) process, staff will ensure that the developer chosen to receive the SHIP set aside will meet all SHIP requirements, including credit and income eligibility, employment status, maximum assets, and others. Also through this process, staff will ensure that the selected developer will provide a sufficient amount of SHIP funds to very low income households. SEPTEMBER 7, 1999 81 BOOK