Pre-construction subsidy for affordable rental housing

(a) Pre-construction subsidy establishment. A pre-construction subsidy is established for the purpose of funding a portion of the development of affordable rental housing units provided for in this chapter. (b) Source of funds. (1) The aggregate of pre-construction subsidy payments made under this article and post-construction grants made under Article 4 may not exceed $10,000,000 in general funds; provided that there is no limit on payments made under this article from funds outside of the general fund. (2) The maximum amount of funds available per fiscal year is limited to the amount appropriated for pre-construction subsidies pursuant to this article and post-construction grants pursuant to Article 4 in each fiscal year’s executive operating budget and program. (3) No more than 5 percent of the moneys designated for pre-construction subsidies in any given fiscal year may be used for administrative expenses. (c) Pre-construction subsidy. The owner may apply for a pre-construction subsidy under this subsection after a building permit or professional self-certification has been issued for the affordable rental housing project in accordance with the following provisions: (1) An owner who has been awarded a pre-construction subsidy is not eligible for a post-construction grant pursuant to Article 4 for the same affordable rental housing project. (2) Pre-construction subsidy amount. An owner may be eligible to receive a total of $50,000 for each unit. (3) A pre-construction subsidy may only be used for purposes of paying prevailing wages to every laborer and mechanic performing work on the job site for the construction of the affordable rental housing project, in compliance with HRS Chapter 104. (4) To apply for a pre-construction subsidy, no earlier than the date of issuance of a building permit or professional self-certification for the affordable rental housing project, and no later than 12 months after the issuance of a building permit or professional self-certification, the owner shall submit to the department of planning and permitting a pre-construction subsidy application for the project in a form prescribed by the director of planning and permitting. At a minimum, the pre-construction subsidy application must include: (A) A current title report for the property, a description of the affordable rental housing project, including but not limited to location, zoning lot tax map key number, underlying zoning district, height, density, the number of affordable units at each AMI level, and whether there is a commercial component to the project; (B) The building permit number or professional self-certification number issued for the affordable rental housing project; and (C) The total estimated cost of the affordable rental housing project and all sources of funding for the project. (5) Upon receipt of the pre-construction subsidy application for an affordable rental housing project, the department of planning and permitting shall certify project eligibility for the funding, review and process the subsidy application, and calculate the subsidy amount for which the project is eligible. (6) All pre-construction subsidy awards are subject to the execution of a written pre-construction subsidy agreement between the city and the owner. At a minimum, the pre-construction subsidy agreement must include provisions: (A) Restricting the use of the pre-construction subsidy moneys in accordance with subdivision (3); (B) Requiring that annual payroll records be submitted to the director of planning and permitting, due by September 30 of each year, consisting of a certified copy of all payrolls and a certified copy of a fringe benefit report in compliance with HRS § 104-3; (C) Requiring the owner to obtain a certificate of occupancy for the affordable rental housing project within 24 months after the issuance of a building permit or professional self-certification for the project; provided that the director of planning and permitting, at the director’s discretion, may extend this 24-month period if the owner demonstrates good cause; (D) Requiring that the owner develop and manage the affordable rental housing project in compliance with all applicable laws, rules, regulations, and other governmental requirements; (E) Providing that if the owner breaches or otherwise violates any terms of the pre-construction subsidy agreement, the owner shall forfeit and return all the pre-construction subsidy moneys received in accordance with the penalty provisions set forth in § 32-5.4 (c); and (F) Providing that the director of budget and fiscal services may, from time to time at the director’s discretion, conduct an audit of the use of the pre-construction subsidy moneys to determine compliance with the requirements of this article and the applicable pre-construction subsidy agreement, and require the owner to cooperate with the audit and provide any information requested by the director. (7) For all affordable rental housing projects eligible for pre-construction subsidies, upon the execution of a pre-construction subsidy agreement pursuant to subdivision (6), the director of planning and permitting shall transmit the following to the director of budget and fiscal services: (A) Certification that the affordable rental housing project is eligible for the pre-construction subsidy, together with a copy of the project’s pre-construction subsidy application; (B) The building permit number or professional self-certification number issued for the affordable rental housing project; (C) A copy of the fully executed pre-construction subsidy agreement for the affordable rental housing project; and (D) The total pre-construction subsidy amount payable, and the calculation thereof. (8) All pre-construction subsidy awards are subject to the execution of a written pre-construction escrow agreement by the city (as grantor), the owner (as grantee), and an escrow agent. At a minimum, the pre-construction escrow agreement must include a provision for periodic disbursements of the pre-construction subsidy pro rata in proportion to the prevailing wages paid to date, as evidenced by the submission of certified payroll records.