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Sunnyside selected for $500,000 in federal foreclosure funds

The city of Sunnyside is one of the recipients of a federal program that will provide funds for nearly half a million properties nationwide that have been foreclosed.

It's all part of the federal bail-out of Freddie Mae and Freddie Mac that dominated national headlines recently.

Called the housing and economic recovery act of 2008, the program has allotted $593,000 for the city of Sunnyside. That's according to City Manager Eric Swansen, who said the details are still being ironed out about how the funds will be applied here.

The Sunnyside City Council meets on Monday, Jan. 12, and will consider the priorities it wants to see in how the funds are administered.

Swansen said Yakima County will act as a pass-through agency in directing the money to Sunnyside and other cities such as Wapato and Toppenish, which will also receive funds.

During a recent Driving Rural Yakima Valley's Economy legislative priority meeting in Sunnyside just a couple of weeks ago, Wapato Public Works Director Gary Potter commented that his city had qualified for more than $200,000. He wasn't sure, though, if Toppenish would take up the grant opportunity because of regulatory costs that would hit the city's budget.

Sunnyside is hopeful to be able to put the funds to work, given that the program targets abandoned foreclosed properties.

Swansen emphasized that the funds can only be used to reduce the number of vacant and abandoned homes that have "fallen through cracks of the whole foreclosure issue."

There are 20 vacant, foreclosed properties in Sunnyside, and under the program the city would need to use the money to purchase the properties and fix them up for resale.

Another possibility would be to buy the properties and simply demolish foreclosed homes that are in especially bad disrepair, and then sell the vacant lot to a home developer. Any profit on the transactions would go back into the recovery act program.

One of the strings attached to the program is that the landowner or home buyer needs to fit a low-income category. Swansen said another option might be to sell the properties to organizations like Habitat for Humanity or the Catholic Archdiocese that specialize in home construction for low income families.

As part of the sale contracts, Swansen said the city will be able to include language requiring how the property is used. "We're not going to allow criminal activity," he said.

Sunnyside has until Jan. 15 to tell the federal government it wants to receive the funds and until April to deliver a plan of attack in using the money.

Sunnyside won't have enough money to purchase all 20 properties and Swansen said council will need to decide its priorities. They could range from purchasing homes in fairly good condition and renovating them for re-sale or targeting houses in the worst condition and tearing them down to encourage new development.

Whatever spending priority council pursues, the city will see benefits in reviving dormant properties and in increased sales tax revenues due to construction.

"Let's conservatively think about this," Swansen said. "Let's say we are able to buy 10 properties. "That's 10 new home starts, 10 new furnaces, windows, doors."

Swansen pointed out neighboring home owners will especially benefit when the vacant properties are rehabilitated.

The program is a one-time only effort, so Swansen said the city will have to be careful in how it proceeds since only 5 percent of the funds can be used for administrative costs.

Another issue of concern is that the city is not in the business of buying and fixing up properties, then selling them.

"That's not our forte. We don't have expertise in those areas," Swansen said. "I want to hear from folks who really understand this stuff."

As a result, he plans to hold a meeting with local contractors and realtors to get their input as the city moves forward.

Swansen figures Sunnyside will have about three years to fully implement the federally funded purchase and resale program.

He's hopeful, but cautious.

"My big concern is that if we do this, can we do it well and within the budget allotted and with maximum benefit to the community?"

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