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City Of ' dlldGL~ .Barite DHonica City Council Meeting: June 14, 2011 Agenda Item: ~ lg To: Mayor and City Council From: Andy Agle, Director of Housing and Economic Development Subject: Affordable Housing Production Program Amendments Recommended Action Staff recommends that City Council: 1. Introduce for first reading amendments to the Santa Monica Municipal Code (SMMC) Chapter 9.56, the Affordable Housing Production Program (AHPP), as set forth in Attachment A, to amend Sections 9.56.070(b) and 9.56.070(c) to defer the comprehensive study of the affordable housing fees until July 1, 2015; 2. Amend the AHPP Administrative Guidelines (Guidelines) as set forth in Attachment B, to: a. Revise Section 4-D of the Guidelines regarding the procedure for development of offsite affordable housing that satisfies a market-rate project's affordable housing obligation to require that construction of offsite affordable housing occurs prior to or concurrently with the market-rate housing; and b. Revise Section 7 of the Guidelines regarding eligibility procedures for occupancy of affordable housing created by the AHPP; 3. Adopt the attached Resolutions that would automatically adjust the Affordable Housing Unit Base Fee and Affordable Housing Unit Development Cost for new market-rate apartments and condominiums; and, 4. Direct staff to prepare for City Council consideration an ordinance implementing an annual fee for the monitoring of affordable housing created by the AHPP. Executive Summary The proposed modifications to the AHPP Ordinance would defer the study of the City's affordable housing fees in light of current market conditions and the existing automatic annual fee adjustments that are based upon changes in land and construction costs. Effective November 29, 2011, the Affordable Housing Unit Base Fee for new market rate apartments of $26.79 per square foot of floor area would be increased to $27.35 and the Unit Base Fee for new market rate condominiums of $31.28 per square foot of 1 floor area would be increased to $31.94. Also, the Affordable Housing Unit Development Cost of $281,100 would be increased to $287,003. Proposed revisions to the AHPP respond to recent circumstances relating to the implementation and effectiveness of the program. Staff recommends that the Guidelines be amended to require that construction of offsite affordable housing units occur concurrently with the associated market-rate housing, and to clarify the procedures for establishing, maintaining and updating the eligibility list for occupancy of affordable units created through the AHPP. Finally, an annual monitoring fee paid by the developer/owner of affordable housing would help offset the cost to the City of ensuring developer/owner compliance with the AHPP. Staff is seeking City Council direction on implementing such a fee. Background The AHPP, contained in SMMC Section 9.56, implements Proposition R, which establishes that not less than 30 percent of all newly constructed multifamily housing in the City annually must be affordable to low- and moderate-income households for at least 55 years. The AHPP was adopted by the City Council on July 21, 1998 and has been periodically amended as necessary when the provisions of Proposition R have not been met. The AHPP requires developers of new market-rate multifamily housing to contribute to affordable housing goals through dedication of a portion of a project's total units as affordable housing, construction of affordable housing offsite, dedication of land for affordable housing development, or payment of a fee. Multifamily ownership housing of four of more units developed in Santa Monica's multifamily districts is required to include affordable units either offsite or offsite. Currently, there are approximately 900 AHPP affordable residences located throughout Santa Monica that were developed byfor-profit developers. The AHPP Ordinance establishes that the City shall develop administrative guidelines. The Guidelines, originally adopted by the City Council on October 5. 1999 and most recently amended on ~ March 3, 2009, detail the affordable housing fee adjustment methodology, the options available to market-rate housing developers when deciding to build offsite affordable units associated with amarket-rate project, the factors used in 2 determining the affordable sale price of ownership units, and protocols regarding the tenant and purchaser selection process for income-qualified households. Discussion Staff has identified components of the AHPP and the associated Guidelines where changes are necessary to: • Preserve fiscal resources by deferring a redundant fee study; • Enhance the success of offsite development of affordable housing by eliminating the option allowing developers to construct offsite affordable housing after completing the associated market-rate development; • Clarify procedures regarding the eligibility list for occupants of affordable housing; and • Establish an annual monitoring fee paid by market-rate developers to help offset the cost of monitoring compliance with the AHPP as more affordable housing is developed. Comprehensive Study Sections 9.56.070(b) and 9.56.070(c) of the AHPP provide that, beginning on July 1, 2010 and approximately every five years thereafter, the City will conduct a comprehensive study of the Affordable Housing Unit Base Fee and Affordable Housing Unit Development Cost and report the results to the City Council. These fees are collected in instances where developers choose to pay a fee toward the construction of affordable housing rather than include affordable housing within their market-rate developments or offsite in another development. The fees are deposited into a housing trust fund and are loaned to nonprofit affordable housing developers to subsidize the production of new affordable housing. Conducting the comprehensive study (Nexus Study) would require about six months and would cost approximately $50,000 for consultant analysis and hearings support, 3 assuming the same analytic approach used in previous Nexus Study updates were to be employed. Staff believes that this analytic approach remains appropriate and has been a model for other .California jurisdictions. However, this is not the most appropriate time to update the City's Nexus Study, due in large measure to the lingering adverse effects of the recent national recession. Although general economic conditions in Santa Monica appear to be somewhat more favorable than in other parts of the State, the statewide unemployment rate is still in double digits and the housing market continues to languish. Thus, an update of the Nexus Study would necessarily utilize data and market conditions derived from this low point in the economic cycle, and would thereby provide a questionable basis for setting long-term baseline standards for this essential City program. An alternative approach would be to continue the annual inflation adjustment of applicable housing fee and affordable housing cost factors for at least another few years until market conditions are projected to have reached greater stability and be more reflective of more typical economic conditions. The Nexus Study methodology is based on the affordable housing need associated with a portion of the labor demand generated by household spending in new market rate multi-family development, and the amount of new household spending is imputed from the cost of this new market rate housing. The Affordable Housing Unit Base Fee and Affordable Housing Unit Development Cost annual adjustment is based on changes in construction costs and land costs. The weighted average annual change in medium condominium sale prices by ZIP Code is used as a proxy measure for land cost changes measured for the immediately preceding calendar year. As such, the annual inflation adjustment accounts for annual changes in the cost of such housing in the City. Thus, in the short- run, this method serves as a reasonable basis for ensuring that the amount of the Affordable Housing Base Unit Fee and the Affordable Housing Unit Development Cost maintain their association with the Nexus Study methodology and remain consistent with annual changes in short-term market conditions. For the above reasons, staff recommends amending the AHPP to delay the comprehensive study until July 2015. At 4 that point, the City could evaluate whether changed conditions would warrant a new Nexus Study Guidelines Modifications Completion of Offsite Housing The current AHPP Guidelines regarding offsite development of affordable units allow market rate housing projects to be completed and certified for occupancy before the completion of construction of associated off-site affordable housing units: To be eligible for this option, the Guidelines require the developer to meet certain milestones of construction readiness for the offsite development (e.g., building permit, site mobilization, construction commencement), and to provide security at least equal to the affordable housing in-lieu fee. Recent experience with the economic downturn and associated foreclosures on pending. multifamily developments has exposed vulnerabilities in this approach to the offsite affordable housing option. The main weakness in allowing market rate projects to be certified for occupancy before completion of the associated affordable housing development is that the various security instruments intended to ensure the completion of the offsite affordable housing, such as letters of credit or trust deeds, do not guarantee that the offsite housing will be built in a timely manner. Staff recommends that the cleanest and clearest way to ensure that offsite affordable housing is constructed according to community expectations is to require the coordinated commencement and completion of both the offsite affordable housing and the associated market-rate housing. Therefore, staff recommends that Section 4-D(1) of the Guidelines be revised to require that the issuance of building permits and the final construction permit sign-off for the off-site affordable housing occur prior to or concurrently with the permit sign-off for the market- rate project, and that Section 4-D(2) be eliminated. Eligibility List for Occupants of Affordable Housing Section 7 of the current Guidelines details categories of priority households for affordable housing and specific procedures regarding tenant and purchaser eligibility. 5 Staff proposes that Section 7-A, describing "first priority" households, be amended so that Santa Monica residents displaced due to the closure of a mobile home park or funding reductions in their housing assistance programs are included in this list. Proposed changes in Section 7-C(7) relate to the process for appealing removal from the eligibility list and restate the process as an `informal review' rather than an 'informal hearing'. This revision is consistent with procedures used for eligibility lists involving federal programs. Finally, minor wording changes are proposed throughout Section 7 to achieve consistency or clarification regarding references to "applicant", "waiting list", "eligibility list", "referral list" and "list of prequalified applicants." Annual Fee Adjustments Section 9.56.070 of the City's AHPP provides that the Affordable Housing Unit Base Fee and the Affordable Housing Unit Development Cost shall be adjusted annually by City Council resolution based on changes in construction and land costs. The fee adjustment methodology is established in Section 2 of the Guidelines and has been calculated for the Affordable Housing Unit Base Fee. The calculation. prepared by HR&A Advisors demonstrates that the current Affordable Housing Unit Base Fee for new market rate apartments of $26.79 should be increased by $0.56 (2.1 percent) to $27.35 per square foot of floor area and the current Affordable Housing Unit Base Fee of $31.28 for condominiums should be increased by $0.66 (2.1 percent) to $31.94 per square foot of floor area. Additionally, the calculation of the Affordable Housing Unit Development Cost adjustment prepared by HR&A Advisors demonstrates that the current Affordable Housing Unit Development Cost of $281,100 should be increased by $5,903 (2.1 percent) to $287,003. The proposed resolutions provided in Attachments C and D would revise the Affordable Housing Unit Base Fee accordingly effective November 29, 2011. Details of the calculations prepared by HR&A Advisors for the Affordable Housing Unit Base Fee and the Affordable Housing Unit Development Cost are provided in Attachments E and F. 6 Compliance Monitoring Fee Currently there are approximately 900 affordable housing residences created by the AHPP. Conducting thorough compliance monitoring involves increasing amounts of staff time as the AHPP portfolio grows. The City currently is reimbursed for a portion of its costs with existing inclusionary housing fees as well as redevelopment funds that would otherwise be allocated to the Housing Trust Fund to assist in the development of additional affordable units. An annual monitoring fee paid by developers/owners of future affordable housing would help offset the cost to the City of ensuring compliance with the AHPP. Staff is seeking City Council direction on implementing such a fee and would return to Council with a proposed Ordinance implementing a monitoring fee. The monitoring fee would be applied prospectively to AHPP development based on the per- unit cost of maintaining the eligibility list (for occupancy), initial household income qualification, annual recertification of eligibility and site visits. Commission Action At its May 26, 2011 meeting, the Housing Commission considered the recommendations detailed in this report and voted unanimously to support the staff recommendations. Alternatives The alternative to deferring the comprehensive fee study would be to conduct the study at an estimated cost of $50,000 or to defer the study for less than the proposed four years. Keeping the current AHPP Guidelines would continue to leave the AHPP vulnerable to economic downturns and inconsistent with other housing services provided by the City. Public Hearing On June 1, 2011, the City published notice of the two proposed resolutions adjusting the affordable housing fees. The City republished this notice on June 8, 2011. 7 Financial Impacts & Budget Actions The proposed deferral of the comprehensive fee study is consistent with the adopted FY 2010/2011 budget and the proposed FY 2011/2012 budget, neither of which includes funding for the study. There are no financial or budget impacts associated with the staff recommendations in this report involving revisions to the AHPP Guidelines or annual adjustment to the affordable housing fee. Prepared by: Jim Kemper, Housing Administrator Approved: _~ Andy Agle, Director Housing and Economic Development Attachments: Forwarded to Council: } Rod Gould City Manager A. Proposed Ordinance Amending the Affordable Housing Production Program (Section 9.56 of the Municipal Code) B. Proposed Amendments to the Administrative Guidelines of the Affordable Housing Production Program C. Resolution Automatically Adjusting the Affordable Housing Unit Base Fee - S. M. M. C. 9.56.070(b) D. Resolution Automatically Adjusting the Affordable Housing Unit Development Cost - S. M. M. C. 9.56.070(c) E. HR&A Analysis Proposed FY 2011-12 Annual Automatic Adjustment for the Affordable Housing Unit Base Fee F. HR&A Analysis Proposed FY 2011-12 Annual Automatic Adjustment for the Affordable Housing Unit Development Cost 8 A it F~- F:atty\muni\laws\barry\AHPP2011Amendment CC 06-14-11 City Council Meeting 06-14-11 Santa Monica, California ORDINANCE NUMBER (CCS) (City Council Series) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA AMENDING SANTA MONICA MUNICIPAL CODE SECTION 9.56.070 TO ADJUST THE TIME TO UNDERTAKE A COMPREHENSIVE STUDY OF AFFORDABLE HOUSING FEES WHEREAS, the City's Affordable Housing Production Program, Chapter 9.56 of the Santa Monica Municipal Code (the "AHPP"), requires developers of multi-family housing project to contribute to affordable housing production and thereby help the City meet its affordable housing goals; and WHEREAS, the requirements of the AHPP are based on a number of factors including, but not limited to, the City's long-standing commitment to economic diversity; the serious need for affordable housing as reflected in local, state, and federal housing regulations and policies; the demand for affordable housing created by market rate development; the .depletion of potential affordable housing sites by market-rate development; and the impact that the lack of affordable housing production has on the health, safety, and welfare of the City's residents including its impacts on traffic, transit and related air quality impacts, and the demands placed on the regional transportation infrastructure; and 1 WHEREAS, subject to certain exceptions, the requirements of the AHPP can be met through various alternatives including providing affordable housing units on-site, providing affordable housing units off-site, acquiring land for affordable housing, and paying an affordable housing fee; and WHEREAS, in establishing the appropriate affordable housing fee, the City prepared a series of analyses of the relationship between new market rate apartment and condominium development in the City and the need for affordable housing created by this new development; and WHEREAS, the initial study was prepared in July 1998 by HR&A Advisors, Inc. ("HR&A"); and WHEREAS, HR&A updated this analysis in March 2000; and WHEREAS, in July 2005, HR&A completed a new update of this analysis; and WHEREAS, the July 2005 study, as did the earlier studies, focused on the relationship between the demand for goods and services created by households who occupy new market rate multi-family development in the City, the number of low-wage workers in public agencies and businesses needed to satisfy this demand, and the costs of producing the affordable housing needed by these workers; and WHEREAS, this study demonstrated the range per square foot which could be imposed on new market rate multi-family development to help finance the development of affordable housing needed to meet the demand created by market rate development; and WHEREAS, on November 8, 2005, the City Council amended Santa Monica Municipal Code Section 9.56.070 to provide that commencing on July 1, 2006,-the 2 Affordable Housing Unit Base Fee shall be automatically adjusted annually by City Council resolution based on changes in construction costs and land costs; and WHEREAS, in order to implement the Council's decision, staff formulated a specific method of measuring changes in construction costs and land costs; and WHEREAS, this proposed methodology was detailed in an April 24, 2006 letter prepared by HR&A on behalf of the City and approved by the Council on June 13, 2006; and WHEREAS, on June 13, 2006, the City Council amended Santa Monica Municipal Code Section 9.56.070 to provide that the City's affordable housing unit development cost shall be established by resolution and that commencing on July 1, 2007, the affordable housing unit development cost shall be automatically adjusted annually by City Council based on changes in construction costs and land costs; and WHEREAS, Santa Monica Municipal Code Section 9.56.020 defines "affordable housing unit development cost" as "the City's average costs to develop a unit of housing affordable to low- and moderate-income households;" and WHEREAS, in order to implement-the Council's decision that the affordable housing unit development cost be adjusted based on changes in development costs and lands, staff formulated a specific method of measuring changes in construction costs and land costs; and WHEREAS, this proposed methodology was also detailed in the April 24, 2006 letter prepared by HR&A and approved by the Council on June 13, 2006; and 3 WHEREAS, Section 9.56.070 provides that no later than July 1, 2010 and every five years thereafter, the City will conduct a comprehensive study of the affordable housing unit development cost and the. affordable housing unit base fee; and WHEREAS, updating the Nexus Study would require about six months and would cost approximately $50,000 for consultant analysis and hearings support, assuming the same analytic approach used in previous Nexus Study updates were to be employed; and WHEREAS, this analytic approach, which has been a model for other California cities, remains appropriate, particular given recent judicial decisions; and WHEREAS, this is not the most suitable time to update the City's Nexus Study. due in large measure to the lingering adverse effects of the recent national recession; and WHEREAS, although general economic conditions in Santa Monica appear to be somewhat more favorable than in other parts of the State, the statewide unemployment rate is still in double digits and the housing market continues to languish; and WHEREAS, an update of the Nexus Study would necessarily utilize data and market conditions derived from this low point in the economic cycle, and would thereby provide a questionable basis for setting long-term baseline standards for this essential City program; and WHERAS, an appropriate alternative approach would be to continue the annual inflation adjustment of applicable housing fee and affordable housing cost factors for at least another few years until market conditions are projected to have reached greater stability and be more reflective of more typical economic conditions; and 4 WHEREAS, as detailed above, the Nexus Study methodology is based on the affordable housing need associated with a portion of the labor demand generated by household spending in new market rate multi-family development, with the amount of new household spending imputed from the cost of this new market rate housing; and WHEREAS, the affordable housing unit base fee and affordable housing unit development cost annual adjustment is based on changes in construction costs and land costs with the weighted average annual change in medium condominium sale prices by ZIP Code similarly used as a proxy measure for land cost changes measured for the immediately preceding calendar year; and WHEREAS, the annual inflation adjustment accounts for annual changes in the cost of such housing in the City; and WHEREAS, in the short-term, this method serves as a reasonable basis for ensuring that the amount of the AHPP Base Unit Fee and the AHPP Housing Development Unit Cost maintain their association with the Nexus Study methodology and remain consistent with annual changes in short-term market conditions,. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN AS FOLLOWS: SECTION 1. Santa Monica Municipal Code Section 9.56.010 is hereby amended to read as follows: Section 9.56.070. Affordable housing fee. A multi-family project applicant eligible to meet the affordable housing obligations established by this Chapter by 5 paying an affordable housing fee shall pay the fee in accordance with the following requirements: (a) An affordable housing fee may be paid in accordance with the following formulas: (1) Multi-family projects in Multi-family Residential Districts: Affordable housing unit base fee x floor area of multi- family project; (2) Multi-family projects in Multi-family Residential Districts on vacant parcels: Affordable housing unit base fee x floor area of multi- family project xseventy-five percent; (3) Multi-family projects in Industrial/Commercial Districts on parcels that are either not already developed with multi-family housing or are already developed with multi-family housing, but the multi-family project preserves the existing multi-family housing or a Category C removal permit has been obtained for the existing multi-family housing: 6 Affordable housing unit base fee x floor area of project devoted to residential uses x fifty percent. (4) Multi-family projects with fractional affordable housing units of less than 0.75 based on the formula established in Section 9.56.050(d): City's affordable housing unit development cost x fractional percentage: (b) For purposes of this Section, the affordable housing unit base fee shall be established by resolution of the City Council. Commencing on July 1, 2006 and on July 1st of each fiscal year thereafter, the affordable housing unit base fee shall be adjusted based on changes in construction costs and land costs. No later than July 1, 2015, 2-0-19, and approximately every five year period thereafter, the City will conduct a comprehensive study of these fees and the results of the comprehensive study shall be reported to the City Council. The amount of the affordable housing fee that the multi-family project applicant must pay shall be based on the affordable housing unit base fee resolution in effect at the time that the affordable housing fee is paid to the City. (c) For purposes of this Section, the City's affordable housing unit development cost shall be established by 7 resolution of the City Council. Commencing on July 1, 2007 and on July 1st of each fiscal year thereafter, the City's affordable housing unit development cost shall be adjusted based on changes in construction costs and land costs. No later than July 1, 2015, 2919 and approximately every five year period thereafter, the City will conduct a comprehensive study of these fees and the results of the comprehensive study shall be reported to the City Council. The affordable housing fee that the multi-family project applicant must pay shall be based on the affordable housing unit development cost resolution in effect at the time of payment to the City. (d) The amount of the affordable housing unit base fee may vary by product type (apartment or condominium) and shall reflect, among other factors, the relationship between new market rate multi-family development and the need for affordable housing. (e) The affordable housing fee shall be. paid in full to the City prior to the City granting any approval for the occupancy of the project, but no earlier than the time of building permit issuance. (f) The City shall deposit any payment made pursuant to this Section in a reserve account separate from 8 the General Fund to be used only for development of very low- and low-income housing, administrative costs related to the production of this housing, and monitoring and evaluation of this affordable housing production program. Any monies collected and interest accrued pursuant to this Chapter shall be committed within five years after the payment of such fees or the approval of the multi-family project, whichever occurs later. Funds that have not been appropriated within this five-year period shall be refunded on a pro rata share to those multi-family project applicants who have paid fees during the period. Expenditures and commitments of funds shall be reported to the City Council annually as part of the City budget process. (g) An affordable housing fee payment pursuant to this Section shall not be considered provision of affordable housing units for purposes of determining whether the multi- -- family project qualifies for a density bonus pursuant to Government Code Section 65915. SECTION 2. Any provision of the Santa Monica Municipal Code or appendices thereto inconsistent with the provisions of this Ordinance, to the extent of such inconsistencies and no further, is hereby repealed or modified to that extent necessary to effect the provisions of this Ordinance. 9 SECTION 3. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Ordinance. The City Council hereby declares that it would have passed this Ordinance and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of the ordinance would be subsequently declared invalid or unconstitutional. SECTION 4. The Mayor shall sign and the City Clerk shall attest to the passage of this Ordinance. The. City Clerk. shall cause the same to be published once in the official newspaper within 15 days after its adoption. This Ordinance shall become effective 30 days from its adoption. APPROVED AS TO FORM: M RSHA J 'S MO TRI ~° L- City Attorney 10 ~~~.~ ~-- -.~ ADMINISTRATIVE GUIDELINES for the ~~ AFFORDABLE HOUSING PRODUCTI of the (Pursuant to Chapter 9. Code) Administrative Guidelines Affordable Housing Production Program CITY OF SANTA MONICA Table of Contents 1. Introduction .................................................................................................................1 2. Fee Methodology ........................................................................................................2 A. Establishment and Periodic Adjustment of Base Fee .........:...................................2 B. Affordable Housing Unit Development Cost ................ 3. On-Site Affordable Unit Option ...................... ,......, .. ~> ; 4. Off-Site Affordable Unit Option ...................... A. One-Quarter Mile Radius Maximum .......... B. Exceptions to the One-Quarter Mile C. Evidence of Site Control ......................:' D. Simultaneous Development of Off-Site 5. Land Acquisition Option........... A. Eligible Land Parcels ............... B. Evidence of Site Control .......... C. Conveyance of. D. Simultaneous 6 E. Eligible Non-Pt't 6. For Saleltiffordab ~~ :~~,. A. Estaablishmenfi'c ~.,, B:~ ~Re-Sale of an P C. Subordination 1 ~ , ~~ ,, D. Defaulfiand For ~~ E. Distribution,ofjlr 7. Tenant and Purchi .................................... 8 ....................................11 ,., ,. 3 .............................................. 8 ................................................13 ..............................................:..............14 Purchase Price ..........................................................14 a Subsequent Purchaser ..................................15 :......................................................................................16 and Condemnation Proceeds .......................................17 Eligibility Procedures ..................................................:.........17 A. Priority Households ...............................................................:..............................18 B. Persons Ineligible to Occupy an Affordable Unit ..................................................19 C. Establishment, Maintenance, and Update of Income-Qualified Tenants and Purchasers List ....................................................................................................19 8. Adjustments or Waivers ...........................................................................................28 .....................................................13 Administrative Guidelines Affordable Housing Production Program Administrative Guidelines Affordable Housing Production Progrem ATT,4CFit~IENTS 1-A Municipal Code Chapter 9.56 Atlministrative Guitlelines Affordable Housing Production Program 1. Introduction These Administrative Guidelines provide guidance on the implementation of the City's Affordable Housing Production Program, Chapter 9.56 of the Santa Monica Municipal Code ("AHPP") (see Attachment 1-A for a complete copy of the Ia~HPP). The AHPP was originally adopted by the City Council on July 21, 1998. It has been amended on several occasions since then. The AHPP gives developers options for satisfying the City's affordable housing req depending on the housing type and location of,$hc`~(c All new multi-family housing developments housing that is part of commercial or other d unless specifically exempted by comparison table on the various optidi~for implements Proposition R ,Approved kz'y~„ Proposition R-req newly cc low- and at not lest than 3D City each year be these information~,af~Put the n housing a variety of options vary being ire units, including multi-family must comply with Chapter 9.56 56. See Attachment 1-B for a 9.56. The AHPP V1oh~,Fa~voters in November, 1990, of all multi-family residential housing ~ntly affordable to, and occupied by, describes the Fee Methodology. Section 3 provides of affordable units required and development incentives associated wittr'the~ On Sit~~Option. The remaining sections expand upon the AHPP and gib. provide additional~'requi~ements regarding the Off-Site Option (Section ), the Land Dedication Option (Section 5), For-Sale Affordable Units (Section 6), the Tenant and Purchaser Eligibility Procedures (Section 7) and Adjustments or Waivers (Section 8). Questions about how a particular multifamily project applicant shall satisfy the affordable housing obligation (pay fee, build units onsite or offsite, or provide land .dedications) Atlministrative Guidelines Affordable Housing Production Program 1 should be directed to the City Planning Division at (310) 458-8341 or to the Planning Counter in Room 111 in City Hall. Questions about current maximum rents and sales price calculation, or Tenant Eligibility and Selection Procedures should be directed to staff in the Housing Division at (310) 458-8702. One way to satisfy the affordable housing obl Housing Unit Base Fee (§ 9.56.070). The am ("Base Fee") is based upon the floor area of Fie defined in the Municipal Code § 9.04.02.030.31 determine the total fee owed by eabf~project. deposited into a special City Trust affordable to very low income, low-in Option is not available for owrership h payment of the Affordable Affordable Housiiaq Unit Base Fee to or floor area o~th~e~eproject, as i by the Base Fee in order to ds from this Base Fee are the development of housing "ome households. The Fee nits in the City's multi-family residential zones. A. Base Fee The Base Fee is set by a Resb;~ution of the City Council (See Municipal Code 9.56.070 (b)) ands~s subject to annual adtustme~t based on changes in land cost and construction cost. The methodology for maFa ~these'ainual adjustments was established by the City Council ,`?~. in June 200fi~More specifically, construction cost inflation is established based on the `.~, Engineering Newsf2ecord's`(ENR) Construction Cost Index, because it is updated monthly and is readily avadaFj~e viathe Internet, The methodology uses annual change in median r,„. condominium purchase prices as a proxy measure for land cost changes. The relative balance between land cost inflation (based on changes in median condo prices) and construction cost inflation (based on a construction cost index) is determined based on current development cost data for recently completed or construction-in-progress multi- family affordable developments assisted by the City. A detailed explanation of the annual adjustment methodology is provided in Attachment 2-A. Administrative Guidelines Affordable Housing Protluction Program 2 There are different base fees for condominiums and apartment projects. Attachment 2- B contains the current, Base Fee amounts for apartment and condominium projects. B. Affordable Housing Unit Development Cost The Affordable Housing Unit Development Cost is set by a Reso, lution of the City Council (See Municipal Code 9.56.070(c)) and is subject to annual adau~tment based on changes in land cost and construction cost. The methodology for makiir~#~iese annual adjustments ~~ was established by the City Council in June 2006 and is the same`methodology used in adjusting the Affordable Housing Unit Base Fee described in Section 3 ;~ The Affordable ~, :,. Housing Unit Development Cost is the average cost to the City to develop Unit of housing `~ affordable to low- and moderate-income housefnlds. ThaAffordable Housirig~Production Program provides that when developers of market ate multi-family housing are providing ~. affordable units on- or off-site and tk~~ calculation gf~!ie number of affordable units required results in a fractional unit, cost of producing that fractional unit Cost if that fraction isrless~tharr0~~75 = 1.2 to pay a fee equal to the ng Unit Development 0.2 X $265,632 = $53,126.40 Administrative Guidelines Affordable Housing Production Progrem 3 3. ®n-Site Aff®rdable Unit ®pti®n Another way to satisfy the affordable housing requirements of Chapter §g.56 is by constructing affordable units on the same site as the proposed new multi-family project (See § 9.56.050). Ownership projects or 4 or more units in multifamilyzones must provide ,~,, ~~ .: affordable units either onsite or offsite (See § 9.56.040). All housing developments that ,~~ provide onsite affordable units in accordance with the AHPP are entitled to a bonus over ,, the maximum allowable number of units on the site (i.e~~~;c3ensitV'b~ausl or a development bonus (commercial/industrial zones) and No. 2180 extended by Interim Ordinance such as: ® Substantial remodel and conversion of coin • Substantial remodel of residerit~~,b,~ildings __ ® Condos and apartments.. Attachment 3-A orovi~le~' a~t'abl~ i nterim Ordinance This includes all units for sale or rent required in an owne,~ship project in a multifamily zone and the fractional portion of a unit that may be paid as~a fee Attachmegt 3 B prc"~ides information on density bonus and ..::; other development mcentw~s~allowed when~pYoviding onsite affordable units. Attachment 3-C anclr3-D prowde;`~nformatjon on the most current income eligibility and rent limits. Att chment 3-E provides~an example of the Agreement Imposing Restrictions on Real Property between the City ~nd the developer regarding a project containing affordable ;. housing units ~, ~ ' Administrative Guidelines Affortlable Housing Production Program 4 4. Off-Site Affordable Unit Option This section of the Guidelines specifies certain additional requirements concerning the location of the Off-Site Affordable Units, site control and concurrent development of the market-rate project and the off-site units. A. One-Quarter Mile Radius Maximum Except as provided below, the alternative site located within aone-quarter mile radius of the.~pac~l on which the proposed, and within the boundaries of the this one-quarter mile radius area shall be Development Department. The Depa mei ~~ method used for determining the area.°~itthii <;.;~ permit is given. Specifically, on a map~gt of units ily housing is a MC § 9 56.060 (c)) ~> .d ley, the Planning Units shall be rate units are i?;outer limit of d Community so doing shall be similar to the of a pending development applicant shall submit as the corners of the parcel Any multi-family parcel or commercial use, located, in whole or in any part, eligible parcel for development of Off- Mile Radius Maximum radius requirement may be waived by majority vote of the decision shall be appealable to the City Council), based upon substantial evii(~~ee demonstrating that the location of Off-Site Affordable Units more ,ate than one-quarter mile from the site of the market rate units, but still within the City limits, better accomplishes the goals of the City's zoning and planning regulations, including maximizing affordable housing production and dispersing affordable housing throughout the City. (SMMC § 9.56.060 (f)) Administrative Guidelines Affordable Housing Production Program 5 The project applicant shall have the burden of demonstrating why a location forthe Off-Site Affordable Units of more than one-quarter mile from the market rate units better accomplishes the City's affordable housing objectives. In making its determination, the Planning Commission shall considerthe recommendations of the Planning Director and the Housing and Redevelopment Manager on the petition. An appl the one-quarter mile radius shall be submitted as part of the, pl other discretionary approvals on the project that are Commission. By way of example, but not by limitation, include: ® No Available Sites. There parcels within the strict accommodate the required n Units makes it possible to locate for an exception to application for any at may justify the of the Planning exception no multi-famdy;gCsuitably zoned non-residential ~, ~i•i~~ of the one=quarter mile radius that can ~~ nber of'Affordable OfE='Site Units. City. size, priee:o~ other characteristics of the alternative site s more affordable units than the project would yield if it of the one-quarter mile radius. of,A~f~©rdability. The size, price or other characteristics of the ~:~ ~tuariV makes it possible to offer the Off-Site. Affordable Units to households of a lower household income level than would be possible within the strict limits of the one-quarter mile radius. In no event, however, shall the Off-Site Affordable Units be located outside a radius of one mile from the market rate units. No more than five project exceptions to the one-quarter mile radius shall be approved in any one City fiscal year. Administrative Guidelines Affordable Housing Production Program 6 C. Evidence of Site Control In order to exercise the Off-Site Affordable Unit Option, the applicant must provide evidence that the site is owned in fee or that an option to purchase, subject to City project approval, has been secured. (SMMC § 9.56.060 (b)) Evidence of such site control (e.g., copies of purchase or option agreements) shall be provided to;,the City as part of the ~„ project application package. D. Simultaneous Development of Off-Site All affordable housing units in amulti-family shall be constructed concurrently with the ce family project or phase of that project. No bui n a phase of market rate City construction permit sign-off units until final construction pern mily project in the multi- be granted for the market rate has ssmmensed a ie; }t # efi " " '' d ~ nd °- j-n" e ; --en--s -eens ru - T , ~~r,-..~ ,~r,.~ e ~ d I 'r7 4H ('•+ ;+L. -. ....hl., ~.,++~,r of ..real , ..> , •+ n m'I~r +' ..1 + + r7.. .+.J .. n.~+..hle h.. #An !"+.. in rn# ~# In~c+ ~.I + #h G.... f.~r. +h.++ ~ Ir! n#hn o one r rnrl # n moot fhp hl' ..#' .,~f..r+Hn .+rLe+r.+#o nrnien+/~.\ nlnc. nrJ~nnnnn 'n+ornc+nn w. #ho#•+m m+ ... .. r• ~ ~ n r - _.. _..___...__..._ Atlministrative Guidelines Affordable Housing Production Program 7 5. Land Acquisiti®n This section of the Guidelines specifies: additional requirerngnts for exercising the Land Acquisition Option. ~ ~~~~ ~, A. Eligible Land R,a~cels ~ Only land parcels meetrng the~tollowin jm~nimu~n~characteristics shall be eligible underthe ~~ ~ ~ , . Land Acq'riisitron".OOpton eligible for conveyance to the City, or an eligible non-profit affordable loper~shall be located in a City multi-family housing, commercial or industrial dist~c~iri which multi-family housing is a permitted use. 2. Minimum Land Value For sites dedicated to the City, or an eligible non-profit affordable housing developer, the fair market value of the parcel(s) shall be at least equal to the amount of the Affordable Housing Production Fee that would otherwise apply were the market rate project applicant to elect that option under Chapter 9.56 instead of Atlministrative Guidelines Affordable Housing Production Program the Land Acquisition Option. The fair market value of the parcels proposed under this Option shall be supported by an estimate of value prepared by a qualified real estate appraiser, subject to the City's reasonable review of the appraisal. For situations involving option payments, rather than conveyance of land in fee, see - 6,000 square feet - Can be developed with at - Free of characteristics that (i.e., irregular shape, excessive to incompatible land below. develop other contamination, adjacent before any parcel can proposed to be conveyed to the City, housing developer, shall be located within a one- on which the market rate units are proposed and The outer limits of this one-quarter mile ~ by the Planning and Community Development method for so doing shall be similar to the method the area within which written notice of a pending development permit is given. Specifically, on a map of City parcels, the project applicant shall draw a set of one-quarter mile radii from the corners of the parcel on which the market rate units will be constructed. Any multi-family parcels located, in whole or in any part, within these intersecting one-quarter mile radii is an eligible parcel for the Land Acquisition option. Administrative Guidelines Affordable Housing Production Program below: For below market rate sales, or option transfers, 3. Site Characteristics The parcel shall satisfy the following minimu 9 5. Exceptions to the One-Quarter Mile Radius Maximum The maximum one-quarter mile radius requirement may be waived by majority vote of the City Planning Commission (whose decision shall be appealable to the City Council), based upon substantial evidence demonstrating,that the location of land ~.i i:~ more than one-quarter mile from the site of the ma°rket rate units better accomplishes the goals of the City's zoning and planCting regulations, including '_ maximizing affordable housing production and' disper~rig, affordable housing throughout the City. (SMMC § 9.56.080) ,>>~ ~ ~~,,~ The project applicant shall have the burden of ectemonstrattng why a proposed site more y than one-quarter mile from the market rate units (but` still within the City limits) better accomplishes the City's affordable hors~n~ objectives I~ making its determination, the Planning Commission shall considerth°~ ~ecomrnendations ofthe Planning Director and the Housing and Redevelopmeni;(Vlanager: A~ application~for an exception to the one-quarter mile radius shall be pracesse~ si~ultaneously~vith any oEfier discretionary approvals on ~: the project that are~ithin the purv~,ew of the Planning Commission. ,~~ h ~~ ~~e By way of,~~cample but~not~by IimitaYion fa~~brs that may justify the special exception include `'~~ y°' ~ti w ® Na`~[vailable Srtes ~liere areAno multi-family parcels within the strict boundaries of ~, the orl'e;dparter mile'~adius that are suitable for multi-family development. Dispersal ofA'ffordable Units. The alternative location makes it possible to locate affordable housing throughout the City. More Affordable Units. The size, price or other characteristics of the alternative site could result in an affordable housing project that yields more affordable units than Atlministrative Guidelines Affordable Housing Production Program 10 would otherwise be required under the On-Site Affordable Units option or the Off- Site Affordable Units option in Ordinance 1918. ® Deeper Level of Affordability. The size, price or other characteristics of the alternative location makes it possible to offer affordable units to households at a lower household income level than would be possible within the strict limits of the one-quarter mile radius. `~ ,~a In no event, however, shall the Land Acquisition O~tron apply to a srte,located outside a ~.~ "~. radius of one mile from the market rate units ~f~7b'more than five protecf exceptions to the one-quarter mile radius maximum shall be B. Evidence of Site Control In order to exercise the Land Acq applicant shall provide evidence, conveyed to the City, or am>~ ;,;>• by the applicant, or thaf an control, including a cu[,reni applicable,, shal~tbe incluef€ C. Conveyance of tF An eligible,site, or opt eligible non'"p ofit affo 1. Fee TitleTransfer in any one City rate multi-family project troval, that the site to be ordable housing developer, is owned in fee has been secured. Evidence of such site p of the option or lease agreement, if m for the market rate project. and an eligible site, shall be conveyed to the City, or an developer, as follows: ~~.~ ~ .;, The site shall~~e'sold or dedicated to the City or to a qualified non-profit housing developer free of any encumbrances, contractual, physical or financial, that would prevent it from being developed in a timely way by the City, or a qualified non-profit housing developer, for affordable multi-family housing. Administrative Guidelines Affordable Housing Production Program 11 If the site is dedicated to the City, or to an eligible non-profit affordable housing developer at no cost, the City shall provide reasonable cooperation as may be requested to help the applicant secure any state orfederal tax credit forwhich such a dedication may be eligible. If the site is sold to the City, or to an eligible non-profit affordable housing developer at below market rate, the difference between the fair market value and the below market sale price must be at least equal to the ~am`bunt~of tie Affordable Housing Production Fee otherwise due, if that optron~~had been selected by the project applicant. ~~~~~ ,> 2. Option to Purchase ~~'\ If the market rate project applicant secures an option for another site to fulfill the Land Acquisition Option the op~ion must have ~a~~rr~inimum term of six months and clearly state that the option may 6e transferred to a third, party, such as the City or a qualified non-profit housing deve[oper.~~under the same terms and conditions, ,,, .,, including the agreetl upoll~purchase pnc"e. A copy of the option agreement and a current title report shall be rncluded wrt~ the application for the market rate project. Any costs incurred byapplrcant to maintain the option from the date of project ~ ~~ ~Y applrcatan through successful transfer;of the option to the City or to a qualified non- prpfit ~develoa~er shall ~`e the responsibility of the applicant. If the sum of the ~' ~ ~ ~ ~. a~plicanYs out-ofi pocket optron-related expenses, from date of project application throq~h conveyance of the option, is less than the amount of the Affordable Housing `; `~~:.~ Production Fee Optrot, these costs will be treated as a credit against the Affordable ~;:' Housing Prod~ctron' Fee that would otherwise be due the City under that Chapter ,:: ~:: 9.56 .optron. 'F~i~e applicant shall pay any difference to the City as a reduced Affordable Housing Production Fee. The applicant shall provide the City a full accounting of all option payments and out-of-pocket option-related costs eligible for offset against the Affordable Housing Production Fee amount, which accounting shall be subject to reasonable City review and approval. Administrative Guidelines Affordable Housing Production Program 12 The land offered for option must have the following minimum site characteristics: - 6,000 square feet - Can be developed with at least 4 dwelling units - Free of characteristics that would make it difficult or impossible to develop (i.e., irregular shape, excessive sloping, soil or to incompatible land use) A Phase I environmental evaluation report be considered for option. The City shall exercise reasonable discretion in option must be consistent with all City Consolidated Rental Housing ~IASt~FUnd G nation, adjacent any parcel can the option: The land requirements, including the D. Simultaneous Conveyance of Landbr O~t~on ~.~" ~. Conveyance of land .or an option, to purchase'`land to~ the City or an eligible non-profit ~:~ ~ ~,. ., affordable housing developer, pursuant to ~h~apter 9.56, shall be completed prior to the s ~~ 3 a City's final sign-off ~on~construction hermits foj~the market rate units, or issuance of a ~~~ , certificate ofoccupancv :whichever occurs=first. E. Ehgible iVon-Profifiaffordable~Housing Developer ?. Dedieatlo~~land, below rn;~rket rate sale of land or transfer of an option to purchase may be made eitherio the City;o~r an "eligible non-profit affordable housing developer." For b. purposes of the La~d,Acgraisition Option of Chapter 9.56, an eligible not-profit affordable housing developer ista''private, non-profit corporation with: (1) a current exemption under Section 501(c)(3) of the U.S. Internal Revenue Code; (2) a certificate of good standing from the Secretary of State in which the organization is incorporated; (3) has the development of housing affordable to low-income households as one of its principle missions; and (4) has been approved by the City Housing and Redevelopment Manager, based on reasonable review of the organization's record of performance developing multi- Administrative Guidelines Affordable Housing Production Program 13 family housing affordable to low-income households. The non-profit affordable housing developer intended as the recipient of land pursuant the Land Acquisition Option must be identified as part of the project application. C. For-Sale Affordable Unit Requiretnenis In the event that the affordable units required under Option or the Off-Site Affordable Unit Option is inte rentals, the following rules shall apply. A. Establishment of the Initial The developer shall establish the sales price median income and total housi income-qualifying household's abil debt at a front-end ratio of no less The conventional 1 Loan Term: Interest Rai Minimum D s~ Mm INlax ~E ~~ . ..Maximum E as 33 1 ncome Ratio2: On-Site Affordable Unit units, rather than unit based upon an the the AHPP (9.56.100) and the financing and to service Ater than a 38 percent. terms: 30 Years Fixed 5% 33% min./38% max. 41% Front End~Ratio, ratio of total riibnthly housing costs (including mortgage principal and. interest, property taxes, property~tnsu~ance homeowners' association dues and mortgage insurance, if applicable - to total gross household incgr~e. Chapter 9.56 of the Municipal Code restricts the front-end ratio to no more than 38%. ~~ ., \;, ,. z Back End Ratio ratio of total monthly housing costs (including mortgage principal and 'interest, property taxes, property insurance, homeowners' association dues and mortgage insurance, if applicable) plus other monthly payments on long-term household debt to gross household income. Note: The borrower must be income-qualified pursuant to Chapter 9.56 of the Municipal Code. Administrative Guidelines Affordable Housing Production Program 14 The lending criteria used by the private lender must be reasonable and customary and shall be subject to review and approval by the City Housing Division prior to completion of the purchase transaction. Moreover, any purchase price for an affordable unit underwritten with afront-end ratio of less than 33 percent or a back-end ratio of more than 41 percent (the maximum generally required by the secondary mortgage :market) will also require review and reasonable approval by the City priorto comp 13. 12e-Sale of an Affordable Unit to a Subseq 1. First Right of Refusal to the City Throughout the 55-year period of the;A Property, the City shall have the first of units created pursuant to the On-Site Affordable Unit Option (Option~fo Purcl shall notify the City in writing afleast 6~~ another qualifying party., The sellershall to prospective buyers: purchase transaction. Imposing RestriEtons on Real plarchase affordable for-sale Unit Option or the Off-Site =rs wishing to sell their units the unit is offered for sale to e'unit is clean, in good repair IyOpbon-related time periods tolled'urtitil these conditions are met to the City's to notify the seller of its intent to exercise the Option to by its designee (e.g., anon-profit affordable r by referral of a qualified moderate-income buyer. (See 'or calculating the subsequent purchase price.) The City or shall close escrow within 90 days from the date that the City notifies seller ofts intent to exercises the Option to Purchase. If the City elects to assign its Option to Purchase, the opening of escrow may be deferred for up to 30 additional days to enable the City to effectuate the assignment. In the event that the City does not exercise the Option to Purchase, or an offer to purchase by the City or a qualified buyer is not accepted by the seller, or once Administrative Guidelines Affordable Housing Production Program 15 accepted, if an escrow account contemplating a sale shall not have been opened within 60 days of a purchase offer, the Option shall terminate and the owner may sell the unit to any income qualifying party at a price as set forth below. Seller shall not refuse an offer by an income qualified buyer, subject to the price restrictions set forth below. Closing costs shall be divided between .seller and buyer as is "~. customary for like real estate transac#ions in Santa Mona a~ the time that escrow is opened. 2. Maximum Subseauent Selling Price The resale price restriction will provide,tli~tthe price for resale of tlie=affordable unit ~. shall be calculated using the same formula and factors=set forth in Section 6A. The monthly housing cost shall include mortgag pn~cipal and interest, property taxes, ~~~~ property insurance, homeowne~s';associatron";dues and mortgage insurance, if a applicable. ~~ ',,, 3. Each purchase? of an affordable unif~sfiall certify, prior to the close of escrow, in a form acceptab~~to the Crtythatthe unit~is=.peing purchased and shall be maintained es as the°purchaser's rinrriary residence :;Failure ofthe purchaserto maintain eligibility for, a~homeowner s exer3~tion from property tax shall be construed as evidence that the unrt is not the primary residence of the purchaser. C. Su At the request~of the ^; ~~~t~-i;,eor~,~gualifying household's lender, the City may subordinate the fq~gomg~income eligibility and resale price restrictions to a first Deed of ..~. Trust at the trme oj`~purchase, provided that the Deed of Trust does not exceed the purchase price of the unit. D. Default and Foreclosure Administrative Guidelines Affordable Housing Production Program 16 A Request for Notice of Default shall be recorded along with the Agreement Imposing Restrictions on Real Property. The Agreement will provide that any Notice of Default will constitute an owner's Notice of Intent to Sell, and that the City may exercise its Option to Purchase. In the event that the City does not exercise its Option and the unit is foreclosed upon, proceeds of the foreclosure sale shall be used first to satisfy the lender's lien{s), and any surplus proceeds, up to the amount that the owner been no foreclosure, shall be paid to the owner. The rE shall be paid to the City for deposit into the City E. ®is4ribution of Insurance and Condemns In the event that the unit is destroyed and incur income household owner instead of being used the homeowners' association members, including the owner, any su be distributed as set forth:above with 7. ~Gll~ilir received had there balance of any surplus Trust Fund. :ion Proceeds Vince proceeds are distributed''to the low- s to rebuild~~or in the event of liquidation of of the ~~~sets of the association to the Wino after os~'vment of encumbrances shall Per Chapfer9 86r~iq{ti fsrYtiik2project~pplicants who have opted to satisfy the affordable or off-site option are required to fill vacant affordable units ;by selecting `~i~pme-~lig~ible tenants from aCity-developed list of income- qualified h'auseholds, excepfi n;-~P"~r~if there are no qualified households on the ownership projecfso~~.~'or more units in the City's multi-family residential zones. Under these exceptions, the project applicant may te-choose themselves to select income- qualified households which shall be subject to eligibility certification by the City. 11 This section establishes priorities for eligibility to occupy On-Site Affordable Units, describes categories of persons ineligible to occupy On-Site Affordable Units, and outlines Administrative Guidelines Affordable Housing Production Program 17 the procedures whereby the City Housing Division -shall establish, maintain, and update the list of eligible tenants. D) ns such as~Code enforcement A)"Resderfs of Santa Monica a+~Feror B) Wor~Cing in Santa Monica at least 36 hours perweek Administrative Guidelines Affordable Housing Production Program 18 B. Persons Ineligible to Occupy an Affordable Unit Chapter 9.56 (see § 9.56.110(c)) specifically disqualifies the following categories of persons from occupying On-Site Affordable Units: All employees and officials of the City or its agencies, authorities, or commissions who have, by virtue of their position, policy-making authority or influence over the implementation of the Affordable Housing Production`,Qrogram, as well as the immediate relatives of employees of such City e~iployees,and officials. :. The immediate relatives of the applicantor owner, including spouse child, parent, C. Housing Authority Administrative Plan with the 1) To create the Eligibility List. the Housing Division shall publish notices in newspapers circulated widely in Santa Monica, including newspapers that reach minority communities. At least one notice shall be published in a Spanish- language newspaper of general circulation. Examples of appropriate newspapers include the Santa Monica Daily Press, L.A. Times, La Opinion, and Atlministra[ive Guidelines Affordable Housing Production Program 19 The Sentinel. The notices should briefly explain what affordable housing is, state the applicable income requirements indicate howto applyforthe Eligibility List, state when the application period opens and closes indicate priorities for eligible occupants, and provide a telephone number for questions. Housing Division shall follow these procedures: A) At least 90 days prior to issuance of a Certificate of Occupancy by the City for newly developed units, or within 5 business days of notice of tenant Administrative Guidelines ARordable Housing Production Program 20 Each time affordable units become available for occupancy, the owner and the vacation in existing developments, owners shall notify the City ofthe number and type (low-/mod-income, number of bedrooms, ownership or rental} of units available. B) Within 20 business days of notice by the owner, the City shall provide the ownerwith a Referral -L+stForm, for each housekrafd~drawn from the Eligibility List, c^^~„t~ri„g-and provide at least three names for each unit available. Additional names may be provided to theme ownerupon request, subject to ~`, ~, availability. ti ~. ~.; C) Owners shall directly contact the persons on fte Referral ~Foriris provided by the City. Owners shall give applicants at Least 5 business days to submit a completed apphcat~on.:; O~n[ners who are"not able to fill vacant units from the Referral Forms p ovided ri~ay request atlditional names from the City. Additional names will. 6e~provided within, 5'business days, subject to D) and selection of applicants. All must be observed. E) Candidates`gn the°~ ~;a ~~, five times After the ity Eligibility List may be referred up to a maximum of referral, candidate names will be removed from the A) Periodic Update: The Eligibility List shall be periodically updated at least every two years. Letters shall be sent to all households on the Eligibility List requesting verification of all information, including name, address, place of residency place of employment (if applicable), and continued interest in Administrative Guidelines Affordable Housing Production Program 21 staying on the list. Eligibility List households shall be given two weeks to respond. At the end of the two week period the names of households who have failed to respond shall be taken offthe Eligibility List. The Eligibility List shall also be updated to incorporate any changes in status (place of time, even if the Eligibility List is closed, priority" households) wi~f>^esult in the aufoCnatic addition ofthat household to the Eligibility List wtth tt~ applica~le.priority '~`' ,F ~C) TheGity Niil~~3~gvide a Refer'~ral S~Form to the owner for each houseliofd selectett from the Eltctibility List^^ +he oeferr~t t •~+ The owner 5~ ,~ --~- shall co~iplete the rReferral S#attts-dorm indicating whethera unit was offered y,. „r to the househo(~i°~and whether;the unit was accepted or refused. A sample ~~~ Refei-r~`~#a#tES`~orm is provided in Attachment ~-4-B. If a unit was not ti offered because of a~,~oor credit history or for anyother reason, the owner y ~ ;?~' twill note thrs as well. The City will incorporate this information into the D) "~ ,p,~;~Households on the City's Eligibility List will be referred only for those units for which they qualify. For example, moderate income households will only be referred for vacancies in moderate income units. ~^.ppl~~a; its-Households on the City's Eligibility List must report any changes to address, household size, Santa Monica residency, employment in Santa Administrative Guidelines Affordable Housing Production Program 22 Monica, and/or,c h..~~~..h„i.+~...,+h^i'~+..aor..^ -.rr'.,,~n^.,r^.,.,+~' to the Housing n' +Division within 10 days. 35)Persons Dependent Upon Income from Other Sources Households on the City's Eligibility List A ^>~~ts-must report income from all sources. Any households on the City' support, including tuition payments, rent and/or any household "A^who ap return of another individual must so diSClb other will be considered along determining elig ~6)Automatic Removal fr+ Applicant names will be A) Failure,tar~~~ipear~fbr a si interview time contact the -> ., date, oK ~~ ~ . . of C) Fraud rrnents~=and/or, substantial gifts, 's as a' dependent upon the tax In these casesr=tihe income of the ;,, ie of the househ~td A^r~~ea~=rt-in ly from the Eligibility List for: interview or prior to the Division to arrange an alternate time or units, or; on a„eligibility documentation, or or; D) Failure„Xo disclose dependent status or receipt of substantial support, or; E) Acceptance of an affordable unit stemming from a Referral. A^^nppli~sHouseholds whose names are removed from the Eligibility List will also have their names removed from the t ~°' ^f or^^..^rc•o.+ n^^r^.,^+^ ^^,+ #rsr~--ar~}F-Referral ~+sts-Form upon which their names appear. ""~i;can~ Households whose names are removed from the Eligibility List shall be notified Atlministrative Guidelines Affordable Housing Production Program 23 by mail at the address which they have supplied to the City. The reason for removal will be specified as part of the notification. ~7)Appeal Process A) Right to Appeal The decision by the City to remove a name o,o^, ^t•f•^,, n^^r^^^+~ or from a Referral appeals must be in writing and Division's from ate-4istthe Eligibility List. B) Scheduling an I Upon receipt of an List; +"+"gym be appealed: All -lousing removal ion shall r^~arr f^•^^•^'°'TThe will schedule an Informal #ea-ring of receipt of the appeal. Once the is set, the appellant may reschedule only upon "which is defined as an unavoidable conflict seriously affecting thet~ealth, safety or welfare of the Appellant or his/her family. C) Fai(ulre of Appellant to Appear for Informal kiearir~gReview does not appear at a scheduled Informal Tearing-Review and has not rescheduled the Informal Tear+i~g-Review in advance, the appellant must contact the Housing Division within two working days. The Housing Division shall reschedule the Informal #ear-iag-Review only if the appellant's absence was caused by medical emergency or incarceration. In this event, the Informal Tear+ng-Review may be rescheduled only once. Administrative Guitlelines Affordable Housing Production Program 24 D) Conduct of the Informal ~Iear+rtgReview The informal review must be conducted by a person other than the one who made or approved the decision under review, ora subordinate of this t„+,,...,.,1 ue.,.~r,, ncv,. +ti~ .,..+~„ ,.f ++.e u,,, ~ ,, n•„ ., +~~o~ afco,.+ rrnvrmurr~c......y .~~ .. . .... .............. .. ........•....~'.y .......... .......... ....,.... Administrative Guidelines Affordable Housing Production Program 25 E) Notification of the Informal ~ar;,,9 ^of~Review Decision If after moving into an affordable unit the tenant's income eventually exceeds the income limitfor the unit, the tenant may remain in the unit as long as his/her income does not exceed 140% of the income limit for-the unit. Administrative Guidelines Affordable Housing Production Program 26 ~8)Changes in Income of Residents of.4ffordable Units However, if the tenant's income exceeds 140% of the income limit for the unit, the following shall apply, depending upon the income mix of the development: A) For Developments that are All Low-Income: If a tenant's income exceeds 140% of the income limit for the low income unit,but remains within the Program limit for amoderate-income unit, the tenant may remain in the unit and his/her name shall be moved automatically fQ the top of the Waiting List for the next available moderate-income, untt~of the~saine size or larger in the ;, City. As long as the tenant's income does not exceed th~~program limits for . ~. ~~. a moderate income unit, the tenant~~nay remain in the lovu'[iEOme until the next moderate income affordab~e~~unit o{=are^'appropriate si~~ becomes available. Once the tenant is offered tenancy in amoderate-income unit, if the tenant does not aceeptthe offer, then"the tenant must move out of the ~..; ~,, ,.,~ , low income unit with 90~~~ ys of t~e.offer of thy; moderate-income unit, Notwithstanding,~'if'tfie~tenant's~~r`lcome exceeds the program limits for a moderate ~hcome umt at any time during hislher tenancy in the low-income unit, the tenant shall be 4iven one year s;rlotice to vacate the unit. For~Mized Income Developments If a tenant's incomeexceeds 140% of the income I~mit for~his/her unit ("original unit") but does not exceed the ,.,.~ income hmits,gf other~units in the development, the tenant may remain in the original umt a~s long as a) the income limit for the original unit is re- ~.. desi~heted for an appropriate higher income category applicable to another unit in'~F~e development, and b) the next vacant higher income unit in the development is re-designated for the same lower income category applicable to the original unit. Notwithstanding, if the tenant's income exceeds 140% the program limits for all affordable units in the mixed income development and also exceeds the Administrative Guidelines Affordable Housing Production Program 27 program limits for a moderate income affordable unit, the tenant shall be given one year's notice to vacate the unit. C) For Mixed Income Projects Including Market Rate Units: If the tenant's income exceeds the program limits for the original unit by 140%, and if there are no units designated for a higher income categbrywithin the development which may be substituted for the original ulntt the~t~enant may remain in the original unit and the tenant's rent may be;r~ised fd?rnarket rate. However, To receive an adjustment or waiver, the applicant must submit an application to the Director of Housing and Economic Development, or his/her designee, at the time the applicant files amulti-family project application. The applicant bears the burden of presenting substantial evidence to support the request and set forth in detail the factual and legal basis for the claim, .including all supporting technical documentation. Administrative Guidelines Affordable Housing Production Program 28 In making a determination on an application to adjust or waive the requirements of this Chapter, the Director of Housing and Economic Development, or City Council on appeal, may assume each of the following when applicable: (1) The applicant is subject to the affordable housing (2) The applicant will benefit from the incl and the City's Municipal Code; (3) The applicant will be obligated to prov units feasible in terms of construction, design, The Director of Housing and ninety days after a a to the City Council if the date that the dee filed Withri'fourteen If the Director of Hou legal ad lce provideel^ requirerr~ents of this 1 otherwise~ave an w ~, ris ~~ requirements shall be ";, the extent necessary of this Chapter; forth in this Chapter ical affordable housing tenure. a written decision within rn may be appealed calendar days from g anti''°Economib~'D'evelopment, or City Council on appeal, upon or of t~e behest of the City Attorney, determines that applying the a ter~woutd,effectuate an unconstitutional taking of property or ~;` >nst`Itut[onal application to the property, the affordable housing l~u~ted or waived to reduce the obligations under this Chapter to ~ravoid an unconstitutional result. If an adjustment or waiver is granted, any change~iji~~he use within the project shall invalidate the adjustment orwaiver. If the Director, or City Council on appeal, determines that no violation of the United States or California Constitutions would occur through application of this Chapter, the requirements of this Chapter remain fully applicable. [The end] Administrative Guidelines Affordable Housing Production Program 29 ATTACHMENTS 1-A Municipal Code Chapter 9.56 (Subject fo Amendments) 1-B AHPP Options Comparison Table 2-A Fee Adjustment Methodology 2-B Current Base Fees for Apartment and Condomiruiii Pri Annually) 3-A Affordable Units Table - Condominiun 3-B Development Incentives Table 3-C Very Low, Low and Moderate Income ,~. 3-D Maximum Rents (Adjusted Anriually~ 3-E Sample of Deed Restrictions ~~~>> 4-A Sample Application f4r~Affordable°~Hoi 4-B Referral Status Eorrri'~''' ;::.. ~ , (Adjusted w/4+ Units in Zones Annually) Administrative Guidelines Affordable Housing Production Program 30 ATTACHMENT 1-A Municipal Code Chapter 9.56 (This attachment will be updated to reflect the City Council action on June 14, 2011) Administrative Guidelines Affordable Housing Production Program Attachment 1-A: Page 1 ATTACHMENT 1-B AHPP Options Comparison Table ® 10% of units for V Income ® 20% of units for;L Income ® 100% of units fog Moderate Income n ® 'LU% ot,~nits are .affordable°~or 4-15 unit projects ,, ~~ ., 25% of units are affordable for 16¢ unit projects V` ~, ~ ® 25% more than the OFF-SITE OPTION ~ ~' • Same a~on sitebption ~ required number of on- ~~ ~_ site units $26 ;79/sf for apartments $31.2'1;$/sf for condominiums Not Applicable 14, 201 on 080 ~ Not Applicable Atlministrative Guidelines Affordable Housing Production Program Attachment 1-B ATTACHfV1EIVT 2-A Fee Adjustment Methodology Table 1 - Afifordable Housing Unit base Fee Affortlabl¢ Rousing UnH Base Fe¢ Annual Ingatlon Atljuslment Calculations for FY 2001742 Land COS[Inflation Metlian Price Change Calculagon ZIP COtle 2009-2010 #COntlos $oltl Weights- Weightetl AVg. 90401 -14.4% 9 2.6% -0.4% 90402 -41.6% 19 5.4% -2.2% 90403 3.4% 145 41.2% 1.4°/a 90404 62°a ]] - 21.9% 1.4% 90405 1.4°/a 73 29_0% 0.4% 352 100.1% 0.6% Source: MDA Dataquick (available on-line aC http:/Mmrw.tlgnews.comlCharS/Annual-ChartsM-Times-ChartslLIPL4T10aspx) Construction Cost in11a1lon Engineering News Recortl's Op051Np1ipn Cost Intlex -Los Angeles Mach 2010 Intlex Value 9,]69.69 March 2071 Index Value 10,035.05 Percentage Change 2010.2011 2.] % ~y Souroe: Engineering News Remrtl (available at htlplN.vrvcenr.wnstmetion.wmlreatures/coneco/subslconstlntlexHist.asp) Derivation of Lantl Costantl Consbuc5on Cost DdlcUlddan Weights Hartl Construction Most Recent CCSM Family RenfalProjecfs Lantl Cost Cost Sum 145814th Street $ 2730,000 $ 8,035,559 $ 8,]65,559 2602 Broatlway 5 51]5000 5 11199833 ~ £ 1fi.3]4.833 $ ],905p00 1],235,392 $ $ 25,140,392 31.4% 68.6% 100.00% Soumz: Housing Division, City o{Santa Monica lntla0on Factor DedvaGOn Inffallon Value Weight Wtd. AVg. Lantl Value Inflation 0.6% 31.4% 0.2% ConsWCtion COSt Inflation 2.]% 68.6% 1.9% U rsv:;:wa~.~..~-nu Adjusted Fees FY 2010-11 Fees Inflation Factor Uptlatetl Fees a S Change Condos $31.28 2.1% $31.94 ;j 50.88 Apartments 326.]9 2.1% $2].351 $0.56 5y~..,~<..~,x1 For InPormadon Only: Consumer Price Index Change, LA-Riv-Or Co., All Urban Consumers, 1982-84 = 100 Mar. 20101ndex Value 225.483 Mar. 2011 Intlex Value 232 241 Percentage Change Mar.2010-Ma[2017 3.0% Spume: US Bureau of Labor Stagsgcs (available at: htlp:/AVww.bls.gov/cpi) Prepanadby: HRBA, Inc Administrative Guidelines Affordable Housing Production Program Attachment 2-A: Page 1 ATTACFiMEfVT 2-A Fee Adjustment Methodology Table 2 -Affordable Flousing Unit Development Cost AHOrtlable Housing Development Cost Annual Inflation Atljusiment Calculations for FY 2011-t2 Lantl COStlnfla6on ZIP COtle Metlian Price Change 2009-2910 #COntlos SOltl Calculation Weights Weightetl AVg. 90401 -14.4% 9 2.fi% -0.4% 90402 -416% 19 5.4% -2.2% 90403 3.4% 145 41.2% 14% 90904 - 8.2% ]] 219% 14% 90405 1.4% 102 29_0% 0.4% 352 100.1% ~ Source: MDA Datequick (available on-line et hhp:/Mrvnv.tlgnevs_coMCharts/Annual-ChartslLA-Tmes-0hads/ZIPL4Ti0.aspx) ConsVUCfIOn Lostlnfladon Engineering News RemN's Construction Cos[ Intlez-Los Angeles March 20101ntlez Value 9,]69.69 March 201 t Intlez Value 10.035.05 Perceniage Change 2009-2010 - ~~ wx~+n 2.]% Source: Engineering News Remrtl (available at h0pllwmvencwnstmctioOCOmifeaWreslconecofsubs/constlndexHisLasp) Derivation of Land Cosf and Constrvc6on Cost Ca/cufaGOn Weights Hartl Construction Most Recent CCSM Family Renfal Projects Lantl COS[ Cost Sum 145a 14th Street $ 2,]30,000 $ 6035,559 S 8,]65,559 2602 Broadway S 5.1]5.000 $ 11199833 S 183]4833 $ ],905,000 5 1],235,392 $ 25,140,392 316% 68.6% 100.0% Source: Housing Division, City of Santa Monim Inflation FacfOr Denvd6on Infation Value Weight Wtd. AVg. Lantl Value lnflaiion 0.6% 31.4% 0.2% Consimclion COSt Inflation 2]% 68.6% 1.9% e~+ ,~vaa:a-:,.awl. /e Adjusted Unit LOSt FY 2010-11 COSWnit Inflation FacWr Uptlatetl COStlUnga $Change AHOMabie Housing Development LOST 3281,100 2.1% 6FN 5281,003tl$ 05.903 Forlnformation Only: Consumer Price Intlez Change, LA-Riv-Or Cq., All Urban Consumers, 1982-84 =100 Mar. 20101ntlex Velue 225.463 Mar. 2011 Index Valua 232.241 Percentage Cbange Mac 2010-Mac 2011 3.0% Souma: US Bureau of Labor Statistics(available at htrP/lwww.bis.gov/cpi) P d6 'HRSA,i Administrative Guidelines Affordable Housing Production Program Attachment 2-A: Page 2 ATTACHMENT 2-B Current Base Fees fior Apartment and Condominium Projects FEE FOR APARTMENT PROJECTS Current Fee: $26.79 [adopted 9-28-10]. Effective Proposed Fee: $27.35 (City Council to consider o, date will be August 15, 2011) ~ `~~ 11; 1; if adopted, Effective 0. 0. Effective Bash Fee is due prior~ta~completion,of pro]ect, but not before building permit issuance, and the~amo~upt of fee due~~s based on fee amount in effect at time of payment. Administrative Guitlelines Affordable Housing Production Program Attachment 2-B ATTACHMENT 3-A Affordable Units Table -Condominium Projects w/q.+ Units in Multifamily Zones (This attachment will be updated to reflect the City Council 14, 2011.) Atlministrative Guidelines Affordable Housing Production Program Attachment 3-A ATTACHMENT 3-B Development Incentives Density Bonus Table for Housing Development in all Zones (This attachment will be updated to reflect the City Cou~c~f act~o~ on June 14, 2011.) Administrative Guidelines Affordable Housing Production Program Attachment 3-B: Page 1 ATTACHMEFJT 3-C Very Low, Low and Moderate Income Levels 2011 6ncome Limi#s MAXIMUM ALLOWABLE I Household Very Low ,:~~,;Low Moderate~e ~ Size (50°/a) ;~~60%) ~ ~, (100%) ` 1 $29,900 $35,9Q0= ' $59,800 2 $34;200 $41,000 $68,400 3 $3~4~Q ;: ,. $46,1Q0; $76,900 4 $42,700 `:: $51,200 ~`;ti $85,400 5 ~~ $46,r150 .,•:=,$55;3r?Q~ ~~ $92,300 6„ , ° '~ $49,550 , .. '' $59,400 $99,100 7'' $52,950 ', $63,500 $105,900 :8°~, r :,$56,400 x;`:,,$67,600 $112,800 Administrative Guidelines Affordable Housing Production Program Attachment 3-C ATTACHMENT 3-D Maximum Rents 2011 Ften$ Llmi$S MAXIMUM ALLOWABLE ~,>.. Very (_ow r~ Moderate Unit T pe (50%;) : , Low 6Q,%) (100%) 0-Bdrm `$747 _ $~89~6„ $1,495 1-Bdrm $85,4 $1:F,024'' $1,708 2-Bdrm,,,,,,'. ~; $1,01,4 ,, $1;216 $2,028 3-Bdrm:=°'' ;;,$1,158 ~" $1,389 $2,316 4-Bdrm $1,308 ~~;, $1,568 $2,615 Rents: Administrative Guidelines Affordable Housing Production Program Attachment 3-D ATTACHMENT 3-E Sample of Deed Restriction (This attachment will be updated to reflect the City Council actio[i ~on June 14, 2011.) Administrative Guidelines Affordable Housing Production Program Attachment 3-E: Page 1 ATTACHNIE(VT 4-A Sample Application for Affordable Fiousing Eligibility List (This attachment will 2011.) Administrative Guidelines Affordable Housing Production Program Attachment 4-A ATTACHMENT 4-B Referral Form (This attachment will be updated to reflect the City Council action on June 14, 2011.) Administrative Guidelines Affordable Housing Production Program Attachment 4-B ~ ~ Analyze. Advise. Act. HR&A ADVISORS, INC. Econarnie Development, Real Estate Advfsory & Public Policy Considtants May 20, 2011 Mr. Barry Rosenbaum, Esq., Senior Land Use Attorney Office of the City Attorney City of Santa Monica 1685 Main Street Santa Monica, CA 90405 Re: Proposed FY 2011-12 Annual Automatic Adjustment for the Affordable Housine Unit Base Fee Dear Mr. Rosenbaum: This letter summarizes the results of applying the annual adjustment calculation methodology adopted by the City to establish the Affordable Housing Unit Base Fee pursuant to Santa Monica Municipal Code Section 9.56.070(b) ("the affordable housing unit base fee shall be adjusted [annually] based on changes in constructions costs and land costs). This methodology was approved by the Santa Monica City Council at a public hearing on June 13, 2006, based on the recommendation of HR&A in a letter to City staff dated April 24, 2006. A copy of the Apri124, 2006 letter is included for reference as Attachment A hereto. The City Council approved the last annual increase for FY 2010-11 using this methodology when it adopted Resolution No. 10529 (CCS) on September 28, 2010. For the construction cost inflation component of the calculation approach, the Engineering News Record's (ENR) Construction Cost Index specific to the Los Angeles metro area is utilized, because it is updated monthly and is readily available via the Internet. The applicable index change was 2.7 percent measured between March 2011 (the budget adoption year) and March 2010, as compared with a -0.3 percent change between March 2009 and March 2010. Although there is no comparable index for inflation in land cost, we use the weighted average annual change in medium condominium sale prices by ZIP Code as a proxy measure for land cost changes measured for the immediately preceding calendar year. The 2010 median condo price changes by City ZIP code were published in the Los Angeles Times in January 2011, using Los Angeles County Assessor data compiled by MDA Dataquick. The weighted average change for the City during 2010 was 0.6 percent. During 2009, there was a -3.4% reduction. 2800 28TH Srxeer, Sulre 325, SnNTn MoN[cn, CnalroRNln 90405 • Tsr: 310.581.0900 • FAx: 310.581.0910 Los Angeles New York Barry Rosenbaum, Esq. City of Santa Monica May 20, 201 I The relative balance between land cost inflation (based on changes in median condo prices) and construction cost inflation (based on a construction cost index) was determined based on development cost data for the two most recently completed or planned multi-family affordable developments assisted by the City - i.e., 1458 14`h Street and 2602 Broadway. The approach uses a simple average of the ratio between land purchase price and the sum of land cost and hard construction cost to derive the land value percentage (31.4%). For the two most recent developments, this factor represents a larger share than in past calculations (21.4%). The inverse of the land value percentage is the construction cost share (68.6%). Table 1, on the following page, presents the annual adjustment calculation establishing the Affordable Housing Unit Base Fee for FY 2011-12. It shows that a weighted average inflation index using this City Council-approved approach results in a 2.1 percent annual increase to: $31.94 per square foot for condominium developments (an increase of $0.66 per square foot from the FY 2010-11 Fee); and $27.35 per square foot fot apartment developments (an increase of $0.56 per square foot from the FY 2010-11 Fee). It is my understanding that the results of the calculations shown in Table 1 will be the basis for a Resolution changing the Affordable Housing Base Fee for FY 2011-12. We are available to assist you in presenting the Resolution to the City Council Sincerely, F t% ~/~ PAUL J. SILVERN, Partner HR&A ADVISORS, INC. Page 2 Barry Rosenbaum, Esq. City of Santa Monica May 2Q 2011 Table 1 Affordable Housing Unit Base Fee Annual Inflation Adjustment Calculations for FY 20011-12 Lantl Cost Inflation Median Price Change Calculation ZIP Cotle 2009-2070 #COndos Soltl Weights Weighted Avg. 90401 -14'.4% 9 2.6% -0.4% 90402 -41.6% 19 5.4°/a -2.2% 90403 3.4% 145 41.2% 1.4% 90404 6.2% 77 21.9% 1.4% 90405 1.4% 102 29.0% - 0.4% 352 100.1 % 0.6 Source: MDA Dataquick (available on-line at: http:/lwrowu.dgnews.com/Charts/Annual-Charts/LA-Tmes-Charts/ZIPLAT10.aspx) Construction Cosf Inflation Engineering News Record's Construction Cost Index -- Las Angeles March 2010 Index Value 9,769.69 March 2011 Index Value 10,035.05 Percentage Change 2010-2011 2,7/,'3 ~sava~an s~~sv-...,.-. Source: Engineering News Record~(available at http://wwuv.enr.wnstruction.com/features/coneco/subs/constlndexHist.asp) Derivation of Land Cost and Construction Cosf Calculation Weigfrfs Hard Construction Most Recent CCSM Family Rental Projects Land Cost Cos[ Sum 1458 14th Street $ 2,730,000 $ 6,035,559 $ 8,765,559 2602 Broadway $ 5.175.000 5 11.199 833 $ 16.374.833 $ 7,905,000 $ 17,235,392 $ 25,140,392 31.4% 66.6% 100.00% Source: Housing Division, City of Santa Monica Inflation Factor Derivation Inflation Value Weight Wttl. Avg. Land Value Inflation 0.6% 31.4% 0.2% Construction COSt Inflation 2.7% 68.6% 1_9% Atljusted Fees FY 2010-11 Fees Inflation Factor Updated Fees ;i $ Change Contlos $31.28 2.1 % $31.94 $0.56 Apartments $26.79 2.1 % $27.35 ~ $0.56 ~.n..,.a.~.,~~~:"-.~. For Information Only: Consumer Price Index Change, LA-Riv-Or Co., All Urban Consumers, 1982-84 = 100 Mar. 2010 Index Value 225.483 Mar. 2011 Index Value 232.241 Percentage Change Mar. 2010-Mar. 2011 3.0 Source: US Bureau of Labor Statistics (available at: http:/lwww.bls.gov/cpi) Prepared by: HR&A, Inc HR&A ADVISORS, INC. Page 3 ATTACHMENT A Apri124, 2006 I4R&A Letter re: Annual Adjustment Methodology HR&A ADVISORS, INC. Analvzr. i\dvisc. Act. ituaurov, ahaNbVfl'L&ALSGfNLfR, hYC Paltry, Flnmrcio(& hfmmgemenl CauulkvNS - Apri124, 2006 Mr. Ron Barcfield Housing Administrator - Cify of Santa Mooica 2121 Clovertield Bivd., Suito 100 Santa Monica, CA 90465 Re: Annual Adiustmenf for tfie Affordable Housine Fee Dear Ron: •'~'Pec }wurte9uesy this letter summarizes an annualadjustmeht approach we recommended ""- "fdr'th'e City of Serifs Monica's ("City's Affordable Housing Fee,~which developers ofmulti- family residen[ialdevelopers mayalect to pay, pursuantto Santa Monica Municipal Code Section 4.56.07Q as amended. This recommendation was inciuded in Section V of our recent report, 2005 Updnte, 77re Nexus Beaveen New MarketXate Multi-Pamity Developments rn Jhe City ofSanta Monica and the Need jorA-Qordable Housing, Juty 1, 2005 ("2005 Nexus Study Update"). in order to bettor ensure that the Affordable Housing Fees remain consistent with changing market conditions, it would be prudent for the City to apply an annual adjustment index, but to use an inflation concept other than the ConsumerPrice Index (CPi). While the CPI is oRen used to make inflation adjustments because of its Convenience, the monthly changes in the value ofconsumer goads that dominate the CPI ate not be the most appropriate basis for measuring change in the City's cost to develop affordable housing. However, to be meaningful, any alternative index must rely on data that is readily accessible to City stafffor calculating the change, and for the public's information. A suitable alterna8ve approach would need to measure amual changes in land cost and construction costs, which together account for about 75-80 percent of the cost of new affordable housing development I There are, in our experiencq several well-established construction cost indicts. We recommend Engineering News Record's (ENR) Construction Cost Lldex, because it ' The other20.25%<eonsisES Ofprofessianal fees sad other"soft costs"and fwancing costs, neither of which is mgulaly monitored by third party sources for inflation changes. 280a2smS'me6r, Surra325, SANTh MOMCA, CAIIIURYIA 90405 • Tee: 310.581.0900 • Fnx:330.481.0930 Ins Anortrs Yo. CntaoANLt POaT1.1[at, OR NewYnrtR Ron 13arefield Housing Division City of Santa Monica Aprit 24, 2006 is updated monthly and is readily available via theInternet- HoweveG there is no comparable index of changes in land cost. One proxy measure that could be used for Land cost changes is change in median condominium purchase prices? Since the median condo sale price for the City as a whole would be skewed by the tendency for sates to be concentrated in a few subareas, a more neutral measure would be the weighted average annual change in median co^do sale prices by ZIP Code. These data are published by the Los Angeles Times each Ianuary, using Los Angeles County Assessor data compiled by Daiaquick. They are also available on a subscription basis from other vendors, such as First American Reat Estate Solutions. The relative balance beriveen land cost inflation (based on changes in median condo prices) and construction cost inflation (based on a construction cost index) could be determined based on current development cost data for recently completed orconstruction-in-progress multi- familyaffordable developments assisted by tfic City. Ne recommend using a simple average of the ratio between land purchase price and the sum of land cost and hard construction cosE to derive the land value percentage; the inverse of this ratio would be the construction oust share.a Since the proposed amoral inflation adjustments to the Affordable Housing Fee will be adopted by Resolution of the Ciry Council as park of the annual budget process each June, we recommend that City staff measure the weighted average annual change in median condominium price for the immediately preceding calendar yeaz, and the construction cast index change berivccn March of the budget adoption yeaz and blareh of the immediately preceding year. We recommend using the annual change in median condo prices in the calculation, rather then ycar- over-year changes in March or any ocher month, because median rrtontlily prices can vary significantly due to the number of sales and particular composition of the sales in any particular month. The annual average tends to smooth out these effects. We recommend the monthly year- over-year approach for construction costs, however, because constnaetion represents a much larger share of total project cost. Using the mast recently available construction cost inflation data better ensures that the Affordable Housing Fee will keep pace with rho actual cost to the City ofdevelopingaffordablehousing. Table 1 below, which is a variation on Table V-5 from the 2005 Nexus Study Update,'t illustrates how such an annual index could be constructed and applied to the recently adopted Affordable Rousing Fees for new market rate apartment and condominimn projects, for FY 2006-07. It shows, for example, that a weighted average inflation index as proposed herein ~ Consistent with ilte City's historical experience,this assumes that most new affordable multi-family projects will be developed inmulti-family districts, although some recent projects include sites in commercial disticts. Unlike residcatiat property, there is no readily nveilable data source for commercial land price changes. a For example, if the nvemge land cost forrccent projects was 33A million and average hard construction cast was $4.0 million, the land m land plus consWdion cost ratio would ht 25%($3.0 million!($3.0 million+34.0 million) end the conshuction cost to land cost plus conshuelion mst ratio would be 75%. a Table V-5 was based on Citywide average fees, which was ane alternative fee schedule presented in rho 2005 Nexus Study Updatt. Table i herein uses the alternative tve3gkred m~emge fees, which were also presented in dte 2005 Nexus Study Update, and ibvas these fees that the City Council actually adopted on October 11, 2005. HANIILTON,RABLVOV1rZ&ALSClNi.GR, TNC. Page 2 RonBarefleld- HousingDivision City of Santa Monica April 2d, 2006 would result in a 7.9 percent annual increase, compared ryith a 5.2 percent increase based on construction costs alone, or 5.1 percent based on the CPL It is my understanding that the inflation adjustment approach described above will be presented to the City Council on May 9, 2006. We are avaiiable to assist you, as needed, with that presentation. Sincerely UL J. VE Partner AnMU.7o;t, RABAlOV[TL&ALSCAIJLER, INC. Page 3 fton Barefield IIDUSing Division Ciry oFSanta Mmlica Apri129, 2006 Table t AHerdabie Housing Feo Annual inflation AdJusiment CaleWaOons far FY 2806.67 Land Cosfinifagon Medlan Annual PB¢a Caicufallon 21P COde Change DUring 2005 #Condos Soid Weight Weighted Avg. 90401 36.9°b 27 4.5% 7.6% BOd02 -2.7% 30 6.0% -0.1% 90403 8.8% 237 39.5% 3.9% 80404 25.6% 182 27.0% 8.g°b 90405 10s% ]9.4 24.0% z„6% 800 14.8°O/a Source: Los Angales7lmes, Real Estate Secdon, p. K19, January22, 2008 (hosed on DalaDulck InfpnnaVOn Systems) Cpnsfinet/on Cos[Inllatlon Engineering News RerAN's ConsWCdon Cosi index March 20031ndex VaNB 7,309 March 20061ntlex VaNa 7,882 Percentage Change 2005-2000 52% Source: Englneedng News Rernry (available at hdpdNrvnv.ant.tanaWCd¢n.conrNeatureslconecofaubs/conslinde~aiiaGasp7 Derivat7an olLand Cost antl COnstrvelion Casf Calculation Welghfs Most R¢cent CCSM Famlry Reniai Prpleda Lantl Cast Hard COnstruc0on Total 1424 Broadway $ 3,640,000 $ 8,100,000 S 11,740,000 2607 Santa NmNm epulevard $ 3,250,000 $ 8,100.000 $ 11,350,000 2209 Main SVeet 5 120000 3 9.123.910 S t2.243.91n $ 10,010,000 $ 26,323,910 $ 35,333,910 28% 72% 100% Source: Hsusrng Divlsfon, Ciry of Santa MaNca /nflaflon FaclorDeriva#on Inllaticn Yalue Wslght Witl. AV g. Land VelUe Inflation 14.8% 28.3% 9.2% Consirudion COSt lndadon i.2% 71.7°F $@& 7.9•(0 AtljustetlFees Oct 2003 Base Peas InOatten Factor Vptlatetl Feas ~I S Change Condos $26.08 7.9% $28.75' $2.07 Apanmenis $22.33 7.9% $24.1 Of $1.77 Forfnformallon Onry: Consumer Ptlra intlex Change,LA-RN~Or Co.. All Urhan consumers Feb. 20051ndex Value 197.d Feb.2006 JntlexVaWe 207.5 Percenlago Ghan9e 2006-2008 5.7% Source: U3 Bureau oFLabor Sfadsdrs (available at httpJ,4pvw.bls.gov/cp) Prepamdbg F/dmlQen, RahlnevAZ 8 Aiscnufeq InF HAYfiCTON, I2ARNOVI'tZ&ALSCHULEA INC. page 4 ~~~~~-~~ Analyze. Advise. Act. HR&A ADVISORS, INC. Ecottomic Deve[oprnenr Real Estate Advisory & Public Policy Cansnltants May 20, 2011 Mr. Barry Rosenbaum, Esq., Senior Land Use Attorney Office of the City Attorney City of Santa Monica 1685 Main Street Santa Monica, CA 90401 Re: Proposed FY 2011-12 Annual Adjustment forthe Affordable Housing Unit Development Cost Dear Mr. Rosenbaum: This letter summarizes the results of applying an annual adjustment to the Affordable Housing Unit Development Cost pursuant to Santa Monica Municipal Code (SMMC) Section 9.56.070(c) (" ...Commencing on July 1, 2007 and on July 1 s` of each fiscal year thereafter, the City's affordable housing unit development cost shall be adjusted based on changes in construction costs and land costs ..: '). The inflation methodology is the same as that used to produce annual adjustments for the Affordable Housing Unit Base Fee, pursuant to SMMC Section 9.56.070(b). That methodology was approved by the Santa Monica City Council at a public hearing on June 13, 2006, based on the recommendation of HR&A in a letter to City staff dated April 24, 2006. A copy ofthe Apri124, 2006 letter is included for reference as Attachment A hereto. SMMC Section 9.56.070(a)(4) provides that developers of market rate multi-family housing are eligible to pay a fee equal to a fraction of an affordable unit when the number of units otherwise required by Section 9.56.050(d) is less than 0.75. In such cases, the amount of the fee is equal to the City's Affordable Housing Unit Development Cost multiplied by the fractional unit. The City's Affordable Housing Development Unit Cost is deftned as the average cost to the City to develop a unit of housing affordable to low- and moderate-income households. The Affordable Housing Unit Development Cost was originally estimated to be $239,949, as contained in the nexus study prepared by HR&A in 20051 to support the imposition of the Affordable Housing Unit Base Fee. The amount of the Affordable Housing Unit Development Cost is equal to the City's total cost to develop a unit of affordable housing (i.e.; land, ' Hamilton, Rabinovitz & Alschuler, Inc., The Nexus Between Nerov Market Rate Multi-Fami/y Developments in the City of Santa Monica and the Need for Affordable Housing, 2005 Update, July 1, 2005, prepared for the Ciry of Santa Monica. 28~~2$TH STREET, SUITE 325, SANTA MONICA, CAQFORNIA 90405 TEL:3t0.$$1.09W FAX: 31U.58L09I0 Los Angeles New York Barry Rosenbaum, Esq. City of Santa Monica May 20, 2011 construction, professional fees and other "soft" costs and financing costs) minus the amount of construction loan that can be supported by the net operating income derived from operating a typical City-assisted affordable housing development. A 2005-2007 cumulative inflation increase for the Affordable Housing Unit Development Cost to $265,632 using the approved methodology was adopted by the City Council when it approved Resolution No. 10230 (CCS) on July 24, 2007. The City Council approved the last annual increase for FY 2010-11 using this methodology when it adopted Resolution No. 10530 (CCS) on September 28, 2010. For the construction cost inflation component of the calculation approach, the Engineering News Record's (ENR) Construction Cost Index specific to the Los Angeles metro area is utilized, because it is updated monthly and is readily available via the Internet. The applicable index change was 2.7 percent measured between March 2011 (the budget adoption year) and March 2010, as compared with a -0.3 percent change between March 2009 and March 2010. Although there is no comparable index for inflation in land cost, we use the weighted average annual change in medium condominium sale prices by ZIP Code as a proxy measure for land cost changes measured for the immediately preceding calendar year. The 2009 median condo price changes by City ZIP code were published in the Los Angeles Times in January 2011, using Los Angeles County Assessor data compiled by MDA Dataquick. The weighted average change for the City during 2009 was 0.6 percent. During 2009, there was a -3.4% reduction. The relative balance between land cost inflation (based on changes in median condo prices) and construction cost inflation (based on a construction cost index) was determined based on development cost data for the two most recently completed or planned multi-family affordable developments assisted by the City. These developments - 1458 14a' Street and 2602 Broadway -are different from the projects used in past calculations. The approach uses a simple average of the ratio between land purchase price and the sum of land cost and hard construction cost to derive the land value percentage (31.4%). For the two most recent developments, this factor represents a larger share than in past calculations (21.4%). The inverse of the land value percentage is the construction cost share (68.6%), which is correspondingly lower for two most recent developments than in past calculations (78.6%). Table 1, on the following page, presents the annual adjustment calculation establishing the Affordable Housing Unit Development Cost for FY 2011-12. It shows that a weighted average inflation index using the City Council-approved approach results in a 2.1 percent annual increase to $287,003 (a $5,903 increase compared with the FY 2010-11 Unit Cost). HR&A ADVISORS, INC. Page Barry Rosenbaum, Esq. City of Santa Monica May 20, 201 L It is my understanding that the results of the calculations shown in Table 1 will be the basis for a Resolution changing the Affordable Housing Unit Development Cost for FY 2011-12. We are available to assist you in presenting the Resolution to the City Cotmcil. Sincerely, Dkcl~.__ PAUL J. SILVERN, Partner HR&A ADVISORS, INC. Page 3 Barry Rosenbaum, Esq. City of Santa Monica May 20, 2011 Table 1 Affordable Housing Development Cost Annual Infation Adjustment Calculations for FY 2071-72 Land Cost Inflation Median Price Change - Calculation ZIP Cade 2009-2010 #COntlos Sold Weights Weighted Avg. 90401 -14.4% 9 2.6% -0.4% 90402 -47.6°/a 19 5.4% -2.2% 90403 3.4% 145 41.2% 1.4% 90404 6.2% 77 21.9% t.4% - 90405 1.4% 702 29_0% 0.4% 352 100.1% 0.6% Source: MDA Dataquick (available on-line at: hdp:/lwww.dgnews.com/ChartslAnnual-Charts/LA-Times-ChartslZIPLAT10.aspx). Construction Cost Inflation Engineering News Record's Construction Cost Index- Los Angeles March 2070 Index Value 9,769.69 March 20711ndex Value 70,035.05 Percentage Change 2009-2010 2.7% yt n ~xm,-.. w. ~3 Source: Engineering News Record (available at http:/lwww.enr.wnstruction.com/featureslconecolsubs/wnstlndexHist.asp) Derivation of Land Cost antl Construction Cost Calculation Weights Hard Constmction Most Recent CCSM Family Rental Projects Land Cost Cost Sum 1458 14th Street $ 2,730,000 $ 6,035,559 $ 8,766,559 2602 Broadway $ 5 175 000 $ 71.199.833 3 16.374.833 $ 7,905,000 $ 17,235,392 $ 25,140,392 37.4% 66.6% 100.0% Source: Housing Division, City of Santa Monica Inflation Factor Derivation Infation Value Weight Wtd. Avg. Land Value Inflation 0.6% 37.4% 0.2% Construction Cost Inflation 2.7% 68.6% 1.9% Adjusted Unit Cost FY 2070-11 CostlUnit Infation Factor Uptlatetl Cost/Unit . $ Change Affordable Housing Development Cost $267,700 2.1 % $287,003 - $5,903 For Information Only: Consumer Price Index Change, LA-Riv-Or Co., All Urban Consumers, 1982-84 = 100 Mar. 2010 Index Value 225.483 Mar. 2017 Index Value 232.241 Percentage Change Mar. 2010-Mar. 2077 3.0% Source: US Bureau of Labor Statistics (available at: http:/lwww.bls.gov/cpi) Prepared by: HRBA, Inc. HR&A ADVISORS, INC. Page 4 ATTACHMENT A April 24, 2006 HR&A Letter re: Annual Adjustment Methodology HR&A ADVISORS, INC. Analyze. r\dvisC. Act. iTAtacTON,RAam~o+mz &ALSCfM.FR iNC. Poftry, F)rconriol &hfw,ogemenf Coreuf~on/a Apri124, 2006 Mr. Ron BarcScld Housing Administrator City of Santa Monica 2121 Clover&etd Blvd., Suite 100 Santa Monica, CA 90405 Re: Annual Adivstment for YLe Affordable Housin¢ Fee Dear Ron Per your request this letter summarizes an annual adjustment approach we recommended for the City of Santa Monica's ("City")Affordable Housing Fee, which developers o£mu1H- famiiy residential developers may sleek to pay, pursuant to Santa Monica MunIctpal Code Section 9.56.070, as amended. T(tis recommendation was included in Section V of our recent report 2005 Update, TheNezxasBettveenNewMarketRateMulti-Pami7yDevelopments in [he City ofSanta Monica and the Need forA„~ordoble Ilausing,Tuiy 1, 2005 ("2005 Nexus Study Update"), Tn order to better ensure that the Affordable Housing Fees remain consistent with changing market conditions, it would be pendent for We City to apply an annual adjustment index, but to use an inflation concept other than the Consumer Price Index (CPI). While the CPI is often used to make inflation adjustments because of its convenience, the monthly changes in the value ofconsumer goods that dominate the CPI are not be Ute most appropriate basis for measuring change in the City's cost to develop affordable housing. However, to be meaningful, any alternative index must rely on data that is readily accessible to City staff for calculating the change, and for the public's information, A suitable altemative approach would need to measure annual changes inland cost and construction costs, wluch together account for about 7S-S0 percent ofthe cost of new affordable housing development-t There are, in our experience, severnlwelt-established construction cost indicts. We recommend EngineeringNews Record's (ENR) Construction Cost Index, because it ' The other20-25%wnsists ofprofessional fees and other"soil costs"and financing rnsts, neither of which is regularly monitored by third paM1y sanrces for inflation changes. 280a28raSTnesr, 8una325, SANTA MeffiCA, CA[.ffOWUUt 90105 • Ta: 310.581.0900 • FAx: 310.581.0910 LaSANGElt,4 Ne.CUaow+u POA'Mm,OR NEW YenK Ron Earefieid Rousing Division City of Santa Monica April 24, 200G is updated monthly and is readily available via the Internet. However, there is no comparable index of changes in land cost. Oneproxy measure that could be used for land cost changes is change in median condominium purchase prices? Since the median condo sale price for the City as a whole would be skewed by the tendency for sales to be concemmted in a few subareas, a more neutral measure would be the weighted average annual change in median condo sale prices by ZIP Code. ~ These data are published by the Los Angcics Times each January, using Los Angeles County Assessor data compiled by Datagttick. They are also available on a subscription basis from other vendors, such as First American Real Estate Solutions. The relative balance behveen land cost inflation (based on changes in median condo prices) and constntction cost inflation (based on a aonstmetimt cost index) could be dekerrrtined based on current development Bost data for recently completed or constntetion-in-progress multi- famiiyaffordable developments assisted by the City. We recommend using a simple average of the ratio between land purchase price and the sum of land cost and hard construction cost to derive the land value percentage; the inverse of this ratio would 6e the consttuction cost share.a Since the proposed annual inflation adjustments to the Affordable Housing Fee wilt be adopted by Resolution of the City Council as part of the annual budget process each June, vve recommend that City staff measure dre weighted avemge annual change in median condominium price forthe immediately preceding ca[endaryear, and the constuction cost index change between March of the budget adoption year and March of the hnntediately preceding year. We recommend using the annual change in median condo prices in the calculation, rather then year- over-year changes in Maxeh or any other month, because median monthly prices can vary significantly due to the number of sales and particular composition of the sales in any particular month. The annual average tends to smooth out these effects. W.e recommend the monthtyyear- over-ycar~pproach for cmistmction costs, however, because constmction represents a much larger share of totat project cost, Using the most recently available construction cost infation data bettec ensures that the Affordable Housing Fee will keep pace with the actual cost to the City of developing affordable housing. Table I below, which is a variation on Table V-S from the 2005 Nexus Study Update,4 illustrates how such an annual index could be constructed and applied to the recently adopted Affordable Housing Fces for new market rata apartment and condominium projects, for FY 2006-07. It shows, for example, that a weighted average inflation index as proposed herein ~ Consistent with the City's historical experience, this assumes that mast new affordable multi-family projects will be developed inmulti-family districts, although some recent projects include sites in commemial districts. Unlike residemial property, there is no readily available data source for <otnmereiai land price changes. ' For example, if the average land cast for recent projects was 53.0 rniliion and average hard construction wstwas 59.0 million, the land to land plus construction cast ratio would be 25°/a (53.0 tniliion/ (53.0 million+59,0 million) and the tanstruction cost fo land cost plus constmefion cost ratio would be 15%. ~ Table V-5 was based on Citywide average fees, which was one alternative fee schedule presented in fhe 2005 Nexus Study Updote. Table i herein uses the altcmative tvetghterT rtvernge fees, which were also presented in We 2003 Nexus Study Update, and ihYas these fees that dre City Council acNally adopted on October i 1, 2005. HAhIILTON,RA-INOVrrZ&ALSCHULER, INC. Page 2 [ton BaraFeld Housing Division City oFSanta Monica April 24, 2006 would result in a 7.9 percent annual increase, compared with a 5.2 percent increase based on construction costs alone, or 5.2 percent based on the CPI. It is my understanding that the inflation adjustment approach described above will be presented to the City Council on May 9, 2006. Are are available to assist yea, as needed, with that presentation. Sincerely III. J. VE Partner HAbm.7oY, ttnetxovt7z & Atscttucea, Iuc. Page 3 Ron Bare£eld Housing Division City of Santa Monica Apri124, 2006 Tabiat Affordeblo Housb7g Fae Annual Inflation Atllustmant Calculations for FV 2006.07 Land Casf lrt!la0on Metlbn Annual PAC¢ Calculanon 21P Cada Change OUtlng 2005 #COndos $oftl Welghls Wolghtad AVg. 90401 30.9% 27 4.6% 1.6% 90402 -2.1°6 30 5.0% -04% 90403 9.8% 237 39.5% 3.9% 904C9 25.5% 762 27.0% 8.9% 99905 10.5% >~ 2A0Y Z,t;y 800 14.8% $oUrte: LOSMgsIeSTimes, Real Esbia SeGiaM p. K19, January 22, 2008 (based an Cala9utck Infannaean Systems) Cansfnreflan Cost IMegen Engineadng News Record's ConsWCgon Cast index Marti 2005IMeX Value 7,309 Merck 20081MeXVafue 7,$$2 Petcenlage Change 2005-2006 62% Source; Engtneedng Nevrs Record (available at htipJlmsw.eneconsWdien.conrileatureslconseotsubskanslindeaiiist.aapj Oerivatlan aTLand Cost end COnstmetlon Cast Calculation Wefghts Mast Recent CC$M Family RantaiPmjeets Land Cost Herd COnsiNCtlon Total 1429 BmaAvay $ 3.640,000 $ 6,100,000 $ 71,]40,000 2601 Santa Manira Eculevartl $ 3,260,000 $ 8,100,900 $ 11,350,000 2209 Ma1n 96eet $ 3.120000 6 912;.970 B 122d;,910 S 10,010,000 $ 25,323,910 $ 35.333,910 28% 72% 100% Source: Housing UiNstan, Cityof Santa Monica IntlaflortFacforOerFradan Inlation Yalua Weight Wttl. AVg. Lantl Value ingation 14.8% 28.3% 4.2% Consimdton COSt in9a8on s.z% 779/ J8% 7.9°!e Atfjusted F¢es Oct 20089as¢Fees InOaiion Factor Uptlatetl Fees ~ $Change Condos 828.08 T.9% $28.16 52.07 Aparhnenls $22,33 7.9% $24.10 81.77 Far lnlarmafion Only; Consumer Price Ndex Change, LA-Riv-0r Co., Ail Urhan Ccnsumars Feb. 20051ndaX Value 197.4 Feb. 20061Max Value 207,5 Percenbgs Ghange 20052008 5.7% Source: U9 Bureau of Lobar SfaOSgcs (available al: h9p2Hraw.bts.govfepp Preparadby: NamrROn. Rab7rtavifz 8 /USCfluler Inc. HA1ItLTON, RABI.YOVIIZ & Ai.$C}j[JLRR, INC. page 4 Reference Resolution Nos. 10578 (CCS) and 10579 (CCS)