SR-CC/PA-1
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MAY 231989
C/ED:HD:CR:baw Santa Monica, California
Parking Authority
City Council: 5/23/89
To: Mayor and city council Members
Chairperson and Parking Authority Members
From: city staff
Subject: Recommendations Regarding the Sale of Air Rights Over
Parking Lot Four at 1116-46 Fourth street to Retirement
Housing Foundation for Development of Senior Housing
INTRODUCTION
This report transmi ts information and recommendations regarding
the sale of air rights over Parking Authority Lot 4 located at
1116-46 Fourth street. The report recommends that the Parking
Authority adopt a resolution authorizing the transfer of Parking
Lot 4 to the city, upon receipt of a u.s. Department of Housing
and Urban Development (HOD) Section 202 loan commitment and upon
a determination by the city council that the desired pUblic
parking facility for the site can be constructed in conjunction
with the senior housing. The report also recommends that the
City council: (1) adopt a resolution tranSferring parking Lot 4
from the Parking Authority to the city, contingent upon the
receipt of the HUD section 202 loan commitment and City council
detennination that the desired parking facility can be
constructed with the senior housing; and (2 ) adopt a resolution
authorizing the sale of the air rights to Retirement Housing
Foundation (RHF) and to negotiate and execute an Option Agreement
subject to award of the Section 202 loan and City Council
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approval of construction of the desired public parking facility
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for the site in conjunction with the proposed project.
BACKGROUND
On February 28, 1989, the Parking Authority and city Council
approved in concept the development of affordable senior housing
utilizing the air rights over Parking Authority Lot 4, located at
Fourth and Wilshire. The project proposes the use of BUD section
202 loan program funds to develop sixty-seven (67) units of
senior housing, including the manager's unit, at the site. The
City Council authorized staff to prepare and issue a Request for
statement of Qualifications to select a project development team.
On March 29, 1989, the city council approved the selection of the
development team of Retirement Housing Foundation, non-profit
sponsor, Phillips Consulting, housing consultants, and Bahr
Vermeer and Haecker, architects, to prepare an application for
the proposed section 202 senior housing project on the Fourth and
Wilshire site.
The Parking Authority authorized the Authority Attorney to
prepare the necessary resolutions and notice of intent to sell
the air rights over Parking Lot Four to RHF contingent upon the
receipt of a funding commitment from HOD under the section 202
program, determination that the desired parking facility for the
site can be constructed in conjunction with the senior housing,
completion of required environmental analyses, and execution of a
Development and Disposition Agreement.
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. At City Council direction, Ci ty staff is currently working with
Kaku Associates, parking and traffic consultants, to determine
the need and feasibility of increasing the number of public
parking spaces in conjunction with developing senior housing at
the site. This includes an analysis of current and future
parking demand in the area served by the parking lot, an analysis
of the site constraints in constructing a facility to accommodate
identified needs and an economic feasibility analysis. city
staff will make recommendations to the City council regarding the
pUblic parking component of the project in July 1989.
In addition, City staff has begun to meet wi th members of the
community to inform the residents of the status of the project.
Upon receipt of a section 202 funding commitment, the design
process will begin. This process will include meetings with
neighborhood residents regarding project design.
The following timeline outlines the next steps in the process of
obtaining a HUD Section 202 loan commitment and project design.
The schedule reflects the time required by Kaku Associates to
complete the parking demand analysis.
1) May 23, 1989 - Recommendations to city Council to: 1)
adopt resolution regarding the transfer of the Fourth
street property to the City; 2) hold a public hearing
regarding the proposed sale of air rights; 3) adopt
resolution authorizing the sale of air rights to RHF
contingent upon receipt of a section 202 loan
commitment; and 4) authorize the City Manager to execute
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an Option Agreement for the purchase of the air rights,
contingent upon receipt of a Section 202 loan
commitment. Recommendation to parking Authority to
adopt resolution regarding the transfer of the Fourth
Street property to the city. Information on City funds
required for project cost not covered by the HUD loan.
2) June 15, 1989 - Development team submits loan
application to HUD for Section 202 loan funds.
3) July 1989 - Information and recommendations to City
Council regarding the need for additional public parking
at the site.
4) August 1989 - Begin environmental review required by
California Environmental Quality Act.
5) September 1989 - HUD Notice of Award of Section 202 loan
funds.
6) October 1989 - June 1990 - project design and approval
process.
The following describes the requirements for submittal of a loan
application, including the amount of city funds required for
project amenities not covered by the HUD loan.
DISCUSSION
The non-profit sponsor must submit evidence of site control when
applying for HUD Section 202 Loan Program funds. In order to
grant site control to Retirement Housing Foundation, the Parking
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Authority and City must transfer the property to the city, the
City Council must hold a public hearing on the proposed sale of
air rights, and the City and RHF must negotiate and execute an
Option Agreement which provides RHF the exclusive right to
purchase the air rights for the proposed project. The city
Council and Parking Authority performed these same steps for the
Third street senior housing project.
The following describes this process in detail and discusses the
estimated maximum amount of city funds required for project costs
the Section 202 loan program may not fund.
Granting of site Control
The HUD Section 202 Loan Program requires that RHF submit
evidence of site control through an option Agreement to purchase
the property with the HOD application. It is necessary for the
City to enter into an Option Agreement with RHF, which provides
RHF with the exclusive right to purchase the air rights for the
development of senior housing under the Section 202 Loan Program
on the site. In response to City Council direction, the Option
Agreement is contingent upon receipt of a Section 202 loan
commitment and a determination that the desired pUblic parking
facility can feasibly be constructed with the senior housing
project.
Transfer of Title
The title to Parking Lot Four is currently held by the Parking
Authority of the City of Santa Monica. Parking Authority law
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prevents the Parking Authority from us inq property or revenues
for non-parking purposes. However, the City is not restricted in
this manner. Under Highways Code Section 32667, the legislative
body by two-thirds vote may adopt a resolution transferring
property of the Parking Authority to the city. Therefore it is
recommended that both the city Council and Parking Authority
adopt the attached resolutions authorizing transfer of property,
subject to the receipt of a HUD section 202 loan commitment for
the senior housing project.
In order to ensure that there is no fiscal impact of the transfer
of Parking Lot Four to the Parking Authority Fund it will be
necessary for the City and Parking Authority to enter into a
Payment Agreement that provides for an annual payment of revenues
collected from the public parking meters by the City to be paid
to the Parking Authority. Upon RHF t S receipt of a HUD Section
202 loan commitment staff will return for approval to execute
such a Payment Agreement.
Public Hearing
The Municipal Code section 2508A, as amended by Ordinance No.
1125 (CCS) requires that the City hold a public hearing prior to
the sale of property held by the city. A notice was published in
the Outlook on May 12th and 19th, as required by the Municipal
Code, specifying that a public hearing would be held on the
proposed sale of air rights over Parking Lot Four to REF. Six
notices were also posted at the site. In addition, the Municipal
Code allows for the sale of real property without public bidding
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if it is in the best interests of the city. Due to the
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experience of RHF in successfully obtaining HOD Section 202 loan
commitments, and in developing and managing senior housing, the
attached resolution finds that is is in the best interests of the
city to provide RHF with an exclusive option to purchase the air
rights of the property.
city Funds
The BUD 202 program regulations prohibit the use of funds for
items such as structured parking, building articulation,
balconies, or other design amenities. By covering the cost of
ineligible items, a locality strengthens the chances of receiving
a HOD Section 202 loan commitment and produces a more functional
and attractive project. Exhibit 1 details the costs not covered
in the HOD 202 loan. It is anticipated that the difference
between the HUD approved costs and the total project costs would
be approximately $1,963,203, however, the city will receive funds
from the sale of the air rights. It is proposed that these funds
be applied towards the costs not included in the Section 202
loan. It is anticipated that the City would have to provide
funds in excess of the sale proceeds to the project, in the
amount not to exceed $1,163,203 or approximately $17,624 per
unit. Funds are currently available for this project in the
Citywide Housing Trust Fund.
In additon, the city will encumber funds for architectural and
engineering expenses incurred prior to receipt of Section 202
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funds. The developer will reimburse the City for eligible costs
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upon funding of the Section 202 loan.
NEXT STEPS
The city Manager will negotiate and execute an Option Agreement
with RHF for the sale of the air rights over the Fourth street
property to be submitted with the application for section 202
funds due June 15, 1989.
City staff will return to the City Council with recommendations
regarding the pUblic need for additional public parking spaces
and the economic and physical feasibility of constructing a
facility to meet those needs in July 1989. This will provide the
City Council with the opportunity to choose not to proceed with
the proposed project prior to a section 202 loan program award.
In addition, City staff will begin the environmental review
process required by the California Environmental Quality Act, in
August 1989.
Upon award of a Section 202 loan commitment, RHF will submit the
project to the Planning Commission, Architectural Review Board
and Coastal Commission for review and approval. In addition, RHF
will work with the North of Wilshire Residents neighborhood
organization during the project design and approval process.
FINANCIAL/BUDGETARY IMPACTS
A maximum of $1,163,203 will need to be committed to this project
for costs which may not be covered by the HUD Section 202 program
loan. Funds from the Citywide Housing Trust Fund are currently
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available. After receipt of a section 202 loan commitment,
$500,000 will be committed from account #01-720-264-146-961 and
$663,203 will be committed from account #01-720-264-145-961.
RECOMMENDATIONS
It is recommended that the City Council:
1) Adopt the attached resolution which authorizes the transfer
of property at 1116-46 Fourth Street owned by the Parking
Authority to the City, subject to the conditions stated;
2) Hold a publ ic hearing on the proposed sale, waiving public
bidding requirements, of the air rights of Parking Lot Four
to RHF for the development of senior housing;
3) Adopt the attached resolution authorizing the sale of the air
rights to RHF, subject to REF's receipt of a Section 202 loan
commitment, determination that the desired parking facility
for the site can be constructed in conjunction with the
senior housing, compliance with the California Environmental
Quality Act, and execution of a Development and Disposition
Agreement;
4) Authorize the City Manager to negotiate and execute an Option
Agreement, which provides RHF the exclusive right to purchase
the air-rights of Parking Lot Four for the development of
senior housing.
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, It is recommended that the Parking Authority:
1) Adopt the attached resolution which authorizes the transfer
of property at 1116-46 Fourth street by the Parking Authority
to the City, subject to RHF's receipt of a Section 202 loan
commitment.
Prepared by: Carol Anderson, Housing Analyst
Candy Rupp, Housing Program Manager
Community and Economic Development
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, EXHIBIT 1: PROJECTED COST SUMMARY SECTION 202 LOAN
Comparison of Development cost and MaximUM HUD 202
Loan
DEVELOPMENT COSTS NOT INCLUDED IN 202 LOAN
Parking Structure $1,381,950
Elevator - Two additional
floors with lobby $ 28,000
Trash Chute - Two additonal
floors and room $ 5,000
Off site Utilities $ 10,000
Landscaping $ 4,000
Facade Improvements $ 126,185
Parking Meters $ 52,000
Off-site costs $ 100,000
Architect & Engineers Fee $ 106,068
Contingency & Inflation (on above) $ 150,000
TOTAL NON-HUD COSTS $1,963,203
MAXIMUM HUD 202 LOAN:
Construction Costs $2,805,000
Construction Contingency $ 84,776
Financing Costs $ 350,403
Construction Interest $310,403
Taxes $ 5,000
Insurance $ 20,000
Title and Recording $ 15,000
Legal $ 9,000
Organizational $ 2,000
Audit $ 5,000
Consultant Fee $ 40,000
Management Fee $ 6,600
Land Cost $ 800,000
TOTAL HUD COSTS $4,102,779
TOTAL PROJECT COST $6,065,982
SOURCES OF FUNDS
HUD 202 LOAN $4,102,779
CITY LAND SALE PROCEEDS $ 800,000
CITYWIDE HOUSING TRUST FUND $1,163,203 ($17, 624junit)
TOTAL FUNDS AVAILABLE $6,065,982