SR-414-003 (6)
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JUL 2 5 1989
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Redevelopment Agency Meeting: 7/25/89
city council Meeting
Santa Monica, California
TO:
Chairperson and Redevelopment Agency
Mayor and city Council
FROM:
City staff
SUBJECT:
Recommendations to (1) Adopt Resolutions Allocating
Funds to the Downtown and OCean Park lea) and 1 (b)
Redevelopment project Low and Moderate Income Housing
Trust Fund, (2) Approve Earnest Money Agreements with
Community Corporation of Santa Monica for the
City-wide Housing Acquisition and Rehabilitation
Program (CHARP) and the Pica Neighborhood Housing
Trust Fund (PNHTF), (3) Approve an Agreement with the
pico Neighborhood Association for the Operation of
PNHTF, and (4) Approve Revisions to the Program
Guidelines for CHARP and PNHTF.
INTRODUCTION
This report transmits for adoption resolutions allocating funds
to the Downtown and Ocean Park lea) and l(b) Redevelopment
Project Low and Moderate Income Housing Trust Fund for use in the
city-wide Housing Acquisition and Rehabilitation Program as
approved in the Fiscal Year 1989-90 Budget.
The report
recommends approval of standard Agreements with community
Corporation of Santa Monica for the use of CHARP and PNI:iTF
"earnest money" funds, and a standard Agreement with the Pico
Neighborhood Association (PNA) for PNHTF Program operation. The
report also recommends that revisions be made to the Program
Guidelines for both the city-wide Housing Acquisition and
Rehabilitation Program (CHARP) and the Pico Neighborhood Housing
Trust Fund (PNHTF) to ensure the efficient operation of the
Programs.
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JUL 2 5 1989
BACKGROUND
The city-wide Housing Acquisition and Rehabilitation Program
(CHARP) and pico Neighborhood Housing Trust Fund (PNHTF) were
created in 1983 to preserve and expand the stock of affordable
housing in Santa Monica for low and moderate income households.
Since Fiscal Year 1983-84, a total of one hundred fourteen (114)
uni ts have been assisted with CHARP funds, and a total of one
hundred thirty two (132) units have been assisted with PNHTF
funds. The Redevelopment Agency and ci ty Council have
appropriated $525,412 for CHARP and $510,624 for PNHTF in the
approved Fiscal Year 1989-90 Budget.
In order to utilize redevelopment tax-increment funds for
affordable housing development, resolutions finding such
development to be of benefit to the redevelopment projects must
be adopted by the Agency and the city Council at the start of
each fiscal year. It is also necessary at this time to execute
an Agreement with Community Corporation of Santa Monica (CCSM)
for the use of $75,000 from CHARP as earnest money deposits.
No resolutions of benefit are necessary for the PNHTF Program, as
it is funded with federal Community Development Block Grant
(CDBG) and Rental Rehabilitation Program funds. However, at the
start of each fiscal year it is necessary to execute (1) an
Agreement with CCSM for the use of $25,000 from PNHTF as earnest
money deposits, and (2) an Agreement with the pica Neighborhood
Association (PNA) defining its role in the PNHTF Program's
operation.
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The Agency and city first adopted Program Guidelines for the
CHARP and PNHTF Programs in 1983, and have revised them
periodically since then to both account for changing market
condi tions and to ensure the efficient implementation of the
programs and the city r s housing policies. Further revision of
the Guidelines is necessary at this time to ensure continued
participation in the programs by non-profit housing developers,
and to comply with new federal regulations relating to lead-based
paint hazard abatement and disabled accessibility.
DISCUSSION
Resolutions of Benefit
california redevelopment law allows local Redevelopment Agencies
to use tax-increment funds outside of the redevelopment project
area which generated them if the expenditure of such funds will
be of benefit to the project. Under the provisions of this law,
increasing and improving the supply of affordable housing for low
and moderate income households outside the project area is
considered to be of benefit to the redevelopment projects. State
law requires that the Redevelopment Agency adopt resolutions each
year formally determining that the use of tax-increment funds in
this manner will benefit the redevelopment projects. In
addition, the city council must concur in this determination.
Therefore, in order to utilize the new redevelopment
tax-increment funds appropriated to CHARP in the FYS9-90 budget,
the attached resolutions must be adopted by the Redevelopment
Agency and city Council.
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California redevelopment law also requires that 20% of all
tax-increment funds received by the Agency annually be used to
assist low and moderate income housing activities. This
allocation to the CHARP Program, in addition to the Agency' s
lease payment for the public housing development at 175 Ocean
Park Boulevard and other approve housing-related expenditures for
FY89-90, will satisfy the "20% set-Aside" requirement for this
fiscal year.
Agreement for CHARP "Earnest Money" Funds
In addition to adopting resolutions of benefit for the CHARP
Program, it is necessary at this time to approve and execute an
Agreement with Community Corporation of Santa Monica (CCSM) for
the use of the $75,000 "Earnest Money" component of CHARP. These
funds are to be used (1) for deposits on properties to be
purchased for affordable housing projects, and (2) as a revolving
fund for reimbursable development expenses which cannot be
obtained on a contingency basis.
The proposed "Earnest Money" Agreement is in the standard grantee
contract form used in the Community Development Program. It is
the same Agreement used in previous years, and it includes all
appropriate provisions of state law applicable to redevelopment
agency activities, as well as the usual city requirements
relating to accounting procedures, political activities, and
equal employment opportunity.
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Agreement for PNHTF "Earnest Money" Funds
Similar to the CHARP Program, it is necessary at this time to
approve and execute an Agreement with CCSM for the use of the
$25,000 "Earnest Money" component of PNHTF. These funds are to
be used only for deposits on properties to be purchased for
affordable housing projects.
The proposed "Earnest Money" Agreement for PNHTF, like the
Agreement proposed for CHARP, is in the standard grantee contract
form used in the community Development Program. It is the same
Agreement used in previous years, and it includes all appropriate
provisions of Federal law applicable to the use of CDBG funds, as
well as the usual city requirements relating to accounting
procedures, political activities, and equal employment
opportunity.
Agreement with Pica Neighborhood Association
Along with the Agreement for PNHTF Earnest Money funds, it is
necessary at the beginning of each fiscal year to execute an
Agreement with the pica Neighborhood Association (PHA) detailing
PNA's role in the operation of the PNHTF Program. The proposed
Agreement is the same as that used in previous years. PNA's role
in the operation of the PNHTF Program includes reviewing each
loan application submitted, meeting with City staff on a regular
basis, and annually assessing the housing needs of the pico
Neighborhood. Both the Agreement for Program operation and the
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PNHTF Earnest Money Agreement were reviewed by the PNA Board on
July 13, 1989.
Revision of CHARP and PNHTF Program Guidelines
Both the CHARP and PNHTF Programs provide thirty-five (35) year
deferred payment loans to eligible borrowers for the acquisition,
rehabilitation, and/or new construction of affordable housing
units for low and moderate income households in Santa Monica.
PNHTF funds may only be used within the pica Neighborhood of
Santa Monica. A Regulatory Agreement restricting the rent
levels, occupancy, management, and disposition of each assisted
property is recorded to secure each program loan.
The proposed revisions to the Guidelines would increase the
development fees allowed project sponsors from one and one-half
percent ( 1.5%) to three percent (3 %) of the total development
cost of the assisted project, and increase the maximum per unit
loan amount under the PNHTF Program from $35,000 to $40,000.
These revisions would not affect any of the project review and
approval processes currently in place, and the Program Guidelines
would remain unchanged in all other respects.
1. Increase in Allowable Development Fee
Increasing the development fee allowed by the Programs is
necessary at this time to (1) more adequately reimburse project
sponsors for the costs involved in developing affordable housing
projects, and (2) make the Programs comparable to similar
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affordable housing programs in California and throughout the
nation.
The costs involved in initiating and carrying-out affordable
housing developments have increased dramatically in recent years
as projects have become more complex, often inclUding multiple
public and private funding sources and the syndication of low
income housing tax credits. The actual cost of sponsoring an
affordable housing project is currently between 10% and 15% of
the total development cost of a project. While the proposed
three percent (3%) development fee would still not actually cover
the cost of packaging and developing a project, it would come
significantly closer to doing so.
In recognition of the substantial costs involved in packaging and
developing affordable housing projects, other public agencies
allow much higher development fees to the sponsors of proj ects
which they assist. For example, 5-10% development fees are
allowed in the city of Chicago and in Saint Paul, Minnesota, a
4-5% fee ($5,000 per unit) is allowed by the national Local
Initiatives Support Corporation (LISe), and a 4-6% fee is allowed
by the City of San Francisco. These public agencies also provide
operating support to local non-profit corporations, as the City
of Santa Monica does, but allow higher development fees to both
(1) more adequately cover the cost of developing affordable
units} and (2) provide an incentive to local non-profit
developers to develop as many affordable units as possible.
staff is proposing that the development fees allowed by both the
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CHARP and PNHTF Programs be increased to three percent (3%) for
these reasons.
2. Increase in PNHTF Maximum Per Unit Loan Amount
Increasing the maximum per unit loan amount under the PNHTF
Program is necessary at this time to compensate for increased
project costs resulting from new federal regulations relating to
(1) lead-based paint hazard abatement, and (2) accessibility for
disabled households.
The U. S. Department of Housing and Urban Development (HUD) has
recently adopted extensive regulations regarding the inspection,
testing, and abatement of lead-based paint hazards in housing
rehabilitation projects assisted with federal CDBG funds. These
regulations have significantly increased the cost of acquisition
and rehabilitation projects assisted by the PNHTF Program, as
extensive inspection and abatement procedures are now required to
mitigate the hazardous effects of lead-based paint used in
buildings constructed prior to 1978. For example, the cost of a
thirty-two (32) unit acquisition and rehabilitation project
currently being carried-out by CCSM at 2020 Cloverfield Boulevard
has been increased by approximately $80,000 by these regulations,
or $2,500 per unit.
In addition, recent revisions to section 504 of of the federal
Rehabilitation Act of 1973 have increased the number of
accessibility modifications required in rehabilitation projects
assisted by the PNHTF Program. Staff estimates that these new
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$3,000 per unit.
requirements will increase project costs between $2,000 and
The PNHTF Program Guidelines specify a maximum project loan
amount of $35,000 per unit. In order for non-profit development
corporations to comply with the regulations described above in
their development of affordable housing units in the Pico
neighborhood, staff is recommending that the maximum per unit
loan amount be increased to $40,000 at this time.
FINANCIAL/BUDGETARY IMPACTS
The Fiscal Year 1989-90 budget includes an appropriation of
$525,412 for the City-wide Housing Acquisition and Rehabilitation
Program.
This appropriation is reflected in the following
accounts:
Funds Requiring Resolutions of Benefit
16-720-264-000-942
18-720-264-128-942
18-720-264-129-942
Downtown Fund
Ocean Park l(a) Fund
Ocean Park 1(b) Fund
Subtotal
Funds Not Requiring Resolutions of Benefit
16-720-264-731-942
16-720-264-000-942
16-720-264-128-942
16-720-264-129-942
Vitale Gilpin Fund
Earnest Fund Repayment
Earnest Fund Repayment
Earnest Fund Repayment
Subtotal
TOTAL
$98,866
$164,400
$60,806
$324,072
$126,340
$37,500
$27,375
$10,125
$201,340
$525,412
The approval of the CHARP Earnest Money Agreement with CCSM will
result in the expenditure of $75,000 from the following accounts:
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TOTAL
$37,500
$27,375
$10,125
$75,000
16-720-264-000-942
18-720-264-128-942
18-720-264-129-942
The Fiscal Year 1989-90 budget includes an appropriation of
$510,624 for the pico Neighborhood Housing Trust Fund.
appropriation is reflected in the following accounts:
This
TOTAL
$364,624
$146,000
$510,624
19-720-264-000-930
19-720-264-134-930
CDBG
Rental Rehab
The approval of the PNHTF Earnest Money Agreement with CCSM will
result in the expenditure of $25,000 from account number
19-720-264-000-930.
No further financial or budgetary impacts
are anticipated as a result of the actions recommended in this
report.
RECOMMENDATIONS
It is recommended that the Redevelopment Agency:
(1) Adopt the attached Resolution of the Redevelopment
Agency of the City of Santa Monica allocating $98,866
into the Downtown Redevelopment Project Low and
Moderate Income Housing Trust Fund to provide funds
for CHARP, and finding the provision of affordable
housing
to
be
of
benefit
to
the
Downtown
Redevelopment project.
(2) Adopt the attached Resolution of the Redevelopment
Agency of the City of Santa Monica allocating
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$164,400 into the Ocean Park Redevelopment Project
1 (a) Low and Moderate Income Housing Trust Fund to
provide funds for CHARP, and finding the provision of
affordable housing to be of benefit to the Ocean Park
Redevelopment Project l(a).
(3) Adopt the attached Resolution of the Redevelopment
Agency of the City of Santa Monica allocating $60,806
into the Ocean Park Redevelopment Project 1 (b) Low
and Moderate Income Hous ing Trust Fund to provide
funds for CHARP, and finding the provision of
affordable housing to be of benefit to the Ocean Park
Redevelopment Project l(b).
(4) Approve the execution of an Agreement by and between
the Redevelopment Agency of the City of Santa Monica
and Community Corporation of Santa Monica for $75,000
in CHARP Earnest Money funds.
(5) Approve the revision to the Program Guidelines for
the City-wide Housing Acquisition and Rehabilitation
Program as described in this report.
It is recommended that the City Council:
(6) Adopt the attached Resolution of the City Council of
the city of Santa Monica finding the use of funds in
the Downtown Redevelopment Proj ect Low and Moderate
Income Housing Trust Fund to be of benefit to the
Downtown Redevelopment Project.
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(7) Adopt the attached Resolution of the city council of
the city of Santa Monica finding the use of funds in
the Ocean Park 1 (a) Redevelopment proj ect Low and
Moderate Income Housing Trust Fund to be of benefit
to the Ocean Park l(a) Redevelopment Project.
(8) Adopt the attached Resolution of the City Council of
the City of Santa Monica finding the use of funds in
the Ocean Park 1 (b) Redevelopment proj ect Low and
Moderate Income Housing Trust Fund to be of benefit
to the Ocean Park l(b) Redevelopment Project.
(9) Approve the execution of an Agreement by and between
the City of Santa Monica and Community Corporation of
Santa Monica for $25,000 in PNHTF Earnest Money
funds.
(10) Approve the execution of an Agreement by and between
the city of Santa Monica and the Pico Neighborhood
Association for the implementation of the pico
Neighborhood Housing Trust Fund.
(11) Approve the revisions to the Program Guidelines for
the pico Neighborhood Housing Trust Fund as described
in this report.
Prepared by: Jack Gardner, Senior Development Analyst
Candy Rupp, Housing Program Manager
Department of Community and Economic Development
: benefit
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