SR-9A (40)APPENDIX E
Derivation of the Development Fee for
Four Prototypical Market Rate Multi-Family Developments
in the City of Santa Monica
Hameltorz Raboiamtz &.9lschtder.lnc
DERIVATION OF A DEVELOPMENT FEE FOR THE AFFORDABLE HOUSING DEMAND GENERATED BY
PROTOTYPICAL MARKET RATE MULTI-FAMILY DEVELOPMENTS
IN THE CITY OF SANTA MONICA
Protorype AH Prototypa R2 Prototype #3 Prototype 7W '
CalculaUonFacWr AptJLowarCozt AptJHigherGost Contlo/LOwerCOSt CondWMighefCOSt AYERqGE
~
5-Unrt Market Rate Multl-Famdy Project Proflle
7rwn HR6A'CprSYamP M1kdelS, 7990 CawusJ
MonthlyRenUPUrchasePnce $ 2,067 $ 2,827 $ 316,142 $ 418,3q2
Rent or O.vnership CosUHousehold Income 37 00% 37 00% 35 00% 35 00%
Householdlncome $ 67,038 $ 05,184 $ 77,536 $ 99,252 $ 82,253
Household Income x 5 Umts $ 335,189 $ 425,919 $ 387 681 $ 496,260 $ 417,262
Atl~ustment forTazes, Cansumer I~terczt 6 Savings
~awn u s aveeu aECwromic aMiys~sq ~
HouseholdConsumptionExpendituresfHauseholdlncome 755% 755% 755% 755%
Household Conwmphon Expenddures Per Pro ect $ 252,798 S 321,472 $ 292,388 $ 374,277
Total Worker ~emand Per S-Unit Pro~ect's
Atljustetl HouseholA Consumption Expenditures ~
(hwn IMPLAN MotleQ
~
Direct 0 37769 0 47157 0 43707 0 55942 0 46145
Indirect 009061 011307 010480 013414 01108g
Induced 016732 020880 019353 0 4773
3
.
Q 04
Total 0 63582 0 79344 0 73540 _
0 94129 ..-..
0 77649
Number of Low-Income Worker Households .,
~Som PUMS Oefa, 1990 Censu )
Percent of ToWI Workers 38 36% 38 36 % 38 36 % 38 36% ~
Number of Low-Inc Workers 0 24390 0 30436 0 28210 0 36108 0 29786
Low-inc WorkerslHousehold (0 66, use 1 0) 1 00000 1 00000 1 00000 7 OOOOD
Numbar of ~aw-Inc Worker Households 0 24390 0 30436 0 28210 0 36108 0 2978~
Number of Moderato-lncome Warker Households ~
(ham PUMS Deta 18&1 Censu~ ii
PercentofTotalWorkere 7245% 1245% 1245% 7245% ~
NumberofMOd-Inc Workers 007916 009878 009156 011719 009667
Mod-Inc WorNerslHowehold 231671 231671 231677 231671
Number of Mod-Inc Worker Hauseholds
0 03417
0 04264
0 03952
0 05058 ~l
0 041 /3
Num6er of Low 6 Mod-Income Workar Households
(ham PUMS Defe 1990 Ceruu~
Percen~o(TotalWorkers 5036% 5036% 5036% 5036%
Numbero(LowBMod-Inc Workers 032020 039958 037035 047403 03910N
Low 8 Mo~lnc WorkerslHOUSehold 1 00485 1 04465 1 04d65 1 04465
Number of Low 8 Mod-Inc Worker Households 0 30645 0 38250 0 35452 0 45377 0 37431
Maximum Justifiab~e Development Fee
(kom HRBA Svbsrcry Gep Eshmetes oM "CmsbmnN ModaQ
Gmss Square Feet (GSF) Per 5-Unit Pro~ect 7,600 7,600 7 6D0 7,600
Low-Inc City Su6sidy Gap/Rental Unit $ 154,918 $ 154 916 $ 154 916 $ 154,916 ~
Mod-Inc qtySubsidyGap/RentalUmt $ 112,092 $ N2,092 $ 112092 $ 712092
~
Subsidy Gap (Fee)/GSF
SubsidyGapx#Low-Inc WorkerHouseholtls $ 37,784 $ 47,151 S 43702 $ 55,937 $ 46,14
Subsidy Gap (Fee~/GSF - Low-Inc Wmker Households
$
4 97
S
6 20
$
5 75
$
7 36 $ ~
6 0
SubsidyGapx#Mod-Inc WorkerHouseholds
suh~~n~ nao rFaovr.cc _. u~n_i,,,. ui,,.~,e, u,.~ ~~„w,.~._ $
e 3,834
~~~ S
~ 4,780
,. ~, $
a 4430
„ ~„ $
.. 5,670 S
__- ' 4,67
-
SaMONexhHxealc~ tls P~qe 1 I HR6q, Inc Bl1/98
I~'' ~PP+~~ -~
q-~
F 1HOUSINGISHARE\WPFILESISIAFFRPIIINCLUsup WPD ~UN - 9~
Councd Meeting May 5, 1998 Santa Monica, Cahfornia
TO Mayor and Members of the City Councd
FROM C~ty Staff
SUBJECT Supplemental Staff Report
Recommendation to Direct the City Attorney to Prepare an Ordmance
Implementing Revisions to the City's Inclusionary Housing Program by
Enacting an Affordable Housing Production Program
Summary of Ftecommended Affordable Housing Production Program
Staff has previously recommended that the City Counal direct the City Attorney to prepare
an ordmance implementing revisions to the City's Inclusionary Housing Program which
requires developers of market rate multifamdy housing to assist in the production of
affordable housing through payment of an affordable housing development fee to the City,
or other speafied options This staff report transmits a supplemental report prepared by
Hamdton, Rabinovitz & Alschuler, Inc (HR&A) dated April 21,~998 (AttachmentA) that
presents additional analysis on the definition of a"governmental constrainY' and an
addit~onal rate of return threshold for condominium pro~ects which is used to identify when
the cost impact of a City program or regulation may become a constraint
The recommended program has the following general features
^ DevelopmentFee Opfion. Developers of any market rate multifamdy pro~ects (that
is, two or more units), may elect to pay an affordable housing development fee to
the City, assessed on a per-gross square foot basis Eliminated from the existing
I~~"1, _- ~
~~
JUN - 9 ~
Ordinance 1615 is the requirement that affordable housmg umts be built on-site in
most instances
~ Development Fee Amounts. Fees wdl be established by Resolution of the City
Counal after the Council considers, among other factors, the impact of the fee on
typical market rate multifamily development pro~ects (constraint analysis) and the
nexus between market rate multifamily development and the need for affordable
housing Staff prelimmarily recommends that the fee vary by product type, one fee
for apartments and another fee for condominiums
Staff has relied on the expertise of HR&A to provide thresholds for assessing when
a development fee would operate as a constraint to market rate apartment and
condominium development under State Housing Element Law Tables 3A and 3B
in the HR&A report provided in Attachment "A" of the Apnl 14, 1998 City Counal
StafF Report indicate the development fee thresholds The condommium threshold
ranges from four to eight dollars per square foot without crossing the line that
defines a"constramt " This fee range is essentially the same whether the threshold
is determined by the "cash on cash return on eqwty" model -- originally utilized -- or
the "gross margin" model which was subsequently utdized for consideration The
apartment threshold ranges from five to six dollars per square f~ot
A"nexus" study wdl be prepared and provided to the City Councd at the time a draft
implementation ordinance ~s presented
2
A"nexus" study wdl be prepared and provided to the City Councd at the time a draft
implementation ordinance is presented
Fee Reductions as an Incentive to Preserve Existing Housing, To encourage
residential development in the City's commercial or industnal zones (that is, non-
residential sites) and vacant sites (non-residential and multi-family), staff recom-
mends that the fee be reduced for multifamily pro~ects in those areas
On-Site Affordable Housing Production Option. As another option under this
proposed program, the developer of a new market rate multifamdy pro~ect may elect
to include units affordable to lower-income households in the pro~ect It is proposed
that the minimum on-site option requirement be set at the same threshold needed
to qualify for the State-mandated density bonus (that is, 10% affordable at 50% or
less of Median Income, or 20% affordable at up to 60% of Median Income) If this
option is selected, developers would be eligibie to use the density bonus
development standards recommended by City staff The program will include
further specifications about the on-site affordable units (for example, qualifying
household incomes and minimum 2-BR unit sizes)
Othe~ Affordable Housing P~oduction Options_ Developers may also choose
other options which would assist in the production of affordable housing, such as
3
off-site construction of affordable units within a one-half mile radius of the market
rate pro~ect or purchasing or optioning land for an affordable housing development
Budgetary/Financial Impact
Approval of the new Affordable Housing Production Program does not have a finanaal or
budgetary impact at this time
Recommendation
It is recommended that the City Council direct the City Attorney to draft an ordinance
implementmg the Affordable Housing Production Program recommended in the HR&A
Report, Recommenda5ons for Revrsfng the Crty of Santa Mon~ca's Inclusronary Nous~ng
Program dated April 6, 1998 (Attachment A to the Apnl 14, 1998 City Council Staff Report)
Prepared by Jeff Mathieu, Director, Resource Management Department
Robert T Moncnef, Housmg Manager
Johanna Gullick, Housing Coordmator
Attachments
AttachmentA April 21,1998 HR&A Supplemental Report, Defning a"Govemmental
Constrainf' under State Housing Element Law and Further Explanation
of the Condominium Pro~ect Rate of Return Thresholds used to Define
a °Governmental ConstrainY'
ATTACHMENT A
DEFINING A "GOVERNMENTAL CONSTRAINT"
UNDER STATE HOUSING ELEMENT LAW
DEFINING A "GOVERNMENTAL CONSTRAINT"
UNDER STATE HOUSING ELEMENT LAW
Housing Element Law. State law reqwres local ~urisdictions to assess any
constraints imposed by local government on the maintenance, improvement or
development of housing in formulating a frve-year housing strategy,
~unsdictions are reqwred to, among other th~ngs, consider removing any such
constraints
City's "Constreint" Definition. The C~ty's 1998-2003 Housing Element Update
defines an "actual governmental constrainY' as follows '
A City program, either mdrvidually or in combination with other programs,
is a°constraint" if it has a sigrnficant adverse impact on the Citys ability to
meet its fair share of the regional need for additional housmg
This "significant adverse impact" occurs when reasonably well-mformed
and expenenced property owners or developers elect not to pursue
average multi-famdy housmg development pro~ects in the City because
the cost of complymg with a City program, regulation or procedure causes
the pro~ect's financial return to fall below mirnmum thresholds generally
accepted by the development commurnty If it does, developers or
owners would pursue the average development in another junsdiction
where the mmimum thresholds are achievable, or to make other
investment choices, thereby substantially dimirnshmg the Iikeiihood that
the City would meet its "fair share" target
Financia/ Ratios As Indicators of "Constraint." It is difficult to say preasely
when the "constraint" Ime has been crossed, because of the wide vanety of
developers and development pro~ect circumstances There are, nevertheless,
generally accepted financial ratios that can be used to identify when the cost
impacts of a City program or regulation on typical apartment and condomirnum
pro~ects become a "constraint "
HR8~A's analysis of whether Ordinance 1615 constituted an actual
governmental constramt evaluated four typical apartment and four typical
condominium pro~ects, and the effects Ordinance 1615 would have on key
fmancial ratios for each pro~ect, using computer models that simulated the
financial performance of these typical pro~ects
Hamdton, Rabmovifz & Alschuler, Jnc Page 1
Apri121, 1998
The 1998-2003 Hous~ng Element Update identified the City's Incfusionary
Housing Program as a potentral, not an actual constraint on the
development of new multi-family housing Based on financial modelmg
(which included reasonabfe assumptions about land, construction and
other development costs and income vanables for typical pro~ects in the
R2 District), HR8~A concluded that market conditions would not support
new multi-famify devefopments of the type analyzed, even if the City had
no Inclusionary Housing Progam High land cost was the overridmg
factor that adversely affected the financial returns of the typical pro~ects
modeled Average fand costs were at levels that could not be }ustified on
the basis of the income achievable from the completed pro~ect
HR&A's finanaaf mode{s were ~pdated io help define the pomt at which
the scale of an Affordable Housmg Production Program fee would
become an "actual governmental constraint " However, ad~usting the
mode4s to account for today's more favorab{e economic climate did not
alter the conclusion that market conditions do npt support new multi-
family developments of the type analyzed, because land costs remam
very h~gh
Hamifton, Rabmowtz 8 Alschuler, Inc Page 2
Apnl 21, 1998
FURTHER EXPLANATION OF THE CONDOMINIUM PROJECT RATE OF RETURN
THRESHOLDS USED TO DEFtNE A"GOVERNMENTAL CONSTRAlNT"
^ Rea! Estate Developmenf Competes foi Financia/ Capita/ With Many Other,
Much Less Risky Investment Alfemafives
Real estate pro~ects take longer ta produce a return on investment,
cannot be converted easdy to cash and are substantialiy nskier
mvestments than many other aiternatives
For companson, the long-term historical average return in the stock ~
market (S8P 500) is about 13°k per year Dunng the bull market of the
past three years, the average annual retum on the market as a whole
(S&P 500) was about 3196 per year. These levels of retum were
avadable with no more effort than a few phone calis to a bank or
brokerage
Real estate investors, therefore, expect to earn higher returns on invested
capital than on other, largely passrve forms of investment (e g., stocks
and bonds)
^ Alternative Return on Investmen! Indicators for Condominium Projects.
Measuring "return" in real estate is also more complicated than in many other
forms of investment because of the very same distingwshmg factors (e g, time,
liquidity and risk) and because it usually involves several sources of capitai,
including borrowed funds (i e , "leverage°)
For condominwm pro~ects, at least three different "return" mdicators area
generally used
ALTERNATIVE `FEASIBILITY" THRESHOLDS FOR
SMALL-SCAIE CONDOMINIUM DEVELOPMENTS
Thresbold Name fwmule Generdly
Acceptable Range
Cash-on-Cash Return on Epwty [Gross Sales-ICosi of Sales+Total 40-50%
[Leveragedl DeveloDment CostlliEqwty
Gross Margin ('ProfiYl IGrass Sales-ICost of Sales+Total 18-ZO%
IUNevereged) Development CosUl/Gross Sales
Return on Development Cost [Gross Sales-(Cost of Saies+Total 20-25%
{Unleveragedl Development Costl)/Total
Development Cost
Source HR&A
Ham~lton, Rab~novrtr & Alschuler. Inc Page 3
Apnl21, 1998
The "Return on Equity" Thresho/d. HR&A's analysis has consistently used
the return on equity approach to evaluate and establish "constramY thresholds
for typical apartment and condomirnum pro~ects in Santa Monica
For condommiums, this represents the fota/, cumulafive seturn on
money invested by the developer (i e, to buy land and pay for other pre-
construction costs), which is received afierthe pro~ect has been
approved, constructed and all of the units have been sold
It is not a measure of profit per unit or an annual rate of return
Constraint-Defined Fee Ranges implied Sy The Return on Equity
Threshold. Using this threshold, HR&A estimated that an Affordable Housing
Production Program fee would not be a governmental constraint on typica~ new
condommium pro~ects if the fee was in the range of $4 to $8 per gross square
foot, depending on pro~ect location in the city and pro~ect size
The !mp/ications Df An Alternative "Constraint" Threshotd. In response to
questions about the retum on eqwty threshold, HR&A also applied the "gross
margin" threshold to the same prototypical condommwm pro~ects
This is another way of evaluating the same typical pro~ects, but involves a
different calculation, and not merely a change in the threshold
perceniage
This threshold removes the effects that borrowing may have on finanaal
results due to ffuctuations m interest rales, loan-lo-val~e ralios and the
creditworthiness of the developer
The result~ng constraint-defined fee range using gross margin as a
threshold is $5 to $7 per gross square foot, or about the same range
implied by the return on eqwty threshold
[See Table 36-2, on the following page]
Hamrtton, Rabinoviiz 8 Alschuler, Inc Page 4
Apnl 21, 1998
Tabla 38-2
IMPACTS OF AN AFFORDABLE HOUSING PRODUCTION PROGRAM FEE, IN ONE DOLUIR
INCREMENTS, ON PROTOTYPICAL CONDOMINlUM PROJECTS IN THE R2 DISTRICT IN THE CITY
OF SANTA MONICA, UNDER HIGH AND LOW LAND COSTS AN D PURCHASE PRICES,
USING AN 18°l.-20°ti GROSS MARGIN CONSTRAINT THRESHOLD
Fee Amount 1-Lot Pro~ects in the R2 DisGict 1-Lot Pro~eets in tlie R2 ~~strict
Per GSF •
Lwver-Coaf Hiyher-CosP Lower-CosP Hiyher-CosF
ProfiP Delta Proffi Deka Proht DeRa Proffi DeMa
LaM Land Land Land
Res~d' Res~d Resid Resid
$0
(Base Case) 19 9°~ 0 0!6 20 0°,6 D 0°.6 19 9°k 0 0% 20 09G 0 OX
51 19 6% -2 094 19 7% -1 4% 19 5% -2 6% 19 7% -1 5°G
$2 19 2°.6 -41 X 19 4°~ -2 8% 191 °.6 -5 3% 19 4% 3 0%
S3 188% -6195 190% -02% 188% -79% 197% ~5%
S4 185% -82%. 1B7% -58% 184% -105% 188°~6 ~1%
s5 ~e~~ -~02~ ~es^,s -s9^~ ~$;p~ 13:24~ 185% J6%
/
as t77X -12'2X ~e~^~ -ss^~ ns°,c -us% ,az~ as^,6
~~~ 17 4°.6 -14 3°.6 T7.89(r -~.7°~'i 77 3°h -18 4% ~f9~., ~~`i,
gg 170°h -163!6 175°% -111% 169% -211% 176°,6 -91%
ag 76 8% -1 B 4°G 17 2% -12 5% 16 5% -21 1°~ 17 3% -~ O 6S4
$~p 163% -204°,6 169% -138% 161°k -237% 170% -121°,6
g~~ 159% -224°,6 168% -153% 158% -263% 168% -136%
g~~ 15 5 k -24 5°~6 16 2°h -16 7°6 15 4% -28 9%6 18 5% -15 2°6
g~g 152% -265h 159% -187% 150% 316°.L 182°.6 -767%
y~q 148°.6 -288°H 158% -194iG 146% -342% 159°.6 -182%
E ~ 5 14 4% -30 646 15 3% -20 8~G 14 2°~ -36 8% 15 6% -19 7%
g~g 141% 327~ 150% -222% 138% -395% 153°~ -212~
g~7 137% -347% 147% -236% 733% -421% 150°h -227%
g~ g 13 3 k -36 7% 14 4°h -25 D% 12 9% -44 7%a 14 6% -24 2X
g~ g 13 0% -38 8 k 14 1% -26 4°h 12 5% -47 4°~i 74 3°i6 -25 8N.
$zp 12 6% -40 8% 13 7% -27 8°h 12 1% -50 0% 14 0°5 -25 8%
'$49/sf (one lot) to S38/sf (three lota) land cosk E262$328/sf aseumed sde pnce
z S72/sf (one lot) to SB6/sf (three lots) land cos[; E243$314/sf assumed sale pnce
' Developer profit marg~n =[(Total Sales - (Cost of Sales + Total Development Cost))lfotal Sales]
` Percent change in res~dual land walue
Source HR8A
Hamdton, Rab~nowtz 8 AlschuJer, !nc Page 5
Apn121. 1998
An Affordable Nousing Production Program Fee Must Be Supported By
Evidence of "Nexus." Before imposing an affordable housing fee on new
multi-family development pro~ects, Constitutionai law also reqwres an
appropnate analytic foundation to show, among other thmgs, ihat there is a
reasonable relationship between new market rate multi-family housing and the
need for affordable housing
HR&A is preparing a Nexus Study that analyzes the demand for goods and
services created by households who occupy new market rate multi-family
housing, the number of lower-wage worker househoids needed to meet that
demand, the cast of suppiymg housing that is affordable to those lower-wage
worker househaids, and what this means about the fee amount chargeabfe to
new market rate multi-family development to offset the need for affordable
housing that these pro~ects create
The Nexus Study will be completed by early June and will be considered by the
Planning and Housing Comm~ssions and City Council along with any draft
ordinance that the City Council may direct the City Attorney to prepare to revise
the City's Inclusionary Housing Program
Hamdton, Rabinovdz & Alschuler, Inc Page 6
Apn121,1998
F \HOUSING\SHAREIWPFILES\STAFFRPTUNCLUCC2 WPD
Council Meeting April 14, 1998 Santa Monica, California
TO Mayor and Members of the City Counal
FROM City Staff
SUBJECT Recommendation to Direct the City Attorney to Prepare an Ordinance
Implementing Rewsions to the City's Inclusionary Housing Program by
Enacting an Affordable Housmg Production Program
Introduction
Staff recommends that the City Council direct the City Attorney to prepare an ordinance
implementing revisions to the City's Inclusionary Housing Program which requires
developers of market rate multifamily housing to pay an affordable housing development
fee to the City, or choose from among other specified alternatives to payment of a
development fee This staff report transmits a report prepared by Hamilton, Rabinovitr &
Alschuler, Inc (HR&A) dated April 6,1998 (Attachment A) that presents HR&A's analysis
and recommendations for rewsing the Inclusionary Housmg Ordinance, Santa Monica
Code Section 9 28 et seq , commonly known as Ordinance 1615 Background information
regarding the Ordinance revision process to date is also included
Background
On November 6, 1990, the voters of the City of Santa Monica approved Proposition R,
adding Section 630 to the City Charter Proposition R(Appendix "A" of Attachment A)
provides that the City Council, at all times, require that not less than 30% of all multifamdy
residential housing newly constructed in the City, on an annual basis, be permanently
affordable to and occupied by low- and moderate-income households It further requires
1
that at least 50% of those urnts be affordable to "low-income households" defined as not
exceeding 60% of inedian income, and the remainder be affordable to "moderate-income"
households defined as not exceeding 100% of inedian income
At vanous meetings in 1991, City Counal considered strategies for implementation of
Proposdion R On March 4, 1992, City Councd adopted Ordinance 1615 (Appendix "A° of
Attachment A) Subsequently the City Council adopted amendments which require the
provision of on-site inclusionary units m most arcumstances and allow payment of a fee
m other hmited circumstances
On June 9, 1992, the City Counal adopted a resolution which established the inclusionary
unit base pnce for purposes of calculatmg the in lieu fee option Those fees were
determined by assessing what, on average, it cost the City to subsidize the construction
of a new residential unit This analysis covered a three-year period On average, the per
unit cost of these subsidies was $51,032 Thus, the inclusionary unit base price for
determming in lieu fees was set at $51,000 Pursuant to Seciion 9 28 070(c) of the
inclusionary housing ordinance, the inclusionary unit base price shall be ad~usted by the
Consumer Pnce Index (CPI) between the date of adoption of the Resolution establishing
the base price through the month in which payment is made Currently the fee is
approximately $56,055
In April 1995, the City initiated the 1998-2003 Housing Element Update As part of this
Update, HR&A analyzed whether certain of the City's programs operated as actual or
2
potential governmental constraints on new housing development within the meaning of
Government Code Section 65583(a)(4) In assessmg this issue, HR&A selected several
financial feasibility thresholds for consideration These thresholds esiablished the point
at which HR&A believed a reasonably well-informed and expenenced property owner or
developer with an average multifamily housing pro~ect would elect not to pursue that
pro~ect because of the cost of complying with a City program, regulation, or procedure
Based on HR&A's approach, pro~ects which would result in a fmancial return below these
thresholds would be deemed "infeasible", for purposes ofthe constraintanalysis, since the
expenenced property owner would not develop the pro~ect given that the financial return
would be insuffiaent when measured against other investment opportunities In analyzing
the City's existing Inclusionary Housing Ordinance, HR&A determined that it operated as
a potential constraint Under current market conditions, average apartment and
condominium pro~ects in the R2 Distnct were found not feasible even without ihe
mclusionary housing requirement However, were market conditions to improve to the
point where multifamily construction was feasible, HR&A concluded that the Inclusionary
Housing Ordinance would operate as an actual constraint
The Housing Element has gone through extensive public review On April 15, 1997, the
City Councd approved the Housing Element in concept
Program 2 a of the City's Draft Housing Element reqwres review and revision of the City's
Inclusionary Housing Ordinance Speafically, the Housing Element states "Study modifi-
cations of the City's Inclusionary Housmg Program (Ordinance 1615) which would help
3
support new housing production in a way that balances this production with maintenance
and conservation of existing housing stock, whde complying with Proposition R"
At the same meeting where the City Council gave conceptual approval to the Housing
Element, the Council directed staff to prepare an amended Inclusionary Housing
Ordinance
On July 8, 1997, City Council approved the selection of HR&A to prepare analyses relating
to modifications to the City's Inclusionary Housing Ordmance HR&A has provided
assistance to staff in conducting public workshops and heanngs to gather public input on
the existing program IYs scope ofwork has been divided into three phases, from mid-July
through April 1998 These phases include 1) research and analysis pnor to articulation
of preliminary concepts, 2) reviewand presentation of preliminary concepts through public
workshops, study sessions and public hearings, and 3) final recommendations ofan imple-
mentation program and rewew with decision makers Based on comments from the
Commissions and the public who testified before them, and after further discussions with
City staff, HR&A has developed a final recommendation to revise the City's Inclusionary
Housing Program
Discussion
For more than a decade, the City of Santa Monica has required developers of market rate
multifamily housing (i e, apartment bwldings and condommium pro~ects) to help offset the
impacts that their pro~ects have on the City's household income balance and in order to
4
comply with State and City law and local housing policies Proposition R requires that 30
percent of all new multifamily construction each year be affordable to low- (60% of inedian
mcome) and moderate-income households (100% of inedian income) The Proposition
requires that the City Council adopt an ordinance to implement its requirements It does
not, however, mandate the pro~ect-by-pro~ect inclusionary housing production approach
established by Ordmance 1615, as enacted in 1992
During its consideration of the 1998-2003 Housing Element Update, the City Counal
concluded that the current developer requirement, the Inclusionary Housing Program as
embodied in Ordmance 1615 and related gwdelines, needs to be changed to address
problems with the program, changes in the local housing market, State law, and the
funding environment for affordable housmg
After considering public comments on six conceptual alternatroes to Ordinance 1615 that
were reviewed in workshops and public hearings over the past six months, it is recom-
mended that the City discontmue the current pro~ect-by-pro~ect inclusionary housing
production approach, and instead enact a new Affordable Housmg Production Program
that requires developers of market rate multifamily housing to pay an affordable housing
development fee to the City, or choose from among other specified alternatives to meet the
requirement The fees would be pooled and leveraged with other avadable funding to
develop housing affordable to lower-mcome households, through the auspices of non-
profit, community-based development organizations The revised program would also
5
allow developers to include affordable units in theirpro~ects, bwld affordable units on other
sites, or perform other actions that assist the development of affordable housmg
Summary of Recommended Affordable Housinq Production Proqram
The recommended program has the following general features
^ Development Fee Developers of market rate multifamily pro~ects (i e, two or more
units), may elect to pay an affordable housing development fee to the City,
assessed on a per-gross square foot basis
~ Base Fee Amounts Base fees will be established by Resolution of the City Councd,
after considering, among other factors, the feasibility of the base fee for typical
market rate multifamdy development pro~ects (constraint analysis) and the nexus
between market rate multifamily development and the need for affordable housing
Simulations ofthe feasibility oftypical multifamdy pro~ects, undertaken as part ofthe
constraint analysis, indicate that there is a reasonable basis to vary the fee by area
ofthe City (e g, one fee north of Wilshire Boulevard and in Ocean Park, anotherfee
for all other areas), and by product type (apartment versus condominium) While
there is ~ustification for varying the fee by area of the City staH recommends, for
ease of administration, that the fee vary only by product type
^ Fee Reduchons as an Incenhve to Minimize Tenant Drsplacement Because it is
City policy to reduce adverse impacts of new development on the City's supply of
6
existing rental housmg, it is proposed that the fee be reduced for multifamily pro~ects
in the following circumstances
-- Sites that are vacant (multifamdy or non-residential)
-- Non-residential sites (i e, commeraal or industnal zoning districts)
^ On-Site Atfordable Housing Produchon Optron As an alternative to paymg an
affordable housing developmentfee, the developer of a new market rate multifamdy
pro~ect may elect to include units affordable to lower-income households m the
pro~ect If the proportion of such units matches the mmimum thresholds needed to
qualify for the State-mandated density bonus (i e, 10% affordable at 50% or less
of Median Income, or 2D% affordable at up to 60% of Median Income), new zoning
flexibilities are proposed to be permitted by the City The program will include
further specifications about the on-site affordable units (e g, qualifying household
incomes and minimum 2-BR unit sizes)
^ Other Affordable Housmg Productron Optrons Developers may also choose to
perform other actions which assist in the production of affordable housing, such as
off-site construction of affordable units withm a one-half mde radius of the market
rate pro~ect or purchasmg or optioning land foran affordable housing development
Staff has relied on the expertise of HR&A to provide the threshold for assessing when a
developmentfee would operate as a constraintto market rate apartment and condominium
development Tables 3A and 3B in the HR&A report prowded in Attachment "A" indicate
7
the development fee amounts that HR&A believe could be charged That fee could range
from four to eight dollars per square foot for condominiums and from five to six dollars per
square foot for apartment pro~ects, without crossing the Ime that defines a"constrainY'
HR&A's analysis of the developer profit margin threshold is based on a return on equity
modei The analysis suggests that a threshold 40-50% return is needed by developers of
condominiums for a pro~ect to be "feasible° An assumption behind what is a feasible
threshold return is that the return is not annual, but, rather, a return taken after the pro~ect
is developed and the units are sold This said, staff believes lhere may be other more
appropriate approaches to determining what is a feasible return, and one or more ofthese
approaches will be presented as part of the presentation of this staff report
The constraint-determined fee ranges shown in HR&A's report will not be enough to
compensate the City for the cost of producing new affordable housing For a typical frve-
unit apartment pro~ect, fee revenuederived within the constraint-determined range is equal
to about one-quarter (28%) to almost one-third (34%) of the City's subsidy gap for a new
low-income unit For a condominium version of the same pro~ect, the constramt-
determined fee revenue equates to ~ust under one-quarter (23%) to ~ust below one-half
(45%) of the City's subsidy gap for a new low-income unit Stated another way, it would
take between 15 and 18 units of market rate apartments or between 11 and 22 new
condominium units to generate enoug h fee revenue at the constraint-determined fee levels
to equal the average City subsidy gap needed for one new unit affordable to a low-income
household
8
A"nexus" study is also being prepared by HR&A under separate cover and will be provided
to the City Councd at the time it is presented with a draft implementation ordinance
Public Meetings
The recommendations for a new Affordable Housing Production Program (Revised
Inclusionary Housing Program) take into consideration comments from the Commissions
and the public who testified before them Six conceptual alternatives to Ordmance 1615
were identified and discussed with the public and City decision makers beginning in
September 1997 More specifically, a Public Workshop was held September 7, 1997 that
included an open house segment where participants viewed and commented on display
panels that explamed the current Inclusionary Program and possible conceptual
alternatives ApresentationwithgroupdiscussionabouttheexistmglnclusionaryProgram
and conceptual alternatives was conducted Subsequently, Public Hearings and Study
Sessions were conducted at the September 10, 1997 Planning Commission meeting, at
the September 18, 1997 Housing Commission meeting, and at the October 7, 1997 City
Councd meeting
Preliminary recommendations were presented tothe Housing Commission on February 19,
1998 and to the Plannmg Commission on March 5, 1998 In addition, staff conducted a
Public Workshop on March 26, 1998 to prowde the public an opportunity to discuss the
preliminary recommendations before coming to City Council with a final recommendation
All Council and Commission Meetings and Public Workshops were noticed in the local
9
newspaper and notices were maded to the Planning Division's List developed for compre-
hensive planning pro~ects
Planninq Commission Recommendations
The Planning Commission recommendations are attached to ihis report as Attachment B
In summary, the Planning Commission recommends adoption of the preliminary
recommendations for revising the City's Inclusionary Housing Program as outlined m the
February 4, 1998 report by HR&A The Planning Commission, however, identified several
key issues for City Counal consideration
1 Development Fee - The fee imposed should be set at a level which would
actually generate funds to support affordable housing development but not higher
than is feasible for the average development pro~ect
2 Development Fee rn Commercial Areas - Look aUcompare Office Mitigation
Fee to ensure no disincentroe to develop multifamdy residential rather than
commercial use
3 Tenant Displacemenf - Develop a relocation program to provide assistance
to tenants displaced by demolition of their buddings for new construction pro~ects
4 On-SiteAffordable Housinq - In the event that Prop R's 30°/a annual requirement
of low/moderate housing is not met and as a resuit permits for residential
development are stalied, allow a development pro~ect which provides on-site
affordable units to proceed
10
Housinq Commission Recommendations
The Housmg Commission recommendations are attached to this report as Attachment C
In summary, the Housing Commission supports the preliminary recommendations for
revising the City's Inclusionary Housing Program as outlined in HR8~A's February 4, 1998
Report The Housing Commission agreed that the City must aggressively pursue a variety
of strategies to both increase (through new construction) and preserve (through
acquisition/rehabditation pro~ects) affordable housing to comply with State law and local
housing policies The Housmg Commission believes that the proposed new Affordable
Housing Production Program is only one part of that strategy and urges the City Council
t~ consider additional sources of revenue for affordable housing construction and
preservation
The Housing Commission identified additionai areas for City Counal consideration in
rewsing the Inclusionary Housing Program
1 Development Fee - The development fee should be m the range of $5 to $8 per
squarefoot based on the "constramY'thresholds identified m HR&A's memorandum
dated February 4, 1998
2 Development Fee for Commerc~al Propert~es and Vacant Land - The new
program should include a reduced fee m commercial areas to encourage residential
development on commercial sites and on vacant multifamdy parceis The relation-
ship between the new fee and the current Office Mitigation Fee should be reviewed
11
3 Penod~c Fee Recalculation Cntena - The new program should include criteria to
review and recalculate the development fee and other program elements on a
regular basis
March 26, 1998 Public Workshop
A Public Workshop was held on March 26, 1998 to provide the public with an opportunity
to both comment on and ask questions about the Preliminary Recommendations to revise
the Inclusionary Housing Program, the Draft Housing Element, and proposed changes to
the R2 and R3 development standards to accommodate density bonus units Comments
from the public at the March 26 Workshop focused on a number of issues (Attachment D)
The ma~or issues regarding revisions to the City's Inclusionary Housing Program which
engendered comment included
1 Development Fee - Concerns were expressed regarding how the development
fee will be set If the development fee is set too low it will encourage recycling of
existmg housing How was a reasonable rate of return to developers calculated~
2 Tenanf D~splacement- Existing tenants will be displaced if the development fee
is set too low Specifically, Pico Neighborhood residents expressed concern that
their neighborhood would experience a greater recycling of properties and therefore
a greater rate of tenant displacement than other areas of the City
3 Selection of Tenants for On-S~te Affordable Housrng/Pnonf~ze Santa Monrca
Res~dents - A ma~onty of Workshop participants expressed a desire to see Santa
Monica residents pnoritized for selection in on-site affordable units
12
Projects Completed Subject to Ordinance 1615
A summary of completed multifamdy pro~ects, sub~ect to Ordinance 1615 (based on
Certificates of Occupancy issued from Apnl 1, 1992 to March 31, 1998), has been provided
for City Councd information (Attachment E-1) A total of 10 pro~ects, consisting of 151
units, have been completed sub~ect to Ordinance 1615 A total of 5 privately-financed
pro~ects, consisting of 28 units, have been completed sub~ect to Ordmance 1615 The
net total of privately-financed new units completed, sub~ect to Ordinance 1615, is 22 units
(6 units were demolished prior to construction) Of the 28 total units completed, sub~ect
to Ordinance 1615, 6 units were made available for low/moderate mcome households, or
21% of the units that received a certificate of occupancy
During the same period, another 5 pro~ects or 123 units that received a City loan received
Certificates of Occupancy Of those 123 units that received a City loan, 22 units were
consiructed by a non-profit and all were affordable to low/moderate mcome households
It is important to note that these totals include multifamdy residential pro~ects approved
sub~ect to Ordinance 1615 There have been other pro~ects approved under other
Inclusionary Ordinances or under the Earthquake Recovery Act that have received
Certificates of Occupancy since February 11, 1992
Pro~ects with Budding Permit Issued Sub~ect to Ordmance 1615
Also attached to this report is Attachment E-2, "List of Completed Multifamily Pro~ects -
Bwlding Permits Issued Per Ordmance 1615", which is mcluded for your information and
companson purposes Attachment E-2 shows budding permits that were issued for 12
13
multifamily residential pro~ects containing 244 units Of these 244 units, approximately
83% were affordable to low/moderate income households Of these affordable unrts,
approximately 40% were constructed by non-profit organizations
Pro~ects with Planninq Approvals Issued Sub~ect to Ordmance 1615
Attachment E-3 to this report, "List of Multifamdy Pro~ects Planning Approval Received Per
Ordmance 1615", shows planning approvals have been obtamed for 16 pro~ects totaling
643 units Approximately 40% of the pro~ects issued a planning permit were affordable to
low/moderate income households Of these affordable units, approximately 27% were
constructed by non-profit orgarnzations
Budgetary/Financial Impact
The amount of fee revenue produced as a result of these amendmenis depends on the
number and scale of pro~ects that apply for permits Development fees collected pursuant
to a new ordinance would be deposited into a deferred revenue account until they can be
programmed for use in accordance with established budget procedures and necessary
Counal approvals Approval of the new Affordable Housing Production Program does not
have a finanaal or budgetary impact at this time
14
Recommendation
It is recommended that the City Counal direct the City Attorney to draft an ordmance
implementing the Affordable Housing Production Program recommended in the HR&A
Report, Recommendafions for Rewsing the Crty of Santa Mon~ca's Inclusionary Nousing
Program dated Apnl 6, 1998 (Attachment A)
Prepared by Jeff Mathieu, Director, Resource Management Department
Robert T Moncrief, Housing Manager
Johanna Gullick, Housing Coordinator
Attachments
Attachment A Apnl 6,1998 HR&A Report, Recommendatrons for Revising the City of
Santa Monica's Inclusronary Hous~ng Program
Attachment B Planrnng Commission Recommendations- Inclusionary Housing Program
Revisions
AttachmentC HousingCommissionRecommendations-InclusionaryHousmgProgram
Revisions
Attachment D Public Comments from March 26, 1998 Public Workshop
Attachment E-1 List of Completed Multifamily Pro~ects - Certificate of Occupancy
Received, Developed Per Ordinance 1615
Attachment E-2 List of Multifamily Pro~ects - Bwlding Permits Issued Per Ordinance 1615
Attachment E-3 List of Multifamdy Pro~ects - Planning Approval Received Per Ordinance
1615
15
Attachment A
HR~A
]~'tATfII ip\, Ri231V01"[TZ d fll ~CHC'LER, I\'C
Pci.r. Far;,z.r~iai a:lta+ra~z+r.er; Cor,~u,'•cr•;;
DIE1~10R.aNDUDI FOR: Robert ~ioncnef, Housmg 14ana~er
Gty of Santa ~Qomca
NiED'IOR~NDUni FROA1: aui J Sdvem
SUBJECT: Recommendat~ons for Revismg the Gty of Santa Momca's
Inclusionary Housmg Program
D~TE: Aprd 6, 1998
I. INTRODUCTION AND O~'ERVIE~j'
Ihis memorandum presents our recommendahons for revismg the C~ty of Santa Momca's
("Crty") Inclus~onary Hous~n<= Program, specifically Ordmance 1615, the ordmance that
~mplements Proposrtion R' That Propos~hon, adopted by Crty voters m Kovember 1990, requves
that 30 percent of all new• multi-famdy constnicGon each year be affordable to low- and moderate-
mcome households, as defined (a reference cop}• of Proposit~on R is mcluded m Appendix A)
The Propos~UOn requ~res that the Gty Counc~J adopt an ordmance to implement its reqwrements
It does not, however, mandate the pro~ect-by-pro~ect mclusionary housme produchon approach
established by Ordmance l6 t 5( a reference copy ~s also mcluded m Append~x A) The program
presented here for discussion ~s an alternative approach for fulfillmg the overall goal of
Proposition R-- to ensure that new housmg meeu the needs of all Gty res~dents, and hence,
mamtams the Gty's d~verse household mcome and population profile -- and for resolving a
number of pracncal problems ~~ath the Ordmance 1615 approach It calls for replacmg Ordmance
7 67 5 w~th a neN Affordable Housmg Production Program that requ~res developers of market-rate
multi-famih~ housm~ to assist m the product~on of affordable housmg throueh payment of an
affordable housm~ development fee or other speci}ied opt~ons
These recommendations follow several months of analys~s and pubLc discuss~on about
conceptual alternanves to Ordmance 1615 A prel~mmary set of recommendauons was ducussed
w~~th the Plannme and Housm~ Commissions dunng February and A4arch 1998, and tbeir
comments and sug~esnons have been cons~dered m these rev~sed recommendat~ons After takmg
further pubhc testimony and considerme the ments ofthe recommendations herem, we expect that
~ Oidmance IC 1~!CCJi adupted h4arch 3. 199'_. and sub.equentl~ amznded bc Ordmance 16~7 (CCS).
Nocembc~ 1?. 99' col;ectn~el~~ chspte~ed a, S,mtn 41rn:ica h9umc~pal Codz (S\4A4C1 § 9 28 010 e[ seq The
Inclus~onan• Housmg Prom am altu inciud~, ,i ,c~ nl implrmentauon e~udclmeti ~ppioced b~ the Cuc Cnunal o~
Dzczmber 14. 1993
~__ ~-ib~~rallvni.~;ir~___ Ln,q~c.-ii.(=u:nr,~;,~-_, Tr~ c~~ __:.ai-•P~~ ,~-='~r'-_5
\F'a'~.. \\-4~F^nc,'r;~ DC LG51~-~.r[~
Revrsed Indus~onary Housrng Program
for the Gty of Santa Mon~ca
the Crty Council will then direct the Gty attorney to draft an ordmance to implement a rev~sed
Inclusionary Housing Program
The remainder of ttus memo ~s orgamzed mto several parts, as follows
Sirmman~ of the Recommended Pro~ram The next section ~ncludes a capsule
summan~ of the approach we are recommendmg for discusston by the City
Council
Rarronale for the Recommended Program I'he tlurd section summanzes the
public purposes be}und the proposed program, problems w~th the current pro~ect-
by-pro~ect requuement embodied m Ordmance 1615, and the pnncipal themes of
the pubhc comments about szx conceptual altemauves to Ordinance 161~, wluch
~vere presented m public workshops and public heanngs that beean m early
September1997
Development Fee Issues Because our recommendation is to change the City's
affordable housmg program to authonze the payment of an affordable houstng
development fee, as one option for all new market-rate multi-fazruly housmg
developments, rather than the current projett-by-pro~ect, on-srte affordable
housmg product~on program, the fourth secUon addresses certam ~ssues that affect
how the development fee rrught be set and the cost of producmg affordable uruts m
the Crty A"ne~cus' study is bemg prepared under separate cover and wdl be
avatlable to the City Council at the time they are presented with a draft
implementation ordmance
Program Components The fifth sechon presents an outhne of the pnnctpal
components of the revised Program, w}uch could be used as the basis for drafruig a
new implementation ordtnance
Hamdton, Rabrnovi(z 8 Alschuler, Inc Page 2
April 6, 1998
Revised lnclus~onary Housmg Program
lor the Crry of Santa Mon~ca
II. Sti:1~I'~1ARY OF THE RECO~i~iENDED AFFORDABLE HOti~SLtiG
PROD[;CTION PROGR~~I
For more than a decade, the C~ty of Santa Momca has required developers of market rate
muhi-family housmg to help offset the ~mpacts that their pro~ects have on the City's househotd
mcome balance, m order to comply w~th State and C~ty law and local houstng pol~c~es The
developer assistance is bat one component of a mulri-faceted housmg program that also relies on
City and other public funds to construct new housmg uruts that are affordable to lower-tncome
households Followme detaded review m Apnl 1997, the City Covncrl concluded that the current
developer requirement, the Inclusionary Housmg Program as embodied m Ordmance 1615 and
related guidehnes, needs to be changed in order To address problems wrth the program, and
changes m the local housmg mazket, State law and the fundmg env~ronment for affordable
housmg
After considenng comments on six conceptual alternatrves to Ordmance 1615, it is
recommended that the Ctty disconnnue the cunent pro~ect-by-pro~ect mclus~onary housmg
production approach, and instead enact a program that requires developers of market rate multi-
fanuly housing to pay an affordable housmg development fee to the C~ty, or choose from among
other specified altematives to fee payment The fees would be pooled and leveraged wrth other
available fundmg to develop housmg affordable to lower-mcome households, most likely through
the ausp~ces of non-profit, commuruty-based development orgaruzations The revised program
would also allow developers to mclude affordable uruts m their pro~ects, build affordable umts on
another sue or perform other actions that assist the development of affordable housmg Tlus
approach resembles the City's fee program to rrutigate the housmg impacts of commerctal office
development, w}uch has been m place smce 1984 Z
In summary, the recommended program has the followmg general features
Development Fee Developers of market rate mult~-farruly pro~ects (i e, two or more
uruts), may elect to pay an affordable housme development fee to the Crty, assessed on a
per-gross square foot bas~s
Base Fee,~mounts Base fees w711 be establ~shed by Resolution of the City Council, after
considenne, among other factors, the feas~bilrty of the base fee for typical market rate
muln-farruly development pro~ects (i e,"constramts° analysis) and the ne~cus (or
relat~ons}up) bet~veen new market rate multi-fanuly decelopment and the need for
~ Pro~ec[ ~ttgauon b4zasures. Cen• ojSanta:llonica La.rd Cse and C~rculatron E(ements, Occobzr 23. 1984,
a[pp l~i-1~6,andSNIIe1Cy90410~2.etseq
Ham~tton, Rabinovriz & Alschuler, !nc Page 3
Apnl 6, 1998
Revrsed Inclusionary Housmg Program
for the Cdy of Santa Mon~ca
affordable housmg Simulations of the financial feastb~l~ty of typical multi-family pro~ects
mdicate that there is a reasonable basis to vary the fee by area of the City (e g, one fee
north of A'ilslure Boulevard and in Ocean Park, another fee for all other areas), and by
product type (apartment versus condommium)
Fee Reduct7ons as Incentrve to Avord "l enant Dtsplacement Because it ~s C~ty pol~cy to
reduce adverse impacts of new development on the Gry~s supply of e~stmg rental
housmg, and particularly rentals that are affordable to lower-mcome households, the fee
will be reduced for multrfanuly pro~ects m the followmg c~rcumstances
Sites that are vacant (multi-fanuly or non-resident~al)
Non-res~dential sites (i e, commercial or mdustnal zomng d~stncts)
On-Sate Affordable Housrng Productron Optton As an alternatrve to paymg an affordable
housing development fee, the developer of a new market rate mult~-farruly pro~ect may
elect to mclude uruts affordable to lower-mcome households in the pro~ect If the
proport~on of such uruts matches the rrunimum thresholds needed to quahfy for the State-
mandated densuy bonus (i e, 10% affordable at 50°/a or less of the Median Family Income
(MFI), or 20% affordable at up to 60% of the MFI), new zorung fle~cibihhes will also be
permitted by the Crty The program will mclude further specificat~ons sbout the on-sue
affordable uruts (e g, qualifymg household mcomes and rrurumum 2-BR urut sizes).
Other Affordable HousrngProductton Optrons Developers may also choose to perform
other actions wtuch assist in the product~on of affordable housmg, such as off-srte
construct~on of at£ordable umts v~ntlun one-half crule of the market-rate pro~ect, purchasme
or opuorung land for, or assisring wllh the financmg of, affordable housing development
by others The details of these alternatrves will be spec~fied m program implementanon
gutdehnes to be approved by Resolut~on of the City Council
Rabrnovrtc 6 Alschuler, !nc Page 4
April 6, 1998
Rewsed lndusionary Housing Program
for the Crty of Santa Mornca
~. PliBLIC PtiRPOSE RATIONALE FOR THE RECOM~tENDED PROGR11Vi
The recommended program seeks to meet the requirements of Proposiaon R and other
adopted Ctty housmg pol~cies and State law, responds to a number of problems with the current
Ordmance 1615 approach, and reflects considerahon of comment themes that emerged over the
past six months as a half dozen conceptual alternauves to Ordmance 161 ~ were aired m pubhc
w~orkshops and heanngs
?-. The Public Purposes tinderlying the Proposed Affordable Housing Impact
Nlitigation Program
Ever smce the adopt~on of its first contemporary Housing Element m 1983,3 the Cuy has
had a pohcy requinng developers of new market-rate mult~-fartul,v uruts to provide, or assist m the
development of, uruts that are affordable to low- and moderate-income households as one of
several mechamsms for mamtammg balance m the C~ty's household mcome profile The proposed
1998-2003 Hous~ng Element Update reaffirms tlus pol~cy The publ~c purpose ranonale for the
recommended program mcludes the followmg
State Lmv Fstablrshes a Need for the C:ty to Accommodate Its Regronal Farr Share of
Low- and Moderare-Income Households Califorrua's Housmg Element law requires that
each cny and county develop local housmg programs designed to address its `~fair share"
of existmg and future housmg needs for all income groups, as deternuned by the
~unsd~ct~ods Councd ofGovernments, when prepanng the State-mandated Housmg
Element of rts General Plan ° The fair share allocat~on for Santa Moruca is usually
detemuned by the Southern Califorma Association of Govemments, but m the absence of
State fundmg to prepare the allocaaon for the 1998-2003 planrung penod, Santa Monica
estimated what shaze SCAG would have assigned u The City's draft 1998-2009 Ho:rsmg
Element Update` estunates that a SCAG ass~gnment would probably be 3,219 add~nonal
housmg uruts over the five-year planrung penod, ofwluch 1,936 (60%) umts should be
' GR~ of Santa Momca. Hous~ng Elemenr Polrcy Repor4 Januan' I983, at pp 73 ~6 (adopted as the Housmg
Element of the Grneral Plan ba Resoluhon 6620 (CCS). Januarv 2~, 1983)
° Calu Gu~K Code ~y 6»80. 65581(a) and 65584
' Cin ot San[a Momca, 199.4-?003 Housing Elemen[ C pdate. Public Rev~eu Drait, Juh 1997 (Heremafter
refeaed to as Housme Elzmznt Update" or Update ~)
Hamtlton, Rabinowtz & Alschuler, Inc Page 5
Apnl 6, 1998
Rev~sed Inclusronary Nousrng Program
for the Crty of Santa Mon~ca
affordable to low- and moderate-mcome households 6 For vanous reasons articulated m
the draft Update, the City mstead uses a"quantified ob~ecttve" of 1.542 umts, of wiuch
734 (48%) aze mtended for low- and moderate-income households'
It rs the Polrcy of the Crry to tLlainta:n Income Drversety Among Its Populatron and
Households :~ccording to data included m the draft Update, Santa Momca has been
successful m mamta~mng a balance of household mcomes m the City smce 1980 -- i e,
abou[ 40 percent low-mcome, about 20 percent moderate-income and about 40 percent
upper-mcome $ Mazntaznine t}us balance has been accompLshed by a vanety of housmg
programs, mcludmg rent control, a carefully des~gned condommium convers~on program,
and use of a wide vanety of ]ocal, State and Federal fundmg programs to assist m the
construction of new affordable housmg and the preservauon of e~usung affordable
housmg In 199Q the C~ty's voters added Section 630 to the City Charter to requ~re that
30 percent of all new housmg development m the Cuy be affordable to low- and
moderate-mcome households The HousrngElement Update continues to mclude goals,
pohcies and ~mplementahon programs to mcrease the supply of housmg affordable to
lower-mcome and moderate-mcome households'
Recent Chcmges ~n State Law and Federal Laws and Houst~tg Programs Inhtb:t the Ctty's
Abrliry to Fulfill State Mandates and Local Poltcres Concernrng Household Income
Drversrty As d~scussed at length m the Housrng Element Update,10 the Costa-Hawkms
Rental Housmg Act of 1995 (wluch gradually phases out linuts on the pnce at wtuch
voluntanly vacated umts can be re-rented wually), reducuons m State and Federal fundmg
for housmg (e g, reductions m State and Federal budget allocat~ons for housing
proerams) and changes m these programs (e g, reducuons m the Section 8 Fair Market
Rents rendenng part~apanon m the program much less attracnve to pnvate apartment
owners) and the potent~al expuat~on of controls on rents m buildmgs whose development
6 Id , a[ pp II-82 to Q-93. p V-i
Id . at p V-6
8 Houseng E'lemeni L"pdate at pp II-13 to II-11
' See, for eYample, Goa12 0~Increase the Suppl~~ of Housmg Affordable to Very Low, Low and Moderate
[ncome Persons), its ] 0 related pohaes and 1 I related unplementauon programs Houseng Element L~pdate, pp V-12
to V-22
lo See. ]or etample, Housm~ E'lemenl Gpda~e, pp II-4? to II-64
Hamrfton, Rabinowtz & Alschulec Inc Page 6
April 6, 1998
Rewsed lndus~onary Hous~ng Program
for the C~ty of Santa Momca
was ass~sted with Federal funds, all make rt much more difficult for the Cuy to fulfill rts
affordable housmg goals under State law and local pol~cy
The C~ty Has tLfany Programs to Facrktate the Development and Marntenance of
Housrng Affordable to Lower-Income Households, B:u They A~e ,'~ot Su~crent to the
Task The Housing Element Update catalogues a dozen fundmg sources that the C~ty
utihzes to assist m the development of affordab-e housmg " Together, these resources are
pro~ected to assist in the development of 403 new umts affordable to low- and moderate-
mcome households If ac}ueved, thts pro~ection represents only 21 percent of the
esumated need for new affordable housing in the City over the same plazwng penod,
usmg the SCAG need eshmate, or 55 percent of the affordable portion of the Crty's
"quantified ob~ective "
The Y'ast Ma~onty of New Market Rate Multr-Famrly Development u Not Affordable to
Lower-Income Households Data presented m the Housrng Element Update demonstrate
that most umts m new market-rate mulh-farruly development pro~ects are pnced at levels
that are not affordable to lower-income households under applicable defiruUOns '` In light
of the c~rcumstances noted above, and absent an aggressive, mult~-faceted program,
mcludmg partiapation by for-profit developers of multi-faauly housmg, the cumulatrve
effect of new mazket rate multi-fatruly pro~ects will, over time, contnbute to an imbalance
m the Crty's household mcome distnbut~on and will interfere w~th the City's abihty to
meet rts regional fair share of housmg, as establ~shed through State law (48% of all new
housmg over the next five years affordable to low- and moderate-mcome households) and
local laws and pol~c~es (30% of new multi-fartuly construct~on each year affordable to low-
and moderate-income households)
The Consumpt~on Patterns of the Upper-Income Households Who Occupy l~ew Market
Rate Multr-Family Housing Create a t~'eed for Affordable Housing ~n the Crty
Households create demand for goods and sercnces, m the private sector (e g, retad goods
and medical services) and m the public sector (teachers and mumc~pal sen~ces) The
1~ Hous~ngEfement L~pdate, Append~x F
'- For eYample, rhe I995 San[a Momca Aparcment Tznant Sune~ showed that median rznt for apanments m
ne« bmldm~s (pos[-19'9) ~3'as $ I,100 pzr month for a rico-bedroom u[ut (see, Housing Elemenr Cpdate, Tech[ucal
4ppend~t). compared «~th a matunum rent of $'31. utuch the Cih zstabhshed for low-mcome households m a n~•o-
bedroom umt (a[ 60% ~ bSFI? m 1995 Mzdian 2-BR condom¢uum pnczs m pro~ects consweted m thz last few ~zars
are more than n~~~ce Ihe matimum of ~66.69A zstabLshzd b~~ the CiR~ as - affordablz- ro a lo~c-mcomz household (m
I99'), accordmg to our research
Namilton, Rabinovrtz & Alschuler, Inc Page 7
Apnl 6, 1998
Rev~sed !nclusronary Hous~ng Program
for fhe Crty of Sanfa Mon~ca
lugher the household mcome, the more demand is created New market rate multi-fazruly
housmg in Santa Vloruca accommodates upper-mcome households almost exclusively,
because of the lugh cost of rent or purchase price required to occupy ~t Supplying goods
and serv~ces suffiaent to meet Santa Moruca's share oFthe demand created by upper-
income households m new' market rate mult~-fazruly housing requues workers across the
pay scale spectrum, mcludmg lower-wage employees \ew market rate multi-farruly
development is, therefore, causallr related to a need for housmg that is affordable to
lower-wage workers We are now m the process of analyune the data that wdl
demonstrate these relat~ons}ups, and how the need for affordable housmg and the cost of
producmg it relates to the demand created by new market rate muhi-fanuly housmg
development
For these and other related reasons, we believe rt is appropnate and necessary for the Crty
to requue that developers of mazket-rate multi-faauly housmg help meet the housmg goals of the
State (as embodied m 5tate law) and Gty (pursuant to the goals, ob~ectives and policies of the
Housmg Element of its general plan) through voluntary selection from a menu of alternatrve
actions
B. Problems R%ith the Ordinance 1615 Approach
HR&A's assessment of Ordmance 1615, prepared for the Housmg Element Update" and
subsequent analysis, ind~cates that there are a number of practical problems vnth the current
pro~ect-by-pro~ect, on-sue affordable housmg requirement approach to implementmg Proposition
R
These mclude
A Restr:ctzve and Relatrvely Inflezable Program Though there are many mclusionary
housmg programs around the State, and elsewhere, Santa Momca's program has some of
the most restnctrve terms (e g, a 30°io on-srte requirement and applicat~on of the program
to pro~ects as small as two uruts) and the least fle~bilrt~es (the m Leu fee ~s avadable only
under very lirruted circumstances) hfore flexibil~ty is needed to respond to the vanety of
circumstances that affect muhi-family housmg development m Santa Momca
" Hamilton. Rabuto~ itz & Alschuler, Inc ,°Assessment oI the Ctn• s Inclwienan~ Housmg Proa'azn
(Ordmancz 1615) as a Potennal Consuam[ on [hz Deczlopment ofHousmg:' Nocembzr 8, 1996, m Hous~ng Elzment
Lpdaae. Tzchmcal Appzndiz
Ham~tton, RabinovRZ & Alschuler, !nc Page 8
April 6, 1998
Rev~sed 7nclusionary Hous~ng Program
for the Crty oI Santa Monrca
Frna~~cral Feasrbrlrty~ Problems Stmulations of the financial circumstances of typical
mulU-farmly pro~ects. prepared as part of the "governmental constramts" analys~s for the
Housrng Element L'pdate. mdicated that under current market conditions, typical
apartment and condo pro~ects are not financ~ally feas~ble, w~thout any Inclus~onary
Housmg Program If rents or sales pr~ces mcrease faster than the cost of development.
they will erentually become feasible At ttus pomt, the costs implied by Ordmance 1675
would render them a"go~ernmental constramf~ on the development of new housmg
Ttus is because reasonably well-mformed and eacpenenced propertV ow~ners or developers
propos~ng typical multi-fatruly housmg development pro~ects would not be able to earn
rrurumum acceptable levels of financial return under the program's requirements, and
therefore, m our ~udgment, would elect not to pursue the pro~ects "
Temrre Type Dtsparihes Further, Ordmance ] 615 and ~ts assoaated implementat~on
euidelmes result m a huge dispanty between the purchasing power of the C~ry's
°affordable" rent ma~c~mum and "affordable" condorcumum purchase pnce maximum
IInder the program. a moderate-mcome household can spend up to $1,218 for montMy
rent of a 2-BR umt, wtuch is neazly equal to Citywide market rent, but no more than $844
for the mortgage on a two-bedroom condomiruu~ cappmg the maximum purchase pnce
at $129,288, wtuch ~s substanttally below the market pnce 15 Tlus is because total housmg
costs are lirruted to 30 percent of household mcome, under applicable regulauons, and
condoriurnums mclude several other costs (e g, msurance, taxes, homeowners' association
fees) m addition to the mortgage payment that must be mcluded w7ttun the 30 percent
l~trut
Development Communtty Opposrtron The development commumty has generally
opposed on-site inclusionary umts in market-rate pro~ects under the terms required, due to
added costs, lower revenues and percerved problems in marketmg pro~ects wrth a drverse
m~x of household mcomes
Possrble Cor~rcts With the Costa-Hawkrns Rental Housrng Act Tlus 199~ State law will
result m gradual elirtunat~on of mihal re-rental hmits when a urui ~s voluntanly vacated and
could be mterpreted to restnct the Crty's abihty to impose rent limus through a mandatory
on-site mclusionary• housmg program
'" As ~s~ill be d~scussed la:er u~ more detail, ~tvs conclusiun ~s basc~i on sunulaUOns of financ~al renuns for the
most npxal kmds of multo-faauly pro~ects lilcelv to Ue proposzei on the Cri~ These sunulanons do nut purport ro
measure thz econonuc ~~~abilin of md~~idual de~'elopment pro~ects
" Source Rzsolunon 91?d (CCS), adopted August 12. l99'
Ham~7on. Rabmovrtz & Alschu/er, lnc Page 9
April 6. 1998
Revised Inclusionary Noustng Program
for the City of Santa Monrca
C. Conceptual Alternatives to Ordinance 1615
In response to these and other problems wrth Ordmance 1615, and cons~denng the
evolvme nature of the local housmg market and housine pohcy, sa conceptual alternatives to
Ordmance 1615 were identified and discussed wrth the pubhc and Gty decis~on makers beemrung
m September 1997 (A companson matnx of the alternatrves is mcluded in Appendix B)
Bnefly, the alternanves, and a summary of opwo~ expressed about them, are as follows
No Pr:vate Sector Requerements or,'~'ew b~cent~ves Proposit~on R's 30 percent
affordable requ~rement would be satisfied through Cny-assisted affordable housmg
production only, usmg tax-exempt bonds and other e~stmg housmg production revenue
resources (e g, repayment of the MERL program loans) There would be no
requirements on pnvate developers to build affordable housmg or pay for it, unless Cuy-
ass~sted efforts fell shoR of pro~ecuons and rrussed the 30 percent per year tazget
Most commenters d~d not beheve ttus approach would result m a sufficient number of new
affordable uruts, and at best, would s~mply help the Ciry keep pace w~th an expected loss
of affordable u[uts due to the effects of the Cost-Hawluns Rental Housing Act There was
also concem that unregulated new construction that redevelops sites with ewstmg
affordable rental umts could accelerate the reduction m the Citv's stock of affordable
rental umts that is expected to result from full implementation ofthe Costa-Hawkms
Rental Housing Act
A G oluntary Prrvate Sector Program wrth Srgn:ficant Incentrves for On-site Affordable
Un:ts Propositwn R's 30 percent affordable housme requirement would be satisfied
largely by non-profit ptoducnon as m r~,ltemative #1, but would be supplemented to a
greater degree by pm•ate sector on-srte affordable umt production m return for rece~vmg
more stgruficant incentives than are now available m Ordmance 1615 Possible examples
of mcentrves mclude extra densrty bonus, special zorune code flewbilrties, sigmficantly
reduced fees and other requirements. tughly expedited planrung approvals and buildmg
permrt processmg andior access to c~ty eqmty, debt and/or subsidy financme
Though there was some support expressed for tlvs approach, concems were thai any~
financ~al mcent~ves would raise too many conflicts wRth other Crty po6cies, and might
dram financ~al resources that could be more efficientl~• used by non-profit developers
Some aspects of these mcentrves are, however, reflected m the recommended program
Namrlton, Ra6~nov~tt B Afschulei. !nc Page 10
Aprd 6, 1998
Rewsed lnclusionary Housing Program
for the Crty of Santa Monrca
Permrl Ratromng x•uh Preferences for Srgrrrficarrt Affordcrble Housing Commalments
Ttus alternative would estabhsh an annual l~rmt on the number of market rate multi-farmly
units that could be developed each rear, though the number would be cons~stent vnth
Housing Element planrung targets Pro~ects would be evaluated and ranked on the bas~s
of formal critena. with siemficant weight in the sconng to on-site umts or other efforts to
develop affordable housin2
Here aga~n there was mterest m pursumg this approach, but there were also concerns that
it implies too much discreuon m the selection of pro~ects and mtroduces sigrnficant
procedural comphcations
An Affordable Housang Development Fee for All Mu[n-Family Pro~ects weth
Performance Optrons rn L~eu of the Fee.
There was generally umform suppor[ for tlus approach, though it ra~sed a number of
questions about the amount of the fee, how the fee proceeds should be spent and the kinds
of per£ormance ophons Tlus altemahve is the bas~s for the recommended program
A~lodrfied Mandatory Pro~eci-by Pro~ert Program In tlus alternat~ve, the cunent
pro~ect-by-pro~ect, on-srte requirement would remam m place, but v~nth vanous techrucal
and adnunistranve changes to make the exisnng program more flexible (e g, a lower
mclusionary percentage, a more readily ava~lable in lieu fee)
There was support for some elements ofthis altematrve, but many commenters were
concerned that it would not resolve a fundamental problem with the current approach,
namely the mandatory on-site affordable umt requirement
The Stanrs Ozro wrth ti"ery Lrmrted Changes In thrs altematrve, Ordmance 1615's pro~eci
by-pro~ect approach would remam m place with only a very few~ changes, such as a more
fleauble m-heu fee option (e g, removmg the current l~rtutat~ons on pro~ects of less than 20
umts)
In light of the problems wuh Ordmance 1615 noted above, ttus altemative found almost
no support
Hamrlton, Rabrnowtz & Alschuler. Inc Page 11
Apni fi, 1998
Rewsedlnclusionary Housing Program
for the Crty of Santa Mon~ca
D. Polic}~ Themes Guiding Development of the Revised Program
Dunng the workshops and public heanngs about the current program and the relative
ments of six conceptual alternati~es to Ordmance 1615_ several consistent themes were expressed
and these hace been considered carefully m frairung the recommended program They are
^ Avord Dtsplacernent of Fxut7ng Renters and Adverse Impacts on Establrshed Mulh-
family z'~'etghborhoods to the Ertent Possrble Concem has been expressed that any easmg
ofthe ex~stmg program may unleash a w•ave of development pressure that could further
threaten the City's supply of affordable rental umts and could lead to construct~on-related
d~sruptions m establ~shed mult~-family ne~ghborhoods It was suggested that the revised
program mclude measures to avoid or reduce potent~al displacement and neighborhood
disruption impacts
^ Redtrce Feasrbrltry Impacts to the Prrvate Secior Cons~stently, commenters stated that,
although a revised program may impose condit~ons on new development to offset impacts
that aze contrary to Ctty housmg pohcies, any such costs must not cause typical pro~ects
to become infeasible
^ Comply Wrth State Laws Commenters also stated that the rev~sed program must enable a
developer who meets the ~rurumum on-site affordable umt thresholds necessary to qualify
for the State-mandated density bonus to actually actueve ~t, and that the revised program
should avo~d conflicts with applicable provis~ons of the Costa-Hawkms Rental Housmg
Act, Article ~V of the State Constituuon and other appl~cable laws
^ Ach~eve a het Increase m the Number of,4ffordable Unrts Along wrth avoidmg
displacement of ex~stmg, ~~able and affordable rental uruts, other commenters noted that
the rev~sed program should actueve a net mcrease m new uruts, particularly affordable
umts, in order to accommodate pro~ected City population and household growth, and the
City's "fair share ~ of the regiods need for new housmg
^ .1~IaYmu~e the L'se of Fee Revem~es to Factlrtate Higher-L"olume Affordable Housing
Productron by :~'on-Prorts Another cons~stent comment theme was that the Citr's
housing poLcies could be ac}ueved more effac~ently ~f affordable umts were developed m a
way that achieves scale econorrues, rather than a urut or two at a time under the current
program
^ Set Fees at Levels That Really Produce .~ffordable Unrts Others were concemed that,
feasibd~ty impacts on pm•ate developers notwrthstandmg, the amount of any fee that may
Hamrlton, Ra6movitz & Alschuler, !nc Page 72
Aprtl 6, 1998
Revised Jnclusionary Housing Program
for the City of Santa Monica
be assessed for affordable housmg should be set at a rate that would result m development
of affordable umts
^ Consrder Performance Optrons That Contrebute to t~ew Affordable Unrts n: Addrtron to a
More Flex~ble In Lreu Fee Svstem ~4any commenters suggested that the ob~ective of
budding more affordable housmg could be aclueved if, m addition to pro~~dmg affordable
unrts on srte or pay~ng fees for affordable housing to the City, developers are pernutted to
pro~7de other forms of ass~stance to the affordable housing development process (e g,
buildmg uruts on another site or buymg ]and and donaung it to the City or a non-profit
housing developer)
^ Strrve For Geographrc D~strJbut~on ofAffordable Un:ts Another cons~stent comment
was a desue for affordable housmg to be developed m all ofthe Ciry's mulv-fartuly
neighborhoods, and not concentrated just m areas where land is least expens~ve
^ Make the Program Easrer to Understand and Admmister vlost commenters also noted
that the current program ~s too complicated, malung it difficult for applicants, staff and
decision makers to understand and mterpret
^ Do 1Llore Than Srmply Tweak the Exrstang Program Finally, and m l~gh[ of the foregoing
themes, there was general consensus that the rev~sed program needs to do much more
than tinker around the margins of the current program Rather, a fundamentally different
approach is needed
Based on analysis to date. mcludmg re~iew of expenence w~th mclusionary• housmg
programs around the State and elsewhere m the nanon, cons~denng aII comments receiced to date
on the conceptual alternahves and our understandmg of the evolvmg nature of the local real estate
market, HR&A beheves that a development fee approach, with opt~ons for other achons that
ass~st the product~on of affordable housmg, w1ll do more to ach~eve the ob~ecuves of Propos~tton
R and other Crtv housmg po]ic~es, than Ordmance 1615's pro~ect-by-pro~ect, on-site affordable
housmg requirement
Considenng that the Costa-Hawlans Rental Housmg Act w~ll probably result m a faster
escalauon m average rents m the Gty's apartment stock than would have been the case otherwise,
the abilit}• to produce new affordable uruts is cnt~cal to mamtammg a measure of balance m the
pnce and vanety of housmg opportumt~es m the City, consistent wuh the mtent of State la~v, the
vnll of the Cit~'s voters and C~t}~ Councd-adopted pohcy
Hamitton. Rabmowtz & Alschuler, !nc Page 13
Apnl 6, 1998
Revfsed Inclusionary Housing Program
for fhe City of Santa Mon~ca
IV. DEVELOPi~'IEtiT FEE ISStiES
The proposed Affordable Housmg Product~on Program mverts the focus of Ordmance
1615, to one that provides for payment of an affordable housmg development fee or other options
that also ass~st affordable housme production, from the current pro~ect-by-pro~ect reqwrement to
provide affordable uruts on sue, w~th an m-heu fee opt~on under hrruted circumstances How the
fee relates to the actual cost of producmg umts affordable to low-mcome households, and at what
pnce to set the affordable housmg development fee, are therefore central issues to consider
A. The Cost of Producing Housing in Santa blonica That is Affordable to Low-Income
Households
The C~ty of Santa ]biomca has generally rehed on non-profit, community-based
development organizations to develop uruts m the Crty that are affordable to lower mcome
households The process is compl~cated by the need to merge a vanety of public and pnvate
fundmg sources and a bewildenng aux of regulations and procedures that accompany each source
of fundme, wluch are somet~mes m confl~ct w~th one another Further, these pro~ects must be
camed out m the same real estate market environment as for-profit pro~ects
Develonment and Ooerahne Costs
The cost of developmg affordable umts through non-profit developers is, m general,
somewhat less expensrve than the cost of productng for-profit housmg, but not much less The
reasons the savings may appear less than the "non-profit" status of the organization may initially
suggest mclude
Muld-layered Financeng I'he layered subsidy, debt and eqmty structure used in the non-
profit housmg production process -- with four to six funding sources per pro~ect not
uncommon -- allows rents to be maintuned at levels deemed "affordable" to lower-income
households However, packa.a.,,mg these resources is techrucallv complex, time consunung,
costly, and can result m mefficient choices about pro~ect size, urut rrux and design
Transaction costs, particulady the cost of anangm~ for equity contnbut~ons throu2h the
Federal Low Income Housmg Tax Credrt program, are expensive
Accommodaung Vumerous Publrc Ob~ecttves Non-profit development pro~ects, because
of the~r public nature, typically mvolve more time consummg planrung and approval
processes (e g, neighborhood des~gn workshops), are somettmes held to a tueher (and
more costly) standard of design, mcur uruque development costs (e g, payment of
HamiRon, Rabrnovitz & Alschuler, Inc Page 14
April 6, 1998
Revrsed Incfusronary Hous~ng Program
for the Crty of Santa Mon~ca
prevailmg construct~on wages) and often provide a lugher level of buildmg management
and tenant services than ~s typual of pnvate pro~ects
Yet, non-profit pro~ects compete for land and buddmgs m the same real estate market, and
have to pay about the same costs for numerous professional services (e g. architects and
engmeers), as the pnvate sector
Affordable Housme Fundme Resources
Contrary to the situahon in the late 1980s and early 1990s, there are today only very
lusuted sources of fundmg for erther new construcUOn of affordable housmg, or the acqasinon
and rehabilitation of exishng buildmgs to mamtam them as affordable housmg Funds to develop
affordable housmg in Santa Vforuca generally come from three sources
Loans Supported By Affordable Tenant Rents Affordable housmg pro~ects typically
produce enough net operatmg ~ncome to support a modest mortgage, which ~s usually
obtamed from a bank or an urtermediary mstitut~on at below-market rates (e g, about one
percentage pomt below conventional permanent loans for aparunent buildmgs, or about
7 00% today) The ma~cimum loan amount is a function of the average affordabdity level
of the tenant households, w}uch dictates the ma~cimum rent they are considered able to pay
under Federal, State and Crty guidelines," and the typ~cal costs of operaung the buildmg
(e g, adrrurustration, mamtenance, property taxes, an allowance for rent collechon -osses),
plus a reserve for operatmg losses and building systems replacement The mcome s~de of
the ledger ~s therefore constramed by tenant affordabilrty lirruts, and the cost s~de of the
ledger ~s generally higher than m pnvate development, because non-profit developers tend
to provide a tugher level of sernce to tenants, and are required by pubLc lenders to
mamtam lugher reserves, than ~s typical m for-profit pro~ects Thus, the amount of net
operatmg mcome (gross mcome minus operating expenses and the losses allowance)
available frorn an affordable housmg development can only support a relauvely small loan,
even at below-market mterest rates
'° Fedzral, Stare and Cm laws and pohcies dzFine [tiree household mcome cateeonzs [tiat ment special
howmg assistance cen lo«-mcome househotds (eaznme under 50 % of the Los Angeles Counn Median Faauh• Income
(NIFI)), low~-mcomz households (~ 1%a-80% x h1FI, dzpendmg on the program) and moderate-mcome households (81 %-
120° o~ MFI, dependmg on the prograzn) Tbese mcome [hresholds, coupled ~vith a Federal standard tha[ a household
should not pa~ morz than 30 percent of ~ts mcome for housme costs, the Los Angeles Countc MFI, «'iuch ~s ad~usizd bc
the Federal go~ zmmen[ zach cear and a Ci~- calculahon [ha[ coneetts houszhold s¢e ro utut size. ~s the bas~s for
zstabl~stung mavmum affordable rent, and for-sale housmg purchase pncts each year
Ham~lton, Rabmovifz 8 Alschuler, !nc Page 15
Apnl 6, 1998
Rev~sedlnclus~onary Housmg Program
for the City of Santa Monica
The Federal Low-bicome Housmg Tctt Credit About the only remawng non-City pubhc
fundmg resource for affordable housmg ~s equity raised through selhng tax credus to
prnate investors under the Federal Low-Income Housmg TaY Cred~t progam Because
of the way these credrts are made available m Cahforrua, and the fierce competinon for
them from both non-profit and for-profit developers, the ma~umum credit, equal to about
rune percent of eligible development costs, is no longer a~~adable to pro~ects m Los
Angeles Coun[y Four percent tax credits are still readdy available when used ~n
combmahon vnth the issuance by the Crty of tax-exempt bonds Ttus is the approach that
will most I~kely be used m the future to build new affordable housmg m Santa 1~loruca
Though the tax credit ~s ava~lable to pro~ects m wtuch all of the umts aze rented at pnces
affordable to households at 60 percent of the County median fartuly mcome, the City's
affordable housing pro~ects usually attempt to also assist households of even more lirruted
means 7'hus, as a practical matter, neither tax credrts nor any other non-C~ry financtal
assistance would be available to pro~ects m w}uch all of the uruts were affordable at
Proposmon R's and Ordmance 1615's defirunons of"low-" and "moderate"-mcome (i e,
60% and 100% x MFI, respectrvely)
Crty Resrnsrces The Cuy has several current, and pro~ected £uture, sources of funds that
~t channels mto the development of affordable housmg Bnefly, these mclude 17
Federal Affordable Housmg Funds Allocated to Santa Momca. The C~ty receives
annual allocat~ons of funds under two Federal programs For affordable housmg on
a formula basis These aze the HOME Investment Partnerslup and the Commurury
Development Block Grant Only a portion of the funds received by the City are
used for new construchon of affordable housmg The annual amounts of the City
allocations depend on national budget decis~ons made each year by the U S
Congress, and the local share of those funds ava~lable for affordable housmg
development depend on annual C~ty budget dectsions
Repayment of MERL Program Loans The Cuy will eventually recerve repayment
of $33 4 rmll~on m loans from CDBG and HOME funds made avadable by the
Federal government to assist w~th reconstruchon of damaged multi-farruly
buddmes after the 1994 Northndge earthquake Loan repayment proceeds will be
restncted to uses elig~ble under the CDBG and H0~1E programs (~ e, to benefit
lower-income households), mcludmg affordable houstng development
`" More de[ailed erplanations oY Ihese programs, [heir pro~ectzd fi~'e-tzaz y~elds. and the numbzr of new
affordabiz untts [hec are esttma[zd ro help ;uppoR, are tncludzd m Append~r D to the Housrng Element ~'pdate
Hamtlton, Rabinovrtz & Alschuler, !nc Page 16
April6, 1998
Rewsed Inclusionary Housing Program
for the Crty of Santa Monica
-- Redevelopment Housrng Funds At least 20 percent of the tax mcrement revenues
denved from the C~ty's four redevelopment pro~ect areas must be reserved for the
product~on of affordable housmg
-- Other Ezuitng Development Fee Programs The C~ty aiso rece~ves fundmg for
affordable heusmg through an e~stmg fee on the development of commerc~al
office buildmgs, and the rema~rung balance of tax revenues from the sale of
condonuruums com•erted from apartments under the Tenant Ownerstup Rights
Charter Amendment (TORCA), wluch has now expired
-- Other Mrscellcmeous Crry Programs. Fundmg is also available for affordable
housmg development from repayment of an mter-fund loan to assist vnth the
purchase of property at the comer ofPico and Cloverfield Boulevards to expand
Vugmia Park funds commrtted through negot~ated Development Agreements and
from the e~cistmg Ordmance 1615 m heu fee program (less than $l OQ000
pro~ected over the ne~ct five years) The City Council also allocates funds from the
General Fund to assist development of affordable housing
-- Neu~ Tctt-Exempt Bond Program The draft 1998-2003 Hous~ng Element Update
proposes a new fundmg program through wluch the C~ty would ~ssue tax-exempt
bonds to prov~de below-market rate loans for affordable housmg development
Citv Financial Contribut~ons to Affordable Housme Pro~ects
The scale of the City's contnbut~on to the cost of affordable housmg pro~ects, through one
or more of the above sources, ~s denved by subtractmg the value of a rent-supportable mortgage
and any Federal. State or other non-Ciry debt, eqwty or subsid~es from tota] development cost
Today, we esrimate that the per-urut subs~dy gap for newly constcucted rental units affordable to
low- and moderate-mcome households is as shown m Table 1(all calculation detatls are prov~ded
in Appendix C)
HamrKon, Rabrnowlz & Alschufer, !nc Page 17
Apnl 6, 1998
Rewsed lnclus~onary Hous~ng Prog~am
(or the Crty of Santa Monrca
Table 7
PER-UNIT NEW DEVELOPMENT SUBSIDY GAP FOR LOW- AND MODERATE-INCOME HOUSEHOLDS,
CITY OF SANTA MONICA, 1998
(mcludes blend of 2- and 3-BR units and a blend of high and low land pnces)
Calculation Componenl Very Low-Income low-Income Moderate-Income
(50% x MFI) (60% x MFI) (100% x MFp
Development Cost
IRangel' 5182,920 - 5274,907 5182,920 - 5274,901 5782,920 - 5274,907
Predic[able Debt/Eqwty
Contnbutions (Range)
4% Tax Cred~ts' 537,57 2- 548,528 NA NA
Bank Loan' S28.396 - 538.977 S49.638 • S61 426 588.679 - 5107.152
Total 565,906 -87,505 549,638 - 561,426 S88,679 - 5107,152
Development Subsidy
Gap IRangel 5116,984 -$187,433 5133,044 - S213,844 591,193 - 5171,813
Development Suhsidy
Gap Iwe~ghted averege)` 5134,822 5154,976 5112,092
' Inclutles lantl, constmcnon, profeseional fees antl construcnon finenang costs
' 7hrough sale of tex credrcs esmgnad vie compantive eppLCanon for Faderel Low-Income Houemg Tax Credrt Program
' 8elow-market rate loan for throuph tex-exempt financmg for the 50% x MFI umts, convennonal loan far othere
' Refer to calculation detaiis ~n Appendix C
Source HR&A
The 60 percent of inedian scenano m I'able I does not include the four percent tax cred~t,
because the City is unl~kely to pursue tax credrts for a tax-exempt pro~ect m wiuch all of the uruts
rent at the 60 percent-of-me3ian level If it d~d, the weighted average Crty subsidy gap would
declme to $112,988 (i e, by the amount of the additional tax credit)
The m lieu fee for a low-mcome umt under Ordinance 1615 was ongmally set at 3~ 1,OOQ
based on the average City-provided subsidy for four new affordable development pro~ects
completed between 1988 and 199218 Cumulative ad~ustment for mflation smce then puts the fee
todav at 556,055, or about 57 38 per gross square foot for an average five-urut market-rate
16 Resolutwn 8d 1-1 (CCS), adopted Junz 9, 199~ Ihe uuhal fee of 551,000 fee was baszd on C~R• subs~dies
rotalme $6,68~,239 for 131 uiuts u~ four afl'ordable pro~ects of behvezn 12 and 45 iuuts ~cith a rsu~ of bedroom s~zes
Three of the four pro~ecG also tncluded fundtng &om the State Rental Housing Conshuction Prograrn. ~~tuch ~s no
longer a~~mlable
Hamdton, Rabinowtc 8 Alschuler, Inc Page 18
Apnl 6, 1998
Rewsed lndusinnary Hous~ng Program
for the City of Santa Mornca
pro~ect 'y If the current subsidy gap to develop a new umt affordabie to very low-mcome
households (i e, at 50% x MFI) were to be used as the bas~s of the Ordmance 1615 m heu fee. or
alternatrvely as the bas~s for an Affordable Housmg Product~on Program fee, the $134,822
weiehted average equates to about ~18 per square foot for the same average five-umt market-rate
pro~ect
As will be d~scussed below•, if a fee of tlus scale were to be added to the development cost
budget oftypical new market rate apartment and condomimum pro~ects m Santa Moruca, and
such pro~ects were otherw~se financially feasible, ttus fee amount would, m HR&A's ~udgment,
render typical pro~ects financially mfeasible for expenenced developers, and it would therefore
render the requirement a"constramt" wittun the mearung of 5tate housmg element law
Indicators of Feasible Fee Amounts
The precedmg d~scussion estabhshes the scale of the Cih's cost to develop affordable
housmg -- expressed as the we~ghted average subsidy gap -- for new construchon pro~ects T}us
section presents our analys~s of how alternative fee levels could affect the financial feas~bihty of
the londs of apartment and condommium pro~ects typically developed m Santa Moruca, and how
ttus compares w~th our threshold for a housing element "constraint "
HR&A Feasibil~tv Simulation Model Undate
In the course of prepanng the recommended program, HR&A updated the financial
feasibil~ty simulahon models we constructed for the analysis m the 1998-2003 Housrng Element
Update concettung whether certam Cuy programs constitute a"constramt" in the development of
new housmg, wit}un the meamng of State hous~ng element law The updated model accounts for
vanous changes, generally for the better, in local mazket condrtions than existed at the t~me the
ongmal Housrng Elernent Upcfare analysis was completed Among the changes made to the
assampnons in the modet are those shown m Table 2
" Tlvs ~s baszd o~ o~e loa~-mcome umt requ~red for a np~cat 5-wut pro~ect on an R? lot A Rp~cal R2
D~stnet lo[ abuttmg an allec would cield abou[ ~,600 e'oss square feet of buildmg floor azea, or about fi~~e 1,~20-s I
utu[s m a nuo-ston• to«nhouse arran~ement, mcludmg lofl area on ihe upper floor
Hamtlton, Rabinovitz & Alschuler, Inc Page 19
Apnl 6, 1998
Rewsedlnclus~onary Hous~ng Program
(or the Gty o/ Santa Mornca
Table 2
CHANGES TO HR&A'S MULTI-FAMILY DEVELOPMENT FINANCIAL FEASIBILITY MODEL
Model Parameter August 1996 Model February 1998 Model Notes
Proteet Start Date 7!7/96 1; 7/98 Updated Analysis
City Develapment Fees Varies Varies Uptlated to FY 1997-98
Gty Fee Schedules
Construction Casts
Apt (Low cos[ area, 7 lot) 568/GSF incl Pk'g 571/GSF incl Pk'g 4% ~ntlation ~n LA
Apt ILow cost area, 3 lots) S64lGSF mcl Pk'g 567lGSF incl Pk'g County construd~an
Apt IH~gh cost area, t lot) 577/GSF incl Pk'q 580/GSF incl Pk'g costs
Apt iHigh cost area, 3 Iots1 573/GSF inG Pk'g S76/GSF incl Pk'g
Condo (Low cost area, 1 lot) S73/GSF incl Pk'g S76/GSF mcl Pk'g
Condo (Low cost area, 3 lots) S68/GSF mcl Pk'g S77/GSF incl Pk'g
Contlo (High cost area, 1 lot) 582/GSF incl Pk'g S85/GSF inG Pk'g
Condo (High cost area, 3 lots) 577JGSF mcl Pk'g 580/GSF incl Pk'g
Loan Interest Rates
Cons[ruct~on Loan 10 5% 9 5% Improved Market
Permanent Loan 8 0% 8 0% Conditions
Apt Cap~talizavon Rate 8 5% 8 0% Improved Market
Conditions
Apartment Market Rents
Low Cost Area S1 15/SF/Mo S1 25/SF/Mo Improved Market
High Cost Area S 1 40/SF/Mo 51 50/SF/Mo Contlitions
Condo Market Sales Pnce
Low Cast Area 5135/SF 5160/SF Improved Market
High Cost Area 5200/SF S235/SF Conditions
Source HRS~A
Recent smgle-farruly home and apartment buildmg sales mdicate that land values are nsmg
once agam We mamtamed the land cost assumprions from our previous modeling work ($40-$75
per square foot), however, because there has not been a suffic~ent number of comparable sales
(i e, erther vacant land or siguficantly underdeveloped sites) over the last year to estabhsh a clear
pattern of change across the C~ty
2 Feasibditv Threghpids
As we noted m our mitial review of Ordmance 161> for the Housmg Element Update, all
housmg development projects and housmg developers are not equal, and therefore ~t is not
possible to esiabl~sh a bnght-hne threshold for adverse feasibdrty impacts that will apply m every
case Property owners and developers have vartnng deerees of expenence, resources, abdrty to
Hamitton, Rab~nowtz 8 Alschuler, Inc Page 20
Apnl 6, 1988
Rev~sed Inclus~onary Nousing Program
for the Crty of Santa Mon~ca
ra~se cap~tal, slulls and tolerances for nav~eatmg through the Iocal land use approval process, and
degrees of motrvahon to seek an alternanve use of their propernes The rrurumum acceptable
financial retums that property ow~ners and developers expect from a multi-famdy residenhal
pro~ect m order to proceed wtth new construchoq or to contmue o~vmne or managmg an e~ustmg
buddmg, also ~~ary Further, the irummum acceptable return will vary by pro~ect size, Iocation,
and product type (e g, condorruniums versus apartments)
In our prewous work analyung whether certazn City programs constituted an actual
govemmentat constramt on new housmg development w~ttun the mearung of Government Code
Secnon 65583(a)(4), we selected several financial feasibdity thresholds for considerauon These
financial feasibdity thresholds estabhshed the pomt at wtuch we believed a reasonably well-
informed and expenenced property owner or developer with a typical multi-family housmg
development pro~ect would elect not to pursue that pro~ect because of the cost of comply~ng wrth
a Crty program, regulation or procedure A pro~ect that results m a financial retum below these
thresholds is deemed mfeasible, because a well-mformed and expenenced property owner or
developer would, mstead of developmg the mulu-fartuly pro~ect m Santa Moruca, pursue
development pro~ects m other locations where these mmimum thresholds are ac}uevable, or make
other mvestment choices
Bnefly restated, these thresholds are
Cash-on-Cash Return for Apartmeni Pro~ecu rlmong the many measures of return on
mvestment for income-producmg propeRies that are used m the real estate mdustry, cash-
on-cash return on equity ~s now a part~cularly important benchmark. even for apartment
build~ngs that will be held for a number of years Real estate competes v~nth an
mcreasmgly wide range of altemative opportucuties to eam a return on mvesced capital In
add~non, our expenence and discussions with other real estate professionals mdicate that
developers, and theu lenders, want to acfueve their returns from real estate investment
sooner rather than later 20 Developers expect to aclueve rates o£ return that are greater
than attemattve, largely passcve forms of investment (e g, cnsured deposits, bonds or other
securities, or mutual funds) commensurate wuh the level of nsk and act~ve mvolvement
required by real estate development
`" That is, developers and theu lendzrs no longer count on e~ctraordmart' u~tlation m value over htne to
produce the lecel of renun needed to ius[~ ffie mvestmznt No~;~, an acceptable retwn needs ro be acluevable m a much
shorter penod of tune, such as «hzn an apartmrnt proiec[ achieces stabil¢ed occupanc}, or a condomuvum pro~ect sells
out
Hamdton, Rab~novrt[ 8 Alschuler, !nc Page 27
Apnl 6. 1998
Rewsed lnclusronary Housrng Program
for the CRy of Santa Monrca
A developer of a small apartment pro~ect must be reasonably certam of acluevmg between
l2 and 1~ percent retum on mvested eqwty by the nme the pro~ect reaches a stabihzed
occupancy level (i e, 95 percent) before committmg to undertake the pro~ect Once agam,
tlvs ~s a¢eneral benchmark, and one to wtuch there are undoubtedly some exceptions
T}us cash-on-cash return threshold, because rt~s a funct~on of income over time, applies to
the apartment scenanos only It is calculated as the pre-tax net cash flow (i e, net
operating income mmus debt sercnce) drvided by the equrty contnbution (in the form of
land and/or cash) Any extra development costs, such as an ~lffordab(e Housing
Produchon Program fee, would have a direct effect on cash-on-cash return Thus,
assurrung a pro~ect was otherw~se feasible, a fee that causes ttus measure of return to d~p
below 12 percent, holdmg everyttung else constant, would, m our ~udgment, be the
d~fference between a feas~ble and an mfeasible pro~ect, for most small-scale pro~ects, and ~t
would therefore constrcute an "actual governmental constramt °
Developer Pro,fit for Condomrn:um Pro~ects "Ikus ~s the margmal d~fference to the
developer between the value of the completed pro~ect when all of the umts have been sold
(~ e, gross sale value mmus the cost of sales) and the cost of developmg it (i e, total
development cost, includmg land), compared wrth the equity contnbui~on (land and cash)
TFus retum on equity calculat~on differs from the cash-on-cash return described above for
apanments m that rt includes the cost of development In our opimon, wtuch is supported
by discuss~ons wrth a number of other real estate profess~onals, most condominium
developers would need to be reasonably confident of receivmg a return on equrty of
between 40 and 50 percent, m addit~on to the value of all development costs, m order to
proceed with a pro~ect, particularly small ones Inasmuch as an additional development
cost, such as an Affordable Housmg Production Proeram fee would directly affect
developer profit, a fee that causes profit to be less than 40 percent for small pro~ects,
holding everytlung else constant, would cause a typical pro~ect to be mfeas~ble, and the fee
level would therefore constuute a"constramt °
Red:echon rn Resrdual Land Yalue For each aparunent and condorrunium pro~ect
scenano, the res~dual value of the land ~s denved from the estimated sale or market value
(i e, eross sale pnce less cost of sales) of the firushed pro~ect From ttus value we deduct
all the costs mvolved wrth creatmg the ~mprovements, mcludmg hard construction costs,
financmg and other "soft" costs, and a 20-ti percent (for apartments) to 50 percent (for
condorrumums) profit marg~n for the developer Any rema~rung value m the fitushed
pro~ect ~s assumed to be allocated to land, thus the term "residual land value " Any
decrease m market value or increase m costs, whether caused by a Crty program or
requvement, or any other factor (e g, an mcrease m mterest rates), that cannot be passed
forward to consumers m the form of Fugher rent or condomm~um sale pnce, and ~f the
Hamdton. Rab~now(z 8 Alschuler. Inc Page 22
April 6, 1998
Revised lnc7us~onary Housing Program
/or the C~ty of Santa Mon~ca
developer is unwlllmg ro accept a lower profit, would cause the developer to seek a
reduction m the land cost by a Lke percentage =' In our feas~bility model, we assume that
when a C~ty program causes such a reduction (i e, by addmg to development cost or
reducmg mcome), the developer and ]and owner would renegoUate the pnce of the land,
but only up to about a 15 percent reduction from the assumed aslung pnce A C~ty
pro,,uram or requirement, or other factor, that results m a residual land value reducuon of
more than 1~ percent would be a scale of reduction that the land owner would probably
not find acceptable and the deal would collapse Once more, t}us ~s a general feas~bility
gwdehne, and mdividual cucumstances could support other conclus~ons
Using these thresholds, and the more financ~ally favorable assumptions noted above, we
re-ran the simulations of financial feasibdity for one-lot, two-story pro~ects and three-lot, two-
story pro~ects in the R2 Distnct The s~mulations agam mcluded an apartment and condorruruum
vananon of each prototype, and both a lower and tugher land cost and rents or purchase pnce
vanat~on for each (total of eight scenanos} For the one-lot and three-lot R2 prototypes, the
revised s~mulations resulted ~n the same conclusion that we reached for the HousrngElement
Update typ~cal pro~ects are still not feastble, based on the above feasibilrty thresholds, even
wuhout the Inclusionary Housing program This ~s due to the fact that, holdmg all other Crty
zomng and development rules constant, assuming a pro~ect follows all cunently apphcable Ciry
approval procedures and related City fees, and pays for land at mazket pnces and all customary
construct~on costs, profess~onal fees and finanang costs, the sum of total development costs
exceeds the mcome that a developer can ac}ueve from operation (apaRments) or sale
(condocrumums) of the completed pro~ect, such that the resultmg mcome falls below minunum
thresholds of financ~al feasibilrty that are generally rel~ed on m the development commumty F~Lgh
land costs still represent the ovemdmg factor that affects the feasibility of mult~-family pro~ects m
the City Land costs conunue to be at levels that cannot be ~ustiSed on the bas~s of the total cost
of development and average market rents and condommium purchase pnces
As we noted m our analysis for the 1998-2003 Housrng Element Update, these
simulat~ons are best-approximations of the financial situahon of the most typical mulh-fazruly
resident~al development cucumstances m Santa vlonica, but do not account for all possible
vanauons It is also ~mportant to recall that the feas~bdrty model assumes a particular appraach
to multi-farruly residential development, w}uch is typ~cal m 5anta Momca, but not umque The
-' In prachce, am such pro~ect cost mcrzase would probably' be absorbed, to ~'arvmg de~ees bc all three
sources. 6ut the exacl allocahon of [he added co~[ «~ould be pro~echspec~c We do no[ beliece the cutren[ market u•ill
suppor[ passmg ~'erv much of the cost Ionvard ro consumers, but developers ma~~ be uillmg to shacz the~r profits
somewhac Because we cannet accountfor such «~de ti~anauon m poss~ble outwmes. ~j•e ha~e assutned m the feas~bihry
modzl tha[ all such costs ~i~ill bz borne by a reducnon m the pnce a dzaeloper would be ~nllmg to pa~ for ]and
Namtlton. Rabinowiz & Alschuler, Inc Page 23
Aprd 6, 1998
Revued lnclus~onary Housing Program
for the Crry of Sanfa Monica
approach reflected m the simulation models assumes that a de~eloper buys a site from another
party m an arms-length transacnon The deceloper secures the nght to purchase the site at a fixed
pnce once all City ent~tlements to develop are m hand (~ e, up to and mcludmg a buddmg pernut),
through payment of a monthly sum (~ e, option-to-buy paymen[) be~rwng with pro~ect
conceptualuation and contmumg until the City issues a buildmg pemut Only at that pomt m rime
is the land purchased The models also assume that the developer obtams convent~onal financm¢
for the pro~ect Tlus means that the amount of the loan (and hence, the amount of equity
required) is a function of 75 percent ofthe value ofthe compieted pro~ect, or m the case ofan
apartment pro~ect, the mortgage amount that can be supported when the monthly cash flow is
equal to I 15% of the debt sernce, wfuchever is less The model does not account for outs~de
equity mvestors, nor the preferred retum on thev investment that they are usually due Any other
approach to the development of a srte -- e g. by a property owner directly who has a low cost
basis ~n the land, or nse of below-market rate financmg -- could lead to d~fferent results about
pro~ect development costs, income and feasibility than those discussed here
For the R2 D~stnct, where most multi-fatruly development m the Crty occurs, we estimate
that, holdmg all other t}ungs constant, rents would have to mcrease between 30 and 35 percent for
the one-lot pro~ects to be feas~ble For the three-lot apartment prototypes, rents need to cl~mb
another 10 to 19 percent to reach feas~bihty Condo pnces m a one-lot prototype need to mcrease
between 25 and 41 percent, and m a three-lot project, they need to mcrease 17 to 28 percent to
reach feasibility
Feasibi-ity Imol~cat~ons of Altemative Affordable Housing Develooment Fees
To test the financial feasibilrty imphcanons of alternatrve fee levels on typical pro~ects m
the R2 Distnct under these c~rcumstances. we assumed that rents and purchase pnces reach the
pomt at wtuch typical projects are feasible, holdmg all other tlvngs constant, and then added one
dollar mcrements of potent~al City affordable housmg development fee to the "feasible" one-lot
and three-lot R2 prototypes Table 3A shows the resuits for prototyp~cai apartment pro~ects, and
3B shows the results for protoR~pical condomiruum pro~ects Appendix D contams the output
from each of the eight simulation model runs that estabUsh the "base cases" -- i e,"feasible"
prototypes w~th no fee
Namtlton. Rab~nowtz & Alschulec Inc Page 24
Apnl 6, 1998
Revised lnclusionary Housing Program
for the Crty of Santa Monrca
Ta61e 3A
IMPACTS OF AN AFFORDABLE HOUSING PRODUCTION PROGRAM FEE, IN ONE DOLLAR INCREMENTS,
ON 'FEASIBLE' PROTOTYPICAL APARTMfNT PROJECTS IN THE R2 DISTRICT IN THE CITY Of SANTA MONICA,
UNDER HIGH AND LOW LAND COSTS AND RENTSlPURCHASE PRICES
Fee Amount 7-Lot Prqec[s in the R2 Distnct 3-Lot Prqects in the R2 D~stnct
Per GSF
Lawer-CosP H~gher-Cast~ Lowar-Cost Pogher-Cast
Cash-on Delta Cashon Del1a Cash-0n Delta Cash-0n Delta Land
-Cash' Land -Cash Land -Cash Land -Cash Resid
Resid ` Resid Res~d
749% 00% 75.9% 00% 153% 00% 149% 00%
51 14 2% -2 0% 14 4% -1 0% 14 4% -2 5YO 14 3% -2 7%
S2 136% -38% 136% -27% t35% -50% T3.6% -41%
S3 130% -5.8% 129% -41% 128% -75% 130% -54%
S4 12.4% -7 7% 12 3% -5 2% 12 2% -12 5% 12 5% -6.8%
~5 11.5% -~-63b 1t.7% -fi.2% t'~.5% -t5.0% t20% -95%
~6 t i a% -t i 5% t t 2% •~ z% i i o% -n 5% 11.6% -'L0.83~
g7 11 0% -13 5% 10 7% -S 3% 10 5% -20 0% 11 2% ~12 2%
Sg 108% -154% 102% -9.3% 101% -250% 108% -135~
59 10 3% -17 3% 9 8% -70.3% 9 7% 27 5% 10 4% -16 2%
S10 99% -192% 95% -173% 93% -300% 101% -176%
git 96% -27.2% 9.1% -124% 8.9% -325% 97% -789%
S12 93% •231% 88% -134% 86% 375% 94% -203%
g73 9 0% -25.0% 8 5% -14 4% 8.3% -40.0% 9 2% -23 0%
g~4 8 7% -26.9% 8 296 -15 5% 8 0% -42 5% 8 9°/a -24 3%
$i5 85% -308% 79% -165% 7.8% -450% 88% -257%
g~g 82% 327% 77% -775% 75°6 -500% 84% -270%
g~7 S 0% -34 6% 7 5% -78 6% 7 3% -52 5% 8 2% -29 7%
$~g 78% -365% 72% -196% 71% -550k 80% -311%
g~ g 7.6% -38.5% 7 0% -20 6% 6 9% -57 5% 7 S% -32 4%
S20 7 4% -40 4% 6.8% -21 6% 6 7% -62 5% 7 6% 33 8%
' S451sf (one lot) to S40/sf {three lotsl land eost, 51 25/sf/mo current market rent
` 575;sf (one lot) to S70/sf ( three lots) land cost ; S1 50/sf/mo current market rent
' Cash-on-cash retum m the first stabi6ted year.
` Percent change in residual land value
Source HR&A
Hamdton, Rabrnovrh & Alschu~er, Inc Page 25
April B, 1998
Rev~sed Inclusionary F}ousrng Program
tor the City of Santa Monfca
Table 36
IMPACTS OF AN AFFORDABLE HOUSING PRODUCTION PROGRAM FEE, IN ONE DOLLAR INCREMENTS,
ON 'FEASIBLE' PROTOTYPICAL CONOOM/NlUM PR0.IECTS IN THE R2 UISTRICT fN THE CITY OF SANTA MONICA,
UNDER HIGH AND LOW LAND COSTS AND RENTS/PURCHASE PRICES
Fee Amount LLot Prqects m the R2 D~stnct 3-Lot Pro~ects m the R2 Oistnct
Per GSF
Lawer-Cost' H~gherCost~ LowerCost Higher-Cost
Profri' Delta Profit Oelia Profi[ Delta P~ofit Delia
Land Land Land Land
Res~d' Resid Resrd Resid
50 ~Base Case) 50 2% 0 0% 50 7% 0 0% 50 2% 0 0% 50 4% 0 0%
S1 48 0% -2.0% 49 4% -1 4% 47 6% -2.6% 49 0% -1 5%
32 458% -47% 480% -27% 451% -53h 475% -30%
S3 43 6% -6 1% 49 7% -4 ~% 42 5% -7 9% 46 0% -4 5%
~i`q. 41 0% -8 2% 45 4% -5 5% 39.~i -'IO_596 44.6% -6 1%
~5 34.?% -'Y4.296 44.1 % -fi 9% 37.3% -13 2% 43 1% J 6%
gg 37 0% -72.2% 42 8% -8 2% 34 6% -15 8% 47 6% -9 7%
~~ 34.8% -763% 424~ -96% 322% -7B.4% 40.1% -'f0.696
~~ 32 6% 18 4% 4~.19& -74.t196 29.6% -21 1% 38.7% -10 6%
$g 30.4%
Z8'Z% -20 4%
'ZZ 5% 38 8%
37 5% -12.3%
-13.7% 27 0%
24 5% -23 7%
-26 3% 37 2~
35.7% -12 1°6
-13 6%
570 28.0% -24 5% 36.2% -15.7 % 21 9% -29 0% 34 3% -75 2%
S~ ~ 23.8% -26.596 34 9% -76 4% 19 3~ •26 3% 32 6% -76 79'0
$~ 2 2~ 6% -28 696 33 5% -16 4% 16 7% -34 2% 31 3% -18 2%
S13 19 4% 30.6% 32.2% -17 8% 14.2% 36 8% 29 8°6 -19 7%
5~4 17 2% -32.7% 30 9% -19.2% 71 6% 39.5% 28 4% -21 2%
S~ 5 150% -347% 296% -205% 90% 421% 269% -227%
S76 128% 367% 283% -219% 64% -447% 25.4% -242%
$~~ 10 6% 38.8% 27.0% -23 3% 3.9% -47 4% 24 0% •25 8~
$~ a 8 4% -40 8% 25 6% -24 7% 1 3% -50.0% 22 5% -27 3%
S19 6 9% -42.9% 24 9% -26 0% 0 0% -52 6% 21 0% -28.8%
Szp
' S45isf (one lot) to S40/sf (three lotsl land cost, 5160lsf current market purchase price
' S75lsf (one lotl to S70/sf I three lotsl land cost, 5235/sf current market purchase pnce
' Developer profit margin (after reium on all mvesied caprtal an d development costs)
` Percerrt change ~n res~dual land value
Source HR&A
Namdfon, Rabrnohtz & Alschuler, Inc Page 26
Aprd 6, ~ 998
Rewsedlnclusronary Hous~ng Program
for the Crty of Santa Monrca
The kughLghted values shown m Tables 3A and 3B md~cate the fee amounts that could be
charged without causmg the Fee to const~tute a`govemmental constramt" witlun the mearung of
State housing element law~ These results mdicate that there are different tolerances for an
affordable development fee, dependmg on the product type (condomimums vs apaztments) and
area of the Cuy (e g,"tugher-cosdvalue" areas north of Wilsiure and m Ocean Park vs all other
areas of the City) More specifically, the fee could range from four to eight dollars per square
foot for condorrumums, and five to s~x dollars per square foot for apartment pro~ects, without
crossmg our defimtion of a"constramt " If set at these levels, typical pro~ects m wtuch all of the
umts are market rate would be assessed £ees as shown m Table 4, on the followtng page
For a one-lot apartment pro~ect, the constramt-deternuned 55-$6 per square foot fee range
is equal to about two-tlurds (68%) to over three-quarters (8l%) of the fee that is now m effect for
a low-mcome unrt, although the ability to pay the current fee is highly restncted under Ordinance
1615 For a one-lot condorruruum pro~ect, the constramt-deternuned $4-$8 per square foot fee
range is equal to between half (54%) and~ust over the cunent full fee (109%) for a low-income
urut
For a typ~cal five-umt apartment pro~ect, fee revenue denved w~tlun the constraint-
deternuned range is equal to about one-quarter (28%) to one-tlurd (34%) of the C~ty's subs~dy
gap for a new low-income umt For a condotturuum version of the same pro~ect, the constraint-
deternuned fee revenue equates to between 23 and 45 cents of each dollar of City subsidy gap for
a new lowancome ucut Stated another way, rt would take between 1 S and 18 umts of market
rate apartments, or between 11 and 22 new condorruruum umts to generate enough fee revenue at
the constramt-determined leveis to equal the average City subsidy gap needed for one new umt
affordable to a low-mcome household
Hamitton, Rabinovrtz & Alschul~r, !nc Page 27
Apnl 6, 1998
Rewsed Inclusionary Housing Program
for the Crty of Santa Mon~ca
Table 4
PER-PROJECT COST OF CONSTRAINT-DEFINED FEES IN THE R2 DISTRICT
# Umts Floor Area
(GSF)
5 7,600
Apartment Prqects Condomimum Pro~ects
Fee Per Fee Amount Fee Per SF Fee Amaunt
SF
55 00 538,000 S4 00 530,400
S6 00 545,600 S5 00 538,000
5600 545,600
57 00 353.200
S8 00 860,800
70 15,000 5500 575,000 5400 560,000
S6 00 590,000 55 00 S75,000
5600 590,000
S7 00 5105,000
58 00 S 120,000
75 22,500 5500 5112,500 5400 590,000
S6 00 5135,000 55 00 S112,500
S6 00 5135,000
57 00 5157 500
S8 00 5180,000
20 30,000 S5 00 S150,000 S4 00 5120,000
5600 5780,000 S500 5150,000
ssoo siao,ooo
s~ oo sz~o,ooo
ss oo szao,ooo
25 35,000 S5 00 5787,500 54 00 5150,000
S6 00 5225,000 S5 00 5187,500
S6 00 4225,000
S7 00 5262,500
S8 00 5300.000
Source HR&A
For whatever development fee or fee range ~s eventually adopted, n is also recommended
that the fee be reduced when new multi-fanuly pro~ects are proposed on vacan t residential srtes, or
vacant or underutilized commercial sites, rather than on multi-faauly sites wuh e~stmg rent-
controlled apartments Tlus incentive may reduce the potential for displacement of e~stme
renters, should a developer elect to utilize the Elhs Act or successfully obtam a Rent Control
removal pernut
Ham~lton. Rab~nov~tz & Alschuler, !nc Page 28
Apnl 6, 1998
Rev~sed Inclus~onary Housmg Program
for fhe Crty of Santa Monrca
Table 5 shows that tn add~tion to a reduced fee, certam other calculation ad~ustments may
be needed m order to prevent an ~ffordable Housmg Product~on Program fee from exceedme the
fee now m place to offset the affordable hous~ng impacts o£ new office development, and thereby
reduce the attract~veness of developmg a residential pro~ect on a commeraal s~te that ~s also
suited for office development T}us example suggests that the reduced fee would have to be set
between ~5 and ~6 per gross square foot, ~t would have to be applied aeainst residennal floor area
counted at one-half its actual value, and the floor area for any ground floor parkmg would have to
be tgnored Tlus approach to countmg floor area would be generally consistent wuh existme
zorun¢ code regulations that are intended to encourage development of housing m commercial
zones
Table 5
AFFORDABLE HOUSIN G FEE FOR NEW MARKET RATE MULTI-FAMILY HOUSING
ON A STANDARD C3 COMMERCIAL SITE VS.
THE AFFORDABLE HOUSING FEE FOR COMMERCIAL OFFICE DEVELOPMENT
Pro~ect Parameter Market Rate Commercial Office Pro~ect
Multi-Family Pro~ect
Apanment Condomin~um
Maximum BuJdmg Height
Feet (by SMMC) 60'-0" 60'-0" 45'-0"
Stories (by design) 5 5 3
Parlang Levels One @ tst FI One @ 7st FI All
1-2 Subt 1-2 Subt Subterrenean
Maximum FAR 2.0 2 0 Z 0
Floor Area Per Floor 4,500 4,500 5,000
Gross Floor Area 22,500 22,500 15,000
Ad~usted Gross Floor Area 9,000 9,000 7 5,000
~res~dent~al at 50% x actual,
not including ground flaor parkmg)
Number of Residential Units 20 76 NA
Fee Per GSF or Atl~usted GSP 55.60 S5 60 S3 38 -- lst 15,000 GSF
57 51 -- Over 15,000 GSF
Total Fee S50,400 550,400 550,700
Source HR&A
Hamilton, Rabrnowtr & Alschuler, !nc Page 29
Aprtl 6, 1998
Rev~sed lndusronary Housmg Progrem
for the Crry of Santa Monica
The Case for an On-Srce ,4ffordable Housme .a.lternauve
Because of the gap bztween the constramt-deterrruned fee levels and the average City
subsidy needed to produce a dwellmg unit affordable to a low-mcome household, it ~s in the Cuy'~
mterest to facilitate the inclus~on of low-mcome uruts m proposed market rate pro~ects (i e,
aclveve whole uruts with ~o addinonal City fundmg) Our analys~s of the financ~al feasibilrty
imphcations of the proposed new development envelope and parlung flexib~hties for dens~t~~ bonus
pro~ects md~cates that the addmonal cost of mcludmg a low-mcome urut m a typical one-lot
pro~ect m the R? D~stnct would be completely offset by the abilrty to aclueve one additional
market rate urut (t e, s~x market-rate uruts and one low-mcome umt m a dens~ty bonus pro~ect vs
fi~~e market rate umts otherwise allowed) If set at levels that meet the irurumum requvements of
the State densrty bonus law, pro~ects m the R2 D~stnct should be able to produce the numbers of
affordable uruts shown m Table 6, if the proposed development envelope and parlcmg fleaubilihes
aze enacted Table 6 also suggests that the 5tate dens~ty bonus formula ~*nll probably encourage
developers who elect ttus ophon for larger pro~ects to provide uruts at 50 percent or less of
median farruly mcome, because domg so will allow more mazket rate umts to be developed
Table 6
AFFORDABLE ANO MARKET RATE UNITS FOR TYPICAL PR0.IECTS IN THE R2 DISTRICT
UNDER THE PROPOSED ~ENSITY BONUS PROGRAM REVISIONS
Lot Size Base Units Units Allowed Market Rate Low-Income
Iwith half Allowed With 25% Units Units
alley width) (7 1,500 sf) Density Bonus
7 lot
18,000 sf)
1@ 50% x MFI or
t @ 60% x MFI
2 lots 11 14 11-12 2@ 50% x MFI or
116,000 sf) 3@ 60% x MPI
3 lots 16 20 16-78 2@ 50% x MFI or
(24,000 sf) 4@ 60% x MFI
Saurce HR&A
The Case for Other ?.Iternatrves
W"e further recommend that the Crty allow developers two add~UOnal alternatrves for
meetmg the~r obl~gation to ass~st m the production of affordable housmg, besides payment of a fee
or ~ncludmg affordable uruts on site with a density bonus Though these other altematives are
somewhat more difficult to specify, they would enable the pnvate market to choose from among a
HamNton, Rabrnovrtc & Alschuler, lnc Page 30
Apnl 6, 1998
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Rewsed Inclus~onary Housing Program
1or the Cily o(Santa Mon~ca
COMPO:vEhTS OF TAE pROPOSED AFFORDaBLE HOUSL~iG PRODL'CTION
PROGR~Di
In more specific terms, an ordmance unplementmg an Ai~'ordable Production Program
along the lmes of the precedmg discussion w711 need to mclude prov~s~ons that address at least the
followmg issues
A. Recitals, Purpose of the Program and Definitions
Like Ordinance 1615, the new implementauon ordmance should mclude the C~ty Counc~l's
findmgs that support enactment of the program, mcludmg references to the forthcommg "nexus"
study The rec~tals should also state the City's ~ntention that the developer's selection from
among the specific altematives proczded for m the body of the ordmance (i e, pay a fee, build
uruts on-site or provide other forms of ass~stance to affordable housmg producbon) is up to the
developer The implementation ordmance may also reqmre a defirunons section to define specific
terms that are not already defined m the zorung ordmance
B_ The Development Fee ~lternative
The ~mplementanon ordmance should establish an Affordable Housmg Producuon
Program fee, specify the basis for chargmg ~t, the amounts and circumstances under w}uch the fee
wil] be reduced as an mcentrve to accompUsh other City pol~cy ob~ectrves, and should also provide
a hardship exemption for unanticipated circumstances These prov~sions might mclude
Establzshment of the Fee The appl~cability of the fee must be stated m terms of the type
and scale of pro~ects agamst wtuch it is to be appl~ed (e g, all muln-farruly pro~ects of two
or more umts), and any exempt~ons (e g,"grandfather" clause) that may be appropnate
for pro~ects already m the development p~pelme or sub~ect to other restrictions on the
City's ability to change rts development regulations (e g, Development Agreements and
vested subdivision maps)
Amount of the Fee The amount of the fee should be set by Resolution of the Cuy
Council, and updated at least every two years to account for chanemg market, local
housmg policy and other circumstances Annual mflation ad~ustments usmg the Consumer
Pnce Index are not appropnate, m our ~udgnent, because there is very little relationslup
between the costs mvolved m the development process (e g, changes m interest rates) and
the pr~ce beha~~or of a shopptng cart of consumer goods It is recommended that the fee
be imposed on the basis ofthe gross floor area ofthe pro~ect, usmg the zomng code
defirution of"floor area " The floor area and fee can be esrimaTed at the time of planrung
Hamdton, Rabinovitz & Alschufer, Inc Page 32
Apnl 6, 1998
Rev~sed lndusionary Houstng Program
for the C~ty of Santa Monica
approvals (i e,°imposed°) and final~zed at issuance of a buddmg pernut when the exact
amount of floor area has been determtned
^ Fee Reduchon Incent:ves In orderto encourage developersto avoid potential
displacement problems, the fees should be reduced by one dollar per square foot when
new market rate mulTi-farruly prolects are proposed for vacant mulh-farruly s~tes and
commercial srtes For commercial srtes, the res~dent~al floor area on wluch the reduced fee
ts assessed should be counted at one-half ~ts actual value
^ Timrng of Fee Payment Collectton of fees should be deferred unril the final sign-off on
the pro~ect buildmg permrt
^ Nardrhep Exemptton The ~mplementation ordmance should mclude a hardstup
exemption, w~hereby a developer has an opporturuty to demonstrate to the Planrung
Comm~ssion, or the C~ty Council on appeal, that the ma~nmum fee is legally unpemvss~ble
C. The On-Site Affordable Housing Development Alternative
The Affordable Housmg Production Program ordmance should allow for the new
development standards flexib~lit~es when the mimmum percentages of on-s~te affordable housmg
are mcluded m the pro~ect, as recommended by City staff under separate cover
The ordmance should also spell out the mirumum spec~ficanons for the on-sue uruts Past
expenence suggests that apartment developers are much more hkely to be mterested m pursumg
the on-site approach with a real~stic dens~ty bonus than condomu~ium developers It may
therefore be advisable to defer certam on-site affordable unit procedures (e g, the means for
ensunng long-term affordability of the on-site for-sale umts) for case-by-case approval as part of
the subd~v~sion map process, although general parameters could be spelled out m the Program
guidelmes Among the ordinance provisions that might be needed are the followmg
Reference to the RevuedDerrsrty Bonus Development Standards The mmimum on-s~te
requ~rement m heu of paymg the development fee should be set at the same thresholds
needed to qualify for the State-mandated densrty bonus (e g, 10% of the uruts affordable
to households at 50% x'vIF'I or 20°/n of the umts affordable at 60% x MFI) The pro~ect
should then be allowed to use the alternative densuy bonus development standards
recommended by Ctty staff, and to do so ~nthout needmg any addrtional d~screhonary
pernuts ~ust for the density bonus (i e, no Parlung Reducnon Pernut)
Hamdfon, Rabinovriz 8 Alschuler, Inc Page 33
Aprd 6, 1998
Rewsedlndusionary Housing Program
for the Crty of Santa Monica
Characterrstics of On-Site Li~rts The ordmance should mclude many of the provisions
now mcluded m Ordmance 1615 and the ex~stmg fee program to rrut~gate the affordable
housmg impacts of new office development These mclude, for example
-- Construction Concurrencv and Occuoanc~,~ 5chedules The affordable umts should
be constructed at the same time as the market rate units, as Ordmance 161 ~ now
says Any hme limrts on how soon after completion the affordable un~ts must be
rented or sold and occup~ed should be deferred to separate ~mplementaUOn
gmdelmes and should allow staff to approve extensions for unusual c~rcumstances
-- ;viirumum Umts Sizes The schedule of urut sizes by number of bedrooms, and the
flexibilities about mtenor fimshes m Ordmance 1615 still seems appropnate We
recommend that the ordmance specify at least 2-BR/850 s f umts, but no
requvement that the unrt configurahons (by number of bedrooms) match that for
the mazket rate umts
-- Location of Uruts m the Develooment We recommend that for pro~ects of up to
about 20 uru-s, a developer be allowed to locate or cluster on-s~te afforda6le uruts
wdlun a buildm¢ as needed or desired, prov~ded there are no significant ~denhfiable
differences between inclusionary and market rate units, as stated m Ordmance
1615 For larger pro~ects, some dispersal ofthe affordable un~ts may be
appropnate, perhaps at the d~screnon of the Planning Commiss~on m the context of
its discretionary re~~ew of pro~ects at t}us scale
-- Pnane Reauirements The ma~mum allowable affordable low-mcome rents and
condo purchase pnces should contmue to reference the applicable Federal, State
and Citv calculauon parameters, but defer the specifics to a separate City Council
Resolut~on, as Ordinance 1615 does now In either the new ordmance, or any
assoctated guidelmes or Resoluhons, the maxunum allowable purchase pnce for an
affordable condo should be set at a level that reflects the household's income ta~c
benefits from ownerslup (e g, up to 40% of household mcome)
-- On-Srte Tenant and Owner El~eibility Reauuements Provisions along the hnes of
those already mcluded m Ordmance 1615, mcludmg the anri-conflict of mterest
provis~ons, should be mcluded m the new ordmance Preference should also be
grven to qualifymg households displaced by the 1994 Northndge earthquake and
any pnor tenants w-ho resided on the site if u ~s bemg redeveloped
HamiRon, Rab~novrh & Alschufer, !nc Page 34
April 6, 1998
Rev~sed Inclus~onary Housrng Program
for the C~ty of Santa Monrca
Relationshio to Other Crtv rlffordable Umt Reauuements The on-site uruts
should be allowed to count a¢amst any replacement unrts reqmred to sansfy a Rent
Control removal pemut requ~rements and pre~lous Crty mclusionary requirements
Deed Restnctton to Ensure Lon¢-Term rlffordabilrtv The new ordmance should
mclude a provis~on as Ordmance 161 ~ does now to reqwre recordat~on of a deed
restnction secunng long-term affordabil~ty, but for a specific number of years (e g,
~5 years)
D. The Off-Site Affordable Housing Development Alternative
The unplementation ordmance for the new Affordable Housmg Production Program
should allow a developer to consttuct affordable uruts on another srte m the Cuy m lieu of paying
the development fee or puttmg the units on site At least two categones of issues about tlvs
option wdl need to be addressed in the implementahon ordmance
Locahon Relatrve to the Market Rate Pro~ect It is a City ob~ecttve to pro~zde atFordable
housuig opportunities ~n all of the City's mult~-fa~ruly neighborhoods The implementation
ordmance should spec~fy, for example, that a developer selectmg the off-sue approach
should locate the off-s~te units witlun a one-half rmle rad~us of the market rate pro~ect
G'nrt Characterrstres All of the specifics m the precedmg section about on-site umts
would also apply to the off-site option
E. Land Acquisition Alternatives
The new implementat~on ordinance should identify several methods by wFuch developers
could help the City acquire land for affordable housing as a final option These should include
donahng land to the City or a non-profit orgamzat~on, selhng land to the City or a non-profit at
below market value, and optiomng land on behalf of the C~ty or a non-profit Further details of
these altemahves should be specified m sepa~ate guidehnes Case-by-case approvals of such
alternatrves may be reqwred m order to ensure that they are roughly equrvalent m value to what
the C~ty would have received through the other alternatn~es and that the s~tes are cons~stent w~th
the C~ty's housmg production needs (e g, su~tably located land)
Hamllfon, Ra6inovitz 8 Alschuler, Inc Page 35
Apnl 6, 1998
Rewsedlnclusronary Hous~ng Program
for the Crty o(Santa Mon~ca
Fee Revenue Accounting and Administration
The new ~mplementat~on ordinance should also mclude typical development fee
admicustrarion prachces, as follows
Allowable Uses ofFee Revenaes The new ordmance should spec~fy that fee
revenues wdl be used to facil~tate new construct~on (e e, grants, loans, land
options and purchases or any customary affordable hous~ng development cost) of
housmg affordable to low-mcome households (i e, at or below 60% of MFI), and
for C~ty admuustranve costs related to the producnon of these umts and for
morutonng and evaluation of the Program Adrmnistrat~ve costs should be capped
at 10 percent of the fee revenues collected each year
DedtcatedAccount Fee revenues should be deposited mto a dedicated account,
such as the Cityw~de Housmg Trust Fund, and expendrtures and commrtments of
funds should reported to the Crty Council annually as part of the City budget
process and the annual Program performance rev~ew (see below) The ordmance
should further provide that any finds that have not been spent or comm~tted to an
affordable housmg pro~ect or Program ~mplementation should be refunded on a pro
rata share to those who have paid fees dunng the five-yeaz penod The ordmance
should further provide for the ab~ltty of a pnvate party to request an audit of the
ded~cated account, at the requestmg patty's cost
G. Program Monitoring and Evaluatian
L~ke Ordmance 1615, the new ordmance should require an annual accountmg of
affordable and market rate mult~-fauuly development, relarive to Proposidon R's requirements
The new ordmance should retam Ordmance 1615's lan2uage d~rectmg the Crty Council to amend
the program as needed ~n the event that the annual rate of new affordable housing production falls
short of the 30 percent threshold m Proposrtion R The ordmance should also require a more
comprehensive evaluation of program performance, an accounting and assessment of the cho~ces
developers have made about paymg fees or perfornung other actions to assist the affordable
housing production process, and any recommendahons for program or ordmance modifications
lVe recommend that t}us evaluanon be conducted every two years following the effective date of
the new ordmance Tlus review could also include recalculahon of the affordable housmg
development fee
Rabrnowtr & A7schu/er, lnc Page 36
Apnl 6, 1998
Revised Incfusionary Nousmg Program
for the CRy of Sanla Monrca
H. Repealer Provisions
The new implementaz~on ordnance should repeal Ordinance 1615 and rescmd the
Ordmance 1615 implementanon guidelmes
Ham~tton, Rabrnovrtc 8 Alschuler, Inc Page 37
Apnl 6, 1998
Revised lnclusionary Housmg Program
for the Cdy o1 Santa Mon~ca
APPENDIX A
Proposition R and Ordinance 1615
Hamdton, Rabmovriz&Alschuler, Inc April6.1998
PROPOSITION R
SECTION 630 Inclusionary Housing.
The City Counal by Ordinance shall at ail times require that not less than thirty percent (30)%of ali mult'rfam~ly-
residential housing newly constructed in the City on an annual basis is permanently affordable to and
accup~ed by low and moderate mcome housefiolds. For purposes of this Section, "4ow mcome household"
means a household with an income not exceeding sixty percent (60%) of the Los Angeles County median
income, ad~usted by family size, as published from time to time by the United States Department of Housing
and Urban Development, and "moderate income household' means a househoid with an income not
exceeding one hundred percant (100%) of the Los Mgeles County median ~ncome, adjusted by family size,
as published from hme to t~me by the United States Department oi Housing and Urban Development. At least
fifty percent (50%) of the newly constructed units reqwred to be permanently affordable by this Section shall
be affordable to and occupied by low mcome households.
F
CITY ATTORNEY'S IMPARTIAL ANALYSIS OF PROPOSITION R
Pursuant to provisions of the Government Code, the City Council has proposed that the City Charter be
amended to add Section 630 relating to inclusionary housing.
This measure would add Section 630 to the City Charter to require that the City Council by ordinance shall at
all times require that not Iess than thirty percent (30%) of all mulYrfamily residential housing newly constructed
in the City on an annual basis is permanentiy affordable to and occupied by low and moderate income
households
The measure defines "low income household° as a household with an income not exceed~ng sixty percent
(60%) of the Los Angeles Counry median income, ad~usted by famdy size. A"moderate income household" is
defined as a household with an income not exceeding one hundred percent (10096) of the Los Angeles
County median income, ad~usted by family size.
Under the measure, at least ffty percent (50%) of the newly construded units required to be permanently
affordable must be affordable to and occupied by low income households. In other words, at least fifteen
percent (15°6) of all newly constructed housing in the C~ty must be affordable to and occupied by low income
households.
The measure gives the City Counal discretion in the method of implementing the requirements of this
Sedion. However, whatever method the City Council adopts by ordinance must ensure that at least thirty
percent (30%) of the multi-family housing newly constructed each year in the City is permanently affordahle to
low and moderate income households
ROBERT M MYERS, City Attomey
usow / 27
924.130
~~ dewL (Pnor oode 4 9a1L4. added by Ord. No.
Z31CC5. ~Pt~d 10/10/50)
9.7A140 Ne~. x ~e.Cxd d~mu
~~nan w[hose clcmenrs prcnou~}y sct fotth m
tha C~aP¢r. the Eollaw'~ng ncw or mued elrm~nta shad
be ~nduded ~a the gcncr+~ pi+u: a laad ux elcmea~ •
~•~±>>noc elemea~ a houem~ demmt, a oo~xn~
elemen4 aa ePe° spae~ demrnt a•••~e„Y v(~ty v•"•~~
a safery elemeat, a noix clemeat, aad i ssmc hs~waY
.~T.~,r_ m u,.,;.,,,,.,.y ••=t1, Stare ~s Surh othcr
~ fiatha d~a. o~'^'~^`~'^ m t~e abae ~?~+~
may ye ~~!~~ or made L~~ ame w maa ~o compfy..,tL
$nse requusmrna- (Pnor cade 4 9411H; ~nn•~+ yy Otd
:vo 231CCS, adopted 10/10150)
9.Zt.150 Gmcal parpota d tLe pian.
In the preparauon af tbe m:uer plnn, the Come~+~+nn
sbad make ~eful ~*+~.,....:Y~~k~!~ve siaveys aad sn~~es
of tLe essveg condiao6s aad probabFy funue gowth of
the mnniagaliry aad us eanro¢s The nt.r ~n y~ made
.vssh the general puc~xise of gu~dmg ~~;~i ~~.+.mgi~el,;ne
a eoo~~•*e4 adnutcd, aad ha=mosaous developmeat oE
~he munsciFalit9 whr3, 3n ~~,idanee mcb eatting and
tunue ne~. ws~ best y~~.,,ote pubUc healt~ safety. morals,
mmemeaee, P~PQ'~9~ or the gmerdl wetfire, as well
as effideary and xonomy m t6e praess of developm•^•
(Pnor code 3 9alz added by Ord. No. 231cCS, adop~ed
ionaso~
9?A360 Adoption ot a+~•~+ir plan.
'ILe C:.. ....,~oa may y,~yae aad adopt all oc aaY P~
of che mast_-x plaa and may ~commrnd such pta.±c to the
Ciry Coundl for adopnon as offida1 pl~~~ Befoze rrmm-
mcadmg to the Cary Co~,*~t any, sucf~ plaa. o: auy amend-
mrnc ehere[o, ehe P~~~~,n~ Commimon~~t~ hoid at leatt
one p.ibl~c heannp notice of the nme and placa of whieh
~+~~~ be gvca by aae publimnoa in a newspa.~a of genezal
arailaaaa iu ebe Gry aad by surb othr, meaas as the
Co~++*+ K~on may deem o~~~ry 'Ibe adoption of tbe
plan or any parc, amendment, ar addinoe, shall be by
cesolunon camed try the affir**A~*~+e ~o~~c of ¢ot kss than
a ma~onry of all of che mcmbas of the Cor~++'ro~a'Ihe
:aoVunon shall :sfei acpxsssSy to the maps, d~saiptm
matter and othcr matteis mtended by the Com_~++~~non
to form the whole or part of the plan and the atuon taken
shall be rrrnrdrd on the adopted plan o; part thereof by
the ~denafymg agnaaae o.` the ~h~ of the Com~*~~~
and a mgy of the plan or part [hereo( shall be artified
to the Qry CounaL
Upon rocc~pc of a a:.~fied copy of the maaer plaq
or any oan theroof, or amendmene :hare[o, as adopted
by che Planiung Com_m~mon, the Gty Cound shall adopt
such pars the:eof as ccawnabty may be a~l~ed ro[he
dc~efopment of the Cin for a~uonable'x.~od of ame
eruwng Such pares shall the:zupon be eadoxsed and
art~5ed as o~aal plaas ihiu adopted fo: the temWry
avereL and hereby aze declared to be esablsshed to
canserve and p,~.,,ote the publie health safen and generel
Welfare Before adopnng any such plan or ~art theteAf
m~~,~~ ~~a ~ ary c.~~ ~u nom u~c
one putrlie hcariag [heceoq mnce of the time and plaoe
of w~h~eh sha~ be pubtu.`±~.~ a[ leau oncz in a¢cwap~r
af geornt :~,culsnon in the Ciry a~ teut tm dsys be£oce
[he day oE a,•~, beacmg, No ~h•~~c m or s•u;^•,n m tbe
*+~~ter plaa or aa/ par: tbasof. or amendmeni theacW.
ys ado¢ed kry the Plammmg Co~•*,~ aon, ahall be mde
by the Gty Camal m adopnag the ume ss an a~dal
plan unN the said pcop~~± r7~•~~e or ~~~+:aon shatl hsve
been n. :~.: w[hc Ptannmg C.oR+,~<R,~n for a xspors
thereon and an atteued mpy of wch report ~ti•n have
been fled w~ith the Cary Coana7. Failure ot [he P3.W,mg
~~nrn.ea:06 30 tD RpOR v~rlnn f0~' ~r5• pt Qai~ Jpp~
~pQ u~y ~ dcnmur~n jry LbC ~ry COLLnG7. 3~tCf
such cefecznoe, ~+~~~ be d«med ro be a~proval ot c6e
Pi~~ed `~"^3~ or addirioo. (Pnor mde § 9413: added
by Ord. No. ?31CGS, adopced 1d10t50)
ra..~ 9.28
INCI.USIONARY HOUSING P&OGRAM
Sabons
918A10 F'~*~ and Pcrpoae-
9.~S.OZO D~~~tioni
9.78.030 Appliobiiip.
9.?8.040 Pro~ derdopmeat reqaiiemmts
918.030 Oa-site and lo-liea [ee aptloos
9.78.060 Oo-srte iodnsiooary oait
de~elopmmt req¢f+'eme~••
9.25.070 Ia-4ea lees [or inelosiooaq
h
t
i
9.78.080 o
ts
ng
Fee wai~ees
9.Z8.090 Dmtiq bonns and othc
inemp~es,
9.28.100 Pnang requiirments [or
indasiooar~ unitt
928110 El~pbility tsqoixemmts.
9.Z8.17A Rdation to units tequi[ed b1:mt
rnntrol board.
938130 Deed xsstriaioas.
9.28.140 Anilabitiry o( gwernmmt
subsidics
9.28.150 EaforcemeOL
928.160 R.~•t:on to uaits or [ees eeqnteed
pumunt to tumrt ord~na~ces
implemmnng program 10 0[ ehe
c;~5 xo~;~ ~~~a~
9.28.170 Mnual cepoci
9.78.010 Findit~s ind purpose.
"I'he Ciry Council fin3s and dedarss
(a) The Ciry at Sana Momm haz a responvbitiry w
address chc need~ of ~~s ssidenu and residena in the
ceg3oa, from all soeul aad economx groups, for decent,
affordable houung, while at the sazne time maintait+~~~
an eeonom~eally sound and healthy env~ronmeat
(6) 'ILe Hoacmg Eiement of the General Plan oE the
Cry of Sanca Momn adop~ed on Saauary 25,19ffi, pcrnviid-
Sa2
918.030
ed for ~ u~d¢siouary hwe++o piogam m addrsst tLe ^_~
for ~!_^^^_^_t and aHordable hrn«~ m Pcogam 12
(c) Tbe Gry Couad pmperly oonadeced aad adopted
the wd.,y,,...eaa of an mdcmoac7' ~'~"3 P~+m a'""'"
wrould ~mplcmrnc che gosl~ of Progr~m 12 az iu meetmg
oa Mucb 10, 2987.
(d) On hme ?8.19~8. she CSey rr, i eevaed Progr+m
lZ,d„r,t,,,g G'..,,•,^• xnmber 14a8 (~) ~n impiemrnt
thaae fevi~oas.
(e) Oa May 1. 2990. [he C5ry C~ ~ adapted Q~-
naaa Number 1519 (CCS) on aa mterim ba~, F*~+^•
rh~, the vau ma~onty af nnr 6m+~*++o uniu being o0o-
uroaed'm the Qry oE Sann Mooiea were not a8ordable
m pecsaes af law, moderdt0. ar midme ;~.u4 that the
....., t.,t mduvonary ccqui¢emcaa p!!~± oa new hoa~mg
~CIJ}ScuCnt WCR tn~ri.vmsr. te allar the Ciry of ~*_*a
Mo~a w y..;hde ~cmc o~bas of uesv bausmg ~ts
to pecions of toa, modecam, or ~d~e i~s.e, that t6e
ameet per sqnam foot ia-tieu fee sas madequare [o allow
ehe Gry of Sanu Moni~a to pcovide the mimber of uaits
w~hich would be p.r,+ided ifthe mdusionuy req~ri~meecs
on oeav housing developmeat ~ae mu by provision of
o~siu La~a*+e uaits. and that it wu necesta:y to amead
ffie iad~uiouary progi'am on an ~++*~m batis to alk~w com-
pleaon ot sw~es te de~e~c tbe most a~:,.g,.~ate on-sm
aad m-licu fee requuements
(~ Qn Navember 6, 1990, the w~ns of the Ciry of
Saan Momcs spp~v.ed Ympo9tion R, adding Searoa
630 so [hc Qry Chaacr u mad u folloas:
2hc Ciry CauncIl by Os~;~~~m shall at all rimcs
requaz thac aot lea rh~~ thury pcrcent (30%) o[ all
multf~,•,~Fy~ieadea6al houmg newiy conscrueted in
tbe Qry on an annual ba.s~s u perm~*±satty aHordable
to and omip~ed by loe~ and moderate mcome
houuholds For purposes of ihn Secnon, "!aw u~come
household" m~~!+~ a household wuh an u~come not
csceed~n8 swy pcreznt (60°h) af the L.os Angeles
Couary medun mcome. adputed by family sixe, as
publuhed from nme to nme by the Unrted S[ates
Department of HOiiang anci Uiban Developmcnt, and
"modcrue ~me 6ousehold" meaos a houuholdwlth
an mwme uot e:cudu:g ane hund~d pecsenc (1~Q5'c)
of the Los Angelcs Counry mc~+,a~ mcome, ad~us[ed
by f~<<y sue, bs pubiishcu from cme to cuno by che
Umied Staca Dcpartmen; of Housmg and [Jcban De-
~elopment Ac leazt fiEry pe:cent (50 0) of the newly
mtucutted ~uurs t~.ucm w'x permanently aHordable
by thLS Sect~on shall be affo:da6la to and arup~ed try
law income houscholds.
(g) On Dxembe: 29,1990, the Gry of Sanra Monica
publuhed norice [hac on January 8,1991, the Gry Counnl
would coas~der isues relatuig eo the implementauon of
Repos~uon R induduig whcthc: [he chi.^y ~xr.zn[ cequire-
ment of Propounon R wuld be met on-sste vr oH ate,
whet6er an ~n-iieu fee would bc pcrm~cted and whether
the thrrry pecsent rcqci:sm:n[ kad to be met on a pro~ea
by project basss. 'Iha carice alw prvhded that at the
January 8, 1991 meetmg. ;he Grv Couna! would cons~der
d~recring sraS to pcepazz an or~=~=ace co implemeac
r...~sinon FL
(h) Gry S~ p~pa:ed a scaH report for [he Jamucy
8, 1991, ~ry Couacil m«cng idrnnfyvig the muo thac
had w bc ad~caed as pan of chc ,..,ylcmr.•~••:••n of
F.~~non R s~$8~~8 a prr_~~ tor oM+~:~,~_ pubhc
i~ut presevh++~ Ciry Sraffs raoluaou of asues naed
by Proponaau R's ~mplemcannoo. end rxomme~+~~
that st~ be d'u!±±!~ rn N.~~se an andina~ ~~+.~
i ~~.aon R
(i) At i¢ Jaauary 8. 1991 meeang, the Cry Couad!
da~?_~ uaff m prepare an or~c~~~x ~mplemrntiog
A~,t,asinon R and co tetum rhe ordu~ana to the Gry
Couadl on February ?b, 1991.
()7 Zhe Santa Mmuca Plazusiug Com+*+eqon, as well
25 OtbCi ~911pS LIl I~iC COiCmi3IlltY, bCIINGd [!lC SChCdl3IC
for the rceum of [he orj;*+~*+ce did noc y.o.ade ~yf,.,a:,,ui-
aes for adequau tenevr of vanous alcemacive scxategia
for implemrntiag Propomaon R
(k) At its meeting on Febnury 19, 1991, the Qry
Cau~dl ~±~+ m reoorwderwhe~her an o~naaR sliou(d
be p:epared, and scheduled far iu ne~¢ xtg~,f•• meecn6
a genenl ~y+mon of impiemm~g strategirs.
(1) On March 5, 1991, the Ciry Council ~xxsed tLe
~'.42tOIMV tD p[CPdiL 3D ot~nanq ~p~tme (~ fiF'ma
of applicanoas for markec-race residennal houcing unnl
surb ame as the C~ry Cnund ~±prcd aa or~+•++~nce impk.
meadag Pcoposidon R u¢p~g from thc pcoh~3iuon a~
projeet in wFuch [huty pe~ent of the uni[s conse~+»!~±
on-sice are availabie io low and modr.aie mcome persons
as p:wided far in Proposiaon R.
(m) On Marrh 7b, 1991, Ordanance Number 15T1
(~) was adop~ed ~mpamng ~mons on new mu~~ ~y
hovsu~g m ensure mmplianx w~th Aroposiuon R T~s
or~~~+nee was due to e.r~~re on September ?b, 1991.
(n) On Apn13,1991, the Ptanning Cammuaon m~ewed
an oudine dcveloped by uaff on thc i4ua and mfom+~^^n
chat would be presented as parc of the analysa on the
alternawe implementanon stra[egiu.
(o) On Sepeember 10, 1991, the Ciry CounN adopud
Ordmana Number 1544 (CCS) excending the cuuueoas
on new mulrifami(y housmg ~o ensure compi~ance with
Pmposinen FL pending che issuance of a s[aH repat[ an
a proposed unplementanon scaccgy under Propvsinon
R, to ailaw public r~mew and wmmene on the scag report,
and to ailow ume for publ~c heanngs before the Plannu~g
CommLss:on and Gcy Counnf 11~u ord~nance wss due
co expu~ on )anuary 10, 1992
(p) On September 10. 1991, a r~por[ was ~ed by Gry
scaff on che "Propoud Implemencation Strategy Undcr
Propos~uon R" incorporated mto a Summarv Report and
TecFwpl RepoR on Propos~uon R_
(~ On October 16 and October Z5. 1991, the Pianning
Commusion conducted a publ~c heanng on che proposed
:mpkmenradort s~ategy. and tortnula~ed a ~ecommrndanon
co Ne Ciry Counal. 7he Plann~ng Comm~ssion requesced
a iwo oT throe mon[h estenvon of ehe eusc~ng moracors~
ordu~ance on mulufamily ies~dcnual de~dopmcnt to allow
for fw~ther public renew and Plannmg Commuuom m~sid-
eratwn
543
9.?8 O10
(r) On No~ba 19.1991 the Q¢y C<*, ~ oood~~•••+
3 pttbZic M'^no On tbG S(lff p[O~Sl~ 2ad lC~~Kt~A rh~r
staff ••~~,••,,c •~;nocal modeLs ~~~ provide addiriooal
iafor*~A~on w cLc Ciry Cwnal
(s) On tiwambc 25.1991. the Gry Couadl adopted
Ocdinaace Number 1609 (CCS) w ensure ttiat the 6ry
of Saara Monica..wld .a....ply weth Proptmnon R wh7e
fur~er ~•,~hym~S ~~•=r~es Eorlocg-tL~..+~pkmmtinoa
of the measiae. Tha oidiuance wat due to ta~+ce on Apr~7
10. 1992
(t) On December 3. 1991. the Cay Coum7 dir~~~±
the Cery AzraraeY w'r~ ~k,axe aa aM+++~+~te impiemr`^^~
Pro~?~±*±oa R which uti1¢ed aa approsr~ requu'ing the
pxwLOOa of oo-au m~+m^nary tiwia m ct wn .u~.sm-
sta~ss, ~*+~ allowmg che paymeat of an m-Lcu fee m other
axwmsaac2s, ati sec .~.;;, bc]wr 2be EoOmrmg a~it~c~++~+'
u c_~~~ry m eaabk thc Gry to mut thc :squinmeacs
of Propaseoa R
(n) p~--_.r.~,*+~ tc the 1980 Census, 428% of all S•"*
Ma+~ rK+~h am aE law or,~~,~i•n,• i~mm~ ppp~i.
ma~nty eight tboacand frve hundxzd rrsdeaa live below
the poverry luu.
(v) The hvmelce populanou ia the Ssnn Momn ~sa
is as~+rt+~ ~id [o be betwecn three thousand and frve thou-
sand persans
~w~ A!'Y+...:m.r Jy tavelvC tbO~ee~,vi five h13IId7Cd SOQ}'-
5vc lower mcome boaceholds aze paymg more thaa one-
thssd of thar incomc far ho".~. Over chree~uaxsets ot
these are rcnters Whcn themu of hou~,~o acce3t thirty
p«rt~ it bc~,W cs a burdca r_~+~^~ tfie money ava~abic
for other uece.ssazy a~eases.
~;) ~'-PP=^"^,'•'~y two thousand four huadred houu-
holdt in the Ciry Irve m ho~~e+no ~t is wecerowded.
(y) The average salcs price of a two-bedroom,
sw~e_f~,~~}y house m 1990 was 5ve hundred twenry-fre
thousand three huadrzd fihy dollazs and a two-bcdroom
coodn~„~~um aversgcd three hundred fifry-one thoasaad
mrc h+~~~sd eight doilaxs.'Ibc high mA of for-sale houang
md~us tbat there axz im oppomiwnes for lower-mmme
or modera[e-income households to own homa m Santa
Momm vnthouc ~m~samz.
(z) Over cwenry pexuat of Santa Monica's households
arc headed by semor auuns. Agpsvuma~ely s.,.s~-fi~re
pezceac af ehe seeior anun households a:e rencers Ia
1980, xruor fam;li~s repru~nted ewenty pe:cent et tk~e
fa!*!~t~~ wnth ~nmmes 5elow the pove:ry Icvd and suteen
percent o: the suigle-person-houuholdt liw~g ~n poverry
m the C~ry
(aa) "Ihere u essennally no vacant ra~dential land in
Santa Mocvn ivew consuuaion mast ocw: on rcrycled
par¢Ls or oa .nargmal mmmacal or indusc-a! land Whrn
pamis are recyrJed which pm~io~uly conwned aSordable
houung, there a often a net loss m[he roW numbcr of
afiort:abie ho++a~~ tuua pcwded, even wuh an induvonary
housing rcqwrcment
(bb) 'ITu-e u inadequaee fede:al and stace a~poort
for prograas to assut the Gty m meeting ies aHordable
housing needt. (Pnor oode § 962o- uneadeP by Ord No
1519CCS. adop~ed SISi9Q. Ord. No 1615CCS § 1, adopt~
3/S/92)
9.28.07A D~*+4oui
I3c followwg aords or phrases bs ased in chu mapaec
shal] bave the fotlow~ ~:
De.ebped Urc A me of laad ~hid1 iad•+a^'~ e;*~^
res.denaal or mmme:cal saucnues
D.r~~...e Unit One ~ moie rooms, d^°ene4 °~.
or mte~ed for oa¢~aacy u xpaxaae livmg quutexs, wGh
ftill coohne_ s1c~,~,.g, aad.bt[hxoom fadltria fDt thC
ealuave we of a aagle houxhold DMel~mg uait shaU
also mdudc nngle toom _~~panry unit
HUD. 2he Unned St+~n Depar~rnc oE Hausing aad
u~ ~t~~t ~ ~ ~~.
Indutiontq UniL A tCntal Oi oaaC[Shtp dwdlino ~y~
as roq~med by chs Chapcc wE+~± ss aHordabk by a houie-
ho1C wlth law ar modrnm mmme.
Inonme ~ r~'?"7. Zbe goa amua! housetwld'mrome
wavderaig ha+=v~~id ~ aad aumber of depeade~e~
iacome of all wage axnecs, eldecly ot disahkd [..~,Ay
mem6ers, and atl otber sourca of 6ousehold meam~
In-lieo Fea A fee paid m the City 6y a deve]aQer
subjea to this Cbapte m 4eu of prondiag the reqiamd
incturionuy unia
'.-Sarlru Q•r• UmL A dw.~~~ tmi[ it w whi~ the Itntal
nce or sala pnoe is noc samaed by this C~apter.
'.Nn+Tnm AllowaEle Rmt A monthty houssag chuge
wtu~ doa not n~~ thuty pa,-;,~,at of the Los Angdes
Cauary low mcome (in the ease af a low ineome ~,!+;t) or
me~+~++ wmme (~a ~he cbse of a moderue iacame uait~
adjuctcd for twu~,~,ld ys, ~ pu6~;~h~ fmm ^**' to dme
by thc Unrced Sutes Depaztment of Housing and Ucban
De~dopmeac'I~s ~,~,ge e,nu.,,Y..,;rnrnt full cormden~n
for housiug sernea aad amemties as provided w market
~•• dwelling unia m[he projec4 whethn or imc oocupans
o: market rete doveWng uniu pay separace charg~s far a~dt
sc• vica and amemaa Hrn,~!+o sernss and x**~*+on n~ra
amemoa mclude, but are noc ~~+*+ned co, [he Eallow~in&
P~E. ux of x*+,~•on s~~t,nes induding pooLs or heaSth
spas, and,~~~~~a if the pro~ea a mauermerc~zd. Notwi[h-
s[aadiag thc foregomg, unliry chaxga for uu of natural
gss and eleccuiry, to the euen[ iadmduat2y metered for
each wut in the projea, may be pasud tl~rough or bilSsd
d~xeuly co [he oa.vpana of ~uaonary usua m the pio~aU
~n addmon co ~a_~um allowable renaoollcacd far those
inc3us~onary ua~a
"Modecate" aud "I,mr' Iamme Lerels. I?etermuted
penodicaily by the Gry baud on the Uruted Sutes De-
par[orne of Housuig and Clr6an Development (HiJDj
cstunace of inedian moome m the L~ Aneeles-L.ong Heach
Pnr.~ary Mecopolnan Scacs~rrl Area The nvo major
income categones aee. "moderate mcome" (SUty-one
per.ent to one hundred per~.ent of the area rtedian) and
"low Ncome" (sum percene or Iea of ehe area median).
Funhcr ad~uscmcnt shall bc madc by household siu u
uea5luh~ by ehe Gry Tne Ptann~ng Departmenc sha11
makc available a l~se of moderace and low income leveh
u ad~asted, which L~st sbal! bt updatw' pcnod~cally by the
Gry aad filed with ehc C~n Qerk
liole~6m~~y D~es.Aay mnuig ducna m wtueh mulri-
family dwelling un~u are a pe~rtced use.
Saa
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928.090
9.28.090 Dmaq bouos and other
pra7xct whirb mcec appLrable requiscmcars of Suce
la~r az a renilc of wcFuaonary u+uu aro ennucd ro deaary
bonuses oz o[hcr 3ocrnnva m~-~*_-o-daace on[b the piwt
soas of ~+th ~a. (Pnor code § 9a1$, amended 6y Ord
No. 1514CGS, adapccd 5/1r90. Otc1 Na. 1615CC5 4 1.
adop[ed 3/3r42)
9.28.100 Pr~~+± xsqoi~mentc far
7be C5ry Ce~, ~~r,~n. by ~~sd„n~•,, on an mmni !+~
set ma~ia, m alloa2bk rrnu md L,u....,~ alloarabk pur-
chase pnca for induvwazy umR adlusi~d bY [he aumbcr
of bedxoo~ S~rb mmm~ albarable ~K and ~._-....,mm
allwable gu~?+A~ pnces shall be se= ac races svch tbat
q~~s~~sd ooaspana far low m...,.,.a uaia psy no more than
thaty pesszac of the gcns monthYy hoiuehofd mmme for
6oueholds nr~~~~ smy petrent af the m~;~n itxome.
Qualified oa~ancs fa moderate mmme unia asu p$y
0o moie ~++ thatY Pa¢at of t~e ges hotaehold in~.t+,,.e
foz hrnsseholds carning the r±K++~* iemma (Prior code
g 942~ ame*±d~ by Otd. No. 3519CCS. adaPud S/119P,
Oni No. 1615CCS ¢ 1, adopted 3/3192)
9.28.110 EJIg'bilit~ reqaitemmta
(a) Onty laa:rocome and maleaco-~r..,.. botueholds
shaII be eligble m e~~py or owu and oa.v~y,^~ti•~^^
unus The Gry ~h~n develop a Isst of mcome-q+,~t~fisd
households whic~ ~ prionry to pezsoas who have been
~y~ ppnaunr w the Fn,~ qq Go~ent C%+~ Sxtion
7060. pe:soas ceadiag m Sann Monira.. and persons
worVang ia Santa Momca Dcvelapcrs •h>ti~ be cequued
to selca house6oldv from•che Grya~*+snucexsd list of
~,We-q~ut_~i householdt 2he Caty shall develop ~~;~
isaawe gwdetina for [he tenant andputcLaser ulection
Process, which shall rcquun, at a rt+,~,+**~3m, c6ac eighty
pcr«nc o: the inclus~anazy umu m a pro~ecc 6e leased
and ocvpud wichu~ „xty days of Lauanm of che mrdfi~te
of ocatpanry (or the pro~ee4 or sold and oa~pud within
one huadxsd ewenry days of issuanx of the cern5cate of
ocwpaary ior the pro~ea, aad that any vaontia in
mduswnary units eh~n be leased and cY,±,rned wi•h,~ thiity
days of vanrxy, or soid and oavpied wnttun one hvndred
twcnry days ot racanry.
(b) ~e follrnr.ng mdiv~d„~~~, by v~rtue of theu position
or relauonship, are tpeligible to oevpy an mduseonacy
umt
(1) All emplwees and offiaaLs oF [he Ciry of Santa
Monua or ~cs agcnaa, authonna, or commimons who
have, by th~ authonry ot theu pcs~uon, policy-making
au[hanry or mfluencc aHecung,Gry housmg prognR+~
(2) Thc unmediaie relau.es, employees, or other
pccsons gainu~g agni5mnt econortucbene5t from a direct
bavnar ?~iation with pub4c emoloyees or affiaafs.
(3) 'Ihe irsme'c.~a[e ~Iawa o( thc apphmnc or owner,
indudv~g s,~oue, duldrrn, puents, gandparenu, hrother,
suia, father-uflaw. mochcr-m-law, soo-m-law, ru,.ohter-m-
law, aunt, unde, ruea, nephew, suter-in-law. and 5rorher-
in-law (pnor code § 9e30, added bv Ord No 1r.~a8CCS,
adaptrd 5r1&88, emcnded by (?cd. Na. 1615IXS ; 1.
adapced 3!3/92)
9.28.120 Relaaou ro anics reqaired y rmt
eonad board.
I.ov-m:...,,e and modcrarcm~..,,e dwe~g ~a dn~d-
aped u part of a~.*#rt nm pm;~ puxsuat m ce~Faoe-
ment :equiiemcntt of the Sann Monia Rent Control
Soat4 sEall oouat towacsk the nK~?±oa of this Qiapoet
d thry otherwsc meet apptiabie requiremma for this
C3apter mdude+g- but nat Immted m, the iacome •~~~n1'ay
reqimewrnu aF d~e ~Ker. ~± ~on rcq~c~++~+*~
and priang requ~rtr.,ena. New ioduuonary uasa seq~csd
by che Rrn~ Concoi Soard whidi meec che s[andards of
[his Qup[er a~tt couac towanis the aosfac~on of this
Cbapta. (Pcnr mdc § 9431; added by O~d Na 1448CCS,
adopted 6R8/88; amended by Ord No. 1615CGS ¢ 1,
adopted 3f3A2)
9.28.130 Dced retttiesions.
Pnor to issuana of a bw'ldmg permic for a y.~~xt
subjea to the requircmena sec 5oxth in chis G~apcer. the
applian[ shall submit deed resaicaoas or other legall
insnvme¢a setnng fonh the obLgauon of the applicant
under [h~c ~+.+p[er for Gry ieview aad appraal ~+~+
nsnx6oos shall be eHarrve far the lifeame of [he projea.
(Priar wde g 9432; addedby Otd. No.1448CC5, adopced
6R8B8; amended by Ord. No. 1615CCS § 1, adapted
3f3/'92)
9.28140 A•ailsbilit7 ot governmmt
snbsidies.
I[ is the ia~eac af thu Chapter that the requiremeab
for the incl~vonaryumcc shall noc depend upon the ava7-
abiliry of Fede.~l ar Sute hounng subs3di~s. Ylus Seetioa
doa not, however, prectude the uu of such progr ?+~ or
subadia (Pnor code § 9433; addcd by Ord No.1519C6,
adopced 5/li9D; amended by Ord. No.1615CCS § 1, adopt-
ed 3t3/92)
9.28.150 Enfoccemeec
13o buildu~g permi[ oc osupan~y pcrmit sha11 be isued,
nor arry developmme appraal gnnted, for a projea whieh
is oot exempt aad doa not meet che requirement of this
Chapter. Al1 inclusionary umcs shall be rented or owned
m~_~T+*dance with tfus ~apter (Pnor mde § 9434: ad~•a
bp Ord No 1615CCS § 1, adopced 3!3/9Z)
9.28.160 ReLUOn w units or [ees reqaired
pursuant ro Cuture ordinanees
implemmting prognm 10 of the
C~tys tiousing Element
Low-mcame or moderaic-income dwelting un~a con-
m+~^_r~? to mea [he ~squucments oE this Chapcer, or in-1~eu
fees gaid to meet the requ~rements of this Chapter, shall
be ~red~ted toward requuemenrs for on-s3ee replacement
umu or fea required ou:suant to any ordinance imple-
meneng Pro~am 10 of the Gn/s Housmg Elem~nc (Pnor
codc § 9435, added by Ord Vo 1615CC5 §], adop[ed
3(319Z)
547
9.28.I70
9.78170 Aooaal repart
"Ihc Hnusm6 DePar~ect shall submu a~ort w the
Cary Cnuadl on an aaaual 6atisv~ieh s6all conL'm mfor-
manoa eamv++•r_ the ;,,.pkmeanrion ot sL'a Ghapter
and wbether tbe ~,~+moaa of Fa~~:~a R have becn
met In thc eveat tbe provmoas of F.~ x±*_+~n R hwe
not baa me~ the CSiy Cwnal ~~ o~ a~ aeoon mca-
ssry to amead the provisiom of thn mapter ar us ~Yla
~n,:~.. op ~o that the pcvnaoot sriIl be ^!~± (Ptior
code § gq36; a~^~~ by Ord No. 1615C:C5 § 1, adopmd
3/3l92)
(]upoer 932
AAa:turr,CP[1RAL RF.Vtn~+'
Se~tione
931.010
Pm~poae.
932.020 7YRr~aoo~
43Z.030 Ac~hife~mcal IIeriew Baa~d--
Mmnba'ahip.
932.Of0 Goiddind aad ~taadads.
932.fl50 GofdBtne aad stand~ds-
Sobmissiou tor appcvra4-
rt•: _ ••••.• aad a~a~7abHit~ of
copin.
93i060 Appoinhnmt ~ad cam of atlic~
932.070 Rn1es
932U80 OCiars. ekrbon ot o~Rrs.
932.090 Seaelar~.
432.100 Meetin~C.
93i110 Arc~itsaual n+iew msviUS.
93Z120 JnrisdieGoa
93?~;9 Psoeedaxe tor renew.
932140 Cnteria.
932150 Site p~•~•
932.160 Appeals.
932.170 Arcbi~ral rniew ~uria
boundatxs.
9~2.180 Pos±:.+g of propenr-
932A30 Pnrpoae.
ihe purpase of this C~apter a to pcomote the public
hea![h, satery and general welfare by utabl~ching such
proceduizs and providing suc6 regulauoes as ue deemed
n~r*-~~sy co pr~serve ~<ung azess of naturai beauty,
cvlcural unporunce; [o assure that buildings, sauctuies,
signs or other developmena are m@ood nn•, ~,~; deugn,
ha-monious with surmunding developmrna aad in general
con[nbute w che pcacmcon of Santa Monra's .~~utation
as a plax oC buury, spacousn~ and quality, to prevent
che devdopmen[ of scuetuxss or usa which are not of
aceeptable eaenor design or appearaaa, are of inFenor
aualiry nc like}y to have a depceaating effect on the lo~t
ertvuonmenc or surroundmg azea by eeawn of appeararwe
or raluc: to eliminate mndi noas, savcnucs, s~gu ar uses
which by rcason of thcu eHect teod co degnde the health,
satery or gcneral wetfam oE che commumry; and y.~ride
a mnnnumg source of progra+*+~ and muns of ~pco+ing
the Gt~s overall appaaraaee. (Pnor oode § 4501; added
by Ord No. 959CCS, adopced 7A114)
932.02D Dd_*_~aaas.
For pu~~ =-sn o( thu mapter, the followwg defiatnaas
a,~n yave the mn~+*~ defined hcma:
(a) Chaprec - Shsll rcfer co Chaptet 932, Aivde 9,
Smn Monu~ Mumapal Codc.
(b) r•,•••w••,,,•• - Shall mean the Acciutxiw~at Review
Co~*~+++~nee.
(c) C,~••,,,:•~on-Shall mcaa the Saata Mom~a Plao-
y~ ~.,.~,~,nn
(d) Coaad - Shall mean the Santa Moaicr City
Couneil.
(e) Di~ia - Shall mc~ an c~+~TM/ de~ared :..~.:-
teautal renew dssuut
(f~ Memba - Shell mean a wung member of the
Acchiteenual Reviea Commitme. (Priar cvde § 9502;
added by Ord No. 959CfS, adopted 7/9(!d)
93Z030 Arehiteetura! Re~iew Baard--
Membaahip
Aa A:chireaurat Review Boazd 'u heceby emrblishod
w6ich shall wns~st of s~ven ('~ mambers. At kaA tvro (2)
of the membr.s shall be prof~ional archi!^^Q- Othe
members of the baard sha11 be pexsoas who, as a tesWt
o! cheir eamiag ~erirnce, aad ~,r~:~.~q ~ q~~~x~
ca ana~ya md'mcetN.d acchnecnual and eavironmenra!
ctendc and mfotmanua. to appraise r¢soum ~ in light
of the polieies ut forth in thu o+dinaaa, w ix axponsive
[o the sodal, aes[~eec, ceawcional and cvltural e~~~
of the communicy. Other expesnse sueh az ceaucva[ion.
reaeanon. deygn, laa!~~pmg, [he arts, urban ptar++;*+e.
ailnaal-hniancal oreset~anort aad aolo~a! and ewcoo-
menral uarnces xF+au_ usso~r az praeeable, be repiaeated
on che Board_ (Pnor code § 9503; added by Ocd. No.
959CCS, adopced 7/9/7a; amec~ded by Ord No. lOQ3CCS.
adop[ed 7/Si75)
9320a0 Ga,deliws and anadards.
Yhe Archuecnua! Review Baud may, by raolutio4
atablish guidelines and stac~dards for ia evaluation of
pro~r devcloproenu mthin an axctutedura! seview
discict, m wpplcmenc che rn[ena se~ forth m thss Chapta.
Such gu~del~nes and standards shall reflxt and effectua[e
the putposes ezpress~d by Secnon 932010 of this fade
and shall mclude, but nc~d not be l~m~ted to, considetation
ot the following elemencc-
I The mcegnry of neighborhood en~ironmenu:
2 Edsnng loedl, wnal, aucheuc, recrwtional and
witurai facif~ties, dcsigns and panems vnch~n the dacricx:
3. 2he disparate demena of naghborfiood mmmuiti-
neswich~n a da[act md [he arehiceetural relanonship of
adjoin~ng neighborhood eommun~tie~ and
4 General pattems and standatds of acehiteaunl
developmeot w~ttw~ [he en[ue dssma (Pnotcode § 9503.~
addcd by Ord No 1003CCS, adopted 7Br75)
548
Rewsed lrrclusronary Housrng Program
for the C~ty of Santa Monica
APPENDIX B
Matria Comparing Sia Conceptual Alternatives to Ordinance 1615
Hamdton, Rabrrrowtc & Alschuler, Inc Apnl 6,'I 998
t Conceptuat Atternative ~
I get tmpacts ~ tmpfementatiort
Issues
#1: HO Pffv8t9 S9Ct~f •P^~'
profit~^9 Element •Repeai Ord. 1615 and adopt
Re uirements
4 • Oth~ replacament
1615 admin., •May need stand-6y program to
~nforcement costs reach 30%
~re orgarxzationai •May want credrt-vading program
ts
#2: Voluntary Private Sector •Non
PfograM W/InCefltiV@S •Nevdng Element model and tefine
D
afforc i
e~nv s
(extra denSlty, zoning flexibility, 1615 costs •Enact replacement ardinanca
~eduCBd f6eS, 8xp@dit@d iesign, admmister •Repeal Ord. 7675
processing, city firtancing} snnves
#3: Permit Rationing That Favors •sec:
appro'^9 Eiement •Adopt new progrem ordrnance
Affordabie Units •Esta• •Atign procedurel requirements
weigh ~ 615 costs • Repeai Ord. 167 5
iesign and
~rogram
#4: Mandatory Fee w/In Lieu •nnan
•C~~^g Efement
•Determ~ne fee amount
Performance
{buy 6 •Feasibility tests
1615 costs •Prepare nexus study, if needed
in Gtywide housmg •Adopt new ordinance
cet recovers •Adopt fee expenditura plan
iin_ costs •Repeal Ord. 1615
aus' study
#5: MorB Flexible MandatOry On- •KeeFng Element
uv~
re •Speafy new progrem elements
$iLe Rqmt. q
(highe •Test for feasibility
more Ord. 1615 costs ~Enact Ord. 1615 chariges and
reverwe amend Buidelines
#6: Status Quo wlLimited Changes 'KeBF
i •Davelop fee amendments
n
requ
~~e avenue
•Test for feasibility
•Amend Ord 1615
I-4R&A, Inc.
October 14, 1997
Rev~sed Inclus~onary Housmg P~ogram
/or the Crty of Santa Monzca
APPENDIX C
Estimates of the Capital Subsidy Needed to Develop an Affordable Rental Unit
in the City of Santa Monica tinder Alternative Affordability Thresholds,
Land Costs and Unit Sizes
Ham~tton, Rab~nov~ & Alschuler, !nc Apnl 6,1998
Wn ~ ~~P
~~~~ ~~~
.a
~ ~ ~~a
• i0
~J~ ' WN
~AN
,~ ~ ~~~~
~~
~ r ~~
~~
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P ~4~
~ ~~~
~~~
~}~
~~ ~ ~~
~
yN~
~~
~s
~~;
~*~
~~ ~
c~rnK we~or xeauweo ro aevaw~w~rrawneu ~rK wr
uouw.tauma ~rrwarartxn~rra~n,woeesn~uoun~s.
CR'/O~tN1iAY0MC17M1
11wb1 hubct IIT D wnYr. 701i K Mil IIM~1 ha bct 11= O wMM1. N1L X Ybl Rwal hob et RZ M rrb.100f ~ IIFI
2-0P/1-flA YBRR-0 ~ 2~BP/1~8A 38R/!d A $~BR/'I~A }W1~A
~~ Cab4tla~ Fadan Lor Coat Ifd~ Coal Lw Cea1 M~ Co! lwCOa Ifd ~ Caal LorCwt Hcli GoY lwr Cort 1~ Cv~t Lw Cop MaM Cosl
uw. ie m ~z i~ ie ~e ~x u ie ~e iz is
~v cans rnucrroN ~vrRa~ca
1 1ACwq~MAORani~Ma~r{I-yr~mMYi) f 51,700 S 6~,700 f 51,~00 i 5f,]W S 57,]00 ~ 51,300 t 51,~00 i 51,300 S 51,700 S 31,]00 i 51,]W S 51.]00
Y nrcMM11Wr~F~iqrtiemr 30% 30% 30% 50% l07L l0f1 !0% 70% 10DX 100% tOm~ 1a0x
3 WmYmlbuaN~altltemr7NwlnN~{qra~ S 35.6~' f 35,0.50 f 75~0 = 13.050 S ]0.710 f ]07l0 S 70780 S ]0,7l0 f 31.J00 f 31,700 f 51.~00 S 51.700
! ~/kNlMIIw~IbIMWqC~t I~1 ~'M 1~N W~ f 710 f 770 ~ TA S 770 f 1.20.1 S 13l3 f 12L1 S 1.]61
S No.a/tMAq~smwefecter ~ !N 1N 1N 0GS QYS 1.0~ 100.5 0% 0.% 100.5 106~'
e ~... wourr~• s s (m)
' s px~ s pz) s • s - s - s - s . s . s - y -
~ r...~..~u~o.~.~.~v..ur w~ r+~ n~ ru s ni s rs~ s ass s sss s i.ne s ~,rs :~.sox s+.~ox
! TGC MwrlM IIwY f• ~577 f 57I f !!! f EO! fY~ !N IN tM q~ tM W1 NA
D Ymn~n/JowlbRw[priGC i ~ S10 S St0
r~~ S SG4 f SW NA IN 1q W~ W~ µ~ W~ W~
10 lwt. Nwthel6's 4w YanIM~ Op~nH~p Cpts S (l30) f (S50) S (7'SO) f (750~ S (/SOj f ~ S (750) f (130) i (350) f ~Sq f (250) f (750)
„~...: •~w..hre s rn s c+~ s c,~ : m ~ <~a s c,.~ s ~,s~ s i,a~ s c,~n s am s i~ee~ s nm~
13 Lws: R~pYe~nw Rwvw L (7T S R+7 f 17~ f 1]S) f RSl f Q51 S (15) f ~ f R51 S (251 S psl f 175)
71 4u. Nw~AVIICSYs~w.y1~~OD~EtAbrrw S (1~ f (15) S (18) f (78) f ~ f (~ f (25) S (!S) S p~ S pn S (sb f µ2)
7~ MR Opw~q Ysan Q1011 MI lF~t f 379 i 276 f 700 f 700 i 1II f ~20 S 520 f 31! f 776 f 750 t 90! S !72
15 0.4t Cav~rp~ Ralb 1 f0 t 70 1 t0 1.10 / 10 1 70 1 10 1 10 1 t0 1 10 1 10 110
~e w,~.,.ranwrmo.o.r.r~.~e s ~so s ~ar s zn s xn s x. s ~ex s an s .ea s ~ s eez s e~. s ~
77 Appert~bMllorlp~p f3l,{31 f36,m6 f]!ff7} f16B10 iW915 HY.63! fBts26 f6t.057 791.7Z7 {Blp79 f707.757 f107.0!!
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79 L~ss• LNTCEpty f 3],512 f 37.577 f IBSI6 f~65I6 f - f • f - f - f • S - f • f -
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GWTAL i1184DM RlpUNED TO OEVE~OP AN NFORDABLE RENTAL UNR
UMDER /LLTERMATIVE AFFpRp11&LITY TWlFAIW~Dq ~/1ND COSTS ANO UMT ~7,
QfY OF SiU'!T~ YOMCA 1St
NEW COHSTRUC710N DEVELOPMENT COST3
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CaWUCOrnLOenFee /OXxbene~nan S 79000 f 1013 S 79.000 70%ibenamdn S 32000 S I.000 S 37000 Asyuneyqpis100%zTqelOtutbp~elyCO~1
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CRY OI iNNTA YONIC/~ 799t
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Less•W~nt ProewW !0 50
p~~y~g~ f3,105,521 f3,638,697
P2llell3l LimRa IlACeunM f2.071.851 T2.017.637
Y21lO/(3/ ~iuib WiCtrma~n O/Ko9/ 57,777,399 L2.~1]}%
pp„v~gr~ NaimN Use S2?13.399 NamW Use 52,313,389
AnnudlleQU~ten7~xGMt 4% ].71% 785,827 a% 371% fe5,8Y7
Gron Fapu~mn Tn[GS7~ l85B,i71 f858.47t
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~p~~e 99.996 5857,413 899% S85],~13
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NH iyw~ par Oe4r SO 70 SO 70
Ne! Nws 3800,189 f800~189
Pq~WIBItCf1D
GPIT~IL iU0.9DY REGUREO TO DlYFLOP AN AFf01{p,~p~E RENTILL UMR
UNDER KTERtU71VCAFWRp~1BILR~/ 7NREy1pLp8, W~0 C03Ti 11MD IIKT l~S,
G7TY OF 0IW 7A IpWp~ 1991
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TOTAL
NEW CONSTRUCTION DEVELOPMENT CO5T5
71» O~vNepnrr sewuilo
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t~ ~b 73 ~
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600 L 83 S
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f2501i7.000
S
1300 L
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7 177 S
219 f . P~rtrMqyuqw~w0iqp~peyq:iwyd i
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59.313 S
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doa~ncs f 10000 f flTS S f0000 AbruKe f }0,000 L 873 f 10000 PcrNRdA
fE4Wp.! S 11T6000 Y 9B00o S 1.116,pW Sll.qnp,y S t,176,000 i 9BOW S 17Y6000 PutreM1 '
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513,SOOhpcp S 2{]000 S 20150 S 2{]000 fi1500lspeca S 7t7.000 f 20.750 S .
2q.000 Pa~RCNyWx~wbqpaee4ey:mp.raqe
10%iMttoris S /17.800 i 9!W S 71TW0 70%aMcops f 777.800 L 9.BW f 177.800 PorNRdA
5%s IW co~ls S Se.B00 5 ~.900 S SE,BOO 5%zhrC wAS 5 5! 800 L t 900 f 58.800 Pa GYY Rnt utla~xby 9~tldnes
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f 1.605.IW S 1St.i83 E i605.~OD S f,gp5.W0 f 137783 L .
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46fl9 5
lDS70
5%xaOL1~WmAS
f
D07I0 S
6,689 S I
I
10270 FaCrytrNlu~8W0efrcs.bwaM
No.ace f 2000 L 7S7 S Z007 Abw,Xe S 2a00 f 167 S 2000 Pa ~
c~r mn u~aaweno a.ee~,ws
w r,a
Ab.'rm S t0 000 i ffi3 S 10.000 Abw~ce f 10000 f B31 S .
10 000 Pa Gly 0a~ utlv~.lwg pJeehes: hyl sq
Pleranee S 5,000 5 ~17 S S.OOD Abwiee f 5000 S It] S 5000 PvClytr~rtuqaw~tYgy~pefines.rtWttlgp
.yowoe 5 71.000 L 1 000 f 12,OOD ~lnance i 12,000 5 7 000 S 12 000 Oe qy aert utlawltrp y~0efnes, m6`anpe
'
Nownce S 2.SW L 208 i 2.500 r.wwite S ;500 L ZOB i 2500 PrGyRSRUMawenpyueefros:hghaq
.
PNwYee f 1).500 L 1158 S l.775 Abwriee f 175W L f158 S t375 PerdlyAMUNawihyg~pefneyqwpb ~
Mw~snca S 5.000 S N7 E 2.500 Ab~vance S 4000 L 11 / S 2.500 Per Cy treM1 uipxweiny queefnes. pr pq
No~c< i SO 000 S 4 187 S Su.000 Abinnce S 50.000 f ~,167 S 50.000 Per Cry dfR utlerMqng gu0tine5. NQ1 end '
s ~e~no s isass s isasas s ~w,ro s +ssss s ~sa,s.s
f71sf S 26000 S 2131 S 28ppp f1M S 28,000 f 2333 f 28.000 PIrHR6A ~
Moirence f t00 S 33 S - Ala«enee S ~00 L ]3 S • Pa C!y eett udero*~M 7+Oefnes
N9~ entl
5700tiM:smes f tOd00 S 900 S 5300~Ma;mos f 10,800 L 900 f ,
- PvNRdA
S 28 ~00 E ] 767 3 29.000 f 38.~00 t 3167 S ZB.aoO
996 z twd.so11.q1er f 18] 638 5 ll6lfi t67.y75 g1i [ b'WSW~.pykr S 161616 f 13 636 761626 Fq Q~11
Ciy uNar~M9 Wde(nes h~land ,
1 o%:Iwn ~nqut f M 000 S 2.167 S 28 pOp 1 0%x loen ~maut f 31 000 { 2 583 f 71.000 Asames Iwn = 700%; TaW DeuebprteR Cost ,
1 0%: ben Wlqu; S 26 000 f 2.161 S . 7 OX x bui annv~ S 11.000 f 2 SB] { - Names Iwn =100%x TotY Derebpn~~et Co#
509izmazbr~ E 770300 5 920! S 11050D 50%xreletlun f 7N,730 f 10979 S 711750 AssunesES%bennle,qm=fpp7{aTeWpw~WpmMCOy ~
11%:~IWwat.lu~Si 1 2~259 5 2033 S 2~.259 11%a(IetEeesNynE~ S 29.209 f 2.!]{ f 29109 60%d100%[md~nWipprf(yWrtssyyr~qp~
0 7%: (IWd mSNYndi f - E • 0 t% a(!eN ee~1.YMl f - S - 50%x nsOM PeMa la amWm of 9enq~l Iq'Y W nof 4feG nsais ~
fEWNA f 9 600 f B00 f 9 BOD fE00NK f 9,600 L N10 f 9 600 Per Cty OaR v~yet~.tArq gu0eircs bw mtl
1%.tiNCOxs S 1605~ S 1,77b f 18,051 t~xlrrtleoris S 16054 S 1S-0 S 1605r PeNRdA
AbwM.'! L E000 S 66] S l,pp0 Nvaenee f 0000 i 6n7 f 8,000 PaQ1y8~Rvqvw1lvgq,iyelnes h~1pp
HawCe
S
• 500 S
375 E
150D
i1W~wmce
f
I 500 S
375 f i
/.500 Pa Cty treR uqerwieriq qa7Nnes bw W
S 22~911 5 107s7 5 1%.973 S 261t13 f 27759 S 230.fU
f Zb10.360 S 731,197 S t,t61.585 f S,DB,810 S Y7l,901 S 2.195.TB5
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Rev~sed Inclus~onary Hous~ng Program
for the City of Santa Monica
APPENDIX D
Financial Feasibilitv Simulation Model Results for
10 Prototypical Apartment and Condominium Projects in the City of Santa :VIonica,
Base Cases With No Affordable Housing Production Fee
Ham~tton, Rabrnov~tz & Alschuler, Inc April 6,1998
Haimlton, F~binovitz& Alschukr, Inc Cily of Santa Monca Run 1 01 - Feb-98
Apanment wiltiout Inclusion7ry I~laicin~7 Roqwromenl, Small Lol, Lawr-f'r~cetl Arua
SUMMMY - SCENAPoO 9-A
SOURCESlWD USES OF FUNDS 1998 $) _
-- -~~ ___ i CASH FtGN UPON STA61UZqT10N OR PROFlT UPON COMFLETION OF CONUO SALES (1999$) _
~
FbrGSF
Toral Percun[ Old~ __, To~l __ I~aicent NRA _ PSF
SOURCES ...... _
...- __
- Grcrs Paenual Incarie/521~ Rewnuo
R:rn~a~~entf
Af~1/Ccx'F't(Cmdo)Loan $1J05.424 893% 516511 Gro.sPoU~ntblFlentallrxomo y138,D77 1053% 6,695 2062
.
LanA Equiry 344,250 27 896 51 42 Grosz Potonlul Salc~s fbvenue o 0 0% 6,695 0 00
Cash tquily ~212,1~ -17 19G ~31 6'~ (6.904]
I_~c va~ancyltatl tleLl/cdlection la;s -53%
-_ ._ 6.695
__.... =1 03
TdalSaircs,. $1237,484 100096 _
~ 518484 .,
H~ec[rve(;rosslroome/9~lesF7avtxiue $131,173 100% 6,695 1959
USFS Lesa Operaliny/Salec E~erc~~
NkxatedlandC~l 5344,250 278% 55142 AFer[rtnntExpor~es (13,261) -1ot% 6695 (19B)
Lbmoliuai 10,000 08% 149 SalesExpensrs 0 00% _ 6,695
~ 000
'
Re-develo(~rneniStud~/Nialysis 10,000 08% 149 TolalOperd~ing/ShIc35E~er5es ($13261) -101% 6,695 (19~
Mchtec;lure and Engineermg , 24,499 2 056 3 66
PoanChW6ldgPennas/q[yFe~.sJAssess 54.515 44% 814 NetOp Income15alesF~venue $117,912 89996 6,695 1761
I~-LJeu Pee 0 0 0% D 00
ql-SiteFlequirernonls 47,535 38% 710
Corsth3wld- OuUS~IU Imprw + Fbtonnon 475.345 38 4% 71 00 ~e~l 9aruce - ADaArtents (98,192) __ -74 9%
~ _ 6,695 14 67~
Tesling and Irspeciiors 7,500 06% 1 12 Ne[ Op Qsh FIavRJBt Salos Revenue $19J20 150% 6,695 2 95
Canslr~hmfbrfom~nceBatd 7,130 O6% 107
I k,ul Eshale Taxe~ Ihru Lcra~-up/4hles 2,559 0 2% ~ 38
Cureln~clionlrsurarx~ 20,005 i6% 300 PFIYSICAL,ECONCIAICPlVDREGULATORYPAFiAMETERS „
_-_
__
9irvayandTRlolr~surarqe 10,000 08% 149 ~~~ _,., Amounl
Legal, Cmsulting Aa:tn~, Adron 20,000 1 6% 2 99 Lol S1ze (SF) 7.500
h4vl~nng dntl A<~hrertising 5,150 0 4% 0 77 8cmomc Aiea (Lawr- Pnmd or Wgher-Prioad) Lcwar
Constructim Contmyency W,467 4 1% 7 54 ToFal Pllo`vable Unrts 5
(:oretnctim Menegenien[ 51,842 4 2% 7 74 Number of Market Ra~e Unils 5
Corx;lruchm Lo[an Fee 15,127 1 2% 2 26 Numher dAllorc9bla Unrts 0
CAnstruClian Int6f9s[ 81,831 66% 12 22 TypB ol Unlb 2~2~
F~rtrx7nBnt LUen Fee 16,581 1 3% 2 48 Slze of Market Ra[e UrnL, (S~ 1,339
Laise-up f~Fcrt (Surplu3) 16,934 -1 4% _~2 53~ Sze of Aflordablo Unrts (SF) N~
ToblLk;es ~$1237.484 ~~100096 $18484 BuddmgElf~cqncyFacta(%) 100%
Qac3 &llldng Area (~) 6,695
Toral (:ost pc~r Unrt 5247,497 Req.nred Parking Spaces (1 level belon ga~) 10
~oC~l Cust par Unrt na mclu~ng l.and $178,647
FINANCING ~MMARY RESIf)UPL~AND VPLUE - MARTMQJTS
~~
-. .. -- ' flmourtt ~r GSF Per SF
f'undm~C~te -F~nrr3nantLcnn Oc[~1998 Mnaun[_
Y BIdQ
51761 Land
1572
Intere~Ua:no
AmortrzauonTerm(Years) 80%
30 No[Operalmglncane(iromaboVe)
Stebl¢edValue $1
7.912
1,473,899 22015 19652
MinimumDebtCareragoRa~o 115 LessS`~Ic~C~tsdB`i6 (117,912) (I761) (~5T2)
Maxirtum Lcen to Value (Pn~eCie~ Rano 75% L~s DeueloprtQn[ C:cs[s (NIC land) 893,234~ 133 42 119 1~
Sleal¢ed Value d Anartrrenis (Cap Rate Apprcech) $1,473,899 Invoatmenl Value 5580.665 586 73 S77 42
Cash (After De6[ Serv~ce) on Qsh (Eq~rty) F~turn - Less Devaloper PrdA Q 20% Cos[ (178,64~7 _~6,8~ 23 8
At Shabdized Oxupancy a Canplelion f 4 9% Resitlual Land Value 5402,018 S6o os 553 6o
1998 $ Res~dal Land Value $390,308 S58 30 S52 04
Paga 1
Hemilron Rabmovitr & Alschuler, Irc Giry d Santa Monca Run 1 oi -Fab-9e
Apstment wrthou[Ifclua~ontyHouamg Hequremenl, SmeIILo4 Lowa-RicedMaa
CMITAL CASH FIOW - SCENMIO 9-A
_._. .
_ _"'
TOTAL 1998 IB99 2000 2001 2002 200~ 2004 2005 2008 2007 2008 2ooB 2a10
Souces d FunAs
ConstuchonLoanQmvs
1008468
552237 458,229
~
0
0
0
0
0
0
0
o
D
0
Pa~mananlLoanFunding 1,105,424 0 1,105,424 0 0 0 0 0 0 0 0 0 0 0
Cxoaslfcome(Sales(50%d4mo~lhs~ 22,343 0 22943 0 0 0 0 0 0 0 0 0 0 0
LessVsency/BadOebl (1,117) 0 (1,117) 0 0 0 0 0 0 0 0 0 0 0
LessOp ExpMomeownerAssac Fees _(4.292) ____._„0 (4,282) 0 0 .o_ 0 D_ 0 a _o _ _ 0 0 __ 0
Totel So~ces d F~nds 2,130,823 552,297 7,578 587 0 0 0 0 0 0 0 0 0 0 0
.uses ol c untls
Allo[eletlLentlCOS~ 399250 314,250 0 0 O 0 0 D 0 O 0 0 0 0
Demohmn 70,000 10,000 0 0 0 0 0 D 0 0 0 0 0 0
Pre-Development Studies/Anelysis 10,000 10,000 0 0 0 0 0 0 0 0 0 0 0 0
Mch d Englneeing CosU 24,480 23 274 1,225 0 0 0 0 0 0 0 o a o 0
PlenChCk/BltlgPrm~s/CityFees/ASSess 54,515 54,575 0 0 0 0 0 0 0 0 0 0 0 0
In-Lieu Fee 0 0 0 0 0 0 0 0 0 0 0 0 0 0
qf-SdeRequremenls 47,535 0 47535 0 0 0 0 0 0 0 0 0 0 0
ConsVBuAd-OuVOn-S~lelmpoVements 427,811 iB0,138 237873 0 0 0 0 0 0 0 0 0 0 0
ReEenhon C 10°G 47,535 0 47,575 0 0 0 0 0 0 0 0 0 0 0
Tes~~ng end lnsped~ons 7,500 3,333 4,187 0 0 0 0 ~ 0 0 0 ~ 0 0
ConsduchonPalamerceBond 7,130 7,130 0 0 0 0 0 0 0 0 0 0 0 0
HadFSteteTezesDunngCOnsFUCNOn 2,559 1,125 1,434 0 0 0 0 0 0 0 0 0 0 0
Conshuchonlnswance 20,085 20,085 0 0 0 0 0 0 0 0 0 0 0 0
Survey end TM1k Inauance 10,000 10,000 0 0 0 0 0 0 0 0 0 0 0 0
Legal, Consultng Acctng, Admm 20,000 11,429 8,571 0 0 o a D o 0 0 0 0 0
Markabnga~dAdvabsmg 5750 0 6,760 4 0 0 0 D 0 0 0 0 0 0
ConsUUCl~onConl~ngercy 50487 0 50.487 0 0 0 0 D 0 0 0 0 0 0
P~o~ect Menegement 51 842 15,952 35,891 0 0 0 0 D 0 0 0 a ~ ~
PamanerllLOanFee iB,SBt 0 18581 0 0 0 0 D 0 0 0 0 0 0
ConatruelionLoenflepeyment 1,105,424 0 1,705,924 0 0 0 0 D _ 0 0 0__ _0 . 0 0
TotalUsee d Funds 2,262,889 701,250 1,SB1,B53 0 0 0 0 D 0 0 0 0 0 0
Net Ro~act Cash Flo.v (Equity) (132080) (148,994) 16,934 0 0 0 0 0 0 0 0 ~ 0 a
Cumulntive Cash Floei
_"'"„ (148,094) (132,060)
_____ _____ '_ 0
'__ _ 0
____ " 0
"' 0 D 0 0 0 0 0 0
Conekuction Loan Bulonces
Gmvs
1008486
552,2a7 458,229
0
0
0
0
0
0
0
0
0
0
0
LoenFees@15h 15,127 15,127 0 0 O 0 0 0 0 0 0 U a a
Actruedlnteesl(q~95% 91,831 28,2J7 55,600 0 0 0 0 0 0 0 0 0 0 a
LesRepnymahts 1105424 0 7,105,424 0 0 __ _0 0 0 0 0 0 0 _ 0 0
EndingBalance 0 599,595 (593,595) 0 0 0 0 0 0 0 0 ~ 0 0
Pepa 2
Flamiltm, F7nynoh~ g Alsdiuler.lnc
DEN97Y
. -
!ot S¢e (sQ
.~ ~- '~7ir`naint
Alley Aree Cwnted (s9
SiteArealnclutlngqllcy porh 7.500
500
vi (5~
ZO^~9 6,000
Max7mum S~teArea~Urut (siNnit)
A4awmum 8ese UrufslS~te (rounded) ~''
1.500
2~ ~~s~N Bonus (raundecq 5
ToWlAllowable Ih~ts 0
UNI7$ 5
Numbei olMerNetRateAp~m~~
Pl~+rtber ofAffprtlgple Apartmqils
Number of Law Income 0
Number of Maderatelncome
NuRber of Hkrket RnteCondo 0
~
m~iums
P4n'ber afANordeble Condominn~m ~
s
Number olLo.v Inccme N4
NUmbe~' of McrJerate Income ~
TYpe of Lhrts
EcmomcArea(Lower-orHgher-Pnced)
S¢e ot Merlcet Rate Units (sQ 26d/2bn
Lower
Srze otAtbrdable UrJts (s~
B~ulding EMicienq Feda (%) 1,339
W1
Grass Builduy q~~ (s~ ~
700%
F aos
INCOME
PARIGfVG -
-~----~_._-~
Reqwreq Pakng at 2 SpacesPer I;htl - ryterkel Rete ~~~nt'
Required Pakng at 1 5 SpacesPer lkut - AHwdeble 10
Re9un~GuestPerkng a} 1 SpecePer 101.h~ts (rcundedl o
TotqlPaking SFaces Fle~uired (1 lavel below g~{a) - 0
10
SCH~DULE
SfartPre-Development (moyrj Amount
Pre-De+.elopme~tPenod (mmths) f 1 98
8
Start CmstrUChon
CmsCUC6on Pernd (mmths) 9/I/9B
End CmsWc4m g
Ster1 Lease-U
/
~ 5~~~
Manhs to 100%
L
enso-Up
6/1/99
Mmhs to 10p9~ ~~5 4
Lease-UP/Sel-Out
~anplehm
9!3% 9
1998 8 7 ~ __~_
Aper[ment Rent (per mmlh) ?g!1 Sales Pnce Saleq pnce
MaiketRete - _ mmihs
Aflortlabte Low Income 52,169
AHordablaMod tncome (Lower of Merket or Mod q¢~t 5731
~ 51,218
Cmdanfnfum Sales pricas (ps~
Hlerket Ryte
Affordable Law Income
Afbrdadle Moder~e Income
CPER471NG E~+~NSES qND PqRqMETEpg
Apertment Bed DebUCollectwn Lass I~b amcurtf
APertrnent leasng Commissims 5 ~96
OperahrxJ E~enses. IncWdhg Reserrea (pe urnt per yea) 00%
az,soo
HomeoNa+er Assocw6m Feas (per unitper year) ~~,,
G~~y af Senfe Mmica
Ap°rt^~e^t wilhaut Inclusion
_- ~Y Hausm9 Requiement. Small Lnt. Lower-Pnced Area
~lA
N4
~
Run 1 01-Fey -90
Paga 3
Hemilton, Ra6inovitz $ Alschular, Inc Cny of Santa Monica Run 1 Ot -Feb-9B
Apartmenl williout Inclusionary Floua~ng Roquirement, Smnll Lot, Lower-Pr~ced Arou
ASSUMPTIONS, PAfiT 2- SCENARIO 9-A
LAND
-._._._ _.....-..- ---
.
.
. Amount
Land Cost - Lower Pr~ct~d Areas ($I'SF) $45
Lantl Co5 - I ligher Pncetl Areas ($PSF) NA
DEVELOPMENTPARAMETERS~IC FINANCING~ _ _ _ _ `
No of
1/98$ Slart Star[ puartere
Budga Quarter Year [o Sprmd
~
DomoOUOn 10,000 ~
3 ~ 1998 1
Pre-0evalopment Studies/Anelysis 10,000 1 1998 3
Amhitectural & Engineenng (5%Hmd Costs) 24,499 1 1gg8 6
Plen Check/Bldg Permils/City Fees/Assess 54,515 3 1998 1
Off-SrteNeywremerVS 47,535 2 1999 1
In-LIBU Fee 0 3 1998 1
Const/Butld-Out/OrSrtelmprov(S~IPSFBIdg) 475,345 3 1998 4
Testfng and Inspeclions 7,500 3 1998 4
Constructon Pedormance Bond (1 5%consQ 7,130 3 1998 1
R[3al Esla[e Taxes Dunng ConstruchUn 2,559 3 1998 4
Cons[n~ciion In~urance ($4PSP/YR) 20,085 3 1990 1
Survey/~itle In~urance ~and fake-Down Q Starl oF Const) 10,000 3 1998 1
Legal, Consulhrg, AccMg, Admm 20,000 1 1998 7
Markatng end Advertising 5,000 2 1999 2
ConstructanConhngency(f0%Const) 48,998 3 1998 f
F'ro~ECt Mgml (70`%COStc NIC LantllFinanang 8 Ta„es) 51,842 3 1998 5
FINANCING PARAMEIERS
-~ -- ~ -
- ECONOMIC PARAMETEHS
-~
~- -
.~
_ Amount ~-
- _
--
Amount
Constructbn Loen Fundmg - Apts (% of Perm Loan Amt) 1 a0% Apertment Value
Con~ruchon ~oan fundrng - Condos ~`A; of Pro~~ted Value) NA N06 Apts (~% Occup less op axpensos) $t 17,912
Cons[ruction~oanF~~s(%) 15% ValueBasedonCapRateApproach $7,473,899
Constructan Loan Interest R~e ~9G) 9 5% Value Based on Construction Costs $1,237,484
Condo ValueNnit - Lower Priced Area NA StahA¢ed Value (Cap RMe Approach) $1,473,899
Condo ValueNnit - Higher Riced Area NA Constructan Loan Amourd QS%LN) 57,105,424
Construcuon Loan Amounl - Condos NA Permanent Loan Amoun[ -
LosserolDSCor75%LTV $7,105,424
Permanent Loan. Apls
Minimum Oebl Coveraga Rato 1 15 Annuel InHation Rete -~ Rents, Costs, EKpenses 3 0%
Maximum Loan to Value -LN (Pro~ected) 75% Annual Intlatlon Rate - Property Tmces 2 0%
Interest Fete (%) 8 0%
Arnortrzanon Tcrm 30 Condo SalesTransacuon Costs NA
Cap Rate 8 0% Cash on Cash Hetum Threshold 15%
Devebper Coninbupon of Eqwty (%) 100 0%
Fundmg Year 1999 Cash Ftow hom Operahora to Develope~ (%) f 00 0%
Funding ~uarter 4 MaK Acceptable Residuel Land Value fleductwn 15 0%
Paga 4
~
~
O
2
~
~
~
a
~
~
E
~
g
8
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;X
~ IN N ~=1~ y g~O
N
~j', I ~ I
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~ Z' ~ ~ ~ b ~ ~I~ b ~I~ I
o ; ~~~m ~~,~ ~ e~ j
8 I I I
° ml mo~~`~ ~o~l~ ~ ~~
~ ~~ ooinlg aom ~ $o
~ ~ 1
d~ ~
~
~I o~ s ~ ~ M m ° ' ~ ~I~ GI.
~ ~~ ~ m a ui lui Q ~!~c ~1 ~
~ K ~w v i.~. K ~'I~ ~ O
~ ~ ~ ~
~ ~ ~~ ~ ~ = 8
F ~ o~ ~' W ~ ~
~ ~~~~~ ~ ~ ~ ~ ~' ~ m~ ~~~ ~
~i rx-~~~ ~ ~ ~ m:~ ~ ~ ~- ~N~~~
~~ ~~~~~ ~ ~ ~ ~~ ~ ~~ ~~LL~~
g ~~~~e ~~~~ ~e ~~ ~' ~~~~ gm~~~
~ Wffi~~ ~w~~ ~ ° ~ to°~° n~~~
Z ~~°'T~ g_ o ot w Qa~~G1~~~ue`
f~ aS~m~ ~~~'f @9~ ~ ~~i ~ ~E~~a~F<~~D
~ °~g~~ ~~ 5 a r~ia oZ~~°o`o ~'
S bGc~~w y~dr~~ ? n~ ~ ~~~>>~~~;~3
° 8Z ~ ~~°ZZ~~s~mb~
`na~Q]~II °n°nciI`8i °nva~r'ggg=N~Sge~nouv'i$'8iio~`8i
~ I N~ iOJM ~~ ~ O aC O m 00 - ~ ~ O 0 a0 [7 ^ 4J cY ~
I ~ I~ ~ ~
4
t
Q
~ ee de de 3e ee 3e de 34 3e de de de 3e de ~ d4 3Q de ~ c~ 2~' de de T2 de d2
m~ noao om~oraoamininmcn<oc+i~~om<nv<c~o
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CJ O L7 O
ID m~IJO~i~ u~i88 ^~~~0 S~CI N~8 00 TN ~voa] n
~I in I~ ~ ~ 1~ O O N OO ~~O ifl O t7 O O(O ~ f~ N N ~ N O ~ f0 ~
5°-~~~,~~~ ~~~
LJ~m NvC~~'lJIIN NNN
IN I~ ~
~j~ ~O t~D N'O~ ~< N
3m~~,~~~s ~_s
~ ~«,~-~a ~~,~
i
_~~~~~ ~~~
°cmm~i°'~i ovc°~i
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I~n~~~w O1wa
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~ ~~ ~~~
~~ ~~ ~~~
m~~$; ~~~
tOONSC ~1J~
~y8J8~ S~u~
z~~B~~ ~~~
o~b~_~° ~
~&~ ^m ~
I ~
~n~~ t'f 00 NN iflCl nm~N~N~~(1in N~ NNO~ m0 ~
<N~~~ w N ~- ~I1 M~ ~ C
W iW W ~ ¢
~ c S' ~~ ~O
~, a~p ~ ..a - m s~ ~a
y± L F
~C ~ LL + ~i ~ J ~ ~ ~ ~p a
m ¢ ~ a C~.. ~~rt Q C ~ S O~~ V U
~ ~~ mUC~. SP.~C>."' g 'O I J ~Smy C~
tY'J D~~ ~ E r~^. C J 8 ~ r] N 1~ ~ C (~ I ~ ~ ~i t ~ U
E ~ C y Y~y~ ~ y m J ~ y-. m~ C
~ iJ bS~2 ~'~~C]~~QC~$c`(n `v ~; ~ LLpj~ ~~
~ ~FS' c3~e~~F~~B~~_g~ » > ~ m~~~ n~
~z~a~ ~_~'e-g~a~5m6v"m65~6~a~ ~' ~ `'~S~ 8'~
aa ~~ - ID;,~~°"_" gE c~ ma$ ~
~~wwa m°-~~3 'm~a~~+~ac:~~~~~~¢i~ ~G z 8'~`y.~ _~ ma
U~at~ ~~~pavm~NC~,cw2~C ~~t`~p`~p~~pE~'~' c~~ V c~_ry~~y ~N
~8"C3 ZL]FiLs-.".'U~J~4~,~2VVUV~'~ Hf5 Z c~9~x~ t8'
$ ~ ~~ ~I ~-a~~~s t5
~
~
HemRon, FlehnoviR 9 Als<IwMr, Inc Cty of Sanle Mmim Run I Ol -Feb-98
Apskme~t .AMit Iroluato~ery Heusfng Hoqwmmenf, Sma~ Lal, Hfglwr-Hiod Mm
CAPI7AL CASH FLOW - SCENABID 10-A
TOTPL 1%8 1999 2000 2001 2002 2009 2004 2005 2008 2007 2008 2009 2070
Sourres of Funds
ConsliuQion Laan Drews 1.341,278 891,713 515,524 0 0 0 0 0 0 0 a 0 0 0
Pe~maneri Laan Funding 1,48a,578 0 7,184,578 0 0 0 0 0 0 0 0 0 0 0
Ctosslncorrw(Sales~5094o19rrpnl~s) 27,997 0 27997 0 0 0 0 0 0 0 ~ 0 ~ 0
l.essVaCanCy/tL'100eb1 n,400) D (1,400) 0 0 0 0 0 0 0 0 0 ~ 0
LeasOpExp/HomeoWrerASSOCFees _ _, _55150 ___, 0 (5,150) 0 „ 0 0 _ 0 0 0 0_,_ 0 0 _0 _ 0
TdalSourcesolFuntls 2,859,263 831,713 2,021,549 0 0 0 0 0 0 0 0 0 0 0
uves d cunos
AlbmledlandCost 573,750 577,750 0 0 0 0 0 0 0 0 0 0 0 0
DBmalRion 1D,000 IOOW 0 0 0 0 U 0 0 0 0 0 0 0
aa-oaveiopmam nuaes~nrery~s io,ooo ~o,ooo 0 0 0 0 0 0 0 0 0 0 0 0
NCh 8 Erglneefing Co95 27,557 2B,1I9 1,378 0 0 0 0 0 0 0 0 D 0 0
PlanChcM/IktlyAmiglCl~yFees~ASS~ss 54898 54,848 0 0 0 0 0 0 0 0 0 0 D 0
in-~AU ~a o 0 0 0 0 0 0 0 0 0 0 0 0 0
OX ~Sle fleqwemeris 53.500 0 53,580 0 0 0 0 0 0 0 0 0 0 0
Consl/BUlltl Oulla~ - ulle Ilrproverrenl5 482 040 210,240 287,800 0 0 0 0 0 0 0 0 0 0 0
fie1CI111M(~10% 59,SB0 0 53580 0 0 0 0 0 0 0 0 0 0 0
leslingantlln5peclions 7,Soo 3,337 4.187 0 0 0 0 0 0 0 0 0 0 0
ConatrudionPertuimnce Bond 8,034 8,034 0 0 0 0 0 0 0 D 0 0 0 0
RBdIEs~eteTexesDVingConStrudion 4,313 1,875 2,938 0 0 0 0 0 0 0 0 0 0 0
ConsliuCllonlnsUrance 20,085 20,085 0 0 O 0 0 0 0 0 0 0 0 0
3urveyantlTnlelnsu~enm 10,000 i0000 0 0 0 0 0 0 0 D 0 0 0 0
Legdl, Consulbnp, ACC~fI(J, Atlmin 20,800 11 771 8,829 0 0 0 0 0 0 0 0 0 U 0
hUrkahngendAdveR~sng 5,150 0 5,750 0 0 0 0 0 0 0 0 0 U 0
ConstruGionCortmgancV 587W 0 5B,7B7 0 0 0 0 0 0 D 0 0 D 0
Fopcl Managemenl 57,211 I7,603 39,807 0 0 0 0 0 0 0 0 0 0 0
F'¢frtlafleni Loan Fea 22,269 0 22,289 0 0 0 0 0 0 0 0 0 U 0
Constructlon~mn fY~payrr~nt 1,08d_578 0 1_484578 0 0 0 0 0 0_ _ D 0 _0_ D _ 0
TalelUsesofFuntls 2,981,818 961,717 2,OU0102 0 0 0 0 O o 0 0 0 0 0
Ne~ PfO~ed Q5h Flav ([qUlm (108,558) (190,004) 21.447 0 0 0 0 0 0 0 0 0 0 0
Glmulalivn Ca3h Flpv
_'____ (130,004) (108,558)
__"_ ___'_ 0
'_'__ 0
_____ 0
"___ 0
e"'= 0
=_'e.. 0
'__'_ 0
_____ 0
_____ 0
_____ 0
_____ 0
_____
Conrtrudion L~n ~lances
Qaws 1,347238 831,713 515,524 0 0 0 0 0 0 0 0 0 0 0
LOdn FBBS ~ I 59L 20,209 20.209 0 0 0 0 0 0 0 D 0 0 0 0
AccrudlMre4Q95% 117,132 38508 77.825 0 0 0 0 0 0 0 0 0 0 0
LessHepeymefis 1484578 0 1,484578 0 0 0 0 0 0 D
~~~ 0 0
~~~ 0 0
~
EndngBeknae ~0) 891428 (891,928~ 0 0 0 0 0 0 D 0 0 0 0
Pgqe 2
Fiamdtm, Rabnohtr & Alschuler, Inc City of Santa Mmim Pun 1 01-Feb-9B
Apertment rnriout Inclusimary HauHng Requvement, Smdl Lol. Hgher-Priced Aree
ASSUt~Y'f10NS PART 1- SCENARO 10=A
'_._...__ ,.,_
PARbNG
DENSTY
--.. ....... ._ --
~
-
'_~ant
Lot S¢e (st) 7,500 Reqwrad Perkng at 2 Spaces Per Lhd - AAarket Rate 10
Alley AreaCanted (sA 5W ReqwredPakng at 1 SSpecesPer lhR - Atbrdable ~
SneArealncludngAlle~Pahm(s~ 8,000 RequiredGuestParkngatlSpacePerlOlhns(rwnde~ _ ~
Zq~~9 R2 Total Pakirg Spaces P,equired (1 levd below grade) 10
Mawmum Srte AreaNnd (sfNndJ ~ ~~
Mawrrum 8ase UnitslSite (raunded) 5
29JL Dens~y Bmus (rounde~ 4
Totel Allowable Lhits 5
PLrrber of Mazket Rate Apertmm4s 5
Nanber otANadableApartmarts ~
Number ot Lv.v Incame ~
Number of Moderete Incoma ~
Nirrber ot Market Rete Cmdomniums r14
hLrN~er otAHordable Cmdominums ~
NumberofLoHlncome W+
Number o( Maderale Income ~
Type ot l.hils 2bd/2~a
Ecmom~eArea (LOwer- or Hgher-Prce~ Hgher
Size of Maket Rate lhits (sf~ 1,339
Size oi AHxda6le Units (sQ 8`~
Building Efliaen~y Fador (9G) ~~
Gross Buitdug Area (s~ 6,695
SCHEDULE _
-" Amount
SfariPre-DevelopmeM(moT/r) ~~~~ ~1T
Pra-De~elopment Perial (mmihs) 8
S~rt Cmstruction 9/1/~
Cons4ucEm Pernd (mmihs) 9
End ConskucLm 5/31/99
S~rt Leese-UP/Sales Period 6/1/99
Mmhs to 10096 Lease-Up 4
Mmhs to 10096 Sales ~
Lease-UplSel-Out CompleLm 91~199
INCOME
.._ - 1998 1 1998 ree 1
Rent Seles Price Sal~ Prwa mmths
Apartment Rmt (per mrntli) 0
Maket Rate $Z.~~ 8
Afbrdeble Low Income ~~~
AHordeble Mod Income (Lowe of Market a Mad HaiQ $1,218
Cmdaninum Sales Pnces (ps~
Merket Rete H0' $0
~ $~
A}kxdable Low Incane ~ a0
Afbxdak~le Moderete Income
OPER4TINGFJ~ENSESAN~PAR4MEfERS .
..._
. Amount
Apwtmmt Bad DebU~llechm Loss Reb 5 0%
AparVnmt Leasng Commissims ~ ~
Operahng F~ai¢ea, includng Rasarves (per unR per yea) 53,000
HomeovmerAssoaahanFees(perunitperyear) H4
Paga 3
Homtltan, RabmowK & Alschuler, Inc City of Sante Monica Run 1 Ot -Feb-98
Apartment wrthout Inclusionary Houe~ng Requvement, SmeN Lo[, Highor-Pnced Nea
ASSUMPTIONS PART 2- SCENARIO 10-A
- _ -_.F_... ._c__ ._ ..'_ . _"-".._..... _ .
LAND
~ Amount
Land Co& - I..rnve.r f'ncecl Areas ($PSF) y75
L.antl Coa - HighFr Pncod Nces ($PSF) NA
DEVELOPMEN7 PARAMEI'ERS (NIC FINANCIN_~
.,-._..._. .._-. ....
__
__
Noof
1/08$ Stan Sterl puarters
8udgd puarter Year ioSpread
Domahuan 10,000 3 1998 ' 1
Pra-DevelopmentStudies/Analysm 10,000 1 1998 3
Architectuml & Engineerv~g (5'h' Herd Costs) 27,557 1 1998 6
Plen ChecklBldg Pertnits~City FeeslAssess 54,846 3 1998 1
Off-SileRequvaments 53,560 2 1998 1
In-Li~~ Feo 0 3 1998 1
Const/Budd-Out/On-Sitelmprov(SBOPSFBIdg) 535,600 3 1998 4
Testing end Inspediors 7,500 3 1998 4
ConstrucLOn Perbrmance Band (1 5% consQ 8,034 3 1998 1
f4eal Estate iaxes Uuring Conctruction 4,313 3 1998 4
ConsYrucfion Insurunce ($4PSF/YR) 20,085 3 1998 1
Survey/itlle Insurance ~end I~ake-Down Q S[art of Const) 10,~00 3 1998 1
Legal, Consulhrg, Accing, Admm 20,000 1 1998 7
Merketng and AdveRising 5,D00 2 1999 2
Construction Contingency (10% Const) 55,113 3 1998 1
PrqectMgml(70%COStsNICLantl/Fmenr,~ngRTaxes) 57,21f 3 1998 5
FINANCING PARAMElERS _
Amounf
Constructwn Loen Funding - Apts (9G of Perm Loan Amt) 100%
Con3ruclion Loan Fundinp - Condos (~, of f'ro~wtod Value) NA
ConstructionLaan Foos (%) 1 5%
Constmctpn Loan Interest Rete ~96) 9 5%
Condo ValueNmt - Lower Pnced Area NA
Condo ValueNrnt - Higher Riced Nea NA
CunstrucfiOnLoan Amounl - Condos NA
PermaneM Loen, Apts
Minimum Debt Coverage Ra6o
Maximum Loan to Velue -LN (Pro~ected)
IMarest Rete (%)
Amort¢auon Term
Cap Rate
Funding Yeer
Funding Quarter
ECONQMICPARAMETERS _
Amount
Apertment Value ~ ~~
Noi, APts (95%OCCUp iess op enP~:as)
Value Basetl on Cap Hate Approach
Value Based on Consiruction Costs
Slabil¢ed Velue (Cep Rffie Approach)
Constructfon Loen Amount (75%LN)
Parnaneail Loan Amount -
Lesser oF DSC or 75%LTV
1 15 Annual InHation Rale - Renis, Costs, Expenses
75% Annual Infletlon Rate - Roperty Texes
80%
30 Condo Salos Transaction Cos[s
7 5% Cash on Cash Rewrn l~hreshold
Devebper Contribuhon of Equity (%)
1999 Cash Flow hom Operatio~ to Developar (%)
4 Mex Acceptable Residuel Land Value ReAuc6on
Page 4
$148,458
$1,979,437
$1,593,134
$1.979,437
S 1,484,5T8
$1,484,578
30%
20%
NA
15%
100 0%
100 0%
15 0%
Handtan Finbinovitz & A~chuler, Irw City ol Sante Monica Run 1 01 - Feh -98
Caidormmurn wrthcwl Inc luewrwry Ilawm~7 Heymrumtan[, Snwll LW, Lovwr-I'ra:ed 14eu
Sl1MMARY - S(.YNAFtl019-A
SOUFCES /VJD USES
OF FUNUS (1~8 $) _ _._,_„ _._ CASH FLOW UPON STABILIZATION OFi PROFIT Uf'CNJ CAMFLETION OF (:ONDO SN.ES 99f3$
-------~_..Z_......
_
----....... . . ... __ I ~r GSF
Toml FLrcenl Bldg To1al
.. .....- Porconl GSF Dldg F?SF
SUURL'ES ....__._..__.._..--- --- --- _.....
tr~ns Paenual In;ar~e/SalES fiewnue
S~les F~evc~we -- Caidunimm~~ 51,638,762 111 8% 521577 Gruss I'oleniral fien[al Income 50 00% 7,595 0 00
Land Equily 345,938 23 6% 45 55 Grcrs Polentral Sales Fk~venue 1 J81263 100 0% 7 595 234 53
G39h F. nUiiy 519,4731 _35 591, (BB 40) I~r, v.~:anrylhed datt/r.dleaion I~ 0 0 096 7,595 0 00
TdalRnircx;: $1,465227 1000% $19292 Elfec4nreGrosslncornel5alesRevenue $1,781,263 1W% 7,595 23453
USES ' I_~s Operating/3ilec Emenses
MlocatedLandCa;l $345,938 236% $4555 A~rtrrpntFxperses 0 0096 7,595 OOD
Cl3rnohtiai 10,000 07% $132 SalesExpens~ ~42,W~ -80% 7,595 187
Pre-ckvelopmentSlutlieslMalysis f0,000 07% 5132 7o~alOperaling/SaI~E~erees (5142.501) -80% 7,595 (1876~
Mdwecture and Engineermg 29,669 2 0% 53 91
Plan Chk/Rlck,~ Portnits/Qry Fecs//~ssess 64,755 4 4% 58 53 Nel Op IncomeMet Salas Re~renue $1,638,762 92 0% 7,595 215 77
In-t.ieuFee 0 00% 5000
qt-SrtefWqulron~dnis 57,722 39% 5760
(;or~slhSuil~i-CkiUS~te Imprw + R3tenAOn 577,220 39 4% S76 00 Oebt ~nnce - Ppartmen6 0 0 0% ~,595
~
~ 0 00
~~ ~
Tesung and lr~pecnor~ 7,500 O S% E0 99 Net Op Q+sh Flwv/Net Sales Revenue $1,638,762 92 0% 7,595 215 77
Coretruchm f'crfarrwrx:e 8aid 8,658 o s% S7 l4
F9eal EsMte fanE;s Ihru Leese-up/Sales 2.571 O 2% $0 34 Lcw^ C~veloprrent Costs ~65227) _...,.... =82 3% ) 595 {192 92)
~~
Conctnr.nailrx~uranc~ 22,785 16% $300 Rditaoss) $173,535 97% 7,595 2285
SLrvcyund fitlelreurance 10,000 079G $132
Le~+l, Caisulung Acctng Adnin 30,000 2 0% $3 95 PFiYS7CPL_ ECONOMIC ANO REC3JLATORY PMPMEfERS
~ ~~~ _ ___
NYarkutingandA[Nenism~j 20,600 14% 8271 _„ Pinount
CoretructimConlin~orx;y 61,118 42% 5805 LatSlze(SF) 7,~
Corstrucnm Maregernent 63,535 4 3% $B 37 Ecmomr, Area (I_cMer- Pnoad or Higher-f~n~d) Laver
Coretrucuai Lwn Pea 17,956 1 2% 82 36 Total NlaraGlo Units 5
CorStruc:tia~ Intere.t 120,929 8 3% y15 92 Number d Market Ra[e Un~6 5
PormarantLwn F~cx; O 00% EOOD Number d Affad~blu Unrts ~
Saloc Period Operaung Expensec 4,271 0 3% $0 56 Type of Umb Ztxl2be
Tolal Ue,c~s $1~,465227 100 0% $192 92 Sza ol Markot (iale Units (SF~ ~~5~9
Sze ot /Ufordable Umts (SF) B50
To~l Cost por Unit $293,045 Building Effaancy Facla (%) ~~
l~o~l Coat per Unit not inc:WrLng Land 5223.858 Q'ms Bwldng /Uea (SF) 7,595
Hec}ured Parking SpecES (1 level belav 9ra~) ~~
FINANCING SUMMARY
._....-- - .. ..------
~/4nount
PF.SIIXIN..I.ANq VI'LUE - CpNDOMINIUMS
Funding Ciitm ~ Coretructi«i Loan ~~~Nw 1999 ~~~ ~ ~ ~ Nnount GSF 61~ PSF
Intores[Rate 95% NetSalesF6venue 51,638,762 $21577 E21850
Amomzation Torm 17 Mon[hs LESS [bveloprtnn[ Cccts (NIC land) ,~1,119,289) (147 ~7~ __SI49 24
NFaxircurn Loen ro Vahp (Prqecte~ Ratio 75% IflVes[men[ Value $519,473 $6B 40 $69 26
Prqecfed Malue oF Condommiurr~ 51,781263
L~ Cevaloper Prafd @ 5096 d EQuiry 172,969 (22 7~ _ 23 O6~
psh (PrdM1) on (Ash (EqUity) Fielum 50 2% Hesidual Land Value 5346,504 S45 62 546 20
1998 $ Hesidual Land Value 5367,606 54a 40 54s o1
Page t
Homilbn, Rabinovi~ H Alschuler, Irc City d Senla Monce Run 1 01 -Feh-BB
Condammium rrthaut Ineluc~onuyHousinq flapura maM, Smell Lol. Lower -Pricad Mss
CAPITAL CASH FLOW - SCENMIO 13-A
TOTAL
1998 1897
/998 _""
1999
2000
2007
2002
200~
2004
2005
2006
2007
2008
Souces d Funds
ConstuctionLoanLYews 1,187,082 512,311 970,206 14,545 0 0 0 0 0 0 0 0 0 0
PamaneniLoanFunding 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Grosslncome/SalesRevenue 1,781,269 0 1058085 725,178 0 0 0 0 0 0 0 0 0 0
Less Sales Costs (f 42,50I ) 0 (84,407) (58,014) 0 0 0 0 0 0 0 0 0 0
Less Op ExpMwneowner Assac Fees _ (4~ o (3 996) (625) 0 0 0 0 0_ 0 0 0 __0 _ _ 0
Talel Souces d Funds 2.891,SSJ 512,311 1,838 /58 681 OB4 0 0 0 0 0 0 0 0 0 0
uses oi r unas
AlloeatedLandCost
3CS,B98
995898 0
0
0
0
0
0
0
0
0
0
0
0
OemohOan 10,000 10 000 0 0 0 0 0 0 0 0 0 0 0 0
P~a-Dawlopment Studisa/Analyeb 10,000 10,000 0 0 0 0 0 0 0 0 0 0 0 0
qlch 8 Engmeaing Costa 20,BB9 28,702 2,887 0 0 0 0 0 0 0 0 0 0 0
Plnn Chtk/Bldg Prmis/Cily Fees/Asaess 64 755 84.755 0 0 0 0 0 0 0 0 0 0 0 0
In-Liw fea 0 0 0 0 0 0 0 0 a 0 0 0 0 0
Q`f-SReRequraments 57,722 0 51,722 0 0 o a 0 0 0 0 0 0 0
Conal/Build-OUVOn-Stle lmpovemanla 51B,4B8 715,4A6 40G 050 0 0 0 0 0 0 0 0 0 0 0
Ralanhon @ 10% 57,722 0 57,722 0 0 0 0 0 0 0 0 0 0 0
Teshng end Inspechons 7,500 7,887 5,833 0 0 0 0 0 0 D 0 0 0 0
Conelruc~ion Pertamaroe Bond 8,858 8,858 0 0 0 0 0 0 0 0 0 0 0 0
Reel Eslete T~es ~uring Constuchon 2,571 583 2.008 0 0 0 0 0 0 D 0 0 0 0
Cons4ucbonlnsurence 22,785 22,785 0 0 0 0 0 0 0 D 0 0 0 0
Survey end 7itk Insuarca la,ooo 1o.aoo a o 0 0 0 o a o a o 0 0
Lagd Conaulinp, Acetng. Admm 90,000 13 333 73 933 3,J89 0 0 0 0 0 0 0 0 0 0
Makelinp and Advatismg 20 B00 0 20,800 0 0 0 0 0 0 0 0 0 0 0
ConsUuctlonConlingercy 81118 0 61,118 0 0 0 0 0 0 0 0 0 0 0
P~o~aClMellegemenl 6J,S75 7,475 49,898 71,272 0 0 0 0 0 0 0 0 0 0
PermeneMLOenFee 0 0 0 0 0 0 0 D 0 0 0 0 0 0
CanslruchonLonnHepayment 1,395947 0 987,952 387,995 0 0 0 0 a 0 0 0 0 0
TotalUsesdFunds 2858,018 837,378 1,838,758 382,541 0 0 0 0 0 0 D 0 0 0
NatPro~edCashFlwv~Eqwly) 173,535 (125008) (0) 288,594 0 0 0 0 0 D 0 0 0 0
Cumul~Ne Cesh FIVN
______ (123,008) (125008)
a__ '____
= 178,535
_____ 0
__'__ _ 0
____ 0
___'_ 0
___'_ 0 0 0 0 0 0
Cons1 uclron Loan ealemea _
o
0
0
Rmvs iJ97,OB2 512,311 670,208 14,545 0 0 0 0 0 o a
LoenFBes@15% 77958 17.958 0 0 0 0 0 0 0 0 0 0 0 0
Accruedlnlaesl@95% 120929 24.J35 80.504 18,090 0 0 0 0 ~ 0 0 0 0 0
LeseRepayments 1,335,947 0 0 1,335,847 0 0 0 0 _ _ 0 0 0 0 0 0
Ending Belance _
~~~~~ ~(0) 554,601 750,710 ( 1 305,312) 0 0 0 0 0 0 0 U 0 0
Pege 2
Hamdtm, RabnoH~ & Als huler, Inc City of Smta Mmica
Candominum wMhaul inclusianery Hausng Reqinrement, Smell Lot. Lowe~-Priced A~ea
ASSUIuPT10NS. PAHT 1- SCENAHO 13-~A -- --
DEN9N
_
_
--~.~...... --~ mount
Lot S¢a (sQ ~.5~
Alley Area CouMed (sf~ ~
SdeArea Includng Alle~ Parhm (sQ 8,OD0
Zmng ~
Mawmum SAeArea~Unit (sf/unit) 1,500
Mawmum Base Units/Srte (raunded) 5
25% Daiaty Bonus (iaundern ~
Total Alloweble Lhns 5
UNITS
..'-".. ..__._ Artwunt
N~mberolMarketHeteApartrrre~is ~ ~
FL rrber ot Affordable Apartrnenis ~
Num6er ot Lw+lncame W1
Number of Maderate Income ~
I~Lrtber of Merket Rete Cmdomnwms 5
I~L rrber of Aflordable Condaninums 0
Number ot ~w+lncane ~
Number ot Mcderate Income ~
Typa of Units 2bd/2ba
Ecmomn Area (Lower- or Hgher-Prced) Lowef
Size of Merket Rate LhNs (sf~ 1,519
S¢e of AHordeble Units (s~ 8~
Bui{~ing EN~cienq Factor (%) 100%
Gross Buildirg Arae (sQ 7.595
PARWN~
_..._,......------ -- -_~maunt
Pequired Pakng at 2 SpacesPer lkut - Mmket Rale ~ 10
RequvedPaknge115SpecesPerl.hrt-ANadable ~
RequvedGuestPazkngatlSpacePerlOlhils(rcunde~ 0
Totel Pakvg Spaces RecNired (1 le~ belax grede) 10
SCHEDU.E
-" Amount
StarlPre-Development (mcyyr) -~--...1/I]98
Pre-De~ebpment Period (mmtls) 1 ~
SW t Cms4uchm 11/1l98
Cmstrucdm Perfod (mmihs) 9
End Cmstruchm 7/31/99
Stert Leese-Up(Sales Period 8!1/~
Mmhs to 10U96 Lease-Up W+
Mmfis to 100% Sales B
Leese-Up/se9-Out Canple4m 3~31/00
INCOME
--- -
199e
799a
1
rea e~t
Rent Sel~ Price Seles Pr~ce _ mmths
Apa~tme~t Pa~t (per rtwnh) ~
Mazket Rate ~
Afbrdable Low Incame W+
Albrdable Mod Income (Lowc` of Mazlcet or Mod Rait) W+
Cmdaninum Sales Pnces (psQ
Market Rate
Afbrdable Low Income $225 00
880 02 $341,775
$60.018
(Per Ordnence 1615 Prcgrem C~delnes, 1998)
Afbrdable Moderate Income 5152 12 $tt9,306 (Per Ordnence 1615 Pragram Gwdelnes, 1998)
qPER4TiNGE7~ENSESANDPAR~MEfERS __
- Amwnt
Aputmait Bad DebU~Aec6m Loss Ra~ ~
Apartma~t Leasng Commissims ~
OperaOng Emmses, Includng Resenres (pa und per yea) Wl
Homeowner Ass~Aan Fees (px unR per y ear) $2,500
pege3
Run 1 01 -Feb-98
Hamilton, Rabinovrtz & Alscbuler, Inc Crty of Sanfa Monica Run 1 O7 -Feb-9B
Condommium. wRhout Inclusionary Housing RequremeM, Small Lat, Lower-Prwed Mea
ASSUMPTIONS, PAR72 - SCENARIO 13-A
LAND
- ~--- ---- Amount
Lantl Cost -- Lower Pnced Areas ($PSF) ~ $45
Land Cost - Higher Riced Preas ($PSF) NA
DEVEIOPMENT PARAMETERS (NIC FINANCINGI__
. .. .
""-
-
No 01
1 ~98 $ STart Sfart Ouarters
Bud$et __Quarter Year
-. to S~xead
_....._
DemolR~on 10,000 4 ~~ '
Pre-Developrrentstutlres/Analysl5 to,000 1 1s98 4
NchRedural & Engineenng (5 % Hazd Costs) 29,669 1 1998 7
Plan Check/Bldg Perm2s~CAy Fees/Pssess 64,755 4 1998 1
Off-Site Re[plrements 57,722 3 1999 1
In-L~eu Fee 0 4 1998 1
Corrst/Bwld ~Outpn-SRe Improv ($76PSF Bldg) 577,220 4 1998 4
Testing and Inspechons 7,500 4 1998 4
Cor~struc[~on Pertormance Batd (1 5% const) 8,658 4 1998 7
Real Estate Taxes During Construdion 2,571 4 1998 4
Comtuchon Insurance ($4PSFJYR) 22,785 q 1998 1
Sirvey/Title Insurance (Land Take-Dovm @ STart of Const~ 10,000 4 1998 1
Legal, Consutting, Acdng, Admin 30,000 7 1998 9
Marke4ngandAdveRismg 20,000 6 1999 3
ConstructionCordmgency (10% Const) 59,338 4 7998 3
Ro~ect Mgmt (! 0°/ Costs NIC Lantl/Finanang & Tanes) 63,535 4 7998 6
FINANCING PARAMEfERS
~_. _....-- '-~----
-•- ECANOMIG PARAMETERS
-._.... ---...._ --
--'-
Amount
~
~~ Amount
Construction Loan Fundmg - Ap1s (%o} Perm Laan Amq ~~
~
NA Condommium Value ~~ ~
Consh'ucLon Loan Fundmg - Condos (°/ of Ro~ected Value) 75% Value Based on Sales Raes $1,781,263
Coristruc4on Loan Fees (%) 1 5% Value Based on Coristrudion Cos~ $1,465,227
Corstruct~on Loan Interest Rate (%) 9 5% ConstrucUOn Loan AmourK (/5% LTV ~- Sales Prwe) $1,335,947
Annual Inllation Rate - Rerds, CosTS, Expenses 3 0%
Total Value of Condominwnu $1,787,263 Annual Inllation Rate -- Roperty Taxes 2 0%
Condo Sales Transacdon Costs 8 0%
Cash on Cash Retirn Tfreshold 50%
Developer Contribution af Equdy (%) 100 0%
RofR fram Sale to Developer Nk) 100 0%
Max. Acceplable Residual Land Value Reduchon 15 0%
Page 4
HFUnAkn, Rabuwvih& ALschuler, Inc CilyofSnntaMonice Runt Ot-Feb-98
SUMMMY - SCFNAFtlO i4-A Contlortunmm wrthout Incluzionery ilaismg Reqwroment, Smell La, rogner-Nnooa nrea
SOURCES NJD USES OF FUN[7S 799F3
. .- __ __ _
,.
.. _ CqSH R.OW UPON SiABIUZA110N CH PROFIT UPON COMRETICN OF CONDQ SNLES (1~398 $L_
f~rGSr~
Total ibn;ent Bldg fotal F'arcent GSF Eiltl~ PSF
SOUIICES
~~~ ~ ~
-._.
Gro~;s F>dennal Incare~3ilss Rewnue
_-".-
--..._ .. __
_
~
~leslleve~iib ~Ccndcriuniunn $2,134,032 1159Y(+ $28098 Gros3PrnenlralFk3ntallrxOn» 50 00% 7,595 000
Land Equiry 576,563 31 3% 75 91 Gross Potenl~l Seles Fbuenue 2,319,600 100 0% 7.595 305 41
(:7eh Gquiry 068,704 =47 256 114 3B Less vJCanc+/RBtl deb[M~leCtion IoES9 0 0 0% 7,595 0 00
I cAal Soun[:s u
$1,841,891 100 04G 5242 51 EFfeclrve Gross lncanel~Ies Revenue E2,319,600 100% ~~ ~ 7,595 305 41
USFS I.ess Opor~ting1S31es E~erees
Nla;dtetllandCa;t $576,563 313% $7591 AFerln~:nlFxpar~sas 0 00% 7595 000
f?~molilicx~ IO,OOD 0596 00`N, Sak3sExpen:.rs ~185,56~ _;80% 7,595 (2443)
f~re-d~elopmcrit 3ud~ll+nalysis 10,000 O S% 00'K Tobl Operatmy/3ales ERler~sea (y185,568) _
-80% 7,595 (24 4~
NchitecturoandEnginaermg 33,138 18% 00%
l~lan ChW~ldg Permils/Qry Fe~;/Assesa fi5,086 3 5% 0 0% Net Op InconxiMet ~lea Revenus 52,134,032 92 096 1595 280 9B
In-LIOUFee 0 00% 00% ~
Otl-Srtefiequiren~enLS 64,550 35% 00%
CorutBuild-Ck~t/S11e Imprw + f~tenhm 645,575 35 0% 0 0% Lbbt SerHCO - Apartmen6 0 0 0% 7,595 0 00
Tesliny anA Ir~spocnors 7,500 0 4% 0 0% NIX Op C2sh Flav/N01 Sales Revenue $2,134,032 ~ 92 0% 7,595 280 98
C'qrs[ruchcxtF'erfomHiweBOntl 9,684 05% 00%
Fk;~alEsfatefaxes[hrul,mse-u(.ySales 4,284 02% 00% l.~sfbveloprtt;n[Ccets (1,841,891 =794% 7.595
~ (24251)
Corslruclim In&urar~ 22.785 1 2% 009L Profu ~~;s) $292.141 12 fi96 7.595 38 46
SunreyandTitlolreurance 10,000 05% 0096
Logal, Cmculung Accing Admin 30,000 1 6% 00% PHYSICPL, F.CONOMIC/WD REdJLATORY PMM9EfEI~1S
MarkeunganhA~Nenisinq 20,600 11% 00% Nnount
C;ons[ruc~ionCon~ingency 68,264 37% 0096 LIXSze(SF) 7,500
Construc[im Maregement 69,622 3 8% 0 0% Ecmomc A~ (l.ower- Pnoed or Wghei-Fnwd) 11i9her
Corstruchm Loan fee 23,259 1 3% 0 0% Totril Nlowablo Urnts 5
Coretutiqi Inlamst 165,648 9 0% 0 0% Number d Marke[ Rate Uni~ 5
f''[irmanent Lcen Feo 0 0 0% 0 0% Num6er d Aflorc9ble Unrts 0
S31es 4k~nod (~e2ling [xpersE~ 5,125 D 3% 0 0% Type of Unhs 2bdl2ha
fo~l Uses $1,841,89f ~ f 00~0% 5242 51 S~ze oF Marl~l f}ate Units (SF) 1,519
Sze oF Affordabla Units (SF) 850
Tolal Cost pE;r Urnt §368,378 Building F]fcency Fac[or (96) 100%
To~l Coct per Urnt na inr.ludiny Land $253,066 Grcss BuAdny Area (SY~~ 7 595
Requimd Parkin~ SpecES (1 lavel below ya~) 10
FINANCING SUMMAl1Y
--~~~~~~~ ~ ~- ~ ~-- ~ " AmourY RF.SIIXIF~LANqVPIUE-CpNDOMINIUMS
Funding CSte - Cors~rucliai Loen Nw 1999 ~ ~ ~~ ~~ ~ Mnount ~ G:,F DI~ PSF
Inler[3st Ne[e 9 5% Net Seles FY~venue E2.134,032 528098 _
5284 54
Amortizahon Term 17 Mcxrths Lms Developrrnnt Costs (NIC land) j1265,32B) ~166~ _~68 71
MaxurumLcen to Val~n (Prqe3cte~ Ratio 75% Inves[menl Value _
5~8,704 11438 $115 B3
Prqectetl Vdlut3 of Cmdoirrnlums 52.319,600
L~s Cbvelaqx Prafit @509h d E9uiry (288,281) ~37.9~6' _..~.4~
(2sh Q~rdrt) ai Cash (Eqwty) ReNrn 50 7% Residual Land Value 5580.423 $76 42 577 39
1998$FiBSid~all.andValue 5547,104 57203 SM95
Faga 1
Hamilbn, Nabinovitr $ Alachuler Irc Ciry af Sente Monce Run 1 01 -Fab-BB
Condominium without I~IUSio naryHouaing Hequtom~nl, Small Lof, Ifipher-Prcad Nos
CMITAL CASH FLOW - SCENMIO tI-A
TOTAL 1988 1997 1998 1999 2000 2001 2002 2003 2004 2005 ~2006 2oW 2008
Sovices d Funds
ConstuclionLoenC`aws 1550,593 790,119 744,854 15,620 0 0 0 0 0 0 0 0 0 0
PrmanentLoenFunding 0 0 0 0 0 0 0 0 0 0 0 0 a 0
Gros5lrcomB/Sales Hevenue 2,318,800 0 1,375,257 849,343 0 0 0 0 0 0 D 0 0 0
Less SaNS Cosle (185,588) 0 (110,021) (75,5A7) 0 0 0 0 0 0 0 0 0 0
Less Op EzpMameowner Assx Fees 5 125 0 (4,375) _ _ (750) 0 0 0 0 0 0 0 0 _ 0 0
To[al Sovicea ol Funds 3,878 500 790,119 2,005,71 B 883 885 0 0 0 0 0 0 D 0 0 0
Uses oI Funtls
AllocetedLendCosl 578,583 576,56J 0 0 0 0 0 0 0 0 0 0 0 0
Oamohbon 70,00~ 10000 0 0 0 0 0 0 0 0 0 0 0 0
Pre-DeVelopmant Sludrea~Anulysis 10,OOD 10,OU0 0 0 0 0 0 0 0 0 0 0 0 0
lvch S Engmeeing Costs 38,138 29,824 3,314 0 0 0 0 0 0 0 0 0 0 0
PlanChck/BltlgPrmts/GtyFaeS/ASSess 83086 05,086 0 0 0 0 0 0 0 0 0 0 0 0
In-Liau Fae D a 0 0 0 0 0 0 0 0 0 0 0 0
qf-SitaRequraments 64,558 0 84,558 0 0 0 0 0 0 0 0 a ~ ~
ConaVButld-OuV~-Srtelmpovements 581,018 129115 451,903 0 0 0 0 0 0 0 0 0 0 0
neront~on @ io% sa,sse o ea,sse o 0 0 0 0 0 0 0 0 0 0
Teshngandlnspeclions 7.500 1,667 5839 0 0 0 0 0 0 0 0 0 0 0
Construc4onPatarmerceBond 9,884 8,684 0 0 0 0 0 0 0 0 0 0 0 0
RBdEs~elaTe%BS~uringCOnsYUC~lon 4.280 938 3,34~ 0 0 O 0 0 0 0 0 0 0 0
Construel~onlnsurenca 22.785 22,785 0 0 0 0 0 0 0 0 0 0 0 0
$ufVByandTlllelnSVaroB 10,000 IO,ODO O O O O O O O O O O O O
Legd, Consuling, Acctng Admin 30 000 13,333 13.333 3,333 0 0 0 0 0 0 0 0 0 0
MmkahngandAdvahsing 20,800 0 20,800 0 0 0 0 0 0 0 0 0 0 0
ConskucbonConbngeroy 68,286 0 88.264 0 0 0 0 0 0 0 0 0 0 0
Pro~ectMenagement 68,622 8,181 49,145 12,288 0 0 0 0 0 0 0 0 0 0
P9maneMLOanF¢9 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Cana4uchonLoanflepeymanl 1,789,70U 0 1280881 4]6,839 0 0 0 _ 0 _0 0 0 0 0 0
TotelUseadFunda 9,387,358 887,185 2,005,718 484458 0 0 0 0 0 0 0 0' 0 0
Net Pro~act Cesh Flav (Equdy) 292.141 (97,088) 0 389.207 0 0 0 0 0 0 0 0 0 0
Cumulatrve Cush Flw+
__"_ (97,088) (87,~88)
___" 292,141
'____ 0
_ 0
____ 0
_'_ 0 0 0 0 0 0 0
ConstuctionLoen 9alunces
0
0
0
0
0
0
0
0
0
paus
Loan Fees Q 1 5% 1550.597
29 2`.~9 790,119 744,854
23,259 0 15,620
0 0
0 0 0 0 0 0 0 0 0 0
Accruedlntresl(a95% 185848 77,5J1 110,492 17B7B 0 0 0 0 0 0 0 0 0 0
Less Repaymenta 1,738,700 0 0 1,738,700 _ 0 0 0 0 0 0 0 0 _ 0 0
EndinBBak~rce 0 850,808 855,298 (1,70B,20S) 0 0 0 0 0 0 0 0 0 0
Pope 2
Humtltm, Aebnom4 & Alschuler, Inc Qry of SmW Mmice Run 1 01-Feb-90
Condommum witliaut Indunionery Houang Requiremen6 Smell Lot, Higher-Pncad Area
ASSUMPTIONS. PART 1- SCENARO ~4-A
DEN9TV PARIUNG
-~~ -------.......-- -.....---..._.._.. ---- ...-
maunt --'- -..._ _ ..
-~nt
Lot See (sQ 7,500 Required Pakng at 2 SpacesPa lhit -~ Market Rate ~~ 10~
Alley Area Cwnted (sfl 500 Reqwred Pakhg at 1 5 SpacesPer l,hil - ANordable 0
SlteArealncludng Alle~ Pa~m (s~ 8,000 Reqwred GuestPukng et t SpacePer 10 Lhits (rounded) 0
Zmng R2 Total Paking Spaces Reqiiretl (1 level below grade) 10
Mewrcum Sde AreaNnd (slJuniQ 1,500
Mewmum Base Umts/Sde (rounded) 5
297G Dens~y Bonus (raunde~ 0
Total Allowable l.hrts 5
UNITS
__.._.....'_ "~_.' __
-~
Amaunt
Nu mher ol Market Rate Apartmenffi ~K~
Ni mber oF Affordabla Aparimenis N4
Number ot Lox Incame AlA
Number ot Moderete Income t~14
Nu rtber of Merket Rate Cmdomnn~ms 5
tJu irber of Arordable Condaminums 0
Num6er of Lo.v Incame 0
Number of Maderate income 0
Type af lhits ~, 2bd/2ba
EcmomeArea(lnwer-«Hgher-Prked) Hgher
SizeolMarketRatelhits (sQ ~,s~s
Size otAfhrdable Uruts (sQ 850
Building Efliae~cy Facta (%) 1 W76
Gross BwkJug Area (s~ 7,595
SCHEDU4E
Amaunl
SWriPre-Developnent (mq~yr) 111I9B
Pre-De~elopmaitPeriod (mmMs) 10
Sfnrt Cm struciim I 1/f /88
ConsW chm Perod (mmths) 9
End ConstrucLm 7/31/99
S1ertLease-Up/SalesPerbd 8/1/99
Mmhs to 100%Laase-Up N4
Maihs to 1D0% Seles 8
I ~..~e-Up/Sel-Oul CamplaUm 3/31(00
INCOME
-'-
- 199 1 7998 ree t
Flent Sales Price Sal~ Pnce mmM~s
APertmenl Rait (per mmhJ W1
MeAcet Rate W1
AtAxdable Low Income W1
Affordeble Mod Incoma (Lower of Market a Mod f7mt) ~l4
Cmdommum Sales Prices (ps~
Market Rate $293 00 $445,067
Affordable Low Income $80 13 $68,108 ~er Qdnance 1615 Program Gwdelnes, 1990)
Afkxdeble Moderape Income $152 12 5129,306 (Per Ordnance 1615 Pragram Gudelnes, 1998)
OPERqTINGFJ~ENSFSANDPAR4METEpS _
Amauni
Apartment Bad DebyCo~lechm Loss Pa~ i~14
Apartment Leasng Commissims ~l4
Operatrg E~enses, Includhg Resenres (pa unit per yeer) ~lA
Homeo~+nar AssoaaGm Fees (per unrt per Y~) 53,000
Pege 3
Hamdron, Habinovrtz 8 AGchuler, Inc CRy of Santa Monica
Condomm~um: wRhout Inclusionary Housmg Requrement, Small Ld, Higher-Pncad Mea
ASSUMPTIONS PART.2_=SCENARIO 74-A___,____
LPNO
------ --..__-... . Amount
Land Cost - Lower Pr~ced Areas ($PSF) S75
Lantl Cast - Wgher Praed Neas ('SPSF~ NA
DEVH.OPMENT PARAMETERS rilC FINMICING) _
DemolR~on
Re-Development Studres/Analysis
Nchrtectural & Engineermg (5 % Hartl Costs)
Plan CheclqBldg PermiS~CAy Fees/Assess
OTf-SRe RequremenLs
In-~L~eu Fee
Const/Bwld-Outpn-SRe Improv ($85PSF Bldg)
Testmg and Inspections
Construction Performance Bond (1 5% co~tJ
Real Estate Taxes Dunng Construdion
Construction Insuraace ($4PSFJYR)
Survey/TRIe Insurance (Land 7ake-Down ~ S4irt of Canst)
Legal, Consumng, Acctng, Admm
Marketing and AdveMSing
Construction Corrt~ngency (10% Const)
Ro~ect Mgmt (/0 % Costs NIC Land/Finanang & Taxes)
FINANCING PARAMEfERS
ConstrucUon Loan Funding - Apts P/, of Perm Loan Artth
Construction Loan Funding - Condos (%o} Ro~ected Value}
Construcdon Loan Fees ( %)
Corrstruchon Loan Interest Rate (°6)
Tohal Value of Condaminiu~
1~98$ Start Start Quarters
Budget Quarter Year to Spread
10,000 4 - ........- 1998 1
10,000 1 1998 4
33,136 1 1998 7
65,086 4 1998 1
64,558 3 1999 1
0 4 1998 1
645,575 4 1998 4
7,500 4 1998 4
9,684 4 1998 t
4,284 4 1998 4
22,785 4 1998 1
10,000 4 1998 1
30.000 1 1998 9
20,000 6 1999 3
66,276 4 1998 3
69,622 4 7998 6
ECANOMIC PARAMEfERS
_
~~ Amount
~~ Amount
NA CondominiumValue
75% Value Based on Sales Rices $2,319,600
1 5% Value Based on Comtrudion CosCs $1,841,891
9 5% Construction Loan Amourrt p5% LN - Sales Rwe) $1,739,700
Annual InAatian Rate -- Rerds, CosTs, Expenses 3 0%
$2,379,600 Annual Inllatian Rate - Roperty TaKes 2 0%
Condo Sales Transachon Costs B 0%
Cash on Cash Rehrn TFveshdd 50 %
Developer ContribuGon o} Eqwty (%) 100 0%
Rotd irom sale to Developer P/ ~ ~oo o%
Max Pccepla6le Residual Land Value Reduchon 15 0%
Run 1 01-Feb-98
Page 4
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~ ry ~ ~ ¢~ =71L'iJ~~ ¢ ~ CZ C
~ ~ Z ~~(~'~ ~S ~~i ~ Y' ~ ~ ~
a'~ Q~ ~ m m° `[' ~$~`~01 ~' ~~ ~ ~~'~ ~e U~'C ~ O ~2 m ~~ d m~
'> ~ ~ m~~~ ~u'S ~ ~ ~ U mm` ~ ~YO~- v7' a~ `,9, ~- a
E ~¢° ~ ~ba~~ @~w~ s~ ~I ~~~~~~~W°~ y~ `°~~$~ ~~~
r~'~ ~ m~'~~~ ~`$i~ p° ~p° a3' "~aS~'8~o8 s` 3!g~ ~ I ~~ p J g~ gD~
~i um~ ~ ~C7C7ffi.~ ~<r`~o fii °t5 r ~~o>>~HN~!tl~a ~I ffim~'~~ ~~'~i
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i
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~C Cp7m ~OQ~I(1 OvOOCIfG00~0001+fO00fOV.~1AN<~ O~~ ~ m ~
~~ IQ K i1K' ~ ^ ~ ~~' N ~
myQL i ' y
m ;
~ ~~ ~~~~~ ~~~~~~~~~~~~~~~~~~~~~+~
~p Nm NtOV ~ ~ON O P~OMN ON lh~
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~ ~ ' ' '~
' IDI ~O ~tD~p O~DOf~ 00ON ^ V^? O~O C~Of PJN ON I~M1(D O~
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I N W Yl S ]
I[~
~ ~ a --
~ ~ ~ ~~ ~n
~ ~ ~+ ° $ ~ `o_
~ ` g' ~ ~~~ ~ ~ ~ ~ ~, d~ -~
-~ .. a m~ a I~ o~V t3
L o e ~ ~ ~ ~,~>- ~ o ~ a~ ts
¢ A o ~~6b m~~~ ~S u~ a ~ i~.^~,~~~ ^m$
m Z ~n: ~ ~~,~-_°'E~ ~°-~,~-~~~~~~~~~~ ~ a~`~'~~~ 2$
~ `~ m ca o~ ~ c- c= f ~ Y~
n ~ ol g~t ~~~~? aw_°~~~~~a~~~-~uy ~ S~~oa ~a
~ r ~ _r~~ ~~$;~~~jm5fl5~5~~b"a~~n3 s`3p`3 ~~ ~m€$Sm ~ti
w ,i~~ww°~ =~'63 m ~a~ ~ v..`~`~~2~~'iA --r zl ~~~ ~v ffi~
~ ~ T v~°r~ r° ~ Ui'~E=~w~~e $~Q~~~~°~ ° eci ~. m~ ~° ~~d ~e
¢ c v~ m{ ~_ ~ m z• r cc- tf~
~ ~ 8~ ~~~~4 ya3~asa-~~8~8~3~~8888~g oo ~I ~~€~~~n t4~
~
Hamilbn, Rabinovih BAlschuler, Irc Cityd Santa Monca Hun I Ol -Fab-oa
Basa Caseta M~igation Fee Senertrvdy Teat on 7-Lot R2 datriet
1lpetment wrthou[ I~IUaionayNOUamg Requiament Le,paLOt, Lowr-Rk~dMea
CMITPL CASH FIOW - SCEHMIO 11-A
_.._
_.TOTAL -...-.
1998 19B9 2000
2001
2002 _
2003
2004 ..
2005
20U6 __......_
2007
2008
2009
2010
Sovices d Funds
ConsYU<tqnLoanUa.vs 2,771,698 0 2,665,699 706,005 0 0 0 0 0 0 0 0 0 0
PeimenerRLoenFundmg 3,167,320 0 0 3,167,520 0 0 0 0 0 0 0 0 0 0
Carosslrcome/Sales(50%d4monM5) 150112 0 0 150,1t2 0 0 0 0 0 0 0 0 0 0
Lesz Vacercyl8ed Debt (7,508) 0 0 (7 508~ 0 0 0 0 0 0 0 0 0 0
Less Op ExpM~eowner Assm Faes (31,827~ __0 0 (31,.827) .0 0 0_ 0 0 _0 0 0 0 0
TalelSevcasdFunds 6,a49,797 0 2,885,693 3,384,104 0 0 0 0 O 0 0 0 0 0
USBS UI ~UfItl3
AllocutedLandCost 927,000 0 927,000 0 0 0 0 0 0 0 0 0 0 0
Demobhon 20,900 0 20600 0 0 0 0 0 0 0 0 0 0 0
Pre-Development5ludiec/Analysis 15000 15,000 0 0 0 0 0 0 0 0 0 0 0 0
Arch 8 Enginaermg Coats 72,781 81,BB4 10,817 0 0 0 0 0 0 0 0 0 0 a
Plan Chck/Bldg Prmis(CllyFees/ASaesa 142,096 192,098 0 0 0 0 0 0 0 0 0 0 0 0
qi-Site Naqurementa 1i6,952 0 148,952 0 0 0 0 0 0 0 0 0 0 0
In-Liw Fee 0 0 0 0 0 0 0 0 0 0 0 0 0 0
ConstlBuild-Oul/On-Site Impovements 1,322,584 0 1,322,564 0 0 0 0 0 0 0 0 0 0 0
fleten~ionQ10% 146,952 0 146,952 O D 0 0 0 0 0 0 0 0 0
Tashng endlnepechons 7 725 0 7725 0 0 0 0 0 0 0 0 0 0 0
ConstruclionPMamenceBond 21901 0 21,601 0 0 0 0 0 0 0 0 0 0 0
RBalESle~eTaXB3DunngGOnsluCllon 9,180 D 9,180 0 0 0 0 0 0 0 0 0 O 0
ConsUuchonlnsutance 70,906 0 70,608 0 0 0 0 0 0 0 0 0 0 0
SurueyerdTtlelnsuurce 15,450 0 15450 0 0 0 0 0 0 0 0 0 0 0
Legd, Consultng, Acctng, Admin 20 B00 7,491 7 491 5 B18 0 0 0 0 0 0 0 0 0 0
MrkebngendAdvalismg 70300 0 2575 7,725 0 0 0 0 0 0 0 0 a 0
CenslruclwnConhngercy 149828 0 149,928 0 0 0 0 0 0 0 0 0 0 0
Pro~actManegement 105754 0 80,202 45,152 0 0 0 0 0 0 0 0 0 0
PamananlLOanFe9 47.510 0 0 47,510 0 0 0 0 0 0 0 0 0 0
ConshucUOnLaanRepayment 3,187,320 0 0 3,767,920 0 0 0 0 0 0 0_ 0 0 0
TolalUsesdFunde B,G19,117 226,451 2,819,992 3273,724 0 0 0 0 0 0 0 0 0 0
NelP~o~actCashFiw+(Equity) (J69,320) (228,G57) (253,848) 170,778 0 0 0 0 0 0 0 0 0 0
Cumulehve Cash Flav
"'___ (228,451) (480,099) (389,520)
""_ _'___ _____ 0
__'__ 0
_____ 0
_____ 0
'__'_ 0 0 0 0 0 0
CanstuctionLoen Belencas
Ore.vs 2771.898 0 2.885.BB3 106,005 0 0 0 0 0 0 0 0 0 0
Laan Fees @ 1 5% 41 575 41,575 0 0 0 0 O 0 0 0 0 0 0 0
Aecrued Intaezt Q 9 5% 354,048 0 199,9a9 214 097 0 0 0 0 0 0 0 0 0 0
Less Hapeyments 3,187,320 0 0 9,187,~20 0 0 0 0 0 0 0 0 0 0
EndingBahrce 0 41,575 Z805,692 (2,847,218) 0 0 0 0 0 D 0 0 0 0
Pa9e 2
Hamiltm,RabnoNtz&Alschuler,lnc Cil~otSm}aMmice Run1 01 -Feb-98
Base Case fa Lfi9gation Fee Sens~ONy Test m 3-LOt R2 ~istr~ct
Apmtment vnM~aut Induaimery Houang flequrcament. Large Lut. Lower-Pnced Area
ASSUFPTIONS, PART 1-- SCENAqO 11-A
DENSiN
-'-_ ------ -I~nT
Lot 5¢e (sQ 22,500
Alley Aree Counted (sQ 1500
StleArea Includng Alley Pa4m (sf~ 24,000
Zmng R2
Mewmum S~teAraq.Uru1 (sf/und) 1,500
Mewmum Bese UmtslSAe (raunded) 16
297G Deisy Banus (~aunder~ 0
Totel Allowable lhits I6
UNITS _
_
Amwnt
NirrberofMazketRateApeitmenis ~~ i6~
N~ mber of AMardebla Apariments 0
Num6er of Lav Incame 0
Number of Maderate Ineome 0
N.inber of Merket Rate Caxlomnwms W1
N~r~er of Affordable Condaniniums N4
NumberotLorvlncoma M4
Number af Moderate Income N4
Type of Units 2bd/2ba
Ecmomc Area (lower- w Hgher-Prced) Lower
SlzeofMarketRatelhns (sQ 1,424
Size of Affordable UnRS (sQ 850
BuiWirg ERicienq Faaa (96) 100%
Gross 8uildirg Area (sQ 22,785
PARMNG
. ~--~i~mount
Requved Pakng at 2 SpacesPer lhd - Mmket Rate ~ 92
RequiredPakngatlSSpacesPerUnrt-Afkxdeble 0
Requved GuestParkng at t SpecePer 51.hi4s (rourded) 4
Totel Pwktng Spaces Required (1 level below grede) _
36
SCHEQULE
Amount
SlertPre-Davebpment (mo/yr) 1 1 8
Pre-De~elopmeN Perlod (mmtFs) 12
S~rt Cmstructian 1/1/99
Cms4uc5m Perad (mmths) 12
Fntl CmstruCGm 12/31/99
Start Leasa-Up/Sales Period 1 /1/00
Mmfisio f00%Lease-Up 9
Mmfis to t009G Salas fy4
Lease-UpJSeI-Out CompleUm 9/30/00
INCOM~
1998 8 8 ree t
Fle~H Sal~ Priee 3ales Price 1mrnihs
Aperlment Rent (per mmri) 0
Ma(ket Rate §I,965
Afbrdebie Low Income 3731
AHordableMod tncome(LowaolMeAcataMod Pont) $1,218
Cmdommum Se~esPrices (ps~
Market Rata l~14
Afiordeble Low Income W1
Aflordeble Maderale Income t~W
CPER4TING F~6'ENSe9AND PAR1MkTERS
AmauM
Apartmmt Bad DebVCollecYm Lms Rab 5 036
Apmtment Leasng Commiss~ms 0 036
OperaErg E~eisea Includng Reserves (pa unrf pei yeer) 52,500
HomaownaAssoantimFeea(perunRperyeer) N4
Pepe3
Hamdlon, Rabinovi4 $ Alschule~ Inc Cityot San~a Monica flun 1 01 - Feb-~98
Base Case for Mrtiga[ion Pae Sen&trvity Test on 3-Lo[ R2 Distnct
Aparlmen[ wrthout Inclusionary Hougng Requ~rement, Large Lo4 Lower-Pnced Area
ASSUMPTIQNS, PART 2- SCENARIO 11 -A
LANO
Land Cost - Lower Pnced Ar~s ($PSF)
Lantl Co~ - Wgner Pricotl Areas ($PSf)
DEVELOPMENTPARAMEI'ERS (NIC FINAN
Damulnion
Pra-~Developmenl Studies/Analysis
ArchiOectural & Engineering (5% Hard Costs)
Plan Cheek/Bldg Permds/City Fees/Assess
Otf-Srte Requvemen(s
In ~-Lieu Fee
Const/Budd -- OutJOn -Site Improv ($67JS33 PSF Bldg)
Testing end Inspechons
Constructan Pertormance Bond (1 5% cons~
Roal ESate Taxes Dunng Construclion
Conarucnon Insurance (54PSF/YR)
Surveylfltle Insuranc~ aand Take-Down Q 5t.ut of Const)
Legal. Consul4ng. Accing, Admm
Marketng and AdveAismg
Constructwn Contingency (10% Const)
Pro~ec[ Mgmt (5 0% Cos[s NIC Land/Financmg 8 Tanec}
Amount
5ao
NA
No of
1/98$ Start Start Quartere
BuAget C~uartei Year to Spread
~ 20~000 -~---j' - ..-_. 19ss --.....- t
15,000 1 1998 4
~2.781 1 1998 8
142,096 4 1998 1
142,671 4 1999 t
0 4 1998 1
1,426,714 1 1999 4
7.500 t 1999 4
21.401 1 1999 1
9J80 1 1999 4
68,355 1 1999 1
15,000 1 1999 1
20,000 1 1998 11
10,000 3 1999 4
145,561 4 1999 i
105,354 1 1899 7
FINANCING PARAMETERS
Amount
Constructnn Loan Fundmg - Apts (%oi Fprm Loan Amt) 100%
Constnx;h~xr I. qdn Funding -~ Condns (96 nf Prn~~:icd Value) NA
Cunstmcnon Luan F"ees (%) 1 5%
Constructan Loan Interest Rate ~`36) 9 5%
Condo ValueNnit -- Lower Priced Area NA
Condo ValueNnit - Highei Riced Nee NA
Conslructwn Loan Amount - Condos NA
Permenenl Loan, Apts
M inimum Debt Covarage iia6o 1 15
Maximum Loan to Value -LN (Pro~ected) 75%
Interest Rate (%) 8 0%
Amortiza[ion Term 30
Cap Hale 8 0%
Funding Yenr 2000
Funtling ~uarter 4
ECONOMIC PARAMEfERS
Amount
Apartment Value '
NOI, Ap[s (95'R, Occup less op oxpenses) 5337,847
ValuollasodaiCaplaaleApproach $4,223,093
Value Based on Construction Costs a3,536,640
Stabil¢ed Value (Cep Rate Approech) 54.223,093
Cohstructron Loan Amount p5%LN) 53,167,320
Permenen[LoanAmount -
Lesser ol DSC or 75%LTV 53,167,320
Annuat Intlation Rffie - Rents, Costs~ Expenses 3 0%
Annual Inflation Rate - Roperty Taxes 2 0%
Condo Salea Trensa:twn Cosfa NA
Cash on Cash Retum Threshold 15%
Devebper ConUi6ulion of Equ~ry (%) 100 0%
Cash Flow hom Operadors to Developer (%) 100 D%
Mex Aceepteble Residual Lend Value Reduchan 15 0%
Pege 4
Hemdtm, F~binovitz& Alschu@r, Inc City of Santa Monca Run 1 Of -Feb-98
f3ase (Ase for Mrtipanon f~~txa SenE:rtrvity Tea[ on 3-Ld H2 D~etnct
Apartmen[ withaut Indusiona ry Hou31nU fieqwrt3mon4 ~~9o La, Hi~he~-Prlcod AraB
SUMM/WY ~- SIX=NAR10 12-A
SOURCES /WD USFS OF FUNDS~~
_ . - ._ . _ _
._.. __. CASFi RGW UPON STA6IUZATIIXJ OFi PFi0F1T U WN COMFLETION OF CONDO SALE
-. _ . . __. . S (2000 $) _
_
4'erGSF
Tolal Fert;ont E31~ Tulal
...-_ Pert:ont
_-_... NFW
-....
.._ PSF
_
SnURCF_S ~ ~~ ~ ~ (~rtas PIXOnhal Incorna/S31zs Re~.enug .
Pertrrar~enlLmn -Apanrr~nLS $4,12t,731 893% S160B7 Gres,Po~nlelRen[allncort~ $5t6,327 1358% 22785 2266
Land Equiry 1,622 250 35 2% 71 20 Gross Polenlel Sales Fk±~renue 0 0 0% 22,785 0 00
Cash F_quity ~130,270 _-24 5% _ j49 ~ L~ vacancy/tad debl/collaction lass ~25,8161 __=6 B% 22,785 -1 13
To[al Sourtrs $4,613,111 100 0% 5202 46 Elfec3me Gross Incqne/S21os Fievenue $490,511 129% 22,705 21 53
USES I..ess Ope2tmg/Sales [~erx~s
Nloc..~ladLanACa;t $1,622250 352% E7120 A~rtnterrtFxponses (50923) -134% 22785 (223)
Ikinlfllllal 20,600 OA9f. 090 Sakr'Exp[3nSw 0
~
~ _ 00% 22,705
~ _, OOD
R~-tle,elopmcnt Sudies/Malysis 15,000 0 3% 0 66 ($50,923)
Tohal (~erdtin9/~Ias E~¢~enses
~ -13 4'7~ 22,785 (2 23)
lvcbitecturoandEnginesring 82,963 1B% 364
FlanChk/E11ck7Portnits/QryFe~(Assess 142,756 31% 627 NotOp Income/SaI~fHMenue 5439,SB7 896% 22,785 f929
(~I-Srto Requrt3rtiettls 167,617 369G 7 36 ,
In-Li~uFee 0 00% OOD
Cc,ic;V}3wltl-~OuV~tulmpraia~F~tenliai 7,676,165 363% 7356 ~blS~rw[;e-/1part~renLS ~366,0701 _-746`X, _22,785 _{1607~
Ttr~ungandlm[~'.I~urx 7,725 0296 034 NelOp C2shFlcw/NetSalesfbvenue $73,518 150% 22,785 323
Constrix;hnnik±d~r~i~iweCfond 24,410 059G 1 W
Fk:alEsFUlelarssthruLuse-upJSales 16,085 03% 071
Corelnctimlisurar~ 70,406 15% 309 PHYSICfV_,ECONQNICPNDREdJLAT077YPARAMEfEfiS
..._
...--~....
SLrveyantl litlelrnu2nee 15,450 0396 068 - . ... -.. . Mioun[
Lc3yal, Consul[ing Ac~tng Adnin 20,600 0 4% 0 90 Lal Slze (SF) 22,500
MarkennganUACNemsing 10,300 02% 045 EconomcArea(LOher-Pno3UOrliigfpr-Pnced) Higlx3r
Coretrucl~ai 0orning[incy 170,903 3 796 7 50 Tolal Nlpvable Unrts i6
Convtrur,tim Akii~a47ement t 18,099 2 694, 5 18 Number d Marke[ Rele UmB 16
Corstruclion L.cen ~ee 54,087 1 2% 2 37 Number d Aflac9ble Unrts 0
CorHlruc:li0n In[en~,3t 461,653 100% 2026 TyExi of Urn6 2bd2~
~menen[ Lwn F~o 61,817 1 9% 2 71 9ze oF Marl~t Fla[e Uni~ (SF~ 1 A24
Lmce-up Lkir;rt (9irplis) 145,7~ -3 2% 6 40 9zo of /Uforctdbls Unrts (SF) 850
lobl U;es 54,613,1 I I 100 096 _,_
5202 46 Builtling FJf~c~ency Fac[a ('1G) 10096
Gr~s Buddng Area (S~) 22.785
To41 Cost Ear Unrt $288,319 Roquired Parking SFec~ (1 level beluv ga~) 38
Total Cost (ier Unrt nU includingl.and $786,929
FINANCWG SUMMARY fiESIDUPL LPND VALUE - APARTMENTS
~
-
-
--- -'--... - -
Amount --
.'-'.- fi3r C;SF
-. Per SF
Funding ~to - F'ermanent L~n Or.t 2000 14nourd [ildc~
~ Land
InterestFk~te 80% NetOF:vatinglm,are(hcmabove) 5439,587 E1929 E~954
MiortizaqmTerm(Yea~s) 30 Sletnl¢o[1Valuo 5,494,842 24116 24422
Minimum De6t Cv~era~e Rano t 15 Ltss 3ales Cmts d 8"6 (439,58~ (19 2~ (19 5~
Mex~rrumLCen 1~ thalu3 (Prqecte~ FlaUO 75% Less ~velcpmen[ Cce[s (NIC Land) (2,980,861Z _~1_~ .~132 93
S[aal¢edValue d A~aAtt7enb (Cap Ralo Ap(7rovr,h) $5,494,842 Investment Value 52,503,991 E10990 5111 29
Qsh (Afl~ Debl Senrc:e) on Qsh (Eqaity) fleturn - Less Lbveloper Prdrt Q 2596 Cost 47,7~ ~~ (33 23~
k Sabihmtl (kcupan~y a Canplenon 14 9% Flesid~l Land Value 51.756265 577 OB S78 06
1998 $ R9sidsl Land Value 51,655,449 S72 66 S73 SB
Paga 1
Hemdbn Rabmovih 8 Alschulei, Irc Ciry d Santa Monce Run 1 07 -Feb ~ BB
Basa Cme for Mitigahon Fw S~nsRrvlly iest on 9-Ld fl2 Dutict
Apalmant wtlhout Irclusionry Houamg Hequ~amen4 Luga Lot, Migha -Rieae Area
CMITPL CASH FLOW - SCENMIO 72--A
TOTAL 19D8 1999 2000 2001 2002 2003 2004 2005 2008 2007 __2008 2008 2010
Souces d Funds
ConsYuchonloanRmvs 3,605,387 0 3,479,823 125,774 0 0 0 0 0 0 0 0 0 0
PwmanentLoanFundmg 4,121,131 0 0 4,121,131 0 0 0 0 0 0 0 0 0 a
Gioss Ircome/Sales (5076 d 4 monlhs) 193,623 0 0 199,823 0 0 0 0 0 0 0 0 0 0
Less Vocaney/8ed Debt (9,881) 0 0 (8,881) 0 0 0 0 0 0 0 0 0 0
Less Op EKpM~eowne~ Assac Feea 38,192) __ 0___ 0 (J8,192) 0 0 _ 0 0 _ 0 _ 0 0_ __0 _ 0 0
Total SovCes ol Funtls 7 872 278 0 3,179 823 4,392,851 0 0 0 0 0 0 0 0 0 0
Uses ol Funtls
Alloceted Lend Cosl ~ 822 250 0 1 822 250 0 o D o 0 0 0 0 a o 0
~emalihon 20,800 0 20800 0 0 0 0 0 0 0 0 0 0 0
Pre-Development ~udiaslAnalyeis 15,000 15,OD0 0 0 0 D 0 0 0 0 0 D 0 0
NehBEngineamgCosls 82983 70,518 12444 0 0 0 0 0 0 0 0 0 0 0
PlanChck/BltlgPrmta/CityFbes/ASSess 192,758 142,758 0 0 0 0 0 0 0 0 0 0 0 0
qf-SRaRoquramonts 18]817 0 187817 0 0 0 0 0 0 0 0 0 0 0
In-Lieu Fee 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Const/Budd-OuyOn-Sitelmpovemenls 1,508,548 0 1,508,548 0 0 0 U 0 0 0 0 0 0 0
PeOanhan@ 70% 167817 0 18],817 D o 0 0 0 0 0 0 0 0 0
Testmgandlnspechons 7,725 0 7.725 D 0 0 0 0 0 0 0 0 0 0
Conslruel~on Perfamance 8ond 26,610 0 24,010 D 0 0 0 0 0 0 0 0 0 0
RBaI ES~etB Texes Dur~ng Ganst uCtlon 16.OBS 0 18,083 D 0 0 0 0 0 0 0 0 0 0
Construchonlnsurenca 70,/06 0 70,408 D 0 0 0 0 0 0 0 0 0 0
SurveyendTdklnsuarco 1545D 0 15,450 0 0 0 0 0 0 0 0 0 0 0
Laqd, Consultng Acctng Admm 20,800 7,491 7 491 5,818 0 0 0 0 0 0 0 0 0 0
MakelingandAdvabsing 10,300 0 2,575 7725 0 O 0 0 0 0 0 0 0 4
ConstruebonConhngercy 770,903 0 170,803 0 0 a 0 0 0 0 D 0 0 a
Pro~actManegement 1IB,OBB 0 67,085 50,814 0 0 0 0 0 0 0 0 0 0
PHnlBnenlLOanFae 81,817 0 o B1,B77 0 O 0 0 0 0 0 a 0 0
ConstructlonLoanRepeymenl 9,121.731 0 0 4,721,131 0 0 0 0 0 0 0 0 _ 0 0
TotalUsesdFunds 8,364,257 2J5,765 9,881,587 4,246BOS 0 0 0 0 0 0 0 0 0 0
Nal Pro~ect Cash Flav (Equrty) (691 980) (2]5,785) (401,984) 145.749 0 0 0 0 0 0 0 0 0 0
CumulelrveCeshFlox
_"'_' (2J5,785) (837,728) (491,980)
_____ ___'_ '_"_ 0
_____ 0
__'_' 0
' 0 0 0 0 0 0 0
Canatuction Loen Balancea
p~s
3,605,387
0 3,478,823 125,774
0
0
0
0
0
0
0
0
0
0
Loan Fees Q 1 5% 54,081 54,081 0 D 0 0 0 0 0 0 0 0 0 0
Atcrued~ntaest@95% 48185~ 0 182,880 218,973 0 0 0 0 0 0 0 0 0 0
LessRepeyments 4,121.131 0 0 4,121,131
"" 0
_ 0
'_ 0
_ 0 0
....' 0
__'..... 0 0
.._....._ 0 _U
EndmgBalerc~ _
0 _..... "_
54,OB1 3862,308 (3,718,984) 0 0 0 0 0 0 0 0 0 0
Page 2
Fiamdtm, Flnbnowtr & Alschuler Inc Ciy of Smta Mmwa Run 1 01-Feb-98
Base Case for Mi4gatim Fee SensihNry Test m 9-Lot R2 Dis6iet
Apmtmart nnlhwt Inclusimery Flauang Requrement, Lnrge Lot, W~er-Pnced Aree
ASSUIuPT10NS PART 1- SCENAHO 12 ~ A
DENS'fY
_
--._..........` ---.._ ..- ---'----------- -- PARbNG
..
..---
~
maunt
Lot S¢e (aQ 22,500 Requvad Pakng at 2 Spaces Per lh~l - Markat Pate ~ ~~~ 32~
AIIeyAreaCounted(sQ 1500 RequvedPakhgetl5SpecesPerLhit-AHordeble 0
SiteArea Ineludng Alle~ Pa~m (sQ 24,000 Hequved Guest Pazkng et 1 SpacePer 5 Lhib (rwndedJ 6
Zmng R2 TotalPakingSpacesFleq.~ired(flevelbelowgrade) 38~
Mewrcum SReAreryUnit (sf/unit) 1,500
Mewmum Bese Urols/Sile (rcunded) 16
2976 Dms~ty Banus (raundc~ 0
Total Allowable l.hits ' 16
UNITS
Amaunt
Number of Merket Rate Apartmmts 16
W rrber of AHordable Apwhna~ts 0
NumberoiLoxlncome 0
Numbar o1 Moderata Income 0
Nimber ol Markel Rate Cmdomniums ~1q
N.ircber of Affatleble Cmdommums Pi4
Number of Low Income rN
Number of Maderate Income rl4
Type oi lhits 2bd/2ba
EcmomoArea (lnwer- or Hgher-Prned) Hgher
5¢e of Maket fiete Lhils (sn 1,424
Siza of AHordebla Units (sQ B W
BuiNing Effwiency Facta (%) t0a16
Gross BwWing Area (sQ 22,785
SCHEDULE
Amount
SfartPre-Develapment (mo/yr) 1J1798
Pre-De~elapmentPerwd (mmihs) 12
SfartCmstrucM1m 1/1(99
Constructlon Pernd (mmths) 12
End ConstruC~m 17J31/99
Start Lease-Up/Sales Penod 1I1/00
Mmhsto 100%Leasa Up 9
Mmhs to 10096 Seles W1
Leese-Up/Sel-Oul Canplellm 9/30(00
INCOME
1 rFee ~
_ fiart 3a1~ Pnce Sal~ Pnce _~mm ~
Aputrnent Rent (per mmW) 0
Merket F~te §2,535
AHordable Low Income $731
Aflordabla Mod Income (Lowa of Merkat a Mod Fient) E1,218
Cmdaninium Seles Prices (psf~
Merket Fete P14 $0
Afbrdable Low Income PW y0
Atbrdable Mader~e Income Pl4 $0
CPERAl1NG E~ENSES AND pAR4METERS
maunt
Apartmait Bad Debt/Co1lacAm Loss Rate 5 09G
Apartment Leesng Commissirns 0 096
Opera4ng 6q~enses, Includng Reserves (pa unit per yea) $3,000
Homeowner Assooahon Fees (per unit per y mr) tyq
Page 3
Hamilton, Rabmovih $ Alschuler, Inc CNy of Santa Monica Run 1 01 -Feb-98
6ase Caso For Miligation Foe Sens~tivRy Test on 3-l.0[ R2 Dis[nct
Apartm~nt withou[ Inclusiunwy Hou~ng Roqui~emen[, Lerpe Lo[, Higher-Pncod Area
ASSUMPTIONS, PART 2_ , SCENARIO„12_-A
LAND
--...... --'-~--...._,_.__...
Amount
Land Cost - Fligha Prir,ed Areas ($PSF) $70
Land Co:~ -- Lowcr Pnced Aieas ($PSF) NA
DEVELOPMENTPARAMEfERS(NIC FINANCING)
~ ~ ~~~~
No of
1/98$ Siart Start ~uarlers
Budga ~uarler Year [o Spreatl
Uernolihon 20,000 1 1999 1
Pre-Development Studies/Analys~s 15,000 1 1998 4
Architactural 8 Engmeering (5% Hmd Costs) 82,963 1 1998 8
Plen Check/61dg Pertnrts/Crty Fees/Assess 142.756 4 1998 t
Olt-Site Reqwrements 162,735 4 1999 1
In-LieuFee 0 4 1998 1
ConsUButld-OutlOn-Sda lmprov ($761538 PSF Bldg) 1,627,345 1 1999 4
Testing and Inspections 7,500 1 1999 4
ConstructwnPerformanceBond(15%const) 24,4f0 1 1999 1
Roal Estate Taxes Ounng Conslruchon 16,065 1 1999 4
Construclion Insurance ($4PSF/YR) 68,355 1 1999 1
5urvey/Title Incurance ~antl Taka-DOwn Q Starl ol ConS) 15,000 1 1999 1
Legei, Consulting, Accing, Adm~n 20,000 1 1998 I 1
Merketng nnd Advartising 10,000 3 1999 4
ConstructnnConhngency(10%Const) 165,926 4 1999 1
Pro~~ct Mgmt (50%Costs NICLand/Fmanang 8 Taxes) 118,099 1 1999 7
FINANCING PARAMETERS _ ______
'
-_..._......". -
~ Amount
Construclpn Loan Funding - Apts (% of Perm Lonn AmQ 100%
CunsVUCtion I oan Fundmg - Condus ~%u~ Pro~acteA Value) NA
Cons[ruclionLOUn Fees (%) 1 5%
Construclwn Loan Interest Rale (%) 9 5%
Condo ValueNrnt - Lowe~ P~leed Area NA
Condo ValueNrut - Higher Riced Area NA
Conslruclibn L c~an Amount ~- Condos NA
Permanent Loan, Apte
Minimum Debt Coverage Ra6o 1 15
M aximum Loan to Velue -LN (Pro~ected) 75%
Inleresl Rale (96) 8 0%
AO~OrtI[et100 Term 30
C ap Rate 8 0%
Fundinq Yenr 2000
Funding Ouarter 4
ECONOMICPARAMEfERS _
Amount
ApartmeM Value
NOI, Apfa (95%OCCUp less op expatses) 5439,587
Vulue Besed on Cap Rete Approech 55,494,842
Value Based on Cmstmchon Costs 54,613.111
Slabd¢ed Value (Cep Rete and GRM) 55,494,842
ConstructanLoanAmouniQ5%LN) $4,121,131
Permanen[ Loan Amoun[ -
Lesser of DSC or 75%LTV 54,121,131
Annual Inflalion Refe - Rents, Cosffi, Ezpanses 3 0%
Annuel Inflation Rete - Roperty Taxes 2 0%
Condo Sales Trans~ction Cosls NA
Cash on Cash ReWrn 1'hreshold 15%
Devebper Contdbu[lon of Eqwty (%) 100 0%
Cash Flow from Oparalions to Developer (%) 10D 0%
Mmc Axepteble flesidual Land Value Reduction 15 0%
Page 4
Hamiltm, F@bvwvitz & ALschuler, Inc City of Santa Monca Run 1 01 -Feb - 98
8ase (:ase la Mili~hat Fee Sereil~Wty lest m 3-Ld f~'2 D~slncl
Caidonrni um wrthcxrt Incluaiawry Ha~mfl Roquimmo~rt, Lurge Lo[, Lcxhir-f'rK:ed Naa
SUMMARY - SC~NAFtlO 15-A
SOURCES PND USES OF FUNDS (Ab1 $) _ . ___ _ CASH FLqN UPON STA8ILIZAl70N OFI P(~FIT UPON COMF'L.EfION OF CONUO 6ALE S~'+001 $~
r~r esr- -.---- ---- -_ _.......--
Total Ftrcent
~~ 81d~c ToMdl
_.
' FHrcent
-._.- GSF Bldg
._ PSF
S(7URCtS .
(3r~s Patenhal Inca'nelSala; Re~,enue ......
.
~lesflcavemre-Cmdcminiums $4,562,234 1II4% $20023 GrossPol~nlmlRen[allncome $0 00% 22,785 000
Land Equiry 927.000 22 6% 40 68 Grnss F~utenlpl Sales f~wnue 4,958,950 100 0% 22.785 217 64
Cu~h Equiry 51,392,4451 -34 0% 61 11~ L~s vajarx;y/17t3tl debt/CdiBC[IOn loe,s 0 0 0% 22 765 0 00
Total Swrc~s $4,096,789 100 0% $17980 FJfeclrve Gross Ir~cana/~lea Revenue $4,958,950 1 DO% ~~~ ~~22,785 217 64
USf-,S L~~ Opo2hng/91es E~erses
Nlcxatetl lantl Ctx;t $927,000 22 6% $40 6B A~vrtnl2nt E7cp011SB9 0 0 0% 22,785 0 00
Oemohtion 20,600 059G $09D SelesC-jtpBnses 396,718 -80% 22,785 (17~
Pre-develo{'nrxaM9ud~es/Malyeis 15,000 04% $066 TohalOpe2ting/91osE.~ensm (5396,716) ~-809G _
~~ 22,785 (1741)
ArchitectureandFngineermg 77,306 19% E399
Plan Chkl8lcig Pertnns/Gry Fees/~sess 157,907 3 9% 56 93 NBI Op IncomeMe[ S31es Fl9venuB 54,562234 92 096 22,~85 200 23
IXf-SileFR3quirerr~en6 t58,136 3B'K 5685
In-Lieufee 0 00% $OOD
Cureth3uild-(kiUS~~o Imprw + fblennon 1,561,359 38 1% S68 53 Debt SorNCe -/partrr~nb 0 00% 22785 0 00
Tesung and Irepectiorc 7,725 0 29G SO 34 Nel Op Qsh FlavMel Sales Rewnue y4,562234 ~ 92 0% 22,785 ~~~ 20D 23
(:onSlrtiClionFY~rfUfmanCeBontl 22,738 O6% 5100
HBalEslate7axE!.^,thn~Lcvse-u~/Sak~s 9,211 02% $040 L~,sDovelopmenlCcets
{4,096,~ -826% 22,795 ~1
79
BOf
Cofs[Nr.lion lnsu2noe 70.406 1 7% $309 _
Prdrt ~aesj 465,445 _
94% 22 765 _
.
_
20 43
SurveyandTillelruurance 15,450 04% $O68
Legal, Consulnng Axtng Admn 30,000 07% $I 32 PoiY9CPL, ECIXJOMIC PNQ RECaULATOFY PAAAMETENS
MarkehngandAd/ertisiny 42.436 10% $188 -..__..--.. _.._-.__.._ .........._.__ ...._... Nnoun[
(:orslnictlm Conunyrcy i6M1,028 4 0% $7 20 La 9ze (5F) ~~~ ~~22,500
Corelruc[ion Mana9en~nl 113,794 2 B% $4 99 EconomlC Area (LoNer- Pnoed or Highar-Pnoed) Low~r
Coretn~cnon Loen Fe[3 45,509 7 1% $2 00 Total Alla~able lJrots i6
Corstruc[im In[eiest 639,766 15 696 $28 OB Number d Market Reta Uni6 i6
PormanentLOOn Fee 0 00% $000 Number of Afforchble UnRa 0
~les F~nod Operanng Experses 20,417 0 5% $0 9D Type of Units 21x1(2ho
7olal Uses $4.096,789 100 0% y17980 9ze of Market Rele UniCS (SF~ 1,424
9zo of Affo~dfl416 Ufu16 (SF) 850
Totil Cast per Unil 5256~049 Eluiltl~nq Eflc~ancy Facta (%) 100%
ioG~l Cosl (r~r Unrt nU includingLand 5198.112 C`rrss 6uildngArc3a (SF) 22,785
Fbquired ParWng S~ces (1 le~rel belcw ga~) 38
FINANCING SUMMARY
~ ~~~~
~ ~ lvnount FESIWN_I.PNpV~UE~-GpNDOMINfUMS
Funding Calo - Conslrurtim I.oan Mar 1999 I4nount GSF E31ds PSF
Interest faa[e 9 5% Ne1 Sales Fbvern~e 54.562234 5200 23 E202 77
AmortizahmTerm 24Mmths L~sDe~relopmentCcsts(NICLan~
~ (3,169,789) _Lt~ 14088f
MaximlmLOBn b Value (Prqecte~ Fhno 75% Inwsfmont Value y1,392,445 E6631 561 B9
FYqected ~I~x3 oF Candominwms y4.958,950
L~s Develaper Prdrt @ 50% aF Equity (463,50~~ 20 30~ (20 GQ
Cash (Prdrt) m Cash (Ec}.iAy) Return 50 2% Resitlual Land Value y928.945 540 77 41 29
1933 $ Residal Land Value y850,116 $37 31 $3) 78
Page 1
Humilton Habmonh & Alschuler Iro City d Sante Monea Run 1 Ot -Feb-98
Basa Casa /a Mtl~gatbn Fe~ S rnsitnrty 7ast on 9-LOt 112 Dutr~ct
Condom~nmm wrthout InclunonaryHouain y Haqu~emsM, Smell Lat Loww- Riced Mea
CMI7AL CASH FLOW - SCENA/110 15-A
TOTPL _ 1998_ 18a9 2000 2007 2002 2009 2004 2005 20oe 2007 _ 2008 2000 2010
Souces d Funds
ConetuctionLoanOre.va 3039,837 0 2,198,784 819,848 IS.305 0 0 0 0 0 0 0 0 0
PnmanentLOanFUntlmg 0 0 0 D 0 0 0 0 0 0 0 0 0 0
Gross Ircome/Seles Revenue <.958,950 0 0 4,008,810 952,9q0 0 0 0 0 0 a 0 0 0
less Saks Costs (396,718) 0 0 (320,529) ~76.187) 0 0 0 0 0 0 0 0 0
Less Op ExpM~eowner Assac Fees _~04~ 0___ _D (1B 782) (825) 0 0 0 0 0 0 0 __.o _ __ 0
TofalSo~cesdFunds 7,575,754 0 2,198,786 6,488,197 B90,899 0 0 0 0 0 0 0 0 0
U SBS ol FunAs
AllocaledLandCost
927,000
0 92],000 0
0
0
0
0
0
0
0
0
0
0
oamoi~eon zo,eoo o zo,eoo 0 0 0 0 0 0 0 0 0 0 0
Pre-DevelopmentStudies~Analyaie 15,000 12,857 ZI43 0 0 0 0 0 0 0 0 0 0 0
Nch b Engmeemg Cosis 77,308 78,853 98,720 1,933 0 0 0 0 0 0 0 0 0 0
P1anChekJ9ldgP~mts(CRyFaes/Assess 157907 0 157.907 ~ O 0 0 0 O 0 O O 0 D
ql~-SilaRequrements 158738 0 0 158138 0 0 0 0 0 0 0 0 0 0
in-~ieuFee o 0 0 0 0 0 0 0 0 0 0 0 0 0
ConsVBwld-Out/On-Silelmpavemenb 1,405,224 0 1,171,020 274209 0 0 0 0 0 0 0 0 0 0
Felenlion@10% 15B,1JB 0 0 156,178 0 0 0 0 0 0 0 0 0 0
Tasling end Inspect~ons 7,725 0 8,998 1,288 0 0 0 O 0 0 D o 0 0
ConstrucbonPalamarce8ond 2R,798 0 22,738 0 0 0 0 0 o a o 0 0 0
ReelE.leleTexecDu~~ngConstucNOn 9.211 0 7.850 1,581 0 0 0 0 ~ 0 0 0 0 a
Conslruchonlnsurence 70,408 0 70,406 0 0 0 0 0 0 0 0 0 0 0
SuNey end Tltle In9vellCe 15 450 0 15 050 D 0 0 0 0 0 0 0 0 0 0
Legd, Conaullmg, Aeeing, Atlmm 30,000 9.474 9,474 9,<70 7.579 0 0 0 0 0 0 0 0 0
MYkelmgendAdval~sin8 12,438 0 0 3B,7B2 4244 0 0 0 0 0 0 0 0 0
Conatr~ehanConhngeroy 164028 0 0 184028 0 0 0 0 D 0 0 0 0 0
Pro~ecl Mflnagemen~ 119 794 0 47 414 58 897 9 4B3 0 0 0 0 0 0 0 0 0
r~,~~a~,e~e w.,~~ i dd o 0 o a o 0 0 o a o 0 0 0 0
ConsVUChonLoanRepeyment 3718,212 0 0 3888288 52923 0 0 0 0 _0_ __0 _ __ 0 0 0
To~alUsesdFunds 7,110309 80984 2,494,859 4488177 88229 0 0 0 0 0 0 0 0 0
Net Pro~ect Cush Flora (EquRy) 485,445 (80,984) (298,178) D 822,805 0 0 0 0 0 a 0 0 0
CumUIaIIVeCaShFIOH
______ (60,989) (J57,160) (357,180)
_____
_____ _____ 0
_____ 0
_____ 0
_____ 0 0 0 0 0 0 0
Canatuchon Lonn Balances
0
pqNg 9,037,937 0 2,188,784 819,848 15,305 0 0 0 0 0 0 0 0
LOen Feas @ 1 576 45,508 45,509 0 0 0 0 0 0 0 0 0 0 0 0
Accrued Interesl Q 9 5% 839,7fi6 0 104.442 247,827 287,497 0 D 0 0 0 0 0 0 ~
Less flepeyments 3.719,212 0 0 0 3,719,212 0 0 0 0 0 0 0 _ 0 , 0
EndmgBalaroe (O) 45509 2,J03,228 1,OB7,675 (3,418410) 0 0 0 0 0 0 ~ 0 0
Pege 2
Hemillm, Flabnovdz & Alsdiuler, Inc City ol SaJe Mmice Run 1 01 -~ Feb-98
Base Case fa Mrtgaum Fee Sensttrviy Test m 9-Lot R2 Duvid
Condommum wNhaut Incluaimary Housng Requrtemen4 large Lot, Lowa-Prked Area
ASSUIuPTIONS. PART 1- SCENAHO 1.5-A
DEN9N
-----.'-. "--`--'--'.--.....-" ........ ......_._..-_..._._...... ._--..
maunt
Lot S¢e (s~ ......... . . .
22,500
Alley Area CwMed (sQ 1500
SiteAreelnc~dmg Alle/ Pahm (sQ 24,000
Zmng R2
Meximum Site Area~UnM1 (st/unit) 1,500
Mawmum Base Unrts/Site (roundecl) 16
29K, Dms~ty Bonus (rounded) 0
Tolel Allowa6le lkuts 16
UNITS
Amaunt
IWrtt~er of Market Fi.iteApattments ~
N,,m6er ol AHordeble Aparimm4s N4
Number of Lav Income N4
Number of Maderatelncome r14
f~Lmbar af Market F~te Cmdomniums 16
Namber of Afladabla Candaninums 0
Number of Lav Incane 0
Number of Moderate Income 0
Type ot Lhits 26d/2ba
Ecmomc Area (Lower- a Hgher-Prced) Lower
Size of Meiket Rate lhils (sfl 1,424
S~ze of Afinrdable Units (sQ 850
Bu~lding Efriciency Fada (%) 10096
Gross Buildug Area (sQ zz,~es
PARWN6
. - _.._._.-~
F7equved Parkng nt 2 Spaces Per lhit - Market Rata ~~~~ ~~~92
Hequired Pakng et 1 5 Spaces Per lkut - Afbrdable 0
Fteqwred Guest Parkng at ~ Spece Per S lhits (rourded) 6
Tofel Paking Spaces Heq~ired (1 lev9 below grade) 38
SCHEOU4.E
----'--
Amant
SmrlPre-Development (mq~yr) 1 1 98
Pre-Oe~ebpmait Period (mmtlw) 14
Start Cmstructlon 3/1/99
Cmstruc9m PeruA (mmths) 12
Fiid Conatructim 2/28/00
Sfar~ Lease-Up/Sales Period 3/1/00
Mmfisto 100%Leesa-Up NA
Mmristo t009L Sales 12
Lease-Up/Sel-Out Complehm 2/28/01
INCOME
-~-~~ -- 998 1938 ree t
Rent Sales Pnce Sales Pnce mmMs
Apartmmt Rmt (per mmA~) __ ~14
MerketRate M4
Afbrdable Low Income f W
Affordable Mod Incoma (Lowa o} Market a Mod Rmt) W1
Cmdaninium Seles Pnces (ps~
Meiket Rete 5204 00 $290,509
Afbrdable Low Incoma $80 13 $68,108 ~Per Ordnmca 1615 Pragram CLidelnes, 1993)
Afinrdeble Moderate Income $152 12 $129,306 (Per Ordnance 1615 Pragram C~uklelnes, 1993)
OF'ER+ITING EJ~ENSE3ANDPAR4M~RS
Amwnt
Apertment 8ed ~ebyCollechm Lass qab r14
Apartment l.essng Comm~ssims NA
Oparahng E~enses, Includng Reser.es (pe unit per yeer) r14
HomeownerAssoaahonFees(perurotperyeer) $2,500
P~e3
Hamilton, Rabmovrtz & A6chuler, Inc Grtyof Santa Mornca
Base Case tw MrtigaNon Fee SerrsRrvRy Test on 3-Ld R2 D~str~ct
Condammwm. wRhout Inclusionary Housmg Requrement, Small Lat, Lower-Prwed Area
ASSUMPTIONS?ART2 _.$CENARIO_75=A __.
LAND
------------ ----- Amount
Land Cost - Lower Pr~cetl Areas ($PS~ $40
l.and Cmt - hUghec R~ced Meas ($PSh~ NA
DEV~OPMEf~fT PARAMEfFAS NIC FINANCING)
.~--"----
-- - ------
--'- '-"
-'-
No d
1~96$ STart STart Quarters
Budget _ Gluarter _
----- _ Year to Spread
~
De11701R1on 2p 000 1 1999 1
R'e-DBVelopfYlBnt51udre5/Analys5 15,000 1 1998 5
Nchiledural S Engineermg (5% Hard Cos~) 77,306 1 1998 9
Plan Check/Bldg PermiS~CRy Fees/Pssess 157,907 2 1999 1
Ofl-SRe Requrerrents 151,588 1 2000 1
In-L~eu Fee ~ 2 ~~g ~
rov ($71/$35 PSF Bldg)
On-SRe Im
ConsyBmid-Out 1
515
883 1 1999 4
,
,
p
~
TesGng and InspecTions 7,500 7 lsss a
CorStruction Pertormance Bond (1 5% wmt) 22,738 1 1999 1
Real Es~te Tazes Dvmg Construdion 9,211 1 1999 5
Camtuchon Insurance ($4PSF/YR) fi8,355 1 1999 1
Survey/Trtle Insurance (Land Take ~-Down @ S4irt of Canst) 15,000 1 1999 7
Legal, Consuldng, Acctng, P,dmin 30,000 1 1998 13
Marketlng and Advertismg 40,000 6 1999 3
Canstruchon Contingency (10%Cons~ 154,612 2 2000 3
Ro~ect Mgmt (5 0%COSts NIC Land~Financmg 3 Taxes) 173,794 1 1999 4
FINANCING PARAMEfEAS EGONOMIC PARAMEiHRS __
----- Amount Amount
Construction Loan Funding - Apts P/ of Perm Loan Amq NA Condommium Value
Canstruchon Loan Fund~ng - Condos (%ot Ro~ected Value) 75% Value Based on Sales R~ces $4,958,950
Construction Loan Fees (%) 1 5% Value Based on Corrstruchon Cosls $4,o96,7es
Canstruction Loan Interest Rate (%~ 9 5% Comtruction Loan Pmaunt p5%LN - Sales Prroe) $3,719,272
Annual Inflatian Rate - Rents, Cos~, Expenses 3 0%
7oTaI Value of Condcmmiurrs $4,958,950 Annual Inllatian Rate - Roperty Taxes 2 0%
Condo Sales TYansacUon Costs 8 0%
Cash on Cash ReUrn TMeshdd ~%
peveloper CorNibu6on of EquAy ~/) 1000%
R'o}it trom Sale to Daveloper (°r) 100 0%
Max. Pcceptable Residual Land Value Reduchon 15 0%
Run 1 07-Feb-98
Page 4
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~d ~'`m `3 $~~~~°~~m~~~~`o56a688~ 88 °J Sa~`g~ ~
m ~ ~_°_`' c~ a~
~' w`~~wa °sp'o~dUS'a~a~w3i,~~~~"~'u~$o z~ $g=.E~ a
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5 ~Oi~tS ~a858s'SS8rc4`~'c°i~~~c~c°~Sc4891 ~ss Zi ~m°xs =
~ ~ ~ ~°-° c, ~_=e~~'~ f4
Ham~tton, AaUuio~~tz & Ahchulei, l~c G~y d Santu Monce Run 1 01 ~-FBO-BB
Besa Casa fw MNigatwn Fea Senv~tivdy Tast 9-Lot R2 D~skcl
Condommium wrtAout IncluaionaryHOUamg Raqu~emaM, SmeU Lo~ H~ghar-Riad l4aa
CMITAL CASH FLOW - SCENMIO 16-A
TOTAL 1998 7899 2000 2007 2002 200J 200C 2005 2008 2007 2008 _ 2008 R(110
Souces d Funds
Con5FUC11onLoanOre.vs 4,075,295 0 3,137.J79 921873 18,388 0 0 0 0 0 0 0 0 0
PxmanentLoanFundmg 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Groae Ircome/Salas Revenua 8,884,859 0 0 5,401,087 f,289,792 0 0 0 0 0 0 0 0 0
Less Saks Costs (53478B) 0 0 ~432,085) (102,703) 0 0 0 0 0 0 0 0 0
Uss Op EapM~eowner /issac Faes _ 2~ q 500) 0 0_(23,750) (73~__ 0 0 0 0~__0 0 0___0 0
TotalSaucesdFunds 10,200,865 0 3137314 5,888,845 1,188,707 0 0 0 D 0 0 0 0 0
Uws ol F~iiJs
Alloceted Lend Cosl 1,622.25D
DemoLbon 20,800
Pie-Develapmant"~udi~qAnelysis 15000
Wch A Engineaing Caet. 87,492
PIenCAcWBIdgPrm~s/CkyFe~c/Assess 15BSB2
ql-SiteRequremants 178808
In ~-L~eu Fee ~
ConaUBuJd-Out~On-Siialmpro~emenlc 1,591 274
fletenlion Q 10% 178 BOB
Tesbng and lnspeclions 7 725
ConstructlonPatamaroeBond 25748
Reel Fslate Tazes Ounng ConsfucGOn 18 119
Construchonlnsurance 70,408
$UrveyantlTllklnsuence 75450
legel, Cansuting, Acetng,Admin 30,000
MarkehngendAdva~haing 42,436
Construchon Conhngeney 185,BC0
Pro~ect Menegemen~ 120,Si5
Pamanent Loan Fee D
ConstructwnLonnRepayment 5,017,644
0 1 822 250 0 0 0 0 0 0 0
0 20,800 0 0 0 0 0 0 0
12,857 2,193 0 0 0 0 0 0 0
43,740 41,55B Y,187 0 0 0 0 0 0
0 158,582 0 0 0 0 0 0 0
0 0 179,808 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 t,'~280fi2 285,272 0 0 0 0 0 0
0 0 178,808 0 0 0 0 0 0
0 8,038 1,288 0 0 0 0 0 0
0 25,749 0 0 0 0 0 0 0
0 13,9B8 2.T31 0 U 0 0 ~ 0
o ~o,aoe o 0 0 0 0 0 0
0 15,950 0 0 0 0 0 0 0
9,474 9.47G 8474 1,578 0 0 0 0 0
0 0 38 192 4 244 0 0 0 0 0
0 0 185 840 0 0 0 0 0 0
0 52727 69,272 10,545 0 0 0 0 0
0 0 0 0 0 D 0 0 0
0 0 4,9d3,231 88,413 0 0 0 0___ _ 0
88,077 3,366,825 S,B68,B45 84,781 0 0 0 0 0
(98,077) (22751f) 0 1 ,111,928 0 0 0 o D
(a6,o77) (293,588) (2B9,S8B) 0 0 0 0 0 0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
D
0
0
0
0
0
0
0
0
9
0
0
0
0
0
0
0
0
0
0
0
TotulUsea d Funda 8,382,527
Net Pw~ect Cesh Flav (Eqmtyl
Cumulatrve Cesh Flav
ConsYUCtion Loen Balences
pmvs
Lonn Paea @ I 5%
Mcrued Intaest ~q 9 5%
Less Repayments
Endmg 8elaroe
818,338
0 0 0 0
0 0 0 0
4,075,295 0 3,197,919 921,913 16,~68 0 0 0 0 0 0 0 0 0
g1,129 61,729 0 0 0 0 0 0 0 0 0 0 0 0
877,219 0 t49,022 891,821 3BB,37B 0 0 0 0 0 0 0 0 0
Q013,644 0 0 0 5,013844 0 0 0 0 0 0 0 0 0
D 61,128 3,280,337 1,267435 (4,8f0,901) 0 D 0 0 0 0 0 Q ~
Page 2
Hamdim, Rabnohtz & Alsdiuler, Inc Cif/ of Sava Mrnica Run 1 01-Feb-98
F3ase Casa tor M~tgdion Fea Sensrtmly Test m 9-Lot R2 District
Condominum' wilhaul Inclusimary Hausng Re~p~irement, Lerge Lot, Hgher-Priced Area
ASSUI~PTIONS, PART 1- SCENAHO 16-A
DENSITY
Amaunf
Lot S¢e (s~ 22.500
Alley Area Cwnted (sfl 1500
Site Area Includng Alley Patirn (s~ 24,000
Zonng R2
Mazimum SiteAreaiUnit (sf/anit) 1,500
Mawrrum Base Units/Site (rounded) 16
23~ Dens~y Bonus (rounde~ 0
Totel Allowable Units 16
UNI
Amaunt
Nurt~ber ol MarketRataApariments -~C
Nurrber of AHordeble Apertmmts W1
Number of Lo.v Incane W1
Number of Moderate Income N4
N~rcber oi Mazket Rete Condomniums 16
W mber of AHordeble Cmdomniuma 0
Number of Lw+lncane 0
Number of Maderate Income 0
Typa ot lk~its 2hd/2ha
EcmomaArea(lower-aHigher-Pr~ed) Hgher
5¢e of Market Rale Units (sQ 1,424
S¢e ofAflwdable Umts (eQ B50
Bwkling Eflicienq Faciar (%) 100%
Grass Buildinp Area (s~ 22.785
PARWNG
_-_.._.__._'__..._... _-'._ .._...,..,._._..- _.,.._..
~mount
Reywred Pakng at 2 SpacesPer lhit - Merket Rate ~~ ~~~~ 32
Fiequked Pakng et 1 5 Spaees Per lkut - Atbrdeble 0
F~qwred GueslParkng at 1 SpacePer S l.hits (rouMed) _ 6
Totd Pnking Spncas RBq~ued (1 level belaw grede) 38
SCHEDU.~
Amaunt
Slert Pre-Develoqrrent (mayyr) ~1J9B
Pre-DeielopmenlPenod (mmths) 14
SfartCmstrucUm 3/1/99
ConshUCtlm Periotl (mmlhs) 12
Ed Cmstruc4m 2/28/OD
SfertLeese-Up/SalesPeriod 311/OD
Mmfis to 100% Lease-Up Wl
Mmfis to 10096 Seles 12
Lease-Up/Sel-OW Ccmple4m 2/28lO1
INCOME
1998 1998 1998 rea t
Fleit Seles PNce Setes Pnce _,~mmths)_
Apartrnent Rent (per mrnh) ~ r14
Mwket Rate P14
Afbrdable Low Income N4
Afixdeble Mod Income (Lawer ol Market ar Mad Rent) W~
Cmdanvrum Sa~es Pnces (psF)
Metket Rate
Afbrdable Low Income
Afbrda6le Moderffie Income
$27500 $391,617
$8013 $68,108 ~PeiOrdFance1615ProgramCxidelnes,1993)
$152 72 $129,806 ~ei Ordnance 1615ProgramGLdelnes, 1993)
CPER4l7NG FJ~ENSES AND PAR4MEfEKS
Amaunt
Aperiment Bed Debt/Collec4m Laes Pab W1
Apatment Leasng Corrmisslms W1
Operahng E~enses, Includng Reserv~ (per unrt per yeer) IyA
Homeowner Assoaellon Fees (per unR per year) $3,000
Page3
Attachment B
PLANNING COMMISSION RECOMMENDATIONS
INCLUSIONARY HOUSING PROGRAM REVISIONS
February 25, 7998 and March 4, 1998 Meetings
The Planrnng Commission supports the Preliminary Recommendations for rewsing the
City's Inclusionary Housing Program (specifically Ordinance 1615, the ordinance that
implements Prop R) as outlined in the February 4, 1998 report by Hamilton, Rabinovitz &
Alschuler The Planning Commission requested that the following additional issues or
program components also be recommended to the City Councd for their consideration
Development Fee Issues
9 The fee imposed should be set at a level which would actually generate funds to
support affordable housing development but not higher than is feasible for the average
development pro~ect
2 Look at appropnateness of offering a broad base of revenues for affordable housing
including assessing a fee on single family housmg
3 The fee should be paid at Certificate of Occupancy as this would be less of a pro~ect
cost burden
4 Look aUcompare Offce Mitigation Fee to ensure no disincentrve to develop multifamily
residential rather than commercial use
Other Program Issues
1 Large pro~ects, to the extent permitted by law or through the use of a development
agreement, should be required to prowde some percentage of affordable units on-site
2 Develop a relocation program to prowde assistance to tenants displaced by demolition
of their buildmgs for new construction pro~ects
3 In the event that Prop R's 30% annual reqwrement of low/moderate housmg is noi met
and as a result permits for residential development are stalled, allow a development pro~ect
which provides on-site affordable units to proceed
4 Require on-site units to provide minimum 2 bedroom units
5 Keep Ordinance 1615 prowsions that require low/moderate on-site units, whenever
reasonably possible, be evenly d~stnbuted throughout a pro~ect
Implementation Issues
1 Assess possible need of additional staff resources to implement new program
2 Set up a routine process for assessing non-standard options (e g, buy or option land
for non-profit developer)
3 Specify m new ordinance what steps should be taken if 30% Proposition R requirement
is not met on an annual basis
March 18, 1998
Attachment C
HOUSING COMINISSION RECOMMENDATIONS
INCLUSIONARY HOUSING PROGRAM REVISIONS
February 19, 7998 and March 5, 1998
The Housing Commissi~n feels strongly that the City needs to modify the Proposition R
implementation program in an era of increasing City need for additional funds to produce
affordable housing and clearevidence that it is extremely difficult, if not impossible, to meet
Proposition R goals on a pro~ect-by-pro~ect basis as currently reqwred in Ordinance 1615
The Housmg Commission supports the preliminary recommendationsfor revising the City's
Inclusionary Housing Program as outlined in Hamilton Rabinovitz & Alschuler's (HR&A)
February 4, 1998 Report
The City is experienang a significant threat to its supply of affordable housmg due to the
combination of changes to the Section 8 Program (i e, lower Fair Market Rents relatroe to
market rents that make the program much less attractive to pnvate landiords) and the
Costa-Hawkins Rental Housmg Act The City must aggressroely pursue a vanety of
strategies to both increase (through new construction) and preserve (through acquisition/
rehabilitation pro~ects) affordable housing to comply with State law and local housing
policies The proposed new Affordable Housing Production Program is one part of that
strategy, but the City needs to consider additional sources of revenue for affordable
housing construction and preservation It is important to note that issues such as
displacement of tenants through the Costa Hawkins Rental Housing Act and the Ellis Act
need to be addressed, but that the revision process of the Inclusionary Housing Program
may not be the appropriate vehicle for domg so An aggressroe forward thinking policy is
the only way to preserve any significant amount of affordable housing in the City
The Housing Commission recommends the followmg additional program components to
and issues regarding the new Affordable Housing Production Program to the City Counal
for their consideration
Development Fee
1 The development fee should be in the range of $5 to $8 per square foot The
Commission makes this recommendation based on the "constrainY' thresholds in Tables
3A and 38 of HR&A's rnemorandum dated February 4, 1998
2 The new program should include a reduced fee in commerciai areas to encourage
residential development on commeraal sites and on vacant multifamdy parcels The
relationship between the new fee and the current Office Mitigation Fee should be reviewed
3 The new program should include criteria to review and recalculate the development fee
and other program elernents on a regular basis
Proposition R Changes
1 Assess a possible amendment to Proposition R which would allow acquisition/
rehabilitation pro~ects to be counted as also satisfying Prop R affordable housing
requirements This would allow the City to use the proceeds of fees from new market-rate
multi-family housing development for both new construction and acquisition/rehabilitation
pro~ects
Additional Issues
1 Aliocate more than the minimum 20% of tax increment monies from the Earthquake
Redevelopment Area be used for affordable housing
2 Concerns aboutthe rising cost of new affordable housing development suggest thatthe
City needs to become more flexible in its programs Consider the concept of preservmg
affordabdity by buying deed restrictions m market rate bwldmgs -- i e, a capital vs a
subsidy program
Attachment D
Notes from March 26, 1998 Public Workshop on
- Housing Element Update,
- Modifications to City's Inclusionary Housmg Program, and
- Modifications to Residential Development Standards to Accommodate
State Density Bonus Units
• Size of units is 1200 sq ft irrelevant - there are numerous pro~ects in the Pico
Neighborhood wdh less square footage per unit, i e 17th and Michigan
• No reason to change R2 and R3 - Bonus units can be accommodated
• City is already out of compliance - Why attempt to be in compliance now~
• Why must there be additional square footage/density allowed~ The City is
already too dense now
• Pico neighborhood residents believe that recycling of properties threatens their
neighborhood
• Is there any mechanism that can protect existing housing~
• State Density Bonus is a given, create more + attractive option to State Density
Bonus for Developers
• Did staff attempt to fit units with Density Bonus units in existing zoninglbuddmg
envelope~
• If Development Fee is too low then there will be recycling of properties
A Low Fee will cause displacement of existmg tenants
• Concerned that City might over compensate and set low fee
• If City sets high fees they risk law suits
• Can a City not meet iYs share of regional growth/housing~
• 400 units are proposed near Ralphs Doesn't that meet Santa Monica's fair
share~ Why do we need more development~
• R2 and R3 zones are bemg singied out Why not include other Zoning Distncts
m Revision~
• What is considered a fair Rate of Return? How was it determined~
• If City needs 1500 units to fulfill iYs fair share why not allow granny urnts?
• Elevator shafts will actually increase bwlding height to 3 stories
• If 1500 units are bwlt in 3 years, can new development be stopped by City~
• Santa Monica is only 9 square mdes, we don't need more development The
City is already to dense
• If we increase lot coverage we discourage Child Play Areas and Less Green
Space
• Parking and Traffic - If we have more density we wdl have parkmg problems and
more traffic
• Wdl these revisions change the North of Wilshire Rezonmg standards~
• Proposed In-Lieu Fee will not build enough affordable units City should set a
high fee
• Can low In-Lieu Fee fulfill Prop R low- and moderate-unit requirements~
• Why doesn't City use other resources to fund affordable housing~ Why do we
need a development fee~
• Why not tax single famdy housing~
• How are tenants selected for low income units?
• How many on-site inclusionary units have been built~
• How does the City define "Affordable"~
• Has there been a Demographic study of tenants in on-site inclusionary units~
• Are tenants evicted if over income?
• Prioritize Santa Monica residents in units~
• Require Section B pnority for on-site units
• Does City leverage other funds with development fees collected?
• How many units have been created using State Density Bonus and how are they
being monitored?
Attachment E-1
List of Completed Multifamily Projects - Certificate of Occupancy Received
(includcs Yrojects w/City l.,oans and excludes LQ Rcbuilds)
.. . , ... _.
in-Licu ln-Licn LOWINCOMEUNITS j~ MOD.INCOMEUNITS 1larkel-
Fh ~ ~~ $y~, Mx~,~+~ ir I•ec Fcc - R~tc ~'~~~ ~~ y::
~IM1~'~~illl ~IW~~1'/1~11 ~
"~'~ ~~r~<< ~rr~,~, ~°. ~ a ~ ~r ~"4"udU~C~ ~,~'~ ~ Pxid " ~1m1. O~ tinr ons~~. u~ ti~~~ ~ n~~-c~~r nrt-~~~, __ ~i~~ ~~~`_l 1 n~ts ~S~U~~~"
~ ~_'---v. ~
i2~2 osms~ o s L._ I I ~ 4 z~-oct-sa
. . .. .. . °- - -- °-°-~ - - -- ° -- - -. ....~...... ° - - -~ - - - - ------- - -- -- -- - - - --• -- ------ ---° -° - -- ° - -- --° . - ° - . °. -
--- ..... .. -
Tvtal Uerls : ~ ~ ~ ~ ~ ~ ~ ~
Luw Mud.
~otrd A/'J'nrdt~hle Unih : ~ ~ ~ # uf Proiccts
%~ Affordablc: 20/ 20/ oi 0
'~C~ '~ ~df~kt' i ~ ~ i~;x ~~"~^ .~'Y'~~~ `
..,.~~ ~ .. ~v.,.±~~Y~S h~~.:
In-I.icn In-1 icu ' LOW INCOME UNITS MOD. INCOME UNITS tii~~rket-
l ih Fec I•cr Rxln ~$~y~ s+:
, ~~a~~ 4 \ew ~~~~r.~~m ~~~~vn~r~ ~
~v^ ~u, v ,
~~I~,~r~ ;: ~ l_ni~s ~ap~ ~ la~Hn. 1 aid ? Awt. ' un-tiur ortaur u~~-s~~~ rn~ ti~« orc-~ur w~-tirt~ ; I'nitc ~1~~f~~
,, z.,. a , !~ ~ ~ ;
1302 Stanford St 5 6 I~/'I I I ~ ~ 5 28-Jun-95
- -- ' '' '' .......... .. . ... .' '- --"' "'" '.. . .. ....... ........' '• ' ' ' " """""' ' ' ' '''."" '-' _--- -- ' '--- "--'--"" "' '.. .' ''
_ ............._ ..........
Tntnl Units : 6 1 0 0 0 0 0 5
Luw Mutl.
Tntn! Affor~lnb[e Units : ~~~ # nf Prniccts
0
°/ AI'f'urdi~ble: ~~% i7/ o/
u . .,~» . ,., ,., ... ., ; ~M , , ,. ~ ,
.,.,, ,~ .,~ ~s, ~ ~.,~„ :, .,. , ., ,. , , , ~ -~. ,,,, ~, ,.. „ ,„~ r., , ,,,,~, ~, : ~>>,,,.~ ~ z.~, :
luiavLn. APrd 07. /')9H . .. / nx'e / oj3
In-1 ico In-laru i ~OW INCOME UNITS ; MOD. INCOME UNITS ' ~~~~'k~'~-
f P r~ {
~ ~ ~
~~ ~ ( ity
~ hre
I
~ :'
~~ Fc~
~~~~~r.~m
A
~
~ i
;.~~~~r.~~m
1 Nate
~:IIItK E '
~ a
~
~a~~~~ ~~~~~~ ~.o8n
~ S
( mt.
O~o-Silr UR-Sne On-Sde On-ldr URtinr On-~ile ~~ ,
z
7144 12th St q 17 I.
.. .. .. .. .... . _ _... ... . ,h'
. .. .. I
. .. . . .... ~
.. .. .. ... . • .. .. . • . .. ...... .... .. . . 17
.. . . .. .. .. ... ... ., ... . .. . .
. . ........ ...... . 28-Oct-96
..... .. . . . .
. .. . . . . .. .
843 15th St . ... ..
7 3 IN
.. . ... . . . .......
- . . I
° -- -' ' ~/I
- - - -' --... $49'493 ~~ ~
... .. .. _. . : . .--- . . ... .. ... _ - --- -- °
- - - -° -' -- --' -' --. .. .. . ~ - 3
°. ..°-°'-' --' 19-Sep-96
-'--- - - ' ° -
. . . - ' - °'°
1908 Euclid St '- --
.
0 7 '' I....l ~. ~ ~ 5 04-Detr96
Tan! Unils : 2~ C o -- o is o o e
Low Mod.
TntnlAjfnrdaAleUnats: ~s ~ ta #o1'Proiccts
'% Affordablc: ~o% ai ssi 0
f ~'CqCI" ~ i~ d ~+~7~~3~$f ;
t
;;
+ 9'"~~
M,
,
„
in-l.icn
In-l.iau LOW INCOME UNITS
MOD. - -
INCOME UNITS
~tarl.cl-
~~ ri~
3 ~j'
~
~
~
~~~
~
a ~ S~~,
~~~ Fcc
1'xid :' Fec
1unPrnlil
AmL
e
S
un,
~m ~
c~
.
~
tinnPn~fil '
c
i
urt
ti
• o Hale
I;nite
~~w~' ~.,
~,
~
~`~~~,y ~
;~
„
,~~
~~ ~"
#,ddo
~
4 ~
~, _
(In-
nr
nr
~ ~~-
~
~ ~
~
~-
-
n~ a
7422 06th St 4
28 ~
......... I~'
"""" "' I',
" '' ' ".. ~
.__.__'__. _'_ ' '''' """""""" ' 21
''"'
" """"'" '. .... .
.. ..""' .. .. 22-Ju1-97
... . .. .....
. . .. . .' ""
7422 07th St '.''. _.""' " "'' ..
3 28 I
." ' "" ~~,
"" " __ _ ~......I
'_ ' ' ' "" ~
"" " "' " ' ' ' .. . "' " "' ' """ '. 21
.. . . . . '
... .. ... .. .. . ... . .
. . ... .. ... ... 15-May-97
.. ... . ... . .
' ' " '. _ '_ _.'
1430 07th St
..
' "" """"' ". ... .. . . . .
3 28 ,~.
"'"'_____' ' " .... .. ...... ~
...." " ' ~ ~
' '' ' "" ~
"'""_..._____•.'_ '_•."._"__'_'__"'.. 21
...''' '
""""""""' ' ' '. ..
.. ...."'"'" 15-May~97
""'. .. .. ...
... .
.
1020 72th St 0 22 '
....... ~
....... I
.......' Z~
"""'.. ...'" "'"'....."'
''__.
'_-''_._____._._.' ~
_'"_'""" 25-Jun-97
'"' ""''
.........
1854 EuGid St
. . . ... .. ................
p 7 ~
. .... .... .. ..'----'. ...~. I I
.... . . .
. .~.~.... >
""'""'" • ' '' " "'"" ''"' ' >
' ' '' " ,
"--" "'" "--- '-- ' 5
. .....'""" 18-Mar-98
'"" " " ""
Toln/ Ulli[S : 713 22 0 21 64 ~ ~ ~6
Low Mod.
Totnl Affirrdable 1/urGc : io~ 43 64 # of Proiects
0
'% Affurdablc : 95 / sa ~ s7 /
,., ~=~„s,.., ., _„ ,~ . . ....,. ~ .
:.,,, .:,~.m~ ,,, w,M,,,~,, ~ ... . .. . :.:. ..: ~.,~M .,<, ~~w R~ , <, , , :,,-,,,,,,,, . ~,~,~~~ „ N . w.. .~~ . ~.,, ,~., . .,~, ~ ~~
TueeduV, Aprl/ 117, 799N ~ . ... Pny,e 1 o/'.i
SiJMMARY OF COMPLETED DEVELOPMENT
PER ORDINANC~ 1615
(mcludes Pro~ects w/Crty Loans and ezcluJec N:Q Nchmldc)
~~
~5:
~. ~ "~r~
u"~~~~~~,;. \cl
'fotals \ct %
,
Numbcr of Projects = 10
~ uf \en
n/a 1~~~~i~
Total Units = 151 (20) 131 87%
Low Mod.
To1al Affi~r~/ahle Units = 128 46 82
% Affordable = 85% 30% 55%
~q' ;fy~.~} .
~~#.~$~~~~~'~d'+~:~ ;~~~~~~
N5 c di~f +11ra. 0.. , y
~.y~,'~!+~~+af~
'~~I.k+m~nr~~ ~.~,T~~
~,{
;Y~ ~~~~~~II~~~
,{~
~~R,~~~ ~I~'~~~~~
~~pt~{~"
~;~.Fc ~ MOD. INCOME UNITS
NonP:~!
OfSRP U'fSVB nll-$.Lf: ti~~t`~~
~Ill~h ~~~~~~~~ ~ i~ ~
~'~~ f~'+^~~~ .,~ 4 ~.
1 w 1 ~ ,xd~d ..
12eport Yevr 1 (4/92-3/93) : ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Report Vcar 2 (4/93-3/94) : ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
Repurt Year 3 (4/94-3/95) : ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 20 ~
Reporl Year 4 (4/95-3/9G) : ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 17 ~
Rc~url Ycar 5(4/96-3/97) : ~ ~ ~ ~ 1e ~ ~ a~ z~ ~s ~oi
Currcnt Yc2r (4/97-3/98) : ~S 22 ~O z~ sa ~o ~o s~ >>3 ~o~ ss/
TOTALS : ~0 25 0~ 21 82 ~0 ~0 23 157 128 85%
,,.-:,~. „~,.,, .~~, . ~. .,,~,.xn.r:. ~. ~,=,.~.mr: ,~ ~~, „~..:,:r,,, ~ ~..:,~:-.*r y ,~~ ,~~ . .. .,~~~.s. ~.~. „~~«,.:,:,:~.~~,~, ,,, ,:,:,. , ,.,~~ ........... ...sr ~ ~ . ,,,,,.....,~ , ..,...
/neeAnV..tpnl /17. /998 ... . . :.:~ ~. :: . ~.• PnAe.3 nJ.4.•
Attachment E-2
List of Multifamily Projects -
Per Ordinance 1615
(includcs Pro~ccls w/City Loans and excludes GQ itebuilds)
,
,~tq~1~,~~~ i ~~~~r
~~y
~
,
, ln-I.icu In-I,icu LOW INCOME UNITS ~ MOD. fNCOME UNITS ylurkel-
p ~ r, ~;i
~ ~"
~ f{ ~t ~~M
,r,^~
~
~ F~v~
~
~ Tir
hnnlYnfif
\nnl'mTt
j Ra[c
11
~ ~'~pr"'
~~~~t
~
~
~ ~~.
i .~
1p~~
~~1#MIA~~ ~~:
S
' ~
41 .:,, P'P, ~
g~.
k 1 .i~4;. y~
y„
„:
yy!'ft~d5~ T 7"~~
. i~ .,>&. i. tn,. 81d
!
~ .A~If[. ~ln-~itr !)?-pnr Un-ti~tr j ()u-Sih• 1)1T-~rtc 1)n \tt~ ,11
Y ~
,~
n~A1~
.
04th St
1335 6 ~, I
. ~ ~
. . . . ..
.. ..... ..... .. ~
... . ' " ~
"" ""'. ...... . ." " ~
..__ _' l""""' " •' ' "' ' ' 4
" """' ' "" 22-AUg-96
" "' ' ' " " "
..'''' "'""'
1128 05th St
. .. . ..
'...... .
0 32
.' "" _ __. " "' .
i' I~/'I
. .
I~.
.. . . ...
.............
~
.:... .
32
"'"'"'_..___ .__..
"'""'•'"'""'" ' "''
0
' """"'"'
20-May-97
""' ''''" '
. . . '" .______"
1231 05th St "'"''.. . .. "
7 28 "'" _'__" .... ..
I I ' I
. I I
. . .... .
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JUN - 9 ~S8
RM JM BM:PM f/housmglshare/wpfiles/staffrpUsec8stff wpd
Council Meeting June 9, 1998 Santa Monica, California
To Mayor and City Council
From City Staff
Sub~ect Recommendations to Minimize the Displacement of Section 8 Tenants
INTRODUCTION
This staff report transmRs information to City Councd concernmg various policy options
designed t~ mmimize the displacement of tenants whose landlords have canceled their
Section 8 contracts with the Housing Authority of the City of Santa Mornca.
BACKGROUND
On May 5, 1998, the CityCouncil directed staffto research and propose poliaes thatwould
minimize the displacement of Section 8 tenants
Currently, 981 tenants livmg in Santa Monica receive assistance from the Santa Monica
Housmg Authonty Of these, 127 live in apartments owned by nonprofit corporations and
are unlikely to be affected by Section 8 contract cancellations While 854 tenants may be
considered vulnerable, many owners have said they will not cancel their contracts because
of the impact that it would have on their long-standing tenants
The County of Los Angeles administers 108 vouchers in Santa Monica The cost
estimates contamed in this staff report do not include the cost of assisting County Section
8 tenants wh~ live in Santa Monica
1 1-~
JUN - 9 ~
The recent cancellation of 58 Section 8 contracts that may displace tenants is traced to the
interplay of three factors
^ In 1995, the State passed the Costa-Hawkins Rental Housmg Act (Costa-Hawkins)
which stripped cities of the ability to control rents upon the vacancy of apartments
Costa-Hawkins established a three-year phase-in period durmg which rents could
rise, on a limited basis, forvoluntarily vacated apartments The phase-m period wdl
end on January 1, 1999, at which time rents forvoluntanly vacated apartments may
be increased to market levels Since September 1995, for reni-controlled apart-
ments only, the phase-in of Costa-Hawkins has led to a 34% mcrease in the median
pnce of rents for apartments that have been vacated and rented again
^ While rents were increasing in Santa Monica, the Department of Housing and Urban
Development (HUD) reduced the Fair Market Rent (FMR) for the Los Angeles area
by fourteen percent The FMR is the maximum rent that HUD sets for the Section
8 Program (ad~usted by apartment size), and is based on the cost of rental housing
for the Los Angeles/Long Beach area Immediately after the reduction in the FMR,
Santa Monica applied for and received HUD approval to pay'exception' rents up to
the statutory limitof 120% ofthe FMR Unfortunately, even at this higher'exception'
rent level, it is not possible to keep pace with Santa Monica's escalating rents
^ In 1996, Congress directed HUD to allow landlords to terminate their one year or
older Section 8 contracts with 30 days wntten notice to their tenant Once a
landlord cancels a Section 8 contract (a process known as "opting ouY' of the
Section 8 program), the tenant loses their rent subsidy and rent fortheir apartment
reverts to the Rent Control Maximum Allowable Rent (MAR) The tenant may
remain m the apartment but must pay the Rent Control MAR and the cost of utilities
~
without Section 8 subsidy assistance Even though the MAR level rent is less than
the Seciion 8 rent, most tenants would have difficulty paying it The average annual
income for Section 8 households in Santa Monica is $9,205 The Section 8
standard for rent subsidy provides that tenants pay no more ihan 30% of their
household income for rent and estimated utilities By this standard, the average
Section 8 tenant can afford $230 per month for rent and utdities
Dunng the period of stnct rent controls, Section 8 rents were very competitive with MAR
rents Now, however, with the "phase-in" of vacancy decontrol, and an easier Section 8
"opt-ouY' procedure, some building owners see an incentive to reevaluate their Section 8
tenancies
The 58 contracts recently canceled by owners represent more than 6% of Santa Monica's
Section 8 contracts Only three tenants have been able to pay the MAR and remain m their
urnts Although ii is impossible to accurately estimate the exact number of future contract
terminations, it is safe to assume that the number of terminations wdl increase on an
accelerated basis as January 1, 1999 approaches
DISCUSSION
Seniors, the disabled, and famdies with chddren have been particularly vulnerable to being
displaced because they make up most of the Section 8 tenanls To date, 67% of the
contract cancellations have mvolved seniors or the disabled, and 28°/o have involved
famdieswith chddren Seniors and the disabled often reqwre speaal relocation assistance
They are among the least able to locate and move into a new apartment on short notice
Most are not prepared to incur the financial cost of moving into a new apartment, and
moving is emotionally difficult for seniors and the disabled because they may be forced to
move away from the support network offriends and professionalsthat help them Famdies
3
with children are confronted with fmding larger apartments, which is difficult to do in Santa
Monica gwen the nature of the existing rental housing stock
On April 30, 1998, the Housing Authority and the Human Serwces Division hosted a
meeting of City-funded social service agenaes that work with Section 8 tenants whose
owners have canceled their contracts The agencies confirm the negative impacts of
relocation expenenced by Section 8 elderly and disabled tenants, including depression,
anxiety, chronic dlness, an inabdity to act, a decrease in soaal support, and a diminished
sense of control
During the past four months, City staff has bnefed the Housing Commission, the Rent
Control Board, the Commission on the Status of Women, the Social Seroices Commission,
the Commission on Older Americans, Congressman Waxman, and Assemblywoman
Sheila Kuehl regarding the status of the Section 8 program These boards, commissions
and elected offiaals supporl the development of City strategies designed to prevent the
displacement of Section 8 tenants
The Cambridqe Expenence
On January 1, 1995, folbwing the passage of a statewide initiative in November 1994 and
a related action by the Massachusetts Legislature later that year, rent control was
abolished in Massachusetts A two-year phase-in penod was granted for low-income
households through December 1996 The City of Cambridge, Massachusetts, had had a
system of rent control in place since 1970 Cambridge undertook a study m mid-1997 to
document the impacts of the termination of rent control on rents and on the population that
resided in the city's 16,000 formerly rent controlled units The study, published in January
1998, provides valuable lessons for Santa Monica
4
The Cambndge study documented an 85% increase in the cost of rental housing upon the
rental of vacated units between January 1995 and July 1997 Tenants who remained in
their units experienced rent mcreases of 40°/a above previous rent control levels The
study also showed a demographic shift in Cambridge when units were vacated and new
tenants moved in Sixty percent of the new tenants who moved to Cambndge came from
other communities Compared to tenants whose tenancy began dunng the rent control
period, the new tenants had higher incomes, were not seniors, did not have children, and
were more likely to be college or graduate students Accordmg to the study, 42°/o of the
tenants remaining in formerly rent controlled units were at nsk of being displaced from their
units because of their inability to afford the rent increases.
In response to the end of rent control, Cambridge established the New Lease Program
The New Lease Program wasdesigned to assist low-mcometenants (approximately 1,200)
by stabilizing their existing tenancies wa temporary subsidies, helping them to find new
housing, and helping to pay their relocation costs The program assisted 283 tenants (23%
ofthe total) The real need for assistance was probably much greater Five hundred thirty-
five eligible households had to move from their apartments before the program became
operational, and, therefore, it was too late to assist them
City staff has contacted other California cities affected by Costa-Hawkms to determine how
they are managing its impact on their Section 8 programs The cities contacted include
Berkeley and West Hollywood These inquiries mdicate that Santa Monica is in the
forefront of documenimg the impact of Costa-Hawkins and proposing possible solutions
5
OpUons for City Counal Consideration
Staff has analyzed a range of possible strategies for City Councd consideration Whde the
strategies recognize the immediacy of the Section 8 problem, and the need for prompt City
action, staff is not proposing a long term financial commitment bythe City because it would
have a ma~or impact on the City's General Fund Short term expenditures, if approved, will
be limited to Housing Authority operating reserves, TORCA funds and/or Redevelopment
Agency Funds If the Santa Monica Section 8 program is to survive over the long term,
ultimately a special partnership with HUD is needed Therefore, strategiesforworkmg with
HUDtowardsthatpartnershiparerecommended Staffrecognizes,however,thattheHUD
partnership may take time m forming and action should be taken by the City to minimize
tenant displacement in the short term
Option One: Do nothing and let the marketplace determine the future of the Section
8 tenants in Santa Monica. The ma~onty of tenants affected are likely to be seniors, the
disabled, and families with chddren who currently reside in neighborhoods with strong
rental markets As the cost of housing rises throughout Santa Monica, many of these
tenants wdl not be able to find another Section 8 apartment in Santa Monica and will have
to relocate to other communities Because of documented impact on tenants to date, and
the anticipated future impact on tenants, staff does not recommend lett~ng the market be
the sole determinant of the future for Section 8 tenants
Option Two: Support SB1730 (Burton), advocate enhanced Costa-Hawkins
enforcement by the Rent Control Board, and engage an advocate to augment
ongoing advocacy efforts with HUD. Under Costa-Hawkins, rent mcreases are
permissible when a rent-controlled apartment is "voluntary vacated " Most agree that
Costa-Hawkins does not permit rent increases for apartments vacated by former Section
6
8 tenants whose owners have opted out of the Section 8 program However, to be clear
about this, California Senate Bdl 1730, sponsored by Senator Burton, speafies that a
vacancy created by an owner opting out of the Section 8 program is not a"voluntary
vacancy" and that a rent increase, therefore, is not permissible
Staff believes City Councd should adopt a resolution urgmg the Rent Control Board to
initiate a special pro~ect designed to monitorthe re-rental ofapartments vacated by Section
8 tenants whose building owners have opted out of the Section 8 program The momtonng
would help ensure that vacated apartments are not rented at illegal rent levels
City staff has been working actively with both HUD and Congressional staff to advocate for
financial and regulatory relief An example of relief would be the establishment by HUD
of a Santa Monica-speafic FMR, an FMR that reflects the cost of housing in Santa Monica
City staff believe that HUD must be the ma~or provider of the long term finanaal solutions
required forthe survroal ofthe Section 8 program As such, staff believes that professional
assistance in its ongoing advocacy effort is warranted
Option Three: Create a City-funded relocation and security deposit program.
Because of their low incomes, most Section 8 tenants are unable to pay the full costs of
moving and makmg secunty deposits on new apartments At a meeting held Aprd 30,
1998, City-funded social service agencies reported that tenants generally need two types
of assistance when faced with relocation (1) relocation moving assistance, and (2) secunty
deposit assistance
Staff proposes that the City contract with compames that would assist tenants to locate
apartments in Santa Monica and to physically move into new apartments Additionally,
staff proposes a program to assist displaced tenants to pay their security deposits on new
apartments
Option Four: Create a program that provides rental assistance for up to two years
for in-place Section 8 tenants whose building owners have canceled their Section
8 contracts. The program would use City funds (limited to Housing Authonty operating
reserves, TORCA funding and Redevelopment Agency funds) to pay the difference
between the Maximum Allowable Rent (MAR) and the tenants' share of their current
Section 8 contract rent With a temporary City rent subsidy, tenants could remain in their
apartments for a significant period, giving them additional time to locate alternative
housing The program may also serve to reduce the number of Section 8 contract
cancellations by eliminating the financial incentroe to cancel Section 8 contracts Dunng
the penod of the temporary subsidy program, staffwill continue to work with HUD to effect
changes to HUD policy which would be beneficial to Santa Monica and which would
provide permanent answers to the Section 8 problem
The Housmg Authority wdl administer the temporary subsidy program Tenants who
maintain Section 8 program eligibility would qualify HUD may allowthe Section 8 program
to "reserve" the certificates or vouchers of program participants for a period of up to six
months This would allow the tenants to avad themselves of the City temporary subsidy
without permanently losing their certficates or vouchers If the tenants find other
apartments dunng the six month period, they would be able to use their old vouchers or
certificates to pay the rent If tenants cannot find alternative housing within six months,
they may remain m their City-subsidized units for up to two years
8
FINANCIAUBUDGETARY IMPACTS
Option One - Do Nothing
No finanaal impact
~ption Two - Advocacy
Staff estimates that it wdl cost $25,000 annually to engage a specialized legislative
advocate Because of the nature of the work, General Fund resources wdl be reqwred for
this effort
Option Three - Relocation Assistance
Staff estimates that, for a two-year period, $40,000 annually from the Housing Authonty's
operatmg reserve is required to operate the program The operating reserve balance is
currently $1,042,089
Option Four - Two-year rental subsidy
Staff estimates that the two-year rental assistance program would cost approximately
$700,000 annually during the first two years of operation The Housing Authonty's
operating reserve would be used during the first year The second year of program
operation wdl require a combination of Housing Authonty operating reserve and TORCA
Construction funds The City Charter ailows TORCA Construction funds to be used for
rental assistance Currently, $1,185,D73 of the TORCA fund balance is unencumbered
Recommendations
Staff recommends that the City implement options two, three, and four This includes
hinng an advocate to assist staff in the City's ongoing advocacy efforts for HUD relief,
passmg a resolution urgmg the Rent Control Board to initiate a special Section 8
9
enforpemenl pro~ect, supporting SB 1730 (Burton), creating a relocation and security
deposit program, and instituting a two-year rental assistance program to assist Section 8
tenants to pay the Maximum Allowable Rent (MAR) if the owner cancels the contract for
their units
During the first year of the program, the funds to implement options three and four will be
taken from Housing Authonty operating reserves, requiring an increase to the FY 1998-99
Housing Authority budget of $740,000, and the creation of an additional expenditure
account within the Housing Authority Fund (the 12 Fund) for these costs During the
second year of the program, funds currently available in the TORCA deferred revenue
account will be used This will reqwre an increase to revenues and expenditures in the
TORCA Fund (14 Fund) of $740,000 in the FY 1999-2000 budget This also will require
the creation of an additional revenue and expense account w~thin the 14 Fund Staff
recommends makmg the budget changes indicated above
Prepared by Jeff Mathieu, Director, Resource Management Department
Bob Moncnef, Housing Manager
Peter Mezza, Housing Coordinator
Martin Kennerly, Accountant
10
JUhJ-Bg-?998 i1~58 FROM SMML~D ED. oERUICES D'ePT. TO 94581621 P.a2
June 8
Mayor Rabert Hoi6rook
and Councilmembers
City of Santa Monica
1685 Main Street
Sar~ta Manica, CA 9o401
Dear Mayor Holbraok and Councilmembers,
As a member of the Family Self-Sufficlency Program's Coordinating Committee, I urge
you to support the preseroation of the Section 8 Housing Program in Santa Monica.
Speaking to you as a ~itizen and resident , but working in the school district, i know
that approximately 1,OD0 families with more than 480 children currently recBiVS rental
assistance from the Santa Mo~ica Housing Autharity. VJithout support from the Gity,
these familias are in ~eoopardy of losing their subsidized housing, and without that,
accsss tv the range of services and programs which have supported them in their
efforts to became independent of public assistance. Changes in State and Federal
rsguiations, including passage of Costa-Hawkins, will force these families to relocate,
outside oi 5anta Monica in order to coritirtue ta rsceive subsidized hausing.
Having worlced in the community nan-profit and public ssctor of a^anta Monica for
nearly 20 years, all of it work on dahalf of children and families "at risk," I am deeply
concemed that the disruption of schoolirsg &nd other family supports that suCh
relocabon would entail would put these familie~, already struggling, at even further
risk. 12 seems a particular shama that Fhts might happen now. With the implementatian
of the Family Self•Sufficiency program, a number af these families are currently
making great sfrides toward sociaf and economic self-suffic;ency, samething which
Sants Monica has always supported in so ma~y ways and which is illustrated so well
by the collaborative eftorts of the FSS Program.
I am therefore haping that you will act ta pre~ent ihis disruptive crisis ;n their lives by
lobby~ng Federal govemment to increase funding to reflect the level of Santa MoniCa
rents; to hslp families, where necessary, with the costs of relacation; and to considsr a
temporary rantal assistance program supported by the City.
The Tuesciay, June 9th, meeting is crit(cal far these Santa Monica fam~lies. Again, I
urge you to take whatevsr aotions are needed ta support them as they work so hard ta
support thsmselves.
Sin erely, ~~ ~'~~
~__~~ ~
Katherine K. MeTaggart ~
mrp; p a~
~8-09'98 TL'E 14.05 FeL~i 310 3'.4 78-31 fFEISSi.~f.\ F3~IIILF CFITER
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7ane 9, 1998
?~4ayar Robert Holbrook
City of Santa _LSonica
1685'vlain 5treet, Raom 200
Santa hlonica, CA 40401
bcar ~Iayor Holbrook.
Post-it• Fax Note 7671
To ~kpdY" ~1 ~''D°G-
Co ~D"P~
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Faa r.~~~ ¢S8 ~- ~b Z I
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25fh Year
osta ~ ~ tlp Pa9cs~ /
Frcm t'i ~f {f~(C.r..a
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Fa%~ J
i_ am wriring to express the Venice Family CI'uuc's suppori fer the preservation of
the 5ecti~n 8 program in the City of 5anta Monica The Climo is the "family
doetor" to many low-income tesidents o£SantaMonica and many ofthese res~dents
aze currently ir. the 5ection 8 program Elsminatir~ the rental assistanoe currenfly
availab:e to the approximately 1,C00 eligible households (incIuding almost 500
children under the ave of 18) would mean the Ioss of stable housin~
In our work w e see the unpact ofunstable housin~ situa!ions on £artiiies, esgecially
famit~es withypu»g children Prev~iti~e health practices (immuniaations, w~eli-baby
ar,d weil-chitd medicxl visEts), good nutrition, as well as tunely trea.ment pf inedical
prqblems became less af a priorty for fam;lies now concerned with 6asic survival
Families who are then fOrced *.01~ve in Shetters often find themselves cramnled into
sm;,l[ lnring areas where there is constant exposure to infecfious diseases
1Ne urge the CiY~ Counci~ to seek alternatives wiuch would pre~•erft this crisis•
- labbying the £edeYal gor~emraern fer increased fiinding, w-hich would hnng the
rents to a Competitive level;
- appropriation of City funds for a"temporary rental assistance program", wluch
would pay the difference between tenants' poRion oFthe rent znd the maximum rent
sllowed; and,
- affering emergency :elocatiUn assisiance far Section S tenants who have been
"opted out"
V6'e won~ libe to see that the hea!th needs of this econom~calfy disadvantaged
populatiar. be given top priority in tlus decis~on Thank you for your time and
consideration
\ ~T ~
SI C~, ~_ ~~4s ;'t~\
I~ ~+ ~' R ~E
/ ~• .
„/ l - _ _ _ IL : ~,In~.- '`
~ \~~,~~Y %
141anuel Castell os/ r, LC3W '` y` .-`-~~
Director of Fam~3/Services
A ta~ ~empe, non-p.o~-i, p::b~c l~neit a ger,izer.~on p:n~~d;cy fraz heaf!h car_ ;or ~nm-:ncnme :emires sinie 1970
~C475DAYlO~RD NENY[RS
_ nnO Kai:ke-Cc~.ii 5-`na.~~an- ~,.,,e4.ae--a ^ ~c~i~~.c~~a.~'v - .~~
/~iVl O Lr N~ti C• •:s ~ m B- - ~.U]
t~ G 1 Iy. - w~.. -
a I 5. fx ~~i Oa .
i.ooLe. ~"i.~..ee. ~ s~a~,n : v~re~va~w.~_ C_i-~'su ~~V A~ ~'-5-nAy: ~~ ~~:enor
Trust Caprtal Grcup • Dav~d Knapp (Ph) 310-57E-0051 4(FaH} 3t~J57Fr005E i$6!9l9B =-3 00 Ptit =2i2
David Kna~p & Robert Strock
1535 6th Street, =101
5anta :~4oruca, Ca 90401
(310) 5i 6-0050
lune 9, 199&
Santa Moruca Crty Cot;nal
Citv Hali
Santa Moruca, CA
Re P,1ay 9, 1998 mectrng re~arding agenda rte:~l relatrng to Section 8
:~s an ocvner of ~ Lmits on 20th Street m the Crty of Santa Monica ~vhere more than 70;~
of the restdents are usuig the Section 8 Program, I urge you to su~port the preservation of
the 5ection 8 Program in ~ur City. I also ~vork in Santa Monica and oivn six
condoirumLUns. Approximately 1000 lo~v-income households ~ncluding elderly, disabled
and famihes tivLth children recen~e rental assistar.ce from the Santa Monica ~-Iousmg
Authority. These Santa ?~.Soruca residents are currently at-risk of losing their housing due
to chanaes in 5tate and Federat regulahons. Ihe passage oY Costa-Hawlans (Vacancy De-
controi? and a conb essional mandate allo~ving o-.vners to "Opt Out" oY their HUD contraLt
wrthout cause are forcmg these famihes out of Santa Moruca
I urge you to take the following actions to prevent this ma~or flousing crisis
Lobby Federal government to prnvide increased tunding to reflect the cost of rents
in 5anta Mon~ca m order Tor the Section 3 Program to remain competitive in the
marketplace
Otfer emergency relocati~n assistance such as moving expenses, secunty deposit and
hrst ~I~onths' rent to Section tS tenants ~vho ha~~e been "opted out°.
Appropriate Crty tunds tor a temparary rental assistance payment program that
enabies ~echon 8 tenants faang "opt out` the abilrty to rema~n m their homes by
pay ing the difierence bet~veen th~ tenants' portion of the rent and the maximum
allo~vable rert (MAR)
At thz June 9th Crty ~oune~l meeting, your vote anu support for *.he achons will be crrtical
in preeentina the displacement oi th~s economically disadvan±aged population. Only your
?%ote tieill ensure the diversity of Santa Ntaxuca ~vh~ch makes t~us City such a special place
to work and o~vn property.
Sincerely,
D~vid Knapp
O~vner
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