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SR-414-000 (3) F:\ResourceManageShareISTAFFREPORTS2004IDRAFTBOXllmpPlanStaffReports ~ ' B Redevelopment Agency Meeting: November 23, 2004 Santa Monica, California NOV 2 3 2004 TO: Chairperson and Redevelopment Agency Members FROM: Redevelopment Agency and City Staff SUBJECT: Consolidated Five-Year Implementation Plan for Earthquake Recovery, Downtown, Ocean Park 1 A, and Ocean Park 1 B, Redevelopment Project Areas FY 2004/05 through FY 2008/09 INTRODUCTION This report requests that the Redevelopment Agency hold a public hearing to review the consolidated Five-Year Implementation Plan, required by Community Redevelopment Law, for the Earthquake Recovery, Downtown, Ocean Park 1 A, and Ocean Park 1 B, Redevelopment Project Areas for FY 2004/05 through FY 2008/09 and adopt the plan. BACKGROUND Community Redevelopment Law (the Law) requires that the Agency adopt a Five-Year Implementation Plan (the Implementation Plan) that contains goals, objectives, programs and estimated expenditures for each redevelopment project area. An adopted Implementation Plan does not constitute an approval of any specific program, project or expenditure; instead, it serves as a planning tool to outline an agency's projected actions and programs for the next five years. The Agency may amend the plan at any time after its adoption. The Agency adopted the initial Five-Year Implementation Plan for the Earthquake Recovery Redevelopment Project Area on June 21 , 1994, concurrent with the approval of the Earthquake Recovery Redevelopment Plan. A consolidated Five-Year Implementation Plan for the Downtown, Ocean Park 1 A and Ocean Park 1 B Redevelopment Project Areas ~e 1 NOV 2 ~ 2004 was adopted on November 22, 1994. A subsequent consolidated Five-year Implementation Plan for the Earthquake Recovery, Downtown, Ocean Park 1A and 18 Redevelopment Project Areas was adopted on November 16, 1999. A related policy adopted at that time directed staff to maximize the dedication of redevelopment funds to housing by a variety of means. In addition to the requirement that redevelopment agencies spend a portion of tax increment to increase and improve the supply of housing for low- and moderate-income persons, the Law contains Agency inclusionary and production housing requirements. These requirements, which are distinct from the City's inclusionary housing ordinance requirements, mandate that at least fifteen percent of all new and substantially rehabilitated dwelling units developed with Agency assistance in project areas adopted on or after January 1, 1976, by public or private entities, are to be available to very low, low and moderate-income households. Of these units, not less than forty percent are to be available to very low-income households. The Law requires that the Agency adopt a ten-year housing compliance plan, which quantifies its obligation. The ten-year compliance plan must be updated every five years. Ocean Park 1 A and 18 Project Areas are exempt from the ten-year housing compliance plan requirement because they were adopted prior to January 1, 1976. A current and consolidated housing compliance plan for the Earthquake Recovery, and Downtown Redevelopment Project Areas is included in the consolidated Implementation Plan for FY 2004/05 through 2008/09. 2 The Agency issued a Notice of Public Hearing, pursuant to California Community Redevelopment Law, to review the current Implementation Plans and to consider adoption of a new, consolidated Five-Year Implementation Plan at the November 23, 2004 Redevelopment Agency Meeting. DISCUSSION The consolidated Five-Year Implementation Plan covers all four redevelopment project areas for the period FY 2004/05 through FY 2008/09. It estimates the amount of redevelopment funds generated for the five-year period; identifies current commitments and legal mandates for the use of these funds; and establishes general types of projects and activities for the Agency over the next five years. The Implementation Plan proposes that, in addition to the Redevelopment Housing Trust Fund, uncommitted funds not legally mandated for affordable housing from the Downtown, Ocean Park 1 A and 18 Project Areas continue to be allocated to affordable housing as they have been pursuant to Council's 1999 direction. Council, however, may wish to allocate these funds for other purposes, including paying City loans owed by the Redevelopment Agency. Consolidated Five-Year Implementation Plan o Earthquake Recovery Redevelopment Project The Agency anticipates that overthis five-year period, projects and activities will be funded with available tax increment revenue and a series of debt financing structures. In 3 implementing this financing strategy, staff anticipates that the Earthquake Recovery Redevelopment Project Area will generate approximately $304.4 million (net of administrative expenses and debt service) from a combination of tax increment and incurring new debt. Of these project funds, approximately $280.2 million is proposed for various programs over the next five years (see below), while $24.2 million has been previously committed for capital improvement projects, consisting of the Seismic Retrofit of Public Parking Structures, the new Library Parking Structure, Palisades Bluff Stabilization Project, the Liberal Arts Facility at Santa Monica College, and affordable housing. . Disaster Prevention and Mitigation: The new Implementation Plan proposes to continue to fund disaster prevention and mitigation programs to meet the City's seismic retrofit needs and mitigate against effects of future disasters. Funds will be used to implement the Downtown Parking Task Force recommendations for the downtown area and to stabilize the Pacific Palisades bluffs, for which the City has received time-sensitive funding from FEMA and other federal sources. ($123.2 million) . Commercial Revitalization: This program will revitalize and promote economic investment and business expansion in the Project Area or of benefit to the Project Area, and preserve the area's existing employment base by funding additional parking and/or replacement parking in the downtown area, parking improvements beyond the Downtown Parking Task Force recommendations, and opportunities to promote and support transit oriented development. ($60 million) 4 . Community Revitalization: This program will include projects that improve, repair, rebuild or provide adequate parking and street network in the civic center area, including public improvements associated with the housing proposed for the civic center area, as well as the development of a child care facility. ($13.3 million) . Affordable Housing: This will include approximately $97.7 million of revenue from the Earthquake Project Area to further increase, improve or preserve the supply of affordable housing within the city. These funds are comprised of the project area's anticipated "20% set-aside" tax increment revenues, and proceeds of bonds expected to be issued in the next five years. ($97.7 million) . Institutional Revitalization: This includes $10.2 million which was committed in the previous five-year period to assist in the replacement of the Liberal Arts Building located on the Santa Monica College campus, which is anticipated to be expended in the next five years. ($10.2 million) o Downtown, Ocean Park 1 A and 1 B Projects Over the next five years, the new plan proposes to allocate all available funds (net of administrative expenses and debt service obligations) to affordable housing, consistent with Council's 1999 direction. ($ 9.1 million) o Affordable Housing Program In summary, the Agency plans to provide an estimated $106.8 million through the leveraging of state-mandated housing set-aside funds and available non-housing 5 funds. $6.7 million of this amount is not legally required for housing and could be used to repay City-owed debt (see below), from the Agency's four redevelopment project areas over the next five years: (1 ) Ocean Park 1 A and 1 B Project Areas: Housing Set-Aside Funds: Non Housing Funds: $ 4.3 million $ .7 million $ 3.6 million (2) Downtown Project Area: Housing Set-Aside Funds: Non Housing Funds: $ 4.8 million $ 1.7 $ 3.1 million million (3) Earthquake Recovery Redevelopment Project Area: Housing Set-Aside Funds: $ 26.9 million Bond Proceeds: $ 70.8 million $ 97.7 million Total: $106.8 million Attachment A provides a summary of the consolidated Five-Year Implementation Plan. o City Debt Repayment Should Council decide to utilize uncommitted non-housing funds to reduce the Agency's existing debt obligations to the City, the result would be a decrease of $6.7 million for affordable housing purposes from non-housing funds over the next five years. As of June 30, 2004, the loans from the City to the Agency totaled $22.6 million. Any repayment of the Ocean Park 1 A and 1 B project area's existing $5.9 million outstanding debt balance would be to the City's Community Development Block Grant (CDBG) fund. Such repayment would require that funds be spent for eligible CDBG purposes within a defined time frame, so as to not risk an excess accumulation of CDBG funds, resulting in a reduction of the City's annual CDBG allocation. The Downtown Project Area's outstanding debt obligation of $16.7 million is not CDBG related, any repayment would go to the City's 6 General Fund without any specific restrictions. Another alternative for the use of non-housing funds from the Downtown Project Area would be to allow for the accumulation of these funds during this period as the agency explores revitalization opportunities for that Project Area. Re-evaluation of the Implementation Plan The proposed programs and allocation of resources in the Implementation Plan are guides to assist the Agency in its expenditure of funds over the next five years. The Agency is required to conduct a public hearing to review the progress of this Five-Year Implementation Plan between the second and third years following the adoption of the plan. Changes to the Implementation Plan may be made at that time to reflect changes in policy direction or re-designation of funds. The Agency may review and make changes to the Plan at more frequent intervals at its discretion, after holding the required public hearing. 1 O-Year Affordable Housina Compliance Plan Staff has also incorporated into the Housing Component of the Implementation Plan a ten- year affordable housing compliance plan addressing the period FY 2004/05 through FY 20013/04, which describes the affordable housing obligations of the Earthquake Recovery and Downtown Redevelopment Project Areas. (The Ocean Park 1 A and 1 B project areas are exempt from this requirement and were therefore excluded from this provision). The compliance plan details the Agency's existing five-year obligation, based on its projected 7 obligation over the ten-year period of FY 2004/05 through FY 2013/14. The compliance plan demonstrates that the Agency expects to meet its inclusionary housing obligations over the statutory ten-year period in compliance with the requirements of redevelopment law. BUDGET/FINANCIAL IMPACT There are no immediate budgetary impacts associated with the adoption of the proposed Five-Year Implementation Plan. The Implementation Plan sets forth the anticipated use of the funds and funding for specific projects will be appropriated later. Changing current policy to allow repayment of City-owed debt from funds not legally required for affordable housing would result in $3.6 million to the CDBG fund and $3.1 to the General Fund over the five year period, while reducing the funds available for affordable housing by the same amount. PUBLIC NOTICING This hearing was publicly noticed for three weeks in the Los Angeles Times newspaper (October 21, October 28 and November 4) and posted in four permanent locations within each project area, pursuant to Community Redevelopment Law, Section 33490 (d). In addition, notice was mailed to those persons and entities that requested notice. RECOMMENDATIONS It is recommended that the Redevelopment Agency take the following actions: 1 . Hold a public hearing on the Agency's Implementation Plan; 8 2. Determine use of available non-housing funds from the Ocean Park and Downtown project areas over the five-year period; and 3. Adopt the Five-Year Implementation Plan forthe Earthquake Recovery, Downtown, Ocean Park 1 A, and Ocean Park 1 B, Redevelopment Project Areas. Prepared by: Jeff Mathieu, Director, Resource Management Department Bob Moncrief, Housing and Redevelopment Manager Martin Kennerly, Administrative Services Officer Tina Rodriguez, Redevelopment Administrator Ron Barefield, Housing Administrator Jim Kemper, Senior Administrative Analyst Attachment A: Attachment B: Executive Summary Five-Year Implementation Plan for the Earthquake Recovery, Downtown, Ocean Park 1 A, and Ocean Park 1 B, Redevelopment Project Areas 9 Attachment A SANTA MONICA REDEVELOPMENT AGENCY IMPLEMENTATION PLAN FY 2004/05 to FY 2008/09 EXECUTIVE SUMMARY Introduction Since 1994, the California Community Redevelopment Law (CRL) has required that all redevelopment agencies adopt a five-year implementation plan. This year, the Redevelopment Agency of the City of Santa Monica is due to adopt its five-year Implementation Plan for FY 2004/05 through FY 2008/09. Together with the Agency's redevelopment consultant and legal counsel, staff has prepared this updated Plan for Agency consideration on November 23,2004. At this meeting, the Agency will conduct a public hearing on the FY 2004/05 through FY 2008/09 Implementation Plan and consider its adoption. Five- Year Implementation Plan Pursuant to Section 33490 of the Redevelopment Law, the FY 2004/05 through FY 2008/09 Implementation Plan delineates the Agency's goals and objectives for each of the four redevelopment Project Areas (Earthquake Recovery, Downtown, Ocean Park lA, and Ocean Park lB)l. In addition, the Implementation Plan contains specific programs and related expenditures to be made during the next five years, as well as a description of how the goals and objectives and programs will alleviate the impacts of the 1994 Northridge earthquake and eliminate blight in the Project Areas. The purpose of the Implementation Plan is not to approve any specific program, expenditure or project at this time, but rather to provide a visionfor the Agency's anticipated activities within the next five years. The Plan sets forth a series of programs for each of the Agency's four redevelopment Project Areas. These programs and estimated expenditures over the next five years are summarized below. Staff anticipates that projects and programs implemented during the next five years would be funded with available tax increment and debt financing. It is assumed for this Implementation Plan that bonds would be issued in FY 2006/07 and FY 2007/08. o Earthquake Recovery Project Area Staff anticipates that the Agency's proposed expenditures and commitments during the next five years will total approximately $304.4 million, net of administrative expenses and debt service. ~ $123.2 million for Disaster Prevention and Mitigation Program This program proposes to continue to fund disaster prevention and mitigation projects. Funds would be used to implement the Downtown Parking Task Force recommendations, which include the seismic retrofit of existing parking structures, the demolition and rebuilding of existing parking structures and additional parking in the downtown area, and the stabilization of Pacific Palisades Bluff project. ~ $60 million for Commercial Revitalization Program This program would revitalize and promote economic investment and business expansion in, or of benefit to, the Project Area, and preserve the area's existing employment base by funding additional parking and/or replacement parking in the downtown area, parking improvements 1 Pacific Ocean Park (adopted in July 1971) is an inactive Project Area. No projects were ever established for the area and the area has not generated tax increment revenue. Therefore, it is not reported in this Implementation Plan. beyond the Downtown Parking Task Force recommendations, and opportunities to promote and support transit-oriented development. ~ $13.3 million for Community Revitalization Program This program would include projects that improve, repair, rebuild or provide adequate parking and street network in the Civic Center Area, including public improvements associated with the housing proposed for the Civic Center Area, as well as the development of a child care facility. ~ $97.7 million for Affordable Housing Program To further increase, improve or preserve the supply of affordable housing within the city. . $26.9 million would be from the CRL-mandated Housing Set Aside Funds (referred to as Redevelopment Housing Trust Funds); and $70.8 million would be from bond proceeds. ~ $10.2 million for Institutional Program A previous funding commitment to Santa Monica College for the rebuilding of the Liberal Arts facility damaged by the 1994 Northridge earthquake would be expended during the upcoming five-year period. o Downtown Project ~ $4.8 million for Affordable Housing Over the next five years, the new plan proposes to allocate all available funds (net of administrative expenses and debt service obligations) to preserve, improve and increase affordable housing outside of the Project Area. . $1.7 million would be from the CRL-mandated Housing Set Aside Fund; and $3.1 million would be from available non-housing funds used for housing, which are referred to as Preservation and Production of Affordable Housing (PP AH) funds. o Ocean Park Projects lA and IB ~ $4.3 million for Affordable Housing Over the next five years, the new plan proposes to allocate all available funds (net of administrative expenses and debt service obligations) to preserve, improve and increase affordable housing outside of the Project Area. . $0.7 million would be from the CRL-mandated Housing Set Aside Fund; and $3.6 million would be from PP AH. Affordable Housing Revenues In summary, for all Project Areas, staff proposes that approximately $106.8 million of CRL-mandated Redevelopment Housing Trust Fund monies and PP AH funds would be allocated over the next five years to fund land acquisition, new construction, and acquisition and/or rehabilitation projects to provide affordable housing. This includes commitment of approximately $0.8 million made in the FY 1999/00 through FY 2003/04 Implementation Plan period that would be expended during the upcoming five-year period. These funds would consist of the Project Area's anticipated 20 percent Redevelopment Housing Trust Fund revenues, PPAH funds and proceeds from bonds expected to be issued in the next five years. These funds would further increase, improve or preserve the supply of affordable housing within the city. Other activities consistent with the City's Housing Element, Consolidated Plan and the CRL may also be considered. Funds may be loaned or granted to eligible borrowers for these uses. Affordable Housing Component The Housing Component of the Implementation Plan summarizes the Agency's projected housing obligations pursuant to the legal requirements of the CRL and provides an overall framework for the Agency's Housing Program goals and expenditures. It sets forth the Agency's proposed program for insuring an appropriate number of very low, low, and moderate-income dwelling units are produced in connection with any new construction or substantial rehabilitation within the Project Areas. In general, the CRL provides that in Project Areas adopted on or after January 1, 1976, at least 15 percent of all new or substantially rehabilitated units, developed by public or private entities other than the Agency, be available to very low, low and moderate income households. At least 6 percent must be available to very low-income households. . In sum, the Housing Component demonstrates that the Agency has a projected affordable housing production five-year obligation for FY 2004/05 through FY 2008/09 of 170 units, of which 68 units must be available to very low income households and has a projected affordable housing production obligation of 389 units for the lO-year compliance period FY 2004/05 through FY 2013/14, of which 156 units must be affordable to very low income households. This production requirement is equal to 15 percent of all units that are projected to be produced within the Earthquake Recovery Project Area over the lO-year period.2 The Agency expects that it will be able to fulfill its housing production obligations given existing and anticipated projects. 2 Because the Ocean Park 1A and 1B Project Areas were adopted prior to 1976 and the Downtown Project Area is designated exclusively for non-residential use, Earthquake Recovery is the only Project Area currently subject to the housing production requirement. Attachment B Five-Year Implementation Plan FY 2004/05 to FY 2008/09 November 2004 Prepared by Santa Monica Redevelopment Agency 1685 Main Street Santa Monica, CA 90401 and Seifel CONSULTING INC. 1388 Sutter Street Suite 520 San Francisco, CA 94100 Tel 415.931,9600 V\IWW.seifel.com Five-Year Implementation Plan FY 2004/05 - FY 2008/09 Santa Monica Redevelopment Agency I. Introduction ....................... ........................................................... ........... 1-1 A. Organization..................................................................................................................... .................................... I-I B. Interpretation ..... ...... ...... .............. ...... ................. .......... ........... ............... ....... .... ....................... ........ ........ ............ 1-2 C. Description of Project Areas ...... ...... .................................................... ........ .......... ... ....... ............. ..... .......... ....... 1-2 D. FY 1999/00 through FY 2003/04 Agency Accomplishments ........................................................................... 1-4 E. Agency Expenditures and Commitments During FY 1999/00 through FY 2003/04........................................ 1-7 II. Five-Year Redevelopment Program...................................................... 11-1 A. FY 2004/05 through FY 2008/09 Goals and Objectives...................................................................................II-I B. FY 2004/05 through FY 2008/09 Implementation Plan Revenues...................................................................II-4 C. FY 2004/05 through FY 2008/09 Projects and Activities.................................................................................II-5 D. FY 2004/05 through FY 2008/09 Implementation Plan Expenditures............................................................II-8 E. Linkage Between Agency Program and Elimination of Blighting Influences.................................................II-9 III. Housing Component .............................................................................111-1 A. Overview of Agency Affordable Housing Responsibilities.............................................................................III-I B. Statutory Requirements for Housing ................................................................................................................III-2 C. Housing Production Plan................................................................................................................................ III-II D. Replacement Housing............................................................................................................................... ...... III -14 E. Redevelopment Housing Trust Fund and Additional Agency Housing Resources ..................................... III-I 5 F. Housing Program ..................................... ........................................ ................ .......... ....... ............. ............ ..... III -15 G. Completion of Housing Obligations in Ocean Park IA and IB ................................................................... III-19 Santa Monica Redevelopment Agency Five-Year Implementation Plan SeifeI Consulting Inc November 2004 Table of Contents (continued) Lists of Figures and Tables Fi2ures Figure 1-1 Boundaries of Project Areas Santa Monica Redevelopment Project .............................................................. 1-8 Tables Table 1-1 Redevelopment Plan Time and Financial Limits .............................................................................................. 1-8 Table II-I Projected Revenues Available for Non-Housing Programs Earthquake Project Recovery Area ............... II-I 0 Table 11-2 Projected Revenues Available for Non-Housing Programs Downtown Redevelopment Project...............1I-11 Table 11-3 Projected Revenues Available for Non-Housing Programs Ocean Park Redevelopment ProjecL............II-12 Table 11-4 Projected Non-Housing Five-Year Program Expenditures .......................................................................... 11-13 Table III-I 2004 Los Angeles County Maximum Incomes by Income Category and Household Size........................I1I-7 Table I1I-2 Affordable Housing Cost........ ............. ....... ............. ...... .................... ....... ....... .......... .............. ......... ....... ......111-7 Table I1I-3 Affordable Housing Expenditure Proportions by Income Category............................................................I11-8 Table I1I-4 Redevelopment Housing Trust Fund Expenditures Requirement Non-Age Restricted Housing...............I1I-9 Table I1I-5 Summary of Historical and Projected Housing Production ...................................................................... III-I 2 Table I1I-6 Housing Production and Affordable Obligation....................................................................................... I1I-21 Table I1I-7 Projected Resources Available for Housing Program............................................................................... I1I-22 Table I1I-8 Housing to be Produced with Agency Assistance/Housing Resource Expenditures ............................... I1I-23 Santa Monica Redevelopment Agency Five -Year Implementation Plan II Seifel Consulting Inc. November 2004 Santa Monica Implementation Plan (FY 2004/05 through FY 2008/09) I. Introduction California Community Redevelopment Law (CRL) requires each redevelopment agency administering a redevelopment plan to prepare and adopt a five-year implementation plan. The principal goal of the implementation plan is to guide an agency in implementing its redevelopment programs that will alleviate or eliminate blighting influences and the adverse effects of disasters, in this case, the Northridge earthquake. In addition, the affordable housing component of the implementation plan provides a mechanism for a redevelopment agency to monitor its progress in meeting its affordable housing requirements and obligations under the CRL, The implementation plan is a guide, incorporating the goals, objectives and potential programs of an agency for the next five-years, while providing flexibility so the agency may adjust to changing circumstances and new opportunities. This document constitutes the Implementation Plan for the project areas administered by the Santa Monica Redevelopment Agency (Agency), which are the:1 Earthquake Recovery Redevelopment Project Area (adopted June 1994, expiring in June 2025); Downtown Redevelopment Project Area (adopted January 1976, expiring in January 2017); Ocean Park 1A Redevelopment Project Area (adopted June 1960, expiring January 2010); and Ocean Park 1B Redevelopment Project Area (adopted June 1961, expiring January 2010). This Implementation Plan outlines the proposed program of revitalization, economic development and affordable housing activities of the Agency for the required five-year implementation plan period, FY 2004/05 through FY 2008/09. It includes goals, activities and estimates of expenditures and a description of how they will mitigate the impacts of the Northridge earthquake, alleviate blight and meet affordable housing requirements. The Housing Component includes the affordable housing production plan, which summarizes historical and projected housing production, the affordable housing obligation and the Agency's progress in meeting the obligation, The Housing Component also includes the status of the Low and Moderate Income Housing Fund (Redevelopment Housing Trust Fund) and estimated annual deposits into the Redevelopment Housing Trust Fund over the next five-years. It also includes the Housing Program, with estimates of Redevelopment Housing Trust Fund expenditures and affordable housing units to be assisted by the Redevelopment Housing Trust Fund over each of the five-years in the implementation plan period. A. Organization Generally, the Implementation Plan must contain the following information: 1. Specific goals and objectives for the next five-years for both housing and non-housing activities. 2. Specific programs and expenditures for the next five-years for both housing and non-housing acti viti es, 1 Pacific Ocean Park (adopted in July 1971) is an inactive project area. No projects were ever established for the area and the area has not generated tax increment revenue. Therefore, it is not reported in this Implementation Plan. Santa Monica Redevelopment Agency I-I Five-Year Implementation Plan Seife! Consulting Inc. November 2004 3. An explanation of how the goals, objectives, programs and expenditures will assist in the alleviation of the impacts of the Northridge earthquake, the elimination of blight and in meeting affordable housing obligations. 4. Other information related to the provision of affordable housing. Chapter I provides a basic discussion of the CRL and Project Area descriptions and also summarizes the Agency accomplishments (and expenditures) over the last five-year implementation plan period (FY 1999/00 through FY 2003/04). Chapter II includes the five-year Redevelopment Program, with goals and objectives, the proposed five-year projects and activities and related revenues and expenditures, and a description of the impacts of the Northridge earthquake and blighting conditions and how they will be alleviated by the activities. Chapter III includes a detailed discussion of CRL affordable housing requirements and the proposed affordable housing activities and projected expenditures, and charts Agency progress in meeting its affordable housing obligations. Chapter III also includes the Affordable Housing Production Plan. B. Interpretation The Implementation Plan is intended to provide general guidance for the implementation of the Agency's programs and activities. The Agency expects that particular constraints and opportunities, not fully predictable at this time, will arise in the course of undertaking the projects and activities described in this Implementation Plan over the next five-years. Therefore, the Agency intends to use and interpret this Implementation Plan as a flexible guide. The Agency acknowledges that specific projects and activities as actually implemented over the next five years may vary in their precise timing, location, cost, expenditure, scope and content from those set forth in this document, or may be delayed beyond the planning period of this Implementation Plan. c. Description of Project Areas The Project Areas consist of approximately 1,894 acres located within the city of Santa Monica, which is located in Los Angeles County. The Agency's Project Areas were adopted over a 34 year period, and have been amended over time. Table I-I, shown at the end of the chapter, summarizes the time and financial limits of the Project Areas. Figure I-I, shown at the end of the chapter, includes a general vicinity map of the Project Areas. 1. Earthquake Recovery Redevelopment Project Area The Earthquake Recovery Redevelopment Project Area (ERRP A) was established in 1994. The project area was formed to alleviate the effects of the January 1994 Northridge earthquake in the area that predominantly includes the damaged structures. Approximately 90 percent of all red-tagged and approximately 80 percent of all yellow-tagged buildings in the city were included in the Project Area. This damage significantly affected the city's affordable housing stock, as well as commercial and public properties. The project area is bounded on the east by Cloverfield Boulevard and 26th Street, on the west by the Pacific Coast Highway/Beach Promenade, on the south rougWy by Pico Boulevard and on the north by Montana Avenue. The City Council approved the Redevelopment Plan for ERRP A on June 21, 1994. As a result of the Agency's contribution to the Education Revenue Augmentation Fund (ERAF) in 2004, the Agency was able to extend the Project Area's time limit on plan activities by one year to 2025. (Refer to Table I-I, shown at the end of the chapter.) Santa Monica Redevelopment Agency Five- Year Implementation Plan 1-2 Seifel Consulting Inc. November 2004 2. Downtown Redevelopment Project Area The Downtown Redevelopment Project (Downtown) encompasses about 9.9 acres of property located in the downtown core of Santa Monica. The Downtown Redevelopment Project is bounded by Broadway on the north, Fourth Street on the east, Colorado Avenue on the south, and Second Street on the west. The City Council approved the Redevelopment Plan for the Downtown Project in January 1976. The Agency eliminated its time limit on incurring debt in 2004 and as a result of the Agency's contribution to the Education Revenue Augmentation Fund (ERAF) in 2004, the Agency was able to extend the Project Area's time limit on plan activities by one year to 2017. (Refer to Table I-I, shown at the end of the chapter. ) 3. Ocean Park Redevelopment Project Area lA The Ocean Park Redevelopment Project was the first project proposed to be undertaken by the Santa Monica Redevelopment Agency. It was designated for study as a potential redevelopment project in April 1958 when an application was submitted to the federal government for survey and planning funds. With these funds, the Agency commenced preparation of formal plans for the area encompassing thirty- three acres of land in the southwest comer of the city. In October 1959, as a result of a reduction in the availability offederal funds for the project, the City divided the proposed thirty-three acre Ocean Park project into two separate projects so that at least one project could proceed with the funds available to the Agency at the time. Ocean Park Redevelopment Project lA (Ocean Park lA) encompasses the northern 25 acres of the originally proposed 33 acre project. The City Council approved the Redevelopment Plan for this Project on June 30, 1960, following requisite studies and hearings by the Planning Commission, Redevelopment Agency, and the City Council. The Redevelopment Plan was amended on November 14, 1967, principally to change the permitted land uses in the Project Area. In 1986, the Plan was amended to establish a limit on the dollar amount of tax increment revenue that may be allocated to the Project Area and time limits within which to incur debt. The Redevelopment Plan was amended again in November 1994 to comply with time limit changes pursuant to AB 1290. As a result of the Agency's contribution to the Education Revenue Augmentation Fund (ERAF) in 2004, the Agency was able to extend the Project Area's time limit on plan activities by one year to 2010. (Refer to Table I-I, shown at the end of the chapter.) Ocean Park Redevelopment Project lA is bounded by Ocean Park Boulevard on the north, Neilson Way on the east, Ocean Park Project IB on the south, and the State beach parking lots and beach on the west. 4. Ocean Park Redevelopment Project Area IB Ocean Park Redevelopment Project IB (Ocean Park IB) encompasses the southern 8 acres of the originally proposed 33-acre project. The City Council approved the Redevelopment Plan for this Project on January 24, 1961, following requisite studies and hearings by the Planning Commission, Redevelopment Agency, and the City Council. The Redevelopment Plan was amended on January 26, 1965, July 13, 1971, and again on September 12, 1972, principally to change the permitted land uses in the Project Area. The plan was amended in 1986 to establish a tax increment revenue limit and was amended again in November 1994 to comply with time limits established by AB 1290. As a result of the Agency's contribution to the Education Revenue Augmentation Fund (ERAF) in 2004, the Agency was able to extend the Project Area's time limit on plan activities by one year to 2010. (Refer to Table I-I, shown at the end of the chapter.) Santa Monica Redevelopment Agency Five-Year Implementation Plan 1-3 Seifel Consulting Inc. November 2004 Ocean Park 1B is bounded by Ocean Park Redevelopment Project lA on the north, Neilson Way on the east, the City limit on the south and the State beach parking lots and beach on the west. D. FY 1999/00 through FY 2003/04 Agency Accomplishments The Agency has undertaken many projects and activities in the Project Areas over the last five-year implementation plan period. Agency efforts have been focused on the alleviation of the impacts of the Northridge earthquake and blight through the following activities: Disaster prevention and mitigation programs to seismically retrofit public parking structures and fund relevant studies to mitigate earthquake effects. Commercial revitalization programs to promote private sector investment and business expansion within the ERPPA Project Area and to preserve the Area's existing employment base and the restoration of local jobs. Community revitalization programs for enhanced public parks and recreational facilities and parking in the ERPP A and Civic Center street network improvements. Affordable housing activities to increase, improve and preserve affordable housing opportunities and to improve the City's existing housing stock. Institutional revitalization to assist Santa Monica Community College District with the costs of repair and reconstruction of earthquake damaged facilities. The following subsections include a list of projects and activities accomplished over the last five-years (FY 1999/00 through FY 2003/04) by Project Area. 1. Earthquake Recovery Redevelopment Project Area The following activities have been the primary focus of the Agency during the last implementation plan period in ERRP A. During this period, the Agency: Disaster Prevention and Mitigation Committed funds for seismic retrofit design studies and retrofit construction of parking structures within, or of benefit to, the Project Area. The agency anticipates committing additional funds over the next implementation plan period. Committed funds towards the construction of a public parking structure at the new Main Library. This public parking structure will provide parking in the downtown area while seismic retrofit work is being done on the downtown parking structures, and will remain as additional public parking after retrofit work is completed. This also helped to achieve both commercial and community revitalization goals by contributing to the economic restoration of the City's primary commercial area. Acquired the six downtown parking structures for the purposes of accomplishing their seismic retrofit. Committed funds to the Santa Monica Palisades Bluff Stabilization Project, which is a project that will provide for the stabilization of the bluff area along a 1.6 mile stretch of Pacific Coast Highway. The Agency anticipates committing additional funds over the next implementation plan period. Santa Monica Redevelopment Agency Five-Year Implementation Plan 1-4 Seifel Consulting Inc. November 2004 Commercial Revitalization Enhanced and constructed parking structures to preserve economic investment and activity in the Project Area, Funds were expended on a public parking structure in conjunction with an affordable housing development and to the public parking structure at the library. Added street fixtures, implemented crosswalk improvements, enhanced pedestrian amenities and safety features, and completed street reconstruction, as part of the Pico Streetscape Phase of the Commercial Streetscape Program. Community Revitalization Acquired land in the Civic Center area to implement the goals and objectives of the Civic Center Specific Plan. Provided funds towards Virginia Avenue Park acquisition and improvement costs. Committed funds towards the construction of a public parking structure at the new Main Library. This public parking structure will provide parking in the downtown area while seismic retrofit work is being done on the downtown parking structures. Affordable Housing Acquired land in the Civic Center Specific Plan Area to provide affordable housing on the site. Additional funds from the FY 1999/00 tax allocation bond issue were also allocated and spent for affordable housing purposes. Expanded the supply of affordable housing by providing gap fmancing for acquisition, rehabilitation and new construction of housing. Provided 20 percent of the Agency's tax increment from ERRPA to the Redevelopment Housing Trust Fund. Institutional Revitalization Program Provided funds for the reconstruction of the municipal pool located on the Santa Monica College campus, which serves the needs of the college and the community. Committed additional funds to the Santa Monica Community College District for the Liberal Arts facility. 2. Downtown Redevelopment Project Area During the last implementation plan period, the Agency dedicated all tax increment revenues after debt service and administrative costs to increasing, improving and preserving the supply of affordable housing in the city. Affordable Housing Provided funding for the acquisition, rehabilitation and new construction of affordable housing. Allocated additional non-housing funds for affordable housing purposes from revenues that exceeded non-housing expenditures. Deposited 20 percent of the Project Area's tax increment revenue to the Redevelopment Housing Set-Aside Fund to provide financing for programs that provide housing to very low and low income households. Santa Monica Redevelopment Agency Five-Year Implementation Plan 1-5 Seifel Consulting Inc. November 2004 3. Ocean Park lA and IB Redevelopment Project Areas During the last implementation plan period, the Agency dedicated all tax increment revenues after debt service and administrative costs to increasing, improving and preserving the supply of affordable housing in the city. Affordable Housing Provided funding for the acquisition, rehabilitation and new construction of affordable housing. Allocated additional non-housing funds for affordable housing purposes from revenues that exceeded non-housing expenditures. Deposited 20 percent of the project areas' tax increment revenue to the Redevelopment Housing Set-Aside Fund to provide financing for programs that provide housing to very low and low income households. Santa Monica Redevelopment Agency Five-Year Implementation Plan 1-6 Seifel Consulting Inc. November 2004 E. Agency Expenditures and Commitments During FY 1999/00 through FY 2003/041 The following table summarizes the Agency's expenditures during the prior Implementation Plan period. Agency Implementation Plan Expenditures and Additional Capital Improvement Project (CIP) Commitments FY 1999/00 through FY 2003/04 Santa Monica Redevelopment Agency ERRP A Downtown Ocean Park 1A11B ~ffordable Housing Actual Expenditures $19,892,622 $1,171,356 $3,452,792 Additional CIP Commitment 749,862 1,758,244 3,874,119 Subtota $20,642,484 $2,929,600 $7,326,911 Disaster Prevention and Mitigation Actual Expenditures $18,309,212 Additional CIP Commitment 13,192,463 Subtotal $31,501,675 Commercial Revitalization Actual Expenditures $8,205,205 Additional CIP Commitment Subtota $8,205,20'" Institutional Revitalization Actual Expenditures $1,000,000 Additional CIP Commitment 10,206,823 Subtota $11,206,823 Community Revitalization Actual Expenditures $45,601,911 Additional CIP Commitment Subtota $45,601,911 Tota $117.158.098 $2.929.600 $7,326.911 Total Actual Expenditures $97,633,098 Total Additional CIP Commitment $29,781,511 L Including the 20% Housing Set-Aside. 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'. -/.....7., ... ...... , .S .. " " . '. '.. ........'...: ". '. i ,," ...t).... '.r ~X~A\pmOH . . ." , , ..1- Q) j;;, . il', '?: ,..._~..... '.~ ! . ~ , .' i .,., ..... .' .uO~W .... j;, . .. ,::: . . . ' ~~fqSl!.M: , ....'.. ., . . '." ". , .., . . "SAri eUBluoli\l .... ......... "., .:.... .......'.. :,:. ". '.. . i . . __, , ':.' .~ ....... .i,/ .., .. - .. ..,........ '. , : . .... ..... .. ....... " ~. .. :. )IE: O'l q> <0 ~ II. Five-Year Redevelopment Program This section describes the FY 2004/05 through FY 2008/09 Redevelopment Program, including the Agency's FY 2004/05 through FY 2008/09 goals and objectives, the five-year projects and activities, the deficiencies to be corrected, an explanation of how the five-year Redevelopment Program will alleviate the impacts of the Northridge earthquake and blighting conditions, and estimated expenditures and revenues over the five-years. (Chapter III presents detailed information on the Housing Redevelopment Program, including the projects, activities and estimated revenues and expenditures related to affordable housing.) As they are implemented, the projects and activities may be modified to better serve the purposes of redevelopment. The cost estimates are preliminary and subject to refinement as the Redevelopment Program planning and implementation proceed. Some of these projects and activities may not be completed within the next five-years of the Redevelopment Program, and thus, related costs may not be incurred in the next five-years. A. FY 2004/05 through FY 2008/09 Goals and Objectives The CRL requires the Agency to establish goals and objectives for the Project Areas for the five-year implementation plan period. The Implementation Plan goals and objectives emphasize eliminating the impacts of the Northridge earthquake and physical and economic blighting conditions that interfere with successful revitalization of commercial, residential and industrial areas within the Project Areas. They also emphasize expanding affordable housing opportunities within the City. The following describes the goals and objectives of each Project Area for the five-year Implementation Plan period, FY 2004/05 through FY 2008/09. These goals and objectives are from the original Project Area goals and have been updated to reflect new developments and opportunities. The order of the goals and objectives are not intended to indicate the category's relative priority. 1. Earthquake Recovery Redevelopment Project Area During FY 1994 through FY 1999, the Implementation Plan primarily focused on repairing immediate physical, earthquake damage to residential and commercial structures in the ERRP A. Since 1994, many of the structures needing immediate attention (due to the severe earthquake damage) were either repaired or demolished. In the last five-years (FY 1999/00 through FY 2003/04), the goals of the previous implementation plan were as follows: Disaster Prevention and Mitigation Commercial Revitalization Community Revitalization Increasing, Preserving and Improving the Supply of Affordable Housing Institutional Revitalization2 2 The Agency committed substantial funds to assist Santa Monica College in the repair of damage caused to the Liberal Arts facility by the Northridge Earthquake. Those funds will be expended during the FY 2004/05 through FY 2008/09 Implementation Plan period. Santa Monica Redevelopment Agency Five-Year Implementation Plan II-I Seifel Consulting Inc. November 2004 The following future goals and objectives will allow the Agency to continue meeting some of its existing goals and objectives while adding some new goals. Goal I - Disaster Prevention and Mitigation Repair, replace, upgrade or reconstruct facilities with remaining earthquake damage or essential public facilities that are in need of such improvements to mitigate against the effects of future disasters. Goal 2 - Commercial Revitalization Retain existing businesses by means of redevelopment activities and by encouraging and assisting the cooperation and participation of owners, businesses and public agencies in the redevelopment of the Project Area. Promote private sector investment and business expansion within the Project Area. Preserve the area's existing employment base and promote the restoration of local jobs. Achieve an environment reflecting a high level of concern for architectural, landscape and urban design and land use principles appropriate for the attainment of the objectives of the Redevelopment Plan, Provide support to projects that promote public transit oriented development. Goal 3 - Community Revitalization Improve, repair, rebuild or provide for off-street parking and other public improvements, facilities and utilities whose deficiencies adversely affect the ERRP A. Provide for adequate parking and street network in the Civic Center area, and encourage the upgrading of surrounding public areas. Install and construct, or caused to be installed and constructed, public improvements, essential public facilities and utilities, to repair, restore, demolish or replace property or facilities damaged by the earthquake or facilities necessary to prevent or mitigate future emergencies. Acquire, upgrade and/or rehabilitate property for essential public facilities and park improvements. Assist in the development of a child care facility in the Civic Center area. Goal 4 - Increase, Improve and Preserve Affordable Housing Continue to acquire, rehabilitate and construct residential buildings to increase, improve, and preserve the supply of affordable housing. Goal 5 - Institutional Revitalization Expend previously committed funds for the Santa Monica Community College District for the Liberal Arts facility, which was damaged by the Northridge earthquake. 2. Downtown Redevelopment Project Area The Downtown Redevelopment Plan was adopted in 1976. At that time, the following goals were included in the Agency Report to City Council, and those goals have guided the Downtown Redevelopment Project's implementation ever since: Revitalize/Intensify the Central Business District. Develop a Compact, Coordinated and Integrated Business Center. Redevelop Underutilized Properties. Santa Monica Redevelopment Agency Five-Year Implementation Plan II-2 Seifel Consulting Inc. November 2004 Increase Economic Vitality. Induce Mass Transit. Induce Greater Design Quality and Increase Employment. Redevelopment activities of the Downtown Project were largely focused on the development of the Santa Monica Place shopping center and the two adjoining parking structures, which are owned by the Agency. The following are remaining goals to be implemented over the next five-years and they are consistent with the original redevelopment plan. Goal 1 - Increase, Improve and Preserve the Supply of Affordable Housing Continue to provide funds for affordable housing outside the Project Area. Although there are currently no opportunities for residential development in the Project Area, options for the development of housing in the Project Area are being explored, and this Implementation Plan would be amended as needed to reflect such development. 3 Non-housing funds have been used for and will continue to be made available for affordable housing, after any debt repayment to the City. Goal 2- Increase Economic Vitality Continue to increase the economic vitality of the Downtown Project Area as a whole by significantly increasing property values, new business expansion, tax revenues generated and greater investment interest in projects located in the city. The emphasis would be on replacing, upgrading, rehabilitating or installing improvements to the parking structures and expanding the supply of parking within the Downtown Project Area. 3. Ocean Park Redevelopment Project Areas lA and IB The original Ocean Park lA and IB Redevelopment Plans were adopted in 1960 and 1961, respectively. At that time, the goals that formulated the overall policy direction of the Project Areas were intended to accomplish the following: · Eliminate Blight. · Eliminate Causes of Blight. · Encourage Owner and Business Participation in Redevelopment Activities. · Encourage Rehabilitation, Redevelopment and Development. · Encourage Economic Revitalization. · Provide Owner/Occupant Relocation. · Rebuild Public Facilities. 3 The Downtown Project is subject to the requirements of Section 33413 of the CRL (lnclusionary Housing Production obligation, which is described fully in the Housing Component section of the Plan). However, since there are no residential units within the project area, there is no historical or current production obligation. If new housing is built in the future, there will be a production obligation. The Agency must still provide at least 20 percent of the gross tax increment from the Downtown Project Area to Redevelopment Housing Trust Fund, pursuant to Section 33334.6 of the CRL. Santa Monica Redevelopment Agency 11-3 Seife! Consulting Inc. Five-Year Implementation Plan November 2004 These original goals have been largely fulfilled with the completion of the Sea Colony condominiums, Santa Monica Shores apartment complex, Ocean View Park, Neilson Villas and Barnard Park Villas senior apartments. The Agency's goal for this Implementation Plan period is to: Goal 1 - Increase. Improve and Preserve the Supply of Affordable Housing While this was not an original goal of the 1960 and 1961 Ocean Park Projects (and funding of affordable housing with tax increment generated by these Project Areas was not required by the CRL until 1986), increasing, improving and preserving the supply of affordable housing will continue to be a primary objective in the Ocean Park Project Areas over the next five-years. Non-housing funds have been used for, and will continue to be made available for, affordable housing, after any debt repayment to the City. B. FY 2004/05 through FY 2008/09 Implementation Plan Revenues Over the next five-years, the Agency will undertake those activities for the non-housing program that can be financially supported by its revenue stream. As described earlier, the non-housing program refers to the program not funded with the required 20 percent Housing Set-Aside funds. However, affordable housing activities have been historically funded and will continue to be funded from tax increment revenues in addition to the 20 percent Housing Set-Aside. These additional funds are referred to as the "Preservation and Production Affordable Housing funds." The Agency has three basic revenue sources for the non-housing program: Uncommitted fund balances through FY 2003/04. Annual tax increment revenues, net of the Agency's annual obligations including County property tax administration costs, state mandated payments to the Educational Revenue Augmentation Fund (ERAF), pass-through payments to affected taxing entities, Agency administrative expenses, outstanding debt obligations and the 20% Housing Set-Aside Fund. Additional revenues from future debt issued over the next five-years (in addition to outstanding debt). Tables II-I, 11-2 and 11-3, shown at the end of the chapter, summarize the Agency's projections of anticipated revenues over the next five-years from the ERRP A, Downtown and Ocean Park Project Areas, respectively. Each table shows the uncommitted fund balance as of the beginning ofFY 2004/05. This uncommitted fund balance is the amount of funds remaining after the Agency met all of its obligations through FY 2003/04 including all prior budget commitments the Agency has made to redevelopment projects that would constitute the non-housing program. This uncommitted fund balance is divided between funds available for non-housing projects and those carried over from prior years for affordable housing preservation and production activities. The tables then show the projected tax increment revenues to the Agency over the next five-years after deductions for the Agency's annual obligations and inclusive of additional proceeds from future debt to project the Agency's non-housing program funds.4 The Agency's non-housing program funds are then distributed among non-housing projects and the affordable housing preservation and production fund. 4 The tax increment projections are intended only as estimates, which are based on the best available information at the present time. Actual tax increments may be higher or lower than indicated in the projections. The projections in this report are not intended to predict future tax increment growth resulting from the increase in assessed value. Santa Monica Redevelopment Agency 11-4 Five-Year Implementation Plan Seifel Consulting Inc. November 2004 c. FY 2004/05 through FY 2008/09 Projects and Activities The Agency will undertake projects and activities in the Project Areas over the next five-years to alleviate the impacts of the Northridge earthquake and blighting conditions and attain the redevelopment goals as described below. These projects and activities constitute the Agency's non-housing program and the affordable housing component funded through Housing Set-Aside and non-housing funds for the next five-years. The Agency anticipates that over this period, projects and activities will be funded with available tax increment revenue and a series of debt financing structures, including, Tax Allocation Bonds, and Lease Revenue Bonds or other debt financing structures. It is assumed for this Implementation Plan that in FY 2006/07 and FY 2007/08 the Agency will increase its debt obligations by leveraging its increment and incurring new debt. In total, the Agency anticipates expenditures and commitments during the FY 2004/05 to FY 2008/09 period of approximately $313.5 million, based on the Agency's financial plans as described above, including $24.2 million of previous commitments. These estimated expenditures and commitments are generally described below and assume new debt of $200 million. The section immediately following outlines the estimated expenditures and commitments by specific goal and program area. The expenditures discussed are only estimates of anticipated costs, which may change as actual funding obligations are made through budgetary approvals or appropriations by the Agency over the next five- years. 1. ERRP A Programs for FY 2004/05 through FY 2008/09 Over the next five-years, $304.4 million is anticipated to be available. Approximately $123.2 million is expected to be spent on disaster prevention and mitigation projects, such as the seismic retrofit of existing parking structures and the demolition and rebuilding of existing parking structures in the downtown area and the stabilization of Palisades Bluffproject. Approximately $60 million is expected to be allocated under the Commercial Revitalization Program for future redevelopment as part of the proposed Civic Center Specific Plan, and funds to promote transit-oriented development. Approximately $13.3 million is expected to be spent in Community Revitalization projects such as the public improvements associated with the housing project being proposed for the Civic Center Area, and as part of the Civic Center Specific Plan, a child care facility. $97.7 million would be allocated for affordable housing projects to satisfy the minimum mandated by the CRL, This figure is comprised of $70.8 million in leveraged 20 percent housing set-aside requirement based on the estimated two additional bond issues over the next five-years, and $26.9 million of remaining housing set-aside funds, including uncommitted funds through FY 2003/04. A funding commitment of$10.2 million to Santa Monica College for the rebuilding of the Liberal Arts facility damaged by the 1994 Northridge Earthquake will be expended during the next five-year period. Santa Monica Redevelopment Agency Five-Year Implementation Plan 11-5 Seifel Consulting Inc. November 2004 Disaster Prevention and Mitigation Activities ERRP A funds will continue to be used for a seismic retrofit and infrastructure imprQvement program to continue to assist in the seismic upgrade of essential, vulnerable or other public facilities and structures within the Project Area that are vital to the health and safety or commercial revitalization of the Project Area. A funding commitment of $11.3 million, which includes $4.3 million for the parking structure at the new Main Library, was made in the 1999-2004 planning period for seismic retrofit. These funds are to be expended in the next five-years. The Agency is anticipating allocating $100.3 million in the next five-years to implement the Downtown Parking Task Force recommendations for the downtown area and to provide funding during the first five-year period of the lO-year program. These recommendations provide for (1) the seismic retrofit ofthree parking structures and (2) the tear down and rebuilding of three parking structures and (3) the acquisition of sites for and construction of additional parking structures in the downtown area. [$111.6 million expenditure] A funding commitment of $1.9 million was made in the 1999-2004 planning period for the stabilization of the Palisades Bluffs, Those funds will be expended in the next five years. The Agency anticipates allocating $9.7 million over the next five-years to complete the stabilization of the bluff area and any improvements that become necessary to mitigate against the effects of a future disaster. [$11.6 million expenditure] Section 33490 requires that the Implementation Plan include an explanation of how the goals and objectives, programs and expenditures will eliminate blight within the project area. Although the primary purposes of the ERRP A are to alleviate the impacts of the earthquake disaster by assisting in the reconstruction of buildings and stimulation oflocal economic activity, implementation of these projects would also alleviate the following conditions of blight: 1) unsafe/dilapidated/deteriorated buildings caused by the earthquake; and 2) inadequate public improvements/infrastructure/facilities. Estimated Program Expenditure: Commercial Revitalization Programs ERRP A funds will be used to pay for programs that will revitalize and promote economic investment in the project area, promote business expansion in the Project Area or be of benefit to the project area and preserve the area's existing employment base. To provide funds for redevelopment within the Project Area or that will be of benefit to the Project Area, including but not limited to, providing additional parking and/or replacement parking in the downtown area in addition to any parking improvements implemented through the Downtown Parking Task Force recommendations for the downtown area. However, any such use of funds in the Downtown Project Area would require a finding by the Agency that any such use is of benefit to the ERPP A. $123,200,000 To provide funds for projects that promote and support transit oriented development. Section 33490 of the eRL requires that the Implementation Plan include an explanation of how the goals and objectives, programs and expenditures will eliminate blight within the project area. Although the primary purposes of the ERRP A are to assist in the reconstruction of buildings and stimulate local economic activity, implementation of these projects would also alleviate the following conditions of blight: 1) inadequate public improvements/infrastructure/facilities; 2) unsafe/dilapidated/deteriorated properties; and 3) depreciated or stagnant property values or impaired investment. Estimated Program Expenditure: Santa Monica Redevelopment Agency Five-Year Implementation Plan $60,000,000 11-6 Seifel Consulting Inc. November 2004 Community Revitalization Program ERRP A funds will be used to implement the community revitalization goals through funding of the following activities: Additional amounts may be allocated over the five-year period for capital improvement projects or design, architectural or engineering studies for such projects, which may include: circulation, water, sewer or electrical system improvements that benefit the project area; facilities to improve and enhance safety in the project area; off-street parking and an improved street network in the Civic Center area; and other public facilities and park improvements that serve or benefit the project area, such as the public improvements associated with "The Village" development. As part of the Civic Center Specific Plan, provide funds for a child care facility. Although the primary purposes of the ERRP A are to assist in the reconstruction of buildings and stimulate local economic activity, implementation of these projects would also alleviate the following conditions of blight: 1) factors preventing the economically viable use of buildings/lots; 2) inadequate public improvements/infrastructure/facilities. Estimated Program Expenditure Affordable Housing Programs The Agency will continue to deposit the CRL-mandated percentage of tax increment revenue from the Earthquake Project Area to the Redevelopment Housing Trust Fund, to implement affordable housing development throughout the city, $13,300,000 An estimated $97.7 million of housing set-aside funds would be allocated over the next five-years to fund land acquisition, new construction, and acquisition and rehabilitation projects to provide affordable housing. This includes a $0.8 million commitment made in the FY 1999/00 through FY 2003/04 planning period, which will be expended during the next five-year period. These funds are comprised of the Project Area's anticipated 20 percent housing set-aside tax increment revenues, and proceeds from bonds expected to be issued in the next five-years. These funds will further increase, improve or preserve the supply of affordable housing within the city. Other activities consistent with the City's Housing Element, Consolidated Plan, and the CRL may also be considered, Funds may be loaned or granted to eligible borrowers for these uses. Santa Monica Redevelopment Agency Five- Year Implementation Plan II-7 Seifel Consulting Inc. November 2004 Deposits of at least 20 percent of tax increment revenue to the Redevelopment Housing Trust Fund will assist in the development of housing for very-low, low and moderate income families. Pursuant to the Agency's affordable housing objectives delineated in the Housing Component section of this Plan, the Agency anticipates that housing set-aside funds from the project areas will be invested in construction, acquisition, or rehabilitation citywide. Estimated Program Expenditure: Institutional Revitalization Program $97,700,000 In the last five-years, $10.2 million was committed to assist in the reconstruction of the Liberal Arts facility located on the Santa Monica College campus, and which serves the needs of the college and the community. These funds are anticipated to be expended in the next five-years. Although the primary purposes of the ERRP A are to assist in the reconstruction of buildings and stimulate local economic activity, implementation of these projects would also alleviate the following conditions of blight: unsafe/dilapidated/deteriorated buildings caused by the earthquake. Estimated Program Expenditure: $10,200,000 2. Downtown Programs for FY 2004/05 through FY 2008/09 Over the next five-years, the Agency proposes to allocate all available funds (net of administrative expenses and debt service obligations) to affordable housing outside of the Project Area. If the development of housing becomes an allowable use per the Downtown Redevelopment Plan in the Project Area in the next five years, this Plan would be amended as needed to reflect such use. The Agency could also consider the accumulation of funds for future uses as the Agency explores revitalization opportunities for the Downtown Project Area. The Agency is also exploring the use of available funds from the ERRP A in the Downtown Project Area for capital improvements, such as parking structure improvements. Potential expenditures for this program are discussed under the ERRP A's Commercial Revitalization Program. Estimated Program Expenditure: $4,800,000 3. Ocean Park lA and IB Programs for 2004/05 through 2007/08 Over the next five-years, the new plan proposes to allocate all available funds (net of administrative expenses and debt service obligations) to affordable housing. Estimated Program Expenditure: $4,300,000 D. FY 2004/05 through FY 2008/09 Implementation Plan Expenditures Table 11-4, shown at the end of the chapter, summarizes estimated expenditures during the five-year implementation plan period, FY 2004/05 through FY 2008/09. The nature and scope of the activities and expenditures have been shaped by Agency goals and objectives for the Project Areas, available revenues for funding projects and activities, and the impacts of the Northridge earthquake and blighting factors to be eliminated within the Project Areas. The projected expenditures on Agency projects and activities included in Table 11-4, shown at the end of the chapter, represent an estimate based on reasonable assumptions regarding potential tax increment revenues over the next five-years. Santa Monica Redevelopment Agency 11-8 Five-Year Implementation Plan Seifel Consulting Inc. November 2004 E. Linkage Between Agency Program and Elimination of Blighting Influences The CRL requires that the Implementation Plan provide an explanation of how the goals, objectives, programs and expenditures for the next five-years will serve to eliminate blight in a project area. The five- year Redevelopment Program will continue the process of improving the Project Areas and alleviating the impacts of the Northridge earthquake and blighting conditions. This section describes how deficiencies will be corrected by the projects and activities proposed for the next five-years. 1. How the Agency's Proposed Goals, Objectives, Programs and Expenditures Will Eliminate Blighting Influences The Agency's proposed goals, objectives and programs, as outlined previously, will help eli!TIinate the impacts of the Northridge earthquake and blighting influences in the Project Areas as follows: a. Earthquake Recovery Redevelopment Project Area The ERRPA was established in June 1994 to address the effects of the January 17, 1994 Northridge Earthquake. The Community Redevelopment Financial Assistance and Disaster Law (Health and Safety Code Section 34000 et seq., "Disaster Project Law") at that time authorized redevelopment agencies to establish redevelopment projects in areas devastated by a disaster without the requirement that blight be demonstrated. As such, the proposed ERRP A projects in the Implementation Plan are intended to alleviate the immediate and sustained physical and economic effects of the disaster, rather than specific blighting conditions. The previous Section II.C.1. sets forth the connection between specific activities and the blighting conditions they are intended to address. b. Downtown Redevelopment Project Area The Agency's activities over the next five years will be involved in increasing the vitality of the Downtown Project Area by facilitating the revitalization of Santa Monica Place and enhancing parking opportunities to support the continued upgrading and renovation of commercial buildings in the Downtown and ERRP A Project Areas. As mentioned previously, the Downtown Project Area is subject to the requirements of Section 33413 of the CRL (inc1usionary housing production obligation, which is described fully in the Housing Component section ofthe Plan). However, since there are no residential units within the Project Area, there is no historical or current production obligation. If new housing is built in the future, however, there will be a production obligation. In addition, the Agency provides at least 20 percent of its tax increment from the Downtown Project Area to the Redevelopment Housing Trust Fund, pursuant to Section 33334.6 of the CRL and the Agency anticipates that it will provide additional available revenues from the Project Area to increase, improve and preserve the supply of affordable housing within the city of Santa Monica. c. Ocean Park lA and IB Redevelopment Project Areas The Agency provides at least 20 percent of its tax increment from the Ocean Park Project Areas to the Redevelopment Housing Trust Fund, pursuant to Section 33334.6 of the CRL and the Agency anticipates that it will provide additional available revenues from the Project Areas to increase, improve and preserve the supply of affordable housing within the city of Santa Monica. Santa Monica Redevelopment Agency Five- Year Implementation Plan 11-9 Seifel Consulting Inc. November 2004 0'1 ~ QO Q EI ~ os >< ~~ ff.J ~ ;:: ... 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'" -; .... o Eo-< Table 11-4 Projected Non Housing Five Year Program Expenditures FY 2004/05 through FY 2008/09 Santa Monica Redevelopment Agency (Constant 2004 Dollars) Estimated Program Expenditures Pro_iect Area 2004/05-2008/09 Earthquake Recovery Disaster Prevention and Mitigation $123,200,000 Commercial Revitalization $60,000,000 Community Revitalization $13 300,000 Institutional Revitalization Program $10,200,000 Affordable Housing $97 700,000 Total for Earthquake Recovery $304,400,000 Downtown Affordable Housing' $4,800,000 Total for Downtown $4,800,000 Ocean Park lA/1B Affordable Housing' $4,300,000 Total for Ocean Park lA/lB $4300000 a. Includes a combined total of$6.7 million ofPPAH funds which may be reduced to pay existing debt service. Santa Monica Redevelopment Agency Five-Year Implementation Plan II-13 Seifel Consulting Inc. November 2004 III. Housing Component This chapter comprises the housing component ofthe Implementation Plan, summarizing the Agency's housing obligations pursuant to the legal requirements of the CRL and providing an overall framework for the Agency's Housing Program goals and expenditures. The Agency is guided by the City's adopted and certified Housing Element and its Consolidated Plan. 1 The Agency intends to implement all relevant goals, policies, strategies and programs from the Housing Element and Consolidated Plan, as generally described in this chapter. This chapter is organized as follows: Section A presents an overview of the Agency's affordable housing responsibilities. Section B presents more detailed statutory requirements, including requirements for affordable housing production, replacement housing, and the Housing Program, and Low and Moderate Income Housing Fund (Redevelopment Housing Trust Fund) revenues and expenditures. Section C includes the Housing Production Plan. Section D describes the Replacement Housing Plan requirement. Section E details the five-year Redevelopment Housing Trust Fund status and deposits. Section F includes the Agency's five-year Housing Program, annual expenditures, the Redevelopment Housing Trust Fund assisted affordable housing production annual estimates, and expenditure targeting requirements. Section G describes the completion of housing obligations for the Ocean Park lA and 1B Project Areas. Please note, Chapter I summarizes the Agency's accomplishments for the previous five-year Implementation Plan period (FY 1999/00 through FY 2003/04) for both the non-housing and housing accomplishments. A. Overview of Agency Affordable Housing Responsibilities This section presents an overview of the Agency's CRL obligations related to the provision of affordable housing. The housing portion of the Implementation Plan is required to set forth specific goals and objectives for the five-year implementation plan period (FY 2004/05 through FY 2008/09), present estimates of specific Redevelopment Housing Trust Fund deposits, projects and expenditures planned for the five-year implementation period, and explain how the stated goals, objectives, deposits, programs, projects and expenditures will produce affordable housing units to meet these obligations. The CRL requires an implementation plan to include the following affordable housing planning components: The Housing Production Plan, including the total number of housing units to be produced and the number of affordable housing units to be produced for two time periods' For the ten year compliance period (FY 2004/05 through FY 2013/14), and For the life of the Redevelopment Plan through (FY 2024/25). Identification of proposed locations for replacement housing that the Agency would be required to produce if a planned project would result in the destruction of existing affordable housing. 1 The City's Housing Element, which was due to expire on June 30, 2005, has been extended one year by the State of Cali fomi a Department of Rousing and Community Development (RCD). The current Consolidated Plan is in effect until June 30, 2005. The City will begin to update its Consolidated Plan in the beginning of 2005. Santa Monica Redevelopment Agency III-I Five- Year Implementation Plan Seife! Consulting Inc. November 2004 Amount available in the Redevelopment Housing Trust Fund, estimates of annual deposits into the Redevelopment Housing Trust Fund during the five-year Implementation Plan period, and the Agency's plans for using the annual deposits to the Redevelopment Housing Trust Fund. The Housing Program with estimates of the number of new, rehabilitated or price restricted affordable housing units to be assisted by the Redevelopment Housing Trust Fund during each of the five years, and estimates of the expenditures of monies from the Redevelopment Housing Trust Fund during each of the five years. A description of how the Housing Program will implement the Redevelopment Housing Trust Fund expenditure targeting and other requirements. B. Statutory Requirements for Housing This section summarizes the Agency's affordable housing requirements under the CRL and provides background information and analysis regarding affordable housing needs and conditions in the Project Areas and the overall community. Relevant section references to the CRL are included in parentheses. The major statutory requirements for affordable housing imposed on redevelopment agencies by the CRL may be categorized generally as: 1. Affordable Housing Production Requirement (Section 33413): Agencies must cause specified minimum percentages of new or substantially rehabilitated housing units in project areas subject to this requirement to be available to very low, low and moderate income households at a legally defined affordable housing cost. 2 2. Replacement Housing Requirement (Section 33413): Agencies must replace within four years housing units removed from the housing stock as a result of redevelopment activities. 3. Redevelopment Housing Trust Fund Requirement (Sections 33334.2, 33334.4 and 33334.6): Agencies are required to deposit specified percentages of tax increment revenue for the provision of affordable housing into the Redevelopment Housing Trust Fund. The CRL also imposes various limits on the use of Redevelopment Housing Trust Fund monies. 4. Housing Program (Section 33490(a)(2)(A)): Agencies are required to prepare a Housing Program with estimates of the number of affordable housing units to be assisted during each of the five years, estimates of annual expenditures and a description of how the Housing Program will implement expenditure requirements. The sections of the Housing Component that address Redevelopment Housing Trust Fund expenditure requirements must be reviewed every five years in conjunction with updating the Housing Element or preparing the next five-year Implementation Plan. The CRL requirements are described in greater detail in the following sections. 1. Affordable Housing Production Requirement Redevelopment agencies administering project areas created by redevelopment plans adopted on or after January 1, 1976 and territory added to project areas by amendments adopted on or after January 1, 1976 must meet an affordable housing production requirement. Since the Ocean Park lA and IB Project Areas were adopted prior to 1976 and the Downtown Project Area is designated exclusively for non-residential 2 The CRL defines substantially rehabilitated units as all units substantially rehabilitated with Agency assistance. Substantial rehabilitation means rehabilitation, the value of which constitutes at least 25 percent of the after-rehabilitation value of the dwelling, inclusive of land value. (334l6(b )(2)(A)(iii)) Santa Monica Redevelopment Agency Five-Year Implementation Plan III-2 Seifel Consulting Inc. November 2004 use, ERRP A is the only Project Area subject to the housing production requirement.3 As part of an implementation plan, an agency must adopt the Housing Production Plan, a plan showing how the agency intends to meet its affordable housing production requirements. The plan must be consistent with the community's housing element and must cover the following time periods: Production over the ten year compliance period (FY 2004/05 through FY 2013/14). Production through the life of the ERRP A Redevelopment Plan (through FY 2024/25). The Housing Production Plan must include estimates of the number of residential units to be produced within project areas. It also must include the number of units to be developed or substantially rehabilitated at an affordable housing cost to very low, low and moderate income households in order to meet the affordable housing obligation. (Section 33413) Units produced outside of a project area after January 1, 1994 count one for two (or one half of a unit) towards meeting an agency's affordable production obligation. (Section 33413(b)(2)(A)(ii)) Refer to Section 3.a below for definitions of income categories and affordable housing costs. Additionally, the Plan must include estimates of the number of units the agency itself will produce or that it will provide assistance to produce during the time period of the Plan, including the number of units available at an affordable housing cost to very low, low and moderate income households. Section C of this chapter contains the Agency's Housing Production Plan. a. Agency Developed Housing The CRL inclusionary housing obligation requires at least 30 percent of all new or substantially rehabilitated dwelling units developed directly by an agency to be available at affordable housing cost to persons and families of very low, low or moderate income. Of those units, at least 50 percent must be affordable to very low income households. The 50 percent requirement translates to 15 percent of the total number of units developed or rehabilitated by an agency (50 percent of30 percent equals 15 percent). This requirement applies only to units developed by an agency and does not apply to units developed by housing developers pursuant to agreements with an agency. (Section 33413(b)(I)) This production requirement is not anticipated to apply to the ERRP A because the Agency has not directly developed housing and does not anticipate directly developing dwelling units. b. Housing Not Developed by the Agency When new dwelling units are developed in a project area by public or private entities other than the agency or when housing is substantially rehabilitated in a project area by public or private entities with agency assistance, at least 15 percent of these units must be affordable to very low, low or moderate income households.4 The income definitions are included in Section B.3 below. Of those units, at least 40 percent must be affordable to very low income households. This 40 percent requirement for very low income households translates to 6 percent of the total number of units (40 percent of 15 percent equals 6 percent). (Section 33413(b)(2)) This affordable housing production requirement applies to the ERRPA. 3 Although the Downtown Project Area has no residential units, options for the development of housing may be pursued over the next five years. If new housing is permitted to be built in the Downtown Project Area in the future, the Project Area will be subject to affordable housing production requirements and this Plan would be amended as needed to reflect such requirements. 4 Prior to 1994, the rehabilitation of any unit, whether substantial or not, triggered affordable housing production requirements. After 1993 and until January 1, 2002, housing production requirements were triggered by (a) the substantial rehabilitation of a multifamily residential project with three or more units regardless of whether an agency provided financial assistance and (b) the substantial rehabilitation of a one or two unit residential project if the project received agency assistance. AB 637 and SB 701, effective January 1,2002, impose the affordable housing production requirement on substantial rehabilitation projects that receive agency assistance regardless of the number of units. Santa Monica Redevelopment Agency III-3 Five-Year Implementation Plan Seife! Consulting Inc. November 2004 c. Duration and Enforceability of Affordability Covenants As of January 1,2002, rental units must be subject to affordability covenants of the longest feasible time, but not less than 55 years for rental units and 45 for owner occupied units to meet the affordable housing production requirement.5 Section (33413(c)(I)) An agency may permit sales of owner occupied units prior to the expiration of the 45 year period for a sales price in excess of affordable cost pursuant to a program that protects the agency's investment of Redevelopment Housing Trust Fund monies, including, but not limited to, an equity sharing program that establishes a schedule of equity sharing that permits retention by the seller of a portion of the excess proceeds, based on the length of occupancy. The remainder of the excess proceeds of the sale must be allocated to the agency and deposited in the Redevelopment Housing Trust Fund. Within three years from the sale of the units, the agency must expend funds to make affordable an equal number of units at the same income level as the units sold. Only the units originally assisted by the agency can count towards the agency's housing affordable housing replacement and production obligations. Section (33413(c)(2)) An agency must require the recording of affordability covenants or restrictions for each parcel or unit with the office of the county recorder of covenants or restrictions. Covenants and restrictions must run with the land and are enforceable by the agency or community. (Section 33413(c)(3)) d. Agency Acquisition of Affordability Covenants To satisfy the affordable housing production requirements, an agency may purchase or otherwise acquire affordability covenants on existing multifamily housing units that are not presently available at affordable housing cost, or are affordable to households of low or very low incomes but are units that the agency fmds, based upon substantial evidence after a public hearing, cannot reasonably be expected to remain affordable to the same group of persons or families. Affordable units made available by an agency's acquisition oflong term affordability covenants may count towards the agency's affordable housing obligation. The covenants must be for 55 years for rental units and 45 years for owner occupied units. However, no more than 50 percent of an agency's housing obligation can consist of units made available by the acquisition of long term affordability covenants, and not less than 50 percent of units made available by the acquisition of long term affordability covenants shall be available at an affordable housing cost to, and occupied by, very low income households. (Sections 33413(b)(2)(B) and (C)) e. Aggregation of Units The CRL permits an agency with more than one project area to meet its affordable housing production requirements in the aggregate in one or more of those project areas if the agency fmds, based on substantial evidence, after a public hearing, that the aggregation will not cause or exacerbate racial, ethnic, or economic segregation. (Section 33413(b)(2)(A)(v)) f. Fulf'Illment of Housing Production Obligation The affordable housing production obligation must be fulfilled prior to the time limit on a redevelopment plan's effectiveness. Alternatively, a redevelopment plan may be extended until the Agency's housing obligations are met. Under the CRL, a redevelopment project cannot be terminated if the agency has not met its affordable housing production requirements. Refer to Section G for further detail. 5 Prior to AB 637 and SB 701, in order for units to count towards fulfilling affordable housing production requirements, units had to be subject to affordability covenants of at least the duration of the redevelopment plan's land use controls. Santa Monica Redevelopment Agency I1I-4 Seifel Consulting Inc. Five-Year Implementation Plan November 2004 2. Replacement Housing Requirement The replacement housing requirement applies to project areas established by redevelopment plans (or areas added by amendments) adopted on or after January 1, 1976. This requirement applies to the ERRPA. Although the Downtown Project Area was adopted after January 1, 1976, the Project Area does not contain residential uses, and thus, is not subject to the replacement housing requirement. However, if the Agency initiates residential uses in the Downtown Project Area in the future, the Project Area will then be subject to these requirements. When residential units sheltering very low, low and moderate income households are destroyed, or removed, or are no longer affordable due to agency action or assistance, an agency must cause the replacement of those units within four years. Each replacement unit must include at least the same number of bedrooms as the units that were removed. The lost units may be replaced with fewer units if an equal or greater number of bedrooms are provided. For example, four two bedroom units may be replaced with two four bedroom units, as each configuration has a total of eight bedrooms. (Section 33413) At least thirty days prior to acquiring property or adopting an agreement that will lead to the destruction or removal of low and moderate income housing units, an agency must adopt by resolution a replacement housing plan that generally describes the location, timing and method by which replacement housing will be provided. (Section 33413.5) Replacement units may be located anywhere within the territorial jurisdiction of the agency.6 (Section 33413(a)) An agency may either construct replacement housing itself, or assist with the development of replacement housing through agreements with housing developers. a. Income and Affordability Requirements The basic income and affordability standards for replacement housing are the same as those for the affordable housing production requirement and for use of Redevelopment Housing Trust Fund monies, as described below in Section B.3. The units must be available at affordable housing cost to households of very low, low and moderate income. As of January 1,2002, the CRL requires 100 percent of replacement units to be available at affordable housing cost to the same income level of households as the households displaced. For dwelling units destroyed or removed after September 1, 1989 and before January 1,2002, the CRL required that 75 percent of the replacement units be available at affordable housing cost to the same income level of households (very low, low or moderate income) as were displaced from the units removed or destroyed. (Section 33413(a)) Replacement units do not have to match the tenure (rental versus ownership) or tenancy (age restricted or non-age restricted) of the units that were destroyed, so long as the proportionality requirements of Section 33334.4 are satisfied. b. Duration and Enforceability of Affordability Covenants The affordability duration and enforceability requirements for replacement housing are the same as those required for affordable housing production. (Section 33413(c)) Refer to Subsection Lc, above for a description of the requirements. c. Priority Households An agency must give priority in renting or buying housing developed as part of a redevelopment project to households displaced by an agency regardless of whether the units are inside or outside of a project area. As of January 1,2002, AB 637 requires an agency to maintain a list of displaced households that are to be given priority. An agency may establish rules to determine priority. 6 For city agencies, replacement units can be located anywhere within the city, and for county agencies, replacement housing can be located anywhere within the unincorporated portion of the county. Santa Monica Redevelopment Agency II1-5 Five-Year Implementation Plan Seifel Consulting Inc. November 2004 The Agency does not anticipate that any of its current or planned redevelopment activities would require the relocation of households or the removal of affordable housing units in its Project Areas, However, if future redevelopment activities were to require relocation, the Agency would make every effort to minimize the number of households affected in the Project Areas. All Project Area households would be eligible for the Agency's relocation program. Furthermore, the Agency would meet its replacement housing obligations, as described above. 3. Redevelopment Housing Trust Fund Requirement The CRL requires an agency to set aside in a separate Low and Moderate Income Housing Fund (the Redevelopment Housing Trust Fund) at least 20 percent of all tax increment revenue generated from its project areas, The funds must be used for the purpose of increasing, improving and preserving the community's supply of affordable housing. Such housing must be available at affordable housing cost and occupied by households of very low, low or moderate income. (Sections 33334.2 and 33334.3) The CRL imposes Redevelopment Housing Trust Fund expenditure requirements based on the proportion ofunmet need for housing affordable to households of very low, low and moderate incomes.7 (Section 33334.4(a)) It also requires that a minimum percentage of Redevelopment Housing Trust Fund expenditures be spent on non-age restricted housing. (Section 33334.4) The CRL also places other limits on the use of Redevelopment Housing Trust Fund monies, as described below. As discussed in Chapters I and II, the Agency anticipates the allocation of additional available non- housing funds to be used for activities that preserve and produce affordable housing. This revenue source is referred to as Preservation and Production of Affordable Housing (PP AH) funds. These funds are not considered part of the Redevelopment Housing Trust Fund, and thus, are not subject to the Redevelopment Housing Trust Fund requirements described in this section. a. Income Levels and Affordable Housing Cost Agencies are specifically required to expend their Redevelopment Housing Trust Fund to assist very low, low and moderate income households, generally defmed as those households with:8 · Very Low Incomes up to 50 percent of area median income, adjusted for family size. · Low Incomes from 50 percent up to 80 percent of area median income, adjusted for family size. · Moderate Incomes from 80 percent up to 120 percent of area median income, adjusted for family size. Table III-I shows the maximum income limits for each income level by household size, published in 2004 by the State of California Department of Housing and Community Development (HCD) utilizing income limits prepared by the U.S. Department of Housing and Urban Development (HUD) for Los Angeles County. 7 As provided by AB 637 and SB 701. 8 The Health and Safety Code defines low and moderate income in Section 50093, low income in Section 50079.5, and very low income in Section 50105. Santa Monica Redevelopment Agency Five-Year Implementation Plan III-6 Seifel Consulting Inc. November 2004 Table 111-1 2004 Los Angeles County Maximum Incomes by Income Category and Household Size Santa Monica Redevelopment Agency Persons 1 2 3 4 5 6 7 8 Very Low $20,850 $23,800 $26,800 $29,750 $32,150 $34,500 $36,900 $39,250 Low $33,300 $38,100 $42,850 $47,600 $51,400 $55,200 $59,000 $62,850 Moderate $46,250 $52,900 $59,500 $66,100 $71,400 $76,700 $81,950 $87,250 Source: State of California, Department of HCD, February 2004. Housing assisted by Redevelopment Housing Trust Fund monies must be available to very low, low and moderate income households at an affordable housing cost in accordance with the CRL.9 For housing assisted by Redevelopment Housing Trust Fund monies after January 1, 1991, the affordable housing cost definitions presented in Table III-2 apply. For housing assisted by Redevelopment Housing Trust Fund monies prior to January 1, 1991, affordable housing cost is defined as rent or cost for rental or ownership housing that does not exceed 25 percent of the household's gross income. Table 111-2 Affordable Housing Cost Santa Monica Redevelopment Agency Rental Housine:8 Ownership Housine: Income % Income Spent % of Area % Income Spent % of Area Level on Housing Median Income on Housine: Median Income Very Low 30% 50% 30% 50% Low 30% 60% 30% 70%b Moderate 30% 110% 35%c 110% "Rental housing costs include rent and utility allowance. Affordable housing costs are adjusted by number of persons in household. b Ifthe gross income ofthe low income household is between 70% and 80% of area median income, the Agency may optionally require that housing cost not exceed 30% of the actual gross income of the household. C But not less than 28 percent of actual income. Source: CRL Section 50052.5. b. Targeting According to Income Need Redevelopment Housing Trust Fund monies must be used to assist housing for persons of very low and low income in at least the same proportion as the total number of housing units needed for each of these income groups in the community bears to the total number of units needed for very low, low, and moderate income groups within the community. The CRL requires that the Agency use Southern California Association of Governments (SCAG) figures for determining its proportionate spending for housing for very low, and low income groups in the community. Therefore, the proportion of Agency 9 CRL Section 50052.5 includes the definition of affordable housing cost. AB 637 added the words "occupied by" to all references in the CRL that refer to the requirement that housing units be "affordable to" very low, low and moderate income households in order to clarify the existing law that the units required to be "available" at affordable housing cost to qualifying households are also required to be "occupied by" such households. Santa Monica Redevelopment Agency III-7 Five-Year Implementation Plan Seifel Consulting Inc. November 2004 expenditures required for very low and low income housing units is determined by dividing the number of housing units needed for very low income and low income households, respectively, (as calculated by SCAG) by the total number of units needed for very low, low and moderate income households within the community (as calculated by SCAG). (Section 33334.4) The Agency's proportionate income targeting obligation must be met over the ten year compliance period. 10 However, the initial period for meeting this requirement will be January 1, 2002, the date AB 637 became effective, through the ten year compliance period ending in 2014. (Section 33490(a)(2)(A)(iii)) Table III-3 shows the Agency's proportionate spending requirements for housing affordable to persons at or below 120 percent of median income. Table 111-3 Affordable Housing Expenditure Proportions by Income Category City of Santa Monica Income Group and Relation to Total Housing Expenditure Percentage by County Median Income Units Income Level Minimum Maximum Very Low (0-50%) 508 39.7% 100.0% Very Low and Low (0-80%) 839 65.5% 100.0% Moderate (81-120%) 442 0.0% 34.5% Total 1,281 100.0% N/A Source: SCAG, 2001, and City of Santa Monica 2000-2005 Housing Element (12!ll/01). As Table III-3 indicates, the Agency is currently required to expend Redevelopment Housing Trust Fund monies in the following proportions: at least 39.7 percent for units affordable to very low income households, at least 65.5 percent for units affordable to very low and low income households, and no more than 34.5 percent on housing affordable to moderate income households. However, the Agency is entitled to expend a disproportionate amount of the funds for very low income households, and to subtract a commensurate amount from the low and/or moderate income thresholds. Thus, the Agency can spend a minimum of39.7 percent and a maximum of 100 percent of Redevelopment Housing Trust Fund monies on units affordable to very low income households. Similarly, the Agency can provide a disproportionate amount of funding for very low and low income housing combined by reducing the amount of funds allocated to housing affordable to moderate income households. Thus, the Agency can spend a minimum of 65.5 percent and a maximum of 100 percent of Redevelopment Housing Trust Fund monies on units affordable to very low and low income households (as long as 39.7 percent is spent on units affordable to very low income households). In no event can the expenditures targeted to housing affordable to moderate income households exceed the threshold amount (34.5 percent). Under the CRL, an agency is allowed to reduce its income targeting requirement if other locally controlled fuading is producing newly constructed housing for the targeted incomes, as long as such units are produced without any agency assistance and their continued affordability is ensured through long term affordability covenants (45 years for owner occupied and 55 years for rental). An agency may adjust the income targeting proportion by subtracting from the need identified for each income category, the number of units for persons of that income category that are newly constructed with other locally controlled JO The Agency's first compliance period commenced with the adoption of the Agency's first Implementation Plan and extended for a ten year period through FY 2003/04, which is concurrent with the Agency's first two five-year Implementation Plan periods (July 1, 1994 through June 30, 2004). To the extent the Agency has affordable housing production deficits or surpluses from the first compliance period, such obligations must be taken into account in the Agency's current ten-year compliance period (July 1,2004 through June 30, 2014). Santa Monica Redevelopment Agency Five-Year Implementation Plan III-8 Seifel Consulting Inc. November 2004 government assistance over the duration of the implementation plan. However, an agency cannot subtract units developed pursuant to a replacement housing obligation under federal or state law. (Section 33334.4(a)) Locally controlled means government assistance where the local government entity has discretion and authority to determine the recipient and the amount of assistance. (Section 33334.4) Examples of such funding are CDBG, HOME Investment Partnership Program, and fees received by a city pursuant to a city authorized program. c. Targeting to Non-Age Restricted Housing In addition to the requirement outlined above, a defmed minimum percentage of Redevelopment Housing Trust Fund monies must be spent on housing that does not impose age restrictions on residents. (Section 33334.4(b)) This minimum is equal to the percentage of Santa Monica's population under age 65, as reported in the most recent U.S. Census. The 2000 Census indicates that 85.6 percent of the City's population is under 65 years of age, as shown in Table III-4. Thus, the Agency must expend at least 85.6 percent of its funds on housing that is available to all persons regardless of age. This requirement must be achieved over the period between January 1,2002 and the mandated ten year compliance period ending in 2014. Table 111-4 Redevelopment Housing Trust Fund Expenditures Requirement Non-Age Restricted Housing City of Santa Monica Age Targeting Less than 65 65 and over Total Source: 2000 U.S. Census Population 72,006 12,078 84,084 Expenditure Percentage 85.6% minimum expenditures 14.4% maximum expenditures 100% total expenditures d. Duration and Enforceability of Affordability Covenants The CRL requires the placement and recordation of affordability controls on any new or substantially rehabilitated housing assisted by Redevelopment Housing Trust Fund monies. For rental housing, controls must be placed on the assisted housing units requiring them to remain affordable for 55 years, F or owner occupied housing, the units must remain affordable for 45 years. I I An agency may permit sales of owner occupied units prior to the expiration of the 45 year period for a sales price in excess of affordable cost pursuant to a program that protects the agency's investment of Redevelopment Housing Trust Fund monies, including, but not limited to, an equity sharing program that establishes a schedule of equity sharing that permits retention by the seller of a portion of the excess proceeds, based on the length of occupancy. The remainder of the excess proceeds of the sale must be allocated to the agency and deposited in the Redevelopment Housing Trust Fund. Within three years from the sale of the units, the agency must expend funds to make affordable an equal number of units as the same income level as the units sold. Only the units originally assisted by the agency can count towards the agency's affordable housing replacement and production obligations. (Section 33334.3(f)(1)) An agency must require the recording of affordability covenants or restrictions for each parcel or unit with the office of the county recorder of covenants or restrictions. Covenants and restrictions must run with the land and are enforceable by the agency or community. (Section 33334.3(f)(2)) II Prior to January 1, 2002, the income and affordability covenants for Redevelopment Housing Trust Fund assisted projects were required to be imposed for the longest feasible time but not less than 15 years for rental housing, 10 years for owner occupant housing, and 30 years in merged areas. AB 637 modified these requirements. Santa Monica Redevelopment Agency III-9 Five-Year Implementation Plan Seifel Consulting Inc. November 2004 e. CRL Restrictions on Use of Funds Redevelopment Housing Trust Fund Leveraging The CRL prohibits agencies from using Redevelopment Housing Trust Fund monies to the extent that other reasonable means of private or commercial financing for new or substantially rehabilitated units at the same level of affordability and quantity are reasonably available. (Section 33334.3(j)) When more than 50 percent of an affordable housing development's funding is provided from the Redevelopment Housing Trust Fund, an agency must make a finding that no other private or commercial means of financing the units at the same level of affordability and quantity could be reasonably obtained. Other Limitations on Use of Redevelopment Housing Trust Fund Monies The CRL imposes limits on the use of Redevelopment Housing Trust Fund monies for the construction of infrastructure and public improvements. (Section 33334.2(e)(2)) The conditions under which Redevelopment Housing Trust Fund monies may be used to fund these costs are: The improvements must be a reasonable and fundamental component of the new construction or rehabilitation of income restricted housing units that are directly benefited by the improvements. A 55 year affordability control must be imposed on rental units, and a 45 year affordability control must be imposed on owner occupied units, Covenant and deed restrictions must be recorded with the redevelopment agency. If the newly constructed or rehabilitated affordable units are part of a larger project such as a mixed income or mixed use project, Redevelopment Housing Trust Fund monies may only be utilized for a pro rata share of the cost of the improvements. For mixed income residential developments, the maximum amount is based on the ratio of the number of affordable units to the total number of housing units. For mixed use projects, the maximum is based on the ratio oftotal cost of the affordable units to the total cost of the project. Use of Funds outside ofProiect Area An agency can use funds outside a project area upon resolution by the agency and legislative body that the use will be of benefit to the project. (Section 33334.2(g)) If an agency has more than one project area, it can spend housing funds from one project area in other areas, pursuant to a resolution by the agency and legislative body that such use of the funds will benefit the project. (Section 33334.2(g)(1)) The Agency must meet these legal requirements with respect to the expenditure of Redevelopment Housing Trust Funds. Section F describes the Agency's compliance with meeting the expenditure requirements. 4. Housing Program Requirement Agencies are required to prepare a Housing Program with estimates of the number of new, rehabilitated, or price restricted affordable housing units to be assisted during each of the five years. The Housing Program must also include estimates of expenditures of monies from the Redevelopment Housing Trust Fund during each of the five years. Finally, it must include a description of how it will implement the expenditure requirements over the ten year compliance period. Section F includes the Agency's Housing Program. Santa Monica Redevelopment Agency Five-Year Implementation Plan III-I 0 Seifel Consulting Inc. November 2004 5. Completion of Housing Obligations CRL Section 33333.8, as amended by SB 211, requires that an agency comply with and fulfill its affordable housing responsibilities, including Redevelopment Housing Trust Fund, replacement housing, and affordable housing production responsibilities, prior to the expiration of the time limit on redevelopment plan effectiveness. A redevelopment project cannot be terminated if an agency has not complied with its affordable housing obligations. The implementation plan needs to address the ability of the agency to comply with its housing responsibilities for redevelopment projects that are within six years of reaching their limit on plan effectiveness. The Ocean Park IA and IB Project Areas are within six years of reaching the limits on plan effectiveness. Refer to Section G of this chapter for a description of how the Agency intends to comply with its housing responsibilities for these Project Areas. c. Housing Production Plan This section constitutes the Housing Production Plan of the Agency's FY 2004/05 through FY 2008/09 Implementation Plan. It includes estimates of housing production in the ERRP A, the Project Area subject to the affordable housing production requirement, and the Agency's strategy for meeting its affordable housing production obligation. The Agency has met, and expects to continue to meet, its affordable housing production obligations. 1. Housing Production The Agency projects that 8,333 housing units will be produced in the ERRP A during the life of the Redevelopment Plan. For purposes of the Housing Production Plan, the term produced includes newly constructed units, as well as substantially rehabilitated units. 12 Of the 8,333 units, the Agency projects that 7,806 units will be newly constructed and 527 units will be substantially rehabilitated. Table III-5 shows historical and projected housing production in the ERRP A. a. Historical Production (through FY 2003/04) The Agency reports that 2,825 units have been produced in the ERRP A through FY 2003/04, of which 2,298 units have been newly constructed and 527 have been substantially rehabilitated, b. Projected Housing Production The Agency has evaluated the potential for future housing production in the ERRP A through the end of the Redevelopment Plan. Based on an inventory of land suitable for residential development in the City's 2000 through 2005 Housing Element, the ERRP A can support build out of 7,806 newly constructed units through the life of the Plan. Since 2,298 units have been newly constructed through FY 2003/04, the Agency estimates that the remaining 5,508 new housing units to reach build out are likely to be produced in the ERRP A from FY 2004/05 through the end of the Plan. 12 As previously discussed, prior to 1994, the rehabilitation of any unit, whether substantial or not, triggered affordable housing production requirements. After 1993 and until January 1, 2002, housing production requirements were triggered by (a) the substantial rehabilitation of a multifamily residential project with three or more units regardless of whether an agency provided financial assistance and (b) the substantial rehabilitation of a one or two unit residential project if the project received agency assistance. AB 637 and SB 701, effective January 1, 2002, impose the affordable housing production requirement on substantial rehabilitation projects that receive agency assistance regardless of the number of units. Santa Monica Redevelopment Agency Five-Year Implementation Plan III -11 Seifel Consulting Inc. November 2004 .-~ Ten Year Production (FY 2004/05 through FY 20013/14) Based on building permit data and known future projects, the Agency estimates that 1,129 total housing units will be produced in the ERRP A within the next five years. During the following five year period from FY 2009/10 through FY 2013/14, the Agency estimates 1,460 total housing units will be produced in the ERRP A. 13 Thus, a total of 2,589 units are estimated to be produced in the current ten year compliance period, Production over Life of the Redevelopment Plan Based on historical production and the inventory of land suitable for residential development described above, the Agency projects that a total of 8,333 units could potentially be produced within the ERRP A during the life of the Redevelopment Plan (7,806 newly constructed units and 527 substantially rehabilitated units). Table III-5 summarizes the units produced through FY 2003/04 and the units projected to be produced through the end of the Redevelopment Plan by relevant time period. Table 111-5 Summary of Historical and Projected Housing Production ERRP A Total Units Produced Year New Substantially Total Rehabilitateda Historical throu2h FY 2003/04 2,298 527 2,825 FY 2004/05-2008/09 1,129 0 1,129 FY 2009/10-2013/14 1,460 0 1,460 Total Ten Year Compliance Period 2,589 0 2,589 (FY 2004/05-2013/14) FY 2014/15-Life ofthe ERRPA Plan 2,919 0 2,919 Total over Life of the ERRPA Planb 7,806 527 8,333 a Prior to 1994, the rehabilitation -substantial or not- of any residential unit, triggered the housing production requirement. (Refer to footnote 4 in Chapter III.) b. Based on inventory of land suitable for residential development in the City's 2000-2005 Housing Element. Source: Santa Monica Redevelopment Agency, City of Santa Monica 2000-2005 Housing Element (December 11,2001). 13 The 1,460 unit estimate for FY 2009/10 - FY 2013/14 was determined by the following methodology: 5,508 new housing units are likely to be produced from FY 2004/05 through the end of the Plan based on an inventory of land suitable for residential development in the 2000-2005 Housing Element (7,806 units less 2,298 units that were newly constructed through FY 2003/04 equals 5,508 units). 5,508 units less 1,129 units estimated by Agency staff to be produced from FY 2004/05 - FY 2008/09 by analyzing building permit data and known future projects equals 4,379 units. The 4,379 unit figure was then divided by the 15 remaining years in the ERRPA Redevelopment Plan, which equals 292 units per year. Since FY 2009/10 - FY 2013/14 is a five year period, 292 units was multiplied by 5, thus providing an estimate of 1,460 housing units for FY 2009/10 - FY 2013/14. Santa Monica Redevelopment Agency 1II-12 Seifel Consulting Inc. Five- Year Implementation Plan November 2004 2. Affordable Housing Production Obligation a. Historical Obligation (Through FY 2003/04) Through FY 2003/04, 2,825 housing units were produced in the ERRP A, creating housing production obligations of 424 affordable units (15 percent), of which 170 units (40 percent) had to be affordable to very low income households. b. Obligation for Ten Year Compliance Period (FY 2004/05 through 2013/14) Based upon the forecast of2,589 housing units to be produced in the ERRPA between FY 2004/05 and FY 2013/14, the Agency will have an obligation to ensure at least 389 units (15 percent) are affordable to very low, low and moderate income households. Of these, at least 156 units (40 percent) must be available at affordable housing cost to very low income households. c. Obligation for the Life of the Redevelopment Plan A total of 8,333 housing units are projected to be produced in the ERRP A over the life of the Redevelopment Plan. Based on this estimate, the Agency will have an obligation to ensure that at least 1,251 units (15 percent) are affordable to very low, low and moderate income households. Of these, at least 502 units (40 percent) must be available at affordable housing cost to very low income households. Table III-6, shown at the end of the chapter, summarizes the Agency's production obligation by time period. 3. Agency's Plan to Meet the Affordable Housing Production Obligation The Agency has provided assistance, and plans to continue to provide assistance for the development of affordable housing both inside and outside the ERRP A. The Agency has met, and plans to continue to meet, its obligation through Agency assistance for affordable housing development and substantial rehabilitation. Anticipated future projects will continue the Agency's compliance over the next ten years and through the remaining life of the Redevelopment Plan. The Agency itself has not directly developed any housing in the past, nor does it have plans to do so in the future, The Agency has found it more cost effective and administratively efficient to provide financial assistance, as necessary, to private developers (both for-profit and nonprofit) to construct and rehabilitate affordable housing, than to act as a housing developer. Since it is not directly developing housing, the Agency does not have an affordable housing production requirement with respect to Agency developed housing. Thus, the relevant affordable housing production requirement is that 15 percent of units must be affordable to very low, low and moderate income households, and of those units, at least 40 percent must be affordable to low income households (6 percent of the total). As previously discussed, affordable units produced within the ERRP A with or without Agency assistance, receive a one for one credit that counts towards the Agency's affordable housing production obligation. Affordable units produced outside the ERRP A, with or without Agency assistance, receive a one for two credit that counts towards the Agency's affordable housing production obligation (i.e. credit for one-half unit is received for one unit produced outside the ERRPA). Therefore the total number of units that count towards the Agency's affordable housing production obligation does not equal the total number of affordable units produced inside and outside the ERRP A. a. Historical Affordable Housing Production (Through FY 2003/04) The Agency has met its affordable housing production requirements through FY 2003/04. To date, 1,154 affordable units count towards the Agency's Affordable housing production obligation, of which Santa Monica Redevelopment Agency Five- Year Implementation Plan III-13 Seifel Consulting Inc. November 2004 496 are affordable to very low income households. 14 The Agency exceeded the requirements for the production of units affordable to very low income households and units available to very low, low and moderate income households. Thus, the Agency met its affordable housing production obligation for the fIrst ten year compliance period, FY 1994/95 through FY 2003/04. b. Affordable Housing Production Ten Year Compliance Period (FY 2004/05 - FY 2013/14) Within the next fIve years (FY 2004/05 through FY 2008/09), the Agency estimates that 560 housing units affordable to very low, low and/or moderate income households will count towards the Agency's affordable housing production obligation. Of these, 242 units affordable to very low income households would count towards the Agency's affordable housing production obligation. During the following fIve years (FY 2009/10 through FY 2013/14), 219 housing units affordable to very low, low and/or moderate income households would count towards the Agency's obligation. Of these, 88 units affordable to very low income households would count towards the Agency's obligation. Thus, over the ten year compliance period (FY 2004/05 through FY 2013/14), the Agency estimates that 779 units affordable to very low, low and/or moderate income households would count towards the Agency's affordable housing production obligation. Of these, 330 units affordable to very low income households would count towards the Agency's obligation, The Agency is projected to more than meet its production obligation. c. Future Affordable Housing Production (FY 2004/05 through the Life of the Plan) The Agency anticipates that 1,217 housing units affordable to very low, low and moderate income households would count towards the Agency's affordable housing production obligation from FY 2004/05 through the end of the Redevelopment Plan. Of these, 506 units affordable to very low income households would count towards the obligation. 15 Thus, given that the Agency has met its obligations through FY 2003/04, it anticipates that it will continue to meet the affordable housing production obligations over the life of the Redevelopment Plan. d. Affordable Housing Production through the Life of the Plan Table III-6, shown at the end of this chapter, summarizes the Agency's historical and projected affordable housing production, the affordable housing obligation, and the Agency's progress toward meeting the obligation for the following relevant time periods: · Agency historical obligation and production through FY 2003/04; · Agency anticipated obligation and production for the current ten year compliance period (FY 2004/05 through FY 2013/14), shown by each fIve year period; · Agency anticipated obligation and production for FY 2014/15 through the life of the Plan; and · Agency historical and anticipated obligation and production total for the life of the Plan. D. Replacement Housing The Agency did not have a replacement obligation during the last fIve-year Implementation Plan period and has no plans to destroy or remove any residential units. As the Agency does not expect the displacement of any households in the next ten years, it will not be obligated to plan to replace any units, In the event that the removal of housing were to become a necessity in the future, the City and Agency would follow all State requirements for replacement housing and relocation, and make every effort to relocate persons as close as possible to their existing place of residence. 14 Units produced outside Project Areas have been included on a one for two basis. IS Units produced outside Project Areas have been included on a one for two basis. Santa Monica Redevelopment Agency III-14 Five- Year Implementation Plan Seife) Consulting Inc. November 2004 E. Redevelopment Housing Trust Fund and Additional Agency Housing Resources The primary funding source for the Agency's affordable housing activities during the five-year Implementation Plan period will be the Redevelopment Housing Trust Fund, which consists of the 20 percent Housing Set-Aside portion of annual tax increment revenue, bond issuance proceeds secured by the 20 percent Housing Set-Aside and designated for the Redevelopment Housing Trust Fund, and interest income. Additional Agency housing resources include Preservation and Production of Affordable Housing (PP AH) funds, which are non-housing funds used for affordable housing activities, and locally controlled funds such as CDBG and HOME. The history, status and estimated future level of Redevelopment Housing Trust Fund revenues and additional housing resources are described below. 1. History and Status The Agency has made deposits to the Redevelopment Housing Trust Fund and/or direct expenditures in an amount not less than 20 percent of the cumulative tax increment revenue allocated to the Agency from each Project Area. The Redevelopment Housing Trust Fund balance of uncommitted funds at the end of FY 2003/04 was $1.3 million. 2. Deposits During the Implementation Plan Period The Agency plans to continue to deposit funds from its Project Areas into the Redevelopment Housing Trust Fund. Based on the Agency's projections, the Agency estimates that the total five-year deposit of Housing Set-Aside revenue into the Redevelopment Housing Trust Fund will be $45.1 million between FY 2004/05 and FY 2008/09. After deducting debt obligations, and adding interest income and net debt issuance proceeds, the Agency will have approximately $99.4 million available in Funds for its Housing Program. The Agency plans to use all of its available Redevelopment Housing Trust Fund revenue in the next five years. Table III-7 at the end of this chapter, summarizes Agency revenues available for affordable housing activities over the next five years. 3. Additional Agency Housing Resources a. Preservation and Production of Affordable Housing (PP AD) Funds As part of the adoption of the Agency's FYl999/00 through FY 2003/04 Implementation Plan, the Santa Monica Redevelopment Agency Board set policy by directing Agency staff to identify ways to accelerate the generation of housing revenues and target tax increment that are not needed for critical seismic work so that those funds can be provided for affordable housing. Each year, after balancing its obligations, the Agency determines the amount of non-housing funds to be dedicated to the preservation and production of affordable housing projects and activities, The funds are referred to as Preservation and Production of Affordable Housing (PP AH) funds. Unlike the Redevelopment Housing Trust Fund, these funds are not subject to the housing expenditure requirements described earlier in this chapter. During this Implementation Plan period, approximately $7.4 million of PP AH funds will be available for housing projects and activities, as shown in Table III -7 at the end of this chapter. F. Housing Program During the five-year Implementation Plan period, the Agency will concentrate on housing activities that are most applicable to the Agency's goals and objectives. In developing its affordable Housing Program, the Agency has been guided by the goals and objectives of the City's Housing Element and the Consolidated Plan, both of which are incorporated into this Implementation Plan by this reference. Through its affordable housing activities, the Agency will support and advance the overall Housing Santa Monica Redevelopment Agency III -15 Seifel Consulting Inc. Five- Year Implementation Plan November 2004 Element programs as well as contribute to the implementation of the policies and strategies identified in the City's Consolidated Plan.16 The Agency is committed to assisting the City in achieving the goals and objectives and policies presented in the Housing Element and the City's Consolidated Plan, including: Promote the construction of new housing within the City's regulatory framework. Protect the existing supply of affordable housing. Promote the rehabilitation and continued maintenance of existing housing. Provide housing assistance and supportive services to very low, low and moderate income households and households with special needs. Eliminate discrimination in the rental or sale or housing on the basis of race, religion, national origin, sex, sexual orientation, age, disability, family status, AIDS, or other such characteristics. Promote quality housing and neighborhoods. Promote the participation of citizens, community groups, and governmental agencies in housing and community development activities. As discussed above, the Agency has been guided by the City's Housing Element's goals and objectives in developing its affordable Housing Program. Therefore, the Agency will use redevelopment funds for housing developments and activities to assist in the production of up to 700 affordable housing units. 1. Housing Program Description The Agency recognizes the important role of the Housing Program and its activities in its overall Redevelopment Program. Consequently, the proposed Housing Program should be viewed not simply as the means of implementing the Agency's stated goals and objectives related to affordable housing, but as a key element in its overall blight alleviation and revitalization efforts. The goal of the Housing Program is to increase and improve the supply of affordable housing to very low, low and moderate income households, and preserve the existing stock of affordable housing in the Project Areas. The Agency intends to implement its Housing Program through the provision of financial and technical assistance for housing that may include, but will not be limited to, new construction, substantial rehabilitation, and affordability covenant acquisition of rental and ownership housing, Private and nonprofit developers may be assisted with land write-downs, predevelopment loans, development subsidies or land leases. Affordability may be enforced through deed restrictions and language incorporated into loan and lease documents. 2. Proposed Housing Activities and Expenditures The Agency's Redevelopment Housing Trust Fund revenues will be used in a flexible manner to respond to favorable development, substantial rehabilitation and affordability covenant acquisition opportunities. The City Council and Agency have approved resolutions determining that the use of Redevelopment Housing Trust Fund monies to assist housing activities located outside the Redevelopment Projects is of benefit to the Project. Redevelopment Housing Trust Fund monies will be spent both inside and outside the Project Areas. The type of financial assistance to be provided may include cost write-down and gap financing for projects utilizing federal and state funds, as well as loans for property acquisition, development, renovation, on- and off-site improvements, predevelopment costs and development fees. In carrying out its purpose to preserve, improve and increase the affordable housing supply, the Agency may use the following methods: Acquire land or building sites. 16 The parts of the Implementation Plan that address the affordable housing requirements must be adopted every five years either in conjunction with the community's housing element cycle or the implementation plan cycle. (Section 33490(a)(l )(A)) Santa Monica Redevelopment Agency III-16 Seifel Consulting Inc. Five-Year Implementation Plan November 2004 Improve land or building sites with on-site or off-site improvements. Donate land to private or public persons or entities. Finance insurance premiums pursuant to CRL Section 33136. · Construct buildings or structures. Provide subsidies to, or for the benefit of, persons or families of very low, low, or moderate income. Develop plans, pay principal and interest on bonds, loans, advances or other indebtedness, or pay financing or carrying charges. Require the integration of affordable housing sites with sites developed for market rate housing. Assist the development of housing by developers. The Agency plans to target its Redevelopment Housing Trust Fund expenditures for specific income groups as required by the CRL. The Agency will make every effort to encourage the preservation and development of housing affordable to a variety of income levels. By combining various funding sources, and partnering and collaborating with other entities dedicated to the preservation and development of affordable housing, the Agency is confident it will be able to meet its affordable housing production obligations and expenditure requirements within the ten year compliance period, as well as over the life of the Redevelopment Plan. The Agency will expend monies from the Redevelopment Housing Trust Fund over the next five years on the programs and activities described above. The Agency will use these revenues to leverage other funding sources devoted to the provision of affordable housing to maximize the number of affordable units that can be developed, substantially rehabilitated, or acquired. These other funding sources include CDBG and HOME Investment Partnership funds from HUD, CalHF A, HCD, Low Income Housing Tax Credit equity funds, and other City Housing Trust funds. Any other loans, grants or financial assistance from any other public or private source may be utilized if available. It should be noted, however, that several factors may result in expenditures and unit production for given years being either less than or greater than what is projected. These factors include the timing of the development process, the levels of Redevelopment Housing Trust Fund revenue and other public assistance, the need to amass sufficient funds for an efficiently-sized development, and development opportunities. 3. Preservation and Production of Affordable Housing Funds As discussed previously in this chapter, another Agency housing resource is Preservation and Production of Affordable Housing (PP AH) funds, which are non-housing revenues designated by the Agency for affordable housing activities. Similar to the Redevelopment Housing Trust Fund, PP AH revenues will be used in a flexible manner to respond to favorable development, substantial rehabilitation and affordability covenant acquisition opportunities. The type of financial assistance to be provided may include cost write-down and gap financing for projects utilizing federal and state funds, as well as loans for property acquisition, development renovation, on- and off-site improvements, predevelopment costs and development fees. PPAH funds, however, are not subject to the expenditure requirements of the Redevelopment Housing Trust Fund. 4. Housing Resource Assisted Affordable Housing Production The Agency expects to take advantage of various opportunities as they are presented and to initiate actions as necessary, consistent with the CRL and the City's Housing Element, to preserve and facilitate the development of housing affordable to households whose basic housing needs are not met by the private housing market. Santa Monica Redevelopment Agency Five-Year Implementation Plan III-17 Seifel Consulting Inc.November 2004 Table III-8, at the end of this chapter, presents the housing units the Agency expects to assist by using Redevelopment Housing Trust Fund and PP AH funds over the five-year Implementation Plan period. In summary, from FY 2004/05 through FY 2008/09, the Agency proposes to assist in the production of up to 700 units affordable to very low, low and moderate income households. The City's overall affordable housing goal is to realize the development, over the next five years, of an estimated 925 units that are affordable to very low, low and moderate income households. This takes into account the anticipated production gap between the goals and actual housing production through FY 2005/06 and an extrapolation of an assumed future production gap through FY 2008-2009 based on the yearly goals used through FY 2005/06. In the past, the Agency has assumed that a significant portion of the moderate income housing units produced would be produced by market developers, while the Agency primarily focused on assisting in the production of very low and low-income housing units. However, in order to better address the City's housing goals, the Agency may consider using its Redevelopment Housing Trust Fund and/or PP AH funds to fund increased production of moderate income housing units, while preserving the required proportional expenditures for very low and low income units. Please note the number of affordable housing units in Table III-6 does not correspond to the number of affordable housing units in Table III-8. Table III-6, which addresses housing production and affordable housing obligations, presents affordable housing units produced with and without Agency assistance. Affordable units produced outside the ERRP A are counted on a one for two basis for purposes of calculating the affordable housing eligible to meet the affordable housing production obligation presented in Table III-6. As shown on Table III-6, the Agency estimates that 560 units available to very low, low and/or moderate income households will count towards meeting the Agency's affordable housing production obligation. Table III-8, which addresses Redevelopment Housing Trust Fund expenditure requirements, includes only those affordable housing units produced with Agency assistance. The projected 700 units shown in Table III-8 include units located both inside and outside the ERRPA. All units are counted on a one for one basis, i.e., the number of units located outside the ERRPA has not been adjusted. 5. Estimated Housing Resource Expenditures FY 2004/05 through 2008/09 Table III-7, shown at the end of this chapter presents the Agency's estimated housing expenditures for the five years of the Implementation Plan period. The Agency estimates Redevelopment Housing Trust Fund revenues and expenditures of approximately $99.4 million for housing activities during the next five years. In addition, the Agency estimates approximately $7.4 million in revenues and expenditures of Affordable Housing Production and Preservation funds. Projected revenues will be sufficient to cover the Agency's planned expenditures for housing projects and activities over the next five years. The Agency plans to target its Redevelopment Housing Trust Fund for specific income groups and non- age restricted housing as required by the CRL. The Agency will make every effort to encourage the development of housing affordable to a variety of income levels and needs. By combining various funding sources, and in partnership and collaboration with others dedicated to the development of affordable housing, the Agency is confident it will be able to meet its housing production obligations over the life of the Redevelopment Plan. a. Redevelopment Housing Trust Fund Income Targeting The Agency plans to target its Redevelopment Housing Trust Fund monies to specific income groups as discussed in section IILB.3.b. of this Implementation Plan. From January 1,2002 through the end of the ten year compliance period in 2014, the Agency plans to target Redevelopment Housing Trust Fund monies in the following proportions: at least 39.7 percent on units affordable to very low income Santa Monica Redevelopment Agency III-IS Seifel Consulting Inc. Five-Year Implementation Plan November 2004 households, at least 65.5 percent on units affordable to very low and low income households, and no more than 34.5 percent on units to moderate income households. The Agency will monitor its Redevelopment Housing Trust Fund expenditures with reference to the relative percentages of need demonstrated by each income category, will conduct periodic reviews of expenditures, and will consider adjustments to expenditures as needed. The Agency anticipates it will meet its very low, low and moderate income targeting requirements for the ten year compliance period ending in 2014. b. Redevelopment Housing Trust Fund Assistance for Non-Age Restricted Housing The Agency plans to target Redevelopment Housing Trust Fund expenditures to provide affordable housing that is not restricted by age. Specifically, at least 85.6 percent of Redevelopment Housing Trust Fund monies is planned to be spent on non-age restricted housing over the period between January I, 2002 and the ten year compliance period ending in 2014. The Agency will continue to monitor Redevelopment Housing Trust Fund expenditures in order to comply with the requirement for minimum Redevelopment Housing Trust Fund expenditures on non-age restricted housing. G. Completion of Housing Obligations in Ocean Park lA and lB Ocean Park lA and Ocean Park IB Project Areas will reach their time limit on plan effectiveness on January I, 2010. This section describes how the Agency intends to comply with its housing responsibilities for these Project Areas. 1. Deposits to and Expenditures from the Redevelopment Housing Trust Fund Since January 1986, the first year that housing set-aside requirements were imposed on redevelopment projects established prior to 1976, the Agency has deposited at least 20 percent of its gross tax increment revenues into the Agency's Redevelopment Housing Trust Fund. The Agency anticipates that the remaining Redevelopment Housing Trust Fund moneys for the Ocean Park lA and 1B Project Area will be substantially spent on the projects and activities described in this Implementation Plan by the end of the effectiveness of the Redevelopment Plan. 2. Elimination of Project Deficits If an agency deposits less than 20 percent of tax increment revenues to the Redevelopment Housing Trust Fund in any year beginning in FY 1985/86, the difference between the 20 percent and the amount allocated to the Redevelopment Housing Trust Fund that year constitutes a deficit of the project. An agency is required to adopt a plan to eliminate the deficit in subsequent years. The Agency does not have a deficit. 3. Excess Surplus Funds The Agency does not have an excess surplus in its Redevelopment Housing Trust Fund, as defmed under Section 33334.12(g)(I). Therefore, the Agency has no obligation to expend or transfer excess surplus funds to the county housing authority or another public agency exercising housing authority powers 4. Relocation Assistance The Agency has not undertaken any activities that would incur a relocation assistance obligation. 5. Replacement Housing The Agency has not undertaken any activities that would incur a replacement housing obligation. Santa Monica Redevelopment Agency Five- Year Implementation Plan III-19 Seifel Consulting Inc. November 2004 6. Affordable Housing Production Requirement Redevelopment agencies administering project areas created by redevelopment plans adopted on or after January I, 1976, and territories added to project areas by amendments adopted on or after January I, 1976, must meet the affordable housing production requirement. The Agency does not have a production requirement for either Ocean Park lA or lB. Santa Monica Redevelopment Agency Five-Year Implementation Plan III-20 Seifel Consulting Inc. November 2004 = = ~ ~ ~< ..c.... o ~ >. bJ).~ u = e ~ '~~ ~ [g....< = = .... 1:1:I '" = '" Ei '" ...... Q., Ei \C~.s go ~~~~ i:l="'> '" I::: "0 '" :E<~"g ~"O,,~ = '" os : ~ 's; = ... = ~~~ .s~~ = os = .. = os ~ r:;' IJJ ~..c .S t: "' os g~ 1:1:I ~ ; ~ii: 5~ ~~ ~... .. 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Table 11I-8 Housing to be Produced with Agency Assistance/Housing Resource Expenditures FY 2004/05 through FY 2008/09 Constant FY 2004/05 Dollars Santa Monica Redevelopment Agency Housing Resources and Affordable Units Assisted Total $6,338,000 $7,057,000 $57,638,000 $24,647,000 $3,679,000 $99,359,000 42 46 378 162 24 Preservation & : Affordable Production of : Units Mfordable Housing: Assisted (PP AH) Funds. ! $3,290,000 : $812,000 : __ $889,000 : _~ $905,000: $1,503,000 : Total Combined Housing Resources Total Affordable Units Assisted Fiscal Year Redevelopment Housing Trust Fund Affordable Units Assisted FY 2004/05 FY 2005/06 ~~---- FY 2006/07 FY 2007/08 FY 2008/09 22 5 6 6 10 $9,628,000 $7,869,000 $58,527,000 $25,552,000 $5,182,000 $106,758,000 63 52 384 168 34 651 $7,399,000 : 49 700 Note: Figures may not add exactly due to rounding. a. Includes non-housing program revenues allocated as Preservation and Production of Affordable Housing (pP AH) funds as shown on Tables II-I, II-2 and II-3. The $7,399,000 figure includes $6,649,000 in PPAH funds from Downtown and Ocean Park IA and 1B Project Areas and $750,000 dedicated to affordable housing from ERRP A, which was part of a previous hond issuance. These funds are not subject to Redevelopment Housing Trust Fund requirements. Source: Santa Monica Redevelopment Agency, Seifel Consulting Inc. Santa Monica Redevelopment Agency Five-Year Implementation Plan III-23 Seifel Consulting Inc. November 2004