SR-300-002-01 (69)
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3ptJ-002-0/ e
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C/ED:HD:ML:Jt
Counc~l Meeting 12/13/83
Santa Monica, California
TO:
Mayor and CIty CouncIl
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FROM:
City Staff
Ob. 1 3 1983
SUBJECT:
RecommendatIon to Hold PublIC Hearing on Proposed
Use of CDBG ContIngency Funds for Hous~ng SIte
AcquIsItIon and Recommendation to Approve Purchase
Agreements for Sites Located at 1851-1901 and 1907
Eleventh Street, Santa MonIca.
Introduction
This report transmIts proposed purchase agreements for the
acquISItIon of vacant parcels of land located at 1851-1901 and
1907 Eleventh Street, Santa MonIca.
It IS recommended that the
CounCIl receIve publIC comment on the use of CDBG funds for thIS
purpose and author~ze acquISItIon of the sites to promote the
development of federally aSSIsted housing for famIlIes. The
proposed acquISItIon WIll complement other separately funded and
approved housIng endeavors in the PICO Neighborhood, includIng
the PICO NeIghborhood Hous~ng Trust Fund Program ($585,000) and
the PICO NeIghborhood Housing RehabIlItatIon ServIces Program
($320,588) .
Background
On July 13, 1981, the CIty and the CIty'S HousIng AuthorIty
entered into agreements WIth the HousIng AuthorIty of the County
of Los Angeles (HACoLA) to permit the development of up to 30
unIts of affordable housIng WIthIn the CIty'S JurISdIctIon. The
HousIng AuthorIty then obtaIned a fundIng commItment from HUD
based upon executIon of the above-descr~bed documents.
Later
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tha t year, a CIty-owned site (a tr 1 angular shaped parcel located
at Ocean and Bay) was submItted to HUD for reVIew and approval
contIngent upon publIC reVIew and receIpt of necessary land use
approvals.
On March 23, 1983, the CouncIl authorIzed staff to
locate an alternatIve sIte due to diffIcultIes Involved In
developIng the prevIously approved CIty-owned sIte.
At that
tIme, the CouncIl reserved $458,587 In CommunIty Development
Block Grant (CDBG) funds for sIte acquIsItIon and authorIzed
staff to obtaIn appraIsals for that purpose. As the March 23rd
staff report IndIcated, a request for addItIonal funds, If
necessary, would be presented In conJunctIon WI th a request for
approval of a speCIfIC sIte.
WIth such authorIzatIon, staff undertook a thorough search to
IdentIfy a SUItable SIte for acqUISItIon and development.
CriterIa used to reVIew SItes Included the follOWIng:
o Feasible to acquire withIn the CIty'S CDBG budget;
o Large enough to permIt some economies of scale In
the development process;
o DeSIrable reSIdentIal enVIronment; and
o ProximIty to schools, transportatIon, and serVIces.
Preference was also gIven to vacant, unImproved SItes as opposed
to SItes WhIch would Involve demolItion and pOSSIble relocation.
The SItes recommended for acqUISItion fIt these criterIa more
closely than other available SItes identIfIed through the search
process.
The remaInIng sectIons of thIS report descrIbe the SItes, terms
of the proposed Purchase Agreements,
and the IITurnkey"
development process under WhICh the SIte WIll be developed. The
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dlty'S role In the project IS also dIscussed. The report
concludes wIth a recommendatIon that the CouncIl approve the
Purchase Agreements, allocate addItIonal funds for sIte
acqUIsItIon, and authorIze the City Manager to take all actIons
to effect the terms of the Purchase Agreement.
DescrIptIon of the SIte
The proposed SIte is comprised of three contIguous 7,5@0 square
foot parcels located on Eleventh Street, north of PICO Boulevard.
The lots are zoned R2, and can be Improved WIth 19 reSIdential
unIts under the MunICIpal Code. A map shOWIng the location of
the site and surrounding reSIdential uses is attached as
ExhIbIt 1.
AcquisitIon Procedures and Terms of Sale
The procedure for procurIng the proposed SIte IS governed by
CDBG program regulatIons. The owners were first notifIed that
the CIty was interested In purchaSIng the property on a voluntary
sale basis. The SItes were appraIsed and the appraIsals were
reVIewed by a competent reVIew appraIser. Offers were tendered
to the owners and the speCIfIC terms of sale presented here were
negotIated by HOUSIng DIVISIon staff. The fInal versions of the
Purchase Agreements have been approved by the City Attorney and
signed by the CIty Manager, contIngent upon CounCIl approval.
The terms of sale were structured to mInImIze rIsks by
accommodating the speCIfIC development process contemplated for
thIS SIte. ~'lhIle the mechanICS of the "Turnkey" program WhICh
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WIll provIde development fundIng are descrIbed In a subsequent
sectIon, the speCIfIC term of sale recommended for approval are
as noted below:
1. PrIce
The total negotiated price for both SItes IS $589,500 or
$26.20 per square foot. ThIS amount exceeds the $24.00 per
square foot value Indicated by appraIsals of the IndivIdual
SItes. The Increase above appraIsed value, which IS
approxImately 9%, can be JustIfIed because the sites are
contIguous, or assembled, and are more valuable as a whole
than they would be IndIVIdually. ThIS enhanced value IS due
to the relatIve scarCIty of larger parcels In Santa MonIca,
Increased development capaCIty, and economIes of scale WhICh
can be achieved in the development of one rather than two or
three scattered SItes. Additionally, as the use of
contIguous parcels WIll reduce constructIon costs of the
proJect, and therefore reduce the amount by which the CIty
WIll need to SUbSIdIze or "wrIte-down" land costs to
faCIlItate development of the site. The fact that the
sellers have agreed to a lengthy holdIng period (180 days)
IS also worth a SIgnIfIcant sum, further substantiatIng the
agreed upon prIce.
2. HoldIng PerIod
Upon approval of the attached Agreements, escrow WIll be
opened WIth the depOSIt of $7,500 by the City. The CIty can
exercise Its rIght to purchase within the 180 days and can
extend the escrow perIod for 3 addItIonal months WIth the
depOSIt of an addItIonal $3,750 Into escrow. If escrow
falls to close for any reason other than the usual buyer1s
contIngenCIes, such as approval of the prelImInary tItle
report, SOlIs report, and legal descrIptIon, or lack of
CounCIl approval of the Purchase Agreements, all depOSIts In
escrow less cancellatIon charges would be paId to the Seller
as lIqUIdated damages.
Because the CIty faces very little risk In assurIng the
development of these SItes - funding is reserved, the site
and proposed development can be approved WIthIn the requIred
tIme lIne, and speCial land use approvals are not
contemplated - the likelIhood of not purchaSIng the site IS
mInImal. However, to accommodate any unknown contIngenCIes
which might arIse, the option to extend escrow IS a
deSIrable alternatIve to retaIn. The total acquiSItion
prIce WIll Increase by $4,000 If the CIty elects to extend
escrow by three months, such that the optIon to extend WIll
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have to be carefully evaluated In VIew of the status of the
proJect at the tIme.
3. Specific Terms
In additIon to the terms noted above the Agreements also
contaIn proVI s ions speCl f IC to development process planned
for the SIte. To meet HUD and HOUSIng AuthorIty deadlInes
for the submISSIon of developer proposals WhICh are
IndIcated In ExhIbIt 2, It was necessary to obtaIn a SIte
survey, and title report prIor to CounCIl actIon. The
Agreements allow the CIty to undertake necessary
predevelopment work and to assign the Agreement to the
selected developer If It so elects.
The CIty has also agreed to cooperate In an exchange of the
sellers' property at the request of the sellers, so long as
there IS no expense to the CIty.
The follOWIng chart is prOVIded to summarIze the terms of
sale:
1851-1901
190'7
Total
Square footage
ZonIng
Purchase PrIce
Land Cost Per UnIt
Escrow DepOSIt
90' Day ExtenSIon Fee
5,00"
R2
$396,0"0
7,500
R2
$193,500
$5,0"0
$4,0'09
$2,500
0'
22,500
R2
$589,500'
$31,026
$7,50'0'
$4,0'00
Development Process
The funds reserved for the constructIon of thIS apartment complex
are prOVIded through the "Turnkey" program.
Under thIS program,
developers prepare proposals In response to a Request for
Proposals Issued by HACoLA.
The proposals are then ranked by
cost, design, developer qualIfIcatIons, and other factors, and
the hIghest-ranked developer is referred to HUD for approval.
Following receIpt of all approvals, the developer WIll acqUIre
the SItes, bUIld the proJect, and "turn the keys over" to the
HOUSIng AuthorIty when constructIon is complete.
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The City's Role
The CIty'S Involvement in thIS proJect will include the prOVISIon
of fInanCIal aSsIstance, technIcal aSsIstance, as well as to
gUIde development and the operatIon of the project In a fashIon
WhICh addresses cItizens' needs.
The varIOUS forms of CIty
aSSIstance and Involvement are descrIbed as follows:
1. FInancial ASSIstance
As the CounCIl is well aware, federal cost regulatIons make
It economIcally infeasible to produce affordable housing in
hIgh cost areas such as Santa MonIca WIthout addItional
aSSIstance from the CIty or other sources. In this case, as
In prior developments assIsted by the CIty, SIte acqUISItIon
costs WIll need to be SUbSIdIzed. The SUbSIdy Will be equal
to dIfference between HUD cost ceIlings, in thIS case
$967,860, and the actual amount approved by HUD for the
development of thIS proJect. This IS the same method used
to determine the CIty'S contributIon to land costs for Ocean
Park VIllas located on 5th Street. The amount of the write-
down WIll not be known untIl HUD reviews the costs of the
selected project.
A review of the tlmellne attached as ExhIbIt 2 WIll reveal
that developer proposals are due to the HOUSIng AuthorIty on
December 15, 1983. As HUD regulatIons require that all
responding developers show evidence of SIte control at the
tIme of submIssIon, the HOUSIng DIvision issued an
inVItatIon to prepare proposals on the Eleventh Street SIte,
including approprIate caveats as to the neceSSIty of CounCIl
approval. ThIS InVItatIon, attached as ExhIbit 3, indicates
that the CIty WIll antICIpate transferring the site to the
selected developer for less than its fair market value. The
developer WIll then pass through these saVIngs to the
Housing Authority when It buys the proJect.
2. Technical Assistance
To assure expedl tIOUS preparation of proposals, Cl ty staff
have obtaIned a preliminary tItle report, 50115 report and a
survey WhICh WIll be made avaIlable to any developer WIshIng
to prepare a proposal for the Eleventh Street SIte. The
selected developer WIll reImburse the CIty for these
expend I tures. Staff W III also advi se respondl ng developers
as to zoning and bUIldIng code requirements as necessary.
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When a developer and a specIfIc development proposal are
selected, staff wIll assIst in obtaInIng permIts and
approvals as necessary.
3. Developer SelectIon
A selection commIttee composed of CIty and HACoLA staff wIll
reVIew development proposals and wIll refer the preferred
proJect to HUD for approval. The CIty WIll be prOVIded with
copies of all responses to the RFP, and City staff will have
15-20 days in WhICh to reVIew and rank proposals wIth HACoLA
staff.
Any development selected will he sUbJect to the City's
normal reVIew procedure, except that federally assisted
developments are exempt from the requIrements of OrdInance
6385. Absent any requests for variances, WhICh are not
antICIpated, thIS proJect WIll not he SUbJect to the
PlannIng CommISSIon's Development Review procedures.
4. ConditIons for Sale
In conSIderatIon of the fInancIal and technical assistance
the CIty is prOVIding, HACoLA has agreed to several
condItIons recommended by CIty staff, IncludIng CIty
representatIon on the developer selectIon commIttee, the
recordatIon of a deed restrIctIon on the sIte, and as a
condItion of sale, to gIve preference to Santa Monica
resIdents, and secondly to persons employed in Santa MonIca
In the selectIon of tenants. The deed restrIctIon which
would run wIth the property would lImIt ItS use to low and
moderate Income housIng and would Include a reversion of the
sIte and Improvements to the CIty upon cessatIon of federal
operatIng SubsIdIes. The CouncIl WIll approve the grant
deed and any covenants prIor to the conveyance of the sItes.
CitIzen and NeIghborhood RevIew
The acquIsItIon of thIS sIte necessitates the transfer of
resources from the CDBG Contingency fund to a new
SIte
AcquisitIon fund.
Because the sum Involved SlIghtly exceeds 10%
of the CIty'S EntItlement grant amount, a notIce of a publIC
hear 1 ng on
the proposed budgetary actIon has been publIshed In
the newspaper and all persons and agenCIes on the CDBG maIlIng
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list have been notIfied by mall In accord wIth the CIty'S CDBG
Ordinance. AddItIonally, the PICO NeIghborhood ASSOcIatIon (PNA)
distributed flyers In the vIcInity of the of the sIte announcIng
the proposed acquIsItion of thIS property and its Intended use.
PNA also provIded translatIon serVIces to assure that all
neIghborIng
reSIdents would be aware of thIS proposal. All
materIals announCIng the hearIng and the proposed acquisitIon
indIcated that comments
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wrItIng VIa, telephone, or in
person at the CouncIl meeting are encouraged.
As of thIS wrItIng staff have not receIved any comments regarding
the proposed use of the site for reSIdential development WhICh
raIse envIronmental or other SImIlar concerns.
Most
communicatIons have been requests for applIcatIons.
FInancial and Budgetary Impacts
It IS recommended that the CIty CouncIl allocate funds for the
acqUIsItIon of the site and for closing costs from approprIated
funds as follows:
o Transfer from:
SIte AcquiSItIon
(19-200-262-000-914)
$458,587
CDBGContingency
(19-200-262-000-774)
$141,413*
o Transfer to:
EleventhStreet SIte AcqUl.sitlon $6100',101010**
(to a new account number to be
assigned wIthin the Community &
NeIghborhood Improvement account
serIes)
*A report recommended by Community and Neighborhood Services
Budget AdJustments dated December 13, 1983 details the amount
currently avaIlable In the CDBG Contingency fund.
**A schedule of total acqUIsItIon costs 15 attached as Exhibit 4.
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Staff RecommendatIon
It IS recommended that the CounCIl:
1. Conduct a hearIng on the proposed use of CDBG ContIngency
funds for the above descrIbed project, conSIdering publIC comment
on the pro] ect.
2. Approve the Purchase Agreements for 1851-1901 and 1907
Eleventh Street,
Santa MonIca,
pendIng completIon of
envIronmental clearances reqUIred by CDBG regulatIons;
3. Allocate $458,587 from hOUSIng Site AcqUISItIon and $141,413
from CDBG ContIngency funds for the acqUISItIon of the site,
IncludIng clOSIng costs.
4. AuthorIze the Clty Manager to take all actIons necessary to
meet the terms and condItIons of the Purchase Agreement;
authorIze the City Manager to formally advise HACOLA of the
follOWIng condItIon of sale at a below market prIce:
a. The CIty shall receIve copIes of all developer
submissions prIor to proJect selectIon and shall have
representatIon on the developer selection committee;
b. the CIty's wrIte-down shall not exceed the dIfference
between the maXImum allowable developer's prIce and the HUD
approved total development cost exclUSIve by land and the
CIty shall reVIew the developer's and HUD's estImates of
total development costs prior to determining the final sales
prIce;
c. the CIty shall record covenants WhICh run WIth the land
restrIctIng the use of the property to low-moderate Income
hOUSIng and WIth a prOVISIon for tItle to revert to the
City; and
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d. that preference shall be given to Santa MonIca residents
and secondly to those employed In Santa Monica in the tenant
selectIon process.
5. AffIrm that the site may be offered to the developer at a
below market price.
6. Direct the CIty Attorney to draft the grant deed and
necessary convenants.
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