SR-407-005-01 (4)
C/ED: HD: CR: jt
City council
Parking Authority
Redevelopment Agency: 4/28/87
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APR 2 8 1987
Santa Monica, California
To: Mayor and city Council Members
Chairperson and Parking Authority Members
Chairperson and Redevelopment Agency Members
From: City Staff
Subject: Recommendations Regarding the Sale of Air-Rights Over
Parking Lot Three at 1121-35 Third Street for Develop-
ment of Senior Housing, contingent on Receipt of Sec-
tion 202 Loan to Retirement Housing Foundation (RHF)
INTRODUCTION
This report transmits information and recommendations concerning
the development of senior housing units over the surface parking
lot at 1121-35 Third Street referred to as Parking Lot Three.
The report recommends that the City Council:
(l) certify the
August 4, 1986 Initial Study and the Negative Declaration (EIA
804) (SCH 86051403) for the proposed senior housing project; (2)
adopt a resolution transferring Parking Lot Three from the Park-
ing Authority to the City, contingent on the receipt of a Section
202 loan commitment from the U.S. Department of Housing and Urban
Development (HUD); and (3) adopt a resolution authorizing the
sale of the air-rights to Retirement Housing Foundation (RHF),
and execution of an Option Agreement subject to receipt of the
HUD Section 202 loan commitment. In addition, the report recom-
mends that the Parking Authority adopt a resolution authorizing
the transfer of Parking Lot Three to the City, upon receipt of
the HUD Section 202 loan commitment.
The report also recommends
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that the Redevelopment Agency commit up to $90,000 from the City-
wide Housing Acquisition and Rehabilitation Program funds for the
paYment of predevelopment expenses associated with the project.
BACKGROUND
The city Council directed staff in the FY 1986-87 departmental
workplans to evaluate alternatives and to identify funding
sources for developing affordable housing on City-owned parking
lots between Third and Fourth Streets, north of Wilshire. On
June 24, 1986 staff presented to the City council a report which
indicated that the development of rental units for lower income
seniors utilizing the HUD section 202 Loan Program was feasible
on the City-owned parking lot on Third Street. The project could
include seventy-two (72) housing units, while still maintaining
the eighty-three (83) public parking spaces.
The City Council on May l3, 1986 selected the development team
led by the national non-profit housing developer, Retirement
Housing Foundation (RHF), through a Request for Qualifications
process. RHF submitted an application for a HUD Section 202 loan
commitment for the Santa Monica site in July, 1986 and narrowly
missed obtaining a commitment due to the limited amount of HUD
funds available at that time. Subsequently, HUD has announced
the availability of HUD section 202 loan funds in this fiscal
year and the City has been working with RHF to prepare an ap-
plication for this funding round.
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The following discusses the project design, and the actions which
need to be taken in order for RHF to submit an application for
HUD Section 202 loan funds for the Parking Lot Three site.
DISCUSSION
Project Design
The senior housing project will include seventy-two (72) units,
consisting of eighteen (18) studio units, and fifty-four (54)
one-bedroom units, with thirty (30) parking spaces for the exclu-
sive use of the tenants, and the retention of the existing
eighty-three (83) public parking spaces. The project would be
constructed with the ground level as public parking, first level
a combination of public and tenant parking, and housing on the
four levels above. The final project design will be submitted
for necessary reviews by the Architectural Review Board and Plan-
ning Commission, interested residents, and City staff when RHF
secures the HUD section 202 loan commitment. RHF will submit all
necessary applications for planning and zoning approvals, includ-
ing an application for a zone change.
Next Steps
(l) certification of Environmental Review
In accordance with State and City CEQA Guidelines the City under-
took the required environmental review of the proposed senior
housing project, and the Initial Study was completed in August
1986. Based on the information provided by the Initial Study and
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Negative Declaration (EIA 804) (SCH 8605l403), there is suffi-
cient data to support a finding that the project will not have a
significant effect on the environment. It is recommended that
the City council find and determine that the Initial study and
Negative Declaration for the senior housing project adequately
analyses the potential environmental effects of the project in-
cluding effects on air, noise, light and glare, population, de-
molition, relocation or remodel of residential commercial or in-
dustrial buildings, utilities, fiscal impact, transportation and
circulation, and that there was sufficient public review of the
environmental analysis, attached as Exhibit 1 to this report.
(2) Granting of site Control
The HUD section 202 Loan Program requires that RHF submit
evidence of site control through an Option Agreement to purchase
the property with the HUD application. It is necessary for the
City to enter into an Option Agreement with RHF, which provides
RHF with the exclusive right to purchase the air-rights for the
development of senior housing under the section 202 Loan Program
on the site.
(3) Transfer of Title
The title to Parking Lot Three is currently held by the Parking
Authori ty of the City of Santa Monica. Parking Authority law
prevents the Parking Authority from using property or revenues
for non-parking purposes. However the City is not restricted in
this manner. Under Highways Code section 32667, the legislative
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body by two-thirds vote may adopt a resolution transferring prop-
erty of the Parking Authority to the City. Therefore it is
recommended that both the city council and parking Authority
adopt the attached resolutions authorizing the transfer of prop-
erty, subject to the receipt of a HUD section 202 loan commitment
for the senior housing project.
The HUD 202 program regulations prohibit the use of funds for
items such as structured parking, building articulation, balco-
nies, or other design amenities. Typically, the locality covers
the costs of the ineligible items. Exhibit 2 details the costs
not covered in the HUD 202 loan. It is anticipated that the dif-
ference between the HUD approved costs and the total proj ect
costs would be approximately $1,000,000. However, the City will
receive funds for the cost of the subdivided portion of the prop-
erty to be used for the senior housing units. The project is
feasible if these funds are used to cover the costs not included
in the Section 202 loan. Therefore, it is not anticipated that
the City would have to provide funds in cash to the project, but
would have to commit the proceeds from the sale of the air-rights
to the project.
In order to ensure that there is not a fiscal impact of the
transfer of Parking Lot Three to the Parking Authority Fund it
will be necessary for the City and Parking Authority to enter
into a PaYment Agreement that provides for an annual paYment of
revenues collected from the public parking meters by the City to
be paid to the Parking Authority. Upon RHF's receipt of a HUD
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Section 202 loan commitment staff will return for approval to
execute such a Payment Agreement.
(4) Public Hearing
The Municipal Code Section 2508A, as amended by Ordinance No.
1125 (CCS) requires the City to hold a public hearing prior to
the sale of property held by the City. A notice was published in
the Evening Outlook on April l7th and 22nd, as required by the
Municipal Code, specifying that a public hearing would be held on
the proposed sale of air-rights over Parking Lot Three to RHF.
In addition, the Municipal Code allows for the sale of real prop-
erty without public bidding if it is in the best interests of the
City. Due to the experience of RHF in successfully obtaining HUD
section 202 loan commitments, and in developing and managing
senior housing, the attached resolution finds that it is in the
best interests of the city to provide RHF with an exclusive op-
tion to purchase the air-rights of the property.
(5) Predevelopment Expenses
The HUD Section 202 Loan Program provides financing at 9.25% for
forty years for the development costs approved by HUD. HUD does
not provide funds until the project is ready to start construc-
tion. Costs for architectural and engineering services, and ad-
ditional environmental work will be incurred prior to the
availability of section 202 funds. These costs are typically
paid for by the locality and reimbursed by the developer upon
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funding of the Section 202 loan. It is anticipated that the pre-
development costs will be $90,000 for architectural and engineer-
ing work. Funds for these costs will not be expended until after
receipt of a Section 202 loan commitment. Funds may be committed
from the FY 1987-88 citywide Housing Acquisition and Rehabilita-
tion Program (CHARP) account for these costs. These funds will
be paid back to the CHARP account upon HUD funding of the section
202 loan.
Applications for section 202 funds are due on June l, 1987 and
funding recommendations are anticipated by September 30, 1987.
Upon receipt of a section 202 loan commitment, staff will return
to Council for authorization to execute a Development and Dis-
position Agreement with RHF. RHF will submit all necessary ap-
plications to the Planning commission for a zone change or
variances to permit the development of this project, and the
project would undergo standard development review by City staff,
the Architectural Review Board and Planning commission.
FINANCIAL/BUDGETARY IMPACTS
As detailed in this report a total of $90,000 in City-wide Hous-
ing Acquisition and Rehabilitation Program funds will be expended
in FY 87-88 for the payment of predevelopment expenses associated
with the section 202 project. It is necessary to encumber these
funds at this time to ensure that funds are available when the
HUD section 202 loan commitment is received. In order to meet
programmed commitments for FY 1986-87, the Redevelopment Agency
must increase the current appropriation authority in the CHARP
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accounts to permit the encumbrance and expenditure of $77,094
that has been returned to the CHARP account from the FY 85-86
Earnest Fund revolving fund and is being held pending appropria-
tion. The increase in the appropriation for the CHARP accounts
should be as follows:
l6-720-264-000-942
l8-720-264-128-942
l8-720-264-l29-942
$39,594
$27,375
$lO,l25
$77,094
Total
This amount, plus $l2,906 in CHARP funds available from previous
appropriations for a total of $90,000 is to be encumbered in the
following CHARP accounts for the section 202 senior housing
project:
l6-720-264-000-942
18-720-264-128-942
18-720-264-129-942
$39,706.00
$14,856.50
$35,437.50
$90,000.00
Total
RECOMMENDATIONS
It is recommended that the City Council:
(1) Certify the August 4, 1986 Initial Study and Negative Dec-
laration (EIA 804) (SCH 8605l403) for the senior housing
project in that the Initial Study and Negative Declaration
adequately analyze the potential environmental effects of
the proposed project, and the City Council further finds
that they have reviewed and considered the environmental
documentation in connection with its determination of
whether or not to approve the project.
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(2) Adopt the attached resolution which authorizes the transfer
of property at 112l-35 Third street owned by the Parking
Authority to the City, subject to RHF's receipt of a Sec-
tion 202 loan commitment.
(3) Hold a public hearing on the proposed sale, without public
bidding, of the air-rights of Parking Lot Three to RHF for
the development of senior housing.
(4) Adopt the attached resolution authorizing the sale of the
air-rights to RHF, subject to RHF's receipt of a Section
202 loan commitment, compliance with the provisions of the
Subdivision Map Act sections 66410 et. seq,. and execution
of a Development and Disposition Agreement.
(5) Authorize the City Manager to execute the attached option
Agreement, which provides RHF the exclusive right to pur-
chase the air-rights of Parking Lot Three for the develop-
ment of senior housing.
It is recommended that the Parking Authority:
(1) Adopt the attached resolution which authorizes the transfer
of property at ll2l-35 Third Street by the Parking Authori-
ty to the City, subject to RHF's receipt of a section 202
loan commitment.
It is recommended that the Redevelopment Agency:
(1) Increase the appropriation authority in the CHARP accounts
by a total of $77,094 as follows:
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l6-720-264-000-942
l8-720-264-128-942
l8-720-264-129-942
$39,594
$27,375
$10,125
(2) Encumber and authorize the expenditure of up to $90,000 in
Redevelopment Agency funds from CHARP for the payment of
predeve10pment expenses on the project from the following
account numbers:
16-720-264-000-942
18-720-264-128-942
18-720-264-129-942
$39,706.00
$l4,856.50
$35,437.50
Prepared By: Candy Rupp, Housing Division
Community and Economic Development Department
Exhibits: 1.
2 .
3.
4.
Initial study on Senior Housing Project
Projected Cost Summary
City council Resolutions
Parking Authority Resolution
:staff202
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