SR-407-003-017 (2)
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CC/PA-2
APR 261988
Santa Monica, California
CjED:HD:JM: jt
city Council
Parking Authority: 4/26/88
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TO: Mayor and City council Members
Chairperson and parking Authority Members
FROM: City Staff
SUBJECT: Recommendations Regarding the Development of Parking
Lot at 1423 Second street and Designation of Community
Corporation of Santa Monica as the Developer
INTRODUCTION
This report transmits information and recommendations regarding
the development of a mixed-use project over the City-owned sur-
face parking lot at 1423 second street. The report recommends
that the City council and Parking Authority: (1) approve in con-
cept the development of the project in accordance with the
development criteria described herein: and (2) designate Coromuni-
ty Corporation of Santa Monica as the developer of the proposed
project.
BACKGROUND
In the FY 1985-86 Community and Economic Development budget and
departmental workplans, the City Council directed staff to ex-
amine the feasibility of a Single-Room Occupancy Residential Ho-
tel (SRO) Project. The initial steps of this examination included
an inventory of the residential hotel units in Santa Monica, and
a review of the availability of State and Federal funding sources
for the acquisition and rehabilitation of residential hotel
units.
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Cc!PA-2
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Over the course of the following two years, staff has worked with
Community corporation of santa Monica to locate an appropriate,
available site.
The City Council directed staff in its FY 1987-1988 Community and
Economic Development departmental workplans to continue to manage
the development of a Single Room Occupancy (SRO) Project with
Community Corporation and to look to the possibility of develop-
ing a new SRO. Due to the prohibitively high acquisition costs
of suitable properties in the Downtown or Lincoln Corridor areas,
staff has not been able to secure a project site which would be
economically feasible to develop or rehabilitate.
Thus, given the difficulty of locating a site, staff looked to
the potential development opportunities offered by City-owned
property. staff has identified the Parking Authority-owned sur-
face parking lot at 1423 Second street, between Santa Monica and
Broadway, as an appropriate site for the development of a mixed-
use project which could accommodate twenty-eight (28) units of
multi-family rental housing above ground floor commercial space.
The downtown location of the Second street site and its proximity
to social services, transportation lines, and shopping provides
an ideal site for locating a mixed-use project of this kind.
The following discusses the proposed project, including project
design, financing, developer selection, and the future actions by
Council which the project will require.
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.
DISCUSSION
Project Description
The proposed site is 7,500 square feet in area and contains twen-
ty-six (26) metered parking spaces. It is zoned C-3 and is sub-
ject to the Zone 3 guidelines of the Third street Mall specific
Plan. These guidelines allow, with site Review, a development of
six stories or 84 feet, with a Floor-Area Ratio (FAR) of 3.0.
Preliminary analysis by staff indicates that it would be feasible
to develop twenty-eight (28) units of rental housing for very low
and moderate income households. The housing would be constructed
on the third, fourth and fifth levels, above a theater occupying
the first and second levels.
The housing units would be self-contained single apartments but
would substantially meet the needs of the population typically
served by SRO housing, i.e. primarily single non-elderly adults.
Priority for occupancy in the units would be given to persons who
are direct referrals from local Santa Monica programs serving the
homeless and very low income individuals. (In addition, these
units could meet future replacement requirements engendered by
further development of the Pier.)
Approximately 7,500 square feet of commercial space is proposed
to be made available to a theater operator. The selected theater
operator will meet some of the needs left unmet by the closures
of the Cine Latino and Fox International theaters through the
showing of Spanish-language cinema. The use of the property in
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this fashion will attract and will be of value to a wide variety
of socioeconomic groups. In addition, the theater use will en-
sure nighttime activity on the street, enhancing both security
for residents and the economic viability of the area. The Condi-
tional Use permit process required for the theater will ensure
compatibility of this commercial use with the goals of the Third
street Mall Specific Plan. The income from the commercial use
will help subsidize the operation of the affordable housing com-
ponent of the project.
project Financing
Based upon comparable projects, construction costs will be ap-
proximately $875,000 for the housing componentJ and $350,000 for
the theater component of the development. Total development
costs, including soft costs, are estimated to be $1,900,000. The
projected rents and the income from the commercial space, rented
at approximately $1.00 per square foot, will allow the project to
carry private financing of approximately $1,000,000.
In addition, recent Federal Tax legislation provides for an an-
nual tax credit over ten years to projects which provide new
units for lower income households. The state of California also
provides a companion tax credit program which provides for a
credit over four and one-half years. It is estimated that equity
from these two programs would be $650,000. The combination of
private debt financing and tax credit equity will leave a gap of
approximately $250,000. Therefore a city subsidy of approximate-
ly $250,000 or $8,929 per unit would be required.
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In order to make the project financially feasible the City may be
required to lease the property to the Developer at less than the
fair market value for the leasehold interest. While, typically,
the fair market value of a leasehold interest would be approxi-
mately 10% of the fair market value for purposes of sale, the
public benefit of the project would enable the City to lease the
property for what the projectls affordable rent structure could
support.
Program Eligibility
The source of city funds for the proposed proj ect would be the
Citywide Housing Acquisition and Rehabilitation Program (CHARP).
The proposed development would meet the eligibility criteria for
CHARP funding. No specific appropriation for this project is re-
quired at this time, as funding determinations are done ad-
ministratively in accordance with city Council approved program
guidelines.
Should the project be designated to meet replacement housing re-
quirements, future council action would be required to appropri-
ate the necessary funds from a source other than CHARP, as re-
placement housing is not an eligible use under either program.
Housing Development criteria
1. Household Types to be Served
In keeping with the City Council r s previous direction to staff
regarding the development of an SRO proj ect, staff recommends
that the project be comprised of O-bedroom efficiency units.
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Twenty-one (21) of the units will be made available to households
earning less than 50% of the Los Angeles County median income
($13,400). The remaining seven (7) units will be available to
households earning between 50% and 120% of the County median in-
come ($29,820).
2. Rent Levels
The rents for the units will be established in such a way as to
maximize affordability to persons who are not eligible to receive
Federal rental assistance. Rents will range from a low of $295
to a high of $722 per month depending on household income.
3. Design standards
The project will consist of twenty-eight (28) O-bedroom units of
approximately 510 square feet. In order to increase the
livability and marketability of the units, staff recommends that
each unit have its own bathroom and cooking facilities. Approxi-
mately 7,500 square feet in ground floor commercial space will be
provided.
Developer Selection
After consideration of the history and needs of this project, it
is recommended that the City Council reaffirm its prior selection
and directly designate Community corporation of Santa Monica
(CCSM) as the developer of the proposed project. CCSM has worked
with staff for the past two years to identify potential project
sites and sources of funding, and has demonstrated the skills and
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experience necessary to develop and manage a proj ect of this
type.
The Developer will select an architect, prepare specific plans
for the site in consultation with City staff, obtain necessary
Coastal Commission and City approvals, obtain firm construction
cost bids and select a contractor, and present final financing
and site plans to City staff for approval.
Future Actions Required
1. Transfer of Title
The title to 1423 Second street is currently held by the Parking
Authority. parking Authority law prevents the Parking Authority
from using the property for non-parking purposes and from enter-
ing into a "below market.. lease for the property. Therefore it
will be necessary for the Parking Authority to transfer ownership
of the land to the City of Santa Monica, as the city may lease
the property to the Developer at less than fair market value.
In order to transfer the property, the City and Parking Authority
will be required to make findings as to the public benefit which
necessitates the transfer, as was done most recently in transfer-
ring the Edwards Center site from the Parking Authority to the
City.
2. Lease A9reement
The City and the Developer will execute a Lease Agreement govern-
ing operation of the property, similar to the 175 Ocean Park
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Boulevard Lease Agreement. The City would retain ownership of
the land, while the Developer would own and operate both the
housing and commercial components of the project subject to the
conditions of the Lease Agreement.
3. Payment Agreement
In order to ensure that the transfer of the property does not
adversely impact the Parking Authority Fund it will be necessary
for the City and Parking Authority to enter into a Payment Agree-
ment. The Payment Agreement will provide for an annual payment of
the lease revenues received by the City to the Parking Authority
Fund.
staff will return with the resolutions required for the transfer
of ti tIe, the Lease Agreement, and the Payment Agreement for
council review and approval.
Replacement Parkinq
The proposed project would not replace the existing parking on-
site, but the existing twenty-six (26) spaces would be included
in the expansion of Parking structure Six, which is adjacent to
the site. The Parking and Traffic Engineer is currently conduct-
ing an area-wide parking analysis which will help determine the
replacement parking needs.
At the start of construction the Parking Authority will lose the
use of the twenty-six (26) currently available metered parking
spaces. The Parking Authority currently receives approximately
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$10,600 per year in revenues from these meters. In order to mini-
mize the impact to the Parking Authority Fund resulting from the
loss of revenues, the Lease Agreement between the City and the
Developer will require payment equivalent to the loss to the
Parking Authority.
As new construction in the Third street Mall Assessment District,
the project will be required to pay the District assessments for
parking necessitated by the new development. Despite the con-
tribution to the Assessment District, the Coastal Commission
could still require that parking be provided on-site for the new
uses. The proposed project analysis assumes the contribution to
the Assessment District would meet the need for new parking.
FINANCIAL/BUDGETARY IMPACT
No financial or budgetary action is required at this time. The
proposed project is eligible under the Citywide Housing and Ac-
quisition and Rehabilitation program and projects are approved
administratively, assuming program funds are available and pro-
gram guidelines are met.
RECOMMENDATIONS
It is recommended that the City Council and Parking Authority:
1. Approve in concept the project at 1423 Second street to be
developed according to development criteria recommended by this
report and authorize the City Manager to review and commit the
use of CHARP funds in accordance with City Council approved Pro-
gram Guidelines.
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2. Designate Community Corporation of Santa Monica as developer
of the project.
Prepared by: Jeff Mudrick, Sr. Development Analyst
Candy Rupp, Housing Program Manager
Department of Community & Economic Development
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public viewing areas including a roof-top observation deck,
pilots' lounge and other public amenities. It also includes
about 10,000 square feet of commercial office space surrounding
an atrium on the lower parking lot level. Artists have been
encouraged to focus their proposals on the sod roof, courtyard
and interior lobby. An exhibition of five finalists will be held
in June, 1988.
5. Pier
The sum of $73,700 is allocated for artwork on or adjacent to
Santa Monica pier in a manner to be determined by a selection
committee consisting of an artist, PRe representative and Paul
Leaf. An R.F.P. will be devised to conform to special design and
construction plans when they become available.
6 . Art Bank
The sum of $20,000 is allocated for purchases of art for the
City's Art Bank collection. A plan to purchase outdoor sculpture
for the courtyard of City Hall will be studied by an
implementation committee consisting of Jane Ullman, Judy Neveau
and Michael McCarty.
7. The sum of $5,551 is allocated in the General Fund account
for a contingency reserve.
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Time Line
Artist Designation Date Installation Date
Big Wave 1984 September, 1988
Solar Web 1985 March, 1989
Main Library April, 1988 November, 1988
Airport August, 1988 December, 1988
Pier Undetermined Undetermined
Art Bank November, 1988 February, 1989
Budget and Fiscal Impact
$122,551 is available in Percent for Art General Fund Account
#01-740-560-000-905. $73,700 is available in P.F.A. Pier Account
#30-740-560-000-905. $34,700 is available in P.F.A. Airport
Account #33-740-560-000-905. The total budget and fiscal impact
of the 1987/88 Art Plan is $230,951.
Recommendation
This report recommends Council approve the 1987-88 Art Plan for
the Percent for Art program and expenditures totaling $230,951 as
proposed by the Arts commission.
Prepared by: Lynne C. Barrette, Assistant City Manager
Henry Korn, Arts Director
(artplan2)
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