SR-05-12-2015-8Ayo i Council Report
Santa Monica
City Council Meeting: May 12, 2015
Agenda Item: (_
To: Mayor and City Council
From: Andy Agle, Director of Housing and Economic Development
Subject: Disposition of City -owned Housing Properties
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Staff recommends that the City Council:
1. Authorize the City Manager to transfer ownership of the 419 and 1616
Ocean Avenue properties to Community Corporation of Santa Monica, including
negotiation and execution of agreements consistent with affordability covenants
and funding parameters established in the City's Housing Trust Fund Guidelines.
2. Adopt the attached resolution declaring that 2018 19th Street is not needed for any
public purpose and authorize the sale of the property.
Executive Summary
To ensure the long -term affordability of 24 City -owned apartments, staff recommends
conveyance of 419 and 1616 Ocean Avenue to Community Corporation of Santa Monica,
a locally based, nonprofit organization committed to developing and managing
affordable housing. Additionally, staff recommends selling the vacant property at
2018 19th Street on the open market in an effort to increase the City's capacity to produce
and preserve affordable housing.
Background
Ocean Properties
The Housing Division currently oversees property management of 24 rent - controlled
apartments and a commercial space at 419 and 1616 Ocean Avenue (Ocean Properties).
On July 22, 2014, Council directed staff to request proposals from nonprofit housing
providers to acquire, preserve, and operate the properties as affordable housing.
In December 2014, staff issued a Request for Proposals (RFP) targeted to nonprofit
housing providers. The RFP solicited proposals from experienced nonprofit housing
providers to acquire, rehabilitate, and operate the properties long -term as affordable
housing targeting low- income households.
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99th Street
The property located at 2018 19th Street (19th Street) is an 8,000- square -foot, vacant
parcel located in the first block north of Pico Boulevard, as shown in Attachment A.
The site has a zoning designation of R -2, which would only support a development of
approximately four residences with no economy of scale and minimal opportunity to
leverage other public or private funding. The property was originally acquired by Habitat
for Humanity with funds from the City's Redevelopment Agency for development of
affordable ownership housing. The property was conveyed back to the Redevelopment
Agency in 2009 because Habitat for Humanity determined that development of affordable
housing on the site would be infeasible (see staff report of May 26 2009). Subsequently,
the property has been deemed a City Housing Asset by the State of California Department
of Finance. Any proceeds from sale of the property must therefore be reported and
expended as Low and Moderate Income Housing Asset Funds.
Discussion
Ocean Properties
The City received proposals from two qualified nonprofit providers: Los Angeles County
Housing Development Corporation (HDC) and Community Corporation of
Santa Monica (CCSM). Both providers demonstrated thoughtful consideration and
planning in response to the RFP. Proposals were evaluated based on the
following criteria:
® Thoroughness, completeness, and responsiveness to the RFP;
® Financial feasibility of the proposal;
® Financial capacity of the nonprofit affordable housing organization;
® Demonstrated ability and experience in successfully undertaking rehabilitation of
tenant - occupied properties;
® Demonstrated ability and experience in owning and operating affordable housing
rental properties; and
® Knowledge and understanding of local laws concerning landlord /tenant rights and
responsibilities.
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A committee was formed to review the two proposals. Committee members were
comprised of two City Housing staff and one City of Los Angeles affordable housing
professional who reviewed the proposals based on the Council- approved evaluation
criteria listed above. After independent evaluations and collaborative discussions, the
committee unanimously recommended that the Ocean Properties be conveyed to CCSM
due to their extensive experience with owning and operating affordable housing in Santa
Monica, their record of success in rehabilitating tenant - occupied properties, and their
financial capacity. CCSM has 45 full -time staff to manage its properties, allowing it to add
additional affordable apartments within a strong, local infrastructure. CCSM has
successfully rehabilitated over 70 existing buildings in Santa Monica, allowing it to
develop methods for rehabilitating occupied properties in a manner that minimizes
disruption to existing tenants. A recent independent auditor's report has confirmed
CCSM's solid finances.
CCSM proposes to assume ownership and income restrict all apartments to low- income
households with the following affordability mix: five apartments at 30 percent of area
median income (AM]), 17 apartments at 60 percent of AMI, and five apartments at
80 percent of AMI. As all of the existing apartments are rent - controlled, current tenants
(11 households) would not be subject to income limits and would be allowed to remain in
their homes as long as they desire. Once any existing tenant ends their tenancy, the
tenant would be replaced by an income - qualified tenant. A deed restriction would
preserve affordability of all apartments for 55 years, with an option to extend affordability
for another 25 years. At the end of the 80 -year period, the City would have the option of
purchasing the properties for $1 each.
The rehabilitation at 419 Ocean Avenue focuses on deferred maintenance and potential
long -term issues such as efficient use of utilities. At 1616 Ocean Avenue, CCSM
proposes a major rehabilitation focused on accessibility upgrades, updates to most of the
major building systems and finishes, and conversion of one large commercial space into
three apartments. Based on CCSM's proposal, staff estimates that $3 million in City
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assistance will be necessary for the proposed rehabilitations. Staff recommends
proceeding with conveyance of the properties to CCSM, including negotiation and
execution of agreements consistent with affordability covenants and funding parameters
established in the Housing Trust Fund Guidelines.
190 Street
Staff has examined various strategies to create affordable housing opportunities on
the site. The small economy of scale achievable at the site would result in a prohibitively
high per -unit development cost with minimal leveraging potential, requiring a large City
subsidy to achieve affordability and financial feasibility. Therefore, staff proposes the sale
of 19th Street with the proceeds to be deposited into the City's Low and Moderate Income
Housing Asset Fund to create future affordable housing opportunities with potential to
yield a greater number of residences than possible at 19th Street.
To allow for sale of the property, Council must adopt the resolution provided in
Attachment B declaring that 19th Street is not needed for any public purpose. Prior to a
call for competitive proposals and negotiation for the sale of 19th Street, staff would
comply with Government Code Section 54222, which requires various public agencies
(school districts, county, etc.) be allowed the first opportunity to make a purchase offer
for the property. Staff recommends that Municipal Code Section 2.24.110 (d) regarding
the sale of real property be utilized in order to allow for sale by competitive proposals
and negotiation. Staff would return to Council for approval of final sale. The Council could
award the sale of 19th Street to the best proposer or reject any and all proposals.
Environmental Analysis
Ocean Properties
Conveyance of the Ocean Properties with existing buildings for the purpose of preserving
the apartments as affordable housing is categorically exempt from environmental review
pursuant to California Environmental Quality Act (CEQA) Guideline 15061(b)(3), as it can
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be seen with certainty that there is no possibility that the preservation of existing housing
may have a significant effect on the environment.
19th Street
Sale of 19th Street is categorically exempt from environmental review pursuant to CEQA
Guideline 15312, as it involves the sale of surplus governmental property for which the
use of the property has not changed since it was conveyed to the City. Should the
successful purchaser of the property pursue development of the site, such development
would be subject to CEQA review.
Next Steps
Ocean Properties
With Council authorization on the recommendations discussed in this report, staff would
proceed to negotiate and execute agreements with affordability covenants and funding
parameters consistent with the Housing Trust Fund Guidelines for execution by CCSM
and the City Manager.
19tt' Street
With Council authorization, staff would proceed with offering public agencies the first
opportunity to make a purchase offer for the property. If no public agency is interested in
acquiring the property, the City would sell the property following the competitive
procedure outlined in Santa Monica Municipal Code Section 2.24.110 (d). Staff would
return to Council for approval of final sale.
Financial Impacts & Budget ,Actions
Ocean Properties
Staff estimates a one -time capital investment of $3 million from available Housing Trust
Funds for initial rehabilitation, which equates to $112,000 per unit, well within the Housing
Trust Fund Guideline limits. Funds would be processed pursuant to the Housing Trust
Fund Guidelines.
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19th Street
There is no immediate financial impact associated with authorizing staff to pursue
disposition of the property, subject to final Council approval of any sale. The amount of
sale proceeds would be identified when staff returns to Council for consideration of
entering into a purchase and sale agreement. Sale proceeds would be deposited into the
Low and Moderate Income Housing Asset Fund (15 Fund) for use toward affordable
housing developments.
Prepared by: Ava Lee, Senior Development Analyst
Housing and Economic Department
Forwarded to Council:
Elaine M. Polachek
Interim City Manager
Attachments:
A. Location map of 19t' Street
B. Resolution of Intent to Sell 2018 19th Street Property
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C [ I mt IT, 7-11 -11
Reference:
Resolution No. 10878
(CCS)