Loading...
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 • �•• 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. 1 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. 7 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 3 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 0 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. M 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 h 11 C [ I mt IT, 7-11 -11 Reference: Resolution No. 10878 (CCS)