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SR-12-15-2015-3B City Council Report City Council Special Meeting: December 15, 2015 Agenda Item: 3.B 1 of 3 To: Mayor and City Council From: Andy Agle, Director, Housing Division, Housing and Economic Development Gigi Decavalles-Hughes, Director Subject: Annual Report on Housing Asset Fund Recommended Action Staff recommends that the City Council: 1. Receive the attached Annual Report on the Low- and Moderate-Income Housing Asset Fund for Fiscal Year 2014-15 and direct City staff to post the report on the City's website by December 31, 2015; and 2. Direct staff to present the independent audit of the Low- and Moderate-Income Housing Asset Fund to City Council upon completion of the independent audit of the City’s Comprehensive Annual Financial Report (CAFR) and post the results of the audit on the City's website after presentation to Council. Executive Summary State law requires the City to prepare an annual report regarding the low- and moderate-income housing asset fund of the former Santa Monica Redevelopment Agency. The law also requires the completion of an independent audit of the fund. The annual report is attached and the audit is being completed as part of the City’s annual audit process. Background Senate Bill 341 (SB 341), which is codified in Health and Safety Code Section 34176.1 and became effective on January 1, 2014, requires each housing successor that assumed the housing functions of a former redevelopment agency to post a report on its website that contains information regarding the low- and moderate-income housing asset fund (Fund) of the former redevelopment agency fo r the previous fiscal year. In this case, the City, as the housing successor (Housing Successor), is required to prepare and post the report on its website. 2 of 3 In addition, the Housing Successor is required to conduct and provide to the Council an independent financial audit (Audit) of the Fund within six months of the end of the fiscal year. The Audit may be included as part of the City’s independent financial audit. Discussion The City as Housing Successor assumed the housing functions of the former Santa Monica Redevelopment Agency (RDA) on January 10, 2012 (Attachment B Weblink). The transfer of the functions included the transfer of formerly designated RDA low- and moderate-income housing funds together with any funds generated by former RDA housing assets. The funds must be maintained by the City in the separate Fund and expended in accordance with Health and Safety Code section 34176.1 (Section 34176.1). To ensure that the monies in the Fund are expended in accordance with the law, Section 34176.1(f) requires an independent financial audit of the Fund within six months of the end of the fiscal year. The independent audit of the City’s Fund will be included as part of the City’s comprehensive annual financial report (CAFR) prepared by Macias Gini & O’Connell LLP, the City’s independent auditor. Staff is working to complete the CAFR during the required six-month timeframe. Staff will post the results of the independent audit of the Fund on its website after the CAFR is presented to City Council. SB 341 also requires annual reporting and posting of fiscal year 2014-2015 activities related to the Fund. The Report includes the following information: The Fund balance for the fiscal year ending June 30, 2015 is $2,527,363, with $2,283,642 of deposits from interest and residual receipts, and $603,958 of expenditures during the period; The former RDA’s replacement housing obligations are satisfied; The former RDA’s inclusionary housing obligation was satisfied as of June 30, 2009; Approximately 11.4 percent of the affordable housing assisted by the former RDA is restricted to seniors; and 3 of 3 There is “excess surplus” (unencumbered funds of more than one million dollars) in the Fund, with a plan to encumber these funds within the next three fiscal years. The Annual Report is attached as Attachment A and is required to be posted on the City's website after Council's review and receipt. Financial Impacts and Budget Actions There is no immediate financial impact or budget action necessary as a result o f the recommended action. Prepared By: Tina Rodriguez, Successor Agency Administrator Approved Forwarded to Council Attachments: A. Attachment A-Annual Report B. January 12, 2012 Staff Report (Weblink) SANTA MONICA HOUSING SUCESSOR Page | 1 Attachment A ANNUAL REPORT REGARDING THE LOW AND MODERATE INCOME HOUSING ASSET FUND FOR FISCAL YEAR 2014-2015 PURSUANT TO CALIFORNIA HEALTH AND SAFETY CODE SECTION 34176.1(f) FOR THE SANTA MONICA HOUSING SUCCESSOR This Housing Successor Annual Report (Report) regarding the Low and Moderate Income Housing Asset Fund (LMIHAF) has been prepared pursuant to California Health and Safety Code Section 34176.1(f). This Report sets forth certain details of the Santa Monica Housing Successor (Housing Successor) activities during fiscal year 2014-2015 (fiscal year). The purpose of this Report is to provide the governing body of the Housing Successor an annual report on the housing assets and activities of the Housing Successor under Part 1.85, Division 24 of the California Health and Safety Code, in particular sections 34176 and 34176.1 (Dissolution Law). This Report conforms with and is organized into sections I. through XI., inclusive, pursuant to Section 34176.1(f) of the Dissolution Law: I. Amount Deposited into LMIHAF: This section provides the total amount of funds deposited into the LMIHAF during the fiscal year. A total of $2,283,642 was deposited into the LMIHAF during the Fiscal Year 2014-15. This accounted for payments made by borrowers in the form of residual receipt payments on existing Housing Successor loans. II. Ending Balance of LMIHAF: This section provides a statement of the balance in the LMIHAF as of the close of the fiscal year. At the close of the fiscal year, the ending balance in the LMIHAF was $2,527,363. The remaining balance in the LMIHAF will be spent in accordance with SB341 allowable housing uses as follows: 1) administration and monitoring expenses (with a cap based on Housing Successor loan and grant receivables); 2) up to $250,000 per fiscal year on homelessness prevention and rapid rehousing services (provided Housing Successor has fulfilled all replacement, affordable SANTA MONICA HOUSING SUCESSOR Page | 2 housing production, and monitoring, database compilation and web site publication requirements); and 3) all other funds in the Housing Asset Fund can be used to develop, acquire, rehabilitate, acquire long term affordability covenants for, or preserve lower income housing, affordable to households earning 80 percent of median income or less. The use of all other Housing Asset Fund category has the following expenditure requirements: a. 30% to Extremely Low income households; b. no more than 20% on Households between 60-80% median income; c. these requirements must be met over a 5-yr period. III. Description of Expenditures from LMIHAF: This section provides a description of the expenditures made from the LMIHAF during the Fiscal Year. The expenditures are to be categorized. Expenditures from the LMIHAF totaled $603,958 during this fiscal year on the Step Up on Second property consisting of thirty-six units. Housing Development Expenditures:  Expenditures on Low Income Units $ 18,119  Expenditures on Very Very Low Units $585,839 Total Housing Development Expenditures $603,958 IV. Statutory Value of Assets Ow ned by Housing Successor: This section provides the statutory value of real property owned by the Housing Successor, the value of loans and grants receivables, and the sum of these two amounts. Under the Dissolution Law and for purposes of this Report, the “statutory value of real property” means the value of properties formerly held by the former redevelopment agency as listed on the housing asset transfer schedule approved by the Department of Finance under Section 34176(a)(2), the value of the properties transferred to the Housing Successor pursuant to Section 34181(f), and the purchase price of property purchased by the Housing Successor. Further, the value of loans and grants receivable is included in the reported assets held in the LMIHAF. The following provides the statutory value of assets owned by the Housing Successor. Statutory Value of Real Property $ 11,635,000 Value of Loans and Grants Receivable $ 152,736,889 Total Value of Housing Successor Assets $ 164,371,889 SANTA MONICA HOUSING SUCESSOR Page | 3 V. Description of Transfers: This section describes transfers, if any, to another housing successor agency made in previous fiscal year(s), including whether the funds are unencumbered and the status of projects, if any, for which the transferred LMIHAF will be used. The sole purpose of the transfers must be for the development of transit priority projects, permanent supportive housing, housing for agricultural employees or special needs housing. The Housing Successor did not make any LMIHAF transfers to other Housing Successor(s) under Section 34176.1(c) (2) during the fiscal year. VI. Project Descriptions: This section describes any project for which the Housing Successor receives or holds property tax revenue pursuant to the ROPS and the status of that project. The Housing Successor does not receive or hold property tax revenue pursuant to the ROPS. VII. Status of Compliance w ith Section 33334.16: This section provides a status update on compliance with Section 33334.16 for interests in real property acquired by the former redevelopment agency prior to February 1, 2012. With respect to interests in real property acquired by the former redevelopment agency prior to February 1, 2012, the time periods described in Section 33334.16 shall be deemed to have commenced on the date that the Department of Finance approved the property as a housing asset in the LMIHAF; thus, as to real property acquired by the former redevelopment agency now held by the Housing Successor in the LMIHAF, the Housing Successor must initiate activities consistent with the development of the real property for the purpose for which it was acquired within five years of the date the DOF approved such property as a housing asset. The following provides a status update on the real property or properties housing asset(s) that were acquired prior to February 1, 2012 and compliance with five-year period for initiating development activities: Address of Property Date of Acquisition Deadline to Initiate Development Activity Status of Housing Successor Activity 1725 Ocean Avenue April 11, 2000 October 2, 2018 The Agency transferred title to the City on March 9, 2011, and DOF approved it as a housing asset of the Housing Successor on October 2, 2013. SANTA MONICA HOUSING SUCESSOR Page | 4 The property has been developed and completed on March 17, 2014, with 160 affordable apartments. 1751 Cloverfield Blvd October 3, 2003 October 2, 2018 The Agency transferred title to the City on March 9, 2011, and DOF approved it as a housing asset of the Housing Successor on October 2, 2013. The property was developed and completed on January 28, 2007 as a congregate housing and emergency shelter, providing 55 beds affordable to persons at or below very-low income. 2018 19th Street June 26, 2009 October 2, 2019 The Agency transferred title to the City on March 9, 2011, and DOF approved it as a housing asset of the Housing Successor on October 2, 2014. On May 12, 2015 City Council adopted Resolution 10878, declaring property as surplus property and to commence the process for inviting proposal for the sale of the property. The sales proceeds will be deposited in the LMIHAF. VIII. Description of Outstanding Obligations under Section 33413: This section describes the outstanding inclusionary and replacement housing obligations, if any, under Section 33413 that remained outstanding prior to dissolution of the former redevelopment agency as of February 1, 2012 along with the Housing Successor’s progress in meeting those prior obligations, if any, of the former redevelopment agency and how the Housing Successor’s plans to meet unmet obligations, if any. Replacement Housing: The former Redevelopment Agency had one replacement housing obligation that it transferred to the Housing Successor. The outstanding 520 Colorado Avenue replacement housing obligation includes the replacement of the 16 units which were removed. The replacement housing obligation was fulfilled with the construction of 32 new apartments as part of the new housing development at 520 Colorado Avenue, completed in October 21, 2015. SANTA MONICA HOUSING SUCESSOR Page | 5 Inclusionary/Production Housing: According to the Implementation Plan for the former redevelopment agency, no Section 33413(b) inclusionary/production housing obligations were transferred to the Housing Successor. The former redevelopment Agency exceeded its total affordable housing production obligation for the ten-year compliance period (fiscal year 2004-05 through fiscal year 2013-14) where 703 units were affordable to very low, low or moderate income households, of which 302 were affordable to very low income households. The former redevelopment agency’s Implementation Plans are posted on the City’s website at: http://www.smgov.net/Departments/HED/Housing_and_Redevelopment/RDA/Redevelop ment_Documents.aspx. IX. Income Test: This section provides the inf ormation required by Section 34176.1(a)(3)(B), or a description of expenditures by income restriction for a five year period, with the period beginning January 1, 2014 and whether the statutory thresholds have been met. However, reporting of the Income Test is not required until 2019. There is nothing to report at this time. X. Senior Housing Test: This section provides the percentage units of deed-restricted rental housing restricted to seniors and assisted individually or jointly by the Housing Successor, its former Redevelopment Agency, and its host jurisdiction within the previous ten years in relation to the aggregate number of units of deed-restricted rental housing assisted individually or jointly by the Housing Successor, its former Redevelopment Agency and its host jurisdiction within the same time period. For this Report, the ten-year period reviewed is July 1, 2005 through July 1, 2015. The following provides the Housing Successor’s Senior Housing Test- Reporting requirements for Implementation Plans pursuant to CRL Section 33490 (a)(2)(C)(iv): 68 Assisted Senior Rental Units 11.4% Senior Housing 597 Total Assisted Rental Units XI. Excess Surplus Test: This section provides the amount of Excess Surplus (unencumbered funds) in the LMIHAF, exceeding one million or the aggregate amount deposited in the fund over the preceding four fiscal years if any, and the length of time that the Housing Successor has had excess surplus, and the Housing Successor’s plan for eliminating the excess surplus. At the end of fiscal year 2014-2015 the LMIHAF had $2,527,363 in unencumbered funds. Per SB 341, unencumbered funds over one million are defined as “Excess Surplus”. The Housing Successor plans on encumbering these Excess Surplus funds within the three fiscal years (required time frame, per SB341) to encumber these funds.