HomeMy WebLinkAboutResolution 93-172 07/06/1993M1'
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Resolution No. 93-172_ N C.s.
~~f thf~ C;it>> ofi 1'~~t~~luma, Californi~~
RESOLUTION ADOPTING AN AMENDMENT TO THE HOUSING ELEMENT
OF THE PETALUMA GENERAL PLAN: PRESERVATION OF "AT-RISK"
ASSISTED UNITS
WHEREAS, an amendment to State Planning Law (Chapter 145, Statutes of 1989,
amended Section 65583 of the Government Code) mandates that Cities amend their
General Plan Housing Elements to include an analysis of certain assisted housing
complexes; and
WHEREAS, the City of Petaluma has completed its analysis and planned for the
preservation of those units, as defined by the State; and
WHEREAS, the California State Department of Housing and Community Development
has approved of the analysis as submitted;
NOW, THEREFORE, BE IT RESOLVED that the City Council of Petaluma hereby
adopts the amendment (Attached as Exhibit A to this resolution) to the Housing Element
of the General Plan.
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Under the power and authority conferred upon this Council by the Charter of said City.
REFERENCE: I hereby certify the foregoing Resolution was introduced and adopted by the Approved as to
meetin f °~
Council of the City of Petaluma at a (Regular) (~dCBtj ii~I~ibhi~ g
on the .....6 th ............. day of ...........sl U).~I--...........-..... .........., 19..E ~., by the ~ '~
following vote: ~----•-•-- • ---•-----•---------------------
City Attorney
AYES: Nelson, Barlas, Vice Mayor Read, Sobel, Shea, Hamilton, Mayor Hilligoss
NOES: None
ABSENT: None
ATTEST : ......................... ................. .. ...-.......-..-...-....-...
Ci Clerk
/~ ,
Mayor
Gbuncil Fila...ry.....i_ ..
CA 10-85 Res. No......... ~ n.- ~..'~.... N.C.S.
EXHIBIT A
HOUSING ELEMENT AMENDMENT
INTRODUCTION
A recent amendment to State plannin law ,(Chapter 145, Statutes of 1989; .amended
section 65583 of the Government Code mandates that Cities amend their General Plan
Housing Elements to include an analysis and program for preserving assisted housing
developments which provide housing for low income households. This report amends the
Petaluma General Plan Housing Element, adopted by the Petaluma City Council on March;
18, 1991 and found to be in compliance with State law by the Califorma State Department
of Housing and Community Development on Apri126, 1991.
Consistent with State requirements, this analysis will address aten-year period beginning
with 1991 and is to be updated, as part of the City's Housing. Element, every five years
pursuant to State law and includes the following sections:
1. An inventory and discussion of restricted low-income housingg projects in
Petaluma with the potential for conversion in the indicated timeframe;
2. An analysis of the costs of preserving or replacing these "at-risk" units;
3. Quantified objectives for the number of "at-risk" units to be preserved;
4. An analysis of the organizational and financial resources available for
preserving or replacing the units "at-risk."
5. Programs for preserving the "at-risk" units.
1. INVENTORY OF UNITS AT RISK OF LOSING USE RESTRICTION
Section 1 identifies all assisted housing units in the City of Petaluma that are at risk of
converting to non-low income status between July 1; 1991 and July 1, 2001 and evaluates
the possibility of conversion.
Proieet Information and Sources (Section 65583 (a~(8L(A~
According. to Section 65583 (a) (8) an inventory shall include all multi-family rental units
which are- assisted under any .number of Federal. Department of Housing and Urban
Development (HUD). State, local, and/or other programs, and which are:
1. Eligible to change. to non-low-income housing uses due to termination of
subsidy contract, mortgage prepayment, or expinng use restrictions; and
2. Eligible within the ten-year period following the statutory adoption "due
date" of the Housing element Amendment.
This inventory was compiled b~ reviewing City-assisted housing documents, information
from Sonoma County Community Development Commission, the Department of Housing
and Urban Development, the Califorma Department of Housing and Community
Development, and the "Inventory of Federally Subsidized Low-income Rental Units at
Risk of Conversion" (California Housing Partnership Corporation).
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See Pages 3 and 4 for a detailed inventory and location map of projects.
Discussion of the two at-risk projects
Park Lane Apartments is located at 109 Magnolia Avenue in Petaluma. The property
consists of 13 two-story apartment buildings, with a total of 90 dwelling units. Additionally,
on-site is a single-story laundry/recreation building. The mix of dwelling units includes:
16 studio units (474 sq. ft.), 40 one-bedroom units (694 sq. ft.), and 34 two-bedroom units
(811 sq. ft.).
The buildings were constructed in one phase in 1972 and 1973, under the Section 236
interest subsidy program, authorized by the Housing and Urban Development Act of 1968.
Both families and elders reside at Parklane; at this time occupancy is approximately two-
thirds elders.
The 236 (J) (1) program provided direct payments of subsidies to mortgage lenders and
provided mortgage insurance for certain sponsors for the construction of rental and
cooperative housing for low and moderate income tenants. The mortgage term normally
extended for forty years, however, owners have the option of prepaying the loans after
twenty years.
Potential for conversion:
Prepayment of Section 236 loans is regulated by the provisions of the Emergency Low-
Income Housing Preservation Act (Title II of the Housing and Community Development
Act of 1987, replaced by Title VI of 1990).
Under the provisions of the 1990 Low Income Housing Preservation and Resident
Homeownership Act (LIHPRHA), owners of prepayment eligible projects can choose to
retain project ownership in exchange for additional federal incentives or sell their
properties under a voluntary sale" program. Where owners choose to sell, tenants,
nonprofit, and governmental agencies are provided with an exclusive 12-month negotiating
penod. Prepayment and conversion of the housing to non-low income use can only occur if
there is no willing buyer to purchase a project. A Notice of Intent may be filed up to two
years prior to the scheduled prepayment date to indicate the owner's preliminary decision
regarding sale of property versus stay-in as low income with incentives. Within nine
months following the Notice of Intent, the owners must prepave a "Plan of Action" for
submittal to HUD. This plan must include: any proposed changes in mortgage or in the
regulatory agreements; a description of federal state and local incentives that are being
requested as dart of the effort to own and develop the property; and any proposed plans to
transfer the title of the property and/or sell it. '
LIHPRHA provides the owners of .eligible projects an opportunity to. receive additional
federal incentives for projects, enabling them to raise rents and refinance a portion of their
equity, while extending low-income use restrictions. for the remaining useful life of the
project. The useful life of a project refers to the expected physical-life of a building with
normal maintenance and repairs, as well as replacement of utilities. HUD establishes
standards and procedures for determining when the useful life of a building expires. The
difference between the tenants' portion of the rent (30% of household income) and market
rent is covered by a Section 8 contract for very low and low income tenants.
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INVENTOI~~'
L®W INC®1VIE 1ZENTAL UNITS
SUBJECT T® TEIZIVIINATIO'N ®F FEI)EI~L 1VIOIZTGAGE
EY THE YEAR 2001
Project Name Owner Name FHA;Project # Loan Amount ~ Section 8 Contract # Total Units Earliest Date of
Street 'Street Section of Act Loan Term, Int. Rate . Program/Finance Type Total Elderly SubsidyTermInation °'
Locality `Locality . Owner/Tenant Type Processing Status Section 8 Type __._______ ._:...~.._~~_
Zip Code Zip Code Rent Sup Flex TPA Final• Endorsement Date HAP Agree/Exec Date FHA Section 8 FHA Section 8
Park Lane Apartments
109 Magnolia Avenue
Petaluma, CA
94952.
Moonbay Associates 12144209
P,Q. Box 3047' 236(J)(1)
Sanfa Clara, CA LD FAM
95055
$1,237,00(1
Final Endrs Current
090CT73
90 0
0 0
090CT93
(+20)
r ~,
~:
~.
LOW INC®IVIE RENTAL UNITS
SUBJECT T® TERMINATION ®~''1lZULTI-~AIVIILY I-I~USING 1ZEVENiJE
BONT) RE~UI.A,T~I~Y~ AGREEMENT
~Y THE YEAR 2001 .
Valley Orchard
Retirement Apts.
2100 E. Washington
Petaluma, CA
Washington
Retirement Co.
2107 Union St.
San Francisco, CA-
Multi-Family
Rental Housing
Revenue Bonds,
..1983 Issue A
o1NOV93
$4,100,000
Regulatory 20
Agreement
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As of November 1993, twenty years after the initial. HUD loan, the owners of Parklane
filed their required Notice of Intent to :Sell. The City was aware that this sale was an
option and was fully prepared to swing into action. The City Council entered into a
"partnership for preservation" with Burbank Housing and Development Corporation, a
local nonprofit .housing provider, developed a .strategic plan, and allocated funds to
implement the plan.
Valley ®rchard is a 102-unit senior apartment complex near the southeast corner of Ely
Boulevard South and East Washington Street. The property consists of 82 studio units, 15
one-bedroom units, Stwo-bedroom units, recreation facilities, dining and an administration
area. The facility is a community complex for seniors, however it is not a convalescent
hospital.
In 1983, the City issued $4,100,000 in Multi-Family Housing Revenue Bonds to construct
the retirement apartments. Under the use restrictions of that bond issue, no less than 20%
of the total number of units were to be "set-aside" for rental to low or moderate income
tenants. A regulatory. agreement was included as part of the financing documents ensuring
compliance of that requirement for ten years.
The implementation and administration of the Low and Moderate Income program at
Valley Orchard has been done by the owner, Washington Retirement Apartments and the
complex's property management company. Quarterly compliance reports have been
routinely submitted to the City's program administrator. A compliance audit was
completed by an independent company in January of 1990. The Program Administrator
furnishes the owner with the annually updated median income schedule, produced by U.S.
Department of Housing and Urban Development.
Potential for conversion:
This project is completely different. from Parklane Apartments in terms of "conversion."
The regulatory agreement which outlines the provisions under which the 20 set-aside units
are rented to low and moderate income tenants is a function of the, bond issue only. There
are no external forces (e.g. federal law) or funding sources to modify the terms of the
agreement or bind the property owner at the termination of the agreement.
.Although the City has not been officially notified by the owner of Valley Orchard, it is .our
current assumption that the ten-year obligation to provide low and moderate cost rentals
will. terminate. at the end of the life of the bonds in November 1993. If the owner informs
us of plans to re=issue bonds or restructure the debt in any way which involved the City of
Petaluma, we will use that opportunity to renegotiate the extension of the set-aside below-
market-rate units for the longest time possible.
The City has entered into a verbal agreement with .Petaluma Ecumenical Project (PEP),. a
local nonprofit senior housing provider. A tentative plan of action has been discussed;
funds have been allocated for potential replacement units.
2. COST OF PRESERVING OR REPLACING AT-RISK UNITS
Section 65583 (a) (8) (B) requires that the estimated: cost of producing new rental housing
comparable in size and rent levels to replace the units which could convert and the cost of
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preserving all of the developments. at risk of converting, must be included in the Housing
Element Amendment.
Parklane Apartments., According to the San: Francisco Regional Office of HUD, a 1993
appraisal of the Parklane Apartment complex has been completed, and has been agreed-
upon by both the owner, Moonbay Associates, and HUD. HUD has not released that
figure to the City.
Replacement cost (new construction of like units): The cost of replacing the.. 90 apartment
umts is readily available. The City of Petaluma is involved in a development partnership
with Eden Housing, Inc. to develop a 74-unit apartment complex in the City. Eden has
provided the City with their draft. development cost pro-forma to enable us to provide
specific cost information, which would be directly comparable for Parklane replacement.
In summary, the -cost per unit in 1993 dollars is approximately $.118,000/unit. To replace a
90-unit complex, the total development cost, including site acquisition, would be
$10,620,000.00. A copy of a draft pro-forma is included as Appendix One.
Valley Orchard. The cost/value of the entire Valley Orchard Retirement Complex is
neither known nor relevant, since replacement of the market-rate congregate care facility. is
not appropriate or financially realistic.. The complex is not for sale. The estimated cost of
provision of re lacement housing- units to equal the 20 set-aside units can be looked at in
two ways: ~1) Market rents in Petaluma in comparison to what Valley Orchard
renters are currently paying; and (2) the estimated, cost of constructing twenty assisted
senior apartments to replace that housing stock.
(1) In the case of Valley Orchard, the comparison. of market rate rents to those .rents
charged for the set-aside units is an important feature, when considering the possible
relocation of tenants.
Market Rents (no services)* V.O."B.M.R."Rents (with services)**
$620.00
$675.00
* Senior rentals only
* * Valley Orchard Below-Market-Rate with meals and other services.
When the regulatory agreement .was implemented, the set-aside requirement was that
"Low or Moderate Income, tenants shall occupy at least 20% of all completed and occupied
units in the Apartment Building..." (Apartment Building Development and Administration,
Agreement, April 1, 1983.). There was no specific provision for a certain percentage of
each income category.. When an city-sponsored audit was completed on the low-mod
program at Valley Orchard, the rent schedule showed that the tenants being served were
moderate income residents, however still within compliance of the agreement. Therefore
when the duration of the set-.asides has reached its end, those residents could move into
market rate housing with no significant rent increase.
The City has made arran8ements with PEP to consider the re-location of ariy eligible
Valley Orchard residents into their newest complex, Vallejo Street Senior Apartments.
(PEP's rent structures are for low and very low income seniors.)
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Since the Housing Element is required. to evaluate replacement costs, the following up-to-
dafie. development costs have been ascertained from Petaluma's leading senior housing
developer, PEP.. The estimated numbers are based on 1993 land and construction costs;
"other" costs include local permits and fees, architecture and. engineer fees, construction
and mortgage loan fees, construction. period interest, appraisal, legal, title, and escrow,
rent-up and marketing, and 10% developer fee. .
Estimated cost of reglacing20 elder units
Unit Type Size Land cost/unit Const.Cost/unit Other/unit Total
Studio 450 $10,000
1 Bdrm. 650 $12,000
$40,000 $25,000 $75,000
3~ QUFII~D OBTE~TI:~ES k'Ol~ ~~~ 12ISI~~ FITS
The current Housing Element established the maximum number of housing units that
could be constructed, rehabilitated, and conserved during the Housing Element period. In
response to State Law regarding this amendment, Figure 9.14 of the existing element has
been modified to reflect the conservation (either by preservation or replacement) of the
110 total at-risk units.
Modified Figure 9.14
1°21 1992 1~ 1 °~~4 1 °O Trial
Maximum Market Aate
Units Allowable Under 500 500 500 500 540 2,500
Growth Management
System
Average Building
Perrriits Issued/Year 350 350 350 350 354 1,750
(Private Market)
Below-Market Rate
Units in Pipeline 61 28 122 78 289
(Nonprofit Activity)
Rehabbed Units 35 5 5 5 5 55
Conserved Units 2 2 2 2 2 10
+90 +20 +110
$45,000 $28,000 ~ $85,000
Figure 9-14: Quantified Objecnves
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4. ORGANIZATION AND .FINANCIAI..ItESOLTRCES
Section 65583 (a) (8) (C) requires that the Housing Element Amendment identify public
and private nonprofit entities with the organizational and financial resources to acquire
and manage assisted housing developments. The. City of Petaluma is fortunate to have a
number of highly-qualified nonprofit housing providers, with whom we work on a regular
basis. Each has its own area of expertise and we have drawn upon that expertise to assist
us in this preservation endeavor.
Nonprofit agencies with organizational resources to assist with at-risk projects:
As stated previously, the City of Petaluma has a written contract with BHDC to assist us
with the preservation issues at Parklane and a verbal agreement with PEP to assist with the
replacement of the Valley Orchard. set-aside units. Both nonprofit organizations are
community-based 501(C)3 .agencies, with a long and successful track record of providing
affordable housing in the City of Petaluma. A list of their, housing complexes can be
provided upon request.
Financial resources available for use in preservation or replacement:
There are a variety of existing and potential funding sources available for potential
acquisition, subsidy, or replacement of umts at risk for use by a public or nonprofit entity.
For Parklane Apartments only, under LIHPRHA HUD will provide the owners of
Parklane Apartments with incentives which enable .them to raise rents and refinance a
portion of their equity, while extending low-income use restrictions for the remaining useful
life of the project, As stated previously, the difference between .the tenant's portion of the
rent and market rent will. be covered by Section 8 contracts. Should a nonprofit, such as
Burbank Housing Development Corporation, take ownership of the project, the following
HUD incentives could be offered:
0 Mortgage insurance for acquisition loaris for 95% of equity.
0 Project-based Section 8 contracts, with HUD-subsidized rents set at levels
high enough to provide an, return to owners who retain the project or. to
cover debt service on an acquisition loan for new purchasers.
0 Grants to nonprofit purchasers that would fill any gap between fair market
rent or local market rent (whichever is higher) and allowable rents.
For Valley ®rchard Apartments only a re-issuance of Multi-family Housing Revenue
Bonds is a possible source of refinancing. Should the current owners of Valley Orchard
request the City's assistance in issuing new bonds to refinance the project, the City would
be prepared to do so, in return for along-term extension on the regulatory agreement,
requiring low and moderate cost.units.
For both projects, Redevelopment Set-Aside and Housing Fund: The redevelopment
tax increment 20% low-mod set-aside and developers' contribution into the In-Lieu
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Housing Fund are two of the major sources of funding for ,housing in Petaluma.. Between
1987 and 1993, the City has expended over $10,U00,000 on site. acquisition, predeyelopment
and development expenses, a family homeless shelter,. rental assistance programs, and a
second mortgage program.
In FY 1992-93, the City Council allocated $25,000.00 to Burbank .Housing to utilize their
expertise to preserve Parklane Apartments. A portion. of that allocation was also used to
get an up-to-date valid City building inspection on all of the apartment buildings.
In FY's 1991-92 and 1992-93, Council allocated close to $600,000 to PEP for their Vallejo
Street Senior Apartment Complex, an 84-unit senior complex. PEP will work with the
residents who may be exiting Valley Orchards to be placed on the move-in list for this
complex to be completed in August 1994.
Community Development Block Grant funds are available to Petaluma and could be used
for preservation of at-risk units, if needed.
5. PROGRAMS FOR PRESERVING "AT-RISK"'UNITS
Section 65583 (c)(6) ,states. that the Housing Element Amendment should include, or
reference, programs in the .Housing Element to preserve the low income use of at-risk
projects listed in the ten-year inventory.
Objectives, Policies, and Programs are outlined in Section 9.8 of the Housing Element.
Under Housing Variety, Objective (b) calls for the "preservation and increase of the
existing supply of rental apartments". , Each program. in the Housing Element indicates:
Responsible Bodies, Timing, and Progress.
Program (26), reserved for future use, shall now read:
Program (26) Attempt to preserve affordable housing in the City that is at risk of
converting to market rate by monitoring the .affordability status of projects and
identify possible solutions from the range of realistic :options.
Responsible Bodies: Housing staff, designated nonprofit agencies, HUD (when
federally-funded. projects)
1~ming' Ongoing
Progress: The City and community based nonprofit agencies have entered into
formal and/or informal. agreements to preserve or replace units at risk.
Under this. Housing .Element .Program, certain actions have been completed by either City
staff or nonprofits, .some are currently in progress, some will be implemented in the future.
Completed: Identified the projects at-risk; researched range of options and agencies
involved; identified nonprofit agencies with e~cpertise to assist m preservation or
replacement; identified funding sources; allocated funds. At Parklane, arranged for fast-
track building inspection at Parklane; coordinated plans with HUD; met with tenants and
property owners; distributed two informational newsletters to tenants.
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In progress: Keeping track of progress of all pertinent parties and agencies in the
proposed sale/conversion; communlcation with owners of projects to keep them .informed
of "the City's preference in dealing with community and housing expertise; ongoing
communication with tenants, as appropriate.
Future implementation: Any legal and fiscally responsible activity necessary to preserve .
and/or replace at-risk units.
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