HomeMy WebLinkAbout1999-01-11 City Council (10)TO:
City of Palo Alto
CitY Manager’s1
HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: PLANNING AND
COMMUNITY ENVIRONMENT
AGENDA: JANUARY 11, 1999 CMR: 113:99
SUBJECT:BUDGET AMENDMENT ORDINANCE TO PROVIDE FUNDS FOR
PRESERVATION OF A BELOW MARKET RATE UNIT AT 922
BAUTISTA COURT
RECOMMENDATION
Staff recommends that the Council adopt the attached Budget Amendment Ordinance to
appropriate $149,500 in Residential Housing In-Lieu Funds for costs related to preserve the
unit at 922 Bautista Court as Below Market Rate (BMR) housing.
BACKGROUND
The unit at 922 Bautista Court is a three-bedroom, two-bath, zero-lot-line unit that was .
constructed, along with the adjoining 924 Bautista Court, in 1987 by the Palo Alto Housing
Corporation (PAHC). The unit was sold for $100,000 in July 1987, with BMR program deed
restrictions. The City restrictions, recorded with the property’s grant deed, limited the resale
price, but did-not contain specific language requiring City consent to refinancing or
prohibiting refinancing in excess of the BMR value. This language has been included in all
deed restrictions since 1993. In October 1994, the City and PAHC became aware that the
owners had over-f’manced the property by about $75,000 in excess of its $110,000 value
under the deed restrictions, by obtaining a line of credit loan secured by the property. By
April 1995, the line of credit loan was in default. Complicated legal and title issues extended
the foreclosure process and prevented a legal settlement until now.
DISCUSSION
A legal settlement has recently been reached and approved by Council that, ultimately, will
return the property to the BMR program. Under the terms of the settlement, transfer Of
ownership of the unit must occur by January 15, 1999. Due to the shortage of time, the City
will take title on an interim basis until the unit can be resold through the BMR program. The
settlement includes the payment by the City of $125,000 to the current owners of the
property in return for clear title to the unit. The $24,500 in additional funds requested are
CMR: 113:98 Page 1 of 3
necessary to pay real estate taxes, closing costs and repairs. At this time, the exact amount
of repair and fix-up costs are not known, but the unit will be inspected and costs estimated
as soon as possible. Staff will be working with PAHC to sell the unit to a qualified buyer.
Under the City’s BMR housing price guidelines, the current average price for a new three-
bedroom BMR unit is $198,950, based on 1998 income levels.
RESOURCE IMPACT
In November, 1996 (CMR:449:96), the City Council adopted a Budget Amendment
Ordinance for up to $130,000 to fund the purchase of this unit. At that time, the Residential
Fund did not have sufficient funds for the entire amount, so a $100,000 loan from the
Commercial In-Lieu Fund was authorized.
Due to the long delay in resolving legal issues regarding this property, the original $130,000
budget appropriation expired with the 1996-97 Fiscal Year. The current action would
reinstate the budget appropriation for this project and add $19,500 for a total of $149,500.
The increase is necessary due to the terms of the settlement agreement. The Residential
Housing In-Lieu Fund has balance of approximately $189,000 including the $100,000 loan
from the Commercial Fund. The $100,000 loan will be repaid at the time the BMR unit is
sold.
The City Attorney’s Office and PAHC have incurred legal expenses related to litigating this
case. If sufficientfunding is not available in the City Attorney’s Office outside legal service
budget to cover these costs, staffwill return with a Budget Amendment Ordinance.
POLICY IMPLICATIONS
This action does not represent any change to existing City policies.
ENVIRONMENTAL ASSESSMENT
The provision of City funds to preserve a single-family ownership unit in an existing City
affordable housing is ’categorically exempt under Section 15326 of the California
Environmental Quality Act (CEQA).
ATTACHMENTS
Budget Amendment Ordinance tO Appropriate Funds for the Preservation of 922 Bautista
Court as a Below Market Rate Unit
PREPARED BY: Catherine Siegel, Housing Coordinator
CMR: 113:98 Page 2 of 3
DEPARTMENT HEAD REVIEW:
O. ~’-DVTARD GAWF k)
Director of Planning and Community Environment
CITY MANAGER APPROVAL:
FLEMING
Manager
CC:Palo Alto Housing Corporation
CMR: 113:98 Page 3 of 3
ORDINANCE NO.
ORDINANCE OF THE COUNCIL OF THE CITY OF PALO ALTO AMENDING
THE BUDGET FOR THE FISCAL YEAR 1998-99 TO PROVIDE AN
ADDITIONAL APPROPRIATION OF $149,500 FOR PRESERVATION OF A
BELOW MARKET RATE UNIT AT 922 BAUTISTA COURT
WHEREAS, pursuant to the provisions of Section 12 of Article
III of the Charter of the City of Palo Alto, the Council on June
22, 1998 did adopt a budget for fiscal year 1998-99; and
WHEREAS, the Below Market Rate (BMR) housing unit at 922
Bautista Court has been in danger of foreclosure and conversion
to a full market cost unit; and
WHEREAS, Budget Amendment Ordinance No. 4386 was adopted by
the City Council to appropriate funds to purchase and preserve
this BMR unit on November 4, 1996; and
WHEREAS, due to the time required to resolve various legal
issues regarding this property, the acquisition did not occur
during the 1996-97 fiscal year and the budget appropriation
lapsed; and
WHEREAS, negotiations to purchase the BMR unit have
concluded and the City can preserve the unit if the purchase is
made by January 15, 1999; and
WHEREAS, sufficient funds are available within the
Residential Housing-In-Lieu Fund; and
WHEREAS, the additional appropriation of funds requested
from the Housing-In-Lieu Fund is for a one-time cost and no
future year General fund ongoing costs are anticipated; and
WHEREAS, City Council authorization is needed to amend the
1998-99 budget as hereinafter set forth.
NOW, THEREFORE, THE Council of the City of Palo Alto does
ordain as follows:
SECTION i. The sum of One Hundred Forty Nine Thousand Five
Hundred Dollars ($149,500) is hereby appropriated to nonsalary
expenses in the Housing In Lieu Residential Fund.
SECTION 2. This transaction will reduce the Housing-In-Lieu
Residential Fund reserve from $189,412 to $39,912.
SECTION 3. As specified in Section 2.28.080 (a) of the Palo
Alto Municipal Code, a two-thirds vote of the City Council is
required to adopt this ordinance.
SECTION 4. The Council of the city of Palo Alto hereby
finds that this project is exempt from the provisions of the
California Environmental Quality Act, and therefore, no
environmental impact assessment is necessary.
SECTION 5. As provided in Section 2.04.350 of the Palo Alto
Municipal Code, this ordinance shall become effective upon
adoption.
INTRODUCED AND PASSED:
AYES:
NOES:
ABSTENTIONS:
ABSENT:
ATTEST:APPROVED:
Interim City Clerk Mayor
APPROVED AS-TO FORM:City Manager
Senior Asst. City Attorney Director of Administrative
S@rvices