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HomeMy WebLinkAbout2000-10-23 City Council (12)City of Palo Alto C ty Manager’s Report TO:HONORABLE CITY COUNCIL FROM:CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: SUBJECT: OCTOBER 23, 2000 CMR:393:00 APPROVAL OF CONTRIBUTION TO THE HOUSING TRUST OF SANTA CLARA COUNTY IN THE AMOUNT OF $500,000 FROM THE RESIDENTIAL HOUSING IN-LIEU FUND REPORT IN BRIEF The Housing Trust of Santa Clara County was recently established to provide additional financial resources to address the County’s affordable housing deficit. The Housing Trust will provide funding for rental housing development, housing for homeless persons and assistance for first-time homebuyers. The Housing Trust is organized as a private, non- profit entity but its governing board includes representation from the County, the cities, business, the housing industry and non-profit providers of housing and homeless services. The Housing Trust has initiated a capital campaign to raise $20 million in initial funding. To date, $12.8 million has been pledged with $5 million from public jurisdictions and the rest from major employers and private foundations. Palo Alto has been asked to contribute funds as part of an effort to reach the $20 million goal by the end of this year. Staff recommends that the City contribute $500,000 to the Housing Trust from the City’s Residential Housing In-Lieu Fund with the provision that the City’s funds be used exclusively for qualifying affordable housing projects located within.the City of Palo Alto. CMR:393:00 Page 1 of 6 RECOMMENDATION Staffrecommends that the City Council: 1. Pledge a contribution to the Housing Trust of Santa Clara County in the amount of $500,000 to be funded from the Residential Housing In-Lieu Fund; 2. Specify that the City’s contribution shall be used exclusively for qualifying affordable housing projects located within the City of Palo Alto; 3. Provide staff direction on any specific provisions or requirements which should be ’ included in the agreement with the Housing Trust; 4. Authorize the City Manager to enter into a Memorandum of Understanding with the Housing Trust. BACKGROUND The concept of a countywide trust fund for affordable housing was developed and initially promoted by the public/private, countywide Collaborative on Housing and Homelessness. With support and funding from the County Board of Supervisors, a report by Hausrath Economics Group titled "Creating a Housing Trust Fund for Santa Clara County" was prepared and presented for public review in 1997. The report analyzed housing needs, alternative revenue sources for a permanent, ongoing trust fund and governance and administrative issues. The Hausrath report was accepted by the County Board of Supervisors in May 1997; County staff, working with the Silicon Valley Manufacturers Group and the Collaborative, began the process of creating and funding the trust fund. Originally, it was hoped that a permanent, renewable source or sources of revenue would be found for the trust fund. However, the revenue sources identified in the Hausrath report were either too problematic in terms of the required political or legislative approvals or were limited in the magnitude of the funds that could be generated. Furthermore, a professional public opinion survey conducted to gauge voter willingness to support higher taxes, bonds or other fees for affordable housing found that the public was unlikely to approve such a ballot measure. An alternative strategy was then devised in which the trust fund would be created and initially funded with voluntary donations from local government and major Silicon Valley businesses. After some initial success had been demonstrated, consideration would then be given to permanent revenue sources of funding. A $20 million goal was set and the campaign started with a $2 million commitment from the County which was shortly followed by a pledge from the Silicon Valley Manufacturers Group to raise $10 to $15 million in donations from local employers. As of October 2000, a total of $12.8 million has been committed to the trust fund with $7.8 million in commitments from private sources, mostly from local "high-tech" employers, and $5 million from public jurisdictions. To date, the following cities have contributed to the Housing Trust: San Jose, Santa Clara, Sunnyvale, Milpitas and Campbell. The organizational structure of the trust fund has been established. Named the Housing Trust of Santa Clara County, the fund has been organized as an independent, private non- profit entity governed by a board of directors that reflects the original private / public partnership philosophy. The fund’s governing body includes representation from County CMR:393:00 Page 2 of 6 government, cities (including Council Member Dena Mossar representing the Santa Clara County Cities Association), major employers, housing non-profits, homeless service agencies, building and real estate trade organizations and private foundations. The Community Foundation of Silicon Valley acts as the fiscal agent for the Housing Trust. Administration of the lending operations has been contracted to a non-profit community development organization that has experience operating housing loan programs. The Housing Trust will provide funds for three target areas of housing need: Homeless Housing .Affordable Rental Housing .First-Time Home Buyers Assistance The initial $20 million will be divided evenly between these three target areas. In general, the emphasis will be on the provision of loans. However, up to 50 percent of the homeless housing assistance component will be in the form of grants. Three committees composed of experts in each housing area met during 1999 to develop criteria for loan amounts, repayment terms, household eligibility and other program standards. The Housing Trust is ready to begin making loans as soon as the capital campaign goal is met. DISCUSSION The creation and funding of a countywide housing trust fund represents an innovative and significant effort to address the area’s affordable housing crisis. Nationwide, there are over 150 housing trusts, including three operating in California under similar situations with the participation of multiple jurisdictions (Alameda, Sacramento and Napa). The Housing Trust of Santa Clara County is unique compared to other housing trusts in the level of participation of the private sector including business, foundations and the housing industry. The substantial financial commitments from the private sector are also a unique aspect of the initiative. Local Housing Trust Benefits: The principal benefits of.a local housing trust are to generate increased funding for housing development and assistance and to make it easier for housing developers to attract other development funds from State and Federal sources for their projects. Most affordable housing projects have at least three, and often five or more, sources of funding. The increasing complexity of affordable housing financing is an impediment to higher levels of housing production. Local housing funds that are made available at different stages of the development process and that are flexible in response to local market conditions can be very effective in stimulating housing production. Often housing assistance programs designed for average conditions by the State or Federal government do not work well in Silicon Valley. Locally controlled housing development funds can be tailored to meet local needs and priorities and to work within local income and price levels. Advocates for the Housing Trust estimate that up to 5,000 households could be served with the initial $20 million investment. By successfully generating new funds for housing within the County, the CMR:393:00 Page 3 of 6 Housing Trust will attract and leverage additional housing funding from outside sources which would not otherwise have been available. Palo Alto’s Contribution: Staff recommends that the City contribute $500,000 to the Housing Trust. This contribution would be required to be invested in a manner consistent with the City’s investment policy and spent in compliance with the terms of the City’s Below Market Rate Program. In addition, the City can place reasonable restrictions on the use of its contribution. By restricting the City’s contribution to projects that are located within Palo Alto, the City is ensuring that at least our original contribution will be available to local housing developers. Because about sixty percent of the Housing Trust’s contributions come from the private sector, and some of the public sector funds do not have locational restrictions, there should be funds potentially available for Palo Alto projects in addition to the City’s $500,000 contribution. There are two Palo Alto projects currently in the predevelopment stage that would be eligible for funding from the Housing Trust. These projects are the .family housing development on the South of Forest Area (SOFA) Plan site and the Opportunity Center project for homeless services and housing. The Housing Trust has developed a model agreement for local government contributions to the Trust. Council could direct staff to negotiate with the Housing Trust to modify the model agreement to specify the terms for the City of Palo Alto’s. contribution. While the City can expect to place reasonable restrictions on the use of its contribution, the pledge should be made with the understanding that the Housing Trust will control the funds and will make the decisions on how the funds are used. Examples of issues which could be negotiated are: 1) Should the City pay its contribution at the time of approval of the agreement, and thus lose the interest earnings on our contribution, or should the City retain its funds until there is a qualified Palo Alto project ready to be funded? 2) Is the annual one percent administrative fee charged by the Housing Trust’s fiscal agent acceptable to the City? 3) Should the City’s funds be restricted to use for rental housing or housing for homeless persons? 4) Should the City’s funds be provided only in the form of loans to developers? The model agreement provides that when Housing Trust loans are repaid, the repayment goes back to the Housing Trust for future loans, rather that back to the contributing agency. ALTERNATIVES TO STAFF RECOMMENDATION The alternatives available to .the City Council include: 1) 2) 3) Designate a larger, or smaller, amount of funds for the County Housing Trust; or Designate a different source of funds for the City’s pledge; or Decide not to make any pledge of City funds. CMR:393:00 Page 4 of 6 The $500,000 pledge recommended by staff is consistent with the highest pledges of the mid-sized cities (Sunnyvale and Milpitas have each pledged $500,000) and is reasonable given the housing funds available presently to Palo Alto. However, a lower pledge (between $250,000 and $500,000) could be justified based on the $250,000 pledged by Campbell and Santa Clara and also proposed by Los Gatos. The Commercial Fund could be considered as the source for the City’s contribution. However, the current balance of that Fund is approximately $820,000 compared to the more than $1.7 million available in the Residential Fund. Furthermore, the Commercial Fund is composed solely of housing mitigation fees paid by developers of commercial projects and its use is restricted by Council policy to the production of new housing units. These fees are also subject to specific reporting requirements under State law and must be expended within five years of receipt by the City. Staff believes that the use of the Residential Fund for the City’s contribution is preferable due to the greater flexibility in the use of the funds and the higher fund balance. Another option is for the City to use the General Fund as the source of the housing trust fund contribution. This approach has been used by Santa Clara County and the City of San Jose. RESOURCE IMPACT A contribution of $500,000 will reduce the Residential Housing In-Lieu Fund from its current balance of approximately $1.7 million to $1.2 million. However, about $375,000 in fee revenue is expected to be received by the City during the current fiscal year from approved residential projects. This revenue will partially replenish the funds removed from the Residential Housing In-Lieu Fund. The current balance of the Commercial Housing In- Lieu Fund is about $820,000 which is available for new housing development. It is possible that a significant Palo Alto pledge to the Housing Trust will generate further donations from local businesses, thus increasing the total pool of funding resources available for affordable housing countywide. POLICY IMPLICATIONS The recommendation in this staff report is consistent with Palo Alto Comprehensive Plan policies that encourage housing opportunities and housing diversity. Comprehensive Plan policies support addressing housing needs on a regional basis and working with outside agencies and other jurisdictions to develop and implement housing programs. TIMELINE If the Council approves the motion, the City Manager will be authorized to enter into a Memorandum of Understanding (MOU with the Housing Trust. The .MOU would be modeled on the form used by the other cities that have made pledges. If the City’s contribution is made following the terms of these other agreements, the funds pledged by the City would be paid to the Housing Trust within 30 days of the execution of the formal agreement. CMR:393:00 Page 5 of 6 ENVIRONMENTAL REVIEW This action is not subject to the California Environmental Quality Act. ATTACHMENTS A.Current Donor List for Housing Trust of Santa Clara County, Inc. B.Sample Agreemem Between the Housing Trust and the City of Sunnyvale PREPARED BY: Catherine Siegel, Housing Coordinator DEPARTMENT HEAD REVIEW: CITY MANAGER APPROVAL: G. EDWARD GAWF~ Director of Planning and Community Environment EMILY Assistant to the City Manager CC:Housing Trust of Santa Clara County CMR:393:00 Page 6 of 6 FROM : IAYSOCKI ~ ASSOCIATES FAX NO. : 488 984-3533 Oct, 05 2000 12:21PM P2 Housing Trust of Santa Clara County, Inc. Investing in our Community wlth’~sion, Compassion and Innovation LIST. PRIVATESECTOR EUBLIC SECTOR Adobe Applied Materials Ciseo Systems Intel Corporation. Hewlett-Paekard Knight Ridder (SJ Mercury) Valley Foundation Rivermark Developers Kaufman & Broad Nortel Networks. Solectron Mid-Peninsula Bank DMX Stratex Networks Santa Clara County Assoeiatlon of Realtors Califomia Association Of Realtors EOnline Aspect .Technologies Santa Clara County, Farm Bureau MCMS NextLink Silicon YMley Manufacturing Group $1,000,000 $1,000,000 $1,ooo,ooo $1,000,000 $1,000,000 $I,000,000 500,000 400,00o 200,000 200,000 200,000 100,000 lOO,0OO $ 50,000 $ 25,000 $ 10,000 $ 10,000 $ 10,000 $ 5,000 $ 2,500 Santa Clara County San Jose Sunnyvale Milpitas Campbell Santa Clara Subtotal - Private:$ 7,814,300 Subtotal - Public: TOTAL-TO.DATE: 12, 1 " Attachment A $2,500,000 $1,000,000 $ 500,000 $ 500,000 $ 250,000 $5,0oo,ooo A!o tO/MOO 11 Attachment BAGREEMENT BETWEEN CITY OF SUNNYVALE AND COMMUNITY FOUNDATION SILICON VALLEY REGARDING A CONTRIBUTION TO THE SANTA CLARA COUNTY HOUSING TRUST FUND ENDOWMENT THIS AGREEMENT is made and entered into as of October 2, 2000, by and between THE CITY OF SUNNYVALE (City) and COMMUNITY FOUNDATION SILICON VALLEY ("Foundation"), a California nonprofit corporation. RECITALS The Housing Trust Fund of Santa Clara County (HTF) Endowment Fund ("Endowment Fund"), an investment pool fund in which private corporations and public agencies participate, has been created by the Foundation for the purpose of establishing a revolving loan fund and grant-making program to address the issue of affordable, available housing in Santa Clara County. On June 20, 2000 the City Council of the City of Sunnyvale approved and adopted its budget for fiscal year 2000-2001. The approved budget provides for $500,000 in Housing Mitigation Funds to be contributed to the Housing Trust Fund, herein known as the Housing Trust Fund of Santa Clara County (HTF) Endowment Fund. Co The City’s Housing Mitigation Policy requires that the funds be used to implement those policies contained in the Housing and Community Revitalization Sub-Element of the General Plan for providing assistance in expanding, preserving, or improving the supply of low and moderate housing in the City. Do The City desires to increase, improve, or preserve affordable housing for persons and families of low and moderate income in the City of Sunnyvale, by participating in the Endowment Fund as specified in this Agreement. The purpose of this Agreement is to set forth the mutual agreement of the City and the Foundation regarding the use of the City’s Housing Mitigation Funds through the Endowment Fund. In view of the above, the parties agree as follows: Page 1 of 6 SECTION 1 AUTHORITY AND STATUS OF FOUNDATION Foundation represents and warrants that the information contained in this Agreement is true and accurate to the best of its knowledge, and that it is a duly organized, validly existing nonprofit corporation in good standing under the laws of its place of incorporation; that its signatory to this Agreement is authorized by resolution, bylaws, or constitution of the nonprofit corporation, currently, in full force and effect, to execute this Agreement on Foundation’s behalf. SECTION 2 DEPOSIT OF CITY’S HOUSING MITIGATION FUNDS INTO ENDOWMENT FOUNDATION City agrees to deposit the sum of $500,000 into the Endowment Fund within 30 days after the mutual execution and delivery of this Agreement. SECTION 3 USE OF CITY’S HOUSING MITIGATION FUNDS BY ENDOWMENT 3.1 Foundation agrees that no fees will be charged to City’s Housing Mitigation Funds on deposit in the Endowment Fund for administrative or overhead costs, including but not limited to fundraising expenses. The sole administrative expenses which may be charged to City’s Housing Mitigation Funds on deposit in the Endowment Fund shall be as set forth in Section 6. 3.2 The Foundation shall serve as the Endowment Fund’s fiscal agent. Subject to this Section 3.2, the City’s Housing Mitigation Funds may be disbursed either as loan or grant funds. The initial disbursement of the City’s Housing Mitigation Funds from the Endowment Fund shall be used exclusively for one or more projects that meet all of the following criteria: 3.2.1 Any such project must increase, improve or preserve affordable housing in the City of Sunnyvale. 3.2.2 Such housing must be affordable to persons and families of low or very low income households as those terms are defined by the Department of Housing and Urban Development as pertains to the San Jose Metropolitan Statistical Area. 3.2.3 The Foundation shall use the City’s Housing Mitigation Funds to increase, improve or preserve affordable housing for homeless individuals and families, affordable rental housing and/or provide first-time homebuyers assistance Page 2 of 6 3.2.4 3.2.5 3.2.6 3.2.7 programs for persons and families of low or very low income households, by methods of providing financial assistance that include, but are not limited to, the methods set forth in California Health and Safety Code Section 33334.2 (e). Any new or substantially rehabilitated housing that is developed, financed or assisted, in whole or in part, with the City’s Housing Mitigation Funds shall remain available at affordable housing costs to persons and families of low or very low income households, as the case may be, for the longest feasible time, but not less than (a) thirty (30) years for rental units, or (b) thirty(30) years for owner-occupied units. The Foundation shall require the recording in the office of the County Recorder of covenants or restrictions implementing this Section 3.2.4 for each parcel or unit of real property subject to this Section 3.2.4, which covenants or restrictions shall run with the land and shall be enforceable against the original owner and successors in interest, by the City or the Foundation. There shall be no discrimination against or segregation of any person, or group of persons, on account of race, color, religion, national origin, ancestry, gender, marital status, sexual preference, or handicap status in the sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of any such project, or any part thereof, nor shall any recipient of the City’s Housing Mitigation Funds, or any person claiming under or through such person, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number use or occupancy of tenants, lessees, subtenants, sublessees, or vendees of any such project. The restrictions of this Section 3.2 shall apply only to the initial use of the City’s Housing Mitigation Funds by the Foundation. After the initial, use of the City’s Housing Mitigation Funds by the Foundation, reinvestment of funds that are repaid to or otherwise recaptured by the Foundation shall not be subject to this Section 3.2, but shall otherwise assist affordable housing projects through the Housing Trust Fund in accordance with the Foundation’s Articles of Incorporation or bylaws. The Foundation shall refund to the City any portion of the City Housing Mitigation Funds that have not been disbursed or contractually committed to be disbursed in accordance with Page 3 of 6 this Section 3.2 by the date that is thirty-six (36) months after the date of this Agreement. Provided the City’s Housing Mitigation Funds are disbursed or contractually committed to be disbursed in accordance with this Section 3.2 within such 36-month period, the Foundation shall have no obligation to repay any portion of the City’s Housing Mitigation Funds to the City. 3.3 All disbursements by the Foundation shall be made with the advice and suggestion of the Endowment Fund Steering Committee which has been formed by the Endowment Fund Initiative Committee and which includes two members of the Santa Clara County Board of Supervisors. The Foundation shall follow the recommendations regarding disbursements rendered by the Endowment Fund Steering Committee unless to do so would be a violation of law, this Agreement, or the Foundation’s Articles of Incorporation or Bylaws. SECTION 4 INVESTMENT OF THE FUND Foundation shall hold, manage, invest and reinvest the Endowment Fund in accordance with the "reasonably prudent person" standard. SECTION 5 FINANCIAL REPORTS 5.1 Foundation shall establish and maintain, in accordance with generally accepted accounting principles, a complete record of all financial transactions related to the Endowment Fund. 5.2 Foundation shall provide City with quarterly reports which shall set forth in detail all financial transactions related to the Endowment Fund. Foundation shall also provide City with a copy of its audited report, prepared by independent certified public accountants. 5.3 Foundation shall provide City with a written report on the initial expenditure of the City’s Housing Mitigation Funds, including, at a minimum, for each project assisted with City’s Housing Mitigation Funds, the following information: location and description of the assisted project(s); number of units; rent or sale pdce and income restrictions; and term of restrictions. SECTION 6 ADMINISTRATIVE FEES Foundation may charge an annual administrative fee equal to one percent (1%) of the fair market value of the Endowment Fund against the Endowment Fund. Foundation may also charge against the Endowment Fund reasonable bank fees. One-Twelfth (1/12) of the annual fees will be deducted monthly. Foundation shall Page 4 of 6 report the fees charged against the Endowment Fund in its quarterly and annual reports. SECTION 7 NOTICES Any communication or notice which either party is required to send to the other or which either party desires to send to the other, shall be in writing and shall be either personally delivered or mailed in the United States mail, postage prepaid, to the respective parties addressed as follows: City City of Sunnyvale Housing Division P. O. Box 3707 Sunnyvale, CA 94088-3707 Foundation:Community Foundation Silicon Valley 60 South Market, Suite 100 San Jose, CA 95113 Either party may change its address by sending notice of the new address to the other party pursuant to this Section. SECTION 8 COMPLIANCE WITH ALL LAWS Foundation shall comply with all applicable laws, ordinances, codes and regulations of the federal, state and local governments. SECTION 9 MISCELLANEOUS PROVISIONS The parties agree that this Agreement shall be governed and construed in accordance with the laws of the State of California. In the event that suit shall be brought by either party to this Agreement, the parties agree that venue shall be exclusively vested in the state courts of the County of Santa Clara, or where otherwise appropriate, exclusively in the United States District Court, Northern District of California, San Jose, California. go The headings of the sections and subsections of this Agreement are inserted for convenience only. They do not constitute a part of this agreement and shall not be used in its construction. The waiver by any party to this Agreement of a breach of any provision of this Agreement shall not be deemed a continuing waiver or a waiver of any subsequent breach of that or any other provision of this Agreement. D°Any and all exhibits which are referred to in this Agreement are incorporated herein by reference and are deemed a part of this Agreement. Page 5 of 6 This Agreement may only be amended by formal written agreement executed by both parties. If a court of competent jurisdiction adjudges any provision of this Agreement as void or unenforceable, the remaining provisions shall not be affected hereby and shall remain in full force and effect; provided that construction of the agreement without the invalid or unenforceable provision does not deprive the parties of the benefit of their bargain. Where this agreement refers to City and no Officer of the City is named, the City Manager shall have the authority to act on the City’s behalf. CITY OF SUNNYVALE COMMUNITY FOUNDATION SILICON VALLEY Robert S. LaSala City Manager Peter Hero President ATTEST: Linda Kelly City Clerk APPROVED AS TO FORM: City Attorney Page 6 of 6