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Home My WebLink About0367.091i I j J t. - July 18, 1991 HONORABLE CITY COUNCIL Palo Alto, California ,.'''''''''< ,30 JVERBTT AVENUE PROPOSED 7IHANCING Members of the council: Report i1). Brief 18 This report i5 relatE'.d te> the financing proposal presented by Community Housing Inc. (CHI) for use of City and Community Development BlocK Grant (CDBG) funds for the lease and development of property commonly known as 330 Everett~ This report is presented in conjunction 'With CMR.: 32(j:,1, -which relates to the Planned community (PC) zone change and the development of 330 Ever-etta Staff is not recommending that Council approve the finAncing proposal. BaCkground On July 1 ~ 1991 council recEdved a report on 330 Everett }.venue (CMR:J20:91j pertaining to the Planning commission's recommendation for the development of a 51-unit belo'W-market-rate senior residence project. '!'he report a~so contained CHI r s proposal for financing of the project and their request fer City participation. As outlined in CMR:320:91, CHI is proposing to obtain tinancir~ for acquisition and development of 330 EVerett frem several sources# including 1) the federal Department of Housing and Urban Develop ment#s se~tion 202 support Housing for the Elderly program (Federal 202 funds); 2) City CDBG funds; 3) City Housing In Lieu funds; and 4) state and/or private funding. CHI is proposing to use Federal 202 funds and the City Housing In Lieu funds for the construction of the project and CDBG funds tor acquisition of the property. CHR: 367: 91 L , '. t r l I i , r" ! I '- o 'inancing propo,al The site centrol arrangement is a c~mple~ transaction that creates a 50-year ground lease with CHI as the L~ssee and the current owner as the Lessor. Additior.ally~ a new !1lortqaqe is created with CHI a!= the Lender holding a first deed of trust on the newly merged single parcel. Housing and urban Development (HUD} has determined that the proposed funding for the ne'W mortgage is not a CDBG-eligible activity. Since CDBa funds cannot be used for the project as it is currently envisioned, alternative funds would have to be taken from the Housing in Lieu fund. The amount of Housing i:;. Lieu funds requested is $665,000 in the form of a modified loan, and $300,000 in the form of a grant. The grant from the Housing in Lieu fund would be used to provide amenities that would not be allowed with the use of Federal 202 or CDBG funds. The use of City funds would be conditioned tipon the approval of Federal 202 funding. CHI will apply to the federal gO·w'ernment as an applicant in competition with other applicants for a portion of a specific amount of Federal :;:02 funds~ CHI's application fer F~deral 202 funds will require lIIsite control-(proof of land acquisition financing), and therefore city Council approval of this request for fu_nds. Currently, there are no funds in the in the Housing In Lieu Residential account and $2.9 million in the Commercial account. Ci ty Staff R_~viell' City staff reviewed the financing proposal and recommends that even th-ough there is a great i]ernand for this type of housing, the financing as proposed should not be approved by Council. staff recommends denial of the CHI's request for three reasons. First, if Housing in Lieu funds are used, the funds ~ould have to come from the. Commercial account. By Council policy, Commercial account funds may not be used for senior housing. To date, City Council has approved only one loan to the Residential account from the Co~ercial account, for the purcha~e of the existing complex at 630 J .. os Ror,les. That loan 'Was made 'With the understanding that it would be paid back from the Residential account in a relatively short period of time. CHI's proposal would request a grant of $300,000 and a I02.n of $665,000 that ,",auld be paid back on an 'as aVailable-basis. Second, the $66S I COD loan is based on a lease of the subject property. To date. loans and grants from Housing in Lieu funds have been used only for the outright purchase of land. Finally, the lease option and ground lease provide a mechanism whereby the existing commercial loans on the property .auld be paid off (by the $665,000), thereby creating a lo~-interest loan that is extremely beneficial to the property owner. Under this arrange ment, CHI, as lessee, would pay monthly ground rental to the property owner and the property owner would repay the debt on the property, in monthly installments, to CHI, under a deed of trust~ CMR:367:91 2 L 'l I i I !. , , I I 1 j I i I I -"I. - ZPC ,.vie. The Palo Alto Housing Corporation (PARe) reviewed the financing p~oposal at their July 10 meeting. Their minutes are included as part of this report. PAHC strongly supports the Lytton IV project, based on the need for more senior housing~ The PARe also supports the CHI request fer a grant of $300#000 from t,he P.:ousing in Lieu commercial account for the 330 Evarett desired amenities. They feel tbat 'the grant shO'..lld be made 'With the understanding that Commercial account fur~s would be replaced from Residential account fUnds as they become available. However, 'While PARe .... ould support the loan of $€65,OOO if CHI restructures its agreement to acquire the subject property and CDBG funds: are used to purchase the property, the PAHC does not recommend use of Housing in Lieu Commercial account funds for the $665,000 loan, in any form. RecouepdatioD Staff recommenas aenial cf the Community Housing Inc ~ proposed financing request for 330 Everett Avenue, as presented. Respectfully submitted, CMR:l67:91 1 I f I . r I J J. ! I .. "-. ., ! 1 , : i I o NEXT MEETING: July 24, 19917:30 AM Council Confereoce Room Ci:vlc Center, 250 Hamilton PALO ALTO HOUSING CORPORATION 540 Cowper Street, Suite G Palo Alto, CA 943Ol-li!06 (415)321-970:) MINUTES OF THE MEETING OF JULy 10, 1991 DIRECTORS PRESENT: Mike Anderson Lou Gold smir.h Joe Martignetti Jess WlIson DIRECTORS ABSENT: Tony Carrasco Jacqueline Stewart STAFF PRESENT: Ken Brundage STAFF ABSENT: Sylvia Seman OTHERS PRESENT: Susan Anstead Ron Hall Norman Olmer Marilyn Utl Marlen~ Prendergast Bob Wood, Valerie Glassford Jean o.,,'es Alan Henderson Janet Owens Steve Stephens Laurel MacDermott Bill Fellman, Manager, Real Estale Services, City of Palo Alto Jim Gilliland, Manager, Planning Projects, C,ty of Palo Alto Jim Koch, Community Housing Inc. Prddent Martignetti called the meeting to order at 7:40 AM. 1. Opening Business Martignetti welcomed Janet Owens back from her leave of absence. 'L • " - A. Review the Minutes of lune 19. 1991 Martignetti presented tho minutes of the meeting oflune 19, 1991. Mll!ilID: (Martignetti, Goidsmith) to approve the Minutes of lune 19, 1991, passed unar..imously. B. City Contract Martignetti .reported that the items deIegatrJ:f to staff for negotiation were included in the City contract. The indemnification covers t.~e Palo Alto Housing Corporation, PAHC AparIlMnts, Inc., and PAHC caJjfornia Park Corporatioo to a maximum amount per occunence of S200,C()O. IT. Items for Policyl Action A. Consider Recommendations of the Nominating Committee Zatz reported that the Nominating Committee recommends appointment to the Boar<l of Susan Ansread. Susan has. strong background in property management, real estate marketing, and real estate business management. M2li!ln: (Zatz, Dawes) to appoint Susan Anstead to the PaIo Alto Housing Corpontion Board, passed unanimously. B. New Accounts -Corporate Resolutions M2.tiQn: (Henderson, Okner) to authorize several new Certificate of Deposit accounts and to make the follo'loring resolutions: Reso1ved: That litis organization establish one or more deposit accounts with Suntitomo Ba..1.k of california pursuant to t..~e te:ms and conditions of the atta~hed signature card. JO"....eph Martignettl, Pre!ident; Michael Anderson, Vice President; Jean Dawes, VIce President; Louis Goldsmith, ViCe President; less ""-lison, Vice President; Alan Henderso~, Treasurer; Marlene Prendergast, Secretary; are duly elected and acting officers of thi. organiz.1tion and are authorized to establish each account. Further resolved: that the above officers of this organi.zation are authorized to draw checks on each account, signed, as provided on the attached signature caro. The bank is authorized to handle and pay all checks so signed, including those drawn to the order of any offlcer or other person authorized to sign them. Resolved. that a thrift account be established in the name of this corporation with Fireside Thrift Co. and that checks, drafts and orders for 2 w; • I f , , i' t , I I 1_ ... ~ i , ' f' [ ['" I , , - o o payment of funds may be endorsed anj signed by any two of the foUo .. ing: Jo.teph Marngnetti, President; Michael Anderson, Vice President; Jean Dawes, Vic'! President; Louis Goldsmith, Vk;c Prelident; Jess. Wil.s.on, Vice President; Alan Henderson, Treasurer; Marlene Prendergast, Secretary. Resolved, further, that the authority hereby conferred shall remain in force and effect until written notice of revoca'Jcn thereof by the Secretary of this organization shall have been received by Fire!side Thrift Co. at the office at which the account is kept. Resolved that any t'Ilo'Cl together of the following: Joseph Maz1ignetti, President; MlchaeI Anderson, Vice President; Jean Dawes, Vice President; Louis GoldSmith, Vice President; JCS$ W!lson, V1ce President; Alan Henderson, Treasurer; Marlene Prendergast. Secretary of this organization 2re authorized to sigu for the account, as provi.ded herein, with signatures certified to us by the Secretary of the orgar.iz.ation. Any written ::Iotice of revocation to ma.intain account must be presented at the office of account. Passed unanimously. m.ReportS A. Lytton Gardens IV Martignetti introduced Jim Koch of Community Housing. Inc. Martignetti said that the issues kfor..: the Board.as the Lytton Gardens rv Committee saw them are: 1) l.s a Planned Community-zoned de-velopmer.t of 5{) affordable uni~ for seniors a desirable addition to the bousing stock of Palo Alto? 2) Because HUD does nO( offer financU1.g for certain amenities (such as balconies) that the City of Palo Alto requires, is it appropriate for the City of Pa10 Alto to provide funds for the construction of those amenities? 3) Is the proposed project structured in a finanCially ft:a.slble man."1er? lim Koch SfX)ke to the Boord. Community Housing, Inc. ba'i a V\·d..iting list of 6C() names. In a recent e"~mination of the list, it Vr.-as discovered t.'1at at Ieasl 160 people on that list would quaJify for affordable housing and are curr~tIy willing and able to move to a new residence immediately. Only about 100 names leave tlJe list per year. This indicai.es a need for more .senior housing. The plans for L}tton [V include using the existing management of other Lytton developments in order to save money. The site is one block from the Senior Center and a park. It is four blocks from the other Lytton buildings. Since senior health is often dependenr upon activity and socla1ization~ the site is ideal. Furthermore, L'rie buildings adjacent to the site are 3 \ ;!',£~H ". - architecturally similar to tlte plans for the r:e· ... · 'building which ""ill make the project more attractive to nejghbors and City pla:ming officials. Funding for senior housing is practically limited to HUD's new Section 202 program. The maximl!m construction funding possible through Section 202 is approximately $2,900,000, which is n~ encugh '!laney to b'Jild ;n Palo Alto. The project will cost approximately 3,2 million doliar. to build exclusive ofland acquisition costs. $315,000 of the difference is for construction of amenities tllat the City requires and HUn regards as lulturies and will nO( fu nd, The current owner of the land will offer a 50 year lease of the property if Community Housing, Inc. pays $665,000 for the refinancing of the several kru. on the site into one mortgage. This plan is inraccive bt-c.ause the cost of purchasing the lard is prohlDitive, Prerequisite. to ma.'cing a Section 202 application are: land control (purchase or lease contracO. zoning approval, and detailed e>\pla.T'Jations of funding sources for cmts ove .. what S«tion 202 will provide. The Section 202 applicatio[] is due August 12. The Board chose to discu~s the issues one at a time. I, Th~ Board strongly suppo'-" the .ddition of 50 afiordable housmg units for seniors in Palo Alto. 2. The Board supports City funding of ar estimated $315,000 for construction of amenities the City reqUlre5 and RUD will [lot fund. The funding could be obtained from a loan from the Commercia! Housing Reserve to the Residential Housing Reserve lontii furtller in-lieu payment5 to the Residential Housing Reserve are generated foc repayment. City staff anticipates that approximately S300 1 C(X) of in-lieu payments to the Residential Housing Reserve <will be generdted in the near future. 3. The Board had rrill<ed feelings regarding the feasibility of the project specifically in regard to the land acquisition proposal. Members agreed that the ground ka:;e ~ currently negotiated did not appear highly desirable. The Board felt that purchase of the property would be more cesir3ble t.f)an the existing ground lease structure. The Board would support utiliz4tion of CDBG funds if an outright purchase of the property could be negotia.ted with the owner . • " - " ,"" o R Council Action Re Middlefield W<U Site GoldsmiLi reported mat at the City Council meeting of Monday, July 15, the Council decided the disposition of the surplus well sites. Council decided in general to sen the sires at a minimum of $300,000 ea.ch. The Palo Alto Housing Corporation has asked that some portion of the proceeds from the sales of the surplus well sites be placed in Lie Housing Reserve fund. In response to • n<ed for funds in purchase Oak Manor To"",llouses, the Council decided to place 50 ~ d the proceed, from the sale of the Seale site in the fund. The Council decided DO( to CQmnllt funds from the sale of surplus weU sites CUlcluding the Middlefield site) to the Housing Reserve fund. C. Comprehensive Housing AffordabUity Strategy (CRAS) Accvities Glassford repo:ted that staff has been working closely with Cil)l staff to compile statistics to complete the eRAS. On July 1I, Glassford .. ill be attending a workshop with Sarah Cheney from the City to better understand the CRAS and related legislation. D. Lot R Development Goldsmith reported that the Development Committee has met to discuss Lot R. He suggested that if the CRAS gives a sense of .... hat kind of housing Palo AIto needs, we migr.! address that need in our plans for LoOt R. Carrasco's sketches iIldicate that the site can support units and park1ng spaces in the order of 96 Single Room Occupancy units at about 175 square feet each, 50 senior housing units at about 350 square feet each, and surface and underground parking spaces for the housing plus perhaps 50 more public parking spaces than now erists, Goldsmith noted that if Lytton IV is built, we m.1ght want to plan to serve a dLfferent population than seniors. The new building might provide offIce space for the Corporation and some street-le .... el commercial space. The next meeting of the Development Commince is Tuesday, July 23,1991 at 4:00 PM in the Palo Alto Housing Corporation office. s • - • E. oak Manor Townhouses Rehabilitation Glassford reported that the Oak Manor Townhouses rehabilitation is in fun swing. Residents have bIxn cooperative and amicable. Five uruts b-ave been eornpletei.y rehabilitated ("mc1uding two ceiling replacements). It appears as if the rehabilitation costs will be ",thin the proposed budget Kim Baukol. our new full-time mallHenance per:)On, has been invaluab!e. Ginger van dec Linden, the on-site manager, has also been very Mlpful in the change of ownership arid changes in her duties.. There an currently seven low or very low in:ome resident families at Oak V..anor. This meets the Ieq'lJ U'ements for the subsidi1ed financing applications we are pursuing. IV. Adjournment Martignetti closed the meeting 019:03 AM. Respectfully submi,..e<I, Marilyn Zat:< for Marlene Prendergast, Secretary 6