HomeMy WebLinkAbout0422.092Septeober 10, 1~92
HONORABLE CITY COUNCIL
Palo Alto, CalIfornia
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PALO ALTO HOUSING CQRPQBATION FUNDING REQUEST
He.bers of the Council:
REpoRT IN BRIEF
~i5 report and CHR:368:9Z (attached) forw.rd to Councll a reque,t by the P,lo
~lt. ~"'in9 Corporatlon (P~C) that the Clty con,ider rein,tating the concept
of • con,ultlng rehtionship with P"AHC and. change in the source of City
funding for PAHC.
BACKGROUND
By letter dated July 20, 1992, P~C reque,ted th.t the City relnst.te the
concept of using PAHC as a consultant and consider a1ternate sources of
funding for P~C instead of Community Development 8lock Gr.nt (COBG) funds.
Th~ request was ref!rred to the Policy and Services Committee, who reviewed
the request .nd the recommendation of st.ff at their AU9u,t 4, 1992 meeting.
At the Pol1c~ and Se~ices Committee meeting, PAHC verba11y presented in
alternate reque,t for annu.1 funding in the amount of $100,000, to be taken
from the City's Housing Reserve Funds. The request is outlined in the
attached letter from P~C dated AU9u,t 2B, 1992 ano the attachment thereto.
The .1tem.tlYe propo •• 1 includes the,e point>: I) .nnual funding of $100,000
to be paid In 12 equal ;n,t.11 .. nt., 2) amend 1992-1993 contract, 3) no COBG
funds fDr the ]nfo~tiG~ and Referral program, administration of the B!low
~rket Rate program and administration of the development of housing projects
$ue~ a5 the Barker ~ote' and a downtown SRO, 4) a reY1s~ City (ouncil policy
on use of the Housing Reserve Funds to a110w for funding of PAHC~s
ao.inistratfon, S) revise Housing Reserve Guidelines for commerc;a' funds to
allow aCQtJisition of existing housing, 6) a request for meetfngs. with l.Q]: HUO
offiCials on conflict of interest is!ues, 7) conlinut exp'~ratfons of
altern,te fu~din9. and 8} continue to explore alternatives for funding the
Below Market R.te (BMR) pr09r .. with the cave.t that PAHC ha, serious
reservations about tharging fees to buyers Dr seliers.
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The Policy and SeTY;CeS Committee referred the prop~sed PAHC funding and the
staff recommend!t1on to the full City Council for discussion and consideration
wit~out aaking , srec1fie rec~ndation~ The Committee requestfd that
addltiona1 fnf~r.latiDn be provided to the Council ~s discussed in the
following section.
ISSUES AND PlSCUSSIQN ITEMS
Correctlgns to CMB;368;92
On p.ge 3 of t~ July 30, 1992 staff report, under the he.din9 Us< of Hou.ing
the st.ff roport inOicates th.t the resldentl.1 fund has
s figure is not correct. Tne residential fund still owes t~e
commerci., fund $392,000. If the repa~nt ~re m.de, the residential fund
would have. negative b.lance of $193,000. This debt to the commercial fund
occurred in Hovember 19~O, when Council authorized a $1,000,000 loan from the
commerci.l to the residential account for the PAHC purchase of Oak Manor
Townh~s at 630 Los Robles. $607,000 was repaid to the cOmm€rcial and
indYstrial account ~en th! Seale Street well site prope~ty was sold. Funds
paid into the residentia1 accou!'It by reSidential developments ~a..,.e not bee..,
suffjc~ent to compiete repayment to the c~r(1al fund.
Tne Housing Reserve Guidelines, attached to CMR:368:92, were an older v~rsion
that did not include. clause added by Council in Noyember 1990 .110wlng for
loans from the c03Dercial to residential account fGr family housing. The
correct cory is attached.
Current HQusing Reservt Fund ppljcy
The Co.nfttee requested that staff conment on tne current pol icy ratior.ale for
use of the Housing Reserv~ Funds. T~e baSic question is the use of Housing
Reserve funds for administrative ex~nses.
lIllen Chapter 16.47 of the Palo Alto lfunicipal Code (PAMC), titled Approval of
Projects w~th IMpacts on Housing, was first adopted in ]984, it specified that
COMmercial Ind industrial projects shall contribute to programs that increase
the C;ty's 10.-and moderate-inc~ housing stock. Chapter 1~.47 provides
that the commercial and industrial developer shall provide low/~derate-income
~ousing units as a condition of development the number of units required is
based on I fon.ula approxi~tin9 tne ~unt necessary to satisfy a 10 percent
low· .nd moderate-Income "Dusing need created by the development. As an
alternative t~ providing actual units, Cnapter 16.47 provides for an in-lieu
fee, which aost developers have chosen to use. The C;ty's policy has ~en to
li.it t~e u.e of these ;n-lieu fuods to housing likely to be occupied by
workers_ Afte, adoption of Cn'pter 16.47, the CounCil, on Febru.ry 3, 1986,
adopted the Housing Reserve Guidelines, whic~ limit administrative activities
t~at can be funded from Housing Reserve Funds to ·payment of pre-development
and development costs· for new construction. It should be noted that the
EYidelfnes, while a"ocat1ng commercia' and industrial funds for new hovsing,
do not specifically lim1t tne ~se of funds to housing like1~ to be occupied by
workers.
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I rf Staff has maintained i consistent position that the re(l.50n for collecting the
cownercia1 and fndustr~ .. ' fte-s is to construd new h!lt.Jsing that wi 11 offset
the jobs cre.ted b~ thE additional commercial and industrfal construction.
The Guideline, allow for the funds to be used for pre-development and
development costs, but stiff believes t~1s ;s intended for i specific
deve10pment and not g~neril a~infstrltiDn. Staff does net support use of
these funas for g~neral admfnistrltive purposes for either City staff
1~1n1$t~itiv. IKpenses or PAHC general aa.ir.istrative expenses.
Funds are .1so added to the Housing Reserve Fund from residential deY~loper5
who uke a" In-lieu payment in.tead of pro',lding • Se10w Market Rate (BMR)
unit. Traditionally. these residential funds have been used for acquisition
of exlst1ng housing (e.g., the Rent,l Housing Acquls1tlon Program) .s well .s
for new hoU'sing. The Housing Reserve Guide'ines also permit "'reasonable
eXP8"ses necessary to ad~infster the City's Below Market Rate Program or other
City sponsored housing programs.t These adm1n1strit;ve C05t~ for the BHR
progr .. are li;ted under a heading titled 'eligible uses in support of
existing lOW/MOderate-income housl"g.' It is not clear if this was intended
to .ean tnat only funds from the residentia1 account of tMe Housing ReSErve
Fund could be used for this purpose.
As shted In tho Ju1~ 30, 1992 stoff report (page 4), staff be11e,es that not
only s~ould the r.itigation fees (b~t~ from Chapter 16.47 and from the BMR
progra.) not be used for general .dministrat;ve costs, but further
investigation should be ~ade on a1ter"ate funding for administr~tion of the
BMR program,
A further toneern is the requirement in state law regarding the collection and
~se of developeent fees. Government Ccde Sections 65000 through 66007 require
both a financial and lega1 nexus t or connec.tion, between the sourc.e of the fee
and tts use. Although a nexus relationship was identified at the time of
•. d.ption of the Ordinance 1mplementing Chapter 16.47, a complete nexu, 'tud~
consistent with 1991 standards has not been performed. The City Attorney's
Office has advisod staff that a nexu. st"d~ should b. done prior to any
further changes in the Reser'lle Guidel·ines. The nexus study would esta.blish ii
basis for col1ectlon of the fee and would identify the possible uses for which
the funds could be used, in accordance with state 1aw. The revised guideljnes
that would result .ight include genera' administration, if a nexus between th~
rplson for collection of the fees and t~eir ~se f~r general administration c~n
be .stab11.lIed.
Based upon the experienct of other cities, staff believes that such a study
would cost roughl~ Sl5,OGO to SlS,DDO and would involve both the Plar,ning
Division and the Attorney's Office. Work on the nexus study will be a
priority of the new COSo-funded Senior Planner.
Limitjng of C0romQrcial ~o Ne~ Con$tr~(tion
Housing R!serve Funds are collected as i mitigation from co~rcia1/ir.dustrial
projects because they create additional jobs, wh~ch creates the need for
additional hQ~sin9. With Palo Alto's severe jobs/housing imbalance, new
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~~~sing units Ire ~eec~d. Altnou9h staff is supporti~! of programs that bu~
uisting unHs Ir'-' Cli~"ert thp.m t(l 1ow-and moderate-income units over time.
we belhve that· ~ emphasis shcu1d be on new construction: and that cOITme'Tcial
Ind f~dLl:strlal fw, js s~ould not t.e used t<l purchase ex1stirlg housing.
As PAHC h.s noted, P.lo Alto Is • difficult m.rket in wh'ch to find .acant
lind ind create new housing. Staff believes that th1s .akes the development
of pvblicly sup~ort!d new housing even more tmpartlnt. To purchase an
Ilxhting bul1dhg ..nere two bedroclfI units are rentirlg from $750 to S850 and
roduce t~e •• rents to 1350 to $450 is ad.iroble, but has the effect of taking
In affordable unit Ind targeting It to I low-income group instead of creating
• new unit that targets the some low-income group.
P.bllcly supported projects should .lso target the new construction .arkets
for low-.nd moderate-Income persons that are not being met by for-profit
deyelopers. Mo.t new housing developments in Palo Alto are large (1,600 to
2,200 square feet per unit) condomjni~s. Very few rental projects are being
constructed, and staff believes that the City should be pro-actively using
cOIIerc111 and 1ndustrial housing funds for the construction ~f new or
.ddltlona' rental units.
Meeting$ Between HUP Ind PAMC
Previously, severil 1t~~e$ haye been raised that needed to be addressed with
HUO. Several Qf these ~aye been substantially resol~ed. At the Polity and
Services Coamittee meEting, an additional matter relating to the conflict of
interest f5sue on consulting was discussed.
The confl1ct of interest ~5sue on consulting services was originally raised in
the HVD IOnitoring reports and findings of April 4, 1991. The findings were
rel.ted to the relotlon.hip bet •• en the City and PAHC and the lack of proper
procure.ent procedures_ Recent discussions with NUO staff nave raised an
addition.l concern over whit HVO believes ~Dnstitutes a conflict of intfrest
under tne CD8G r&gul.tlons. This probl~ arises if PAHC is being paid by the
City to advise the City on the appropriateness of expending funds on a project
while If PAHC I. in Competition for those funds. (ity staff spo" to Da'id
SuttGn. who is the Deputy Regionl1 Counsel for Regfon rx of HUO and would be
adYising S6rdon HcKay. the O;rector of the Office of Community Plann7ng and
DeYelopment, San Francfso RegiDnal HUO Office, the decis~on ~aker OM this
Issue. It WIS cl~ar that HUD had previously considered this subject in cases
involving both Oa¥is and San Jos~, where HUe found similar conflicts of
interest to exist concerning the use of CnSG funds by those cities. Da~id
Sutton advt!ed us of the exceptl0n proced~res that exist under the
regUlations, but also stated that we would hav~ a diffic~lt time making an
effecthe cue for In u.ception from ttle conflict of interest regulatic .:; in
PAHC's USe.
Although tnt' conf11ct of interest issue is primarily i legal one, staff
believes that we should avoid tbe appearance of a conflict as a matter of
pellcy_ The consultlog th.t PAnC would do that might cawse • conflict is a
'VerI SlUll portiCo" of the ovenll contract and, 11"1 the past year, would ha,,"e
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appl,ed only to the City's seeking odvic. from PAHC on lytton IV. In
addition. some of the services t~at PAH( ~as pro~ided previous'1 can continue
under the I~fo~tion and Referral pr~gr~~. Therefore, in view of tnf
foregoing. Staff therefo~e bel1e~es that the ·Consultant-relati~n5h1p should
eelse.
As expl lined previously. the Housing Reser,e Fund h brokeon into two accounts,
t~e commertia' and industrill account and the residential account. The
residential account has no unc~itted funds. Tne commercial account has i
current balance of $3,241,000. Interest is added to the accounts based on t'e
City's return on investment. As of June 30, 1~92, the rate ~as 5.92 percent.
For fiscal 1991-1992, S248,152 in interest .as odded to the Housing Reserve
Fund.
Fees tota11ng $163 ,000 Ire still owed to the commercial account ~y developers
for approved projects that ~aye not completed construct1on~ N~ additional
residentiAl projects ~ave been approved tnat will contrib~te funds to the
resid~nt1il actount. Several app1ications have been received for future
projects thAt would be requlred to Make mitigation payments or ~n-lieu BMR
p~ntsj however, it is difficult to estimate any funding that might be
recel.ed from th.se future projects.
po$$ible Pe!ands on HQysing Reserve funds
Projects that oight be coopetin~ for the a.olloble Housing Reserve Funds
include the following. T~e dollar figures shown, which are very prelimi~arYI
Ire only for the amount that would be drawn from the Hous1n~ Reserve Funds.
Downtown SRO: Th;s proposal is scheduled for further discussion at City
Councn in ttle near future. The PAHC proposal .auld pro'lide up to ISO
units of studio housi~g for low-income workers. C05t esti.ates on the
need for Housing Reserve Funds range froo S500,OOO to 52,000,000.
B,rrer H~terJ 437 Emerson Street: Housing Reser~e Funds are being
conSidered only for use in expansion of the Barker Hotel and not for the
aCQuiSition costs. [f PAHC and the City are able to purchase t~e
property, lIinimal expansion of S to 6 units wOi.lld cost approximately
SIOO,OOO, while oddltion cf 0 third floor or reconstruction (25 to 30
units added) could require up to $1,000,000.
L}1tGn IV, 330 Everett: Staff has received i request from Community
Kouslng Incorporated (CHI) for SI,450,OOO in City funds for this
project. The pri.ary sour~~ for th~se funds is the Housing Reservt
Fund. Use of these funds wauld necessitate I change in the Gity;s
unwritten policy (see page 2) limiting commercial and industrial funds
to worker housing. since 5eni~rs are not generally considered members of
the work force. A second option 15 a further loan from the commercial
,(cDuni to the residential account. Discussion of the CHl reQuest will
be scheduled for City Council in the near future.
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Print! 'or~p,.ofit o.ve1ope-rs! Staff "'IS rec:eh'ed inquiries fr~m for·
profit del/elopers of low-and mod!'rate·inc:ome stud~o housing seeking
su't~ble sites for development ~n Palo Alto. They have indicated that,
due to the ~fgh co~t of land in P.lo 41to~ some assistant! from the ,tty
would be helpful In kteping the rental cost down. No dollar figures
have been discussed.
Other possible housi"9 projects include the Tower Well ,ite, lands In and
around tho C ... o Club and other long-rang. proposals. Total estimates for
known projects rong. from S2,050,OOO to $4,450,000.
Cyrrent WC FiIJl4ing
For 1991-1992 PAHC requested SI07,200 in funding. The total paid by the City
io COBG and Housing R.serve Funds for 1991-1992 and the amount avail.bl. in
1992-1993 are .s follows:
Below Market Rate Administration
Adslnistratiye [xpenses
Information and Referral
Administrative Costs for:
Downtown SRO Oe"lopmont
Barker Hotel AcquisitIon
Plum Tree Acquisition
TO'4l 1991-1992 FUNDING
* rrom Housing R~serve Funds
** fr~ COB. funds
1991-92 ~.ctual
* $34,574.08 •• 7,8Z6.35 •• 7,940,61
•• 21,842.97
** 16,635.65 .. I1,06~·~1
S]05,888.47
1992-93 Est imated
• 140,000
** 28,OCO .. 18,000 •• 18,000
$104,000
The City can fUnd PAHC In 1992-1993 • total of $104,000 in COeG and Housing
Reserve funds. Refmburse.en: requires that PAHC account for the expenditures,
w~fch .ust be in the area~ of Information and Referral, sale and resale of BMR
units t Barker Hotel acquisition and deYelopment, Ind development of a downtown
SRO. Staff has worked with PAHC to defIne the eligible items for Information
and Referral, and stoff believes thot the full $28,000 avanable can be used.
That would apply a. well to the $36,000 in pre-developmont costs available for
developmont of the B.rker Hotel and the Downtown SRO.
The eurrent Housir.g Reserve Guidelines allow for Housing Reserv~ Funds to be
used for ad.1n1stration of the BMR program. although there is i question 15 to
whetner t~e Guidelines specifically permit tne commercial and industrial funds
t~ pay the BMR administration costs or only the residential fund. 8eciuse of
ttle negative balance in the residential account, the City is reimbursing PAm;
from the commerCial and ~ndustrial account unt1l completiun of the nexus
study. 1" addition, for fiscal 93·94, staff had anticipated that a. portion of
the BMR costs would be eligible for COBG funding, since i portion of the
benefiCiaries ire COBG income-eligible. Staff has .lso discussed wit~ PAHC
otner CDBG inco.e-eligibl. projects.
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ANALYSIS
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Staff strongl~ supports the Palo Alto Housing Corporation and their work.
Whether City fu~~ing for PAHC comes from COBG o~ the H~usin9 Reserve Fund,
however. relsonable reporti~g and record kteping is prudent to ldentify what
services have been provided a.nd the cost of t"ilt service.
Beeause of the issues related to use of the Housing Reserve FYnds for genera~
lo.in1stratio~, the necessity to perform. nexys study and the ability to fund
PAHC for the f~ll amount req~ested, staff belieyes that we sh~uld continue
funding PAHC as approved by the C,uncil for 1992-1993. In addition, since
preparition for funding for the 1993-1994 fisc.l ye.r begins in OctobEr, ,taff
believes that the c~rr~nt funding programs and sources should be continued for
1993~1994 wit~ allowances for changes and new programs. Tnis will allo~ for a
year of operation to assess where we are and what additional changes are
N!quired.
The programs we have set up ~"clude reimbUrsement for direct e.penses based on
actual t1.e spent plus an ~110cltion for indirect costs. Because af t~e
retarseeent for both direct and ir.direc:t costs, the City should be paying
for the full cost~ of tne BMR administration and an Information and Referra'
program, IS well as pre-developl'lHl!nt and' development costs as!Jocht.ed with a
defined project.
The other two primary areas ~er! PAHC provides serv1ces are managemfnt of
existing housir.g and general planning and admin~stration. Project management
casts should be borne by .anagement fees on the projects. PAHC's b~dget is
$275,000 with the City funding $104,000 for BMR administration, Infonoation
and Referral and specific project developments. Project management costs
should be barne by management fees based On the projects. Tne remaining PAKe
budget should be sufficient to cover general planning and administration.
REC0!f4EN!lAJ I ON
Staff rec~nds that the Council adopt the recommendations contained in
CMR:36a:9l and repeated be'o~. as well as an aadtt10nal recommendation to
begin work on I nexus study for use of Housing Rt5erve Funds and preparation
of revised guidelines fbr Housing Reserve Fund use.
L tk)using Reserve funds should not be used for' add it ional
a~in;strative activities; however. PAHC may consider applying
t~rou9h the Human Services R~$ource A1location Process for City
General Funds.
2. Staff and PAHC explore alternative methods of fundfng BMR sales
and resales.
3. The City not enter into i c.onsulting re1a.t1()nship with PAHC, but
should utilize PAHC for speciil contracts as the need irises and
under proper procurement proced~res.
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4. City staff and F~HC continue to improve the Housing Jnfo~ation
ud Referral progl"'i...1It to allow for maximum reimbursement.
S. Staff and PAHC conti~ue IIOnitoril19 of the time ar, .. actual costs of
service delivery with the goal of establishing an annual contr.ct
amcunt for the BHR and Housing Information and Referr.l programs.
6. St.ff. through the City Attor.ey'. office and tne Planning
Division. shall begin preparltlon of • nexus study r.garding the
Housfng Mitiqat10n FitS. Staff will retur~ to C~unc!l with a
propos.l for c~nducting the study.
Respectfully .uba)itted.
/1~L<,.t ~J:ii~j; J~ES E. Gi l(;'j;
.,nager Phnning Projects
WILl! AM ZANER
City lI,nager
, / t ( /'~, I. c':/','. r:,~ ,: 1(.". '/. ~I -
KE~NETH R, SCHREIBER
Director of Planning and
Community Environment
AttachMents: tMR:368:92, dated 7i3Qj92, PalD Alto Housing Cgrporation
funding Request
Hous'"g Reserve Guide11nes, corrected copy
Palo Alto Housing Corporation letter. dated 8/28/i2.
cc: P.lo Alto Housing Corporation
C1ti2ens Advisory COMmittee
Coamunity Ho"slng Incorporated
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~$ tG the other areas of c~ncern that PAHC has requestpd be addressed with
HUD , IIOst ha"ve been resolved ntishctorily. A synopsis. f!ir each follows:
(xc!ssive Federal Regulations: The City has forwarded our concerns regarding
excessive reporting and regulation requirements on all fEderal fund) to HUO.
letters sho~ld also be addressed to congressional representat'ves. As stated
previousl1, we 00 not believe that we will nave a significant impact on
securing thanges.
Jleighbcrllood aased NonprofH: With the assistance or HUD and an opinion by
the City Attorney's office, PAHC has bee~ designated as a Local Development
Corporation whic~ allows for all of the same Icti~lties as I Neighborhood
aased Nonprofit. Tne issue of allOWing _ity-.ide nef9h~orh.od based nonprofit
in cfties larger than 25,000 people s,ould be further addressed with HUO, but
is currently i verj low priority.
Depreciation and Reserves: After numerous discussions between staff? PAHC and
HUD, HUD ruled that depreciation could be shown as a direct expense. Staff,
IS well as PAHC, had concerns ab~ut HUO's interpretation that re=~~ves could
not be lIlintained on the federal share. W. asked for and set up a meetin~
with HUO officials, who after vacillating several times, have agreed to allow
depreciation to be shown as • direct expen.e. This is of benefit to PAHC in
allowing for retention of funds.
landbankfng: St.ff has not had time to follow-up on a request to allow for
accUMulations of f~nds beyond 1.5 ti~ t~e annual CDBG entitlement. A (nang~
in this regulation would allow fer greater accumulations of funds to allow
purchase of expensive Palo Alto property. This is also I low priority, since
we feel t~at t~e expenditure of the annual entitlement should be done in a
timely ~nner. We are currently bringing our backlog of projects up-to-date
whi(~ .il1 reduce our accumulation of funds for Dt"er reasons and allow a
greater -develoPlent pot,-We will not, however, be able to si~ply set aside
funds indefinitely as we ~aye in the past and we concur with HUD that this is
not appropriate,
Relocat;o~: Staff ~oes not intend to pursue revisions to relocation
requir~nts. They are leg1s1ative reqUirements and enforced nat;~n~ide.
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July 3Q. 1992
HONORABLE CITY COUNCIL
P310 Alto, California
Attention: Pc1icy and Services Committee
PALO ALTO HOUSING CQRPORATION fUNDING REQUUI
Members of the Council:
REPORT IN BRIEF
1
ThiS report forwards to COHnci1 a request by the Paro Alto Housing COl:"poration
,PAHC) that the City consider reinstating the concept of a consulting
relat;~nshlp with PAHC and a change ;n thE source of City funding for FAHC.
The request is outlined in the attached letter dated July 20. 1992.
i!ACKGRQU!!O
In January 1991, officials from the Department of Housing and Urban
Development (HUO) began a series of site \/lsits ar.d mClnltoring reports
regard i ng the Cit)' s management of the Commu n i tf Oeve 1 opmen t B 1 aelc, Grant
(CDBG) program. City staff h~s had to init~ate numerous changes in order to
bring the CnSG program into compliance witn existing HUD regulations.
Some of the char,ges direct1}" affecte-d the us.e of CDSG funds by PAHC. Prior to
1991-)992, the City used the CDBG program to fund PAHC fer project-specific
dev!lopment costs, non-specific pre-housing develJpment, project management,
planning and administration, and consulting. PAHC was paid in twelve equal
monthly installments. PAHC wz;s also respnnsjble for sales and resales of
Belo~ Market Rat~ (BMR) units in the (ity progr~m but was not re1mbursed
specifically for Hese expenses, since they are not generally COBG income
eligible.
The HUD monitoring reports identified several issues in the contractual
relationship between the City and PAKC, including the fact that of the above
reimbursed items, only project-specific development costs were being e.xpend~d
properly under HUn regulations . • For the past year, staff and PAHC heve been work.ing to correct these
deficiencies and to find appropriate PAHC activities that ~a~ be funded by
City funds and CDSG funds. The 1992·1993 CH.y contract with PAHC specifies
that PAHC will be reimbursed up to $28,000 from CDBG fUrlds, for Housing
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lnformaUon and ~eferra' senlic.es, and up to $40,000 from the City's HO'js1ng
Reserve Funds, for adminlstratior. of sales and resales of the City BMR units.
Rp.-imbursement will be for act\Ja, time spoent. including an allowable for
indirect costs.
1n additicn, $293,995 of COBG funding is available for site-specific projects
related to downtown Single Roc-m O<:cupancy (SRO) hOUSing. Administration
expenses can be reimbursed from t~e $293,995, but a specific SRO proposal is
r-equired to be appro\led by the CO'Jncil before reimbursement can be me:de.
The time management reporting and the indirect cost acco~nting systems tr.,:
were put 1n place this year by PAHC will allow staff and PA4C to evaluate the
actual cost of senlices proldded. Income generated from past, present and
future activities funded with CnS{i funds must be returned to the City and
progrimmed for new uses consistent with CDSG funding procedures. Because of
these program income requirements. some form of these accounting systems will
be required in the future whether or not continued PAHC funding comes from
COBG.
ISSUES A~Q DISCUSSION ITEMS
The ?AHC proposa1 raises several issues that should ~e disc~ssed:
BeloW Market Rate (BMRI Program
PAHC has administered the CH.Y 8MR program since the pl"ogram's inception.
Sirlce the program participants are ger;erally not COBG·income eligible under
HUD guidelines. administration of the program is not an eligible CnaG expense.
Tne City corrected that ~missfon in 1991·92 and is now reimbursing PAHC from
Housing Reserve Funds for actual costs to administer the BMR program.
Consulting
One of the maj~r HUD findin~ was the status of t~~ relationship bet~een the
CHy and PA.HC. lhe problem was that the Cit; treated PAHC as a sole source
?r(}vider and did not require competitive bfddlng for some of the consu1ting
~rvices provided by PAHC to the (. ity. HUD staff cone' uded that a number of
organizations could provide the services that PAHC provides. and thus the City
needs to uti 1 lze a RequeEt for Proposal (RFP} process. before awarding a
(ontract for these types of services. If PAHC is to be considered by the City
is a consultant and is federally funded, then proper procurement procedures
ar~ required.
Providing consulting services to the City is the specific area that PAHC is
requesting einstatement of funding. In th€ past, PAH( has ad .... ised the C,ty.
other non-profits and for-profits on the development of low income housing and
the merits of proposed projects. PAHC has also been reimbursed by the City
for assistan(e in preparation and review of tile Hous.irlg Element of the
Comprehensive Plan and (H.AS (Comprehensive Housing AffQrdability Strategy).
CMR:36B:92
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HUO's Sa.n Francis.cQ Qff~ce ha'i irH:J;C3.ted tha.t even if appropriate procurement
procedures are followed, P,AJ1C w111 be in a C~r1f1 let of interest position on
specific development projects receiving fed~ral fU!"'lds, if P,Cl,I1C is reimbursed
by the City for consultant acti'o'ities such as re'Jiewing other appl icaf1ts'
propos.als) advising the CH.y or. the expenditure cf fUl\ds. artd prolJidi:-t9
contextual input into the Housin~ Element and (HAS. TMts would preclude PAHC
fr't1m being eligibie for use of fe·jeral fur,ds administered by the (~ty on any
PAHC projects.
Planning and Administration
One of the underlying issues is the funding of PAHC planning and
administration acti'iities. This 'nt1\.Jde~ such Hems as re¥'iew of the
multiple·family regulations, pr€paration of reports on the ffderal at·risk
housing unit.:> af1d employee housin91 sen-ing on Co~ittees related to SRO
housing and homeless issues~ and general activities associated with the
development of lD~ income housing. lhese items are ~ligib1e (DSG expenses,
but only under the 20 percent COSG prog~am administr~tion cap. The full 20
percent of program administratiorl funds is required fe:" the City staff
necessary to prope:--ly administer the CDBG program.
PAHC has toncef1trated their work in the lJr1iqt.Je atmosphere 'Jf Piil1c Alto. This
has not allowed for the de'Veloprr€:nt of a 1arger number of units, which
increases the potential for management fees as well as aevelopment fees.
Conversely, PP.HC has provided specialized advic'E! and counsel tD the-City.
Since PAHC is in the precess of hiring a new director-, it is important to tnem
that precise direction from the City be given. For example, if the City is
~ot goin9 to fund general planning and administration, it will be necessary
that PAHC reaS$~SS tn€ir role ~n th€ commcnity and in the region.
Use pf Housing Reserve Funds
PAHC is request;ng that Housing Reserve Funds b€ considered for funding of
their admjnistrat1ve costs. The guidelines for W~e of the Housing Reserve
Funds (attach~d) allow for t~o "Eligible Uses in Support of Existing
low/Moderilte Income Housing." Trrese C.re 1J Casts in sl.rpport of the City's
Rental Housii1g AcquisitiOrj Program; and 2) Reasonable expenses necessary to
administer the ~ity's Below Market Rate Progrdm or atrrer City-spof1sored
housing programs. Item 1 re1ates to actual costs associcted with the
acquisition of eXisting hoU'sing and nat general administrative costs. UndH
ihm l, tne City began, in the 1991·1992 PAHC contract, to reimburse PAHC fa;
actual expenses related to sales and resale of the BMR units. Sinca these
eligible uses are specifically listed under support of existing housing, the
funding source is the .esidential accolJ1"',t, whic.tI current1j ha.s $250,000.
These r~ulations are City policy and subj€ct to chang~ by the Council.
The issu~ is whether it is approprIate to pay PAHC's general administrative
costs from the HIJusing Resene Fund r~slde[\Ual arId commerCial acco\lnts.
1he~e accour·ts are funded by fees colTect€d from developer.£. in accordance ..... ith
Chapter 16.47 of the PAMC, ~Approva' of Projects ~ith Impacts on Housing"
'copy attached) and Program 13 of the Housing flement of the Comprehensilr'e
CMR,368:91 7/30/91
Page 3
"
Plan (copy attached). Staff has resl!n'atjon5 about the use of Hou~;f'lg Reserve
Funds for any admln1stratille costs, Admin1s.trative costs associated lfIith an
approved capital project may be appropriate, but not for general operating
costs.
Staff concern for tlsing /1ousing tl:EservE Funds for administrative costs also
extends to the administrotion of the BMR pro-;ram. ATternati~e $O'Jrces to USE'
of Hous'ng Reserve Funds, such as a processing fee collected at the time of
sale of each unlt, should be in~estigated,
City General Funds
PAHt general administratlve costs could be paid from General Funds. This
would require elther a specific al1oc~tion set aside for PAKC, or PAHC wDuld
be reQuired to ,ompete against other social ser~ice age~cies during the Human
Services Resource Allocation Pr~cess,
AnnL1i.l Funding Source
PAHC desires an annual and consistent funding source in order to proper1y
staff and budget for their offic.e. At this ti~e, PAHC is keeping track of
actual t~me spent on the Housin~ rnform3tion and Referral program,
administration of the BMR program, and pre·de~eloprnent slte-specific cests of
approved projects. In the comil"'J !Il-",..t.~<;, H;o= Cit~' and PAHC should have a
better idea of the cost to deli~er servic.es. Adjustments might be made in the
future for a set funding amount for BM~ and Housing Information and Referral
costs that would average expenditures over several years.
Effect on Funding
PAHC's operating budget for 1992·1993 is 5275,0:-0. Even if PAHC is able to
use the following City sources to the fUllest extent~ they expect to have to
use S22,OOO of their own c.apital to maintain operations. City funding
1nc1 "des:
Housing Reserve Funds: U~ to $40,000 for sales and resale of BM'R units.
Reimbursement .,il1 be based on ac.tual expenditur~s. Approximately
S35,600 ~as paid in i991-1992 for sale and resale of 24 units. If fewer
units are processed or Tess time is requi~ed to prOCESS units in 1992-
1993, the actual reimbur"seillent to PA.HC lWil T be 1 ess.
Hoosing fnformation and Referral: Up to $28,000 is availab1e from COSG
for a Housing Information and ~eferra1 program, This includes providing
information to income eligible hDt.I~eholds on hou~ing optioris, advice on
available housing units, information on subsidy programs and a~ailabl~
sources, referrals to 10c.al agencies and service as an advocate for
ind1viduals. Reimbursement wtl1 be based on actual expenditures. Since
no previous records are a~a,lable and the categories of items to be
reimbursed are still being e~aluated, t~e actual reimbursem~nt is not
Known at this time.
CHR:368:91
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Project-Specific Costs: Approximately S36,OOQ is ayallabTe for
administration costs related to ~cquisltion of the 8~rker Hot€l and
development cf a downtol'l'n SRO. The-s'2 fl,;nds must be applied for as part
of development pi ans for the proj.ects.
The maxi~um available from the City is S104,OOO, although PA~C does not expect
to be able to use all of th~ funds. Gi'len current market conditions, B~R
sales and rfsales could be 110,000 less than the maximum $40,000. Actual
reimbursement under the Housing Information a;:c Referral Program is unr.i.owll
but could be as much ii!S one-half of the budg2t~d amount. Oependir,g en project
pro9ress~ project-sp~cifjc costs could also be approximately ene-half of the
budgeted S36,000. Total reimbursement to PAHC cO'Jl-d be as 10 .... as 552,000 .. ith
the resulting need for PAHC to find another S28,OOO from non-City sources, not
counting PAHC's own projected $22,000 snortfall.
SUMMARY
A sUr/mary of the primary; ssues and staff comment s arE as follows:
ConsultIng: The broad-based consulting that h<ls been perforrr.ed by PAHC
in the past i~ probab1y not desirable to reinstate, consld€ring the
probable conflict of lntHest issues and 'l"€sulting loss for PA.HC of
access to federal funds administ~red by th€ City that result for
specific deilelopment project funding. Certain r€ports and information,
such as the reports on at-ri sk ur.i ts and employee hous ing, coul d be
r~imburs~d on a contract basis without the necessity for a full scale
RFP proces.s. provided that se'""eral contractors were considered and a
reasonable baSis made for the decision to choose a specific contractor.
PTanning and Administration: IMe issue is whether PAHC and the City
continue the relationship of the past years wherein the City provides
money to PAHC on an annual bijsis for planning and odministration which
i5 analogous to day-tn-day operatjons. Since CDeG program
administration funds. are not an available funding source, the funds
would haile to come from eitl1er the General Fund. the I"ousing Reserve
Fund or other PAHC sources. PAHC is arlticipating thct they will be
522,000 short of operating funds after the maximum addition of Sl04,OOO
in funding from City SO'jrces. If the City funding sources (i.e. CDoG
and Housing Re~erve Funds for BMR admirlistratior:J will not reach the
ma~imum available, PAHC estimates that they need in excess of 550,000
for planning and ddministration in order to balance their budget without
drawing on their capital funds.
Housing Reserve Funds: Housing Res€rve Funds are call feted from
developers for the express purpose of providing affordable housing
units. Staff does not bel ieve it is appropriate to us€ these funds for
PAHC's general administration. Moreover, alternative sourc~~, such as a
prncessing fee, shauld be consjdered for eacn 8MR sale and resa1e.
Annual Funding: In order to staff and b~dget properly, PAKC is seeking
stable and consistent funding. Staff is of the opinion that during this
CMR:368: 92 7/30/92
P.:ge 5
.....
o
fiS'il year, annualized funding amounts could be estab1ished for t~e BMR
Program and the Ho~~ing Information and Referral prGgram.
RECO!t1ENDAII ON
Staff recommends that the Policy and Ser~ices Committee reccmmend t~ the
Courjcil tr.at:
1. Housing Reserve funds sho\,,'ld not be used fo!'" additional PAHC
administrative activities; however, PAHC may consider applying
through tn! Human Services Resource Allocation Process for tity
i'ieneral Funds.
2. 5t~ff and PAHC exp10re alternative methods of funding BMR sales
and resales.
3. Tne City net enter into a consulting relationship with PAHC, but
should utilize PAHC for special contracts as the need arises and
according to the proper prociJrer,rent procedures of the City and the coec re9ulQtion~.
4-. Citjl staff and PAHC (:ontinu! to improve the Housing Information
and Referral program to allow for maximum reimbursement under the
COBG pro9ram.
5. Staff ar.~ ?AHC continLiE p""'nitoring of the time and actual c.csts of
se-rvice delivery, with ttl,:: gcal of ~stablishin9 an annual (ontract
amount for th~ BMR and Housing Information and Referral programs.
" ~. C ;>i;f;/£C'0,-£ ~.s ectfuliy S, Ubmitt;,d, .'
J ES E. Glllll~~
Y'nager Pl anning Pr{)jects
U~. 9)-
KENNET~ R. SCHREIBER
Director of Plannfng and
Community Environment
WILll'>'11 ZANER
City Manager
Attachments: 7/20/92 lett~r to William Zaner, City Manager, from
Sylvia Seman, Palo Alto Housing CorpDratiOI'1
Housing Reser¥e Guidelines of the City of Palo Alto
PAMC Chapter 16.47. Approva1 of Projects with lmpact~
on ~ous ing
£xcerpts from Housing ~le~ent, PaT a Alto Comprehensive Plan
(:c: Palo Alto Housing Corporation
COaG Citizens Advisory Committee
CMR:368:92
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7/30/91
Page 6
July 20, 1992
Mr. William Zaner
City Manager
City of Palo Alto
Dear Bill:
o.
'
Palo Alto Housing Corporation
Enclosed is the letter we discussed asking the Council to consider reinstating the
concept ofa consulting relationship with the Palo .... Ito Housing Corporation (PARC).
We also ask for funding, other than CDBG, III permit that service to continue and to
permit PAHC planning and adminislr.!.ti\'e costs to be funded.
As)'t>u recall. at the meeting or the POlicy and Services Committee, July 7, 1m, we
said that we would be sending such a let ... ". The Committee members jr,dkated that
the proper procedure would be m have the ma:ter agendized on the Council's consent
calendar ior referIallO them. Accordingly, we so request this of you, and would very
much appn.ciare it if the llem could be heard at the Policy and Services Committee
meding of August 4, 1992.
If you have any questions or wish addition~ information, please contact me.
Sincerely,
Sylvia 1. Seman
Executive Director
Enclosure
540 Cowper StrP.e~ Suite G, Palo Alto, California 94301. (415) 321.9709
1
'.' '.
Palo Alto Housing Corporation
July 20, 1992
Honorable City Coundl
Palo Alto: Califontia
Memben of the Council:
During the past year the Palo Alto Housir>g Corporation (PA-'!C) and the City staff
have 1>een struggling to fit cur long term practices to stricter intcIpretation of HUD
regulations so thai much of our acti"ties could continue to be funded from Community
Development Block Grant (CDBG) moneys. W. feci that, because the spirit of HUD
regulations derive from unIommate situations in other parts of the country, not
applicable to Palo Alto, our approach to providing housing does not fit the cum:n
HaD CDOO mold and C3n not be made [0 fit. As i! resuit, the ex:cellent 22 year
consulting relationst-jp between the City and the Hou.sing Corporation 15 in danger ('If
being sacrificed to compliance with byper-Io.::hnical federa! CDOO regulatioos.
".ir.e PAHC requests thar the Council refer to the PoliCY and Services Committee the
task of exploring with ut sources 'Of funding, other than CDBG, for our low/moderate
income bousing and planning and consulting activities. This would include a look at
1) whether any City restriction precludes the continuation of the oonlraCtual conSulting
relationship for PARC housing services and 2) whc!her the Housing Reserve Fund
guidelines can be amended I<> include certam PARC acti,ities as eligible uses.
Backgroynd
P ARC was created as a result of action of the City Council in 1969 10 foster and
develop low-and moder.lle-mcome housing in Palo AI:o. Since 1970, the PARe has
.served the City continuously as a housing consultant under a contract that has been
reviewed and renewed annually. PARe has served mary roles witll unique su=.
A. Development of Low/Moderate Income Housing Units
This has been a major !<)Ie for the PARC under its contractual scope of services. The
following projects have lJeen completed:
New HOUSing
Colorado Park Ap2I1ments
I141 Colorado Avenue
Webste, Wood Apartments
941 Webster Street
Number of Units
60
68
540 Cowper Stree~ Suite G, Palo Alto, California 94301. (415) 321·9709
o 0
Birch Coun Ccndomiuiums
2502-2: : i Birch SL an~ 302-362 Grant Ave. 40
TennanA~t>
4230 Terman Drive ,2
Cilifomia Park Apartments
230 I Park BcuI~--d 45
School Site Duplex Units
71 g. 720 Ashby Drive
3722-3724 Ortega Court
m-774 Talisman Com
922-924 Bauti.sta Court
Total 313
B. Ac:quisitioo and Rehabilitation of HOIlsing
The Rental Housing Ac:quisition Program (RHAP) is an exceller.t .xample o( what the
<XmSUl!lUlt relationship bas been able to achieve in the City. The idea was developed;"
the PARC and then inc.orpor->.led by the City as a progtam in the Housing Eement of
the ColllJlI"'hensive 1'1an. Under RP.AP. we have ac:quired. rehabilitated and ma .. ,aged
92 market-rate housing units. As tumOYeTS naturally occurred, we have achieved a
renantpopulation comprising 76% of very low-and low-income tenants in the
folJowin8 locations:
RnAI' Prpmtjes
Em Apartments
129 Emerson Street
Ferne Townhouses
101-131 Ferne Avenue
Emerson South
3067 Emerson Street
Curtner
300-310 Cu~er Avenue
Waldo
3039 Erner",n Street
Number !lfUnit5
II
16
6
9
6
2 ,_ ... _---
Pine Street Ho",,"
1259 Pine S <reel
0aIc Manor Townhouses
630 Los Robles A venue
Plum Tree Townhouses
3020-3038 Emerson Street
C. BMR Program
'-
. 1
31
lQ
92
'I'he P ARC, as consultant, worked with City staff to Cf'e2.te and implement the Below
Mari:et Rate (BMR) program through which nearly 250 moderate· income :ndividu.als
and families have been able to purchase homes in new developments. An addItional 30
BMR rental units have also been created in three market rate apartment oomp!exts.
D. GeneraI Housing Consultatior.
The City has utilin:d the consulting service.< of PAHe for a variet)' of subjects, ranging
from 31talysis of housing clevelopment proposals, the Housing Elements, the CRAS,
multi-family zoning regu1alions, the Palo Alto Medical Foundation housing
contribution and city employee housing, ID research of methods for protecting the
existing rubsidized housing developments at risk of conversion to market-rate housing,
preservation of the existing stOck of SROs and homeless issues.
As con.sultan! to the City we have also assisted other non-profit and for-profit
organizations to produce IlJw/moderate--income housing in Palo Alto, including Lytton
Gardens, Arastradero Park, Palo AlID Gardens and Sheri<lan Apanments.
The community has benefitted from this long-time pUbiiciprivat: partnership. First,
and perhaps most importantly, we have provided long term affordability for all P AHC
units. Each of our developments is attractive, ~1-Il'..all2ged and an asset ID its
neighborhood. The families we serve are able to live close to their jobs and obtain
excellent educations for their children. We have d-.-veloped expertise on City needs
through our consulting assignments. such as work on the housing e~ements. We
combine that with our knowledge of funding sources from federal, S[ate and private
progrnms to bring additional resouroes ID bear in Palo AlID. Ou, goals and the City's
goals are id=nticaI. and the City knows that it can trust and reI y on u.s to produce
quality projects and marage progr.uns .. ,d projects that meet City goals.
As we have developed ar J grown over the years and developed new funding sources,
the pel""...entage of City support we have received to run the PARe has diminished from
100% in the first few years to about 45% in the 1990·91 year. We think thi, is
3
'-:c----.-.-'---
o o
appropriate. However, we realize now that we ca!lnot continue providing the lcino of
3CfVices the Cit)' e:.tpects j and the Corporation wishes ro provide, if tne City!.s. fundlng
of our actjvities depends substanti, !ly upon HUD~<"trolted CDOO funds.
PTqc;nt funding SituatiQQ
Ci staifadvise that HUD', current interpretation of the CDW regulations will nOl
p<,.J'it the City to utilize COOO funds for consulting services witheut issuing formal
Requests for Proposa" (RFP), This apparently is to foster competition atId avoid the
appear..nce of -5'Wet..ILeart" deals. However, the RFP process, combined with the
CDBa fuOOlng cycle, would nct work well with most of the consulting task> that
l' ARC performs fur the City.
City needs for general consultation on housing can arise any time of the year and
cannot usually be planned six months in advance and placed in competition for CDOO
funding. Additionally, if the City needs advice about issues when: time is of the
=ce, such as potential conversions of the SROs, the P..FP process will simply be roo
lengthy to be useful.
A gr<at deal of time and effort must be expended in seeking suitable site< in Palo Alto
(or new housing. constrUCtion. OpportUnities to further our purpose of foscering and
developing low-and moderate-income hOlL!ing do net conform to CDOO funding
cycles. Actual development of. project can work withi.~ the COW process, but only
on the rare oc=ion when: 011 factors come together p<rfectly within the framework of
the process. O!l Liese occasions, PARC would e.pee! to apply for CDBG funds. O!l
thcne occasions when: it does not work, we would hope to be able to provide the City
with our ..pen;se and proposals irrespective of me CDOO process.
Likewise, availability of pro .>erties for at: _ "isition =ot be timed to coincide with an
RFP process or annual. CDOO allocation. The P ARC pride. it",lf on being aware of
good opportunities when they occur. The City would lose those opportunities if they
must be hostage to a lengthy process. Sometimes the approach appropriate in Palo Alto
for acqui5ition of a property, although highly suc=sful in providing affordable
housing to members of the community, would not comply with HUD regulations.
For example, the 1991 purc.'1a.<e under the RHAP program of Oak Mar Jr Townhouses,
the 33 unit apanment building at 630 Los Robles Avenue, would ha-.' been impossible
under =t HTJD regulations. The property was no:; eligible for CDBG funds
boca ... all of the resident families had incomes abo,e CDOO eligibility levels.
Accordingly, we requested Housing Reserve funds for the acquisition, stating that in
10-20 yean as over·income tenan[.S moved out we would replace these market rate
families with those of very-low or low-income. Appro~imately one year after the
purchase, the Housing Authority of Santa Clara County announced new funding for the
Section 8 Moderate Rehabilitation Program. It had been several years since this
funding had been available. We h"e juS! been infomed that our application for Oak
4
•
:i&
, .. ". ~ . ~
~ " .... :
--"".-" ",~'"
Manor has beer. selected in the competition for funding. As soon as rehabilitation work
is complela!, we «peet to be able to serve 19 ofl11e 33 hOJseholds under this rental
",bsidy program. The ability to act promptly and with flexibility provided a valuable
h"using asset to L"le City and made it affordable more rapidly without an y HUn
mquired re]o;atiOll expense.
Fonncr:ly> a pomon of the CDBG funds allocated to P ARC covered administrative
activitie.;, such as staff time necessary to make a proposal to l11e Cit) for a site for a
new development or ii RHA? apartment complex a~quisition. However, in view of the
increase in City staff expenses to monitor a.nd supe ..... ise CDBG activitie-.s, there are no
longer any administrative funds avaiWlle to PARC under the "cap" BUD allows for
this category.
Instead, some of PARe's existing activities are being -retrofitted" to other COSO
caIo)!ories, The approved $28,000 of CDBG funds for 1992-93 are allocated to cover
the estimated costs for our information, refe.rml and housing co!.mseling services.
'I'hrough these services, PARe provides information to low-income peopl~ about
'waiting lists for subsidize<l housing. The CDBG Ad,;sory Committee suggested we
amplify these functions through extensi .... e out-reach. Vle question the logic of
expanding this activity simply becat.:5.e it is eligible for CDBG money, because we
believe that the goals of the City, the PARC and even BUD are better served l11rough
funding of our activities that create new housing rather than new waiting lists.
btensive records must be kept to justify the information and referral activities in order
to obtain CDBG reimbursement, but should more than the allocated arnount be spent on
the activity, the PARe would not be reimbursed for the excess. Likewise, should less
Ih.an the aIIcx:ated .mount be spent, PARC would have to finance the resulting
deficiency in l11e amount of CDBG income we had budgela!.
The PARC oporating budget of $275,000 for 1992-93 assumes th, continuation of
consulting services as we have ~Dnducted them in the past. Without funding beyond
the S28,CXJO CDBG amount, we 'Will need to use capital funds to the extent of about
$58,000. We do not feel we ca." justify or s',stain such a drain. Even if CDBG
funding is increased by $36,000 to incl'Jd~ activities in the "pcx:;l" such as acquisition of
the Borre and development of a new SRO, PAHC would still have to use
approxlmately $22,000 of capital to maintain operations. Since PARe's operations
require staffcontinuiry. we need to have assured annual funding SQ'.,jrces and amounts
in order to employ and retain qualified personnel.
Dl'ring the course of this pasl difficult year, we had the opponunity 10 give a HUn
official a tour of the varied housing accomplishments the City has been able to achieve
through the continuing relaLionship with the PARCo He was very impressed, and
expressed regret that CDSG guidelines do not permit t.i.is kind of straightforward
relationship to be funded. He hoped that other funding would be 5eCllred to continue
the sllcce.ssfuI effons in the ccmmunity.
5
o
Conclusion S and Rccqrn mendatiou
A knowledge of the community's goals as a whole and a sensitivi<y to neigh'borhood
concems are critical in (lorder to be effective in creating affordable hOusing tr.at is
appropriate in our community. HUD's fonr"" does nO! fully appreci2.<e that dynamic.
While rules and regulztians may prevent bad things from happening, they also prevent
good things from happening, make it impossible to respond to rapidly changing
situations, and build wasted time and effort into the organization.
The pmblem of providing affordable hO'JSi."g in Pilo Alto will not go away. The City
bas expressed its commitment to worlting on the problem in its Housing Element in the
Comprehensive Plan, tile ("HAS and other plannlng document', We believe the broad-
based COI\SUltin~ =gem between the City "'.d the PARC has produced e.«ollent
results in devel ?ing and fostering low and moderate inC<lme housing in Palo Alto, and
PARC is ready, willing and able to continue that special relationship SO long as the
City desires and is able to finance its fair slla.. ... of the costs involved. The ongo;"g
CitylPARC consulting relationship bas been a force enahling Palo Alto to be in the
forefront nationally in hOusing issues.
We ronclude that it is impractical to tap CDBG funding for the kinds of consulting
services PARe has provided to the City in the past, in view of the restrictior-.s now
governing the allocation and use of CDBG f'.l."lds. We ask for policy airection
~ the continuation of PARC's broadly-based housing consulting services to the
City. We also ask for exploration with US of other sources of City funding, such as the
Housing R.e:s,er./e, that CQuld permit funding fur consulting, planning and administrative
activities for OUT low-and moderate-income housing programs and projects.
Sincerely,
FaJo Alto Housing Corporation
~~~L ;;O~h Marti~, Jr.
President
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P,O. IClX lOBe
',IolO .IlTO, CA ,l).!):;
RESE~YE GUTDEllH(S
The-Hous;n9 Reserve-(t.'le Re.serv~) is iii separdte C~ty fund set csi~e for-the
specific plJrposle of assi5tiJig in the dev~lopt:"1C'!it of hnusing that is afford.!Ole
-tc _low ,IIooerate and' lIiddle-~n::ome famiJies and.in aSllsting in the housi ... g
no!eds ~f 10\0' otnd IfIOderate in(omE.: persons. All monies ::Orltl"'iDu':ea to the
Reserve l:nd interest ur . .,'fngs accn'::-c! shall be used s'Oleiy f~r these purposes,
subje.::-t .to gIJide1ines st"t forth be1.,1,.J+
The Re.serve i.s made up of twO account:!;, the "l"dustrial-CoJillTicr-ci"al" and the
"Resldentla1-His.::ellancous" accounts. f.lonies rec~ived from i na .... stria 1 j!nd
cOlmlErdal developers', pursua:n to Chapter 15.(7 ';If the Palo A1r,0 /·Iunicip.al
Code"*', are deposited by the Cfty F'inance Oepa:"'tment in the Ino'ustrl~"
Commerci~' account. "Iol"ties rec.eived from reSidential developers, ;,,-lieu of
providlJ1St housing under the City's Be 1010,' Mar~et Rate (8HR) Prog'ram {Program l2
of the Hou.s1ng Oemel'lt) , are d-eposlted by the· Flroa",ct! Oll;partment in the
Residenti~l-Misc~naneous account. ThiS secoi"ld account also inclwdes monies
from miscellaneous .sources that are i"tended for housing purposes (e.~.,
Mortgage Re'llerlue Bond fee payment, ~ebster Hood payments. ind Co'ly repayment of
loans from the Reserve.
(ligible U~£'5
The Reserve 10'111 be used to reduce t"e cost of h~'..:sing te levels .... hi" are
affonJable to low, ~ocfer=te 2nd middle income f~milies, as dt'fined in the
C.ity's Compren.ensiYe Plan. A preference .... ill t.e !j!iven to projects ~itl'l hOUSing
for fi!miles 'Wit:") minor children, hO~/e .... er, this preference doeS .not prec1ude t~c
use of funds 'f~r other t)'pes .of ~,ousing c:ffcrCat;.le to tile lQ:iI. moderate-and
l1idd1e incoll'.e. Bonies that have been credited to the IndL.'str'ial-Colr..rnerc:ial
account If/llst be us-:od to SlJPP{lri: the constrLoction of new .'lousing de .... eiopr.-..ent.
vhereas nonies credited to ttle Resioential-1Hsc:e11.a.neaus i!ccovn" may be usell
for eitner new or" existln.g Mousing. EliC;ibTe uses jnclud'!':', but are not ~ilil;ted
to, the fClll~in9;
Eligible Uses in Support of Ilew lOloJ/i'!ode1'"c te/Hidcile Incol.:e HOl!Si'r,g Develop~ent
1. Purchase of land or ~fr rjghts for-resale to 'fvelopers at a redu~ed cost
to f.acilitillte !1ousin9 development fel" 100/, r.;od'er.a.te and mioale incofi.(!'
llouseh01ds;
2. ReeJuction of inte:"est r-l.tes for cor:structiol'\ loc:ns or permanent firl.1nc:l11g
u.s~d' tly oe"vel!lper-s or purchc!sC'rs Cor 10'''. 8IOCler-ate and middle inco.r.e
housi n 9:
-tnc:ll1dlng pe)'oents required pUl"5i.Jant to the Cc 1; fornle:. t.n\'ir~nr.l!nal OUi!lity
),ct prior to ~ni!ctra':'tlt cd Ch<l!pter 15.(].
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Pi'!ae!,t of predl'Ye'1o)lCl'lel'lt and dtvelopment CC$~SI !nc1udins
u;oc.fat2d 'With obUining MOT.tgil.gl!' Revenue Bond' f1 nanc, "g; and
the cos ts
4. PlYftnt of off-site costs dirll!'Ctly re1ating to low, moderatl!', an;1 Ili-ddle
inc(lme housing deve1opme.,t {e.g_. uti lity connections~ road 'mprove~nt5).
El1,i~h Uses in Support ()f rxisting Lo",,/Hoder-i!a Income Housing
1. Costs in support of t~t C;~yI5 ~~ntal Mousing ~cqui$ition Program; and
2. Re"asonilble ~xpi!nses necessz.ry to administer the City's BeloW' Karket Rate
P.r~jir.a1D Dr other City-s!,onsor-e~ l'Io:.r~inS' programs.
Procedures
R1?quest for vse of the Reserve funds shall be submitted to the City Manager
for review and recorrmendation to the Ci ty Council.
A Te~uest for fur-dillg should provide the fono""fng minimum infor~tion:
1. Size of loan or 9~ant r~quested;
2 . .It description of the propos~l to be funded and th~ organizatiolls involve<l
in tbe project. Fublic,benefit and relevant Co~rehensive Pl~n Housing
policies and programs should be identified;
3. Identification of tfle numbi!r of 10 .... ~<lerate~ and" lfJiddle income persons to
b.e assisted and the spedfic in,ome range of those as~i.sted;
.fl. Re.a.ions why a grant~ rather than I "ICian~ is requested (if aPPlicable);
S. Identification of 10an rate and" tE'rns~ security or c:cllc:teral, and source
of repayment funds (i f app1icatlle); a,()d
IS. ldentific.ation of leverage achieved throug" City grant or loan.
Audit
At the cl<lse of uch fiscal yei!.r~ the Director of Finance and' the Director of
Planning and COllmJnity Envir~r.me:nt shall rf!p~rt on acti\lity durin.g the pnv"iouS·
year (deposits and t.rans.fejs.) and available funds. The City Aw1jitof"'S O··'ic!
shall periodical1y exa ... !ne this repc~t and all HO\lsing Reserve funds~ and shall
report en the resulU of thfs e.xamina tion.
Guidelines revie''''ed and approved lly the Palo Alto:! City C.our'lci'l on Fe'br~ary J,
1965.
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AP)OVAL OF PR01ECTS II>. t 7 .010-1647.020
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Chapl~ 16 .• 7
APPROVAL OF PROJECTS wrm IMPACTS ON HOUSING
Sections:
16.47.0 I 0 Declaration of ,oal IUId pU'l'ose.
!6.47.020 Applicability.
16.47.030 Exemptions.
16.47.040 Housing nquiremenl
16.4 7 .050 Penalties.
16.47.060 Severability.
16 .• 7.010 Declantion of soa! and purpose. The goal and purpose of this
chapter is to lessen the shortage of low-income and moderate-income
housinS in Palo Alto by ",quiring developers of luge commercial and
industrial projects, lS a condition of using land for the privileg' of devdop
ment, 10 contribute to programs that increase the city's low-income and
moderate-income housing stock. (Ord. 3560 § I (pan), I 984).
16 .• 7.020 Applicability. This chapter 'hall apply to the follo .... in.
developments, except those exempt under Section 16.47.030:
<a) Any new gross square footage of two thousand five hundred gross
square feet or greater on a site once the gross square footage of nonexempt
uses on I site has reached twenty thousand gross square feet:
(b) A."1y gross square footage of two thollSAAd five hundred gross
square feet or greater on a site that is convened from"" exempt use to a
nonexempt use once the gross square footage of nonexempt uses on a site
has neache!! t .... enty thousand gross square feet:
(c) Any new gross square footage in .. development, or gross square
footage that is convened from an exempt use to a nonexempt use, if such
development removes from the city"s ilousin& Sloek two or more legal dwell
ing units that have last been used for hOllSing:
<d) N ..... gross square footage that repiaces n"nexempt u><, shall !lot b.
conside~d Voss square footage for the P"'l'0ses of the ordinanc. codified in
this chapter. ~R.pLaces" melUlS that the new gross square footage receives
design approval pursuant to Chapter 16.4B .... ithin one year of the previous
nonexempt uses being demolished;
(0) New gross square footage in • development used for (I) an on-sire
ca(,t.ria. reoreational facility, and/or day care faoility. to be provided for
. employees and/or their children and not open to the genera) pub!: •. or (el a
hazardous materials storage facility shall be exempted from the requirements
of this chapter. Ii any squ ..... footage exempted under this subsection (e) is
converted 10 I nonexempt use, the entire amount of gross squart foota~e
conven.d must meet the requiremenlS of this chapter, regardless of the
numb.r of square feel convened. (Ord. 3597 § l. 1985: Ord. 3560 § I
<part). 1984).
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16.47.030-16.47.040 OBUILDING REGULATiONsO
16.47.030 Exemptions. The foJlo .... in' uses .• s defmed in t'ille 18 of Ihe
Palo Alco Municip~1 Code, ~r. exempt (rom thi> chapur:
(a) Residential uses:
(b) Churches:
(el CoUegi's and univenities:
(d) Commercial recreation:
(e) Hospitals ~nd conv~lescent facilities:
(n Private ci'Jbs,lodl!es. and (ratema! organiz.alions:
<I) Private educational facilities:
(h) Public faciIities.(Ord. 3560 § I (part), 1984).
16.47.040 Housing requirement. (a) Developments must provide the
number of low-income and moderate-income hOU5;"Jl units detennined by
the Connula set forth below or provide an in-lieu ree as set forth in Section
16.7S.040(d) below:
Gross Square Feet x .017 = Number of units required
350
(b Itis (O""ula is based on the reasonable approximation of the
L"!lOunt _, housins necessary to 5al:sfy ten percent of the demand for low to
moderate-income housing based on the averase number oflow to moderate
income employees generated, per average household by the .verage
commercial and indu.!riaI development.
(c) Housi:".g units may be sold or rented 10 low-income and moderate
income buyeTS pursuant to tlle city's below marleet rale (BMR) program and
may be provided either on the site of the proposed development or off-site.
If the uni, is provided on sile, its desisn and location shall be part of the
architectural review application of the entire proposed development. If It-..
urJt is off-site, the director of planning and community environment must
approve the size I condition and location of the unlu.
(1) A housin, unit jf sold, shall be sold to the ciry, or city's designee.
at the cost of construction and fmancing. excluding land costs and profil:
provided, that the cost shall not be greater than that affordable to buyers
under the cUrren! income limits for the Palo Alto below market rale
pro~m, published yearly by the department of planning and communiry
environmenl and on rue with the ciry clerle.
(~) A housin, lInil. if rented. sho.ll be rented for a minimum of fifty
nine years subject to Palo A110's below market rate rental progr.lm. or for a
lesser period: provided, that it is sold in accordance with subdivision (I) of
this section.
(3) A below market rate a,reement shan b~ entered inlo between the
city and the developer at the time of design approval of the devolopmen!
pUTSuan t to Chap ler I 6,48,
(d) If housmg units at. nol to be provided. the de .. loper sholl make :In
in-lieu pa)'ment to th. city's s;>eeial housing fund of fifty thou~nd dollan
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APPROYAL. OF PROJECTS
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16.47.050
._~ per required unit as • reasonable approximation of the cost of constructing
an av.i-a~e ~Iow marice! rate unit. This sum is the equivAlent of two dolla"
and fOrly-thre( cents per square foot of proposed development. The firty
. thousand dolla" per unit shall b. adjusted annually from the dale of
approval of the ordinance ~odilied herein by the percentage changes in the
Consumer Price Index, ail urban consume" inde", for tr,e San Franciselr
Oakland a ..... and ~onseQuently the two doUaf$ and forty-three cents p<r
square foot may fluctuate.
(e) Half of the in-lieu payment must be paid within tell calendar days
of the developer's receiving the first grading or building permit for a project
Or the permit shall be nuD and void. The remainder oi the payment must be
made before the developer receives a use and occupancy permit for the
projecL For a phased project, payments may be made for each poroon of a
phased project within ten calendar days of the fITSt gradin, or building
permit for that phase and as the certificate of use and occup.ncy for that
phase is applied for.
(0 If the formula as applied 10 a proposed development results in a
fractior.. or a Wlit. the developer shall provide for the fraction of a unit either
a whole unit or a prorated in-lieu payment, based on the above fcrmula.
(J) At the time of • developer's application for architectural review
pu=ant 10 Chapter 16.48. or. if no architecrural review is necessary, at [he
time of an application for a certificate of use and occupancy. the developer
must notify the director of planning and community environment whether
units or an in-lieu payment wiD be provided to the city. The housing require·
menl shall then be placed as a condition on the director's approval of t.'Ie
project pursuant to Chapter 16.48 or as a conditicn on the issuance of a use
and occupancy permit by the division of inspectional services.
(h) Exception for Mixed Use Developments. in a mixed housing and
commercial or industriaJ development, the developer's housing requirement
pursuant to this chapter and the developers below market rate housing
reqUIrement pursuant to program 10 of the housing element of the compre·
hens;ve plan both 'should b. calculated. The developer shall he required to
meet onlYlhe larger of the two requirements. (Ord. 3560 § I (pan), 1984).
16 .• 7.050 Penalties. (a) All remedies prov,ded for in this chapter shall
be cumulative and not ex elusive.
(b) Violation of any provision of this chapter. i:r.cludinS. but nOt
limittd to. converting an rxempt 'Use to a nonexempt use without !ender.ng:
the appropriate housing mitigati<ln to the city, is a ,,,isdemeanor punishable
as provided in this code.
(c) Each person or entity is guilty of. separat' offense for ."ch and
every day durinE any ponion of which any violation of any provision of this
chapter is commi!led. continued or permilted by such person or entity and
shoJI be punished acoordin!'iY.
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16.47.060 BUILDING REGULATIONS ..
(d) Any person or entity violatiIi, any provW"n of this chapter. in·
cludinll. but not limited te, convertin, an exempt use to a nonex~mpt use
wit hot tendering the appropriate housing mitiialion to the city, may be
liable civilly in a sum not to exceed flYe hundred dollars for each day in
whi,h such violation occurs.
(0) Pe=ns employed in the fonowin, designated employee positions
an authorized to exercise the authority provided in Penal Code Section
836.S and an authorized to issue citations for violations of ~ chapter.
chief bundm, OffICial, assistant c:h.ief buildini offICial, and ordinance com·
pliance inspector. (On!. 3608 § 2, 1985). .
16.47.060 Sevetability. If any provision or clause of this chapter or the
application thereof to any penon or circumstance is held to be unconnj
.tutional or to be otherwise invalid by any court of competfnt jurisdiction,
such i.,.a1idity shall not affect other chapter provisions, and clauses of this
chapter are declared to be severable. (On!. 3608 I I. 1985; ant. 3560 § I
(part). 1984).
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Renta1 Hous1ng
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EXCERPTS FROM HOUSrNG ELEMENT
P~LO ALTO CO~PRE~ENSrVE PL~N
Policy Ii: Maintain at ltut the pr~sent ntHr.ber of {!IIJrtJ'ple-fiurJiy rerta7
units w,h1'h rt'orking to increase the cverai1 su'pp7y of renta7 hOIJsing.
Program 8: Con.tinue the adopted ccndominiiJm con .... ersion ordinar.ce,
Pr~grarn Responsibility: Planning Divisio~
Most tlf the 1ower-ccst 1'10us1.,g L, Palo Alto ;s rer.tal housing, Between 1968
ind 1974, nine apartment projects containing ,31 units were con .... erted to con
dominiums, thrEatening to reduce the renta1 housing supply substanti1liy.
Conversions in Palo Alto had a d;s~lacement rate of 82 p~rcent. according to a
1974 survey. Most tenants were forced out b~cause of ~igher costs, becatJs,e
the monthly carrying cast of' a condcminlum is almost always higher tnan reM
on a comparable un; t, A few tenants mo .... ed out because, at that t -irne. t"ey
would ratner rl:!nt than own. A 1974 condominium conversion ordinance greatly
raduced the number of conversion applications until tW\l hrge a~pli<:ations
were received and approved in 1980. Neither of these two projects, however.
was ultimately converted. The 1974 condominium conv~rsion ordinance was re
placed in 1981 by "a new ordinan.ce which allows an app1ication for conversion
to be filled only if thoer-e is a CitY\ro'1de: renta1 vacancy rate ..... hich exceeds
three percent, or regardless. of the vacancy rate, if:
C One bel ow-mar~et-rate renta1 unit is provided for every two non
bel~w-market-rate units to be converted.
o The tenants of at 1 east two-thircs of the rentaT units consent to the
conversion.
There have been no condominium convErsions since this ordinance became law.
Progrdll: 9: For any residential development in multiple-fi!.miTy zones which
caus.es tre lOSS of rental housing units. subchvisicm approval (including
condominium maps) may be granted if iny twc of the following tnr€e circum
stances are-met:
o The project will result in .;; si~n;ficar.t net gain to the City housing
supply (defined as 100 percent more units than tho~e prel,'iou:sly ex.
isting on the site) and com~ly with the City BMR program;
o The number of rental units to be prcvided by the projects is at least
equal to the number of existing rental units;
o Not less than 20 percent of the units provided are BHR units.
Program Responsibility: P1anning Division
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nis program establ ishe, an ,cceptable tradeof{ between the number and type of
ne-w units in a condominium subdillis,cn and the loss of nr;tal units. The
first condition provides only for rede~e'opme~t witnin existi~g zoning 1~ve15.
The fntent of this (ondition is to d!sccurage dem"olition ':Jf renhl units when:!
there is an ;nsig~ificant net g~in in units.
Progralll 10: The C.ity should discourage ccnverSlon of lands designated as
residential to non-residential uses.
Program R!sponslbil1ty~ P1 annlng O~vision
Afford.bl~ H~using
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Policy 7: Encourage and foster the development of neill and existing housing
units I.fford,b7e to' 701f-, moderate-, and midd,e-income flDlJSeho1ds. especia77y
those househo7ds ~ith chi1dren.
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Tne City should 'IIIor;'. with nonprofit housing or: -zations and the local
development cOl7llUn;ty to ensure that ~11 affordable ""using. including fa-'y
housing and units for seniors on fh::= ~ incomes, remains affordable over t .e-.
These units, for either ownershiD c· rental, should be dispersed throughout
ttle City_
Progrlll 11: Continue support fer the Palo Al to Housing (.orporaticn in the-
provision of 'OW~, moderate· and middle-income housing, with pri:nHY em~·
phasis on ttle 10\0'· and moderate·income sectors.
The Pilo Alto ~OUS~;,3' Corporation was established in 1969 to encourage and
develop low-and moderate-income h01Jsing in Palo P.1to. Jt is an independent~
nonprofit organization wl'lo~,e board members ser· .... ! without pay. In addit;on to
its development activities, the Corporation has prc/fded consulting service1
en h~u:;ing to the City under contract since 1970. The programs and servic.es
of the Corpo'!"'"at~~n ha'lle been parth1ly funded by the City'"s Community Deve~JP~
ment Slock Grant Program.
The Corporation has sought to use every means to produce housing at .lower
costs lIIithout sacrificing QUill itt. Construction and permanent financing at
lowest available interest rates, reductior~ of land costs through la.nd banking
or oth-er means, utilization of a11 alla,l1ab1e subsidy programs~ and development
by experie~ced nonprofit hous;ng organizations can combine to yield affordable
housing.
Projects serving low~. moderate-and midd1e-inco~e households developed by the
Lar-paratian include Colorado Park. Webst£:T \oiQod, Birch Court, Terman Apart
ments and the Californja P,rk Apartments (refer t~ tabl~ on page 17). 1he
c.orporation also OW'nS and oper-ates the Elm, Ferne, t.merson S~lUth, Curtner ant
Waldo Apartments, and a sin91e-familj1 home on Pine Street. The Corporation
has also developed eight duple~ units within new subdivlsions at four surplus
schoo1 sites.
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Program 12: To make ~ultiple-family housing attractive f~r famllie~ with
children, such housing should provfde suitab~e open space areas for chil-,
dren'.'§ plaj.
The CHy's revised multiple-family loning reguhtions inc1ude ;""€quirements for
adequate common -open area 0:1 the ground level is .well is minimum private open
areas. The regulations ir.clude landscape and design guidelines to-anure that
open ar!as are botn functional and attractive,
Progra.m 13: In housing de ... el cpments of three or mor~ un; ts, not 1 ess than ]0
~ercent of the ur.its should be pro,dded at below-marl:.ft rates to 10w-and
moderate-inco~ fa,m1l1es (for projects of three to nine units a. prc-por
tionate in-li~u payment will b.e accepted). For each BMR unit provided
Oller and above the requirement, a developer sl'lal1 be permitted to bunt::
-one additional market-rate unit uo to a ma)(imuTn unit increast' over the
ailowable zoning of 15 perc'5!nt~ 'and consistent with all other zoni1'19
requirements.
~rcgram Responsibility: Planning Di~ision. Palo Alto Housing Corporation
The City of Palo Altcls BMR Program is intended to increase the housing supply
for individuals and famili!s who tiave 10w-and moderate-incomes. As land
available for nOl.:sing becomes mere scarce, cfJntributions toward the BI"IR pro
gram will be needed fr(1r:t beth hT'ge and small housing projects to increase the
number of BMR units. Since the be9inning of the program in 1974. 153 for-sale
units and 30 rental uniots ha'./e beer: occupied, and another 10 units iave been
committed to the program (refer to table on page 19). The primary objedive
is to obtain actual housing units rather than equ~valent cash. Occu~ancy far
BMR units is determined according to City Council-established guide1ines from
those on a numbered waiting list, maintained for the City by the Palo .A.lto
Housing Corporation_
The initial selling price of BMR units is bas~d on what w~uld be affordable to
families whose incomes are no nigher than 100 percent of the median income
reht!d to fami1y size, as established from time to time by HUD for Santa
Clara County (BMR Income Guidelines). Because continued aff'Jrdabnity is a
major goa' of the pr~graml deed restrictio~s provide the mec~anism to contrQ1
the resa1e price t~at insures t~at succeeding buyers cil.n al so afford those
units. Consequ!nt1y. 212 families ha¥e been s!rved since the inception of tne
program.
eefore acceptance of plans for review by Palo Alto City staff, a de¥eloper of
a complex of three or more reSidential ~nits sho~Td agree to one or a combina
tion of the following alteTTliltives that are listed in order of priority. Pro
vision by the developer and acceptance by the City of the BMR arrangement will
be part of the ap~li,atjon for de¥elopment.
On-Site BMR Unlts
For each ten units. deY~l c~ed. not less UtiI,n one of such units should be pro
vided as a BHR unlt wlth,n the d!ve1opM"t. The price for such BMR units
should b~ establiShed. at the time of appronl of the tentative subdivision map
by the CIty. The prlce should be based on the estimated direct construction
and financing east of the 8MR unit (exc'wding land cost, ~arketing cost offsi~e improvements and profit). but in any eyent. shou1d be co~sistent with the
prH:e r"ilgfS allowed by the Bl'tR Income GlJidelines irt effect at the time
Fractions cf required BMR units shculd be handled by equivalent in-lie~
payrn<!nts.
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fDr each BHR unit provided over and above thr requirement, a developer shall
b6: perllUted to ~1Jl1d otle additiDnal lnarJc:et·Tiite unit. However, in no ever.f
sh~Tl the total number of units in a development be ~re than 15 perce~t over
the n.umber otherwise ,1loWE:Q by l_oning_
Off-Sit. 8KR Unlts
Provide on or beforE ctlmpletion of any development of te~ or more units not
Tess thin one BMR ur;it eLOI)ewhere in the City fer each fltne units deve1oped.
These units may be flew or existing and lIust be aPP"o\led by the City. taking
into c.onsid-ent1on.sut'" factors 15 size, 1ocaticn, amenities, ilnd condition.
In-Lleu P.,.ent. Ba,ad on S.les f,ic.
The City will consider an in-lieu pajment alternat1'11e to actual units, for
pr-oje,ts of ten or more units, only if the de\lel0.Der substantiates that the
direct construction and financing costs of the BMR units (excluding land cost,
markettl"lg cost, off~site improvements and profit) exceed the selling prices
.11o....d by the BltR Income GuideHnes.
The 1n-1 ieu payment for projects Df tIn or IIOre units is to be f'ive percent of
the actu.l sales price of each unit ,old. The piyment will be made to the
Clty upon the .al. of each unit ir. the subdivision.
In~lieu payments for fractions of BKR 1 • .lnUS will be deter~ined:
o Disr.garding Iny bonus ~nits.
° As a pe,centage of the s.lling prlce of .ach of the unlts for which
no BMR unit is provided, by the followinS ,.te,:
Nl!mb~r
IN-liEU FEE CONTRIBUTIONS
FOR FRACTIONS or BltR UNITS
of Uni ts Percentage
10+ S
9 4.75
8 4.5
7 4.25
6 4.0
5 3.75
~ 3.50
3 3.25
Rate
If the de\lel~per retains any compieted unit as a renta1, either for its own
account or througn subsidiary or aff1·~jated organizations, the -;T1-1ieu payment
for such unit should be negotiated betwean the deve10per and the City.
Equlva1ent A1ternat1ves
The City may consider reasonabl~ equivalent alternati~es to these guidelines.
S1tes L.arger than Five Acres
Developers ... ho build on siti!S larger than five ilcres are expected to provide
more than 10 pe~cent 8MR units and/or to set aside land for lssisted nousjng
to be buil t by others. Appropri ate BMR c.ontributions in such cases shall be
indi\lidually negotiated between the de\leloper and the City.
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F 0 101 'O~~C
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HOUSING RESERVE GUIDELINES
FUcose
T~e Housing Ro..serve (the Reserve) is a separate City fund set aSIde for the
spuifi-: purpose rd issistfng in the development of housing that is affordable
to lDW~ inOderatei:"ld middle ir.come (amil ies ind in assistir,g in the housing fleed.:;
cf low and moderite income persons. All monies contributed to the Reserve and
interest earnings accrued shall be used solely for these purposes~ subject to
guideline, set forth below.
The Res~rve is made up of two accounts, tne "Jndustria'~Ccnrnercial· and the
-Residentlal·Miscellaneous" ac(ounts. Monies Ti!ceived from industrial and
comnercii.l developers, pursuant to Chapter 16.47 of the Palo Alto Municipa1
Code·, are dep~s1ted by the City finance Department in the rnaustr1al-Commercial
accDunt. Monies received from residential deveTopers; in-lieu of providil"lg
housing u!1der the C1ty l s Below Market Rate (BMRJ Program (Program 13 of the
Housing Eleme"t~. are depOSited by the Finance Department in the Res1dentia1-
Miscellaneous ac~ount. This second account also includes monies from
m;scel1aneous sources that are i~tended for housing purposes (e.g., Mortgage
~e~enue Bond fee payment, Webster Wood payments, ~nd any repayment of loans from
the Reserve).
[]fgible Uses
Tne Reserve will be used to reduce the cost of housin.g to h'llels tha: are
affordable to low, moaerate and middle income families, as defined in the City's
Comprehensive Plan. A preference will be gtven to projects 1I/;th ~ou5;n9 for
families with .inor children, however, this preference does not preclude the use
of fuods for other types of houslng affordable to the low, moderate and mlddle
income. Monies that have b!en credited to the Industrja~,-Collll1erc;al account must
be used to support the constr~ction of ne~ housing development, ~hereas monies
credited t(l the Re:.idential-Misce'laneous acco'unt may be used for either new or
existing housing. However. no-intuest loans !"1ay be lJ1ade on a case-by-tase basis
as determined by the City C~un'il from the Industrial-Commer~ial account to the
ReSidential-Miscellaneous account to support the acqvisition of existing housing
to be used for 1~ and moderate income families. Eligible uses include. but are
not lllit.d to, the following:
fl'!gible U:;es in Support of Hew low!~oderite(Midd_lL1ncomg. Hovsino D_eyelopment
l. P~rt;hise of lan.d or air rights for resale to de .... elopers at a reduced cost
to facilitate housing development for low, moderata and middle income
households;
• Includino !pavmen.ts required pursuan110 the California ErlVircnmental quafitv Act prior to endctmeIlt
of CNpte! 16,47
JI:\iG,<~,g
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2. Reduction of interes.t ratp.s for constructi.on loans or ~errn.anent finar.cing
used by developers or purch.uers of 10111, moder3te and middle income housirlg;
3. Payment Df pre-devE=lopme~t and development costs, including the costs
Issoc1 ated wi th obtain; n9 Mortgage Re' .. enue Bond fi nancit!9 j and
4. Payment of off·s1te co~ts directl,)' relating to low t moderate, and middle
income housing dev!lop~nt 'e.g., ~t1'ity connections, road improvements).
[l isible USU in Support of ExLstirlg lp'r' '''Ioderate Incgme Housil"g
I. Costs in supPGrt of the City's Rental Housfng ACQu,sition Program; and
2. Reasonable expenses necessary to administer the C1tjl~S Below Market Rate
Program or other C;t,)'~Sponsored flousi ng programs.
~LJres
Request for use of the Reserve funds shall be submitted to the City Manager for
revie~ a~d recommendation to the City Coun'i1~
IA. request for funding should pr"lfide tfte following minimum in.formation:
1. Size of loan or grant requested;
2. A description of th~ proposal to be fu~ded and the organ'zatl~ns involved
in the prDject. Publ ic benef; t and rel evant Comprehensive pl an Hou c 19
polities and programs shou1d be identified;
3. Identification of the number of low, ~oderate and middle income persons to
be Jssisted and t~e specific income range of those assisted;
4. Reasons ~y I grant, rather than a loan, is requested (if applicable);
5. Identification cf loa~ rite and terms, security or collateral and source of
repayment funds (if applicable). and
6. Identification of leverage achieved through City gri1l'\t or loan.
A!!Qi1
At the close of each fiscal year, the Director of finance and the Director cf
Planning and Community Environm~nt shall report on a~tivity during the pre~ious
year (deposits and t:"'ansfers) and aljailable funds. The City Auditors Office
sha11 periodically examine this report and all Housing Reser~e funds, and shall
report on the results of this examinati on.
A,pproved by P3rO Aho City Council on FebriJary 3, 1986 amended November 19, 1990
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ME. William Zaner
City Mamger
City of PaJo Alto
Palo Alto Housing Corporation
August 28, 1992
RE: City Financlal Support of the Palo Alto Housing Corporation
Dear Bill:
Our leaer to you of Jul}' '20, 1992 enclosed a. tetter to tr.t City Council of the same date
outlining our view for City financiaf support ofPAHC's .acti, .. iLi~ in light of the current
iD.tetpretaUons of CDBG fuooing. ]1 was arukipated that thes~ issues would he discuss.ed in
the. Policy and Servi<:es Committee meetln&: of August 4, J992.
City Staff'.s re«lmmendatiow. with respect to the CityfPAHC r~lationship and funding were
given In CMR:368:92 of}uly 30. 1992. There was lnsufficiem time for m; to produce a
wr:uen response to Staffs report prk)r to the Policy and Sm'iees Committee meeting of
August 4, so our represen.tatives g .. ve In oral presentation at tha! tL.'ne. The Committee asked
that our co~nts be submitted i.": writing for further Council co1l5ideration.
Encbsed is a summary of the principal points we voiced aI: the August 4 meeting. Undertying
c\u position are tw0 basic: principles. First, that the long-term relationship betweer. the City
and the Housing CotpOration pertaining to low-and moderate-income housing he: b~D highly
benefidal in carrying OUI me City'! housing goals, and should be contirlued. Secoc.dly, CDBG
funding of PAHC' s work: for the City has become, under eyn-ent LntetpTe" • .aUOns of CDSG
rules, ex.tr~ly limited ane! therefore other and simplerfunaing mecna.nisms are n~ary.
It is apparem that City Staff and PAHC have differing views regarding these funding matters..
We understood thill the PaHcy and Services Committee felt the City Staff and P AH C should
meet to seek accommodatioc of the differences expressed. We ha.ye always stressed
cooperation ill our dealing with the City and we are uDcomfonable with .a situation that may
appear-to be confrontational. AccordiDgly, we urge you to convene a join!: C't)'!P ARC
meeting prior to considerat3on of this subject by the full Council in its September 14 meeting.
If you can arrange such a session during the ~t two weeks, we would appredate it very
much.
Sincereiy )tours,
PALO ALTO HOUSING CORPORATION
c;a.i~~,~y
President
cc: Kenneth R. Schreiber
James E. GiJliland
540 Cowper Street, Suite G, Palo Alto, C.I,forni. 94301, (415) 32\·9709
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SUMMARY OF PALO ALTO HOUSING CORPORATION RECOMMENDATIONS
TO PALO ALTO COUNCIL POLICY AND SERVICES COMMllTEE MEeTING
OF AUGUST 4, 1992 KEGARDING CITY FINANCIAL SUPPORT
OF HOUS ,G CORPORATION ACTIVITIES
1. For ttl e Fiscal )'eu 1992-93, 'PAIiC .s.hoL!ld be funded 1.1n I contractual basis II a flat
SlOO~OOO. !O be paW in 12 equal mor.thJy installments.
2. The PARe contract fur !9S"2-93 should be amended to this effe.."t. including .. new scope
of servic-e5 thai will recognize PA..'1C'1 plannlDg and adrninisU'ative activ:ties, including
plann.il1~ f!lT a new SRO, acquiring the Barker Hotel, seeking sites for other new
wnstrUcuon, and seeking properties for a..;:QL1isiLlon under RHAP.
3. M. compensation rOi thjs alternative sourCe of City funding, PARe would r~i\'e no
CDBG funding ($28,000) for its Jnformati..:m and Referral Service!, nor any HOUSing
RtsefVe funds {S40,OOO) for its BMIUDi.sco'.lnl Program services. Furtller, PAHC would
request 00 administrative funds {S:J.6,OJO) fro:r.l the CDSG poot fDr itS acriYities relating to
acquisttioIl of the Barker HOld and development oi a new SRO. The total potential PAHC
funding for ali of tt:el.e accounts if S I 04,000, or $4,000 more than the il at sum requesu!;tj
above.
4. As a IX :ky matter~ HOWiing Reserve funds shQuld be usal:Jle for PAHC pfanninr: and
admin1strative activities, including admini;tratioD of the BMRlDiscount program.
s. As .. policy matter, the CouncJl should permit the use of funds-from the
Commen:ialllndustri.aI Acroun: of the Housing Reserve to acqu i re existing housi ng that
wi1l be aT become. housing fur low/moderate income residents, primarily working
individuals or families (perhaps on a case b~ case b~iS).
6. Staff report CMR:368:92, top ofp.age 3, nises the question that PAHC could be precluded
from beLng ehgible to use any federal funds adminiMered through the City if PAHe
provided certain consulting :!oervices to the CiIY, which allegedly would result in a conflict
of interest sibJ.ation.
In furtherance of eariier Council direction, the PoliC] and Services Committee should
request the Council to direct Cfty Staff and PAHC representatives jointly to meet with top
HUD .staff in San Francisco, and jf necesSlU)' to contact our c-ongressional representatives.
10 discuss t!lis and otl')er relevant COSO questions
7. PAHe/Staff should continue to look for altema~ive ,sources of funding on an ongoing basis.
8. City Staff and PAHe should explore ahemalive meth.xls of funding the COSts of BMR
sales, as appropriate. PAHC has reserviUioru. about char,ging fees to buyer" and lor sellers
to raise funds.
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