HomeMy WebLinkAboutItem AAGENDA REPORT
DATE: I a i6� � 40 ip"
TO: Honorable Mayor and City Council
THRU: John B. Bahorski, City Manager
FROM: Lee Whittenberg, Director of Development Services
SUBJECT: HOUSING SET -ASIDE EXCESS FUND STATUS —
REDEVELOPMENT AGENCY
SUMMARY OF REOUEST:
Receive and File Staff Report.
BACKGROUND:
As of June 30, 2002, the Redevelopment Agency Housing Set -Aside Fund will have the
following excess fund amounts that will be subject to the 50% additional excess surplus
amount provisions of Section 33334.12(a)(2):
❑ Surfside Project Area: $ 174,000.00
❑ Riverfront Redevelopment Project Area: $ 360.000.00
Total Excess Housing Set -Aside Funds $ 534,000.00
If these excess surplus funds are not spent or encumbered by June 30, 2002, the Agency
will then be required to allocate a minimum amount of $267,000 in fiscal year 2002 -2003
from other Agency revenues to the Housing Set -Aside Fond for use in increasing or
improving the supply of low- and moderate- income housing within the community.
In addition, the repayment of the "swing loan" for the acquisition of the Seal Beach
Trailer Park from the MPROP Loan will add an additional $ 1,000,000.00 to the
Riverfront Redevelopment Project Area Excess Housing Set -Aside Fund upon receipt by
the Redevelopment Agency of those proceeds. If the MPROP repayment funds are not
then expended within 3 years from the repayment date, they will also be subject to the
50% additional excess surplus amount provisions of Section 33334.12(a)(2). This would
result in an additional $500,000 allocation of from other Agency revenues to the Housing
Set -Aside Fund for use in increasing or improving the supply of low- and moderate -
income housing within the community.
RDA
Agenda Item
CAMy Docum=Ut DA�xcess Housing Set -Aside FuM Stutus.CC SreffRe ft.docVWI 9 -02
Status of Redevelopment Agency 20% Housing Set -Aside Fxcess Funds
City Council Staf Report
January 14, 2002
As a result of these looming penalties, City staff members have been meeting with
several low- and moderate - income housing providers to discuss potential project to
utilize the current excess surplus funds. Mercy House is one of those providers and has
been the most responsive to the possibilities of preparing project proposals within the
community.
Penalty Provisions of Redevelopment Law re: Housing Set -Aside Excess Fund Balances:
The California Redevelopment law has specific penalty provisions regarding the non -use
of the mandated 20% housing set -aside fiords. When these funds are determined to be
"excess" the redevelopment agency must do one of the following to remedy the situation:
• Disburse voluntarily its excess surplus funds to the county housing authority or to
another public agency exercising housing development powers within the
jurisdiction; or
• Expend or encumber its excess surplus within two additional years.
If an excess surplus still exists three years after the funds became excess surplus, the
agency is prohibited from encumbering or expending any funds from any source for non-
affordable housing purposes except that the agency may use funds to meet obligations
that were incurred prior to the date that funds became excess surplus, i.e., three years
prior to this sanction being enforced. Further, the agency must commit an additional 50%
of the excess surplus amount for affordable housing from non - housing set -aside sources.
The specific language regarding the penalty provisions are set forth in Health & Safety
Code § 33334.12, and are provided as Attachment 2.
FISCAL IMPACT: Potential impacts to ability of Redevelopment Agency to
consider future non - housing related projects for implementation. If the excess surplus
funds are not spent or encumbered by June 30, 2002, the Agency will then be required to
allocate a minimum amount of $267,000 in fiscal year 2002 -2003 from other Agency
revenues to the Housing Set -Aside Fund for use in increasing or improving the supply of
low- and moderate- income housing within the community.
These actions would have substantial negative impacts to the ability of the Agency to
fund future projects with Agency funds. Pursuant to Section 33334.12(e), the Agency ". .
. shall be prohibited from encumbering any funds or expending any moneys derived from
any source, except that the agency may encumber funds and expend moneys to pay the
following obligations, if any, that were incurred by the agency prior to three years from
the date the moneys became excess surplus . " This would not allow the Agency to
undertake planned improvement projects such as the West End Pump Replacement
Project or the Corporation Yard NPDES/Water Quality Project.
Further, the Agency does have unallocated funds sufficient to provide the potential
additional funding of $267,000. In this case, those funds would have to provided by the
Excess Housing Set -Aside Fund SWWs.CC SMtr Report 2
Status of Redevelopment Agency 20% Housing Set -Aside Excess Funds
City Council StafReport
January 14, 2002
City from the General Fund as a loan to the Agency. This would have a significant effect
on the programs and services that are funded by the General Fund.
RECOMMENDATION:
Receive and File Staff Report.
e Whittenberg
irec[or of Development Services
Attachments: (2)
Attachment 1: Draft Redevelopment Agency Minutes, October 22, 2001
Attachment 2: California Health & Safety Code § 33334.12
Excess F using Set -Aside Find SWtus.CC Stun Report
Slates of Redevelopment Agency 20% Housing Set -Aside Excess Funds
City Council Staff Reporl
January 14, 2001
ATTACHMENT 1
DRAFT REDEVELOPMENT AGENCY MINUTES,
OCTOBER 22, 2001
Excess Housing Set-Aside Fund Stu[us CC Soft It on
AYES: Boyd, Campbell, Doane, Larson, Yost
NOES: None Motion carried
PRESENTATION - MERCURY HOUSE - LOW /MODERATE HOUSING
OPPORTUNITIES
The Executive Director stated that Mercy House was
requested to make a presentation on how they might assist
in addressing the low /moderate housing problem in Seal
Beach, staff is seeking consent to work with Mercy House to
develop a low /moderate income housing project, there is
currently no such housing opportunities in this community
however it is believed there may be opportunities on the
horizon. It is known that the Agency has funds available
that must be used for low income housing, the Trailer Park
provided only a temporary respite for compliance with the
housing requirements of the Agency, to that staff has been
working to find a means to fulfill the requirements for
expenditures of these low and moderate income funds,
although no yet successful, to partner with a group that
could move forward would be a consideration.
Mr. Larry Haynes introduced himself as the Executive
Director of Mercy House and an original staff member, said
he would support the staff recommendation to partner with
Mercy House to provide permanent, affordable housing,
housing that is needed by many families yet also works well
with the surrounding community. Mr. Haynes introduced Mr.
Mike Hennessey, development manager, and Mr. Paul Jiles who
lives in the vicinity of three shelters and a walk -in
center. Mr. Haynes explained that Mercy House is a non-
profit, non - sectarian organization that has been providing
services, shelter, counseling, etc., to a variety of care
of homeless populations for twelve years, an integrated
continuum of care to individuals and families that find
themselves trapped in poverty, provide emergency
assistance, they operate four transitional shelters, now in
the process of developing the ultimate solution of
permanent housing. Mr. Haynes said although their
motivation is to be as compassionate as possible and
provide as many needs as they can, one of their standing
principles in terms of services provided is self -
sufficiency because ultimately no matter how much one tries
to provide for someone true freedom is not going to come
out of constantly living on the dole, eventually freedom
and independence is going to come from doing for ones self,
that is what all of the Mercy House programs are geared to
do. He said their quest now focuses on their most stable
services which is permanent housing, this is a stable, non-
transient population, households that have lived
successfully in the transitional shelters for up to a year,
with some there has been a long term relationship, some
that are set up for success in a permanent housing
situation and in fact are ready to move on. Mr. Haynes
said there are a variety of characteristics to Mercy House
projects, three of which are that all of their projects are
felt to be attractive, it is understood that Council had
been provided photographs of some of their facilities yet
the photos do not do the projects due justice, to which he
invited members of the Council to visit their facilities,
it is felt their properties are the nicest on any block,
they always beautify and make better their surroundings,
they take pride in that, another characteristic is that
they are well integrated with the surrounding community,
they can no advocate so hard for the persons they want to
serve that they cause disruption in other sectors of the
community, their actions most do all possible to support
good governance, prosperous business, and harmony in the
homes and neighborhoods, their projects are thought do
that, and likely moat important of all of the Mercy House
projects is their management, first of all long term, they
own and operate all of their facilities, they provide
intensive management, Someone lives on -site at each of
their properties therefore the local community has
immediate redress if in fact there is a problem, that is
felt to be important, all of this effort is unprecedented
in this County which is neighborhood support, nimbyism is
often mentioned, not in my backyard, love what you do,
think it is important, but not next to me, however unusual
as a nonprofit is that there are residential neighborhoods
that actually want Mercy House to build in their
neighborhood.
Mr. Paul Jiles stated that he serves as President of the
Board of Directors for the Historic French Park
Neighborhood Association, he came to French Park about
three years ago, there are a number of urban stories of
that neighborhood, one of the first he heard was about
Mercy House and the way they interact with the neighborhood
and the neighbors, mention was made of the nimbyism
syndrome, that does not exist with Mercy House in French
Park, they have been good neighbors to all, have been
responsive to concerns and have worked closely with the
neighbors in developing their project, the French Park
Board is proud of their association with Mercy House, and
are happy to encourage Seal Beach to support them as they
seek to expand their programs. Chairman Yost inquired as
to the neighborhood before and after Mercy House came in.
Mr. Jiles explained that French Park is a neighborhood in
transition, the oldest neighborhood of Santa Ana with first
structures dating to the late 1880'x, there was a downturn
in the quality of life in the mid- 1970's where a number of
houses were destroyed and replaced with less than desirable
apartment buildings which are characterized by overcrowding
and high density, Mercy House moved into French Park just
as the area was returning to its quality of life, it is
felt they were very helpful in that process, their
properties are well maintained, clean, attractive, well
painted, freshly landscaped, it is felt they have lifted
their surroundings, a good influence to the neighborhood as
residents try to bring it back to life.
Mr. Haynes said he is a support of people person, he is not
a developer, has no relationships, his commitment to
whatever they do is to have something that not only fits
people that they are impassioned about but something that
works well within a neighborhood, and upon explaining the
desires of his father while he was growing up, Stated that
people like himself has no business coming into cities or
neighborhoods where they do anything to harm the quality of
life, people have worked too hard for their investment and
he honors that investment.
Mr. Mike Hennessey, owner of the Hennessey Group Real
Estate Development and Consulting, commercial and
residential real estate developers having clients of both
public and private agencies. Mr. Hennessey stated he has
worked with Mercy House since about their inception on
three of their projects, work that he is proud of, in his
business he has learned that every project is a
collaboration, no one gets a real estate development done
on their own, that is no clearer than with a Mercy House
project, a collaboration with a public agency, a
partnership with stakeholders in the community, nearby
residents, builders and contractors that donate their time
and efforts to reduce costs to make a project happen, as
well as public agency grants and private donations all
together. He explained that the first hallmark of a Mercy
House project is community involvement and consensus,
because there are so many partners in each project they can
not move forward without the community being pleased with
it and enthusiastically pushing the public process forward,
that is critical to success, the second hallmark is long
term quality, not just how a project looks when it is built
but how the project lasts and is maintained over time, that
serves the purpose of repeat business, this being one of
the few agencies that experiences having a city ask them
back to do a second project, Santa Ana in fact approached
Mercy House to develop a second project on a vacant lot,
the long term quality also gives a subtle message that
speaks of the people who live there, about the change to
their lives and how they intend to live from here forward,
a phrase that is often used is to 'foster an atmosphere of
dignity and responsibility', that is the way they view the
long term quality of their projects. Mr. Hennessey said
what they would like to do in cooperation with the Agency
is to assist in site selection, prepare a design concept,
and develop a financial program that will lead to a
feasible project.
Councilman Yost inquired if Mercy House projects usually go
into existing neighborhoods. Mr. Hennessey responded that
all of their projects are in existing neighborhoods, that
being a much more difficult task than going to an edge city
to build a project, there will always be interaction with
the people around a project, that can take place now or at
the podium, the advice is that they be brought into the
process up front, explain exactly what is proposed, what it
will look like, solicit their input from the beginning so
that the end result is in fact a consensus. Agencymember
Campbell reported that she and the City Manager visited a
Mercy House project, it was very nice, Supervisor Silva
made a visit as well after which determined that they want
to become involved. This is something that needs to be
done, the Agency has funds that need to be used otherwise
will be lost, the County is willing to provide funds, Mercy
House will provide the project management, what else could
be asked, and encouraged the other members of the Agency to
visit their facilities.
Agencymember Campbell moved to approve the request of staff
to work with Mercy House to develop low to moderate housing
projects. Chairman Yost asked what Sites would be
considered, and anywhere in the City. To that Agencymember
Campbell responded that would depend on what sites would
become available, there are few in coastal cities, it could
be anywhere in the community, with the Executive Director
adding that a location within the Redevelopment Project
Area would be preferred. Agencymember Boyd seconded the
motion.
Councilman Boyd asked how Mercy House was chosen. The
Executive Director offered that a tour was taken of their
facilities, after seeing what they have done and their
Project successes it appeared to be worthwhile to have them
make a presentation to the Agency, staff has not gone
through a selection process with other firms as Mercy House
seemed to be a good fit in with other projects, they do
partner with John Lang Homes, the product is outstanding
inside and out, and he too encouraged the other members of
the Agency to visit their facilities. Councilman Boyd
inquired if the requested authorization is for a specific
time frame, the staff report cites about $1.2 million that
needs to be utilized in the near future. The Director
stated that no time specific would be preferred as it
depends on the availability of sites, one site in mind then
fell out, however there is somewhat of a time frame to
utilize the low income affordable monies of the Agency,
that dependent too on the MPROP loan coming back to the
City, that time frame is uncertain, preparation of the 1290
Plan is somewhat behind schedule, the State is looking to
see the Plan soon in that the Department of Housing and
Community Development has inquired in relation to the
Housing Element as to what progress has been made and how
will it be made, and confirmed that that equates to about
one hundred ten units within four years.
AYES: Boyd, Campbell, Doane, Larson, Yost
NOES: None Motion carried
AGENCY COMMENTS
Chairman Yost said in reference to the comments of Mr.
Jeffers he had asked the City Attorney to render an
opinion, the Trailer Park bond counsel felt that a member
of the City Attorney's firm could do so, that would be at
taxpayer expense, however it likely will not be complete by
the Park board meeting on Tuesday. The City Attorney
responded that the transcript has been received, there will
be communication with the bond counsel that dealt with the
issuance as they will have information that will be
helpful, their opinion may also be sought, it is hoped this
can be done in about a week or as quickly as possible.
Chairman Yost noted that the Park was purchased with tax
exempt bonds, there is a desire to make certain the bonds
are protected with whatever changes they are considering to
make, the opinion is important to that, however may be
complicated. Agencymember Campbell interjected that the
Trailer Park bonds have been sold, that is over, the issue
is will these changes impact the tax exempt status, if that
were to occur the people who bought those municipal bonds
would lose their tax exempt status and no reason to hold
them, they then try to sell them, if that occurs then it
would be necessary to go back on the market, that is not
wanted, explaining that the existing cooperation agreement
specifies that the residents assume the Park when the bonds
are paid. With regard to the low and moderate income
housing monies of the Agency, Chairman Yost suggested that
a blighted parcel of property at 4t" and Marina Drive be
looked at.
CLOSED SESSION
No Closed Session was held.
ADJOURNMENT
Tt was the order of the Chair, with consent of the Agency,
to adjourn the meeting at 7:16 p.m.
Status of Redevelopment Agency 20% Housing Set -Aside Excess Funds
City Council Staf'Reporl
January 14, 2002
ATTACHMENT 2
CALIFORNIA HEALTH & SAFETY CODE § 33334.12
33334.12.(a)(I) Upon failure of the agency to expend or encumber excess surplus
in the Low and Moderate Income Housing Fund within one year from the date the
moneys become excess surplus, as defined in paragraph (1) of subdivision (g), the agency
shall do either of the following:
(A)Disburse voluntarily its excess surplus to the county housing authority or
to another public agency exercising housing development powers within
the territorial jurisdiction of the agency in accordance with subdivision
(b).
(B) Expend or encumber its excess surplus within two additional years.
(2) If an agency, after three years has elapsed from the date that the moneys
become excess surplus, has not expended or encumbered its excess surplus, the agency
shall be subject to sanctions pursuant to subdivision (e), until the agency has expended or
encumbered its excess surplus plus an additional amount, equal to 50 percent of the
amount of the excess surplus that remains at the end of the three -year period. The
additional expenditure shall not be from the agency's Low and Moderate Income Housing
Fund, but shall be used in a manner that meets all requirements for expenditures from that
fund.
(b) The housing authority or other public agency to which the money is transferred
shall utilize the moneys for the purposes of, and subject to the same restrictions that are
applicable to, the redevelopment agency under this part, and for that purpose may
exercise all of the powers of a housing authority under Part 2 (commencing with Section
34200) to an extent not inconsistent with these limitations.
(c) Notwithstanding Section 34209 or any other provision of law, for the purpose
of accepting a transfer of, and using, moneys pursuant to this section, the housing
authority of a county or other public agency may exercise its powers within the territorial
jurisdiction of a city redevelopment agency located in that county
(d) The amount of excess surplus that shall be transferred to the housing authority
or other public agency because of a failure of the redevelopment agency to expend or
encumber excess surplus within one year shall be the amount of the excess surplus that is
not so expended or encumbered. The housing authority or other public agency to which
the moneys are transferred shall expend or encumber these moneys for authorized
purposes not later than three yews after the date these moneys were transferred from the
Low and Moderate Income Housing Fund.
Excess Housing Se[ -Aside Fund Swus.0 Staff R,,n
Status of Redevelopment Agency 20% Housing Set -Aside Excess Funds
City Council Staff Report
January 14, 2002
(e) (1) Until a time when the agency has expended or encumbered excess surplus
moneys pursuant to subdivision (a), the agency shall be prohibited from encumbering any
funds or expending any moneys derived from any source, except that the agency may
encumber funds and expend moneys to pay the following obligations, if any, that were
incurred by the agency prior to three years from the date the moneys became excess
surplus:
(A) Bonds, notes, interim certificates, debentures, or other obligations issued
by an agency, whether funded, refunded, assumed, or otherwise, pursuant
to Article 5 (commencing with Section 33640).
(B) Loans or moneys advanced to the agency, including, but not limited to,
loans from federal, state, or local agencies, or a private entity.
(C) Contractual obligations which, if breached, could subject the agency to
damages or other liabilities or remedies.
(D) Obligations incurred pursuant to Section 33445.
(E) Indebtedness incurred pursuant to Section 33334.2 or 33334.6.
(F) Obligations incurred pursuant to Section 33401. (G) An amount, to be
expended for the operation and administration of the agency, that may not
exceed 75 percent of the amount spent for those purposes in the preceding
fiscal year.
(2) This subdivision shall not be construed to prohibit the expenditure of excess
surplus funds or other funds to meet the requirement in paragraph (2) of subdivision (a)
that the agency spend or encumber excess surplus funds, plus an amount equal to 50
percent of excess surplus, prior to spending or encumbering funds for any other purpose.
(f) Nothing in this section shall be construed to limit any authority a redevelopment
agency may have under other provisions of this part to contract with a housing authority
for increasing or improving the community's supply of low- and moderate -income
housing.
(g) For purposes of this section:
(1) "Excess surplus" means any unexpended and unencumbered amount in an
agency's Low and Moderate Income Housing Fond that exceeds the greater of one
million dollars ($1,000,000) or the aggregate amount deposited into the Low and
Moderate Income Housing Fund pursuant to Sections 33334.2 and 33334.6 during the
agency's preceding four fiscal years. The first fiscal year to be included in this
computation is the 1989 -90 fiscal year, and the first date on which an excess surplus may
exist is July 1, 1994.
(2) Moneys shall be deemed encumbered if committed pursuant to a legally
enforceable contract or agreement for expenditure for purposes specified in Section
33334.2 or 33334.3.
(3) (A) For purposes of determining whether an excess surplus exists, it is the
intent of the Legislature to give credit to agencies which convey land for
less than fair market value, on which low- and moderate -income housing
Excess Housing Sd -Aside Fund Stnus.CC Smff Report
Status of Redevelopment Agency 10 %Housing Set -Aside Excess Funds
City Council StaJfReport
January 14, 2001
is built or is to be built if at least 49 percent of the units developed on the
land are available at affordable housing cost to lower income households
for at least the time specified in subdivision (e) of Section 33334.3, and
otherwise comply with all of the provisions of this division applicable to
expenditures of moneys from a low- and moderate - income housing fund
established pursuant to Section 33334.3. Therefore, for the sole purpose of
determining the amount, if any, of an excess surplus, an agency may make
the following calculation: if an agency sells, losses, or grants land
acquired with moneys f Tom the Low and Moderate Income Housing Fund,
established pursuant to Section 33334.3, for an amount which is below fair
market value, and if at least 49 percent of the units constructed or
rehabilitated on the land are affordable to lower income households, as
defined in Section 50079.5, the difference between the fair market value
of the land and the amount the agency receives may be subtracted from the
amount of moneys in an agency's Low and Moderate Income Housing
Fund.
(B) If taxes that are deposited in the Low and Moderate Income Housing Fund
are used as security for bonds or other indebtedness, the proceeds of the
bonds or other indebtedness, and income and expenditures related to those
proceeds, shall not be counted in determining whether an excess surplus
exists. The unspent portion of the proceeds of bonds or other indebtedness,
and income related thereto, shall be excluded from the calculation of the
unexpended and unencumbered amount in the Low and Moderate Income
Housing Fund when determining whether an excess surplus exists.
(C) Nothing in this subdivision shall be construed to restrict the authority of an
agency provided in any other provision of this part to expend funds from
the Low and Moderate Income Housing Fund.
(D)The department shall develop and periodically revise the methodology to
be used in the calculation of excess surplus as required by this section. The
director shall appoint an advisory committee to advise in the development
of this methodology. The advisory committee shall include department
staff, affordable housing advocates, and representatives of the California
Redevelopment Association, the California Society of Certified Public
Accountants, the Controller, and any other authorities or persons
interested in the field that the director deems necessary and appropriate.
(h) Communities in which an agency has disbursed excess surplus funds pursuant to
this section shall not disapprove a low- or moderate - income housing project funded in
whole or in part by the excess surplus funds if the project is consistent with applicable
building codes and the land use designation specified in any element of the general plan
as it existed on the date the application was deemed complete. A local agency may
require compliance with local development standards and policies appropriate to and
consistent with meeting the quantified objectives relative to the development of housing,
Excess Housing Set -Aside Furst Stuon cc Stair Report
w
Status afRedevelopmentAgency 20% Housing Set -Aside Excess Funds
City Council StaJfReport
January 14, 1002
as required in housing elements of the community pursuant to subdivision (b) of Section
65583 of the Government Code.
(i) Notwithstanding subdivision (a), any agency that has fonds that become excess
surplus on July 1, 1994, shall have, pursuant to subdivision (a), until January 1, 1995, to
decide to transfer the funds to a housing authority or other public agency, or until January
1, 1997, to expend or encumber those funds, or face sanctions pursuant to subdivision (e).
Excess Housing Se[ -Aside FuM SUtw.CC Sr fr Report