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HomeMy WebLinkAboutCC AG PKT 2005-02-14 #F City of Seal Beach Agenda Report • Date: January 14, 2005 • To: Honorable Mayor and City Council From: John B. Bahorski City Manager Subject: Appointments to the Trailer Park Board SUMMARY OF REQUEST: Council Member Antos requested a report on the settlement agreement between Linc Housing and the Trailer Park residents as it pertains to the possible new board configuration. BACKGROUND: In March 2001, Linc Housing and the Seal Beach Trailer Park Resident Owners Association (SBTPROA) executed a cooperation agreement that created the Seal Beach Affordable Housing Corporation (SBAHC). The board of directors for SBAHC is composed of seven directors, two of which are appointed by SBTPROA and three that are appointed by Linc Housing. These five directors then elect the remaining two directors from community leaders in Seal Beach or surrounding communities. (Attachment A). Currently, the trailer park is operating under this board configuration. The two - community members originally selected were Patty Campbell and Paul Yost. It is important to point out that these individuals were not serving as Council Members appointed to the board rather as community members. Dr. Yost has since resigned and Ms. Campbell remains on the board. A settlement agreement has been reached between residents of the trailer park and Linc Housing that will amend the cooperation agreement and change the SBAHC board composition. The City and Redevelopment Agency were not parties to the lawsuit and are not parties in the settlement agreement. Changes to the SBAHC board configuration were developed and agreed to by the parties involved in the settlement agreement. The following is a language from the settlement agreement: • • " If the IRS agrees that doing so will not affect SBAHC's 501(c)(3) status, and if the Redevelopment Agency and American Capital Access consent, the Cooperation Agreement shall be amended to state that of the seven members of SBAHC, three directors will be selected by Linc, three directors will be appointed by the SBTPROA Board, and one director will be a government representative or employee from the City of Seal Beach, selected by the other six directors. Should the remaining six directors be unable to agree by majority vote on the seventh director, the matter will be referred to binding arbitration, in accordance with Paragraph 21 of this agreement." (Attachment B). To date, the IRS and American Access Capital have not agreed to the proposed configuration change to the SBAHC Board. In addition, staff has not brought forward this item to the Redevelopment Agency Board because it would be premature given the requirement for the IRS and American Access Capital to grant approval to the new board configuration. Once the IRS and American Access Capital have given their respective approvals, then the Redevelopment Agency would need to consent to the change and provide a list of possible governmental representatives that would be acceptable to both parties. Clearly the settlement agreement language is structured so that both parties agree • to the governmental representative. Neither the City nor the Redevelopment Agency can force acceptance of a governmental representative. le If City Council has a strong desire to act on this issue, a letter could be sent to Linc Housing with a single recommendation or multiple recommendations of individuals that could serve as the governmental representative. The letter should contain a disclaimer that the Redevelopment Agency still must consent to approving the new board configuration and the letter should not be used to influence the IRS or American Access Capital decision - making on this issue. The advantage to this approach would be that both Linc and the SBTPROA would then have time to debate and agree on a governmental representative. Linc Housing has indicated that they would like to have one or more names of individuals that could serve as the governmental representative. As indicated in the settlement agreement language, the six directors must approve the governmental representative and should that not occur, the matter is then referred to binding arbitration. Since there is a community member vacancy on the current board, City Council could also put forth, within the same letter, a recommendation or recommendations to fill the vacancy created by community member Yost. This may be a short -term appointment, but that will depend on how quickly the approvals are obtained from the IRS, American Access Capital and the Redevelopment Agency. City Council should be aware that the appointment of this community member still requires approval from SBAHC board of directors. Under either one of these board configuration scenarios, the City can only provide recommendations of individuals to serve. The ultimate decision of who serves rests with SBAHC. FISCAL IMPACT: Unknown at this time. RECOMMENDATION: Discuss and take appropriate action. ATTACHMENTS: A) Current Seal Beach Trailer Park Cooperation Agreement B) Potential SBAHC Board configuration (settlement agreement) Seal Beach Trailer Park Cooperation Agreement This Cooperation Agreement ( "The Agreement ") is made between LINO Community Development Corporation (LINC CDC), LINC Housing Corporation (LING), and the Seal Beach Trailer Park Resident Owners Association (SBTPROA) on March 5, 2001. Whereas, on December 21, 2000 LINC CDC purchased the Seal Beach Trailer Park (The Park) with the 501(c)(3) tax exempt bonds (The Bonds) and the financial assistance of the City of Seal Beach (The City); and its Redevelopment Agency (The Agency); and, Whereas, additional financial assistance is to be provided by the State of California Department of Housing and Community Development's "MPROP" program. Whereas, the documents related to The Bonds, The Agency's and The State's financial assistance (collectively the Financing Documents), impose certain affordability requirements on the owner of The Park: and, Whereas, the ability of LINC CDC to purchase The Park and subsequently transfer it to another organization with resident - homeowner representation is predicated on LINC's experience and financial stability; and, Whereas, SBTPROA represents the homeowner residents of The Park; and Whereas, LINC, LINC CDC and SBTPROA all desire to enable the residents of The Park to participate in the governance of The Park and the establishment of park • policies, budgets, and community guidelines; It is therefore agreed: 1. LINC, LINC CDC and SBTPROA will form a 501(c)(3) non - profit corporation to be known as Seal Beach Affordable Housing Corporation (SBAHC). In the event this name is not available, another similar name shall be chosen. 2. The SBAHC by -laws shall provide that SBAHC shall have seven (7) directors, two (2) of which shall be appointed by SBTPROA and three (3) of which shall be appointed by LINC. These five (5) directors shall elect the remaining two (2) directors from community leaders in Seal Beach or surrounding communities. The term of office for directors and term - limits Of any) shall be described in the by -laws of SBAHC, however the directors appointed by SBTPROA shall be among those holding the longest term of office. 3. SBTPROA agrees that it will continue to be an association of resident - owners with the purpose of promoting and protecting the general welfare of the residents and owners of mobile homes within The Park. Only those households that both own and occupy a home in the Park will be eligible for voting membership in SBTROA. SBTPROA will hold Park -wide elections of its directors in a time and manner specified in its by -laws. Such elections shall be monitored by a qualified, neutral ( (� Seal Beach Trailer Park Cooperation Agreement March 5, 2001 Page 2 1 third -party entity. SBTPROA will determine a process for selecting their appointments to the SBAHC Board of Directors and amend its by -laws to describe and require this process as well as owner - occupancy membership. SBTPROA shall provide SBAHC and LINO CDC with a written certification of both the election and the appointments. 4. This agreement shall serve as LINO CDC's non - revocable commitment to transfer The Park to SBAHC upon receipt by SBAHC of Federal and State tax exempt status. LINC CDC and LINC shall pursue formation and tax exemption with reasonable diligence. Transfer shall be subject to approvals by the City, the Agency, the Bond Trustee, and the Bond Insurer as detailed in the Financing Documents. 5. In the event that conditions prevent the establishment of SBAHC as a new single asset 501c3 corporation, LINO CDC and SBTPROA each shall use its best efforts to affect the intent of this agreement through the entity that holds title to The Park. 6. Upon the transfer of The Park to SBAHC, LINC shall be retained to provide asset management services under a separate agreement that shall run for the term of The Bonds. LINC shall receive compensation equal to 2% of the gross rental receipts of The Park as specified in The Financing Documents. 7. Upon repayment of The Bonds and other financing, and upon request by a majority of the households in The Park, LINC irrevocably commits to relinquish its right to appoint its three (3) directors of SBAHC. Replacement directors shall be selected by the remaining four (4) directors. 8. From the execution of this agreement until the transfer of The Park to SBAHC, LINC CDC and LINC will meet and consult with SBTPROA on all major policy and operational decisions including community guidelines, operating budgets, capital improvements, and guidelines for building additions to homes in The Park. 9. Current rules and regulations shall remain in effect until changed. New community guidelines supplanting the existing rules and regulations will be established jointly with LINC CDC and SBTPROA. This process will include a workshop open to all residents prior to drafting the guidelines. 10. The Finance Documents limit rent increases to 2% per year following April 1, 2003, unless otherwise approved by The City and /or The Agency. LING CDC and SBTPROA acknowledge that the 2% rent increases will be necessary for an unknown number of years until various reserve funds are fully funded. Subsequent to funding all reserve requirements and subject to meeting the debt service • coverage obligations of the bonds, the need for such rent increases will be 1, Seal Beach Trailer Park Cooperation Agreement March 5, 2001 Page 3 ( assessed each year with the goal of minimizing or eliminating rent increases to the maximum extent possible. 11. SBTPROA will use its best efforts to obtain the cooperation of all residents of The Park in providing information required to document compliance with the Finance Documents. SBTPROA will convene regular meetings of all residents to disseminate information and report on progress. 12. The operation of The Park will be consistent with two (2) separate regulatory agreements included as part of The Financing Documents specifying affordability and other obligations arising from: a) the tax - exempt bonds; b) The Agency's loan and grant assistance. Copies of the regulatory agreements will be available for review in The Park office. Should individual residents desire personal copies, they will be provided for the • - cost of duplication. An additional regulatory agreement may be required for the State loan. . - 13. Rents shall be increased in accordance to the Financing Documents, requirements, and projections. Initial rent increases for owner occupied homes protected by the previous covenant shall be as follows. On or before April 1, 2001 $79.00 per space On April 1, 2002 $79.00 per space On April 1, 2003 $80.00 per space Non -owner occupied homes shall be charged a rent of $800.00 per space per month. Spaces 44, 45, 59 and 60 are not protected by the previous covenant and shall be charged market rate rents of $800 per month or higher. 14. New leases will be available to all residents and will be for a term of 34 years. Leases will require owner occupancy except in certain hardship cases and will provide for the minimum income certification required for ensuring: a) Compliance with the Financing Documents; b) Eligibility of The Park for the California MPROP Loan; c) •Property tax exemption for The Park; d) Long -term rental assistance e) Compliance with The Park Rules and Regulations. • 15. No new sub - leases will be permitted except in the case of hardship. Hardship will be defined as • • a) illness or unemployment of the head of the household with a loss of income that makes it impossible to pay housing costs existing prior to such illness or unemployment; or. Seal Beach Trailer Park Cooperation Agreement March 5, 2001 Page 4 • b) an involuntary transfer of employment more than 100 miles from The Park. Hardship subleases shall be for a maximum of one year, but may be reviewed and • renewed for one additional year. 16. Approved subleases existing as of November 30, 2000 shall be permitted to remain in effect, but shall be subject to rent increases to market rate rents. Existing sublessees who are able to buy the home in which they are residing will have their rent payments reduced to a level consistent with other owner - occupants in The Park. 17. New long -term leases will remain in effect upon any sale or transfer of The Park and, upon transfer of a home, will be fully assumable by the qualified buyer of that home in The Park. Long -term leases shall also be assumable by heirs of the Homeowner- Lessee, provided they meet all regular requirements for owner - occupancy. Should an heir not choose to live in The Park, the long -term lease shall remain in effect upon the sale of the home to a qualified buyer. 18. Existing long -term leases will be honored to the extent that they are not terminated by this or any prior sale of The Park. All allowable rent increases and pass- throughs will be implemented until such time as the lease payment increase is equivalent to the increases paid by residents who did not have a lease on November 30, 2000. 19. No legal resident of The Park on November 30, 2000 shall be displaced because the household income is found to exceed those rent levels specified in the regulatory agreements or Financing Documents. In the event The Park, in • aggregate, fails to comply with the income levels specified in the regulatory agreements, sales of homes may be restricted to households meeting the Financing Documents' affordability requirements. 20. In order to mitigate any economic hardship that could arise from the purchase of The Park, two assistance programs will be provided: a) A debt service bridge payment will allow the agreed upon rent increases to be phased in over three equal installments. Residents will be responsible • for 1/3 of the increase in 2001, 2/3 of the increase in 2002, and become responsible for the full increase in 2003. The Agency has funded the difference between the average rent of $527 per space and the residents portion for each of the first two years. This assistance in not available for spaces with subleases nor for spaces 44, 45, 59 and 60. b) Additionally, long -term rental assistance is available to those owner- occupants who lived in The Park as of November 30, 2000 and whose income is such that their increased rent would exceed 30% of their • ( i Seal Beach Trailer Park Cooperation Agreement March 5, 2001 Page 5 income. Such long -term rental assistance must be applied for on an annual basis and all income must be verified in writing by each source. , State and Federal income tax returns may be required as part of the application for this assistance. 21. Park Management Staff are employees of the property manager. As such, they will not expect to receive direction or supervision from resident directions of SBTPROA or SBAHC and they will not follow such direction or supervision if it is given. 22. The primary point of contact between residents and The Park Management is to be the Resident Manager. In the event a resident is dissatisfied with the resident . manager's actions, an appeal should be directed to the manager's supervisor by telephone or in person. Further appeals shall be in writing and directed first to the local or regional manager of the property manager, then to the Vice - President of LINC. If, following this procedure, the resident is still dissatisfied, a written appeal may be directed to the Chairman of the Board of SBAHC who will convene a grievance Committee of Directors to consider the matter. 23. Those homeowners who have building plans that were complete and submitted to The City on or before December 21, 2000 and that meet city and state codes will be allowed to build subject to reasonable design review. 24. LINC CDC and SBTPROA shall work together to define guidelines for improvements and additions to individual homes. Such guidelines will be consistent with state and local codes and designed to preserve the unique character of the park while maximizing each homeowner's opportunity to improve his or her home. 25: LINC CDC and SBTPROA recognize that the Gibbs Law Firm (Gibbs) has provided valuable advice and service related to the financing of The Park in an amount that has not been agreed upon by all parties. When a reasonable fee is • agreed upon by all parties, LINC CDC and SBTPROA agree to pay Gibbs that amount from the proceeds of the MPROP loan at its closing to the extent there are funds available to do so. In the event that funds sufficient to pay Gibbs the agreed upon amount are not available at MPROP closing, LINC CDC and SBTPROA agree that any remaining balance owed Gibbs shall be paid form the cash flow of The Park after paying all operating expenses and debt service as defined in The Financing Documents. 26. Subject to approval by The Agency, LINC, LINC CDC, and the SBTPROA agree to increase the length of the term of The Agency regulatory agreement to be consistent with the Bond regulatory agreement. 1 t Seal Beach Trailer Park Cooperation Agreement March 5, 2001 Page 6 • 27. This Agreement may be amended from time to time by unanimous mutual agreement of all parties. 28. LINC and LINO CDC shall each be bound by the actions of the other in all matters related to management of The Park. 29. As long as homes in the park meet the requisite standard under state and city codes they can continue to be sold in place Agreed A IMP LIN* CDC Community Developmen ..oration By unter L. Johnson • President Irt LINC ousing Corpo ion By Hunter L. Johnson President Seal B-ach Trail-r P k Reside t Owner Association By ` ,/ I, President Keese shall immediately give Notice to all parties of the Effective Date of this Agreement. The indemnity obligations and protections set forth in Paragraph 12(b)(4) and the releases set forth in Paragraph 17 shall only become effective as to each of the respective PAYORS upon receipt of their respective payments. (6) Binding Arbitration. Any dispute with respect to distributions under this Paragraph shall be submitted to binding arbitration under Paragraph 21 of this Agreement. 13. Amendment of Cooperation Agreement. It is the intention of the parties that the Cooperation Agreement will be amended as set out in the attached Exhibit B Amendment to Cooperation,Agreement, and as set put in this Paragraph. a. If the IRS agrees that doing so will not affect SBAHC's 501(c)(3) status, and if the Redevelopment Agency and American Capital Access consent, the Cooperation Agreement shall be amended to state that of the seven (7) members of SBAHC, three (3) directors will be selected by LINC, three (3) directors will be appointed by the SBTPROA Board, and (1) director will be a government representative or employee from the City of Seal Beach, selected by the, 'other six directors. Should the reinaining six directors be unable to agree by majority vote on the seventh director, the matter shall be referred to binding arbitration, in accordance with Paragraph 21 of this Agreement. b. SBAHC will apply for a ruling from the Internal Revenue Service that would allow the Cooperation Agreement to be immediately amended in accordance wide Paragraph OO copy pp ' 13.a without jeopardizing its 501 c 3 status. A co of this a hcation for a ruling shall be sent to Plaintiffs' counsel, and any suggestions; recommendations, or requests made by SBTPROA's counsel regarding the content of the application will be considered by SBAHC. in Page 13 of 35 Ion! 11100014/464446.01 June 7, 20M • ;( Agenda Item "F" I asked for this to be placed on the Agenda because of one section of the Settlement Agreement that requires a "City Government Representative" on the board. As you know, the City of Seal Beach was not a party to the lawsuit and was not consulted prior to the Court approving the Settlement Agreement. However, we are in a position to either deal with the Settlement Agreement as written, or request the Court to modify the Settlement Agreement to delete all reference to the City of Seal Beach. The Settlement Agreement does not seem to me, to place an undue burden on the City. We do, however, have to address the issue of a "City Government Representative ". To me, it seems that a City Government Representative is some one that the City of Seal Beach (City Council) recognizes as a representative of the City. The way the future board is constituted (3 Linc, 3 Residents and 1 City Government), places the City Government Representative in a swing vote position. In addition, there is one other group with no representation; the bond holders. Since the City Government Representative has to balance the interests of Linc, the residents, bond holders and the City of Seal Beach, I believe the City Government Representative needs to be an elected official. We already represent the City on a variety of boards and commissions. These duties are rotated annually with the Mayoral appointments. I recommend a similar City Council action on this position; specifically adding this position to the duties of the Chairman of the Redevelopment Agency, or to the Vice Chairman of the Redevelopment Agency, since the subject property is located in the Redevelopment Agency area. In this way the person serving on the board would change annually with the Council/Agency reorganization. I believe that any City Council member would be able to fulfill these duties and I also believe that we elected officials have the obligation to sit on the board in order to represent � thee � interests of all parties equally. 2 , L2�+ Charles Antos