HomeMy WebLinkAbout2019-07-09; City Council; ; Acquisition of 2636 Hancock Circle, an affordable housing resale unit, and appropriation of community development block grant funds in the amount of $275,000.CA Review ~
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CITY COUNC I L
Staff Report
Meeting Date:
To:
From:
Staff Contact:
Subject:
July 9, 2019
Mayor and City Council
Scott Chadwick, City Manager
Debbie Fountain, Community & Economic Development Director
debbie.fountain@carlsbadca.gov or 760-434-2935
Acquisition of 2636 Hancock Circle, an affordable housing resale unit, and
appropriation of community development block grant funds in the amount
of $275,000.
Recommended Action
Adopt a Resolution authorizing the city manager to execute all required documents to complete
acquisition of 2636 Hancock Circle, an affordable housing resale unit, appropriating community
development block grant funds in the amount of $275,000 and authorizing the Deputy City
Manager Administrative Services to appropriate the funds to complete the acquisition of real
property.
Executive Summary
As part of the City of Carlsbad's loan documents for homes purchased through the city's
lnclusionary Housing Program, the city entered into a Resale Restriction and Option to Purchase
Agreement ("Agreement") on July 15, 2014 with the owner of the property at 2636 Hancock
Circle. This agreement allows the city the option to purchase the property at a restricted price
at the time the owner provides notice of intent to sell or transfer ownership of the property
during the 30-year term of the Agreement. On March 13, 2018 (Resolution No. 2018-037), the
City Council amended its Community Development Block Grant (CDBG) Program Action Plan
allowing for the city to exercise its option to purchase affordable housing resales at a restricted
price and authorizing the use of CDBG funds for this acquisition.
The owner of the property at 2636 Hancock Circle provided notice to the city of the intent to
sell on May 30, 2019, and the city subsequently notified the owner of its intent to exercise its
option to purchase the property at a restricted price calculated to be $257,600. The city and
owners subsequently entered into a purchase agreement, and escrow has been opened with
the intent of completing the property acquisition by July 16, 2019, but no later than September
5, 2019. At this time, staff is recommending that the City Council authorize the city manager to
execute all required documents to complete the purchase of the subject property, which
includes Acceptance of the Grant Deed, and authorize the appropriation and expenditure of
CDBG funds to complete said acquisition; staff is recommending an appropriation of $275,000
to cover the purchase price and all related escrow and other processing fees.
July 9, 2019 Item #3 Page 1 of 8
The Carlsbad Municipal Code does not provide authority to city staff to proceed with
acquisition of property, or accept the Grant Deed for transfer of property ownership, without
prior approval by the City Council. This action by the City Council to approve the acquisition and
appropriate the CDBG funds for this acquisition will allow for completion of the acquisition
process for the subject affordable housing resa le unit; the city will own the property at the end
of this transaction and intends to resell it at a later date to an eligible lower-income buyer.
Discussion
In 1993, the city adopted an inclusionary housing ordinance that requires all residential
development to include 15% of the total number of homes to be affordable to low income
households. The residential developer has the option to produce rental or ownership product
to satisfy the inclusionary requirements. The Bressi Ranch developer produced ownership
product to.satisfy its inclusionary housing obligation; a total of 100 condominiums were
developed and sold to low income buyers. As part of this sale, the developer transferred its
financial subsidy (difference between market value of the home and restricted low-income
price) to the City of Carlsbad; the city then recorded a silent second loan agreement (in the
amount of subsidy) and a Resale Restriction and Option to Purchase Agreement against the
property to ensure that the property remains affordable for a 30-year term, as required by the
city's inclusionary ordinance.
At the time an owner of a restricted condominium decides to sell the home, the city has the
first option to purchase the home at a restricted price (based on low income maximums at the
time of the notice to sell). On March 13, 2018, the City Council approved an amendment to its
CDBG Program Action Plan authorizing city staff to respond with the city's intent to exercise its
option to purchase resales of affordable, restricted price homes as they become available on
the market, and to utilize CDBG funds to purchase these resale units. This action would allow
the city to recapture an affordable home and then resell it to an eligible lower-income buyer. As
the owner, the city will be able to place additional restrictions on the property and/or resale at
a lower price, if necessary, to create more affordable housing opportunities; this effort will also
assist with implementation of the Homeless Response Plan and the city's goals to create more
affordable housing opportunities for rehousing purposes.
The owner of the affordable, restricted condominium at 2636 Hancock Circle provided notice to
the city of intent to sell the unit on May 30, 2019. The city responded with its intent to exercise
its option to purchase the home. The restricted sales price was calculated at $257,600 and a
purchase agreement was executed by the city and the owner and deposited into escrow. Per
the requirements of the Resale Restriction and Option to Purchase Agreement, the city
indicated its intent to complete acquisition of the resale unit within 90 days of the city's notice
of intent to exercise its purchase option, as required per the Agreement; the city intends to
purchase the home sooner in order to expend the CDBG funds in an expedited manner with an
intended close date no later than July 16, 2019 if the acquisition is approved by City Council.
To proceed with the subject acquisition, the City Council is being asked to authorize the city
manager to execute all acquisition documents, including the Grant Deed, and to authorize the
Deputy City Manager Administrative Services to appropriate and expend CDBG funds in an
July 9, 2019 Item #3 Page 2 of 8
amount not to exceed $275,000 for purchase of the affordable, restricted home and related
acquisition costs.
Fiscal Analysis
The homeowner purchased the home at Mulberry, Bressi Ranch in 2014 at the restricted,
subsidized price of $217,000. As set forth in the Resale Restriction and Option to Purchase
Agreement, the restricted price for the city to purchase the affordable residential property from
the homeowners at 2636 Hancock Circle iri 2019 is $257,600, based on an 18% increase in low
income levels over the past 5 years. It is anticipated that there will be additional acquisition
costs including escrow fees. Staff is requesting that the City Council approve a total
appropriation of federal CDBG funds in the amount of $275,000 to cover all acquisition costs for
the subject property; the City Council approved a set-aside of $750,000 in CDBG funds for this
purpose in March 2018. The Resale Restriction and Option to Purchase Agreement states that
the 6% real estate agent fee ($15,456) is to be paid to the City of Carlsbad at close of escrow,
since the city acts as the real estate agent for the purposes of this sales transaction. These
funds will be deposited to the CDBG fund to allow for additional purchases of these resale
homes in the future.
Next Steps
All acquisition documents will be executed by the city manager, and the city will complete the
purchase of the subject affordable, restricted home and subsequently record the Grant Deed to
transfer ownership of the home to the City of Carlsbad by no later than September 5, 2019 and
as early as July 16, 2019. The home will then be resold to another lower income household at a
later date.
Environmental Evaluation (CEQA)
Pursuant to Public Resources Code section 21065, this action does not constitute a "project"
within the meaning of CEQA in that it has no potential to cause either a direct physical change
in the environment, or a reasonably foreseeable indirect physical change in the environment,
and therefore, does not require environmental review.
Public Notification
This item was noticed in accordance with the Ralph M. Brown Act and was available for public
viewing and review at least 72 hours prior to the scheduled meeting date.
Exhibits
1. City Council Resolution
2. Form of Grant Deed
July 9, 2019 Item #3 Page 3 of 8
RESOLUTION NO. 2019-115
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, AUTHORIZING THE CITY MANAGER TO EXECUTE ALL REQUIRED
DOCUMENTS TO COMPLETE ACQUISITION OF 2636 HANCOCK CIRCLE,
CARLSBAD, CALIFORNIA, AN AFFORDABLE HOUSING RESALE UNIT, AND
APPROPRIATING COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS IN THE
AMOUNT OF $275,000 AND AUTHORIZING THE DEPUTY CITY MANAGER
ADMINISTRATIVE SERVICES TO APPROPRIATE FUNDS TO COMPLETE
PURCHASE OF THE REAL PROPERTY.
WHEREAS, the City Council of the City of Carlsbad, California has determined that it desires to
exercise its option to purchase an affordable housing resale unit located at 2636 Hancock Circle,
Carlsbad, California as set forth in the Resale Restriction and Option to Purchase Agreement executed
between the city and property owner on July 15, 2014; and
WHEREAS, the property owner for 2636 Hancock Circle provided notice to the city on May 30,
2019 indicating the owner's intent to sell or transfer ownership of the restricted affordable housing
unit at the noted location; and
WHEREAS, the city responded to the property owner of the restricted affordable housing unit
on June 6, 2019 indicating its intent to exercise its option to purchase the property at 2636 Hancock
Circle; and
WHEREAS, the City Council approved a change in policy on March 13, 2018 (Resolution No.
2018-037) and amended its Community Development Block Grant (CDBG) Program Action Plan
authorizing city staff to respond with the city's intent to exercise its option to purchase resales of
affordable, restricted price homes as they become available on the market, and to utilize CDBG funds
to purchase these resale units; and
WHEREAS, the purchase approval by City Council allows for the city to recapture an affordable
home and extend its affordability for an indefinite period of time, if so desired, and to resell it to an
eligible buyer at a lower price, if necessary, to implement the city's affordable housing goals and
policies; and
WHEREAS, the purchase approval by City Council will also assist with implementation of the
city's Homeless Response Plan and the city's goals to create more affordable housing opportunities.
Ill
July 9, 2019 Item #3 Page 4 of 8
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
1. That the above recitations are true and correct.
2. That the City Council hereby authorizes the City Manager to execute all acquisition
documents, including the Acceptance of the Grant Deed, for the purchase of the
affordable housing unit located at 2636 Hancock Circle, Carlsbad, California at the
restricted purchase price of $257,600.
3. That the City Council hereby authorizes the city's Deputy City Manager Administrative
Services to appropriate and expend Community Development Block Grant funds in an
amount not to exceed $275,000 for purchase of the affordable, restricted home and
related acquisition costs for the property located at 2636 Hancock Circle, Carlsbad,
California.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 9th day of July, 2019, by the following vote, to wit:
AYES: Hall, Blackburn, Bhat-Patel, Schumacher, Hamilton
NAYS: None.
ABSENT: None.
Uum<LO. Km m¼JL_I
~ARBARA ENGLESON, City Clerk
(SEAL)
July 9, 2019 Item #3 Page 5 of 8
· Recording requested by, and after
recording, return deed and tax
statements to:
SPACE ABOVE THIS LINE FOR RECORDING PURPOSES ONLY
GRANT DEED
APN:
Documentary transfer tax declaration:
W ARN1NG: ANY PERSON WHO MAKES ANY MATERIAL NIISREPRESENTATION OFF ACT FOR THE PURPOSE OF
AVOIDING ALL OR ANY PART OF THE DOCUMENTARY TRANSFER TAXIS GUILTY OF ANIISDEMEANORAND IS
SUBJECT TO PROSECUTION FOR SUCH OFFENSE.
The undersigned grantor(s) declare(s) transfer tax of: $ County of
D Unincorporated area $ City of
D Computed on the full value of property conveyed, or D Computed on full value less liens and encumbrances remaining at time of sale, or
D Exempt because:
This DEED, executed on this day of , 20 , between grantor,
and grantee,
WITNESSETH, that the grantor, for
paid by the grantee, the receipt of which is hereby acknowledged, does grant and convey unto the said grantee,
the following described real property, along with all associated rights, titles, interests or claims, situated in the
municipality of , m County, California-legally described as:
Property address:
Source of title:
This GRANT DEED is made subject to:
Deeds.com Uniform Conveyancing Blanks
Exhibit 2
July 9, 2019 Item #3 Page 6 of 8
WITNESS my hand this day of , 20
Signature Signature
Print name Print name
Capacity: ____________ _ Capacity: ____________ _
Signature Signature
Print name Print name
Capacity: ____________ _ Capacity: ____________ _
Construe all terms with the appropriate gender and quantity required by the sense of this deed.
A notary public or other officer completing this certificate verifies only the identity of the individual who
signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of
that document.
STATE OF ________ _,
COUNTY OF ______ ~
On this __ day of~------' 20 __ , before me,-----------------~
a notary public, personally appeared ___________________________ _
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to
the within instrument, and acknowledged to me that he/she/they executed the same in his/her/their authorized .
capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph
is true and correct.
WITNESS my hand and official seal.
Notary Public
Print name
My commission expires: _________ _
Deeds.com Uniform Conveyancing Blanks July 9, 2019 Item #3 Page 7 of 8
Exhibit A
Deeds.com Uniform Conveyancing Blanks July 9, 2019 Item #3 Page 8 of 8