Loading...
HomeMy WebLinkAbout1996-09-12; Housing Commission; MinutesMinutes of: HOUSING COMMISSION Time of Meeting: 6:OO P.M. Date of Meeting: September 12,1996 Place of Meeting: CITY COUNCIL CHAMBERS CALL TO ORDER: Chairperson Calverley called the Regular Meeting to order at 6:OO p.m. PLEDGE OF ALLEGIANCE: The pledge of allegiance was led by Commissioner Escobedo. ROLL CALL: Present: Late: Sata, Scarpelli Absent: Wellman Chairperson Calverley, Commissioners Escobedo, Noble, Rose, Schlehuber, Walker Staff Present: Evan Becker, Housing and Redevelopment Director Debbie Fountain, Senior Management Analyst Leilani Hines, Management Analyst COMMENTS FROM THE AUDIENCE ON ITEMS NOT LISTED ON THE AGENDA: There were no comments from the audience. APPROVAL OF MINUTES: ACTION: Motion by Commissioner Rose, and duly seconded, to approve the Minutes of the Regular Meeting of August 8, 1996, as submitted. Calverley, Escobedo, Noble, Rose, Schlehuber, Walker VOTE: 6-0-3 AYES: NOES: None ABSTAIN: Sato, Scarpelli (late); Wellman NEW BUSINESS: 1. CT 9242(A)/PUD 92-06(A)/SDP 9246(A) HDP 92-03(A) AFFORDABLE HOUSING PROJECT - SAMBI SEASIDE HEIGHTS - Request for recommendation of approval of a 42-unit for-sale affordable housing project and financial assistance in an amount not to exceed $453,600 from the City of Carlsbad Housing Trust Fund supporting the satisfaction of an inclusionary housing obligation of the project know as Sambi Seaside Heights. Evan Becker reviewed the background of the request and stated that the Housing Commission has seen the Sambi Seaside Heights Project before. Mr. Becker described the location of the project, the type of units and the unit mix, the development team, the affordability aspect of the project in terms of meeting the City’s needs and priorities, and the financial aspect of the project. Mr. Becker explained that the Sambi project is a revision of a previously approved submittal. The original project (CT 92-02) was recommended by the Housing and Planning Commissions, and approved by City Council in March 1994. Subsequently the Coastal Commission approved the project with a condition requiring a redesign of the project because of some environmentally sensitive lands. These changes have resulted in the need for the project to be re-evaluated by the City and approved by the Planning Commission HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 2 and City Council. The changes include a revised affordable housing component which must be reconsidered by the Housing Commission. Mr. Becker stated that the Sambi project has gone from 349 residential units to 277 residential units. The project components are now 140 multi-family dwelling units and 137 standard single-family lots. The multi- family units in Area “A (east of Alga Road) consist of two components-42 affordable townhomes comprising the for-sale affordable project and an adjoining 40-unit market for-sale townhome project, which are tied together by sharing community facilities and a single homeowner‘s association. Mr. Becker said that what was before the Commission previously in terms of the affordable component was also a site development plan for an apartment project with no concrete program for how the project was going to be financed or who was going to develop the project, etc. Mr. Becker stated that what is being presented to the Commission tonight is in a more advanced stage in terms of the applicant being prepared to implement this project. Mr. Becker described the project as paired units with 42-unit affordable two-story townhomes. There are 30 three-bedroom units that are roughly 1,208 square feet; there are 12 two-bedroom units, which are 1,122 square feet each. Staff is in favor of the unit mix, because it is tilted toward the larger size unit with the three bedroom units in this distribution, with very amble sized units in both cases. In terms of affordability, the lnclusionary Housing requirement is what this project must comply with to meet the requirement. The affordability must be at a level affordable to a household earning no greater than 80 percent of the area median income. Mr. Becker stated that based on HUD data, the maximum eligible incomes for a family of four for the three-bedroom unit are $41,750 and $35,425 for the two-bedroom. Mr. Becker said that the standard that derives the purchase price maximum for these units, based on these incomes, a family can pay 30 percent of that income for their housing cost. The purchase prices are based on applying 30 percent of income to those incomes. The housing costs must include not only the major component of cost for a for-sale unit, which is the mortgage payment, but also must include the homeowners’ fee, taxes, insurance, etc. This project must have units that sell at no greater than those maximum purchase prices. Mr. Becker said that the developer has made a request for financial assistance to support sale of the 42 units at affordable prices. Staff is recommending that assistance be provided in the amount of $10,800 per unit or a total of $453,600. Mr. Becker explained the City’s “undewr‘ ing criteria” for financial assistance for this project to be: the development team; the cost of the project;hu.ndue gain for the developer; subsidy analysis (leveraging of money); form of assistance; security; and minimized risks (construction risks and market risks). d Mr. Becker said that each of these items is explained in the staff report and gave further explanation of them. He said that the Sambi group is a capable team, experienced with for-sale housing, and has brought in expertise who has helped them develop this project and can implement it successfully. Mr. Becker said that staff believes the costs are reasonable; and the project is a notch or two above the most basic homeownership-type product. Being a townhome and not a stacked-type of condominium unit, each townhouse has a patio, two-car garage, and two and one-half baths. While costs are greater than affordable rental units previously considered by the Commission, Staff believes that the total costs come in at a reasonable level. On a line-item basis of where the subsidy money is going, staff is comfortable that there is no profit in this for the developer, there are not fees that are being extracted out of the budget; therefore, the assistance going in is to reduce the purchase prices. As far as the form of assistance, Mr. Becker stated that this is a silent-second loan program, deferred loan--no interest or principal payments. In effect, it is a grant with the exception that at resale the entire subsidy is recapture. What is recaptured will be recycled into assistance to another unit. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 3 In terms of security, the fact that these are restricted purchase price units and subsidized, means that there is considerable cushion of instant equity of how much bank debt exists on these properties. Mr. Becker said that the construction risk is mitigated by (1) a capable development group and (2) the motivation that drives this development team is not just built on this project, but include a much larger project, where their profits are tied to building market units. Without the successful implementation of this project, the developer will be prevented from implementing the market part of this project. Mr. Becker explained the Proforma Subsidy Analysis describing a subsidy requirement with land and without land, sources of subsidy to include city assistance subsidy, developer subsidy including land, developer subsidy not including land; and city leverage for 80 percent AMI and 70 percent AMI. Mr. Becker explained that the land is something of value that the developer holds and it is something that a certain dollar value is placed on it. Mr. Becker further explained that this land needs to be isolated separately because it is not a cash item. Taking the land estimate value out of this leaves a subsidy requirement that is essentially cash that someone would have to put into this transaction as a subsidy. In this case there is no other subsidy source for affordable homeownership projects. Eighty person of area median income is the maximum level that is allowed by the lnclusionary Ordinance. Mr. Becker explained that families of different incomes, no greater than 80 percent of median income, will walk in to buy these units; and they will have to receive different levels of subsidy to afford these units. Some families below 80 percent will be able to afford the maximum purchase based on the bank’s underwriting criteria; but at a certain level they are going to require additional subsidy. Mr. Becker said that he feels the 70 percent AMI fairly reflects how the units will be sold and how much subsidy will be required. Based on 70 percent of AMI, the recommended level of assistance the City would provide would be $1 of subsidy for each $4.50 from the developer or some other source (leverage of 4.51). If 70 percent of AMI is the average, it will mean that people walked in to buy these units who had incomes that ranged any where from 60 to 80 percent of median income. That is a best guess as to what range of incomes it will take to have enough people to walk in to absorb these 42 units. Mr. Becker concluded that what Staff is recommending in terms of financial assistance provides a role for the City which is in their lnclusionary Ordinance. In terms of affordable homeownership, the City need ranking and priority for homeownership is a medium priority, not as high as the multi-family rental large units for low- income families; but, Mr. Becker stated that this homeownership product fits the mix very well considering that the Commission has approved probably well over 500 rental affordable units, including 344 that have been built. Staff thinks this project fits into the City’s needs and priorities well in terms of the mix of what we want out of the lnclusionary Housing Program. In addition, the proposal serves a number of different Housing Element goals and objectives, including the relationship of this affordable housing project and its proximity to Carlsbad Ranch, where there will be a tremendous number of lower-income jobs created from the hotels, golf course, Lego, and the Gemmological Institute. Mr. Becker explained that the Affordable Housing Agreement has not been finalized but will to be executed prior to developer’s map being finalized. The Affordable Housing Agreement will establish the timing of the project and the affordability requirements. In addition, it will refer to the project and the site development plan that has been approved by the Planning Commission. It will be recorded against their entire property and constitute their binding obligation to get this project done to meet their affordable housing requirements under the lnclusionary Ordinance. With that Staff is recommending the Commission’s support of the project as recommended by the Planning Commission and also recommending the provision of the financial assistance stated in the Resolution. Chairperson Calverley opened the item for discussion among the Commission members. rc HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 4 Commissioner Rose asked whether the affordable housing was going to be intermingled with the other housing or if it would it be segregated. He also asked about the down stroke to protect the City’s interests, and wanted to know how much the buyer’s payments would run. Mr. Becker responded that the Area “A component of the project contains two components in a “dumb bell” effect. One is a market townhome project, the other is the affordable townhome project, joined essentially with the joint use of a community facility, community recreation area. In addition, there are also other market townhouses and single-family homes that are in this section that is west of Alga Road. Mr. Becker did not have his work-up of the affordable purchase price. Commissioner Schlehuber figured it to be about $900 for the two bedroom figuring 30 percent of $35,000. Mr. Becker guessed that the mortgage payment a family would pay may be $670 (the developer confirmed the guess). He said that with the restricted purchase price, the homeowners’ fees, taxes, and insurance are taken out first, and whatever is left of the 30 percent is calculated at a certain interest rate to see how much debt the buyer can carry. Commissioner Rose asked what the down stroke would be for the buyer. Mr. Becker said that the buyer is going to be underwritten by a bank and the bank will decide how much they are comfortable lending. The purchase price is based on how much the bank is willing to lend the buyer. Like any home buying situation, the buyer can run into the same situations that could cause them to default. With lower-income buyers, there is probably a higher likelihood of some problems, and it is for that reason that part of what will be included in the Affordable Housing Agreement, and which these developers have on their own decided they will do, is a home buyer training program for first-time home buyers. The training and counseling program will provide a little bit of assistance to make sure that the responsibilities of homeownership are understood to them, and that they can fulfill them. Commissioner Rose asked if a down stroke is required. Mr. Becker replied that buyers will have to put up a down payment. It may be as little as 2 to 3 percent; but they will have to be able to do that. In return they will get a shot at appreciation, and equity. The City will recover the subsidy. The buyers do not get a shot at the subsidy; but over and above that level, if there is appreciation of the unit they get it. Some affordable homeownership programs have been put together so that in reality all they do is mimic rental housing with a low rent. It is not a good idea to do that when you have to put out money to fix your roof, and all the other things you have to do to invest in a house and maintain it. You do not have to do that in a rental situation, and the buyer does not have any of the benefits of getting anything back in terms of appreciation. It doesn’t set up any incentive to take care of the property. Mr. Becker said that the project is structured to include incentives and benefits of homeownership. Commissioner Schlehuber asked about the balance of the Housing Trust Fund and the $453,000 commitment to the Sambi project. Mr. Becker replied that the Housing Trust Fund balance is roughly $1.5 million. He said this would be the second commitment out of the Housing Trust Fund, and that there is a commitment to the Laurel Tree project for $200,000. The Housing Trust Fund is fed by housing impact fees and is dedicated housing money. The money can be used for any affordable housing purpose that is covered under the Housing Element, and it particularly appropriate where inclusionary-type housing fees are going back into supporting inclusionary housing development. Commissioner Schlehuber asked about the fee on small unit development. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 5 Mr. Becker replied that the fees that go primarily into the Housing Trust Fund are the housing impact fees which are assessed on projects that did not have a requirement to build units under the lnclusionary Housing Ordinance because they had already gotten in a complete application at the time--May of '93 or whenever it was-yet they did have to pay a fee, which is roughly $2,950 per unit. Commissioner Schlehuber commented about the proforma analysis where the 70 percent AMI is the more likely case. He said that the subsidy of $45,000 (including land) seems like a lot of risk to the developer. He said that the likely case is that people are not going to walk in who just hit 80 percent of area median income. He questioned whether the developer can find the financing for the additional $16,000. Mr. Becker replied that the developer would rather not have to put up $16,000 cash. Commissioner Schlehuber asked how long the developer is going to carry it for. Mr. Becker replied that there have been many discussions about how to approach this to make it easier on everybody. The developer knows that the City is not going to take the downside risk in terms of finding additional subsidy beyond what is proposed. With aggressive marketing of the project, there is a better chance perhaps the households coming in can be more up to the 80 percent of the median income. In addition, neither the developer nor Staff has given up on other subsidy sources; but again, there are not deep subsidy sources. The City has had a mortgage credit certificate program for some time, and Staff has agreed to apply for mortgage credit certificates on a project basis for this project. It is not included in the report because we want this to be a worst case scenario, and if the mortgage credit certificates were to come through, which we would not know until the end of next year, that would help. That means that people at any level of income under 80 percent of median income can pay more for their unit because they are going to get the benefit of the mortgage credit certificate. One thing that we admittedly tried to do is to take away some of the cost argument by building in a situation where we are sure that the developer has to work to get their subsidy level down and if a part of that is to come in lower than $152,000 per unit, then fine. Staff does not think there will not be the achievement of any situation where the developer would have any cash excesses; but again, they could work down the $16,000 by doing that. Commissioner Schlehuber asked when the developer would get access to the money. He asked if the money would be put into escrow; and if it is contingent on the receipt of a construction loan and other loans. Mr. Becker replied that it would be contingent on the developer having their other financing in place. Staff has indicated that the money would be made available for construction purposes and then rolled over into the subsidy that actually goes to the family. We would hold out that on a construction loan basis, and come in after the bank; but the reality of affordable housing is that, just like with rental projects, the banks are very adamant about having subsidy money in first if there is any. It is truly impossible to get them to play unless you do that. In our case, as they construct this project, $10,000 will constitute maybe three days' worth of activity, and very quickly the bank will be in there for far more than we are. We would attempt to get behind the bank. Ultimately, the City will be in second position to the bank regardless. That is a requirement of any of the banks these days. Again, we are protected by a considerable cushion given that the banks loan and our loan in relation to the market value of these units is a very small percentage of loan to value in comparison to what you normally see. Commissioner Schlehuber asked if the City would have a recorded silent second. Mr. Becker replied affirmatively. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 6 Commissioner Escobedo asked for clarification of the description of the financial assistance requested from Sambi Seaside Heights dated May 20, 1996. Mr. Becker replied that Commissioner Escobedo is probably looking at the original application proposal that the developer made. He said that Staff is not recommending what the developer asked for in the original application. Commissioner Escobedo asked when the original application was submitted. Mr. Becker replied that the very first application that the Housing Commission considered was in 1993 and was approved by the Council in March of 1994. Commissioner Schlehuber commented that it was December 1993. Commissioner Escobedo commented that the current application is dated May 20, 1996. Mr. Becker explained that Commissioner Escobedo is looking at the developer's application regarding this redesigned affordable project. Commissioner Escobedo asked for clarification of number 1 of the developer's May 20, 1996 application (the City to contribute an amount equal to 110% of the financial shortfall ... this amount approximates $1,002,144 ...). Mr. Becker replied that Staff included what the developer submitted in their application, including the developer's request for financial assistance. Mr. Becker explained that after numerous meetings and discussions with the developer, Staff has developed a recommendation, which is in the Staff report that is different from the original application. It is important for you to know what they asked for as part of their application; but Staff does not ask the developer to rewrite their application based on what we have agreed to. The Commission sees what the developer asked for initially, and then sees Staffs recommendation, which is different in this case. The terms are different and it is less money than they asked for. Commissioner Escobedo asked whether what Staff is recommending is included in the packet. Mr. Becker replied that the Staff is recommending $453,000. Chairperson Calverley invited the applicant to speak. Charlie Mallon, Sambi Seaside Heights, 8642 Firestone Boulevard, Downey, CA, addressed the Commission and thanked Staff for their thorough and detailed report to the Commission. Mr. Mallon commented that he has been with Sambi since February of 1996, and one of the very first things he got to do was meet Staff and start conversations about a revised application for affordable housing. One of the first things that Sambi, as a group, decided to do when we reprocessed our tentative map was to update the affordable product. Sambi felt that the City had just done two relatively large rental projects, and that the timing was probably appropriate for a for-sale affordable project. Mr. Mallon expressed his pleasure to have the opportunity to the first affordable for-sale project that will be put on site within Zone 20. Mr. Mallon stated that between April and September they have made a lot of headway with conversations with Staff, resulting in a collaboration of efforts to develop a product that will be exemplary for the City and become the standard in the future. Mr. Mallon said that what Sarnbi is presenting just in comparison is the change from an affordable apartment project at a very high density of 20 units per acre to a very conventional townhome at about 12 units per acre. Each one of these units has been designed with either a rear yard or a front yard that is dimensioned at 15 x 15, so each has a private enclosed yard. Sambi thinks that what their project is dynamic in terms of r HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 7 affordable housing. Mr. Mallon said that Sambi has b 1 en having conversation with thre architectural firms, bidding out the working drawings for the project. Sambi would like to see the 277-unit project (including the 42 affordable units) get started very quickly. Mr. Mallon explained that the first thing that they are going to do as developers is to start early marketing and education of the local population of the product that they are planning to develop, planning to design and actually construct. They have had conversations with North American Mortgage, a very large mortgage company, and with their assistance prepared an education plan that Sambi expects to implement once they start the working drawings of this project. Mr. Mallon addressed how Sambi will make up the gap and said they are going to address the issues of aggressive marketing, try to focus on who or what the market is, Le., is it down at the 70 percent of the median level or is it closer to the 80 percent of median income level. Sambi thinks that starting early, as opposed to when the models are opened, will result in some positive effects to the overall budget. Mr. Mallon stated that this is his motivation. Once Sambi has identified possible buyers, they will start an education process; especially for first-time home buyers because besides making a payment to a bank as a mortgage payment, buyers will also have an obligation and responsibility for property taxes, homeowners’ association fees, and other assessments that homeowners have. Mr. Mallon said the sooner Sambi can start this process, the more productive they will be; and ultimately minimize their financial obligation relative to this project. Mr. Mallon pointed out that the project does meet or exceed every planning and engineering requirement. Sambi has gone through Planning and has not asked for any variances from engineering or planning, so it is in absolute conformance with the PD. The contribution by the developer is significant. Mr. Mallon stated that his motivation over the next year going through the design process and the actual construction process of the project, is to work his tail off to make sure that the reality is the lessor of the two financial investments on the part of the developer. Lastly, Mr. Mallon said that Sambi is willing to be a ginnie pig with the for-sale affordable project in Carlsbad. Commissioner Scarpelli asked Mr. Mallon if he has worked up a budget for the homeowners’ association fees. Mr. Mallon replied that just today at 12 o’clock he had lunch with the association management company they have selected. They have under contract a company called Keystone Pacific who just moved their offices from Orange country to Carlsbad off of Palomar Airport Road. The budget preparer Sambi has chosen is Barbara Goto, who operates a company out of San Clemente called DGW Consultants. They met to discuss the project in general terms as to how the project would come together in light of the fact that there are two projects sharing a common facility. Mr. Mallon said the fees will range somewhere between $98 and $1 10 a month. Commissioner Scarpelli asked if there were going to be any other fees besides the homeowners’ association fee that will be attributed to this project. Mr. Mallon replied that there would be no other fees or assessments. Commissioner Noble asked if the homes meet VA standards. Mr. Mallon replied that yes they do. rc HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 8 Commissioner Noble stated that it is very important because in this area this project could be a good source of homes for enlisted retiring. Mr. Mallon replied that this is very important to him. He stated that the homes will be VA, FHA, and Fannie Mae approved and constructed to those regulations. Chairperson Calverley asked if the common area, the pool area, was for just the townhouses, the affordable and the market rate in Area A. Mr. Mallon replied that it is exclusive to the 82 units that comprise planning Area A and 42 townhomes and the 40 paired homes. He said there is close to a 10,000 square feet for the pool, the cabana, spa. Mr. Mallon proudly mentioned that Sambi was able to meet all of the conditions of the PD to be able to pick up the RV parking. Chairperson Calverley asked about the size of the pool. Mr. Mallon replied that the pool has not been designed yet; but that it will sit in an area that will comfortably fit and ultimately will be average in size with a large area for the sun deck. His guess is that it is about 20 x 50, which will probably be consistent with any one of the rnulti-family projects. Chairperson Calverley asked if $57,000 was budgeted for just the pool, and not the cabana, and the cement around it. Mr. Mallon replied negatively and commented that it was a good question. Because it is a shared facility on the budget the Commission has, there is an allocation which is roughly 42/82s of the cost. The before- market rate product will also have a financial obligation, since that is a shared construction cost. Mr. Mallon said that the budget the Commission has is for only the affordable projects. Chairperson Calverley asked about the $700 per unit cost for the pool from the Common Area Detail. She also expressed her concern for the amount of leverage between the developer’s dollar and the City’s, and the possibility of it changing to 1:l. Mr. Mallon responded that the agreement has not be negotiated yet, but the conversations about the agreement is that the developer’s investment will not get lower than the 2.9:l. Chairperson Calverley expressed concern for the developer’s numbers, and asked if the number the City is committing to on a ratio or actual dollars, i.e., for every real dollar the City gives the developer, are we talking about the developer putting up real money, be it $2 or $4. Or would the developer be giving the City a piece of paper in good faith. Commissioner Scarpelli expressed his concern about the $40/square foot cost for the brick and stone. Mr. Becker responded that Staff feels the costs are reasonable and explained that the prototypical costs for a stacked condominium unit at a higher density are basically close to these costs; not quite, but close to it. This is not 20 to the acre, it is 12 to the acre. These are 11 to 12,OO-square foot townhouses, so with that Staff felt that if we made some kind of adjustment for that, it would be well below the prototype that we got in our study for a homeownership unit. Staff has indicated that if there are cost savings based on actual certified costs, not including land; but if the net proceeds from these restricted sales are greater than the costs, not including land, then basically those would come back to the City to reduce its level of assistance. Another way of saying that is the minimum that the developer would be putting in is the land value. That is the minimum. That is one way they can work to try to insure that they are in effect not putting in any cash but HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 9 only putting in the land value. But that also makes the land value a moot issue as well, because whatever the land value is, that is what is going in the deal, from the developer’s standpoint, over and above actual costs, not including land. If that were to occur, there is a reduction in the amount of subsidy that the City would provide, which is the best safeguard you could possibly have and avoids an unending debate whether $42 a foot in hard costs is reasonable versus whatever other number. Chairperson Calverley asked what the developer is planning to charge for the market-rate units. Mr. Mallon replied that the developer does not have product pricing established yet; but said that he estimates it to be between $165,000 and $172,000, and probably on average $165,000. Chairperson Calverley asked if the market-rate units will be a nicer product than the affordable housing. Mr. Mallon responded that they are almost exactly the same, just larger and less dense. Rather than being 12 to an acre, the market-rate units are plotted at 10 to an acre. They are the same product construction- wise with nine-foot plates from floor to ceiling, so mechanically they will be the same building. Chairperson Calverley asked if the developer is going to be able to build a market-rate unit at less density, make a developer profit, make a return on their investment, and be able to sell the units for less than what the cost of building an affordable unit is with just a return on it with no developer fee. Mr. Mallon replied that the developer is going to sell the market-rate units for $165,000. Chairperson Calverley replied that the affordable unit is going to cost the developer $152,000 with no developer fee on it and no return on it. Mr. Mallon responded that at $152,000 they have the land and they add a developer fee to it. Chairperson Calverley disagreed and said that the Commission has been told there was no developer fee. Mr. Mallon apologized and said that the difference would be the profit and the developer fee between 152 and 165 on average. Mr. Mallon stated that he is struggling to understand what Chairperson Calverley is questioning. Chairperson Calverley replied that she wants to make sure that in the Resolution the $453,600 isn’t concrete. She does not think it is going to cost the developer $152,000 to build an affordable project. Mr. Mallon said that the developer would be happy to do that and expects to get into that kind of agreement with the City. He pointed out that the agreement has not been negotiated, but expects the negotiations of the agreement to do just what Chairperson Calverley suggests. Mr. Becker responded that in the Resolution it is referred to up to $400,000 in each case; and that is to relate to the feature which, the minimum leverage ratio is going to be the 2.9:l. If it gets below that because of costs, then the City will give less than the proposed amount. Chairperson Calverley asked why the developer didn’t donate the land to a non-profit organization instead of putting in the land and the grading for free, and then also taking on the added risk of having to sell the units for less than 80 percent. Then the developer would know their risk would be done. Mr. Mallon responded that he seriously considered this option; and had he felt there was an opportunity to do that and be successful in doing so, that is what would have been done; to the extent the developer could HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 10 . have paid a fee instead of building it, they would have paid a fee instead of building. However, that was not an option as described by Staff, and every time Mr. Mallon brought it up, he was told it was not an option for Sambi.. Commissioner Scarpelli asked Evan about the Resolution not stating the minimum 2.9:l ratio. Mr. Becker replied that the Resolution does not state this ratio; but it is found in the Staff report under the Form of Assistance regarding any proceeds over and above costs. Mr. Becker reads from page 7 of the Staff report the second paragraph of “E. Form of Assistance.” What the City would propose to do, and has done before, is to have the assistance and the Affordable Housing Agreement structured as is presented in the Staff report. Staff does not include everything in the Resolution that would be the elements of the deal. If there is a key element that the Commission would like have included in the Resolution, it can be added. Chairperson Calverley opened the public testimony and issued the invitation to speak. There being no persons desiring to address the Commission on this topic, Chairperson Calverley declared the public testimony closed and opened the item for discussion among the Commission members. Commissioner Noble stated that he likes the project. He stated that this project is finally one of the ones that has all the things which the Commission has complained about more than anything else--it is not being built off-site, it is being reduced in size, they are increasing the size of the affordable units, whether they are rentals to be sold, and they also have, in most all the other projects the Commission has ever approved along this line, they have set the affordable out by themselves and they did not have the same quality of recreation facilities in areas that the other homes did, so in essence that makes them look like step children or feel that way. With this project, the developer has cut back in the number of homes, and they have increased the number of three bedrooms, which is good. Commissioner Scarpelli stated that he agrees this is a fine project and that the developer should be complimented for their efforts for the architecture, the plot plan, and the development of a nice neighborhood. He expressed his concern about making sure there is a clear understanding with the developer so that there are not any problems in the future and suggested making an amendment to the Resolution to include item E. on page 7 of the Staff report so that there is an understanding that the minimum cost to the developer will be the donation of the land. Commissioner Scarpelli would like to add as a condition to the Resolution to include that “City assistance will be structured to provide for a reduction in the amount of assistance if the proceeds from the sale of the affordable units exceeds their actual cost, not including the land value.” Commissioner Noble suggested asking the applicant for his opinion. Chairperson Calverley replied that the Commission needs to finish their discussion, and said she would like to change the conditions and expressed her concern about the project taking a third of what is in the bank. She said that she would like in the Resolution, on the third paragraph, where it says “WHEREAS, the applicant has expressed a need to receive financial assistance in the amount of ...”, to change the wording to “assistance not greater than.” Mr. Becker responded that he could clarify that the recital is intended to reflect that the applicant believes their need is for that amount, and they are agreeing that that is what there need is for. Mr. Becker said that Item 3 says that the assistance would be an amount not exceeding $453,600. Chairperson Calverley stated that the applicant wanted over a million. ,- HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE I1 Mr. Becker replied that the applicant is now agreeing that their need is now consistent with what Staff is recommending. Commissioner Sat0 asked to hear exactly how the amendment to the Resolution is going to be written. Chairperson Calverley replied that paragraph three overrides paragraph two, and asked Commissioner Scarpelli to read the proposed amendment to the Resolution Commissioner Scarpelli read the second paragraph of Item E., Form of Assistance on page 7 of the Staff report as an amendment to the Resolution as “City assistance will be structured to provide for a reduction in the amount of assistance if the proceeds from the sale of the affordable units exceeds their actual cost, not including the land value.” Commissioner Scarpelli stated that what this means is that that‘s the minimum contribution that would be allowable, which would be the land contribution; and it proposed to prevent any misunderstanding of the City’s position. Chairperson Calverley stated that the Commission is agreeing with the proposal, up to $453,600, but if it does not take $152,000 to build these units, then it does not cost $453,600. ACTION: Motion by Commissioner Scarpelli, and duly seconded, to adopt, as amended, Resolution No. 96-01 0 recommending approval of the development of 42 for-sale townhomes affordable to low income households with the amended Sambi Planned Development on property generally located east of Paseo del Norte, north of Camino de las Ondas and south of Palomar Airport Road. Calverley, Escobedo, Rose, Sato, Scarpelli, Schlehuber, Walker, VOTE: 7-1 -1 AYES: NOES: Noble ABSTAIN: Wellman Commissioner Noble expressed his concern that once a condition is added, the Commission should give the applicant an opportunity to give his opinion. Chairperson Calverley addressed Commissioner Noble and told him that it is her understanding that it is not proper to bring the developer back up once they have sat down, even though the Commission is making adjustments. Commissioner Noble said that the correct procedure is to close the public testimony and if you come up with something the applicant has not had a chance to consider, the Chair can reopen the public testimony and ask the applicant what they think about the changes. Chairperson Calverley replied that the Planning Commission does this but the Council does not. Commissioner Noble replied that they don’t come up with a lot of changes, and neither the Planning or Housing Commissions are adjudicating, not here to set standards or policies; but are here for the purpose of recommending certain things. Commissioner Noble asked Mr. Becker how many Commissioners it took for a majority. Mr. Becker replied five. Chairperson Calverley agreed that the Commission needs five votes to pass anything. -. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 12 Commissioner Noble said that it is protocol that if you have something in a public hearing that has not been put before the applicant, and with all of the other negotiations they go through with Staff, the developer should have the right to speak. Commissioner Noble expressed his concern about how the applicant probably feels about not having the opportunity to at least comment on what the added conditions were. Chairperson Calverley stated that as she understood it, Staff was saying this was not new and was not added. Commissioner Scarpelli agreed that they were not adding any conditions, but that they were just clarifying something in the Resolution by reiterating from the Staff report and reading from the text of the Staff report; therefore, it was not an addition or an adjustment to the Staff report according to Commissioner Scarpelli. Commissioner Scarpelli said the Commission was going along 100 percent with Staffs recommendation. The Commission asked that further clarification be part of the Resolution because it is important that the City understand as well as the developer understand what the City’s bottom line is.. Chairperson Calverley added that we are talking about a third of our budget. Commissioner Scarpelli said that it was read right from the text of Staffs recommendation. It was just moving it, into the Resolution. Chairperson Calverley commented that she wants to make sure she is doing this correctly and that the Commissioners are comfortable with it. Commissioner Noble mentioned that Robert‘s Rules of Order states that if something comes up that hadn’t been made public that you could reopen the pubic session. Chairperson Calverley stated that this did not fall under that. 2. COMPREHENSIVE HOUSING AFFORDABILITY STRATEGY ANNUAL PERFORMANCE REPORT FOR FISCAL YEAR 1995 - 1996 - Request for Housing Commission Approval of a recommendation of the City Council to submit the Comprehensive Housing Affordability Strategy Annual Performance Report for Fiscal Year 1995 - 1996 to the U.S. Department of Housing and Urban Development. Leilani Hines reviewed the background of the request and stated that the Annual Performance Report is a report that reports on the progress in carrying out the City’s Annual Plan for both housing activities as well as community development activities. It also assesses the City’s performance in meeting the City’s overall five- year goals and objectives and strategies for housing and Community development. Lastly, the federal regulations for the CDBG program require that the City complete a performance report in order to remain eligible for further CDBG as well as home entitlement moneys. Ms. Hines stated that she would be focusing on the available funding sources the City has for housing and community development activities, the expenses the City has incurred in the last year, and how many households have been assisted with the funding sources the City has expended. Ms. Hines described the various programs explained in the Staff report, including the CDBG Program, the Section 8 Rental Assistance Program, the Redevelopment Housing Set-Aside funds, the San Diego County Regional MCC Program (mortgage credit certificate program), and the Housing Trust Fund. Ms. Hines stated that the CDBG Program is a program that can fund anything that is related to housing, community development, or public service needs of the community. The City needs to make sure that those -. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 13 who benefit from such activities are of lower income. For the CDBG Program, the City had approximately $1.2 million available this year from its new allocation, and then the balance that was rolled over from a previous year. The City expended about 52 percent of those funds--$642,000, and the remainder of the fund balance will be expended by December of this year. Total assistance under the CDBG Program resulted in about 4,700 households assisted. The bulk of the households assisted were under the public service or facilities projects, and under housing-related services which include the Community Resource Centers, Homeless Prevention Program, Lifeline Shared Housing, or Comprehensive Housing Services, as well as the Brother Benno’s Day Center in Oceanside. Out of a total CDBG Program budget for housing or housing- related activities, 30 percent of those funds available of those funds were used for that specific purpose. The City funded about six homeless shelters and three homeless service providers. We also funded our single- family residential rehab program and a big chunk of the money went for repayment of Section 108 loan for the Villa Loma project. Ms. Hines stated that there are a number of public service or facility activities under the CDBG Program including 17 sub recipients who provide a variety of services to youths, seniors, handicapped persons, and others, employment services, and recreation activities. Ms. Hines described the Section 8 Rental Assistance Program as a program that subsidizes what a household can afford to pay in rent and what the actual market-rate rent is based on four persons who are at very low income or at 50 percent of the median income. Ms. Hines explained that 12 percent of the $3 million available this year has gone to administrative costs and said that the program can reach a maximum of 503 households. As of August the City has leased about 488 households on this program. Commissioner Scarpelli asked why the City is serving only 488 when there is a maximum of 503 when there is a waiting list of people trying to get Section 8 funds. Ms. Hines responded that with the constant turnover or changing of households dropping out of the program and coming into the program, there is always going to be a small number of those certificates or vouchers that are unused in a certain point in time. Mr. Becker responded that the status of them is that they are looking. There is always a certain number who are out armed with their certificate and they are looking. In reality, sometimes to get maximum utilization the City will actually get more than 503 people leased up because this is an utilization of $3 million. It isn’t necessarily just 503. HUD will criticize you if you do that too much, but a way to make sure you are fully utilized all the time is to over lease. Ms. Hines continued her presentation with the Redevelopment Housing Set-Aside funds, and said that this represents about 20 percent of the City’s annual redevelopment tax increment which is set aside for developing affordable housing opportunities for lower income households. Ms. Hines said that for this fiscal year the City had a rollover balance of approximately $652,000 from 94-95; and in 95-96, the City had a total deposit amount of $340,000; with a total $894,000 available for housing activities for the year. The City’s expenditures were about $98,000 for planning and administrative expenses; however, the City is continually committed to using the funds for affordable housing opportunities. About $500,000 of that redevelopment set-aside has already been committed to the Laurel Tree Apartment project. Chairperson Calverley asked if the $500,000 that is committed to Laurel Tree is out of the same funds that were discussed earlier. Ms. Hines responded that no, that it is a separate funding source. Chairperson Calverley responded $500,000 for Laurel Tree and $200,000 out of the other funds. .- HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 14 Ms. Hines replied affirmatively. Ms. Hines described the San Diego Mortgage Credit Program to be a regional program which has been developed to assist lower and moderate income households to obtain their own house. It functions very much like an income tax credit, being a very shallow program. For fiscal year 1995, including the rollover balance, there was about $500,000 in MCC credit, and expended about $328,000 of the credit available, which basically went to assist 14 households, of which three of those were lower income households. Ms. Hines expects the balance remaining from 95-96 will be rolled over and help about 12 households in the future. Ms. Hines described the Housing Trust Fund as a big funding source that is comprised of the City’s inclusionary housing impact fees from the lnclusionary Housing Ordinance, and the sale of affordable housing credits. These funds are used to expand affordable housing opportunities, particularly in relation to the lnclusionary Housing requirements. Total funds available are at $2 million. From this housing trust fund, the City has a $200,000 commitment to the Laurel Tree Apartments. All in all the City’s assessment in terms of meeting their overall goals and objectives has been successful in reaching the numbers set out in its annual plan. All the housing opportunities, community development projects, and policies and programs have been consistent with the five-year consolidate plan. Ms. Hines explained that the next step in the process is to give the public an opportunity to review or comment on the APR. The APR has been available since August 30, 1996, and will be available until September 30, 1996. This document has to be submitted to HUD as soon as possible. According to HUD, the City has a little bit longer than the September 30. All comments that are received regarding the APR-- whether presented to the Commission or presented to the Housing and Redevelopment Office--are always attached as an appendix to the plan; and the plan is revised where appropriate in accordance to the comments received. Staff would like to recommend that the Commission approve the Resolution that recommends that the City Council submit the APR to the U. S. Department of Housing and Urban Development pending the completion of the 30-day public review and comment period. Chairperson Calverley opened the item for discussion among the Commission members. There was no discussion on this item. ACTION: Motion by Commissioner Scarpelli, and duly seconded, to adopt Resolution No. 96-01 1 recommending the submittal of the Comprehensive Housing Affordability Strategy Annual Performance Report for Fiscal Year 1995-96 to the US. Department of Housing and Urban Development. Calverley, Escobedo, Noble, Rose, Sato, Scarpelli, Schlehuber, Walker VOTE: 8-0-1 AYES: NOES: None ‘ ABSTAIN: Wellman ANNOUNCEMENTS: Mr. Becker announced that the City closed the application period for the Housing Program Manager and has received approval to refill the other Analyst position. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 15 Mr. Becker gave an update on the Laurel Tree project. A slight redesign to the project has been submitted that goes along with the change in the financing. Mr. Becker said there is still a good chance of pulling it off without any additional subsidy from the City and that it could be under construction if not by the end of the year, maybe early in 1997 with some luck. Mr. Becker explained that the tax credit program is under heavy, heavy pressure to change its allocation method and that It is difficult to get tax credit in San Diego county. The revamped system is so biased that the City got basically nothing in the last round with the exception of one project that was financed with almost all cash; and it was an SRO-type rehab project. The system favors Los Angeles and the Bay area, so San Diego county get little in terms of family or new construction. The Housing and Redevelopment Department has been working hard, along with the mayor, to get a geographic distribution of the tax credits. Statistically, Los Angeles and the Bay area out compete the City of Carlsbad in ways that are not fair. Commissioner Noble asked about the status of a survey the Commission worked on Mr. Becker replied that the survey is pending the Council reconvening in another workshop. Chairperson Calverley asked Mr. Becker if any developers have provided him with a marketing survey on the need for affordable housing in Carlsbad. Mr. Becker replied that Sambi has one, which is not a needs study, but is the basic absorption study--how long will it take to sell the units--on affordable and market units. Chairperson Calverley asked if the Commission could see it. Commissioner Schlehuber mentioned the Laurel Tree project. Mr. Becker replied that all tax credit projects, lenders, and tax credit investors require a market study, and there is one with Villa Loma. Chairperson Calverley asked if each one of the Commissioners could have a copy. Mr. Becker stated that the reports are quite large and are available at his office. Commissioner Scarpelli asked Mr. Becker if the rec room and meeting room at Villa Loma are available to anyone other than the tenants as a meeting place. Mr. Becker replied that no it is not. The Bridge group has asked the City not to schedule any City events there. Chairperson Calverley commented that she was told that by the requirements of the tax credits that no one other than the people who are living in the unit had usage of it, and it was not something that Bridge decided, but a condition of their credits. HOUSING COMMISSION MINUTES SEPTEMBER 12,1996 PAGE 16 ADJOURNMENT: By proper motion, the Regular meeting of September 12, 1996 was adjourned at 755 p.m. EVAN E. BECKER Housing and Redevelopment Director KATHY VAN PELT Minutes Clerk MINUTES ARE ALSO TAPED AND KEPT ON FILE UNTIL THE WRITTEN MINUTES ARE APPROVED.