HomeMy WebLinkAbout1993-08-12; Housing Commission; ; PURCHASE OF REAL PROPERTY AND SECTION 108 LOAN (CDBG) APPLICATIONITEM2
STAFF PERSON(S): EV AN BECKER
DEBBIE FOUNTAIN
STAF1'' REPORT
DA TE: AUGUST 12, 1993
TO: HOUSING COMMISSION
FROM: HOUSING AND REDEVELOPMENT DEPARTMENT
SUBJECT: PURCHASE OF REAL PROPERTY AND SECTION 108 LOAN CCDBG)
APPLICATION: Request (Ql approval of a recommendation to the City Council
to purchase approximatdy ~~enty (20) acres of real property located generally on
the west side of El Camino Real between Palomar Airport Business Park and
Sunfresh Rose Greenhouses (APN: 215-02P.-15 & 215-020-01) for the purpose of
causing the development of aff 01:j::!.ble housing; and authorization to submit an
application to the U.S. Department of Housing and Urban Development (HUD)
for the purposes of providing additional funding for purchase of the subject
property.
I. RECOMMENDATION
That the Housing Commission ADOPT Housing Commission Resolution No. 002 recommending
to the City Council the purchase of approximately twenty (20) acres of real property subject to
the terms and conditions outlined therein and ADOPT Housing Commission Resolution No. 003
recommending authorization from the City Cmincil for staff to submit an application for a Section
108 Loan to the U.S. Department of Ho~~ng and Urhan Development for the purpose of
providing additional funding for the purchase of subject property.
II. BACKGROUND
The City of Carlsbad's 1991-96 Housing Element sets forth the objective (3.12) of land banking.
Land banking is a process used for acquiring land suitable for the development of affordable
housing. Typically, the land banking concept seizes the opportunity to acquire and hold, or
"bank", land in advance of approval of specific development plans for a project. In this way, the
City takes the initiative to capitalize on the availability of sites which are suitable for affordable
housing and available at a reasonable price.
For the past four (4) program years, the City has: set aside, or allocated, federal Community
Development Block Grant (CDBG) funds for ~e purpose of land acquisition for affof4able
housing. The City currently has a balance of $880,372.30 in the CDBG Affordable Housing
Acquisition Fund. Per recent discussions wit\1 the U.S Department of Housing and Urban
Development (HUD), the City must take action soon to expend the noted balance of funds or risk
losing them due to inactivity. Staff has indicated to HUD that every attempt will be made to
(i)
PURCHASE OF BRESSI I )PERTY
AUGUST 12, 1993
PAGE2
expend the funds by December 31, 1993 in order to remain in compliance with regulations for
the CDBG funds. The property, outlined in more detail below, is currently available at a
reasonable price ( approximately $2 million).
It is staffs recommendation that the City use its existing CDBG funds ($880,372.30) in
combination with a loan from HUD through the Section 108 program to purchase property, as
identified within this report, for affordable housing purposes. A description of the Section I 08
Loan Program is provided in Exhibit 3 of this report. The program basically allows the City to
borrow against future allocations of CDBG funds. For example, if the City borrows $1.2 million
through the program, the loan could be repaid over a 10-15 year period by_ using a portion
($150,000 -$200,000) of our annual CDBG entitlement funds. The City would still have funds
available to fund other projects through the CDBG program. The City of Carlsbad's CDBG total
allocation for 1993-94 was $512,000.
The subject property is described in the Legal Description provided in Exhibit 4. It is currently
owned by the Bank of America as Trustee Under Declaration of Trust of Mary E. Bressi. The
property is commonly referred to as the "little Bressi property" because it is a portion of the
larger Bressi Ranch property. Aviara Land Associates Limited Partnership (ALA) currently holds
an option to purchase the property which expires on October 26, 1993.
The property was optioned by the Aviara Land Associates Limited Partnership (ALA) for the
purpose of developing affordable housing which would satisfy its obligations to the City of
Carlsbad as outlined within their Inclusionary Housing Development Agreement. If approved,
the City would exercise ALA's option, or have the option assigned to it, to purchase the subject
property. The City would retain ownership of the property and, if so desired, could lease the
property back to a for-profit or non-profit developer on a long term basis for the purposes of
developing affordable housing.
III. ANALYSIS
The timely acquisition of the subject property will insure that an attractive site is retained and
ultimately devoted to an affordable housing development. The purchase of the subject property
has. a number of advantages as highlighted below:
• It helps the City to meet one of its Housing Element objectives which is to "bank" land
for affordable housing.
• It helps the City to remain in compliance with federal regulations for the CDBG program
by expending funds allocated for the purchase of property in a timely fashion; eliminates
the risk of losing these COBO funds. ·
• It provides the City with a valuable resource in its effort(s) to provide a considerable
number of affordable housing units at a desirable, suitable site.
PURCHASE OF BRESSI PROPERTY
AUGUST 12, 1993
PAGE 3
• Public land ownership is desirable regardless of the type of affordable housing project to
be developed due to the return on investment opportunities; it is an accepted practice.
• By eliminating "holding costs", it helps . to reduce the costs associated with eventual
development of an affordable housing project by a for-profit or non-profit
developer/builder which benefits the community. Unused CDBG funds are not held or
invested by the City.
Ultimately, all or part of the investment in the subject property may be recaptured m a
development transaction, or the land value may be used to enhance project affordability.
In even the best situation, there is always some element of risk when purchasing property.
Although staff believes these risks are minimal, we have outlined them below for your
consideration as well:
• By using CDBG funds, the City is obligated to ensure that the use of the property benefits
low/moderate income persons. Therefore, if for some reason an affordable housing
project cannot be developed on the subject property, the City must develop another project
on the site which has direct benefit to low/moderate income persons. If the City is unable
to develop any type of project which benefits low/moderate income persons, it must sell
the property and return the funds to the federal government or reallocate them to an
eligible project.
• While staff believes it is unlikely, the termination of the CDBG program could result in
the loss of the City's source of repayment for the Section 108 Loan. Staff will not
propose to HUD any other sources of repayment or security beyond CDBG, the land or
the eventual affordable housing project developed on the land.
• The worst case scenario would be for the City to own a piece of property which could not
be developed for the intended purpose(s). The risk of this happening is slight. However,
there is always some chance that something could happen to prevent the City for using
the property in an advantageous manner.
Staff believes that the advantages of purchasing the subject property far outweigh the
disadvantages or risk of the transaction. We believe that the site is highly suitable for the
development of affordable housing. By owning the subject property, staff also believes that
housing can be provided which is affordable to households with incomes at 50% or 60% of the
County Median, not only those at 80% of the median. This means that we can meet a critical
housing need of low income households residing, or expected to reside, in our community.
IV. TERMS AND CONDIDONS
This property acquisition is recommended subject to the terms and conditions outlined within the
Resolution No. 002 and highlighted below. • These terms and conditions are intended to insure
PURCHASE OF BRESSI OPERTY
AUGUST 12, 1993
PAGE4
a purchase at reasonable value; the dedication of the site exclusively to affordable housing
purposes; and to respect the position of the current option holder, ALA.
1. The City Council shall authorize expenditure of up to $2.1 million for the purchase and
attendant costs of appraisals and closing.
2. Funds shall be drawn from the City's Community Development Block Grant (COBO)
Housing Fund and other CDBG funds which are approved for the transaction by the U.S.
Department of HUD (e.g., a loan from the Section 108 Program).
3. The purchase shall be subject to all applicable HUD terms and conditions governing the
federal CDBG program, including, but not limited to:
• Contract with HUD for repayment of any loans;
• Pledge of grants made or for which the City may become eligible for any loans
provided to the City;
• At discretion of HUD, provide other security which may be required for any loans
made to the City;
• Repay loan( s) made to the-City within a period which shall not exceed 20 years;
• Use the property for· a purpose which provides direct benefit to low/moderate
income person.
4. The value of the site in relation to the option purchase price shall be supported with at
least one MAI appraisal.
5. The purchase shall be subject to an agreement with ALA, holder of the option on the
subJect property, whereby the land shall be held for a period of at least eighteen (18)
months exclusively for the development of affordable housing as proposed by ALA and
their partners and as approved by the City of Carlsbad. If the ALA project does not
commence within eighteen (18) months, ALA shall have, for a period of six (6) months,
the option ,of purchasing the property from the City for its full purchase cost. In any
event, the property shall remain devoted exclusively to affordable housing development.
V. SUMMARY
As stated above, staff is requesting that the Housing Commission approve Housing Commission
Resolution Nos. 002 and 003 recommending Lliat the City Council authorize the purchase of the
property identified within this report and the submission of an application for a Section 108 Loan
through the CDBG program.
If the Housing Commission recommends and the City Council authorizes the purchase of the
subject property, the acquisition will be completed in accordance with federal regulations for the
CDBG program. This process includes a requirement for two (2) appraisals of the property to
ensure that the purchase price is fair and ~nable.
PURCHASE OF BRESSI PROPERTY
AUGUST 12, 1993
PAGE 5
The City will be required to complete a full application for the CDBG loan through the Section
I 08 program. If recommended for approval by the Housing Commission and authorized by the
City Council, staff will submit an application requesting approximately $1.2 million from the
Section 108 Loan Program and combine this loan with our existing allocation of $880, 372.30
to purchase the subject property. Staff \\'.ill recommend that the Section 108 Loan be repaid with
a portion of the City's future allocation of CDBG funds.
ATTACHMENTS:
I. Housing Commission Resolution No. 002
2. Housing Commission Resolution No. 003.
3. Exhibit No. 3, Summary of Section 108 Loan Program.
4. Exhibit No. 4, Legal Description of property owned by Bank of America as Trustee
Under Declaration of Trust dated June 2, 1988 F /8/0 Mary E. Bressi, known as the "little
Bressi" property.
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HOUSING COMMISSION NO, 002
A RESOLUTION OF THE HOUSING COMMISSION OF THE
CITY OF CARLSBAD, CALIFORNIA RECOMMENDING
APPROVAL OF SUBMISSION OF APPLICATION FOR
SECTION 108 LOAN THROUGH THE FEDERAL
COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
IN THE MAXIMUM AMOUNT OF $1.2 MILLION FOR THE
PURPOSE OF PURCHASING PROPERTY FOR THE
DEVELOPMENT OF AFFORDABLE HOUSING.
CASE NAME: LITTLE BRESSI
APN: 215-020-15 & 215-020--01
WHEREAS, the City of Carlsbad has identified a need to purchase property for
the purposes of the development of affordable housing; and
WHEREAS, property located generally on the west side of El Camino Real
14 between Palomar Airport Business Park and Sunfresh Rose Greenhouses, APN: 215-020-15 &
15 215-020-01, is available for purchase for the purpose of causing the development of affordable
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WHEREAS, the Housing Commission supports the purchase of property for the
purposes of providing affordable housing within the City of Carlsbad;
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing
Commission as follows:
A)
B)
That the foregoing recitations are true and correct.
That the Housing Commission recommends that the City Council of the City of
Carlsbad APPROVE purchase of property identified by APN: 215-020-15 and
215-020-01 subject to the following terms and conditions:
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Terms and Conditions:
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The City Council shall authorize expenditure of up to $2.1 million for the purchase
and attendant costs of appraisals and closin1.
Funds shall • be drawn from the City's Community Development Block Grant
(CDBG) Housin1 Fund and other CDBG funds which are approved for the
transaction by the. U.S. Department of Housing and Urban Development.
The purchase shall be subject to all applicable BUD terms and conditions governing
the federal CDBG program, including but not limited to:
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contract with HUD for repayment of any loans for the purchases;
pledge of grants made or for which the City may become eligible to repay any
Joans for the purchase;
at discretion of HUD, provide other security which may be required for any
loans made to the City for the purchase;
repay any loans made to the City by HUD within a period not to exceed
twenty (20) years; and,
use the property for a purpose whlch provides direct benefit to low/moderate
income persons, such as affordable housin1.
The value of the site In relation to the option purchase shall be supported with at
least one MAI appraisal.
The purchase shall be subject to an agreement with Aviara Land Aaoclates Limited
Partnership (ALA), holder of the option on the subject property, whereby the land
shall be held for a period or at least eighteen (18) months exclusively for the
development of affordable housing as proposed by ALA and their partners and as
. approved by the City of Carlsbad. H the ALA project does not commence within
eighteen (18) months, ALA shall have, for a period of six (6) months, the option of
purchasing the subject property from the City for its full purchase cost. In any
event, the subject property shall remain devoted exclusively to affordable housing
development.
27 HC RESO NO. 002 2
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PASSED, APPROVED, AND ADOPTED at a regular meeting of the Housing
Commission of the City of Carlsbad, California, held on the 12th day of August, 1993 by the
following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
EVAN BECKER
EDWARD SCARPELLI, Chairperson
HOUSING COMMISSION
15 HOUSING AND REDEVELOPMENT DIRECTOR
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· 27 HC RESO NO. 002 3
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HOUSING COMMISSION NO, 003
A RESOLUTION OF THE HOUSING COMMISSION OF THE
CITY OF CARLSBAD, CALIFORNIA RECOMMENDING
APPROVAL OF SUBMISSION OF APPLICATION FOR
SECTION 108 LOAN THROUGH THE FEDERAL
COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
IN THE MAXIMUM AMOUNT OF $1.2 MILLION FOR THE
PURPOSE OF PURCHASING PROPERTY FOR THE
DEVELOPMENT OF AFFORDABLE HOUSING.
CASE NAME: LITTLE BRESSI
APN: 215-020-15 & 215--020-01
WHEREAS, the City of Carlsbad has identified a need to purchase property for
the purposes of the development of affordable housing; and
WHEREAS, property located generally on the west side of El Camino Real
between Palomar Airport Business Park and Sunfresh Rose Greenhouses, APN: 215-020-15 &
215-020-01, is available for purchase for the purpose of causing the development of affordable
• housing; and
WHEREAS, the Housing Commission supports the purchase of property for the
purposes of providing affordable housing within the City of Carlsbad;
WHEREAS, the City of Carlsbad currently has allocated $880,372.30 in federal
Community Development Block Grant (CDBG) Entitlement funds for the purpose of purchasing
property for the development of affordable housing for low/moderate income persons; and
WHEREAS, the City of Carlsbad has the need to raise an additional $1.2 million
to purchase subject property through the federal Section 108 Loan program.
NOW, THEREFORE, BE IT HEREBY RESOLVED by the Housing
Commission as follows:
A)
B)
That the foregoing recitations are true and correct.
That the Housing Commission recommends that the City Council of the City of
Carlsbad APPROVE submission of an application to the U.S. Department of
Housing and Urban Development for a Section 108 Loan in the maximum amount
of $1.2 million for the purposes of purchasing property for the development of
affordable housing for low/moderate income persons subject to the following
terms and conditions:
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The purchase of property with Community Development Block Grant (CDBG) funds
shall be subject to all applicable HUD terms and conditions governing the federal
CDBG program, including but not limited to:
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contract with HUD for repayment of any loans for the purchase;
pledge of grants made or for which the City may become eligible for to repay
any loans for the purchase;
at discretion of HUD, provide other security which may be required for any
loans made to the City for the purchase;
repay any loans made to the City by HUD within a period not to exceed
twenty (20) years; and,
use the property for a purpose which provides direct benefit to low/moderate
income persons, such as affordable housing.
The value of the site in relation to the option purchase shall be supported with at
least one MAI appraisal.
The City shall reimburse owner for all reasonable expenses be/she incurred for:
recording fees, transfer taxes, documentary stamps, evidence of title, boundary
survey and legal description of the real property; penalty costs and any other
prepayment charges; pro-rata portion of any prepaid real property taxes which are
allocable to the period after the City obtains title to the property. Whenever
feasible,tbese expenses shall be paid directly by the City so that the property owner
does not need to seek reimbursement.
27 HC RESO NO. 003 2
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PASSED, APPROVED, AND ADOPTED at a regular meeting of the Housing
Commission of the City of Carlsbad, California, held on the 12th day of August, 1993 by the
following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATIEST:
EVAN BECKER
EDWARD SCARPELLI, Chairperson
HOUSING COMMISSION
15 HOUSING AND REDEVELOPMENT DIRECTOR
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EXHIBIT 3
SECTION 108 LOANS
COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM
1. Section 108 Loans are for front-end financing for large-scale community and economic
development projects that cannot be financed from annual grants.
2. Projects eligible for this financing include the acquisition of property, the rehabilitation
of housing and related relocation, clearance and-site improvements.
3. City must prepare an application outlining the purpose of the funds. Also, the City must
follow applicable citizen participation requirements which includes a minimum of two (2)
public hearings.
4. Application for a Section 108 loan may be submitted at any time. It must include a
schedule for repayment of the loan which identifies the sources of repayment. Also, the
City must provide a certification providing assurance that the public entity bas made
efforts to obtain financing for activities described in the application without the use of
the loan guarantee and the City cannot complete such financing consistent with the timely
execution of the program plans without such guarantee.
S. The amount any one entitlement public entity may receive may be limited to
$35,000,000. No commitment.to guarantee shall be made if the total outstanding notes
or obligations guaranteed on behalf of the public entity would exceed an amount equal
. to five times the amount of the most recent grant.
6. Security requirements: 1) contract with HUD for repayment; 2) pledge all grants made
or for which the City may become eligible; 3) at discretion of HUD, provide other
security (i.e., lien on property, etc.)
7. The repayment period shall not exceed 20 years.
8. City must pay any issuance, underwriting, servicing and other costs associated with the
private sector financing of the guaranteed obligations. Such costs are payable out of the
guaranteed loan funds. • • •
EXHIBIT A
TIIE VILLAS AT EL CAMINO REAL
LEGAL DESCRIPTION
EXHIBIT 4
A PORTION OF PARCEL 2 OF PARCEL MAP NO. 1188, IN 1llE COUNTY OF SAN
DIEGO, STA TE OF CALIFO~ ACCORDING TO MAP TiffiREOF FILED IN THE
OFFICE OF COUNTY RECORDER OF SAN DIEGO COUNTY, DECEMBER 20, 1972.
BEING A DIVISION OF A PORTION OF LOT A OF RANCHO AGUA HEDIONDA,
IN THE COUNTY OF SAN DIEGO, STATE OF CAUFORNIA, ACCORDING TO
MAP THEREOF NO. 823, FILED IN TIIE OFFICE OF COUNTY RECORDER OF
SAN DIEGO COUNTY, AND A PORTION OF SECTIONS 25 AND 26, AND
FRACTIONAL SECTIONS 23 AND 24, IN TOWNSHIP 12 SOU1H, RANGE 4 WEST, •
SAN BERNARDINO BASE AND MERIDIAN, ACCORDING TO OFFICIAL PlAT
THEREOF.
EXCEPTING THEREFROM. TIIAT PORTION OF COUNTY ROAD SURVEY NO.
1800-1, AS GRANTED TO THE COUNTY OF SAN DIEGO BY DEED RECORDED
JULY 24, 1970.
BRES.51\AFFHSO.AGR 9 fflf'}f,/93