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HomeMy WebLinkAbout2003-03-18; Housing Commission; MinutesMinutes of: Time of Meeting: Date of Meeting: Place of Meeting: HOUSING COMMISSION 6:OO P.M. March 18,2003 CITY COUNCIL, CHAMBERS CALL TO ORDER Vice-Chairperson Scarpelli called the Special Meeting to order at 6:09 p.m PLEDGE OF ALLEGIANCE Commissioner Houston led the Pledge of Allegiance. ROLL CALL Present: Staff Present: Commissioners: Renee Huston Dons Ritchie Edward Scarpelli Bobbie Smith Management Analyst: Craig Ruk Housing Program Manager : Bobbi Nunn APPROVAL OF MINUTES Minutes of November 14,2002, were approved as written. VOTE: 4-0 AYES: 4-0 NOES: None ABSTAIN: None COMMENTS FROM THE AUDIENCE ON ITEMS NOT LISTED ON THE AGENDA There was no audience in attendance, who wished to speak at this time. NEW BUSINESS Vice-Chairperson Scarpelli requested nominations for Chairperson and Vice-Chairperson of the Housing Commission. Commissioner Dons Ritchie nominated Commissioner Edward Scarpelli. Commissioner Smith seconded the nomination of Mr. Edward Scarpelli. Nominations were closed. .Vice-Chairperson Scarpelli accepted the nomination and asked if there was any discussion. The nomination of Commissioner Edward Scarpelli was approved unanimously. Chairperson Scarpelli called for nominations for the Vice-Chairperson position. Commissioner Smith nominated Commissioner Renee Huston to be appointed Vice-Chairperson. Commissioner Dons Ritchie .seconded her nomination. The nomination of Commissioner Huston to be appointed Vice-Chairperson was approved unanimously. Chairperson Scarpelli stated the next item on the agenda, which is the adoption of a resolution recommending approval of the Public Housing Agency (PHA) Plan for submittal to the Department of Housing and Urban Development. The staff has recommended to the Commission the plan be approved, which will be presented to the Housing and Redevelopment Commission. HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 2 of 16 Ms. Bobbi Nunn, Housing Program Manager, said she would be presenting the Carlsbad Public Housing Agency Annual Plan for fiscal year 2003. She presented background on the Public Housing Agency Plan. Ms. Nunn continued, pursuant to the Quality Housing and Work Responsibility Act of 1998, Public Housing Agencies are required to submit a five-year annual plan. The Housing and Redevelopment Commission must adopt the annual plans, and a copy with required certification submitted to the U.S. Department of Housing and Urban Development or HUD. The Housing and Redevelopment Commission adopted the five-year plan for fiscal year 2000 and 2004 on January 9, 2001. The Annual Plan states the PHA that administers the Section 8 Tenant Based Rental Assistance Program must address the followbig: Housing Needs of Families and Strategies for Addressing Needs; Financial Resources; PHA Policies Governing Eligibility Selection and Admissions; PHA Determination Policies; Operations and Management Policies; PHA Grievance Procedures; Homeownership Programs Administered by the PHA; PHA Community Service and Self-Sufficiency Programs; Civil Rights Certifications; Fiscal Audit. Rent Ms. Nunn stated that as far as the fiscal year 2003 progress in meeting the five-year plan and goals, there are certain goals that the Housing Agency has to identify they have met: To expand the supply of assisted housing. We have received 125 additional vouchers since fiscal year 2000. Since fiscal year 2000, approximately 140 units of affordable housing have been developed through the Inclusionary Housing Requirement. The PHA goal leverage private or other public funds to create additional housing opportunities. The following are in the process of development or approval: o Sunny Creek, which was 50 units and was completed in November 2002. o Calavera Hills, which is 106 units. o Villages of La Costa, which is 180 units. o Kelly Ranch, which is a 122 units. Ms. Nunn continued, in addition, the Housing Agency purchased 38 acres of parcel land within the Redevelopment Area to potentially provide for another ten rental units. Also, the following for sale affordable units are in the process of development or approval: e The Jefferson Senior Condominiums, which is 26 units. Village by the Sea Condominiums, which is 10 units. Rose Bay Town homes, which is 24 units. The Laguna Point Condominiums, which is 3 units. With regard to the PHA goal to improve the quality of assisted housing, the Section 8 Program did receive a High Performance ranking on the SEW Certification in fiscal year 200 1. Our SEW Certification for fiscal year 2002 has been submitted to HUD, and we are waiting for the final ranking. The Housing Agency continually recognizes providing excellent customer service. We are in the process of developing a rental property owner’s survey in order to determine if there are ways the Housing Agency can provide services to owners that would make them more likely to work with the program. We are also in the process of HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 3 of 16 streamlining our lease processes and assuring that our initial owner payments are mailed within two weeks of the effective date of the lease. The waiting time for our high priority applicants on our waiting has been reduced to six months to one and a half years. A participant education program has been implemented. On the PHA goal to increase assisted housing choices, we still provide voucher mobility counseling to our clients as they are coming through the intake process and receiving their vouchers. We participate in rental property owner workshops. Our payment standards have been set at 110% of the fair market rent, which allows for clients, especially here in Carlsbad, to have more opportunities to lease affordable units within the area. Thirty-six new owners have been recruited as of this date. Ms. Nunn continued regarding the goal to promote self-sufficiency and asset development of assisted households. We still continue to voluntarily administer a family self-sufficiency program. We maintain on- going communications and relationships with agencies and non-profits that provide services to persons with disabilities. We provide information on home ownership opportunities. To ensure equal opportunity in housing for all Americans, the Housing Agency as the Housing and Redevelopment Department, contracts with Heartland Human Relations in Fair Housing Association to provide fair housing counseling and training to staff, to participants, and to owners. In fact, we will be having a workshop next Thursday, March 20,2003. We offer training to staff and participants on fair housing, and we provide information on agencies that assist persons with disabilities. Ms. Nunn stated there are supporting documents that are required to support the PHA Plan and to ensure that the plan is consistent with the documents. The documents that are referenced within the plan are the Regional Analysis of Impediments to Fair Housing Choice in the San Diego Area, the City of Carlsbad Consolidated Plan, the Administrative Plan for the Section 8 Tenant Based Rental Assistance Program, the City of Carlsbad Family Self-sufficiency Action Plan, and the City of Carlsbad Single Audit Report on Federal Award Programs. The supporting documents are available for review in our office, the City Clerk’s Office, in both libraries in the reference section, at the Senior Center, and at our Faraday Building. Ms. Nunn said as far as public participation, the plan does require a public review and comment period for 45 days prior to adoption. The 45-day period started on March 1, 2003, and will end on April 14,2003. That allows for public comment on the proposed annual plan, public input on needs and priorities, and there will be a public hearing on April 16, 2003. All comments will be addressed in the final plan that is submitted to HUD. As of this date, we have not received any comments, and we will be having a meeting of the Resident Advisory Board on March 24, 2003, which at this point is twelve clients who are either participants or applicants on our waiting list, and will be reviewing the PHA plan and allowing some personal time for comments and suggestions or any input they may have. Commissioner Huston asked how this Annual Plan is different than the one submitted fiscal year 2002? Ms. Nunn answered it updates any goals that have been achieved to our five-year plan from 2002-2003. Last year we identified we did have some new units that were allocated. This past fiscal year we did not get any new allocations from HUD. That is an example of what was updated. It identified the total units that had been obtained since fiscal year 2000 and didn’t identify any particular units for this past fiscal year. The statistics on the waiting list have changed slightly; the number of people, the number who are under 30% of the median income, and the ethnicities breakdown changed slightly. Commissioner Scarpelli asked about the waiting period having been reduced from what numbers in the past? Ms. Nunn answered that previously the clients were facing a minimum of a one-year wait with all three priorities. Now they are being called in as soon as three months after applying. If they are a veteran and they apply right before we are getting ready to pull from the waiting list, they would be pulled in right away. For the most part, our clients have to wait six months if they meet the highest priorities. The highest HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 4 of 16 priorities are households whose income is under 30% of the median income, qualify as either a resident or a person working in Carlsbad, and they quality as either a family, a person over the age of 62, or a person with disabilities. Commissioner Scarpelli congratulated Ms. Nunn for reducing the waiting time on the waiting list. In a period of the category you just described, it went fiom one year to six months, does that mean they are actually placed then in a unit? Ms. Nunn replied that some could be, yes. Especially if they are already in a unit where they are paying the rent themselves. Once they go through the process, they can begin receiving rental assistance right away as soon as they receive their voucher. Chairperson Scarpelli stated that in previous years we’ve tried to work on our efforts to recruit new owners into the program, and it appears as though that has been done. With the availability of units because of the situation in Iraq, do you see any immediate change that would benefit Section 8? Ms. Nunn answered that we have seen rents reducing, and that has definitely assisted our clients. We’ve also seen owners a little more open to trying the program if they had never tried the program before, or possibly returning to the program because of the higher vacancy rate. We are now getting a lot more calls about vacancies. In this unfortunate time, it actually benefits the Rental Assistance Program, and it does benefit our clients that are looking for affordable units. Chairperson Scarpelli stated to Debbie Fountain and Bobbi Nunn, because of the recognition the City of Carlsbad Housing received based on the report, we ought to get that word out to the North County Times to notify the public of what the SEW rating is for the City’s Housing Agency and what it has accomplished. Barbara Brill or Tom Earl would be people to contact at North County Times. . Commissioner Smith asked Ms. Nunn about the waiting list moving from a year to six months. Of the waiting list, how many people do we have that have actually applied for the local assistance and the home ownership assistance? Ms. Nunn replied that as far as the Rental Assistance Program, our most current is 1,354 as of mid- February. We did have a substantially higher waiting list just a couple of years ago, but we did go through a purge process where we sent out interest cards to everyone on the waiting list to make sure they were still interested. That reduced our waiting list by almost one half. Chairperson Scarpelli asked if anyone is interested in speaking, please step up to the podium Mr. Todd Ratzesberger stated he has applied to be a member of the Commission representing Section 8. He is a Section 8 client. He brought to Bobbi Nunn’s attention a date error on the last paragraph, April 2003. Mr. Ratzesberger continued, a professional property manager runs the units where he lives, and he feels that might be a quick way to get in touch with people. When he moved into his unit there weren’t any vacancies, but the resident manager said there were seven openings out of 41 now. Mr. Nunn said just to make a note, the date of April 2003, that is a workshop we have scheduled so the date is correct. Thls will be submitted to HUD on the 17” of April, we will have already conducted this April workshop. Chairperson Scarpelli said that does raise an issue of the recommendation which sounds like a sound one. Often times the rental agency’s corporate office doesn’t know what is actually happening or it is not as up to HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 5 of 16 date. We ought to look into Todd’s recommendation; that is talk to the resident managers about upcoming possibilities. Ms. Nunn said when we conduct the workshops, we try to have an attorney present who can answer questions about the new legislation that affects property owners, as well as any changes in the laws. When we send out the invitations, we send them out to both resident managers and to the corporate office. Often times if our checks go straight to the corporate office and if we just sent the flyer there, you are right, it does not trickle down to the resident managers. They are the ones who usually do the initial screening and have influence on whether or not an owner will accept a program. Chairperson Scarpelli asked if we have a one-piece flyer features list as to the benefits of being a Section 8 landlord. With real quick bullet points in getting their attention. Ms. Nunn said yes we do, but it is more of a packet, and it has all the housing agencies in San Diego County listed on it. It was developed using the hds we had for the Community Opportunities Program. The finds for that program have unfortunately expired. With that program, we had funding that was available to offer more outreach to owners, and we did develop a brochure for owners explaining the Rental Assistance Program It is generic and lists the positive features of the program. It also gives owners information on which agency to contact depending on what area their property is located. Chairperson Scarpelli stated that often brochures will sometimes get thrown away pretty quickly because no one has the time. He was thinking more along the lines of just quick reminders on a monthly or quarterly basis. Something that is at a quick glance: Why should you be a Section 8 landlord? What are the benefits of it? This could be really sharp, precise bullet points and on a regular mailing basis. This would be just to increase what you have already accomplished by bringing new owners into the program. Ms. Nunn thanked Chairperson Scarpelli for his suggestions. Commissioner Smith inquired as to when a person is purchasing a home, do you offer homebuyer workshops or anythmg to ready them for the ownership program? Ms. Nunn answered that is not through the Section 8 Rental Assistance Program. There are different organizations that offer home ownership programs, and depending on what the home ownership program is, there are some requirements that a potential home buyer go through that type of program before they go forward. That is not something that is part of the Rental Assistance Program. Chairperson Scarpelli mentioned an incident that occurred to him today. His fm about a year and a half ago purchased a piece of property to build 13 homes, and his fm paid $325,000 for the piece of property to develop a 13-home subdivision. There was a piece of property adjacent to his piece which would generate another 12 hopefblly affordable type homes, and that same piece of property is on the market for over $1,000,000. It will generate less homes, yet you can see the difference in the cost of just the bare land. This is a reality we have to face in our community; the cost of new home development or apartment development is so high that we have a real challenge in this Commission to try to provide affordable housing. Commissioner Huston moved that the Resolution recommending approval of the Public Housing Agency Plan for submittal to the Department of Housing Urban Development be approved. Commissioner Smith seconded the approval. VOTE: 4-0 AYES: NOES: None Huston, Ritchie, Scarpelli and Smith HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 6 of 16 ABSTAIN: None Chirperson Scarpelli stated the next item on the agenda is the recommendation of approval to the City Council to provide $105,000 in financial assistance and approval of the loan agreement and related documents for construction of three affordable condominium units to satisfy the requirements of the Inclusionary Housing Ordinance for the Laguna Point Project. The staff is recommending approval on this resolution. Mr. Craig Ruiz, Management Analyst, began his presentation to the Commission. The Laguna Point Project is a 21-unit condominium project. A model of the proejct is before the Commission. Of that 21 units, there will be three affordable units included within the development. Each of the affordable units will be one bedroom in size, ranging from 830 to 850 square feet, and they will be affordable to households earning 80% or less of the area median income. Mr. Ruiz presented an artist rendering of what the project will look like. This project is located at the intersection of State Street and Laguna. He showed a site plan and landscaping plan, and as presented in the staff report, there are two main buildings. There is a smaller building in the middle that houses the offices and a breezeway with units above it. He presented a drawing of the view looking from the north as well as the elevation traveling on Laguna toward the south. The project is going to cost roughly $9,000,000 to produce, which includes over $5,000,000 in hard construction costs and $780,000 in soft construction costs, sales marketing and other various costs are lumped together at a little over $1,100,000, the permit fees are over $500,000 and the land value is $1,700,000. The sales revenue presented in the pro forma attached to the report, states the builder estimated in the pro forma of sales revenue of about $9,860,000. With the 18 market rate units generating just under $8,600,000, which is not quite $480,000 a unit, then the three affordable units would earn $120,000 each or $360,000 total. As presented in the report, we are recommending $105,000 in financial assistance, which if everything went according to plan, would be about $780,000 in profit from the sales or roughly 8% profits. Mr. Ruiz continued it is important to note this project is the first of its kind. There are not any comparable projects in Carlsbad. This is what we are projecting as far as sales and revenues and costs, but we do not know exactly what the untis are going to sell for. This is what the pro fom is projecting, but it could be more or less. Chairperson Scarpelli inquired about the $9,800,000 again, let’s say on the $8,595,000, what does that divide into again average value per unit? Mr. Ruiz answered it is about $480,000 a unit. Chairperson Scarpelli stated that is the average. Mr. Ruiz continued the developer is requesting the financial assistance in the amount of $210,000. Staffs recommendation is $35,000 per unit. As we have said in the past, we have the Housing Policy Team, which is made up of Debbie Fountain, myself, as well the Planning Director, the Community Development Director, Financial Director and the Assistant City Attorney. We review all these financial assistance requests. Just like this development is unique, so is our recommendation on financial assistance. There wasn’t a precedent that was set before this with a similar type project so we are branching out into new ground. The financial assistance requests that you have seen in the past for “for sale projects” have been in the amount of $15,000 each per affordable unit. We propose a recommendation that is somewhat higher for three different reasons. First was the developer did not request any type of development standards modifications or waivers or any type of density bonuses. Other projects in the past have requested variances from our standards or higher density to offset some of these costs. That is a non-monetary value that can be given to a project, but it is not part of this project. Second, it is only 21 units. It is a very small HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 7 of 16 project. With smaller projects, there is a cost of doing business that is higher. There aren’t as many units to spread the cost over. Finally this project is in the Redevelopment Area and there is a benefit to having housing, let alone affordable housing in the Redevelopment Area. One of our primary goals is that people live, work, shop all in the Redevelopment Area. This will be one of two housing projects in the Redevelopment Area. We are hoping it will spur future developments of its type in the area. Mr. Ruiz continued as stated in the report, there is a $15,000 a unit value for the affordable housing value this project will provide. On top of that, $20,000 per unit in value for the Redevelopment value that is offered. Along with the fmancial assistance, there are also loan documents that were included for your review, the loan agreement, the note, the deed of trust, and regulatory agreement that the developer and the City will enter into as part of this financial assistance. Our recommendation to the Commission is to recommend to the City Council approval of the financial assistance in the amount of $105,000. Then recommend approval of the loan documents, including the loan agreement, note, deed of trust, and regulatory agreement. Commissioner Huston commented on the artist rendering and admired the sidewalk setback with the vegetation. It lends itself to the redevelopment. She asked if that would really happen? Mr. Ruiz stated the builder will address this in his presentation. He did say the picture is a projection. There is an elevation difference from the drawing, so it will not look exactly like the drawing. Commissioner Huston commented about wanting to make the village walkable. She asked Mr. Ruiz if initially the developer asked for $70,000 per unit? Mr. Ruiz said correct. Commissioner Huston inquired as to what the developer’s justification was for that amount? Mr. Ruiz answered that the developer answer that question also. Commissioner Huston asked what the interest rate is on this? Exactly what pool of money does this come out of! Mr. Ruiz said the Redevelopment Agency is part of our money and 20% of that money has to go into affordable housing. It is called our low and moderate income-housing fund. That would be the source of the money, and that is specifically what it is earmarked for. Typically, we lend the money to the builder to reimburse for construction costs. Then the project is built and the three units are sold to low-income households. The money for each unit will be recorded in the form of a note and a grant deed against each of those affordable units. Commissioner Huston asked if it is like a second trust deed? Mr. Ruiz said correct. With the sale of each affordable unit, the builder is credited with repayment of the loan and no longer has that obligation. It transfers from him to each homeowner. When the homeowner sells the property, after 15 years, they can sell it on the open market. At that point, that note plus any other developer subsidy, plus a share in the appreciation comes back to the Redevelopment Agency where we would then take that money and put it into another affordable project. Commissioner Huston asked if in the interim is there interest that rolls over? HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 8 of 16 Mr. Ruiz answered we do not do a straight interest rate like a traditional first mortgage. We do a shared appreciation so if that loan represented 10% of the purchase price, when it is sold; we take roughly 10% of any appreciation. Commissioner Huston reiterated then the loan is paid back out of the appreciation. So there really isn’t an interest rate associated with it? Mr. Ruiz said correct. Commissioner Huston asked if that was standard procedure? Mr. Ruiz said in affordable housing, it is standard. Commissioner Smith asked if the person will have to wait 15 years before they can sell the home? Mr. Ruiz answered they can sell it at any time, but if they were to sell it prior to the 15 years form the date it was constructed, they would have to sell it to another low income homeowner and then that loan would travel to the new buyer. They would be restricted on the amount they could sell it for, and that loan travels with the new buyer. Whoever owns it at the end of the 15 years, then it would be recaptured. Chairperson Scarpelli asked Mr. Ruiz to get a little more involved with the no windfall the Commissioners might have for a low-income buyer. He asked the other Commissioners if they are aware that someone else cannot come in and make a windfall on this? He asked if the Commissioners needed further detail on it. Commissioner Smith asked if the homebuyer would have to pay a certain amount of money and would be locked into this for the next 15 years? Is that what you are saying? Mr. Ruiz said no. They are free to sell the unit at any time. They are going to have to come up with the down payment and closing costs, so they will have money into this project, but when they go to sell the unit, the second trust deed in whatever amount it turns out to be, gets transferred to the new buyer so they are not repaying that, but the sales price they bought it at versus what they are going to sell it for later will only appreciate 3 or 4% a year; it will be tied to the increase of the median income. Commissioner Huston asked about the possibility of a person buying this unit and renting it out? Mr. Ruiz said one of the conditions that will be in our loan documents on that second is that it has to be the person’s primary residence. They have to live in the unit 10 months a year. We research the tax records to verify they are still getting their tax bill at that address. They also have to fill out an affidavit every year that states they still live there. If they for some reason tried to rent it out, we would find out about it, then they would be in default. If it was after 15 years, we would force them to repay the loan. If it was before the 15 years, they would have to remove the renter and move back into the unit or they would have to sell it to another low-income homebuyer. Commissioner Huston questioned if they default on their loan, repossession, is that part of the package? Mr. Ruiz answered something that will be included in the loan documents is a “right to cure.” If they were to default on the loan, we would review if it is in our best interest to let the person who holds the first to foreclose on this person or it is it in our interest to cure the default by paying the loan current, take over ownership and get another person who is a low income home owner to buy it. Commissioner Smith asked if the person will be paying the same amount of money for the next fifteen years? HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 9 of 16 Mr. Ruiz replied yes, that would be if they did get a fixed-rate loan. Commissioner Huston asked if that would be true even if their income changes over that period of time? Mr. Ruiz said correct. Chairperson Scarpelli asked if the low-income buyer has rights to refinance on the first loan? Do they maintain all the normal rights as an owner as far as refrnancing to achieve a lower interest rate? Does the secondary holder have some approval of a refinance of a first loan? Mr. Ruiz answered that in the loan documents it states the second is subordinated to the first loan, which means the City is in second position behind the primary lender. The City agrees to resubordinate to a refinanced loan if they are lowering their interest rate and lowering their monthly payment. The City will not subordinate if they are trying to cash out. Commissioner Ritchie asked if there would be a difference in the appearance of the subsidized units? Mr. Ruiz replied the architecture is all the same. The location would be that they are first floor units so they will not have the views the other units will have. Certainly, from the exterior there is no difference. The architecture is the same throughout. Commissioner Ritchie stated we would not want them to stand out since there will be people paykg that kind of money for a condominium. Chairperson Scarpelli asked if there were any further questions. He asked the applicant to step up to the podium. Bill Canepa, Wave Crest Resorts, 829 Second Street, Encinitas. Mr. Canepa has been developing exclusively in the coastal area from Del Mar to Carlsbad since 1972. The developments include some waterfront developments. This development has been the most challenging development. About 70% of the property was acquired about four years ago. The neighboring property owner went before City Council with a recommendation of staff for approval on a ten-unit project on the comer and then was turned down. Our neighbor worked with us and suggested we buy his property since he was discouraged. Mr. Canepa said he understood at that time there was a recommendation of a $70,000 subsidy for that one unit, and I would like to clarify if that was a staff recommendation or if it was a recommendation that went to the Housing Commission? Mr. Ruiz stated it was staff who recommended the $70,000 subsidy for the one unit. Mr. Canepa continued that his company was involved in this project and knew City Council considered this a gateway to the northern portion of the downtown Carlsbad, and they wanted to see a nice project on this site. Despite staffs recommendation, they turned down a previous project, which was bulkier and was not as architecturally sound as this one. The City Council and the Design Review Board unanimously approved us. Yes, the project will look as close as possible to that rendering showed earlier. The City Council and staff were very particular to make sure the trees, landscaping and the bushes were all the type specified in the landscape drawings, except the landscaping is a little more mature. There is a requirement that the average trunk height for the palm trees be an average of 15 feet. That is exactly what the project will look like. An architectural student who works for the architect did the drawing and model. That model really wasn’t intended for public consumption. When the project is sold, we will build a more handsome model depicting the tile roof and other details. As far as the setback and the elevations of the building, the model is about as exact as possible. The project was challenging from the affordable housing standpoint. Our HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 10 of 16 much greater preference was to pay an in-lieu fee. Most projects in the City of Carlsbad, I thmk, can pay an in-lieu fee. Debbie, what is the fee? Ms. Debbie Fountain, Director of Housing and Redevelopment, answered that in-lieu fees are not allowed. There are in-lieu fees, but the project has to be six units or less to be able to pay an in-lieu fee. I think you are talking about going off site and buying credits in another project. Mr. Canepa said right and what are those fees typically? Ms. Fountain said the credit for Villa Loma is $42,000 a unit now. Mr. Canepa said he had a conversation with Debbie Fountain and Lori Rosenstein, the planner, about three years ago and stated he would gladly pay a fee. At that time, he thought it averaged $34,000 or $35,000. He would gladly pay a $50,000 fee for each affordable unit. Our company needs a larger subsidy then $35,000 a unit or this project probably will not be able to go forward. The other possibility we hoped for was that Housing would acquire some apartments in the village of Carlsbad. This goes back three years ago. There was some talk about Tyler apartments, I believe, but that never materialized. We looked at the possibility of buying other units, but we had to buy them in the quadrant, but there aren’t any units that have been built in this area since 1985. He did look at some units adjacent to the project, but after talking with staff, those were built in 1953 and those would have serious problems as far as bringing them up to code. Coming up with the estimates of the profitability of this project, it was kept in mind that what we submit to your staff is what we need to submit to our lender. It may differ a little because costs are still coming in. We knew there is not a lender in the world who will lend on a condominium project where the developer does not have a chance of making a 10% profit. This is different then if we were a contractor and we were signing a contract and were going to make X number of dollars for building this project. It is a speculative project. No condominium units have ever ’been sold in the Village of Carlsbad for the price we are anticipating these will need to be sold if we were to make a 10% profit. We used the best comparable we could find, the Ocean Point Condominiums, which were being built on Tamarack, they have much better views and they have sound factors. They are not going to be as handsome architecturally as our units. Nevertheless, those units sold for a lower price. In the report submitted to Craig Ruiz, it stated we used Ocean Point Condominiums as a comparable, but hopefully will be able to sell this project at a greater price. Mr. Canepa continued, as far as construction costs, we have several estimates from contractors. The best estimate received to date is $287,000 higher then the figure used in the report given to Craig Ruiz. Mr. Ruiz is aware of that, and I subtracted that amount. It was the contractor’s contingency. I do need to have final working drawings. I hope to be able to reduce the contractor’s profit or be able to reduce their overhead so that I am able to build this project without that contingency. Unfortunately, from having been in this business for thirty years, I know as working drawings are done, rather then getting less expensive, things tend to get more expensive. I am proceeding with the hope I will be able to complete this for $287,000 less then the best bid I have received so far. Incidentally, another bid I received was $1,250,000 higher then that figure, which is the second best bid I have received. This will be an expensive project to build, but a handsome project. We estimate our cost per unit is about $270,000 per one-bedroom unit. In contrast, we will need to sell these in the $120,000 range, hopefilly higher, but we don’t have all the maintenance fees calculated yet. It is just too great a cost of $150,000 for us to bear, and I don’t feel it is realistic to pass it on. It is not a project meant for really wealthy people even though the units are going to sell for in the vicinity for $500,000 per unit. Hopefully, people who buy will have a lot of equity in their other home to use as a down payment. We need that $70,000 per unit. As I stated earlier, we would gladly contribute $42,000 or even more if that option were available to us, but it is our understanding the City Council would like to see condominiums built in the Redevelopment Area. HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 11 of 16 Mr. Canepa also said he acquired this property, some of it four years ago, some of the property he acquired two and a half years ago. The $1,725,000 is not the value of the property. That is our cash purchase price of the property plus the plans, drawings, the entitlements, which are expenses incurred to date. We paid cash for the property. Mr. Scarpelli mentioned about the land next to his had appreciated at a high rate. We have actually had an appraisal of $2,700,000 for the property. I think that may be on the high side, but that is what an independent appraiser came up with. Again, $1,725,00 was our cash purchase price. We are not adding anythmg for our money, which we have tied up for four years in this project when we came up with that cost. We are looking for at least a 10% profit on this project. That is contingent on the market place staying good, interest rates staying down, and being able to bring this in at a better price then my best construction estimate has been. We don’t intend to lessen the quality of the project. The City Council is counting on this project being what we have shown them to be. We built the Tamarack Beach Resort, we developed the Hilton Hotel here in Carlsbad, and we are working on another hotel project. We are going to build what we were approved for if we are able to move ahead. Chairperson Scarpelli said he needs clarification. Was the purchase price plus the entitlements out of pocket? Mr. Canepa said the exact purchase price of the first piece of property was $1,000,000. That was approximately 30,000 square feet, and that was the property that fronted on Roosevelt and Laguna. The second purchase price was $589,000 even though he was originally asking $850,000. The seller was discouraged since he had staffs recommendations of approving a ten-unit project, he had designed the project, done the working drawings, he was optimistic he would get it approved by the City Council, but he was turned down. We did not buy it from him immediately. He had it on the market for a while, and we purchased it for $589,000. Added to that at the time when we were putting this information together, we had spent $1,725,000 with the plans and the applications that we had made to date. Since that day, that figure has increased, but that is part of the soft costs I am showing you. As of today, we have $1,864,000 in the property. It was $1,725,00 when I gave Craig Ruiz all the figures. Again, any money we spend fiom that day forward would be part of the calculations that came up to $9,100,000 total cost. Chairperson Scarpelli asked if anyone has any questions of the applicant at this point? Commissioner Ritchie asked if Mr. Canepa had any other amenities on the property, like pools and tennis courts? Mr. Canepa said they do not have tennis courts, but they do have a pool and a spa. There is a recreation room, men’s and women’s bathrooms, every unit has a deck, every unit has more storage space then what is required by code, although code does require every unit has storage space, the parking spaces are all nine foot wide, whereas we could have gotten by with eight and a half foot wide spaces, but then you start having doors getting dinged. Every unit, including the affordable units, has two parking spaces, which are enclosed parking. The first floor is parking, but it is enclosed and the second and third floor are where the units are. In the front, there is some guest parking. Commissioner Huston asked since it is in the Redevelopment Area, will your company be subject to prevailing wages during construction costs? Mr. Canepa said no, because if they were, they definitely would not be building the project. Commissioner Huston said she knows they are building another condominium project just west of the railroad tracks. Is that equivalent to this in size or is it a comparative project? Mr. Canepa asked if she was talking about Village by the Sea? HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 12 of 16 Debbie Fountain answered that it is actually larger. It is a 65-unit condominium project and it has retail as part of it. They actually are doing their affordable housing on site as well. They have eleven units they are required to provide so they are doing that on-site within their project. Commissioner Huston asked if they are requesting a subsidy like this as well? Ms. Fountain said no, they did not request a subsidy. Theirs is a little larger project plus they did get a density bonus, and they had some minor standard modifications, but they have been able to make it work without any assistance. Commissioner Huston asked if staff has any rebuttal to the things Mr. Canepa said other then what you have already said; the three criteria. Commissioner Smith asked if this project would be gated? Mr. Canepa said yes, the parking structures are gated. I would also like to add something. There are a couple of things if you do approve the request. With our hotel project, it was required we form a Single Purpose Entity. Lenders have done this ever since Donald Trump failed and almost brought a bunch of lenders down with him. It is preferred to form an entity that exclusively owns and develops one property, and that may or may not be a requirement. The agreement would have to be between Wave Crest Resorts 11, which was formed because Wave Crest Resorts had to become a single purpose entity. If you approve this request, I would request staff be given the discretion to continue to honor it if we are forced to form another mirror entity which would have the same participants as the first one, but for legal reasons we may need to put it into a separate entity. Mr. Canepa added he doesn’t necessarily want the City to lend him the money. He is willing to take the money if and when he successfully builds the project and the units are sold. He is not requesting to get paid ahead of time, but does need the $70,000. If the City wants to put off giving the $70,000 until the units are sold to the affordable people, and then the loan is made to them, that would be acceptable to receive the money when it is earned which would be when the units are delivered to the affordable buyers. Commissioner Smith asked if it is usually done that way? How does the City usually do this? Mr. Canepa stated this has changed because initially when talking with Craig Ruiz, the money would be given at the beginning when the construction loan is made. It looks like the money will be given as the project is being built. He is satisfied to receive the money after the project is built and sold. He stated his concern is how the lender will view getting a second trust deed on the property, even if it is subordinate to them. Mr. Canepa said further he does not want to complicate things, but he wants to make sure the City has looked into the legality of someone buying the unit, they intend to occupy the unit, but things change such as more children and they can no longer occupy the unit. He hopes they would have an option besides having to be forced to sell it, that they could rent it to someone who may qualify for an affordable unit if they didn’t want to be forced to sell the unit. If they had to sell it, he doesn’t have a problem with that. He is concerned about the enforceability of that. Would that stand up in a court of law? While the units are being sold, he doesn’t want to start facing a lot of legal issues. Another question would be what if the City did not give me a subsidy, is there still going to be a lean put on these units? Commissioner Smith said her understanding was that when a person goes to purchase the one-bedroom unit, they purchase the unit as long as they live in there for ten months out of the year. They cannot rent it out, but if they have to sell the property, they can sell it again to a low-income person, not for profit, but they can sell it. I don’t see anything wrong with that. HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 13 of 16 Mr. Canepa said it won’t really affect him once he has sold it to them if five years fiom now they have another child and there are two children and they can no longer live there, and they have to sell it and they don’t want to sell it. I guess that would be between them and the Housing Authority at that point. Chairperson Scarpelli said that the chances of that particular type of person, unless they had just won the California State Lottery or they just got involved with an IPO that was successful, they probably wouldn’t have been able to move out of that into something else without taking their equity with them. Commissioner Huston asked Mr. Canepa what the homeowner association fees are going to be? Mr. Canepa said that is still being worked on. At Ocean Point, the fees were around $350 a piece. The fees will be based to some extent on the square footage of the unit. He anticipates the one-bedroom fees will be less, but that is why the sales price hasn’t really been completely worked out because we have to sell them to people who make 80% of the median income, so we know what their payments can be, but then it depends what the interest rate is once we sign our agreement with the City, and then also what the maintenance fees are. The fees will probably be around $250.00. Commissioner Smith asked if that was per month or per year. Mr. Canepa answered that would be per month. The Ocean Point project is $350 average for those units, and those units average around 1,600 square feet so the one-bedrooms will probably be maybe $200 to $250 a month maintenance fee. Again, the total payment they can make is around $1,100 per month and that includes the maintenance fees. So the higher the maintenance fees, the less we can sell the units for. At the same time, we need to have maintenance fees that are appropriate to maintain the building for replacing the roof when it needs to be replaced so we would like them to be as low as possible, but at the same time, they need to be realistic. Chairperson Scarpelli thanked Mr. Canepa. He asked if the other Commissioners had any questions. He continued that this Commission had indicated to staff before their disenchantment with a project that came to them prior to where it was felt the developer’s request for an amount of money was greater then what the staff had recommended, and we realized at that time, that we have this committee made up of.. ... What is the name of the committee? Mr. Ruiz answered it is the Affordable Housing Policy Team. Chairperson Scarpelli said he would like to recommend to Debbie Fountain that a member of the Housing Commission be placed on that team. There seems to be a problem in this area. He feels the developer’s request for a 10% profit on a project of this size is not extravagant. With the amount of risk taken in the work that is going to be done, there probably aren’t a lot of people willing to work on a 10% profit. Again, he thinks the Housing Policy Team is overlooking this major issue of a fair profit to be made on a particular project, especially when it enhances to the extent that this particular project would enhance our north end vision of the City of Carlsbad and the northern gateway to the City of Carlsbad. It has been in need of a major overhaul for well over twenty years, since Hawthorn moved out of that site at least, and even before while they were in that site. He thinks staff needs to look at this and the Committee needs to look at the advantage of the development to the City and to the people of this community. This project would improve the downtown area, and therefore the real estate values, the commercial values of the businesses doing business downtown. Those are the issues that really need to be approached, in my opinion, when evaluating a request such as the developer’s request of $70,00 a unit versus the approach that was being used by the Committee to come up with it’s $35,000 per unit. As a member of this Commission and as a member of this community, he does not want to see this site left idol. He recommends the approval of the developer’s HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 14 of 16 request for what might be a 10% profit by providing a $70,000 per unit subsidy to this project versus the staffs $35,000 recommendation. Again, I would like to chide the staff. It knows the Commission’s position on this as we have gone through this one time not too many months ago. But it doesn’t appear from what is occurring here, that was taken into consideration. It is not this Commission’s desire to overrule staffs recommendations, but again, I feel compelled to do it again. I wish I wasn’t put into a position to have to do it, but as one Commissioner, I would not accept the recommendation of staff and I would recommend to the rest of my Commissioners that we recommend the subsidy be at the developer’s request for the reasons he has requested it. Commissioner Huston said she would like to respond to Chairperson Scarpelli’s comments. She differs as she feels staff has given considerable allowance because it is in the Redevelopment Area and the amount they are recommending is double so I think that has been taken into consideration by doubling the amount. I would beg to differ with you on that point. Commissioner Smith said she would agree with Commissioner Huston. Because staff has placed a lot of input and because they have the know how redevelopment is run and how the projects are going, I think we should leave it like it is. Commissioner Ritchie said she would hate to lose this project because that is a significant comer. I think it will encourage upgrading a lot of other properties that are along Roosevelt and State Street. So I would agree with Chairperson Scarpelli. I think we should approve the developer’s request. Chairperson Scarpelli said that he is looking at a fair profit for the developer and the advantage received from this particular project. Our policy or our formula is faulted. That is the problem He is not criticizing the way they came up with the figure. His concern is with the formula in which the committee is working, because if the formula which the committee is working with is creating something less then an anticipated profit of 10% to a developer for a project of this size, that is going to enhance our City, and particularly the downtown community of this City to the extent this would be. I am suggesting that possibly one member of this Commission be appointed to the Housing Committee for future projects of this type that come before us. I’d like to make a motion that we grant the developer financial assistance in the amount of $210,000 and also for the Laguna Point and that we approve the loan agreements, related documents, for construction of three affordable condominium units to satisfy the requirements of the Inclusionary Housing Ordinance for the Laguna Point project. Commissioner Brown seconded the motion. Chairperson Scarpelli asked for a vote in the motion VOTE: 3- 1 AYES: Ritchie, Scarpelli and Smith NOES: Huston ABSTAIN: None Ms. Fountain recommended Chairperson Scarpelli issue a minute order to request to have somebody on the Policy Team, that should be done as a Commission. She does not know what will happen with that, but it should be a motion of the whole Commission. Chairperson Scarpelli made a motion that the City Council appoint a member of the Housing Commission to the Affordable Housing Policy Team of the City of Carlsbad. Commissioner Ritchie seconded the motion. HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 15 of I6 Chairperson Scarpelli asked if there was a discussion on the motion. Commissioner Smith asked if Chairperson Scarpelli could state why we are appointing a member of the Housing Commission to the Affordable Housing Policy Team? Chairperson Scarpelli believes that with the two most recent significant projects that were brought to this Commission, the Team used a formula in the past to come up with a solution for subsidy for affordable housing projects such as this. They were below what would have fairly and mutually beneficially been acceptable. In fact, in the last project, this Commission unanimously approved the developer’s recommendation versus the staffs recommended amount. Therefore, if a member of this Commission were appointed to the Affordable Housing Policy Team, then our insight could be considered in coming up with an adjustment to the formula being used. So we don’t put staff through the embarrassment of turning down their very studied recommendation. Again, this Commission’s problem is not with staff. The staff is held in very high regard, all of them. This Commission’s concern is with the way in which the policy is being implemented and the results we are getting that are bad. VOTE: 4-0 AYES: NOES: None ABSTAIN: None Huston, Ritchie, Scarpelli and Smith Ms. Fountain said she will take Chairperson Scarpelli’s comments back to the Affordable Housing Policy Team and let them know what the concerns are then report back to the Commission at the next Housing Commission Meeting. She shared that typically the way these recommendations come forward, and it is the same way with the City Council or Planning Commission or anyone else, the City staff makes what they think is its best professional recommendation to the Housing Commission or to the City Council. It does not bother us, from a staffs standpoint, if you do not go with our recommendation. I understand what the issue is that you are concerned about how the formula is developed by staff, but I want you to know we are okay if you want to make an altemate recommendation. That is why it comes to you. Staff makes a recommendation to the Housing Commission, if the Commission doesn’t agree with that recommendation, it is fine for you to make an alternate recommendation to the City Council. That doesn’t hurt our feelings. That is how the process should work. That is what you’ve been directed by the City Council to review is all financial assistance requests. If they did not want you in that capacity, you would not be reviewing those financial assistance requests, and they would be going directly from staff to the City Council. If you get three votes to change the recommendation, then the recommendation changes. One of the things that Mr. Canepa mentioned is we have taken recommendations forward to the Council as an example, and they have not gone with staffs recommendation. That doesn’t mean that they sit with staff when we make our recommendations, but they recognized we made our best professional recommendation, but we don’t agree with it for whatever reasons and all the reasons stated are good reasons why you had a difference of opinion. Ms. Fountain said she just wanted to share that with the Commission. She will take the comments back to the Affordable Housing Policy Team and let them know what the concerns of the Housing Commission are and then she will report back to the Commission on what action is taken. Chairperson Scarpelli asked if Ms. Debbie Fountain, Director of Housing and Redevelopment, had any announcements. DIRECTOR REPORT: Ms. Fountain said there are quite a few projects going on right now. One of the projects mentioned tonight was the Village by the Sea Project which is the condominium project downtown, and it will have eleven affordable units affordable to households at 80% or below the area median income. That is an exciting HOUSING COMMISSION MINUTES MARCH 18,2003 PAGE 16 of 16 project because it is one of the first residential projects to be built in the village area since about mid 80’s. It was 1985 or 1986 when the last residential project was built in the village. It was actually a rental product. This is positive to see more residential coming into the village area because we think it is one of the things that will help revitalize or continue to revitalize the village area. Commissioner Ritchie asked where this is located? Ms. Fountain said it is on Carlsbad Blvd, east on Christensen to the commuter rail station, so it is on the west side of the Village Commuter Rail Station, just south of Magee Park. On Carlsbad Blvd, it is between Beach and Christensen. Part of it fronts on Carlsbad Blvd and part of it fronts on Christensen. They will be having affordable units in that complex. These two projects in the Village Area we are happy about. Ms. Fountain continued there are other projects going forward. Calavera Hills is a 106-unit apartment project ready to issue bonds. Also, the Villages of La Costa, which is a 180 units is moving forward. They are getting their frnancing together. We also have the Rose Bay Project. It will be a “for sale” project of 24 town homes. They are moving forward. In addition, we have Kelly Ranch, an apartment project which is beginning to move forward. There is a lot of construction moving forward with affordable projects. Sunny Creek has been built and is now fully occupied, and that added 50 units to our total. At this time, we have over 1,100 units in total of affordable housing since we adopted the Inclusionary Housing Ordinance in 1993. In about ten years, we have been able to bring on a little over 1,100 units. That is a credit to the Housing Commission and the City Council for having the political will to implement to continue to enforce the Inclusionary Housing Program. CHAIRPERSON’S REPORT Chairperson Scarpelli thanked the Commission for electing him Chairperson. He will do his utmost to continue the great work of this Commission and to aid each of you in any way that is needed. He will give it all of the attention and energy it deserves. Commissioner Ritchie complimented Chairperson Scarpelli on his insight as it is always very valuable. Chairperson Scarpelli congratulated Commissioner Huston as Vice-Chairperson. ADJOURNMENT By proper motion, the meeting of March 18,2003 was adjourned at 7:35 p.m. Respectfully submitted, Debbie Fountain Housing and Redevelopment Director PATRICIA CRESCENT1 Minutes Clerk MINUTES ARE ALSO TAPED AND KEPT ON FILE UNTIL THE WRITTEN MINUTES ARE APPROVED.