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Home My WebLink AboutED Purchase BMR Housing Unit 2016 (missing agr.)C/TY OF Agenda Item No: 3.e n4 Meeting Date: April 18, 2016 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Economic Development Prepared by: Tom Adams City Manager Approval: Economic Development Coordinator TOPIC: Purchase below market rate (BMR) housing unit. SUBJECT: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL APPROVING, AND ALLOCATING AN AMOUNT NOT TO EXCEED ONE HUNDRED AND FORTY FIVE THOUSAND DOLLARS ($145,000) OF CITY AFFORDABLE HOUSING IN -LIEU FUNDS FOR, A LOAN TO MARIN HOUSING FOR THE PURCHASE OF A BELOW MARKET RATE HOUSING UNIT (A.P.N 179-420-07) RECOMMENDATION: Staff recommends that the City Council approve an allocation from the City's Affordable Housing in In - lieu Fund in an amount not to exceed $145,000 to provide a loan to Marin Housing for the purchase and eventual resale of a Below Market Rate housing unit, and authorize the City Manager to effectuate the Loan Agreement. BACKGROUND: The City contracts with the Housing Authority of the County of Marin ("Marin Housing") to administer the City's Below Market Rate ("BMR") Ownership Housing Program. The City's Agreement with Marin Housing requires that each contract conveying a BMR unit to a buyer must include a resale restriction and an option to purchase constituting a right of first refusal to Marin Housing ("Resale Restriction"). In most cases Marin Housing qualifies a buyer to purchase the unit and the unit is transferred directly from the seller to the qualified buyer and Marin Housing does not provide any funding. Occasionally, due to default by the owner or other reasons, a BMR unit must be purchased by a public agency to assure that the unit remains in the BMR program. In these situations, the City uses funding from the City's Affordable Housing In -lieu Fund to directly purchase the BMR unit to provide an acquisition loan to Marin Housing. ANALYSIS: FOR CITY CLERK ONLY File No.: 229 Council Meeting: 04/18/2016 Disposition: Resolution 14098 SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 The contract between Marin Housing and the owner of a specific BMR unit at the property designated as A.P.N 179-420-07 requires the owner to occupy the unit. Marin Housing has confirmed this unit is not owner -occupied. The owner has acknowledged violating the contract and has agreed to sell the unit to Marin Housing pursuant to the Resale Restriction. The contract between Marin Housing and the owner provides a formula for the resale price, which for this unit is $145,000. The transaction structure will be a loan from the City to Marin Housing. Marin Housing will purchase the unit and repay the City once the unit is sold to another income -eligible buyer. The original restrictions for the unit required the unit to be affordable to a household earning up to 120% of Area Median Income, or $120,000 for a four person household. This unit could be affordable to a lower income household assuming a resale price that is under $200,000. Therefore, staff recommends this unit be moved from a moderate income category to a lower income category. If the unit were moved to a lower income category, it would be affordable to a household whose income does not exceed 80% of Area Median Income, or $82,400 for a four person household. Moving the unit to a lower income category is consistent with the policies in the General Plan Housing Element and it will provide a housing unit for those most in need of housing assistance. FISCAL IMPACT: There is no impact to the General Fund. The loan shall not exceed $145,000 and would be charged to the City's Affordable Housing In -lieu Fund. When the unit is resold, the funds will be repaid to that fund. OPTIONS: • Adopt the resolution authorizing the loan to Marin Housing. • Do not adopt the resolution and reject the loan request. Staff does not recommend this option, as the unit could be removed from the affordable ownership housing stock. RECOMMENDED ACTION: Adopt the resolution allocating funds from the City's Affordable Housing in In -lieu Fund in an amount not to exceed $145,000 to provide a loan to Marin Housing for the purchase and eventual resale of a Below Market Rate housing unit, and authorize the City Manager to effectuate the Loan Agreement. ATTACHMENTS: Resolution RESOLUTION NO. 14098 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL APPROVING, AND ALLOCATING AN AMOUNT NOT TO EXCEED ONE HUNDRED AND FORTY FIVE THOUSAND DOLLARS ($145,000) OF CITY AFFORDABLE HOUSING IN -LIEU FUNDS FOR A LOAN TO MARIN HOUSING FOR THE PURCHASE OF A BELOW MARKET RATE HOUSING UNIT (A.P.N 179-420-07) WHEREAS, Section 14.16.030 of the Zoning Ordinance of the San Rafael Municipal Code requires that residential projects include units affordable to low and moderate income households, and/or that the developer pay in -lieu affordable housing fees; and also imposes a requirement for payment of in -lieu affordable housing fees on new nonresidential (commercial, industrial or institutional) development. These in -lieu funds are placed in a separate housing fund ("the Affordable Housing In -lieu Fund"), to be used for the acquisition, improvement or construction of housing affordable to very low, low, and moderate income households; and WHEREAS, the City has contracted with the Housing Authority of the County of Marin ("Marin Housing") to administer the City's Below Market Rate ("BMR") Ownership Housing Program. The City's agreement with Marin Housing provides that each contract conveying a BMR unit to a buyer shall include a resale restriction and an option to purchase constituting a right of first refusal to Marin Housing ("Resale Restriction"); and WHEREAS, Marin Housing and the owner of the BMR property identified as APN 179- 420-07 entered into an agreement containing the Resale Restriction; and WHEREAS, Marin Housing desires to exercise its option to purchase the BMR unit at APN 179-420-07 pursuant to the Resale Restriction, but Marin Housing does not have the funds necessary to exercise the purchase option; and WHEREAS, the City of San Rafael desires to provide a loan to Marin Housing to finance acquisition of such unit by Marin Housing ("the Loan"), until the unit can be resold to a low or moderate income household, so that the unit might remain in the City's BMR program; and WHEREAS, the City of San Rafael desires that the unit be affordable to a low income household and requests that Marin Housing move this unit from a moderate income category affordable to a household at 120% of Area Median Income, to a lower income category affordable to a household whose income does not exceed 80% of the Area Median Income; and WHEREAS, it is proposed that the City fund the Loan with One Hundred and Forty Five Thousand Dollars ($145,000) from the City's Affordable Housing In -lieu Fund; and WHEREAS, Marin Housing has provided a proposed Promissory Note for this transaction, attached hereto as Exhibit A and incorporated herein by reference; and WHEREAS, the transaction will serve the goals of the City's housing element by maintaining housing available at affordable cost in the community, thereby decreasing the market pressure on the supply of affordable housing in the community; and WHEREAS, the California Environmental Quality Act (Public Resources Code Section 21000 et seg.) ("CEQA") imposes no conditions on the City's consideration and approval of this Agreement, because the project undertaken pursuant to this Agreement is the rehabilitation of existing improvements and such projects are exempt from CEQA requirements under the categorical exemption set forth in 14 CCR Section 15301; and WHEREAS, by staff report accompanying this Resolution and incorporated herein by reference, the City Council has been provided with additional information upon which the findings and actions set forth in this Resolution are based. NOW, THEREFORE, BE IT RESOLVED that the City Council hereby approves allocation of One Hundred and Forty Five Thousand Dollars ($145,000) from the City's Affordable Housing In -lieu Fund monies to fund the Loan to Marin Housing, and authorizes the City Manager to effectuate a Loan Agreement, in a form approved by the City Attorney, and to accept the Promissory Note with Marin Housing attached as Exhibit A. BE IT FURTHER RESOLVED that this Resolution shall take immediate effect upon adoption. I, ESTHER BEIRNE, City Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council held on the 18'h day of April 2016, by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ESTHER BEIRNE, City Clerk PROMISSORY NOTE (Pertaining to Marin County Assessor's Parcel No, 179-420-007) Principal Amount: $145,000. DATE: April 29, 2016 FOR VALUE RECEIVED, the undersigned, THE HOUSING AUTHORITY OF THE COUNTY OF MARIN (Borrower) promises to pay to the CITY OF SAN RAFAEL acting as SUCCESSOR HOUSING AGENCY OF THE FORMER SAN RAFAE L REDEVELOPMENT AGENCY, a California Redevelopment Agency formed pursuant to the California Community Redevelopment Law (Health & Safety Code Section 33000, et seq.) (Lender) or to order, the sum of ONE HUNDRED FORTY FIVE THOUSAND AND NO/100'S DOLLARS ($145,000.00), payable without interest, as specified below. Borrower sball make one lump -sum payment, in lawful money of the United States, of the full principal balance of this Note, excepting only such credits against such balance as may be approved in writing by Lender, on or before the earlier of the following: a. April 28, 2017; or - b. 60 days following the close of escrow on the sale by Borrower to a third party of the real property located in the City of San Rafael, County of Marin, identified as Assessor's Parcel No. 179-420-007. If the Borrower fails to make payment when due or fails to comply with any other term of this promissory note, the loan will be considered in default, This Note may be prepaid by the Borrower at any time in whole or in part without premium or penalty. The Borrower must promptly inform Lender of any change in name or address. If the Lender prevails in a lawsuit to collect on this Note, Borrower will pay Lender's court costs, collection agency costs, and attorney's fees in an amount the court finds to be reasonable. By: Lewis A. Jordan Executive Director ROUTING SLIP / APPROVAL FORM INSTRUCTIONS: Use this cover sheet with each submittal of a staff report before approval by the City Council. Save staff report (including this cover sheet) along with all related attachments in the Team Drive (T:) --> CITY COUNCIL AGENDA ITEMS 4 AGENDA ITEM APPROVAL PROCESS 4 [DEPT - AGENDA TOPIC] Agenda Item # Date of Meeting: 4/18/2016 From: Tom Adams Department: Economic Development Date: 4/6/2016 Topic: Allocate funds to purchase an individual below market rate (BMR) housing unit. The City will be repaid for the full purchase amount when the unit is resold to another income eligible buyer at a below market rate price. Subject: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL APPROVING THE ALLOCATION OF AN AMOUNT NOT TO EXCEED ONE HUNDRED AND FORTY FIVE THOUSAND ($145,000) FOR THE PURCHASE OF A BELOW MARKET RATE (BMR) HOUSING UNIT WITH CITY IN LIEU HOUSING FUNDS (A.P.N 179-420-07) Type: ® Resolution ❑ Ordinance ❑ Professional Services Agreement ® Other: Staff Report APPROVALS ® Finance Director Remarks: Van - Approved 4/7/16 ® City Attorney Remarks: LG -Approved 4/7/16 with changes. ® Author, review and accept City Attorney / Finance changes Remarks: Accepted all changes M City Manager Remarks: FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: