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Home My WebLink About04/14/1997 - City Council Special Meeting - Redevelopment AgencyROLL CALL NEW BUSINESS HOME Investment Partnership Agree- ment with Civic Center Barrio Housing Corp. SPECIAL JOINT MEETING OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY CITY OF COSTA MESA APRIL 14,. 1997 The City Council and the Redevelopment Agency of the City of Costa Mesa, California, met in special joint session April 14, 1997, at 6:00 p.m., following the, regular 5:30 p.m. Agency meeting, in first floor Conference Room A, City Hall, 77 Fair Drive, Costa Mesa. Notice of the special joint meeting was given as required by law. The meeting was called to order by Mayor/Agency Member Buffa. Council/Agency Members Present: Mayor/Agency Member Peter Buffa Mayor Pro Tem/Agency Chair- person Gary Monahan Council Member/Vice Chairperson Libby Cowan Council/Agency Member Joe Erickson Council/Agency Member Heather Somers Council/Agency Members Absent None Officials Present: City Manager/Executive Director Allan Roeder City Attorney Thomas Kathe Redevelopment and Housing Manager Muriel Ullman Management Analyst Paula Schaefer Accounting Supervisor Diane Butler Executive Secretary Marie Thompson The Management Analyst gave the background of the proposed Affordable Housing Agreement with Civic Center Barrio Housing Corporation (CCBHC) utilizing HOME and Redevelopment Agency set-aside funds: A Notice of Funding Availability 'was issued in September, 1995. In February, 1996, the,City Council entered into an Exclusive Negotiating Agreement with CCBHC for acquisition and rehabilitation of rental _property in Target Area No. 5 (Mission/Mendoza Drives). In May, 1996,18 Fund Reservation and Implementa-tion Agreement for commitment of 1994-95 HOr.1"': funds was approved and the project divided into two' phases. HOME 4A was approved for acquisition and rehabilitation of 1022 EI Camino Drive in July, 1996, but was later canceled by the City Council in November, 1996. . The Management Analyst reported that 968 Mission Dri e and 980 EI Camino Drive were identified and combined int- one HOME project. CCBHC is proposing to aLq.uire --bbfl four -unit buildings: 968 Mission Drive is to be -reconfigured 1 { 43 into three apartments, each containing three bedrooms; 980 EI Camino Drive is to be reconfigured into .one two-bedroom and two three-bedroom apartments in an effort to provide more units for larger families pursuant to the Consolidated Plan. She added that these units would remain affordable for the 55 -year term of the loan and will be maintained by CCBHC to ensure that they remain in good condition in accordance with Housing Quality Standards. The Management Analyst then outlined the financial structure of the purchase, and the governing HOME Program regulations. She explained that the City's loan of $722,289.00 utilizes HOME funds for acquisition, predevelopment, and rehabilitation; the Redevelopment Agency would loan $60,511.00 for installment assistance to fund the cash flow shortfalls; and both loans would carry simple interest, with payment set at 50 percent of net cash flow, with the balance due in 55 years. The Management Analyst introduced outside counsel, Barbara Leibold, and Executive Director of CCBHC, Helen Brown. Tom Schworer, 1816 Kinglet Court, Costa Mesa, offered to be a resource for decision making on this project. He felt that properties in the area have gone into foreclosure because of overpricing, and in his opinion, the proposed projects are not appropriate for the Mesa del Mar area. Council/Agency Member Erickson asked Mr. Schworer for his opinion on the market value of a completely renovated four- __ plex such as that being proposed in Mesa del Mar. Mr. Schworer replied.that any investment property value is based upon a predictable income stream. The City Manager/Agency Executive Director reported that he has seen Mr. Schworer's property which is a good example of proper maintenance; however, the properties being considered for the HOME Program did not receive the same quality of care. He added that reconfiguration would create larger units, and the standards imposed on other develop- ments are demanded of City and/or Redevelopment projects. In response to a question from Mayor Pro Tem/Agency Chairperson Monahan as to the consequences of not proceeding with the HOME Investment Partnership Agreement, the Management Analyst stated that funds must be committed to an affordable housing project, and staff could return within.a minimum of 30 days with alternatives for use of the funds. She outlined the eligible uses: commit to another area of the City; subsidize rents (Tenant Based Assistance Program);., use for the first-time home buyers program; and acquire and rehabilitate single-family homes. The Redevelopment and Housing Manager stated that incomes are restricted over 55 years; the bulk of assistance will subsidize the cost of the -project; rehabilitation was checked by an independent consultant 'to confirm that it will endure for 55 years; and there will be a property manager for these and. other nearby units to prevent overcrowding. Sherrill MacKay, Marcus & Millichap, 19800 MacArthur Boulevard, Suite 100, Irvine, reported that there is only a small inventory of available property. She described the criteria Marcus & Millichap uses in determining the market- ability and value of property. The Management Analyst gave the square footage costs for previous HOME projects: 734, 740, and 744 James Street, $153.00; 745 West 18th Street, $158.00; 707 and 711 West 18th Street, $164.00; and the project at 968 and 980 EI Camino Drive, $123.00. She added that simple land value was appraised at $2.48,000.00 for demolition for 968 Mission Drive, and the purchase price is $269,000.00. Mayor Pro Tem/Agency Chairperson Monahan indicated that he was not interested in going forward with such projects in the future, and thought it was time to look at alternative uses for the funds. Council Member/Agency Vice Chairperson Cowan asked how much money had been spent by Civic Center Barrio Housing Corporation for the subject properties. The Redevelopment and Housing Manager responded that these are reimbursable loan costs; that the City Council already approved the project, and the final stage is being reviewed this evening. She reported that the City's costs are approximately $20,000.00 for 1022 EI Camino Drive, and $20,000.00 for the two new buildings, plus relocation. Council/Agency Member Erickson agreed that alternatives for the funds should be reviewed; however, he preferred that future HOME funds be used for single-family home rehabilitation. MOTION Council/Agency Member Erickson made a motion to approve To Approve - the HOME funds with the proviso that staff continue to work Funds for the with representatives such as Thomas and Barbara Schworer HOME Project in conjunctionwith the project to ensure its compatibility with the existing neighborhood. He did not want to waste the money already spent on the project. SUBSTITUTE MOTION Project Rejected Council/Agency Member Somers did not support the motion even though some funds were already spent. She believed that the City should be proceeding in a different direction. Mayor/Agency Member Buffa thought it would be difficult to stop the' project now because of the money already expended. Mayor Pro Tem/Agency Chairperson Monahan asked if the expended dollars could be recovered by the City from HOME funds. The Management Analyst responded that the expended funds were taken from the 10 percent administra- tion funds which HUD allows to develop affordable housing, and is an eligible use of the funds whether or not the City produces a project. She reported that if an alternative project were selected, another funding source would have to be found for administrative costs. She also explained that Civic Center Barrio Housing Corporation's costs for engineering, architecture, Phase I environmental procedures, etc.. would be considered predevelopment eligible costs, and both the City and Civic Center Barrio would be covered for expenditures already incurred. A substitute motion was made by ' Mayor Pro Tem/Agency Chairperson Monahan, seconded by Council/Agency Member Somers, rejecting the proposed project, directing that the HUD money be used to cover Civic Center Barrio's costs, and directing staff to present a plan at the City Council meeting of April 21, 1997, for reallocation of the HOME funds. J 'Council/Agency Member Erickson commented that this would probably be the last project he would support; however, he was concerned about wasting the money already expended. Council/Agency Vice Chairperson Cowan asked about future payment of administration costs. The Redevelopment and Housing Manager responded . that it would come from Community Development Block Grant (CDBG) or HOME 5 funds. She added that if it were decided to place the money into rehabilitation, the guidelines would need to be changed; and if the money were returned to HUD, it could jeopardize future CDBG funds. Mayor Pro Tem/Agency Chairperson Monahan agreed with Council/Agency Member Erickson's concern about wasting taxpayers' money; nevertheless, he felt the proposed projects were not cost effective, resulting in more money being wasted: Council/Agency Member Somers concurred. The substitute motion carried 3-2, Council/Agency Members Erickson and Cowan voting no. HOME 5 Fund The Management Analyst presented the Fund Reservation for Reservation and the same 1995-96 and 1996-97 HOME funds for Civic Implementation Center Barrio Housing Corporation to acquire and rehabilitate —Agreement a project in Target Area No.. 1 (Shlimar, Dr ive/James Street/18th Street). She reported -that CIVIC -Center -:Barrio has not finalized a Conditional Option Agreement, and i the funds are to be committed, the City must notify HUD by May 1, 1997. She also advised that a property has not wt_*ten selected; therefore, no analysis is available. The Redevelopment and Housing Manager reported that if. HOME 4 and HOME 5 are rejected,: there- will be approximately $1 million available in HOidIE funds; .and it will be necessary for the City Council to take action within 60 days to remain eligible for funding even if designation of one of the four uses takes place at a later date. She stated that review of the options will be made available to the City Council at its meeting of April 21, 1997, and if the funds were to be designated for rehabilitation, consultants could be hired to administer the balance of the $1 million. MOTION/HOME 5 On motion by Mayor Pro Tem/Agency Chairperson Monahan, Rejected; Referred seconded by Council/Agency Member Somers, and the Four Options to carried 5-0, the HOME 5 project was rejected, and staff was the April 21, 1997, directed to bring the four eligible options to the City Council Council 'Meeting meeting of April 21, 1997. CITY ATTORNEY The City Attorney presented a claim from Fred Stillions REPORTS which was filed against the City and the Redevelopment Stillions Claim Agency.' He reported that On April 7, 1997, the City Council considered the claim which relates to a Request for Indemnification in litigation concerning Willdan Associates and the City's Rehabilitation Loan program. He noted that on April 7, the City Council voted to reject the claim, and the recommendation is for rejection by the Redevelopment Agency as well. Because of possible litigation, and existing litigation, Mayor/Agency Member Buffa suggested that the Redevelopment Agency take action now, but withhold discussion until closed session. MOTION 'On motion by Agency Member Erickson, seconded by Claim Rejected Agency Chairperson Monahan, and carried 5-0, the claim. from Fred Stillions was rejected by the Redevelopment Agency. i ADJOURNMENT At 6:30 p.m., Mayor/Agency Member Buffa adjourned the special joint Council/Agency meeting to a special City Council meeting. Mayor of the zity of C Mesa ATTEST: l l Deputy City -Cl k of the City of Costa Mesa