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HomeMy WebLinkAbout2004-02-26MINUTES REGULAR PALM DESERT REDEVELOPMENT AGENCY MEETING THURSDAY, FEBRUARY 26, 2004 CIVIC CENTER COUNCIL CHAMBER I. CALL TO ORDER - 3:00 P.M. Chairman Spiegel convened the meeting at 3:01 p.m. II. ROLL CALL Present: Member Jean M. Benson Vice Chairman Buford A. Crites Member Jim Ferguson Member Richard S. Kelly Chairman Robert A. Spiegel Also Present: Homer Croy, Acting City Manager David J. Erwin, City Attorney Sheila R. Gilligan, ACM for Community Services Justin McCarthy, ACM for Redevelopment Rachelle D. Klassen, City Clerk Mark Greenwood, City Engineer Philip Drell, Director of Community Development Paul S. Gibson, Director of Finance/City Treasurer Teresa L. La Rocca, Director of Housing Michael J. Errante, Director of Public Works David Yrigoyen, Director of Redevelopment Robert P. Kohn, Director of Special Programs III. ADJOURN TO CLOSED SESSION Request for Closed Session: Conference with Real Property Negotiator pursuant to Government Code Section 54956.8: 1) Property: APN 634-241-033-8 (43-775 Kelsey Court) Negotiating Parties: Agency: Justin McCarthy/Teresa La Rocca/ Palm Desert Redevelopment Agency Property Owner: Banca Financial Under Negotiation: x Price x Terms of Payment MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 With Agency Board concurrence, Chairman Spiegel adjourned the meeting to Closed Session at 3:02 p.m. He reconvened the meeting at 4:02 p.m. IV. RECONVENE REGULAR MEETING - 4:00 P.M. A. REPORT ON ACTION FROM CLOSED SESSION. None V. AWARDS, PRESENTATIONS, AND APPOINTMENTS None VI. CONSENT CALENDAR A. MINUTES of the Regular Meeting of the Redevelopment Agency of February 12, 2004 Rec: Approve as presented. B. CLAIMS AND DEMANDS AGAINST THE AGENCY TREASURY - Warrant Nos. 157RDA, 159RDA, 162RDA, 164RDA, 166RDA, 169RDA, 160-Housing, 162-Housing, 167-Housing, 170-Housing, 161HA, and 171 HA. Rec: Approve as presented. C. REQUEST FOR AUTHORIZATION to Contract for Services for Maintenance of the Public Improvements at Entrada del Paseo (Joint Consideration with the Palm Desert City Council). Rec: By Minute Motion, authorize Change Orders to the existing contracts with : 1) Southwest Aquatics, Palm Desert, California, in the amount of $2,975 for maintenance of the water feature at Entrada del Paseo; 2) M & M Sweeping, Inc., Thousand Palms, California, in the amount of $2,100 for weekly sweeping of the parking lots at Entrada del Paseo — funds are available in the Capital Budget for the current fiscal year (Account No. 850-4358-433-4001). Upon motion by Ferguson, second by Crites, the Consent Calendar was approved as presented by a 5-0 vote. VII. CONSENT ITEMS HELD OVER None 2 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 VIII. RESOLUTIONS — None IX. NEW BUSINESS A. REQUEST FOR AUTHORIZATION TO ACQUIRE PROPERTY KNOWN AS 43-830 YELLOW SAGE DRIVE (APN 634-062-017). Member Kelly suggested that the Agency consider holding any Desert Rose properties that become available for sale until such time as it is known what is going to be done so that if residents have to be relocated, there will be Desert Rose property to relocate them in. Director of Housing Teresa LaRocca noted that legal counsel was looking at the Unit Regulatory Agreement because the City does not allow property owners to rent their units. She said if the City starts renting units, questions may come up as to why residents cannot do the same. Member Ferguson said it was noted in Closed Session a strong desire to buy back these units. Ms. LaRocca responded that that would be done whenever possible and as quickly as possible. She said staff would have a full report to the Agency Board at the next meeting. Member Ferguson moved to, by Minute Motion: 1) Authorize acquisition of the subject propertyforthe purpose of retaining affordability covenants and resale; 2) authorize the Executive Director to execute any documents necessary to facilitate this acquisition — funds are available in the Acquisition, Rehab, Resale Budget, with additional direction to staff that any Desert Rose properties that become available in the future should be held by the Agency for further action for the purpose of potential resident relocation. Motion was seconded by Kelly and carried by a 5-0 vote. B. REQUEST FOR AWARD OF CONTRACT FOR CONSTRUCTION OF A STORAGE FACILITY FOR THE EL PASEO COURTESY CARTS TO BE LOCATED ON THE FIRST FLOOR OF THE GARDENS ON EL PASEO PARKING STRUCTURE (CONTRACT NO. R21810). Member Ferguson moved to, by Minute Motion: 1) Award the subject contract to James E. Simon Company, Indio, California, in the amount of $24,800; 2) authorize the Chairman to execute said contract; 3) authorize the Finance Director to set aside the amount of $2,480 as a 10% contingency (use of contingency requires additional action) for this project — funds are available in Account No. 850-4416-414-3681. Motion was seconded by Benson and carried by a 5-0 vote. 3 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 C. REQUEST FOR APPROVAL OF A JOINT POWERS AGREEMENT BETWEEN THE COACHELLA VALLEY HOME -PURCHASE FINANCE AUTHORITY AND THE PALM DESERT REDEVELOPMENT AGENCY (CONTRACT NO. R22410). MR. JOHN WOHLMUTH, Executive Director of the Coachella Valley Association of Governments, stated that CVAG had been looking into the rapid increase in median home prices in the Coachella Valley which, in the past year, had increased 22%. At the same time, affordability had dropped by 5%, and median household income was not keeping up with median home price. He said this was referred to CVAG by the City of Palm Desert after discussing a consortium concept and dealing with banks that really wanted a Valley -wide program primarily because banks have service areas which are not necessarily where the branches are located. The service areas of most of the banks in the Coachella Valley included all the way to Blythe. He noted documents included in the Council packets (on file in the City Clerk's office). He said they had also been meeting with financial institutions, and eight banks would be depositing $2.35 million if the consortium and the Joint Powers Agreement (JPA) is set up. Of that amount, $200,000 was set aside for loan loss reserve. In the event there are foreclosures, the loan Toss reserve is tapped and any losses could be paid out of that fund if there are losses to that home and the consortium has to pick up the second. The concept of this program was a 75% first trust deed carried by the eight banks on a rotating basis depending on the deposits, with a 25% second trust deed to be funded by the consortium and repaid by the homeowners. He said the second trust deed would be at or below the first trust deed, and the program was for moderate income families. It was basically marketed at 80-120% of County median, which would get a family with approximately $40,000 to $60,000 income into a home at approximately $200,000-$250,000, although there were very few homes in the Coachella Valley that matched that market now. One question raised was whether these would be new homes or existing homes, and he said CVAG was not in the home construction business but was rather in the finance business if this business is approved. CVAG would essentially take the money from the banks, turn it into second trust deeds, and the individuals who purchase the homes pay back the second trust deeds similar to the first trust deeds. The consortium would be used to make that happen. The program was designed so that it would take limited staff at CVAG (10-20 hours per month) to administer it, primarily because CVAG has contracts out there to do what is necessary to run the consortium. Discussions had been held relative to retaining Rancho Housing Alliance for loan origination and education, as one of the important aspects of the program was that all individuals/applicants would have to go through an education program before their application is considered, with additional education on a yearly basis. He said there would also be a servicing agreement, probably with a private sector company, to service all of these loans. As the homeowner pays the first trust deed and 4 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 the second trust deed, this company would handle all of the servicing. Mr. Wohlmuth noted that CVAG potentially would make some money to cover their costs, approximately $80,000 per year, and the business plan was included in the Council packets. That money would be split with approximately $40,000 per year for the contracts and $40,000 per year for staff overhead, depending on how many homes are sold. MR. WOHLMUTH noted that they would be going to all of the City Councils in the various Valley cities and in Blythe to see if they will participate in the program. Once they had all of the cities who want to participate, they will go back to the banks and ask if it is enough city participation to warrant a program. He said the Cities of Coachella and Blythe had already approved the program. The City of Indio had yet to agree to participate, and Desert Hot Springs Council would be discussing it next week. If La Quinta and Indio perhaps do not participate in this program, it will probably be turned over to another entity because some of consortium banks perhaps will not deposit their funds into the consortium without those two large cities. He stated that when this issue was discussed by CVAG's committees and Executive Committee, one of the concerns was the risk in the program. In addressing the risk, they looked not only at the $200,000 loan loss reserve but the JPA was designed so that in the event the losses exceed $200,000, the agent bank (Pomona First Federal in this case) will take over the program and administer the rest of the program. The JPA will simply be folded up at that point, and Pomona First Federal would carry out the program and decide whether there will be continued consortiums. He noted the back of the handout discussed the real estate market in the Coachella Valley, specifically in Palm Desert, as well as southern California and the State of California, and this would give Council an idea of what is happening in the State. He offered to answer any questions. Member Kelly said he was very much in favor of this program; however, in case enough cities do not approve the program, he felt it would be good if the City of Palm Desert somehow was involved because he would hate to see someone else take it over. He asked what the City of Palm Desert could do to make sure it stays involved in the program in the event there are not enough cities participating. MR. WOHLMUTH stated it was his feeling the Cities of Indian Wells and Rancho Mirage probably would not participate in the JPA, but the banks were not really concerned about those two cities not participating, especially Indian Wells, because of the probability of having moderate income home prices in Indian Wells. Rancho Mirage does have a census area that has more than they thought of moderate income home prices. However, his suggestion was that if the banks do not want to participate after it is determined how many jurisdictions and CVAG will participate, the City of 5 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 Palm Desert could join into a partnership with someone like Rancho Housing Alliance that could do this program and do it Valley -wide. Ms. LaRocca added that staff was currently in the process of developing a first-time home buyer program for the City of Palm Desert. It will focus on the high end of the low income spectrum rather than moderate, but the moderate could be included as well. She said that program should be coming to Council very shortly for review and consideration. Member Ferguson noted the table on page 15 of the report and said it looked like among all of the cities there were 14,756 households in the moderate income gap. Taking the loss scenario example on Item 8A, a typical home was at $200,000, and if all of these households were to fund (which he knew they would not), that would be $3 billion. 25% of that is $737 million, and he questioned securing that with a loss reserve of $200,000. MR. WOHLMUTH stated that the banks would deposit $2.35 million, which carries the 25% seconds. Assuming that all of the banks would participate and there is actually $2.15 million as the 25% seconds, that is all the consortium has, and that will deliver approximately 40 homes can be assisted in the Coachella Valley under the first consortium. Once those 40 homes turn into mortgages, the banks would want to deposit more money. Similar programs in Orange County and Claremont were on their second and third consortiums. He said the deposits by the banks are limited to whatever the deposits are, not necessarily how many moderate income homes are in the Coachella Valley; it is limited to how much money there is in the consortium. Member Ferguson asked how much would come out of the City's pockets to start this, and Mr. Wohlmuth responded the amount was zero. Member Ferguson asked, if cities do not have to participate with any money, why the cities of Indian Wells and Rancho Mirage would not participate. MR. WOHLMUTH responded that it was his feeling that, philosophically, they think the private sector should do this and that they essentially do not have any homes so whatever the risk, albeit it slim, it is not worth it for them. Member Ferguson said he had heard at one point months ago that Palm Desert's City Manager was opposed to this program, and he asked whether that had been resolved. MR. WOHLMUTH responded that CVAG had actually come to the Palm Desert City Council several months ago and discussed the program at that point. 6 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 Ms. LaRocca added that she did not believe Mr. Ortega was necessarily opposed to the program. He was simply asking those questions being asked tonight with respect to liability and risk. With regard to those cities that think the private sector should do this, Member Ferguson asked what a good argument was for why it needs to be done. MR. WOHLMUTH answered that with regard to the private sector, there are programs out there, like an FHA program, which is approximately 3% down plus 3% closing costs. The banks were offering this money to the consortium to get CRA (Community Reinvestment Act) credits, so there was something in it for the banks. He said he felt the cities might as well take advantage of the Federal law that requires them to provide funds to the communities and turn it into a program. That was the concept here. This would provide assistance for someone who is making a decent salary but does not have the savings to put down on a house. This program would basically get them into a home for the closing costs. He added that it was very difficult for people in this income bracket to be able to save enough for a down payment, especially with the home prices increasing so much over the last year and with the trend expected to continue along those lines as long as the interest rates stay low. Upon question by Member Ferguson, he said the $200,000 was one of the consortium banks making a deposit that does not want to fund or to participate in first or second trust deeds, and they do get CRA credit for that. Member Ferguson asked if they had agreed to let us opt out if that $200,000 reserve were tapped out, with no further liability, and dissolve the authority. MR. WOHLMUTH agreed. He said their regulators require them to deposit money into the community, so they look at an organization like CVAG or perhaps Palm Desert and say what is the possibility that the loan loss reserve is tapped. They know what the foreclosure rate is. Pomona First Federal estimated over the last five years that they had, in this segment of the housing, a maximum of two foreclosures out of several thousand loans in this housing price range. One of the concerns of Pomona First Federal was the higher end market, where people are actually able to walk away from a home that may have gotten more than 80% financing for that home and the market drops, and these people actually have a place to live, if it is a second home, or find another place to live. The moderate income individual would just have to get out of their home and rent something else. Their concern was the foreclosure rate in the moderate income is nowhere near the foreclosure rate at the high income, and they were willing to take that risk. 7 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 Member Ferguson asked if a moderate home buyer could still utilize this program to buy a home in Rancho Mirage even if the City of Rancho Mirage does not participate in this program. MR. WOHLMUTH replied that this concept was put into the JPA. He said in his position as Executive Director of CVAG, he did not think individuals should be able to utilize this program to buy a home in Rancho Mirage if that city does not participate. He said he felt cities that participate should get the benefits of the program for their communities. Member Ferguson said what he was hearing was that they just need a conduit to implement this program, and CVAG was selected. He asked whether Palm Desert could do it if for some reason CVAG does not do it. Ms. LaRocca stated that Palm Desert originally started this program by looking for ways to provide first-time home buyers programs. Once staff started to talk to the various banks and the consortium, staff realized that what they needed was a large pool of potential buyers to draw from. One city alone could not do it with a consortium concept. Member Ferguson stated that if the City didn't have the same angst as the Executive Director of CVAG did about benefitting other cities and just wanting to help moderate home buyers, it could theoretically do the whole Valley, and Ms. LaRocca agreed that, theoretically, it could be done. Mr. McCarthy noted there might be a perception that the $200,000 loan loss reserve went against the first deeds of trust; however, it only goes against the seconds and only secures that $2.3 million. The lenders were actually on the hook themselves for their first deeds of trust. Chairman Spiegel asked why two of the Valley's largest banks, Bank of America and Security Pacific, were not listed. MR. WOHLMUTH responded that all of the potential banks that have service area in the Coachella Valley had been invited to participate. He noted that Bank of America does have its own program where they provide CRA credits to communities, and they decided not to participate. He said one of the things that Orange County, Claremont, and San Jose told them was that there might be more banks on the second consortium if the JPA wants to continue with this program after the first consortium. What happened in the Orange County case was that they started with approximately eight banks with the first consortium, and now they are up to 12 or 13 banks. With regard to the escrow fees that are paid to the Finance Authority, Member Ferguson asked if that was sufficient to cover the overhead at CVAG to administer the authority, and Mr. Wohlmuth responded that it was 8 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 sufficient. He said the escrow fees/closing costs were actually paid by the home buyers. Member Ferguson stated this was, then, an entirely revenue neutral program at CVAG, funded by other people's money, and our only exposure was $200,000 of some other banker's money. MR. WOHLMUTH stated that our exposure is not the $200,000. If we go above the $200,000, we simply fold the JPA. The $200,000 was a loan loss reserve. The bank gets credit for depositing it, but if it has to be tapped, we don't have to pay it back. The bank essentially gets credit for depositing it in our account, and it is only used for loan loss reserve. Member Ferguson asked if that loan Toss reserve would be supplemented with the $43,000 per year we are supposed to be making. Mr. Wohlmuth responded that was up to the JPA if they decide to do that at that point. Member Crites moved to, by Minute Motion, approve the subject Joint Powers Agreement by and between the Coachella Valley Home -Purchase Finance Authority and the Palm Desert Redevelopment Agency for the purpose of creating a Valley -wide First Time Home Buyer Program. Motion was seconded by Kelly and carried by a 5-0 vote. X. CONTINUED BUSINESS None XI. OLD BUSINESS None XII. PUBLIC HEARINGS None XIII. REPORTS, REMARKS, AND AGENCY BOARD ITEMS REQUIRING ACTION A. EXECUTIVE DIRECTOR None B. AGENCY COUNSEL None 9 MINUTES PALM DESERT REDEVELOPMENT AGENCY MEETING FEBRUARY 26, 2004 C. CHAIRMAN AND MEMBERS OF THE AGENCY 1. Member Ferguson asked Mr. Gibson if he could, by March 2, provide an analysis of the fiscal impacts of Proposition Nos. 57 and 58, existing law, and the League of California Cities' initiative as to which one would damage the City least. XIV. ORAL COMMUNICATIONS - C None XV. ADJOURNMENT Member Crites moved to adjourn the meeting at 6:20 p.m. to the Joint Study Session on Friday, February 27, 2004, at 9:00 a.m. Motion was seconded by Benson and carried by a 5-0 vote. ATTEST: ROBERT A. SPIE C ELLE D. SSEN, SECRETARY PALM DESERT REDEVELOPMENT AGENCY 10